UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-19854
APRIA HEALTHCARE GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0488566
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3560 HYLAND AVENUE, COSTA MESA, CA 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)427-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
There were 51,079,608 shares of Common Stock, $.001 par value, outstanding
at August 2, 1996.
<PAGE>
APRIA HEALTHCARE GROUP INC.
FORM 10-Q
For the period ended June 30, 1996
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
Consolidated Income Statements
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
<PAGE>
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash $ 20,089 $ 18,829
Accounts receivable, less allowance for
doubtful accounts of $85,075 and $86,567
at June 30, 1996 and December 31, 1995,
respectively 334,586 258,332
Inventories 60,127 45,198
Deferred income taxes 47,712 45,883
Refundable income taxes 16,360 27,710
Prepaid expenses and other current assets 10,886 7,770
--------- ---------
TOTAL CURRENT ASSETS 489,760 403,722
PATIENT SERVICE EQUIPMENT, less accumulated
depreciation of $180,610 and $161,953 at
June 30, 1996 and December 31, 1995,
respectively 192,187 167,090
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET 105,916 80,108
INVESTMENT IN OMNICARE plc 1,467 1,504
COVENANTS NOT TO COMPETE, NET 17,950 20,272
GOODWILL, NET 296,135 298,870
OTHER ASSETS 8,063 8,419
--------- ---------
$1,111,478 $ 979,985
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 62,276 $ 100,653
Accrued payroll and related taxes
and benefits 26,825 26,792
Accrued restructuring costs 11,030 19,085
Other accrued liabilities 41,578 48,910
Current portion of long-term debt 11,866 9,652
--------- ---------
TOTAL CURRENT LIABILITIES 153,575 205,092
LONG-TERM DEBT 609,200 490,655
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value:
10,000,000 shares authorized; none issued -
- -
Common Stock, $.001 par value:
150,000,000 shares authorized; 51,014,267
and 49,692,266 shares issued and
outstanding at June 30, 1996 and
December 31, 1995, respectively 51 50
Additional paid-in capital 316,752 294,522
Retained earnings (deficit) 31,900 (10,334)
--------- ---------
348,703 284,238
COMMITMENTS AND CONTINGENCIES - -
--------- ---------
$1,111,478 $ 979,985
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------- -----------------
1996 1995 1996 1995
------ ------ ------ ------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $306,579 $287,286 $601,882 $571,895
Costs and expenses:
Cost of net revenues 96,943 88,270 191,034 173,806
Selling, distribution and
administrative 144,493 146,187 285,437 292,090
Provision for doubtful accounts,
net of recoveries 14,560 13,149 27,858 26,363
Amortization of intangible assets 4,349 4,210 8,451 8,134
Restructuring costs - 2,661 - 2,661
Merger costs - 6,988 - 6,988
Employee contract settlements - 3,206 - 3,206
Loss on disposition of
U.K. subsidiary - 500 - 500
------- ------- ------- -------
260,345 265,171 512,780 513,748
------- ------- ------- -------
OPERATING INCOME 46,234 22,115 89,102 58,147
Interest expense 12,003 11,134 23,111 21,816
------- ------- ------- -------
INCOME BEFORE TAXES AND
EXTRAORDINARY CHARGE 34,231 10,981 65,991 36,331
Income taxes 12,323 3,484 23,757 13,042
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY CHARGE 21,908 7,497 42,234 23,289
Extraordinary charge on debt
refinancing, net of taxes - 2,998 - 2,998
------- ------- ------- -------
NET INCOME $ 21,908 $ 4,499 $ 42,234 $ 20,291
======= ======= ======= =======
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Income before extraordinary charge $ 0.42 $ 0.15 $ 0.81 $ 0.49
Extraordinary charge on debt
refinancing, net of taxes (0.06) (0.06)
------- ------- ------- -------
Net income $ 0.42 $ 0.09 $ 0.81 $ 0.43
======= ======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding 52,575 48,539 52,286 47,495
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
ASSUMING FULL DILUTION:
Income before extraordinary charge $ 0.42 $ 0.15 $ 0.81 $ 0.47
Extraordinary charge on debt
refinancing, net of taxes (0.06) (0.06)
------- ------- ------- -------
Net income $ 0.42 $ 0.09 $ 0.81 $ 0.41
======= ======= ======== =======
Weighted average number of common
and common equivalent shares
outstanding 52,576 51,323 52,399 51,150
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
------ ------
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 42,234 $ 20,291
Items included in net income not
requiring (providing) cash:
Provision for doubtful accounts 27,858 26,363
Depreciation 44,217 41,207
Amortization of intangible assets 8,451 8,134
Amortization of deferred debt costs 519 6,061
Loss (gain) on sale of property,
equipment and improvements 21 (150)
Impairment loss - 500
Deferred income taxes (1,173) 6,276
Changes in operating assets and liabilities,
net of effects of acquisitions:
Increase in accounts receivable (103,440) (47,515)
Increase in inventories (14,392) (882)
Decrease (increase) in prepaids and
other current assets 17,492 (13,037)
Increase in other non-current assets 960 (542)
Decrease in accounts payable (38,377) (10,438)
Decrease in accrued payroll
and other liabilities (7,205) (8,885)
Decrease in accrued restructuring costs (8,055) -
Other - 609
Net purchases of patient service equipment,
net of effects of acquisitions (56,298) (51,601)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (87,188) (23,609)
INVESTING ACTIVITIES
Purchases of property, equipment and
improvements, net of effects of
acquisitions (30,094) (22,804)
Proceeds from sale of property,
equipment and improvements 67 509
Acquisitions and payments of
contingent consideration (7,317) (38,587)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (37,344) (60,882)
FINANCING ACTIVITIES
Proceeds under revolving credit facility 222,300 397,222
Payments under revolving credit facility (104,300) (169,694)
Proceeds from senior and other long-term debt - 119,857
Payments of senior and other long-term debt (5,084) (263,333)
Capitalized debt costs, net (11) (1,343)
Issuances of Common Stock 12,887 7,210
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 125,792 89,919
-------- --------
NET INCREASE IN CASH 1,260 5,428
Cash at beginning of period 18,829 21,188
Net activity for Homedco - October 1, 1994
to December 31, 1994 - 3,697
-------- --------
CASH AT END OF PERIOD $ 20,089 $ 30,313
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
APRIA HEALTHCARE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - POOLING OF INTERESTS AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Apria Healthcare Group Inc. ("the Company") and its subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
On June 28, 1995, Homedco Group, Inc. ("Homedco") merged with and into
Abbey Healthcare Group Incorporated ("Abbey") to form Apria Healthcare
Group Inc. ("the merger"). The merger was accounted for as a pooling-of-
interests and, accordingly, the consolidated financial statements reflect
the combined financial position and operating results of Abbey and Homedco
and have been adjusted to conform the differing accounting policies of the
separate companies for all periods presented.
In the opinion of management, all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the results of
operations for the interim periods presented, have been reflected herein.
The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 1995, filed with the Company's Form
10-K.
NOTE B - RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform to the
current year presentation.
NOTE C - INCOME TAXES
Income taxes have been provided at the effective tax rate expected for the
year. The Company's effective tax rate differs from the statutory rate as
a result of state income taxes (net of federal benefit) and the use of net
operating loss carryforwards.
NOTE D - ACQUISITIONS
The Company periodically makes acquisitions of complementary businesses in
specific geographic markets. Acquisitions that closed during the six month
period ended June 30, 1996 resulted in cash payments of approximately
$6,509,000.
NOTE E - RESTRUCTURING COSTS
In connection with the merger, the Company adopted a plan to restructure
and consolidate its operating locations and administrative functions within
specific geographic areas. The plan, which is substantially complete,
resulted in a restructuring charge in 1995 of approximately $68,304,000
consisting of accrued costs and impairments. The following table
summarizes amounts paid through June 30, 1996 and the remaining accrual at
June 30, 1996.
Accrual at December 31, 1995 $19,085,000
Severance amounts paid through June 30, 1996 (5,545,000)
Other amounts paid through June 30, 1996 (2,510,000)
----------
Accrual at June 30, 1996 $11,030,000
==========
NOTE F - LONG-TERM DEBT
The Company uses interest rate swap and cap agreements to moderate its
exposure to interest rate changes. The Company currently has a swap
agreement covering $280,000,000 of notional principal.
NOTE G- EQUITY
The change in stockholders' equity, other than from net income, resulted
from shares issued under the employee stock purchase plan, the exercise of
stock options and the tax benefit associated with disqualifying
dispositions of incentive stock options and exercises of nonqualified stock
options. For the six months ended June 30, 1996, shares valued at $440,000
were issued under the employee stock purchase plan, proceeds from the
exercise of stock options amounted to $12,447,000 and the related tax
benefit amounted to $9,344,000.
NOTE H - AGREEMENT AND PLAN OF MERGER
On June 28, 1996, the Company, Apria Number Two, Inc., a wholly owned
subsidiary of the Company ("Apria Sub") and Vitas Healthcare Corporation
("Vitas") entered into an Agreement and Plan of Merger ("the Agreement")
providing for the merger of Apria Sub with and into Vitas with Vitas being
the surviving corporation and becoming a wholly owned subsidiary of the
Company. Under the Agreement, subject to possible adjustments as provided
by the Agreement, (i) each share of Vitas Common Stock will be converted
into the right to receive .290 shares of the Company's Common Stock, (ii)
each share of Vitas 9% Cumulative Nonconvertible Preferred Stock would
remain outstanding and be purchased by the Company for its stated value
plus all accrued and unpaid dividends thereon, (iii) each share of Vitas
Series B Preferred Stock would first be converted into Vitas Common Stock,
which would then be converted into the right to receive .290 shares of the
Company's Common Stock, (iv) each of the Vitas stock purchase warrants
would be exchanged for a number of shares of the Company's Common Stock
based on the exchange ratio of .290 and (v) any Vitas stock options
outstanding would be exchanged for the right to receive shares of the
Company's Common Stock based on the exchange ratio of .290. The
transaction is expected to close in the fourth quarter of 1996 and to be
accounted for as a pooling of interests.
NOTE I - COMMITMENTS AND CONTINGENCIES
The Company is engaged in the defense of certain claims and lawsuits
arising out of the ordinary course and conduct of its business, the outcome
of which are not determinable at this time. The Company has insurance
policies covering such potential losses where such coverage is cost
effective. In the opinion of management, any liability that might be
incurred by the Company upon the resolution of these claims and lawsuits
will not, in the aggregate, have a material adverse effect on the
consolidated financial condition of the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net revenues increased 6.7% to $306.6 million for the second quarter
of 1996 compared with $287.3 million for the same quarter of the prior
year. For the six months ended June 30, 1996, net revenues were $601.9
million compared with $571.9 million for the same period of the prior year,
representing a 5.2% increase. Infusion therapy, respiratory therapy and
medical equipment/other grew at rates of 3.4%, 6.2% and 11.5%,
respectively, for the second quarter of 1996, and 2.5%, 4.0% and 10.9%,
respectively, for the six months ended June 30, 1996, over the comparable
1995 periods. Growth in all three business lines is due to volume increases
in both the traditional and managed care markets. The impact of four
significant managed care contracts signed in early 1996 was realized during
the second quarter. Although the Company believes its long-term growth
opportunities are mainly in managed care markets, continued development
of business from traditional referral/payor sources is equally important.
Gross margins for the second quarter and six months ended June 30,
1996, were 68.4% and 68.3%, respectively, compared with 69.3% and 69.6% for
the same periods of 1995. The decline is primarily attributable to an
increase in the Company's managed care customer base. Participation
in the managed care system requires a broad offering of
products and services, including lower-margin services, medical equipment
and supplies. Also, the intense competition in these markets has caused
some price compression. To mitigate the effect of these factors, the
Company is implementing various initiatives to reduce its operating costs
and has placed sales force incentives on certain higher-margin "focus"
products.
Selling, distribution and administrative expenses as a percent of net
revenues for the second quarter and six months ended June 30, 1996, were
47.1% and 47.4%, respectively, compared with 50.9% and 51.1% for the same
periods last year. Much of this improvement can be attributed to the
successful execution of the restructuring and consolidation plan initiated
in conjunction with the Abbey/Homedco merger ("the Merger"). Employee
reductions and branch consolidations are substantially complete and the
associated expense savings is gradually being realized.
Also contributing to the improvement in operating income in the 1996
periods is the absence of certain charges recorded during the comparable
periods in 1995. The three and six month periods ended June 30, 1995 included
charges of $2.7 million, $7.0 million and $3.2 million for restructuring
costs, merger costs, and employee contract settlements, respectively, recorded
in conjunction with the Merger.
Interest expense increased for the second quarter and six months ended
June 30, 1996, to $12.0 million and $23.1 million, respectively, from $11.1
million and $21.8 million for the same periods last year. The increase is
primarily due to an increase in long-term debt (see Liquidity and Capital
Resources). In January 1996, the Company entered into a new one-year swap
agreement to fix the interest rate on the notional principal amount of $280
million.
Income taxes were $12.3 million and $23.8 million in the second
quarter and six months ended June 30, 1996, respectively, up from $1.8
million and $11.4 million for the same periods in the prior year (the 1995
amounts reflect a tax benefit of $1.7 million on the extraordinary charge).
The increase is due primarily to higher pretax income. Income tax expense
for the three months ended June 30, 1995 reflects a change in the estimated
annual effective tax rate due to the merger of Homedco and Abbey during that
quarter.
Liquidity and Capital Resources
- -------------------------------
Cash used in the Company's operating activities for the six months
ended June 30, 1996, was $87.2 million, compared with $23.6 million for the
same period in the prior year. The two major factors contributing to the
additional use of cash were increases in accounts receivable and reductions
in accounts payable. Offsetting the cash uses somewhat were income tax
refunds received of $8.0 million and prior year payments applied to current
year estimated tax payments of $19.0 million.
In conjunction with the restructuring and consolidation plan, the
Company decided to convert all branch operating locations to one
standardized information system. The activities associated with the system
conversions generally cause disruptions to normal operations, which create
billing and collection delays and have resulted in an increase in accounts
receivable. During the second quarter, the Company aggressively increased
its conversion activity, completing 125 conversions compared with 43 during
the first quarter. At the end of the second quarter, approximately 85
percent of the planned conversions were completed, with the remaining 50
conversions scheduled for completion by the end of the third quarter. The
Company has experienced some improvement in cash collections for locations
that converted in 1995 and early 1996. Company-wide cash collections are
expected to improve by the fourth quarter as normal processing resumes.
Further, collections-based incentive programs have been implemented at the
local and regional levels and an accounts receivable task force has been
assembled to ensure proper focus is given to billing and collection
activities. Increased revenue also contributed to the increased levels of
accounts receivable.
The Company also centralized its accounts payable function in
connection with the restructuring and consolidation plan. The
centralization process disrupted day-to-day activities causing a processing
backlog which was reflected in the accounts payable balance at December 31,
1995. During the six months ended June 30, 1996, the backlog was
substantially eliminated, resulting in significant outlays of cash.
Other factors contributing to the use of cash and corresponding
increase in long-term debt include purchases of resale inventory to support
business growth and payments made against the restructuring cost accrual,
comprised primarily of severance and trailing facility costs. Such
payments are expected to continue through the year 2000, according to
contractual terms. Additional expenditures were made to support the
information systems conversions/enhancements and branch consolidations,
resulting in a corresponding increase to property, plant and equipment.
On June 28, 1996, the Company entered into an agreement to merge with
Vitas Healthcare Corporation, the nation's largest hospice provider, in a
transaction to be accounted for as a pooling of interests. This
transaction is expected to close during the fourth quarter of 1996. In
order to effect the transaction and meet the working capital needs of the
combined company, additional financing has been obtained. Effective August
9, 1996, the Company entered into an agreement with a syndicate of banks
which provides for borrowings of up to $800 million. The agreement is
structured as an unsecured, five-year revolving line of credit.
The Company believes that amounts available under the new credit
facility and cash provided by operations will be sufficient to finance its
operations for at least the next 12 months. At August 9, 1996,
availability under the credit facility was $398 million.
<PAGE>
PART II. OTHER INFORMATION
- --------------------------
Item 1-3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders of the Company on June 12,
1996
(b) Directors re-elected at Annual Meeting:
David L. Goldsmith
Leonard Green
Frederick S. Moseley
Member of the Board whose term expires in 1997:
Jeremy M. Jones
Members of the Board whose terms expire in 1998:
Terry Hartshorn
Charles D. Martin
Vincent M. Prager
(c) Matters Voted Upon at Annual Meeting:
1. Election of Directors
---------------------
The Company's Board currently consists of seven
directors and is divided into three classes with
staggered three year terms. Voting results were
as follows:
FOR WITHHOLD
---------- --------
David L. Goldsmith 45,202,585 123,446
Leonard Green 45,135,185 190,846
Frederick S. Moseley 44,778,485 547,546
2. Ratification of the Company's Independent Accountants
-----------------------------------------------------
The Board of Directors has selected Ernst & Young
to serve as the Company's independent accountants
for the fiscal year ending December 31, 1996,
subject to ratification by the holders of a majority
of the shares represented at the Annual Meeting.
Voting results were as follows:
For 45,262,808
Against 15,949
Abstain 47,274
Broker Non-Votes 0
Item 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description and Reference
------- -------------------------
2.5 Agreement and Plan of Merger dated June 28, 1996
among Apria Healthcare Group Inc., Apria Number
Two, Inc. and Vitas Healthcare Corporation.
Incorporated by reference to Apria Healthcare
Group Inc.'s Registration Statement on Form S-4
(Registration No. 333-9407), as filed with
the Securities and Exchange Commission on August
1, 1996.
10.57 Standard Commercial Single Tenant Lease, dated
May 1, 1996, between 555 First Street, Inc. and
Apria Healthcare, Inc. for the premises at 555
First Street, San Fernando, California.
10.58 Standard Commercial Multi-Tenant Lease, dated
March 15, 1996, between Watson Land Company and
Apria Healthcare, Inc. for the premises at
Watson Industrial Center South, Building #173,
909 E. 236th Street, Carson, California.
11.1 Statement of Computation of Earnings
per Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the
quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APRIA HEALTHCARE GROUP INC.
------------------------------
Registrant
August 13, 1996 /s/ Lawrence H. Smallen
------------------------------
Lawrence H. Smallen
Chief Financial Officer,
Senior Vice President, Finance
and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AT JUNE 30, 1996 (UNAUDITED) AND CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,089
<SECURITIES> 0
<RECEIVABLES> 419,661
<ALLOWANCES> 85,075
<INVENTORY> 60,127
<CURRENT-ASSETS> 489,760
<PP&E> 556,735
<DEPRECIATION> 258,632
<TOTAL-ASSETS> 1,111,478
<CURRENT-LIABILITIES> 153,575
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 348,652
<TOTAL-LIABILITY-AND-EQUITY> 1,111,478
<SALES> 601,882
<TOTAL-REVENUES> 601,882
<CGS> 191,034
<TOTAL-COSTS> 191,034
<OTHER-EXPENSES> 293,888
<LOSS-PROVISION> 27,858
<INTEREST-EXPENSE> 23,111
<INCOME-PRETAX> 65,991
<INCOME-TAX> 23,757
<INCOME-CONTINUING> 42,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,234
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
<TABLE>
EXHIBIT 11.1
APRIA HEALTHCARE GROUP INC.
COMPUTATION OF EARNINGS PER SHARE
<CAPTION> Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income before extraordinary charge
for primary earnings per share $21,908 $ 7,497 $42,234 $23,289
Extraordinary charge on debt
refinancing, net of taxes - 2,998 - 2,998
------- ------- ------- -------
NET INCOME FOR PRIMARY
EARNINGS PER SHARE $21,908 $ 4,499 $42,234 $20,291
======= ======= ======= =======
Interest on convertible debentures -
net of tax effect - 300 - 656
Amortization of registration costs
incurred in the issuance of
convertible debentures net of
tax effect - 1 - 56
------- ------- ------- -------
ADJUSTED NET INCOME FOR FULLY
DILUTED EARNINGS PER SHARE $21,908 $ 4,800 $42,234 $21,003
======= ======= ======= =======
Weighted average shares outstanding 50,839 46,207 50,503 44,890
Incremental shares - reserved
for acquisitions - 21 - 357
Incremental shares - stock options 1,736 2,311 1,783 2,248
------- ------- ------- -------
PRIMARY SHARES 52,575 48,539 52,286 47,495
Incremental shares - stock options 1 65 113 224
Assumed conversion of
convertible debentures - 2,719 - 3,431
------- ------- ------- -------
FULLY DILUTED SHARES 52,576 51,323 52,399 51,150
======= ======= ======= =======
PRIMARY EARNINGS PER SHARE:
Income before extraordinary charge $ 0.42 $ 0.15 $ 0.81 $ 0.49
Extraordinary charge on debt
refinancing, net of taxes (0.06) (0.06)
------- ------- ------- -------
Net income $ 0.42 0.09 $ 0.81 $ 0.43
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE:
Income before extraordinary charge $ 0.42 $ 0.15 $ 0.81 $ 0.47
Extraordinary charge on debt
refinancing, net of taxes (0.06) (0.06)
------- ------- ------- -------
Net income $ 0.42 0.09 $ 0.81 $ 0.41
======= ======= ======= =======
</TABLE>
STANDARD COMMERCIAL MULTI-TENANT LEASE
BETWEEN
APRIA HEALTHCARE, INC., as Tenant
and
WATSON LAND COMPANY, as Landlord
SUMMARY INFORMATION (FOR CONVENIENCE ONLY; NOT PART OF THE LEASE)
Premises Address: WATSON INDUSTRIAL CENTER SOUTH
BUILDING #173
909 E. 236TH STREET
CARSON, CALIFORNIA
Dimensions of Premises: Total Area: square feet
-------
Office Area: square feet
-------
Warehouse Area: square feet
-------
Target Commencement Date: May 1, 1996
Target Expiration Date: April 30, 1996
Options (Describe briefly, Including Deadline for Exercise):
Renewal: Two five-Year Terms
To be exercised six months prior to expiration of term
Expansion/Right of First Negotiation: Up to 20,000 square feet
of contiguous space to be agreed upon by Landlord and Tenant
at the end of the fifty-fourth (54th) month of the Lease
Term; Right of first negotiation on any available space in
the Building after first twelve (12) months of the Lease
Term
Termination: Two Options to Terminate at end of 60th and 72nd
months with six months prior notice and payment of
a termination fee
Payee: WATSON LAND COMPANY
Federal Taxpayer ID Number: 951350050
Landlord Contact:
Name/Title: Anthony J. Manos
Address: 22010 South Wilmington Avenue
Carson, California 90745
Telephone: (310) 952-6400
Facsimile: (310) 522-8788
Tenant Contact:
Name/Title: Director of Real Estate
Address: 3560 Hyland Avenue
Costa Mesa, California 92626
Telephone: (714) 957-2000
Facsimile: (714) 957-2435
Revised August 7, 1995
STANDARD COMMERCIAL MULTI-TENANT LEASE
(Use This Form For Multi-Tenant Property)
TABLE OF CONTENTS
1. BASIC PROVISIONS ("Basic Provisions) 1
1.1 Parties 1
1.2 Premises 1
1.3 Terms 1
1.4 Base Rent 1
1.5 Prepaid Base Rent 1
1.6 Permitted Use 1
1.7 Parking 1
1.8 Real Estate Brokers 1
1.9 Tenant's Pro Rata Share 1
1.10 Exhibits And Addenda 1
2. PREMISES 2
2.1 Letting 2
2.2 Condition 2
2.3 Compliance With Convenants, Restrictions
And Building Codes 2
2.4 Representations Concerning Premises 2
3. TERM 2
3.1 Term 2
3.2 Early Possession 2
3.3 Delay In Possession 2
4. RENT 2
4.1 Base Rent 2
4.2 Additional Rent 3
5. USE 4
5.1 Use 4
5.2 Hazardous Substances 4
(a) Definition 4
(b) Landlord's Representations
And Warranties 5
(c) Tenant's Use 5
(d) Survival 5
5.3 Tenant's Compliance With Law 5
(a) Definition; Evidence Of Compliance 5
(b) Tenant's Right To Contest 5
(c) Landlord's Responsibility 5
5.4 Inspection: Compliance 5
6. MAINTENANCE; REPAIRS; ALTERATIONS 6
6.1 Tenant's Obligations 6
6.2 Landlord's Obligations 6
6.3 Utility Installations; Trade Fixtures;
Alterations 6
(a) Definitions; Consent Required 6
(b) Consent 6
(c) Indemnification 6
6.4 Ownership; Removal; Surrender 7
(a) Ownership 7
(b) Surrender 7
7. INSURANCE; INDEMNITY 7
7.1 Payment For Insurance 7
7.2 Liability Insurance 7
7.3 Property Insurance--Building And
Improvements 7
(a) Building And Improvements 7
(b) Rental Value 7
(c) Adjacent Premises 7
7.4 Tenant's Property Insurance 7
7.5 Insurance Policies 8
7.6 Waiver Of Subrogation 8
7.7 Indemnity By Tenant 8
7.8 Indemnity By Landlord 8
8. DAMAGE OR DESTRUCTION 8
8.1 Definitions 8
(a) "Premises Partial Damage" 8
(b) "Premises Total Destruction" 8
(c) "Insured loss" 8
(d) "Casualty" 8
(e) "Replacement Cost" 8
(f) "Hazardous Substance Condition" 9
8.2 Partial Damage - Insured Loss 9
8.3 Partial Damage - Uninsured Loss 9
8.4 Total Destruction 9
8.5 Damage Near End Of Term 9
8.6 Abatement Of Rent; Tenant's Remedies 9
8.7 Hazardous Substance Conditions 9
8.8 Termination - Advance Payments 10
8.9 Waive Statutes 10
9. REAL PROPERTY TAXES 10
9.1 Payment Of Taxes 10
9.2 Definition Of "Real Property Taxes" 10
9.3 Right To Contest Or Seek Reassessment 10
10. UTILITIES 10
11. ASSIGNMENT AND SUBLETTING 10
11.1 Tenant's Right To Assign Or Sublet 10
11.2 Tenant's Continuing Obligations;
Excess Rent 11
12. DEFAULT; BREACH; REMEDIES 11
12.1 Default, Breach 11
12.2 Remedies 11
12.3 Late Charges 12
12.4 Breach By Landlord 12
13. CONDEMNATION 12
13.1 Permanent Taking 12
13.2 Temporary Taking 12
14. BROKERS' FEE 13
14.1 Role Of Brokers 13
14.2 Payment Of Commission 13
14.3 No Other Brokers 13
14.4 Agency Relationships 13
15. TENANCY STATEMENT 13
16. LANDLORD'S LIABILITY 13
17. SEVERABILITY 13
18. INTEREST ON PAST-DUE OBLIGATIONS 13
19. TIME OF ESSENCE 13
20. RENT DEFINED 13
21. NO PRIOR OR OTHER AGREEMENTS 13
22. NOTICES 13
23. WAIVERS 14
24. RECORDING 14
25. CUMULATIVE REMEDIES 14
26. BINDING EFFECT; CHOICE OF LAW 14
27. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE 14
27.1 Subordination 14
27.2 Attornment 14
27.3 Non-Disturbance 14
27.4 Self-Executing 14
28. ATTORNEYS' FEES 15
29. LANDLORD'S ACCESS 15
30. SIGNS 15
31. TERMINATION; MERGER 15
32. QUIET POSSESSION 15
33. CONSENTS 15
34. PERFORMANCE UNDER PROTEST 15
35. AUTHORITY 15
36. CONFLICT 15
37. OFFER 15
38. AMENDMENTS 16
39. WAIVER OF STATUTORY LIEN 16
40. HOLDOVER 16
41. MULTIPLE PARTIES 16
STANDARD COMMERCIAL MULTI-TENANT LEASE
(Use This Form For Multi-Tenant Property)
