<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 11, 2000
--------------------------------
Equity Marketing, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23346 13-3534145
- -------------------------------- ------------------------ --------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
6330 San Vicente Boulevard, Los Angeles, California 90048
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (323) 932-4300
-----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
Reference is made to the press release of the registrant, issued on
March 29, 2000, which contains information meeting the requirements of this Item
5, and which is incorporated herein by this reference. A copy of this press
release is attached to this Form 8-K as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
None.
(b) PRO FORMA FINANCIAL INFORMATION.
None.
(c) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Exhibit 10.5 Fourth Amendment to Amended and Restated Credit Agreement
dated as of January 25, 2000 between Equity Marketing, Inc.,
Sanwa Bank California and Imperial Bank.
Exhibit 10.6 Fifth Amendment to Amended and Restated Credit Agreement dated
as of March 13, 2000 between Equity Marketing, Inc., Sanwa
Bank California and Imperial Bank.
Exhibit 10.7 Sixth Amendment to Amended and Restated Credit Agreement dated
as of March 24, 2000 between Equity Marketing, Inc., Sanwa
Bank California and Imperial Bank.
Exhibit 10.8 Agreement of Office Lease dated as of July 17, 1998, as
amended as of February 9, 1999, between Miracle Mile, L.L.C.
and Equity Marketing, Inc.
Exhibit 10.9 Agreement of Lease, dated March 10, 2000 between Wide Harvest
Investment Ltd and Equity Marketing Hong Kong, Ltd.
Exhibit 99.1 Press Release of Equity Marketing, Inc. issued on March 29,
2000.
</TABLE>
<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 hereunto duly authorized.
EQUITY MARKETING, INC.
-----------------------------------------
(Registrant)
Date April 11, 2000 /s/ Leland P. Smith
- ---------------------- ------------------------------------------
(Signature)
Leland P. Smith
Senior Vice President, General Counsel
and Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Exhibit 10.5 Fourth Amendment to Amended and Restated Credit Agreement
dated as of January 25, 2000 between Equity Marketing, Inc.,
Sanwa Bank California and Imperial Bank.
Exhibit 10.6 Fifth Amendment to Amended and Restated Credit Agreement dated
as of March 13, 2000 between Equity Marketing, Inc., Sanwa
Bank California and Imperial Bank.
Exhibit 10.7 Sixth Amendment to Amended and Restated Credit Agreement dated
as of March 24, 2000 between Equity Marketing, Inc., Sanwa
Bank California and Imperial Bank.
Exhibit 10.8 Agreement of Office Lease dated as of July 17, 1998, as
amended as of February 9, 1999, between Miracle Mile, L.L.C.
and Equity Marketing, Inc.
Exhibit 10.9 Agreement of Lease, dated March 10, 2000 between Wide Harvest
Investment Ltd and Equity Marketing Hong Kong, Ltd.
Exhibit 99.1 Press Release of Equity Marketing, Inc. issued on March 29,
2000.
</TABLE>
<PAGE>
FOURTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is made and dated as of the 25th day of January, 2000, by and among
SANWA BANK CALIFORNIA ("Sanwa") and IMPERIAL BANK, as the current Lenders under
the Credit Agreement referred to below (and as the term "Lenders" and
capitalized terms not otherwise defined herein are used in the Credit
Agreement), SANWA, in its capacity as Agent for the Lenders, and EQUITY
MARKETING, INC., a Delaware corporation (the "Company").
RECITALS
A. Pursuant to that certain Amended and Restated Credit Agreement
dated as of December 10, 1998, by and among the Agent, the Lenders and the
Company (as amended from time to time, the "Credit Agreement"), the Lenders
agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein.
B. The Company, the Agent and the Lenders desire to modify the Credit
Agreement in certain respects as set forth more particularly below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. WAIVER OF FAILURE TO COMPLY WITH REPORTING REQUIREMENT. The
Lenders hereby waive any Event of Default which may exist as a result of the
failure of the Company to have delivered certain Abbreviated Borrowing Base
Certificates as required under Paragraph 7(b)(5) prior to February 1, 2000.
Nothing contained herein shall in any manner or to any extent constitute any
agreement by the Agent or the Lenders to waive any other Event of Default which
may now or in the future exist under the Loan Documents, whether such Event of
Default is similar to that expressly waived hereunder or otherwise.
2. INCREASE IN PERMITTED STOCK REPURCHASES. To reflect the agreement
of the parties to increase the dollar amount of acquisitions, purchases,
redemptions and retirements of the Company's capital stock, the parties hereto
hereby agree that effective as of the Effective Date the dollar amount
"$1,000,000.00" appearing in line 6 of Paragraph 8(f) of the Credit Agreement is
hereby replaced by the dollar amount "$2,500,000.00".
3. MODIFICATION OF FINANCIAL COVENANT. To reflect the agreement of
the parties to modify the financial covenant set forth in Paragraph 8(j) of the
Credit Agreement, the parties
<PAGE>
hereto hereby agree that effective as of the Effective Date Paragraph 8(j) of
the Credit Agreement is hereby amended to read in its entirety as follows:
"8(j) RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH. Permit
the Company's ratio of consolidated Total Liabilities to consolidated
Tangible Net Worth to be more than (1) as of December 31, 1999,
3.50:1.00, and (2) thereafter, 2.25:1.00."
4. REAFFIRMATION OF SECURITY AGREEMENT. The Company hereby affirms
and agrees that: (a) the execution and delivery by the Company of and the
performance of its obligations under this Amendment shall not in any way amend,
impair, invalidate or otherwise affect any of the obligations of the Company or
the rights of the Secured Parties under the Security Agreement or any other
document or instrument made or given by the Company in connection therewith,
(b) the term "Obligations" as used in the Security Agreement includes, without
limitation, the Obligations of the Company under the Credit Agreement as amended
hereby and (c) the Security Agreement remains in full force and effect.
5. EFFECTIVE DATE. This Amendment shall be effective as of the date
(the "Effective Date") that the Agent receives the following:
(a) Duly executed signature pages for this Amendment from each
party hereto;
(b) A reaffirmation of guaranty and security agreement in form
and substance acceptable to the Agent and the Lenders, duly executed by each of
Corinthian Marketing, Inc. and Equity Marketing Hong Kong, Ltd.;
(c) A copy of corporate resolutions from the Company, certified
by a Secretary or an Assistant Secretary of the Company, authorizing the
execution, delivery and performance of this Amendment by the Company, and an
incumbency certificate identifying the officers of the Company authorized to
execute this Amendment on behalf of the Company; and
(d) Such other resolutions, incumbency certificates, good
standing certificates or other documents as the Agent may reasonably request.
6. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Agent and the Lenders as follows:
(a) The Company has the corporate power and authority and the
legal right to execute, deliver and perform this Amendment and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Amendment. This Amendment has been duly executed and delivered on
behalf of the Company and constitutes the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and the effect of equitable principles whether applied in an action at law or a
suit in equity.
<PAGE>
(b) At and as of the date of execution hereof and at and as of
the Effective Date of this Amendment and both prior to and after giving effect
hereto: (i) the representations and warranties of the Company contained in the
Credit Agreement and the other Loan Documents are accurate and complete in all
material respects, and (ii) there has not occurred an Event of Default or
Potential Default other than such as is expressly waived hereunder.
7. NO OTHER AMENDMENT. Except as expressly amended hereby, the Loan
Documents shall remain in full force and effect as written and amended to date.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
EQUITY MARKETING, INC.,
a Delaware corporation
By: /s/ Teresa Covington
------------------------------
Name: Teresa Covington
------------------------------
Title: Vice President, Finance
-----------------------------
SANWA BANK CALIFORNIA, as Agent and as
a Lender
By /s/ Judy Tu
------------------------------
Name: Judy Tu
------------------------------
Title: Commercial Banking Officer
------------------------------
IMPERIAL BANK, as a Lender
By /s/ Jennifer Huang
-----------------------------------
Jennifer Huang, Commercial Loan
Officer
<PAGE>
FIFTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Fifth Amendment") is made and dated as of the 13th day of March, 2000, by
and among SANWA BANK CALIFORNIA ("Sanwa") and IMPERIAL BANK, as the current
Lenders under the Credit Agreement referred to below (and as the term
"Lenders" and capitalized terms not otherwise defined herein are used in the
Credit Agreement), SANWA, in its capacity as Agent for the Lenders, and
EQUITY MARKETING, INC., a Delaware corporation (the "Company").
RECITALS
A. Pursuant to that certain Amended and Restated Credit Agreement
dated as of December 10, 1998, by and among the Agent, the Lenders and the
Company (as amended from time to time, the "Credit Agreement"), the Lenders
agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein.
B. The Company, the Agent and the Lenders desire to modify the
Credit Agreement in certain respects as set forth more particularly below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for
other valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree that effective as of the
Effective Date (as that term is defined in Paragraph 9 below):
AGREEMENT
1. MODIFICATION OF MATURITY DATE. The term "Maturity Date" set
forth in Paragraph 12 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"'MATURITY DATE' shall mean the earlier of: (a) June 30, 2001,
and (b) the date the Lenders terminate their obligation to make further
Loans hereunder pursuant to PARAGRAPH 9 above."
2. COLLATERAL COVERAGE REQUIREMENTS.
(a) The definition of the term "Borrowing Base" set forth in
Paragraph 12 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"'BORROWING BASE' shall mean at any date all Eligible Accounts and
all Eligible Inventory included in the calculation of the Collateral
Value of the Borrowing Base at such date and, if but only if at such date
the RSI Note qualifies as an Eligible Instrument, the RSI Note."
(b) The definition of the term "Collateral Value of the
Borrowing Base" set forth in Paragraph 12 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"'COLLATERAL VALUE OF THE BORROWING BASE' shall mean at any date
the sum of:
<PAGE>
(a) Eighty percent (80%) of the outstanding
principal balance of Eligible Accounts included in the Borrowing
Base at such date; plus
(b) The lesser of: (1) sixty-five percent (65%)
of the Inventory Value of Eligible Inventory included in the
Borrowing Base at such date; and (2) $4,500,000.00, plus
(c) Fifty percent (50%) of the outstanding principal
balance of the RSI Note."
(c) A new definition of "RSI Note" is hereby added, in correct
alphabetical order, to Paragraph 12 of the Credit Agreement to read in its
entirety as follows:
"'RSI NOTE' shall mean that certain Promissory Note dated February
9, 2000 issued by Restaurant Services, Inc. in favor of the Company in
the original principal amount of $17,466,201.54, as the same may be
amended, extended or replaced from time to time."
(d) A new definition of "RSI Sale and Assignment Agreement"
is hereby added, in correct alphabetical order, to Paragraph 12 of the Credit
Agreement to read in its entirety as follows:
"'RSI SALE AND ASSIGNMENT AGREEMENT' shall mean that certain Sale
and Assignment Agreement dated as of February 9, 2000 between Restaurant
Services, Inc. and the Company."
(e) A new definition of "Eligible Instrument" is hereby
added, in correct alphabetical order, to Paragraph 12 of the Credit Agreement
to read in its entirety as follows:
"'ELIGIBLE INSTRUMENT' shall mean an instrument owned by the
Company for which each of the following statements is accurate and
complete (and the Company by including such instrument in any computation
of the Collateral Value of the Borrowing Base shall be deemed to
represent and warrant to the Agent and the Lenders that such statements
are accurate and complete in all material respects):
(a) Said instrument is a binding and valid obligation of
the obligor thereon, in full force and effect and enforceable in
accordance with its terms;
(b) Said instrument is genuine, in all respects as
appearing on its face or as represented in the books and records of the
Company, and all information set forth therein is true and correct;
(c) Said instrument is free of all defaults,
counterclaims, offsets and defenses and from any rescission, cancellation
or avoidance, and all right thereof, whether by operation of law or
otherwise;
(d) Said instrument contains the entire agreement of the
parties thereto with respect to the subject matter thereof, has not been
modified or amended in any respect, and is free of concessions or
understandings with the obligor thereon of any kind not disclosed to the
Agent in writing;
<PAGE>
(e) Said instrument is, and at all times will be, free
and clear of all liens, encumbrances, charges, rights and interests of
any kind, except in favor of the Agent on behalf of the Lenders;
(f) There is but one original executed copy of said
instrument and the same has been delivered to the Agent, endorsed in
blank or by allonge; and
(g) The Agent holds for the benefit of the Lenders a
first priority perfected security interest in said instrument and there
has been assigned to the Agent for the benefit of the Lenders all rights,
if any, of the payee thereunder to any and all real and personal property
(tangible and intangible) securing such instrument and any and all
guaranties or other forms of credit support therefor.
It is expressly acknowledged and agreed by the Agent and the Lenders that
each representation and warranty made by the Company that the RSI Note is
an 'Eligible Instrument' is subject to the fact that the principal and
installment amounts payable under the RSI Note may be reduced pursuant to
the last sentence of Section 7 of the RSI Sale and Assignment Agreement
and that the existence of such contractual right of reduction, or any
reduction of any principal or installment amounts payable on the RSI Note
pursuant thereto, shall not cause the representations and warranties set
forth in subparagraphs (c) and (d) above to be deemed inaccurate or
incomplete."
(f) The form of Borrowing Base Certificate attached to the
Credit Agreement as EXHIBIT M is hereby amended and replaced by a certificate
in the form of that attached hereto as REPLACEMENT EXHIBIT M.
3. MODIFICATION OF FINANCIAL COVENANTS.
(a) Paragraph 8(i) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"8(i) MINIMUM TANGIBLE NET WORTH. Permit the Company's
consolidated Tangible Net Worth at the end of any fiscal quarter,
commencing with the fiscal quarter ending March 31, 2000, to be less than
(1) $17,000,000, plus (2) seventy five percent (75%) of consolidated Net
Profit After Taxes for each fiscal quarter, determined at the end of each
fiscal quarter beginning with the fiscal quarter ending June 30, 2000 and
with no deduction for losses."
(b) Paragraph 8(j) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"8(j) RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH.
Permit the Company's ratio of consolidated Total Liabilities to
consolidated Tangible Net Worth at the end of any fiscal quarter,
commencing with the fiscal quarter ending March 31, 2000, to be
greater than 2.50:1.00"
4. ADDITION OF LETTER OF CREDIT SUBLIMIT. The first sentence of
Paragraph 2(b) of the Credit Agreement is hereby amended to read in its entirety
as follows:
<PAGE>
"On the terms and subject to the conditions set forth herein, Sanwa
shall from time to time from and after the Effective Date, issue its
letters of credit (a "New Letter of Credit" and, collectively, the
"New Letters of Credit") for the account of the Company in an amount
which when added to the aggregate amount of Loans outstanding
hereunder and the aggregate amount of other Outstanding New Letters
of Credit, Pre-Existing Letters of Credit and unpaid L/C Drawings
will not exceed the Credit Limit; provided, however, that in no event
may the aggregate amount of all Outstanding Letters of Credit exceed
$5,000,000.00."
5. ADDITIONAL REPORTING REQUIREMENTS. Paragraph 7(b) of the
Credit Agreement is hereby amended to delete the word "and" appearing
immediately after the semi-colon at the end of subparagraph (5) thereof, to
renumber subparagraph (6) as subparagraph (8) and to insert new subparagraphs
(6) and (7) to read in their entirety as follows:
"(6) Promptly upon becoming aware of the same, notice of the
occurrence of any "Event of Default" under (and as that term is
defined in) the RSI Note;
(7) No later than the close of business of the Company on the
Business Day next succeeding the date such prepayment is received,
notice of the dollar amount of any prepayment of principal on the RSI
Note; and"
6. ADDITIONAL REPRESENTATIONS AND WARRANTIES. A new Paragraph
6(u) is hereby added to the Credit Agreement to read in its entirety as
follows:
"6(u) RSI SALE AND ASSIGNMENT AGREEMENT. An accurate and
complete excerpt of Section 7 of the RSI Sale and Assignment Agreement
has been provided to the Agent and the Lenders. Section 7 of the RSI
Sale and Assignment Agreement is the sole provision thereof which
provides to RSI any right to reduce any amounts payable thereunder the
RSI Note or for RSI to otherwise assert rights of counterclaim or
offset against amounts payable thereunder, and there are no other
documents, instruments or agreements which provide any such rights."
7. ADDITIONAL NEGATIVE COVENANT. A new Paragraph 8(v) is hereby
added to the Credit Agreement to read in its entirety as follows:
"8(v) RSI SALE AND ASSIGNMENT AGREEMENT. The Company will
not consent to or acquiese in any waiver, amendment or other
modification of any term or provision of the RSI Sale and Assignment
Agreement (other than as contemplated by Section 7 threof) from the
form in which originally executed without the prior written consent of
the Agent and the Lenders."
8. REAFFIRMATION OF SECURITY AGREEMENT. The Company hereby
affirms and agrees that: (a) the execution and delivery by the Company of
and the performance of its obligations under this Fifth Amendment shall not
in any way amend, impair, invalidate or otherwise affect any of the
obligations of the Company or the rights of the Secured Parties under the
Security Agreement or any other document or instrument made or given by the
Company in connection therewith, (b) the term "Obligations" as used in the
Security Agreement includes, without limitation, the Obligations of the
Company under the Credit Agreement as amended hereby and (c) the Security
Agreement remains in full force and effect.
<PAGE>
9. EFFECTIVE DATE. This Fifth Amendment shall be effective as of
the date (the "Effective Date") that the Agent receives the following:
(a) Duly executed signature pages for this Fifth Amendment
from each party hereto;
(b) A reaffirmation of guaranty and security agreement in
form and substance acceptable to the Agent and the Lenders, duly executed by
each of Corinthian Marketing, Inc. and Equity Marketing Hong Kong, Ltd.;
(c) For distribution to the Lenders in accordance with their
respective Percentage Shares, an amendment fee in the aggregate amount of
$31,250.00;
(d) A copy of corporate resolutions from the Company,
certified by a Secretary or an Assistant Secretary of the Company,
authorizing the execution, delivery and performance of this Fifth Amendment
by the Company, and an incumbency certificate identifying the officers of the
Company authorized to execute this Fifth Amendment on behalf of the Company;
and
(e) Such other resolutions, incumbency certificates, good
standing certificates and other documents, instruments and agreements as the
Agent may reasonably request.
10. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Agent and the Lenders as follows:
(a) The Company has the corporate power and authority and the
legal right to execute, deliver and perform this Fifth Amendment and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Fifth Amendment. This Fifth Amendment has been duly
executed and delivered on behalf of the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and the effect of equitable principles whether
applied in an action at law or a suit in equity.
(b) At and as of the date of execution hereof and at and as
of the Effective Date of this Fifth Amendment and both prior to and after
giving effect hereto: (i) the representations and warranties of the Company
contained in the Credit Agreement and the other Loan Documents are accurate
and complete in all material respects (except for such representations and
warranties as are made as of a particular date, which the Company confirms
were accurate and complete in all material respects as of the date made), and
(ii) there are no existing Events of Default or Potential Defaults.
11. NO OTHER AMENDMENT. Except as expressly amended hereby, the
Loan Documents shall remain in full force and effect as written and amended
to date.
12. COUNTERPARTS. This Fifth Amendment may be executed in any
number of counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be executed as of the day and year first above written.
EQUITY MARKETING, INC.,
a Delaware corporation
By: /s/ Teresa Covington
------------------------------
Name: Teresa Covington
------------------------------
Title: Vice President, Finance
-----------------------------
SANWA BANK CALIFORNIA, as Agent and as
a Lender
By /s/ Judy Tu
------------------------------
Name: Judy Tu
------------------------------
Title: Commercial Banking Officer
------------------------------
IMPERIAL BANK, as a Lender
By /s/ Jennifer Huang
-----------------------------------
Jennifer Huang, Commercial Loan
Officer
<PAGE>
SIXTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Sixth
Amendment") is made and dated as of the 24th day of March, 2000, by and among
SANWA BANK CALIFORNIA ("Sanwa") and IMPERIAL BANK, as the current Lenders under
the Credit Agreement referred to below (and as the term "Lenders" and
capitalized terms not otherwise defined herein are used in the Credit
Agreement), SANWA, in its capacity as Agent for the Lenders, and EQUITY
MARKETING, INC., a Delaware corporation (the "Company").
RECITALS
A. Pursuant to that certain Amended and Restated Credit Agreement
dated as of December 10, 1998, by and among the Agent, the Lenders and the
Company (as amended from time to time, the "Credit Agreement"), the Lenders
agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein.
B. The Company, the Agent and the Lenders desire to modify the Credit
Agreement in certain respects as set forth more particularly below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree that effective as of the Effective
Date (as that term is defined in Paragraph 9 below):
AGREEMENT
1. PAYMENT OF DIVIDENDS. To reflect the agreement of the parties
hereto to permit the Company to pay dividends on certain preferred stock of the
Company, Paragraph 8(e) of the Credit Agreement is hereby amended to read in its
entirety as follows:
"8(e) PAYMENT OF DIVIDENDS. Declare or pay any
dividends upon its shares of stock now or hereafter outstanding or make
any distribution of assets to its stockholders as such, whether in cash,
property or securities, except (1) dividends payable in shares of capital
stock and cash in lieu of fractional shares or in options, warrants or
other rights to purchase shares of capital stock, and (2) dividends
payable from time to time on account of those certain 'Series A Senior
Cumulative Participating Convertible Preferred Stock', 'Series B Senior
Cumulative Participating Convertible Preferred Stock' and 'Series C
Senior Cumulative Participating Convertible Preferred Stock' of the
Company, in each case pursuant to the related Certificate of Designation
duly filed under the laws of the State of Delaware, a certified copy of
which has been provided to the Agent."
2. CONSENT. The Agent and the Lenders hereby consent to that certain
Consent to Sale and Assignment Agreement dated as of March 24, 2000, between the
Company and RSI, pursuant to which the audit period under Section 7 of the RSI
Sale and Assignment Agreement is extended from 60 days to 70 days.
<PAGE>
3. REAFFIRMATION OF SECURITY AGREEMENT. The Company hereby affirms
and agrees that: (a) the execution and delivery by the Company of and the
performance of its obligations under this Sixth Amendment shall not in any way
amend, impair, invalidate or otherwise affect any of the obligations of the
Company or the rights of the Secured Parties under the Security Agreement or any
other document or instrument made or given by the Company in connection
therewith, (b) the term "Obligations" as used in the Security Agreement
includes, without limitation, the Obligations of the Company under the Credit
Agreement as amended hereby and (c) the Security Agreement remains in full force
and effect.
4. EFFECTIVE DATE. This Sixth Amendment shall be effective as of the
date (the "Effective Date") that the Agent receives the following:
(a) Duly executed signature pages for this Sixth Amendment from
each party hereto;
(b) A reaffirmation of guaranty and security agreement in form
and substance acceptable to the Agent and the Lenders, duly executed by each of
Corinthian Marketing, Inc. and Equity Marketing Hong Kong, Ltd.;
(c) A copy of corporate resolutions from the Company, certified
by a Secretary or an Assistant Secretary of the Company, authorizing the
execution, delivery and performance of this Sixth Amendment by the Company, and
an incumbency certificate identifying the officers of the Company authorized to
execute this Sixth Amendment on behalf of the Company; and
(d) Such other resolutions, incumbency certificates, good
standing certificates and other documents, instruments and agreements as the
Agent may reasonably request.
5. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Agent and the Lenders as follows:
(a) The Company has the corporate power and authority and the
legal right to execute, deliver and perform this Sixth Amendment and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Sixth Amendment. This Sixth Amendment has been duly
executed and delivered on behalf of the Company and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and the effect of equitable principles whether
applied in an action at law or a suit in equity.
(b) At and as of the date of execution hereof and at and as of
the Effective Date of this Sixth Amendment and both prior to and after giving
effect hereto: (i) the representations and warranties of the Company contained
in the Credit Agreement and the other Loan Documents are accurate and complete
in all material respects (except for such representations and warranties as are
made as of a particular date, which the Company confirms were accurate and
complete in all material respects as of the date made), and (ii) there are no
existing Events of Default or Potential Defaults.
6. NO OTHER AMENDMENT. Except as expressly amended hereby, the Loan
Documents shall remain in full force and effect as written and amended to date.
<PAGE>
7. COUNTERPARTS. This Sixth Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be executed as of the day and year first above written.
EQUITY MARKETING, INC.,
a Delaware corporation
By /s/ Teresa Covington
-------------------------------------
Name Teresa Covington
-----------------------------------
Title Vice President, Finance
----------------------------------
SANWA BANK CALIFORNIA, as Agent and as a
Lender
By /s/ Judy Tu
-------------------------------------
Name Judy Tu
-----------------------------------
Title Commercial Banking Officer
----------------------------------
IMPERIAL BANK, as a Lender
By /s/ Jennifer Huang
-------------------------------------
Jennifer Huang, Commercial Loan
Officer
<PAGE>
OFFICE LEASE
6330 SAN VICENTE BOULEVARD
MIRACLE MILE, L.L.C.,
a Delaware limited liability company,
as Landlord,
and
EQUITY MARKETING, INC.,
a Delaware corporation,
as Tenant.
<PAGE>
6330 SAN VICENTE BOULEVARD
INDEX
<TABLE>
<CAPTION>
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
<S> <C>
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND
COMMON AREAS; PATIO AREA; . . . . . . . . . . . . . . . . . 4
ARTICLE 2 INITIAL LEASE TERM; OPTION TERM . . . . . . . . . . . . . . 13
ARTICLE 3 BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 USE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6 SERVICES AND UTILITIES. . . . . . . . . . . . . . . . . . . 26
ARTICLE 7 REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8 ADDITIONS AND ALTERATIONS . . . . . . . . . . . . . . . . . 31
ARTICLE 9 COVENANT AGAINST LIENS. . . . . . . . . . . . . . . . . . . 32
ARTICLE 10 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11 DAMAGE AND DESTRUCTION. . . . . . . . . . . . . . . . . . . 35
ARTICLE 12 NONWAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 13 CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 14 ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . 38
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES . . . . . . . . . . . . . . . . . 42
ARTICLE 16 HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 17 ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . 43
ARTICLE 18 SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 19 DEFAULTS; REMEDIES. . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 20 COVENANT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . 46
ARTICLE 21 LETTER OF CREDIT. . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 22 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . 47
ARTICLE 23 SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 24 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 25 LATE CHARGES. . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT;
PAYMENTS BY TENANT. . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 27 ENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 28 TENANT PARKING. . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 29 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 51
</TABLE>
EXHIBITS
A OUTLINE OF PREMISES
A-1 OUTLINE OF PATIO AREA
A-2 OUTLINE OF EXPANSION SPACE 1 AND EXPANSION SPACE 2
B TENANT WORK LETTER
C FORM OF NOTICE OF LEASE TERM DATES
D RULES AND REGULATIONS
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
F TENANT'S SIGNAGE
G TENANT'S RESERVED PARKING
H MEMORANDUM OF LEASE
(ii)
<PAGE>
I JANITORIAL SPECIFICATIONS
J FORM OF LETTER OF CREDIT
(iii)
<PAGE>
6330 SAN VICENTE BOULEVARD
INDEX OF MAJOR DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS LOCATION OF
- ------------- DEFINITION IN
OFFICE LEASE
------------
<S> <C>
Abatement Event Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Actual Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
After Hour HVAC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Allowance Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Application of the L-C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Base Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Base Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Base Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
BOMA Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Building Common Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Building Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Building Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Building Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Building Top Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Card Key System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Commission Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Common Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Comparable Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Comparable Deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Comparable Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Contemplated Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Contemplated Transfer Space. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Cost Pools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Direct Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Eligibility Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Estimate Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Estimated Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Excluded Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Excluded Tenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Existing Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Buildout Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Expansion Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Expansion Rent Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Space 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Space 1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Space 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Space Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . 11
Expansion Space 1 Interest Notice. . . . . . . . . . . . . . . . . . . . . . . . . .7
Expansion Space 2 Exercise Notice. . . . . . . . . . . . . . . . . . . . . . . . . .8
Expansion Space 2 Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . .8
Expense Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv)
<PAGE>
Extended Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Extended Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Final Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
First Offer Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
First Offer Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
First Offer Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
First Offer Space. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
First Offer Space Buildout Period. . . . . . . . . . . . . . . . . . . . . . . . . 12
Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Force Majeure Delay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Garage Storage Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Ground Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Initial Premises Extended Term . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Initial Premises/Expansion Space 1 Extended Term . . . . . . . . . . . . . . . . . .8
Intention to Transfer Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Interest Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Landlord Caused Delay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Landlord's Compliance Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 48
L-C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
L-C Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Lease Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lease Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lease Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Load Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Market Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Market Rent Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Maximum Restoration Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Memo of Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Monument Sign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Operating Expense Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Option Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Option Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Option Rent Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Option Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Original Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Original Tenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Outside Agreement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Parking Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Parking Charge Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Patio Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Permitted Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Prevailing Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Prohibited Tenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Proposition 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Reassessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Remeasurement Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(v)
<PAGE>
Rent Concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Rules and Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Second Floor Storage Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Secured Hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Storage Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Storage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Studley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Subject Space. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Tax Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Tenant's Lease Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Tenant Competitor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Tenant Work Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Tenant's Compliance Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Tenant's Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Tenant's Security System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Tenant's Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Tenant's Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Trade Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Transfer Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Transfer Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Transfer Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Transferee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Trigger Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Triggering Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
(vi)
<PAGE>
6330 SAN VICENTE BOULEVARD
OFFICE LEASE
This Office Lease (the "LEASE"), dated as of the date set forth in Section
1 of the Summary of Basic Lease Information (the "SUMMARY"), below, is made by
and between MIRACLE MILE, L.L.C., a Delaware limited liability company
("LANDLORD"), and EQUITY MARKETING, INC. a Delaware corporation ("TENANT").
SUMMARY OF BASIC LEASE INFORMATION
<TABLE>
<CAPTION>
TERMS OF LEASE DESCRIPTION
- -------------- -----------
<S> <C>
1. Date: July 17, 1998
2. Premises
(Article 1).
2.1 Building: 6330 San Vicente Boulevard
2.2 Premises: Approximately 58,059 rentable (54,896
usable) square feet of space located on
the first (1st), third (3rd), fourth (4th)
and fifth (5th) floors of the Building, as
further set forth in EXHIBIT A to the Office
Lease.
3. Lease Term
(Article 2).
3.1 Length of Term: Seven (7) years.
3.2 Lease Commencement Date:
December 15, 1998 (subject to the terms
of Section 5 of the Tenant Work Letter).
3.3 Lease Expiration Date: The last day of the month in which the 7th
anniversary of the Lease Commencement
Date occurs.
</TABLE>
4. Base Rent (Article 3):
<TABLE>
<CAPTION>
Annual
Monthly Rental Rate
Month of Annual Installment per Rentable
Lease Term Base Rent of Base Rent Square Foot
---------- --------- ------------ -----------
<S> <C> <C> <C>
One (1) through Thirty (30) $1,184,403.60 $98,700.30 $20.40
Thirty-One (31) through $1,219,239.00 $101,603.25 $21.00
Sixty (60)
Sixty-One (61) through $1,497,922.20 $124,826.85 $25.80
Eighty-Four (84)
</TABLE>
<TABLE>
<S> <C>
5. Base Year The first twelve (12) months of the
(Article 4): Lease Term commencing on the Lease
Commencement Date.
6. Tenant's Share
(Article 4): Approximately 59.97%.
-1-
<PAGE>
7. Permitted Use
(Article 5): General office use, creative design
development of products for promotional
and retail sale and, ancillary to the
foregoing, paint spray room and glue
spray room (each with industrial
strength ventilation systems), model
assembly/work shop (with industrial
strength ventilation and vacuum systems
and drainage), and operation of
lamination/display making machines with
special ventilation and model assembly
and spray painting.
8. Letter of Credit $400,607.10.
(Article 21):
9. Parking Pass Ratio
(Article 28): Four (4) unreserved parking passes for
every 1,000 usable square feet of the
Premises, of which .5 passes for every
1, 000 usable square feet of the
Premises shall be for the use of a
reserved parking space.
10. Address of Tenant Equity Marketing, Inc.
(Section 29.18): 131 South Rodeo Drive
Beverly Hills, California 90212-2428
Attention: Senior Vice President/Business
Affairs
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, Suite 2400
Los Angeles, California 90067
Attention: Robert J. Plotkowski, Esq.
(Prior to Lease Commencement Date)
and
Equity Marketing, Inc.
6330 San Vicente Boulevard
Los Angeles, California 90048
Attention: Senior Vice President,
Business Affairs
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, Suite 2400
Los Angeles, California 90067
Attention: Robert J. Plotkowski, Esq.
(After Lease Commencement Date)
11. Address of Landlord
(Section 29.18): See Section 29.16 of the Lease.
-2-
<PAGE>
12. Broker(s)
(Section 29.24): CB Commercial Real Estate Group
1840 Century Park East
Suite 700
Los Angeles, California 90067
and
Julien J. Studley
10960 Wilshire Boulevard
Suite 1500
Los Angeles, California 90024
</TABLE>
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ARTICLE 1
PREMISES, BUILDING, PROJECT, AND COMMON AREAS; PATIO AREA;
VERIFICATION OF RENTABLE SQUARE FEET; HOLD SPACE;
EXPANSION SPACE;
RIGHT OF FIRST OFFER
1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS; LANDLORD
MODIFICATION OF PROJECT; PATIO AREA.
1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the premises set forth in Section 2.2 of the Summary
(the "PREMISES"). The outline of the Premises is set forth in EXHIBIT A
attached hereto and each floor or floors of the Premises has the number of
rentable square feet as set forth in Section 2.2 of the Summary. The parties
hereto agree that the lease of the Premises is upon and subject to the terms,
covenants and conditions herein set forth, and Tenant covenants as a material
part of the consideration for this Lease to keep and perform each and all of
such terms, covenants and conditions by it to be kept and performed and that
this Lease is made upon the condition of such performance. The parties hereto
hereby acknowledge that the purpose of EXHIBIT A is to show the approximate
location of the Premises in the "Building," as that term is defined in Section
1.1.2, below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the size of the Premises. Tenant also
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant's business, except as specifically set forth in this Lease
and the Tenant Work Letter attached hereto as EXHIBIT B (the "TENANT WORK
LETTER").
1.1.2 THE BUILDING AND THE PROJECT. The Premises are a part of
the building set forth in Section 2.1 of the Summary (the "BUILDING"). The term
"PROJECT," as used in this Lease, shall mean (i) the Building and the Common
Areas, (ii) the land (which is improved with landscaping, subterranean parking
facilities and other improvements) upon which the Building and the Common Areas
are located, and (iii) at Landlord's discretion, any additional real property,
areas, land, buildings or other improvements added thereto outside of the
Project.
1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to
use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain areas designated for the exclusive use of certain tenants, or
to be shared by Landlord and certain tenants, are collectively referred to
herein as the "COMMON AREAS"). The term "BUILDING COMMON AREAS," as used in
this Lease, shall mean the portions of the Common Areas located within the
Building. The manner in which the Common Areas are maintained and operated
shall be at the sole discretion of Landlord and the use thereof shall be subject
to such rules, regulations and restrictions as Landlord may make from time to
time (the "RULES AND REGULATIONS"). Landlord shall use reasonable efforts to
cause other tenants or occupants of the Project to comply with the Rules and
Regulations and to avoid any unreasonable, material interference of Tenant's use
of the Premises as a result of the failure of such other tenants or occupants to
comply with the Rules and Regulations. The Rules and Regulations of the
Project, attached to and made a part of the Lease as Exhibit "D," shall not be
changed or revised or enforced in any unreasonable way by Landlord, nor enforced
or changed by Landlord in such a way as to substantially interfere with
"Tenant's Lease Rights," as that term is defined in Section 1.1.4 of this Lease.
In the event of any conflict between this Lease and this Rules and Regulations,
the Lease shall prevail and control and the inconsistent provisions of the Rules
and Regulations shall not be inapplicable to Tenant. Landlord reserves the
right to close temporarily, make alterations or additions to, or change the
location of elements of the Project and the Common Areas.
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1.1.4 LANDLORD MODIFICATION OF THE PROJECT. Notwithstanding
anything to the contrary set forth in Section 1.1.2, Section 1.1.3, the Rules
and Regulations or elsewhere in the Lease, Landlord shall not modify the Common
Area or any other portion of the Project in such a manner which shall
(i) materially reduce the common facilities available to the Building,
(ii) materially diminish the amount of visitor parking available to the
Building; or (iii) unreasonably obstruct or interfere with the accessibility of
the Premises, the Building or the parking areas, the visibility of Tenant's
signage or Tenant's use and enjoyment of the Premises or the Building or the
parking areas ("TENANT'S LEASE RIGHTS").
1.1.5 PATIO AREA.
1.1.5.1 IN GENERAL. In addition to the Premises, as set
forth in Section 2.2 of the Summary, during the Lease Term, Tenant shall lease
from Landlord and Landlord shall lease to Tenant the area located outside of the
Building set forth on Exhibit A-1 to this Lease (the "PATIO AREA"). The Patio
Area shall be considered part of the Premises for all purposes under this Lease,
provided that (i) Tenant shall not be required to pay Base Rent or Direct
Expenses for the Patio Area, (ii) Tenant shall accept the Patio Area in its
existing, "as is" condition and the terms of the Tenant Work Letter shall be
inapplicable with respect to the Patio Area, (iii) Landlord shall not be
required to provide the services provided in Sections 6.1.1, 6.1.2, 6.1.3,
6.1.5, 6.1.6, and 6.1.7 of this Lease to the Patio Area, (iv) Landlord shall
have the right, in its reasonable discretion, to approve (a) all improvements,
alterations and/or modifications to the Patio Area desired by Tenant, which
improvements, alterations and/or modifications shall be made by Tenant, at
Tenant's sole cost and expense, and (b) all furniture, fixtures and equipment to
be installed in the Patio Area by Tenant, which furniture, fixtures and
equipment shall be purchased and installed by Tenant, at Tenant's sole cost and
expense. Tenant shall be permitted to install fencing and furniture within the
Patio Area, provided that such fencing and furniture shall be subject to the
prior approval of Landlord, which approval shall not be unreasonably withheld.
Tenant shall comply with all reasonable rules and regulations promulgated by
Landlord from time to time in connection with the Patio Area.
1.1.5.2 REPAIRS/COMPLIANCE WITH LAWS RESPECTING PATIO
AREA. Notwithstanding the terms of Articles 7 and 24 of this Lease, (i)
Landlord shall be responsible, at its sole cost and expense (except to the
extent includable in Operating Expenses pursuant to the terms of Article 4 of
this Lease) for the repair of and shall comply with "Applicable Laws," as that
term is defined in Article 24 of this Lease, with respect to, the Patio Area
(exclusive of any Alterations or furniture, fixtures and equipment in the Patio
Area) to the extent the repairs and/or compliance would have been required in
the event that Landlord had not granted Tenant the rights set forth in
Section 1.1.5.1, above, and instead the Patio Area had remained a Common Area,
and (ii) Tenant shall be responsible, at its sole cost and expense, for the
repair of and shall comply with Applicable Laws (a) with respect to any
Alterations or furniture, fixtures and equipment in the Patio Area, and
(b) within the Patio Area to the extent triggered by Tenant's use of the Patio
Area and/or its Alterations or furniture, fixtures and equipment.
Notwithstanding anything in this Section 1.1.5.2 to the contrary, (I) Landlord's
obligation to comply with Applicable Laws with respect to the Patio Area, as set
forth above, shall be subject to "Landlord's Compliance Conditions," as that
term is defined in Article 24 of this Lease, and (II) Tenant's obligation to
comply with Applicable Laws with respect to the Patio Area, as set forth above,
shall be subject to "Tenant's Compliance Conditions," as that term is defined in
Article 24 of this Lease.
1.2 VERIFICATION OF RENTABLE SQUARE FEET OF GROUND FLOOR, HOLD SPACE AND
FIRST OFFER SPACE. Except as specifically set forth in this Section 1.2, the
rentable and usable square feet of the initial Premises shall be as set forth in
Section 2.2 of the Summary and shall not be subject to remeasurement or
modification. Notwithstanding the foregoing, the usable areas of the ground
floor portion of the initial Premises (the "GROUND FLOOR") (which, subject to
the terms of this Section 1.2, contains 12,889 rentable (12,114) usable square
feet of space), the "Hold Space," "Expansion Space 1," "Expansion Space 2," or
"First Offer Space," as those terms are defined in Sections 1.3, 1.4 and 1.5 of
this Lease, shall be determined in accordance with the standards set forth in
ANSI Z65.1-1996, as promulgated by the Building Owners and Managers Association
(the "BOMA STANDARD"). The rentable square footage of the Ground Floor, the
Hold Space, Expansion Space 1, Expansion Space 2, and First Offer Space, as the
case may be,
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shall equal the product of (i) the usable square footage of the applicable
space measured pursuant to the BOMA Standard, and (ii) the applicable "Load
Factor," as set forth below. Landlord and Tenant shall each have the right,
upon notice (the "REMEASUREMENT NOTICE") delivered to the other party within
ninety (90) days following the date Tenant completes construction of the
tenant improvements in the Ground Floor, the Hold Space, Expansion Space 1,
Expansion Space 2, or First Offer Space, as the case may be, to remeasure the
applicable space in accordance with the BOMA Standard. In the event that any
remeasurement pursuant to the terms of this Section 1.2 indicates that the
square footage measurement previously set forth in an amendment to this Lease
or otherwise agreed upon by Landlord and Tenant is in excess of or lower than
the square footage number which would have resulted had the BOMA Standard
been properly utilized, any payments due either party (or other rights
between Landlord and Tenant) based upon the amount of rentable or usable
square feet contained in the applicable space shall be proportionally,
retroactively and prospectively reduced or increased, as appropriate, to
reflect the actual number of rentable square feet as properly remeasured
under the BOMA Standard. If either party disagrees with the other party's
remeasurement and if a dispute occurs regarding the final accuracy of the
measurement of any space in accordance with the BOMA Standard, upon five (5)
business days notice by either party to the other, the parties shall mutually
and reasonably select a third party architect to finally and conclusively
determine the applicable square footage in accordance with the standards set
forth in this Section 1.2. In the event that a Remeasurement Notice is not
timely delivered in accordance with the terms of this Section 1.2, the
rentable and usable square footage of the applicable space shall not be
subject to remeasurement, and the rentable and usable square footage
previously set forth in an amendment to this Lease or otherwise agreed upon
by Landlord and Tenant shall be binding and conclusive. For purposes of this
Section 1.2, the "LOAD FACTORS" shall be as follows:
<TABLE>
<CAPTION>
Multi-Tenant Floor
Floor Load Factors Full Floor Load Factors
----- ------------------ -----------------------
<S> <C> <C>
1 1.064 1.064
2 1.14 1.025
</TABLE>
1.3 HOLD SPACE. Landlord hereby grants the Tenant named in this
Lease (the "ORIGINAL TENANT") and any assignee permitted or approved pursuant to
the terms of Article 14 of this Lease (a "PERMITTED ASSIGNEE") the right to
expand the Premises to include the "Hold Space", as that term is defined in
SECTION 1.3.1 below, pursuant to the terms of this SECTION 1.3 and this Lease.
1.3.1 DESCRIPTION OF THE HOLD SPACE. The "HOLD SPACE" shall
consist of approximately 5,000 rentable square feet of space, the size of which
shall be designated by Tenant as set forth in Section 1.3.2, below, and the
configuration of which shall be designated by Landlord, subject to Tenant's
approval, which approval shall not be unreasonably withheld. The location of
the Hold Space shall be designated by Landlord, provided that (i) in any event
all of the Hold Space shall be located on a single floor, and (ii) the Hold
Space shall be located on the ground floor or the second (2nd) floor of the
Building.
1.3.2 ELECTION TO LEASE THE HOLD SPACE. In the event that Tenant
desires to lease the Hold Space, then on or before the Lease Commencement Date,
Tenant shall deliver a notice to Landlord indicating (i) Tenant's irrevocable
election to lease the Hold Space during the Lease Term, and (ii) the amount of
Hold Space (which shall not exceed approximately 5,000 rentable square feet of
space) Tenant desires to lease as the Hold Space.
1.3.3 RENT AND TERM. In the event that Tenant shall lease the
Hold Space, the term of Tenant's lease of such space shall commence upon the
later to occur of (i) the Lease Commencement Date, and (ii) the date which is
sixty (60) days (which 60-day period shall be subject to extension, to the
extent applicable, as set forth in Section 5 of the Tenant Work Letter)
following the date Landlord delivers the Hold Space to Tenant, and shall expire
upon the Lease Expiration Date applicable to the initial Premises. Furthermore,
upon Tenant's lease of the Hold Space, such space shall become part of the
Premises for all purposes hereunder, and, except as otherwise provided in this
SECTION 1.3, shall be subject to every term and condition of this Lease,
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and accordingly, the Base Rent and Additional Rent for the Hold Space shall
be at the same rate, and shall thereafter be escalated on the same dates and
in the same manner, as the monthly "Base Rent" and "Additional Rent", as
those terms are defined in this Lease, for the initial Premises. In
accordance with the foregoing, in the event that Tenant elects to lease the
Hold Space pursuant to the terms of this Section 1.3, (i) Tenant's Share
shall be increased by an amount equal to the product of (a) 100 and (b) a
fraction, the numerator of which equals the rentable square footage of the
Hold Space and the denominator of which equals 96,819, and (ii) the number of
parking spaces shall be increased in accordance with the ratio set forth in
Section 9 of the Summary.
