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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
Amendment No. 1
----------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended August 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____
Commission File Number 0-19402
VANS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0272893
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization Identification No.)
2095 North Batavia Street
Orange, California 92865
(Address of Principal Executive Offices) (Zip Code)
(714) 974-7414
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Formal Fiscal Year,
if Change Since Last Report)
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 report(s), 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 registrant's
classes of common stock, as of the latest practicable date: 12,907,688 shares
of Common Stock, $.001 par value, as of October 14, 1996.
1
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Lease between Wohl Venture One, LLC, a Delaware limited liability
company, and the Company
10.2 Construction Agreement between Wohl Venture One, LLC, a Delaware limited
liability company, and the Company
2
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned thereunto duly authorized.
VANS, INC.
(Registrant)
By: /s/ Craig E. Gosselin Dated: December 6, 1996
-------------------------------------
Craig E. Gosselin
Vice President and General Counsel
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Document Page Number
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10.1 Lease between Wohl Venture One, LLC,
a Delaware limited liability company,
and the Company
10.2 Construction Agreement between Wohl
Ventures One, LLC, a Delaware limited
liability company, and the Company
</TABLE>
E-1
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EXHIBIT 10.1
LEASE
between
WOHL VENTURE ONE, LLC,
a Delaware limited liability company
and
VANS, INC., a Delaware corporation
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TABLE OF CONTENTS
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Page
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1. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Premises, Parking and Common Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Vehicle Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Common Areas -- Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Common Areas -- Lessee's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Common Areas -- Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Common Areas -- Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Delay in Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Early Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Early Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Rent Escalations - Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Conditions of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Maintenance, Repairs, Alterations and Common Area Services . . . . . . . . . . . . . . . . . . . . 14
7.1 Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Alterations and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Utility Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.5 Condition of Premises Upon Termination; Additional Use Provisions . . . . . . . . . . . . 21
8. Insurance; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Premises Partial Damage; Premises Building Partial Damage . . . . . . . . . . . . . . . . 27
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9.3 Premises Total Destruction; Industrial Center Buildings Total Destruction . . . . . . . . . . . . 28
9.4 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.5 Abatement of Rent; Lessee's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Termination -- Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10. Real Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Additional Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Definition of "Real Property Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Joint Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Personal Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.1 Lessor's Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Lessee Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Lessees Other Than Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4 Terms and Conditions of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.5 Terms and Conditions Applicable to Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.6 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13. Default Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.1 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.3 Default by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.4 Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.5 Notice Before Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15. Broker's Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
16. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17. Lessor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
18. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
19. Interest on Past-due Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
20. Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
21. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
22. Incorporation of Prior Agreements; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
24. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
25. Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
26. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
27. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
28. Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
29. Binding Effect; Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
30. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
31. Attorneys Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
32. Lessor's Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
33. Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
34. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
35. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
36. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
37. Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
38. Quiet Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
39. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
39.1 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
39.2 Options Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
39.3 Multiple Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
39.4 Effect of Default on Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
39.5 First Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
39.6 Second Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
39.7 Fair Market Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
39.8 Rent Escalations - Option Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
40. Security Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
41. Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
42. Performance Under Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
43. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
44. Cashiers Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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45. Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
46. Storage Tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
47. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
47.1 Lessee's Covenants Regarding Hazardous Materials . . . . . . . . . . . . . . . . . . 60
47.2 Indemnification of Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
48. Lessor's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
49. Easements and Restrictions of Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
50. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
51. Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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LEASE
1. Parties. This Lease, dated, for reference purposes only,
September 12, 1996, is made by and between WOHL VENTURE ONE, LLC, a Delaware
limited liability company (herein called "Lessor"), and VANS, INC., a Delaware
corporation (herein called "Lessee").
2. Premises, Parking and Common Areas.
2.1 Premises. Lessor hereby leases to Lessee and Lessee
leases from Lessor for the term, at the rental, and upon all of the conditions
set forth herein, that certain real property situated in the County of Los
Angeles, State of California, commonly known as 15700 "A" Shoemaker Avenue,
Santa Fe Springs and described as a building containing 180,000 square feet
(consisting of approximately 165,000 square feet on the ground floor and an
additional 15,000 square feet on the mezzanine level) located on the property
shown on Exhibit "A" hereto, said 180,000 square feet herein referred to as the
"Premises," including rights to the Common Areas as hereinafter specified.
Notwithstanding the foregoing, upon completion of the improvements as provided
in the Construction Agreement (the "Construction Agreement") attached hereto as
Exhibit "C", the Premises will be remeasured and the rent will be recalculated
based on the actual square footage of the Premises, as determined pursuant to
the Construction Agreement. The Premises are all of a building, herein
referred to as the "Building." The Premises, the Building, the Common Areas,
the land upon which the same are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Industrial
Center."
2.2 Vehicle Parking. Lessee shall be entitled to exclusive
parking on those portions of the Common Areas shown as Lessee's parking on
Exhibit B.
2.3 Common Areas -- Definition. The term "Common Areas" is
defined as all areas and facilities outside the Premises and within the
exterior boundary line of the Industrial Center that are provided and
designated by the Lessor from time to time for the general non-exclusive use of
Lessor, Lessee and of other lessees of the Industrial Center and their
respective employees, suppliers, shippers, customers and invitees, including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas.
2.4 Common Areas -- Lessee's Rights. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Industrial Center. Under
no circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any
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property, temporarily or permanently, in the Common Areas. Any such storage
shall be permitted only by the prior written consent of Lessor or Lessor's
designated agent, which consent may be revoked at any time. In the event that
any unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.5 Common Areas -- Rules and Regulations. Lessor or such
other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
establish, modify, amend and enforce reasonable rules and regulations with
respect thereto; provided that Lessor shall not be permitted to enforce any
such rules or regulations in a discriminatory manner. The rules and
regulations that shall initially apply for such purposes are attached hereto as
Exhibit "D." Lessee agrees to use reasonable efforts to cause its employees,
suppliers, shippers, customers, and invitees to abide and conform to such
rules. Lessor shall not be responsible to Lessee for the non-compliance with
said rules and regulations by other lessees of the Industrial Center. Lessee
shall have the right to approve any rules and regulations established by Lessor
in addition to those set forth on Exhibit "D;" provided that Lessee agrees not
to unreasonably withhold its approval of any such new rule or regulation and in
any event will approve any new rule or regulation that does not have an impact
on the operation of Lessee's business in the Premises. Lessee's failure to
disapprove of a new rule or regulation within 30 days after its delivery to
Lessee shall be deemed Lessee's approval of that new rule or regulation.
2.6 Common Areas -- Changes. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas,
including, without limitation, changes in the location, size, shape
and number of driveways, entrances, parking spaces, parking areas,
loading and unloading areas, ingress, egress, direction of traffic,
landscaped areas and walkways;
(b) To close temporarily any of the Common Areas
for maintenance purposes so long as reasonable access to the Premises
remains available;
(c) To add additional improvements to the Common
Areas;
(d) To use the Common Areas while engaged in
making additional improvements, repairs or alterations to the
Industrial Center, or any portion thereof;
(e) To do and perform such other acts and make
such other changes in, to or with respect to the Common Areas and
Industrial Center as Lessor may, in the exercise of sound business
judgment, deem to be appropriate.
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2.6.1 Lessor shall at all times provide the parking
facilities required by applicable law and in no event shall the number of
parking spaces or the location of such spaces that Lessee is entitled to under
Paragraph 2.2 be reduced or changed.
2.6.2 In Lessor's exercise of its rights under
Paragraphs 2.6(a) and (e), Lessor shall permit Lessee reasonable access to the
Premises at all times and not unreasonably interfere with Lessee's business
operations and, except in circumstances where the action is required in order
to avoid imminent damage to property or injury or death to persons (in which
event Lessor shall give such notice as is reasonable given the circumstances),
Lessor shall provide Lessee with 30 days' advance notice of the exercise by
Lessor of such rights. As to any such exercise by Lessor that is not required
by applicable law or necessary to avoid such damage, injury or death, Lessee
shall have the right to approve such action; provided that Lessee agrees not to
unreasonably withhold its approval and in any event will approve such action
that does not have an impact on the operation of Lessee's business in the
Premises. Lessee's failure to disapprove of such an action within 30 days
after Lessor's notice to Lessee shall be deemed Lessee's approval of that
action.
3. Term.
3.1 Term. The term of this Lease shall be for ten (10) years
commencing on June 1, 1997 and ending on May 31, 2007 unless sooner terminated
pursuant to any provision hereof subject to the provisions of the Construction
Agreement.
3.2 Delay in Possession. Notwithstanding said commencement
date, if for any reason Lessor cannot deliver possession of the Premises to
Lessee on said date with the Initial Improvements Substantially Complete (as
such terms are defined in the Construction Agreement), Lessor shall not be
subject to any liability therefor, except as expressly provided in Section 12
of the Construction Agreement, nor shall such failure affect the validity of
this Lease or the obligations of Lessee hereunder, but in such case the
commencement of the term shall be subject to delay as provided in the
Construction Agreement.
3.3 Early Possession. If Lessee occupies the Premises prior
to said commencement date for purposes of conducting its business (which as to
the warehouse area shall mean shipping of inventory and as to office area shall
mean conducting business other than incidental use of phones and furniture),
such occupancy shall be subject to all provisions of this Lease, such occupancy
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shall not advance the termination date, and Lessee shall pay rent for such
period at the initial monthly rates set forth below.
3.4 Early Occupancy. Commencing on the Office Area Early
Commencement Date, as defined in the Construction Agreement, Lessee shall
occupy that portion of the Premises consisting of approximately 30,000 square
feet of office space (the "Office Area"); provided, however, such occupancy
shall be subject to all provisions of this Lease, such occupancy shall not
advance the termination date, and Lessee shall pay rent for such space at the
monthly rate of $11,100 plus an appropriate pro rata share of the Operating
Expenses based on square footage of the Premises actually occupied by Lessee.
Neither early occupancy nor early possession by Lessee or its agents,
contractors or invitees shall interfere with or otherwise delay any work to be
performed by Lessor or its contractors under this Lease or Exhibit "C."
4. Rent.
4.1 Base Rent. Subject to Section 3.2 and 3.4 of this Lease,
Lessee shall pay to Lessor, as Base Rent for the Premises, without any offset
or deduction, except as may be otherwise expressly provided in this Lease, on
the first day of each month of the term hereof, monthly payments in advance of
$66,600. The Base Rent is subject to adjustment as provided herein. Rent for
any period during the term hereof which is for less than one month shall be a
pro rata portion of the Base Rent. Rent shall be payable in lawful money of
the United States to Lessor at the address stated herein or to such other
persons or at such other places as Lessor may designate in writing.
4.2 Operating Expenses. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of all Operating Expenses, as hereinafter defined, during each
calendar year of the term of this Lease, in accordance with the following
provisions:
(a) "Lessee's Share" is defined, for purposes of
this Lease, as 34.24% percent with respect to Operating Expenses
applicable to the Industrial Center; provided that to the extent any
Operating Expenses are applicable only to the Building in which the
Premises are located, "Lessee's Share" shall be defined as 100%.
(b) "Operating Expenses" is defined, for purposes
of this Lease, as all costs incurred by Lessor, if any, for:
(i) The operation, repair and maintenance,
in neat, clean, good order and condition, of the following:
(aa) The Common Areas, including
parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways
(i.e., planted areas adjacent to streets and
sidewalks), driveways, landscaped areas, striping,
bumpers, irrigation systems, Common Area, lighting
facilities and fences and gates.
(bb) Trash disposal services;
(cc) Tenant directories;
(dd) Fire detection systems including
sprinkler system maintenance and repair.
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(ee) Security services;
(ff) Any other service to be provided
by Lessor that is elsewhere in this Lease stated to
be an "Operating Expense."
(ii) Any deductible portion of an insured loss
concerning any of the items or matters described in this Paragraph 4.2;
(iii) The cost of the premiums for the liability
and property insurance policies to be maintained by Lessor under
Paragraph 8 hereof;
(iv) The amount of the real property tax to be
paid by Lessor under Paragraph 10.1 hereof;
(v) The cost of water, gas and electricity to
service the Common Areas;
(vi) the cost of Lessor's performing the
maintenance obligations described in Paragraph 7.1, including
replacements; and
(vii) the cost of a Commercial General Liability
policy of insurance, insuring Lessor, but not Lessee, against
liability arising out of the ownership, use, occupancy or maintenance
of the Industrial Center, in amounts determined by Lessor consistent
with the practices of institutional owners of comparable properties,
if Lessor determines to obtain such insurance.
The term "Operating Expenses" as used herein, shall
not include any of the following:
(A) Any ground lease rental;
(B) Costs of the initial construction of Building
(including without limitation any depreciation or other amortization
of such costs);
(C) Rentals for items which, if purchased rather than
rented, would have constituted costs of the initial construction of
the Building which are excluded in item (B), above (other than
equipment not affixed to the Building that is used for janitorial or
similar services);
(D) Costs incurred for the repair of damage to the
Building or the Industrial Center, to the extent that Lessor is
reimbursed by insurance proceeds or would have been reimbursed by
insurance proceeds had the insurance which Lessor
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is obligated to maintain pursuant to this Lease been so maintained;
(E) Costs, including permit, license and inspection
costs, incurred with respect to the installation of tenant
improvements made for tenants or other occupants in the Industrial
Center or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants
of the Industrial Center;
(F) Interest, amortization, fees and charges relating to
indebtedness (provided that nothing in this exclusion shall limit
Lessee's obligation to pay real property tax as provided in Paragraph
10 of this Lease);
(G) Marketing costs, including, without limitation,
leasing commissions, attorneys' fees in connection with the
negotiation and preparation of letters, deal memos, letters of intent,
leases, subleases and/or assignments, space planning costs, and other
costs and expenses incurred in connection with lease, sublease and/or
assignment negotiations and transactions with present or prospective
tenants or other occupants of the Industrial Center;
(H) Overhead and profit increment paid to Lessor or to
subsidiaries or affiliates of Lessor for goods and/or services in the
Industrial Center to the extent the same exceeds the costs of such
goods and/or services rendered by unaffiliated third parties on a
competitive basis;
(I) Lessor's general corporate overhead and general and
administrative expenses;
(J) Advertising and promotional expenditure, and costs of
signs (other than reasonable maintenance and coordination of
directories) in or on the Industrial Center identifying the owner of
the Industrial Center or other tenants' signs;
(K) Costs arising from Lessor's charitable or political
contributions;
(L) Costs for sculpture, paintings or other objects of
art;
(M) Costs (including in conjunction therewith all
attorneys' fees and costs of settlement judgments and payments in lieu
thereof) arising from claims, disputes or potential disputes in
connection with potential or actual claims, litigation or arbitrations
pertaining to Lessor and/or the Industrial Center, to the extent not
typically included in Operating Expenses by landlords of comparable
buildings;
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(N) Management fees to the extent in excess of such costs
as is commercially reasonable for such items for comparable buildings;
(O) Expenses, charges or taxes in connection with
services or other benefits which do not benefit Lessee or which are
not offered to Lessee;
(P) Depreciation;
(Q) Costs of maintaining or repairing any building in the
Industrial Center other than the Building in which the Premises are
located.
(c) The inclusion of the improvements, facilities
and services set forth in Paragraph 4.2(b)(i) of the definition of
Operating Expenses shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide
those services unless the Industrial Center already has the same,
Lessor already provides the services, or Lessor has agreed elsewhere
in this Lease to provide the same or some of them.
(d) The percentages set forth in Paragraph 4.2(a)
have been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of rentable space
contained in the Building or the Industrial Center, as applicable. It
is understood and agreed that the percentage figures set forth in
4.2(a) are approximations which Lessor and Lessee agree are reasonable
and shall not be subject to revision except in connection with an
actual change in the size of the Premises or a change in the space
available for lease in the Building or the Industrial Center.
(e) Anything to the contrary herein
notwithstanding, Lessor, at Lessor's cost, shall be responsible for
the maintenance, repair and replacement of the structural elements of
the foundations, exterior walls and roof of the Building
(collectively, the "Lessor Structural Elements"). Accordingly, any
costs associated with the foregoing shall be excluded from Lessee's
Share of Operating Expenses.