1. BASIC PROVISIONS ("Basic Provisions").
1.1 Parties. This Lease ("Lease") dated, for reference
purposes only, March 15 , 1996, is made by and between WATSON
LAND COMPANY, a California corporation ("Landlord") and APRIA
HEALTHCARE, INC., a Delaware corporation ("Tenant"),
(collectively the "Parties," or individually a "Party").
1.2 Premises. Suite 173 containing approximately
( ) square feet of net rentable area constructed as
office space and
(______) square feet of net rentable area constructed as
warehouse space (collectively, the "Premises") located in that
certain Building (herein so called) commonly known by the street
address of 909 E. 236th Street, in the City of Carson, County
of , State of California , on
that certain tract of real property (the "Land") more fully
described on Exhibit A hereto. The location of the Building on
the Land is shown on the site plan attached hereto as Exhibit A-
1, and the location of the Premises within the Building is shown
on Exhibit A-2. The right to use and enjoy the Premises
hereunder shall include the right to use and enjoy the areas on
the Land or in the Building designed for common usage by tenants
of the Building (the "Common Area"), including but not limited to
sidewalks, entryways, parking areas, elevators, common corridors
and restroom facilities, for all reasonable purposes, including
but not limited to ingress, egress and loading, subject to such
rules and regulations as Landlord may reasonably establish with
respect to such usage.
1.3 Term. Eighty-Four (84) months ("Lease Term")
scheduled to commence on May 1, 1996 ("Commencement Date") and
end on April 30, 2003 ("Expiration Date"). (See Article 3
for further provisions.)
1.4 Base Rent. Dollars ($ ) per month ("Base
Rent"), payable on the first (1st) day of
each month commencing on the Commencement Date. (See Article 4
for further provisions.)
[X]If this box is checked, there are provisions in this Lease for
the Base Rent to be adjusted.
1.5 Intentionally Omitted.
1.6 Permitted Use. The Premises are to be used by Tenant
for general warehouse distribution, general office, pharmacy,
infusion and respiratory therapy and purposes related to the
delivery of home health care services and other incidental
ambulatory care services. It is acknowledged that, as a part of
its business, Tenant intends to mix and store pharmaceuticals,
store liquid oxygen, cleaning solvents and other flammable
materials on the Premises and that Tenant also handles and
disposes of medical waste products.
1.7 Parking. Tenant and its invitees and licensees shall
be entitled to the use of Tenant's proportionate share of the
parking spaces allotted to the Building, which shall be not less
than Two Hundred (200) parking spaces, which spaces shall be so
designated by Landlord at the locations shown on Exhibit A-1 and
at least fifty percent (50%) of such spaces shall be designated
"Priority Areas" (as defined in the Special Provisions Addendum
attached hereto). (See Special Provisions Addendum, Article D
for further provisions.)
1.8 Real Estate Brokers. The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist
in this transaction and are consented to by the Parties (check
applicable boxes):
N/A represents
[ ] Landlord exclusively or [ ]both Landlord and Tenant, and
Julien J. Studley, Inc. represents
Tenant exclusively. (See Article 14 for further provisions.)
1.9 Tenant's Pro Rata Share. "Tenant's Pro Rata Share"
shall be calculated by dividing the net rentable area of the
Premises by the net rentable area of the Building. The net
rentable area of the Building is ___________ square feet. As of
the Commencement Date, Tenant's Pro Rata Share is
________________ percent (_____%).
1.10 Exhibits And Addenda. If marked, the following
Exhibits and Addenda are attached hereto and incorporated herein
by reference as fully as if set forth herein verbatim:
Exhibits Addenda
-------- -------
[X]Exhibit A - The Land [X]Renewal Option
[X]Exhibit A-1 - Site Plan [X]Expansion/Right of
[X]Exhibit A-2 - The Premises First Refusal Option
[X]Exhibit B - Tenancy Statement [X]Base Rent Adjustment
[X]Construction Addendum
[X]Oxygen Tank Addendum
[X]Special Provisons
Addendum
[X]Satellite Addendum
2. PREMISES.
2.1 Letting. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the Premises, for the Lease Term, at
the rental, and upon all of the terms, covenants and conditions
set forth in this Lease. Unless otherwise provided herein, any
statement of square footage set forth in this Lease, or that may
have been used in calculating rental or Tenant's Pro Rata Share,
is an approximation which Landlord and Tenant agree is reasonable
and the rental based thereon is not subject to revision whether
or not the actual square footage is more or less.
2.2 Condition. If Landlord is to construct the Building or
make improvements to the Premises prior to the Commencement Date,
then Landlord shall deliver the sameLandlord shall construct
Landlord's Work and deliver the Premises to Tenant in the
condition and subject to the warranties set forth in the Special
Provisions Addendum and the Construction Addendum. If no
construction is to be performed by Landlord hereunder, then
Landlord shall deliver the Premises to Tenant clean and free of
debris on the Commencement Date anLandlord warrants to Tenant
that the existing foundation, roof and other structural elements
of the Building as well as the major components of the plumbing,
fire sprinkler system, lighting, heating, ventilation, air
conditioning and loading doors, if any, in the Premises, other
than those constructed by Tenant, shall have been properly
maintained and be in good operating condition on the Commencement
Date and such structural elements and major components of the
Building and Landlord's Work will remain in good operating
condition, exclusive of maintenance and ordinary wear and tear,
for at least one (1) year following the Commencement Date. If a
non-compliance with said warranty exists or shall occur, Landlord
shall, except as otherwise provided in this Lease, promptly after
receipt of written notice from Tenant setting forth with
specificity the nature and extent of such non-non-compliance,
rectify the same at Landlord's expense.
2.3 Compliance With Covenants, Restrictions And Applicable
Law. Landlord warrants to Tenant that the Premises and the
Building comply, as of the Commencement Date, with all applicable
covenants or restrictions of record and Applicable Law, excepting
any Applicable Law which exists as of the Commencement Date which
is not applied retroactively and excepting any ADA compliance
obligations for which Tenant is responsible pursuant to the
provisions of Paragraph C of the attached Special Provisions
Addendum. Subject to the applicable provisions of this Lease,
Landlord shall cause the Premises and the Building to be brought
into compliance with any subsequently enacted requirements of
Applicable Law, but Landlord shall not be responsible for
bringing the Building or the Premises into compliance with any
such requirements which are triggered or imposed as a result of
Tenant's particular use of the Premises, or as a result of any
alterations or improvements to the Premises by Tenant after
completion of the initial Tenant Improvements pursuant to the
attached Construction Addendum. If a non-compliance with
Landlord's warranty pursuant to this Paragraph 2.3 shall exist or
occur, Landlord shall, promptly after receipt of written notice
from Tenant setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Landlord's expense,
except as otherwise provided herein. Notwithstanding any
provisions of this Lease to the contrary, Landlord shall have no
responsibility for, and makes no representations or warranties as
to any provisions of Applicable Law or covenants or restrictions
of record which apply or relate in any way to the oxygen tank
described in the attached Oxygen Tank Addendum.
2.4 Representations Concerning Premises. Landlord hereby
represents that all improvements made to the Premises by Landlord
have been performed in a good and workmanlike manner in
accordance with the terms of this Lease and in compliance with
Applicable Law.
3. TERM.
3.1 Term. The scheduled Commencement Date, Expiration Date
and Lease Term of this Lease are specified in Section 1.3.
3.2 Early Possession. Prior to the Commencement Date,
Tenant shall have the right to enter upon, and Landlord shall
provide access to, the Premises for purposes of installing
Tenant's cabling, fixtures, furniture and equipment. Such entry
upon the Premises shall not be deemed to constitute the taking of
possession or occupancy of the Premises by Tenant. If Tenant
totally or partially occupies the Premises prior to the
Commencement Date, the obligation to pay Base Rent shall be
abated for the period of such early possession. However, all
other terms of this Lease, including but not limited to the
obligations to pay Tenant's Pro Rata Share of Operating Expenses
(as defined in Section 4.2) and to maintain the Premises, shall
be in effect during such period. Any such early possession shall
neither affect nor advance the Expiration Date of the Lease Term.
Tenant agrees that throughout the period of its use and occupancy
of the Premises prior to the Commencement Date (the "Early
Occupancy Period"), Tenant shall conduct its activities on the
Premises in such a way so as not to interfere with, disrupt or
delay Landlord's work or activities relating to any of the
improvement work to be performed by Landlord pursuant to the
attached Construction Addendum, and any delay resulting from any
such interference, disruption or delay shall be a "Tenant Delay".
Landlord shall have no responsibility for any damage, theft,
destruction or injury to Tenant or any of Tenant's property as a
result of Tenant's presence or activities on, or use of, the
Premises during the Early Occupancy Period. Landlord makes no
representations as to whether Tenant's occupancy of the Premises
during the Early Occupancy Period will be in compliance with
applicable building, safety or fire codes, and Tenant shall be
responsible for, and assumes the risk of any non-compliance.
Tenant shall indemnify and hold Landlord harmless from and
against any loss, cost, liability, claim or action arising out of
or relating to Tenant's use or occupancy of the Premises during
the Early Occupancy Period.
3.3 Delay In Possession. If for any reason (other than a
delay which is attributable to any act or omission of Tenant, in
which event the Commencement Date shall be deemed to occur on the
date on which the Commencement Date could have occurred absent
such delay by Tenant), Landlord has not substantially completed
construction of Landlord's Work by the Landlord's Completion
Date, Landlord, except as set forth in the Construction Addendum
attached hereto, shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the
obligations of Tenant hereunder, or extend the Lease Term. In
such case, Tenant shall not, except as specifically provided in
Paragraph 3.2, above or as otherwise provided herein or in the
Construction Addendum, be obligated to pay rent or perform any
other obligation of Tenant under the terms of this Lease until
the Commencement Date occurs, as determined pursuant to the
provisions of the attached Construction Addendum, and the
Commencement Date and the Expiration Date shall be adjusted
accordingly. If the Commencement Date falls on a date other than
the first day of a calendar month, the partial month during which
the Commencement Date occurs shall be added to the Lease Term.
After the occurrence of the actual Commencement Date, either
Party, upon request by the other, shall execute a memorandum
reflecting the actual Commencement Date and Expiration Date.
4. RENT.
4.1 Base Rent. Except as herein specifically provided,
Tenant shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be
received by Landlord in lawful money of the United States,
without offset or deduction except as otherwise provided herein,
on or before the day on which it is due under the terms of this
Lease. Base Rent and all other rent and charges for any period
during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of
days of the calendar month involved. Base Rent for any partial
month at the commencement of the Lease Term shall be based on the
rate for the first full calendar month of the Lease Term.
Payment of Base Rent and other charges shall be made to Landlord
at its address stated herein or to such other persons or at such
other addresses as Landlord may from time to time designate in
writing to Tenant.
4.2 Additional Rent. In addition to the payment of Base
Rent, Tenant shall pay to Landlord monthly in advance Tenant's
Pro Rata Share, as defined in Section 1.9, of Operating Expenses.
As used herein, the term "Operating Expenses" means all expenses,
costs and disbursements which Landlord shall reasonably pay or
incur in connection with the ownership, operation and maintenance
of the Building or the Land, which are customarily charged by
landlords to tenants in multi-tenant commercial properties. Such
expenses, costs and disbursements shall include the following:
(1) Wages, salaries and fees of all
personnel (exclusive of Landlord's executive personnel)
engaged in the operation, maintenance or security of
the Building or the Land, including taxes, insurance
and benefits relating thereto to the extent that such
wages, salaries, fees, and related expenses are
reasonably allocable to the Building or the Land and
not to other projects developed, operated or owned by
Landlord;
(2) All supplies and materials used in the
operation and maintenance of the Building or the Land,
including, but not limited to, all supplies and
materials used in connection with the services
described in this Section 4.2.;
(3) Cost of all maintenance, security and
service agreements for the Building or the Land and the
equipment thereon, including, without limitation, alarm
service (if any), janitorial service, trash removal
service, window cleaning, elevator maintenance,
landscaping, lawn irrigation service, and parking area
maintenance;
(4) Cost of all insurance relating to the
Building or the Land for which Landlord is responsible
hereunder and the deductible amounts under such
insurance policies, not to exceed the amount of $12,000
per occurrence, in the event of any loss which is
covered by any such insurance policy;
(5) Real Property Taxes (as defined in
Section 9.2) attributable to the Building or the Land;
(6) Cost of repairs and general maintenance
of the Building and the Common Area (excluding repairs
and general maintenance paid by proceeds of insurance
or by Tenant or other third parties, and excluding
tenant finish or alterations) and costs of reasonable
reserve funds for periodic exterior repainting and
asphalt sealing and repair;
(7) All charges for utilities (including,
but not limited to, water, sewer, electricity and gas)
paid by Landlord for the benefit of the tenants of the
Building generally or in connection with the operation
of the Common Area;
(8) Accounting costs directly relating to
the operation of the Building or the Land; and
(9) The management fee which is from time to
time in effect and which is due to the manager of the
Building provided, however, that to the extent such fee
is paid to an affiliate of Landlord, the amount thereof
shall be limited to a fee which is comparable to
management fees charged by and paid to management
companies engaged in the management of buildings
similar to the Building in the City where the Premises
are located in situations where the management company
is not affiliated with the owner of the building and is
discharging duties substantially similar in scope and
nature to those performed by Landlord's property
manager in connection with the Building.
Notwithstanding the foregoing, in no event shall
Landlord's management fee exceed three-percent (3%) of
the total Operating Expenses (including Real Property
Taxes).
Notwithstanding the foregoing, the following items
shall be excluded from Operating Expenses:
(i) Repairs or other work
occasioned by fire, windstorm or other
casualty of an insurable nature or by the
exercise of the right of eminent domain, but,
in the case of fire, windstorm or other
casualty, only to the extent the cost of such
repairs or work is covered by insurance;
(ii) Repairs, other work,
costs or charges occasioned by the breach of
any covenant, warranty or representation made
by Landlord pursuant to this Lease or in
connection with this Lease, the Premises, the
Building or the Land;
(iii) Attorneys' fees,
costs and disbursements and other expenses
incurred in connection with negotiations or
disputes with tenants or occupants or
prospective tenants or occupants;
(iv) Costs incurred due to
violations by Landlord or its agents of the
terms and conditions of any lease, or by
another tenant or tenants of the terms and
conditions of any lease;
(v) Expenses related to the
management and operation of Landlord as an
entity which do not relate to the operation,
ownership and maintenance of the Building or
the Land;
(vi) Principal, interest and
other costs directly related to financing the
Building or the Land, or, if this is a
sublease, any ground or other rents paid by
Landlord under the primary lease;
(vii) Any costs, fines or
penalties due to any failure by Landlord to
remit timely payments and/or violation by
Landlord of any governmental rule or
authority;
(viii) Profit increment
paid to subsidiaries or affiliates of
Landlord for services on or to the Building
or the Land, to the extent only that the
costs of such services exceed competitive
costs of such services were they not so
rendered by a subsidiary or affiliate;
(ix) Any advertising and
promotional expenditures or leasing
commissions;
(x) Costs of above building
standard services and/or costs of
construction and/or refurbishment for the
specific benefit of another tenant and not
provided to tenants generally; and
(xi) Any compensation paid to
clerks, attendants or other persons in
commercial concessions operated by Landlord
or its subsidiaries or affiliates.
(xii) Capital
improvements, repairs or alterations unless
mandated by changes in Applicable Law
occurring after the Commencement Date and
then only as amortized over the useful life
of the improvement.
(xiii) The utility charges
associated with the provision of HVAC
services outside of normal building hours.
Normal building hours are defined as Monday
through Friday from 8:00 a.m. to 6:00 p.m.,
and Saturday from 8:00 a.m. to 1:00 p.m.
Tenant shall be charged for after-hours HVAC
services provided to the Premises at the rate
of $35.00 per hour. In the event that, due
to unusual circumstances, Landlord
experiences an increase in the rate charged
for the provision of electrical services to
the Building which is greater than fifty
percent (50%) of the rate charged during the
previous year, then the component of the
$35.00 after-hours HVAC charge which consists
of the cost of electricity will be
temporarily increased proportionately to
accommodate the unusual circumstances.
Landlord may invoice Tenant monthly for Tenant's Pro Rata
Share of Landlord's good faith estimate of Operating Expenses,
which amount shall be adjusted from time to time based on
anticipated Operating Expenses. Within four (4) months following
the close of each calendar year, Landlord shall provide Tenant an
accounting showing in reasonable detail all computations of
additional rent due under this Section 4.2. In the event the
accounting shows that the total of the monthly payments made by
Tenant exceeds the amount due from Tenant under this Section as
its Pro Rata Share of Operating Expenses, the accounting shall be
accompanied by a refund. In the event the accounting shows that
the total of the monthly payments made by Tenant is less than the
amount due from Tenant under this Section as its Pro Rata Share
of Operating Expenses, the accounting shall be accompanied by an
invoice therefor. If this Lease shall commence on a day other
than the first (1st) day of a calendar year or terminate on a day
other than the last day of a calendar year, the amount payable by
Tenant as its Pro Rata Share of Operating Expenses, applicable to
the year in which such commencement or termination shall occur
shall be prorated on the ratio that the number of days within the
Lease Term during the partial calendar year in question bears to
three hundred sixty-five (365). Tenant agrees to pay any amounts
due under this Section within forty-five (45) days following
receipt of the invoice or accounting showing additional rent due.
Tenant shall have the right, upon reasonable notice by Tenant to
Landlord, to audit Landlord's books and records concerning
Operating Expenses. If such audit shall correctly disclose that
Tenant has been overcharged for Operating Expenses, all excess
amounts shall immediately be refunded to Tenant, and, if Landlord
has overcharged Tenant by more than five (5%) during the audited
year in question, Landlord shall bear the cost of the audit. In
addition, Tenant shall have the right, after written notice to
Landlord and at Tenant's sole cost and expense, to contest in
good faith any item charged as additional rent hereunder for
Tenant's Pro Rata Share of Operating Expenses prior to paying the
same, provided that (A) no civil or criminal penalty, violation,
fine or levy would be incurred by Landlord as a result of such
contest, and (B) no lien or charge would be imposed upon the
Premises or the Building by reason of such delay. To the
greatest extent reasonably possible and consistent with the
prudent management and operation of the Building, Landlord shall
exercise its best efforts to obtain services and materials which
will be included in Operating Expense at the lowest possible
cost.
5. USE.
5.1 Use. Tenant shall use and occupy the Premises only for
the purposes set forth in Section 1.6, or any other use which is
comparable thereto. Landlord hereby agrees to not unreasonably
withhold or delay its consent to any written request by Tenant,
Tenant's assignees or subtenants, or prospective assignees and
subtenants of Tenant, for a modification of said permitted
purpose for which the Premises may be used or occupied, so long
as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical
systems therein, is not significantly more burdensome to the
Premises and the improvements thereon (including any burden
caused by the use of Hazardous Substances), is otherwise
permissible pursuant to this Article 5, and in Landlord's
reasonable and good faith determination does not negatively
impact Landlord's ability to lease the remainder of the Building
nor adversely impact other tenants then occupying the Building.
If Landlord elects to withhold such consent, Landlord shall,
within five (5) business days after receipt by Landlord of a
request for consent, give a written notification of same, which
notice shall include an explanation of Landlord's reasonable
objections to the change in use.
5.2 Hazardous Substances.
(a) Definition. As used in this Section, the term
"Hazardous Substance" shall mean any product, substance,
chemical, material or waste whose presence, nature, quantity
and/or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Premises,
the Land, or in the Building, is either: (i) potentially
injurious to the public health, safety or welfare, the
environment, the Premises, or the Common Area, (ii) regulated or
monitored by any governmental authority, or (iii) a basis for
liability of Landlord to any governmental agency or third party
under any applicable statute or common law theory. The term
"Hazardous Substance" shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products, by-
products or fractions thereof, "Infectious Waste", and "Medical
Waste" as defined in the California Health and Safety Code.
(b) Landlord's Representations And Warranties.
Landlord represents and warrants to Tenant that, as of the date
hereof, to Landlord's actual knowledge, (i) the Premises, the
Building, the Land and the soil and groundwater on or under the
Land are free of Hazardous Substances, and (ii) the Premises, the
Building and the Land are in compliance with all Applicable Law
(defined in Section 5.3) regulating the handling, transportation,
storage, treatment, use and disposition of Hazardous Substances.