1.3.4 IMPROVEMENT OF HOLD SPACE. The Hold Space shall be
improved pursuant to the terms of the Tenant Work Letter attached hereto as
EXHIBIT B. In connection with the foregoing, for purposes of calculating the
Tenant Improvement Allowance, the usable square footage of the Hold Space shall
be considered as part of the usable square footage of the Premises.
1.3.5 OTHER TERMS. All other terms of this Lease shall apply to
the Hold Space as though the Hold Space was originally part of the Premises.
1.4 EXPANSION SPACE. Landlord hereby grants to the Original Tenant or
a Permitted Assignee the right to lease (i) approximately 16,856 rentable
(14,786 usable) square feet of space located on the second (2nd) floor of the
Building, as more particularly set forth on Exhibit A-2 attached to this Lease
("EXPANSION SPACE 1"), and (ii) without regard to whether Tenant leases
Expansion Space 1 pursuant to the terms of Section 1.4.1.1, below, an additional
area comprised, of approximately 9,656 rentable (8,471 usable) square feet of
space located on the second floor of the Building, as more particularly set
forth on Exhibit A-2 attached to this Lease (the "EXPANSION SPACE 2"), upon the
terms and conditions set forth in this Section 1.4. Notwithstanding anything in
this Section 1.4 to the contrary, Landlord shall determine the precise location
and configuration of Expansion Space 2, provided that the configuration of
Expansion Space 2 shall be reasonably acceptable to Tenant.
1.4.1 METHOD OF EXERCISE.
1.4.1.1 EXPANSION SPACE 1. Tenant's option to lease
Expansion Space 1 shall be exercised only in the following manner: (i) Tenant
shall deliver notice (the "EXPANSION SPACE 1 INTEREST NOTICE") to Landlord on or
before the first day of the eighth (8th) month of the second (2nd) Lease Year,
stating that Tenant is interested in leasing Expansion Space 1 and indicating
whether Tenant is interested in leasing Expansion Space 1 for a term (the
"EXISTING TERM") which expires as of the Lease Expiration Date set forth in
Section 3.3 of the Summary or whether Tenant is interested in leasing Expansion
Space 1 and the initial Premises for a term (the "EXTENDED TERM") which expires
on the date last day of the month of the seventh (7th) anniversary of the
"Expansion Space Commencement Date," as that term is defined in Section 1.4.5,
below, applicable to Expansion Space 1 (in either event, the "EXPANSION SPACE 1
TERM"); (ii) Landlord, after receipt of Tenant's notice, shall deliver notice
(the "EXPANSION RENT NOTICE") to Tenant no later than the first day of the ninth
(9th) month of the second (2nd) Lease Year, setting forth the "Expansion Rent,"
as that term is defined in SECTION 1.4.3 of this Lease, applicable to Expansion
Space 1; and (iii) if Tenant wishes to exercise its option to lease Expansion
Space 1 during the Expansion Space 1 Term, Tenant shall, on or before the first
day of the tenth (10th) month of the second (2nd) Lease Year, exercise the
option by delivering notice thereof to Landlord, and in the event that Tenant
shall lease Expansion Space 1 and the Initial Premises for the Extended Term,
Tenant may, at its option concurrently with such exercise, object to the
Expansion Rent contained in the Expansion Rent Notice applicable to Expansion
Space 1, in which case the parties shall follow the procedure, and such
Expansion Rent applicable to Expansion Space 1 shall be determined, as set forth
in SECTION 2.2.4, below. Notwithstanding anything in this Section 1.4.1.1 to
the contrary, in the event that Tenant elects to lease the initial Premises and
Expansion Space 1 for the Extended Term, the Rent payable by Tenant for the
initial Premises during the "Initial Premises Extended Term," as that term is
defined in Section 1.4.3.1.2, below, shall not be included in the Expansion Rent
Notice but instead shall be determined in accordance with the terms of Section
1.4.3.1.2, below. In the event that Tenant shall fail to timely deliver the
Expansion Space 1 Interest Notice, Tenant shall nevertheless have the right to
lease Expansion Space 1 for the Existing Term (but not for the
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Extended Term), provided that Tenant delivers notice of its election to lease
such space for such term on or before the first (1st) day of the tenth (10th)
month of the second (2nd) Lease Year.
1.4.1.2 EXPANSION SPACE 2. Without regard to whether
Tenant has leased Expansion Space 1 pursuant to the terms of Section 1.4.1.1,
above, Tenant shall have the option to exercise its right to lease Expansion
Space 2 only in the following manner: (i) Tenant shall deliver notice on or
before the last day of the tenth (10th) month of the fourth (4th) Lease Year,
stating that Tenant is interested in leasing Expansion Space 2; (ii) Landlord,
after receipt of Tenant's notice, shall deliver the Expansion Rent Notice
applicable to Expansion Space 2 no later than the last day of the eleventh
(11th) month of the fourth (4th) Lease Year; and (iii) if Tenant wishes to
exercise its option to lease Expansion Space 2, Tenant shall, on or before the
last day of the fourth (4th) Lease Year, exercise the option by delivering
notice thereof to Landlord (the "EXPANSION SPACE 2 EXERCISE NOTICE"), and upon
and concurrent with such exercise, Tenant may, at its option, object to the
Expansion Rent contained in the Expansion Rent Notice applicable to Expansion
Space 2, in which case the parties shall follow the procedure, and the Expansion
Rent applicable to Expansion Space 2 shall be determined, as set forth in
Section 2.2.4, below. Notwithstanding anything in this Lease to the contrary,
in the event that Tenant elects to lease Expansion Space 2, the Lease Expiration
Date applicable to the initial Premises, Expansion Space 1 (if leased by Tenant)
and Expansion Space 2 shall automatically be the date (the "EXPANSION SPACE 2
EXPIRATION DATE") which is the last day of the month of the fifth (5th)
anniversary of the Lease Expiration Date which exists prior to Tenant's of
exercise of its right to lease Expansion Space 2 . The period of Tenant's lease
of the initial Premises and, if leased by Tenant, Expansion Space 1 following
the expiration date applicable to such space prior to Tenant's exercise of its
right to lease Expansion Space 2 and continuing through and including the
Expansion Space 2 Expiration Date is referred to herein as the "INITIAL
PREMISES/EXPANSION SPACE 1 EXTENDED TERM." Notwithstanding anything in this
Section 1.4.1.2 to the contrary, in no event shall the Rent payable by Tenant
for the initial Premises and Expansion Space 1 (if leased by Tenant) during the
Initial Premises/Expansion Space 1 Extended Term be included in the Expansion
Rent Notice but such Rent shall instead be determined in accordance with the
terms of Section 1.4.3.2, below.
1.4.2 DELIVERY OF THE EXPANSION SPACE.
1.4.2.1 EXPANSION SPACE 1. Landlord shall deliver the
Expansion Space 1 to Tenant on a date determined by Landlord between the first
day of the tenth (10th) month of the third (3rd) Lease Year and the last day of
the fourth (4th) month of the fourth (4th) Lease Year. Within ten (10) business
days following notice from Tenant, Landlord shall deliver notice to Tenant
indicating the anticipated date upon which the existing tenant's lease of
Expansion Space 1 shall expire. In the event that the existing tenant of
Expansion Space 1 shall not timely vacate such space, Landlord shall undertake
commercially reasonable efforts to cause such tenant to promptly vacate
Expansion Space 1 so that Landlord shall be capable of delivering such space to
Tenant within the time period set forth above in this Section 1.4.2.1.
1.4.2.2 EXPANSION SPACE 2. Landlord shall deliver the
Expansion Space 2 to Tenant on a date determined by Landlord between the first
day of the sixth (6th) Lease Year and the last day of the sixth (6th) Lease
Year. Within ten (10) business days following notice from Tenant, Landlord
shall deliver notice to Tenant indicating the anticipated date upon which the
existing tenant's lease of Expansion Space 2 shall expire. In the event that
the existing tenant of Expansion Space 2 shall not timely vacate such space,
Landlord shall undertake commercially reasonable efforts to cause such tenant to
vacate Expansion Space 2 so that Landlord shall be capable of delivery such
space to Tenant within the time period set forth above in this Section 1.4.2.2.
1.4.3 EXPANSION RENT. The "Rent," as that term is defined in
Section 4.1, below, payable by Tenant for the Expansion Space 1 or the Expansion
Space 2, as the case may be (the "EXPANSION RENT"), shall be as set forth in
this Section 1.4.3.
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1.4.3.1 EXPANSION SPACE 1.
1.4.3.1.1 EXISTING TERM. In the event that Tenant
elects to lease Expansion Space 1 for the Existing Term, the Expansion Rent
payable by Tenant for Expansion Space 1 shall be comprised of (i) Base Rent,
including escalations, at the same per rentable square foot rate as is
applicable to the initial Premises, and (ii) Additional Rent in accordance with
the terms of this Lease, including, without limitation, the Base Year set forth
in Section 5 of the Summary. In the event that Tenant elects to lease Expansion
Space 1 for the Existing Term, Tenant shall be entitled to an allowance for the
design and installation of improvements to Expansion Space 1 and/or other
portions of the Premises in an amount equal to $20.00 for each usable square
foot of Expansion Space 1.
1.4.3.1.2 EXTENDED TERM. In the event that Tenant
elects to lease Expansion Space 1 for the Extended Term, the Expansion Rent
payable by Tenant for Expansion Space 1 during the Extended Term shall be equal
to the "Market Rent," as that term is defined in Section 1.4.3.1.3, below,
provided that Tenant shall be entitled to, and the Market Rent shall be adjusted
to reflect Tenant's right to, an allowance to be utilized for the design and
installation of improvements to Expansion Space 1 in an amount equal to the
product of (a) the usable square footage of Expansion Space 1, (b) $35.00, and
(c) a fraction, the numerator of which equals the "Index," as that term is
defined, below, for the month which is four (4) months prior to the month in
which the Expansion Space Commencement Date applicable to Expansion Space 1
occurs, and the denominator of which equals the Index for June, 1998.
Furthermore, in the event that Tenant shall elect to lease Expansion Space 1 for
the Extended Term, the Rent payable by Tenant for the initial Premises for the
period of the Expansion Space 1 Term following the Lease Expiration Date set
forth in Section 3.3 of the Summary (the "INITIAL PREMISES EXTENDED TERM") shall
be equal to the Market Rent. On or before the date which is six (6) months
prior to the commencement of the Initial Premises Extended Term, Landlord shall
deliver a notice (the "MARKET RENT NOTICE") to Tenant which shall set forth the
Market Rent applicable to the initial Premises for the Initial Premises Extended
Term. Notwithstanding the foregoing, within thirty (30) days following Tenant's
receipt of the Market Rent Notice, Tenant may, at its option, object to the
Market Rent set forth in the Market Rent Notice, in which case the parties shall
follow the procedure, and the Market Rent applicable to the initial Premises
during the Initial Premises Extended Term shall be determined, as set forth in
SECTION 2.2.4, below. In no event shall the Rent payable by Tenant for the
initial Premises for the period prior to the commencement of the Initial
Premises Extended Term be subject to revision or modification based upon the
determination of the Market Rent payable by Tenant for the initial Premises
during the Initial Premises Extended Term.
1.4.3.1.3 DEFINITIONS.
1.4.3.1.3.1 INDEX. For purpose of this
Lease, the "INDEX" shall mean the Consumer Price Index for all Urban Consumers
for the Los Angeles-Anaheim-Riverside area (base year 1982-1984 - 100),
published by the United States Department of Labor, Bureau of Labor Statistics.
If the base of the Index changes from the 1982-84 base (100), the Index shall,
thereafter, be adjusted to the 1982-84 base 100 before the computation indicated
above is made. If the Index cannot be converted to the 1982-84 base or if the
Index is otherwise revised, the adjustment under this section shall be made with
the use of such conversion factor, formula or table for converting the Index as
may be published by the Bureau of Labor Statistics. If the Index is at any time
no longer published, a comparable index generally accepted and employed by the
real estate profession shall be used.
1.4.3.1.3.2 MARKET RENT. For purposes of
this Lease, the term "MARKET RENT" shall mean the rent (including additional
rent and considering any "base year" or "expense stop" applicable thereto),
including all escalations, at which tenants, pursuant to transactions completed
during the "Market Rent Review Period," as that term is defined in Section
1.4.3.1.3.4, below, are leasing non-sublease, non-encumbered, non-equity space
comparable in size, location and quality to the Expansion Space 1, Expansion
Space 2, Additional Expansion Space, First Offer Space, or, in connection with
the Option Term, the Premises, as the case may be, for a "Comparable Term," as
that term is defined, below (the "COMPARABLE DEALS"), which comparable space is
located in the Building and the "Comparable
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Buildings," as that term is defined in this Section 1.4.3.1.3.3, below,
giving appropriate consideration to the annual rental rates per rentable
square foot, the standard of measurement by which the rentable square footage
is measured, the ratio of rentable square feet to usable square feet, and
taking into consideration only, and granting only, the following concessions
(collectively, the "RENT CONCESSIONS"): (a) rental abatement concessions, if
any, being granted such tenants in connection with such Comparable Deals; (b)
tenant improvements or allowances provided or to be provided for such
Comparable Deals, but deducting therefrom the value of the existing
improvements in the Expansion Space 1, Expansion Space 2, Additional
Expansion Space, First Offer Space, or Premises, as the case may be, such
value to be based upon the age, quality and layout of the improvements and
the extent to which the same could be utilized by general office users, (c)
the condition of the Base Building as compared to the condition of the base
building provided to tenants in Comparable Deals, and (d) all other economic
concessions, if any, being granted such tenants in connection with such
Comparable Deals; provided, however, that notwithstanding anything to the
contrary herein, no consideration shall be given to (x) the fact that
Landlord is or is not required to pay a real estate brokerage commission in
connection with the applicable term or the fact that the Comparable Deals do
or do not involve the payment of real estate brokerage commissions, and (y)
only in connection with the calculation of the Market Rent for the Option
Terms, any period of rental abatement, if any, granted to tenants in
Comparable Deals in connection with the design, permitting and construction
of tenant improvements in such comparable spaces. In determining the Market
Rent, the terms of Comparable Deals may be equitably adjusted to reflect the
square footage leased, whether the rental payable was determined by use of a
discounted fair market formula, and other factors relevant and appropriate to
an analysis and comparison of the terms of the Comparable Deals. The term
"COMPARABLE TERM" shall refer to the length of the lease term, without
consideration of options to extend such term, for the space in question;
provided, however, that in calculating the Market Rent for the Initial
Premises Extended Term and the Initial Premises/Expansion Space 1 Extended
Term, as the case may be, the Market Rent shall be determined based upon
Comparable Deals which are entered into for a term of up to ten (10) years,
provided further that in the event that the term of one or more Comparable
Deals exceeds the term of the Initial Premises Extended Term or the Initial
Premises/Expansion Space 1 Extended Term, as the case may be, the Rent
Concessions applicable to such Comparable Deals shall be prorated to reflect
the actual length of the Initial Premises Extended Term and Initial
Premises/Expansion Space 1 Extended Term, as the case may be, for purposes of
calculating the Market Rent. In no event shall the Rent payable by Tenant
with respect to the initial Premises, as set forth in this Lease, be
considered in determining the Market Rent.
1.4.3.1.3.3 COMPARABLE BUILDINGS. For purposes
of this Lease, the term "COMPARABLE BUILDINGS" shall mean the following
buildings located in Los Angeles, California: 8383 Wilshire Boulevard, 640 South
San Vicente Boulevard, 6500 Wilshire Boulevard, 6420 Wilshire Boulevard, 6380
Wilshire Boulevard, 6310 San Vicente Boulevard, 6300 Wilshire Boulevard, 6100
Wilshire Boulevard, 5900 Wilshire Boulevard, 5750 Wilshire Boulevard,
5700 Wilshire Boulevard and 5757 Wilshire Boulevard.
1.4.3.1.3.4 MARKET RENT REVIEW PERIOD. The
Market Rent Review Period shall be the period which commences three (3) months
prior to the date Tenant exercises the right which triggers the calculation of
Market Rent and concludes as of the date of Landlord's delivery of the
applicable space to Tenant (or in the case of an Option Term, as of the
commencement of the Option Term), provided that with respect to the calculation
of the Market Rent applicable to the initial Premises for the Initial Premises
Extended Term and for the initial Premises and Expansion Space 1 for the Initial
Premises/Expansion Space 1 Extended Term, the Market Rent Review Period shall be
the period which commences three (3) months prior to the date Landlord delivers
Market Rent Notice to Tenant and concludes as of the date upon which the
applicable term commences.
1.4.3.2 EXPANSION SPACE 2. The Expansion Rent payable by
Tenant for Expansion Space 2 shall be equal to the Market Rent, provided that
Tenant shall be entitled to, and the Market Rent shall be adjusted to reflect
Tenant's right to, an allowance to be utilized for the design and construction
of improvements to Expansion Space 2 in an amount equal to the product of
(a) the usable square footage of Expansion Space 2, (b) $0.417, (c) the number
of full calendar months which exist between the Expansion Space Commencement
Date applicable to
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Expansion Space 2 and the Expansion Space 2 Expiration Date, and (d) a
fraction, the numerator of which equals the Index for the month which is four
(4) months prior to the month in which the Expansion Space Commencement Date
applicable to Expansion Space 2 occurs, and the denominator of which equals
the Index for June, 1998. Furthermore, the Rent payable by Tenant for the
initial Premises and Expansion Space 1 for the Initial Premises/Expansion
Space 1 Extended Term shall be equal to the Market Rent. On or before the
date which is six (6) months prior to the commencement of the Initial
Premises/Expansion Space 1 Extended Term, Landlord shall deliver to Tenant
the Market Rent Notice applicable to the Initial Premises and Expansion Space
1 (if leased by Tenant) for the Initial Premises/Expansion Space Extended
Term. Notwithstanding the foregoing, within thirty (30) days following
Tenant's receipt of such Market Rent Notice, Tenant may, at its sole option,
object to the Market Rent set forth in the Market Rent Notice, in which case
the parties shall follow the procedure, and such Market Rent applicable to
the initial Premises and Expansion Space 1 (if applicable) during the Initial
Premises/Expansion Space 1 Extended Term shall be determined as set forth in
SECTION 2.2.4, below. In no event shall the Rent payable by Tenant for the
initial Premises and Expansion Space 1 for the period prior to the
commencement of the Initial Premises/Expansion Space 1 Extended Term be
subject to revision or modification based upon the determination of the
Market Rent payable by Tenant for the initial Premises and Expansion Space 1
during the Initial Premises/Expansion Space 1 Extended Term.
1.4.4 CONSTRUCTION OF EXPANSION SPACE. Tenant shall take
Expansion Space 1 and Expansion Space 2, as the case may be, in their "as is"
condition except as provided in items (b) and (c), below, provided that (a) in
no event shall the foregoing modify the calculation of the Market Rent pursuant
to the terms of Section 1.4.3.1.3.2 of this Lease, (b) Landlord shall at
Landlord's sole cost and expense (except as specifically set forth in the Tenant
Work Letter), deliver Expansion Space 1 and Expansion Space 2, as applicable,
with the work set forth in items 1.2.3 through 1.2.7, 1.2.10 and 1.2.11 of the
Tenant Work Letter complete, and (c) Landlord shall be responsible, at
Landlord's sole cost and expense, for the removal and/or remediation of any
asbestos or asbestos containing material from the Building to the extent
required by Applicable Laws in connection with the improvement or occupancy of
Expansion Space 1 and/or Expansion Space 2, as the case may be, by Tenant. The
construction of improvements in the Expansion Space 1 and Expansion Space 2, as
the case may be, shall comply with the terms of ARTICLE 8 of this Lease.
1.4.5 AMENDMENT TO LEASE. If Tenant timely exercises Tenant's
right to lease Expansion Space 1 or Expansion Space 2 as set forth herein,
Landlord and Tenant shall within thirty (30) days thereafter execute an
amendment to this Lease adding such space to this Lease upon the same terms and
conditions as the initial Premises, except as otherwise set forth in this
SECTION 1.4. Tenant shall commence payment of Rent for the Expansion Space 1 or
Expansion Space 2, as the case may be, and the term of Tenant's lease of
Expansion Space 1 or Expansion Space 2, as the case may be, shall commence upon
the date (in each event, the "EXPANSION SPACE COMMENCEMENT DATE") which is one
hundred twenty (120) days (as the same may be extended as a result of Force
Majeure and Landlord caused delays) following the delivery of such space to
Tenant with the work required of Landlord, as set forth in Section 1.4.4(b),
substantially complete (the "EXPANSION BUILDOUT PERIOD"), provided that the
applicable Market Rent shall be adjusted to reflect the length of the Expansion
Buildout Period as compared to the length of the construction period granted to
tenants in Comparable Deals. The lease term of Expansion Space 1 or Expansion
Space 2 shall expire on the date determined in accordance with the terms of this
SECTION 1.4.
1.4.6 NO DEFAULTS. The rights contained in this SECTION 1.4
shall be personal to the Original Tenant or a Permitted Assignee, and may only
be exercised by the Original Tenant or a Permitted Assignee (and not any other
assignee, sublessee or transferee of the Original Tenant's interest in this
Lease). Tenant shall not have the right to lease Expansion Space 1 or Expansion
Space 2, as the case may be, as provided in this SECTION 1.4, if, as of the date
of the attempted exercise of the expansion option by Tenant, or, at Landlord's
option, as of the scheduled date of delivery of the applicable space to Tenant,
Tenant is in default under Section 19.1.1 of this Lease or in material
nonmonetary default of this Lease, in either event after the expiration of the
applicable notice and cure period (a "TRIGGERING DEFAULT").
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1.5 RIGHT OF FIRST OFFER. Landlord hereby grants to the Original
Tenant or a Permitted Assignee an ongoing right of first offer with respect to
all of the space located on the ground and second floor of the Building other
than the initial Premises, Expansion Space 1 and Expansion Space 2 (the "FIRST
OFFER SPACE"). Notwithstanding the foregoing, such first offer right of Tenant
shall commence only following the expiration or earlier termination of the
initial lease (including renewals) of the First Offer Space. Any First Offer
Space offered to Tenant shall be of a commercially reasonable configuration.
Any First Offer Space leased by Tenant shall be subject to remeasurement in
accordance with, and subject to the terms of, Section 1.2 of this Lease. Upon
Tenant's lease of First Offer Space, the number of parking spaces available to
Tenant shall be increased in accordance with the ratio set forth in Section 9 of
the Summary, and the parking charges applicable to such spaces shall be as set
forth in Article 28 of this Lease. Tenant's right of first offer shall be on
the terms and conditions set forth in this SECTION 1.6.
1.5.1 PROCEDURE FOR OFFER. Landlord shall notify Tenant (the
"FIRST OFFER NOTICE") from time to time when the First Offer Space or any
portion thereof becomes available for lease to third parties. Pursuant to such
First Offer Notice, Landlord shall offer to lease to Tenant the then available
First Offer Space. The First Offer Notice shall describe the space so offered
to Tenant and shall set forth the "First Offer Rent," as that term is defined in
Section 1.5.3 below, and the other economic terms upon which Landlord is willing
to lease such space to Tenant.
1.5.2 PROCEDURE FOR ACCEPTANCE. If Tenant wishes to exercise
Tenant's right of first offer with respect to the space described in the First
Offer Notice, then within ten (10) business days of delivery of the First Offer
Notice to Tenant, Tenant shall deliver notice to Landlord indicating
(i) Tenant's election to exercise its right of first offer with respect to all
or a portion of the space described in the First Offer Notice on the terms
contained in such notice (provided that any portion of First Offer Space not
leased by Tenant shall be of a commercially leasable size and configuration),
and (ii) subject to the foregoing, the portion of the First Offer Space offered
to Tenant which Tenant elects to lease. Upon and concurrent with such exercise,
Tenant may, at its option, object to the First Offer Rent, in which case the
parties shall follow the procedure, and such First Offer Rent shall be
determined, as set forth in Section 2.2.4, below. If Tenant does not so notify
Landlord within the ten (10) business day period, then Landlord shall be free to
lease the space described in the First Offer Notice to anyone to whom Landlord
desires on any terms Landlord desires; provided, however, that upon the
expiration or earlier termination of any lease (an "INTERVENING LEASE") entered
into by Landlord following Tenant's failure to lease any applicable First Offer
Space, including any renewal or extension of such lease and regardless of
whether such renewal or extension is pursuant to an express written provision in
such lease or whether such renewal or extension is consummated pursuant to a
lease amendment or a new lease, Landlord shall re-offer such First Offer Space
to Tenant in accordance with the terms of this Section 1.5.
1.5.3 FIRST OFFER SPACE RENT. The Rent payable by Tenant for the
First Offer Space (the "FIRST OFFER RENT") shall be equal to the Market Rent.
1.5.4 CONSTRUCTION IN FIRST OFFER SPACE. Tenant shall take the
First Offer Space in its "as is" condition except as provided in items (b) and
(c) below, provided that (a) in no event shall the foregoing modify the
calculation of the Market Rent pursuant to the terms of Section 1.4.3.1.3.2 of
this Lease, (b) Landlord shall at Landlord's sole cost and expense (except as
specifically set forth in the Tenant Work Letter), deliver the First Offer Space
with the work set forth in items 1.2.3 through 1.2.7, 1.2.10 and 1.2.11 of the
Tenant Work Letter complete, and (c) Landlord shall be responsible, at
Landlord's sole cost and expense, for the removal and/or remediation of any
asbestos or asbestos containing material from the Building to the extent
required by Applicable Laws in connection with the improvement or occupancy of
the First Offer Space by Tenant. The construction of improvements in the First
Offer Space shall comply with the terms of ARTICLE 8 of this Lease.
1.5.5 AMENDMENT TO LEASE. If Tenant timely exercises Tenant's
right to lease the First Offer Space as set forth herein, Landlord and Tenant
shall within thirty (30) days thereafter execute an amendment to this Lease for
such First Offer Space upon the terms and conditions as set forth in the First
Offer Notice and this SECTION 1.5. Tenant shall commence
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payment of Rent for the First Offer Space, and the term of the First Offer
Space shall commence upon the date (the "FIRST OFFER COMMENCEMENT DATE")
which is 120 days (as the same may be extended as a result of Force Majeure
and Landlord caused delays) (the "FIRST OFFER SPACE BUILDOUT PERIOD")
following the date of delivery of the First Offer Space to Tenant with the
work required of Landlord, as set forth in Section 1.5.4(b), above,
substantially complete, and shall terminate on the date set forth in the
First Offer Notice. In connection with the foregoing, Landlord and Tenant
hereby acknowledge and agree that the Market Rent for First Offer Space shall
be adjusted to reflect the length of the First Offer Space Buildout Period as
compared to the length of the construction period granted to tenants in
Comparable Deals.
1.5.6 TERMINATION OF RIGHT OF FIRST OFFER. The rights contained
in this SECTION 1.5 shall be personal to the Original Tenant or a Permitted
Assignee, and may only be exercised by the Original Tenant or a Permitted
Assignee (and not any other assignee, sublessee or transferee of the Original
Tenant's interest in this Lease). Tenant shall not have the right to lease
First Offer Space, as provided in this SECTION 1.5, if, as of the date of the
attempted exercise of any right of first offer by Tenant, or, at Landlord's
option, as of the scheduled date of delivery of such First Offer Space to
Tenant, a Triggering Default exists.
ARTICLE 2
INITIAL LEASE TERM; OPTION TERM
2.1 INITIAL LEASE TERM. The terms and provisions of this Lease shall
be effective as of the date of this Lease. The term of this Lease (the "LEASE
TERM") shall be as set forth in Section 3.1 of the Summary, shall commence on
the date set forth in Section 3.2 of the Summary (the "LEASE COMMENCEMENT
DATE"), and shall terminate on the date set forth in Section 3.3 of the Summary
(the "LEASE EXPIRATION DATE") unless this Lease is sooner terminated as
hereinafter provided. Tenant shall have the right to occupy the Premises prior
to the Lease Commencement Date for the conduct of Tenant's business, provided
that (A) Tenant shall give Landlord at least ten (10) days' prior notice of any
such occupancy of the Premises, (B) a temporary certificate of occupancy, or its
equivalent, shall have been issued by the appropriate governmental authorities
for the Premises, and (C) all of the terms and conditions of the Lease shall
apply, other than Tenant's obligation to pay "Base Rent," as that term is
defined in Article 3, below, and "Tenant's Share" of the annual "Direct
Expenses," as those terms are defined in Article 4, below, as though the Lease
Commencement Date had occurred (although the Lease Commencement Date shall not
actually occur until the occurrence of the same pursuant to the terms of the
second sentence of this Article 2) upon such occupancy of the Premises by
Tenant. For purposes of this Lease, the term "LEASE YEAR" shall mean each
consecutive twelve (12) month period during the Lease Term; provided, however,
that the first Lease Year shall commence on the Lease Commencement Date and end
on the last day of the twelfth month thereafter and the second and each
succeeding Lease Year shall commence on the first day of the next calendar
month; and further provided that the last Lease Year shall end on the Lease
Expiration Date. Within thirty (30) days following the Lease Commencement Date
(and, if applicable, the commencement of any Option Term), Landlord may deliver
to Tenant a notice in the form as set forth in EXHIBIT C, attached hereto, as a
confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within ten (10) days of receipt thereof, provided
that in the event that such notice is not factually correct, Tenant shall have
the right to make such changes as may be necessary to make the same factually
correct and shall thereafter execute and return the same to Landlord within such
ten (10) day period.
2.2 OPTION TERM.
2.2.1 OPTION RIGHT. Landlord hereby grants the Original Tenant
or a Permitted Assignee two (2) options to extend the Lease Term for a period of
five (5) years each (each, an "OPTION TERM"), which options shall be exercisable
only by written notice delivered by Tenant to Landlord as provided below,
provided that, as of the date of delivery of the applicable notice, a Triggering
Default does not exist. Upon the proper exercise of such option to extend, and,
at Landlord's option, provided that, as of the end of the then Lease Term, a
Triggering Default does not exist, the Lease Term, as it applies to the
Premises, shall be extended for a period of five (5) years. The rights
contained in this Section 2.2 shall be personal to the Original Tenant or a
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Permitted Assignee and may only be exercised by the Original Tenant or a
Permitted Assignee (and not any other assignee, sublessee or transferee of the
Original Tenant's interest in this Lease). Landlord and Tenant hereby knowledge
and agree that the first Option Term shall be applicable following the Lease
Term set forth in Section 3.1 of the Summary, as such Lease Term may be extended
pursuant to the terms of Section 1.4 of this Lease.
2.2.2 OPTION RENT. The Rent payable by Tenant during each Option
Term (the "OPTION RENT") shall be equal to the then applicable Market Rent.
2.2.3 EXERCISE OF OPTIONS. The options contained in this Section
2.2 shall be exercised by Tenant, if at all, and only in the following manner:
(i) Tenant shall deliver written notice (the "INTEREST NOTICE") to Landlord not
more than eighteen (18) months nor less than twelve (12) months prior to the
expiration of the then Lease Term, stating that Tenant is interested in
exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall
deliver notice (the "OPTION RENT NOTICE") to Tenant not less than eleven (11)
months prior to the expiration of the then Lease Term, setting forth the Option
Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or
before the date occurring nine (9) months prior to the expiration of the then
Lease Term, exercise the option by delivering written notice (the "OPTION
EXERCISE NOTICE") thereof to Landlord, and upon, and concurrent with, such
exercise, Tenant may, at its option, object to the Option Rent contained in the
Option Rent Notice, in which case the parties shall follow the procedure, and
the Option Rent shall be determined, as set forth in Section 2.2.4 below.
Notwithstanding the foregoing, in the event that Tenant shall fail to deliver
the Interest Notice, Tenant shall nonetheless have the right to deliver the
Option Exercise Notice within the time period set forth above, in which case the
parties shall follow the procedure, and the Option Rent shall be determined, as
set forth in Section 2.2.4, below.
2.2.4 DETERMINATION OF MARKET RENT. In the event Tenant timely
and appropriately objects to the Expansion Rent (to the extent calculated based
upon the Market Rate), First Offer Rent or Option Rent, as the case may be,
Landlord and Tenant shall attempt to agree upon the Market Rent using their best
good-faith efforts. If Landlord and Tenant fail to reach agreement within ten
(10) days following Tenant's objection to the Expansion Rent, First Offer Rent
or Option Rent, as the case may be (the "OUTSIDE AGREEMENT DATE"), then each
party shall make a separate determination of the Market Rent, as the case may
be, within five (5) days, and such determinations shall be submitted to
arbitration in accordance with Sections 2.2.4.1 through 2.2.4.7 below.
2.2.4.1 Landlord and Tenant shall each appoint one
arbitrator who shall by profession be a real estate broker who shall have been
active over the five (5) year period ending on the date of such appointment in
the leasing (or appraisal, as the case may be) of commercial office buildings in
the Miracle Mile and East Beverly Hills area of Los Angeles, California. The
determination of the arbitrators shall be limited solely to the issue area of
whether Landlord's or Tenant's submitted Market Rent, is the closest to the
actual Market Rent as determined by the arbitrators, taking into account the
requirements of Section 1.4.3.1.3.2 of this Lease. Each such arbitrator shall
be appointed within fifteen (15) days after the applicable Outside Agreement
Date.
2.2.4.2 The two arbitrators so appointed shall within ten
(10) days of the date of the appointment of the last appointed arbitrator agree
upon and appoint a third arbitrator who shall be qualified under the same
criteria set forth hereinabove for qualification of the initial two arbitrators.
2.2.4.3 The three arbitrators shall within thirty (30)
days of the appointment of the third arbitrator reach a decision as to whether
the parties shall use Landlord's or Tenant's submitted Market Rent, and shall
notify Landlord and Tenant thereof.
2.2.4.4 The decision of the majority of the three
arbitrators shall be binding upon Landlord and Tenant.
2.2.4.5 If either Landlord or Tenant fails to appoint an
arbitrator within fifteen (15) days after the applicable Outside Agreement Date,
the arbitrator appointed by one of
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them shall reach a decision, notify Landlord and Tenant thereof, and such
arbitrator's decision shall be binding upon Landlord and Tenant.
2.2.4.6 If the two arbitrators fail to agree upon and
appoint a third arbitrator, or both parties fail to appoint an arbitrator,
then the appointment of the third arbitrator or any arbitrator shall be
dismissed and the matter to be decided shall be forthwith submitted to
binding, final, non-applicable arbitration before a J.A.M.S. arbitrator
mutually agreed upon by Landlord and Tenant. If Landlord and Tenant cannot
agree on the arbitrator, the parties will so inform J.A.M.S., who will then
be authorized to select a J.A.M.S. judge to arbitrate the matter. Each party
shall have the right of discovery pursuant to the California Code of Civil
Procedure and evidentiary hearings shall be governed by the California
Evidence Code, but subject to the instruction set forth in this Section 2.2.4.
2.2.4.7 The cost of arbitration shall be paid by Landlord
and Tenant equally.
ARTICLE 3
BASE RENT
Tenant shall pay, without prior notice or demand, to Landlord or
Landlord's agent at the management office of the Project, or, at Landlord's
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent ("BASE
RENT") as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction except as otherwise provided in this Lease. The Base
Rent for the first full month of the Lease Term which occurs after the
expiration of any free rent period shall be paid at the time of Tenant's
execution of this Lease. If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one month,
the Rent for any fractional month shall accrue on a daily basis for the period
from the date such payment is due to the end of such calendar month or to the
end of the Lease Term at a rate per day which is equal to 1/365 of the
applicable annual Rent. All other payments or adjustments required to be made
under the terms of this Lease that require proration on a time basis shall be
prorated on the same basis.
ARTICLE 4
ADDITIONAL RENT
4.1 GENERAL TERMS. In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct
Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease,
respectively, which are in excess of the amount of Direct Expenses applicable to
the "Base Year," as that term is defined in Section 4.2.1, below; provided,
however, that in no event shall any decrease in Direct Expenses for any Expense
Year below Direct Expenses for the Base Year entitle Tenant to any decrease in
Base Rent or any credit against sums due under this Lease. Such payments by
Tenant, together with any and all other amounts payable by Tenant to Landlord
pursuant to the terms of this Lease, are hereinafter collectively referred to as
the "ADDITIONAL RENT", and the Base Rent and the Additional Rent are herein
collectively referred to as "RENT." All amounts due under this Article 4 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent. Without limitation on other obligations of Tenant which survive
the expiration of the Lease Term, the obligations of Tenant to pay the
Additional Rent provided for in this Article 4 shall survive the expiration of
the Lease Term but shall be payable only for periods included within the Lease
Term. Notwithstanding the foregoing, other than Tax Expenses and costs incurred
for utilities (the "EXCLUDED EXPENSES"), Tenant shall not be responsible for
Tenant's Share of any Direct Expenses which are first billed to Tenant more than
two (2) calendar years after the end of the Expense Year to which such Direct
Expenses relate, provided that Tenant shall be responsible for Excluded Expenses
first billed to Tenant more than two (2) calendar years after the end of the
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Expense Year to which such Excluded Expenses relate only to the extent that
Landlord becomes aware of such increased Excluded Expenses following such two
(2) year period due to governmental revision, supplementation or other
governmental action which results in the adjustment of the Excluded Expenses.
4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in
this Article 4, the following terms shall have the meanings hereinafter set
forth:
4.2.1 "BASE YEAR" shall mean the period set forth in Section 5 of
the Summary.
4.2.2 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "EXPENSE YEAR" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant's Share of Direct
Expenses shall be equitably adjusted for any Expense Year involved in any such
change.
4.2.4 "OPERATING EXPENSES" shall mean all expenses, costs and
amounts of every kind and nature which Landlord pays or accrues during any
Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement, restoration or operation of the
Project, or any portion thereof. Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following: (i) the cost of supplying all utilities, the cost of operating,
repairing, and maintaining, the utility, mechanical, sanitary, storm drainage,
and elevator systems, and the cost of maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with any
governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection with
the Project; (iv) the cost of landscaping, relamping with similar items, and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof, or any area adjacent to the
Project in connection with which Landlord is required to perform such services;
(v) intentionally deleted; (vi) reasonable fees and other costs, including
management fees, consulting fees, legal fees and accounting fees, of all
contractors and consultants in connection with the management, operation,
maintenance and repair of the Project; (vii) payments under any equipment rental
agreements and the fair rental value of any management office space; (viii)
reasonable wages, salaries and other compensation and benefits, including taxes
levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) reasonable costs under any instrument currently in
force pertaining to the sharing of costs by the Project; (x) operation, repair
and maintenance ofall systems and equipment and components thereof of the
Building; (xi) the reasonable cost of janitorial, alarm, security and other
services, reasonable replacement of wall and floor coverings, ceiling tiles and
fixtures in common areas with similar items, maintenance and replacement of
curbs and walkways, repair to roofs; (xii) amortization (including interest on
the unamortized cost) of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are reasonably intended to effect
economies operation or maintenance of the Project, or any portion thereof, but
only to the extent of reasonably intended cost savings, or (B) that are required
under any governmental law or regulation enacted after the Lease Commencement
Date; provided, however, that any capital expenditure shall be amortized with
interest over its useful life as reasonably determined; (xiv) costs, fees,
charges or assessments imposed by, or resulting from any mandate currently in
force imposed on Landlord by, any federal, state or local government for fire
and police protection, trash removal, community services, or other services
which do not constitute "Tax Expenses" as that term is defined in Section 4.2.5,
below; and (xv) payments under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument currently in force pertaining
to the sharing of costs by the Building.
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4.2.4.1 OPERATING EXPENSE EXCLUSIONS.
Notwithstanding anything to the contrary contained in the Lease, "Operating
Expenses" shall not include the following:
A. Landlord's brokerage fees or commissions, finder's fees,
space planning costs, attorneys' fees and other costs incurred by Landlord in
leasing or attempting to lease space or operate concessions in the Project,
including design, construction and construction management costs relating to
tenant improvements of other tenants;
B. costs of design, entitlement, site preparation, planning,
marketing, construction, and/ or acquisition of new buildings, additional land
or any expansion of or major physical change to the Building or the Project;
C. except as set forth in Section 4.2.4 (xii) and (xiii),
costs of items considered capital repairs, replacements, improvements and
equipment, or amortization or depreciation under generally accepted accounting
principles consistently applied or otherwise except for minor capital
improvements, tools or expenditures to the extent each such improvement or
acquisition costs less than Three Thousand Dollars ($3,000) and the total cost
of same are not in excess of Ten Thousand Dollars ($10,000) in any twelve (12)
month period;
D. except as set forth in Section 4.2.4 (xii) and (xiii) and
except to the extent reasonably required in connection with the operation,
maintenance, or repair of the Project, costs for equipment or machinery incurred
by Landlord after the Lease Commencement Date (unless same are reasonably
anticipated to effectuate an annual reduction in Operating Expenses greater than
the annual expense thereof to be included in Operating Expenses pursuant to the
other terms and provisions hereof);
E. except as set forth in Section 4.2.4 (xii) and (xiii),
interest, principal, points and fees on debt or amortization on any mortgage,
deed of trust or other debt secured, or unsecured, by the Project;
F. repairs or replacements to any utility systems which are
dedicated to the use of a single other tenant or concession operator;
G. amounts paid for goods or services to any persons or
entities related to Landlord in excess of the prevailing cost of such goods or
services from competitive unrelated sources;
H. compensation or other costs and expenses incurred in
connection with the operation, leasing, ownership, maintenance and repair of
parking facilities and any valet or shuttle services provided to the Project,
provided that in no event shall this item H exclude from Operating Expenses
taxes, utilities and insurance related to the Project parking facility;
I. any fee to or charge by Landlord (or any person and/or
entity related to Landlord) for management, supervision, employee costs, profit
and/or general overhead, and any bookkeeping and accounting costs or expenses,
except to the extent included in the management fee permitted hereunder;
J. any cost which is the responsibility of any utility
company, governmental agency, or other third party to the extent such cost is
reimbursed to Landlord from such company, agency or other third party, or to the
extent such cost is reimbursable but Landlord has failed to seek such
reimbursement with due diligence;
K. reserves for future expenses beyond current year
anticipated expenses;
L. any costs or expenses for which Landlord has a right to
payment or reimbursement from insurance or a past or present tenant of the
Project to the extent Landlord has failed to seek payment or reimbursement with
due diligence;
M. all interest and penalties incurred as a result of
Landlord's failure to pay bills as the same become due;
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N. charitable or political contributions;
O. accountants' fees, arbitration fees, and other costs and
expenses incurred in connection with any audits conducted by Landlord or any
past or present tenant or any existing or prospective leasing, lease renewal,
lease termination, lease modification or other negotiations or disputes with
employees or contractors, present or prospective tenants or other occupants of
the Project, or their assignees or sublessees, or lenders or ground lessors;
P. costs associated with the operation of the business of the
entity which constitutes Landlord as the same are distinguished from the costs
of operation of the Project, including accounting and legal matters, costs of
selling, syndicating, financing, mortgaging or hypothecating any of Landlord's
interest in the Project or the entity constituting Landlord, and costs incurred
by Landlord, in whole or in part, in connection with or as a result of
Landlord's ownership, operation or management of any properties other than the
Project;
Q. expenses in connection with services, repairs or other
benefits for which Tenant is charged directly but which are provided without
charge to another tenant or occupant of the Project, and costs for which tenants
contract directly with the applicable service provider;
R. costs incurred to comply with laws relating to the removal
of hazardous material (as defined under applicable law as of the Lease
Commencement Date) which was in existence in the Building or on the Project
prior to the Lease Commencement Date; and costs incurred to remove, remedy,
contain, or treat hazardous material (as defined by then applicable law), which
hazardous material is brought into the Building or onto the Project after the
date hereof by Landlord or any other tenant of the Project;
S. advertising and promotional expenditures, costs of
installing, lighting or maintaining signs in or on the Project identifying the
owner, manager, leasing agent or tenants of the Project;
T. any compensation paid or costs incurred in connection with
commercial concessions operated by Landlord or third party operators;
U. any recalculations of Operating Expenses for an Expense
Year in which Landlord has already delivered a "Statement," as that term is
defined in Section 4.4.1 of this Lease, except to the extent such recalculation
results from a good faith error on the part of Landlord (and provided that
Tenant shall remain liable for Excluded Expenses (whether or not a Statement has
been delivered) in accordance with, and subject to the terms set forth in, the
last sentence of Section 4.4.1 of this Lease);
V. rent for space occupied as a Project management office to
the extent such space is larger than 2,000 rentable square feet; to the extent
such management office is used for other purposes, including, without
limitation, leasing activities, the rent and other charges associated with such
office shall be prorated in an equitable manner;
W. costs arising from the gross negligence or willful
misconduct of Landlord's agents or tenants of the Project, and costs incurred
due to the violation by Landlord of any law or the terms and conditions of any
lease of space in the Project;
X. costs incurred to correct any defect or deficiency in the
design or construction of the "Landlord Work," as that term is defined in
Section 1 of the Tenant Work Letter;
Y. costs incurred for the repair of damage or destruction or
eminent domain/taking governed by the destruction and condemnation provisions
of the Lease;
Z. cost of meals, beverages and bottled water;
AA. automobile or travel expense for Landlord or its agents;
BB. any bad debt loss, rent loss or reserves for bad debts or
rent loss;
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CC. costs for acquisition and refurbishment (as opposed to
ordinary repair) of sculpture, murals, paintings or other objects of art;
DD. except as specifically permitted in Sections 4.2.4 (ii),
(iv), (ix) and (xv), fees and payments to obtain or arising under any REA or any
recorded easements, development agreements, participation agreements, covenants,
conditions or restricting conditional use permits, traffic management programs,
mitigation fees, conservation fees, housing replacement or linkage fees, or
similar fees;
EE. rentals and other related expenses incurred in leasing HVAC
systems, elevators or other equipment ordinarily considered to be Capital Items,
except for (1) expenses in connection with making repairs on or keeping Building
Systems in operation while repairs are being made and (2) costs of equipment not
affixed to the Building which is used in providing janitorial or similar
services;
FF. The cost of any electric power provided to the rentable
area of the Building (i) in excess of the amount provided to Tenant without
charge to the extent that Landlord actually charges Tenant directly for such
overstandard use, and (ii) which any tenant directly contracts with the local
public service company or for which any tenant is separately or submetered and
pays Landlord directly;
GG. Any management fees whether paid to Landlord or a third
party, in excess of those management fees which are normally and customarily
charged by landlords of comparable buildings, or otherwise in excess of an
amount (the "Maximum Amount") equal to the product of (A) three percent (3%) and
(B) the amount of gross revenues for the Building, from office tenants;
HH. Costs of any "tap fees" or any sewer or water connection
fees for the benefit of any particular tenant in the Building;
II. Any entertainment, dining or travel expenses for any
purpose;
JJ. Any flowers, gifts, balloons, etc. provided to any entity
whatsoever, to include, but not limited to, Tenant, other tenants, employees,
vendors, contractors, prospective tenants and agents;
KK. Any "finders fees", brokerage commissions, job placement
costs or job advertising cost;
LL. The cost of any training or incentive programs, other than
for tenant life safety information services;
MM. In no event shall Landlord pass through insurance
deductible amounts in excess of reasonable and customary deductible amounts,
provided that in no event shall such deductible amounts exceed $50,000.00 in any
calendar year;
NN. Tax Expenses;
OO. The cost of any "tenant relations" parties, events or
promotion not consented to by an authorized representative of Tenant in writing,
and the cost of any celebration or acknowledgment of holidays;
PP. Costs incurred in removing and storing the property of
former tenants or occupants of the Building;
QQ. The cost of any work or services performed for any tenant
(including Tenant) at such tenant's cost (unless such cost is an allowable part
of Operating Expenses);
RR. "Takeover" expenses, including, but not limited to, the
expenses incurred by Landlord with respect to space located in another building
of any kind or nature in connection with the leasing of space in the Project;
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SS. Costs of renovating the Building or preparing the Base
Building for Tenant's occupancy;
TT. Cost of work or replacements covered by warranties;
UU. Costs, expenses and charges incurred during the Lease Term
which are of the nature of a cost, expense or charge incurred during the Base
Year but not included therein as an Operating Expense (unless the cost, expense
or charge is imputed to have been included in Operating Expenses for the Base
Year so that the Operating Expenses for the Base Year are appropriately
adjusted);
VV. Costs of installing, maintaining and operating any
specialty service operated by Landlord including without limitation, any
luncheon club or athletic facility, or the repair thereof;
WW. Any dues or charges for professional associations of
property owners, managers or tenants of the Project;
XX. Costs resulting from the failure of the Project, as of the
Lease Commencement Date, to comply with laws applicable to the Project as of the
Lease Commencement Date; and
YY. Costs to repair the tenant improvements within space
occupied by any other tenant of the Building to the extent Tenant is charged
directly for comparable repairs to the tenant improvements within the Premises.