(f) Lessee's Share of Operating Expenses shall be
payable by Lessee within thirty (30) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At
Lessor's option, however, an amount may be estimated by Lessor from
time to time of Lessee's Share of annual Operating Expenses
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and the same shall be payable monthly or quarterly, as Lessor shall
designate, during each twelve-month period of the Lease term, on the
same day as the Base Rent is due hereunder. In the event that Lessee
pays Lessor's estimate of Lessee's Share of Operating Expenses as
aforesaid, Lessor shall deliver to Lessee within ninety (90) days
after the expiration of each calendar year, or as soon thereafter as
practicable, but in all events within one hundred eighty (180) days
after the end of such calendar year, a reasonably detailed statement
showing Lessee's Share of the actual Operating Expenses incurred
during the preceding year. If Lessee's payments under this Paragraph
4.2(f) during said preceding year exceed Lessee's Share as indicated
on said statement, Lessee shall be entitled to credit the amount of
such overpayment against Lessee's Share of Operating Expenses and Base
Rent next falling due. If Lessee's payments under this paragraph
during said preceding year were less than Lessee's Share as indicated
on said statement, Lessee shall pay to Lessor the amount of the
deficiency within thirty (30) days after delivery by Lessor to Lessee
of said statement.
(g) Lessor and Lessee shall promptly adjust
between them by appropriate cash payment any balance determined to
exist with respect to Lessee's Share of Operating Expenses after the
end of the calendar year in which this Lease terminates, prorating for
any partial year involved.
(h) In the event of any dispute as to the amount
of Operating Expenses as set forth in Lessor's statement of Operating
Expenses delivered to Lessee, Lessee shall have the right, after
reasonable notice and at reasonable times within one year after the
final statement for such Operating Expenses is delivered to Lessee, to
inspect and photocopy (at Lessee's expense) Lessor's accounting
records with respect to Lessee's Share of Operating Expenses. If,
after such inspection and photocopying, Lessee still disputes the
amount of Operating Expenses as set forth in Lessor's statement,
Lessee shall be entitled to retain an independent certified public
accountant reasonably approved by Lessor to audit Lessor's records to
determine the proper amount of such Operating Expenses and the proper
amount payable by Lessee pursuant to this Lease. Lessee agrees to pay
the cost of such audit, provided that Lessor shall pay such cost if
the audit reveals that Lessor's determination of Operating Expenses as
set forth in Lessor's statement overstated Operating Expenses by 5% or
more. Lessor shall be required to maintain records of all Operating
Expenses for one year after the final
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statement for such Operating Expenses. If such audit reveals an
overstatement or understatement of Operating Expenses, the amount of
the differential shall be promptly reimbursed to Lessee by Lessor or
paid by Lessee to Lessor, as the case may be.
4.3 Rent Escalations - Initial Term.
(a) On the first day of each of the 31st month, the 61st
month and the 91st month of the term of this Lease, the monthly Base Rent
payable under Paragraph 4.1 of this Lease shall be adjusted by the increase, if
any, from the Commencement Date, in the Consumer Price Index of the Bureau of
Labor Statistics of the U.S. Department of Labor for Urban Wage Earners and
Clerical Workers, Los Angeles-Anaheim- Riverside, California (1982-84=100),
"All Items", herein referred to as "C.P.I.".
(b) The monthly Base Rent payable in accordance with
Paragraph (a) above shall be calculated as follows: the Base Rent scheduled to
be paid during the month prior to the month in which the adjustment is to
occur, shall be multiplied by a fraction the numerator of which shall be the
C.P.I. of the second calendar month prior to the month during which the
adjustment is to take effect, and the denominator of which shall be the C.P.I.
for the calendar month prior to the month in which the Commencement Date occurs
or the last rent adjustment occurred, as applicable. The sum so calculated
shall constitute the new monthly Base Rent hereunder, subject to Subparagraph
(e), below.
(c) Pending receipt of the required C.P.I. and
determination of the actual adjustment, Lessee shall pay an estimated adjusted
rental, as reasonably determined by Lessor by reference to the then available
C.P.I. information. Upon notification of the actual adjustment after
publication of the required C.P.I., any overpayment shall be credited against
the next installment of rent due, and any underpayment shall be immediately due
and payable by Lessee, within thirty (30) days after such notice. Lessor's
failure to request payment of an estimated or actual rent adjustment shall not
constitute a waiver of the right to any adjustment provided for in this Lease
or this Paragraph 4.3.
(d) In the event the compilation and/or publication of
the C.P.I. shall be transferred to any other governmental department or bureau
or agency or shall be discontinued, then the index most nearly the same as the
C.P.I. shall be used to make such calculation. In the event that Lessor and
Lessee cannot agree on such alternative index, then the matter shall be
submitted for decision to JAMS/Endispute in accordance with the then rules of
said association and the decision of the Arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
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(e) The adjustment(s) required by this Rent
Escalation Paragraph shall be subject to the following additional
agreements:
(i) The increase under Subparagraph (b), above,
shall be subject to the following annual, non cumulative minimum and
maximum percentage increases per year involved in the adjustment
period:
Minimum yearly percentage increase: 3%
Maximum yearly percentage increase: 7%
The "adjustment period" is defined as the period commencing with the
month designated in SubParagraph (b) as the reference for determining
the "denominator", and ending with the month preceding the month
designated therein as the reference for determining the "numerator".
Should the adjustment period include a partial year, the minimum and
maximum percentages shall be prorated for that partial year by
multiplying them by a fraction, the numerator of which shall be the
number of full calendar months or major portion thereof contained in
said partial year, and the denominator of which is twelve (12).
(ii) The new monthly Base Rent shall in no event
be less than the rent in effect immediately preceding the rent
adjustment.
5. Security Deposit. Lessee shall deposit with Lessor upon
execution hereof $73,260.00 as security for Lessee's faithful performance of
Lessee's obligations hereunder. If Lessee fails to pay rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damage which Lessor may suffer thereby.
If Lessor so uses or applies all or any portion of said deposit, Lessee shall
within fifteen (15) days after written demand therefor deposit cash with Lessor
in an amount sufficient to restore said deposit to the full amount then
required of Lessee. If the monthly rent shall, from time to time, increase
during the term of this Lease, Lessee shall, at the time of such increase,
deposit with Lessor additional money as a security deposit so that the total
amount of the security deposit held by Lessor shall at all times bear the same
proportion to the then current Base Rent as the initial security deposit bears
to the initial Base Rent set forth in Paragraph 4. Lessor shall not be
required to keep said security deposit separate from its general accounts. If
Lessee performs all of Lessee's obligations hereunder, said deposit, or so much
thereof as has not theretofore been applied by Lessor, shall be returned,
without payment of interest or other increment for its use, to Lessee (or, at
Lessor's option, to the last assignee, if any, of Lessee's interest hereunder)
at the expiration of the term hereof, and after Lessee has
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vacated the Premises. No trust relationship is created herein between Lessor
and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for
warehousing, distribution, general office functions and other lawful uses, and
shall be subject to all requirements of this Lease.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises,
in the state existing on the Commencement Date (or, with respect to
the Office Area, on the Office Area Early Commencement Date), but
without regard to alterations by Lessee which are not constructed by
the contractor pursuant to the Construction Agreement, or to the
specific use for which Lessee will occupy the Premises, does not
violate any covenants or restrictions of record, or any applicable
building code, statute, rule, regulation or ordinance in effect on the
Commencement Date (or Office Area Early Commencement Date, as
applicable). In the event that this warranty has been violated, then
it shall be the obligation of the Lessor, after written notice from
Lessee, to promptly, at Lessor's sole cost and expense, rectify any
such violation. In the event Lessee does not give to Lessor written
notice of the violation of this warranty within twenty-four months
from the Commencement Date (or from the Office Area Early Commencement
Date, as applicable), the correction of same shall be the obligation
of Lessee at Lessee's sole cost.
(b) Except as provided in Paragraph 6.2(a) Lessee
shall, at Lessee's expense, promptly comply with all applicable
statutes, ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance
underwriters or rating bureaus, now in effect or which may hereafter
come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof,
relating in any manner to the Premises and the occupation and use by
Lessee of the Premises and of the Common Areas. Lessee shall not use
nor permit the use of the Premises or the Common Areas in any manner
that will tend to create waste or a nuisance or shall tend to disturb
other occupants of the Industrial Center.
6.3 Conditions of Premises.
(a) Lessor shall deliver the Premises to Lessee
clean and free of debris on the applicable commencement dates improved
in accordance with the Construction Agreement and Lessor warrants to
Lessee that the improvements in the Premises other than those portions
constructed by Lessee (other than pursuant to the Construction
Agreement) shall be in good operating condition on the applicable
commencement dates. In the event that it is determined that this
warranty has been violated, then it shall be the obligation
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of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation. Lessee's failure to give such
written notice to Lessor within twelve (12) months after the Office
Area Early Commencement Date shall cause the conclusive presumption
that Lessor has complied with all of Lessor's obligations hereunder.
(b) Except as otherwise provided in this Lease,
Lessee hereby accepts the Premises in their condition existing as of
the applicable commencement dates or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use of the Premises, and any
covenants, easements or restrictions of record and accepts this Lease
subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither Lessor nor
Lessor's agent has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of
Lessee's business.
(c) In the event Lessor holds a warranty covering
any work of repair or maintenance Lessee is obligated to perform under
this Lease, Lessor shall, at Lessee's cost, assign such warranty to
Lessee to the extent necessary to allow Lessee to obtain the benefit
of that warranty for that repair or maintenance. Effective upon any
termination of this Lease, any warranty to the extent so assigned to
Lessee is hereby reassigned by Lessee to Lessor.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Subject to the provisions of
Paragraph 4.2 (Operating Expenses), 6 (Use), 7.2 (Lessee's Obligations) 7.5,
(Condition of Premises Upon Termination) and 9 (Damage or Destruction), and
except for damage to the Premises, Building, or Common Areas (collectively and
individually, "Lessee Caused Damage") caused by any negligent or intentional
act or omission of Lessee, Lessee's, contractors, licensees, employees or
agents (in which event Lessee shall repair the damage at Lessee's expense or
pay Lessor as provided in Paragraph 7.1.1), Lessor, at Lessor's expense, shall
keep in good condition and repair the Lessor Structural Elements and, subject
to reimbursement pursuant to Paragraph 4.2, the parking lots, walkways,
driveways, landscaping, fences, signs, utility installations and other aspects
of the Common Areas and all parts thereof and shall paint the exterior walls
when necessary as reasonably determined by Lessor to keep them in a sightly
condition. Lessor shall not, however, be obligated to paint the interior
surface of exterior walls, nor shall Lessor be required to maintain, repair or
replace windows, doors or plate glass of the Premises, or to maintain or repair
anything required to be maintained by Lessee under Paragraph 7.2. Lessor shall
have no obligation to make repairs under this Paragraph 7.1 until a reasonable
time after receipt of written notice from Lessee of the need for such repairs.
Lessee expressly waives the benefits of any statute now or
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hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair. Lessor shall
not be liable for damages or loss of any kind or nature by reason of Lessor's
failure to furnish any Common Area Services when such failure is caused by
accident, breakage, repairs, strikes, lockout, or other labor disturbances or
disputes of any character or by any other cause beyond the reasonable control
of Lessor.
7.1.1 Lessee Caused Damage. If any Lessee Caused
Damage relates to the Lessor Structural Elements, Lessee shall pay Lessor
within 10 days after demand the amount by which the cost of repair of any
Lessee Caused Damage to be performed by Lessor exceeds the insurance proceeds
received by Lessor with respect to the Lessee Caused Damage from coverage by
insurance obtained by Lessor as part of Operating Expenses. If the cost of
repair of any Lessee Caused Damage is covered by insurance Lessee is obligated
to carry or is in fact carrying, the proceeds of that insurance shall be paid
over to Lessor to the extent Lessee has not previously reimbursed Lessor for
the cost of such repairs. Any other Lessee Caused Damage shall be repaired by
Lessee at Lessee's cost, provided that Lessee shall be entitled to receive
reimbursement for its costs of performing such repairs to the extent that the
costs of any such repairs are not covered by insurance Lessee is obligated to
carry or is in fact carrying and are covered by insurance obtained by Lessor as
part of Operating Expenses and Lessor receives insurance proceeds with respect
to such damage. Lessor agrees to make a claim for and make reasonable efforts
to secure the insurance proceeds described in this Paragraph 7.1.1.
7.2 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 6
(Use), 7.1 (Lessor's Obligations), and 9 (Damage or Destruction),
Lessee, at Lessee's expense, shall keep in good order, condition and
repair the Premises and every part thereof (whether or not the damaged
portion of the Premises or the means of repairing the same are
reasonably or readily accessible to Lessee) including, without
limiting the generality of the foregoing, the non-structural elements
of foundations, exterior walls, interior bearing walls, and roof of
the Premises, any plumbing, heating, ventilating and air conditioning
systems (Lessee shall procure and maintain, at Lessee's expense, a
ventilating and air conditioning system maintenance contract with a
qualified licensed contractor), electrical and lighting facilities and
equipment within the Premises, or that serves only the Premises
wherever situated, fixtures, walls and interior surfaces of exterior
walls, ceilings, windows, doors, plate glass, and skylights located
within the Premises.
(b) If Lessee fails to perform Lessee's
obligations under this Paragraph 7.2 or under any other paragraph of
this Lease, Lessor may enter upon the Premises after ten (10) days'
prior written notice to Lessee (except in the case of emergency, in
which case only such notice, if any, as shall be reasonable under the
circumstances
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shall be required) perform such obligations on Lessee's behalf and put
the Premises in good order, condition and repair, and the cost thereof
together with interest thereon at the rate of ten percent (10%) per
annum shall be due and payable as additional rent to Lessor together
with Lessee's next Base Rent installment. Without limiting the
foregoing, in the event Lessee fails to appropriately maintain the
heating, ventilating and air conditioning system, Lessor reserves the
right to procure and maintain the ventilating and air conditioning
system maintenance contract and if Lessor so elects, Lessee shall
reimburse Lessor upon demand for the cost thereof.
(c) On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender the Premises to Lessor in
the same condition as received, ordinary wear and tear excepted, clean
and free of debris. Any damage or deterioration of the Premises shall
not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices. Lessee shall repair any
damage to the Premises occasioned by the installation or removal of
Lessee's trade fixtures, alterations, furnishings and equipment.
Notwithstanding anything to the contrary otherwise stated in this
Lease, Lessee shall leave the air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing and fencing on the Premises in good operating
condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior
written consent make any alterations, improvements, additions, or
Utility Installations in, on or about the Premises, or the Industrial
Center, except for nonstructural alterations to the Premises not
exceeding $80,000 in cumulative costs during the term of this Lease or
$20,000.00 as to any single project (collectively, the "Threshold
Amounts"). In any event, whether or not in excess of either of the
Threshold Amounts, Lessee shall make no change or alteration to the
exterior of the Premises nor the exterior of the Building nor the
Industrial Center without Lessor's prior written consent. As used in
this Paragraph 7.3 the term "Utility Installation" shall mean air
lines, power panels, electrical distribution systems, space heaters,
air conditioning, plumbing, and fencing. At the expiration or earlier
termination of the term, Lessor may require that Lessee remove any
alterations, improvements, additions or Utility Installations with
respect to which Lessor's consent was not obtained (or with respect to
which Lessor conditioned Lessor's consent on Lessee's agreement to
remove the same if so required by Lessor) and restore the Premises and
the Industrial Center to their prior condition; provided, however,
that Lessor agrees that Lessee shall not be required to remove any of
the Initial Improvements constructed in the Premises pursuant to the
Construction Agreement attached hereto as Exhibit "C.". Lessor may
require Lessee to provide Lessor, at Lessee's sole cost and expense, a
lien and completion bond in an amount equal to one and one-half times
the estimated cost of such
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improvements, to insure Lessor against any liability for mechanic's
and materialmen's liens and to insure completion of the work;
provided, however, that so long as Vans, Inc., a Delaware corporation
("Vans"), or a Lessee Affiliate (as defined in Paragraph 12.2) of Vans
is the Lessee, Lessor shall not require a lien and completion bond
unless the cost of the work for the particular project exceeds
$100,000.00. Should Lessee make any alterations, improvements,
additions or Utility Installations without the prior approval of
Lessor, Lessor may, at any time during the term of the Lease, require
that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions, or
Utility Installations made by Lessee during the term of this Lease
shall be done in a good and workmanlike manner and of good and
sufficient materials and, in the event that the nature of the
applicable work is such that plans and specifications are prepared,
Lessee shall, within thirty (30) days after completion of such
alteration, improvements, addition or Utility Installation, provide
Lessor with as-built plans and specifications for same.