Landlord shall be responsible for all costs and expenses incurred
at any time in complying with all Applicable Law requiring the
remediation or removal of Hazardous Substances existing on the
Premises, the Building or the Land as of the date hereof, or
requiring the remediation or removal of Hazardous Substances
which come to be located on the Premises, the Building or the
Land after the date hereof for reasons other than the actions or
activities of Tenant or those of its employees, agents,
contractors or invitees. In furtherance of the foregoing, and
without limiting the scope thereof, if it is determined at any
time that the Premises contain asbestos or other Hazardous
Substances which were present at the time possession of the
Premises was delivered to Tenant, then the cost of removal,
containment or neutralization of such materials shall be borne by
Landlord. Landlord shall indemnify, defend and hold Tenant
harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, or expenses of any governmentally
ordered remediation or removal of any Hazardous Substances which
exist on the Premises, the Building or the Land after the date
hereof, except for any Hazardous Substances which come to be
located on the Premises as a result of the actions or activities
of Tenant or its employees, agents, contractors or invitees. In
the event of any breach of Landlord's environmental
representation and warranty as provided in this Paragraph 5.2(b)
or in the event that Landlord, its employees, agents, contractors
or invitees shall cause a Hazardous Substance contamination of
the Premises, the Building or the Land, Landlord shall indemnify,
defend and hold Tenant harmless from and against any claims,
judgments, damages, penalties, fines, costs or expenses
(collectively, "Claims") for personal injury or property damage
suffered by Tenant or Tenant's employees, agents, contractors or
invitees as a result of Landlord's breach of such warranty or
cause of such contamination. Notwithstanding the foregoing,
Landlord shall not be held accountable for any Claims, which
arise from a claim by Tenant's agents, employees, invitees or
contractors in connection with Hazardous Substances that is
fraudulent, frivolous or otherwise legally insupportable, and
Tenant shall indemnify Landlord for Landlord's cost of defending
said Claim.
(c) Tenant's Use. Tenant hereby agrees that (i) no
activity will be conducted on the Premises that will produce any
Hazardous Substances, except for such activities that are part of
the ordinary course of Tenant's business activities (the
"Permitted Activities") provided such Permitted Activities are
conducted in accordance with Applicable Law relating to Hazardous
Substances; (ii) the Premises will not be used in any manner for
the storage of any Hazardous Substances except for any temporary
storage of such materials that are used in the ordinary course of
Tenant's business (the "Permitted Materials") provided such
Permitted Materials are properly stored in a manner and location
satisfying all Applicable Law relating to Hazardous Substances;
(iii) Tenant will not install any underground tanks of any type;
(iv) Tenant will not allow any surface or subsurface conditions
to exist or come into existence that constitute, or with the
passage of time may constitute a public or private nuisance; and
(v) Tenant will not permit any Hazardous Substances to be brought
onto the Premises, except for the Permitted Materials, and if so
brought or found located thereon, the same shall be immediately
removed by Tenant, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all
Applicable Law relating to Hazardous Substances during or after
the Term. Upon request from Landlord, Tenant shall provide
Landlord with evidence on an annual basis (or more frequently, if
Landlord reasonably believes that a change has occurred in
Tenant's Hazardous Substances management practices) that Tenant
is complying with all Applicable Law in connection with its use
of Hazardous Substances. If available, such evidence shall
include any public non-proprietary information as may be included
in any copies of Hazardous Materials Management Plans maintained
by Tenant as well as a representative list of Hazardous
Substances used or stored by Tenant on the Premises. Tenant
shall be responsible for all costs incurred in complying with all
Applicable Law relating to Hazardous Substances which Tenant or
its agents, contractors, or invitees store, use or handle in or
upon the Premises at any time during the Lease Term. Tenant
shall indemnify, defend and hold Landlord harmless from and
against any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses (including, without limitation, sums
paid in settlement of claims, attorneys' fees, consultant fees
and expert fees) (collectively, "Claims") which arise on or after
the date that possession of the Premises is delivered to Tenant,
including at any time after the expiration of the Lease Term,
from or in connection with Tenant's storage, use or handling of
Hazardous Substances on the Premises during the Lease Term
provided, however, that in no event shall Tenant be liable for
any Claims resulting from routine leakage from vehicles parked on
or traveling across the Premises or any portion thereof, nor
shall such leakage be deemed a violation of Tenant's obligations
hereunder. Landlord may enter the Premises and conduct
environmental inspections and tests therein as it may require
from time to time, provided that Landlord shall use reasonable
efforts to minimize the interference with Tenant's business.
Such inspections and tests shall be conducted at Landlord's
expense, unless they reveal the presence of Hazardous Substances
(other than Permitted Materials) or that Tenant has not complied
with the requirements set forth in this Section 5.2, in which
case Tenant shall reimburse Landlord for the cost thereof within
ten (10) business days after Landlord's request therefor.
(d) Survival. The representations, warranties and
agreements of the Parties set forth in this Section 5 shall
survive the expiration of the Lease Term or the termination of
this Lease for any other reason.
5.3 Tenant's Compliance With Law.
(a) Definition; Evidence Of Compliance. Except as
otherwise provided in this Lease, Tenant shall, at Tenant's sole
cost and expense, fully, diligently and in a timely manner,
comply with all "Applicable Law," now in effect or subsequently
enacted. As used in this Lease the term "Applicable Law" shall
include all laws, rules, regulations, ordinances, statutes,
codes, directives, covenants, easements and restrictions of
record, permits, and the reasonable requirements of any
applicable fire insurance underwriter or rating bureau relating
in any manner to the Premises. Tenant shall, within forty-five
(45) days after receipt of Landlord's written request, provide
Landlord with copies of all documents and information, including,
but not limited to, permits, registrations, manifests,
applications, reports and certificates, evidencing Tenant's
compliance with any Applicable Law specified by Landlord.
(b) Tenant's Right To Contest. Tenant shall have the
right, after written notice to Landlord and at Tenant's sole cost
and expense, to contest in good faith by appropriate legal
proceedings the validity or application of any law, ordinance or
other legal requirement and to delay compliance therewith pending
the prosecution of such proceedings, provided that (i) no civil
or criminal penalty, violation, fine or levy would be incurred by
Landlord as a result of such contest, (ii) no lien or charge
would be imposed upon the Land or the Building by reason of such
delay, and (iii) such legal proceedings are conducted in the
manner prescribed by Applicable Law. Tenant shall indemnify and
hold Landlord harmless from and against any and all claims,
demands, liabilities, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees)
arising out of or in connection with any such contest by Tenant.
Landlord agrees that it will, at the request of Tenant, execute
or join in the execution of any instrument or document necessary
in connection with any such contest, at no cost to Landlord.
(c) Landlord's Responsibility. Except as otherwise
provided in this Lease, Landlord shall be responsible for any
violations of Applicable Law existing with respect to the
Premises as of the Commencement Date or subsequently enacted and
Tenant shall have no liability therefor, unless caused by Tenant,
its employees or agents, or unless made applicable to the
Premises as a result of Tenant's specific use of the Premises.
Landlord shall, at its expense, make any necessary repairs or
take other action necessary to correct any violation of
Applicable Law for which it is responsible and of which notice is
delivered to Tenant or Landlord by the appropriate governmental
authorities. If, during the Lease Term, any alteration, addition
or change to the Premises is required by legal authorities, then
the obligation to make the same shall be as set forth in Sections
6.1 and 6.2 of this Lease.
5.4 Inspection; Compliance. Landlord shall have the right
to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times upon reasonable prior notice of
at least one business day, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Tenant
with this Lease and all Applicable Law. Landlord may employ
experts or consultants in connection therewith to advise Landlord
with respect to Tenant's activities, including but not limited to
the installation, operation, use, monitoring, maintenance, or
removal of any Hazardous Substance or storage tank on or from the
Premises. The cost and expense of any such inspections shall be
paid by Landlord, unless a Breach of this Lease, a violation of
Applicable Law, or a contamination caused by Tenant is found to
exist.
6. MAINTENANCE; REPAIRS; ALTERATIONS.
6.1 Tenant's Obligations. Except as otherwise specifically
provided herein, and subject to any express or implied warranties
of construction or condition by Landlord, Tenant shall, at
Tenant's sole cost and expense, keep the Premises and every part
thereof (except those for which Landlord is responsible under the
terms of this Lease) in good order, condition and repair,
including, without limiting the generality of the foregoing, all
equipment or facilities located within and serving the Premises
exclusively, such as above the slab plumbing and utility lines,
and electrical systems, lighting facilities, fixtures, interior
non-load bearing walls, ceilings, floors or floor coverings,
windows, doors, and plate glass, reasonable wear and tear
excepted.
6.2 Landlord's Obligations. Landlord shall, at Landlord's
sole cost and expense, maintain the foundation, below the slab
plumbing fixtures, utility lines located outside the Premises or
below the slab, and the structural soundness of the exterior,
interior and load bearing, and demising walls of the Building,
reasonable wear and tear excepted. However, if any maintenance or
repair work for any such items is required as a result of any
negligence or willful misconduct of Tenant or any of Tenant's
agents, employees, shippers, customers, invitees or contractors,
such work shall be at Tenant's sole cost and expense, except to
the extent Landlord actually receives insurance reimbursement for
such maintenance or repair work. In addition, Landlord shall, as
part of Building Operating Expenses, perform or supply all
maintenance, repair and other services to which Operating
Expenses are applicable as and when the same are reasonably
necessary, including, but not limited to, landscape maintenance,
driveway and parking area maintenance for the Premises and Common
Area, roof, downspouts, gutters, exterior lighting maintenance,
waste removal, repair and maintenance of paved areas, cleaning
supplies, miscellaneous building supplies, external painting for
the Building, exterior and interior Common Area maintenance,
heating ventilating and air conditioning repair and maintenance,
elevator repair and maintenance, within the slab or external
plumbing for the Building, insect and pest extermination and
security system for the Building (exclusive of the Premises),
signs for the complex in which the Premises are located and
miscellaneous maintenance.
6.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all carpeting,
window coverings, air lines, power panels, electrical
distribution, security, fire protection systems, lighting
fixtures, heating, ventilating, and air conditioning equipment,
plumbing, and non-demising walls in, on or about the Premises.
The term "Trade Fixtures" shall mean Tenant's machinery and
equipment, including, but not limited to, computer systems,
computer equipment, storage facilities, fences, partitions and
other similar items, that can be removed without doing material
damage to the Building or the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises
from that which are provided by Landlord under the terms of this
Lease, other than Utility Installations or Trade Fixtures.
"Tenant Owned Alterations and/or Utility Installations" are
defined as Alterations and/or Utility Installations made by
Tenant that are not yet owned by Landlord as defined in
Subsection 6.4(a). Except as provided elsewhere in this Lease,
Tenant shall not make any Alterations or Utility Installations
in, on, under or about the Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld
or delayed. Tenant may, however, without obtaining Landlord's
consent thereto, make nonstructural Alterations or Utility
Installations to the interior of the Premises, as long as such
alterations and installations are not visible from the outside,
and do not involve puncturing, relocating or removing the roof or
any existing demising, exterior or load bearing walls.
(b) Consent. Any Alterations or Utility Installations
that Tenant shall desire to make and which require the consent of
Landlord shall be presented to Landlord in written form with
proposed plans. All consents given by Landlord shall be deemed
conditioned upon: (i) Tenant's acquiring all applicable permits
required by governmental authorities, (ii) the furnishing to
Landlord of copies of such permits together with a copy of the
plans and specifications for the Alteration or Utility
Installation prior to commencement of the work thereof, and (iii)
compliance by Tenant with all conditions of said permits in a
prompt and expeditious manner. Any Alterations or Utility
Installations made by Tenant during the Lease Term shall be done
in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Tenant
shall promptly upon completion thereof furnish Landlord with as-
built plans and specifications therefor. Landlord may (but
without obligation to do so) condition its consent to any
requested Alteration or Utility Installation that costs Fifty
Thousand Dollars ($50,000) or more upon Tenant's providing
Landlord with a lien and completion bond in an amount equal to
one and one-half (1 1/2) times the estimated cost of such
Alteration or Utility Installation.
(c) Indemnification. Tenant shall pay, when due, all
claims for labor or materials furnished or alleged to have been
furnished to or for Tenant at or for use on the Premises which
claims are or may be secured by any mechanics' or materialmen's
lien against the Premises or any interest therein. If Tenant
shall, in good faith, contest the validity of any such lien,
claim or demand, then Tenant shall, at Tenant's sole cost and
expense, defend and protect itself, Landlord and the Premises
against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement
thereof against the Landlord or the Premises. If in connection
with such contest Landlord shall require, Tenant shall furnish to
Landlord a surety bond satisfactory to Landlord in an amount
equal to one and one-half (1 1/2) times the amount of such
contested lien, claim or demand (or, if different, the amount
required by statute), indemnifying Landlord against liability for
the same, as required by law for the holding of the Premises free
from the effect of such lien or claim.
6.4 Ownership; Removal; Surrender.
(a) Ownership. Subject to Tenant's right to make
Landlord the owner thereof as hereinafter provided in this
Section 6.4, all Alterations and Utility Installations made to
the Premises by Tenant shall be the property of and owned by
Tenant, but shall be considered a part of the Premises. At the
expiration of the Lease Term, Tenant may, at any time and at its
option, elect in writing to make Landlord the owner of all or any
specified part of the Tenant Owned Alterations and Utility
Installations excepting those Tenant Owned Alterations and
utility installations which have been designated as "Removable
Alterations" pursuant to Paragraph 6.4(b) below. All other
Tenant Owned Alterations and Utility Installations shall, at the
expiration or earlier termination of this Lease, remain the
property of and may be removed by Tenant. If the same are not
removed within thirty (30) days after expiration of the Lease
Term, then they shall nevertheless become the property of
Landlord and no longer be subject to removal by Tenant.
Notwithstanding the foregoing, Landlord shall have the right to
require the removal of any of Tenant's Trade Fixtures by
providing notice to Tenant no later than thirty (30) days prior
to the expiration of the Lease Term.
(b) Exempt Alterations. If Tenant so requests, Landlord shall notify
Tenant in writing whether Landlord will require the removal of
any Alterations upon the expiration or sooner termination of the
Lease Term. Any item for which Landlord so notifies Tenant that
Landlord will not require removal is referred to herein as an
"Exempt Alteration". If Landlord has indicated that Landlord
will require the removal of any Alteration, Landlord may
subsequently notify Tenant that Landlord will not require the
removal of such Alteration (provided that Landlord shall give
such notice, if any, no later than sixty (60) days prior to the
expiration of the Lease Term), in which event Tenant shall not
(unless it has previously done so) remove such Alteration. All
Alterations shall be made in workmanlike manner, in full
compliance with all Applicable Laws. Notwithstanding the
foregoing, Tenant shall not be required to remove, and shall not
remove, any item of the "Improvements" (as defined in the
attached Construction Addendum) which is designated by Landlord
as an "Exempt Improvement" at such time as Landlord approves the
"Final Plans" (as defined in the attached Construction Addendum).
The requirements set forth above in this Paragraph 6.4 are
referred to herein as the "Restoration Standards". If Tenant
fails to place the Premises in the condition required pursuant to
the Restoration Standards upon the effective date of the
expiration or sooner termination of the Lease, Landlord may
perform the necessary work on Tenant's behalf and at Tenant's
expense (b) Removable Alterations. The term
"Removable Alteration" is used in this Lease to refer to a Tenant
Owned Alteration or Utility Installation which Landlord shall
require Tenant to remove upon the expiration of sooner
termination of the Lease Term or any renewal or extension
thereof. Landlord shall not designate any portion of Landlord's
Work or the Improvements to be made by Tenant, consistent with
the space plan prepared by Ericson & Associates, dated October
31, 1995, consisting of Sheet PR-2 (such Landlord's Work and
Improvements are further described in the attached Construction
Addendum and Oxygen Tank Addendum) as a Removable Alteration
other than Tenant's oxygen storage tank or tanks along with
related piping, foundations, enclosures and fixtures, and
Tenant's satellite communications equipment and satellite
cabling. Tenant shall not make any subsequent Alterations or
Utility Installations to the Premises which cost more than Twenty-
Five Thousand Dollars ($25,000) or which impact the Common Areas,
exterior, or structural or mechanical components of the Building
without the prior written consent of Landlord as provided in
Paragraph 6.3 of this Lease. Upon Tenant's submittal of proposed
plans for such Alterations or Utility Installations to Landlord,
Landlord shall indicate whether Landlord will designate such
Alterations or Utility Installations as Removable Alterations.
(c) Surrender. Tenant shall surrender the Premises by
the end of the last day of the Lease Term or any earlier
termination date, with all of the improvements and parts and
surfaces thereof clean and free of debris and in good operating
order, condition and state of repair, reasonable wear and tear
excepted. Tenant shall repair any and all damage resulting from
the removal of any Tenant Owned Alterations, Utility
Installations or Trade Fixtures and restore the Premises to
substantially the same condition as existed as of the
Commencement Date. If Tenant fails to place the Premises in the
condition required pursuant to this Paragraph 6.4 upon the
effective date of the expiration or sooner termination of the
Lease, Landlord may perform the necessary work on Tenant's behalf
and at Tenant's expense.
7. INSURANCE; INDEMNITY.
7.1 Payment For Insurance. Tenant shall pay as a part of
Operating Expenses, its Pro Rata Share for all insurance required
to be maintained under this Article 7. Notwithstanding the
foregoing, Tenant shall pay the full cost of the liability
insurance covering the Premises to be obtained by Tenant pursuant
to Section 7.2 below. Premiums for policy periods commencing
prior to or extending beyond the Lease Term shall be prorated to
correspond to the Lease Term. Landlord and Tenant shall
cooperate to obtain all coverage's required hereby from insurers
who meet the requirements hereof at the most advantageous rates
reasonably obtainable.
7.2 Liability Insurance. Tenant shall obtain and keep in
force during the Lease Term a commercial general liability policy
of insurance protecting Tenant and Landlord (as an additional
insured, but only as respects the negligent acts or omissions of
Tenant) against claims for personal injury, death and property
damage based upon, involving or arising out of the ownership,
use, occupancy or maintenance of the Premises. Landlord shall
obtain and keep in force during the Lease Term a commercial
general liability policy protecting Landlord and Tenant (as an
additional insured) against the same risks with respect to the
Common Area. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than Three
Million Dollars ($3,000,000) per occurrence.
7.3 Property Insurance--Building And Improvements.
(a) Building And Improvements. Landlord shall obtain
and keep in force during the Lease Term a policy or policies in
the name of Landlord, with loss payable to Landlord and to the
holders of any mortgages, deeds of trust or ground leases on the
Premises ("Lender(s)"), insuring loss or damage to the Building
and the Common Area. The amount of such insurance shall be equal
to the full replacement cost thereof, as the same shall exist
from time to time, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of
the unique nature or age of the improvements involved, such
latter amount is less than full replacement cost. If the
coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical
loss or damage, including coverage for the cost of debris removal
and reasonable amounts of coverage for the cost of complying with
any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building or other improvements
required to be demolished or removed by reason of the enforcement
of any building, zoning, safety or land use laws as the result of
a covered cause of loss. Said policy or policies shall also
contain (i) an agreed valuation provision in lieu of any
coinsurance clause, (ii) a waiver of subrogation clause, and
(iii) an inflation guard protection causing an increase in the
annual property insurance coverage amounts by a factor of not
less than the adjusted U.S. Department of Labor Consumer Price
Index for All Urban Consumers for the city nearest to where the
Premises are located. Notwithstanding the foregoing, Tenant
acknowledges that Landlord maintains insurance coverage
substantially equivalent to or superior to the coverage described
in this Section 7.3(a) under a policy or policies of insurance,
the terms of which do not correspond exactly to the terms set
forth herein.
(b) Rental Value. Landlord shall, in addition, obtain
and keep in force during the Lease Term a policy or policies in
the name of Landlord, with loss payable to Landlord and
Lender(s), insuring the loss of the full rental and other charges
payable by Tenant to Landlord under this Lease for twelve (12)
months (including all Real Property Taxes, insurance costs, and
any scheduled rent increases). Said insurance shall provide that
in the event the Lease is terminated by reason of an Insured Loss
(as defined below), the period of indemnity for such coverage
shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one (1) full year's
loss of rental revenues from the date of any such loss.
(c) Adjacent Premises. Tenant shall pay for an
increase in the premiums for the property insurance of the
Building if said increase is caused by Tenant's acts, omissions,
use or occupancy of the Premises (including, without limitations,
the presence, use, operation or maintenance of oxygen storage
tanks and related piping and fixtures) and Tenant fails to cure
same within ten (10) days after Tenant's receipt of notice
thereof.
7.4 Tenant's Property Insurance. Tenant shall, at its sole
cost and expense, by separate policy, or by endorsement to a
policy already carried, maintain insurance coverage on all of
Tenant's personal property, Tenant Owned Alterations and Utility
Installations in, on, or about the Premises. Such insurance
shall be on a full replacement cost basis.
7.5 Insurance Policies. Insurance required hereunder shall
be obtained from companies maintaining at the commencement of the
policy term a "General Policyholders Rating" of at least B+ and a
financial rating of at least Class V, as set forth in the most
current issue of "Best's Insurance Guide." Each Party shall
cause to be delivered to the other Party certificates evidencing
the existence and amounts of such insurance with the insureds and
loss payable clauses as required by this Lease. The certificates
shall contain a provision that the insurer will endeavor to
provide the insured with thirty (30) days prior written notice of
cancellation. After its receipt of such notice, the insured, in
turn, shall promptly provide the other Party with notice of such
cancellation. Each Party (the "Insured Party") shall endeavor to
provide the other, at least fifteen (15) days prior to the
expiration of such policies, with evidence of renewals or
"insurance binders" evidencing renewal of all policies required
to be maintained by the Insured Party hereunder, or the other
Party, after ten (10) days prior written notice to the Insured
Party, may order such insurance and charge the cost thereof to
the Insured Party, which amount shall be payable by the Insured
Party to the other Party within thirty (30) days after demand.
7.6 Waiver Of Subrogation. Without affecting any other
rights or remedies, Tenant and Landlord ("Waiving Party") each
hereby releases and relieves the other and waives its entire
right to recover damages (whether in contract or in tort) against
the other, for loss of or damage to the Waiving Party's property
arising out of or incident to the perils required to be insured
against under this Article 7, whether or not such loss or damage
was caused by the negligence of the other Party. The effect of
such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required or
by any deductibles applicable thereto. To the extent either
Party's insurance policies presently do not provide for such
release and waiver of subrogation, such Party hereby agrees to
obtain the necessary consent of its insurance carrier.
7.7 Indemnity By Tenant. Except for Landlord's misconduct,
negligent acts or omissions and/or breach of express warranties
and the provisions of this Lease and any matter for which
Landlord is to provide indemnification pursuant to Section 7.8
below, Tenant shall indemnify, protect, defend and hold harmless
the Premises, Landlord and Landlord's agents from and against any
and all claims, loss of rents and/or damages, costs, liens,
judgments, penalties, permits, reasonable attorneys' and
consultant fees, expenses and/or liabilities arising out of or
involving the occupancy of the Premises by Tenant, the conduct of
Tenant's business in or from the Premises, any act, omission or
neglect of Tenant, Tenant's agents, contractors, employees or
invitees, or out of any Default or Breach by Tenant in the
performance in a timely manner of any obligation on Tenant's part
to be performed under this Lease (provided that Tenant has
received written notice from Landlord identifying such Default or
Breach and that Tenant has failed to cure such breach after
having a reasonable opportunity to do so). In case any action or
proceeding be brought against Landlord by reason of any of the
foregoing matters, Tenant upon notice from Landlord shall defend
the same at Tenant's expense by counsel reasonably satisfactory
to Landlord and Landlord shall cooperate with Tenant in such
defense.
7.8 Indemnity By Landlord. Except for Tenant's misconduct,
negligent acts or omissions and/or breach of express warranties
and the provisions of this Lease and any matter for which Tenant
is to provide indemnification pursuant to Section 7.7 above,
Landlord shall indemnify, protect, defend and hold harmless the
Premises, Tenant and Tenant's agents from and against any and all
claims, damages, costs, liens, judgments, penalties, permits,
reasonable attorneys' and consultants' fees, expenses and/or
liabilities arising out of or involving the ownership of the
Premises by Landlord, the conduct of Landlord's business, any
act, omission or neglect of Landlord, Landlord's agents,
contractors, employees or invitees, and out of any breach by
Landlord in the performance in a timely manner of any obligation
on Landlord's part to be performed under this Lease (provided
that Landlord has received written notice from Tenant identifying
such breach and that Landlord has failed to cure such breach
after having a reasonable opportunity to do so). In case any
action or proceeding be brought against Tenant by reason of any
of the foregoing matters, Landlord upon notice from Tenant shall
defend the same at Landlord's expense by counsel reasonably
satisfactory to Tenant and Tenant shall cooperate with Landlord
in such defense.
8. DAMAGE OR DESTRUCTION.
8.1 Definitions.
(a) "Premises Partial Damage" shall mean damage to or
destruction of the Premises, other than Tenant Owned Alterations
and Utility Installations, or damage to or destruction of the
Building or Common Area which impairs the utility of, access to
or parking for the Premises, the repair cost of which damage or
destruction is less than fifty percent (50%) of their then
Replacement Cost immediately prior to such damage or destruction,
excluding from such calculation the value of the Land and Tenant
Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage to
or destruction of the Premises, other than Tenant Owned
Alterations and Utility Installations, or damage to or
destruction of the Building or Common Area which impairs the
utility of, access to or parking for the Premises, the repair
cost of which damage or destruction is fifty percent (50%) or
more of their then Replacement Cost immediately prior to such
damage or destruction, excluding from such calculation the value
of the Land and Tenant Owned Alterations and Utility
Installations.