The foregoing schedule of exclusions from Operating Expenses is
intended to function solely as an exclusionary listing and shall not be
interpreted to permit or authorize any cost or expense which would not otherwise
be considered to be an Operating Expense under the other terms and conditions of
this Lease. In no event shall Landlord bill tenants of the Project in the
aggregate for more than 100% of the cost actually incurred by Landlord for any
item of Operating Expense. Landlord shall not include in Operating Expenses for
any Expense Year after the Base Year any new category of Operating Expenses,
unless such new category is (i) required to comply with applicable governmental
law or regulation, (ii) reasonably necessary to maintain the safe occupancy and
use of the Premises, Building and/or Project by Tenant and the other tenants of
the Project, (iii) then customarily provided at the Comparable Buildings, or
(iv) reasonably approved by Tenant. Operating Expenses shall be calculated in a
manner consistent with sound real estate accounting principles, consistently
applied.
Landlord hereby agrees that the total amount of "Capped Expenses", as
that term is defined below, included in Operating Expenses shall not increase
during any particular Expense Year to an amount which is greater than the amount
which would be included in Direct Expenses had Capped Expenses increased at a
rate of seven percent (7%) per Expense Year (the "CAP"), commencing with the
first Expense Year after the Base Year, on a cumulative, compounded basis,
throughout the Lease Term. For the purposes of this Lease, the term "Capped
Expenses" shall mean all Operating Expenses except for (i) any taxes included in
Operating Expenses, (ii) costs incurred under Section 4.2.4(i) of this Lease,
(iii) costs incurred under Section 4.2.4(iii) of this Lease, and (iv) costs
incurred under Section 4.2.4(xiii) of this Lease.
If Landlord is not furnishing any particular work or service (the cost of
which, if performed by Landlord, would be included in Operating Expenses) to a
tenant who has undertaken to perform such work or service in lieu of the
performance thereof by Landlord, Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such work or service to such tenant. If Landlord does not
carry earthquake insurance for the Building during the Base Year but
subsequently obtains earthquake insurance for the Building during the Lease
Term, then from and after the date upon which Landlord obtains such earthquake
insurance and continuing throughout the period during which Landlord maintains
such insurance, Operating Expenses for the Base Year shall be deemed to be
increased by the amount of the premium Landlord would have incurred had Landlord
maintained such insurance for the same period of time during the Base Year as
such
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insurance is maintained by Landlord during such subsequent Expense Year. If
the Project is not at least one hundred percent (100%) occupied during all or
a portion of the Base Year or any Expense Year, Landlord shall elect to make
an appropriate adjustment to the components of Operating Expenses for such
year to determine the amount of Operating Expenses that would have been
incurred had the Project been one hundred percent (100%) occupied; and the
amount so determined shall be deemed to have been the amount of Operating
Expenses for such year. In no event shall Landlord's grossed-up calculations
for any particular expense result in a determination of such particular
expense which, if applied to all tenants of the Building, would result in
more than 100% of such expense being reimbursable to Landlord by all tenants
of the Building, and if such calculations result in an excess, Tenant's Share
of the amount in excess of 100% shall be returned to Tenant. All exclusions
to Operating Expenses, as set forth above, shall be deducted prior to
applying a gross-up methodology to any item of Operating Expenses. Only
those items, or components of items, which are variable (i.e., costs which
vary as a result of changes in occupancy of the Building such as cleaning,
repair, maintenance, HVAC operation, etc.), as opposed to fixed costs (i.e.,
costs which do not vary as a result of changes in occupancy of the Building
such as annual contracted inspections of systems of equipment, fixed security
and insurance costs, etc.) shall be grossed-up. In the gross-up treatment,
reasonable projections shall be used and sound real estate accounting
principles, consistently applied, utilized.
4.2.5 TAXES.
4.2.5.1 "TAX EXPENSES" shall mean all federal, state,
county, or local governmental or municipal taxes, fees, charges or other
impositions of every kind and nature, whether general, special, ordinary or
extraordinary, (including, without limitation, real estate taxes, general and
special assessments, transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property taxes
imposed upon the fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing and operation of the Project, or any portion
thereof. Tax Expenses for the Base Year shall be increased to equal the Taxes
Expenses, including ad valorem taxes and gross receipts taxes, which would be
payable if the Building were fully occupied by tenants paying rental comparable
to Tenant's rent, built out at a level comparable to Tenant's improvements, with
Landlord's Work complete and the Project fully assessed as a result of the
foregoing.
4.2.5.2 Tax Expenses shall include, without limitation:
(i) Any tax on the rent, right to rent or other income from the Project, or any
portion thereof, or as against the business of leasing the Project, or any
portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to,
or in substitution, partially or totally, of any assessment, tax, fee, levy or
charge previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include any
governmental or private assessments or the Project's contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable
to or measured by the area of the Premises or the Rent payable hereunder,
including, without limitation, any gross rents or gross income tax or excise tax
with respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operating, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any
assessment, tax, fee, levy or charge, upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises.
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4.2.5.3 Any reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) incurred in attempting to
protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in
the Expense Year such expenses are paid. Tax refunds shall be credited against
Tax Expenses and refunded to Tenant regardless of when received, based on the
Expense Year to which the refund is applicable, provided that in no event shall
the amount to be refunded to Tenant for any such Expense Year exceed the total
amount paid by Tenant as Additional Rent under this ARTICLE 4 for such Expense
Year. If Tax Expenses for any period during the Lease Term or any extension
thereof are increased after payment thereof for any reason, including, without
limitation, error or reassessment by applicable governmental or municipal
authorities, Tenant shall pay Landlord within thirty (30) days following demand
by Landlord, Tenant's Share of any such increased Tax Expenses included by
Landlord as Building Tax Expenses pursuant to the terms of this Lease.
Notwithstanding anything to the contrary contained in this Section 4.2.5 (except
as set forth in Section 4.2.5.1, above), there shall be excluded from Tax
Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state
income taxes, and other taxes to the extent applicable to Landlord's general or
net income (as opposed to rents, receipts or income attributable to operations
at the Project), (ii) any items included as Operating Expenses, (iii) any items
paid by Tenant or other tenants under Section 4.5 of this Lease, and
(iv) Operating Expense exclusions E, H, K, L, M and DD.
4.2.5.4 The amount of Tax Expenses for the Base Year
attributable to the valuation of the Project, inclusive of tenant improvements,
shall be known as the "Base Taxes".
4.2.6 "TENANT'S SHARE" shall mean the percentage set forth in
Section 6 of the Summary.
4.3 ALLOCATION OF DIRECT EXPENSES. Landlord shall have the right,
from time to time, to equitably allocate some or all of the Direct Expenses for
the Project among different portions or occupants of the Project (the "COST
POOLS"), in a reasonable and equitable manner. Such Cost Pools may include, but
shall not be limited to, the office space tenants of a building of the Project
or of the Project, and the retail space tenants of a building of the Project or
of the Project. The Direct Expenses within each such Cost Pool shall be
allocated and charged to the tenants within such Cost Pool in a reasonable and
equitable manner.
4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. If for any Expense
Year ending or commencing within the Lease Term, Tenant's Share of Direct
Expenses for such Expense Year exceeds Tenant's Share of Direct Expenses
applicable to the Base Year, then Tenant shall pay to Landlord, in the manner
set forth in Section 4.4.1, below, and as Additional Rent, an amount equal to
the excess (the "EXCESS").
4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
Landlord shall give to Tenant within 180 days following the end of each Expense
Year, a statement (the "STATEMENT") which shall state the Direct Expenses
incurred or accrued for such preceding Expense Year, and which shall indicate
the amount of the Excess. Each Statement shall be itemized with reasonable
detail as to general categories and shall specifically note the amount of each
such category. Upon receipt of the Statement for each Expense Year commencing
or ending during the Lease Term, if an Excess is present, Tenant shall pay, with
its next installment of Base Rent due or within 30 days following Tenant's
receipt of the Statement, whichever is later, the full amount of the Excess for
such Expense Year, less the amounts, if any, paid during such Expense Year as
"Estimated Excess," as that term is defined in Section 4.4.2, below. If the
amount of the Excess is less than the amount paid by Tenant as Estimated Excess
during the applicable Expense Year, Tenant shall receive a credit for such
overpayment against the Rent next due under this Lease, provided that if the
Lease Term has expired, Landlord shall pay the amount of Tenant's overpayment to
Tenant. The failure of Landlord to timely furnish the Statement for any Expense
Year shall not prejudice Landlord or Tenant from enforcing its rights under this
Article 4. Even though the Lease Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Share of Direct
Expenses for the Expense Year in which this Lease terminates, if an Excess if
present, Tenant within thirty (30) days following demand by Landlord shall pay
to Landlord such amount. The provisions of this Section 4.4.1 shall survive the
expiration or earlier termination of the Lease Term.
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Notwithstanding anything in this Section 4.4.1 to the contrary, except in
connection with the Excluded Expenses, Tenant shall not be responsible for
Tenant's Share of any Direct Expenses which are first billed to Tenant more
than two (2) calendar years after the end of the Expense Year to which such
Direct Expenses relate, provided that Tenant shall be responsible for
Excluded Expeses first billed to Tenant more than two (2) calendar years
after the end of the Expense Year to which such Excluded Expenses relate only
to the extent that Landlord becomes aware of such increased Excluded Expenses
following such two (2) year period due to governmental revision,
supplementation or other governmental action which results in the adjustment
of the Excluded Expenses.
4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition,
Landlord shall endeavor to give Tenant within 180 days following the
commencement of each Expense Year a yearly expense estimate statement (the
"ESTIMATE STATEMENT") which shall set forth Landlord's reasonable estimate (the
"ESTIMATE") of what the total amount of Direct Expenses for the then-current
Expense Year shall be and the estimated excess (the "ESTIMATED EXCESS") as
calculated by comparing the Direct Expenses for such Expense Year, which shall
be based upon the Estimate, to the amount of Direct Expenses for the Base Year.
The failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Estimated Excess under this Article 4, nor shall Landlord be prohibited from
revising any Estimate Statement or Estimated Excess theretofore delivered to the
extent necessary. Thereafter, Tenant shall pay, with its next installment of
Base Rent due or within 30 days following Tenant's receipt of the Estimate
Statement, whichever is later, a fraction of the Estimated Excess for the
then-current Expense Year (reduced by any amounts paid pursuant to the next
to last sentence of this Section 4.4.2). Such fraction shall have as its
numerator the number of months which have elapsed in such current Expense
Year, including the month of such payment, and twelve (12) as its
denominator. Until a new Estimate Statement is furnished (which Landlord
shall have the right to deliver to Tenant at any time), Tenant shall pay
monthly, with the monthly Base Rent installments, an amount equal to
one-twelfth (1/12) of the total Estimated Excess set forth in the previous
Estimate Statement delivered by Landlord to Tenant.
4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
4.5.1 Tenant shall be liable for and shall pay ten (10) days
before delinquency, taxes levied against Tenant's equipment, furniture, fixtures
and any other personal property located in or about the Premises. If any such
taxes on Tenant's equipment, furniture, fixtures and any other personal property
are levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.
4.5.2 If the tenant improvements in the Premises, whether
installed and/or paid for by Landlord or Tenant and whether or not affixed to
the real property so as to become a part thereof, are assessed for real property
tax purposes at a valuation in excess the highest value for tenant improvements
which Landlord includes in Tax Expenses without direct charge to the applicable
tenant of the Building, then the Tax Expenses levied against Landlord or the
property by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of Section 4.5.1, above.
4.5.3 Notwithstanding any contrary provision herein, Tenant shall
pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer
tax or value added tax, or any other applicable tax on the rent or services
herein or otherwise respecting this Lease; or (ii) taxes assessed upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
4.6 TENANT'S PAYMENT OF CERTAIN TAX EXPENSES. Notwithstanding
anything to the contrary contained in this Lease, in the event that, at any time
during the initial Lease Term, any sale, or change in ownership of the Project
at arm's length is consummated, and as a result
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thereof, and to the extent that in connection therewith, the Project is
reassessed (the "REASSESSMENT") for real estate tax purposes by the
appropriate governmental authority pursuant to the terms of Proposition 13,
then the terms of this Section 4.6 shall apply to the first such Reassessment
of the Project.
4.6.1 THE TAX INCREASE. For purposes of this Article 4, the term
"Tax Increase" shall mean that portion of the Tax Expenses, as calculated
immediately following the Reassessment, which is attributable solely to the
Reassessment. Accordingly, the term Tax Increase shall not include any portion
of the Tax Expenses, as calculated immediately following the Reassessment, which
(i) is attributable to assessments which were pending immediately prior to the
Reassessment which assessments were conducted during, and included in, such
Reassessment, or which assessments were otherwise rendered unnecessary following
the Reassessment, or (ii) is attributable to the annual inflationary increase of
real estate taxes, but not in excess of two percent (2.0%) per annum.
4.6.2 PROTECTION. During the initial Lease Term, as reset, if
applicable, Tenant shall not be obligated to pay any portion of the first Tax
Increase which occurs during the initial Lease Term.
4.6.3 LANDLORD'S RIGHT TO PURCHASE THE PROPOSITION 13 PROTECTION
AMOUNT ATTRIBUTABLE TO A PARTICULAR REASSESSMENT. The amount of Tax Expenses
which Tenant is not obligated to pay or will not be obligated to pay during the
Lease Term in connection with a particular Reassessment pursuant to the terms of
this Section 4.6, shall be sometimes referred to hereafter as a "Proposition 13
Protection Amount." If, in connection with a pending or anticipated sale of the
Project by Landlord, the occurrence of a Reassessment is reasonably foreseeable
by Landlord and the Proposition 13 Protection Amount attributable to such
Reassessment can be reasonably quantified or estimated for each Lease Year
commencing with the Lease Year in which the Reassessment will occur, the terms
of this Section 4.6.3 shall apply to each such Reassessment. Upon notice to
Tenant, Landlord shall have the right to purchase the Proposition 13 Protection
Amount relating to the applicable Reassessment (the "APPLICABLE REASSESSMENT"),
within a reasonable period of time prior to the pending or anticipated sale of
the Project by Landlord, by paying to Tenant an amount equal to the "Proposition
13 Purchase Price," as that term is defined below, provided that the right of
any successor of Landlord to exercise its right of repurchase hereunder shall
not apply to any Reassessment which results from the event pursuant to which
such successor of Landlord became the Landlord under this Lease. As used
herein, "Proposition 13 Purchase Price" shall mean the present value of the
Proposition 13 Protection Amount remaining during the Lease Term, as of the date
of payment of the Proposition 13 Purchase Price by Landlord. Such present value
shall be calculated (i) by using the portion of the Proposition 13 Protection
Amount attributable to each remaining Lease Year (as though the portion of such
Proposition 13 Protection Amount benefited Tenant at the end of each Lease
Year), as the amounts to be discounted, and (ii) by using discount rates for
each amount to be discounted equal to the average rates of yield for United
States Treasury Obligations with maturity dates as close as reasonably possible
to the end of each Lease Year during which the portions of the Proposition 13
Protection Amount would have benefited Tenant, which rates shall be those in
effect as of Landlord's exercise of its right to purchase, as set forth in this
Section 4.6.3. Upon such payment of the Proposition 13 Purchase Price, the
provisions of Section 4.6.2 of this Lease shall not apply to any Tax Increase
attributable to the Applicable Reassessment. Since Landlord is estimating the
Proposition 13 Purchase Price because a Reassessment has not yet occurred, then
when such Reassessment occurs, if Landlord has underestimated the Proposition 13
Purchase Price, then upon notice by Landlord to Tenant, Tenant's Rent next due
shall be credited with the amount of such underestimation, and if Landlord
overestimates the Proposition 13 Purchase Price, then upon notice by Landlord to
Tenant, Rent next due shall be increased by the amount of the overestimation.
4.7 LANDLORD'S BOOKS AND RECORDS. In the event that Tenant disputes
the amount of Additional Rent set forth in any annual Statement delivered by
Landlord, then within two (2) years after receipt of such Statement by Tenant,
Tenant shall have the right to notify Landlord in writing that it intends to
cause an independent certified public accountant (which accountant must be
qualified and experienced, must be employed by a firm which derives its primary
revenues from its accounting practice) to inspect Landlord's accounting records
at Landlord's
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office in the Building for the Expense Year covered by such Statement during
normal business hours ("TENANT'S REVIEW"). Tenant shall provide Landlord
with not less than two (2) weeks' prior written notice of its desire to
conduct Tenant's review. In connection with the foregoing review, Landlord
shall furnish Tenant with such reasonable supporting documentation relating
to the subject Statement (and the Statement for the Base Year, provided that
such supporting documentation relating to the Statement for the Base Year
shall be for informational purposes only and not for the purpose of any audit
of the Base Year Statement if the time period for Tenant's audit of the Base
Year Statement shall have expired) as Tenant may reasonably request. In no
event shall Tenant have the right to conduct Tenant's Review if Tenant is
then in default under the Lease with respect to any of Tenant's monetary
obligations (following the expiration of all notice and cure periods set
forth in Article 19), including, without limitation, the payment by Tenant of
all Additional Rent amounts described in the Statement which is the subject
of Tenant's Review, which payment, at Tenant's election, may be made under
dispute. In the event that Tenant shall fail to provide Landlord with written
notification within two (2) years following receipt of a particular Statement
of Tenant's desire to conduct a Tenant's Review, Tenant shall have no further
right to dispute the amounts of Additional Rent set forth on such Statement.
In the event that following Tenant's Review Tenant continues to dispute the
amounts of Additional Rent shown on Landlord's Statement and Landlord and
Tenant are unable to resolve such dispute, then Landlord shall cause a final
and determinative audit to be made by an independent accountant mutually and
reasonably agreed upon by Landlord and Tenant, of the proper amount of the
disputed items and/or categories of Direct Expenses to be shown on such
Statement (the "FINAL AUDIT"). The results of such Final Audit shall be
conclusive and binding upon both Landlord and Tenant unless either party
objects to the results of such Final Audit by written notice delivered to the
other party within ten (10) days following receipt by the parties of the
result of the Final Audit, which objection must be accompanied by a request
that the correctness of the Additional Rent determination for such Expense
Year in question be determined pursuant to binding arbitration
("ARBITRATION") under J.A.M.S., as set forth in Section 2.2.4.6 of this
Lease. If the resolution of the parties' dispute with regard to the
Additional Rent shown on the Statement, whether pursuant to Tenant's Review,
the Final Audit or the Arbitration reveals an error in the calculation of
Tenant's Share of Building Direct Expenses to be paid for such Expense Year,
the parties' sole remedy shall be for the parties to make appropriate
payments or reimbursements, as the case may be, to each other as are
determined to be owing. Any such payments shall be made within thirty (30)
days following the resolution of such dispute, along with interest at the
Interest Rate from the date such amounts were originally due, until the date
of such payment. At Tenant's election, Tenant may treat any overpayments
(plus the interest described above) resulting from the foregoing resolution
of such parties' dispute as a credit against Rent until such amounts are
otherwise paid by Landlord. Tenant shall be responsible for all costs and
expenses associated with Tenant's Review and any Final Audit, provided that
if the parties' final resolution of the dispute involves the overstatement by
Landlord of Direct Expenses for such Expense Year in excess of two and three
quarters percent (2.75%), then Landlord shall be responsible for all
reasonable, out-of-pocket costs and expenses associated with Tenant's Review
and any Final Audit. In the event that the parties' dispute is resolved
pursuant to Arbitration, Tenant shall be responsible for all costs and
expenses associated with such Arbitration, provided that if the arbitrator's
decision reveals that Landlord's determination of Tenant's Share of Direct
Expenses as submitted to arbitration was overstated, then Landlord shall be
responsible for all reasonable, out-of-pocket costs and expenses of such
Arbitration. If another tenant of the Building audits Direct Expenses for
the Building and, as a result of that audit, Landlord discovers a material
error in Direct Expenses previously paid or to be payable by Tenant, Landlord
shall make an appropriate adjustment to Direct Expenses to correct such error
and shall provide Tenant with supporting documentation of such error at the
time of such correction.
ARTICLE 5
USE OF PREMISES
5.1 PERMITTED USE. Tenant shall use the Premises solely for the
Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or
permit the Premises or the Project
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to be used for any other purpose or purposes whatsoever without the prior
written consent of Landlord, which may be withheld in Landlord's sole
discretion.
5.2 PROHIBITED USES. The uses prohibited under this Lease shall
include any use other than the Permitted Use, provided that notwithstanding
anything in Section 7 of the Summary to the contrary, the Permitted Use shall
specifically exclude, without limitation, the use of the Premises or a portion
thereof for (i) offices of any agency or bureau of the United States or any
state or political subdivision thereof; (ii) offices or agencies of any foreign
governmental or political subdivision thereof; (iii) offices of any health care
professionals or health care service organization (except to the extent utilized
primarily for general office purposes); (iv) schools or other training
facilities which are not ancillary to corporate, executive or professional
office use; (v) retail or restaurant uses; or (vi) communications firms such as
radio and/or television stations (except to the extent utilized primarily for
general office purposes). Tenant further covenants and agrees that Tenant shall
not use, or suffer or permit any person or persons to use, the Premises or any
part thereof for any use or purpose contrary to the provisions of the Rules and
Regulations set forth in EXHIBIT D, attached hereto, or in violation of the laws
of the United States of America, the State of California, or the ordinances,
regulations or requirements of the local municipal or county governing body or
other lawful authorities having jurisdiction over the Project) including,
without limitation, any such laws, ordinances, regulations or requirements
relating to hazardous materials or substances, as those terms are defined by
applicable laws now or hereafter in effect. Tenant shall not do or permit
anything to be done in or about the Premises which will unreasonably obstruct or
interfere with the rights of other tenants or occupants of the Building, or
injure or annoy them or use or allow the Premises to be used for any improper,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises. Tenant shall comply with all
recorded covenants, conditions, and restrictions affecting the Project as of the
date of this Lease.
ARTICLE 6
SERVICES AND UTILITIES
6.1 STANDARD TENANT SERVICES. Landlord shall provide the following
services on all days (unless otherwise stated below) during the Lease Term.
6.1.1 Subject to limitations imposed by all governmental rules,
regulations and guidelines applicable thereto, Landlord shall provide heating
and air conditioning ("HVAC") when necessary for normal comfort for normal
office use in the Premises from 8:00 A.M. to 6:00 P.M. Monday through Friday,
and on Saturdays from 9:00 A.M. to 1:00 P.M. (collectively, the "BUILDING
HOURS"), except for the date of observation of New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord's
discretion, other locally or nationally recognized holidays recognized by
landlords of the Comparable Buildings (collectively, the "HOLIDAYS").
Notwithstanding the foregoing, Landlord hereby agrees to provide to Tenant,
without direct charge to Tenant, HVAC when necessary for normal comfort for
normal office use on any full floor of the Building leased by Tenant, Monday
through Friday from 8:00 a.m. to 7:00 p.m., and Saturday 9:00 a.m. - 1:00 p.m.
(the "EXTENDED HOURS"), except the date of observation of the Holidays. The
Extended Hours shall not serve to prohibit or impair Tenant's right to order
after hours HVAC in accordance with the terms of Section 6.2 of this Lease.
6.1.2 Landlord shall provide adequate electrical wiring and
facilities for connection to Tenant's lighting fixtures and incidental use
equipment, provided that (i) the demand electrical load of the incidental use
equipment does not exceed an average of 3 watts per usable square foot of the
Premises during the Extended Hours on a monthly basis, and the electricity so
furnished for incidental use equipment will be at a nominal one hundred twenty
(120) volts and no electrical circuit for the supply of such incidental use
equipment will require a current capacity exceeding twenty (20) amperes, and
(ii) the demand electrical load of Tenant's fluorescent lighting fixtures does
not exceed an average of 1.5 watts per usable square foot of the Premises during
the Extended Hours on a monthly basis, and the electricity so furnished for
Tenant's lighting will be at a nominal one hundred twenty (120) volts, which
electrical usage shall be subject to applicable laws and regulations, including
Title 24. Engineering plans shall
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include a calculation of Tenant's fully connected electrical design load with
and without demand factors and shall indicate the number of watts of
unmetered and submetered loads. Tenant shall bear the cost of replacement of
lamps, starters and ballasts for non-Building standard lighting fixtures
within the Premises to the extent such cost exceeds the cost of replacing the
same components in Building standard fixtures.
6.1.3 Landlord shall provide city water from the regular Building
outlets for drinking, lavatory and toilet purposes in the Building Common Areas.
6.1.4 Landlord shall provide janitorial services to the Premises,
except the date of observation of the Holidays, in and about the Premises
consistent with the specifications attached hereto as Exhibit I, and window
washing services in a manner and with a frequency consistent with those of the
Comparable Buildings. Within thirty (30) days following demand by Landlord,
Tenant shall pay to Landlord an amount equal to the Actual Cost incurred by
Landlord in connection with the janitorial services provided to the Patio Area.
6.1.5 Landlord shall provide nonexclusive, non-attended automatic
passenger elevator service during the Building Hours, shall have one elevator
available at all other times, except on the Holidays.
6.1.6 Landlord shall provide nonexclusive freight elevator
service subject to scheduling by Landlord.
6.1.7 Landlord shall provide card key access control to the
Building the Building's front entrance, the Building's elevators, and the
entrance to the Building Parking Facility (the "CARD KEY SYSTEM"). The Card Key
System shall operate between the hours of 7:00 p.m. and 7:00 a.m. (the "SECURED
HOURS") At Tenant's option, Tenant's may designate that certain card holders
not retain access to the Premises during the Secured Hours. The Building
Parking Facility shall have a roll-up gate which will be lowered during the
Secured Hours, provided that the same may be raised by card holders. Tenant
shall have the right to prohibit public access to floors of the Building which
are solely occupied by Tenant, provided that Tenant shall reimburse Landlord for
fifty percent (50%) of its Actual Cost in upgrading the Card Key System to the
extent required in order to accommodate the foregoing. Tenant may, at its own
expense, install its own security system ("TENANT'S SECURITY SYSTEM") in the
Premises pursuant to the terms of Article 8, below; provided, however, that
Tenant shall coordinate the installation and operation of Tenant's Security
System with Landlord to assure that Tenant's Security does not interfere with
Landlord's security system in place as of the Lease Commencement Date and the
Building systems and equipment and to the extent that Tenant's Security System
unreasonably interferes with Landlord's security system and the Building systems
and equipment, Tenant shall not be entitled to install or operate it. Tenant
shall be solely responsible, at Tenant's sole cost and expense, for the
monitoring, operation and removal of Tenant's Security System.
6.1.8 Notwithstanding anything to the contrary in this Lease,
Landlord agrees that Landlord shall maintain and operate the Building in a
condition and repair materially consistent with that undertaken by landlords of
the Comparable Buildings.
Tenant shall cooperate reasonably with Landlord at all times and abide by
all regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems.
6.2 OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's
prior written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
Building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Landlord pursuant to the terms of Section
6.1 of this Lease except as permitted in this Lease. Landlord acknowledges,
however, that Tenant shall be utilizing machines other than fractional
horsepower office machines on the ground floor of the Building, which machines
shall be subject to Landlord's approval, which approval shall not be
unreasonably withheld. If Tenant uses water, electricity, heat or air
conditioning in excess of that
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supplied by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay
to Landlord, upon billing, the actual, reasonable and documented cost paid to
third parties at arms length, without profit or overhead or penalty (the
"ACTUAL COST"), in connection with such excess consumption. Furthermore, if
Tenant uses electricity in an aggregate amount in excess of that supplied by
Landlord pursuant to Section 6.1 of this Lease, Landlord may, at its option,
install devices to separately meter such excess electrical use, and provided
that such meters indicate excess usage by Tenant when measured on a monthly
basis, Tenant shall pay to Landlord, within thirty (30) days following demand
by Landlord, the Actual Cost of any such devices. Tenant's use of electricity
shall never exceed "Capacity," as that term is defined, below. If Tenant
desires to use heat, ventilation or air conditioning during hours other than
those for which Landlord is obligated to supply such utilities pursuant to
the terms of Section 6.1 of this Lease (the "AFTER HOUR HVAC"), Landlord
shall supply such utilities to Tenant at Landlord's Actual Cost (which shall
be treated as Additional Rent), provided that Tenant shall deliver notice to
Landlord of any non-Holiday weekday After Hours HVAC desired by Tenant on or
before 12:00 noon of the day such After Hours HVAC is desired and Tenant
shall deliver notice to Landlord of any weekend or Holiday After Hours HVAC
desired by Tenant on or before 12:00 noon of the business day immediately
preceding such weekend or Holiday. As of the date of this Lease, the After
Hours HVAC Cost equals $20.00 per hour for the ground floor and $27.00 per
hour for floors two (2) through five (5) of the Building. For purposes of
this Section 6.2, "CAPACITY" shall mean (i) four and one-half (4.5) watts per
usable square foot on the ground floor, (ii) four and one-half (4.5) watts
per usable square foot on the second (2nd) floor of the Building, and (iii)
seven (7) watts per usable square foot on floors three (3) through five (5)
of the Building, provided that the foregoing "Capacity" shall be exclusive of
(a) the 1.5 watts per usable square foot available for Tenant's fluorescent
lighting, and (b) electricity utilized by the Building HVAC system.
6.3 INTERRUPTION OF USE.
6.3.1 TERMINATION RIGHTS. Notwithstanding anything to the
contrary contained in this Lease, in the event of the occurrence of a "Trigger
Event," as that term is defined, below, which causes an interference with
Tenant's use of or access to the Premises for a period in excess of the
"Eligibility Period," as that term is defined in Section 6.3.2, below, and such
Trigger Event will likely materially adversely affect Tenant's use of, or
prevent Tenant's reasonable access to, the Premises for an additional period of
time reasonably expected to be greater than one hundred eighty (180) days (the
"MAXIMUM RESTORATION PERIOD"), then Tenant shall have the right to request
Landlord to provide Tenant with the reasonable opinion of an independent
qualified consultant as to the reasonably projected period for the restoration
of Tenant's use of and/or access to the Premises. Landlord shall have the right
to reasonably select the identity of the foregoing consultant, subject to
Tenant's reasonable approval. Landlord shall deliver such opinion to Tenant
within thirty (30) days following both Tenant's written request for such opinion
and Tenant's reasonable approval of the identity of the consultant delivering
such opinion. If such opinion is that it is likely that the period for
restoration of Tenant's use of and/or access to the Premises shall exceed the
Maximum Restoration Period, then Tenant may elect to exercise an ongoing right
to terminate the Lease, upon thirty (30) days prior written notice sent to
Landlord within a period of thirty (30) days following receipt of the foregoing
consultant's opinion. For purposes of this Lease, a "TRIGGER EVENT" shall mean
one or more of the following events, provided that in no event shall any of the
following events constitute a Trigger Event if caused by (a) damage or
destruction to the Building, the Project, Common Areas or the Premises (in which
case the provisions of Article 11 of the Lease shall control), (b) the
negligence or willful misconduct of Tenant or its agents, employees, partners or
contractors, or (c) a taking of the Building, the Project, Common Areas, or the
Premises by eminent domain or the exercise of other governmental authority (in
which case the provisions of Article 13 shall control):
(i) interruption of electrical, HVAC, water, gas,
or sewer utilities or services to be used by Tenant in connection with
its occupancy of the Premises, or failure of Landlord to provide
telecommunication cabling repair and maintenance required to be provided
by Landlord under this Lease;
(ii) discovery of a Hazardous Materials condition
in, on or around the Building, Project, Common Areas or Premises which
constitutes a violation of
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Law or which presents a material safety or health risk to Tenant's
employee or visitors, excepting those conditions resulting from Hazardous
Materials which are either:
(A) used by Tenant's contractor in the
construction of Tenant Improvements or Alterations in the
Premises;
(B) generated by Tenant, its assignees,
subtenants, employees, agents, representatives, or contractors or
brought onto or in the Project, Building, Common Areas or Premises
by any of the foregoing parties; or
(iii) repair, maintenance or alteration of the
Premises, the Project, the Building or the Common Areas or any material
intrusion into the Premises by Landlord or the "Landlord Parties," as
that term is defined in Section 10.1 of this Lease.
6.3.2 ABATEMENT RIGHTS. In addition to Tenant's right to
terminate set forth in Section 6.3.1 above, if Tenant is prevented from using
(and does not actually use) the Premises (or any portion thereof) for five (5)
consecutive business days or ten (10) business days in any twelve (12) month
period after Tenant's written notice (the "ABATEMENT EVENT NOTICE") to Landlord
(the "ELIGIBILITY PERIOD") as a result of a Trigger Event, then Tenant's Rent
(which for this purpose and for purposes of Section 11.1 of this Lease includes
Base Rent, Additional Rent, parking charges and all similar periodic charges
contemplated hereunder) shall be abated or reduced (as the case may be) as of
the date of Landlord's receipt of the Abatement Event Notice for such time that
Tenant is prevented from using, and does not use, the Premises (or a portion
thereof) in the proportion that the rentable area of the portion of the Premises
that Tenant is prevented from using bears to the total rentable area of the
Premises. However, if Tenant is prevented from conducting Tenant's business in
any portion of the Premises for a period of time in excess of the Eligibility
Period, and the remaining portion of the Premises is not sufficient to allow
Tenant to effectively conduct Tenant's business therein for a period of time in
excess of the Eligibility Period, then Tenant's Rent for the entire Premises
shall be abated for such time after Landlord's receipt of the Abatement Event
Notice during which Tenant is so prevented from effectively conducting Tenant's
business therein. If, however, Tenant reoccupies any portion of the Premises
during such period, the rent allocable to such reoccupied portion, based on the
proportion that the rentable area of such reoccupied portion of the Premises
bears to the total rentable area of the Premises, shall be payable by Tenant
from the date Tenant reoccupies such portion of the Premises. If Tenant's right
to abatement occurs during a free rent period or other period during which
Tenant's Rent hereunder is abated or subject to a rent credit pursuant to
another provision of this Lease (other than due to another Trigger Event or an
event described in Articles 11 or 13 hereof) ("OVERLAP PERIOD"), Tenant shall be
entitled to an additional free rent credit (applicable to the rent next due and
payable) equal to the free rent to which Tenant was otherwise entitled during
the Overlap Period but which was not used by virtue of application of this
Section 6.3. Notwithstanding any provision of this Lease to the contrary,
(a) Tenant shall be entitled to an abatement of rent if Tenant is practicably
precluded from Tenant's reasonable use of the Premises for any cause set forth
above for all periods shorter than the Eligibility Period, if and to the extent
Landlord receives proceeds from any rental loss or equivalent policy of
insurance held by Landlord in connection with such abatement, and the provisions
set forth above shall not in any way limit or relieve the obligation of any
insurer to make payment of the proceeds of any such policy, (b) the parties
acknowledge that loss of the use of a material portion of the parking passes
granted to Tenant hereunder (without temporary reasonable replacement by
Landlord within a reasonable distance of the Project, with shuttle service if
reasonably required) for longer than the Eligibility Period shall entitle Tenant
to an abatement of Tenant's Rent in an amount proportionate to the interference
to Tenant's business in the Premises resulting therefrom.
6.3.3 EXCLUSIVE REMEDIES. The foregoing Rent abatement and
termination rights shall be Tenant's exclusive remedies for abatement of Rent or
termination of this Lease in connection with a Trigger Event, provided that
nothing contained in this Section 6.3.3 shall impair or reduce Tenant's rights
set forth in Section 7.2 of this Lease.
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ARTICLE 7
REPAIRS
7.1 DUTIES OF REPAIR. Landlord shall maintain, repair and replace
(i) the structural portions of the Building, including the foundation,
floor/ceiling slabs, roof, curtain wall, exterior glass and mullions, columns,
beams, shafts (including elevator shafts), exit stairs, Project parking
facility, elevator cabs, and Building mechanical, electrical and telephone
closets and Base Building (collectively, "BUILDING STRUCTURE"), and (ii) the
mechanical, electrical, life safety, plumbing, sprinkler systems and HVAC
systems installed or furnished by Landlord and not located within the Premises
(the "BUILDING SYSTEMS"), in good order and repair and in a first class
condition. In addition, Landlord shall, at all times during the Lease Term,
cause the Building Systems (including the Building HVAC units servicing the
second floor of the Building) to operate in such a manner which does not result
in a level of noise and/or a level of vibration which unreasonably interferes
with Tenant's use of the Premises. Except as to Landlord's obligations set
forth above in this Section 7.1, Tenant shall, at Tenant's own expense, keep the
Premises, including all Alterations, "Tenant Improvements," as that term is
defined in the Tenant Work Letter, improvements, fixtures and furnishings
therein, in good order, repair and condition at all times during the Lease Term.
In addition, except as provided as part of Landlord's repair obligations set
forth above or elsewhere in this Lease, Tenant shall, at Tenant's own expense
but under the supervision and subject to the prior approval of Landlord, and
within a reasonable period of time, promptly and adequately complete all repairs
which Tenant in obligated to complete; provided however, that, at Landlord's
option, if Tenant fails to make such repairs, Landlord may, but need not, on not
less that ten (10) business days prior notice to Tenant (except in case of an
emergency) make such repairs, and to the extent Tenant was obligated to
undertake such repair at Tenant's sole cost, Tenant shall pay Landlord the cost
thereof, including a reasonable percentage of the cost thereof sufficient to
reimburse Landlord for the Actual Cost arising from Landlord's involvement with
such repairs and replacements forthwith upon being billed for same.
Notwithstanding the foregoing, following reasonable prior notice from Tenant,
Landlord shall repair any items required to be repaired by Tenant pursuant to
the terms of this Section 7.1, provided that, in such event, Tenant shall pay to
Landlord, within thirty (30) days following demand by Landlord, the Actual Cost
incurred by Landlord in connection with such repairs. Landlord may, but shall
not be required to, enter the Premises at all reasonable times to make repairs,
alterations, improvements and additions to the Premises or to the Building or to
any equipment located in the Building as Landlord shall desire or deem necessary
or as Landlord may be required to do by governmental or quasi-governmental
authority or court order or decree. Subject to Section 7.2, Tenant hereby
waives and releases its right to make repairs at Landlord's expense under
Sections 1941 and 1942 of the California Civil Code; or under any similar law,
statute, or ordinance now or hereafter in effect.
7.2 TENANT'S RIGHT TO MAKE REPAIRS. If Tenant provides written notice
to Landlord of an event or circumstance which requires the action of Landlord
with respect to the provision of utilities and/or services and/or repairs and/or
maintenance to the Premises or Project, and Landlord fails to provide such
action as required by the terms of this Lease within ten (10) business days
after receipt of such written notice (or such longer period of time if the
nature of such action is such that the same cannot reasonably be completed
within a ten (10) business day period, provided Landlord has diligently and
continuously commenced such action within such period and thereafter diligently
proceeds to complete said action as soon as possible) Tenant may proceed to take
the required action upon delivery of an additional two (2) business days notice
to Landlord specifying that Tenant is taking such required action, and if such
action was required under the terms of this Lease to be taken by Landlord, then
Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's
reasonable costs and expenses in taking such action plus interest at the
Interest Rate during the period from the date Tenant incurs such costs and
expenses until such time as payment is made by Landlord. In the event Tenant
takes the action permitted above, and such work may create a "Deficiency," as
that term is defined in SECTION 3.1 of the Tenant Work Letter, Tenant shall use
reputable contractors with experience in similar work. Further, if Landlord
does not deliver a detailed written objection to Tenant, within thirty (30) days
after receipt of an invoice by Tenant of its costs of taking action which Tenant
claims should have been taken by Landlord, and if such invoice from Tenant sets
forth a reasonably
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particularized breakdown of its costs and expenses in connection with taking
such action on behalf of Landlord, then Tenant shall be entitled to deduct
from Rent payable by Tenant under this Lease, the amount set forth in such
invoice together with interest at the Interest Rate. If, however, Landlord
is in good faith delivers to Tenant within thirty (30) days after receipt of
Tenant's invoice, a written objection to the payment of such invoice, setting
forth with reasonable particularity Landlord's reasons for its claim that
such action did not have to be taken by Landlord pursuant to the terms of
this Lease or that specifically enumerated charges are excessive (in which
case Landlord shall pay all of the charges not so enumerated, and further,
with respect to the charges not so enumerated, the amount it contends would
not have been excessive), then Tenant shall not be entitled to such deduction
from Rent, but as Tenant's sole remedy, Tenant proceed to claim a default by
Landlord under this Lease.