Notwithstanding anything contained in this Lease to the contrary,
Paragraphs 7.3(d)(i)(bb) and (cc) shall apply to non-structural
alterations, improvements, additions or Utility Installations not
exceeding either of the Threshold Amounts in cost.
(c) Any alterations, improvements, additions or
Utility Installations in or about the Premises or the Industrial
Center that Lessee shall desire to make and which requires the consent
of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to
do so from appropriate governmental agencies, if required, the
furnishing of a copy thereof to Lessor prior to the commencement of
the work and the compliance by Lessee of all conditions of said permit
in a prompt and expeditious manner.
(d) For any additions, alterations, improvements,
or Utility Installations requiring Lessor's prior written consent:
(i) Lessee shall:
(aa) Request Lessor's approval in writing at least
thirty (30) days prior to proposed construction.
(bb) Employ a California licensed architect,
contractor and structural engineer in connection with the proposed
construction, if the work is structural or, in the case of
non-structural work, if the employment of such person is appropriate
in connection with the work being performed and the cost of such work
exceeds $20,000.00.
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(cc) Be fully responsible for the acts of Lessee's
consultants, employees, contractors, subcontractors, invitees and
agents, and cause them to fully comply with any applicable terms of
this Lease and documents referred to by this Lease and all applicable
laws, rules and regulations.
(dd) If employment of that type of professional is
required under clause (bb), enter into written agreements with an
architect and general contractor. Copies of executed agreements will
be forwarded to Lessor within five (5) days of execution.
(ee) Cause to be obtained an applicable building
permit for any and all construction and modifications, and construct
the additions and alterations and perform the construction work in
accordance with all applicable laws, including without limitation the
Americans With Disabilities Act.
(ii) Lessee's Architect (with respect to all
alterations, improvements, additions or Utility Installations for which a
professional architect's services (1) would typically be used by a prudent
tenant doing comparable work or (2) are otherwise used by Lessee) shall:
(aa) Be licensed by the State of California.
(bb) Design and specify within the parameters of the
building work letter (if any) and approved building specifications (if
any) or have received specific written exceptions from Lessor.
(cc) Secure Lessor's written approval before
submitting plans to the general contractor for bidding or to
governmental agencies for approval.
(dd) Secure Lessor's written approval of any changes
or alternates to the plans recommended by the general contractor or
required by governmental agencies.
(ee) Submit a copy of the final application for
permit and issued permit to Lessor.
(ff) Incorporate the building standard details (if
any) supplied by Lessor onto the drawings.
(gg) Submit final plans for Lessor's written
approval prior to construction.
(hh) Be available for final inspection with Lessor
at job completion.
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(ii) Secure Lessor's written approval of details of
any changes in specifications or finishes during construction.
(jj) Provide samples and specifications as required
by Lessor.
(kk) Sign off on the as-built drawings as the
Architect's certification that the improvements have, in fact, been
built as per the Architect's design.
(iii) Lessee's General Contractor and/or
Subcontractors Shall:
(aa) Be licensed by the State of California.
(bb) Have substantial experience providing similar
quality and quantity of improvements. Work history shall be provided
to Lessor prior to being awarded contract.
(cc) Have a bonding capacity equal to or exceeding
the valuation of the job.
(dd) Maintain in full force and effect, throughout
the duration of its performance under the contract with the Lessee, a
Worker's Compensation insurance policy and a Commercial General
Liability insurance policy issued by a licensed insurer with liability
coverage of not less than $1,000,000.00 for personal injury and
$500,000.00 to cover property damage. The Commercial General
Liability insurance policy shall include assumption of contractual
liability. Certificates of insurance containing a thirty (30) day
cancellation clause shall be furnished to Lessor prior to commencement
of performance under the construction contract naming Lessor (Wohl
Venture One, LLC) and its managing agent (currently Cushman &
Wakefield of California, Inc.) as additional insureds.
(ee) Provide a construction schedule to Lessor prior
to commencement of work.
(ff) Use reasonable efforts to require the General
Contractor to warrant the General Contractor's work and that of the
General Contractor's subcontractors, for a minimum of one (1) year.
(gg) Provide Lessor with as-built drawings of all
improvements.
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(iv) All approvals by Lessor, as herein
provided for, shall not be unreasonably withheld and shall be
given within ten (10) business days after submission of a
request therefor or shall be deemed approved. All requests to
be submitted to Lessor shall be submitted through Lessor's
managing agent.
(e) Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or
for Lessee at or for use in the Premises, which claims are or may be
secured by any mechanic's or materialmen's lien against the Premises,
or the Industrial Center, or any interest therein. Lessee shall give
Lessor not less than ten (10) business days' notice prior to the
commencement of any work in the Premises exceeding $10,000.00 in
cumulative costs, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises or the Building as provided
by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense
defend itself and Lessor against the same and shall pay and satisfy
any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises or the
Industrial Center, upon the condition that if Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in
an amount equal to such contested lien claim or demand indemnifying
Lessor against liability for the same and holding the Premises and the
Industrial Center free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys fees and
costs in participating in such action if Lessor shall decide it is to
Lessor's best interest to do so.
(f) All alterations, improvements, additions and
Utility Installations, other than trade fixtures and personal property
of Lessee, which may be made on or brought onto the Premises, shall be
the property of Lessor and shall remain upon and be surrendered with
the Premises at the expiration or earlier termination of the Lease
term, unless Lessor requires their removal pursuant to Paragraph
7.3(a). Notwithstanding the provisions of this Paragraph 7.3(f),
Lessee's machinery and equipment shall remain the property of Lessee
and may be removed by Lessee subject to the provisions of Paragraph
7.2.
7.4 Utility Additions. Lessor reserves the right to install
new or additional utility facilities throughout the Common Areas for the
benefit of Lessor or Lessee, or any other lessee of the Industrial Center,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, security systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably interfere
with Lessee's use of the Premises.
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7.5 Condition of Premises Upon Termination; Additional
Use Provisions.
7.5.1 Lessee shall maintain the Premises as provided
in Paragraph 7.2 and in accordance with the requirements of any covenants or
restrictions as may from time to time be applicable to the Premises. Lessee,
in keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices and any damage or deterioration shall not be
deemed "ordinary wear and tear" if the same could have been prevented by good
maintenance practice. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair, subject to Lessor's obligations under Paragraph 7.1. Notwithstanding
anything contained in the Lease to the contrary, Lessee shall make all repairs
at Lessee's expense or pay Lessor, subject to reimbursement from insurance
proceeds, as provided in Paragraph 7.1.1 with respect to any Lessee Caused
Damage.
7.5.2 Notwithstanding anything to the contrary in
Paragraph 7.2 of this Lease, upon termination of this Lease, Lessee shall leave
all plumbing, heating (including space heaters), air conditioning, electrical
and mechanical systems, on the Premises and in good condition and operating
order, ordinary wear and tear excepted, and Lessee shall upon demand pay to
Lessor that portion of the cost to restore such items to good condition and
operating order.
7.5.3 Notwithstanding anything to the contrary
contained in this Lease, the Premises shall not be used for the warehousing or
distribution of hazardous or explosive products, substances or materials.
8. Insurance; Indemnity.
8.1 Lessee hereby agrees to indemnify, defend and hold
harmless Lessor, its successors, assigns, subsidiaries, directors, officers,
agents and employees from and against any and all damage, loss, liability or
expense including, but not limited to, attorney's fees and legal costs suffered
by same directly or by reason of any claim, suit or judgement 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 resulting anytime therefrom, and
property damage sustained by such person or persons which arises out of, is
occasioned by or in any way attributable to the use or occupancy of the
Premises by the Lessee, the acts or omission of the Lessee, its agents,
employees or any other contractors brought onto said Premises by the Lessee, or
any breach or default in the performance of any obligation on Lessee's part to
be performed under the terms of this Lease, except to the extent caused by the
gross negligence or wilful misconduct of Lessor, its employees, and agents.
Notwithstanding the foregoing, to the extent any damage or repair obligation of
Lessee under this Paragraph 8.1 is covered by insurance obtained by Lessor as
part of Operating Expenses, but is not covered by insurance obtained by Lessee,
then Lessee shall be relieved of its indemnity obligation therefor up to
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the amount of the insurance proceeds which Lessor actually receives in
connection therewith. Lessor agrees to make claims for and make reasonable
efforts to obtain those proceeds. If any action or proceeding is brought
against Lessor by reason of any such claim, Lessee, upon notice from Lessor,
shall defend same at Lessee's expense by counsel reasonably satisfactory to
Lessor (it being agreed that Lessor's good faith belief that a conflict of
interest exists or may reasonably exist in the event that Lessor and Lessee are
represented by the same counsel shall constitute reasonable grounds for
Lessor's insistence on separate counsel). Such loss or damage shall include,
but not be limited to, any injury or damage to Lessor's personnel (including
death resulting anytime therefrom) on the Premises. Lessor shall not be liable
for any damages arising from any act or neglect of any other tenant, if any, of
the Building or Industrial Center. Lessee agrees that the obligations assumed
herein shall survive the termination of this Lease.
8.2 Lessee hereby agrees to maintain in full force and effect
at all times during the term of this Lease, at Lessee's own expense, for the
protection of Lessee, Lessor and Lessor's property manager, as their interest
may appear, policies of insurance issued by a responsible carrier or carriers
to Lessor which afford the following coverages:
(a) Workers' Compensation with statutory limits.
(b) Employers' Liability insurance with the following
minimum limits:
Bodily injury by disease per person $1,000,000
Bodily injury by accident policy limit $1,000,000
Bodily injury by disease policy limit $1,000,000
(c) Property insurance on a special causes of loss
insurance form covering any and all personal property of Lessee
including but not limited to improvements, betterments, furniture,
fixtures, Utility Installations, and equipment on the Premises in an
amount not less than their full replacement cost, with a deductible
not to exceed $10,000. Lessee shall use commercially reasonable
efforts to obtain a waiver of subrogation.
(d) Commercial General Liability Insurance including
Broad Form Property Damage and Contractual Liability with the
following minimum limits:
General Aggregate $2,000,000
Products/Completed Operations Aggregate $2,000,000
Each Occurrence $1,000,000
Personal & Advertising Injury $1,000,000
Medical Payments $5,000 per person
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(e) Umbrella/Excess Liability on a following form basis
with the following minimum limits:
General Aggregate $10,000,000
Each Occurrence $10,000,000
The limits of said insurance in this Paragraph 8.2 shall not, however,
limit the liability of Lessee hereunder.
8.3 Lessor shall, at all times during the term of this Lease,
maintain the following insurance:
(a) a policy or policies of all-risk property insurance,
issued by and binding upon some solvent insurance company, insuring
for the full replacement cost of the building on the Premises. Lessor
shall not be obligated to insure, and shall not assume any liability
or risk of loss for, any of Lessee's furniture, equipment, machinery,
goods, supplies, utility installations, improvements, or alterations
upon the Premises. This policy shall contain an agreed amount
endorsement and be written with no coinsurance. Lessor may, but shall
not be obligated to, obtain earthquake and flood insurance.
(b) Rent insurance on an all-risk basis in an amount
equal to all that is called for under Paragraph 4 of this Lease (Base
Rent and any additional rents payable under this Lease including tax
and insurance costs) for a period of at least twelve (12) months
commencing with the date of loss.
(c) Boiler and machinery insurance in an amount
satisfactory to Lessor on a comprehensive coverage form.
8.4 The Lessee shall deliver to Lessor prior to taking
possession of the Premises, and thereafter at least thirty (30) days prior to
expiration of such policy, certificates of insurance evidencing the above
coverage with limits not less than those specified above. Insurance required
hereunder shall be in companies holding a "General Policyholders Rating" of at
least A-VIII as set forth in the most current issue of "Best's Insurance
Guide". Such Certificates with the exception of Worker's Compensation, shall
name Lessor, its subsidiaries, directors, agents and employees, and its
property manager as additional insureds and shall expressly provide that the
interest of same herein shall not be affected by a breach by Lessee of any
insurance policy provision for which such Certificates evidence coverage.
Further, Lessee shall use commercially reasonable efforts to cause all
Certificates to provide that no less than thirty (30) days prior written notice
shall be given to Lessor in the event of material alteration to or cancellation
of the coverage evidenced by such Certificates.
8.5 Lessor may secure and maintain, at Lessee's expense,
increased amounts of insurance and other insurance coverage in such limits, as
Lessor may require in its reasonable judgment to afford Lessor adequate
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protection consistent with the practices of institutional owners of comparable
properties.
8.6 Lessor makes no representation that the limits of
liability specified to be carried by Lessee under the term of this Lease are
adequate to protect Lessee against Lessee's undertaking under this Paragraph 8
and in the event Lessee believes that any such insurance coverage called for
under this Lease is insufficient, Lessee shall provide, at its own expense,
such additional insurance as Lessee deems adequate.
8.7 Anything in this Lease to the contrary notwithstanding,
Lessor and Lessee hereby waive and release each other of and from any and all
rights of recovery, claims, action or cause of action, against each other,
their agents, officers and employees, for any loss or damage that may occur to
the Premises, improvements to the building of which the Premises are a part,
personal property (building contents) within the building on the Premises, any
furniture, equipment, machinery, goods or supplies not covered by this Lease
which Lessee may bring or obtain upon the Premises or any additional
improvements which Lessee may construct on the Premises, by reason of fire, the
elements or any other cause which could be insured against under the terms of
all risk property insurance policies, regardless of cause or origin, including
negligence of Lessor or Lessee and their agents, officers and employees.
Because this Paragraph will preclude the assignment of any claim mentioned in
it by way of subrogation (or otherwise) to an insurance company (or any other
person) each party to this Lease agrees immediately to give to each insurance
company, written notice of the terms of the mutual waivers contained in this
Paragraph, and to have the insurance policies properly endorsed if necessary to
prevent the invalidation of the insurance coverages by reason of the mutual
waivers contained in this Paragraph. Lessee also waives and releases Lessor,
its agents, officers and employees of and from any and all rights of recovery,
claim, action or cause of action for any loss or damage insured against under
any other policies of insurance carried by Lessee.
8.8 Payment of Premium Increase.
(a) After the term of this Lease has commenced, Lessee
shall not be responsible for paying Lessee's Share of any increase in the
property insurance premium for the Industrial Center specified by Lessor's
insurance carrier as being caused by the use, acts or omissions of any other
lessee of the Industrial Center, or by the nature of such other lessee's
occupancy which create an extraordinary or unusual risk.
(b) Lessee, however, shall pay the entirety of any
increase in the property insurance premium for the Industrial Center over what
it was immediately prior to the commencement of the term of this Lease if the
increase is specified by Lessor's insurance carrier as being caused by the
specific nature of Lessee's occupancy or any act or omission of Lessee, rather
than the general occupancy of the Premises.