(c) "Insured Loss" shall mean damage to or destruction
of the Common Area, Building or Premises, other than Tenant Owned
Alterations and Utility Installations, which was caused by an
event required to be covered by the insurance described in
Subsection 7.3(a), irrespective of any deductible amounts or
coverage limits involved.
(d) "Casualty" shall mean any damage to or destruction
of all or any portion of the Building, or the Common Area or the
Premises without regard to whether such damage or destruction
shall constitute an Insured Loss.
(e) "Replacement Cost" shall mean the cost to repair
or rebuild the Building, or the Common Area or the Premises
(without deduction for depreciation) owned by Landlord at the
time of the occurrence of the Casualty to their condition
existing immediately prior thereto, including demolition, debris
removal and upgrading required by Applicable Law.
(f) "Hazardous Substance Condition" shall mean the
occurrence or discovery of a condition involving the presence of,
or a contamination by, a Hazardous Substance in, on, or under the
Premises.
8.2 Partial Damage - Insured Loss. If a Premises Partial
Damage that is an Insured Loss occurs, then Landlord shall, at
Landlord's sole cost and expense, repair such damage (but not
Tenant's Trade Fixtures) as soon as reasonably possible and this
Lease shall continue in full force and effect. However, Tenant
may, at Tenant's election, repair any such damage or destruction
the total cost to repair of which is Ten Thousand Dollars
($10,000) or less, and in such event, Landlord shall make the
insurance proceeds available to Tenant on a reasonable basis for
that purpose. The Party responsible for making the repairs shall
complete them in a good and workmanlike manner and restore the
Premises or the portion thereof in question to their condition as
they existed immediately prior to the Casualty as soon as
reasonably possible, and this Lease shall remain in full force
and effect.
8.3 Partial Damage - Uninsured Loss. If a Premises Partial
Damage that is not an Insured Loss occurs, Landlord may at
Landlord's option either: (i) repair such damage as soon as
reasonably possible, at Landlord's sole cost and expense, so as
to restore the Premises, or the portion thereof in question, to
their condition as they existed immediately prior to the
occurrence of the Casualty, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to
Tenant, within thirty (30) days after receipt by Landlord of
knowledge of the occurrence of such damage, of Landlord's desire
to terminate this Lease as of the date of the Casualty.
Landlord's failure to provide notice of its election to terminate
within the time period provided in the preceding sentence shall
constitute Landlord's election (and Landlord shall thereafter be
required) to keep this Lease in full force and effect and to
restore the Premises or the portion thereof in question to their
condition as they existed immediately prior to the occurrence of
the Casualty. In the event Landlord elects to give notice of
Landlord's intention to terminate this Lease, Tenant shall have
the right within ten (10) days after the receipt of such notice
to give written notice to Landlord of Tenant's commitment to pay
for the repair of such damage at Tenant's sole cost and expense.
Tenant shall provide Landlord with the required funds or
satisfactory assurance thereof within thirty (30) days following
Tenant's said commitment. In such event this Lease shall
continue in full force and effect, and Landlord shall proceed to
make such repairs as soon as reasonably possible and the required
funds are available. If Tenant does not give such notice and
provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date of the Casualty.
8.4 Total Destruction. Notwithstanding any other provision
hereof, if a Premises Total Destruction occurs (including any
destruction required by any authorized public authority), this
Lease, at Tenant's option, which option shall be exercisable only
by Tenant's delivery of written notice of exercise to Landlord
within thirty (30) days after Tenant has knowledge that a
Premises Total Destruction has occurred, shall terminate as of
the date of the Casualty. Otherwise, the Casualty shall be dealt
with in the same manner as is provided above with respect to
Premises Partial Damage.
8.5 Damage Near End Of Term. If at any time during the
last three (3) months of the Lease Term a Casualty occurs for
which the cost to repair exceeds one (1) month's Base Rent,
whether or not an Insured Loss, either party may terminate this
Lease by written notice delivered to the other within forty-five
(45) days after the date of such Casualty, whereupon this Lease
shall terminate as of the date of such Casualty provided,
however, the Lease shall not so terminate if prior to such
Casualty or within thirty (30) days following the date of such
Casualty Tenant exercises any renewal option then available to it
pursuant to this Lease. In the event that Tenant exercises such
renewal option, the Casualty shall be addressed as set forth in
Sections 8.2, 8.3 or 8.4, as may be applicable.
8.6 Abatement Of Rent; Tenant's Remedies.
(a) In the event of damage described in Section 8.2
(Partial Damage - Insured Loss) or Section 8.3 (Partial Damage -
Uninsured Loss), the Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, payable by Tenant hereunder
for the period during which such damage, its repair or the
restoration continues shall be abated in proportion to the degree
to which Tenant's use of the Premises is impaired.
(b) If Landlord shall be obligated to repair or
restore the Premises under the provisions of this Article 8 and
does not commence, in a substantial and meaningful way, and
thereafter diligently pursue the repair or restoration of the
Premises within ninety (90) days after such obligation shall
accrue, Tenant may, at any time prior to the commencement of such
repair or restoration, give written notice to Landlord and to any
Lenders of which Tenant has actual notice of Tenant's election to
terminate this Lease on a date not less than sixty (60) days
following the giving of such notice. If Tenant gives such notice
to Landlord and such Lenders and such repair or restoration is
not commenced within thirty (30) days after such notice is given,
this Lease shall terminate as of the date specified in said
notice. If Landlord or a Lender commences the repair or
restoration of the Premises within thirty (30) days after such
notice is given and thereafter diligently pursues such repair or
restoration to completion, this Lease shall continue in full
force and effect. "Commence" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of
the required plans, or the beginning of the actual work on the
Premises, whichever first occurs.
8.7 Hazardous Substance Conditions. If a Hazardous
Substance Condition occurs, unless Tenant is legally responsible
therefor (in which case Tenant shall make the investigation and
remediation thereof required by Applicable Law and this Lease
shall continue in full force and effect, but subject to
Landlord's rights under Article 12), Landlord shall either (i)
investigate and remediate such Hazardous Substance Condition, if
required by applicable governmental authorities having
jurisdiction over such matters, as soon as reasonably possible at
Landlord's expense, in which event this Lease shall continue in
full force and effect, or (ii) if the estimated cost to
investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or Five Hundred Thousand Dollars
($500,000), whichever is greater, give written notice to Tenant
within thirty (30) days after receipt by Landlord of knowledge of
the occurrence of such Hazardous Substance Condition of
Landlord's desire to terminate this Lease as of the date sixty
(60) days following the giving of such notice. In the event
Landlord elects to give such notice of Landlord's intention to
terminate this Lease, Tenant shall have the right within ten (10)
days after the receipt of such notice to give written notice to
Landlord of Tenant's commitment to pay for the investigation and
remediation of such Hazardous Substance Condition at Tenant's
sole cost and expense, except that Tenant shall be reimbursed in
an amount equal to twelve (12) times the then monthly Base Rent
or Five Hundred Thousand Dollars ($500,000), whichever is
greater. Tenant shall provide Landlord with the funds required
of Tenant or satisfactory assurance thereof within thirty (30)
days following Tenant's said commitment. In such event this
Lease shall continue in full force and effect, and Landlord shall
proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If
Tenant does not give such notice and provide the required funds
or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Landlord's notice of
termination. If a Hazardous Substance Condition occurs for which
Tenant is not legally responsible, there shall be abatement of
Tenant's obligations under this Lease to the same extent as
provided in Subsection 8.6(a).
8.8 Termination - Advance Payments. Upon termination of
this Lease pursuant to this Article 8, an equitable adjustment
shall be made concerning advance Base Rent and any other advance
payments made by Tenant to Landlord.
8.9 Waive Statutes. Landlord and Tenant agree that the
terms of this Lease shall govern the effect of any damage to or
destruction of the Premises with respect to the termination of
this Lease and hereby waive the provisions of any present or
future Applicable Law to the extent inconsistent herewith.
9. REAL PROPERTY TAXES.
9.1 Payment Of Taxes. Pursuant to Article 4, Tenant shall
pay its Pro Rata Share of the Real Property Taxes, as defined in
Section 9.2, applicable to the Building and the Land during the
Lease Term.
9.2 Definition Of "Real Property Taxes." As used herein,
the term "Real Property Taxes" shall include any form of real
estate tax or assessment, general or special, and any license
fee, commercial rental tax, improvement bond or bonds, levy or
tax (other than inheritance, personal income, franchise, excess
profits, succession, capital levy, or estate taxes) (i) imposed
upon the Premises by any authority having the direct or indirect
power to tax, including any city, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, or (ii) levied against any
legal or equitable interest of Landlord in the Premises or in the
real property of which the Land and Building are a part,
Landlord's right to rent or other income therefrom, and/or
Landlord's business of leasing the Land and Building. The term
"Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason
of events occurring, or changes in Applicable Law taking effect,
during the Lease Term but shall not include (a) any late
penalties or fees, interest or costs of collection unless Tenant
shall fail to pay such Real Property Taxes as and when required
under Section 9.1, or (b) any increase in or recapture of Real
Property Taxes resulting from the sale, transfer or refinancing
of the Building and Land, unless resulting from a sale or
transfer of more than a fifty percent (50%) equitable interest in
Landlord.
9.3 Right To Contest Or Seek Reassessment. Tenant shall
have the right, after written notice to Landlord and at Tenant's
sole cost and expense, to contest the validity of any tax or seek
a reassessment of the taxable value of the Land and the Building
by appropriate legal proceedings conducted in the manner
prescribed by Applicable Law. In this regard, Landlord shall, to
the extent reasonably requested by Tenant, provide Tenant with
such information concerning the Land and the Building as Landlord
may have in its possession and, to the extent required by
Applicable Law or reasonably requested by Tenant, shall join in
any such proceeding at Tenant's expense. Tenant shall not
withhold payment of taxes while Tenant is contesting such taxes
or seeking reassessment of the taxable value of the Land and the
Building.
10. UTILITIES.
Tenant shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services
supplied to the Premises, together with any taxes thereon. If
any such services are not separately metered to Tenant, Tenant
shall pay Tenant's Pro Rata Share of all charges jointly metered
with other premises.
11. ASSIGNMENT AND SUBLETTING.
11.1 Tenant's Right To Assign Or Sublet. Subject to the
provisions of Section 1.6 as to use of the Premises, Tenant may
assign this Lease or sublet the Premises in whole or in part,
provided that Tenant has obtained the prior written consent of
Landlord, which consent shall not be unreasonably withheld or
delayed and further provided that such consent may not be
withheld unless (i) there is an outstanding uncured Breach by
Tenant under this Lease, or (ii) the proposed assignee's use is
prohibited by the terms of this Lease or by Applicable Law.
Notwithstanding the foregoing, Tenant may, without Landlord's
consent, assign or sublet the Premises in whole or in part to (i)
any affiliate of Tenant, or (ii) any independent contractor
performing services for Tenant, provided that the total area
occupied by such independent contractor and its operations does
not exceed ten percent (10%) of the Premises. For purposes of
this Lease, "affiliate" means any person, firm or corporation
directly or indirectly controlling, controlled by, or under
common control with Tenant including without limitation, (a) any
officer or director thereof, (b) any shareholder owning more than
ten percent (10%) of the outstanding stock thereof, (c) any
parent, subsidiary or related or affiliated corporation thereof,
(d) any entity created by merger with, reorganization of, or
recapitalization of Tenant, and (e) any entity which acquires
Tenant or substantially all the assets of Tenant.
11.2 Tenant's Continuing Obligations; Excess Rent. No
assignment, transfer, mortgage, sublease or other encumbrance,
whether or not approved, and no indulgence granted by Landlord to
any assignee or subtenant, shall in any way impair the continuing
primary liability (which after an assignment shall be joint and
several with the assignee) of Tenant hereunder, and no consent in
a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's consent in any other case. If
for any assignment or sublease requiring the consent of Landlord,
Tenant receives rent or other consideration, either initially or
over the term of the assignment or sublease, in excess of the
rent called for hereunder, or in the case of a sublease of part
of the Premises, in excess of the portion of such rent fairly
allocable to such part, after appropriate adjustments to assure
that all other payments called for hereunder are appropriately
taken into account, and after subtracting any expenses incurred
in connection with such assignment or subletting, Tenant shall
pay to Landlord as additional rent one-half (1/2) of the excess
of each such payment of rent or other consideration received by
Tenant promptly after its receipt.
12. DEFAULT; BREACH; REMEDIES.
12.1 Default; Breach. A "Default" is defined as a failure
by Tenant to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Tenant under this
Lease. A "Breach" is defined as the occurrence of any one or
more of the following Defaults. Where a grace period for cure
after notice is specified herein, the failure by Tenant to cure
such Default prior to the expiration of the applicable grace
period shall entitle Landlord to pursue the remedies set forth in
Section 12.2 or 12.3, or both:
(a) Except as expressly otherwise provided in this
Lease, the failure by Tenant to make any payment of Base Rent or
any other monetary payment required to be made by Tenant
hereunder as and when due, where any such failure continues for a
period of fourteen (14) days following written notice thereof
by or on behalf of Landlord to Tenant. Such period of time shall
be in lieu of and not in addition to any statutory notice period.
(b) The failure by Tenant to comply with the terms,
covenants, conditions or provisions of this Lease that are to be
observed, complied with or performed by Tenant, other than those
described in Subsection 12.1(a) above, where such Default
continues for a period of thirty (30) days after written notice
thereof by or on behalf of Landlord to Tenant provided, however,
that if the nature of Tenant's Default is such that more than
thirty (30) days are reasonably required for its cure, then it
shall not be deemed to be a Breach of this Lease by Tenant if
Tenant commences such cure within said thirty-day period and
thereafter diligently prosecutes such cure to completion.
(c) The occurrence of any of the following events:
(i) the making by Tenant of any general arrangement or assignment
for the benefit of creditors, (ii) Tenant's becoming a "debtor"
as defined in 11 U.S.C. 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant, 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 Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where possession is not
restored to Tenant within one hundred twenty (120) days, or (iv)
the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where such seizure is not
discharged within one hundred twenty (120) days provided,
however, that in the event that any provision of this Subsection
12.1 (c) is contrary to any Applicable Law, such provision shall
be of no force or effect and shall not affect the validity of the
remaining provisions of this Lease.
12.2 Remedies. In the event of a Breach of this Lease by
Tenant, as defined in Section 12.1, with or without further
notice or demand, and without limiting Landlord in the exercise
of any right or remedy which Landlord may have by reason of such
Breach, Landlord may:
(a) Terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall
terminate, and Tenant shall immediately surrender possession of
the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant: (i) the worth at the time of the
award of the unpaid Base 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 Base Rent which would have been earned after
termination exceeds the rental value of the Premises for the
remainder of the scheduled Lease Term as of the date of
termination, and (iii) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result
therefrom, including the cost of recovering possession of the
Premises, expenses of reletting and reasonable attorneys' fees.
The worth at the time of award of the amount referred to in
provision (ii) 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 (1%). Efforts by Landlord to mitigate damages caused by
Tenant's Default or Breach of this Lease shall not waive
Landlord's right to recover damages under this Section. If
termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Landlord shall have the right to
recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Landlord may reserve therein the right to
recover all or any part thereof in a separate suit for such rent
and/or damages.
(b) Continue the Lease and Tenant's right to
possession in effect after Tenant's Breach and abandonment and
recover the rent as it becomes due, provided Tenant has the right
to sublet or assign, subject only to reasonable limitations.
Acts of maintenance or preservation, efforts to relet the
Premises, or the appointment of a receiver to protect Landlord's
interest under the Lease shall not constitute a termination of
Tenant's right to possession.
(c) Pursue any other remedy now or hereafter available
to Landlord under the laws or judicial decisions of the State in
which the Premises are located. However, Landlord shall have a
duty to mitigate its damages in connection with the pursuit of
any such other remedy or the remedies herein provided except in
the case where Landlord proceeds with its remedy under California
Civil Code Section 1951.4.
(d) The expiration or termination of this Lease and/or
the termination of Tenant's right to possession shall not relieve
either Party from liability under any indemnity provisions of
this Lease as to matters occurring or accruing during the Lease
Term.
12.3 Late Charges. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent and other sums due
hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult
to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be
imposed upon Landlord by the terms of any ground lease, mortgage
or trust deed covering the Premises. Accordingly, if, during the
Lease Term, more than two (2) monthly installment of rent due
from Tenant shall not be received by Landlord or Landlord's
designee within ten (10) days after such amount shall be due,
then, upon written notice to Tenant, Tenant shall pay to Landlord
a late charge equal to three percent (3%) of such overdue amount.
The Parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's
Default or Breach with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
12.4 Breach By Landlord. If there occurs any emergency
requiring the immediate repair of any item which is the
obligation of Landlord pursuant to this Paragraph 12.4, and
Landlord fails to commence such repairs within an appropriate
time period following notice from Tenant (determined in light of
the circumstance then prevailing), Tenant shall have the right to
perform or commence to perform such repairs. For the purposes of
this Lease, an emergency is defined as a condition which
threatens injury to persons or property or materially interferes
with Tenant's use of the Premises unless immediate action is
taken to correct such condition. So long as Tenant has notified
Landlord of Landlord's failure to make required repairs in
accordance with the requirements of this Paragraph 12.4, or has
used diligent efforts to notify Landlord of any such emergency
(determined in light of circumstances then prevailing), and has
acted reasonably in undertaking any such repairs, then Landlord
shall, subject to the provisions of this Paragraph 12.4, be
obligated to reimburse Tenant for the reasonable costs incurred
by Tenant in undertaking such repairs within ten (10) days
following the receipt of (i) Tenant's invoice for such repairs;
(ii) appropriate mechanic's lien releases; and (iii) such
supporting documentation as may be reasonably requested by
Landlord. Nothing contained in this Paragraph 12.4 shall be
deemed or construed to provide Tenant with any right to offset or
deduct any amount so expended by Tenant against Base Rent or any
other monetary obligation of Tenant under this Lease; however,
Tenant shall have the right to seek recovery of any such amounts
pursuant to a Judicial Reference Proceeding conducted in
accordance with the provisions of Paragraph 12.5, below.
12.5 Dispute Resolution. At the election of either Landlord
or Tenant, either party shall have the right to have any dispute
arising under Paragraph 12.4 above heard by a reference procedure
pursuant to the provisions of California Code of Civil Procedure
Section 638 et seq., for a determination to be made which shall
be binding upon the parties as if tried before a court or jury.
The Parties agree specifically as to the following:
(a) Within five (5) business days after service of a
demand by a party hereto, the parties shall agree upon a single
referee who shall then try all issues, whether of fact or law,
and then report a finding and judgment thereon. If the parties
are unable to agree upon a referee, either party may seek to have
one appointed, pursuant to California Code of Civil Procedure,
Section 640, by the presiding judge of the Orange County Superior
Court. The venue for any judicial reference heard pursuant to
this Paragraph 12.5 shall be Orange County.
(b) The compensation of the referee shall be such
charge as is customarily charged by the referee for like
services. The cost of such proceeding shall initially be borne
equally by the parties. However, the prevailing party in such
proceeding shall be entitled, in addition to all other costs, to
recover its contribution for the cost of the reference as an item
of damages and/or recoverable costs.
(c) If a reporter is requested by either party, the a
reporter shall be present at all proceedings, and the fees of
such reporter shall be borne by the party requesting such
reporter. Such fees shall be an item of recoverable costs. Only
a party shall be authorized to request a reporter.
(d) The referee shall apply all California Rules of
Procedure and Evidence and shall apply the substantive law of
California in deciding the issues to be heard. Notice of any
motions before the referee shall be given, and all matters shall
be set at the convenience of the referee.
(e) The referee's decision under California Code of
Civil Procedure, Section 644, shall stand as the judgment of the
court, subject to appellate review as provided by the laws of the
State of California.
(f) The parties agree that any such dispute shall be
decided as soon as practicably possible. The date of hearing for
any proceeding shall be determined by agreement of the parties
and the referee, or if the parties cannot agree, then by the
referee, but in no event shall the date of the hearing be later
than one hundred twenty (120) days after the date of the service
or demand.
(g) The referee shall have the power to award damages
and all other relief in the event of a violation of any of the
provisions of this Lease which are to be resolved pursuant to
this Paragraph 12.5.
13. CONDEMNATION.
13.1 Permanent Taking. If the Premises or any portion
thereof are taken under the power of eminent domain or sold under
the threat of the exercise of said power (all of which are herein
called "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If (i) more than ten percent
(10%) of the floor area of the Premises, (ii) more than twenty-
five percent (25%) of the land area not occupied by any building,
or (iii) a portion of the Land which materially blocks access to
the Premises, materially interferes with Tenant's business
operations, or reduces available parking by more than twenty-five
percent (25%) is taken by condemnation, Tenant may, at Tenant's
option, to be exercised in writing within thirty (30) days after
Landlord shall have given Tenant written notice of such taking
and of Tenant's option to terminate hereunder (or in the absence
of such notice, within sixty (60) days after the condemning
authority shall have taken possession) terminate this Lease as of
the date the condemning authority takes such possession. If this
Lease is terminated pursuant to this Article, then all rent shall
be paid up to the date that possession is taken by the condemning
authority, and Landlord shall make an equitable reimbursement of
any amounts paid by Tenant and not yet earned. If Tenant does
not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent and other
charges due hereunder shall be reduced in the same proportion as
the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises or shall be equitably reduced
in the event that a portion of the land area not occupied by any
building is taken. 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 Landlord, 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 Tenant shall be entitled to any compensation separately
awarded to Tenant for the value of the loss of Tenant's leasehold
hereunder, Tenant's relocation expenses and/or loss of Tenant
Owned Alterations or Utility Installations or Tenant's personal
property or trade fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall, at
Landlord's sole cost and expense, repair any damage to the
Premises caused by such condemnation, except to the extent that
Tenant has been reimbursed therefor by the condemning authority.
13.2 Temporary Taking. If the whole or any part of the
Premises is taken for any public or quasi-public use under any
statute or by right of eminent domain for temporary use or
occupancy, this Lease shall not terminate by reason thereof and
Tenant shall continue to pay Base Rent and other charges due
hereunder, except to the extent by which the Base Rent exceeds
the amount of the award. In the event of any such temporary
taking, Tenant shall be entitled to receive the entire amount of
the award made for the taking unless the period of temporary use
or occupancy shall extend beyond the expiration of the Lease
Term, in which case the award shall be apportioned between
Landlord and Tenant as of the date of expiration of the Lease
Term. If the temporary taking is for a term in excess of ninety
(90) days, then the taking shall be treated as a permanent taking
and be governed by Section 13.1.
14. BROKERS' FEE.
14.1 Role Of Brokers. The Brokers, if any, named in Section
1.8 are the procuring causes of this Lease.
14.2 Payment Of Commission. Landlord agrees to pay Julien
J. Studley, Inc. a fee as set forth in a separate written
agreement between Landlord and said Broker for brokerage services
rendered by said Broker to Landlord in this transaction.
14.3 No Other Brokers. Tenant and Landlord each represent
and warrant to the other that it has had no dealings with any
person, firm, broker or finder (other than the Brokers, if any,
named in Section 1.8) in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated
hereby, and that no broker or other person, firm or entity other
than said named Brokers is entitled to any commission or finder's
fee in connection with said transaction. Tenant and Landlord do
each hereby agree to indemnify, protect, defend and hold the
other harmless from and against liability for compensation or
charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses and
attorneys' fees reasonably incurred with respect thereto.
15. TENANCY STATEMENT.
Each Party (as "Responding Party") shall within ten (10)
days after written notice from the other Party (the "Requesting
Party") execute, acknowledge and deliver to the Requesting Party
a statement in writing in substantially the form attached hereto
as Exhibit B.
16. LANDLORD'S LIABILITY.
The term "Landlord" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the tenant's interest in the master
lease. In the event of a transfer of Landlord's title or
interest in the Premises or in this Lease, Landlord shall deliver
to the transferee or assignee (in cash or by credit) any unused
or unearned funds of Tenant, if any, held by Landlord at the time
of such transfer or assignment, and the transferee or assignee
shall be deemed to have assumed the obligations of Landlord
hereunder.