ARTICLE 8
ADDITIONS AND ALTERATIONS
8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant may make any
improvements, alterations, additions or changes to the Premises or any
mechanical, plumbing or HVAC facilities or systems pertaining to the Premises
(collectively, the "ALTERATIONS") upon ten (10) days notice to Landlord by
Tenant but without first procuring the prior written consent of Landlord to such
Alterations, provided that Tenant shall obtain Landlord's prior consent with
respect to (i) any Alteration which relates to, or is required in connection
with the use by, Tenant of any hazardous materials or hazardous substances in
the Premises, (ii) any Alteration to the Patio Area, (iii) any Alteration which
adversely affects the structural portions or the systems or equipment of the
Building, or (iv) any Alteration which is visible from the exterior of the
Building. The construction of the initial improvements to the Premises shall be
governed by the terms of the Tenant Work Letter and not the terms of this
Article 8.
8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition to
any Alteration requiring Landlord's consent, the requirement that Tenant utilize
for such purposes only contractors and subcontractors approved by Landlord, in
Landlord's reasonable discretion. With respect to Alterations not requiring
Landlord's consent, Tenant shall utilize only reputable and skilled contractors
and subcontractors which are comparable to the contractors and subcontractors
utilized by tenants at the Comparable Buildings. If such Alterations will
involve the use of or disturb hazardous materials or substances existing in the
Premises, Tenant shall comply with Landlord's rules and regulations concerning
such hazardous materials or substances. Tenant shall construct such Alterations
and perform such repairs in a good and workmanlike manner, in conformance with
any and all applicable federal, state, county or municipal laws, rules and
regulations and pursuant to a valid building permit, issued by the City of Los
Angeles, all in conformance with Landlord's construction rules and regulations.
In the event Tenant performs any Alterations which are not customary general
office improvements which require or give rise to governmentally required
changes to the "Base Building," as that term is defined below, then Landlord
shall, at Tenant's expense, make such changes to the Base Building. The "BASE
BUILDING" shall include the structural portions of the Building, and the public
restrooms and the systems and equipment located in the internal core of the
Building on the floor or floors on which the Premises are located. In
performing the work of any such Alterations, Tenant shall have the work
performed in such manner so as not to unreasonably obstruct access to the
Project or any portion thereof, by any other tenant of the Project, and so as
not to unreasonably obstruct the business of Landlord or other tenants in the
Project. Tenant shall not use (and upon notice from Landlord shall cease using)
contractors, services, workmen, labor, that would disturb labor harmony with the
workforce or trades engaged in performing other work, labor or services in or
about the Building or the Common Areas. In addition to Tenant's obligations
under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees
to cause a Notice of Completion to be recorded in the office of the Recorder of
the County of Los Angeles in accordance with Section 3093 of the Civil Code of
the State of California or any successor statute, and Tenant shall deliver to
the Project management office a reproducible copy of the "as built" drawings of
the Alterations as well as all permits, approvals and other documents issued by
any governmental agency in connection with the Alterations.
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8.3 PAYMENT FOR IMPROVEMENTS. If payment for any Alteration in excess
of Three and No/100 Dollars ($3.00) for each usable square foot of the subject
area is made directly to contractors, Tenant shall comply with Landlord's
requirements for final lien releases and waivers in connection with Tenant's
payment for work to contractors, provided that Tenant's obligations under
Article 9 of this Lease shall apply with respect to all Alterations undertaken
by Tenant. If Tenant orders any work directly from Landlord, Tenant shall pay
to Landlord a percentage (such percentage to be uniformly established for the
Building) of the cost of such work sufficient to compensate Landlord for all
overhead, general conditions, fees and other costs and expenses arising from
Landlord's involvement with such work. If Tenant does not order any work from
Landlord, Tenant shall not be required to pay Landlord any supervision fee or
other compensation in connection with such work, but if such work shall involve
any matter which reasonably requires review or consultation by Landlord's
management staff with third-party consultants, Tenant shall reimburse Landlord
for Landlord's Actual Cost in connection with such review or consultation.
8.4 CONSTRUCTION INSURANCE. In addition to the requirements of
Article 10 of this Lease, in the event that Tenant makes any Alterations, prior
to the commencement of such Alterations, Tenant shall provide Landlord with
evidence that Tenant carries "Builder's All Risk" insurance in an amount
approved by Landlord covering the construction of such Alterations, and such
other insurance as Landlord may require, it being understood and agreed that all
of such Alterations shall be insured by Tenant pursuant to Article 10 of this
Lease immediately upon completion thereof.
8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures,
equipment and/or appurtenances which may be installed or placed in or about the
Premises, from time to time, shall be at the sole cost of Tenant and shall be
and become the property of Landlord, except that Tenant may remove any
Alterations, improvements, fixtures and/or equipment which have not been paid
for with any Tenant improvement allowance funds provided to Tenant by Landlord,
provided Tenant repairs any damage to the Premises and Building caused by such
removal. Furthermore, Landlord may, by written notice to Tenant given at the
time Landlord grants its consent to any Alteration (which notice shall specify
the reasonable grounds for such requirement), require Tenant, at Tenant's
expense, to remove any Alterations or improvements in the Premises upon the
expiration or earlier termination of this Lease, and to repair any damage to the
Premises and Building caused by such removal. If Tenant fails to complete such
removal and/or to repair any damage caused by the removal of any Alterations or
improvements in the Premises, provided that Tenant does not fulfill such
obligation within ten (10) days following notice from Landlord, Landlord may do
so and may charge the Actual Cost thereof to Tenant. Tenant hereby protects,
defends, indemnifies and holds Landlord harmless from any liability, cost,
obligation, expense or claim of lien in any manner relating to the installation,
placement, removal or financing of any such Alterations, improvements, fixtures
and/or equipment in, on or about the Premises, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.
ARTICLE 9
COVENANT AGAINST LIENS
Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within twenty (20) days after notice by
Landlord, and if Tenant shall fail to do so, Landlord may pay the amount
necessary to remove such lien or encumbrance, without being responsible for
investigating the validity thereof. The amount so paid shall be deemed
Additional Rent under this Lease payable within thirty (30) days following
demand by Landlord , without limitation as to other remedies available to
Landlord under this
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Lease. Nothing contained in this Lease shall authorize Tenant to do any act
which shall subject Landlord's title to the Building or Premises to any liens
or encumbrances whether claimed by operation of law or express or implied
contract. Any claim to a lien or encumbrance upon the Building or Premises
arising in connection with any such work or respecting the Premises not
performed by or at the request of Landlord shall be null and void, or at
Landlord's option shall attach only against Tenant's interest in the Premises
and shall in all respects be subordinate to Landlord's title to the Project,
Building and Premises.
ARTICLE 10
INSURANCE
10.1 INDEMNIFICATION AND WAIVER. Except to the extent arising from
matters set forth in items (i), (ii) and (iii), below, Tenant hereby assumes all
risk of damage to property or injury to persons in, upon or about the Premises
from any cause whatsoever and agrees that Landlord, its partners, members,
subpartners, parents, subsidiaries, affiliates and their respective officers,
agents, servants, employees, and independent contractors (collectively,
"LANDLORD PARTIES") shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant. Tenant shall indemnify, defend, protect, and hold
harmless the from any and all loss, cost, damage, expense and liability
(including without limitation court costs and reasonable attorneys' fees)
("CLAIMS AND EXPENSES") incurred in connection with or arising from any cause
in, on or about the Premises, any acts, omissions or negligence of Tenant or of
any person claiming by, through or under Tenant, or of the contractors, agents,
servants, employees, of Tenant or any such person, in, on or about the Project
or any breach of the terms of this Lease, either prior to, during, or after the
expiration of the Lease Term, provided that the terms of the foregoing indemnity
shall not apply to the negligence or willful misconduct of Landlord Parties.
Should Landlord be named as a defendant in any suit brought against Tenant in
connection with or arising out of Tenant's occupancy of the Premises, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees. Further, Tenant's agreement to indemnify
Landlord pursuant to this SECTION 10.1 is not intended and shall not relieve any
insurance carrier of its obligations under policies required to be carried by
Tenant pursuant to the provisions of this Lease, to the extent such policies
cover the matters subject to Tenant's indemnification obligations; nor shall
they supersede any inconsistent agreement of the parties set forth in any other
provision of this Lease. Notwithstanding any contrary provision of this Lease,
neither Landlord nor Tenant shall be liable to the other party for any
consequential damages for a breach or default under this Lease, provided that
this sentence shall not be applicable to any consequential damages which may be
incurred by Landlord relating to, or in connection with (i) action taken by or
on behalf of Tenant pursuant to the provisions of SECTION 7.2 above, or (ii) any
storage, use, treatment, manufacture, sale, disposal or discharge of any
hazardous materials or substances (as those terms are defined by applicable law)
in, on, under or about the Premises, Building or Project by Tenant, its agents,
representatives, employees, contractors, subtenants or assigns, or any actions
taken by Tenant or such parties in connection therewith, or (iii) any holdover
by Tenant following the expiration of the Lease Term, subject to and in
accordance with the provisions of ARTICLE 16 hereof. The provisions of this
Section 10.1 shall survive the expiration or sooner termination of this Lease
with respect to any claims or liability arising in connection with any event
occurring prior to such expiration or termination. Subject to the provisions of
this Section 10.1, Landlord shall indemnify, defend, protect and hold Tenant and
its partners, officers, agents, servants and employees (collectively, "TENANT
PARTIES") harmless from and against any and all Claims and Expenses incurred in
connection with, or arising form (i) any cause in or about the Project, the
Land, the Building or the Common Areas (in each case other than the Premises),
to the extent the same would be covered under a customary CGL Policy of
insurance or is otherwise covered by Landlord's insurance; (ii) any negligence
or willful misconduct of Landlord or of any Landlord Party or any Landlord
contractor, whether in or about the Project, the Land, the Building, the Common
Areas or the Premises, or (ii) a breach of this Lease by Landlord; provided,
however, that the foregoing indemnity shall not apply to the extent of the
negligence or willful misconduct of Tenant or its
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partners, members, subpartners, parents, subsidiaries, affiliates and their
respective officers, agents, servants, employees, and independent contractors.
10.2 LANDLORD'S INSURANCE. Landlord shall carry commercial general
liability insurance with respect to the Building and Project during the Lease
Term, and shall further insure the full replacement cost of the Building and
Project during the Lease Term against loss or damage due to fire and other
casualties covered within the classification of fire and extended coverage,
vandalism coverage and malicious mischief, sprinkler leakage, water damage and
special extended coverage. Landlord's casualty policy shall contain a "building
laws" endorsement (to the extent the same is available on a commercially
reasonable basis). Landlord's insurance coverage shall be in such amounts, from
such companies, and on such other terms and conditions, as Landlord may from
time to time reasonably determine, provided that in no event shall Landlord's
commercial general liability insurance be in an amount less than $5,000,000.00,
combined single limit. Additionally, at the option of Landlord, such insurance
coverage may include the risks of earthquakes and/or flood damage and additional
hazards, and one or more loss payee endorsements in favor of the holders of any
mortgages or deeds of trust encumbering the interest of Landlord in the Building
or Project or the ground or underlying lessors of the Building, Project, or any
portion thereof. Notwithstanding the foregoing provisions of this Section 10.2,
the coverage and amounts of insurance carried by Landlord in connection with the
Building and Project shall, at a minimum, be comparable to the coverage and
amounts of insurance which are carried by reasonably prudent landlords of
Comparable Buildings, and Worker's Compensation and Employer's Liability
coverage as required by applicable law. Furthermore, Landlord shall, during the
Lease Term, carry a policy of rental interruption insurance covering one (1)
years' loss of rent. The minimum limits of policies of insurance required of
Landlord under the Lease shall not limit the liability of Landlord under this
Lease with respect to claims covered by such insuance. The insurance obtained
by Landlord shall specifically cover the indemnification liability of Landlord
under this Lease. Tenant shall, at Tenant's expense, comply with all insurance
company requirements pertaining to the use of the Premises. If Tenant's conduct
or use of the Premises causes any increase in the premium for such insurance
policies then Tenant shall reimburse Landlord for any such increase. Tenant, at
Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body.
10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages
in the following amounts. Tenant may utilize blanket policies of insurance (and
combinations of primary and excess/umbrella policies).
10.3.1 Commercial General Liability Insurance covering the
insured against claims of bodily injury, personal injury and property damage
(including loss of use thereof) arising out of Tenant's operations, and
contractual liabilities (covering the performance by Tenant of its indemnity
agreements) including a Broad Form endorsement covering the insuring provisions
of this Lease and the performance by Tenant of the indemnity agreements set
forth in Section 10.1 of this Lease, for limits of liability of:
<TABLE>
<S> <C>
Bodily Injury and $5,000,000 each occurrence
Property Damage Liability $5,000,000 annual aggregate
Personal Injury Liability $5,000,000 each occurrence
$5,000,000 annual aggregate
0% Insured's participation
</TABLE>
10.3.2 Physical Damage Insurance covering (i) all office
furniture, business and trade fixtures, office equipment, free-standing cabinet
work, movable partitions, merchandise and all other items of Tenant's property
on the Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant
Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter,
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Base Building and Landlord's Work) (the
"ORIGINAL IMPROVEMENTS"), and (iii) all other improvements, alterations and
additions to the Premises installed by or for Tenant. Such insurance shall be
written on "special causes" of loss or damage basis, for the full replacement
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cost value (subject to reasonable deductible amounts) new without deduction for
depreciation of the covered items and in amounts that meet any co-insurance
clauses of the policies of insurance and shall include coverage for damage or
other loss caused by fire or other peril including, but not limited to,
vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting or stoppage of pipes, and explosion.
10.3.3 Worker's Compensation and Employer's Liability or other
similar insurance pursuant to all applicable state and local statutes and
regulations.
10.4 FORM OF POLICIES. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, and any other
party reasonably specified by Landlord, as an additional insured, including
Landlord's managing agent, if any; (ii) specifically cover the liability assumed
by Tenant under this Lease, including, but not limited to, Tenant's obligations
under Section 10.1 of this Lease; (iii) be issued by an insurance company having
a rating of not less than A-X in Best's Insurance Guide or which is otherwise
acceptable to Landlord and licensed to do business in the State of California;
(iv) be primary insurance as to all claims thereunder and provide that any
insurance carried by Landlord is excess and is non-contributing with any
insurance requirement of Tenant; and (v) provide that said insurance shall not
be canceled or coverage changed unless thirty (30) days' (ten (10) days' in the
event of nonpayment of premiums) prior written notice shall have been given to
Landlord and any mortgagee of Landlord. Tenant shall deliver said policy or
policies or certificates thereof to Landlord on or before the Lease Commencement
Date and at least thirty (30) days before the expiration dates thereof. In the
event Tenant shall fail to procure such insurance, or to deliver such policies
or certificate, Landlord may, after delivery of five (5) days' notice to Tenant,
at Landlord's option, procure such policies for the account of Tenant, and the
cost thereof shall be paid to Landlord within five (5) days after delivery to
Tenant of bills therefor. If either party fails to carry the amounts and types
of insurance required to be carried by it pursuant to this Lease, such failure
shall be deemed to be a covenant and agreement by such party to self-insure with
respect to the type and amount of insurance which such party so failed to carry,
with full waiver of subrogation with respect thereto.
10.5 SUBROGATION. Landlord and Tenant intend that their respective
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of
subrogation shall not affect the right of the insured to recover thereunder, so
long as no material additional premium is charged therefor.
10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord. Notwithstanding any provisions of this
Lease to the contrary, the obligations of Tenant to provide increased or new
insurance hereunder shall be limited to the extent the same is (i) then
customarily required by landlords of Comparable Buildings in connection with
comparable tenants occupying comparable sized premises and (ii) reasonably
available for purchase by Tenant at a commercially reasonable cost.
ARTICLE 11
DAMAGE AND DESTRUCTION
11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly
notify Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to
the Premises shall be damaged by
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fire or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord's
reasonable control, and subject to all other terms of this Article 11,
restore the Base Building and such Common Areas. Such restoration shall be
to substantially the same condition of the Base Building, Landlord's Work,
and the Common Areas prior to the casualty, except for modifications required
by zoning and building codes and other laws or by the holder of a mortgage on
the Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, Tenant shall repair any injury or
damage to the Tenant Improvements and the Original Improvements installed in
the Premises and shall return such Tenant Improvements and Original
Improvements to their original condition. Prior to the commencement of
construction, Tenant shall submit to Landlord, for Landlord's review and
approval, all plans, specifications and working drawings relating thereto,
and Landlord shall reasonably approve the contractors to perform such
improvement work. If such fire or other casualty shall have damaged the
Premises, or Common Areas which render the Premises unfit of occupancy for
the purposes permitted under this Lease, Landlord shall allow Tenant a
proportionate abatement of Rent during the time and to the extent the
Premises are unfit for occupancy for the purposes permitted under this Lease,
and not occupied for the conduct of business by Tenant as a result thereof.
Tenant's right to rent abatement pursuant to the preceding sentence shall
continue until Tenant has been provided a reasoable period to rebuild the
portion of the Premises it is required to rebuild under this Article 11
(subject to Force Majeure), to install Tenant's property, furniture,
fixtures, and equipment, and to move in over one (1) weekend.
11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of Section
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of discovery of the damage, such notice to include a termination date
giving Tenant one hundred twenty(120) days to vacate the Premises, but Landlord
may so elect only if the Building or Project shall be damaged by fire or other
casualty or cause, whether or not the Premises are affected, Landlord terminates
the leases of all tenants of the Building that are affected by the casualty in a
manner similar to Tenant, and one or more of the following conditions is
present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be
completed within three hundred sixty and (360) days after the date of discovery
of the damage (when such repairs are made without the payment of overtime or
other premiums); (ii) except for an amount not to exceed the "Threshold Amount,"
as that term is defined below, the damage is not fully covered by Landlord's
insurance policies; or (iii) the damage occurs during the last nine (9) months
of the Lease Term. Notwithstanding the foregoing, if Landlord does not elect to
terminate this Lease pursuant to Landlord's termination right as provided above,
and the repairs cannot, in the reasonable opinion of Landlord, be completed
within three hundred sixty and (360) days after being commenced, Tenant may
elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than 120
days after the date such notice is given by Tenant. For purposes of this
Section 11.2, the "THRESHOLD AMOUNT" shall equal $2,000,000.00.
11.3 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.
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ARTICLE 12
NONWAIVER
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. Except as provided in Section 16, no receipt of monies by
Landlord from Tenant after the termination of this Lease shall in any way alter
the length of the Lease Term or of Tenant's right of possession hereunder, or
after the giving of any notice shall reinstate, continue or extend the Lease
Term or affect any notice given Tenant prior to the receipt of such monies, it
being agreed that after the service of notice or the commencement of a suit, or
after final judgment for possession of the Premises, Landlord may receive and
collect any Rent due, and the payment of said Rent shall not waive or affect
said notice, suit or judgment.
ARTICLE 13
CONDEMNATION
If the whole or any material part of the Premises, Building or Project
shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if Landlord shall
grant a deed or other instrument in lieu of such taking by eminent domain or
condemnation, provided that Landlord terminates all of the leases of all tenants
of the Building that are affected by the taking (or a deed or other instrument
in lieu thereof) in a manner comparable to Tenant, Landlord shall have the
option to terminate this Lease effective as of the date possession is required
to be surrendered to the authority. If more than twenty-five percent (25%) of
the rentable square feet of the Premises is taken, or if access to the Premises
is substantially impaired, in each case for a period in excess of one hundred
eighty (180) days, Tenant shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation because of such taking and
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant's personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the terms of this Lease, and for moving expenses, provided in each
event that such claim by Tenant is payable to Tenant or is otherwise separately
identifiable, and provided further that if the recovery from the condemnor shall
be paid into a common fund or paid to Landlord only, so long as amounts are
specifically designated as payment for claims which are due Tenant pursuant to
the terms of this Article 13. In addition, Tenant shall be entitled to 50% of
the bonus value of this Lease (which bonus value shall be equal to the
difference between the Rent payable under this Lease and the sum established by
the condemning authority as the award for compensation for the leasehold
estate). All Rent shall be apportioned as of the date of such termination. If
any part of the Premises shall be taken, and this Lease shall not be so
terminated, the Rent shall be proportionately abated. Tenant hereby waives any
and all rights it might otherwise have pursuant to Section 1265.130 of The
California Code of Civil Procedure. Notwithstanding anything to the contrary
contained in this Article 13, in the event of a temporary taking of all or any
portion of the Premises for a period of one hundred and eighty (180) days or
less, then this Lease shal not terminate but the Base Rent and the Additional
Rent shall be abated for the period of such taking in proportion to the ratio
that the amount of rentable square feet of the
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Premises taken bears to the total rentable square feet of the Premises.
Landlord shall be entitled to receive the entire award made in connection
with any such temporary taking.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder,
sublet the Premises or any part thereof, or enter into any license or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as
"TRANSFERS" and any person to whom any Transfer is made or sought to be made is
hereinafter sometimes referred to as a "TRANSFEREE"). If Tenant desires
Landlord's consent to any Transfer, Tenant shall notify Landlord in writing,
which notice (the "TRANSFER NOTICE") shall include (i) the proposed effective
date of the Transfer, which shall not be less than thirty (30) days nor more
than two hundred seventy (270) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be transferred (the
"SUBJECT SPACE"), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the "Transfer Premium", as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer, (iv)
current financial statements of the proposed Transferee certified by an officer,
partner or owner thereof, business credit and personal references and history of
the proposed Transferee and any other information required by Landlord which
will enable Landlord to determine the financial responsibility, character, and
reputation of the proposed Transferee, nature of such Transferee's business and
proposed use of the Subject Space and (v) an executed estoppel certificate from
Tenant in the form attached hereto as Exhibit E. Any Transfer made without
Landlord's prior written consent shall, at Landlord's option, be null, void and
of no effect, and shall, at Landlord's option, constitute a default by Tenant
under this Lease. Whether or not Landlord consents to any proposed Transfer,
Tenant shall pay Landlord's review and processing fees, as well as any
reasonable professional fees (including, without limitation, attorneys',
accountants', architects', engineers' and consultants' fees) incurred by
Landlord, within thirty (30) days after written request by Landlord, provided
that (I) in no event shall such fees and costs exceed $2,500.00 for a Transfer,
and (II) no such fees and costs shall be due in connection with an assignment or
sublease which does not require the consent of Landlord pursuant to the terms of
this Article 14.
14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Landlord shall grant or deny its
consent to a proposed Transfer within ten (10) business days following the date
Landlord receives the Transfer Notice. Any denial of Landlord's consent shall
be accompanied by a statement indicating the reasonable grounds upon which
Landlord denied such consent. In the event that Landlord shall fail to grant or
deny its consent within the foregoing ten (10) business day period, and shall
fail to grant or deny its consent within three (3) business days following
receipt of notice thereof from Tenant, Landlord's consent shall be deemed
granted. Without limitation as to other reasonable grounds for withholding
consent, the parties hereby agree that it shall be reasonable under this Lease
and under any applicable law for Landlord to withhold consent to any proposed
Transfer where one or more of the following apply:
14.2.1 The Transferee is of a character or reputation or engaged
in a business which is not consistent with the quality of the Building or the
Project;
14.2.2 The Transferee intends to use the Subject Space for
purposes which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
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14.2.4 The Transferee is not a party of reasonable financial
worth and/or financial stability in light of the responsibilities to be
undertaken in connection with the Transfer on the date consent is requested;
14.2.5 The proposed Transfer would cause a violation of another
lease for space in the Project, or would give an occupant of the Project a right
to cancel its lease; or
14.2.6 Either the proposed Transferee, or any person or entity
which directly or indirectly, controls, is controlled by, or is under common
control with, the proposed Transferee, occupies space in the Project at the time
of the request for consent and Landlord has space in the Building which is
reasonably sufficient to satisfy the proposed Transferee's requirements,
provided that the terms of this Section 14.2.6 shall be inapplicable in
connection with a proposed sublease to be entered into by Tenant during the last
eighteen (18) months of the Lease Term which is for a term (inclusive of
renewals) of eighteen (18) months or less.
If Landlord consents to any Transfer pursuant to the terms of this
Section 14.2 (and does not exercise any recapture rights Landlord may have under
Section 14.4 of this Lease), Tenant may within six (6) months after Landlord's
consent, but not later than the expiration of said six-month period, enter into
such Transfer of the Premises or portion thereof, upon substantially the same
terms and conditions as are set forth in the Transfer Notice furnished by Tenant
to Landlord pursuant to Section 14.1 of this Lease, provided that if there are
any material changes in the terms and conditions from those specified in the
Transfer Notice (i) such that Landlord would initially have been entitled to
refuse its consent to such Transfer under this Section 14.2, or (ii) which would
cause the proposed Transfer to be more materially favorable to the Transferee
than the terms set forth in Tenant's original Transfer Notice (and Landlord
retains or based upon the changes would retain a right of recapture pursuant to
Section 14.4 of this Lease), Tenant shall again submit the Transfer to Landlord
for its approval and other action under this Article 14 (including Landlord's
right of recapture, if any, under Section 14.4 of this Lease).
14.3 TRANSFER PREMIUM. If Landlord consents to a Transfer, as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
to Landlord fifty percent (50%) of any "Transfer Premium," as that term is
defined in this Section 14.3, received by Tenant from such Transferee.
"TRANSFER PREMIUM" shall mean all rent, additional rent or other consideration
payable by such Transferee in connection with the Transfer in excess of the Rent
and Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, after deducting the reasonable expenses (the "TRANSFER COSTS")
incurred by Tenant for (i) any changes, alterations and improvements to the
Premises in connection with the Transfer, (ii) any free base rent reasonably
provided to the Transferee, (iii) any reasonable brokerage commissions and
attorneys fees incurred in connection with the Transfer, (iv) marketing costs;
(v) attorneys' fees paid by Tenant to Landlord in connection with the Transfer,
(vi) tenant improvement allowances granted in connection with the Transfer,
(vii) free rent and concessions granted to the Transferee, and (viii) the amount
of Base Rent and Additional Rent paid by Tenant to Landlord with respect to the
Subject Space during the period commencing on the later of (A) the date Tenant
contracts with a reputable broker to market the Subject Space, and (B) the date
Tenant vacates the Subject Space, until the commencement of the term of the
Transfer. The Transfer Costs shall also be deemed to include the value of any
permanently affixed improvements in the Subject Space which were paid for by
Tenant (specifically excluding any improvements in the Subject Space funded by
Landlord as part of the Tenant Improvement Allowance). "Transfer Premium" shall
also include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer, and
any payment in excess of fair market value for services rendered by Tenant to
Transferee or for assets, fixtures, inventory, equipment, or furniture
transferred by Tenant to Transferee in connection with such Transfer. Tenant
shall not artificially structure any Transfer as a subterfuge in order to
intentionally circumvent the provisions of this Section 14.3. Tenant shall be
required to pay Landlord its portion of any Transfer Premium on a monthly basis
when received by Tenant, provided that Tenant shall be entitled to recover all
of its Transfer Costs prior to owing to Landlord any Transfer Premium pursuant
to the terms of this Section 14.3.
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14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything
to the contrary contained in this Article 14, in the event Tenant contemplates a
Transfer (specifically excluding an assignment or sublease under Section 14.8 of
this Lease) of a full floor or more of the Premises for a period in excess of
eighteen (18) months, Tenant shall give Landlord notice (the "INTENTION TO
TRANSFER NOTICE") of such contemplated Transfer (whether or not the contemplated
Transferee or the terms of such contemplated Transfer have been determined).
The Intention to Transfer Notice shall specify the portion of and amount of
rentable square feet of the Premises which Tenant intends to Transfer (the
"CONTEMPLATED TRANSFER SPACE"), the contemplated date of commencement of the
Contemplated Transfer (the "CONTEMPLATED EFFECTIVE DATE"), and the contemplated
length of the term of such contemplated Transfer, and shall specify that such
Intention to Transfer Notice is delivered to Landlord pursuant to this Section
14.4 in order to allow Landlord to elect to recapture the Contemplated Transfer
Space for the term set forth in the Intention to Transfer Notice. Thereafter,
Landlord shall have the option, by giving written notice to Tenant within thirty
(30) days after receipt of any Intention to Transfer Notice, to recapture the
Contemplated Transfer Space. Such recapture shall cancel and terminate this
Lease with respect to such Contemplated Transfer Space as of the Contemplated
Effective Date until the last day of the term of the contemplated Transfer as
set forth in the Intention to Transfer Notice. In the event of a recapture by
Landlord, if this Lease shall be canceled with respect to less than the entire
Premises, the Rent reserved herein shall be prorated on the basis of the number
of rentable square feet retained by Tenant in proportion to the number of
rentable square feet contained in the Premises, and this Lease as so amended
shall continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same. Landlord
shall be responsible for installing, at its cost, any demising wall and other
improvements necessary to separate the recaptured space from the balance of the
Premises. If Landlord declines, or fails to elect in a timely manner, to
recapture such Contemplated Transfer Space under this Section 14.4, then,
subject to the other terms of this Article 14, for a period of nine (9) months
(the "NINE MONTH PERIOD") commencing on the last day of such sixty (60) day
period, Landlord shall not have any right to recapture the Contemplated Transfer
Space with respect to any Transfer made during the Nine Month Period, provided
that any such Transfer is substantially on the terms set forth in the Intention
to Transfer Notice; provided however, that any such Transfer shall be subject to
the remaining terms of this Article 14. If such a Transfer is not so
consummated within the Nine Month Period (or if a Transfer is so consummated,
then upon the expiration of the term of any Transfer of such Contemplated
Transfer Space consummated within such Nine Month Period), Tenant shall again be
required to submit a new Intention to Transfer Notice to Landlord with respect
any contemplated Transfer, as provided above in this Section 14.4.
14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the
terms and conditions of this Lease shall in no way be deemed to have been waived
or modified, (ii) such consent shall not be deemed consent to any further
Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer, (iv) Tenant shall furnish upon
Landlord's request a complete statement, setting forth in detail the computation
of any Transfer Premium Tenant has derived and shall derive from such Transfer,
and (v) no Transfer relating to this Lease or agreement entered into with
respect thereto, whether with or without Landlord's consent, shall relieve
Tenant or any guarantor of the Lease from any liability under this Lease,
including, without limitation, in connection with the Subject Space (except to
the extent Landlord exercises its right of recapture, as set forth in Section
14.4 of this Lease). Landlord or its authorized representatives shall have the
right at all reasonable times to audit the books, records and papers of Tenant
relating to any Transfer, and shall have the right to make copies thereof. If
the Transfer Premium respecting any Transfer shall be found understated, Tenant
shall, within thirty (30) days after demand, pay the deficiency, and if
understated by more than three percent (3%), Tenant shall pay Landlord's costs
of such audit.
14.6 ADDITIONAL TRANSFERS. For purposes of this Lease, the term
"TRANSFER" shall also include (i) if Tenant is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of fifty percent (50%) or
more of the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held
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corporation (I.E., whose stock is not publicly held and not traded through an
exchange or over the counter), (A) the dissolution, merger, consolidation or
other reorganization of Tenant or (B) the sale or other transfer of an
aggregate of fifty percent (50%) or more of the voting shares of Tenant
(other than to immediate family members by reason of gift or death), within a
twelve (12)-month period, or (C) the sale, mortgage, hypothecation or pledge
of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.
14.7 OCCURRENCE OF DEFAULT. Any Transfer hereunder shall be
subordinate and subject to the provisions of this Lease, and if this Lease shall
be terminated during the term of any Transfer, Landlord shall have the right to
treat such Transfer as canceled and repossess the Subject Space by any lawful
means unless Landlord has contractually agreed to recognize the sublessee. Upon
the occurrence of a Triggering Default, Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant's obligations under this Lease) until
such default is cured. Such Transferee shall rely on any representation by
Landlord that Tenant is in default hereunder, without any need for confirmation
thereof by Tenant. Upon any assignment, the assignee shall assume in writing
all obligations and covenants of Tenant thereafter to be performed or observed
under this Lease. No collection or acceptance of rent by Landlord from any
Transferee shall be deemed a waiver of any provision of this Article 14 or the
approval of any Transferee or a release of Tenant from any obligation under this
Lease, whether theretofore or thereafter accruing. In no event shall Landlord's
enforcement of any provision of this Lease against any Transferee be deemed a
waiver of Landlord's right to enforce any term of this Lease against Tenant or
any other person. If Tenant's obligations hereunder have been guaranteed,
Landlord's consent to any Transfer shall not be effective unless the guarantor
also consents to such Transfer.
14.8 NON-TRANSFERS. Notwithstanding anything to the contrary contained
in this Lease, neither (i) an assignment to a transferee of all or substantially
all of the assets of Tenant, (ii) an assignment of the Premises to a transferee
which is the resulting entity of a merger or consolidation of Tenant with
another entity, nor (iii) an assignment or subletting of all or a portion of the
Premises to an affiliate of Tenant (an entity which is controlled by, controls,
or is under common control with, Tenant), shall be deemed a Transfer under
ARTICLE 14 of this Lease, provided that Tenant notifies Landlord of any such
assignment or sublease and promptly supplies Landlord with any documents or
information reasonably requested by Landlord regarding such transfer or
transferee as set forth in items (i) through (iii) above, that such assignment
or sublease is not a subterfuge by Tenant to avoid its obligations under this
Lease. "CONTROL," as used in this SECTION 14.8, shall mean the ownership,
directly or indirectly, of at least fifty-one percent (51%) of the voting
securities of, or possession of the right to vote, in the ordinary direction of
its affairs, of at least fifty-one percent (51%) of the voting interest in, any
person or entity.
14.9 PERMITTED OCCUPANTS. Notwithstanding any contrary provision of
this Article 14, Tenant shall have the right without the payment of a Transfer
Premium and without the receipt of Landlord's consent, but on prior written
notice to Landlord, to sublease, license, or otherwise grant rights of occupancy
or up to ten percent (10%) of the rentable square footage of the Premises, in
the aggregate, to attorneys, accountants, agents or other professionals on and
subject to the following conditions: (i) such individuals or entities shall not
be permitted to occupy a separately demised portion of the Premises which
contains an entrance to such portion of the Premises other than the primary
entrance to the Premises; (ii) all such individuals or entities shall be of a
character and reputation consistent with the quality of the Building and the
Project; and (iii) such occupancy shall not be a subterfuge by Tenant to avoid
its obligations under this Lease or the restrictions on Transfers pursuant to
this Article 14. Tenant shall promptly supply Landlord with any documents or
information reasonably requested by Landlord regarding any such occupancy. Any
occupancy permitted under this Section 14.9 shall not be deemed a Transfer
under this Article 14. Notwithstanding the foregoing, no such occupancy shall
relieve Tenant from any liability under this Lease.
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ARTICLE 15
SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES
15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any
agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such
intent is specifically acknowledged in writing by Landlord. The delivery of
keys to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord, and notwithstanding
such delivery Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises or terminate any or all
such .
15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15, quit and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear, repairs which are specifically made the responsibility of Landlord
hereunder, and casualty excepted. Upon such expiration or termination, Tenant
shall, without expense to Landlord, remove or cause to be removed from the
Premises all debris and rubbish, and such items of furniture, equipment,
business and trade fixtures, free-standing cabinet work, movable partitions and
other articles of personal property owned by Tenant or installed or placed by
Tenant at its expense in the Premises, and such similar articles of any other
persons claiming under Tenant, and Tenant shall repair at its own expense all
damage to the Premises and Building resulting from such removal. Landlord
acknowledges, consents and agrees that all improvements within the Premises,
including the Tenant Improvements and all Alterations, and all furniture, trade
fixtures, and equipment installed in or on or located in or about the Premises
by Tenant, whether affixed to the Premises or otherwise (the "TRADE FIXTURES"),
shall be and all times remain the sole property of Tenant (whether or not the
cost of same was reimbursed by Landlord), but if not removed at the expiration
of the Lease Term the Tenant Improvements and all Alterations shall
automatically become Landlord's property. The Alterations (but not the Tenant
Improvements) and the Trade Fixtures may be removed by Tenant (or any equipment
lessor or lender of Tenant) at any time during the Lease Term prior to the
expiration or earlier termination thereof, whether or not such items would be
otherwise regarded as property of Landlord by operation of law or otherwise.
Tenant, at its expense, shall repair any damage to the Premises or the Project
caused by such removal.
ARTICLE 16
HOLDING OVER
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Rent shall
be payable at a monthly rate equal to one hundred twenty-five (125%) of the Rent
applicable during the last rental period of the Lease Term under this Lease for
the first one hundred twenty (120) days of any such holdover, and one hundred
fifty percent (150%) thereafter. Such month-to-month tenancy shall be subject
to every other applicable term, covenant and agreement contained herein.
Nothing contained in this Article 16 shall be construed as consent by Landlord
to any holding over by Tenant, and Landlord expressly reserves the right to
require Tenant to surrender possession of the Premises to Landlord as provided
in this Lease upon the expiration or other termination of this Lease. The
provisions of this Article 16 shall not be deemed to limit or constitute a
waiver of any other rights or remedies of Landlord provided herein or at law.
If Tenant fails to surrender the Premises upon the termination or expiration of
this Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall protect, defend, indemnify and hold Landlord harmless from all
loss,
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costs (including reasonable attorneys' fees) and liability resulting from
such failure, including, without limiting the generality of the foregoing,
any claims made by any succeeding tenant founded upon such failure to
surrender and any lost profits to Landlord resulting therefrom.
ARTICLE 17
ESTOPPEL CERTIFICATES
Within ten (10) business days following a request in writing by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord an estoppel
certificate, which, as submitted by Landlord, shall be substantially in the form
of EXHIBIT E, attached hereto (or such other form as may be reasonably required
by any prospective mortgagee or purchaser of the Project, or any portion
thereof), indicating therein any exceptions thereto that may exist at that time,
and shall also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Any such certificate may be
relied upon by any prospective mortgagee or purchaser of all or any portion of
the Project. Within ten (10) business days following request by Tenant,
Landlord shall deliver an estoppel certificate in substantially the form
attached hereto as EXHIBIT E (with such changes as are reasonably required in
order to reflect that the same shall be executed by Landlord in favor of Tenant
rather than Tenant in favor of Landlord), or such other form as may be
reasonably requested by Tenant or a purchaser or lender of Tenant, indicating
therein any exceptions thereto that may exist at that time. At any time during
the Lease Term, if Tenant is not a public company reporting under applicable
federal securities laws, Landlord may require Tenant to provide Landlord with a
current financial statement and financial statements of the two (2) years prior
to the current financial statement year. Failure of Tenant to timely execute,
acknowledge and deliver such estoppel certificate or other instruments shall
constitute an acceptance of the Premises and an acknowledgment by Tenant that
statements included in the estoppel certificate are true and correct, without
exception.
ARTICLE 18
SUBORDINATION
Subject to the terms of this Article 18, this Lease shall be subject and
subordinate to all present and future ground or underlying leases of the
Building or Project and to the lien of any mortgage, trust deed or other
encumbrances now or hereafter in force against the Building or Project or any
part thereof, if any, and to all renewals, extensions, modifications,
consolidations and replacements thereof, and to all advances made or hereafter
to be made upon the security of such mortgages or trust deeds, unless the
holders of such mortgages, trust deeds or other encumbrances, or the lessors
under such ground lease or underlying leases, require in writing that this Lease
be superior thereto. Landlord agrees to provide Tenant with commercially
reasonable non-disturbance agreements in favor of Tenant, from any ground
lessors, mortgage holders or lien holders of Landlord acquiring or modifying
such interests at any time subsequent to the execution and delivery of the Lease
in consideration of, and as a condition precedent to, Tenant's agreement to be
bound by Section 18 of the Lease. Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any such mortgage or deed in lieu
thereof (or if any ground lease is terminated), to attorn, to the lienholder or
purchaser or any successors thereto upon any such foreclosure sale or deed in
lieu thereof (or to the ground lessor), if so requested to do so by such
purchaser or lienholder or ground lessor, and to recognize such purchaser or
lienholder or ground lessor as the lessor under this Lease, provided such
lienholder or purchaser or ground lessor shall agree to accept this Lease and
not disturb Tenant's occupancy, so long as Tenant timely pays the rent and
observes and performs the terms, covenants and conditions of this Lease to be
observed and performed by Tenant. Landlord's interest herein may be assigned as
security at any time to any lienholder. Tenant shall, within ten (10) days of
request by Landlord, execute such further instruments or assurances as Landlord
may reasnably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases.
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ARTICLE 19
DEFAULTS; REMEDIES
19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within seven (7) days after written notice; or
19.1.2 Except where a specific time period is otherwise set forth
for Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this Section
19.1.2, any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a thirty (30) day period, Tenant shall
not be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default; or
19.1.3 To the extent permitted by law, a general assignment by
Tenant or any guarantor of this Lease for the benefit of creditors, or the
taking of any corporate action in furtherance of bankruptcy or dissolution
whether or not there exists any proceeding under an insolvency or bankruptcy
law, or the filing by or against Tenant or any guarantor of any proceeding under
an insolvency or bankruptcy law, unless in the case of a proceeding filed
against Tenant or any guarantor the same is dismissed within sixty (60) days, or
the appointment of a trustee or receiver to take possession of all or
substantially all of the assets of Tenant or any guarantor, unless possession is
restored to Tenant or such guarantor within thirty (30) days, or any execution
or other judicially authorized seizure of all or substantially all of Tenant's
assets located upon the Premises or of Tenant's interest in this Lease, unless
such seizure is discharged within sixty (60) days.
All notices to be given pursuant to this Section 19 shall be in
addition to, and not in lieu of, the notice requirements of California Code of
Civil Procedure Section 1161.
If Tenant disputes that any amount is due and payable by Tenant pursuant
to the Lease, Tenant shall have the right, without waiving any of its rights at
law or in equity, to pay any such amount under protest and thereafter to seek
recovery of all or any part thereof by Landlord.
19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of
default by Tenant, Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity (all of which remedies shall be
distinct, separate and cumulative), the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the Premises
and expel or remove Tenant and any other person who may be occupying the
Premises or any part thereof, without being liable for prosecution or any claim
or damages therefor; and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has
been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
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(iii) The worth at the time of award of the amount by
which the unpaid rent for the balance of the Lease Term after the time of
award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(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, specifically including but
not limited to, brokerage commissions and advertising expenses incurred,
expenses of remodeling the Premises or any portion thereof for a new
tenant, whether for the same or a different use, and any special
concessions made to obtain a new tenant; provided that to the extent any
new lease involves space other than the Premises or extends beyond the
then Lease Term, only those costs, expenses, commissions and concessions
attributable to the Premises or the remainder of the then Lease Term, as
determined on a straight line basis, shall be recoverable by Landlord;
and
(v) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to
time by applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the rate described in Article 25. As used in Paragraph
19.2.1(iii) above, the "worth at the time of award" 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%).
19.2.2 Landlord shall have the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee has the
right to sublet or assign, subject only to reasonable limitations).
Accordingly, if Landlord does not elect to terminate this Lease on account of
any default by Tenant, Landlord may, from time to time, without terminating this
Lease, enforce all of its rights and remedies under this Lease, including the
right to recover all rent as it becomes due.
19.2.3 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or
any law or other provision of this Lease), without prior demand or notice except
as required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
19.3 SUBLEASES OF TENANT. If Landlord elects to terminate this Lease
on account of any default by Tenant, as set forth in this ARTICLE 19, Landlord
shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and
affecting the Premises.
19.4 EFFORTS TO RELET. No re-entry or repossession, repairs,
maintenance, changes, alterations and additions, reletting, appointment of a
receiver to protect Landlord's interests hereunder, or any other action or
omission by Landlord shall be construed as an election by Landlord to terminate
this Lease or Tenant's right to possession, or to accept a surrender of the
Premises, nor shall same operate to release Tenant in whole or in part from any
of Tenant's obligations hereunder, unless express written notice of such
intention is sent by Landlord to Tenant. The foregoing shall not constitute a
waiver of any of Tenant's rights under applicable law, all of which are hereby
expressly reserved.
19.5 LANDLORD DEFAULT. Landlord shall not be in default in the
performance of any obligation required to be performed by Landlord pursuant to
this Lease unless Landlord fails to perform such obligation within thirty (30)
days after the receipt of notice from Tenant specifying in detail Landlord's
failure to perform; provided, however, if the nature of Landlord's obligation is
such that more than thirty (30) days are required for its performance, then
Landlord shall not
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be in default under this Lease if it shall commence such performance within
such thirty (30) day period, and thereafter diligently pursue the same to
completion. Upon any such default by Landlord under this Lease, Tenant may,
except as otherwise specifically provided in this Lease to the contrary,
exercise any of its rights provided at law or in equity.
ARTICLE 20
COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by any persons lawfully claiming by or through Landlord.
ARTICLE 21
LETTER OF CREDIT
21.1 LETTER OF CREDIT. Tenant shall deliver to Landlord concurrently
with the parties' full execution and unconditional delivery of this Lease, an
unconditional, clean, irrevocable letter of credit (the "L-C") in the initial
amount of $400,607.10, which L-C shall be issued by a money-center bank (a bank
which accepts deposits, maintains accounts, has a local Los Angeles office
which will negotiate a letter of credit, and whose deposits are insured by the
FDIC) reasonably acceptable to Landlord, and which L-C shall be substantially
in form and content as set forth in EXHIBIT J attached hereto. Tenant shall
pay all expenses, points and/or fees incurred by Tenant in obtaining the L-C.
21.2 APPLICATION OF THE L-C. The L-C shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants,
and conditions of this Lease to be kept and performed by Tenant during the
Lease Term. The L-C shall not be mortgaged, assigned or encumbered in any
manner whatsoever by Tenant without the prior written consent of Landlord. If
Tenant defaults with respect to any provisions of this Lease, including, but
not limited to, the provisions relating to the payment of Rent, or if Tenant
fails to renew the L-C at least thirty (30) days before its expiration,
Landlord may, but shall not be required to, draw upon all or any portion of the
L-C for payment of any Rent or any other sum in default, or for the payment of
any amount that Landlord may reasonably spend or may become obligated to spend
by reason of Tenant's default, or to compensate Landlord for any other loss or
damage that Landlord may suffer by reason of Tenant's default. The use,
application or retention of the L-C, or any portion thereof, by Landlord shall
not (a) prevent Landlord from exercising any other right or remedy provided by
this Lease or by law, it being intended that Landlord shall not first be
required to proceed against the L-C, nor (b) operate as a limitation on any
recovery to which Landlord may otherwise be entitled. Any amount of the L-C
which is drawn upon by Landlord, but is not used or applied by Landlord, shall
be held by Landlord and deemed a security deposit (the "L-C SECURITY DEPOSIT").
If any portion of the L-C is drawn upon or if any portion of the L-C Security
Deposit is utilized, Tenant shall, within five (5) days after written demand
therefor, either (i) deposit cash with Landlord (which cash shall be applied by
Landlord to the L-C Security Deposit) in an amount sufficient to cause the sum
of the L-C Security Deposit and the amount of the remaining L-C to be
equivalent to the amount of the L-C then required under this Lease or (ii)
reinstate the L-C to the amount then required under this Lease, and Tenant's
failure to do so shall be a default under this Lease. Tenant acknowledges that
Landlord has the right to transfer or mortgage its interest in the Building and
the Project and in this Lease and Tenant agrees that in the event of any such
transfer or mortgage, Landlord shall have the right to transfer or assign the
L-C Security Deposit and/or the L-C to the transferee or mortgagee, and in the
event of such transfer, Tenant shall look solely to such transferee or
mortgagee for the return of the L-C Security Deposit and/or the L-C. If Tenant
is not in default under this Lease beyond the applicable cure period provided
in this Lease as of each applicable "Reduction Date", as set forth below, then
the amount of the L-C shall, as of such Reduction Date, be reduced to the
corresponding amount set forth below.
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<TABLE>
<CAPTION>
Reduction Date Letter of Credit Amount
-------------- -----------------------
<S> <C>
First day of 6th month of 2nd $301,906.80
Lease Year
First day of 5th Lease Year $200,303.55
First day of 12th month of 5th $98,700.30
Lease Year
</TABLE>
In the event that the L-C is not reduced as set forth above because
Tenant is in default of this Lease as of a Reduction Date and Tenant shall
thereafter cure such default, the L-C shall be reduced as set forth above upon
the first day of the month following the cure of such default by Tenant. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the L-C Security Deposit and/or the L-C, or any balance
thereof, shall be returned to Tenant within thirty (30) days following the
expiration of the Lease Term, or earlier termination of this Lease for any
reason other than a default by Tenant.
ARTICLE 22
INTENTIONALLY OMITTED
ARTICLE 23
SIGNS
23.1 FULL FLOORS. Subject to Landlord's prior written approval, in
its reasonable discretion, and provided all signs are in keeping with the
quality, design and style of the Building and Project, Tenant, if the Premises
comprise an entire floor of the Building (other than the ground floor of the
Building), at its sole cost and expense, may install identification signage
anywhere in the Premises including in the elevator lobby of the Premises,
provided that such signs must not be visible from the exterior of the Building.
23.2 MULTI-TENANT FLOORS. If other tenants occupy space on the floor
on which the Premises is located, Tenant's identifying signage shall be
provided by Landlord, at Tenant's cost, and such signage shall be comparable to
that used by Landlord for other similar floors in the Building and shall comply
with Landlord's Building standard signage program.
23.3 PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos,
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at
the sole expense of Tenant. Tenant may not install any signs on the exterior
or roof of the Project or the Common Areas. Any signs, window coverings, or
blinds (even if the same are located behind the Landlord-approved window
coverings for the Building), or other items visible from the exterior of the
Premises or Building, shall be subject to the prior approval of Landlord, in
its sole discretion.
23.4 BUILDING DIRECTORY. A building directory will be located in the
lobby of the Building. Tenant shall have the right to designate names to be
displayed under Tenant's entry in such directory at a rate of one (1) strip for
each one thousand (1,000) rentable square feet of the Premises.
23.5 TENANT'S SIGNAGE. Tenant shall be entitled to install the
following signage, at Tenant's sole cost and expense (collectively "TENANT'S
SIGNAGE"):
(i) The exclusive right to up to one (1) sign on each side on
the Building located, at Tenant's option, either (a) at the top of the Building
between the 5th floor windows and the roofline approximately in the location
designated as "1" on Exhibit F attached to this Lease or (b) on the vertical
surface of the mechanical penthouse of the Building (in either event, the
"BUILDING TOP SIGNS");
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(ii) At Tenant's option, either (a) an exclusive monument sign
adjacent to one (1) of the columns designated as "3" on Exhibit F, attached to
this Lease (but extending no more than five feet toward the Building
driveways), or (b) a sign to be located on or around the corner of the second
floor facade or protruding perpendicular to the facade, at the location
designated as "2" on Exhibit F, attached to this Lease; and
(iii) In the event that Tenant installs a reception area on the
portion of the Premises located on the ground floor of the Building, Tenant may
install identification signage adjacent to its doors to the Premises on the
ground floor, provided that the same shall be acceptable to Landlord, in
Landlord's reasonable discretion.
Notwithstanding the foregoing, (a) the location of Tenant's Signage
shall be consistent with Exhibit F and otherwise reasonably acceptable to
Landlord and Tenant, (b) the size, materials, design, graphics, color,
illumination and specifications of Tenant's Signage shall be subject to
Landlord's approval, which approval shall not be unreasonably withheld
(provided that the graphics, color, and design of Tenant's existing logo are
hereby approved and Landlord hereby agrees that the Building Top Signs and the
sign referenced in Section 23.5(b)(ii), if applicable, may be illuminated); (c)
Tenant's Signage shall comply with all applicable governmental rules and
regulations; (d) Tenant's Signage shall be personal to the Original Tenant and
a Permitted Assignee and (e) Tenant's right to the Building Top Signs shall
terminate in the event that Tenant occupies less than two (2) full floors of
the Building and Landlord delivers a factually correct notice that Landlord has
granted Building top signage rights to another tenant of the Building (which
tenant occupies more rentable square footage of the Building than does Tenant).
Tenant's Signage may, at Tenant's option, include Tenant's name and/or logo.
Tenant shall be responsible for all costs incurred by Tenant in connection with
the design, construction, installation, illumination, maintenance and repair of
Tenant's Signage. Subject to Landlord's reasonable needs in connection with
renovations of and/or in connection with the repair and maintenance of the
Building or Project, Landlord shall not (x) affix any structures to the
Building or Project which will materially obstruct the visibility of Tenant's
Signage, and (y) permit landscaping on the Project to materially obstruct the
visibility of Tenant's Signage. Upon the expiration or earlier termination of
Tenant's rights to Tenant's Signage or upon the expiration of the Lease Term,
Tenant shall, at its sole cost and expense, remove Tenant's Signage and repair
any and all damage to the Building and Project caused by such removal. In the
event Tenant fails to comply with the terms of the proceeding sentence,
Landlord shall have the right, at Tenant's sole cost and expense after 30 days'
advance written notice, to remove Tenant's Signage and to repair any and all
damage to the Building caused by such removal.
23.6 RESTRICTIONS ON LANDLORD'S GRANTING OF EYEBROW SIGNAGE. Prior to
the occurrence of a Triggering Default, Landlord hereby agrees that Landlord
shall not permit any "Prohibited Tenant," as that term is defined, below, to
construct or install eyebrow signage on the Building, provided, however, that
(a) in no event shall any eyebrow signage installed following the date hereof
be located within twenty-seven (27) lineal feet from the corner of the Building
designated as "2" on Exhibit F, attached hereto, and (b) in no event shall the
terms of this Section 23.6 or any other provision of this Article 23 prohibit
the existing signage maintained at the Project by Gruen Associates.
Notwithstanding anything in this Section 23.6 to the contrary, in no event
shall Landlord be permitted to install in excess of two (2) eyebrow signs on
the side of the Building facing San Vicente Boulevard. For purposes of this
Section 23.6, a "PROHIBITED TENANT" shall mean a tenant of the Building that
(i) is located above the ground floor of the Building, and (ii) leases less
than 10,000 rentable square feet of space.
23.7 MULTI-TENANT MONUMENT. Landlord may maintain its existing
signage located on the wall adjacent to the Building entrance, or at Landlord,
option, install a multi-tenant monument at the Project (in either event, the
"MONUMENT SIGN"), provided that the Original Tenant or a Permitted Assignee
only shall be entitled to have its name on such Monument Sign. So long as
Tenant maintains the right to the Building Top Signs in accordance with the
terms of this Article 23, Tenant's signage on the Monument Sign shall be
located at the top of such monument. Furthermore, in no event shall Tenant's
signage on the Monument Sign be located below a tenant of the Project which
occupies less rentable square footage in the Building than Tenant. Landlord
shall be responsible for the cost of the Monument Sign and Tenant shall be
responsible for the cost of Tenant's lettering thereon.
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23.8 RESTRICTIONS ON BUILDING NAME. Provided that no Triggering
Default exists, Landlord hereby acknowledges and agrees that in no event shall
the Building be named after another tenant of the Building or any other entity,
provided that the foregoing restriction upon Landlord shall be inapplicable in
the event that the tenant after whom the Building is to be named shall occupy
more rentable square footage in the Building than Tenant. The calculation of
the rentable square footage occupied by Tenant (or such other tenant or entity)
shall specifically exclude any portion of the Premises which is the subject of
a sublease by Tenant (or such other tenant or entity).
23.9 ADDITIONAL PROJECT SIGNAGE. Except with respect to (i)
Landlord's right to grant rights to signage on the top of the Building, to the
extent permitted pursuant to Section 23.5, above, (ii) eyebrow signage
permitted pursuant to Section 23.6, above, (iii) the Monument Sign, as
permitted pursuant to Section 23.7, above, (iv) signage required by Applicable
Law, (v) signage reasonably required by Landlord in connection with the
operation of the Project or any portion thereof, and (vi) commercially
reasonable signage indicating that the Project, or any portion thereof, is for
sale or for lease, Landlord shall not install any signage on the exterior of
the Building or Project.
ARTICLE 24
COMPLIANCE WITH LAW
Tenant shall not do anything or suffer anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated ("APPLICABLE LAWS"). Subject to Landlord's
obligations as set forth in this Article 24, at its sole cost and expense,
Tenant shall promptly comply with all such governmental measures which relate
to Tenant's use of the Premises, (ii) the Alterations and Tenant Improvements
(as to the Alterations and Tenant Improvements only but not as to any other
part of the Building triggered thereby, except as set forth in item (iii),
below), (iii) the Base Building, Building Systems and Building Structure, but
as to the Base Building, Building Structure and Building Systems, only to the
extent such obligations are triggered by Tenant's Tenant Improvements which are
not customary general office improvements, Tenant's Alterations which are not
customary general office improvements, or Tenant's non-general office use;
provided, however, that Tenant's obligation to comply with Applicable Laws
shall only apply to the extent Tenant's failure to comply therewith would (a)
prohibit Landlord or any tenant of the Building from obtaining or maintaining a
certificate of occupancy for all or any portion of the Building, (b)
unreasonably and materially affect the safety of any tenants, occupants,
invitees, employees or any other person at the Building, (c) impose an
unreasonable health hazard for any such persons, and/or (d) otherwise
materially adversely affect Landlord and/or the Building (items (a) through (d)
to be referred to herein as "TENANT'S COMPLIANCE CONDITIONS"). Should any
standard or regulation now or hereafter be imposed on Tenant by a state,
federal or local governmental body charged with the establishment, regulation
and enforcement of occupational, health or safety standards for employers,
employees, or tenants, then Tenant agrees, at its sole cost and expense, to
comply promptly with such standards or regulations. Subject to the foregoing
terms of this Article 24, and the terms of this Lease, Landlord shall, at its
sole cost and expense, comply with laws relating to items 1.2.3 and 1.2.4 of
Landlord's Work, the Base Building, Building Systems, Building Structure and
the Common Areas; provided, however, that Landlord's obligation to comply with
such Applicable Laws shall only apply to the extent that failure to comply with
therewith would (I) impose an unreasonable health hazard to the occupants of
the Premises, (II) prohibit Tenant from obtaining or maintaining a certificate
of occupancy for the Premises, (III) unreasonably and materially affect the
safety of any tenants, occupants, invitees, employees or any other person at
the Building, or (IV) otherwise materially adversely affect Tenant and/or the
Premises (items (I) through (IV) to be referred to herein is "LANDLORD'S
COMPLIANCE CONDITIONS"). Notwithstanding anything to the contrary set forth in
this Article 24, Tenant's and Landlord's obligation under this Article 24 shall
commence upon the Lease Commencement Date.
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ARTICLE 25
LATE CHARGES
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due more than once in a Lease Year, then Tenant shall pay to Landlord
a late charge equal to three and one half percent (3.5%) of the overdue amount.
The late charge shall be deemed Additional Rent and the right to require it
shall be in addition to all of Landlord's other rights and remedies hereunder
or at law and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner. In addition to the late charge described
above, any Rent or other amounts owing hereunder which are not paid within ten
(10) days after the date they are due shall bear interest from the date when
due until paid at a rate per annum (the "INTEREST RATE") equal to the lesser of
(i) the annual "Bank Prime Loan" rate cited in the Federal Reserve Statistical
Release Publication G.13(415), published on the first Tuesday of each calendar
month (or such other comparable index as Landlord and Tenant shall reasonably
agree upon if such rate ceases to be published) plus two (2) percentage points,
and (ii) the highest rate permitted by applicable law.
ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
26.1 LANDLORD'S CURE. All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. If Tenant shall fail to perform
any obligation under this Lease, and such failure shall continue in excess of
the time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided
to the contrary in this Lease, Tenant shall pay to Landlord, within thirty (30)
days following demand by Landlord to Tenant, sums equal to expenditures
reasonably made and obligations incurred by Landlord in connection with the
remedying by Landlord of Tenant's defaults pursuant to the provisions of
Section 26.1. Tenant's obligations under this Section 26.2 shall survive the
expiration or sooner termination of the Lease Term.
ARTICLE 27
ENTRY BY LANDLORD
Landlord reserves the right at all reasonable times and upon
reasonable notice to Tenant (except in the case of an emergency) to enter the
Premises to (i) inspect them; (ii) show the Premises to prospective purchasers,
mortgagees or, during the last nine (9) months of the Lease Term (provided
Tenant has not exercised its right to lease the Premises during an Option
Term), tenants, or to current or prospective mortgagees, ground or underlying
lessors or insurers; (iii) post notices of nonresponsibility; or (iv) make
repairs to the Premises (to the extent permitted pursuant to the terms of this
Lease) or to the Building or the Building's systems and equipment.
Notwithstanding anything to the contrary contained in this Article 27, Landlord
may enter the Premises at any time to (A) perform services required of
Landlord, including janitorial service; (B) take possession due to any breach
of this Lease in the manner provided herein; and (C) perform any covenants of
Tenant which Tenant fails to perform. Any such entries shall be performed by
Landlord as expeditiously as reasonably possible and in a manner so as to
minimize any interference with the conduct of Tenant's business. Landlord may
make any such entries and may take such reasonable steps as required to
accomplish the stated purposes. For each of the above purposes, Landlord shall
at all times have a key with which to unlock all the doors in the Premises,
excluding Tenant's vaults, safes and special security areas designated in
advance by Tenant. In an emergency, Landlord shall have the right to use any
means that Landlord may deem proper to open the doors in and to the Premises.
No provision of this Lease
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shall be construed as obligating Landlord to perform any repairs, alterations
or decorations except as otherwise expressly agreed to be performed by Landlord
herein. Tenant may designate certain areas of the Premises as "Secured Areas"
should Tenant require such areas for the purpose of securing certain valuable
property or confidential information. Ladlord may not enter such Secured Areas
except in the case of emergency. In connection with the foregoing, Landlord
shall not enter such Secured Areas except in the event of an emergency.
Landlord need not clean any area designated by Tenant as a Secured Area and
shall only maintain or repair such secured areas to the extent (i) such repair
or maintenance is required in order to maintain and repair the Building
Structure and/or the Building Systems; (ii) as required by Applicable Law, or
(iii) in response to specific requests by Tenant and in accordance with a
schedule reasonably designated by Tenant, subject to Landlord's reasonable
approval.
ARTICLE 28
TENANT PARKING
28.1 IN GENERAL. Tenant may rent from Landlord, commencing on the
Lease Commencement Date, up to the amount of parking passes set forth in
Section 9 of the Summary, on a monthly basis throughout the Lease Term, which
parking passes shall pertain to the Project parking facility. Subject to the
foregoing, Tenant shall be entitled to increase or decrease the number of
parking passes rented by Tenant upon not less than thirty (30) days notice to
Landlord. Upon notice to Landlord prior to the Lease Commencement Date, Tenant
shall be entitled to lease any or all of the reserved parking spaces in the
locations designated on Exhibit G attached to this Lease. In the event that
Tenant shall fail to lease any of the reserved parking spaces designated on
Exhibit G, Tenant shall no longer have the right to lease the specific spaces
Tenant failed to so lease, provided that Tenant shall continue to have the
right to lease reserved parking spaces in the amount set forth in Section 9 of
the Summary. Tenant shall pay to Landlord for automobile parking passes on a
monthly basis the "Parking Charge," as that term is defined in Section 28.2,
below. The Parking Charge shall be inclusive of any taxes imposed by any
governmental authority in connection with the renting of such parking passes by
Tenant or the use of the parking facility by Tenant. Tenant's continued right
to use the parking passes is conditioned upon Tenant abiding by all rules and
regulations which are prescribed from time to time for the orderly operation
and use of the parking facility where the parking passes are located, including
any sticker or other identification system established by Landlord, Tenant's
cooperation in seeing that Tenant's employees and visitors also comply with
such rules and regulations and Tenant not being in default under this Lease.
Landlord specifically reserves the right to change the size, configuration,
design, layout and all other aspects of the Project parking facility at any
time and Tenant acknowledges and agrees that Landlord may, on a temprary basis
or in connection with Landlord's compliance with applicable laws, without
incurring any liability to Tenant and without any abatement of Rent under this
Lease (except as specifically set forth in Section 6.3 of this Lease), to the
extent reasonably required, from time to time, close-off or restrict access to
the Project parking facility for purposes of permitting or facilitating any
such construction, alteration or improvements. Landlord may delegate its
responsibilities hereunder to a parking operator in which case such parking
operator shall have all the rights of control attributed hereby to the
Landlord. The parking passes rented by Tenant pursuant to this Article 28 are
provided to Tenant solely for use by Tenant's own personnel and such passes may
not be transferred, assigned, subleased or otherwise alienated by Tenant
separate and apart from a transfer of Tenant's interest in this Lease, without
Landlord's prior approval. Tenant may validate visitor parking by such method
or methods as the Landlord may establish, at the validation rate from time to
time generally applicable to visitor parking, provided that (a) in no event
shall such rate exceed that charged by landlords of the Comparable Buildings,
and (b) visitors parking in the Project parking facility who enter and exit
such facility within a ten (10) minute period shall not be charged.
28.2 PARKING CHARGE FOR UNRESERVED PASSES. The parking charge (the
"PARKING CHARGE") payable by Tenant with respect to the unreserved passes
leased by Tenant shall be as follows: (i) during the first Lease Year of the
initial Lease Term, the Parking Charge payable by Tenant shall equal Sixty and
No/100 Dollars ($60.00) per month for each of the "Discounted Parking Passes,"
as that term is defined in Section 28.3.1, below, rented by Tenant, and Seventy
and No/100 Dollars ($70.00) for each of the "Undiscounted Parking Passes," as
that term is
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defined in Section 28.3.1, below, rented by Tenant; (ii) during the second
Lease Year of the initial Lease Term, the Parking Charge payable by Tenant
shall equal Sixty and No/100 Dollars ($60.00) per month for each of the
Discounted Parking Passes rented by Tenant, and the prevailing rate charged by
Landlord (but in no event in excess of the prevailing parking rate charged by
landlords at the Comparable Buildings) (the "PREVAILING RATE") for each of the
Undiscounted Parking Passes rented by Tenant; (iii) during the third (3rd)
Lease Year of the initial Lease Term, the Parking Charge payable by Tenant
shall equal Seventy and No/100 Dollars ($70.00) per month for each of the
Discounted Parking Passes rented by Tenant, and the Prevailing Rate for each of
the Undiscounted Parking Passes; (iv) during the fourth (4th) Lease Year of the
initial Lease Term, the Parking Charge payable by Tenant for all unreserved
parking passes rented by Tenant shall be the Prevailing Rate but in no event in
excess of Eighty-One and No/100 Dollars ($81.00) per month, and (v) commencing
as of the first day of the fifth (5th) Lease Year and continuing throughout the
Lease Term, the Parking Charge payable by Tenant for all unreserved parking
passes rented by Tenant shall equal the Prevailing Rate, provided that in no
event shall the Prevailing Rate exceed the "Parking Charge Cap," as that term
is defined in Section 28.3.2, below.
28.3 DEFINITIONS.
28.3.1 DISCOUNTED PARKING PASSES AND UNDISCOUNTED PARKING PASSES.
"Discounted Parking Passes" shall mean the first 3.3 unreserved parking passes
for each 1,000 usable square feet of the Premises. "Undiscounted Parking
Passes" shall mean the remaining unreserved parking passes leased by Tenant
pursuant to the terms of this Lease.
28.3.2 PARKING CHARGE CAP. For purposes of calculating the
"PARKING CHARGE CAP" for the fifth (5th) Lease Year, the "PARKING CHARGE CAP"
shall mean $85.05. For purposes of calculating the Parking Charge Cap for each
Lease Year following the fifth (5th) Lease Year, the "PARKING CHARGE CAP" shall
mean the product of (a) the Parking Charge Cap, as previously increased
pursuant to this Section 28.3.2, and (b) 1.05.
28.4 PARKING CHARGE FOR RESERVED PARKING PASSES. The Parking Charge
payable by Tenant for each reserved parking passes rented by Tenant shall equal
(i) during the first Lease Year of the initial Lease Term, Ninety-Five and
No/100 Dollars ($95.00) per month, and (ii) following the first Lease Year of
the initial Lease Term, the prevailing rate charged by Landlord for reserved
parking passes at the Building.
28.5 OTHER TERMS. Notwithstanding anything to the contrary set forth
in Section 28 or elsewhere in the Lease (i) Tenant may use and have access to
the parking areas twenty-four hours a day, seven days a week; and (ii) no
delegation of Landlord's obligations with respect to the parking areas shall
relieve Landlord from responsibility for its obligations with respect thereto,
and no extra charges shall be imposed upon Tenant as a result of such
delegation.
ARTICLE 29
MISCELLANEOUS PROVISIONS
29.1 TERMS; CAPTIONS. The words "Landlord" and "Tenant" as used
herein shall include the plural as well as the singular. The necessary
grammatical changes required to make the provisions hereof apply either to
corporations or partnerships or individuals, men or women, as the case may
require, shall in all cases be assumed as though in each case fully expressed.
The captions of Articles and Sections are for convenience only and shall not be
deemed to limit, construe, affect or alter the meaning of such Articles and
Sections.
29.2 BINDING EFFECT. Subject to all other provisions of this Lease,
each of the covenants, conditions and provisions of this Lease shall extend to
and shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.3 NO AIR RIGHTS. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.
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29.4 MODIFICATION OF LEASE. Should any current or prospective
mortgagee or ground lessor for the Building or Project require a modification
of this Lease, which modification will not cause an increased cost or expense
to Tenant or in any other way materially and adversely change the rights and
obligations of Tenant hereunder, then and in such event, Tenant agrees that
this Lease may be so modified and agrees to execute whatever documents are
reasonably required therefor and to deliver the same to Landlord within twenty
(20) days following a request therefor, provided Landlord reimburses Tenant for
its attorneys' fees, subject to the same limitation applicable to Landlord's
reimbursement in the event Tenant proposes a Transfer. At the request of
Landlord or any mortgagee or ground lessor, Tenant agrees to execute a short
form of Lease and deliver the same to Landlord within ten (10) days following
the request therefor.
29.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that
Landlord has the right to transfer all or any portion of its interest in the
Project or Building and in this Lease, and Tenant agrees that in the event of
any such transfer to an entity which has contractually assumed the obligations
of Landlord under this Lease, Landlord shall automatically be released from all
liability under this Lease following the date of the Transfer and Tenant agrees
to look solely to such transferee for the performance of Landlord's obligations
hereunder after the date of transfer provided such transferee shall have fully
assumed and be liable for all obligations of this Lease to be performed by
Landlord, including the return of any Security Deposit, and Tenant shall attorn
to such transferee. Tenant further acknowledges that Landlord may assign its
interest in this Lease to a mortgage lender as additional security and agrees
that such an assignment shall not release Landlord from its obligations
hereunder and that Tenant shall continue to look to Landlord for the
performance of its obligations hereunder.
29.6 MEMO OF LEASE. Following request by Tenant, Landlord shall
execute and acknowledge a memorandum of this Lease in the form attached to this
Lease as EXHIBIT H (the "MEMO OF LEASE"). Tenant shall be permitted to record
such Memo of Lease, at Tenant's sole cost and expense.
29.7 LANDLORD'S TITLE. Landlord's title is and always shall be
paramount to the title of Tenant. Nothing herein contained shall empower
Tenant to do any act which can, shall or may encumber the title of Landlord.
29.8 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall
be deemed or construed by the parties hereto or by any third party to create
the relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9 TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.
29.10 PARTIAL INVALIDITY. If any term, provision or condition
contained in this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term, provision or
condition to persons or circumstances other than those with respect to which it
is invalid or unenforceable, shall not be affected thereby, and each and every
other term, provision and condition of this Lease shall be valid and
enforceable to the fullest extent possible permitted by law.
29.11 NO WARRANTY. In executing and delivering this Lease, Tenant has
not relied on any representations, including, but not limited to, any
representation as to the amount of any item comprising Additional Rent or the
amount of the Additional Rent in the aggregate or that Landlord is furnishing
the same services to other tenants, at all, on the same level or on the same
basis, or any warranty or any statement of Landlord which is not set forth
herein or in one or more of the exhibits attached hereto.
29.12 LANDLORD EXCULPATION. The liability of Landlord or the Landlord
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the interest of Landlord in the Building and any sales, condemnation or
insurance proceeds received by Landlord or the Landlord Parties in connection
with the Project, Building
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or Premises. Neither Landlord, nor any of the Landlord Parties shall have any
personal liability therefor, and Tenant hereby expressly waives and releases
such personal liability on behalf of itself and all persons claiming by,
through or under Tenant. The limitations of liability contained in this
Section 29.13 shall inure to the benefit of Landlord's and the Landlord
Parties' present and future partners, beneficiaries, officers, directors,
trustees, shareholders, agents and employees, and their respective partners,
heirs, successors and assigns. Under no circumstances shall any present or
future partner of Landlord (if Landlord is a partnership), or trustee or
beneficiary (if Landlord or any partner of Landlord is a trust), have any
liability for the performance of Landlord's obligations under this Lease.
29.13 ENTIRE AGREEMENT. It is understood and acknowledged that there
are no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties' entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease
can be modified, deleted or added to except in writing signed by the parties
hereto.
29.14 RIGHT TO LEASE. Landlord reserves the absolute right to effect
such other tenancies in the Project as Landlord in the exercise of its sole
business judgment shall determine to best promote the interests of the Building
or Project; provided, however, that (a) so long as the Original Tenant or an
assignee permitted pursuant to the terms of Section 14.8 of this Lease is
occupying fifty percent (50%) or more of the Premises, and no Triggering
Default exists, in no event shall Landlord, following the date of this Lease,
enter into a direct lease or consent to a Transfer in connection with any lease
executed by Landlord following the date hereof, for any space in the Building
to an "Excluded Tenant," as that term is defined, below, and (b) so long as the
Original Tenant or an assignee permitted pursuant to the terms of Section 14.8
of this Lease is occupying one full floor of the Building, and no Triggering
Default exists, in no event shall Landlord, following the date of this Lease,
enter into a direct lease or consent to a Transfer in connection with any lease
executed by Landlord following the date hereof, for any space in the Building
to a "Tenant Competitor", as that term is defined, below. For purposes of this
Lease, a "TENANT COMPETITOR" shall mean any of the following entities whose
principal business is competitive with Tenant's principal business: (i)
companies whose principal business is the marketing of "premiums" [i.e., free or
self-liquidating (i.e. sold at substantially less than mass market retail value)
items used to publicize and/or sell the products, services or image of the users
(i.e., the entities conducting promotions which utilize premiums) of such
premium items](including, without limitation, Promotional Partners and
Intervisual Communications, Inc.); (ii) companies whose principal business is
the design and development of point-of-sale materials (i.e., advertising or
promotional materials displayed or utilized at the place of purchase), the
planning of event marketing, contests or sweepstakes related to premiums, toys,
collectibles or novelties, the development of sponsorship, promotions
fulfillment and product sampling programs and the conduct of market research in
connection therewith (including, without limitation, Alcone Marketing, Strotman
and CDM); and (iii) consumer products companies whose principal business is
toy, collectible, collectible-based, novelty, and similar items (including,
without limitation, Applause, Mattel, Playmates and Fun Stuff).
Notwithstanding the foregoing, a "TENANT COMPETITOR" shall not mean an
advertising agency, public relations firm or other entity whose principal
business is not competitive with Tenant's principal business. For purposes of
this Lease, an "EXCLUDED TENANT" shall mean any of the following tenants: (a)
offices of any agency or bureau of the United States or any state or political
subdivision thereof; (b) offices or agencies of any foreign governmental or
political subdivision thereof; (c) offices of any health care professionals or
health care service organization (except to the extent utilized primarily for
general office purposes); (d) schools or other training facilities which are
not ancillary to corporate, executive or professional office use; (e) retail or
restaurant uses (except to the extent consistent with the retail or restaurant
uses at the Comparable Buildings); or (f) communications firms such as radio
and/or television stations (except to the extent utilized primarily for general
office purposes); provided, however, that in the event that Tenant shall not
timely exercise its right to lease Expansion Space 1, then effective upon the
first day following the last day in which Tenant may exercise its right to
lease Expansion Space 1, as set forth in
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Section 1.4.1.1 of this Lease, an "EXCLUDED TENANT" shall mean only any agency
or bureau of a foreign or domestic government which (I) generates foot traffic
to the Building which materially exceeds the foot traffic to the Building that
would be generated by a non-Excluded Tenant, (II) is of a character or
reputation, or is associated with a political faction or orientation, which is
materially inconsistent with that of tenants leasing space at the Comparable
Buildings, and (III) has employees at the Building that carry weapons in the
course of their employment and/or would otherwise create a safety threat which
materially exceeds that created by tenants at the Comparable Buildings.
29.15 FORCE MAJEURE. Any prevention, delay or stoppage due to
strikes, lockouts, labor disputes, acts of God, inability to obtain services,
labor, or materials or reasonable substitutes therefor, governmental actions,
civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to
the obligations imposed with regard to Rent and other charges to be paid by
Tenant pursuant to this Lease (collectively, a "FORCE MAJEURE"),
notwithstanding anything to the contrary contained in this Lease, shall excuse
the performance of such party for a period equal to any such prevention, delay
or stoppage and, therefore, if this Lease specifies a time period for
performance of an obligation of either party, that time period shall be
extended by the period of any delay in such party's performance caused by a
Force Majeure, provided that, except as set forth in Section 5 of the Tenant
Work Letter, no time periods giving rise to Tenant's right to abatement of Rent
or termination of this Lease shall be subject to extension as a result of a
Force Majeure.
29.16 NOTICES. All notices, demands, statements, designations,
approvals or other communications (collectively, "NOTICES") given or required
to be given by either party to the other hereunder or by law shall be in
writing, shall be (A) sent by United States certified or registered mail,
postage prepaid, return receipt requested ("MAIL"), (B) transmitted by
telecopy, if such telecopy is promptly followed by a Notice sent by Mail, (C)
delivered by a nationally recognized overnight courier, or (D) delivered
personally. Any Notice shall be sent, transmitted, or delivered, as the case
may be, to Tenant at the appropriate address set forth in Section 10 of the
Summary, or to such other place as Tenant may from time to time designate in a
Notice to Landlord, or to Landlord at the addresses set forth below, or to such
other places as Landlord may from time to time designate in a Notice to Tenant.
Any Notice will be deemed given (i) three (3) days after the date it is posted
if sent by Mail, (ii) the date the telecopy is transmitted, (iii) the date the
overnight courier delivery is made, or (iv) the date personal delivery is made
or attempted to be made. If Tenant is notified of the identity and address of
Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such
mortgagee or ground or underlying lessor written notice of any default by
Landlord under the terms of this Lease by means constituting notice hereunder
and such mortgagee or ground or underlying lessor shall be given a reasonable
opportunity to cure such default, not to exceed thirty (30) days following the
time period granted to Landlord under this Lease, prior to Tenant's exercising
any remedy available to Tenant. As of the date of this Lease, any Notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
following addresses:
Miracle Mile, L.L.C.
1999 Avenue of the Stars
Suite 2000
Los Angeles, California 90067
Attention: Mr. David Simon
and
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
29.17 AUTHORITY. If Tenant is a corporation, trust or partnership,
each individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant
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is authorized to do so. In such event, Tenant shall, within ten (10) days
after execution of this Lease, deliver to Landlord satisfactory evidence of
such authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant's state of
incorporation and (ii) qualification to do business in California.
29.18 ATTORNEYS' FEES. In the event that either Landlord or Tenant
should bring suit for the possession of the Premises, for the recovery of any
sum due under this Lease, or because of the breach of any provision of this
Lease or for any other relief against the other, then all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party therein
shall be paid by the other party, which obligation on the part of the other
party shall be deemed to have accrued on the date of the commencement of such
action and shall be enforceable whether or not the action is prosecuted to
judgment.
29.19 GOVERNING LAW. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
29.20 SUBMISSION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of, option
for or option to lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
29.21 BROKERS.
29.21.1 IN GENERAL. Landlord and Tenant hereby warrant to each
other that they have had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease, excepting only the real estate
brokers or agents specified in Section 12 of the Summary (the "BROKERS"), and
that they know of no other real estate broker or agent who is entitled to a
commission in connection with this Lease. Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgments, costs and
expenses (including without limitation reasonable attorneys' fees) with respect
to any leasing commission or equivalent compensation alleged to be owing on
account of any dealings with any real estate broker or agent, other than the
Brokers, occurring by, through, or under the indemnifying party.
29.21.2 TENANT OFFSET RIGHT FOR COMMISSIONS DUE STUDLEY.
Landlord shall pay all brokerage commissions owing to Julien J. Studley
("STUDLEY") pursuant to a separate written agreement, dated June 24, 1998, with
Studley (the "COMMISSION AGREEMENT"). Landlord and Tenant hereby acknowledge
and agree that the Commission Agreement provides for the payment to Broker of
certain commissions in connection with Tenant's lease of certain additional
space in the Building, as more particularly set forth in the Commission
Agreement. To the extent that Landlord fails to pay to Studley any amounts due
under the Commission Agreement on or before the date due thereunder, then
Tenant may send written notice to Landlord of such failure and if Landlord
fails to pay such amounts within thirty (30) days after said notice, Tenant
shall have the right, but not the obligation, to offset such amounts owed to
Studley against Tenant's next rental obligations which become due under this
Lease. Any amounts so offset from Tenant's rental obligations hereunder shall
no longer be owed from Landlord to Studley under the Commission Agreement, but
will become due from Tenant to Studley.
29.22 COUNTERPARTS. This Lease may be executed in counterparts with
the same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.23 TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all
present or future legally mandated programs intended to manage parking,
transportation or traffic in and around the Building, and in connection
therewith, Tenant shall take responsible action for the transportation planning
and management of all employees located at the Premises by working directly
with Landlord, any governmental transportation management organization or any
other transportation-related committees or entities.
29.24 TELECOMMUNICATIONS EQUIPMENT. At any time during the Lease Term,
Tenant may install, at Tenant's sole cost and expense, telecommunication
equipment upon the roof of the
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Building. Tenant shall not be required to pay monthly rent for the space
utilized by Tenant on the roof of the Building, provided that Tenant shall pay
to Landlord, as additional rent, for the costs of all utilities necessary to
Tenant's operation of the telecommunication equipment. The physical appearance
and location of any such installation and the size of the equipment shall be
subject to Landlord's reasonable approval, and Landlord may require Tenant to
install screening around such equipment, at Tenant's sole cost and expense, as
reasonably designated by Landlord. Tenant shall maintain such equipment, at
Tenant's sole cost and expense. In the event Tenant elects to exercise its
right to install telecommunication equipment as set forth in this Section
29.24, then Tenant shall give Landlord prior written notice thereof and
Landlord and Tenant shall execute an amendment to this Lease covering the
installation and maintenance of such equipment, Tenant's indemnification of
Landlord with respect thereto, Tenant's obligation to remove such equipment
upon the expiration or earlier termination of this Lease, and other related
matters.
29.25 NO VIOLATION. Tenant hereby warrants and represents that neither
its execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.26 COMMUNICATIONS AND COMPUTER LINES. Tenant may install, maintain,
replace, remove or use any communications or computer wires and cables
(collectively, the "LINES") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord's prior written consent, use an
experienced and qualified contractor approved in writing by Landlord, and
comply with all of the other provisions of Articles 7 and 8 of this Lease, (ii)
an acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Project, as determined in
Landlord's reasonable opinion, (iii) the Lines therefor (including riser
cables) shall be appropriately insulated to prevent excessive electromagnetic
fields or radiation, and shall be surrounded by a protective conduit reasonably
acceptable to Landlord, (iv) any new or existing Lines servicing the Premises
shall comply with all applicable governmental laws and regulations and (v)
Tenant shall pay all costs in connection therewith. Landlord reserves the
right to require that Tenant remove any Lines located in or serving the
Premises which are installed in violation of these provisions, or which are at
any time in violation of any laws or represent a dangerous or potentially
dangerous condition.
29.27 ASBESTOS DISCLOSURES. Tenant specifically acknowledges that
Tenant has been advised that asbestos and/or asbestos-containing materials were
used in the initial construction of the Building, and may have been used in
connection with various additions and improvements made thereafter from time to
time. Tenant shall have no obligation to clean up, remediate, monitor, abate,
regarding or reimburse, release, indemnify, or defend Landlord with respect to
any Hazardous Materials which Tenant did not cause to be introduced onto the
Premises or any other portion of the Project, provided that the foregoing shall
in no event limit or preclude Landlord from including costs incurred in
connection with Hazardous Materials in Operating Expenses to the extent
permitted pursuant to the terms of Article 4 of this Lease.
29.28 PAYMENTS. Whenever in the Lease a payment is required to be made
by one party to the other, but a specific date for payment is not set forth or
a specific number of days within which payment is to be made is not set forth,
or the words "at once," "immediately," "promptly" and/or "on demand," "on
billing," or their equivalent, are used to specify when such payment is due,
then such payment shall be due thirty (30) days after the party which is
entitled to such payment sends written notice to the other party demanding such
payment.
29.29 GOOD FAITH. Wherever in the Lease Landlord or Tenant is granted
the right to grant or withhold consent or approval, exercise discretion or make
a determination, calculation or allocation, except as otherwise expressly set
forth in this Lease, Landlord or Tenant, as the case may be, shall act
reasonably and in good faith.
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29.30 STORAGE SPACE.
29.30.1 IN GENERAL. During the Lease Term, Tenant shall lease
from Landlord (i) approximately 664 square feet of storage space located in the
parking garage known as storage space G-2, (ii) approximately 1,096 square feet
of storage space located in the parking garage known as storage space G-3,
(iii) approximately 109 square feet of storage space located on the second
floor of the Building known as storage area 2-1, and (iv) approximately 148
square feet of storage space located on the second floor of the Building known
as storage area 2-2 (collectively the "Storage Premises"). Tenant shall pay to
Landlord monthly "Storage Rent," as that term is defined in Section 29.30.2,
below, in connection with Tenant's lease of the Storage Premises. Tenant shall
give prompt notice to Landlord in case of fire or accidents in or about the
Storage Premises or of defects therein or in the fixtures or equipment related
thereto. Tenant acknowledges and agrees that Landlord shall have no obligation
to provide any security for the Storage Premises. All Storage Premises leased
by Tenant shall be leased by Tenant in its present existing, "as-is" condition,
provided that Landlord shall, at Landlord's sole cost and expense, demise the
"Second Floor Storage Area," as that term is defined in Section 29.30.2, below,
and shall install a door to and reasonable lighting within such Second Floor
Storage Areas. Tenant shall be fully responsible for repairing any damage to
the Storage Premises resulting from or relating to Tenant's use thereof.
Tenant's insurance obligations under the Lease shall also pertain to Tenant's
use of the Storage Premises.
29.30.2 STORAGE RENT. The monthly storage rent (the "STORAGE
RENT") payable by Tenant for the first Lease Year for the portion of the
Storage Premises located in the Project parking facility (the "GARAGE STORAGE
AREA") shall be equal to the product of (i) the number of square feet of such
Storage Premises, and (i) $0.75. The Storage Rent payable by Tenant for the
first Lease Year for the portion of the Storage Premises located on the second
floor of the Building (the "SECOND FLOOR STORAGE AREA") shall be equal to the
product of (a) the number of square feet of such Storage Premises, and (b)
$1.00. For each Lease Year following the first Lease Year, the Storage Rent
for both the Garage Storage Area and the Second Floor Storage Area shall equal
the product of (I) the Storage Rent payable for the applicable space for the
prior Lease Year (as previously increased pursuant to this Section 29.30.2),
and (II) 1.04. All Storage Rent shall be due on a monthly basis concurrently
with Tenant's payment of the Base Rent due with respect to the Premises, and
shall constitute Additional Rent under the Lease.
29.30.3 SECOND FLOOR STORAGE AREA. Landlord and Tenant hereby
acknowledge that the Second Floor Storage Area comprises a portion of Expansion
Space 2. In the event that Tenant shall fail to timely elect to lease
Expansion Space 2, Landlord may, at its option, at any time following the last
date for Tenant's exercise of such option, as set forth in Section 1.4.1.2 of
this Lease, terminate Tenant's lease of the Second Floor Storage Area upon not
less than thirty (30) days notice to Tenant. In the event that Tenant shall
elect to lease Expansion Space 2, then, notwithstanding anything in this
Section 29.30 to the contrary, commencing upon the date of Landlord's delivery
of the remainder of Expansion Space 2 to Tenant (i) Tenant shall have no
further obligation to pay Storage Rent with respect to the Second Floor Storage
Area, (ii) Tenant's rights with respect to the Second Floor Storage Area shall
no longer be governed by this Section 29.30 but instead shall be governed
pursuant to the terms of Section 1.4 of this Lease, and (iii) all of the terms
of this Lease applicable to the remainder of Expansion Space 2 shall be
applicable to the Second Floor Storage Area.
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
"LANDLORD":
MIRACLE MILE, L.L.C.,
a Delaware limited liability company
By: /s/ David Simon
----------------------------------
Its: David Simon, V.P.
------------------------------
"TENANT":
EQUITY MARKETING, INC.,
a Delaware corporation
By: /s/ Michael Welch
----------------------------------
Its: Executive Vice President
------------------------------
By: /s/ Donald A. Kurz
----------------------------------
Its: President and Co CEO
------------------------------
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EXHIBIT A
6330 SAN VICENTE BOULEVARD
OUTLINE OF PREMISES
[FLOOR PLAN OF FIRST FLOOR]
EXHIBIT A - Page 1
<PAGE>
[FLOOR PLAN OF THIRD FLOOR]
EXHIBIT A - Page 2
<PAGE>
[FLOOR PLAN OF FOURTH FLOOR]
EXHIBIT A - Page 3
<PAGE>
[FLOOR PLAN OF FIFTH FLOOR]
EXHIBIT A - Page 4
<PAGE>
EXHIBIT A-1
OUTLINE OF PATIO AREA
[FLOOR PLAN OF PATIO AREA]
EXHIBIT A-1 - Page 1
<PAGE>
EXHIBIT A-2
OUTLINE OF EXPANSION SPACE 1
AND EXPANSION SPACE 2
[FLOOR PLAN OF EXPANSION SPACE 1 AND EXPANSION SPACE 2]
EXHIBIT A-2 - Page 1
<PAGE>
EXHIBIT B
6330 SAN VICENTE BOULEVARD
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions relating
to the construction of the Premises. This Tenant Work Letter is essentially
organized chronologically and addresses the issues of the construction of the
Premises, in sequence, as such issues will arise during the actual construction
of the Premises. All references in this Tenant Work Letter to Articles or
Sections of "this Lease" shall mean the relevant portions of ARTICLES 1 THROUGH
29 of the Office Lease to which this Tenant Work Letter is attached as EXHIBIT
B, and all references in this Tenant Work Letter to Sections of "this Tenant
Work Letter" shall mean the relevant portions of SECTIONS 1 THROUGH 5 of this
Tenant Work Letter.
SECTION 1
DELIVERY OF THE PREMISES AND LANDLORD WORK
1.1 DELIVERY OF PREMISES; DEADLINE DATE.
1.1.1 DELIVERY OF PREMISES. Following the full execution and
delivery of this Lease by Landlord and Tenant, Landlord shall deliver the
Premises to Tenant, and, except as specifically set forth in SECTION 1.2 below,
Tenant shall accept the Premises and Base Building from Landlord in their
presently existing, "as-is" condition, except as otherwise provided in the Lease
and in this Tenant Work Letter, and except that regardless of whether set forth
below as a portion of "Landlord's Work," Landlord shall, at its sole cost and
expense, perform all corrections, modifications and improvements the Premises
and Base Building which are necessary in order that Landlord may perform all of
its obligations under this Lease and in order that all representations and
warranties made by Landlord shall be accurate.
1.1.2 DEADLINE DATE. In the event that Landlord shall fail to
substantially complete the "Structural Work," as that term is defined in Section
1.2.8 of this Tenant Work Letter, on or before January 1, 1999 (which date shall
not be subject to delays as a result of Force Majeure) and such failure
materially interferes with the construction of the Tenant Improvements, then
Tenant shall have the right to terminate this Lease upon notice to Landlord on
or before January 8, 1999. Provided that Tenant terminates this Lease pursuant
to the terms of this Section 1.2, this Lease shall automatically terminate and
be of no further force or effect, Landlord shall refund all prepaid rent and
return the L-C delivered by Tenant, and Landlord and Tenant shall be relieved of
their respective obligations under this Lease as of the date of Landlord's
receipt of such notice, except those obligations set forth in this Lease, which
specifically survive the expiration or earlier termination of this Lease.
1.2 LANDLORD WORK. Subject to the terms of Section 5.1, below,
Landlord shall, at its sole cost and expense, perform the work set forth in
items 1.2.1 through 1.2.13, below (the "Landlord Work").
1.2.1 Reasonably smooth concrete floor, with existing holes and
damaged areas patched and repaired.
1.2.2 To the extent replacement of existing drywall is reasonably
required or, if drywall is not present, new drywall (fire taped) around surfaces
of core walls and underneath window sills. In addition, to the extent
replacement of existing drywall is reasonably required or, if drywall is not
present, new drywall (fire taped) around surfaces of steel columns.
1.2.3 Primary heating, ventilating and air-conditioning service
("HVAC") including the main distribution loop and base system and base building
thermostatic control system (all delivered in good working order).
1.2.4 Primary electrical system which will service the floor of
the Building on which the Premises are located (delivered in good working
order).
EXHIBIT B - Page 1
<PAGE>
1.2.5 Fire/Life-safety systems as required by applicable building
code ("Code") on an unoccupied basis.
1.2.6 Main telephone terminal panel located in the
telephone/electrical room designated by Landlord and available for secondary
branching by Tenant of lines to the Premises.
1.2.7 Building standard window coverings.
1.2.8 Structural modifications to the Building, as set forth in
those certain plans, dated December 22, 1997, prepared by NYA Engineers, sheets
S-1 through S-6 (the "Structural Work").
1.2.9 Elevator modifications, as set forth in that certain
project manual, dated November 5, 1997, prepared by Learch Bates North America,
Inc., Sections 00020 through 14325.
1.2.10 The actual public corridor wall (which shall include studs
and acoustical insulation and any necessary penetrations, fire dampers and sound
traps) which is adjacent to the Premises but only as to that portion of the
Premises, if any, which occupies only a portion of a floor, rather than an
entire floor, of the Building; provided that Landlord shall pay for the cost of
constructing the corridor wall, Tenant shall pay for the drywall and any
finishes on the interior Premises side of the corridor wall and Landlord shall
pay for the drywall studs, insulation and any finishes on the exterior, common
area side of the corridor wall.
1.2.11 The demising partitions between tenants as to that portion
of the Premises, if any, which occupies a portion of the floor, rather than an
entire floor of the Building, which shall include studs and acoustical
insulation and any necessary penetrations, fire dampers and sound traps
(collectively, the "Demising Walls"), which Demising Walls are adjacent to the
Premises, provided that Tenant shall be responsible to fifty percent (50%) of
the cost of the Demising Walls.
1.2.12 Landlord shall employ a qualified roofing contractor to
assess and complete any reasonably required repairs to the roof of the Building
(Landlord hereby acknowledging that the Building's roof leaked during recent
rains).
1.2.13 Replacement of (i) the AH2-5 hot plenum controllers and
transmitters, (ii) eight pneumatic gauges, and (iii) AH-5 blower bearing and
shaft in the air conditioning unit suspended from the slab on the second floor
of the Building which, as of the date hereof, is causing vibrations within the
Building.
Subject to special or unusual requirements of Tenant's design or
intended particular manner of use (as opposed to reasonably customary design
elements for general office use), in no event shall Tenant be obligated to (i)
correct deficiencies in or legal violations with respect to the Base Building
and Landlord's Work; (ii) cause the Building to comply with laws which would be
applicable regardless of whether Tenant, or another tenant using reasonably
customary design elements for general office use, is improving the Premises; or
(iii) expend any funds or any portion of the Tenant Improvement Allowance for
the foregoing. Landlord shall complete Landlord's Work in compliance with
applicable building codes and other governmental laws and regulations enacted
prior to the Lease Commencement Date (or with respect to expansion space, as of
the applicable commencement date for such space), provided that item 1.2.5 of
the Landlord Work shall comply with applicable building codes and other
governmental laws and regulations enacted prior to the Lease Commencement Date
(or with respect to expansion space, as of the applicable commencement date for
such space) only to the extent the same are applicable to unoccupied space.
Nothing in this Section 1 shall serve to modify Landlord's and Tenant's
respective obligations set forth in Article 24 of the Lease.
EXHIBIT B - Page 2
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SECTION 2
TENANT IMPROVEMENTS
2.1 TENANT IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the
amount of $35.00 per usable square foot of the Premises (but specifically
excluding the usable area of the Patio Area) for the costs relating to the
initial design and construction of Tenant's improvements, which are affixed
to the Premises (the "Tenant Improvements"). Landlord hereby acknowledges
and agrees that, as a part of Tenant's construction of the Tenant
Improvements, subject to the requirements of this Tenant Work Letter, (i)
Tenant shall be entitled to improve the stairwells between the floors leased
by Tenant pursuant to the terms of this Lease, and (ii) Tenant shall be
entitled to replace certain exterior windows with doors on the ground floor
of the Building in order that the Patio Area may be accessed from the
Premises, provided that, notwithstanding anything in this Tenant Work Letter
to the contrary, the specifications and plans for such work shall be subject
to Landlord's approval, which approval shall not be unreasonably withheld.
In no event shall Landlord be obligated to make disbursements pursuant to
this Tenant Work Letter in a total amount which exceeds the Tenant
Improvement Allowance.
2.2 DISBURSEMENT OF THE TENANT IMPROVEMENT ALLOWANCE.
2.2.1 TENANT IMPROVEMENT ALLOWANCE ITEMS. Except as otherwise
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord only for the following items and costs (collectively the
"Tenant Improvement Allowance Items"):
2.2.1.1 Payment of the fees of the "Architect" and the
"Engineers," as those terms are defined in SECTION 3.1 of this Tenant Work
Letter and other consultants ("ARCHITECT AND ENGINEERS FEES"), which Architect
and Engineers Fees shall, notwithstanding anything to the contrary contained in
this Tenant Work Letter, not exceed an aggregate amount equal to $6.00 per
usable square foot of the Premises (the "SOFT COST CAP");
2.2.1.2 The payment of plan check, permit and license fees
relating to construction of the Tenant Improvements;
2.2.1.3 The cost of construction of the Tenant
Improvements, including, without limitation, (i) testing and inspection costs,
(ii) freight elevator usage, hoisting and trash removal costs, (iii) costs of
cabling, conduit, wiring, and connections for voice and data lines, (iv) cost of
designing, fabricating, installing and lighting (if applicable) Tenant's signs,
sign structures, lettering, logos and sign panels (including, without
limitation, identification on multi-tenant monuments or signs), (v) costs of
millwork, installation and finishing of built-in work stations, (vi) costs of
Tenant's security systems, including design and consulting fees and connection
costs or costs of modifying such systems to be compatible with the Building
systems, and (vii) costs of corrective work and contractors' fees and general
conditions (subject to Section 6.5 below);
2.2.1.4 The cost of any changes in the Base Building when
such changes are required by the Construction Drawings (including if such
changes are due to the fact that such work is prepared on an unoccupied basis),
such cost to include all direct architectural and/or engineering fees and
expenses incurred in connection therewith;
2.2.1.5 The cost of any changes to the Construction
Drawings or Tenant Improvements required by all applicable building codes (the
"Code");
2.2.1.6 Sales and use taxes and Title 24 fees; and
2.2.1.7 All other costs to be expended by or at the
direction of Tenant in connection with the construction of the Tenant
Improvements.
2.2.2 DISBURSEMENT OF TENANT IMPROVEMENT ALLOWANCE. During the
construction of the Tenant Improvements, Landlord shall make monthly
disbursements of the Tenant
EXHIBIT B - Page 3
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Improvement Allowance for Tenant Improvement Allowance Items for the benefit
of Tenant and shall authorize the release of monies for the benefit of Tenant
as follows.
2.2.2.1 MONTHLY DISBURSEMENTS. On or before the first day
of each calendar month (the "SUBMITTAL DATE"), during the construction of the
Tenant Improvements (or such other date as Landlord may designate), Tenant shall
deliver to Landlord: (i) a request for payment of the "Contractor," as that
term is defined in SECTION 4.1 of this Tenant Work Letter, or other payees
(including, without limitation, Tenant's Agents or Tenant) approved by Tenant,
in a form to be provided by Landlord, and, if applicable, showing the schedule,
by trade, of percentage of completion of the Tenant Improvements in the
Premises, detailing the portion of the work completed and the portion not
completed; (ii) invoices from all of "Tenant's Agents," as that term is defined
in SECTION 4.1.2 of this Tenant Work Letter, for labor rendered and materials
delivered to the Premises; (iii) if applicable, executed mechanic's lien
releases from all of Tenant's Agents which shall comply with the appropriate
provisions, as reasonably determined by Landlord, of California Civil Code
Section 3262(d); and (iv) all other information reasonably requested by Landlord
(collectively, "ALLOWANCE DOCUMENTATION") . Upon delivery of any request for
payment, Tenant shall be deemed to have waived any claim against Landlord with
respect to the work furnished and/or the materials supplied as set forth in
Tenant's payment request. Notwithstanding the foregoing, Tenant may obtain
reimbursement, within ten (10) business days following request, for one hundred
percent (100%) of the cost of direct order items (such as long lead time
purchase of materials) and other costs for which items (i) and (iii) above are
not applicable, by providing invoices to Landlord. Such reimbursement shall be
paid out of the Tenant Improvement Allowance, up to the amount of the Tenant
Improvement Allowance (subject to the Soft Cost Cap, if applicable), without
retention. Within twenty (20) days thereafter, Landlord shall deliver a check
to payees designated by Tenant in payment of the lesser of: (A) the amounts so
requested by Tenant, as set forth in this Section 2.2.2.1, above, less a ten
percent (10%) retention (the aggregate amount of such retentions to be known as
the "Final Retention"), and (B) the balance of any remaining available portion
of the Tenant Improvement Allowance (not including the Final Retention),
provided that Landlord does not dispute any request for payment based on
non-compliance of any work with the "Approved Working Drawings," as that term
is defined in SECTION 3.4 below, or due to any "Substandard Work," as that
term is defined below. Landlord's payment of such amounts shall not be
deemed Landlord's approval or acceptance of the work furnished or materials
supplied as set forth in Tenant's payment request. Although Landlord will
retain the Final Retention in accordance with the terms of this Section
2.2.2, such Final Retention shall not be in addition to a final retention
provided for in the "Contract," as that term is defined in Section 4.2.1
below, but rather the requirement herein for a Final Retention of ten percent
(10%) shall be applied in conjunction with the amount required as the final
retention in the Contract. "Substandard Work" shall mean work which adversely
affects the mechanical, electrical, plumbing, heating, ventilating and air
conditioning, life-safety or other systems of the Building, the curtain wall
of the Building, the structure or exterior appearance of the Building.
2.2.2.2 FINAL RETENTION. Subject to the provisions of
this Tenant Work Letter, a check for the Final Retention payable jointly to
Tenant and Contractor shall be delivered by Landlord to Tenant following the
completion of construction of the Premises, provided that (i) Tenant delivers to
Landlord properly executed mechanics lien releases in compliance with both
California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or
Section 3262(d)(4), (ii) Landlord has determined that no Substandard Work or
"Deficiency," as that term is defined in Section 3.1 of this Tenant Work Letter,
exists and (iii) Architect delivers to Landlord a certificate, in a form
reasonably acceptable to Landlord, certifying that the construction of the
Tenant Improvements in the Premises has been substantially completed.
2.2.2.3 ADDITIONAL TERMS. In the event that Landlord
identifies any Substandard Work or a Deficiency, Landlord shall fund any portion
of the draw request which is not required to correct the Substandard Work or
Deficiency. Landlord shall advise Tenant within three (3) business days of a
Submittal Date if Tenant's submittal is incomplete. Landlord may only
disapprove any aspect of the Tenant Improvements in the event of Substandard
Work or a Deficiency. Landlord shall not disapprove any aspect of the Tenant
Improvements following payment of the installment of the Tenant Improvement
Allowance, except to the extent that the matter permitting disapproval becomes
evident only following Landlord's disbursement of the
EXHIBIT B - Page 4
<PAGE>
applicable portion of the Tenant Improvement Allowance. Any disapproval by
Landlord pursuant to the terms of this Tenant Work Letter shall include a
description of the disapproved item and the reasonable grounds for the
disapproval. Landlord shall not disapprove any change to the Approved
Working Drawings or Tenant Improvements which is required by law or change in
law or the interpretation thereof.
2.2.2.4 OTHER TERMS. Landlord shall only be obligated to
make disbursements from the Tenant Improvement Allowance to the extent costs are
incurred by Tenant for Tenant Improvement Allowance Items.
2.3 STANDARD TENANT IMPROVEMENT PACKAGE. Landlord has established
specifications (the "SPECIFICATIONS") for certain components to be used in the
construction of the Tenant Improvements in the Premises, which Specifications
are attached hereto as Schedule 1. The Specifications shall not be changed
thereafter unless required by change in law or Code. The quality of Tenant
Improvements shall comply with the Specifications.
2.4 MOVING ALLOWANCE. Notwithstanding anything to the contrary set
forth in this Section 2, after Tenant occupies the Premises, Tenant shall be
entitled to utilize a portion of the unused Tenant Improvement Allowance, if
any, but in no event, when aggregated with the amounts disbursed by Landlord for
Architect and Engineers Fees, in an amount which exceeds the Soft Cost Cap, as
an allowance (the "MOVING ALLOWANCE") for Tenant's moving expenses. In no event
shall Landlord be obligated to disburse any portion of the Moving Allowance for
any purpose other than reimbursement for out-of-pocket costs and expenses
actually incurred by Tenant in relocating to the Premises (collectively,
"TENANT'S MOVING EXPENSES"). After the occurrence of the Lease Commencement
Date and the completion of the relocation of Tenant's business to the Premises,
Landlord shall disburse the Moving Allowance for Tenant's Moving Expenses upon
receipt by Landlord of invoices marked as having been paid or other evidence in
form and content satisfactory to Landlord in support of such costs and expenses
and Tenant's payment thereof. Landlord shall only be obligated to disburse any
component of the Moving Allowance to the extent the same is expended by Tenant.
In no event shall the Moving Allowance provided for herein be available to
Tenant as a credit against rent or other amounts owing to Landlord pursuant to
the Lease or in any manner other than as expressly provided herein.
2.5 FAILURE TO DISBURSE TENANT IMPROVEMENT ALLOWANCE. In the
event that (i) Landlord fails to fulfill its obligation to disburse the Tenant
Improvement Allowance in accordance with the terms of Section 2.2.2, above,
within thirty (30) days following notice from Tenant, (ii) Tenant shall,
following the expiration of such 30-day period, provide notice to Landlord of
such failure, and (iii) Landlord shall fail to fulfill its obligation to
disburse the Tenant Improvement Allowance within ten (10) business days
following receipt of such second notice, Tenant shall have the right to offset
such due but unpaid portion of the Tenant Improvement Allowance against Tenant's
obligation for Rent next due under this Lease.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant shall retain
the architect/space planner approved by Landlord (the "Architect") to prepare
the "Construction Drawings," as that term is defined in this SECTION 3.1.
Landlord hereby approves Rothenberg Sawasy Architects, Inc., as Architect.
Tenant shall retain the engineering consultants (the "ENGINEERS") approved by
Landlord. Landlord hereby consents to Syska and Hennesey as Engineers. The
Engineers shall prepare all plans and engineering working drawings relating to
the structural, mechanical, electrical, plumbing, and HVAC work in the Premises,
which work is not part of the Base Building. The plans and drawings to be
prepared by Architect and the Engineers hereunder shall be known collectively as
the "Construction Drawings." All Construction Drawings shall comply with the
drawing format and specifications determined by Landlord, and shall be subject
to Landlord's approval. Landlord shall grant such approval unless Landlord
provides Tenant with reasonable supporting documentation for the conclusion that
the work provided for in the Construction Drawings would violate applicable code
or the
EXHIBIT B - Page 5
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Specifications or materially and adversely affect the mechanical, electrical,
plumbing, heating, ventilating and air conditioning, life-safety or other
systems of the Building, or materially adversely affects the curtain wall of
the Building, or the structure or exterior appearance of the Building
(collectively referred to herein as a "DEFICIENCY"). Tenant and Architect
shall verify, in the field, the dimensions and conditions as shown on the
relevant portions of the base building plans, and Tenant and Architect shall
be solely responsible for the same, and Landlord shall have no responsibility
in connection therewith, except as specifically set forth in Section 6.8 of
this Tenant Work Letter. Landlord's review of the Construction Drawings as
set forth in this SECTION 3, shall be for its sole purpose and shall not
imply Landlord's review of the same, or obligate Landlord to review the same,
for quality, design, Code compliance or other like matters. Accordingly,
notwithstanding that any Construction Drawings are reviewed by Landlord or
its space planner, architect, engineers and consultants, and notwithstanding
any advice or assistance which may be rendered to Tenant by Landlord or
Landlord's space planner, architect, engineers, and consultants, Landlord
shall have no liability whatsoever in connection therewith and shall not be
responsible for any omissions or errors contained in the Construction
Drawings, except to the extent resulting from (a) Landlord's determination
that a Deficiency exists, or (b) changes requested by Landlord for any other
reason. Tenant's waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.
3.2 FINAL SPACE PLAN. Tenant shall supply Landlord with two (2)
copies signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been commenced. The
final space plan (the "Final Space Plan") shall include a layout and designation
of all offices, rooms and other partitioning, their intended use, and equipment
to be contained therein. Landlord may request clarification or more specific
drawings for special use items not included in the Final Space Plan. Landlord
shall advise Tenant within three (3) business days after Landlord's receipt of
the Final Space Plan for the Premises if the same is unsatisfactory or
incomplete in any respect. Landlord may only disapprove aspects of the Final
Space Plan which would constitute a Deficiency. If Tenant is so advised, Tenant
shall promptly cause the Final Space Plan to be revised to correct any
deficiencies or other matters Landlord may reasonably require.
3.3 FINAL WORKING DRAWINGS. After the Final Space Plan has been
approved by Landlord, Tenant shall supply the Engineers with a complete listing
of standard and non-standard equipment and specifications, including, without
limitation, B.T.U. calculations, electrical requirements and special electrical
receptacle requirements for the Premises, to enable the Engineers and the
Architect to complete the "Final Working Drawings" (as that term is defined
below) in the manner as set forth below. Upon the approval of the Final Space
Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the
Engineers to complete the architectural and engineering drawings for the
Premises, and Architect shall compile a fully coordinated set of architectural,
structural, mechanical, electrical and plumbing working drawings in a form which
is complete to allow subcontractors to bid on the work and to obtain all
applicable permits (collectively, the "Final Working Drawings") and shall submit
the same to Landlord for Landlord's approval. Tenant shall supply Landlord with
two (2) copies signed by Tenant of such Final Working Drawings. Landlord shall
advise Tenant within five (5) business days after Landlord's receipt of the
Final Working Drawings for the Premises if the same is unsatisfactory or
incomplete in any respect. If Tenant is so advised, Tenant shall immediately
revise the Final Working Drawings in accordance with such review and any
disapproval of Landlord in connection therewith.
3.4 APPROVED WORKING DRAWINGS. The Final Working Drawings shall be
approved by Landlord (the "Approved Working Drawings") prior to the commencement
of construction of the Premises by Tenant. After approval by Landlord of the
Final Working Drawings, Tenant may submit the same to the appropriate municipal
authorities for all applicable building permits. Tenant hereby agrees that
neither Landlord nor Landlord's consultants shall be responsible for obtaining
any building permit or certificate of occupancy for the Premises and that
obtaining the same shall be Tenant's responsibility; provided, however, that
Landlord shall cooperate with Tenant in executing permit applications and
performing other ministerial acts reasonably necessary to enable Tenant to
obtain any such permit or certificate of occupancy. No changes, modifications
or alterations in the Approved Working Drawings may be made without the prior
written consent of Landlord, which consent may not be unreasonably withheld.
EXHIBIT B - Page 6
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3.5 LANDLORD'S APPROVAL. Landlord may only disapprove aspects of the
Final Working Drawings which are inconsistent with the approved Final Space Plan
or which create a Deficiency. In the event that (i) Landlord shall fail to
timely approve or disapprove of the Final Space Plan and/or the Final Working
Drawings as set forth in this Section 3, (ii) Tenant shall deliver notice to
Landlord of such failure, and (iii) Landlord shall fail to approve of the Final
Space Plan and/or Final Working Drawings within three (3) business days
following receipt of Tenant's second notice, then Landlord's approval shall be
deemed granted. Landlord's failure to disapprove any aspect of any revision to
the Final Space Plan or Final Working Drawings or Approved Working Drawings and
provide detailed reasons for such disapproval within three (3) business days
shall constitute Landlord's approval thereto. Landlord may only withhold
consents to revisions to the Final Space Plan, Final Working Drawings or
Approved Working Drawings for the reasons enumerated above.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 TENANT'S SELECTION OF CONTRACTORS.
4.1.1 THE CONTRACTOR. A general contractor ("Contractor")
selected by Tenant and approved by Landlord, in Landlord's reasonable
discretion, shall be retained by Tenant to construct the Tenant Improvements.
Landlord approves Howard Building Corporation as Contractor. Tenant shall
deliver to Landlord notice of its selection of the Contractor upon such
selection.
4.1.2 TENANT'S AGENTS. All subcontractors performing work which
materially affects the structural elements of the Building or the mechanical,
electrical, plumbing, heating, ventilating, air conditioning or security systems
of the Building used by Tenant (such subcontractors, and the Contractor to be
known collectively as "Tenant's Agents") must be approved in writing by
Landlord, which approval shall not be unreasonably withheld or delayed. If
Landlord does not approve any of Tenant's proposed subcontractors, laborers,
materialmen or suppliers, Tenant shall submit other proposed subcontractors,
laborers, materialmen or suppliers for Landlord's written approval.
4.2 CONSTRUCTION OF TENANT IMPROVEMENTS BY TENANT'S AGENTS.
4.2.1 CONSTRUCTION CONTRACT; COST BUDGET. Prior to Tenant's
execution of the construction contract and general conditions with Contractor
(the "Contract"), Tenant shall submit the Contract to Landlord for its approval,
which approval shall not be unreasonably withheld or delayed. Prior to the
commencement of the construction of the Tenant Improvements, and after Tenant
has accepted all bids for the Tenant Improvements, Tenant shall provide Landlord
with a detailed breakdown, by trade, of the final costs to be incurred or which
have been incurred, as set forth more particularly in SECTIONS 2.2.1.1 THROUGH
2.2.1.11, above, in connection with the design and construction of the Tenant
Improvements to be performed by or at the direction of Tenant or the Contractor,
which costs form a basis for the amount of the Contract (the "Final Costs").
Prior to Tenant's first delivery of Allowance Documentation, Tenant shall pay to
Landlord fifty percent (50%) of the "Over-Allowance Amount," as that term is
defined, below. For purposes of this Section 4.2.1, the "Over-Allowance Amount"
shall be equal to the difference between the amount of the Final Costs and
the amount of the Tenant Improvement Allowance (less any portion thereof
already disbursed by Landlord, or in the process of being disbursed by
Landlord, on or before the commencement of construction of the Tenant
Improvements). The Over-Allowance Amount shall be disbursed by Landlord
pursuant to the same procedure as the Tenant Improvement Allowance. After
the Tenant Improvement Allowance and the portion of the Over-Allowance Amount
which Tenant has paid to Landlord has been fully disbursed, Tenant shall pay
all costs of completing the Tenant Improvements directly to all applicable
service and materials providers, provided that Tenant shall continue to
provide Landlord with the Allowance Documentation in accordance with the
terms of this Tenant Work Letter.
EXHIBIT B - Page 7
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4.2.2 TENANT'S AGENTS.
4.2.2.1 LANDLORD'S GENERAL CONDITIONS FOR TENANT'S AGENTS
AND TENANT IMPROVEMENT WORK. Tenant's and Tenant's Agent's construction of the
Tenant Improvements shall comply with the following: (i) the Tenant
Improvements shall be constructed in strict accordance with the Approved Working
Drawings; (ii) Tenant's Agents shall submit schedules of all work relating to
the Tenant's Improvements to Contractor and Contractor shall, within five (5)
business days of receipt thereof, inform Tenant's Agents of any changes which
are necessary thereto, and Tenant's Agents shall adhere to such corrected
schedule; and (iii) Tenant shall abide by all rules made by Landlord's Building
manager with respect to the use of freight, loading dock and service elevators,
storage of materials, coordination of work with the contractors of other
tenants, and any other matter in connection with this Tenant Work Letter,
including, without limitation, the construction of the Tenant Improvements,
except during Tenant's initial construction and move-in period, when Tenant
shall have absolute priority over other construction in the Building, whether by
or on behalf of other tenants or Landlord.
4.2.2.2 INDEMNITY. Tenant's indemnity of Landlord as set
forth in this Lease shall also apply with respect to Tenant's non-payment of any
amount arising out of the Tenant Improvements and/or Tenant's disapproval of all
or any portion of any request for payment. Such indemnity by Tenant, as set
forth in this Lease, shall also apply with respect to any and all costs, losses,
damages, injuries and liabilities related in any way to Landlord's performance
of any ministerial acts reasonably necessary to enable Tenant to obtain any
building permit or certificate of occupancy for the Premises.
4.2.2.3 REQUIREMENTS OF TENANT'S AGENTS. Contractor shall
guarantee to Tenant and for the benefit of Landlord that the portion of the
Tenant Improvements for which it is responsible shall be free from any defects
in workmanship and materials for a period of not less than one (1) year from the
date of completion thereof. Each of Tenant's Agents shall be responsible for
the replacement or repair, without additional charge, of all work done or
furnished in accordance with its contract that shall become defective within one
(1) year after the later to occur of (i) completion of the work performed by
such contractor or subcontractors and (ii) the Lease Commencement Date. The
correction of such work shall include, without additional charge, all additional
expenses and damages incurred in connection with such removal or replacement of
all or any part of the Tenant Improvements, and/or the Building and/or common
areas that may be damaged or disturbed thereby. All such warranties or
guarantees as to materials or workmanship of or with respect to the Tenant
Improvements shall be contained in the Contract or subcontract and shall be
written such that such guarantees or warranties shall inure to the benefit of
both Landlord and Tenant, as their respective interests may appear, and can be
directly enforced by either.
4.2.2.4 INSURANCE REQUIREMENTS.
4.2.2.4.1 GENERAL COVERAGES. Contractor shall
carry worker's compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including property
damage, all with limits, in form and with companies as are required to be
carried by Tenant as set forth in this Lease.
4.2.2.4.2 SPECIAL COVERAGES. Tenant shall carry
"Builder's All Risk" insurance in an amount approved by Landlord covering the
construction of the Tenant Improvements, and such other insurance as Landlord
may require, it being understood and agreed that the Tenant Improvements shall
be insured by Tenant pursuant to this Lease immediately upon completion thereof.
Such insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord including, but not
limited to, the requirement that all of Tenant's Contractor shall carry excess
liability and Products and Completed Operation Coverage insurance, each in
amounts not less than $500,000 per incident, $1,000,000 in aggregate, and in
form and with companies as are required to be carried by Tenant as set forth in
this Lease.
4.2.2.4.3 GENERAL TERMS. Certificates for all
insurance carried pursuant to this SECTION 4.2.2.4 shall be delivered to
Landlord before the commencement of
EXHIBIT B - Page 8
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construction of the Tenant Improvements and before the Contractor's equipment
is moved onto the site. All such policies of insurance must contain a
provision that the company writing said policy will give Landlord ten (10)
days prior written notice of any cancellation or lapse of the effective date
or any reduction in the amounts of such insurance. All policies carried
under this SECTION 4.2.2.4 shall insure Landlord and Tenant, as their
interests may appear, as well as Contractor. All insurance, except Workers'
Compensation, maintained by Tenant's Agents shall preclude subrogation claims
by the insurer against anyone insured thereunder. Such insurance shall
provide that it is primary insurance as respects the owner and that any other
insurance maintained by owner is excess and noncontributing with the
insurance required hereunder. The requirements for the foregoing insurance
shall not derogate from the provisions for indemnification of Landlord by
Tenant under SECTION 4.2.2.2 of this Tenant Work Letter.
4.2.3 GOVERNMENTAL COMPLIANCE. The Tenant Improvements shall
comply in all respects with the following: (i) the Code and other state,
federal, city or quasi-governmental laws, codes, ordinances and regulations, as
each may apply according to the rulings of the controlling public official,
agent or other person; and (ii) applicable standards of the American Insurance
Association (formerly, the National Board of Fire Underwriters) and the National
Electrical Code.
4.2.3 INSPECTION BY LANDLORD. Landlord shall have the right to
inspect the Tenant Improvements at all times, provided however, that Landlord's
failure to inspect the Tenant Improvements shall in no event constitute a waiver
of any of Landlord's rights hereunder nor shall Landlord's inspection of the
Tenant Improvements constitute Landlord's approval of the same. Should Landlord
disapprove any portion of the Tenant Improvements in accordance with the terms
of this Tenant Work Letter, Landlord shall notify Tenant in writing of such
disapproval and shall specify the items disapproved. Any defects or deviations
in, and/or disapproval by Landlord of, the Tenant Improvements shall be
rectified by Tenant at no expense to Landlord, provided however, that in the
event Landlord determines that a defect or deviation exists or disapproves of
any matter in connection with any portion of the Tenant Improvements and such
defect, deviation or matter adversely affects the mechanical, electrical,
plumbing, heating, ventilating and air conditioning or life-safety systems of
the Building, the structure or exterior appearance of the Building and Tenant
does not correct such defect within thirty (30) days following written notice
from Landlord, Landlord may, take such action as Landlord deems necessary, at
Tenant's expense and without incurring any liability on Landlord's part, to
correct any such defect, deviation and/or matter.
4.2.5 MEETINGS. Commencing upon the execution of this Lease,
Tenant shall hold weekly meetings at a reasonable time, with the Architect and
the Contractor regarding the progress of the preparation of Construction
Drawings and the construction of the Tenant Improvements, and Landlord and/or
its agents shall receive prior notice of, and shall have the right to attend,
all such meetings. In addition, minutes shall be taken at all such meetings, a
copy of which minutes shall be promptly delivered to Landlord. One such meeting
each month shall include the review of Contractor's current request for payment.
4.3 NOTICE OF COMPLETION; COPY OF RECORD SET OF PLANS. Within ten
(10) days after completion of construction of the Tenant Improvements, Tenant
shall cause a Notice of Completion to be recorded in the office of the Recorder
of the county in which the Building is located in accordance with Section 3093
of the Civil Code of the State of California or any successor statute, and shall
furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do
so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent
for such purpose, at Tenant's sole cost and expense. At the conclusion of
construction, (i) Tenant shall cause the Architect (A) to update the Approved
Working Drawings as necessary to reflect all changes made to the Approved
Working Drawings during the course of construction, (B) to certify to the best
of their knowledge that the "record-set" of as-built drawings are true and
correct, and (C) to deliver to Landlord two (2) sets of copies of such record
set of drawings within ninety (90) days following issuance of a certificate of
occupancy for the Premises.
EXHIBIT B - Page 9
<PAGE>
SECTION 5
DELAY OF LEASE COMMENCEMENT DATE
5.1 LEASE COMMENCEMENT DATE DELAYS. The Lease Commencement Date shall
occur as provided in Article 2 of this Lease, provided that the Lease
Commencement Date shall be delayed by the number of days of delay of the
"substantial completion of the Tenant Improvements," as that term is defined
below in this Section 5, in the Premises which is caused solely by a "Lease
Commencement Date Delay." As used herein, the term "Lease Commencement Date
Delay" shall mean only a "Force Majeure Delay" or a "Landlord Caused Delay," as
those terms are defined below in this Section 5.1 of this Tenant Work Letter.
As used herein, the term "FORCE MAJEURE DELAY" shall mean only an actual delay
resulting from strikes, fire, wind, damage or destruction to the Building,
explosion, casualty, flood, hurricane, tornado, the elements, acts of God or the
public enemy, sabotage, war, invasion, insurrection, rebellion, civil unrest,
riots, or earthquakes. As used in this Tenant Work Letter, "LANDLORD CAUSED
DELAY" shall mean delays in Tenant's construction of the Tenant Improvements
resulting from (i) any breach of the Lease by Landlord (including, without
limitation, failure to timely fund an installment of the Tenant Improvement
Allowance); (ii) material interference with Tenant's construction of the Tenant
Improvements to the extent resulting from Landlord's failure to substantially
complete items 1.2.1, 1.2.2, 1.2.3, 1.2.4, 1.2.5, 1.2.6, 1.2.8, 1.2.10, and/or
1.2.11 of Landlord's Work on or before August 15, 1998; (iii) Landlord's failure
to grant Tenant reasonable access to the Premises, parking areas, and loading
and hoisting facilities, (iv) Landlord's failure to deliver Landlord's Work in
compliance with in compliance with the terms of this Lease, (v) material and
unreasonable interference by Landlord in Tenant's completion of the Tenant
Improvements (provided that Landlord's disapproval on any item requiring
Landlord's consent subject to and in accordance with the terms of this Tenant
Work Letter shall not be a Lease Commencement Date Delay), (vi) delays in
granting or denying Landlord's approval beyond the applicable period of time set
forth in this Tenant Work Letter, and (vii) failure of Landlord to provide one
(1) elevator for Tenant's use during the construction the Tenant Improvements,
the delivery of Tenant's furniture, and Tenant's move into the Premises.
5.2 DETERMINATION OF LEASE COMMENCEMENT DATE DELAY. If Tenant
contends that a Lease Commencement Date Delay has occurred, Tenant shall notify
Landlord in writing of (i) the event which constitutes the Lease Commencement
Date Delay, and (ii) the date upon which such Lease Commencement Date Delay
ends. If such actions, inaction or circumstances described in the notice set
forth in clause (i), above (the "Delay Notice") qualify as a Lease Commencement
Date Delay, then a Lease Commencement Date Delay shall be deemed to have
occurred commencing as of the date of Landlord's receipt of the Delay Notice and
ending as of the date the applicable delay ends.
5.3 DEFINITION OF SUBSTANTIAL COMPLETION OF THE TENANT IMPROVEMENTS.
For purposes of this Section 5, "substantial completion of the Tenant
Improvements" shall mean completion of construction of the Tenant Improvements
in the Premises pursuant to the "Approved Working Drawings," with the exception
of any punch list items, any freestanding furniture, freestanding work-stations.
SECTION 6
MISCELLANEOUS
6.1 TENANT'S REPRESENTATIVE. Tenant has designated Richard B. Shapiro
as its sole representative with respect to the matters set forth in this Tenant
Work Letter, who shall have full authority and responsibility to act on behalf
of the Tenant as required in this Tenant Work Letter.
6.2 LANDLORD'S REPRESENTATIVE. Landlord has designated Mr. Pat Martin
as its sole representative with respect to the matters set forth in this Tenant
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter. Landlord shall make Landlord's Representative available, on a
reasonable basis, to assist Tenant in design, construction and relocation
related issues, at no cost to Tenant.
EXHIBIT B - Page 10
<PAGE>
6.3 TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by
Landlord, the procedure for preparation of the document and approval thereof
shall be repeated until the document is approved by Landlord.
6.4 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in the
Lease or this Tenant Work Letter has occurred at any time on or before the
Substantial Completion of the Premises, then in addition to all other rights and
remedies granted to Landlord pursuant to this Lease, Landlord shall have the
right to withhold payment of all or any portion of the Tenant Improvement
Allowance (in which case, Tenant shall be responsible for any delay in the
substantial completion of the Premises caused by such withholding), and .
6.5 MISCELLANEOUS CHARGES. Neither Tenant nor Tenant's Agents shall
not be charged for parking in the Building or for use of freight elevators,
loading docks or electricity or, during Building Hours, for HVAC, in each event
to the extent utilized during the construction of the Tenant Improvements and
Tenant's move into the Premises.
6.6 LANDLORD'S ACTIONS. Wherever Landlord is required or authorized
to perform any action (or supervise such performance by others) pursuant to the
terms of this Work Letter, Landlord shall perform such action without charge to
Tenant or Tenant's Agents, without reimbursement and without deduction from the
Tenant Improvement Allowance.
6.7 STAGING AREA. Landlord shall provide a reasonable area within the
Building for staging Tenant's initial move into the Premises and/or for Tenant's
furniture assembly. Landlord shall have no obligation to provide a staging area
to be utilized by Tenant in connection with the construction of the Tenant
Improvements.
6.8 EXPENSES DUE TO ERROR. If Tenant reasonably incurs increased
design or construction expenses because of material inaccuracies in the "MEP
Plans," as that term is defined below, then Landlord shall bear any increased
costs in the design and construction of the Tenant Improvements resulting
therefrom separate and apart from, and in addition to, the Tenant Improvement
Allowance and any delays encountered by Tenant in the design or construction of
the Tenant Improvement or Alteration or a result thereof shall be considered a
Landlord Caused Delay as described in Section 5.1 above of this Tenant Work
Letter. For purposes of this Section 6.8, the "MEP Plans," shall mean the
following plans, all prepared by Store, Matakovich & Wolfberg: (i) electrical
plans, dated January 7, 1998, sheets E-1 through E-13, and electrical plans,
dated January 8, 1998, sheets EM-1 through EM-2 Addendum, (ii) plumbing plans,
dated December 17, 1997, sheets P-1 through P-10, and plumbing specifications,
dated December 17, 1997, Section 15400, and (iii) mechanical plans, dated
January 7, 1998, sheets M-1 through M-19 Addendum, mechanical plans, dated
January 7, 1998, sheets EM-1 through EM-2 Addendum, and mechanical
specifications, dated January 8, 1998, Sections 15500 through 15990.
EXHIBIT B - Page 11
<PAGE>
SCHEDULE 1
SPECIFICATIONS
1. If a new vestibule is created in the Building lobby, Tenant
finishes therein shall be consistent with the existing Building
lobby finishes and otherwise reasonably acceptable to Landlord.
2. Interior partitions to be ceiling height only, except to the
extent sound requirements require otherwise.
3. All partitions at exterior windows should terminate on mullions or
be "jogged" to do so.
4. All doors shall be full height, natural wood veneers, stained to
Landlord's approval.
5. Door hardware shall be brushed stainless steel.
6. Acoustic ceilings should be 2' x 2' "Fineline" with tegular board.
Board texture is subject to the reasonable approval of Landlord.
7. Carpet shall be of Class A quality, i.e. minimum 32 oz. weight,
cut pile or 26 oz. weight loop pile.
8. Window blinds shall be Levelor Riviera style, approximately 1"
horizontal slats, color to match window frames.
9. Millwork shall be custom grade, plastic laminate or natural woods.
Hinges shall be concealed.
10. All HVAC and electrical control devices, diffuser types and zoning
requirements must be approved by Landlord.
11. Light fixtures shall be 2' x 4' or 2' x 2', 18-cell (9-cell)
parabolic lenses with electronic ballasts and T-8, 3500K lamps.
12. Electrical trim devices shall be Decora-style.
<PAGE>
EXHIBIT C
6330 SAN VICENTE BOULEVARD
NOTICE OF LEASE TERM DATES
To: _______________________
_______________________
_______________________
_______________________
Re: Office Lease dated ____________, 19__ between
____________________, a _____________________ ("Landlord"), and
_______________________, a _______________________ ("Tenant")
concerning Suite ______ on floor(s) __________ of the office
building located at ____________________________, Los Angeles,
California.
Gentlemen:
In accordance with the Office Lease (the "Lease"), we wish to advise you
and/or confirm as follows:
1. The Lease Term shall commence on or has commenced on
______________ for a term of __________________ ending on
__________________.
2. Rent commenced to accrue on __________________, in the amount of
________________.
3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall
be for the full amount of the monthly installment as provided for
in the Lease.
4. Your rent checks should be made payable to __________________ at
___________________.
5. The exact number of rentable/usable square feet within the
Premises is ____________ square feet.
6. Tenant's Share as adjusted based upon the exact number of usable
square feet within the Premises is ________%.
"Landlord":
__________________________________
a ________________________________
By:_______________________________
Its:___________________________
Agreed to and Accepted
as of ____________, 19___.
"Tenant":
__________________________________
a_________________________________
By:_________________________________
Its:______________________________
EXHIBIT C - Page 1
<PAGE>
EXHIBIT D
6330 SAN VICENTE BOULEVARD
RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. Landlord shall use
reasonable efforts to cause other tenants or occupants of the Project to comply
with the Rules and Regulations and to avoid any unreasonable interference of
Tenant's use of the Premises as a result of the failure of such other tenants or
occupants to comply with the Rules and Regulations. The Rules and Regulations
of the Project, attached to and made a part of the Lease as Exhibit "D," shall
not be changed or revised or enforced in any unreasonable way by Landlord, nor
enforced or changed by Landlord in such a way as to substantially interfere with
Tenant's Lease Rights. In the event of any conflict between the Lease and the
Rules and Regulations, the Lease shall prevail and control and the inconsistent
provisions of the Rules and Regulations shall not be inapplicable to Tenant.
In the event of any conflict between the Rules and Regulations and the other
provisions of this Lease, the latter shall control.
1. Tenant shall not alter any lock or install any new or additional
locks or bolts on any doors or windows of the Premises without obtaining
Landlord's prior written consent. Tenant shall bear the cost of any lock
changes or repairs required by Tenant. Upon the termination of this Lease,
Tenant shall restore to Landlord one set of all keys relating to the Premises.
2. All doors opening to public corridors shall be kept closed at all
times except for normal ingress and egress to the Premises.
3. Landlord reserves the right to close and keep locked all entrance
and exit doors of the Building during such hours as are customary for Comparable
Buildings. Tenant, its employees and agents must be sure that the doors to the
Building are securely closed and locked when leaving the Premises if it is after
the normal hours of business for the Building. Any tenant, its employees,
agents or any other persons entering or leaving the Building at any time when it
is so locked, or any time when it is considered to be after normal business
hours for the Building, may be required to sign the Building register. Access
to the Building may be refused unless the person seeking access has proper
identification or has a previously arranged pass for access to the Building.
Landlord will furnish passes to persons for whom Tenant requests same in
writing. Tenant shall be responsible for all persons for whom Tenant requests
passes and shall be liable to Landlord for all acts of such persons. The
Landlord and his agents shall in no case be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
In case of invasion, mob, riot, public excitement, or other commotion, Landlord
reserves the right to prevent access to the Building or the Project during the
continuance thereof by any means it deems appropriate for the safety and
protection of life and property.
4. No furniture, freight or equipment of any kind shall be brought
into the Building without prior notice to Landlord. All moving activity into or
out of the Building shall be scheduled with Landlord and done only at such time
and in such manner as Landlord designates except during Tenant's initial
construction and move-in period, when Tenant shall have absolute priority over
other construction in the Building, whether by or on behalf of other tenants or
Landlord. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy property brought into the Building and
also the times and manner of moving the same in and out of the Building. Safes
and other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property in any case. Any damage to any part of the Building, its contents,
occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility and expense of Tenant.
EXHIBIT D - Page 1
<PAGE>
5. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours, in such specific elevator and by such personnel as shall be
designated by Landlord, except during Tenant's initial construction and move-in
period, when Tenant shall have absolute priority over other construction in the
Building, whether by or on behalf of other tenants or landlord..
6. The requirements of Tenant will be attended to only upon
application at the management office for the Project or at such office location
designated by Landlord. Employees of Landlord shall not perform any work or do
anything outside their regular duties unless under special instructions from
Landlord.
7. Except as otherwise provided in this Lease, no sign,
advertisement, notice or handbill shall be exhibited, distributed, painted or
affixed by Tenant on any part of the Premises or the Building without the prior
written consent of the Landlord. Tenant shall not disturb, solicit, peddle, or
canvass any occupant of the Project and shall cooperate with Landlord and its
agents of Landlord to prevent same.
8. The toilet rooms, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed, and
no foreign substance of any kind whatsoever shall be thrown therein. The
expense of any breakage, stoppage or damage resulting from the violation of this
rule shall be borne by the tenant who, or whose servants or employees shall have
caused same.
9. Tenant shall not overload the floor of the Premises or drywall,
nor in any way deface the Premises or any part thereof without Landlord's prior
written consent. Tenant shall not purchase spring water, ice, towel, linen,
maintenance or other like services from any person or persons not approved by
Landlord.
10. Intentionally Deleted.
11. Except in connection with the model shop intended to be maintained
in the Premises by Tenant (which shall in any event be subject to the terms of
the Lease), Tenant shall not use or keep in or on the Premises, the Building, or
the Project any kerosene, gasoline, explosive material, corrosive material,
material capable of emitting toxic fumes, or other inflammable or combustible
fluid chemical, substitute or material. Tenant shall provide to applicable
governmental authorities material safety data sheets for any Hazardous Material
used or kept on the Premises.
12. Except as otherwise provided in this Lease, Tenant shall not
without the prior written consent of Landlord use any method of heating or air
conditioning other than that supplied by Landlord.
13. Tenant shall not use or allow the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of the
Project by reason of noise, odors, or vibrations, or interfere with other
tenants or those having business therein, whether by the use of any musical
instrument, radio, phonograph, or in any other way. Tenant shall not throw
anything out of doors, windows or skylights or down passageways.
14. Tenant shall not bring into or keep within the Project, the
Building or the Premises any animals, birds, aquariums, or, except in areas
designated by Landlord, bicycles or other vehicles. Notwithstanding the
foregoing, animals serving the disabled and wheelchairs shall be permitted.
15. No cooking shall be done or permitted on the Premises, for lodging
or for any improper, objectionable or immoral purposes. Notwithstanding the
foregoing, Underwriters' laboratory-approved equipment and microwave ovens may
be used in the Premises for heating food and brewing coffee, tea, hot chocolate
and similar beverages for employees and visitors, provided that such use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.
EXHIBIT D - Page 2
<PAGE>
16. The Premises shall not be used for manufacturing or for the
storage of merchandise except as such manufacturing and/or storage may be
incidental to the use of the Premises provided for in the Summary. Tenant shall
not occupy or permit any portion of the Premises to be occupied as an office for
a messenger-type operation or dispatch office, public stenographer or typist, or
for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a medical office, or as a barber or manicure shop, or as an employment bureau
without the express prior written consent of Landlord. Tenant shall not engage
or pay any employees on the Premises except those actually working for such
tenant on the Premises nor advertise for laborers giving an address at the
Premises.
17. Landlord reserves the right to exclude or expel from the Project
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of these Rules and Regulations.
18. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.
19. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls. Tenant shall participate in recycling
programs undertaken by Landlord.
20. Tenant shall store all its trash and garbage within the interior
of the Premises. No material shall be placed in the trash boxes or receptacles
if such material is of such nature that it may not be disposed of in the
ordinary and customary manner of removing and disposing of trash and garbage in
Los Angeles, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Landlord
shall designate. If the Premises is or becomes infested with vermin as a result
of the use or any misuse or neglect of the Premises by Tenant, its agents,
servants, employees, contractors, visitors or licensees, Tenant shall forthwith,
at Tenant's expense, cause the Premises to be exterminated from time to time to
the satisfaction of Landlord and shall employ such licensed exterminators as
shall be approved in writing in advance by Landlord.
21. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by any governmental agency.
22. Any persons employed by Tenant to do janitorial work shall be
subject to the prior written approval of Landlord, and while in the Building and
outside of the Premises, shall be subject to and under the control and direction
of the Building manager (but not as an agent or servant of such manager or of
Landlord).
23. Except as otherwise provided in this Lease no awnings or other
projection shall be attached to the outside walls of the Building without the
prior written consent of Landlord, and, except as set forth below, no curtains,
blinds, shades or screens shall be attached to or hung in, or used in connection
with, any window or door of the Premises other than Landlord standard window
coverings. Notwithstanding the foregoing, Tenant shall be permitted to apply
privacy tinting to the exterior windows on the ground floor portion of the
Premises, provided that the color and other specifications relating to the
tinting shall be subject to the approval of Landlord, which approval shall not
be unreasonably withheld. Tenant shall be responsible for any damage to the
window film on the exterior windows of the Premises caused by Tenant and shall
promptly repair any such damage at Tenant's sole cost and expense.
24. The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant.
25. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.
EXHIBIT D - Page 3
<PAGE>
26. Tenant shall comply with all applicable governmental laws, rules,
regulations and ordinances concerning smoking.
27. Except as specifically set forth set forth in this Lease, (i)
Tenant hereby acknowledges that Landlord shall have no obligation to provide
guard service or other security measures for the benefit of the Premises, the
Building or the Project, and (ii) Tenant hereby assumes all responsibility for
the protection of Tenant and its agents, employees, contractors, invitees and
guests, and the property thereof, from acts of third parties. Tenant shall
cooperate in any reasonable safety or security program developed by Landlord or
required by law.
28. All office equipment of any electrical or mechanical nature shall
be placed by Tenant in the Premises in a manner reasonably calculated to
eliminate unreasonable vibration, noise and annoyance.
29. Tenant shall not use in any space or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and rubber
side guards.
30. No auction, liquidation, fire sale, going-out-of-business or
bankruptcy sale shall be conducted in the Premises without the prior written
consent of Landlord.
31. No tenant shall use or permit the use of any portion of the
Premises for living quarters, sleeping apartments or lodging rooms.
Landlord reserves the right to change or rescind any one or more of these
Rules and Regulations, in Landlord's reasonable discretion, or to make such
other and further reasonable Rules and Regulations. Tenant shall be deemed to
have read these Rules and Regulations and to have agreed to abide by them as a
condition of its occupancy of the Premises. Landlord shall enforce the Rules
and Regulations in a reasonable and nondiscriminatory manner.
EXHIBIT D - Page 4
<PAGE>
EXHIBIT E
6330 SAN VICENTE BOULEVARD
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Office Lease (the "Lease")
made and entered into as of ___________, 199_ by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises on the ______________
floor(s) of the office building located at ______________, Los Angeles,
California ____________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the
Lease and all amendments and modifications thereto. The documents contained in
Exhibit A represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the
Lease, the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on ____________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6. Tenant shall not modify the documents contained in Exhibit A
without the prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is
$_____________________.
8. To the actual knowledge of Tenant, all conditions of the Lease to
be performed by Landlord necessary to the enforceability of the Lease have been
satisfied and Landlord is not in default thereunder. In addition, the
undersigned has not delivered any notice to Landlord regarding a default by
Landlord thereunder.
9. No rental has been paid more than thirty (30) days in advance and
no security has been deposited with Landlord except as provided in the Lease.
10. As of the date hereof, to the actual knowledge of Tenant, there
are no existing defenses or offsets, or, to the undersigned's knowledge, claims
or any basis for a claim, that the undersigned has against Landlord.
EXHIBIT E - Page 1
<PAGE>
11. If Tenant is a corporation or partnership, each individual
executing this Estoppel Certificate on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Estoppel Certificate and that each person signing on behalf of
Tenant is authorized to do so.
12. There are no actions pending against the undersigned under the
bankruptcy or similar laws of the United States or any state.
13. To the undersigned's knowledge, all initial tenant improvement
work to be performed by Landlord under the Lease has been completed in
accordance with the Lease and has been accepted by the undersigned and all
reimbursements and allowances due to the undersigned under the Lease in
connection with any initial tenant improvement work have been paid in full.
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 19_.
"Tenant":
__________________________________,
a ________________________________
By:_______________________________
Its:______________________________
By:_______________________________
Its:______________________________
EXHIBIT E - Page 2
<PAGE>
EXHIBIT F
SIGNAGE
[PICTURE OF FRONT CORNER OF BUILDING WITH SIGNAGE]
EXHIBIT F - Page 1
<PAGE>
EXHIBIT G
LOCATION OF RESERVED PARKING SPACES
[DRAWING OF GARAGE LEVEL P1 PARKING SPACES]
EXHIBIT G - Page 1
<PAGE>
EXHIBIT H
MEMORANDUM OF LEASE
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
EQUITY MARKETING, INC.
c /o Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, Suite 2400
Los Angeles, California 90067
Attention: Robert J. Plotkowski. Esq.
===============================================================================
MEMORANDUM OF OFFICE LEASE
THIS MEMORANDUM OF OFFICE LEASE (this "Memorandum") is entered into as of
the __ day of ________, 199_, by and between MIRACLE MILE, L.L.C., LLC, a
Delaware limited liability company ("Landlord"), and Equity Marketing, Inc., a
Delaware corporation ("Tenant").
1. TERMS AND PREMISES. Landlord leases to Tenant, and Tenant leases
from Landlord, certain premises (the "Premises") to be located on a portion of
the real property (the "Property") legally described on Exhibit A attached
hereto (known by the street address of 6330 San Vicente Boulevard (the
"Building")) in accordance with the provisions of that certain Office Lease,
dated July 17, 1998, between the parties hereto (the "Lease"). The provisions
of the Lease are incorporated herein.
2. TERM. The initial term of the Lease expires on approximately
_________, 2005, or as otherwise set forth in the Lease. Tenant also has
certain rights to extend the initial term in connection with its leasing of
additional space in the Building and thereafter has two (2) options to extend
the Lease for a period of five (5) years each.
3. EXCLUSIVE RIGHT TO BUILDING TOP SIGNAGE. Subject to the terms of
Article 23 of the Lease, Tenant retains the exclusive right to signage on the
top of the Building.
4. ADDITIONAL RESTRICTIONS ON BUILDING SIGNAGE. Subject to the term
of Article 23 of the Lease, Landlord is prohibited from (i) granting eyebrow
signage to "Prohibited Tenants," as that term is defined in Section 23.6 of the
Lease, and (ii) naming the Building after any entity.
5. RESTRICTIONS ON LEASING. Subject to the terms of Section 29.14 of
the Lease, Landlord is prohibited from entering into a direct lease of space and
from consenting to a "Transfer," as that term is defined in Section 14.1 of the
Lease, to "Tenant Competitors," as that term is defined in Section 29.14 of the
Lease, and to "Excluded Tenants," as that term is defined in Section 29.14 of
the Lease.
6. PROVISIONS BINDING ON PARTIES. The provisions of the Lease to be
performed by Landlord or Tenant, whether affirmative or negative in nature, are
intended to and shall bind or benefit the respective parties and their assigns
or successors, as applicable, at all times.
7. PURPOSE OF MEMORANDUM OF LEASE. This Memorandum is prepared
solely for purposes of recordation, and in no way modifies the provisions of the
Lease.
EXHIBIT H - Page 1
<PAGE>
"Landlord":
MIRACLE MILE, L.L.C.,
a Delaware limited liability company
By:_________________________________
Its:_____________________________
"Tenant":
EQUITY MARKETING, INC., a Delaware
corporation
By:________________________________
Its:____________________________
By:________________________________
Its:____________________________
EXHIBIT H - Page 2
<PAGE>
STATE OF_________________)
) ss.
COUNTY OF________________)
On ________________________, before me, ________________________, a
Notary Public in and for said state, personally appeared
_______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument, the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
____________________________________________
Notary Public in and for said State
STATE OF_________________)
) ss.
COUNTY OF________________)
On ________________________, before me, ________________________, a
Notary Public in and for said state, personally appeared
_______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument, the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
____________________________________________
Notary Public in and for said State
EXHIBIT H - Page 1
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On ________________________, before me, ________________________, a
Notary Public in and for said state, personally appeared
_______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument, the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
--------------------------------------------
Notary Public in and for said State
STATE OF )
) ss.
COUNTY OF )
On ________________________, before me, ________________________, a
Notary Public in and for said state, personally appeared
_______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument, the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
--------------------------------------------
Notary Public in and for said State
EXHIBIT II - Page 2
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
The land referred to is situated in the County of Los Angeles, State of
California, and is described as follows:
PARCEL 1:
LOT 1 OF TRACT NO. 22472, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 712 PAGE 83 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
THE NORTHWESTERLY 5.00 FEET OF LOT "G" OF TRACT 5542, SHEETS 1 TO 5, IN THE
CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 59 PAGES 53 TO 57 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, AND THAT PORTION OF RILEY WAY, 20.00 FEET WIDE
(VACATED) SHOWN ON THE MAP OF SAID TRACT 5542 TITLE TO WHICH WOULD NORMALLY
PASS WITH A LEGAL CONVEYANCE OF THE NORTHWESTERLY 5.00 FEET OF SAID LOT "G".
EXCEPT ALL OIL, GAS, WATER AND MINERAL RIGHTS, WITHOUT RIGHT OF SURFACE
ENTRY, AS RESERVED BY THE CITY OF LOS ANGELES, A MUNICIPAL CORPORATION, IN
DEED RECORDED MAY 28, 1964 AS INSTRUMENT NO. 6301, IN BOOK D-2489 PAGE 453,
OFFICIAL RECORDS.
EXHIBIT H - Page 1
<PAGE>
EXHIBIT I
JANITORIAL SPECIFICATIONS
GENERAL SERVICES
- Daily Services
Clean entry door glass.
Sweep with chemically treated dust mop or vacuum all floors.
Spot clean composition floors and carpets.
Dust desk, chairs and all other office furniture.
Clean all ash trays and sand urns.
Properly position furniture in offices.
Empty all waste baskets and carry trash to pick up area.
Spot clean door, door frames and counters.
Spot clean partition and door glass.
Spot clean around wall switches.
Clean and polish drinking fountains.
Clean elevator and elevator tracks.
Leave on designated lights.
Police stairway entries.
- Weekly Services
Dust ledges and window sills.
Perform low dusting.
Dust the baseboards.
Sweep/vacuum stairways dust rails.
Remove fingerprints from woodwork, walls and partitions.
- Monthly Services
Perform high dusting, i.e., door sashes and tops of partitions.
Dust picture frames.
EXHIBIT I - Page 1
<PAGE>
FLOOR FINISHING SERVICES
Clean and refinish all composition floors - monthly
REST ROOM SERVICES
- Daily Services
Empty and wipe out all waste paper receptacles.
Empty sanitary napkin containers and replace insert.
Polish all metal and mirrors.
Clean and polish all dispensers.
Clean and disinfect wash basins, toilet bowls and urinals.
Disinfect underside and tops of toilet seats.
Spot clean tile walls and toilet partitions.
Spot clean walls around wash basins.
Clean floors with a germicidal solution.
Refill soap, towel, tissue and seat cover dispensers.
- Semi - Weekly Services
Pour clean water down floor drains to prevent sewer gases from
escaping.
- Weekly Services
Wash down ceramic tile walls and toilet compartment partitions.
Perform high dusting.
- Monthly Services
Brush down vents.
Machine scrub floors.
EXHIBIT I - Page 2
<PAGE>
EXHIBIT J
6330 SAN VICENTE
FORM OF LETTER OF CREDIT
(Letterhead of money center bank
acceptable to the Landlord)
__________ __, 1998
MIRACLE MILE, L.L.C.
1900 Avenue of the Stars
Suite 2000
Los Angeles, California 90067
Attention: Mr. David Simon
Ladies and Gentlemen:
We hereby establish our Irrevocable Letter of Credit and authorize you to
draw on us at sight for the account of EQUITY MARKETING, INC., a Delaware
corporation, the aggregate amount of $___________________.
Funds under this Letter of Credit are available to the beneficiary hereof
as follows:
Any or all of the sums hereunder may be drawn down at any time and from
time to time from and after the date hereof by Miracle Mile, L.L.C.
("Beneficiary") when accompanied by this Letter of Credit and a written
statement signed by a representative of Beneficiary, certifying that such moneys
are due and owing to Beneficiary, and a sight draft executed and endorsed by a
representative of Beneficiary.
This Letter of Credit is transferable in its entirety at no cost of
Beneficiary or the transferee. Should a transfer be desired, such transfer will
be subject to the return to us of this advice, together with written
instructions.
The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank. We hereby agree that this Letter of Credit shall be duly
honored upon presentation and delivery of the certification specified above.
This Letter of Credit shall expire on ______________.
Notwithstanding the above expiration date of this Letter of Credit, the
term of this Letter of Credit shall be automatically renewed for successive,
additional one (1) year periods unless, at least thirty (30) days prior to any
such date of expiration, the undersigned shall give written notice to
Beneficiary, by certified mail, return receipt requested and at the address set
forth above or at such other address as may be given to the undersigned by
Beneficiary, that this Letter of Credit will not be renewed.
EXHIBIT J - Page 1
<PAGE>
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1983 Revision), International Chamber of Commerce
Publication 400.
Very truly yours,
(Name of Issuing Bank)
By:________________________________
EXHIBIT J - Page 2
<PAGE>
FIRST AMENDMENT TO OFFICE LEASE
This First Amendment to Office Lease (the "First Amendment") is made and
entered into as of February 9, 1999, by and between MIRACLE MILE, L.L.C., a
Delaware limited liability company ("Landlord"), and EQUITY MARKETING, INC., a
Delaware corporation ("Tenant").
R E C I T A L S
A. Landlord and Tenant entered into that certain Office Lease (the
"Lease"), dated July 17, 1998, whereby Landlord leased to Tenant and Tenant
leased from Landlord that certain space in the building located at 6330 San
Vicente Boulevard, Los Angeles, California (the "Building").
B. The parties desire to amend the Lease on the terms and conditions
set forth in this First Amendment.
A G R E E M E N T :
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
hereby agree as follows:
1. TERMS. All undefined terms when used herein shall have the same
respective meanings as are given such terms in the Lease, unless expressly
provided otherwise in this First Amendment.
2. GIVE-BACK SPACE. Landlord and Tenant hereby acknowledge and agree
that, effective as of the date of the full execution and delivery of this First
Amendment (the "Effective Date"), notwithstanding anything in the Lease to the
contrary, (i) Tenant shall quit and surrender approximately 931 rentable (875
usable) square feet of the Premises located on the ground floor the Building, as
more particularly set forth on Exhibit A, attached hereto (the "Give Back
Space"), (ii) the Give Back Space shall not be a part of the Premises, and (iii)
the "Premises" shall consist of approximately 57,128 rentable (54,021 usable)
square feet of space. Following the Effective Date, Landlord and Tenant shall
each be fully and unconditionally released and discharged from their respective
obligations under the Lease with respect to the Give-Back Space.
3. RENT.
3.1 BASE RENT. Notwithstanding anything in the Lease, as
amended by this First Amendment, to the contrary, commencing as of the Effective
Date and continuing through and including the last day of the initial Lease
Term, the Base Rent payable by Tenant shall be as follows:
<TABLE>
<CAPTION>
Monthly Annual
Annual Base Rent Installment Rental Rate per
of Base Rent rentable square foot
<S> <C> <C> <C>
Effective Date $1,165,411.20 $97,117.60 $20.40
through the last
day of the 30th
month of the Lease
Term
First day of 31st $1,199,688.00 $99,974.00 $21.00
month of the Lease
Term through last
day of 60th month
of the Lease Term
-1-
<PAGE>
First day of 61st $1,473,902.40 $122,825.20 $25.80
month of the Lease
Term through last
day 84th month of
Lease Term
</TABLE>
Nothing contained in this First Amendment shall modify or reduce Tenant's Base
Rent obligation for the Premises (including the Give Back Space) with respect to
the portion of the Lease Term prior to the Effective Date.
3.2 TENANT'S SHARE OF DIRECT EXPENSES. Notwithstanding
anything in Section 6 of the Lease Summary to the contrary, effective as of the
Effective Date, Tenant's Share of Direct Expenses shall equal approximately
59.0%:
4. CONSIDERATION TO LANDLORD. In consideration of Landlord's
execution of this Agreement, Tenant shall deliver to Landlord, within thirty
(30) days following the Effective Date, a check payable to Landlord in an amount
equal to Thirty-Five Thousand Three Hundred Fifty-Six and 56/100 Dollars
($35,356.56) (the "Give Back Space Termination Fee"). The Give Back Space
Termination Fee shall be additional rent under the Lease, as modified hereby.
5. BROKER. Landlord and Tenant hereby warrant to each other that
they have had no dealings with any real estate broker or agent in connection
with the negotiations of this First Amendment other than CB Richard Ellis and
Julien J. Studley (the "Brokers"), and that they know of no other real estate
broker or agent who is entitled to a commission in connection with this First
Amendment. Each party agrees to indemnify and defend the other party against
and hold the other party harmless from any and all claims, demands, losses,
liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent other than the Brokers, occurring by, through or
under the indemnifying party.
6. REPRESENTATIONS OF TENANT. Tenant represents and warrants to
Landlord that with respect to the Give-Back Space (a) Tenant has not heretofore
sublet the Give-Back Space nor assigned all or any portion of its interest in
the Lease with respect thereto, and (b) Tenant has the full right, legal power
and actual authority to enter into this First Amendment and to terminate the
Lease with respect to the Give-Back Space without the consent of any person,
firm or entity. Tenant further represents and warrants to Landlord that as of
the date hereof there are mechanics' liens, or other liens encumbering all or
any portion of the Give-Back Space, by virtue of any act or omission on the part
of Tenant, its predecessors, contractors, agents, employees, successors, assigns
or subtenants. The representations and warranties set forth in this Section 6
shall survive the termination of the Lease with respect to the Give-Back Space
and Tenant shall be liable to Landlord for any inaccuracies or any breach
thereof.
7. NO FURTHER MODIFICATION. Except as specifically set forth in this
First Amendment, all of the terms and provisions of the Lease shall remain
unmodified and in full force and effect.
IN WITNESS WHEREOF, this First Amendment has been executed as of the day
and year first written above.
LANDLORD: TENANT:
-2-
<PAGE>
MIRACLE MILE, L.L.C., EQUITY MARKETING, INC.,
a Delaware limited liability company a Delaware corporation
By: /s/ David Simon By: /s/ Leland P. Smith
Its: David Simon Its: Sr. VP, General Counsel and
Vice President Secretary
By: /s/ Donald A. Kurz
Its: Chairman/CEO
-3-
<PAGE>
EXHIBIT A
OUTLINE OF GIVE BACK SPACE
[RENDERING OF FLOOR PLAN FOR FIRST FLOOR GIVE BACK SPACE]
EXHIBIT A - Page 1
<PAGE>
OFFICE PREMISES
DATED THE 10TH DAY OF MARCH 2000
WIDE HARVEST INVESTMENT LIMITED
and
EQUITY MARKETING HONG KONG, LTD.
*************************************************
TENANCY AGREEMENT
of
Suite Nos. 1,2,3 and 4 on the 18th Floor of Tower 6,
China Hong Kong City, China Ferry Terminal,
Canton Road, Kowloon.
*************************************************
BAKER & McKENZIE
Solicitors
1401 Hutchison House
Hong Kong
<PAGE>
AN AGREEMENT made the 10th day of March
Two thousand
Parties BETWEEN WIDE HARVEST INVESTMENT LTD whose registered office is
situate at 11th-12th Floor, Tsim Sha Tsui Centre, Salisbury
Road, Kowloon, Hong Kong (hereinafter called "the Landlord
which expression shall include its successors and assigns") of
the one part and the person, firm or company set out in Part I
of the First Schedule hereto (hereinafter called "the Tenant")
of the other part
WHEREBY IT IS AGREED as follows :-
Premises 1. In consideration of the rent (hereinafter referred to
as "the said rent") mentioned and of the terms by the Tenant
hereinafter contained the Landlord hereby lets and the Tenant
hereby takes ALL THAT Portion of the building as set out in
Part II of the First Schedule hereto forming part of the
Office Towers of CHINA HONG KONG CITY, CHINA FERRY TERMINAL
Canton Road, Kowloon, Hong Kong (hereinafter referred to as
"the said building") (which said Portion for the purpose of
identification only is delineated and described on the Plan
hereto annexed and thereon coloured Pink and marked "P")
(hereinafter called "the said premises") standing on ALL THAT
piece or parcel of ground registered in the Land Registry as
KOWLOON INLAND LOT NO. 10743 TOGETHER with the use and
enjoyment in common with the Landlord and/the other persons
entitled thereto of the entrances, staircases, landings,
lavatories, corridors and passages in the said building
insofar as the same are necessary for the proper use and
enjoyment of the said premises AND TOGETHER with the use in
common with others having the like right of the lifts
escalators and central air-conditioning services serving the
said premises whenever the same shall be operating for the
term defined in Part III of the First Schedule hereto ("the
said term") YIELDING AND PAYING therefor throughout the term
such rent and other charges as are from time to time payable
in advance and in accordance with the Provisions set out in
the Second Schedule and subject to the Tenant's use,
occupation and enjoyment of the said premises only for the
purposes set out in Part IV of the First Schedule hereto and
not for any other purposes whatsoever.
Rental deposit 2. The Tenant shall on the signing hereof deposit with
the Landlord the sum specified in Part V of the First Schedule
hereto (adjusted where necessary in the manner hereinafter
provided) and security for the due payment of the said rent,
surcharge and the due observance and performance of the terms
conditions and stipulations herein contained and on the part
of the Tenant to be observed and performed and the said
deposit shall be retained by the Landlord throughout the said
term free of any interest to the Tenant with power for the
Landlord without prejudice to any other right or remedy
hereunder to deduct therefrom the amount of any rent,
surcharge or other payments that fall due under this Agreement
and subject as aforesaid the same or the balance thereof after
satisfaction of the amount of any costs, expenses, loss or
damage sustained by the Landlord as a result of any
non-observance or non-performance by the Tenant of
-1-
<PAGE>
any such agreement stipulation or condition shall be returned
to the Tenant without compensation or interest within 45 days
after the Tenant shall have delivered up vacant possession of
the said premises pursuant to Clause 5(j) hereof PROVIDED that
any sum already paid by way of part payment on account of the
deposit shall be automatically transferred as part payment of
the monies payable under this Clause and only the balance
shall then be payable at the time stipulated herein but
without prejudice to the Landlord's rights to claim any
further damages which the Landlord has sustained or may
sustain.
3. The Tenant to the intent that the obligations
hereunder shall continue throughout the said term of tenancy
hereby agrees with the Landlord as follows : -
Rent and (a) (i) To pay the said rent and surcharge
surcharge on the days in manner aforesaid
without any deduction or set-off.
Computation of (ii) If the day on which the rent,
time of payment surcharge or other payments falls
due under this Agreement is a
public holiday, the relevant
payment of said rent, surcharge or
otherwise shall be due and payable
on the preceding business day.
(iii) The Landlord is not obliged to
accept payment of amounts payable
hereunder in any form other than
banknotes and if payment is made by
the Tenant by cheque, such cheque
must reach the office of the
Landlord before 3:30 o'clock in the
afternoon if such payment is made
on any weekday except Saturday, and
before 12 noon if such payment is
made on a Saturday otherwise the
payment shall be deemed to have
been paid by the Tenant on the
following business day and the
Tenant shall be deemed to have
defaulted in making due payment.
For the avoidance of doubt,
business day means a day on which
banks are ordinarily open for
business in Hong Kong.
Adjustment of (iv) If at any time during the said term
charges the operating cost relative to the
supply of the said air-conditioning
and/or the costs and expenses of
management of the said building
shall have risen over costs
prevailing at the commencement of
the said term the Landlord shall be
entitled to serve one month's
notice in writing upon the Tenant
to increase the said surcharges or
any of them by appropriate
amount(s) and thereafter such
increased charges shall prevail.
Further increase shall be made in
the same manner in the event of
costs rising after an earlier
notice of increase shall have
become operative. The Landlord's
assessments of the appropriate
increase shall be conclusive and
binding on the Tenant.
-2-
<PAGE>
Additional air- (v) If the Tenant shall require
conditioning air-conditioning outside the hours
charges set out in Clause 4(c) hereof, the
same can normally be provided on
not less than 48 hours notice in
writing stipulating at what time
the Tenant shall require additional
air-conditioning the Landlord at
such adjusted rates as may be
charged by the Landlord from time
to time.
(vi) Should the surcharge be increased
in accordance with the provisions
of Clause 3(a)(iv) of this
Agreement or should there be any
other increase in the rent during
the term, the Tenant shall upon
such increase becoming applicable
pay to the Landlord by way of an
increase in the said deposit a sum
proportional thereto in order to
restore the ratio of deposit to the
rent plus the surcharge to that
previously subsisting and the
payment of such increase should be
a condition precedent to the
continuation of this tenancy.
Rates (b) (i) To pay and discharge punctually
during the said term all rates,
Government rent, (if any) taxes,
assessments, duties, , charges
impositions and outgoings of an
annual or recurring nature
whatsoever now or hereafter to be
assessed imposed or charged on the
said premises or upon the owner or
occupier in respect thereof by the
Government of the Hong Kong Special
Administrative Region or other
lawful authority (Property Tax only
excepted).
(ii) In the event that an assessment to
rates in respect of the said
premises shall be raised directly
upon the Landlord the Landlord
shall during the month immediately
preceding any quarter in respect of
which such rates may fall due be at
liberty to debit the Tenant with
the amount thereof and the same
shall forthwith be paid by the
Tenant to the Landlord whereupon
the Landlord shall account for the
same to the Government of the Hong
Kong Special Administrative Region
(iii) In the event that no valuation of
the said premises shall have been
made in accordance with the Rating
Ordinance (Cap.116) or any
statutory amendment or modification
thereof for the time being in force
the Landlord shall be at liberty
and entitled to make an interim
valuation equivalent to 7.5% of the
annual rents of the said premises
and to debit the Tenant with the
amount which would be payable upon
such interim valuation and the same
shall forthwith be paid by the
Tenant to the Landlord and any
over-payment or
-3-
<PAGE>
under-payment by the Tenant on
such interim valuation shall be
adjusted when a valuation under the
Rating Ordinance shall have been
made known.
(iv) The Landlord shall be entitled to
treat non-payment of any amount
debited to the Tenant in accordance
with the foregoing provisions of
this Clause or any part thereof in
all respects as non-payment of the
said rent under this Agreement.
Water, gas and (c) To pay and discharge punctually during the
electricity charges said term all charges (including all
necessary deposits) in respect of water,
gas, electric light, power and telephones as
may be shown by the separated meter or
meters installed upon the said premises or
by accounts rendered to the Tenant.
Cleaning charges (d) To keep the said premises in clean and
sanitary condition and to employ cleaning
contractors for the said premises which
cleaning contractors shall be only such
persons or such firm as may be nominated by
the Landlord. Such cleaning contractors
shall be employed at the sole expense of the
Tenant and at the rate agreed by the
Landlord with the contractors and on such
terms and conditions which shall have been
previously approved by the Landlord, all
such payments to be made by the Tenant to
such contractors direct. In case the Tenant
shall have for disposal wet garbage or any
garbage of a perishable nature including but
not limited to food or food remains, the
Tenant shall use plastic bags of such
standards, size and thickness as shall be
prescribed by the Landlord for the removal
or disposal of such garbage and shall direct
and procure cleaning contractors appointed
as aforesaid to use such plastic bags for
such purposes at the sole costs of the
Tenant.
Interior Fitting (e) To fit out the interior of the said premises
out in accordance with the drawings approved by
the Landlord. The Tenant will not cause or
permit to be made any variation to the
interior design or layout of the said
premises without the prior written approval
of the Landlord first having been obtained.
Fitting up (f) To fit up the said premises in a style and
manner appropriate to a first class office
building and so to maintain the same
throughout the said term in good condition
and repair to the satisfaction of the
Landlord.
Decoration works (g) To construct at the Tenant's own expense
by the Tenant within the said premises or furnish items to
the said premises as follows:-
-4-
<PAGE>
(i) (a) A ceiling of non-combustible
material and electrical light
fittings. In case of
extension or relocation of
the sprinkler heads and/or
the smoke detectors and
other fire services equipment
installed by the Landlord is
needed, the cost of such work
will be paid by the Tenant.
(b) Vertical window blinds,
tracks and fittings and
Tenant's expenses.
(ii) Paint and decorate the interior of
the said premises.
(iii) Furnish and install floor fill and
floor finishes. PVC tiles shall not
be used unless approved by the
Landlord.
(iv) With the relevant plan showing all
the details including but not
limiting to the gauge of wire, etc.
duly approved in writing in advance
by the Landlord, complete all
internal electrical and mechanical
installations (heating,
ventilation, air-conditioning,
plumbing, drainage and fire
services) of workmanships and
materials of a standard to the
approval of the Landlord.
(v) Furnish and install or arrange for
the installation of telephones as
well as other Tenant's requirements
within the said premises together
with such meters as are necessary
to measure the Tenant's consumption
thereof.
(vi) Install, support and connect all
lighting fixtures, including lamps,
switches and wiring, save that in
the case of support involving
cutting into structure prior
written approval of the Landlord
will be required.
(vii) Install such fire extinguishers or
other means of fire-fighting
equipment inside the said premises
as may be required from time to
time by all relevant Ordinances and
regulations of the Government of
the Hong Kong Special
Administrative Region.
Telephone System (h) To install at the Tenant's own expense empty
conduits for telephone service to the said
premises. Telephone service to the premises
shall only be installed by the Hong Kong
Telephone Company Limited and the Tenant
shall leave pull wire in all conduits and
pay to the Landlord the expenses incurred in
the installation of telephone jacks and
conduits to the said premises.
-5-
<PAGE>
Electrical Testing (i) To test all circuits for shorts and ground
and to balance loads on all panels.
Pass for Service (j) The Tenant agrees that permanent utility
lines may pass through the ceiling cavity of
the said premises to service other premises
and areas in the said building.
Building Service (k) To employ at the Tenant's expenses only such
& Builder's Work contractors as may be nominated by the
Landlord from time to time for the purpose
of designing and carrying out and installing
all the necessary building services and
builder's work as hereinafter defined in the
said premises in manner as prescribed by the
Landlord or its nominated contractors and in
particular to pay the Landlord vetting fees
consultancy fees and relating charges at the
pre-determined scales as set out by the
Landlord. For the purpose of this
sub-clause, subject to
amendments/alterations from time to time and
to such extent as the Landlord shall in its
discretion deem appropriate or necessary.
(a) The expression "building services"
shall mean all mechanical and
electrical engineering work and
arrangement related to the said
premises including but not confined
to electrical air-conditioning,
plumbing, building automation and
fire fighting installation.
(b) The expression "Builders' work"
shall mean all renovation work not
specified under "building service"
including but not confined to light
track, light trough and graphic
panel.
Submission of (1) (i) All specification, prints, copies
Information and drawing information or
materials are to be furnished by
the Tenant as required by the
Landlord and shall be delivered to
the Landlord's office.
(ii) Prior to the commencement of
construction of Tenant's work, the
Tenant shall furnish the Landlord
with the following information and
items:-
(1) The name and address of
the appointed design/agent
for the said premises.
(2) The name(s) and
address(es) of the
general contractor(s) the
Tenant intends to engage
in the construction of
Tenant's work
(3) The name and address of
the Tenant's authorized
agent/representative, if
any.
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(4) The actual commencement
date of interior
decoration and the
estimated date of
completion of decoration
work, fixturing work,
and date of projected
opening.
(iii) The Tenant when notified by the
Landlord has to submit office
layout drawing within 2 weeks to
the Landlord for its approval.
(iv) For the nominated mechanical and
electrical contractors to prepare
the corresponding designs and
drawings, the Tenant shall provide
the Landlord the followings:-
(1) Three copies of the
reflected ceiling plan
with schedule on voltage,
type, wattage, quantity
and location of outlets
for all light fittings and
air-conditioning.
(2) Three copies of the floor
plan with partitions.
(3) Three layout prints of all
case work including the
location of all sockets,
switches, fuse box,
telephone points, size,
weight and location of
safe, if any.
(4) Three sets of elevations
to describe the space
with all electric outlets.
Statutes, Codes & (m) The Tenant shall have the sole
Ordinances responsibility to comply with all applicable
statutes, codes, ordinances and other
regulations for all work performed by or on
behalf of the Tenant within the said
premises and the Landlord or the Landlord's
agents or representative's approval of
plans, specifications, calculations or of
the Tenant's work shall not constitute any
implication, representation or certification
by the Landlord that the said improvements
are in compliance with said statutes, codes,
ordinances, and other regulations.
Inspection by (n) All Tenant's work shall be subject to the
Landlord inspection of the Landlord, the Landlord's
Architect and Landlord's General Contractor
from time to time during the period in which
Tenant's work aforesaid is being performed.
Reimbursement to (o) The Landlord shall have the right to perform
Landlord on behalf of and for the account of the
Tenant, any of the Tenant's work which the
Landlord determines shall be so performed.
Such work shall be limited to
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<PAGE>
work which the Landlord deems necessary to
be done on an emergency basis, work caused
by the Tenant's fault, and work which
pertains to structural components, the
general utility systems for the said
Building and the erection of temporary
safety barricades and temporary signs during
construction.
Good repair of (p) To keep all the interior of the said
interior premises, the flooring and interior plaster
or other finishing material or rendering to
walls floors and ceilings, and the
Landlord's fixtures therein and all addition
thereto including doors, window, electric
wires and installations and fittings for
light and power in good clean, tenantable
and proper repair and condition and properly
preserved and painted as may be appropriate
when from time to time required and to so
maintain the same at the expenses of the
Tenant and deliver up the same to the
Landlord at the expiration or sooner
determination of the term in such repair and
the like condition (fair wear and tear
excepted).
Replacement of (q) To reimburse to the Landlord the cost of
windows replacing all broken and damaged windows
door glass and fixtures within the said
premises whether the same be broken or
damaged by the negligence of the Tenant or
owing to circumstances beyond the control of
the Tenant.
Good repairs & (r) To keep all taps lavatories wash basins
replacement of sinks sanitary and water apparatus and other
sanitary apparatus internal pipes and all drains (if any) in or
& electrical belonging to the inside of the said premises
wiring clean and in good order and repair and to
keep in clean and good order and repair all
other pipes and all wires cables conduits
fittings and apparatus within or exclusively
serving the said premises and used for or in
connection with the services of water gas or
electricity in the said premises (fair wear
and tear save and excepted) and to repair or
replace the same (including burnt out
fluorescent tubes or light bulbs) at the
expenses of the Tenant if so required by the
Landlord or other competent authority. In
the event of the Tenant failing to proceed
diligently with the necessary repairs or
replacements so required within 14 days
after the Landlord has notified the Tenant
in writing then the Landlord may proceed
with such repairs or replacement and recover
all costs incurred thereby from the Tenant
as a debt.
Cleansing & (s) In the event of the pipes or drains of the
Clearing of Drains said building becoming choked or stopped up
owing to the careless use by the Tenant its
servants agents licensees invitees the
Tenant shall pay the costs incurred by the
Landlord in cleansing and clearing the same
from obstruction.
Entry by Landlord (t) To permit the Landlord or its agents with or
without workmen or other persons authorised
by it and with or without appliances at all
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reasonable times to enter into and upon the
said premises and to examine the conditions
thereof and thereupon the Landlord may serve
upon the Tenant notice in writing specifying
any repairs necessary to be done and require
the Tenant forthwith to execute the same and
if the Tenant shall not within ten days
after the service of such notice proceed
diligently with the execution of such
repairs then to permit the Landlord to enter
upon the said premises and execute such
repairs and the costs thereof (the amount
thereof in case of difference to be
determined by the Landlord's agent) together
with the interest thereon at the rate of 2%
per month calculated from the date on which
such costs are incurred by the Landlord to
be paid by the Tenant shall be a debt due
from the Tenant to the Landlord and be
forthwith recoverable by action.
Entry by the (u) To permit the Landlord or its authorised
Landlord to carry agents at all reasonable times to enter the
out repairs and said premises for the purpose of of fixtures
taking inventories therein and carrying out any repairs therein
provided that take inventories in the event
of emergency the Landlord or its authorised
agents may without notice enter the said
premises forcibly and the Tenant shall at
its own expense reinstate the entrance to
the said premises to its original position.
Entry by the (v) To keep all windows and doors of the said
Landlord to close premises closed and to permit the Landlord
Windows and or its servants and agents and others from
doors time to time during the said term to enter
upon the said premises for the purpose of
closing any doors or windows.
Notify Landlord (w) To notify the Landlord in writing of any
of damage accidents to or defects in the water pipes
gas pipes electrical wire or fittings
fixtures or other facilities provided by the
Landlord in the said premises whether or not
the Tenant is liable hereunder for the
repair of the same forthwith upon the Tenant
becoming aware whether actually or
constructively of the same arising and to
indemnify the Landlord against any claim
made against the Landlord by any third party
and any loss suffered by the Landlord either
directly or indirectly as a result of any
breach by the Tenant of this provision.
To make good & (x) To make good and pay for all damage caused
take care of all by the Tenant his servants or licensees to
articles provided any fixtures fittings and other articles in
by Landlord the said premises and provided by the
Landlord and shall take reasonable care of
the same and shall not remove any of them
from the said premises.
Repair of (y) To permit the Landlord and its duly
neighbouring authorised agents workmen and others
premises appointed by it at all reasonable times
during the said term (but upon giving a
reasonable previous notice in writing save
in case
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of emergency) to enter into and upon the
said premises and to execute any works of
renewal cleansing alteration or repair to
any adjacent or neighbouring premises or to
the building of which the said premises form
part.
Combustible or (z) Not to store or bring upon the said premises
dangerous goods or any part thereof any unlicensed arms
ammunition gun-powder spirits saltpetre or
kerosene any articles of a specially
combustible inflammable or unlawful goods or
dangerous nature.
Storage of goods (aa) Not to use the said premises or any part
thereof for the storage of goods or
merchandise other than in small quantities
consistent with the nature of the Tenant's
business by way of samples and exhibits.
Insurance against (ab) To indemnify the Landlord against any
loss/damage from proceedings actions claims or demands
Interior Defects whatsoever by any person for loss and damage
suffered as a result of the want of repair
of the interior of the said premises or the
spread of fire or the overflow of water or
the escape of any substance or anything from
the said premises due to the default or
negligence of the Tenant its servants agents
licensees or customers; and to effect and
maintain a policy or policies of insurance
which should include the Landlord's
properties and fixtures inside the said
premises against the risks hereinbefore
mentioned in a reputable insurance company
to be approved by the Landlord in such
amount as the Landlord may reasonably
determine and to produce to the Landlord the
policy or policies and the receipt on
request provided always that if the Tenant
shall at any time fail to keep such
insurance on foot the Landlord may do all
things necessary to effect and maintain such
insurance and any monies expended by the
Landlord for that purpose shall be
recoverable from the Tenant on demand.
Breach of (ac) Not to do or permit to be done anything
Insurance Policy whereby the policy or policies of the
insurance of the said building against
damage by fire or other risks for the time
being subsisting may become void or voidable
or whereby the rate of premium thereon may
be increased and the premium and all
expenses incurred by the Landlord in or
about any renewal or such policy or policies
rendered necessary by breach of this term
shall be borne by the Tenant and shall be
recoverable from the Tenant by the Landlord
on demand.
Illegal or immoral (ad) Not to use or permit or suffer to be used
purposes the said premises or any part thereof for
any illegal or immoral purposes.
Installation & (ae) (i) To fit out the interior of the said
Alteration premises in accordance with the
drawings approved by the Landlord
and not without the prior written
consent of the Landlord to make any
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<PAGE>
alteration or addition to the said
premises or any part thereof either
internally or externally or to any
fixtures or fittings or electrical
wiring or electrical mechanical or
air-conditioning installations
therein or to any item therein
(whether or not of a structural
nature).
(ii) Not to place in or upon any part of
the said premises or the said
building any equipment apparatus
machinery or load likely to or
which may cause damage thereto and
not to cause permit or suffer any
load to be placed in any part of
the said premises if the weight of
such load exceeds that permitted
from time to time by the Landlord
in using the said premises or the
said building or any lifts serving
the same or any other thing in or
upon the said premises or the said
building.
(iii) Not to install set up or affix or
permit to be installed set up
affixed in or upon the said
premises or any part thereof in any
manner whatsoever any engine
machinery or mechanical device or
plant or air-conditioning or
heating system.
(iv) To observe and comply with all
rules regulations and instructions
from time to time prescribed by the
Landlord or its authorised
representative or officer in
carrying out any alterations
additions or improvements to the
said premises.
(v) To observe and comply with all
rules regulations and instructions
from time to time prescribed by The
China Light & Power Company Limited
or the relevant authority relating
to the electrical wiring and
installation in the said premises.
(vi) Not to cut maim injure damage alter
or interfere with any of the walls
structural members pipes drains
appurtenances electrical cables
wires fixtures or fittings of or in
the said premises or any part
thereof or suffer or permit the
same to be done.
(vii) Not to change or in any way to
alter the standard entrance door
provided by the Landlord for access
to and egress from the said
premises without having first
obtained the written consent of the
Landlord therefor.
(viii) Not to install additional locks
bolts or additional fittings to the
entrance doors of the said premises
or in any way to cut or alter the
same without having first obtained
the written consent of the Landlord
therefor.
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<PAGE>
(ix) To display and decorate the show
windows up to a first class
standard and in such manner as not
to be offensive to the Landlord who
has the right to require the
removal of any part of the display
as in the Landlord's absolute
discretion considers offensive.
Protection from (af) To take all necessary precautions to protect
typhoon the interior of the said premises against
damage by storm typhoon heavy rainfall or
the like and in particular to ensure all
exterior doors and windows are securely
fastened upon the threat of such adverse
weather conditions.
Subletting (ag) Not to assign underlet or otherwise part
Assigning with the possession of the said premises or
any part thereof in any way whether by way
of subletting lending sharing or other means
whereby any organization company firm or
person or persons not a party to this
Agreement obtains the use or possession of
the said premises or any part thereof
irrespective of whether any rental or other
consideration is given for such use or
possession and in the event of any such
transfer sub-letting sharing assignment or
parting with the possession of the said
premises (whether for monetary consideration
or not) this Agreement shall absolutely
determine and the Tenant shall forthwith
vacate the said premises on notice to that
effect from the Landlord. The Tenancy shall
be personal to the Tenant named in this
Agreement and without in any way limiting
the generality of the foregoing the
following acts and events shall, unless
approved in writing by the Landlord, be
deemed to be breaches of this Clause: -
(i) In the case of a tenant which is a
partnership the taking in of one or
more new partners whether on the
death or retirement of an existing
partner or otherwise.
(ii) In the case of a tenant who is an
individual (including a sole
surviving partner of a partnership
tenant) the death insanity or
disability of that individual to
the intent that no right to use
possess occupy or enjoy the said
premises or any part thereof shall
vest in the executors
administrators personal
representatives next of kin trustee
or committee of any such
individual.
(iii) In case of a tenant which is a
corporation any take-over
reconstruction amalgamation merger
voluntary liquidation or change in
the person or persons who owns or
own a majority of its voting shares
or who otherwise has or have
effective control thereof.
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<PAGE>
(iv) The giving by the Tenant of a Power
of Attorney or similar authority
whereby the donee of the Power
obtains the right to use posses
occupy or enjoy the said premises
or any part thereof or does in fact
use possess occupy or enjoy the
same.
(v) The change of the Tenant's business
name without the previous written
consent of the Landlord which
consent the Landlord may give or
withhold at its discretion.
Compliance with (ah) To carry out and comply with all ordinances
ordinance, regulations by-laws and rules and all
Government notices and requirements of the appropriate
Lease and Deed of government authorities in connection with or
Mutual Covenant in relation to the said premises and not to
do anything or suffer or permit anything to
be done in contravention of the provisions
of the Conditions of Sales or Government
Lease and Deed of Mutual Covenant under
which the Landlord holds the said premises
and to indemnify the Landlord against any
breach of the terms of this clause.
Noise (ai) Not to do or permit or suffer to be done
upon the said premises or any part thereof
any music noise (including sound produced by
broadcasting from Television, Radio and any
apparatus or instrument capable of producing
or reproducing music and sound) or other act
matter or thing whatsoever which may be or
tend to the nuisance annoyance damage or
disturbance of the Landlord or the owners
tenants lessees or occupiers of any
adjoining or neighbouring premises.
Responsible for (aj) To be wholly responsible for and to
acts of servants indemnify the Landlord against all damage
agents and loss or injury occasioned to the said
licensees premises or any part of the said building or
any adjacent or neighbouring premises to any
person whether directly or indirectly
through the defective or damaged conditions
of any part of the interior of the said
premises or any fixtures fittings wiring or
piping therein for the repair of which the
Tenant is responsible hereunder or through
or in any way owing to the spread of fire or
smoke or the leakage or overflow of water
including storm or rain water from the said
premises or any part thereof or through the
act default or neglect of the Tenant or the
servants agents licensees or invitees of the
Tenant.
Preparation of (ak) Not to prepare or permit or suffer to be
food prepared any food in the said premises.
Sleeping of (al) Not without the Landlord's prior permission
domestic use in writing, permit any person to remain in
the said premises overnight. Such permission
shall only be given to enable the Tenant to
post watchmen to look
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<PAGE>
after the contents of the said premises,
which shall not be used as sleeping quarters
or as domestic premises within the meaning
of the Landlord and Tenant (Consolidation)
Ordinance for the time being in force.
Installation in (am) Not to lay, install, affix or attach any
Common Area, wiring, cables or other article or thing
etc. whatsoever in or upon any areas or parts of
the Building in common use or in any place
which is not hereby exclusively let to the
Tenant.
Obstructions in (an) Not to encumber obstruct or permit to be
common area encumbered or obstructed with any boxes,
packaging, merchandise, rubbish or other
articles or obstructions of any kind or
nature at any of the entrances, exits,
staircases, landings, passages, lifts,
escalators, lobbies or other parts of the
said building not included in the said
premises. In addition to any other remedies
which the Landlord may have hereunder, the
Landlord, its servants or agents may without
any prior notice to the Tenant remove any
such obstruction and dispose of the same as
they may think fit without incurring any
liability therefor and the Tenant shall on
demand pay to the Landlord all costs and
expenses incurred in such removal.
Signs (ao) Not to affix, erect, attach, exhibit,
display or permit or suffer so to be done
upon any part within or on the exterior of
the said premises or to or through any
windows thereof any writing sign,
decoration, signboard notice advertisement
placard neon light or other device whether
illuminated or not which may be visible from
outside the said premises except the display
of name-plate or signboard of the Tenant and
their lawful subtenant or licensee at the
entrance to the said premises the size and
position of such name-plate or signboard
shall be subject to the approval of the
Landlord. The Landlord or its authorised
agents shall have absolute discretion in
granting or refusing such approval and any
approval to be granted shall be subject to
such conditions as the Landlord or its
authorised agents may think fit. The
landlord or its authorised agents shall have
the right to remove at the cost and expense
of the Tenant any unauthorised writing,
sign, decoration signboard notice
advertisement placard neon light or device
affixed or put up or displayed without the
proper approval of the Landlord or its
agents.
Sale by auction or (ap) Not to permit or suffer to be held upon the
etc. said premises any sales by auction, fire,
bankruptcy, closing-down or sale of similar
nature or any discount-type of retail
business or any form of unethical business
operation Provided that this clause shall
not preclude genuine promotional, clearance
or periodic seasonal sales.
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<PAGE>
Movement of safe (aq) Not to move any safe heavy machinery
and heavy equipment and freight bulky matter or
machinery fixtures in and out of the said building
during normal office hours without first
obtaining the Landlord's written consent.
The Tenant shall keep the Landlord
indemnified against all damages sustained by
any person or property and for any damages
or monies paid out by the Landlord in
settlement of any claim or judgments as well
as legal costs incurred in connection
therewith and all costs incurred in
repairing any damage to the said building or
its appurtenances resulting from movement of
any heavy machinery equipment freight bulky
matter or fixtures. The Tenant requiring to
move to and from the said building such
items undertakes at all times to use the
service lifts provided by Landlord for such
purposes and to notify Landlord and arrange
with the Landlord a suitable time for such
deliveries to be effected.
Adjacent (ar) If any excavation or other building works
excavation or shall be made or authorised in the vicinity
shoring of said building, the Tenant shall permit
the Landlord his servants or agents to enter
the said premises to do such work as may be
deemed necessary to preserve the exterior
wall of the said building from injury or
damage without any claim for damages or
indemnity against the Landlord.
Floor loading (as) The Tenant shall not place any load upon any
floor of the said premises in excess of the
loading capacity for which the floor is
designed. The Landlord preserves the right
to prescribe the weight and position of all
safes and any heavy articles which must be
placed so as to distribute the weight.
Business machines and mechanical equipment
authorised by the Landlord shall be placed
and maintained by the Tenant at the Tenant's
expense in settings sufficient in the
Landlord's judgment to absorb and prevent
vibration noise and annoyance to occupiers
of the other portions of the said building.
Vermin (at) The Tenant shall take all due precautions to
ensure that the said premises do not become
infested with insects or vermin. In the
event of the premises becoming so infested
the Tenant shall pay the cost of
extermination as arranged or approved by the
Landlord and the selected exterminators
shall be given full access to the said
premises for such purpose.
Rules and (au) To observe faithfully and comply strictly
Regulations with such reasonable Rules and Regulations
as the Landlord or the Landlord's agents
from time to time prescribe for the proper
management and maintenance of the said
premises and the said building. Notice of
any additional Rules or Regulations shall be
given in such manner as the Landlord may
elect. The Rules and Regulations set out in
the Third Schedule
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<PAGE>
hereto and such additional Rules or
Regulations shall constitute the initial
Rules and Regulations binding upon the
Tenant and shall have the same force and
effect as if set out in the body of this
agreement.
Keep premises (av) To keep the said premises well and
well lighted sufficiently lighted throughout the business
hours of the Tenant.
No incense to be (aw) Not to burn or permit to be burnt incense in
burnt the said premises or in any part of the said
building.
Fire Risk (ax) Not to do or permit any act or thing to be
done which is likely to cause any fire risk
or other hazard in the said building.
Loading & (ay) To ensure that the Tenant's employees
Unloading Areas servants agents or visitors do not obstruct
those areas of the building allocated to
temporary vehicle parking or designated as
loading/unloading areas and at all times
comply with the directions of the Landlord
staff and accredited agents in exercising
due control of such areas and the delivery
of goods generally.
Toilet Facilities (az) To use in common with others the lavatories
and washing accommodations and facilities
provided by the Landlord in the said
building and not to permit or suffer the
same to be used in any improper manner or
whereby the soil or waste pipes may become
impeded or blocked and at all times to
indemnify the Landlord against liability for
damage by the escape of water thereby caused
to the properties or effects of the tenants
or occupiers of the other part of the said
building.
Parking (ba) Not to park in obstruct or otherwise use nor
permit any employee agent or licencee of the
Tenant to park in obstruct or otherwise use
these areas of the said building allocated
to the parking or movement of or access for
vehicles or designated as loading/unloading
areas otherwise than in accordance with the
regulations from time to time made by the
Landlord.
Use of building (bb) Not without the previous written consent of
name the Landlord to use or permit to be used the
name/logo or any part of the name/logo of
the Landlord or of the said building or any
picture representation or likeness of the
whole or any part of such name/logo or of
the said building or of the said premises in
connection with the business or operations
of the Tenant or for any purpose whatsoever
other than to indicate the address and place
of business of the Tenant.
4. The Landlord hereby agrees with the Tenant as follows : -
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<PAGE>
Quiet enjoyment (a) To permit the Tenant (duly paying the rent
surcharge and rates and observing and
performing the terms and conditions herein
contained)to have quiet possession and
enjoyment of the said premises during the
said term without any interruption by the
Landlord or any person or persons lawfully
claiming through under or in trust for the
Landlord.
Roof and main (b) To amend and repair such defects in the
structure roof, main electricity supply cables, main
drain pipes, main walls and exterior windows
frames of the said building and the lifts
and the central air-conditioning plant
therein as the Landlord shall discover or as
the Tenant or other authorised person or
Authority shall by notice in writing bring
to the attention of the Landlord and to
maintain the same in a proper state of
repair and condition at the cost of the
Landlord PROVIDED that the Landlord shall be
entitled to be given a reasonable period of
time wherein to view any such defects and to
amend and repair the same.
Air-conditioning (c) To provide and maintain lifts, escalators
services air-conditioning service during the hours of
8:00 o'clock in the forenoon to 6:00 o'clock
in the afternoon on weekdays and during the
hours of 8:00 o'clock in the forenoon to
2:00 o'clock in the afternoon on Saturdays
(excluding Sundays and public holidays). The
supply of air-conditioning shall be
controlled and regulated by the Landlord at
its sole discretion, and also such
electricity as is attributable to lights of
the entrances, passages, corridors,
staircases, landings and lavatories PROVIDED
however the Landlord shall neither be liable
to pay compensation to the Tenant in respect
of any period during which due to
circumstances beyond the control of the
Landlord the proper operation of the said
lifts or central air-conditioning plant
shall be interrupted as the result of
defects, mechanical failure or breakdown or
need for repair or overhaul, nor shall the
Landlord be liable thereby to grant any
abatement of rent and/or air-conditioning
service charge in respect of such
interruption.
Property Tax (d) To pay the Property Tax for the time being
payable in respect of the said premises.
Maintenance of (e) (i) To be responsible for the maintenance
common parts lighting cleaning operating and servicing of
all the common parts of the said building.
(ii) To carry out all necessary decoration to the
common parts of the said building as and
when the Landlord shall in its absolute
discretion decide the same is necessary.
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<PAGE>
(iii) To keep the common parts toilets and other
parts of the said building for common use
clean and in proper condition.
(iv) To use its best endeavours to maintain lifts
escalators fire and security services
equipment air-conditioning plant and other
facilities of the said building in proper
working order.
Directory board (f) To provide and maintain at the main entrances and in
all other appropriate places suitable directory
boards indicating to all persons entering the said
building the whereabouts of the said premises with
the Tenant's name in such uniform lettering or
characters as shall be designated by the Landlord.
For the avoidance of doubt, the expression "the
Tenant's name" herein contained shall mean the name
of the Tenant as set out in First Schedule of this
Agreement and if the Tenant carries on business under
a name other than his own name such expression shall
mean the first of his business names as the Landlord
shall be notified by the Tenant. For any subsequent
change of the name of the Tenant or his business name
which necessitates the replacement of the directory
board or name plates thereon, the costs for the new
directory boards and the new name plates shall be
borne solely by the Tenant.
5. It is hereby expressly provided as follows : -
Default (a) (i) If the rent or the surcharge reserved or
interest thereon, if any, or any part
thereof shall be unpaid (whether
formally or legally demanded or not) for
fifteen days next after any of the days
on which the same ought to have been
paid or in the case of the breach or
non-performance of any of the
stipulations and agreements herein
contained on the part of the Tenant to
be kept done or performed or if the
Tenant shall become bankrupt or go into
liquidation it shall be lawful for the
Landlord at any time thereafter to
re-enter into and upon the said premises
or any part hereof in the name of the
whole and thereupon this Agreement shall
absolutely determine but without
prejudice to the right of action of the
Landlord in respect of any breach by the
Tenant of the terms of this Agreement.
All costs and expenses incurred by the
Landlord in demanding the rent and the
surcharge and other charges (if the
Landlord elects to demand) shall be paid
by the Tenant and shall be recoverable
from him as a debt.
(ii) Notwithstanding anything hereinbefore
contained in the event of default in payment
of the said rent and the
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surcharge on the date on which the same
falls due for payment, the Tenant shall
further pay to the Landlord on demand
interest on the amount in arrears at the
rate of (1.5%) per month calculated from the
date on which the same became due for
payment (as stipulated in Clause 1 hereof)
until the date of payment as liquidated
damages and not as penalty provided that the
demand and/or receipt by the Landlord of
interest pursuant to this provision shall be
without prejudice to and shall not affect
the right of the Landlord to exercise any
other right or remedy hereof (including the
right of re-entry) exercisable under the
terms of this Agreement.
(iii) Notwithstanding anything herein contained in
the event of default in payment of the
surcharge on the date on which the same
falls due for payment or any interest
thereon the Landlord shall in addition to
its other rights under the terms of this
Agreement be entitled to disconnect the
supply of air-conditioning to the said
premises until the amount in arrears shall
have been fully paid by the Tenant without
incurring any liability to the Tenant for
any loss or damages suffered by the Tenant
as a result thereof.
Distraint (iv) For the purpose of Part III of the Landlord
and Tenant (Consolidation) Ordinance
relating to distress for rent or of these
presents the rent payable in respect of the
said premises shall be and be deemed to be
in arrear if not paid in advance at the time
and in manner hereinbefore provided for
payment therefor. All costs and expenses
for and incidental to the distraint shall be
paid by the Tenant and shall be recoverable
from him as a debt.
Abatement (b) If the said premises or any part thereof are rendered
uninhabitable by fire water storm wind typhoon
defective construction white ants earthquake
subsidence of the ground or any calamity beyond the
control of the Landlord and not attributable to any
failure by the Tenant to observe and carry out the
terms of this Agreement the rent or a part thereof
proportionate to the extent to which the said
premises shall have been so rendered uninhabitable
shall abate and cease to be payable until the same
shall have been again rendered fit for occupation
Provided always that the Landlord shall not be
required to reinstate the said premises if by reason
of the condition of the same or any local Regulations
or other circumstances beyond the control of the
Landlord it is not practicable or reasonable to do
so.
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Condemnation (c) If at any time during the continuance of
this tenancy the competent authorities shall
condemn the said building as a dangerous
structure and it shall be pulled down or
shall make a demolition order which shall
become operative in respect of the said
premises or any part thereof or a closure
order in respect of a part of the said
premises under their powers the tenancy
hereby created shall cease as from the
commencement of the pulling down of the said
premises or from the time when such
demolition or closure order shall become
operative.
Expression (d) The expression "the Tenant" shall (where the
of Tenant context permits) mean and include the party
or parties specifically named and shall not
include the executors and administrators or
any such party or where such party is a
corporation any liquidator thereof.
Acceptance of rent (e) The acceptance of rent by the Landlord
hereby stipulated shall not be deemed to
operate as a waiver by the Landlord of any
right to proceed against the Tenant in
respect of a breach by the Tenant of any of
the Tenant's obligations herein contained.
Fire and overflow (f) The Landlord shall not be under any
of water liability to the Tenant or to any other
person whomsoever in respect of any loss or
damage to person or property sustained by
the Tenant or any such other person caused
by or through or in any way owing to the
overflow of water or the escape of fumes,
smoke, fire or any other substance or thing
from anywhere within the said building. The
Tenant shall fully and effectually indemnify
the Landlord from and against all claims and
demands made against the Landlord by any
person in respect of any loss, damage or
injury caused by or through or in any way
owing to the overflow of water or the escape
of fumes, smoke, fire or any other substance
or thing from the said premises or to the
neglect or default of the Tenant his
servants, agents or licensees or to the
defective or damaged condition of the
interior of the said premises or any
fixtures or fittings for the repair of which
the Tenant is responsible hereunder and
against all costs and expenses incurred by
the Landlord in respect of any such claim or
demand.
Injury to Tenant (g) The Landlord shall not be liable for any
caused by lifts, injury to the Tenant his servants licensees
escalators or invitees caused by any defect in or by
the defective or negligent working of any
lift or escalators in the said building by
the Landlord's servants or otherwise and the
Tenant shall indemnify the Landlord against
all claims actions and proceedings in
respect of such injuries.
Accidents and (h) The Landlord shall not be responsible to the
Injury to Tenant's Tenant or the Tenant's licensees servants
agents or other persons in the said premises
or
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chattel calling upon the Tenant for any accident
happening or injury suffered or damage to or
loss of any chattel or property sustained on
the said premises or in the said building.
Re-Letting notices (i) During the three(3) months immediately
preceding the determination of the said
term of tenancy the Landlord shall be at
liberty to affix and retain without
interference upon any external part of
the said premises a notice for re-letting
the same and the Tenant shall permit
persons with written authority from the
Landlord or its agents at reasonable
hours of the day to view the said
premises or any part thereof.
Delivery of vacant (j) The Tenant shall deliver up vacant
possession possession of the said premises to the
Landlord with all fixtures fittings and
additions therein at the expiration or
sooner determination of this Agreement in
good clean and tenantable repair and
condition in accordance with the
stipulations herein before contained
together with all keys giving access to all
parts of the said premises. Providing that
the Tenant shall at its own expense to
remove all fixtures, fittings, additions,
partitions and alterations made or installed
upon or in the said premises whether by the
Tenant of by the previous occupier of the
said premises and taken over by the Tenant
and to re-instate restore and make good any
damage caused by such removal or
re-instatement. The Tenant's obligations
relating to removal or re instatement under
this Clause may be modified or varied by the
Landlord notifying the Tenant in writing
that the Landlord proposes without payment
of any compensation to retain all or any of
the said fixtures, fittings, additions
partitions, floor coverings, erections and
alterations which the Tenant is otherwise
liable hereunder to remove but subject to
this proviso, the Tenant shall re-instate
restore and make good the said premises or
any part thereof requiring to be re-instated
restored or made good and in the event of
the Tenant failing so to do the Tenant shall
on demand pay to the Landlord the cost of
such re-instatement restoration or making
good.
Landlord not (k) The Landlord shall not be bound by any oral
bound by oral representations or oral promises with
representation respect to the said building and its
appurtenances or in respect of the said
premises except as herein expressly set
forth with the object and intention that the
whole of the agreement between the Landlord
and the Tenant shall be set forth herein and
in no way modified by any oral discussions
which may have preceded the signing of this
Agreement.
No waiver (l) No condoning excusing or overlooking by the
Landlord of any
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default breach or non-observance or
non-performance by the Tenant at any time or
times of any of the Tenant's obligations
herein contained shall operate as a waiver
of the Landlord's rights hereunder in
respect of any continuing or subsequent
default breach of non-observance or
non-performance or so as to defeat or affect
in any way the right of the Landlord herein
in respect of any such continuing or
subsequent default or breach and no waiver
by the Landlord shall be inferred from or
implied by anything done or admitted by the
Landlord unless expressed in writing and
signed by the Landlord.
No excuse for (m) This Agreement and the obligation of the
non-payment of Tenant to pay the said rent and other sums
rent due hereunder and perform the Tenant's
obligations hereunder shall in no way be
affected impaired or excused because the
Landlord is unable due to circumstances
beyond his control to fulfil any of his
obligations under this Agreement or to
supply or is delayed in supplying any
service expressly or impliedly to be
supplied or is unable to make or is delayed
in making any repair additions alterations
or decoration or is unable to supply or is
delayed in supplying any equipment or
fixtures if the Landlord is prevented or
delayed from so doing by reason of strike
labour troubles shortage of materials or any
outside cause whatsoever or by reason of any
order or regulation of any department of the
Government of the Hong Kong Special
Administrative Region.
No actual eviction (n) The Landlord shall also have the right at
in certain events any time without constituting an actual or
constructive eviction of the Tenant and
without incurring any liability to the
Tenant therefor to install or erect at the
entrances passages passageways doorways
corridors landings staircases lobbies or
other public parts of the said building
counters showcases or light boxes or to
change the arrangement and/or location of
entrances passageways doors doorways
corridors landings staircases lobbies lifts
escalators toilets or other public parts of
the said building or any service or
apparatus serving the said building and to
change the name number or designation by
which the said building is known.
Year 2000 (o) The Landlord shall not be liable for the
Compliant failure or malfunction of the computer
systems used in the operation and management
of the said building, whether the same is
operated controlled or owned by the
Landlord, the manager of the said building
or otherwise due to the same not being Year
2000 compliant or otherwise and the Tenant
shall indemnify the Landlord against all
claims actions and proceedings in respect of
any resulting loss or damage which may be
suffered by any third party.
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<PAGE>
Stamp Duty and (p) The stamp duty payable on this Agreement
legal costs shall be borne by the parties hereto in
equal shares but the land registration fee
(if any) shall be paid by the Tenant. The
Tenant shall also bear Baker & McKenzie's
costs and disbursements of and incidental to
the preparation and completion of this
Agreement calculated a half of 75% of full
scale cost.
Service of (q) Any notice required to be served on the
Notices Tenant shall be sufficiently served if
delivered to or despatched by registered
post to or left at the premises or at the
registered office or last known address in
Hong Kong of the Tenant and any notice
required to be served on the Landlord shall
be sufficiently served if delivered to or
despatched by registered post to or left at
the registered office of the Landlord in
Hong Kong or any other address which the
Landlord may notify to the Tenant from time
to time. A notice sent by registered post
shall be deemed to be given at the time and
date of posting.
Approval of (r) No approval by the Landlord is valid unless
Landlord it is in writing and signed by the Landlord
or its authorised agents.
No premium or (s) The Tenant hereby expressly admits and
fine declares that no premium or fine or other
consideration or key money has been paid to
the Landlord by the Tenant for the creation
of this tenancy.
Sale and (t) If at any time during the tenancy hereby
redevelopment created the Landlord shall enter into a
contract for the sale of the said building
or of any part thereof which shall include
the said premises or if the Landlord shall
resolve to redevelop the said building or
any part thereof whether wholly by
demolition and rebuilding or otherwise, or
partially by renovation, re-furbishment or
otherwise (which intention so to redevelop
shall be sufficiently evidenced by a copy of
a Resolution of its Directors certified to
be a true and correct copy by its Secretary)
then in either of such events the Landlord
shall be entitled to give six clear calendar
months' notice in writing expiring at the
end of any calendar month during the tenancy
hereby created terminating this Agreement
and immediately upon the expiration of such
notice this Agreement and everything herein
contained shall cease and be void but
without prejudice to the rights and remedies
of either party against the other in respect
of any antecedent claim or breach of any of
the agreements or stipulations herein set
out.
(u) The Tenant hereby expressly agrees to
deprive itself of all rights (if any) to
protection against eviction or ejectment
provided by any
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<PAGE>
existing or future legislation from time to
time in force and applicable to the said
premises or to this tenancy and the Tenant
agrees to deliver up vacant possession of
the said premises to the Landlord on the
expiration or sooner termination of the
tenancy hereby created notwithstanding any
rule of law or equity to the contrary.
Reservation of (v) The Landlord reserves the right exercisable
Rights at any time or times : -
(i) To change the name or description
of the said building or any part
thereof,
(ii) To make or caused to be made any
structural or non-structural
alteration or improvement in or
addition to entrances landings
staircases driveways passages
lobbies or any part of the said
building in common use, without
incurring any liability to make any
payment to the Tenant on any
account whatsoever provided that in
the happening of case (i) hereof
the Landlord shall give to the
Tenant and the Postal and other
Government Authorities not less
than three months' notice in
writing or any such change.
(iii) The Landlord reserves the right
from time to time and by notice in
writing to the Tenant to make and
introduce and subsequently amend
adapt or abolish if necessary such
regulations as it may consider
necessary for the management and
maintenance of the said building as
a first class commercial Building.
(iv) Such regulations shall be
supplementary to the terms and
conditions contained in this
Agreement and shall not in any way
derogate from such terms and
conditions. In the event of
conflict between such regulations
and the terms and conditions of
this Agreement the terms and
conditions of this Agreement shall
prevail.
Special Condition (w) The parties hereto hereby agree that the
terms or conditions or matters set out in
the Fourth Schedule hereto (if any) shall
apply to this Agreement and shall be
incorporated as an integral part of the
Agreement.
Joint and Several (x) In this Agreement where the context so
Liability permits or requires the words importing the
singular number shall include the plural
number and vice versa and word importing the
masculine gender shall include the feminine
gender and neuter gender and where there are
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<PAGE>
two or more persons included in the
expression "the Tenant" covenants expressed
to be made by the Tenant shall be deemed to
be made by such persons jointly and
severally.
Marginal notes (y) The marginal notes are intended for guidance
only and do not form part of this Agreement
nor shall any of the provisions of this
Agreement be construed or interpreted by
reference thereto or in any way affected or
limited thereby.
Governing Law (z) This Tenancy Agreement shall be governed by
and construed in accordance with the laws of
the Hong Kong Special Administrative Region
and the Tenant hereby irrevocably submits to
the non-exclusive jurisdiction of the courts
of the Hong Kong Special Administrative
Region. The submission to such jurisdiction
shall not limit the right of the Landlord to
take proceedings in whatever jurisdiction it
may think fit, nor shall the taking of
proceedings in any jurisdiction preclude the
taking of proceedings in any other
jurisdiction or jurisdictions, whether
concurrently or not.
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<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
PART I
EQUITY MARKETING HONG KONG, LTD. whose registered office is situate at Suite
Nos. 7-8, 16th floor of Tower 3, China Hong Kong City, 33 Canton Road,
Tsimshatsui, Kowloon, Hong Kong.
PART II - PREMISES
Suite Nos. 1,2,3 and 4 on the 18th Floor of Tower 6 of China Hong Kong City,
China Ferry Terminal, Canton Road, Kowloon which for the purposes of
identification only is shown on the Floor Plan annexed hereto and thereon
coloured Pink.
PART III -TERM
Three years commencing from the 1st day of September 1997 to the 31st day of
August 2002 (both days inclusive).
PART IV - USER
To use or occupy the said premises or any part thereof solely and exclusively
for the purpose of office which shall not be changed without the previous
written consent of the Landlord and in particular not to use or permit the same
to be used for domestic purpose or for shops or as sleeping quarters and not to
allow any person to remain in the said premises overnight.
PART V - DEPOSIT
The deposit subject to increase in accordance with Clause 3 (a) (vi) of this
Agreement shall be HK$473,700.00.
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<PAGE>
THE SECOND SCHEDULE ABOVE REFERRED TO
PART I
PARTICULARS OF THE SAID RENT
The said rent throughout the said term hereby created shall be HK$126,432.00 per
calendar month payable in advance on the first day of each and every calendar
month.
PART II
PARTICULARS OF SURCHARGES
The monthly surcharge to cover the costs of building management and
air-conditioning throughout the said term subject to increase in accordance with
clause 3 (a)(iv) of this Agreement shall be HK$31,468.00 per calendar month
payable in advance on the first day of each and every calendar month.
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<PAGE>
THE THIRD SCHEDULE ABOVE REFERRED TO
RULES AND REGULATIONS
1. Plumbing fixture shall be used only for the purposes for which they
were constructed. No sweepings rubbish rags or other alien substances
shall be deposited therein. All costs for making good damage resulting
from any misuse of the plumbing fixtures shall be borne by the Tenant.
2. No Tenant shall drill into or in any way deface part of the said
premises or the said building. No drilling shall be permitted save with
prior written approval of the Landlord and as the Landlord may direct.
3. Save with prior written consent of the Landlord, which consent will not
normally be granted, no flagholes or aerials shall be erected, and no
flags shall be flown from windows or elsewhere in or upon the said
building.
4. Each Tenant must upon the termination of his tenancy restore to the
Landlord all keys of offices and toilet rooms used by the Tenant.
5. All removals or the carrying in or out of furniture or bulky matter of
any description must take place after office hours and during the hours
which the Landlord or his agent may determine from time to time. The
Landlord reserves the right to exclude goods from the said building
which violate any of these Rules and Regulations or the Agreement of
which these Rules and Regulations are a part.
6. No Tenant nor any of the Tenant's servants employees agents visitors or
licensees shall bring into any passenger lift in the said building any
goods effects chattels luggage bulky parcels food trays tiffin carriers
or other space-occupying items and the Tenant shall ensure that such
items are restricted to the designated lift.
7. No Tenant shall do or permit to be done in the said premises or any
part thereof any act which shall or might subject the Landlord to any
liability or responsibility for injury to any person or to property.
8. Windows shall remain closed or locked save in an emergency such as fire
or break-down of the air-conditioning system and the reasonable extent
necessary to enable the Tenant to clean the same.
9. Canvassing touting and peddling in the said building is prohibited and
each Tenant shall co-operate to prevent the same.
10. Save with the prior written consent of the Landlord, which consent will
not normally be granted, no cooking or preparation of food shall be
permitted by any Tenant in the said premises. No Tenant shall permit
any unusual or objectionable odours to be produced
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<PAGE>
upon or to permeate from the said premises.
11. Not to do or permit or suffer anything in the said premises or in the
said building which may be or go to be a nuisance or annoyance to the
Landlord or any other Tenants or occupiers thereof or of any adjoining
building or affect the reputation of the said building as a high class
office building.
12. The Tenant shall no install in the said premises any partitioning other
than the supplied or approved by the Landlord.
13. Not to keep or permit or suffer to be kept upon any part of the said
premises any lives-stocks or animals and to carry out such pest control
for the said premises upon the request by the Landlord for the said
premises via nominated pest control companies at the Tenant's expense.
14. All blinds and/or curtains used within the said premises shall conform
externally to standard colour and design and such blinds and/or
curtains shall be approved by the Landlord so as to preserve a uniform
external appearance.
15. The Tenant shall not carry on or permit or suffer to be carried on in
or upon the said premises or any part thereof any trade or business
which the Landlord shall in its absolute discretion regard as dangerous
noxious noisy or offensive.
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<PAGE>
THE FOURTH SCHEDULE ABOVE REFERRED TO
SPECIAL CONDITION
1. The Landlord shall carry out the following items on an one time
basis: -
- provide new carpet for the said premises;
- replace ceiling tiles in the said premises;
- replace light boxes and ceiling grids in the said premises;
- clean/repair the fan coil units in the said premises;
- provide additional fan coil units in the premises;
2. Save and except the above mentioned items, the said premises shall be
handed over to the Tenant in a bare shell condition.
3. Notwhithstanding anything hereinbefore written, the Tenant shall be
entitled, during the period from 1st September 1999 to 30th November 1999
(both days inclusive) of the term of the tenancy to occupy the said premises
free of rent for fitting out purposes, Provided that if the Tenant shall have
observed and performed the terms of this Agreement, the Tenant shall have
another rent free period from 1st July 2002 to 31st August 2002 (both days
inclusive). Provided that during the said rent free periods, all the rates,
Service Charged, Government Rent, electricity, water charges and all other
outgoings payable in respect of the said premises shall be borne by the
Tenant absolutely.
4. Upon completion of the fitting out work in the said premises, the
Tenant shall at its own expense remove all debris and rubbish resulting from
such fitting out work to the location designed by the Landlord or its
authorised agents.
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<PAGE>
AS WITNESS the hands of the parties hereto the day and year first above
written.
SIGNED by Lawrence Chong Koo Seong )
of Sino Real Estate ) (Signed by Sino Real Estate
Agency Ltd., a company duly ) Agency Ltd.)
Authorised by the Board of )
Directors of the Landlord ) /s/ Lawrence Chong Koo Seong
)
for and on behalf of the Landlord ) Agent for the landlord
whose signature is verified by :- ) for the sole purpose of
execution of this
/s/ Debbie Cheung Fong Agreement
Cheung Fong, Debbie
Solicitor, Hong Kong SAR
Messrs. Baker & McKenzie
SIGNED by Wong Cho Kuen, Simon )
)
for and on behalf of the Tenant ) (signed by Equity Marketing
in the presence of :- ) Hong Kong by Mr. Wong Cho Kuen)
(Signed by Chan So Ping /s/ Simon Wong
G547826(9))
R E C E I V E D the day and year first above)
written of and from the Tenant the sum of) (Signed by Sino Real Estate
HONG KONG DOLLARS FOUR HUNDRED ) Agency Ltd.)
SEVENTY THREE THOUSAND AND SEVEN )
HUNDRED being the above mentioned deposit ) /s/ Lawrence Chong Koo Seong
to be paid by the Tenant to the Landlord )
from the previous Tenancy Agreement ) Agent for the landlord for
the sole purpose of
execution of this
Agreement
HK$473,700.00
<PAGE>
TOWER 6
[FLOOR PLANS OF FLOORS 8TH, 9TH, 10TH-16TH, 17TH AND 18TH]
<PAGE>
FOR IMMEDIATE RELEASE
CONTACTS: Ria Marie Carlson Lisa Mueller
Equity Marketing, Inc. The Financial Relations Board
(323) 932-4096 (310) 442-0599
EQUITY MARKETING ANNOUNCES $25 MILLION
PRIVATE EQUITY INVESTMENT FROM CROWN CAPITAL
PROCEEDS WILL ACCELERATE EQUITY'S GROWTH INITIATIVES
COMPANY EXPECTS MORE DIVERSIFIED REVENUE MIX BY YEAR-END
LOS ANGELES, March 29, 2000 - Equity Marketing, Inc. (Nasdaq: EMAK) and
Crown Capital Group have signed a definitive agreement, under which Crown will
invest $25.0 million in the company in exchange for convertible preferred stock
and warrants to purchase an additional $15.0 million of convertible preferred
stock.
Proceeds from the transaction are expected to fund Equity's new growth
initiatives, including an acquisition strategy designed to add new clients and
expand the company's range of services, such as the company's recently formed,
Internet-focused interactive division.
"Our outstanding financial and operational performance in 1999, coupled
with strong sales activity for 2000 and today's alliance with a leading
investment firm, establishes a strong platform for accelerated growth," said Don
Kurz, Chairman and Chief Executive Officer of Equity Marketing, Inc. "The
infusion of capital, experience and advice from our new partners at Crown will
help us make strategic acquisitions in the marketing services and Internet
marketing industries, targeting companies that will further build our client
roster and enable us to provide more comprehensive services for existing
clients. Our infrastructure - in the form of information systems, controls,
facilities and management depth - was strengthened last year to accommodate
business expansion. We intend to significantly diversify our revenue mix by the
end of this year."
<PAGE>
"We see tremendous promise in Equity Marketing and the marketing
services industry," said Peter Ackerman, Special Limited Partner of Crown
Capital Group. "Equity has consistently proven that they can deliver what
clients need - strong sales growth and enhanced brand value - in a way that is
creative, efficient and measurable. Moreover, the $85 billion, high-growth
marketing services industry is highly fragmented, making it ripe for
consolidation by strong players such as Equity."
Jeff Deutschman, Crown Capital's Managing Director, added: "We are
enthusiastic about our investment in Equity Marketing. Based on a careful
analysis of the company and its environment, Equity meets our selection criteria
and represents an exceptional investment opportunity. We will work diligently
with Equity to use our capital to accelerate its many opportunities for growth."
"We are proud to have Crown as a business partner," Mr. Kurz continued.
"This agreement represents a strong endorsement of Equity's core business model,
management strength and growth prospects."
Under terms of the agreement, which has been approved by Equity's board
of directors, Crown will purchase $25.0 million of newly designated convertible
preferred shares which will pay an annual cumulative dividend of six percent and
shall be convertible into Equity common stock at $14.75 per share. Crown shall
also receive warrants to purchase an additional $15.0 million of convertible
preferred stock - $12.0 million of which will have a conversion price of $16.00
per share and the remainder of which will be convertible at $18.00 per share.
The transaction will close in two stages. In the first stage, which
closed today, Crown has purchased $11.9 million of the $25.0 million of newly
designated convertible preferred shares and has received warrants to purchase an
additional $7.14 million of the $15.0 million of convertible preferred stock
that are subject to the warrants. In the second stage, Crown will purchase the
balance of the convertible preferred shares and will receive the balance of the
warrants upon satisfaction of certain customary conditions, including
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act and, if certain regulatory approvals are not
obtained, approval by the stockholders of the company. The definitive agreement
provides for certain payments to Crown, including a termination fee if the
<PAGE>
second stage of the transaction fails to close for certain reasons (other than
due to the failure of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act to expire).
Equity's board of directors received the opinion of financial advisors
Houlihan, Lokey, Howard & Zukin, a national investment banking firm, that the
transaction is fair, from a financial point of view, to the company and its
stockholders.
Upon the close of these transactions and assuming the conversion of
preferred stock and the exercise of all warrants (representing a total
investment of $40.0 million), Crown Capital will be Equity Marketing's largest
shareholder, with 2,611,582 shares of common stock, which is approximately a 24
percent ownership interest, after giving effect to the assumed future exercise
of all currently outstanding employees' and directors' stock options. Equity
will also add Mr. Ackerman and Mr. Deutschman to its board of directors,
increasing the number of board members from six to eight.
"We welcome Peter and Jeff to our board," Mr. Kurz concluded. "Their
proven financial skills, mergers and acquisitions experience, business acumen
and network of contacts will provide valuable insight and strengthen our
organization. With their partnership, we are well positioned to capture a
leadership role in the marketing services industry. This transaction ushers in a
new era for Equity Marketing."
Crown Capital Group, with offices in New York City and Mexico City, is
a private equity investment firm focused on building long-term value for
middle-market companies. Since 1997, Crown's equity investments include
companies involved in e-commerce, movie theater exhibition, consumer sampling,
life insurance and home textiles. The firm's partners have substantial
experience in the acquisition and financing of companies representing a broad
range of industries.
Equity Marketing, Inc. is a leading marketing services company,
providing a wide range of custom promotional programs that build sales and brand
awareness for some of the most renowned companies in the world, including Burger
King Corporation, The Coca-Cola Company, BP Amoco, and CVS/pharmacy. The company
is also a developer and marketer of distinctive consumer products, based on
trademarks it owns or classic licensed properties, and is the master toy
licensee for Warner Brothers' Scooby-Doo-TM-. More information about Equity
Marketing is available on the company's web site at www.equity-marketing.com.
CERTAIN EXPECTATIONS AND PROJECTIONS REGARDING THE FUTURE PERFORMANCE
OF EQUITY MARKETING, INC. DISCUSSED IN THIS NEWS RELEASE ARE FORWARD-LOOKING AND
ARE MADE UNDER THE "SAFE HARBOR" PROVISIONS OF
<PAGE>
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE EXPECTATIONS AND
PROJECTIONS ARE BASED ON CURRENTLY AVAILABLE COMPETITIVE, FINANCIAL AND
ECONOMIC DATA ALONG WITH THE COMPANY'S OPERATING PLANS AND ARE SUBJECT TO
FUTURE EVENTS AND UNCERTAINTIES. MANAGEMENT CAUTIONS THE READER THAT THE
FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE COMPANY'S ACTUAL
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL POSITION IN 2000 AND
THEREAFTER TO DIFFER SIGNIFICANTLY FROM THOSE EXPRESSED IN FORWARD-LOOKING
STATEMENTS: THE COMPANY'S DEPENDENCE ON A SINGLE CUSTOMER; THE SIGNIFICANT
QUARTER-TO-QUARTER VARIABILITY IN THE COMPANY'S REVENUES AND NET INCOME; THE
COMPANY'S DEPENDENCE ON THE POPULARITY OF LICENSED ENTERTAINMENT PROPERTIES
AND THE ABILITY TO LICENSE, DEVELOP AND MARKET NEW PRODUCTS; THE COMPANY'S
DEPENDENCE ON FOREIGN MANUFACTURERS; THE COMPANY'S NEED FOR ADDITIONAL
WORKING CAPITAL; AND THE POTENTIAL NEGATIVE IMPACT OF ACQUISITIONS. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO REFLECT EVENTS
OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS. THE RISKS HIGHLIGHTED HEREIN SHOULD NOT BE ASSUMED TO
BE THE ONLY ITEMS THAT COULD AFFECT THE FUTURE PERFORMANCE OF THE COMPANY.
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