8.9 Exemption of Lessor from Liability. Lessee hereby agrees
that Lessor shall not be liable for injury to Lessee's business or any loss
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of income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises or the Industrial Center, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning, or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon
other portions of the Industrial Center, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee, Lessor shall not be liable for
any damages arising from any act or neglect of any other lessee, occupant or
user of the Industrial Center, nor from the failure of Lessor to enforce the
provisions of any other lease of the Industrial Center. Notwithstanding
anything in this Paragraph 8.9 to the contrary, but subject to Paragraph 8.7,
nothing in this Lease shall limit Lessor's liability for injuries to natural
persons or damage to property to the extent caused by the active negligence or
willful misconduct of Lessor, its employees or agents.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean if the
Premises are damaged or destroyed to the extent that the cost of
repair is less than fifty percent of the then replacement cost of the
Premises.
(b) "Premises Total Destruction" shall mean if
the Premises are damaged or destroyed to the extent that the cost of
repair is fifty percent or more of the then replacement cost of the
Premises.
(c) "Industrial Center Buildings" shall mean all
of the buildings on the Industrial Center site.
(d) "Industrial Center Buildings Total
Destruction" shall mean if the Industrial Center Buildings are damaged
or destroyed to the extent that the cost of repair is fifty percent or
more of the then replacement cost of the Industrial Center Buildings.
(e) "Insured Loss" shall mean damage or
destruction which was caused by an event required to be covered by the
insurance described in Paragraph 8. The fact that an Insured Loss has
a deductible amount shall not make the loss an uninsured loss.
(f) "Replacement Cost" shall mean the amount of
money necessary to be spent in order to repair or rebuild the damaged
area to the condition that existed immediately prior to the damage
occurring excluding all improvements made by lessees.
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9.2 Premises Partial Damage; Premises Building Partial
Damage.
(a) Insured Loss: Subject to the provisions of
Paragraphs 9.4 and 9.5, if at any time during the term of this Lease
there is damage which is an Insured Loss and which falls into the
classification of Premises Partial Damage, then Lessor shall, at
Lessor's expense, repair any damage to the Base Building (as defined
in the Construction Agreement), other than tenant improvements,
fixtures and Utility Installations constructed by Lessee, and Lessee
shall, at Lessee's expense, repair all other damage to the Premises
and to Lessee's fixtures, equipment, tenant improvements or Utility
Installations, as soon as reasonably possible and this Lease shall
continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of
Paragraphs 9.4 and 9.5, if at any time during the term of this Lease
there is damage which is not an Insured Loss and which falls within
the classification of Premises Partial Damage, unless it is Lessee
Caused Damage (in which event Lessee shall make all repairs at
Lessee's expense or pay Lessor, subject to reimbursement from
insurance proceeds, as provided in Paragraph 7.1.1), which damage
prevents Lessee from using the damaged portion of the Premises, Lessor
may at Lessor's option, which shall be exercised within forty-five
(45) days of the occurrence of such casualty, either (i) repair any
damage to the Base Building, other than tenant improvements, fixtures
and Utility Installations constructed by Lessee, as soon as reasonably
possible at Lessor's expense, in which event Lessee shall, at Lessee's
expense, repair all other damage to the Premises and to Lessee's
fixtures, equipment, tenant improvements or Utility Installations as
soon as reasonably possible, and in such event this Lease shall
continue in full force and effect, or (ii) give written notice to
Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate this Lease
as of the date of the occurrence of such damage. If Lessor does not
give such termination notice within such forty-five (45) day period,
Lessor shall be deemed to have elected not to rebuild. In the event
Lessor elects to give such notice of Lessor's intention to cancel or
terminate this Lease or fails to give such notice within such
forty-five (45) days, Lessee shall have the right within twenty (20)
days after the receipt of such notice (or expiration of such
forty-five (45) days if Lessor fails to give such notice) to give
written notice to Lessor of Lessee's intention to repair all of the
damage (including any damage to the Base Building) at Lessee's
expense, without reimbursement from Lessor, in which event this Lease
shall continue in full force and effect, and Lessee shall proceed to
make such repairs as soon as reasonably possible. If Lessee does not
give such notice within such 20-day period this Lease shall be
cancelled and terminated as of the date of the occurrence of such
damage.
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9.3 Premises Total Destruction; Industrial Center
Buildings Total Destruction.
(a) Subject to the provisions of Paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage,
whether or not it is an Insured Loss, and which falls into the
classifications of either (i) Premises Total Destruction, or (ii)
Industrial Center Buildings Total Destruction, then Lessor may at
Lessor's option, to be exercised within forty-five (45) days of the
casualty, either (i) repair any damage to the Base Building, other
than tenant improvements, fixtures and Utility Installations
constructed by Lessee, as soon as reasonably possible at Lessor's
expense, in which event Lessee shall, at Lessee's expense, repair all
other damage to the Premises and to Lessee's fixtures, tenant
improvements and Utility Installations as soon as reasonably possible,
and in such event this Lease shall continue in full force and effect,
or (ii) give written notice to Lessee within forty-five (45) days
after the date of occurrence of such damage of Lessor's intention to
cancel and terminate this Lease, in which case this Lease shall be
cancelled and terminated as of the date of the occurrence of such
damage. If Lessor does not give such termination notice within such
forty-five (45) day period, Lessor shall be deemed to have elected not
to rebuild and the Lease shall be cancelled and terminated as of the
occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to Paragraph 9.4(b), if at any time
during the last six months of the term of this Lease there is
substantial damage, whether or not an Insured Loss, which falls within
the classification of Premises Partial Damage, Lessor or Lessee may at
its option cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to the other party
of its election to do so within 30 days after the date of occurrence
of such damage.
(b) Notwithstanding Paragraph 9.4(a), in the
event that Lessee has an option to extend or renew this Lease, and the
time within which said option may be exercised has not yet expired,
Lessee shall exercise such option, if it is to be exercised at all, no
later than twenty (20) business days after the occurrence of an
Insured Loss falling within the classification of Premises Partial
Damage during the last six months of the term of this Lease. If
Lessee duly exercises such option during said twenty (20) business day
period, Lessor shall, at Lessor's expense, repair any damage to the
Base Building, other than tenant improvements, fixtures and Utility
Installations constructed by Lessee, as soon as reasonably possible at
Lessor's expense, in which event Lessee shall, at Lessee's expense,
repair all other damage to the Premises and to Lessee's fixtures,
equipment, tenant improvements or Utility Installations as soon as
reasonably possible, and in such event this Lease shall continue in
full force and effect. If Lessee fails to exercise such
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option during said twenty (20) business day period, then Lessor may
at Lessor's option terminate and cancel this Lease as of the
expiration of said twenty (20) business day period by giving written
notice to Lessee of Lessor's election to do so within ten (10)
business days after the expiration of said twenty (20) business day
period, notwithstanding any term or provision in the grant of option
to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) Subject to the provisions of Paragraph 51, in
the event Lessor and/or Lessee repairs or restores the Premises
pursuant to the provisions of this Paragraph 9, the rent, Operating
Expenses and all other amounts payable to Lessor hereunder for the
period during which such damage, repair or restoration continues shall
be abated in proportion to the degree to which Lessee's use of the
Premises is impaired; provided that if the damage, repair or
restoration relates to Lessee Caused Damage, that abatement shall be
given only to the extent Lessor receives proceeds from rent abatement
insurance. Except for abatement of rent as provided above, if any,
Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or
restore the Base Building under the provisions of this Paragraph 9 and
shall not commence such repair or restoration within one hundred (100)
days after such obligation shall accrue, Lessee may at Lessee's option
cancel and terminate this Lease by giving Lessor written notice of
Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate
as of the date of such notice. In the event that Lessor shall be
obligated to repair or restore the Base Building pursuant to Paragraph
9 of this Lease and shall not commence such repair or restoration
within one hundred (100) days after such obligation shall accrue, the
right of Lessee to terminate this Lease pursuant to this Paragraph
9.5(b) shall be the sole right and remedy of Lessee against Lessor,
and Lessor shall have no other liability to Lessee, for damages,
specific performance or otherwise, in connection with any such
failure.
(c) If any repair or restoration that Lessor shall
be obligated to or shall elect to undertake under the provisions of
this Paragraph 9 is estimated by Lessor's architect to take more than
270 days from the event of damage to complete, either party at such
party's election, may cancel and terminate this Lease by giving the
other party written notice of the electing party's election to do so
at any time prior to the commencement of such repair or restoration.
In such event, this Lease shall terminate as of the date of such
notice. Lessor agrees to cause its architect to provide its estimate
of the time necessary to complete the repair or restoration within 60
days after the damage or destruction.
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(d) If Lessor shall be obligated to repair or
restore the Base Building under the provisions of this Paragraph 9 and
shall not complete such repair or restoration within two years after
the damage or destruction, Lessee may at Lessee's option cancel and
terminate this Lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the Lessor's completion of such
repair or restoration. In such event, this Lease shall terminate as
of the date of such notice. Lessee's right to terminate this Lease
pursuant to this Paragraph 9.5(d) shall be the sole right and remedy
of Lessee against Lessor, and Lessor shall have no other liability to
Lessee for damages, specific performance or otherwise in connection
with any such failure to complete such repair or restoration.
9.6 Termination -- Advance Payments. Upon termination of
this Lease pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor,
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any
statute which relate to termination of leases when leased property is destroyed
and agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property
tax, as defined in Paragraph 10.3, applicable to the Industrial Center subject
to reimbursement by Lessee of Lessee's Share of such taxes in accordance with
the provisions of Paragraph 4.2, except as otherwise provided in Paragraph
10.2.
10.2 Additional Improvements. Lessee shall not be
responsible for paying Lessee's Share of any increase in real property tax
specified in the tax assessor's records and work sheets as being caused by
additional improvements placed upon the Industrial Center by other lessees or
by Lessor for the exclusive enjoyment of such other lessees. Lessee shall,
however, pay to Lessor at the time that Operating Expenses are payable under
Paragraph 4.2(c) the entirety of any increase in real property tax if assessed
solely by reason of additional improvements placed upon the Premises by Lessee
or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein, the
term "real property tax" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the Industrial Center
or any portion thereof by any authority having the direct or indirect power to
tax, including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable
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interest of Lessor in the Industrial Center or in any portion thereof, as
against Lessor's right to rent or other income therefrom, and as against
Lessor's business of leasing the Industrial Center. The term "real property
tax" shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinabove included within the definition of "real property tax," or (ii) the
nature of which was hereinbefore included within the definition of "real
property tax" or (iii) which is imposed for a service or right not charged
prior to June 1, 1978, or, if previously charged, has been increased since June
1, 1978 or (iv) which is imposed as a result of a transfer, either partial or
total, of Lessor's interest in the Industrial Center or which is added to a tax
or charge hereinbefore included within the definition of real property tax by
reason of such transfer, or (v) which is imposed by reason of this transaction,
any modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Industrial Center is not
separately assessed, Lessee's Share of the real property tax liability shall be
an equitable proportion of the real property taxes for all of the land and
improvements included within the tax parcel assessed, such proportion to be
determined by Lessor from the respective valuations assigned in the assessor's
work sheets or such other information as may be reasonably available, Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Lessee contained in the
Premises or elsewhere. When possible, Lessee shall cause said trade
fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay to
Lessor the Shares attributable to Lessee within ten (10) days after
receipt of a written statement setting forth the taxes applicable to
Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light,
power, telephone and other utilities and services supplied to the Premises,
together with any taxes thereon. Unless separate metering is not available
from the applicable utility, all such utilities shall be separately metered
with respect to the Building, and the installation of such separate meters
shall be Lessor's obligation as part of the Base Building work. If any such
services cannot be separately metered to the Premises at any time, Lessee shall
pay, at Lessor's option, either Lessee's Share or a reasonable proportion to be
determined by Lessor of all charges jointly metered with other premises in the
Industrial Center.
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12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily
or by operation of law assign, transfer, mortgage, sublet, or otherwise
transfer or encumber all or any part of Lessee's interest in the Lease or in
the Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold, condition or delay. Without limiting Paragraph 12.2
hereof, a sale or transfer of all or substantially all of the assets of Lessee
shall be a transfer within this Paragraph 12. Lessor shall respond to Lessee's
request for consent hereunder within ten (10) business days and any such
assignment, transfer, mortgage, encumbrance or subletting without such consent
shall be void, and shall constitute a noncurable breach of this Lease without
the need for notice to Lessee under Paragraph 13.1. If at any time or from
time to time during the term of this Lease, Lessee desires to assign or sublet
all or any part of Lessee's interest in this Lease or in the Premises, Lessee
shall give prior written notice to Lessor setting forth the terms of the
proposed assignment or subletting and the space so proposed to be assigned or
sublet. Such assignment or sublease shall be subject to, without limitation,
all the conditions in this Paragraph 12 and the following conditions:
(a) The assignment or sublease shall be on the terms set
forth in the notice given to Lessor. Any subsequent changes or
modifications will require Lessor's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
(b) Lessee acknowledges that Lessor's agreement to lease
these Premises to Lessee at the rent and terms stated herein is made
in material reliance upon Lessor's evaluation of this particular
Lessee's background, experience and ability, as well as the nature of
the use of the Premises by this Lessee as set forth in Paragraph 6.
In the event that Lessee shall request Lessor's written consent to
assign or sublease the Premises as required in this Paragraph 12.1,
then each such request for consent shall be accompanied by the
following:
(i) Financial statements of the proposed assignee
or sublessee;
(ii) A statement of the specific uses for which
the Premises will be utilized by the proposed assignee or sublessee;
and
(iii) Preliminary plans prepared by an architect or
civil engineer for all alterations to the Premises that are
contemplated to be made by Lessee, the proposed assignee or sublessee.
(c) No assignment or sublease shall be valid and no
assignee or sublessee shall take possession of the Premises assigned
or subleased until an executed counterpart of such assignment or
sublease has been delivered to Lessor.
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(d) No sublessee or assignee shall have a right further
to sublet or assign except in accordance with all consent and other
requirements of this Paragraph 12.
(e) 50% (after deduction of (i) reasonable real estate
brokerage commission paid by Lessee and (ii) any actual out-of- pocket
costs incurred by Lessee in connection with improvement allowances or
tenant improvements provided to the sublessee or assignee) of any sums
or other economic consideration received by Lessee as a result of such
assignment or subletting (except rental or other payments received
which are attributable to amortization of the cost of leasehold
improvements other than building standard tenant improvements made to
the assigned or sublet portion of the Premises by Lessor, and except,
in the event that Lessee's interests in the Premises are assigned or
sublet together with other assets of Lessee, for consideration which
is attributable to assets of Lessee other than its interests in the
Premises), whether denominated rentals under the assignment or
sublease or otherwise which exceed, in the aggregate, the total sums
which Lessee is obligated to pay Lessor under this Lease (prorated to
reflect obligations allocable to that portion of the Premises subject
to such assignment or sublease) shall be payable to Lessor as
additional rental under this Lease without affecting or reducing any
other obligation of Lessee hereunder. In the event of subletting of
only a portion of the Premises, in calculating whether the rent
received by Lessee exceeds the rent payable under this Lease, the rent
payable under the Lease shall be prorated according to the square
footage involved in order to reflect the rent applicable to the space
sublet.
12.2 Lessee Affiliate. Notwithstanding the provisions of
Paragraph 12.1 hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessor's consent, to any corporation or other business entity
which controls, is controlled by or is under common control with Lessee, or to
any corporation or other business entity resulting from the merger or
consolidation with Lessee, or to any person or entity which acquires all or
substantially all of the assets of Lessee as a going concern of the business
that is being conducted on the Premises, all of which are referred to as
"Lessee Affiliate," provided that before such assignment shall be effective
said assignee shall assume, in full, the obligations of Lessee under this
Lease. Any such assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease, even if after such
assignment or subletting the terms of this Lease are materially changed or
altered without the consent of Lessee, the consent of whom shall not be
necessary.
12.3 Lessees Other Than Individuals.
(a) If Lessee is a partnership, a transfer of any
interest of a general partner, a withdrawal of any general partner
from the partnership, or the dissolution of the partnership, shall be
deemed to be an assignment of this Lease.