17. 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.
18. INTEREST ON PAST-DUE OBLIGATIONS.
Any monetary payment due to one Party from the other
hereunder, other than late charges, not received by Landlord
within thirty (30) days following the date on which it was due,
shall bear interest from the thirty-first (31st) day after it was
due at the rate of twelve percent (12%) per annum, but not
exceeding the maximum rate allowed by law, in addition to the
late charge provided for in Section 12.3.
19. TIME OF ESSENCE.
Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under
this Lease.
20. RENT DEFINED.
All monetary obligations of Tenant to Landlord under the
terms of this Lease are deemed to be rent.
21. NO PRIOR OR OTHER AGREEMENTS.
This Lease contains all agreements between the Parties with
respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.
22. NOTICES.
22.1 All notices required or permitted by this Lease shall
be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by certified or
registered mail with postage prepaid or by overnight courier or
mail service that guarantees next-day delivery and provides a
receipt, or by facsimile transmission, and shall be deemed
sufficiently given if served in a manner specified in this
Article 22. Set forth below is (are) each Party's address(es)
for delivery or mailing of notice purposes:
If to Tenant:
APRIA HEALTHCARE, INC.
3560 Hyland Avenue
Costa Mesa, California 92626
Attention: Director, Real Estate
With a copy to the Premises.
If to Landlord:
WATSON LAND COMPANY
22010 South Wilmington Avenue
Carson, California 90745
Either Party may, by written notice to the other, specify a
different address for notice purposes. A copy of all notices
required or permitted to be given to Landlord hereunder shall be
concurrently transmitted to such party or parties at such
addresses as Landlord may from time to time hereafter designate
by written notice to Tenant.
22.2 Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of
delivery shown on the receipt card or if no delivery date is
shown, the postmark thereon. Notice delivered by overnight
courier that guarantees next day delivery and provides a receipt
shall be deemed given twenty-four (24) hours after delivery of
the same to the service or courier. If any notice is transmitted
by facsimile transmission or similar means, the same shall be
deemed served or delivered upon telephone confirmation of receipt
of the transmission thereof, provided a copy is also delivered
via delivery or mail. If notice is received on a Sunday or legal
holiday, it shall be deemed received on the next business day.
23. WAIVERS.
No waiver by Landlord of the Default or Breach of any term,
covenant or condition hereof by Tenant shall be deemed a waiver
of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Tenant of the same or of any
other term, covenant or condition hereof.
24. RECORDING.
Neither this Lease nor a short form of memorandum of this
Lease shall be recorded in the office of any county recorder
without Landlord's express written consent, which may be granted
or withheld by Landlord in its sole and absolute discretion. In
the event of any such recordation, the recording party shall be
solely responsible for any documentary transfer taxes or other
taxes relating to or arising out of any such recordation.
25. 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.
26. BINDING EFFECT; CHOICE OF LAW.
This Lease shall be binding upon the Parties, their personal
representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall
be initiated in the County in which the Premises are located.
27. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
27.1 Subordination. Subject to Section 27.3 below, this
Lease shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or security
device (collectively, "Security Device"), now or hereafter placed
by Landlord upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and
to all renewals, modifications, consolidations, replacements and
extensions thereof. If any Lender shall elect to have this Lease
superior to the lien of its Security Device and shall give
written notice thereof to Tenant, this Lease shall be deemed
prior to such Security Device, notwithstanding the relative dates
of the documentation or recordation thereof.
27.2 Attornment. Subject to the non-disturbance provision
of Section 27.3, Tenant agrees to attorn to a Lender or any other
party who acquires ownership of the Premises by reason of a
foreclosure of a Security Device.
27.3 Non-Disturbance. Tenant's subordination of and
obligations under this Lease shall be subject to receiving
assurance (a "non-disturbance agreement") from the Lender (or if
no Lender exists as of the execution of the Lease, then from any
future Lender), that Tenant's possession and this Lease,
including any options to extend the term hereof, will not be
disturbed so long as Tenant is not in Breach hereof and attorns
to the record owner of the Premises.
27.4 Self-Executing. The agreements contained in this
Article 27 shall be effective without the execution of any
further documents. However, upon written request from Landlord
or a Lender in connection with a sale, financing or refinancing
of the Premises, Tenant and Landlord shall execute such further
writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-
disturbance agreement as is provided for herein.
28. ATTORNEYS' FEES.
If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate
suit, whether or not such action or proceeding is pursued to
decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats
the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party of
its claim or defense. The attorneys' fees awarded shall not be
computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably
incurred.
29. LANDLORD'S ACCESS.
Landlord shall have the right to enter the Premises at any
time in the case of an emergency, and otherwise at reasonable
times upon reasonable notice, for the purpose of performing its
obligations hereunder.
30. SIGNS.
Tenant may, with Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed, install
such signs as are reasonably required to advertise Tenant's
business. The installation of any sign on the Premises by or for
Tenant shall be subject to the provisions of Article 6
(Maintenance; Repairs; Alterations) and the Special Provisions
Addendum Article I (Signage).
31. TERMINATION; MERGER.
Unless specifically stated otherwise in writing by Landlord,
the voluntary or other surrender of this Lease by Tenant, the
mutual termination or cancellation hereof, or a termination
hereof by Landlord for Breach by Tenant, shall automatically
terminate any sublease or lesser estate in the Premises.
However, Landlord shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one
or all of any existing subtenancies. Landlord's failure within
fourteen (14) days following any such event to make a written
election to the contrary by written notice to the holder of any
such lesser interest shall constitute Landlord's election to have
such event constitute the termination of such interest.
32. QUIET POSSESSION.
Upon payment by Tenant of the rent for the Premises and the
observance and performance of all of the covenants, conditions
and provisions on Tenant's part to be observed and performed
under this Lease, Tenant shall have quiet possession of the
Premises for the entire Lease Term.
33. CONSENTS.
Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other
Party, such consent shall not be unreasonably withheld or
delayed. Landlord's consent to any act, assignment of this Lease
or subletting of the Premises by Tenant shall not constitute an
acknowledgment that no Default or Breach by Tenant of this Lease
exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise
specifically stated in writing by Landlord at the time of such
consent.
34. 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 (with interest from the date paid
until the date repaid at the rate provided in Article 18) or so
much thereof as it was not legally required to pay under the
provisions of this Lease. No payment by Tenant or receipt by
Landlord of a lesser amount than that stipulated herein for Base
Rent, additional rent or any other charge shall be deemed to be
other than on account of the earliest stipulated Base Rent,
additional rent or other charge then due, nor shall any
endorsement or statement on a check or letter accompanying any
check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to
rights to recover the balance of such Base Rent, additional
rent, or other charges or pursue any other remedy in this Lease,
at law or in equity.
35. AUTHORITY.
If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf.
If either Party is a corporation, trust or partnership, such
Party shall, within thirty (30) days after request by the other
Party, deliver to such Party evidence of such authority.
36. CONFLICT.
Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.
37. OFFER.
Preparation of this Lease by either Party and submission of
same to the other Party shall not be deemed an offer to lease.
This Lease is not intended to be binding until executed by all
Parties hereto.
38. AMENDMENTS.
This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification.
39. WAIVER OF STATUTORY LIEN.
Landlord shall not be entitled to any statutory lien or
security interest in any personal property or Tenant Owned
Alterations, Utility Installations or Trade Fixtures located on
the Premises.
40. HOLDOVER.
In the event that Tenant shall hold over at the expiration
or other termination of the Lease Term set forth in this Lease,
or any renewal term, then this Lease shall continue as a periodic
lease with rent payable monthly subject to termination by either
Party upon thirty (30) days prior written notice to the other,
which notice may be given at any time. Such periodic tenancy
shall be subject to all of the terms and conditions of this
Lease, including the Base Rent, in effect during the final month
of this Lease Term, or applicable renewal term. Upon the
expiration or earlier termination of the Lease Term or renewal
term, as applicable, Tenant shall be liable for Base Rent during
the holdover period in an amount equal to one hundred twenty-five
percent (125%) of the Base Rent provided for in this Lease during
the last month of the Lease Term or renewal term, as applicable,
together with all other additional rent and other charges
provided for in the Lease. Tenant acknowledges that the rental
value of the Premises in the future is difficult to estimate and
that the increased amount of Base Rent set forth in this Section
is a reasonable estimate by the Parties of the future rental
value of the Premises upon expiration or termination of the Lease
Term or renewal term set forth in this Lease.
41. MULTIPLE PARTIES.
Except as otherwise expressly provided herein, if more than
one person or entity is named herein as either Landlord or
Tenant, the obligations of such multiple Parties shall be the
joint and several responsibility of all persons or entities named
herein as such Landlord or Tenant.
The parties hereto have executed this Lease at the place and on
the dates specified above their respective signatures.
Executed at
on
by LANDLORD:
WATSON LAND COMPANY,
a California corporation
By
Name Printed:
Title:
Address:
Telephone Number ( )
Fax Number ( )
Executed at
on
by TENANT:
APRIA HEALTHCARE, INC.,
a Delaware corporation
By
Name Printed:
Title:
Address:
Telephone Number ( )
Fax Number ( )
EXHIBIT A
THE LAND
EXHIBIT A-1
SITE PLAN
EXHIBIT A-2
THE PREMISES
EXHIBIT B
TENANCY STATEMENT
Tenant:
Landlord:
Premises: ( ) square feet of net
rentable area of office and warehouse space on the _________
(___) floor of the Building located at
.
Lease: Lease Agreement dated __________________________,
19___, by and between Landlord and Tenant and covering the
Premises.
In order to induce [Lender to make a mortgage loan to Landlord
secured by a lien on Landlord's interest in the real property and
improvements in which the Premises are situated and an assignment by
Landlord to Lender of the Landlord's interest in the captioned Lease]
[Purchaser to purchase the Landlord's interest in the real property
and improvements in which the Premises are situated, which purchase
includes an assignment from Landlord to Purchaser of Landlord's
interest in the captioned Lease], the undersigned makes the following
statements and agreements with the intention that all parties to whom
this instrument is delivered by the undersigned may fully rely
thereon:
1. The undersigned hereby certifies, as true and correct,
the following statements:
a. Attached hereto as Exhibit "A" and made a
part hereof for all purposes is a true, correct and
complete copy of the Lease (and all exhibits,
amendments and addenda thereto) between Landlord and
Tenant with respect to the Premises described in the
Lease. The Lease [has/has not] been modified or
amended in any manner or respect. Such Lease (and all
exhibits, amendments and addenda thereto)
[constitutes/does not constitute] the entire and
complete understanding and agreement between Landlord
and Tenant with respect to the Premises covered
thereby.
b. The Lease [is/is not] presently in full force
and effect.
c. As of the date hereof, neither Landlord nor
Tenant is in default under the terms and conditions of
the Lease, except as otherwise provided herein;
specifically;
d. Tenant [has/has not] prepaid any rent or made
a security deposit except as specifically set forth in
the Lease.
e. There are no offsets, defenses or
counterclaims with respect to the payment of rent
reserved under the Lease or in the performance of the
other terms, covenants and conditions of the Lease on
the part of Tenant or Landlord, as the case may be, to
be performed, except as otherwise provided herein;
specifically:
.
f. Tenant [is/is not] in possession of the
Premises, [has/has not] occupied the Premises
continually since , 19 , and [has/has
not] accepted the Premises. Tenant and Landlord have
complied fully and completely with all of their
covenants, warranties and other undertakings and
obligations under the Lease to this date, with the
result that Tenant is fully obligated to pay the Base
Rent (as such term is defined in the Lease) and other
charges due under the Lease and is fully obligated to
perform, and is performing, all of the obligations of
Tenant under the Lease, without any right of
counterclaim, offset or defense, except as otherwise
provided herein; specifically:
.
g. The Commencement Date (as such term is defined in
the Lease) is , 19 , and pursuant to the
provisions of the Lease, as currently in effect, the
primary term of the Lease will expire on
, 19 . Subject to and in accordance with the terms
and conditions set forth in the Lease, Tenant has the
option to renew the Lease for ( )
additional term(s) of ( ) years each.
h. Base Rent (as such term is defined in the
Lease) under the Lease has been paid in full through
, 19 .
i. Tenant [has/has not] received notice that
Landlord has made any other assignment, pledge or
hypothecation of the Lease or the rents due thereunder.
j. Tenant [has/has not] assigned, mortgaged,
sublet, encumbered or otherwise transferred all or any
part of its interest under the Lease.
2. [FOR LENDER ESTOPPEL] Tenant hereby acknowledges that
Landlord's interest in the Lease has been or is to be
assigned to Lender pursuant to an [Assignment of Leases and
Rents] from Landlord to Lender and agrees that, from and
after the date hereof: without the prior written consent of
Lender Tenant will not pay the Base Rent or any other sums
becoming due under the terms of the Lease more than one (1)
month in advance.
3. As used herein, the terms "Tenant," "Landlord," and
"[Lender/Purchaser]" shall mean the persons hereinabove
named as such, and their respective heirs, personal
representatives, successors and assigns.
4. The undersigned is duly authorized to execute this
instrument on behalf of Tenant or Landlord, as may be
applicable.
5. All terms used but not defined herein shall have the
same meaning ascribed to them in the Lease.
EXECUTED this day of , 19 .
-----------------------------------------------------------
a----------------------------------------------------------
By:
Name:
Title:
- 1 -
STANDARD COMMERCIAL SINGLE-TENANT LEASE
BETWEEN
APRIA HEALTHCARE, INC., as Tenant
and
555 FIRST STREET, INC., as Landlord
SUMMARY INFORMATION (FOR CONVENIENCE ONLY; NOT PART OF THE LEASE)
Premises Address: 555 First Street
San Fernando, California 91340
Dimensions of Premises: Total Area: 55,400 square feet
Scheduled Commencement Date: August 18, 1996
Scheduled Expiration Date: August 31, 2006
Options (Describe Briefly, Including Deadline for Exercise):
Renewal:
One five-year option at fair market rent
exercisable upon 180 days' notice
Expansion/Right of First Refusal: None
Termination Option: One Option to Terminate at the end
of the ninety-sixth full calendar
month of the Lease Term exercisable
upon pursuant to Special Provisions
Addendum (180 days prior notice
required)
Landlord Contact and
Address For Rental Payments:
Name/Title: Mr. Wayne Q. Turner
C/O TDA, Inc.
Address: 1214 Donnelly Avenue
Burlingame, California 94010
Telephone: (415) 343-6333
Facsimile: (415) 343-0858
Taxpayer I.D.No.:
Tenant Contact:
Name/Title: Director, Real Estate
Address: 3560 Hyland Avenue
Costa Mesa, California 92626
Telephone: (714) 427-2000
Facsimile: (714) 427-2435
Revised April 26, 1996
STANDARD COMMERCIAL SINGLE-TENANT LEASE
(Do Not Use This Form For Multi-Tenant Property)
1. BASIC PROVISIONS ("Basic Provisions").
1.1 Parties. This Lease ("Lease") dated, for reference
purposes only, May 1 , 1996, is made by and between
555 FIRST STREET, INC., a California corporation
("Landlord"), and APRIA HEALTHCARE, INC., a Delaware corporation
("Tenant"), (collectively the "Parties," or individually a
"Party").
1.2 Premises. That certain real property more fully
described on Exhibit A hereto (the "Land") including all
improvements thereon or to be provided by Landlord under the
terms of this Lease (the "Improvements"), and commonly known by
the street address of 555 First Street,
located in the City of San Fernando, ,
County of Los Angeles , State of California
, containing approximately fifty-five thousand four hundred
(55,400) square feet of net rentable area (collectively, the
"Building") and generally described as (describe briefly the
nature of the Building) a one-story
concrete "tilt-up" wall office, warehouse and distribution
building and all exterior areas within the Land (collectively,
the "Premises"). The right to use and enjoy the Premises
hereunder shall include the right to use and enjoy the exterior
areas within the Land which constitute a part of the Premises,
including but not limited to sidewalks, entryways and parking
areas, subject to such rules and regulations as Landlord may
reasonably establish with respect to such usage. A site plan
showing the location of the Building on the Land is attached
hereto as Exhibit A-1. (See Section 2 for further provisions.)
1.3 Term. One Hundred Twenty (120) months ("Lease
Term") scheduled to commence on August 18, 1996 ("Commencement
Date") and scheduled to end on August 31, 2006
("Expiration Date"). (See Article 3 for further provisions.)
1.4 Base Rent. Thirty-Six Thousand Ten and No/100
Dollars ($36,010.00) per month ("Base Rent"), payable on the
first (1st) day of each month commencing on the first (1st) day
of the first full calendar month of the Lease Term for which no
prepaid Base Rent has been paid . (See Article 4 for further
provisions.)
[X] If this box is checked, there are provisions in this Lease
for the Base Rent to be adjusted.
1.5 Prepaid Base Rent. At such time as Landlord has
acquired fee title to the Premises and upon the unconditional
effectiveness of this Lease, Landlord shall present Tenant with
an invoice for Prepaid Base Rent, and Tenant shall pay to
Landlord Thirty-Six Thousand Ten and No/100 Dollars ($36,010.00)
as Base Rent for the first full calendar month of the Lease Term.
1.6 Permitted Use. The Premises are to be used by Tenant
for general warehouse distribution, general office, nonretail
pharmacy, infusion and respiratory therapy and related purposes
(collectively, the "Initial Use") and for such other lawful
purposes that are compatible with a commercial business park and
consistent with any currently existing covenants, conditions and
restrictions applicable to the Premises; provided, however, that
notwithstanding anything to the contrary contained in this Lease,
in no event shall the use of the Premises be changed to a use
which creates a materially greater risk of liability to the
Landlord in connection with Hazardous Substances and/or risk of
injury to persons or casualty loss than the Initial Use without
the prior written consent of Landlord, which consent shall not be
unreasonably withheld, and Landlord shall have twenty (20 days
within which to respond to any written request by Tenant for such
consent. It is acknowledged that, as a part of its business,
Tenant intends to store liquid oxygen, cleaning solvents and
other flammable materials on the Premises and that Tenant also
handles and disposes of medical waste products, provided that any
such storage, handling and/or disposal shall be in accordance
with this Lease.
1.7 Parking. Tenant and its invitees and licensees shall
be entitled to the exclusive use of all parking spaces in the
parking areas on the Land.
1.8 Real Estate Brokers. The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist
in this transaction and are consented to by the Parties (check
applicable boxes):
-----------------------------------------------------------------
-------------------------------------------------------------
represents
[ ] Landlord exclusively or [ ] both Landlord and Tenant,
and
Julien J. Studley, Inc.--------------------------------
------------------------------------------------------------
represents
Tenant exclusively. (See Article 14 for further provisions.)
1.9 Exhibits And Addenda. If marked, the following
Exhibits and Addenda are attached hereto and incorporated herein
by reference as fully as if set forth herein verbatim:
Exhibits Addenda
-------- -------
[X]Exhibit A - The Land [X]Renewal Option
[X]Exhibit A-1 - Site Plan [X]Base Rent Adjustment
[X]Exhibit B - Tenancy Statement [X]Construction Addendum
[ ] [X]Oxygen Tank Addendum
[ ] [X]Special Provisions
Addendum
2. PREMISES.
2.1 Letting. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the Premises, for the Lease Term, at
the rental, and upon all of the terms, covenants and conditions
set forth in this Lease. Unless otherwise provided herein, any
statement of square footage set forth in this Lease, or that may
have been used in calculating rental, is an approximation which
Landlord and Tenant agree is reasonable, and the rental based
thereon is not subject to revision whether or not the actual
square footage is more or less.
2.2 Condition. Landlord shall deliver unconditional
possession of the Premises subject to the terms of this Lease to
Tenant broom clean and free of debris with all prior tenants
having vacated on a date which is estimated to be on June 18,
1996 (the "Scheduled Delivery Date"). The date upon which the
Premises are actually delivered to Tenant in the condition
described above is referred to herein as the "Delivery Date"..
For all purposes of this Lease, the "Delivery Date" shall be
deemed to occur upon Landlord's closing of its purchase of, and
taking title to, the Property. Landlord shall provide Tenant
with no less than three (3) business days prior written notice of
the estimated Delivery Date, and, subject to occurrences beyond
the reasonable control of Landlord, the Delivery Date shall occur
on the date specified in said notice.
2.3 As Is Lease. Except as disclosed by that certain
report prepared by Dames & Moore dated as of May 1, 1996 (Job No.
26190-020-112), with respect to the Premises, a copy of which has
been received by Landlord and Tenant, Landlord represents that
Landlord has no actual knowledge (with no imputation of knowledge
or duty of investigation), of the presence of any Hazardous
Substances upon the Premises. Except as specifically set forth
in the immediately preceding sentence and subject to the
covenants of Landlord specifically set forth in this Lease,
Tenant acknowledges (i) that the Lease of the Premises pursuant
hereto shall be on an entirely "AS IS" , "WHERE IS", " WITH ALL
FAULTS" basis, (ii) that Landlord has made no representations or
warranties, express or implied, respecting the condition of the
Premises, the compliance of the Premises with Applicable Law or
matters of record, or the suitability of the Premises for the
conduct of Tenant's business, and (iii) that Landlord shall have
no obligation for the improvement or alteration of the Premises
prior to occupancy thereof by Tenant.
3. TERM.
3.1 Term. The scheduled Commencement Date, Expiration Date
and Lease Term of this Lease are specified in Section 1.3.
3.2 Early Possession. After the Delivery Date, Tenant
shall have the right to enter upon, and Landlord shall provide
access to, the Premises for purposes of installing Tenant's
cabling, fixtures, furnishings and equipment. Such entry upon
the Premises shall not be deemed to constitute the taking of
possession or occupancy of the Premises. Any such early
possession shall neither affect nor advance the Expiration Date
of the Lease Term. Tenant's entry upon or occupancy of the
Premises prior to the Commencement Date shall be subject to all
terms and conditions of this Lease other than Tenant's obligation
for payment of Base Rent and Tenant's obligation for payment of
Real Property Taxes pursuant to Article 9 below.
3.3 Delay In Possession. If for any reason Landlord cannot
deliver possession of the Premises to Tenant as agreed herein by
the Scheduled Delivery Date, Landlord, except as set forth below,
shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of
Tenant hereunder. In such case, Tenant shall not, except as
otherwise provided herein, be obligated to pay rent or perform
any other obligation of Tenant under the terms of this Lease
until Landlord delivers possession of the Premises to Tenant and
the actual Commencement Date occurs. The actual Commencement
Date shall occur upon the "substantial completion" of the
"Improvements" as such terms are defined in the Construction
Addendum, or such earlier date as is specified in the
Construction Addendum. If the actual Commencement Date shall
occur on a date other than the first (1st) day of a calendar
month, then the partial calendar month during which the
Commencement Date occurs shall be added to the Lease Term. In
such a case, the Expiration Date shall be the last day of the one
hundred twentieth (120th) full calendar month following the month
when the actual Commencement Date occurs. If possession of the
Premises is not delivered to Tenant within sixty (60) days after
the Scheduled Delivery Date, Tenant may, at its option, by notice
in writing to Landlord, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder
provided, however, that if such written notice by Tenant is not
received by Landlord prior to the delivery of possession by
Landlord, Tenant's right to cancel this Lease shall terminate and
be of no further force or effect. After the occurrence of the
actual Commencement Date, either Party, upon request by the
other, shall execute a memorandum reflecting the actual
Commencement Date and Expiration Date.
4. BASE RENT.
Except as herein specifically provided, Tenant shall cause
payment of Base Rent and other rent or charges, as the same may
be adjusted from time to time, to be received by Landlord in
lawful money of the United States, without offset or deduction,
on or before the day on which it is due under the terms of this
Lease. Base Rent and all other rent and charges for any period
during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of
days of the calendar month involved. Base Rent for any partial
calendar month at the commencement of the Lease Term shall be
calculated at the same rate as is provided for the first (1st)
full calendar month of the Lease Term and shall be payable on the
Commencement Date. Payment of Base Rent and other charges shall
be made to Landlord at its address stated herein or to such other
persons or at such other addresses as Landlord may from time to
time designate in writing to Tenant.
5. USE.
5.1 Use. Tenant shall use and occupy the Premises only for
the purposes set forth in Section 1.6, or any other use which is
comparable thereto. Landlord hereby agrees to not unreasonably
withhold or delay its consent to any written request by Tenant,
Tenant's assignees or subtenants, or prospective assignees and
subtenants of Tenant, for a modification of said permitted
purpose for which the Premises may be used or occupied, so long
as the same will not impair the structural integrity of the
Improvements on the Premises or the mechanical or electrical
systems therein, is not significantly more burdensome to the
Premises and the Improvements thereon, and is otherwise
permissible pursuant to this Article 5. If Landlord elects to
withhold such consent, Landlord shall, within twenty (20)
business days after receipt by Landlord of a request for consent,
give a written notification of same, which notice shall include
an explanation of Landlord's reasonable objections to the change
in use.
5.2 Hazardous Substances.
(a) Definition. As used in this Section, the term
"Hazardous Substance" shall mean any product, substance,
chemical, material or waste whose presence, nature, quantity
and/or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health,
safety or welfare, the environment or the Premises, (ii)
regulated or monitored by any governmental authority, or (iii) a
basis for liability of Landlord to any governmental agency or
third party under any applicable statute or common law theory.
The term "Hazardous Substance" shall include, but not be limited
to, hydrocarbons, petroleum, gasoline, crude oil or any products,
by-products or fractions thereof, and any medical waste generated
by Tenant in the course of its use of the Premises.
(b) Landlord's Hazardous Substances.. Landlord shall
be responsible for all costs and expense incurred at any time in
complying with all Applicable Law affecting or relating to the
Premises arising out of (1) sub-surface Hazardous Substances
existing as of the date Landlord delivers possession of the
Premises to Tenant, or (2) hereafter caused to be located upon
the Premises by sub-surface migration from adjacent property or
by the acts or omissions of Landlord and/or any of Landlord's
employees, agents or contractors (the Hazardous Substances
referred to in this clause (2) and in clause (1) above are
collectively referred to herein as "Landlord's Hazardous
Substances"). In furtherance of the foregoing, and without
limiting the scope thereof, if it is determined at any time that
the Premises contain Landlord's Hazardous Substances which are
required by applicable governmental authority to be removed,
contained or neutralized, then the cost of removal, containment
or neutralization of such materials shall be borne by Landlord.
Landlord shall indemnify, defend and hold Tenant harmless from
and against any and all claims, judgments, damages, penalties,
fines, costs, liabilities or losses (including, without
limitation, sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise on or after the date
that possession of the Premises is delivered to Tenant, including
at any time after the expiration of the Lease Term, from or in
connection with Landlord's Hazardous Substances. Notwithstanding
anything in this Lease to the contrary, in no event shall
Landlord have any obligation to indemnify, defend or hold Tenant
harmless from any claims, judgments, damages, penalties, fines,
costs, liabilities or losses of any kind whatsoever arising out
of storage, handling use or placement of Hazardous Substances on
the Premises by Tenant, or by Tenant's agents, contractors,
invitees or employees.
(c) Tenant's Use. Tenant shall have the right to
store, use and handle Hazardous Substances on the Premises
provided that such Hazardous Substances are used in the operation
of Tenant's business and are stored, used, handled and disposed
of in compliance with all Applicable Law and provided (i) that no
Hazardous Substances may be stored, used, handled, or disposed
of, at the Premises other than such Hazardous Substances as are
customary for the operation for business for Tenant's Initial
Use, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld, and Landlord shall have
twenty (20 days within which to respond to any written request by
Tenant for such consent; and (ii) that any Hazardous Substance
storage, use, handling and/or disposal at the Premises shall be
conducted in a manner in accordance with manufacturer
specifications therefor (if such specifications are made
available by the manufacturer) and generally accepted industry
practices regarding safety and security measures with respect
thereto (including, without limitation, as to disposal of medical
wastes). Upon request from Landlord or a Lender (defined below),
Tenant shall provide Landlord or any Lender on an annual basis
(or more frequently, if Landlord or one of its Lenders reasonably
believes that a change has occurred in Tenant's Hazardous
Substances management practices) with evidence that Tenant is
complying with all Applicable Law in connection with its use of
Hazardous Substances. If available, such information shall
include any public nonproprietary information as may be included
in any copies of Hazardous Materials Management Plans maintained
by Tenant as well as a representative list of Hazardous
Substances used or stored by Tenant on the Premises. In the
event that a claim is made by a governmental entity or litigation
is commenced by any third party, on the basis of an alleged
violation on the part of Tenant of any Applicable Law relating to
Hazardous Substances in connection with the Premises, Tenant
shall promptly notify Landlord of the existence of any such claim
and provide to Landlord such cooperation and information as
Landlord may reasonably require in connection with the defense of
each claim so long as Landlord shall take such steps and make
such agreements as Tenant reasonably deems necessary to preserve
the absolute confidentiality and secret nature of any information
provided by Tenant, except that Landlord may make such
disclosures of such information as are reasonably required (i) to
Landlord's employees, agents, representatives, contractors,
advisors, attorneys and/or consultants, (ii) by applicable
governmental authority or Applicable Laws, or (iii) to enforce
the provisions of this Lease. Tenant shall be responsible for
all costs incurred in complying with all Applicable Law relating
to Hazardous Substances which Tenant or its subtenants or any of
their respective agents, employees, contractors, or invitees
store, use or handle in or upon the Premises at any time during
the Lease Term. Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including,
without limitation, sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) (collectively, "Claims")
which arise on or after the date that possession of the Premises
is delivered to Tenant, including at any time after the
expiration of the Lease Term, from or in connection with Tenant's
storage, use or handling of Hazardous Substances on the Premises
during the Lease Term. Tenant acknowledges that, except as
specifically provided in this Lease, Landlord makes no
representation or warranty with respect to whether any Hazardous
Substances are currently located upon, within or beneath the
Premises, and Landlord shall have no obligation to Tenant to
remove, remediate, abate or take other action with respect to, or
to indemnify, defend or hold harmless Tenant with respect to, any
such Hazardous Substances as may be currently or hereafter come
to be located upon, within or beneath the Premises, other than
Landlord's Hazardous Substances as provided above.
Notwithstanding any other provision herein contained, Tenant
shall not be responsible for the cost of or otherwise liable in
connection with any contamination by Hazardous Substances or
remediation of the same to the extent such contamination is
caused by any persons other than Tenant, its subtenant(s), or any
of their respective agents, contractors, employees or invitees
after the Delivery Date, unless Tenant shall have failed to take
commercially customary and reasonable measures to safeguard the
Premises from such contamination and the contamination would not
have occurred if the Premises had been so safeguarded. In the
event Landlord is required by applicable governmental authority
to take any removal, remediation or action with respect to any
Landlord's Hazardous Substances, the cost of which is reasonably
estimated to exceed twenty-five percent (25%) of the replacement
cost of the Improvements, Landlord shall have the right to
terminate this Lease upon sixty (60) days prior written notice to
Tenant, provided that such termination notice is delivered with
sixty (60) days following Landlord's first learning of the
estimated cost of such required action.
(d) Survival. The representations, warranties and
agreements of the Parties set forth in this Article 5 shall
survive the expiration of the Lease Term or the termination of
this Lease for any other reason.
5.3 Tenant's Compliance With Law.
(a) Definition; Evidence Of Compliance. Except as
otherwise provided in this Lease, Tenant shall, at its sole cost
and expense, fully, diligently and in a timely manner, comply
with all "Applicable Law," which term is used in this Lease to
include all laws, rules, regulations, ordinances, statutes,
codes, directives, covenants (including, but not limited to
currently existing covenants, conditions and restrictions
applicable to the Premises), easements and restrictions of
record, permits, and the reasonable requirements of any
applicable fire insurance underwriter or rating bureau relating
in any manner to the Premises now in effect or which may
hereafter come into effect, provided that Tenant has been
notified of such requirements. Tenant shall, within forty-five
(45) days after receipt of Landlord's written request, provide
Landlord with copies of all documents and information, including,
but not limited to, permits, registrations, manifests,
applications, reports and certificates, evidencing Tenant's
compliance with any Applicable Law specified by Landlord, and
shall notify Landlord of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving
failure by Tenant or the Premises to comply with Applicable Law.
(b) Tenant's Right To Contest. Tenant shall have the
right, after written notice to Landlord and at Tenant's sole cost
and sole expense, to contest in good faith by appropriate legal
proceedings the validity or application of any law, ordinance or
other legal requirement and to delay compliance therewith pending
the prosecution of such proceedings, provided that (i) no civil
or criminal penalty, violation, fine or levy would be incurred by
Landlord as a result of such contest, (ii) no lien or charge
would be imposed upon the Land or the Improvements by reason of
such delay, and (iii) such legal proceedings are conducted in the
manner prescribed by Applicable Law. Tenant shall indemnify,
defend and hold Landlord harmless from and against any and all
claims, demands, liabilities, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees)
arising out of or in connection with any such contest by Tenant.
Landlord agrees that it will, at the request of Tenant, execute
or join in the execution of any instrument or document reasonably
necessary in connection with any such contest, at no cost to
Landlord.
(c) Landlord's Responsibility. From and after the
Delivery Date during the term of this Lease, Tenant, at Tenant's
sole cost and expense, shall take all actions (including, without
limitation, making such improvements or alterations to the
Premises) as are required to cause the Premises to comply with
Applicable Law, including, without limitation, such compliance as
is necessitated as a result of the condition of the Premises
existing as of the Delivery Date, as a result of improvements or
alterations to the Premises, Tenant's particular use of the
Premises and/or Applicable Law newly enacted following the date
hereof; except, however, that Landlord, at Landlord's sole cost,
shall take all actions (including, without limitation, making
such improvements or alterations to the Premises) as are required
to cause the Premises to comply with Applicable Law following the
date hereof to the extent (i) such action is required with
respect to any Landlord's Hazardous Substances, or (ii) such
action is required by any Applicable Law newly enacted following
the date hereof which requires improvements or alterations to be
made to items of the Premises which are to be maintained by
Landlord pursuant to Section 6.2 below and such action is not
necessitated by Tenant's alterations or improvements to, or
particular use of, the Premises.
5.4 Inspection; Compliance. Landlord shall have the right
to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times upon reasonable prior written
notice for the purpose of inspecting the condition of the
Premises and for verifying compliance by Tenant with this Lease
and all Applicable Law. Landlord may employ experts or
consultants in connection therewith to advise Landlord with
respect to Tenant's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal
of any Hazardous Substance or storage tank on or from the
Premises. The cost and expense of any such
inspections shall be paid by Landlord, unless a Breach of this
Lease, a violation of Applicable Law, or a contamination caused
or materially contributed to by Tenant is found to exist or be
imminent.
6. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
6.1 Tenant's Obligations. Subject to the provisions of
Sections 2.2 (condition of the Premises upon delivery), 2.3
(Landlord's warranty as to Hazardous Substances), 6.2 (Landlord's
obligations to repair), 8 (damage or destruction), and 13
(condemnation), Tenant shall, at Tenant's sole cost and expense,
keep Premises (including, without limitation, the Building) and
every part thereof (except those for which Landlord is
responsible under the terms of this Lease) in good order,
condition and repair, including, without limiting the generality
of the foregoing, all equipment or facilities located within and
serving the Building, such as interior or above foundation or
slab plumbing or utility lines, heating, ventilating, air
conditioning, and electrical systems, lighting facilities,
boilers, fired or unfired pressure vessels, fire alarm and/or
smoke detection systems and equipment, interior nonload bearing
walls, ceilings, floor coverings, windows, doors, skylights and
plate glass, reasonable wear and tear excepted. Tenant shall not
be responsible for keeping or maintaining structural portions of
the exterior walls or load bearing members of the Building as
well as any other portions of the Premises for which Landlord is
responsible pursuant to Section 6.2, except to the extent that
any repairs or maintenance are required by reason of damage or
abuse on the part of Tenant, or any of its employees,
contractors, or invitees, or Tenant's failure to perform its
obligations under this Lease, in which case Tenant shall be
responsible for any such repair and or maintenance. Tenant, in
keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Tenant's
obligations pursuant hereto shall include, without limitation,
any and all required maintenance, repairs and/or replacements to
the parking lots and other exterior portions of the Premises;
except, however, that in the event of a capital expenditure by
Tenant with respect to replacement or resurfacing of the majority
of the parking area following Tenant's initial improvement of the
Premises (the parties hereby acknowledging that following the
Delivery Date, Tenant shall cause the parking area of the
Premises to be improved to a good operating condition as a part
of the Tenant Improvements at Tenant's sole cost, subject to
Landlord's payment of the Improvement Allowance, pursuant to the
Construction Addendum), if the reasonable useful life of such
work of improvement extends beyond the term of this Lease, then
Landlord shall reimburse Tenant for a fraction of the cost of
such work (within thirty (30) days following Tenant's submission
to Landlord of paid invoices or other reasonable evidence of the
cost of such work), the numerator of which shall be the number of
months following the expiration of the term of this Lease within
the useful life of such work of improvement, and the denominator
of which shall be the number of months within the useful life of
such work of improvement.
6.2 Landlord's Obligations. In addition to and without
limiting the generality of the warranties and agreements of
Landlord contained in Sections 2.2 (relating to condition of the
Premises), 2.3 (relating to Hazardous Substance), 5.3(c)
(Landlord's responsibility), 8 (relating to damage or destruction
), and 13 (relating to condemnation), Landlord shall, at its sole
cost and expense, maintain all structural portions of the
exterior walls or load bearing members of the Building, the
foundation, roof structure (provided that Tenant shall be
responsible for the roof membrane), within or below the
foundation or slab plumbing fixtures, utility lines located
outside the Building or below the foundation or slab, and the
structural soundness of the exterior walls, in good repair,
reasonable wear and tear excepted.
6.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all carpeting,
window coverings, air lines, power panels, electrical
distribution, security, fire protection systems, lighting
fixtures, heating, ventilating, and air conditioning equipment,
plumbing, and non-demising walls in, on or about the Premises.
The term "Trade Fixtures" shall mean Tenant's machinery and
equipment, including, but not limited to, computer systems,
computer equipment, storage facilities, fences, partitions and
other similar items, that can be removed without doing material
damage to the structural portions of the Premises. The term
"Alterations" shall mean any modification of the Improvements on
the Premises from that which are provided by Landlord under the
terms of this Lease, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Tenant Owned
Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Tenant that are
not yet owned by Landlord as defined in Subsection 6.4(a).
Except as provided elsewhere in this Lease, Tenant shall not make
any Alterations or Utility Installations in, on, under or about
the Premises without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed. Tenant
may, however, without obtaining Landlord's consent thereto, make
nonstructural Alterations or Utility Installations to the
interior of the Building, as long as they are not readily visible
from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing exterior or load
bearing walls and can be made or constructed at a cost of no more
than $30,000 in the aggregate during any one calendar year. In
addition, the installation, removal, replacement or modification
of floor or wall coverings will not require Landlord's consent.
(b) Consent. Any Alterations or Utility Installations
that Tenant shall desire to make and which require the consent of
Landlord shall be presented to Landlord in written form with
proposed plans. All consents given by Landlord shall be deemed
conditioned upon: (i) Tenant's acquiring all applicable permits
required by governmental authorities, (ii) the furnishing to
Landlord of copies of such permits together with a copy of the
plans and specifications for the Alteration or Utility
Installation prior to commencement of the work thereof, and (iii)
compliance by Tenant with all conditions of said permits in a
prompt and expeditious manner. Any Alterations or Utility
Installations made by Tenant during the Lease Term shall be done
in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Tenant
shall promptly upon completion thereof furnish Landlord with as-
built plans and specifications therefor. Landlord may (but
without obligation to
do so) condition its consent to any requested Alteration or
Utility Installation that cost Twenty Thousand Dollars ($20,000)
or more ($50,000 as to the original named Tenant and its
Affiliates) upon Tenant's providing Landlord with a lien and
completion bond in an amount equal to one and one-half (1-1/2)
times the estimated cost of such Alteration or Utility
Installation. If Landlord shall so advise Tenant in writing
concurrently with approval of any request for Alteration or
Utility Installation, Tenant shall be required to remove the same
and repair any damage caused by the removal upon the expiration
of the Lease Term.
(c) Indemnification. Tenant shall pay, when due, all
claims for labor or materials furnished or alleged to have been
furnished to or for Tenant at or for use on the Premises which
claims are or may be secured by any mechanics' or materialmen's
lien against the Premises or any interest therein. If Tenant
shall, in good faith, contest the validity of any such lien,
claim or demand, then Tenant shall, at Tenant's sole cost and
expense, defend and protect itself, Landlord and the Premises
against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement
thereof against the Landlord or the Premises. If in connection
with such contest Landlord shall require, Tenant shall furnish to
Landlord a surety bond satisfactory to Landlord in an amount
equal to one and one-half (1-1/2) times the amount of such
contested lien, claim or demand (or, if different, the amount
required by statute), indemnifying Landlord against liability for
the same, as required by law for the holding of the Premises free
from the effect of such lien or claim.
6.4 Ownership; Removal; Surrender.
(a) Ownership. Subject to Landlord's right to require
Tenant to remove the same as provided in Section 6.3(b), all
Alterations and Utility Installations made to the Building by
Tenant shall be the property of and owned by Tenant, but
considered a part of the Building, and shall automatically become
the sole property of Landlord upon the expiration of the Lease
Term or earlier termination of this Lease. Tenant shall pay all
costs of repairing any damage to the Premises resulting from
Tenant's removal of Trade Fixtures, Alterations or Utility
Installations. On or before the expiration of the term or
earlier termination of this Lease, Tenant shall have the right to
remove from the Premises any Alterations not permanently affixed
to the Premises, and Tenant shall remove from the Premises all of
its Trade Fixtures and other personal property not permanently
affixed to the Premises, and Tenant shall repair any damage to
the Premises resulting from such removal. If Tenant shall fail
to remove all of such Trade Fixtures and other personal property
from the Premises upon such expiration or termination, Landlord
may, at its option, remove the same in any manner that Landlord
shall choose, and store or dispose of such property without
liability to Tenant for loss thereof, and Tenant shall pay to
Landlord upon demand the reasonable expenses incurred in such
removal and storage charges on such property for any length of
time that the same shall be in Landlord's possession. In the
alternative, Landlord may, at its option, sell said property, or
any of the same, in accordance with Sections 1980-1991 of the
California Civil Code and Section 1174 of the California Code of
Civil Procedure or any successor statutory provisions, for such
prices as Landlord may obtain and apply the proceeds of such sale
to any amounts due under this Lease from Tenant to Landlord and
to the expense incident to the removal and sale of such property.
(b) Surrender. Tenant shall surrender the Building by
the end of the last day of the Lease Term or any earlier
termination date, with all of the Improvements and parts and
surfaces thereof clean and free of debris and in good operating
order, condition and state of repair, ordinary wear and tear
excepted.
7. INSURANCE; INDEMNITY.
7.1 Liability Insurance Carried By Tenant. Tenant, at its
sole cost and expense, shall obtain and keep in force during the
Lease Term a commercial general liability policy of insurance
protecting Tenant and Landlord (as an additional insured but only
as respects the acts or omissions of Tenant), against claims for
personal injury, bodily injury, death and broad form property
damage based upon, involving or arising out of the ownership,
use, occupancy or maintenance of the Premises. Such insurance
shall be on an occurrence basis providing single limit coverage
in an amount not less than Two Million Dollars ($2,000,000) per
occurrence. Tenant shall in addition reimburse to Landlord,
within thirty (30) days after receipt of an invoice from
Landlord, the amount paid by Landlord for commercial general
liability coverage maintained by Landlord during the Lease Term
with respect to the Premises, against claims for personal injury,
bodily injury, death and broad form property damage in an amount
not in excess of Two Million Dollars $2,000,000 per occurrence.
In connection with any such demand for reimbursement by Landlord,
Landlord shall provide to Tenant reasonable documentation
evidencing the payment by Landlord of the premium to be
reimbursed and the amount of such premium applicable to the
Premises. The amount of the annual premium to be reimbursed is
estimated to initially be in the approximate amount of $
per year. In the event that the amount of such premium for the
first year shall exceed $ , or if in any given year
thereafter during the Lease Term such premium exceeds 110% of the
premium for the immediately preceding year, Tenant, upon giving
Landlord notice within ten (10) days following receipt of written
demand for reimbursement from Landlord, shall be entitled to
obtain one or more written quotes for the provision of insurance
coverage comparable (and from comparable insurers) to that
commercial general liability coverage maintained by Landlord with
respect to the Premises. In the event that the quoted premium in
connection with any bona fide quote is less than that being
demanded by Landlord, then Tenant's obligation to reimburse
Landlord shall be limited to the amount of such bona fide quote.
7.2 Property Insurance. Tenant, at its sole cost and
expense, shall obtain and keep in force during the Lease Term a
policy or policies of "All Risk" insurance (including a vandalism
and malicious mischief endorsement and sprinkler leakage
coverage) in the name of Landlord and Tenant, with loss payable
to Landlord, Tenant and to the holders of any mortgages, deeds of
trust or ground leases on the Premises ("Lender(s)"), as their
respective interests may appear, insuring loss or damage to the
Premises, including, but not limited to Alterations and Utility
Installations. The amount of such insurance shall be equal to
the full replacement cost of the Premises, including, but not
limited to Alterations and Utility Installations (based on the
reasonable valuation thereof provided by Landlord to Tenant in
writing on or before the Commencement Date), as the same shall
exist from time to time, but in no event more than the
commercially reasonable and available insurable value thereof if,
by reason of the unique nature or age of the Improvements
involved, such latter amount is less than full replacement cost.
If the coverage is available and commercially appropriate (i.e.,
such insurance is obtainable at reasonable rates and is normally
carried by owners of buildings similar to the Building located in
the San Fernando Valley area of Los Angeles County, California),
such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood), including
coverage for earthquakes, the cost of debris removal and
reasonable amounts of coverage for the cost of complying with any
ordinance or law regulating the reconstruction or replacement of
any undamaged sections of the Premises required to be demolished
or removed by reason of the enforcement of any building, zoning,
safety or land use laws as the result of a covered cause of loss.
Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause. The policy of
insurance to be maintained pursuant to this Section 7.2 (other
than any policy of earthquake insurance), shall include a
deductible not to exceed $50,000.00. Subject to the above
provisions of this Section 7.2, any earthquake insurance shall
include a deductible not to exceed the greater as between (i)
five percent (5%), and (ii) $100,000.
7.3 Tenant's Property Insurance. Tenant shall, at its sole
cost and expense, by separate policy, or by endorsement to a
policy already carried, maintain insurance coverage on all of
Tenant's personal property, Tenant Owned Alterations and Utility
Installations in, on, or about the Premises. Such insurance
shall be on a full replacement cost basis.
7.4 Insurance Policies. Insurance required under this
Article 7 shall be obtained from companies maintaining at the
commencement of the policy term a "General Policyholders Rating"
of at least A and a financial rating of at least Class VII, as
set forth in the most current issue of "Best's Insurance Guide."
Each Party shall cause to be delivered to the other Party
certificates evidencing the existence and amounts of such
insurance with the insureds and loss payable clauses as required
by this Lease. The certificates shall contain a provision that
the insurer will endeavor to provide Landlord with thirty (30)
days prior written notice of cancellation. Tenant shall provide
Landlord with immediate notice in the event that Tenant shall
receive any notice of cancellation or termination with respect to
any insurance policy required to be maintained by Tenant
hereunder. Tenant shall provide to Landlord, at least fifteen
(15) days prior to the expiration of such policies, with evidence
of renewals or "insurance binders" evidencing renewal thereof, or
Landlord, after ten (10) days prior written notice to Tenant, may
order such insurance and charge the cost thereof to Tenant, which
amount shall be payable by Tenant to Landlord within thirty (30)
days after demand.
7.5 Waiver Of Subrogation. Without affecting any other
rights or remedies and to the extent this release and waiver does
not invalidate or impair their respective insurance policies,
Tenant and Landlord release each other and their respective
agents, employees, officers, directors, shareholders, successors,
assigns, and subtenants for all liability for injury to any
person or damage to any property which is caused by or results
from a risk which is actually insured against pursuant to the
provisions of this Lease without regard to the negligence or
willful misconduct of the parties so released. Tenant shall use
its best efforts to cause each insurance policy it obtains
pursuant to Sections 7.2 and 7.3 above, to provide that the
insurer thereunder waives all right of recovery by way of
subrogation as is required herein in connection with any injury
or damage required by the policy. If such insurance policy
cannot be obtained with such waiver of subrogation, then the
party obtaining such insurance shall promptly notify the other
party of the inability to obtain insurance coverage with the
waiver of subrogation.