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(b) If Lessee is a corporation, unless Lessee is
a public corporation whose stock is regularly traded on a national
stock exchange, or is regularly traded in the over-the-counter market
and quoted on NASDAQ, any sale or other transfer of a percentage of
capital stock of Lessee which results in a change of controlling
persons, or the sale or other transfer of substantially all of the
capital stock or assets of Lessee, shall be deemed to be an assignment
of this Lease.
12.4 Terms and Conditions of Assignment. Regardless of
Lessor's consent, no assignment shall release Lessee of Lessee's obligations
hereunder or alter the primary liability of Lessee to pay the Base Rent and
Lessee's Share of Operating Expenses, and to perform all other obligations to
be performed by Lessee hereunder. Lessor may accept rent from any person other
than Lessee pending approval or disapproval of such assignment. Neither a
delay in the approval or disapproval of such assignment nor the acceptance of
rent shall constitute a waiver or estoppel of Lessor's right to exercise its
remedies for the breach of any of the terms or conditions of this Paragraph 12
of this Lease. Consent to one assignment shall not be deemed consent to any
subsequent assignment. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee, Lessor may consent to subsequent assignments of
this Lease or amendments or modifications to this Lease with assignees of
Lessee, without notifying Lessee, or any successor of Lessee, and without
obtaining its or their consent thereto and such action shall not relieve Lessee
of liability under this Lease.
12.5 Terms and Conditions Applicable to Subletting.
Regardless of Lessor's consent, the following terms and conditions
shall apply to any subletting by Lessee of all or any part of the
Premises and shall be included in subleases:
(a) Lessee hereby assigns and transfers to Lessor
all of Lessee's interest in all rentals and income arising from any
sublease heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's
obligations under this Lease; provided, however, that until a default
shall occur in the performance of Lessee's obligations under this
Lease, Lessee may, subject to Paragraph 12.1(e) receive, collect and
enjoy the rents accruing under such sublease. Lessor shall not, by
reason of this or any other assignment of such sublease to Lessor nor
by reason of the collection of the rents from a sublessee, be deemed
liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a
default exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents due and to become due under the
sublease, Lessee agrees that such sublessee shall have the right to
rely upon any such statement and request from Lessor, and that
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such sublessee shall pay such rents to Lessor without any obligation
or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee or Lessor
for any such rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be
effective unless and until it has been approved in writing by Lessor.
In entering into any sublease, Lessee shall use only such form of
sublease as is reasonably satisfactory to Lessor, and once approved by
Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublessee shall, by reason of
entering into a sublease under this Lease, be deemed, for the benefit
of Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions
contained in a sublease to which Lessor has expressly consented in
writing.
(c) If Lessee's obligations under this Lease have
been guaranteed by third parties, then a sublease, and Lessor's
consent thereto, shall not be effective unless said guarantors give
their written consent to such sublease and the terms thereof.
(d) The consent by Lessor to any subletting shall
not release Lessee from its obligations or alter the primary liability
of Lessee to pay the rent and perform and comply with all of the
obligations of Lessee to be performed under this Lease.
(e) The consent by Lessor to any subletting shall
not constitute a consent to any subsequent subletting by Lessee or to
any assignment or subletting by the sublessee. However, Lessor may
consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining
their consent and such action shall not relieve such persons from
liability.
(f) In the event of any default under this Lease,
Lessor may proceed directly against Lessee, any guarantors or any one
else responsible for the performance of this Lease, including the
sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor, or any security
held by Lessor or Lessee.
(g) In the event Lessee shall default in the
performance of its obligations under this Lease, Lessor, at its option
and without any obligation to do so, may require any sublessee to
attorn to Lessor, in which event Lessor shall undertake the
obligations of Lessee under such sublease from the time of the
exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents
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or security deposit paid by such sublessee to Lessee or for any other
prior defaults of Lessee under such sublease.
(h) Each and every consent required of Lessee
under a sublease shall also require the consent of Lessor.
(i) No sublessee shall further assign or sublet
all or any part of the Premises without Lessor's prior written
consent.
(j) Lessor's written consent to any subletting of
the Premises by Lessee shall not constitute an acknowledgement that no
default then exists under this Lease of the obligations to be
performed by Lessee nor shall such consent be deemed a waiver of any
then existing default, except as may be otherwise stated by Lessor at
the time.
(k) With respect to any subletting to which
Lessor has consented, Lessor agrees to deliver a copy of any notice of
default by Lessee to the sublessee. Such sublessee shall have the
right to cure a default of Lessee within ten (10) days after service
of said notice of default upon such sublessee, and the sublessee shall
have a right of reimbursement and offset from and against Lessee for
any such defaults cured by the sublessee.
12.6 Attorney's Fees. In the event Lessee shall assign or
sublet the Premises or request the consent of Lessor to any assignment or
subletting or if Lessee shall request the consent of Lessor for any act Lessee
proposes to do then Lessee shall pay Lessor's reasonable attorney's and/or
consultants' fees incurred in connection therewith, such attorney's fees not to
exceed $500.00 for each such request.
13. Default Remedies.
13.1 Default. The occurrence of any one or more of the
following events shall constitute a material default of this Lease by Lessee:
(a) (i) The vacating of the Premises by Lessee in
the event that it results in an impairment or limitation on the
insurance coverage for the Premises or any breach or default of any
loan then encumbering the Premises; or (ii) the abandonment of the
Premises by Lessee in the event Lessee is deemed to have abandoned the
Premises pursuant to California Civil Code Section 1951.3.
(b) The failure by Lessee to make any payment of
rent or any other payment required to be made by Lessee hereunder, as
and when due, where such failure shall continue for a period of ten
(10) days after written notice thereof from Lessor to Lessee. In the
event that Lessor serves Lessee with a Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes such Notice to Pay
Rent or Quit shall also constitute the notice required by this
subparagraph.
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(c) Except as otherwise provided in this Lease,
the failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in paragraph (b) above, where such
failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee; provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30)
days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure
to completion. To the extent permitted by law, such thirty (30) day
notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(d) (i) The making by Lessee of any general
arrangement or general assignment for the benefit of creditors; (ii)
Lessee becomes a "debtor" as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within one hundred twenty (120)
days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where possession is
not restored to Lessee within ninety (90) days; or (iv) the
attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in
this Lease, where such seizure is not discharged within ninety (90)
days. In the event that any provision of this Paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or
effect.
(e) The discovery by Lessor that any financial
statement given to Lessor by Lessee, any assignee of Lessee, any
subtenant of Lessee, any successor in interest of Lessee or any
guarantor of Lessee's obligations hereunder, was materially false and
that such financial statement was known by Lessee or the other parties
who delivered it to be materially false at the time it was delivered.
13.2 Remedies. If Lessee fails to perform any affirmative
duty or obligation of Lessee under this Lease, within ten (10) business days
after written notice to Lessee (or in case of an emergency, without notice),
Lessor may at its option (but without obligation to do so), perform such duty
or obligation on Lessee's behalf including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses,
permits or approvals. The costs and expenses of any such performance by Lessor
shall be due and payable by Lessee to Lessor upon invoice therefor. In the
event of a breach of this Lease by Lessee, as defined in Paragraph 13.1, with
or without further notice or demand, and without limiting Lessor in the
exercise of any right or remedy which Lessor may have by reason of such breach,
Lessor may:
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease and the term
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hereof shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the worth at the time of the
award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
the Lessee proves could have been reasonably avoided; (iii) the worth
at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such
rental loss that the Lessee proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Lessor for all the
detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including but not limited to the
cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and that portion of the leasing commission
paid by Lessor applicable to the unexpired term of this Lease. The
worth of the time of award of the amount referred to in provisions (i)
and (ii) of the prior sentence shall be calculated based on an
interest rate equal to ten percent (10%). The worth at the time of
award of the amount referred to in provision (iii) of the prior
sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding the unpaid rent and
damages as are recoverable therein, or Lessor may reserve therein the
right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under
subparagraphs 13.1(b), (c) or (d) was not previously given, a notice
to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d).
In such case, the applicable grace period under subparagraphs 13.1(b),
(c) or (d) and under the unlawful detainer statute shall run
concurrently after the one such statutory notice, and the failure of
Lessee to cure the default within the greater of the two such grace
periods shall constitute both an unlawful detainer and breach of this
Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to
possession in effect (in California under California Civil Code
Section 1951.4) after Lessee's breach and abandonment and recover the
rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. See Paragraphs 12 and
36 for the limitations on assignment and subletting which limitations
Lessee
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and Lessor agree are reasonable. Acts of maintenance or preservation,
efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter
available to Lessor under the laws or judicial decisions of the State
of California. Unpaid installments of rent and other unpaid monetary
obligations of Lessee under the terms of this Lease shall bear
interest from the date due at the maximum rate allowed by law.
(d) The expiration or termination of this Lease
and/or the termination of Lessee's right to possession shall not
relieve Lessee from liability under any indemnity provisions of this
Lease as to matters occurring or accruing during the term hereof or by
reason of Lessee's occupancy of the Premises.
13.3 Default by Lessor. Lessor shall not be in default
unless Lessor fails to perform obligations required of Lessor within a
reasonable time, but in no event later than thirty (30) days after written
notice by Lessee to Lessor and to the holder of any first mortgage or deed of
trust covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has failed to perform
such obligation; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days are required for performance then
Lessor shall not be in default if Lessor commences performance within such
thirty (30) day period and thereafter diligently prosecutes the same to
completion.
13.4 Late Charges. Lessee hereby acknowledges that late
payment by Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses
or other sums due hereunder will cause Lessor to incur costs not contemplated
by this Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Property. Accordingly, if any
installment of Base Rent, Operating Expenses or any other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) business
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to 5% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of any of the aforesaid monetary
obligations of Lessee, then Base Rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding Paragraph
4.1 or any other provision of this Lease to the contrary.
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13.5 Notice Before Late Charge. Notwithstanding the
provisions of Paragraph 13.4, the 5% late charge described in Paragraph 13.4
shall not be imposed with respect to the first late payment during the term of
this Lease unless the applicable payment due from Lessee is not received by
Lessor or Lessor's designee within ten (10) business days following written
notice from Lessor that such payment was not received when due. Following the
first such written notice from Lessor during the term of this Lease (and
regardless of whether such payment is then received within such 10-business day
period), a late charge will be imposed without notice (as set forth in
Paragraph 13.4) for any subsequent payment due from Lessee during the term of
this Lease which is not received within ten (10) business days of its due date.
14. Condemnation. If the Premises or any portion thereof or the
Industrial Center are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first
occurs. If more than twenty percent of the floor area of the Premises, or more
than twenty-five percent of that portion of the Common Area designated as
parking for the Industrial Center is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within thirty (30) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within thirty (30) days after the condemning authority shall
have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the floor area of the Premises taken bears to
the total floor area of the Premises. No reduction of rent shall occur if the
only area taken is that which does not have the Premises located thereon. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any award for loss of or damage to Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount
in excess of such severance damages required to complete such repair.
15. Broker's Commissions.
Lessee and Lessor each represent and warrant to the other that neither
has had any dealings with any person, firm, broker or finder (other than those
persons, if any, whose names are set forth at the end of this Paragraph 15) in
connection with the negotiation of this Lease and/or the
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consummation of the transaction contemplated hereby, and no other broker or
other person, firm or entity is entitled to any commission or finder's fee in
connection with said transaction and Lessee and Lessor do each hereby indemnify
and hold the other harmless from and against any costs, expenses, attorneys'
fees or liability for compensation, commission or charges which may be claimed
by any such unnamed broker, finder or other similar party by reason of any
dealings or actions of the indemnifying party. Named brokers:
Lessor's Broker: Cushman & Wakefield of California, Inc.
and CB Commercial Real Estate Group, Inc.
Lessee's Broker: CB Commercial Real Estate Group, Inc.
The commission payable to Lessor's Broker with respect to this Lease shall be
pursuant to the terms of the separate commission agreement in effect between
Lessor and Lessor's Broker. Lessor's Broker shall pay a portion of its
commission to Lessee's Broker, if so provided in any agreement between Lessor's
Broker and Lessee's Broker. Nothing in this Lease shall impose any obligation
on Lessor or Lessee to pay a commission or fee to any party other than Lessor's
Broker.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at
any time upon not less than ten (10) days' prior written notice from
the other party, ("requesting party") execute, acknowledge and deliver
to the requesting party a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect) and the date
to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to the responding party's
knowledge, any uncured defaults on the part of the requesting party,
or specifying such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or of the business of the requesting
party.
(b) At the requesting party's option, the failure
to deliver such statement within such time shall be a material default
of this Lease by the party who is to respond, without any further
notice to such party, or it shall be conclusive upon such party that
(i) this Lease is in full force and effect, without modification
except as may be represented by the requesting party, (ii) there are
no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has
been paid in advance.
(c) If Lessor desires to finance, refinance, or
sell the Property, or any part thereof, Lessee hereby agrees to
deliver to any lender or purchaser designated by Lessor such financial
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statements of Lessee as may be reasonably required by such lender or
purchaser. Such statements shall include the past three (3) years'
financial statements of Lessee. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and
shall be used only for the purposes herein set forth. Notwithstanding
the foregoing, so long as Lessee is a publicly traded company, Lessee
shall be required to deliver only those financial statements of Lessee
that are publicly available.
17. Lessor's Liability. The term "Lessor" as used herein shall
mean only the owner or owners, at the time in question, of the fee title or a
lessee' interest in a ground lease of the Industrial Center, in the event of
any transfer of such title or interest. So long as the applicable grantee
assumes all of the obligations of Lessor hereunder arising from and after the
effective date of the applicable transfer, Lessor herein named (and in case of
any subsequent transfers then the grantor) shall be relieved from and after the
date of such transfer of all liability as respects Lessor's obligations
thereafter to be performed, provided that any funds in the hands of Lessor or
the then grantor at the time of such transfer, in which Lessee has an interest,
shall be delivered to the grantee. The obligations contained in this Lease to
be performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at the
Interest Rate (as defined below). Payment of such interest shall not excuse or
cure any default by Lessee under this Lease; provided, however, that interest
shall not be payable on late charges incurred by Lessee nor on any amounts upon
which late charges are paid by Lessee. As used herein, the term "Interest
Rate" means the lesser of (a) a floating annual interest rate equal to three
and one-half percent (3.5%) over the prime rate (for corporate loans at large
United States money center commercial banks) published in the Wall Street
Journal on the first business day of each month, or (b) the maximum rate
permitted by applicable law. In the event that the Wall Street Journal fails
to publish such a prime rate, the "prime rate" shall be the prime rate or
reference rate quoted by a national bank having offices in California selected
by Lessor in its sole discretion.
20. Time of Essence. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor
under the terms of this Lease, including but not limited to Lessee's Share of
Operating Expenses and insurance and tax expenses payable shall be deemed to be
rent.
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22. Incorporation of Prior Agreements; Amendments. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior or contemporaneous agreement or understanding pertaining to
any such matter shall be effective. This Lease may be modified in writing
only, signed by the parties in interest at the time of the modification.
Except as otherwise stated in this Lease, Lessee hereby acknowledges that
neither the real estate broker listed in Paragraph 15 hereof nor any
cooperating broker on this transaction nor the Lessor or any employee or agents
of any of said persons has made any oral or written warranties or
representations to Lessee relative to the condition or use by Lessee of the
Premises or the Property and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable
laws and regulations in effect during the term of this Lease except as
otherwise specifically stated in this Lease.
23. Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or by
certified mail and if given personally or by mail, shall be deemed sufficiently
given if addressed to Lessee or to Lessor at the address noted below the
signature of the respective parties, as the case may be. Either party may by
notice to the other specify a different address for notice purposes except that
upon Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice purposes. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently transmitted to
such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
Any notice given pursuant to this Lease shall be personally delivered,
delivered by Federal Express or comparable overnight courier, providing written
evidence of delivery, or delivered by U.S. registered or certified mail, return
receipt requested, postage prepaid and sent to Lessor and Lessee at the
following addresses:
LESSOR:
Wohl Venture One, LLC
c/o Wohl Property Group
2828 East Foothill Boulevard, Suite 201
Pasadena, California
Attn: Skip Wohl
With a copy by the same method to:
Cushman & Wakefield of California, Inc.
555 South Flower Street, Suite 4200
Los Angeles, California 90017-2413
Attn: Mark Harryman
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LESSEE:
Prior to the Office Area Early Commencement Date:
Vans, Inc.
2095 Batavia
Orange, California 92665
Attn: Craig E. Gosselin, Esquire
After the Office Area Early Commencement Date:
Vans, Inc.
15700 "A" Shoemaker Avenue
Santa Fe Springs, California ________
Attn: Craig E. Gosselin, Esquire
With a copy by the same method to:
Proskauer, Rose, Goetz & Mendelsohn, LLP
2121 Avenue of the Stars, Suite 2700
Los Angeles, California 90067-5010
Attn: Kenneth Krug, Esquire
or such other address as either party may from time to time designate as its
notice address by notifying the other party thereof. Notice so sent shall be
deemed given (a) when personally delivered, or (b) on the first business day
following deposit with Federal Express or a comparable overnight courier
service providing written evidence of delivery, or (c) five business days
following deposit in the United States mail, if notice is sent by registered or
certified mail, return receipt requested, postage prepaid.
24. Waivers. No waiver by Lessor or Lessee of any provision
hereof shall be deemed a waiver of any other provision hereof or of any
subsequent breach by Lessee or Lessor, as the case may be, of the same or any
other provision. Lessor's or Lessee's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's or
Lessee's, as the case may be, consent to or approval of any subsequent act by
Lessor or Lessee. The acceptance of rent hereunder by Lessor shall not be a
waiver of any preceding breach by Lessee of any provision hereof, other than
the failure of Lessee to pay the particular rent so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
25. Recording. Lessee shall have the right to record a memorandum
of this Lease, in form reasonably acceptable to Lessor, at Lessee's sole cost
and expense.
26. Holding Over. If Lessee, with Lessor's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all of the
provisions of this Lease pertaining to the obligations of Lessee,
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except that the monthly rent shall be 150% of the rent payable in the last
month of the lease term but all Options, if any, granted under the terms of
this Lease shall be deemed terminated and be of no further effect during said
month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and
condition.
29. Binding Effect; Choice of Law. Subject to any provisions
hereof restricting assignment or subletting by Lessee and subject to the
provisions of Paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State where the Industrial Center is located and any litigation
concerning this Lease between the parties hereto shall be initiated in the
county in which the Industrial Center is located.
30. Subordination.
(a) This Lease, and any Option granted hereby, at
Lessor's option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation or security now or hereafter
placed upon the Industrial Center and to any and all advances made on
the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding
such subordination, Lessee's right to quiet possession of the Premises
shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the
provisions of this Lease (subject in each case to any applicable cure
periods), unless this Lease is otherwise terminated pursuant to its
terms. If any mortgagee, trustee or ground lessor shall elect to have
this Lease and any Options granted hereby prior to the lien of its
mortgage, deed of trust or ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior
to such mortgage, deed of trust, or ground lease, whether this Lease
or such Options are dated prior or subsequent to the date of said
mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) So long as such documents are consistent with
the nondisturbance requirements of Paragraph 30(a), above, Lessee
agrees to execute any documents reasonably required to effectuate an
attornment, a subordination or to make this Lease or any Option
granted herein prior to the lien of any mortgage, deed of trust or
ground lease, as the case may be, Lessee's failure to execute such
documents within ten (10) days after written demand shall constitute a
material default by Lessee hereunder without further notice to Lessee
or, at Lessor's option, Lessor shall execute such documents on behalf
of Lessee as Lessee's attorney-in-fact. Lessee does hereby
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make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute
such documents in accordance with this Paragraph 30(b); provided,
however, that this appointment of Lessor as Lessee's attorney-in-fact
shall not be effective so long as Vans, or a Lessee Affiliate (as
defined in Paragraph 12.2) of Vans is the Lessee under this Lease.
31. Attorneys Fees.
31.1 If either party brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such proceeding, action, or appeal thereon, shall be entitled to its
reasonable attorney's fees and such fees as may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term, "prevailing party" shall include,
without limitation, a party who obtains legal counsel or brings an action
against the other by reason of the other's breach or default, or who defends
such action, and substantially obtains or defeats the relief sought, whether by
compromise, settlement, judgment, or abandonment of the claim or defense by the
other party.
31.2 The attorney's fee award shall not be computed in
accordance with any court fee schedule, but shall be such as to fully reimburse
all attorney's fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to attorney's fees, costs and
expenses incurred in the preparation and service of notices of default and
consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such default. Lessor and Lessee
agree that $350.00 is a reasonable sum per occurrence for legal services and
costs per preparation and service of a notice of default and that Lessor may
include $350.00 as additional rent due in each such notice of default as an
amount that must be paid to cure said default.
32. Lessor's Access. Upon reasonable prior notice to Lessee,
Lessor and Lessor's agents shall have the right to enter the Premises at
reasonable times for the purpose of inspecting same, showing the same to
prospective purchasers, lenders, or (during the last nine (9) months of the
term of this Lease) lessees, and, with the prior consent of Lessee, making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises or the Building any
ordinary "For Sale" signs and Lessor may at any time during the last 120 days
of the term hereof place on or about the Premises any ordinary "For Lease"
signs. During any period that Vans, or a Lessee Affiliate (as defined in
Paragraph 12.2) of Vans is the Lessee under this Lease and in occupancy of the
Premises, Lessor agrees that it shall make reasonable efforts to avoid locating
any "For Sale" sign on the Premises in immediate proximity to any signs
identifying the Lessee so as to minimize any misimpressions that Vans, Inc. and
not the Building is for sale. All activities of Lessor pursuant to this
paragraph shall be without abatement of rent, nor shall Lessor have any
liability to Lessee for the same.
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33. Auctions. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
or the Common Areas without first having obtained Lessor's prior written
consent. Notwithstanding anything to the contrary in this Lease, Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises or
the Industrial Center without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Industrial Center.
Lessor hereby approves of the signs described on Exhibit "E" attached hereto,
which shall be installed, maintained and removed at Lessee's sole cost and
expense.
35. Merger. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not
work a merger, and shall, at the option of Lessor, terminate all or any
existing subtenancies or may, at the option of Lessor, operate as an assignment
to Lessor of any or all of such subtenancies.
36. Consents. Except for Paragraphs 33, 34, 46 and 47 hereof,
wherever in this Lease the consent of one party is required to an act of the
other party, such consent shall not be unreasonably withheld, conditioned or
delayed.
37. Guarantor. In the event that there is a guarantor of this
Lease, said guarantor shall have the same obligations as Lessee under this
Lease.
38. Quiet Possession. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder, Lessee
shall have quiet possession of the Premises for the entire term hereof subject
to all of the provisions of this Lease and all easements, covenants, conditions
and restrictions of record. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Property.
39. Options.
39.1 Definition. As used in this paragraph, the word
"Option" has the following meaning: (1) the right or option to extend the term
of this Lease or to renew this Lease or to extend or renew any lease that
Lessee has on other property of Lessor; (2) the option or right of first
refusal to lease the Premises or the right of first offer to lease the Premises
or the right of first refusal to lease other space within the Industrial Center
or other property of Lessor or the right of first offer to lease other space
within the Industrial Center or other property of Lessor; (3) the right or
option to purchase the Premises or the
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Industrial Center, or the right of first refusal to purchase the Premises or
the Industrial Center, or the right of first offer to purchase the Premises or
the Industrial Center, or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchaser other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this
Lease is personal to Lessee and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Lessee
and the first person or entity to which Vans, or a Lessee Affiliate of Vans,
assigns this Lease, provided, however, the Option may be exercised by or
assigned to any Lessee Affiliate. The Options herein granted to Lessee are not
assignable separate and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any
multiple options to extend or renew this Lease a later option cannot be
exercised unless the prior option to extend or renew this Lease has been so
exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to Paragraphs 13.1(b) or 13.1(c) and continuing until the
default alleged in said notice of default is cured, or (ii) at any time after
an event of default described in Paragraphs 13.1(a), 13.1(d) or 13.1(e)
(without any necessity of Lessor to give notice of such default to Lessee).
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an
Option shall terminate and be of no further force or effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of 30 days after notice from Lessor that such
obligation becomes due (without any necessity of Lessor to give notice thereof
to Lessee), or (ii) Lessee fails to commence to cure a default specified in
Paragraph 13.1(c) within 30 days after the date that Lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessee commits a default described in
Paragraphs 13.1(a), 13.1(d) or 13.1(e) (without any necessity of Lessor to give
notice of such default to Lessee).
39.5 First Option. Lessor hereby grants to Lessee the option
to extend the term of this Lease for a five (5) year period commencing on the
date the prior term expires (the "First Option Period") upon each and all of
the following terms and conditions:
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(a) Lessee gives to Lessor on a date which is prior to
the date that the First Option Period would commence (if exercised) by
at least six (6) and not more than twelve (12) months, a written
notice of exercise of the option to extend this Lease for said
additional term, time being of the essence. If said notification of
the exercise of said option is not so given and received, this option
shall automatically expire;
(b) The provisions of Paragraph 39, including the
provision relating to default of Lessee set forth in Paragraph 39.4,
of this Lease are conditions of this option;
(c) All of the terms and conditions of this Lease except
where specifically modified by this option shall apply;
(d) Any prior Lessee that has not been expressly released
from liability under this Lease, and any guarantor of the Lessee's
performance hereunder, expressly reaffirms in writing the extension of
their liability for the term of the option; and
(e) Subject to adjustment as provided in Paragraph 39.8,
the monthly Base Rent for each month of the First Option Period shall
be ninety-five percent (95%) of the Fair Market Rent (as defined
below) of the Premises as of the commencement of the First Option
Period, but in no event less than the monthly Base Rent scheduled to
be paid during the month prior to the commencement of the First Option
Period.
39.6 Second Option. Lessor hereby grants to Lessee the
option to extend the term of this Lease for a five (5) year period commencing
on the date the First Option Period expires (the "Second Option Period") upon
each and all of the following terms and conditions:
(a) Lessee gives to Lessor on a date which is prior to
the date that the Second Option Period would commence (if exercised)
by at least six (6) and not more than twelve (12) months, a written
notice of exercise of the option to extend this Lease for said
additional term, time being of the essence. If said notification of
the exercise of said option is not so given and received, this option
shall automatically expire;
(b) The provisions of Paragraph 39, including the
provision relating to default of Lessee set forth in Paragraph 39.4 of
this Lease are conditions of this option;
(c) All of the terms and conditions of this Lease except
where specifically modified by this option shall apply;
(d) Any prior Lessee that has not been expressly released
from liability under this Lease, and any guarantor of the Lessee's
performance hereunder, expressly reaffirms in writing the extension of
their liability for thee term of the option; and
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(e) Subject to adjustment as provided in Paragraph 39.8,
the monthly Base Rent for each month of the option periods shall be
ninety-five percent (95%) of the Fair Market Rent of the Premises as
of the commencement of the Second Option Period, but in no event less
than the monthly Base Rent scheduled to be paid during the month prior
to the commencement of the Second Option Period.
39.7 Fair Market Rent.
(a) The term "Fair Market Rent" as used in this Lease is
defined to mean the rent, including all escalations, at which tenants are
leasing non-sublease, non-encumbered, non-equity space comparable in size and
quality to the Premises for the Option Period as to which Fair Market Rent is
being determined in the Mid Cities Area, giving appropriate consideration to
the annual rental rates per square foot and the standard of measurement by
which the square footage is measured and any free rent or tenant improvement
allowances given in connection with those leases. In determining Fair Market
Rent it shall be assumed that:
(i) The Premises are in good condition and repair
(less reasonable wear and tear).
(ii) The Premises would be leased for the period
of the option being exercised by a tenant with the credit standing of
Lessee, as the same exists at that time.
(iii) The Premises would be leased on the same
terms of this Lease insofar as the obligations for repair, maintenance,
insurance and real estate taxes existed as of the expiration of the
original term of this Lease.
(iv) No deduction shall be given nor consideration
given to allowances for real estate brokerage commissions.
(v) The Premises will be used for its highest and
best use.
(vi) The rent escalations in Paragraph 39.8 will
be applicable.
(b) Determination By Lessor. Lessor shall initially
determine the Fair Market Rent in each instance, and shall give Lessee notice
(the "Market Rent Notice") of such determination and the basis on which such
determination was made on or before the 90th day prior to the date on which
such determination is to take effect, or as soon thereafter as is reasonably
practicable.
(c) Disputes re Fair Market Rent. In the event that
Lessee notifies Lessor in writing, on or before the 20th business day following
any Market Rent Notice, that Lessee disagrees with the applicable
determination, Lessor and Lessee shall negotiate in good faith to resolve such
dispute within 10 business days thereafter (The 30th business day
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after any Market Rent Notice is referred to herein as the "Outside Agreement
Date.") If not resolved by the Outside Agreement Date each party shall submit
to the other its determination of Fair Market Rent and the dispute shall be
submitted to arbitration in accordance with the following paragraph titled
"Arbitration Procedures." Until any such dispute is resolved, any applicable
payments due under this Lease shall correspond to Lessor's determination and,
if Lessee's determination becomes the final determination, Lessor shall refund
any overpayments to Lessee, within 5 business days following the final
resolution of the dispute.
(d) Arbitration Procedures.
(i) Lessor and Lessee shall each appoint one
arbitrator who shall by profession be a real estate broker who shall have been
active over the 5-year period ending on the date of such appointment in the
leasing of properties similar to the Premises in the surrounding area of Los
Angeles County. The determination of the arbitrators shall be limited solely
to the issue of whether Lessor's or Lessee's submitted Fair Market Rent for the
Premises is the closest to the actual Fair Market Rent for the Premises as
determined by the arbitrators, taking into account the requirements of this
subparagraph regarding the same. Each such arbitrator shall be appointed
within 15 days after the Outside Agreement Date. Lessor and Lessee may not
consult with either such arbitrator prior to resolution.
(ii) The two arbitrators so appointed shall within
15 days of the date of the appointment of the last appointed arbitrator, meet
and attempt to reach a decision as to whether the parties shall use Lessor's or
Lessee's submitted Fair Market Rent, and shall notify Lessor and Lessee of
their decision, if any.
(iii) If the two arbitrators are unable to reach a
decision, the two arbitrators shall, within 30 days of the date of the
appointment of the last appointed arbitrator, agree upon and appoint a 3rd
arbitrator who shall be a broker who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial 2 arbitrators.
(iv) The 3 arbitrators shall, within 30 days of
the appointment of the 3rd arbitrator, reach a decision as to whether the
parties shall use Lessor's or Lessee's submitted Fair Market Rent, and shall
notify Lessor and Lessee thereof.
(v) The decision of the majority of the 3
arbitrators shall be binding upon Lessor and Lessee.
(vi) If either Lessor or Lessee fails to appoint
an arbitrator within 15 days after the Outside Agreement Date, the arbitrator
appointed by one of them shall reach a decision, notify Lessor and Lessee
thereof, and such arbitrator's decision shall be binding upon Lessor and
Lessee.
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(vii) If the 2 arbitrators fail to agree upon and
to appoint a 3rd arbitrator, then the appointment of the 3rd arbitrator shall
be made by the President of the Los Angeles Chapter of the American Arbitration
Association.
(viii) The cost of arbitration shall be paid by
Lessor and Lessee equally.
(e) Adjustment for Tenant Improvement Allowance. If in
determining Fair Market Rent the parties or the arbitrators, as
applicable, determine that the economic terms of leases of comparable
space include a tenant improvement allowance, Lessor may, at Lessor's
sole option, elect to do the following:
(i) Grant some or all of the value of the tenant
improvement allowance as an allowance for the refurbishment of the
improvements on the Premises; and
(ii) Reduce the Base Rent component of the Fair
Market Rent to be an effective rental rate that takes into
consideration the total dollar value of that portion of the tenant
improvement allowance that Lessor has elected not to grant to Lessee
(in which case that portion of the tenant improvement allowance
evidenced in the effective rental rate shall not be granted to
Lessee).
39.8 Rent Escalations - Option Terms.
(a) On the first day of the 31st month of the term of
each of the Option Periods, the monthly Base Rent payable under
Paragraph 4 of the Lease as modified by Paragraph 39.5(e) and
Paragraph 39.6(e), as applicable, shall be adjusted by the increase,
if any, from the date the applicable Option Period commenced, in the
C.P.I.
(b) The monthly Base Rent payable in accordance with
Paragraph 39.8(a) above shall be calculated as follows: the base rent
scheduled to be paid during the month prior to the month in which the
adjustment is to occur, shall be multiplied by a fraction the
numerator of which shall be the C.P.I. of the calendar month prior to
the month during which the adjustment is to take effect, and the
denominator of which shall be the C.P.I. for the calendar month prior
to the month in which the applicable Option Period commences. The sum
so calculated shall constitute the new monthly Base Rent hereunder,
subject to Paragraph 39.8(e), below.
(c) Pending receipt of the required C.P.I. and
determination of the actual adjustment, Lessee shall pay an estimated
adjusted rental, as reasonably determined by Lessor by reference to
the then available C.P.I. information. Upon notification of the
actual adjustment after publication of the required C.P.I., any
overpayment shall be credited against the next installment of rent
due, and any underpayment shall be immediately due and payable by
Lessee within
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thirty (30) days after such notice. Lessor's failure to request
payment of an estimated or actual rent adjustment shall not constitute
a waiver of the right to any adjustment provided for in the Lease or
this Paragraph 39.8.
(d) In the event the compilation and/or publication of
the C.P.I. shall be transferred to any other governmental department
or bureau or agency or shall be discontinued, then the index most
nearly the same as the C.P.I. shall be used to make such calculation.
In the event that Lessor and Lessee cannot agree on such alternative
index, then the matter shall be submitted for decision to
JAMS/Endispute in accordance with the then rules of said association
and the decision of the Arbitrators shall be binding upon the parties.
The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
(e) The adjustment(s) required by this Rent Escalation
Paragraph shall be subject to the following additional agreements:
(i) The increase under Paragraph
39.8(b), above, shall be subject to the following annual,
non-cumulative minimum and maximum percentage increases per year
involved in the adjustment period:
Minimum yearly percentage increase: 3%
Maximum yearly percentage increase: 7%
The "adjustment period" is defined as the period commencing
with the month designated in Paragraph 39.8(b), above, as the
reference for determining the "denominator", and ending with
the month preceding the month designated therein as the
reference for determining the "numerator". Should the
adjustment period include a partial year, the minimum and
maximum percentages shall be prorated for that partial year by
multiplying them by a fraction, the numerator of which shall
be the number of full calendar months or major portion thereof
contained in said partial year, and the denominator of which
is twelve (12).
(ii) The new monthly Base Rent shall in
no event be less than the rent scheduled to be paid
immediately preceding the rent adjustment.
40. Security Measures. Lessee hereby acknowledges that Lessor
shall have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Industrial Center. Lessee
assumes all responsibility for the protection of Lessee, its agents and
invitees and the property of Lessee and of Lessee's agents and invitees from
acts of third parties. Nothing herein contained shall prevent Lessor, with
Lessee's consent, from providing security protection for the Industrial Center
or any part thereof, in which event the cost thereof
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<PAGE> 56
shall be included within the definition of Operating Expenses, as set forth in
Paragraph 4.2(b).
41. Easements. Lessor reserves to itself the right, from time to
time, to grant such easements, rights and dedications that Lessor deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not interfere with the use of the Premises by Lessee. Lessee
shall sign any of the aforementioned reasonable documents upon request of
Lessor and failure to do so shall constitute a material default of this Lease
by Lessee without the need for further notice to Lessee.
42. Performance Under Protest. If at any time a dispute shall
arise as to any amount or sum of money to be paid by one party to the other
under the provisions hereof, the party against whom the obligation to pay the
money is asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment, and there shall survive
the right on the part of said party to institute suit for recovery of such sum.
If it shall be adjudged that there was no legal obligation on the part of said
party to pay such sum or any part thereof, said party shall be entitled to
recover such sum or so much thereof as it was not legally required to pay under
the provisions of this Lease.
43. Authority. If Lessor or Lessee is a corporation, trust, or
general or limited partnership, each individual executing this Lease on behalf
of such entity represents and warrants that he or she is duly authorized to
execute and deliver this Lease on behalf of said entity. If Lessor or Lessee
is a corporation, trust or partnership, Lessor and Lessee shall each, if so
requested by the other party in writing, within thirty (30) days after receipt
of such request, deliver to the other party evidence of such authority
reasonably satisfactory to such other party.
44. Cashiers Checks.
44.1 In the event that any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn on two or more
occasions during any twelve (12) month period, then Lessor, at its option may
require all future payments to be made by Lessee under this Lease to be made by
Cashier's Checks.
45. Amendments to Lease.
45.1 At such times as a rental adjustment is made to this
Lease by virtue of any provision of this Lease, the parties shall execute a
written amendment to this Lease to reflect said change.
45.2 Lessee agrees to make any non-monetary modifications to
this Lease that may be required by an institutional mortgagee of Lessor and
that do not result in a material adverse change in Lessee's obligations, use or
occupancy under this Lease.
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<PAGE> 57
46. Storage Tanks.
46.1 Notwithstanding anything to the contrary in Paragraph
7.3 hereof, Lessee shall not install storage tanks of any size or shape in the
Premises, above or below ground, without the consent of the Lessor which can be
withheld in Lessor's sole discretion. If Lessor elects to grant its consent,
Lessor shall have the right to condition its consent upon Lessee agreeing to
give to Lessor such assurances that Lessor, in its sole discretion, deems
necessary to protect itself against potential problems concerning the
installation, use, removal and contamination of the Premises as a result of the
installation and/or use of such tank, including but not limited to the
installation of a concrete encasement for said tank. Lessee shall comply at
its expense with all applicable permit and/or registration requirements and
repair any damage caused by the installation, maintenance or removal of such
tank. Upon termination of the Lease, Lessee shall, at its sole cost and
expense, remove any tank installed by or under the direction of Lessee from the
Premises, remove and replace any contaminated soil or materials (and compact or
treat the same as then required by law) and repair any damage or change to the
Premises caused by said installation and/or removal. Nothing contained herein
shall be construed to diminish or reduce Lessee's obligations under Paragraph
47.
46.2 Lessor shall have the right to employ experts and/or
consultants, at Lessee's expense, to advise Lessor with respect to the
installation, operation, monitoring, maintenance and removal and restoration of
any such tank.
47. Hazardous Materials.
47.1 Lessee's Covenants Regarding Hazardous Materials.
(a) Lessor's Prior Consent. Notwithstanding
anything contained in this Lease to the contrary, Lessee has not
caused or permitted, and shall not cause or permit any "Hazardous
Materials" (as defined in subparagraph (b) below) to be brought upon,
kept, stored, discharged, released or used in, under or about the
Premises by Lessee, its agents, employees, contractors,
subcontractors, licensees or invitees, unless (1) such Hazardous
Materials are reasonably necessary to Lessee's business and will be
handled, used, kept, stored and disposed of in a manner which complies
with all "Hazardous Materials Laws" (as defined in subparagraph (b)
below); (2) Lessee will comply with such other rules or requirements
as Lessor may from time to time impose, including without limitation
that (i) such materials are in small quantities, properly labeled and
contained, (ii) such materials are handled and disposed of in
accordance with the highest accepted industry standards for safety,
storage, use and disposal, (iii) such materials are for use in the
ordinary course of business (i.e., as with office or cleaning
supplies), (3) notice of and a copy of the current material safety
data sheet is provided to Lessor for each such Hazardous Material, and
(4) Lessor shall have granted its prior written consent to the use of
such Hazardous Materials.
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<PAGE> 58
(b) Compliance with Hazardous Materials Laws. As
used herein, the term "Hazardous Materials" means any (1) oil,
petroleum, petroleum products, flammable substances, explosives,
radioactive materials, hazardous wastes or substances, toxic wastes or
substances or any other wastes, materials or pollutants which (i) pose
a hazard to the Premises or to persons on or about the Premises or
(ii) cause the Premises to be in violation of any Hazardous Materials
Laws (as hereinafter defined); (2) asbestos in any form, urea
formaldehyde foam insulation, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated
biphenyls, or radon gas; (3) chemical, material or substance defined
as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of
similar import under any applicable local, state or federal law or
under the regulations adopted or publications promulgated pursuant
thereto, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq.; the Resources Conservation
Recovery Act, 42 U.S.C. Section 6901, et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq.; Sections 25115, 25117, 25122.7, 25140,
25249.8, 25281, 25316 and 25501 of the California Health and Safety
Code; and Article 9 or Article 11 of Title 22 of the California Code
of Regulations, Division 4, Chapter 20; (4) other chemical, material
or substance, exposure to which is prohibited, limited or regulated by
any governmental authority or may or could pose a hazard to the health
and safety of the occupants of the Premises or the owners and/or
occupants of property adjacent to or surrounding the Premises, or any
other Person coming upon the Premises or adjacent property; and (5)
other chemical, materials or substance which may or could pose a
hazard to the environment. As used here the term "Hazardous Materials
Laws" means any federal, state or local laws, ordinances, regulations
or policies relating to the environment, health and safety, and
Hazardous Materials (including, without limitation, the use, handling,
transportation, production, disposal, discharge or storage thereof) or
to industrial hygiene or the environmental conditions on, under or
about the Premises, including, without limitation, soil, groundwater
and indoor and ambient air conditions. Lessee shall at all times and
in all respects comply with all Hazardous Materials Laws.
(c) Hazardous Materials Removal. Upon expiration
or earlier termination of this Lease, Lessee shall, at Lessee's sole
cost and expense, cause all Hazardous Materials brought on the
Premises by Lessee or Lessee's agents, employees or invitees, with
Lessor's consent to be removed from the Premises in compliance with
all applicable Hazardous Materials Laws. If Lessee or its employees,
agents, or contractors violates the provisions of the foregoing two
paragraphs, or if Lessee's acts, negligence, or business operations
contaminate, or expand the scope of contamination of, the Leased
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<PAGE> 59
Premises from such Hazardous Materials, then Lessee shall promptly, at
Lessee's expense, take all investigatory and/or remedial action
(collectively, the "Remediation") that is necessary in order to clean
up, remove and dispose of such Hazardous Materials causing the
violation on the Leased Premises or the underlying groundwater or the
properties adjacent to the Leased Premises to the extent such
contamination was caused by Lessee, in compliance with all applicable
Hazardous Materials Laws. Lessee shall further repair any damage to
the Leased Premises caused by the Hazardous Materials contamination.
Lessee shall provide prior written notice to Lessor of such
Remediation, and Lessee shall commence such Remediation no later than
thirty (30) days after such notice to Lessor and diligently and
continuously complete such Remediation. Such written notice shall
also include Lessee's method, time and procedure for such Remediation
and Lessor shall have the right to require reasonable changes in such
method, time or procedure of the Remediation. Lessee shall not take
any Remediation in response to the presence of any Hazardous Materials
in or about the Premises or enter into any settlement agreement,
consent decree or other compromise in respect to any claims relating
to any Hazardous Materials in any way connected with the Premises,
without first notifying Lessor of Lessee's intention to do so and
affording Lessor ample opportunity to appear, intervene or otherwise
appropriately assert and protect Lessor's interests with respect
thereto.
(d) Notices. Lessee shall immediately notify
Lessor in writing of: (i) any enforcement, cleanup, removal or other
governmental or regulatory action threatened, instituted, or completed
pursuant to any Hazardous Materials Laws with respect to the Premises;
(ii) any claim, demand, or complaint made or threatened by any person
against Lessee or the Premises relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous
Materials; and (iii) any reports made to any governmental authority
arising out of any Hazardous Materials on or removed from the
Premises. Lessor shall have the right (but not the obligation) to
join and participate, as a party, in any legal proceedings or actions
affecting the Premises initiated in connection with any Hazardous
Materials Laws.
47.2 Indemnification of Lessor. Lessee shall indemnify,
protect, defend and forever hold Lessor harmless from any and all damages,
losses, expenses, liabilities, obligations and costs arising out of any failure
of Lessee to observe the foregoing covenants.
48. Lessor's Default.
Any damages or judgments arising out of Lessor's default of
its obligations under this Lease shall be satisfied only out of Lessor's
interest and estate in the Industrial Center, and Lessor shall have no personal
liability beyond such interest and estate with respect to such damages or
judgments.
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<PAGE> 60
49. Easements and Restrictions of Record
49.1 Lessee accepts the Premises and Industrial Center
subject to the easements and covenants or restrictions of record.
49.2 Lessor and Lessee agree to cooperate and use their best
efforts to participate in traffic management programs generally applicable to
businesses located in the area which includes the Industrial Center and,
initially, shall encourage and support van and car pooling by Lessee's
employees to the fullest extent permitted by the requirements of Lessee's
business. Neither this Paragraph nor any other provision in this Lease,
however, is intended to or shall create any rights or benefits in any other
person, firm, company, governmental entity or the public.
50. Offer. Preparation of this Lease by Lessor or Lessor's agent
and submission of same to Lessee shall not be deemed an offer to lease. This
Lease shall become binding upon Lessor and Lessee only when fully executed by
Lessor and Lessee.
51. Rent Abatement. In the event that due to (a) Lessor's
blocking of access to the Premises or (b) Lessor's failure to make repairs to
the structural portions of the Building, Lessee is prevented from using and
does not use a portion or portions of the Premises containing five or more of
the loading dock doors in the Premises for more than 10 consecutive business
days, then Base Rent, real estate taxes and Operating Expenses shall be abated
commencing on the 11th consecutive business day Lessee is prevented from using
and does not use such portion of the Premises for such time as Lessee continues
to be so prevented from using, and does not use, such portion of the Premises
in the following proportions: (i) if Lessee is prevented from using and does
not use five of the loading dock doors, the proportion of abatement shall be
25%, and (ii) the proportion of abatement shall increase by 5% for each loading
dock door in excess of five that Lessee is prevented from using and does not
use for the applicable period of time as provided above. Nothing contained in
this Paragraph shall be deemed or construed to defeat or diminish the ability
of Lessor to recover upon any rental or other insurance maintained by Lessor
with respect to the Building.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
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<PAGE> 61
LESSOR LESSEE
WOHL VENTURE ONE, LLC, a VANS, INC., a Delaware corporation
Delaware limited liability company
By: Wohl Property Group, Inc., By _________________________________
a California corporation,
its manager
By _________________________________
By:____________________
Emil H. Wohl Executed on_________________________
President
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SHEPPARD, MULLIN, RICHTER & HAMPTON
DOCUMENT HANDLING FORM
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Client Name: PRUDENTIAL Other Party: WOHL VENTURE
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Document Title: MULTI-TENANT LEASE
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<PAGE> 1
EXHIBIT 10.2
CONSTRUCTION AGREEMENT
(Build to Suit)
Lessee and Lessor are executing, simultaneously with this
Build to Suit Construction Agreement ("Construction Agreement"), a Lease of
even date herewith (the "Lease"). This Construction Agreement is hereby
incorporated into the Lease as Exhibit "C." Capitalized terms used and not
otherwise defined herein have the meanings set forth for them in the Lease. In
consideration of the mutual covenants contained in the Lease, Lessee and Lessor
agree that the Premises shall be improved as set forth hereinafter.
1. BASE BUILDING. The Base Building work shall be performed by
Lessor at Lessor's sole cost and expense prior to the Commencement Date. The
term "Base Building" means the following elements of the Premises: tilt-up
concrete building with concrete floors (without floor covering), roof and
unfinished perimeter walls; base sprinkler system (no extensions); utilities
stubbed to the building wall; landscaping; and parking. All elements of the
initial construction of the Premises not included in the Base Building shall be
considered part of the Initial Improvements (as defined below).
2. PLANS AND SPECIFICATIONS.
(a) Lessor and Lessee have approved the space plan (the
"Space Plan") for the Premises described in Schedule 1 attached hereto.
(b) Based on the approved Space Plan, RGA Architects
("Lessor's Architect"), or another architect selected by Lessor and reasonably
acceptable to Lessee, shall prepare detailed plans, specifications and working
drawings ("Construction Documents") for the construction of leasehold
improvements in the Premises (the "Initial Improvements"). Lessee shall
approve the Construction Documents in writing within five (5) working days of
receipt thereof. Lessee shall only have the right to disapprove the
Construction Documents due to errors and material deviations from the Space
Plan.
(c) Lessee may disapprove the Construction Documents one time
without having delayed Lessor's space planner as described in Section 3(a),
below. Any subsequent disapprovals shall be considered a Tenant Delay unless
the disapproval is caused by errors made by Lessor's space planner or by
material deviations from the Space Plan that were noted in Lessee's initial
disapproval of the Construction Documents and that have not yet been corrected.
3. INITIAL IMPROVEMENT COST.
(a) Lessor shall enter into a contract with Oltman's
Construction Company ("Contractor"), or another contractor selected by Lessor
and reasonably acceptable to Lessee, to construct the Initial Improvements.
Based upon such contract, Lessor shall determine the cost of the Initial
Improvements (the "Initial Improvement Cost"), which may
Exhibit "C"
Page 1 of 8
<PAGE> 2
include the following: cost of basic services for space plans, pricing plans,
construction documents; engineering fees; governmental agency plan check,
permit and other fees; sales and use taxes; Title 24 fees; testing and
inspection costs and all other costs to be expended by Lessor in the
construction of the Initial Improvements, and a Lessor construction management
fee equal to five percent (5%) of the Initial Improvement Cost (for purposes of
which calculation such management fee shall not be deemed included in the
Initial Improvement Cost). Within five (5) working days of receipt by Lessee
of the Initial Improvement Cost, Lessee shall either approve the same in
writing or shall provide Lessor with a detailed list of revisions to the
approved Construction Documents. If Lessee would be obligated under Section
3(b) to pay any excess cost, Lessee may revise the Initial Improvement Cost one
time without having caused a Tenant Delay as described in Section 7 below in
order to reduce such excess cost. Any subsequent revisions shall be considered
a Tenant Delay unless the revision is caused by Lessor's error.
(b) Lessee shall be entitled to a construction allowance in
the amount of $350,000 ("Initial Improvement Allowance") for application
against the Initial Improvement Cost. If the Initial Improvement Cost is in
excess of $350,000.00, Lessee shall pay such excess as provided herein. No
more often than once per calendar month, Lessor shall provide Lessee with an
estimate of the Initial Improvement Costs payable during the following 30 days.
Lessor's estimate shall be based upon the Contractor's application for payment
for the Initial Improvements and upon Lessor's reasonable estimate of any other
elements of the Initial Improvement Costs payable during that period and shall
contain the architect's approval of that estimate. With respect to the first
$700,000 of the Initial Improvement Costs, Lessee shall pay Lessor 50% of the
amount specified in Lessor's estimate. The remaining 50% of that initial
$700,000 shall be advanced by Lessor out of the Initial Improvement Allowance.
At such time as Lessor has advanced the entire Initial Improvement Allowance,
Lessee shall be obligated to pay 100% of any Initial Improvement Costs
thereafter estimated by Lessor and incurred in connection with the construction
of the Initial Improvements monthly using the same procedure of Lessor's
estimates as provided for above in this Section 3(b). All payments of Lessee's
share of the Initial Improvement Cost shall be paid to Lessor by Lessee within
five (5) business days after Lessor's delivery to Lessee of Lessor's estimate
of the amount due. If at any time Lessee does not timely pay to Lessor its
share of the Initial Improvement Costs when due under this Paragraph 3(b)
(each, a "Late Cost Payment"), time being of the essence of all such payments,
Lessor shall have the absolute right to stop all work and not resume that work
unless and until Lessee has paid Lessor (i) all tardy Initial Improvement Costs
payments, (ii) all damages caused by or resulting from Lessor's work stoppage
under this Paragraph 3(b), and (iii) if there occurs more than one Late Cost
Payment, the balance of the Initial Improvement Costs estimated to be payable
by Lessee. This remedy shall be in addition to Lessor's other remedies under
the Lease for such default by Lessee, including without limitation the right to
terminate the Lease.
(c) If the Initial Improvement Cost increases, subsequent to
Lessee's approval, due to the requirements of any governmental agency,
Exhibit "C"
Page 2 of 8
<PAGE> 3
Lessee shall pay Lessor the amount of such increase (except to the extent that
the estimated total Initial Improvement Cost then remains less than the amount
of the Initial Improvement Allowance) at the time and in the manner provided
for in Paragraph 3(b) of this Construction Agreement.
(d) If Lessee requests a change in the Construction Documents
subsequent to approval of the Initial Improvement Cost, Lessor shall notify
Lessee promptly as to any increase in the Initial Improvement Cost and as to
any delay such change would cause in the construction of the Initial
Improvements. Lessee shall approve or disapprove such change within five (5)
business days of Lessor's written notice; Lessor's failure to receive Lessee's
notice approving the same shall be deemed Lessee's disapproval of that change.
If Lessee approves such change, Lessee shall pay the amount of the increase
(except to the extent that the estimated total Initial Improvement Cost then
remains less than the amount of the Initial Improvement Allowance) at the time
and in the manner provided for in Paragraph 3(b) of this Construction
Agreement.
(e) In the event that Lessee makes any such payments for
excess costs and, following the completion of the Initial Improvements and the
payment of the entire Initial Improvement Cost (as increased by any increases
under Paragraphs 3(c) or 3(b)), unexpended Initial Improvement Allowance funds
remain, Lessee shall be entitled to a credit against the initial Base Rent
otherwise payable by Lessee in the amount of the lesser of (i) the total of all
such payments made by Lessee or (ii) the amount of the unexpended Initial
Improvement Allowance funds.
4. CONSTRUCTION OF INITIAL IMPROVEMENTS.
(a) Upon approval and payment (to the extent required under
this Agreement) by Lessee of the Initial Improvement Cost, Lessor shall cause
the Contractor to proceed to secure a building permit and commence construction
of the Initial Improvements.
(b) Lessor shall endeavor to substantially complete
construction of the Initial Improvements as soon as is reasonably practicable.
5. COMMENCEMENT DATES. Notwithstanding anything to the contrary set
forth in Paragraph 3 of the Lease, and subject to Section 6 below:
5.1 The date on which Lessee shall be entitled to occupy the
Office Area, and shall commence payment of rent therefor (whether or not Lessee
occupies the Office Area), under Paragraph 3.4 of the Lease (the "Office Area
Early Commencement Date") shall be the date that is the later of (i) March 1,
1997 or (ii) the date of Substantial Completion of the portion of the Initial
Improvements (the "Office Improvements") consisting of improvements to (or
improvements necessary for the occupancy of) the Office Area. Notwithstanding
the foregoing, in the event that Lessee occupies the Office Area for its normal
business operations prior to the Office Area Early Commencement Date, Lessee
shall commence payment of rent and other payments for the Office Area on the
first date of such early occupancy.
Exhibit "C"
Page 3 of 8
<PAGE> 4
5.2 The date on which the term of the Lease shall commence
under Paragraph 3.1 of the Lease (the "Commencement Date"), including for
purposes of Base Rent obligations (subject to Lessee's earlier obligation to
pay rent with respect to the Office Area as set forth above), shall be the date
that is the later of (i) June 1, 1997 or (ii) the date of Substantial
Completion of the remainder of the Initial Improvements. In the event that the
Commencement Date occurs after June 1, 1997, the scheduled expiration date of
the Lease shall be extended for an equal number of days. Notwithstanding the
foregoing, in the event that Lessee occupies any portion of the Premises
outside the Office Area for its normal business operations prior to the
Commencement Date, Lessee shall commence payment of rent for all portions of
the Premises outside the Office Area on the first date of such early occupancy.
For purposes of the Lease (including this Construction Agreement), "Substantial
Completion" of the Initial Improvements (or Office Improvements, as applicable)
shall occur upon (a) the completion of construction of the Initial Improvements
(or Office Improvements, as applicable) pursuant to the Construction Documents,
with the exception of any punch list items and any furniture, fixtures or
equipment to be installed by Lessee, and (b) the issuance of a temporary or
final Certificate of Occupancy for the entire Premises.
6. DELAY IN SUBSTANTIAL COMPLETION. If there shall be a delay or
there are delays in the Substantial Completion of the Office Improvements
and/or Initial Improvements as a result of Tenant Delays (as defined below),
then, notwithstanding anything to the contrary set forth in the Lease or this
Construction Agreement and regardless of the actual date of the Substantial
Completion of the Office Improvements and/or Initial Improvements, each of the
Office Area Early Commencement Date and the Commencement Date shall be deemed
to be the date the Office Area Early Commencement Date or Commencement Date, as
applicable, would have occurred but for the Tenant Delay or Delays.
7. TENANT DELAYS. The following shall, to the extent that they
actually delay the Substantial Completion of the Office Improvements and/or
Initial Improvements, constitute "Tenant Delays" under the Lease and this
Agreement:
(a) Lessee's failure to approve the Construction Documents on
or before the specified approval date, or Lessee's delay of Lessor's space
planner or architect in completion of the Construction Documents; or
(b) Lessee's delay in approval of the Initial Improvement
Cost, or failure to pay the excess Initial Improvement Cost within the time
limit provided; or
(c) Lessee's modification of the Construction Documents
subsequent to its approval; or
(d) Changes to the Base Building required by the Construction
Documents; or
Exhibit "C"
Page 4 of 8
<PAGE> 5
(e) A breach by Lessee of this Construction Agreement or any
other provision of the Lease; or
(f) Any other unreasonable acts or omissions of Lessee, or
its agents, employees or contractors.
Lessor shall provide Lessee with written notice of any Tenant Delay within ten
(10) days of the occurrence thereof, and Lessor's failure to provide Lessee
with such written notice shall constitute Lessor's waiver of such Tenant Delay.
Only one such notice shall be required for each event constituting a Tenant
Delay.
8. NOTICE OF SUBSTANTIAL COMPLETION. Lessor shall give Lessee at
least ten (10) business days' written notice of the date upon which Substantial
Completion of each of the Office Improvements and the Initial Improvements is
estimated to occur.
9. LESSEE'S LEASE DEFAULT. Notwithstanding any provision to the
contrary contained in the Lease, if a material default as defined in the Lease,
or a default by Lessee under this Construction Agreement, has occurred at any
time on or before the Substantial Completion of the Initial Improvements, then
(a) in addition to all other rights and remedies granted to Lessor pursuant to
the Lease (including, without limitation, the right to terminate the Lease),
Lessor shall have the right to cause the Contractor to cease the construction
of the Initial Improvements (in which case Lessee shall be responsible for any
delay in the Substantial Completion of the Office Improvements and/or Initial
Improvements caused by such work stoppage as set forth in Section 7 of this
Construction Agreement and for all damages caused thereby), and (b) all other
obligations of Lessor under the terms of this Construction Agreement shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease.
10. PUNCHLISTS. Within ten (10) business days after the later of
(a) Substantial Completion of the Office Improvements or (b) Lessee's occupancy
of the Office Area, Lessor, Lessee and the Contractor shall prepare a list (the
"First Punchlist") of remaining items to be completed by the Contractor with
respect to the Office Area. Lessor shall cause the items on the First
Punchlist to be completed within thirty (30) days after delivery of the First
Punchlist to Lessee. Within ten (10) business days after the later of (a)
Substantial Completion of the Initial Improvements or (b) Lessee's occupancy of
any portion of the Premises other than the Office Area, Lessor, Lessee and the
Contractor shall prepare a list (the "Second Punchlist") of remaining items to
be completed by the Contractor with respect to the portions of the Premises
outside the Office Area. Lessor shall cause the items on the Second Punchlist
to be completed within thirty (30) days after delivery of the Second Punchlist
to Lessee. Lessee shall permit reasonable access to the Premises by the
Contractor and Lessor so as to permit completion of the foregoing punchlist
items within the foregoing periods.
11. DETERMINATION OF RENTABLE AREA. Upon the Substantial
Completion of the Initial Improvements, Lessor's Architect shall measure
Exhibit "C"
Page 5 of 8
<PAGE> 6
the rentable square footage of the Premises (including without limitation the
mezzanine portion of the Office Area). Such square footage shall be determined
by measuring to the outside finished surface of the permanent exterior building
walls (and, with respect to the mezzanine, to the outside finished surface of
the interior wall which demises the Office Area from the remainder of the
Premises), without deduction for columns or projections necessary to the
building. Upon such determination of rentable area, all provisions of the
Lease which are dependent upon square footage (including without limitation the
calculation of Base Rent) shall be adjusted accordingly.
12. RENTAL ABATEMENT FOR LATE DELIVERY. In the event that
Substantial Completion of the Initial Improvements and the Office Improvements
occurs later than April 1, 1997 (the "Required Completed Date") and as a result
thereof Lessee is obligated to pay a penalty (the "Penalty") to Orange
Engineering & Machine Company, Inc. pursuant to its lease with Lessee dated
July 22, 1996, then for each day after the Required Completion Date that the
Initial Improvements and Office Improvements are not Substantially Completed
and Lessee actually pays the Penalty, Lessee shall be entitled to a rent credit
in the amount of $2,000.00, which shall be applied against rent first coming
due under the Lease after the Commencement Date. The Required Completion Date
shall be extended by one day for each day Substantial Completion of the Initial
Improvements or Office Improvements is delayed by either (a) a Tenant Delay or
(b) a Force Majeure Delay. As used herein, the term "Force Majeure Delay"
shall mean delays in the construction and completion of the Initial
Improvements and/or Improvements actually and directly caused by fire, flood,
abnormal rain (to the extent that abnormal rain interferes with so-called
"critical path" items, including without limitation grading, pouring of
footings and foundations, pouring of floor slabs, pouring and erecting wall
panels, roofing, pouring site concrete and laying site asphalt), earthquake,
epidemic, or development or construction moratoria imposed by any governmental
authority. Lessor shall provide Lessee with written notice of any Force
Majeure Delay within ten (10) days of the occurrence thereof, and Lessor's
failure to provide Lessee with such written notice shall
Exhibit "C"
Page 6 of 8
<PAGE> 7
constitute Lessor's waiver of such Force Majeure Delay. Only one such notice
shall be required for each event constituting a Force Majeure Delay.
Dated as of September 12, 1996.
"Lessor":
WOHL VENTURE ONE, LLC,
a Delaware limited liability company
By: Wohl Property Group, Inc.,
a California corporation,
its Manager
By:___________________________________
Emil H. Wohl
President
"Lessee":
VANS, INC., a Delaware corporation
By:___________________________________
Its: _________________________________
By: __________________________________
Its: _________________________________
Exhibit "C"
Page 7 of 8
<PAGE> 8
SCHEDULE 1 TO EXHIBIT "C"
(Space Plan)
Schedule 1 to Exhibit "C"
Page 1 of ___
<PAGE> 9
EXHIBIT "D"
None.
Exhibit "D"
Page 1 fo 1 COLOR
<PAGE> 10
SHEPPARD, MULLIN, RICHTER & HAMPTON
DOCUMENT HANDLING FORM
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<S> <C> <C>
Attorney: James A. Lonergan Attorney Billing #: 0111
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Extension: 4204 Location: 42S Client/File #:
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Client Name: PRUDENTIAL Other Party: VONS
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Document Title: CONSTRUCTION AGREEMENT
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Revision history (date, operator, time and notes):
2\TRANSFER\ROSS\SREYGI49.SCH 082696 LYC (ms) 0045; 082796 LZ6 (RPL) <0015;
Saved for Redline as OL1 090696; 091296 LY3 (ol) (version 090696 saved as
.OL2)+revs. <0015; 091296 LZH (Henry) <0015; ?