7.6 Indemnity By Tenant. Except for Landlord's misconduct,
negligent acts or omissions and/or breach of express warranties
and the provisions of this Lease and any matter for which
Landlord is to provide indemnification pursuant to Section 7.7
below, Tenant shall indemnify, protect, defend and hold harmless
the Premises, Landlord and Landlord's agents from and against any
and all claims, loss of rents and/or damages, costs, liens,
judgments, penalties, permits, reasonable attorneys' and
consultant fees, expenses and/or liabilities arising out of or
involving the occupancy of the Premises by Tenant, the conduct of
Tenant's business in or from the Premises, any act, omission or
neglect of Tenant, Tenant's agents, contractors, employees or
invitees (provided that Landlord and/or any of Landlord's agents,
contractors, employees and others entering the Premises at
Landlord's request pursuant to Section 29 below, shall not be
deemed to be the invitees of Tenant), or out of any Default or
Breach by Tenant in the performance in a timely manner of any
obligation on Tenant's part to be performed under this Lease. In
case any action or proceeding be brought against Landlord by
reason of any of the foregoing matters, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord, and Landlord shall cooperate
with Tenant in such defense.
7.7 Indemnity By Landlord. Except for Tenant's misconduct,
negligent acts or omissions and/or breach of express warranties
and the provisions of this Lease and any matter for which Tenant
is to provide indemnification pursuant to Section 7.6 above,
Landlord shall indemnify, protect, defend and hold harmless the
Premises, Tenant and Tenant's agents from and against any and all
claims, damages, costs, liens, judgments, penalties, permits,
reasonable attorneys' and consultant fees, expenses and/or
liabilities arising out of or involving the conduct of Landlord's
business, any act, omission or neglect of Landlord, Landlord's
agents, contractors, employees or invitees (provided that Tenant
and/or any subtenant of Tenant, and/or any of their respective
agents, contractors, customers, employees and business invitees
shall not be deemed to be the invitees of Landlord), or out of
any breach by Landlord in the performance in a timely manner of
any obligation on Landlord's part to be performed under this
Lease. In case any action or proceeding be brought against
Tenant by reason of any of the foregoing matters, Landlord upon
notice from Tenant shall defend the same at Landlord's expense by
counsel reasonably satisfactory to Tenant, and Tenant shall
cooperate with Landlord in such defense.
7.8 Rent Loss Insurance. Tenant, at its sole cost and
expense, shall obtain and keep in force during the term of this
Lease, a policy or policies in the name of Landlord with loss
payable to Landlord and Landlord's lender(s) insuring the loss of
rental and other charges payable by Tenant to Landlord pursuant
to this Lease for one (1) year (including all Base Rent, prepaid
rent, Real Property Taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the
event the Lease is terminated by reason of an insured loss, the
period of indemnity for such coverage shall be extended beyond
the date of the completion of repairs or replacement of the
Premises, to provide for one (1) full year of loss of rent from
the date of such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause and the
amount of coverage shall be adjusted annually to reflect the
projected Base Rent, Real Property Taxes, insurance costs and
other expenses payable by Tenant for the next twelve (12) month
period.
8. DAMAGE OR DESTRUCTION.
8.1 Definitions.
(a) "Premises Partial Damage" shall mean damage to or
destruction of the Premises, other than Tenant Owned Alterations
and Utility Installations, which damage or destruction will
require less than 270 days following the occurrence of the
Casualty to repair or restore.
(b) "Premises Total Destruction" shall mean damage to
or destruction of the Premises, other than Tenant Owned
Alterations and Utility Installations, which damage or
destruction will require more than 270 days following occurrence
of the Casualty to repair and restore.
(c) "Insured Loss" shall mean damage to or destruction
of the Premises, which was caused by an event required to be
covered by the insurance described in Section 7.2, irrespective
of any deductible amounts or coverage limits involved.
(d) "Casualty" shall mean any damage to or destruction
of all or any portion of the Premises without regard to whether
such damage or destruction shall constitute an Insured Loss.
(e) "Replacement Cost" shall mean the cost to repair
or rebuild the Premises, (without deduction for depreciation) at
the time of the occurrence of the Casualty to their condition
existing immediately prior thereto, including demolition, debris
removal and upgrading required by Applicable Law.
(f) "Hazardous Substance Condition" shall mean the
occurrence or discovery of a condition involving the presence of,
or a contamination by, a Hazardous Substance in, on, or under the
Premises.
8.2 Partial Damage - Insured Loss. If a Premises Partial
Damage that is an Insured Loss occurs, then Landlord shall, at
Landlord's sole cost and expense (provided that Tenant shall pay
to Landlord the amount of any insurance deductible), repair such
damage (but not Tenant's Trade Fixtures) as soon as reasonably
possible and this Lease shall continue in full force and effect,
and Tenant shall make all insurance proceeds received by Tenant
under the insurance maintained pursuant to Section 7.2 above,
available to Landlord for the performance of such repairs.
However, Tenant may, at Tenant's election, repair any such damage
or destruction the total cost to repair of which is Ten Thousand
Dollars ($10,000) or less, and in such event, Tenant may retain
the insurance proceeds available to Tenant on a reasonable basis
for that purpose. Further, Landlord shall not be obligated to
make such repairs if the sum of insurance proceeds available and
contributions made by Tenant (as provided above and below) is
more than $50,000 less than the reasonable cost of making such
repairs. Except as provided in Section 8.4 and 8.5 , in the
event that the amount of insurance proceeds available to repair
such damage or destruction is less than the reasonable cost of
actually making the repairs, then Tenant shall be obligated to
pay one-half (1/2) of the shortfall (but in no event more than
$50,000) as its contribution to the cost of such repairs, such
amount to be payable within thirty (30) days after receipt of an
invoice therefor after the repairs are complete. However, within
thirty (30) days following written request by Landlord, Tenant
agrees to provide Landlord with satisfactory assurance that its
contribution to the cost of repairs will be paid in a timely
manner. Notwithstanding the foregoing, if the required insurance
was not in force, Tenant shall promptly contribute the shortage
in proceeds as and when required to complete said repairs. The
Party responsible for making the repairs shall complete them in a
good and workmanlike manner and restore the Premises or the
portion thereof in question to their condition as they existed
immediately prior to the Casualty as soon as reasonably possible,
and this Lease shall remain in full force and effect. Premises
Partial Damage due to flood or earthquake shall be subject to
Section 8.3 rather than Section 8.2, notwithstanding that there
may be some insurance coverage, but the net proceeds of any such
insurance shall be made available for the repairs if made by
either Party.
8.3 Partial Damage - Uninsured Loss. If a Premises Partial
Damage occurs which Landlord is not required to repair pursuant
to the Provisions of Section 8.2, Landlord shall at Landlord's
option either: (i) repair such damage as soon as reasonably
possible, at Landlord's sole cost and expense, so as to restore
the Premises (but not including Tenant's Trade Fixtures), or the
portion thereof in question, to their condition as they existed
immediately prior to the occurrence of the Casualty, in which
event this Lease shall continue in full force and effect, or (ii)
give written notice to Tenant, within sixty (60) days after
receipt by Landlord of knowledge of the occurrence of such
damage, of Landlord's desire to terminate this Lease as of the
date of the Casualty. Landlord's failure to provide notice of
its election to terminate within the time period provided in the
preceding sentence shall constitute Landlord's election (and
Landlord shall thereafter be required) to keep this Lease in full
force and effect and to restore the Premises or the portion
thereof in question to their condition as they existed
immediately prior to
the occurrence of the Casualty, if such failure shall continue
for a period of five (5) days following delivery by Tenant to
Landlord of written notice stating that the sixty (60) day period
provided in this Lease has expired and requesting a decision
within five (5) days. In the event Landlord elects to give
notice of Landlord's intention to terminate this Lease, Tenant
shall have the right within ten (10) days after the receipt of
such notice to give written notice to Landlord of Tenant's
commitment to pay for all but $50,000 of the cost of the repair
of such damage at Tenant's sole cost and expense. Tenant shall
provide Landlord with the required funds or satisfactory
assurance thereof within thirty (30) days following Tenant's said
commitment. In such event this Lease shall continue in full
force and effect, and Landlord shall proceed to make such repairs
as soon as reasonably possible and the required funds are
available. If Tenant does not give such notice and provide the
funds or assurance thereof within the times specified above, this
Lease shall terminate as of the date of the Casualty.
8.4 Total Destruction. Notwithstanding any other provision
hereof, if a Premises Total Destruction occurs (including any
destruction required by any authorized public authority),
Landlord shall notify Tenant of such occurrence no later than
sixty (60) days following the occurrence of the Casualty. In
such event, this Lease, at Tenant's option, which option shall be
exercisable only by Tenant's delivery of written notice of
exercise to Landlord within twenty (20) days after actual receipt
of Landlord's notice, shall terminate as of the date of the
Casualty. Otherwise, the Casualty shall be dealt with in the
same manner as is provided above with respect to Premises Partial
Damage.
8.5 Damage Near End Of Term. If at any time during the
last three (3) months of the Lease Term a Casualty occurs for
which the cost to repair exceeds one (1) month's Base Rent,
whether or not an Insured Loss, either Party may terminate this
Lease by written notice delivered to the other within forty-five
(45) days after the date of such Casualty, whereupon this Lease
shall terminate as of the date of such Casualty provided,
however, the Lease shall not so terminate if prior to such
Casualty Tenant has duly exercised any renewal option then
available to it pursuant to this Lease. In the event that Tenant
has duly exercised such renewal option, the Casualty shall be
addressed as set forth in Sections 8.2, 8.3 or 8.4, as may be
applicable.
8.6 Abatement Of Rent; Tenant's Remedies.
(a) In the event of damage described in Section 8.2
(Partial Damage - Insured Loss) or Section 8.3 (Partial Damage -
Uninsured Loss), the Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, payable by Tenant hereunder
for the period during which such damage, its repair or the
restoration continues shall be abated in proportion to the degree
to which Tenant's use of the Premises is impaired.
(b) If Landlord shall be obligated to repair or restore
the Premises under the provisions of this Article 8 and does not
commence, in a substantial and meaningful way, and thereafter
diligently pursue the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue,
Tenant may, at any time prior to the commencement of such repair
or restoration, give written notice to Landlord and to any
Lenders of which Tenant has actual notice of Tenant's election to
terminate this Lease on a date not less than sixty (60) days
following the giving of such notice. If Tenant gives such notice
to Landlord and such Lenders and such repair or restoration is
not commenced within thirty (30) days after such notice is given,
this Lease shall terminate as of the
date specified in said notice. If Landlord or a Lender commences
the repair or restoration of the Premises within thirty (30) days
after such notice is given and thereafter diligently pursues such
repair or restoration to completion, this Lease shall continue in
full force and effect. "Commence" as used in this Paragraph
shall mean either the unconditional authorization of the
preparation of the required plans, application for required
permits or the beginning of the actual work on the Premises,
whichever first occurs.
8.7 Hazardous Substance Conditions. If a Hazardous
Substance Condition occurs, unless caused by the activities of
Tenant, or Tenant's subtenant or any of their respective
invitees, agents, contractors or employees on the Premises (in
which case Tenant shall make the investigation and remediation
thereof required by Applicable Law and this Lease shall continue
in full force and effect, but subject to Landlord's rights under
Article 12), Landlord shall either (i) investigate and remediate
such Hazardous Substance Condition, if required by Applicable
Law, as soon as reasonably possible at Landlord's expense, in
which event this Lease shall continue in full force and effect,
or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or
Five Hundred Thousand Dollars ($500,000), whichever is greater,
give written notice to Tenant within thirty (30) days after
receipt by Landlord of knowledge of the occurrence of such
Hazardous Substance Condition and such cost of Landlord's desire
to terminate this Lease as of the date sixty (60) days following
the giving of such notice. In the event Landlord elects to give
such notice of Landlord's intention to terminate this Lease,
Tenant shall have the right within ten (10) days after the
receipt of such notice to give written notice to Landlord of
Tenant's commitment to pay for the investigation and remediation
of such Hazardous Substance Condition at Tenant's sole cost and
expense, except that Tenant shall be reimbursed in an amount
equal to twelve (12) times the then monthly Base Rent or Five
Hundred Thousand Dollars ($500,000), whichever is greater.
Tenant shall provide Landlord with the funds required of Tenant
or satisfactory assurance thereof within thirty (30) days
following Tenant's said commitment. In such event this Lease
shall continue in full force and effect, and Landlord shall
proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If
Tenant does not give such notice and provide the required funds
or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Landlord's notice of
termination. If a Hazardous Substance Condition occurs which is
not caused by the activities of Tenant, or Tenant's invitees,
agents, contractors or employees on the Premises, there shall be
abatement of Tenant's obligations under this Lease to the same
extent as provided in Subsection 8.6(a).
8.8 Termination - Advance Payments. Upon termination of
this Lease pursuant to this Article 8, an equitable adjustment
shall be made concerning advance Base Rent and any other advance
payments made by Tenant to Landlord.
8.9 Waive Statutes. Landlord and Tenant agree that the
terms of this Lease shall govern the effect of any damage to or
destruction of the Premises with respect to the termination of
this Lease and hereby waive the provisions of any present or
future Applicable Law to the extent inconsistent herewith.
9. REAL PROPERTY TAXES.
9.1 Payment Of Taxes. Tenant shall pay the Real Property
Taxes, as defined in Section 9.2, applicable to the Premises
during the Lease Term. All such payments shall be made before
the later of (i) thirty (30) days after the date Tenant receives
written notice of the amount of Real Property Taxes which are
due, or (ii) ten (10) days prior to the delinquency date of the
applicable installment. Tenant shall promptly furnish Landlord
with satisfactory evidence that such taxes have been paid. If
any such taxes to be paid by Tenant shall cover any period of
time prior to or after the expiration or earlier termination of
the term hereof, Tenant's share of such taxes shall be equitably
prorated to cover only the period of time within the tax fiscal
year this Lease is in effect, and Landlord shall reimburse Tenant
for any overpayment after such proration. If Tenant shall fail
to pay any Real Property Taxes required by this Lease to be paid
by Tenant, Landlord shall have the right to pay the same, and
Tenant shall reimburse Landlord therefor upon demand.
9.2 Definition Of "Real Property Taxes." As used herein,
the term "Real Property Taxes" shall include any form of real
estate tax or assessment, general or special, and any license
fee, commercial rental tax, improvement bond or bonds, levy or
tax (other than inheritance, personal income, franchise, excess
profits, capital levy, succession, or estate taxes) (i) imposed
upon the Premises by any authority having the direct or indirect
power to tax, including any city, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, or (ii) levied against any
legal or equitable interest of Landlord in the Premises or in the
real property of which the Premises are a part, Landlord's right
to rent or other income therefrom, and/or Landlord's business of
leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring, or changes in
Applicable Law taking effect, during the Lease Term but shall not
include any late penalties or fees, interest or costs of
collection unless Tenant shall fail to pay such Real Property
Taxes as and when required under Section 9.1.
9.3 Joint Assessment. If the Premises are not separately
assessed, Tenant's liability shall be an equitable proportion of
the Real Property Taxes for all of the land and improvements
included within the tax parcel assessed.
9.4 Right To Contest Or Seek Reassessment. Tenant shall
have the right, after written notice to Landlord and at Tenant's
sole cost and expense, to contest the validity of any tax or seek
a reassessment of the taxable value of the Premises by
appropriate legal proceedings conducted in the manner prescribed
by Applicable Law. In this regard, Landlord shall, to the extent
reasonably requested by Tenant, provide Tenant with such
information concerning the Premises as Landlord may have in its
possession and, to the extent required by Applicable Law or
covenant shall join in any such proceeding at Tenant's expense.
9.5 Advance Payment. In the event that a Breach (as
defined in Section 12.1) occurs with respect to the obligation of
Tenant to timely pay Real Property Taxes, then, at any time
thereafter in order to insure payment when due and before
delinquency of any and all Real Property Taxes, Landlord reserves
the right, at Landlord's option, to estimate the current Real
Property Taxes applicable to the Premises (based upon the then
most recent tax bills available to Landlord) and require each
installment of Real Property Taxes to be paid in advance to
Landlord by Tenant monthly in advance with the payment of the
Base Rent. If Landlord elects to require payment monthly in
advance, the monthly payment shall be that equal monthly amount
which, over the number of months remaining before the month in
which the applicable tax installment would become delinquent,
would provide a fund large enough to fully discharge before
delinquency, the estimated installment of Real Property Taxes to
be paid. When the actual amount of the applicable tax bill is
known, Landlord may, but is not required to, adjust the amount of
such equal monthly advance payment so as to provide the funds
needed to pay the applicable Real Property Taxes before
delinquency. If the amounts paid to Landlord by Tenant under the
provisions of this Section 9.5 are insufficient to discharge the
obligation of Tenant to pay such Real Property Taxes as the same
become due, Tenant shall pay to Landlord, upon Landlord's demand,
such additional sums as are necessary to pay such obligations.
All monies paid to Landlord under this Section 9.5 may be
intermingled with other monies of Landlord and shall not bear
interest. At any time that Landlord is collecting estimated
payments from Tenant pursuant to this Section 9.5, Tenant's
obligation to pay Real Property Taxes other than pursuant to this
Section 9.5 shall be abated.
10. UTILITIES.
Tenant shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services
supplied to the Premises, together with any taxes thereon. If
any such services are not separately metered to Tenant, Tenant
shall pay a reasonable proportion of all charges jointly metered
with other premises. Upon request, Landlord shall provide a
written explanation of the methods and means used to calculate
such reasonable proportion.
11. ASSIGNMENT AND SUBLETTING.
11.1 Tenant's Right To Assign Or Sublet. Subject to the
provisions of Section 1.6 as to use of the Premises, Tenant may
not assign or otherwise transfer, mortgage or encumber this
Lease or sublet the Premises in whole or in part, without the
prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing,
Tenant may, without Landlord's consent, but with notice to
Landlord, assign or sublet the Premises in whole or in part to
(i) any affiliate of Tenant, or (ii) any independent contractor
performing services for Tenant, provided that (1) the total area
occupied by such independent contractor and its operations does
not exceed ten percent (10%) of the Premises, (2) the aggregate
portion of the Premises so subleased to or otherwise occupied by
any such independent contractors shall not exceed twenty-five
percent (25%) of the Premises, and (3) any such portion of the
Premises subleased to or occupied by an independent contractor
is not separately demised. For purposes of this Lease,
"affiliate" means any person, firm or corporation directly or
indirectly controlling, controlled by, or under common control
with Tenant including without limitation, (a) any officer or
director thereof, (b) any shareholder owning more than ten
percent (10%) of the outstanding stock thereof, (c) any parent,
subsidiary or related or affiliated corporation thereof, (d) any
entity created by merger with, reorganization of, or
recapitalization of Tenant, and (e) any entity which acquires
Tenant or substantially all the assets of Tenant.
11.2 Tenant's Continuing Obligations; Excess Rent. No
assignment, transfer, mortgage, sublease or other encumbrance,
whether or not approved, and no indulgence granted by Landlord to
any assignee or subtenant, shall in any way impair the continuing
primary liability (which after an assignment shall be joint and
several with the assignee) of Tenant hereunder, and no consent in
a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's consent in any other case. If
for any assignment or sublease requiring the consent of Landlord,
Tenant receives rent or other consideration, either initially or
over the term of the assignment or sublease, in excess of the
rent called for hereunder, or in the case of a sublease of part
of the Premises, in excess of the portion of such rent fairly
allocable to such part, after appropriate adjustments to assure
that all other payments called for hereunder are appropriately
taken into account, and after subtracting any expenses incurred
in connection with such assignment or subletting, Tenant shall
pay to Landlord as additional rent one-half (1/2) of the excess
of each such payment of rent or other consideration received by
Tenant promptly after its receipt. In the event Tenant requests
the consent of Landlord to any assignment, subletting or other
transfer of the Premises or this Lease pursuant to this Section
11, Tenant shall reimburse Landlord for its reasonable attorneys'
fees and costs in connection therewith (including, without
limitation, in review and negotiation of any documentation in
connection therewith), up to a maximum reimbursement of
$1,000.00.
12. DEFAULT; BREACH; REMEDIES.
12.1 Default; Breach. Landlord and Tenant agree that if an
attorney is consulted by Landlord in connection with a Tenant
Default or Breach (as hereinafter defined), One Hundred Fifty
Dollars ($150.00) is a reasonable sum per such occurrence for
legal services and costs in the preparation and service of a
notice of Default and that Landlord may include the cost of such
services and costs in said notice as rent due and payable to cure
said Default. A "Default" is defined as a failure by Tenant to
observe, comply with or perform any of the terms, covenants,
conditions or rules applicable to Tenant under this Lease. A
"Breach" is defined as the occurrence of any one or more of the
following Defaults. Where a grace period for cure after notice is
specified herein, the failure by Tenant to cure such Default
prior to the expiration of the applicable grace period shall
entitle Landlord to pursue the remedies set forth in Section
12.2:
(a) Except as expressly otherwise provided in this
Lease, the failure by Tenant to make any payment of Base Rent or
any other monetary payment required to be made by Tenant
hereunder as and when due, where any such failure continues for a
period of seven (7) business days (with respect to any
installment of Base Rent) or ten (10) business days (with respect
to any other monetary payment required to be made by Tenant under
this Lease) following written notice thereof by or on behalf of
Landlord to Tenant.
(b) The failure by Tenant to comply with the terms,
covenants, conditions or provisions of this Lease that are to be
observed, complied with or performed by Tenant, other than those
described in Subsection 12.1 (a) above, where such Default
continues for a period of thirty (30) days after written notice
thereof by or on behalf of Landlord to Tenant provided, however,
that if the nature of Tenant's Default is such that more than
thirty (30) days are reasonably required for its cure, then it
shall not be deemed to be a Breach of this Lease by Tenant if
Tenant commences such cure within said thirty-day period and
thereafter diligently prosecutes such cure to completion.
(c) The occurrence of any of the following events:
(i) the making by Tenant of any general arrangement or assignment
for the benefit of creditors, (ii) Tenant's becoming a "debtor"
as defined in 11 U.S.C. 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant, 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 Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where possession is not
restored to Tenant within one hundred twenty (120) days, or (iv)
the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where such seizure is not
discharged within one hundred twenty (120) days provided,
however, that in the event that any provision of this Subsection
12.1(c) is contrary to any Applicable Law, such provision shall
be of no force or effect and shall not affect the validity of the
remaining provisions of this Lease.
Any notice of default delivered by Landlord to Tenant pursuant to
this Section 12.1 shall be in lieu of, and not in addition to,
any notice of default required by Applicable Law (including,
without limitation, Section 1161 of the California Code of Civil
Procedure).
12.2 Remedies. In the event of a Breach of this Lease by
Tenant, as defined in Section 12.1, with or without further
notice or demand, and without limiting Landlord in the exercise
of any right or remedy which Landlord may have by reason of such
Breach, Landlord may:
(a) Terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall
terminate and Tenant shall immediately surrender possession of
the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant: (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 the award exceeds the amount of
such rental loss that Tenant proves could have been reasonably
avoided, (iii) the worth at the time of the award of the amount
by which the unpaid rent which would have been earned for the
balance of the scheduled Lease Term exceeds the amount of such
rent loss that Tenant proves could have been reasonably avoided,
and (iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including
the cost of recovering possession of the Premises, expenses of
reletting and reasonable attorneys' fees. 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 (1%). The worth at the time
of the award of the amounts referred to in provisions (i) and
(ii) shall be adjusted to reflect any accrual of interest under
Article 18 hereof. Efforts by Landlord to mitigate damages
caused by Tenant's Default or Breach of this Lease shall not
waive Landlord's right to recover damages under this Section. If
termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Landlord shall have the right to
recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Landlord may reserve therein the right to
recover all or any part thereof in a separate suit for such rent
and/or damages.
(b) Continue this Lease in full force and effect and
this Lease will continue in effect so long as Landlord does not
terminate Tenant's right to possession, and Landlord shall have
the right to collect rent when due. During the period Tenant is
in Breach, Landlord can enter the Premises and relet the
Premises, or any part of the Premises, to third parties for
Tenant's account. Tenant shall be liable to Landlord for all
costs Landlord incurs in reletting the Premises, including
without limitation, brokers' commissions, expenses of remodeling
the Premises required by the reletting, and like costs to the
extent such expenses are allocable to the scheduled Lease Term
hereunder and to the extent such expenses are not amortized in
the rent payable under such other leases. Reletting may be for a
period shorter or longer than the remaining term of this Lease.
Tenant shall pay to Landlord the rent (including but not limited
to Base Rent) due under this Lease on the date the rent is due,
less any rental amount Landlord receives from any reletting. No
act by Landlord allowed by this Section 12.2(b) shall terminate
this Lease unless Landlord notifies Tenant in writing that
Landlord elects to terminate this Lease. After Tenant's Breach
and for so long as Landlord does not terminate Tenant's right to
possession to the Premises, if Tenant obtains Landlord's consent
as otherwise herein provided, Tenant shall have the right to
assign or sublet its interest in this Lease, but Tenant shall not
be released from liability. Landlord's consent to such a
proposed assignment or subletting shall not be unreasonably
withheld. If Landlord elects to relet the Premises as provided
in this Section 12.2(b), rental amounts that Landlord receives
from reletting shall be applied to the payment of: first, any
indebtedness from Tenant to Landlord other than rent due from
Tenant; second, all costs as described above, including for
maintenance, incurred by Landlord in reletting; and third, rent
due and unpaid under this Lease. After the deducting the
payments referred to in this Section 12.2(b), any sum remaining
from rental amounts Landlord receives from reletting shall be
held by Landlord and applied in payment of future rent as rent
becomes due under this Lease. In no event shall Tenant be
entitled to any excess rental amounts received by Landlord. If,
on the date rent is due under this Lease, the rental amounts
received from the reletting is less than the rent due on that
date, Tenant shall pay to Landlord, in addition to the remaining
rent due, all costs including for maintenance Landlord incurred
in reletting that remain after applying the rental amount
received from the reletting as provided in this Section 12.2(b).
(c) Pursue any other remedy now or hereafter available
to Landlord under the laws or judicial decisions of the State in
which the Premises are located. However, Landlord shall have a
duty to mitigate its damages in connection with the pursuit of
any such other remedy or the remedies herein provided.
(d) The expiration or termination of this Lease and/or
the termination of Tenant's right to possession shall not relieve
either Party from liability under any indemnity provisions of
this Lease as to matters occurring or accruing during the Lease
Term.
12.3 Late Charges. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent and other sums due
hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult
to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be
imposed upon Landlord by the terms of any ground lease, mortgage
or trust deed covering the Premises. Accordingly, if any monthly
installment of rent due from Tenant shall not be received by
Landlord or Landlord's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to
Tenant, Tenant shall pay to Landlord a late charge equal to four
percent (4%) of such
overdue amount. The Parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of
such late charge by Landlord shall in no event constitute a
waiver of Tenant's Default or Breach with respect to such overdue
amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
12.4 Breach By Landlord.
(a) If Landlord shall fail to perform any obligation
on Landlord's part to be performed hereunder, Landlord shall not
be deemed to be in breach of this Lease unless and until such
failure shall continue unremedied for a period of thirty (30)
days following delivery to Landlord of written notice thereof
(or, if such failure is not reasonably amenable to cure within
thirty (30) days, Landlord shall have failed to commence curing
the failure within thirty (30) days and to thereafter diligently
pursue such cure to completion). In the event that Landlord
shall fail to remedy such failure within the time provided above,
or, if an emergency shall exist and Landlord shall fail to
commence curing such failure after such attempted or actual
notice and opportunity to cure as is reasonable under the
circumstances, Tenant may, but shall not be obligated to,
perform such obligation at Landlord's expense and, on written
notice to Landlord, demand reimbursement therefor or part
thereof, from Landlord, and Landlord shall promptly reimburse
Tenant after such notice and demand. The foregoing remedies
shall be in addition to any other remedy provided at law or in
equity.
(b) No remedy or claim of default by Tenant shall be
binding upon the holder of a "Security Device" (as hereinafter
defined) whose name and address have previously been furnished to
Tenant in writing, unless Tenant shall first have given such
holder written notice of the default, and (except in the event of
any emergency, or where the time necessary for such holder's
effecting of such cure is not reasonably practical under the
circumstances) offered such holder, a reasonable opportunity to
cure the default, including time to obtain possession of the
Premises by power of sale or a judicial foreclosure, or in the
event of a ground lessor, by appropriate judicial action, if such
should prove necessary to effect a cure.
(c) In consideration of the benefits accruing
hereunder, and notwithstanding anything contained in this Lease
to the contrary, Tenant and all successors and assigns covenant
and agree that, in the event of any actual or alleged failure,
breach or default hereunder by Landlord or in the event of any
other action against Landlord with respect to this Lease, their
sole and exclusive remedy shall be against Landlord's interest in
the Premises. Tenant and all such successors and assigns agree
that the obligations of Landlord under this Lease do not
constitute personal obligations of the individual trustees,
partners, whether general or limited, members, directors,
officers or shareholders of Landlord, and Tenant shall not seek
recourse against the individual trustees, partners, members,
directors, officers or shareholders of Landlord or any of their
personal assets for satisfaction of any liability with respect to
this Lease.
13. CONDEMNATION.
13.1 Permanent Taking. If the Premises or any portion
thereof are taken under the power of eminent domain or sold under
the threat of the exercise of said power (all of which are herein
called "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If (i) more than ten
percent (10%) of the floor area of the Building, (ii) more than
twenty-five percent (25%) of the land area not occupied by any
building, or (iii) a portion of the Land which materially blocks
access to the Building, materially interferes with Tenant's
business operations or reduces available parking on the Premises
by more than twenty-five percent (25%) is taken by condemnation,
Tenant may, at Tenant's option, to be exercised in writing within
thirty (30) days after Landlord shall have given Tenant written
notice of such taking and of Tenant's option to terminate
hereunder (or in the absence of such notice, within sixty (60)
days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority
takes such possession. If this Lease is terminated pursuant to
this Article, then all rent shall be paid up to the date that
possession is taken by the condemning authority, and Landlord
shall make an equitable reimbursement of any amounts paid by
Tenant and not yet earned. If Tenant does not terminate this
Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises
remaining, except that the Base Rent and other charges due
hereunder shall be reduced in the same proportion as the rentable
floor area of the Building taken bears to the total rentable
floor area of the Building or shall be equitably reduced in the
event that a portion of the land area not occupied by any
building is taken. 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 Landlord, 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 Tenant shall be entitled to any compensation separately
awarded to Tenant for the value of the loss of Tenant's leasehold
hereunder, Tenant's relocation expenses and/or loss of Tenant
Owned Alterations or Utility Installations or Tenant's personal
property or trade fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall, at its
sole cost and expense, repair any damage to the Premises caused
by such condemnation, except to the extent that Tenant has been
reimbursed therefor by the condemning authority.
13.2 Temporary Taking. If the whole or any part of the
Premises is taken for any public of quasi-public use under any
statute or by right of eminent domain for temporary use or
occupancy, this Lease shall not terminate by reason thereof and
Tenant shall continue to pay Base Rent and other charges due
hereunder. In the event of any such temporary taking, Tenant
shall be entitled to receive the entire amount of the award made
for the taking unless the period of temporary use or occupancy
shall extend beyond the expiration of the Lease Term, in which
case the award shall be apportioned between Landlord and Tenant
as of the date of expiration of the Lease Term. If the temporary
taking is for a term in excess of ninety (90) days, then the
taking shall be treated as a permanent taking and be governed by
Section 13.1.
13.3 Waive Statutes. Landlord and Tenant agree that the
terms of this Lease shall govern the effect of any condemnation
of the Premises with respect to the termination of this Lease and
hereby waive the provisions of any present or future Applicable
Law to the extent inconsistent herewith.
14. BROKERS' FEE.
14.1 Role Of Brokers. The Brokers, if any, named in Section
1.8 are the procuring causes of this Lease.
14.2 Payment Of Commission. Landlord shall pay to said
Brokers a fee as set forth in a separate written agreement
between Landlord and said Brokers for brokerage services rendered
by said Brokers to Landlord in this transaction.
14.3 No Other Brokers. Tenant and Landlord each represent
and warrant to the other that it has had no dealings with any
person, firm, broker or finder (other than the Brokers, if any,
named in Section 1.8) in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated
hereby, and that no broker or other person, firm or entity other
than said named Brokers is entitled to any commission or finder's
fee in connection with said transaction. Tenant and Landlord do
each hereby agree to indemnify, protect, defend and hold the
other harmless from and against liability for compensation or
charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses and
attorneys' fees reasonably incurred with respect thereto.
14.4 Agency Relationships. Landlord and Tenant hereby
consent to and approve all agency relationships, including any
dual agencies, indicated in Section 1.8.
15. TENANCY STATEMENT.
Each Party (as "Responding Party") shall within ten (10)
days after written notice from the other Party (the "Requesting
Party") execute, acknowledge and deliver to the Requesting Party
a statement in writing in the form attached hereto as Exhibit B.
16. LANDLORD'S LIABILITY.
The term "Landlord" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the tenant's interest in the master
lease. In the event of a transfer of Landlord's title or
interest in the Premises or in this Lease, Landlord shall deliver
to the transferee or assignee (in cash or by credit) any unused
or unearned funds of Tenant, if any, held by Landlord at the time
of such transfer or assignment, and the transferee or assignee
shall be deemed to have assumed the remaining obligations of
Landlord hereunder and upon such assumption by the transferee or
assignee (and Landlord's delivery of evidence of such assumption
to Tenant), Landlord shall be released from further liability or
obligation under this Lease accruing with respect to the period
following such assumption.
17. 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.
18. INTEREST ON PAST-DUE OBLIGATIONS.
Any monetary payment due to one Party from the other
hereunder, other than late charges, not received by Landlord
within five (5) days following the date on which it was due,
shall bear interest from the sixth (6th) day after it was due at
the rate of twelve percent (12%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the late charge
provided for in Section 12.3; provided that as to the first such
failure to pay when due in any twelve (12) month period, such
interest shall not commence to accrue unless and until such
failure remains uncured for ten (10) days following Landlord's
delivery of written notice thereof to Tenant.
19. TIME OF ESSENCE.
Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under
this Lease.
20. RENT DEFINED.
The term "rent" as used in this Lease shall refer to all
monetary obligations of Tenant to Landlord under the terms of
this Lease.
21. NO PRIOR OR OTHER AGREEMENTS.
This Lease contains all agreements between the Parties with
respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.
22. NOTICES.
22.1 All notices required or permitted by this Lease shall
be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by certified or
registered mail or by overnight courier or mail service that
guarantees next-day delivery and provides a receipt, with postage
prepaid, or by facsimile transmission, and shall be deemed
sufficiently given if served in a manner specified in this
Article 22. Set forth below is (are) each Party's address(es)
for delivery or mailing of notice purposes:
If to Tenant:
APRIA HEALTHCARE, INC.
3560 Hyland Avenue
Costa Mesa, California 92626
Attention: Director, Real Estate
Telephone: (714) 427-2000
Facsimile: (714) 427-2435
With a copy to the Premises
If to Landlord:
555 First Street, Inc.
C/O TDA, Inc.
1214 Donnelly Avenue
Burlingame, California 94010
Attention: Wayne Q. Turner
Telephone: (415) 343-6333
Facsimile: (415) 343-0858
Either Party may, by written notice to the other, specify a
different address for notice purposes. A copy of all notices
required or permitted to be given to Landlord hereunder shall be
concurrently transmitted to such party or parties at such
addresses as Landlord may from time to time hereafter designate
by written notice to Tenant.
22.2 Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery
shown on the receipt card or if no delivery date is shown, the
postmark thereon. Notice delivered by overnight courier that
guarantees next day delivery and provides a receipt shall be
deemed given the next business day after delivery of the same to
the service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed
served or delivered upon telephone confirmation of receipt of the
transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Sunday or legal
holiday, it shall be deemed received on the next business day.
23. WAIVERS.
No waiver by Landlord of the Default or Breach of any term,
covenant or condition hereof by Tenant shall be deemed a waiver
of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Tenant of the same or of any
other term, covenant or condition hereof.
24. RECORDING.
Either Landlord or Tenant shall, upon request of the other,
execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes. The Party
requesting recordation shall be responsible for payment of any
fees or taxes applicable thereto. In the event a memorandum of
this Lease is so recorded, upon the expiration of the term or
earlier termination of this Lease, Tenant shall execute and the
party originally recording the memorandum shall cause to be
recorded in the Official Records of Los Angeles County,
California, at such party's sole cost, a quitclaim deed or other
evidence of termination of this Lease in such form as is
reasonably requested by Landlord. Tenant's obligation pursuant
to the immediately preceding sentence shall survive the
expiration or earlier termination of this Lease.
25. 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.
26. BINDING EFFECT; CHOICE OF LAW.
This Lease shall be binding upon the Parties, their personal
representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall
be initiated in the County in which the Premises are located.
27. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
27.1 Subordination. Subject to Section 27.3 below, this
Lease shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or security
device (collectively, "Security Device"), now or hereafter placed
by Landlord upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and
to all renewals, modifications, consolidations, replacements and
extensions thereof. If any Lender shall elect to have this
Lease superior to the lien of its Security Device and shall give
written notice thereof to Tenant, this Lease shall be deemed
prior to such Security Device, notwithstanding the relative dates
of the documentation or recordation thereof.
27.2 Attornment. Subject to the non-disturbance provision
of Section 27.3, Tenant agrees to attorn to a Lender or any other
party who acquires ownership of the Premises by reason of a
foreclosure of a Security Device.
27.3 Non-Disturbance. Tenant's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance
agreement") in a form reasonably acceptable to Tenant from the
Lender that Tenant's possession and this Lease, including any
options to extend the term hereof, will not be disturbed so long
as Tenant is not in Breach hereof and attorns to the record owner
of the Premises.
27.4 Self-Executing. The agreements contained in this
Article 27 shall be effective without the execution of any
further documents. However, upon written request from Landlord
or a Lender in connection with a sale, financing or refinancing
of the Premises, Tenant and Landlord shall execute such further
writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-
disturbance agreement as is provided for herein.
28. ATTORNEYS' FEES.
If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term
"Prevailing Party" shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sought, as
the case may be, whether by compromise, settlement, judgment, or
the abandonment by the other Party or Broker of its claim or
defense. The attorneys' fees awarded shall not be computed in
accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred.
29. LANDLORD'S ACCESS.
Landlord shall have the right to enter the Premises at any
time in the case of an emergency, and otherwise at reasonable
times upon reasonable notice, for the purpose of performing its
obligations hereunder, as reasonably required to exercise its
rights and/or remedies under this Lease, to show the Premises to
prospective lenders, purchasers and/or (during the final 6 months
of the term) tenants, and to post notices of non-responsibility
when appropriate in accordance with Applicable Law.
30. SIGNS.
Tenant may, with Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed, install
such signs as are reasonably required to advertise Tenant's
business. The installation of any sign on the Premises by or for
Tenant shall be subject to the provisions of Article 6
(Maintenance; Repairs; Utility Installations; Trade Fixtures And
Alterations).
31. TERMINATION; MERGER.
Unless specifically stated otherwise in writing by Landlord,
the voluntary or other surrender of this Lease by Tenant, the
mutual termination or cancellation hereof, or a termination
hereof by Landlord for Breach by Tenant, shall automatically
terminate any sublease or lesser estate in the Premises.
However, Landlord shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one
or all of any existing subtenancies. Landlord's failure within
ten (10) days following any such event to make a written election
to the contrary by written notice to the holder of any such
lesser interest shall constitute Landlord's election to have such
event constitute the termination of such interest.
32. QUIET POSSESSION.
Upon payment by Tenant of the rent for the Premises and the
observance and performance of all of the covenants, conditions
and provisions on Tenant's part to be observed and performed
under this Lease, Tenant shall have quiet possession of the
Premises for the entire Lease Term.
33. CONSENTS.
Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other
Party, such consent shall not be unreasonably withheld or
delayed. Landlord's consent to any act, assignment of this Lease
or subletting of the Premises by Tenant shall not constitute an
acknowledgment that no Default or Breach by Tenant of this Lease
exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise
specifically stated in writing by Landlord at the time of such
consent.
34. 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 (with interest from the date paid
until the date repaid at the rate provided in Article 18) or so
much thereof as it was not legally required to pay under the
provisions of this Lease.
35. AUTHORITY.
If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf.
If either Party is a corporation, trust or partnership, such
Party shall, within thirty (30) days after request by the other
Party, deliver to such Party evidence of such authority.
36. CONFLICT.
Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.
37. OFFER.
Preparation of this Lease by either Party and submission of
same to the other Party shall not be deemed an offer to lease.
This Lease is not intended to be binding until executed by all
Parties hereto.
38. AMENDMENTS.
This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification.
39. WAIVER OF STATUTORY LIEN.
Landlord shall not be entitled to any statutory lien or
security interest in any of Tenant's personal property, or Trade
Fixtures located on the Premises.
40. HOLDOVER.
In the event that Tenant shall hold over at the expiration
or other termination of the Lease Term set forth in this Lease,
or any renewal term, then this Lease shall continue as a month-to-
month lease subject to termination by either Party upon sixty
(60) days prior written notice to the other, which notice may be
given prior to the expiration of the Lease Term. Such month-to-
month tenancy shall be subject to all of the terms and conditions
of this Lease, including the Base Rent, in effect during the
final month of this Lease Term, or applicable renewal term.
However, after sixty (60) days prior written notice to Tenant,
which notice may be given prior to expiration of the Lease Term
or renewal term, as applicable, Tenant shall be liable for Base
Rent during the holdover period in an amount equal to one hundred
twenty-five percent (125%) of the Base Rent provided for in this
Lease during the last month of the Lease Term or renewal term, as
applicable, together with all other additional rent and other
charges provided for in the Lease. Tenant acknowledges that the
rental value of the Premises in the future is difficult to
estimate and that the increased amount of Base Rent set forth in
this Section is a reasonable estimate by the Parties of the
future rental value of the Premises upon expiration or
termination of the Lease Term or renewal term set forth in this
Lease.
41. FINANCIAL INFORMATION.
Upon request by Landlord (but not more frequently than once
each year) Tenant shall provide Landlord with copies of the most
recently available financial reports publicly filed with the
Securities and Exchange Commission showing the results of
Tenant's operations either separately or on a consolidated basis
with one or more affiliates of Tenant. If the stock in Tenant
and its parent company is no longer publicly traded, Landlord
shall have the right to request such financial information
concerning Tenant as Landlord may reasonably require on an annual
basis.
42. MULTIPLE PARTIES.
Except as otherwise expressly provided herein, if more than
one person or entity is named herein as either Landlord or
Tenant, the obligations of such multiple Parties shall be the
joint and several responsibility of all persons or entities named
herein as such Landlord or Tenant.
43. ERISA.
Neither Tenant or any of its affiliates, partners or
fiduciaries in respect to the Lease (collectively, the "Tenant
Group") is a Disqualified Person under Section 4975(e) of the
Internal Revenue Code (the "Code") or a Party in Interest within
the meaning of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), with respect to Landlord or any
investor therein disclosed to Tenant during the term of this
Lease, and the Tenant Group shall not enter into any subleases or
other agreements respecting the Premises with any party which is
a Disqualified Person as defined in the Code or a Party in
Interest within the meaning of ERISA, with respect to Landlord.
Following the date hereof and thereafter, as reasonably required
during the term of the Lease, Tenant shall furnish Landlord with
all such certifications of the Tenant Group or other information
which Landlord reasonably requests in order to insure compliance
with the Code and ERISA. Without limiting the foregoing, Tenant
acknowledges that ERISA prohibits the lease, directly or
indirectly, of any property between a pension plan and a Party in
Interest or a Disqualified Person as to that plan, as such terms
are defined in ERISA and the Code, respectively.
44. COUNTERPARTS.
This Lease may be executed in any number of counterparts,
each of which shall be deemed to be an original, but any number
of which, taken together, shall constitute one and the same
instrument.
The parties hereto have executed this Lease at the place and on
the dates specified above their respective signatures.
Executed at
on
by LANDLORD:
555 FIRST STREET, INC.,
a California corporation
By
Name Printed:
Title:
Executed at
on
by TENANT:
APRIA HEALTHCARE, INC.
a Delaware corporation
By
Name Printed:
Title:
C:\Word\Docs\Apria\S-Fernan.Ls2
SINGLETN.DOC
Revised August 7, 1995
EXHIBIT A
THE LAND
LOT 5 OF TRACT NO. 32920, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS A
NGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 993 PAGES 31
AND 32 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
EXCEPTING THEREFROM THE NORTHEASTERLY 54.77 FEET.
EXCEPTING THEREFROM 50% OF ALL CRUDE OIL AND MINERALS BELOW A DEPTH OF
500 FEET FROM THE SURFACE OF SAID LAND BUT THE HOLDER OF SAID EXCEPTED
MINERAL INTEREST SHALL HAVE NO RIGHT OF SURFACE ENTRY.
EXHIBIT A-1
SITE PLAN
EXHIBIT B
TENANCY STATEMENT
Tenant:
Landlord:
Premises: ( ) square feet of net
rentable area of office and warehouse space on the _________
(___) floor of the Building located at
.
Lease: Lease Agreement dated __________________________,
19___, by and between Landlord and Tenant and covering the
Premises.
In order to induce [Lender to make a mortgage loan to Landlord
secured by a lien on Landlord's interest in the real property and
improvements in which the Premises are situated and an assignment by
Landlord to Lender of the Landlord's interest in the captioned Lease]
[Purchaser to purchase the Landlord's interest in the real property
and improvements in which the Premises are situated, which purchase
includes an assignment from Landlord to Purchaser of Landlord's
interest in the captioned Lease], the undersigned makes the following
statements and agreements with the intention that all parties to whom
this instrument is delivered by the undersigned may fully rely
thereon:
1. The undersigned hereby certifies, as true and correct,
the following statements:
a. Attached hereto as Exhibit "A" and made a
part hereof for all purposes is a true, correct and
complete copy of the Lease (and all exhibits,
amendments and addenda thereto) between Landlord and
Tenant with respect to the Premises described in the
Lease. The Lease [has/has not] been modified or
amended in any manner or respect. Such Lease (and all
exhibits, amendments and addenda thereto)
[constitutes/does not constitute] the entire and
complete understanding and agreement between Landlord
and Tenant with respect to the Premises covered
thereby.
b. The Lease [is/is not] presently in full force
and effect.
c. As of the date hereof, neither Landlord nor
Tenant is in default under the terms and conditions of
the Lease, except as otherwise provided herein;
specifically:
d. Tenant [has/has not] prepaid any rent or made
a security deposit except as specifically set forth in
the Lease.
e. There are no offsets, defenses or
counterclaims with respect to the payment of rent
reserved under the Lease or in the performance of the
other terms, covenants and conditions of the Lease on
the part of Tenant or Landlord, as the case may be, to
be performed, except as otherwise provided herein;
specifically:
.
f. Tenant [is/is not] in possession of the
Premises, [has/has not] occupied the Premises
continually since , 19 , and [has/has
not] accepted the Premises. Tenant and Landlord have
complied fully and completely with all of their
covenants, warranties and other undertakings and
obligations under the Lease to this date, with the
result that Tenant is fully obligated to pay the Base
Rent (as such term is defined in the Lease) and other
charges due under the Lease and is fully obligated to
perform, and is performing, all of the obligations of
Tenant under the Lease, without any right of
counterclaim, offset or defense, except as otherwise
provided herein; specifically:
.
g. The Commencement Date (as such term is defined in
the Lease) is , 19 , and pursuant to the
provisions of the Lease, as currently in effect, the
primary term of the Lease will expire on
, 19 . Subject to and in accordance with the terms
and conditions set forth in the Lease, Tenant has the
option to renew the Lease for ( )
additional term(s) of ( ) years each.
h. Base Rent (as such term is defined in the
Lease) under the Lease has been paid in full through
, 19 .
i. Tenant [has/has not] received notice that
Landlord has made any other assignment, pledge or
hypothecation of the Lease or the rents due thereunder.
j. Tenant [has/has not] assigned, mortgaged,
sublet, encumbered or otherwise transferred all or any
part of its interest under the Lease.
2. [FOR LENDER ESTOPPEL] Tenant hereby acknowledges that
Landlord's interest in the Lease has been or is to be
assigned to Lender pursuant to an [Assignment of Leases and
Rents] from Landlord to Lender and agrees that, from and
after the date hereof: without the prior written consent of
Lender Tenant will not pay the Base Rent or any other sums
becoming due under the terms of the Lease more than one (1)
month in advance.
3. As used herein, the terms "Tenant," "Landlord," and
"[Lender/Purchaser]" shall mean the persons hereinabove
named as such, and their respective heirs, personal
representatives, successors and assigns.
4. The undersigned is duly authorized to execute this
instrument on behalf of Tenant or Landlord, as may be
applicable.
5. All terms used but not defined herein shall have the
same meaning ascribed to them in the Lease.
EXECUTED this day of , 19 .
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By:
Name:
Title:
