U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999 OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. - 0-22524
REAL GOODS TRADING CORPORATION
(Exact name of small business issuer as specified in its charter)
California 68-0227324
(State or other jurisdiction (IRS Employer Identification Number)
incorporation or organization)
3440 Airway Drive, Santa Rosa, California 95403
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (707) 542-2600
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock Chicago Stock Exchange
Securities registered under Section 12(g) of the Exchange Act:
Common Stock (Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB[X].
State issuer's revenues for its most recent fiscal year.
$17,218,986
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60-days.
$13,262,412 as of June 15, 1999. The number of shares of the
issuer's Common Stock outstanding as of June 15, 1999 was
4,080,742.
Documents Incorporated by Reference
A portion of the Real Goods Trading Corporation's Proxy Statement
for the 1999 Annual Meeting of Shareowners to be filed with the
Commission on or before June 29, 1999 is incorporated by
reference into Part III, Items 9, 10, 11 and 12 of this Annual
Report on Form 10-KSB. With the exception of those portions
which are specifically incorporated by reference in this Annual
Report on Form 10-KSB, the Real Goods Trading Corporation Proxy
Statement for the 1999 Annual Meeting of Shareowners is not to be
deemed filed as part of this report.
</PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
Mission Statement: To promote and inspire an ecologically
sustainable future.
Introduction. Real Goods Trading Corporation ("Real Goods" or
the "Company") sells primarily environmentally related products
and renewable energy products through mail order catalogs, direct
sales, retail stores and its Internet web site
(www.realgoods.com).
The Company mailed catalogs under the names of Real Goods
,Elements, Chelsea Green Junction, Real Goods News, Post
Consumer, and the Renewable Energy Products Catalog, Real Goods
Renewables in fiscal 1999. The Company also sells renewable energy
products directly to its customers through its renewable energy
department, Real Goods Renewables. The Company's three retail
stores are located in Hopland and Berkeley, California and Eugene,
Oregon. The Company also has an outlet store adjacent to its
Berkeley store.
On April 1, 1998, the Company transferred its consumer education
activities to a not-for-profit 501(c) (3) organization called the
Real Goods Institute for Solar Living (the "Institute"). The
Institute is operated separately from Real Goods and provides
seminars and creates educational programs and projects that
promote renewable energy, solar power and a sustainable future.
A. The Company's Markets
The Company serves several related market segments within the
single line of business of specialty retailing.
The "Environmentally Related Products Catalog Market" consists of
catalog customers who wish to pursue more energy conserving,
wholesome lifestyles with a belief in preserving the earth's
resources in a sustainable manner. Consumers in this market tend
to live in urban and suburban residences served by the
conventional electric utility power grid.
The "Regional Retail Market" is served by the Company's retail
stores. Each of the three stores carries a majority of the
products in the catalogs but also carries environmental and
clothing products as well as unique regional products. Each of
the stores has a resident technician who is knowledgeable about
renewable energy products, and displays that demonstrate
renewable energy products. The Company's retail store at the Solar
Living Center in Hopland, California was built with sustainable
building materials, including strawbale construction, and has many
functioning renewable energy systems. The Company uses its
outlet store in Berkeley, California, to reduce overstocks,
returns and discontinued products.
The Company's original focus, the "Renewable Energy Market,"
consists of homeowners and others living and working without the
benefit of the traditional electric company power grid and
generating their own electricity. The Company has also identified
eco-tourism as a promising sub market for its renewable energy
sales. As the price of renewable energy products (particularly
photovoltaic (solar electric) modules) declines, this market will
become more mainstream.
In conjunction with its product marketing efforts, the Company
has always emphasized the "Consumer Education Market". The
Company produces and sells a wide variety of educational materials
through its catalogs and retail stores and has a successful
co-publishing relationship with Chelsea Green Publishers of
Vermont. In 1992, the Company established the Institute for Solar
Living, which offers educational seminars on a variety of topics.
The Institute was transferred to a not-for-profit 501 (c) (3)
organization on April 1, 1998.
1. Environmentally Related Products Market. The Company's
mail order catalogs market energy saving conservation devices,
environmentally related products durable tools, and educational
and well-made gifts to urban and suburban dwellers.
Approximately 61% of the Company's total sales in fiscal 1999 were
derived from catalogs. The Company mailed approximately 4,716,500
catalogs in the current year, compared to 6,533,500 in the previous
year; the reduction was caused by (1) elimination of the Company's
Earth Care Catalog and (2) more focused marketing strategies.
The environmentally related products offered by the Company
comprise a full spectrum of energy-efficient lighting equipment;
high efficiency appliances; water saving devices such as low-flow
showerheads, low-flush toilets and faucet aerators; recycled
paper products including toilet paper, paper towels and facial
tissue; and household products. The Company also sells non-toxic
household cleaning products, water and air purification devices,
health-related products and durable tools to this same customer
base.
In January 1997 the Company began a trial program offering a
number of its catalog products on its Internet website. The
Company believes that use of the Internet is consistent with it's
mission to reduce the use of paper and fossil fuels. There can
be no assurance that the Company will continue to use the Internet
as a means of reaching potential customers in the future, although
there has been strong growth in this channel during fiscal 1999.
See "5. Internet Site" for further information on this channel.
2. Regional Retail Market. The Company's retail stores
serve as demonstration centers for the mail order catalog and
renewable energy products. The Company markets energy saving
devices, environmentally related products, educational and
well-made gifts and unique regional products in each of its retail
stores. The Company's four retail stores accounted for 19% of
total sales in fiscal 1999 compared to 8% in fiscal 1998. The
Company had 14,300 square feet of retail space during fiscal 1999,
up from a weighted average of 13,175 square feet in fiscal 1998.
The Solar Living Center ("SLC"), which opened in 1996 in Hopland,
California, is a twelve acre demonstration site that is the home
of the Company's flagship store. The 4,200 square foot retail
store is constructed of adobe-like covered rice straw bales and
has a utility intertie system with the local utility, Pacific Gas
& Electric Company ("P.G. & E."). The Company's 10 kilowatt
photovoltaic array and 3 kilowatt wind generator can seasonally
produce more power than is necessary for the site; the Company
sells the excess power back to PG&E. The Solar Living Center
embodies the Company's core principles and provides an
opportunity to demonstrate the practicality of living and working
on a low consumption, environmentally sensitive and renewable
energy basis. The site is immediately adjacent to Highway 101 in
Hopland, California, and has to date been of interest both to
residents of Northern California and to tourists who have made it
a destination. Nearly 129,000 visitors came to the SLC in fiscal
1999. The Company believes that the Solar Living Center remains
important to the Company's future.
In addition to serving as a demonstration center for renewable
energy products and catalog products, the Hopland store also
offers retail products, some of which are unique to the Northern
California bio-region. Many of these unique products are
handmade or made in small quantities that are not suitable for mail
order. Approximately two thirds of the Hopland store's products
are catalog and renewable energy items; one third are retail unique
items.
The 3,800 square foot Eugene, Oregon store carries a majority of
the items in the catalogs as well as renewable energy products
and provides full technical support for these products. The
store is located in a low population area where the Company
believes there are potential renewable energy customers.
In November 1997, the Company began implementing its retail
expansion strategy and opened a retail store in Berkeley,
California. The 4,800 square foot Berkeley store serves as an
urban demonstration center for the Company's catalog and
renewable energy products and features hands on displays of
solar, wind power and energy efficiency. The Company believes that
the store will further the Company's mission of spreading renewable
energy and sustainable living to a wider audience.
In January 1998, the Company opened a 1,500 square foot outlet
store adjacent to the Berkeley store. The Company conducts its
clearance programs through this store.
3. Renewable Energy Products Market. Real Goods Renewables
offers power systems for the eco-tourism market and for domestic
remote homes using renewable sources of energy including
photovoltaic (solar electric), hydroelectric and wind electric,
as well as emerging renewable energy technologies such as
hydrogen fuel cells and a new generation of photovoltaic cells.
Real Goods Renewables endeavors to provide a broad array of
appliances and other system components for most aspects of the
independent power systems lifestyle. These products include
battery storage systems, power conversion devices, charge
controllers, meters, low voltage water pumping systems, solar and
propane gas water heaters, high efficiency refrigerators, solar
cooling devices, composting toilets and a wide variety of
low-voltage household appliances.
The traditional customers for these power systems have been
owners of remote homes in excess of one-quarter mile from the
power companies' lines in the United States and remote villages in
third world countries. The Company believes over 26,000 homes
have used its products to migrate to renewable energy primarily
through solar systems. In addition the Company believes that the
market for small scale solar electric systems in the developing
third world market is increasing significantly. The Company is
seeking to serve the domestic remote home market directly and to
develop strategic alliances to address the developing third world
market through product sales and education. The Company believes
that its renewable energy market will grow significantly in the
near future as it has in the past.
President Clinton's new "million solar roofs" initiative has
brought much interest in renewable energy to mainstream America.
Currently the federal government is proposing tax credits for
homeowners installing renewable energy systems. The Department
of Energy continues to provide funds for photovoltaic
installations via the Team UP program. The California Energy
Commission is offering a renewable energy rebate program for
homeowners who install utility intertie systems. The Company has
offered assistance in fulfillment of the program requirements for
its customers and is well positioned to take advantage of these
offers.
Real Goods Renewables markets its products through the Real
Goods Renewables Catalog, a technical catalog mailed to the more
sophisticated renewable energy buyer, as well as through the
Company's own Solar Living Sourcebook and other educational
materials, and by direct sales. The Company's technical staff is
fully trained in energy system sizing and specializes in
designing solar systems of all sizes.
4. Consumer Education Activities. The Company has
traditionally emphasized consumer education as part of its
mission and continues to produce and sell a wide variety of
educational materials. The Company's primary product for this
market is the tenth edition of its Solar Living Sourcebook, a 575
page textbook that the Company periodically revises, which features
all of the Company's renewable energy products. The Solar Living
Sourcebook is currently distributed by an independent publisher
(Chelsea Green) as well as by the Company itself. Over 110,000
copies of this book have been sold in over 44 English speaking
countries. The Company also markets many publications on specific
aspects of renewable energy conservation and sustainable living
within its catalogs and in its retail stores. The Company does not
spend material amounts for research and development.
The Company has established a successful co-publishing
relationship with Chelsea Green Publishers of Vermont. Through
this relationship, fourteen books have been co-published under the
"Real Goods Solar Living Series" imprint, including the Company's
own Solar Living Sourcebook. The Company believes that these
co-publishing efforts have significantly boosted its position as
an education leader in the sustainability movement.
On April 1, 1998, the Company transferred its Institute for Solar
Living activities to a not-for-profit 501 (c)(3) organization.
Currently in its eighth season, the Institute for Solar Living
offers educational seminars each year for individuals on a
variety of topics such as "Planning and Building Your Renewable
Energy Home" and "Strawbale Construction." The seminars are
taught by the Institute employees and by third-party industry
specialists. The Institute creates increased consumer awareness
with regard to renewable energy products and rents the Solar Living
Center as a demonstration site. The Company has been contributing
funds to the Institute until the Institute can develop its
fundraising efforts and become self-funding.
5. Internet Site. The Company has established a website
(www.realgoods.com) which provides the Company with an
alternative avenue for offering its products and explaining its
mission, history, programs and products. The Company believes
that its customers on its website can find the largest array of
environmental products in any one location. In fiscal 1999 the
Company sold $551,000 worth of products through its website,
representing a 401% increase over the previous year's initial
sales. The Company also maintains an innovative bulletin board on
its website for interested shareowners and prospective stock
purchasers to agree upon the purchase and sale of the Company's
common stock without the intermediation of stock brokers.
Transactions are without cost to purchasers, and sellers pay only
transfer fees. The Company received the approval of the Staff of
the Securities and Exchange Commission for this program in June
1996, and this approval was the first of its kind. There can be
no assurance that the Company will continue to offer this service
to its shareowners in the future.
B. Vendors
The Company currently purchases its products from a vendor base
of more than 700 suppliers, none of which accounts for more than
6% of the Company's purchases. The Company's ten largest vendors
account for 32% of purchases. The four largest annual purchases
are from vendors who sell renewable energy products, including
solar electric modules, high efficiency appliances, and inverters
(power conditioning equipment). While there are many suppliers
of these products, the Company has chosen to limit the majority of
its renewable energy purchases to four vendors: Astropower, a
distributor of solar modules; Solar Electric Specialties
Company, a distributor of solar modules and other equipment
manufactured by Siemens Solar Industries; Golden Genesis, a
distributor of solar modules and high efficiency refrigerators; and
Trace Engineering, a manufacturer of inverters and other solar
electric controls. The Company has had long-term relationships
with all of these vendors. Because many of the renewable energy
products are relatively new, the number of suppliers for these
products can be limited, and the Company, from time to time, may
face short-term dependencies upon certain manufacturers for these
products. However, the Company believes it would not face
long-term difficulties in securing alternate sources of supply for
such products if it experiences an interruption in its current
supply. The Company believes such an interruption would be brief
and is not likely to have a long term material adverse effect on
the Company's orders and sales revenues for the period affected.
The Company generally does not enter into long-term contracts
with its suppliers because adequate alternative sources for most
products exist allowing flexibility to take advantage of
competitive price fluctuations or improvements in technology or
quality by not being obligated pursuant to long-term
arrangements. As a result, there can be no assurance that the
Company will not be subject to unanticipated cost increases or
shortages of supply.
C. Seasonality
Thirty-seven per cent of the Company's revenues are realized in
the third fiscal quarter, which ends on December 31. Renewable
energy products are also subject to seasonality, but the cycle
for these products is the inverse of the environmental,
conservation and gift products, which lessens the effect of the
holiday season on the Company's sales. The Company's fiscal year
ends on March 31. The Company's sales have generally increased
sequentially over the term of the first, second and third fiscal
quarters, and generally declined slightly in the fourth fiscal
quarter. It is possible that such seasonal effects will be
increased if the Company's customer base continues to include a
greater percentage of urban and suburban dwellers. The Company
believes that current trends reflect (i) increased demands for its
renewable energy products during the mild-weather months when its
customers are more likely to undertake construction and major home
improvement projects and (ii) increased demand for environmentally
related gift products, similar to that generally experienced by
conventional retailers, during the holiday season. (See:
"Description of Business - A. The Company's Markets".)
D. Backorders; Returns
Backorders are considered common in certain other industries;
however, in the mail order industry, backorders can be symptoms
of inefficiency, lack of inventory or bad strategic planning
since they create both additional costs and risks of lost sales.
The majority of the Company's backorders arise when (i) vendors
fail to deliver as promised, or (ii) sales of certain products are
higher than anticipated. At March 31, 1998, backorders were
$44,000, which as 4.6% of that month's catalog sales. At March
31, 1999, backorders were $236,000, which was 23% of that month's
catalog sales. Beginning in December 1998 the Company's
backorders experienced a significant increase which continued
through the end of the fiscal year. The increases had two primary
causes: the Company's Holiday catalog was significantly over plan
and the Company's customers increased their purchases of Y2K
related products (products that customers purchase in anticipation
of the potential so-called "Y2K" millennium computer bug to prepare
for the possible disruption of infrastructure and services) by
substantially more than the Company anticipated. Many of the Y2K
products such as batteries, lanterns, oil lamps and grain
grinders are either manufactured in Asia requiring 90-150 day
lead times or are suddenly very short in supply. The Company
expects that by June 1999 the backorder situation should be at or
near historic levels.
Although the Company does have a 90-day return policy for
products returned by customers in their original condition, the
Company has not historically experienced substantial product
returns for its catalog segment. For fiscal 1999, returns of
catalog sales were 6.9% of gross catalog sales. This is an
increase over last year (5.1%) as a result of increasing the soft
goods portion of the product mix. The Company believes that the
hard goods catalog industry in general experiences returns of 5-6%
and the soft goods catalog industry experiences returns of 15-30%.
E. Competition
Within the catalog market, the Company is very small compared to
industry leaders. The market for environmentally related
products has grown, and the number of both large and small
catalog retailers carrying these products has increased. Real
Goods has also developed a small number of proprietary products.
There can be no assurance that the Company will ever sell material
quantities of branded goods or proprietary products. In the retail
market, the Company is experimenting with retail store formats and
it expects to continue to refine its retail store approach.
In the renewable energy market, the Company operates in a niche
presently too technical and application specific to interest the
larger catalogs. The Company's knowledge of its customer and
awareness of vendor offerings enable it to be a better
intermediary between suppliers and customers for its segment of
the market than larger catalogs. The Company believes that Internet
vendors without technical support staff are underselling the
Company's prices for common goods. There can be no assurance
that the resources or market positions of the Company's competitors
in this area will not change. In all three markets, the Company
competes on the basis of price, selection and service. The Company
has continued to work to improve its pricing through selective,
focused buying and improved vendor discounts. In fiscal 1999 the
Company increased its presence at trade shows and plans to continue
to improve its product selection. To improve catalog customer
service, the Company hired more in house staff and extended in
house hours for a reduced reliance on outside operators for its
telephone lines. The Company has also increased staff and telephone
support for Real Goods Renewables.
The Company believes that its image is enhanced by the various
accomplishments that it has made in achieving its mission,
including the opening of the Solar Living Center demonstration
site, the completion of the sale of the largest solar array in
Latin America, the tenth edition of the Solar Living Sourcebook,
the Company's increased presence on the Internet, the mission
message in the mail order catalogs and public relations efforts.
The Company has a membership program in which members pay a $50
fee to receive a designated newsletter with special pricing,
closeout bargains and substantial additional information, as well
as a 5% discount on all purchases. The Company's members order
much more frequently and have a higher average order than the
Company's other customers. In fiscal 1999 the number of members
increased by 12% to approximately 55,000. The Company is
continuing to explore opportunities to enhance the membership
program, including co-ventures with other like-minded
mission-oriented companies and groups.
F. Regulation
Although the Company believes that certain federal, state and
local laws to promote energy conservation may encourage the
purchase of its products, the Company also believes that most of
its customers purchase its products for other reasons. The
Company does not believe that it is subject to regulation other
than regulations applicable to catalog vendors of comparable
products. The Company does not believe that the costs and effects
of its own compliance with federal, state and local environmental
laws are likely to be material. The Company does not generally
seek or obtain governmental approval for the products it sells;
rather, it believes that obtaining such approval is the
responsibility of its vendors or the products' manufacturers. The
Company has not, to its knowledge, been named in any environmental
cause of action relating to its products or the sales thereof.
G. Employees
The Company currently has the full time equivalent of 109
employees. Of those employees, approximately 22 are employed at
the Company's retail stores, 9 are employed at Real Goods
Renewables in Ukiah, approximately 43 are employed in Ukiah
providing support to the catalog and corporate functions, and 35
are employed at Santa Rosa, California at the Corporate
Headquarters. As with many retailers, the Company increases its
use of temporary employees during its third fiscal quarter to
meet the increased demands of the holiday season. The Company
believes its use of temporary employees contributes to its
ability to control overhead costs. The Company is not subject to
any collective bargaining agreements and believes its relationships
with its employees are good. Since the end of the fiscal year,
two of the Company's key persons, one of whom was an officer,
have resigned. The officer has been replaced and the Company is in
the process of replacing the other.
H. Trademarks
The Company has registered the trademark "Real Goods" and has a
license to use the name "Earth Care" for recycled paper products
but has discontinued that product line. That license may be
terminated under certain circumstances. The Company has
registered the name "Real Goods" in Japan. The Company does not
believe that any other patents, trademarks, licenses, franchises,
concessions, royalty agreements or labor contracts are material
to the business of the Company.
Item 2. DESCRIPTION OF PROPERTIES.
As of May 15, 1999, the following describes the Company's
properties:
The Company owns the 12-acre parcel in Hopland, California that
is the site of the Solar Living Center and a retail store.
Hopland is located approximately 12 miles south of Ukiah, on US
Highway 101, a major interstate highway.
The Company owns a facility in Amherst, Wisconsin which
previously housed one of the Company's retail stores. This
property consists of a 5,000 square foot cold warehouse, a 3,000
square foot cold storage building and a 1,600 square foot office
and retail store. This property is listed for sale and is
currently unoccupied.
The Company leases its 10,560 square foot administrative and
executive headquarters in Santa Rosa, CA. This lease expires at
the end of February, 2004.
The Company has a three year lease through March 2002 on its
5,500 square foot Ukiah, California telephone sales facility.
The Company's 15,300 square foot office/warehouse and overflow
storage facilities (also located in Ukiah, California) are leased
through mid October, 2000 and January, 2002 respectively.
The Company has a lease agreement expiring in April 2002 for the
3,800 square foot retail store in Eugene, Oregon.
The Company is in the process of renewing its lease agreement for
the 4,800 square foot retail store in Berkeley, California and it
expects to be able to renew this lease for a three or five year
period. The Company has a month to month lease for the 1,500
square foot Outlet store in Berkeley, California.
The Company believes that it maintains adequate insurance for its
real and personal property.
Item 3. LEGAL PROCEEDINGS.
Not applicable.
<\PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED SHAREOWNER MATTERS
The Company's stock is listed on the Chicago Stock Exchange under
the symbol RGT and it is currently both listed on the Nasdaq
Small Cap Market under the symbol RGTC and traded on the bulletin
board maintained on the Company's web site. The following chart
sets forth the high and low actual sale prices of the Company's
common stock for each quarter within the last two fiscal years.
TRADING INFORMATION
<TABLE>
<CAPTION>
Fiscal Year Ended March 31
High Low
<S> <C> <C>
1998:
First Quarter $6-1/8 $4-3/4
Second Quarter 6-3/4 4-5/8
Third Quarter 6 4-1/4
Fourth Quarter 5-1/4 4-1/8
1999:
First Quarter $6 $4-7/8
Second Quarter 5-3/8 3
Third Quarter 4-1/4 3-1/2
Fourth Quarter 4-1/2 3-7/8
</TABLE>
</PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
SALES
The Company reported a 1.1% increase in net sales to $17,219,000
for fiscal 1999, compared to $17,034,000 for fiscal 1998.
Catalog sales decreased 12.4% to $10,540,000, or 61.2% of net
sales in fiscal 1999, compared to $12,029,000 or 70.6% in the
prior year. In fiscal 1999, the Earth Care catalog was
discontinued. This catalog contributed $1,842,000 to net sales in
fiscal 1998. Excluding the Earth Care catalog, catalog sales were
$10,187,000 in fiscal 1998 meaning comparative catalog sales
increased 3.5%. The Company mailed 4,716,500 catalogs in fiscal
1999 compared to 6,533,500 catalogs in fiscal 1998, a decrease of
27.8%. The Company attributes the 21.2% increase in net sales per
catalog (from $1.84 to $2.23) to more focused marketing strategies
and elimination of the Earth Care catalog.
Retail store sales increased 28.6% to $3,743,000, or 21.7% of net
sales in fiscal 1999, compared to $2,910,000 or 17.1% of net
sales in the prior year. The Company had its three retail stores
and one outlet store open for the full twelve months of fiscal
1999 and had 14,300 square feet of retail selling space during
fiscal 1999 compared with a weighted average of 13,175 square feet
of selling space in fiscal 1998, an 8.5% increase. In fiscal 1998
the Company moved its outlet store from Ukiah to Berkeley,
California, adjacent to its Berkeley retail store. It also closed
its Snow Belt store in Amherst, WI in September 1997. As a result,
fiscal 1999 contained 48 store months compared with 45.7 store
months in fiscal 1998. The Company hired a Retail Director in
fiscal 1999 and believes this additional focus has contributed to
the sales growth in fiscal 1999.
Renewable energy sales increased 43.9% to $2,936,000, or 17.1% of
net sales in fiscal 1999, compared to $2,041,000, or 12.0% of
net sales in the prior year. The increase in this area of the
Company's business is due to the public's increased awareness of
energy utilization and a desire to safeguard the earth's natural
resources, energy incentive credit programs sponsored by many
state agencies in conjunction with the deregulation of utilities,
and customers' interests in potential Year 2000 (Y2K) renewable
energy solutions. The Company also continues to market its
services to the "eco-tourism" market.
GROSS PROFIT
Gross profit amounted to $7,467,000, or 43.4% of net sales in
fiscal 1999 compared to $8,198,000, or 48.1% of sales in fiscal
1998. This decrease of $731,000 of margin, or 4.3 margin points,
is attributable to the following: establishment of inventory
reserves ($232,000 or 1.3 margin points), a higher proportion of
renewable sales in the retail and renewable energy divisions
($257,000 or 1.5 margin points), increased cost of products
($158,000 or 1.0 margin points) and clearance of old stock at
reduced prices ($84,000 or .5 margin points).
Catalog sales had a 3.7% decrease in gross profit of $5,126,000
or 48.6% of catalog net sales in fiscal 1999, compared to
$6,287,000 or 52.3% of catalog net sales in the prior year. The
margin decrease is attributable to the establishment of inventory
reserves and obsolete items necessary to accommodate discontinued
product, clearance sales and increased cost of product which was
not passed through to customers for competitive reasons. Retail
stores sales had a gross profit of $1,400,000 or 37.4% of retail
net sales in fiscal 1999 compared to $1,170,000 or 40.2% of
retail net sales in fiscal 1998. This decrease in margin is
related primarily to the higher proportion of low margin renewable
energy sales and a $40,000 reserve provided for obsolete and
slow-moving products.
Renewable energy sales had a gross profit of $941,000 or 32.1% of
net renewable sales compared to $687,000 or 33.7% of net
renewable sales for the prior year. This decrease is attributable
to higher product costs.
OPERATING EXPENSES
Selling, general, and administrative expenses were $8,132,000 or
47.2% of sales in fiscal 1999, compared to $8,562,000 or 50.3% of
sales in the prior year. Decreases in expenses occurred in the
areas of catalog expenses (due primarily to the discontinuation
of the Earth Care catalog), advertising, postage and freight
expense, supplies and utilities. These decreases more than offset
the increases that occurred in labor and benefits, depreciation,
rent, purchased services, and recruitment costs. Some of the
expense increases were attributable to costs associated with
moving the Company headquarters from Ukiah to Santa Rosa,
California.
OTHER INCOME AND EXPENSE
In fiscal 1999, interest expense was $48,000 and interest income
was $90,000, resulting in a net interest income of $42,000. In
the previous fiscal year, interest expense was $95,000 and
interest income was $24,000, for a net expense of $71,000. The
Company had lower interest expense and higher interest income due
to the cash generated by its direct public offering that commenced
in August 1997 and ended on June 30, 1998. The Company recorded a
$1,000 net gain on the sale and disposition of assets in fiscal
1999. In fiscal 1998, a $13,000 net loss was recorded on the sale
of assets. In fiscal 1999, the Company recorded a $10,000 write
down of the land and building in Amherst, Wisconsin compared to a
$30,000 write down in fiscal 1998 to reflect the estimated net
realizable value of the property held for sale.
INCOME TAXES
Income tax benefits as a percentage of pretax loss were 24% in
fiscal 1999 due to the Company's reported loss, compared to a tax
benefit of 33% for the previous year. The Company believes that the
applied tax rate accurately reflects its actual experience.
NET LOSS
For the year ended March 31, 1999, the Company had a loss
before tax benefit of $632,000 and a net loss of $482,000 or
$0.12 per share. In the previous year, the Company had a loss
before tax benefit of $478,000 and a net loss of $322,000 or
$0.09 per share.
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal year ended March 31, 1999, cash of $371,000 was
provided by operations primarily due to changes in working capital.
The Company used $730,000 of cash in investing activities for
purchases of property, equipment and improvements, primarily for
computer equipment and assets associated with the new
corporate headquarters.
Cash provided by financing activities was $1,106,000 due primarily
to the Company's direct public offering, offset by an increase in
notes receivable, debt repayments and purchases of common stock.
The net effect of all of the Company's activities was to increase
the Company's cash by $747,000 to $2,048,000 at the end of the
period from $1,301,000 at the beginning of the period.
The Company extended its $1,500,000 line of credit through August
1999 to use for seasonal fluctuations in inventory levels as well
as operating expenses; the Company did not use the line of credit
during fiscal 1999 except to support letters of credit. The
Company intends to review its banking relations in July of 1999
and will review its line of credit at that time. Management
believes that cash flow from operations together with bank debt
financing and existing cash reserves will be sufficient to fund
the Company's operations through fiscal 2000.
EFFECTS OF INFLATION
The overall effects of inflation on the Company's business during
the periods discussed were not material.
YEAR 2000 PREPAREDNESS
The Company is addressing the Year 2000 ("Y2K") problem through a
comprehensive evaluation of its hardware, software,
communications and key external vendors and suppliers. At June 1,
1999 the Company estimates that it has completed substantially all
of the necessary hardware upgrades and a large portion of its
software upgrades. Costs of the evaluation and upgrades approximate
$233,000 most of which has been incurred in the normal course of
business as periodic software and hardware upgrades through March
31, 1999.
During fiscal 1999, the Company installed new computer equipment
and upgrades of its catalog and accounting software that are Y2K
compliant and further upgraded some of its hardware.
The Company is continuing its software upgrades and vendor
evaluations and certifications. The Company's Y2K initiatives are
on schedule and no major problems have been encountered to this
time. However, there can be no assurance that the systems of
other companies on which the Company and its systems rely will be
converted in a timely fashion, or that any such failure to
convert by another company would not have an adverse effect on
the Company's systems. Furthermore, there can be no guarantee that
these schedules will be achieved, and actual results could differ
materially from these estimates. Specific factors that might
cause such material differences include, but are not limited to,
the availability of personnel trained in this area and the cost
of such personnel, and the ability to locate and correct all
relevant computer codes and similar uncertainties.
While the Company cannot accurately predict a "worst case
scenario", with regard to its Y2K issues, the failure by the
Company and/or vendors to complete Y2K compliance work in a
timely manner could have a materially adverse effect on the
Company's operations. The Company is in the process of assessing
these risks and uncertainties and developing appropriate courses
of action.
</PAGE>
CERTAIN CONSIDERATIONS
Except for the historical information contained in this Annual
Report on Form 10-KSB, the matters discussed in this document are
forward looking statements. These forward looking statements
concern matters that involve risks and uncertainties, including,
but not limited to, those set forth below, that could cause
actual results to differ materially from those in the forward
looking statements. The matters set forth below should be
carefully considered when evaluating the Company's business and
prospects.
A. CATALOG SALES. The mail order industry is susceptible to the
ebb and flow of both retail industry trends and the general
economy. While the Company could be a beneficiary of a trend
which increases the popularity of the Company's products, that
trend could also ebb away. Of approximately 350 products in each
of the Real Goods color catalogs, 35% are new to those catalogs;
there can be no assurance that the product selection will be
effective. While the Company must incur catalog production and
mailing costs, purchase inventory and staff up in preparation for
customer responses in advance of need, if customer response is
below management's expectations and the Company's sales decrease,
the Company's expenses cannot be reduced timely and
proportionately. In addition, the Company will be reliant to
some extent on the state of the general economy. An adverse
economic environment could impact the mail order catalog industry
as a whole. Finally, catalog companies seeking to increase
revenues and their "house list" often "prospect" with rented lists;
excessive prospecting can adversely affect operating results.
B. RETAIL STORES. There are substantial risks in store
retailing, including poor location of retail stores, failing to
identify consumer trends correctly, theft by customers and
employees, inadequate merchandise selection, inadequate financial
controls, and losing customers to competitors. The Company is
experimenting with retail store formats; there can be no
assurance that any of those formats will be profitable, or, if
profitable, replicatable. The Company has only limited experience
with its new urban store format. The Company sold its Amherst,
Wisconsin store in August 1997 due to the store's failure to
achieve the long term strategic objectives which the Company had
for the store.
C. SOLAR LIVING CENTER. The Company's mission is: "To promote
and inspire an ecologically sustainable future." The Company has
spent approximately $3,000,000 to acquire the land for the Solar
Living Center, landscape the land and construct it as a
demonstration of many of the principles underlying the Company's
mission and vision. Although the initial response has been
extremely encouraging in both sales and number of visitors, there
can be no assurance that the Solar Living Center, which opened in
May 1996, will fulfill the Company's hopes to increase the
public's awareness of the Real Goods mission, that the Company will
ever realize a suitable return on its investment or that the
Company will not incur a substantial loss from the Solar Living
Center. The Solar Living Center is located on a flood plain; the
building at the Solar Living Center is covered by flood insurance
and is above the 100 year flood mark. Currently, a portion of the
Solar Living Center is rented to the Real Goods Institute for Solar
Living, a not-for-profit organization.
D. SEASONALITY. As with nearly all retail enterprises, the
Company's business is seasonal, and it customarily generates
approximately 37% of its revenues in its third fiscal quarter
which is the last calendar quarter of the year. The Company's
execution in its third quarter is material to its financial
success for a fiscal year. Poor third quarter results in any given
year would adversely impact the Company to a greater absolute
extent than poor results in any other quarter.
E. COMPETITION. In the catalog market, the Company is small
compared to industry leaders. If one or more of the larger
catalog retailers decides either to have an environmental
products section in an existing catalog or to launch a comparable
catalog, the Company's business could be adversely affected. In
addition, if the Company successfully identifies an unmet consumer
need, the idea can be copied quickly by catalog retailers with
greater buying power and greater numbers of catalogs in
circulation. As to its renewable energy market, the Company
believes it operates in a niche presently too technical and
application specific to interest the larger catalogs and the
Company's knowledge of its customers and vendors offerings enables
it to be a better intermediary between suppliers and customers for
its segment of the market than larger catalogs. Finally, the
options available on the internet allow potential customers to
obtain certain of the Company's value added services without a
charge, and then purchase their goods more cheaply from less
service oriented vendors.
F. NEW INITIATIVES. The Company has undertaken test programs in
selling via the Internet, as well as a catalog strategy involving
the mailing of discrete catalogs, which may prove to be
productive endeavors; however, there can be no assurance that
they will be successful or, if they appear successful, that they
will continue to be successful.
G. UNCONTROLLABLE EVENTS. The Company is subject to larger
trends and events which are beyond the Company's control. For
instance, a severe recession would decrease consumers' disposable
income and the amounts people spend on non-essential products
such as those the Company offers. If there is a war, earthquake,
fire or similar event, the Company could be adversely impacted.
While the Company carries reasonable insurance considering its size
and economics, such insurance may not fully protect the Company
from events which are beyond the Company's control. Any long term
drop in energy prices could also reduce the attractiveness of
certain of the Company's products; reciprocally, the Company could
benefit from a long term increase in energy prices.
H. SALES TAXES. In 1992, the United States Supreme Court ruled
that states may not impose taxes on out-of-state direct
marketers, but it suggested that Congress could delegate that
power. To date, there has been no congressional action. The
Company collects sales tax only on sales made in California. If
the Congress does delegate the power to levy a sales tax and states
do levy those taxes, the operations of the Company will likely be
affected substantially because the Company's average order is
relatively high and the combination of sales taxes with shipping
charges may affect consumer buying decisions.
I. DEPENDENCE ON KEY PERSONNEL. The Company is substantially
dependent on the continued services of its Founder and Chairman,
John Schaeffer. The loss of Mr. Schaeffer's services for any
substantial period of time could possibly have a material adverse
impact on the Company. The Company maintains a $1,000,000
insurance policy on Mr. Schaeffer's life.
J. Dependence on Certain Suppliers, Including Foreign Suppliers.
The Company carries approximately 350 products in each color
catalog. No more that 6% of the Company's sales arise from a
single product. Approximately 7% of the Company's sales are
generated from products purchased directly from foreign
countries. Accordingly, the Company is subject to both exchange
rate fluctuations and possible disruptions in supplies for those
products. The Company could also be vulnerable because 5.7% of
its revenues derive from products purchased from a single
supplier. However, there is at least one alternative supplier for
each product in every case, and management believes that any such
effect would be temporary.
K. COST INCREASES. For the portion of its sales derived from
mail order catalogs, the Company is particularly susceptible to
increases in paper prices and postal and shipping charges. There
is an immediate effect on the Company's catalog marketing costs
as a result of the paper market price fluctuations. Since paper
capacity is relatively fixed, the Company believes that prices in
this market are directly affected by the strength of the economy.
Increased paper prices as well as increased mailing and shipping
charges could substantially adversely impact the Company's
catalog growth and profitability. Increased paper prices result
in lower costs, but other catalog merchants may be encouraged to
expand their mailings.
Postage costs are also affected by price changes by the United
States Postal Service and United Parcel Service. The Company
does expect annual increases in United Parcel Service's charges.
L. CONTROL. Because of his stock ownership position, John
Schaeffer is likely to continue to have the ability to
significantly influence control over the operations and strategy
of the Company.
</PAGE>
Item 7. FINANCIAL STATEMENTS.
REAL GOODS TRADING CORPORATION
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 17
FINANCIAL STATEMENT AS OF AND FOR THE YEARS
ENDED MARCH 31, 1999 AND 1998:
Balance Sheets 18
Statements of Operations 19
Statements of Cash Flows 20
Statements of Shareowners' Equity 21
Notes to Financial Statements 22-28
</PAGE>
Board of Directors and Shareowners
Real Goods Trading Corporation:
We have audited the accompanying balance sheets of Real Goods
Trading Corporation (the "Company") as of March 31, 1999 and 1998
and the related statements of operations, shareowners' equity and
cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Real Goods Trading
Corporation as of March 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Oakland, California
May 21, 1999
</PAGE>
REAL GOODS TRADING CORPORATION
BALANCE SHEETS
MARCH 31, 1999 AND 1998
(In thousands except share data)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,048 $ 1,301
Accounts receivable, net of allowance of $6
in 1999 and 1998 240 210
Note receivable 20 -
Inventories, net 2,080 2,336
Deferred catalog costs, net 272 439
Prepaid expenses 266 214
Income taxes receivable 89 167
Total current assets 5,015 4,667
Property, equipment and improvements, net 3,553 3,407
Other assets 198 153
Property held for sale 78 102
Note receivable - affiliate 196 -
Deferred income taxes 39 -
Total assets $ 9,079 $ 8,329
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 873 $ 726
Accrued expenses 620 327
Deposits 138 434
Current maturities of long-term debt 16 17
Deferred income taxes - 23
Other taxes payable 57 52
Total current liabilities 1,704 1,579
Long-term debt 552 568
Total liabilities $ 2,256 $ 2,147
Shareowners' equity:
Common stock, without par value:
Authorized 10,000,000 shares;
issued and outstanding,
4,080,742 and 3,857,215 shares,
respectively 7,188 6,065
Retained earnings (accumulated deficit) (365) 117
Total shareowners' equity 6,823 6,182
Total liabilities and shareowners'
equity $ 9,079 $ 8,329
</TABLE>
See notes to financial statements
</PAGE>
REAL GOODS TRADING CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1999 AND 1998
(In thousands except share and per share data)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net Sales $ 17,219 $ 17,034
Cost of sales 9,752 8,836
Gross profit 7,467 8,198
Selling, general and administrative expenses 8,132 8,562
Loss from operations (665) (364)
Interest income (expense), net 42 (71)
Loss on disposition of assets (9) (43)
Loss before income taxes (632) (478)
Income tax benefit 150 156
Net loss $ (482) $ (322)
Net loss per share, basic $ (0.12) $ (0.09)
Net loss per share, diluted $ (0.12) $ (0.09)
Weighted average shares outstanding,
basic 4,004,286 3,472,257
Weighted average shares outstanding,
diluted 4,004,286 3,472,257
</TABLE>
See notes to financial statements
</PAGE>
REAL GOODS TRADING CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1999 AND 1998
(In thousands)
1999 1998
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(482) $(322)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 344 314
Loss on disposition of assets 9 43
Deferred income taxes (39) -
Other 14 30
Changes in assets and liabilities:
Accounts receivable (30) (56)
Note receivable (20) -
Inventories 256 (285)
Deferred catalog costs, net 167 (56)
Prepaid expenses (52) (102)
Income taxes receivable 55 (167)
Accounts payable 147 245
Accrued expenses and other 298 27
Deposits (296) 361
NET CASH PROVIDED BY OPERATING ACTIVITIES 371 32
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, and construction
in progress (514) (494)
Purchase of other assets (45) (35)
Proceeds from sale of equipment and
other assets 25 88
Note receivable - affiliate (196) -
NET CASH USED IN INVESTING ACTIVITIES (730) (441)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 1,138 1,793
Repayment of debt (17) (596)
Purchase of common stock (15) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,106 1,197
NET INCREASE IN CASH 747 788
CASH AT BEGINNING OF PERIOD 1,301 513
CASH AT END OF PERIOD $2,048 $1,301
Other cash flow information:
Interest paid $48 $95
Income taxes paid 1 1
</TABLE>
See notes to financial statements
</PAGE>
REAL GOODS TRADING CORPORATION
STATEMENTS OF SHAREOWNERS' EQUITY
YEARS ENDED MARCH 31, 1999 AND 1998
(In thousands)
<TABLE>
<CAPTION>
Common Stock
Total
Number of Retained Shareowners'
Shares Amount Earnings Equity
<S> <C> <C> <C> <C>
BALANCE, MARCH 31, 1997 $3,404 $4,252 $ 439 $4,691
Issuance of common stock
for bonuses 4 20 20
Issuance of common stock
for direct public
offering, net of
offering costs of $598 449 1,793 1,793
Net loss (322) (322)
BALANCE, MARCH 31, 1998 3,857 $6,065 $ 117 $6,182
Issuance of common
stock for direct
public offering, net
of offering costs of $99 228 1,138 1,138
Shares repurchased (4) (15) (15)
Net loss (482) (482)
BALANCE, MARCH 31, 1999 4,081 $7,188 $(365) $6,823
</TABLE>
See notes to financial statements
</PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Real Goods Trading Corporation (the "Company") was
organized on July 1, 1990 and sells primarily environmentally
related and renewable energy products through mail order
catalogs, four retail stores, and direct sales of its renewable
energy department.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Inventories are stated at the lower of cost (first-in/first-out
method) or market. Inventories include expenses associated with
acquiring the inventory.
DEFERRED CATALOG COSTS - The Company capitalizes the direct cost
of producing and distributing its mail order catalogs. Deferred
catalog costs are amortized based on the estimated sales lives of
the catalogs, generally eighteen weeks.
PROPERTY, EQUIPMENT AND IMPROVEMENTS are stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from 5 to 40
years.
PROPERTY HELD FOR SALE - The building and land which were the
former Snow Belt Store are currently held for sale.
NOTE RECEIVABLE - AFFILIATE - The note receivable represents
fundsadvanced to the Real Goods Institute for Solar Living
("ISL") and bears interest at 5.25% per year. Interest only is
payable until the ISL achieves self-funding.
PRE-OPENING COSTS for retail stores are expensed as incurred.
INCOME TAXES - The Company accounts for its income taxes using an
asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future
events other than changes in tax laws.
EARNINGS(LOSS) PER SHARE - Basic earnings(loss) per share are
computed by dividing net income by the weighted average number of
shares outstanding for the period. Diluted earnings(loss) per
share reflect the potential dilution that could occur if contracts
to issue common stock were exercised or converted to common stock.
Dilutive stock options were not included for the fiscal years ended
March 31, 1999 and 1998, as the Company incurred a net loss in each
year and the effect would be antidilutive.
RECLASSIFICATION - The 1998 financial statements have been
reclassified in order to conform to the March 31,1999
presentation.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of
Financial Accounting Standard ("SFAS") No. 107, "Disclosures
About Fair Value of Financial Instruments" requires disclosure of
the estimated fair value of financial instruments. The carrying
values of cash, accounts receivable, accounts payable, and
long-term debt approximates their estimated fair values.
STOCK-BASED COMPENSATION - The Company accounts for stock-based
awards to employees using the intrinsic value method in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees".
COMPREHENSIVE INCOME - Comprehensive loss and net loss are the
same.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS No.131
Disclosures about Segments of an Enterprise and Related
Information", which establishes annual and interim reporting
standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and
major customers. The Company has adopted this standard effective
for the Company's fiscal year ending March 31, 1999 (note 11).
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No.133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure these instruments at
fair value. This statement is expected to be effective for the
Company's fiscal 2002. The Company believes that this statement
will not have a material effect on its financial statements.
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS
<TABLE>
<CAPTION>
Property, equipment and improvements consist of the following at
March 31 (in thousands):
1999 1998
<S> <C> <C>
Land $ 480 $ 480
Land improvements 783 782
Buildings and leasehold improvements 1,551 1,579
Equipment, furniture and fixtures 1,732 1,308
Construction in progress 15 10
Total 4,561 4,159
Less accumulated depreciation (1,008) (752)
Property, equipment and improvements, net $ 3,553 $ 3,407
</TABLE>
3. LINE OF CREDIT
The Company has a line of credit agreement for $1,500,000 with
National Bank of the Redwoods (the "Bank"). Borrowings bear
interest at 1.5% over the prime rate, payable in monthly
installments. The line is personally guaranteed by the Company's
Chairman and largest shareowner. At March 31, 1999 and 1998, no
amounts were outstanding on the Company's line of credit.
Effective in April 1999, the line was extended through August 31,
1999.
The line of credit agreement contains restrictive covenants
including debt to net worth and current ratios, restrictions on
capital expenditures, positive cash flow at a certain point in
the fiscal year and prohibitions on payment of cash dividends
without the Bank's approval. The line is collateralized by
substantially all of the Company's assets, including inventory,
accounts receivable and mailing lists as well as a key person
life
insurance policy on the life of the Company's Chairman and
largest
shareowner. At March 31, 1999 and 1998, the Company was in
compliance with all covenants of the line of credit agreement.
4. DEBT
<TABLE>
<CAPTION>
Long term debt consists of the following at March 31 (in
thousands):
1999 1998
<S> <C> <C>
Small Business Administration term loan,
interest at 7.77%, payable through
September 2016, secured by land and
building in Hopland, California. $ 568 $ 583
Other - 2
Total 568 585
Less: current portion 16 17
Long-term portion $ 552 $ 568
</TABLE>
<TABLE>
<CAPTION>
Principal payments on long-term debt
are as follows (in thousands):
Fiscal Year ending March 31:
<C> <C>
2000 $ 16
2001 17
2002 19
2003 20
2004 22
Thereafter 474
Total $ 568
</TABLE>
5. DISPOSITION OF ASSETS
In August 1997 the Company completed the sale of the non-real
property assets of its Amherst, Wisconsin store to two former
employees for net proceeds of $88,000, and recorded a loss of
$13,000. The Company is seeking to sell the land and building in
which the store was located. At March 31, 1999, the land and
building had a net book value of $78,000. During fiscal 1999 the
Company sold and disposed of additional miscellaneous fixed assets
for a net loss of $9,000 which included a further write down of its
Wisconsin store of $10,000.
6. LEASES
The Company has operating leases for its offices, warehouse
facilities, the Eugene and Berkeley stores and certain equipment,
which expire from 1999 through 2004. Rental expense for the
years ended March 31, 1999 and 1998 was $308,000 and $188,000
respectively.
<TABLE>
<CAPTION>
Future minimum annual lease payments under operating leases are
as follows (in thousands):
Fiscal Year ending March 31:
<C> <C>
2000 $ 341
2001 325
2002 312
2003 235
2004 226
Total $1,438
</TABLE>
7. INCOME TAXES
<TABLE>
<CAPTION>
Income tax benefits consist of the following for the years ended
March 31 (in thousands):
1999 1998
<S> <C> <C>
Current:
Federal $ - $ (167)
State 1 1
Total 1 (166)
Deferred - federal (151) 10
Total benefit $ (150) $ (156)
</TABLE>
<TABLE>
<CAPTION>
The income tax benefit for financial reporting purposes are
different from the tax provision computed by applying the
statutory federal income tax rate. The differences for each year
are reconciled as follows (in thousands):
1999 1998
<S> <C> <C>
Federal income taxes at
statutory income tax rate (34%) $ (215) $ (163)
State taxes net of federal tax benefit (14) (29)
Effect of permanent differences 8 (33)
Valuation allowance 107 6
Other (36) (7)
Benefit $ (150) $ (156)
</TABLE>
<TABLE>
<CAPTION>
The components of the net deferred tax asset (liability) at
year-end are as follows (in thousands):
1999 1998
<S> <C> <C>
Deferred tax assets:
Benefit of net operating loss carryforwards $ 183 $ 76
Stock option compensation 14 4
Reduction in cost of property 15 1
Other 10 9
222 110
Less valuation allowance (183) (76)
Non-current deferred tax asset 39 34
Deferred tax assets (liabilities):
Inventory reserves $ 99 $ -
Catalog costs (37) (78)
Accruals 32 7
Other (5) (6)
Current deferred tax assets (liabilities) 89 (57)
Net deferred tax asset (liability) $ 128 $ (23)
</TABLE>
Because of the uncertain nature of their ultimate utilization, a
valuation allowance is recorded against the deferred tax assets
associated with the net operating losses. At March 31, 1999, the
Company has net operating losses available for carryforward of
approximately $376,000 and $682,000 for federal and state
purposes, respectively. The federal net operating loss and
$316,000 of the state net operating losses will expire in 2013
through 2018. The remaining state net operating losses expire
through 2004.
8. SHAREOWNER AGREEMENTS
The Chairman of the Board, founder and largest shareowner has a
renewable one-year employment agreement with the Company which
provides for an annual salary of $125,000. Additionally, he has
personally guaranteed the Company's line of credit agreement.
(See Note 3.)
The Company also has a split dollar life insurance agreement with
this individual whereby the Company pays the premiums. The
Company has been granted a security interest in the cash value
and death benefit of the policy, and certain shares of the Company
stock owned by the Chairman of the Board have been pledged as
additional collateral during the period in which the premiums
exceed the cash surrender value. The net cash surrender value at
March 31, 1999 was $180,000 and is included in other assets.
9. SHAREOWNERS' EQUITY
On August 11, 1997 the Company commenced a direct public offering
of up to 1,000,000 shares of newly issued stock and 300,000
shares offered by a selling shareholder at $5.50 per share. The
offering closed on June 30, 1998.
Through March 31, 1999, the Company had issued 676,641 new shares
of common stock, generating gross proceeds of $3,620,000, and had
incurred costs of $697,000 related to the direct public offering.
In August 1998, the Company was authorized to repurchase up to
$100,000 of common stock in open market and private transactions.
In fiscal 1999, 3,900 shares were repurchased for $14,850 and
retired. Through March 31, 1999, a total of 13,084 shares had
been repurchased and retired at an average price of $4.88 per
share.
10. BENEFIT PLANS AND STOCK OPTIONS
The Company sponsors a 401(k) retirement plan. The plan does not
require matching funds from the Company, and the Company has made
no contributions to the plan.
Under the Company's Second Amended and Restated Fiscal 1993 Stock
Incentive Plan ("Employee Plan") the Company can grant incentive
and non-qualified options to purchase 800,000 shares of common
stock. Incentive Stock Options can be granted at prices not less
than 100% of the fair market value of the common shares (85% for
non-qualified options) on the date the option is granted, and
normally vest over a period not exceeding five years from the
date of grant. Options expire ten years from date of grant. As
of March 31, 1999, options to purchase 627,950 shares were
outstanding. Subsequent to year-end, the number of options for
grant under the plan was increased from 800,000 to 1,200,000.
The Company has reserved 100,000 shares of common stock for its
Non-Employee Directors' Stock Option Plan ("Director's Plan").
As of March 31, 1999, options to purchase 39,000 shares were
outstanding and none have been exercised.
In September 1998 the Board of Directors revised the exercise
price of all outstanding Employee Plan options to $4.50 per
share.
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
(in thousands)
<S> <C> <C>
Outstanding at March 31, 1997 268 $ 5.40
Granted 129 5.23
Forfeited (53) 5.21
Outstanding at March 31, 1998 344 $ 5.37
Granted 448 4.50
Forfeited (125) 5.37
Terminated as a result of option
repricing (341) 5.39
Issued as a result of option
repricing 341 4.50
Outstanding at March 31, 1999 667 $ 4.59
Shares exercisable at March 31, 1999 163 $ 4.59
Shares available for grant at
March 31, 1999 207
Range of exercise prices $4.00 to $7.12
Weighted average remaining
contractual life at March 31, 1999 8.2 years
</TABLE>
Additional Stock Plan Information
As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance
with Accounting Principles Board No.25, "Accounting for Stock
Issued to Employees" and its related interpretations.
Accordingly, no compensation expense has been recognized in the
financial statements for employee stock arrangements in fiscal
1999 or 1998.
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation", (SFAS 123) requires the disclosure
of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1996.
Under SFAS 123, the fair value of stock-based awards to employees
is calculated through the use of the option pricing models, even
though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock
option awards. These models also require subjective assumptions,
including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option
pricing model with the following weighted average assumptions:
Expected life, 120 months following vesting in fiscal 1999 and
fiscal 1998, stock volatility, 32.00% in fiscal 1999 and 31.55%
in fiscal 1998; risk free interest rate 5.5% in fiscal 1999 and
6.0% in fiscal 1998; and no dividends during the expected term.
The Company's calculations are based on a multiple option
valuation approach and forfeitures are calculated at a 50% rate,
based on the Company's historical experience. If the computed fair
values of the fiscal 1999 and fiscal 1998 awards had been amortized
to expense over the vesting period of the awards, pro forma net
loss would have been $569,000 or $.14 per share in fiscal 1999, and
the pro forma net loss would have been $360,000 or $0.10 per share
in fiscal 1998. However, the impact of outstanding non-vested
stock options granted prior to fiscal 1996 has been excluded from
the pro forma calculation; accordingly, the fiscal 1999 and fiscal
1998 pro forma adjustments are not indicative of future period pro
forma adjustments, when the calculation will apply to all
applicable stock options.
11. SEGMENT INFORMATION
The Company has three divisions (Catalog, Retail and Renewables),
all of which sell products purchased from other suppliers
directly to customers. The customer bases of all three divisions
overlap to some extent, and the purchases and delivery processes to
customers overlap as well.
<TABLE>
<CAPTION>
Each of the three divisions qualifies as a reportable segment
because each is more than 10% of the combined revenue of all
operating segments. Contribution is defined as net sales less
cost of goods sold and direct expenses. Financial information for
the Company's business segments was as follows:
FY 1999 FY 1998
<S> <C> <C>
Net Sales:
Catalog Division $10,540 $12,029
Retail Division 3,743 2,910
Renewables Division 2,936 2,041
Other - 54
Consolidated Net Sales $17,219 $17,034
Contribution:
Catalog Division $ 5,126 $ 6,287
Retail Division 1,400 1,170
Renewables Division 941 687
Other - 54
Consolidated Contribution $ 7,467 $ 8,198
Reconciliation of Contribution to net loss:
Selling, general &
administrative expenses
Catalog Division $ 5,354 $ 6,236
Retail Division 1,748 1,450
Renewables Division 1,000 701
Other 30 175
Consolidated S G & A expenses $ 8,132 $ 8,562
Interest (income) expense (42) 71
Loss on sales of assets 9 43
Income tax benefit (150) (157)
Net Loss $ (482) $ (321)
</TABLE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
Information with respect to this Item is incorporated by
reference to the information set forth under the headings
"General Information Regarding Directors and Executive Officers,"
"Professional Experience of Executive Officers and Directors" and
"Reports Required by Section 16(a)" under the section entitled
"Board of Directors" in the Company's Proxy Statement for the
1999 Annual Meeting of Shareowners.
Item 10. EXECUTIVE COMPENSATION.
Information with respect to this Item is incorporated by
reference to the information set forth under the headings
"Remuneration of Directors," "Compensation of Executive Officers"
and "Employee Contracts, Employment Termination and
Change-in-Control Arrangements" under the section entitled "Board
of Directors" in the Company's Proxy Statement for the 1999
Annual Meeting of Shareowners.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information with respect to this Item is incorporated by
reference to the information set forth in the section entitled
"Security Ownership of Certain Beneficial Owners and Management"
in the Company's Proxy Statement for the 1999 Annual Meeting of
Shareowners.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to this Item is incorporated by
reference to the information set forth under the heading "Certain
Relationships and Related Transactions" under the section
entitled " Board of Directors" in the Company's Proxy Statement
for the 1999 Annual Meeting of Shareowners.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits following Signature Page.
........................
</PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on this 25th day of June, 1999.
REAL GOODS TRADING CORPORATION
(Registrant)
By:[S]LESLIE B. SEELY
Leslie B. Seely
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates
indicated.
Signature Title Date
[S]LESLIE B. SEELY Chief Financial Officer June 25,1999
Leslie B. Seely
[S]JOHN SCHAEFFER Chief Executive Officer June 25,1999
John Schaeffer
[S]STEPHEN MORRIS Director June 25,1999
Stephen Morris
[S]SAMUEL SALKIN Director June 25,1999
Samuel Salkin
[S]JOHN LENSER Director June 25,1999
John Lenser
[S]BARRY REDER Director June 25,1999
Barry Reder
</PAGE>
Item 13. INDEX TO EXHIBITS.
Exhibit No. Description
3.1* Articles of Incorporation
3.2* Bylaws
3.2^^ Amendments to Article II of the Bylaws, adopted March
13, 1999.
10.1* Form of Indemnification Agreement with Directors
10.12**** Split Dollar Agreement by and among the Company and
John C. Schaeffer and the Trustee of the Schaeffer 1994
Irrevocable Trust dated May 15, 1995 and Assignment of
Life Insurance Policy as Collateral by Trustee of the
Schaeffer 1994 Irrevocable Trust
10.14**** Amended and Restated Real Goods Trading Corporation
Fiscal 1993 Stock Incentive Plan
10.15**** The Real Goods Trading Corporation Non-Employee
Directors' Stock Option Plan
10.18^ Term Loan agreement between the Company and Small
Business Administration, dated June 17, 1996 and
certain ancillary documents.
10.20** Loan Agreement between the Company and National Bank of
the Redwoods dated April 7, 1998 and certain ancillary
documents.
10.23** Lease of 1324 Tenth St., Berkeley, California.
10.25^^ Changes in Terms of Loan Agreement between the Company
and National Bank of the Redwoods dated April 7, 1999.
10.26^^ Lease of 3440 Airway Drive, Santa Rosa, California.
10.27^^ Lease of 205 Clara Street, Unit A, Ukiah, California.
10.28^^ Lease of 77 W. Broadway, Eugene, Oregon.
10.29^^ Lease of 1031 N. State Street, Ukiah, California.
10.30^^ Agreement with Mark Swedlund dated June 1, 1999.
23.2 Independent Auditors' Consent.
* Incorporated by reference to the Company's for 10KSB filed
with the Securities and Exchange Commission on October 1,
1993.
** Incorporated by reference to the Company's for 10KSB filed
with the Securities and Exchange Commission on June 19,
1998.
*** Incorporated by reference to the Company's Form 10-KSB filed
with the Securities and Exchange Commission on June 29,
1994.
**** Incorporated by reference to the Company's Form 10-KSB filed
with the Securities and Exchange Commission on June 28, 1995.
^ Incorporated by reference to the Company's Form 10-KSB
filed with the Securities and Exchange Commission on June
11, 1997.
^^ Incorporated by reference to the Company's Form 10-KSB
filed with the Securities and Exchange Commission on June
25, 1999.
</DOC>
CHANGE IN TERMS AGREEMENT
Borrower: REAL GOODS TRADING CORPORATION
3440 AIRWAY DRIVE
SANTA ROSA, CA 95403
Lender: National Bank of the Redwoods
Ukiah Office
326 East Perkins
Ukiah, CA 95482
Principal Amount: $1,500,000.00
Date of Agreement: April 7, 1999
DESCRIPTION OF EXISTING INDEBTEDNESS. PROMISSORY NOTE DATED APRIL
7, 1998 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00 AND ANY
MODIFICATIONS THEREOF.
DESCRIPTION OF CHANGE IN TERMS. MATURITY DATE IS EXTENDED FROM
APRIL 7, 1999, TO AUGUST 31,1999, WITH INTEREST PAYABLE MONTHLY
BEGINNING APRIL 30,1999 AND EACH MONTH THEREAFTER UNTIL MATURITY,
AT WHICH TIME ALL OUTSTANDING PRINCIPAL AND ACCRUED UNPAID
INTEREST WILL BE DUE AND PAYABLE.
CONTINUING VALIDITY. Except as expressly changed by this
Agreement, the terms of the original obligation or obligations,
Including all agreements evidenced or securing the obligation(s),
remain unchanged and in full force and effect. Consent by Lender
to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender
to make any future change In terms. Nothing In this Agreement
will constitute a satisfaction of the obligation(s). It Is the
Intention of Lender to retain as liable parties all makers and
endorsers of the original obligation(s), including accommodation
parties, unless a party Is expressly released by Lender In
writing. Any maker or endorser, Including accommodation makers,
will not be released by virtue of this Agreement. It any person
who signed the original obligation does not sign this Agreement
below, then all persons signing below acknowledge that this
Agreement is given conditionally, based on the representation to
Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by
it. This waiver applies not only to any initial extension,
modification or but also to all such subsequent actions.
FEES. In return for extending the maturity date to August 31,
1999, Borrower agrees to pay Lender a non-refundable too of
$2,500.00. This fee will be cash when this agreement is signed.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF
THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
AGREEMENT.
BORROWER:
REAL GOODS TRADING CORPORATION
By:[S]R.A. ZELL, PRESIDENT
R.A. ZeLL, President and CEO
LENDER:
National Bank of the Redwoods
BY:[S]JOHN HORN
John Horn
Authorized Officer
</DOC>
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Book Provisions ("Basic Provisions").
1.1 Parties: This Lease("Lease"), dated for reference
purposes only. February 9, 1999 is made by and between Robert &
Toshiko Beeman ("Lessor") and Real Goods Trading Corporation
("Lessee") (collectively the ("Parties," or individually a
"Party").
1.2(a) Premises: That certain portion of the Building,
Including all improvements therein or to be provided by Lessor
under the terms of this Lease, commonly known by the street address
of 3440 Airway Drive, located in the City of Santa Rosa
County of Sonoma , State of CA, with zip code 95403 as outlined
on Exhibit A attached hereto ("Premises"). The "Building" is that
certain building containing the Premises and generally described
as (describe briefly the nature of the Building): a 10,649+/-
s.f. office space with in a 20,852+/-s.f.-building located on a
1.51 acre parcel. In addition to Lessee's rights to use and
occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined in Paragraph
2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center.* The
Premises, the Building, the Common Areas, the land upon which
they are located, along with all other buildings and Improvements
thereon, are herein collectively referred ton the "Industrial
Center." (Also sea Paragraph 2.) *except as specified in Rider
2A. 1.2(b) Parking: 42 unreserved vehicle parking spaces
("Unreserved Parking Spaces"); and 0 reserved vehicle parking
spaces ("Reserved Parking Spaces"). (Also see Paragraph 2.6.)
1.3 Term: 5 years and 0 months ("Original Term")
commencing March 1, 1999 ("Commencement Date") and ending
February 29, 2004("Expiration Date"). (Also see Paragraph 3.)
1.4 Early Possession: None ("'Early Possession Date").
(Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $8,500.00 per month ("Base Rent"), payable
on the first day of each month commencing March 1, 1999 (Also see
Paragraph 4.) [ X ] If this box is checked, this Lease provides
for the one Rent to be adjusted per Addendum 1 attached hereto.
1.6(a) Bass Rent Paid Upon Execution: $8,500 as Base Rent
for the period March 1999
1.6(b) Lessee's Share of Common Area Operating Expenses:
fifty-one percent ( 51 %) ("Lessee's Share") as determined by
[ X ] prorata square footage of the Premises as compared to
the total square footage of the Building or [ ] other criteria
as described in Addendum
1.7 Security Deposit: $12,000 ("Security Deposit"). (Also
see Paragraph 5.)
1.8 Permitted Use: General office ("Permitted Use") (Also
see Paragraph 6.)
1.9 Insuring Party. Lessor Is the "Insuring Party." (Also
see Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate
broker(s) (collectively, the "Brokers") and brokerage
relationships exist in this transaction and are consented to by the
Parties (check applicable boxes):
[ ] represents Lessor exclusively ("Lessor's Broker");
[ ] represents Lessee exclusively ("Lessee's Broker"); or
[ X ] Keegan & Coppin Company, Inc. represents both Lessor
and Lessee("Dual Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon occupancy of the premises
by the Lessee, Lessor shall pay to said Broker(s) jointly, or in
such separate shares as they may mutually designate in writing, a
fee as set forth in a separate written agreement between Lessor
and said Broker(s) (or in the event there is no separate written
agreement between Lessor and said Broker(s) the sum of
($28,140) for brokerage services rendered by said Broker(s) in
connection with this transaction.
1.11 Guarantor. The obligations of the Lessee under
this Lease are to be guaranteed by N/A ("Guarantee'). (Also see
Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an
Addendum or Addenda consisting of Paragraphs A through H and
Exhibits A through E all of which constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, the Premises, for the term, at the
rental, and upon all of the terms, covenants and conditions set
forth in this Lease. Unless otherwise provided herein, any
statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee
agree is reasonable and the rental and Lessee's Share (as defined
in Paragraph 1.6(b) based thereon is not subject to revision
whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee
clean and free of debris on the Commencement Date and warrants to
Lessee that the existing plumbing, electrical systems, fire
sprinkler system, lighting, air conditioning and heating systems
and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on
the Commencement Date. If a non-compliance with said warranty
exists as of the Commencement Date Lessor shall, except as
otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice
of a non-compliance with this warranty within thirty (30) days
after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and
expense.
2.3 Compliance with Covenants, Restrictions and Building
Code. Lessor warrants that any improvements (other than those
constructed by Lessee or at Lessee's direction) on or in the
Premises which have been constructed or installed by Lessor or with
Lessor's consent or at Lessor's direction shall comply with all
applicable covenants of restrictions of record and applicable
building codes, regulations and ordinances in effect on the
Commencement Date. Lessor further warrants to Lessee that
Lessor has no knowledge of any claim having been made by any
governmental agency that a violation or violations of applicable
building codes, regulations, or ordinance exist with regard to the
Premises as of the Commencement Date. Said warranties shall not
apply to any Alterations or Utility Installations (defined in
Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do
not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written
notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature
and extent of such non-compliance, take such action, at Lessor's
expense, as may be reasonable or appropriate to rectify the
non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.8 is permitted for the Promises under Applicable Laws
(as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a)
that it has been advised by the Broker(s) to satisfy itself with
respect to the condition of the Premises (including but not limited
to the electrical and fire sprinkler systems, security,
environmental aspects, seismic and earthquake requirements, and
compliance with the Americans with Disabilities Act and applicable
zoning, municipal, county, state and federal laws, ordinances and
regulations and any covenants or restrictions of record
(collectively. "Applicable Laws") and the present and future
suitability of the Premises for Lessee's intended use; (b) that
Lessee has made such investigation as It deems necessary with
reference to Such Matters, is satisfied with reference thereto, and
assumes all responsibility therefore as the same relate to Lessee's
occupancy of the Premises and/or the terms of this Lease; and (c)
that neither Lessor, nor any of Lessor's agents. has made any oral
or written representations or warranties with respect to said
matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by
Lessor in this Paragraph 2 shall be of no force or effect if
immediately prior to the date set forth In Paragraph 1. 1 Lessee
was the owner or occupant of the Premises. In such event, Lessee
shall, at Lessee's sole cost and expense, correct any
non-compliance of the promises with said warranties.
2.6 Vehicle Parking. Lessee shall be entitled to use the
number of Unreserved Parking Spaces and Reserved Parking spaces
Specified in Paragraph 1.2(b) on those portions of the Common Areas
designated from time to time by Lessor for parking. Lessee shall
not use more parking spaces than said number. Said parking spaces
shall be used for parking by vehicles no larger than full-size
passenger automobiles or pick-up trucks, herein called "Permitted
Size Vehicles." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules
and Regulations (as defined in Paragraph 40) issued by Lessor.
(Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that
belong to or are Controlled by Lessee or Lessee's employees,
suppliers, shippers, customers, contractors or invitees to be
loaded, unloaded, or parked in areas other than those designated by
Lessor for such activities.
(b) It Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall
have the right, without notice, in addition to such other rights
and remedies that it may have, to remove or tow away the vehicle
involved and charge the cost to the registered owner of such
vehicle.
(c) Lessor shall at all times during the Term provide
the parking facilities required by this lease and by Applicable
Law.
2.7 Common Areas-Definition. The term "Common Areas" is
defined as all areas and facilities outside the Premises and
within the exterior boundary line of the Industrial Center and
interior utility raceways within the Premises that are provided and
designated by the Lessor from time to time for the general non
exclusive use of Lessor, Lessee and other lessees of the Industrial
Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas.
2.8 Common Areas-Lessee's Rights. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers,
shippers, contractors, customers and invitees, during the term of
this Lease, the non-exclusive right to use, in common with others
entitled to such use, the Common Areas as they exist from time to
time, subject to any rights, powers, and privileges reserved by
Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Industrial
Center. Under no circumstances shall the right herein granted to
use the Common Areas be deemed to include the right to store any
property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of
Lessor or Lessor's designated agent, which consent may be revoked
at any time. In the event that any unauthorized storage shall occur
then Lessor shall have the right, without notice, in addition to
such other rights and remedies that it may have, to remove the
property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas-Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control
and management of the Common Areas and shall have the right, from
time to time, to establish, modify, amend and enforce reasonable
Rulesand Regulations with respect thereto in accordance with
Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and take reasonable efforts to cause its
employees, suppliers, shippers, customers, contractors and
invitees to so abide and conform. Provided Lessor uses reasonable
efforts to enforce such rules and regulations, Lessor shall not be
responsible to Lessee for the non-compliance with said rules and
regulations by other lessees of the Industrial Center.
2.10 Common Areas-Changes*. Lessor shall have the right,
in Lessor's sole discretion, from time to time: *Subject to
Section 2.
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and
unloading areas, ingress, egress, direction of traffic, landscaped
areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises
remains available;
(c) To designate other land outside the boundaries of
the Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to
the Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Industrial
Center, or any portion thereof; and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial
Center as Lessor may, in the exercise of sound business judgment,
deem to be appropriate.
3. Term. See Rider 2A (new Section 2.11)
3.1 Term. The Commencement Date, Expiration Date and
Original Term of this Lease are as specified in Paragraph 1.3
3.2 Early Possession. If an Early Possession Date is
specified in Paragraph 1.4 and if Lessee totally or partially
occupies the Premises after the Early Possession Date but
prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early Occupancy. All other
terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating
Expenses and to carry the insurance required by Paragraph 8) shall
be in effect during such period. Any such early possession shall
not affect nor advance the Expiration Date of the Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot
deliver possession of the Premises to Lessee by the Early
Possession Date, if one is specified in Paragraph 1.4, or if no
Early Possession Date is specified, by the Commencement Date,
Lessor shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case,
Lessee shall not, except as otherwise provided herein, be obligated
to pay rent or perform any other obligation of Lessee under the
terms of this Lease until Lessor delivers possession of the
Promises to Lessee. if possession of the Premises is not delivered
to Lessee within sixty (60) days after the Commencement Date,
Lessee may, at its option, by notice in writing to Lessor within
ten (10) days after the end of said sixty (60) day period, Cancel
this Lease, in which event the parties shall be discharged from all
obligations hereunder; provided further, however, that if such
written notice of Lessee is not received by Lessor within said ten
(10) day period, Lessee's fight to cancel this Lease hereunder
shall terminate and be of no further force or effect. Except as may
be otherwise provided, and regardless of when the Original Term
actually commences, if possession is not tendered to Lessee when
required by this Lease and Lessee does not terminate this Lease,
as aforesaid, the period free of the obligation to pay Base Rent,
if
any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to
the period during which the Lessee would have otherwise enjoyed
under the terms hereof, but minus any days of delay caused by the
acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor
in lawful money of the United States, without offset or deduction,
on or before the day on which it is due under the terms of this
Lease. Base Plant and all other rent and charges for any period
during the term hereof which is for less than one full month shall
be prorated based upon the actual number of days of the month
involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at
such other addresses as Lessor may from time designate in writing
to Lessee.
4.2 Common Area Operating Expenses. Subject to the limit
described on Section "F" of the Addendum, Lessee shall pay to
Lessor during the term hereof, in addition to the Base Rent,
Lessee's Share (as specified in Paragraph 1.6b)) of all Common Area
Operating Expenses, as hereinafter defined, during each calendar
year of the term of this Lease, in accordance with the following
provisions:
(a) "Common Area Operating Expenses" are defined, for
purposes of this Lease. as all non-capital costs incurred by
Lessor relating to the ownership and operation of the Industrial
Center including, but not limited to, the following:
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, drive-ways, landscaped areas, striping,
bumpers, irrigation systems, Common Area lighting facilities,
fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and
telephone to service the Common Areas.
(iii) Any increase above the Base Real Property Taxes
(as defined in Paragraph 10.2(b)) for the Building and the Common
Areas.-See Addendum
(iv) Any "Insurance Cost-increase" (as defined in
Paragraph 8.1)including increases in the cost of insurance
carried by Lessor with respect to the Common Areas, over the
amount thereof in the year this lease is executed.
(v> Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area operating
Expense.
(b) Any Common Area Operating Expenses and Real Property
Taxes that are specifically attributable to the Building or to
any other building in the Industrial Center or to the operation,
repair and maintenance thereof, shall be allocated entirely to the
Building or to such other building. However, any Common Area
Operating Expenses and Real Property Taxes that are not
specifically attributable to the Building or to any other building
or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Industrial
Center.
(c) The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to
impose an obligation upon Lessor to either have said improvements
or facilities or to provide those services unless the Industrial
Center already has the same, Lessor already provides the services,
or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.
(d) Lessee's Share of Common Area Operating Expenses shall
be payable by Lessee within ten (10) days after a reasonably
detailed statement of actual expenses is presented to Lessee by
Lessor at Lessor's option, however, an amount may be estimated by
Lessor from time to time of Lessee's Share of annual Common Area
Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month
Period of the Lease term, on the same day as the Base Rent is due
hereunder. Lessor shall deliver to Lessee within sixty (60) days
after the expiration of each Calendar year a reasonably detailed
statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's
payments under this Paragraph 4.2(d) during said Preceding year
exceed Lessee's Share as indicated on said statement. Lessee shall
be credited the amount of such over payment against Lessee's Share
of Common Area Operating Expenses next becoming due (See Rider 3A).
If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said
statement Lessee shall pay to Lessor the amount of the deficiency
within ten (10) days after delivery by Lessor to Lessee of said
statement.
5. Security Deposit. Lessee shall deposit with Lessor upon
Lessee's execution hereof the Security Deposit set forth in
Paragraph 1.7 as security for Lessee's faithful performance of
Lessee's obligations under this Lease. If Lessee fails to pay Base
Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use,
apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate
Lessor for any liability, cost, expense, loss or damage (including
attorneys' fees) which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said
Security Deposit, Lessee shall within ten (10) days after written
request therefore deposit monies with Lessor sufficient to restore
said Security Deposit to the full amount required by this Lease.
Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall,
at the expiration or earlier termination of the term hereof and
within reasonable period after Lessee has vacated the Premises,
return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall
be considered to be trust to bear interest or other increment for
its use, or to be prepayment for any monies to be paid by Lessee
under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth In Paragraph 1.8, or any other legal
use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates waste or a nuisance, or that
unreasonably disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or
delay its consent to any written request by Lessee, Lessee's
assignees or subtenants, and by prospective assignees and
subtenants of Lessee, its assignees and subtenants, for a
modification of said Permitted Use, so long as the same will not
impair the structural Integrity of the Improvements on the Premises
or In the Building or the mechanical or electrical systems therein,
does not conflict with uses by other lessees, is not significantly
more burdensome to the Premises or the Building and the
Improvements thereon, and is otherwise permissible pursuant
to this Paragraph 6. If Lessor elects to withhold such consent,
Lessor shall within five (5) business days after such request give
a written notification of same, which notice shall Include an
explanation of Lessor's reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product,
substance, chemical, material or waste whose presence, nature,
quantity and/or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Promises, is
either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated
or monitored by any governmental authority; or (iii) a basis
for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory.
Hazardous Substance shall include, but not limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or
by-products thereof. Lessee shall not engage in any activity in or
about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express
prior written consent of Lessor and compliance in a timely manner
(at Lessee's sole cost and expense) with all Applicable
Requirements (as defined in Paragraph 6.3). "Reportable Use" shall
mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice,
registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the
Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons
entering or occupying the Promises or neighboring properties.
Notwithstanding the foregoing, Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all
Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of
the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any
obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such
additional assurances as Lessor, in its reasonable discretion,
deems necessary to protect itself, the public, the Premises and the
environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation
(and, at Lessor's option, removal on or before Lease expiration or
earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements)
and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance has come
to be located in, on, under or about the Promises or the Building,
other than as previously consented to by Lessor, Lessee shall
immediately give Lessor written notice thereof, together with a
copy of any statement, report, notice, registration, application,
permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party
concerning the presence, spill, release, discharge of, or exposure
to, such Hazardous Substance including but not limited to all such
documents as may be involved in any Reportable Use involving the
Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises
(including, without limitation, through the plumbing or sanitary
sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground
lessor, if any, and the Premises, harmless from and against any and
all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous
Substance brought onto the Promises by or for Lessee or by anyone
under Lessee's control. Lessee's obligations under this Paragraph
6.2(c) shall include, but not be limited to, the effects of
any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of
investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement
thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under
this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such
agreement
6.3 Lessee's Compliance with Requirements. Lessee shall at
Lessee's sole cost and expense, fully, diligently and in a timely
manner, comply with all "Applicable Requirements," which term is
used in this Lease to mean all laws, rules, regulations,
ordinances, directives, covenants, easements and restrictions of
record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations
of Lessor's engineers and/or consultants, relating in any manner
to the Lessee's use and/or occupancy of the Premises (including but
not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises,
including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance,
removal, transportation, storage, spill, or release of any
Hazardous Substance), now in effect or which may hereafter come
into effect. Lessee shall, within five (5) days after receipt of
Lessor's written request, provide Lessor with copies of all
documents and information, Including but not limited to permits,
registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of
any threatened or actual claim notice citation, warning, complaint
or report pertaining to or involving failure by Lessee or the
Premises to corn with any Applicable Requirements. See Rider 3 (B)
6.4 Inspection; Compliance with Law. Lessor, Lessor's
agents, employees, contractors and designated representatives and
the holders of any mortgages, deeds of trust or ground leases on
the Promises ("Lenders") shall have the right to enter the Premises
at any time in the case of an emergency, and otherwise at
reasonable times on reasonable prior notice for the purpose of
inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall
be entitled to employ experts and/or consultants in connection
therewith to advise Lessor with respect to Lessee's activities,
including but not limited to Lessee's installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a
Default or Breach of this Lease by Lessee or a material violation
of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist, or unless the
inspection is requested or ordered by a governmental authority as
the result of any such existing violation or contamination. In
such case, Lessee shall upon request reimburse Lessor or Lessor's
Lender, as the case may be, for the costs and expenses of such
Inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and
Building Code), 7.2 (Lessor's Obligations), 9 (Damage or
Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole
cost and, expense and at all times, keep the Premises and every
part thereof in good order, condition and repair ordinary
wear and tear expected but excluding any items which are the
responsibility Lessor pursuant to Paragraph 7.2 below. Lessee, in
keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. SEE RIDER 3(C).
(b) However, Lessor reserves the right, upon notice to Lessee,
to procure and maintain the contract for the heating, air
conditioning and ventilating systems and if Lessor so elects,
Lessee shall reimburse Lessor, upon demand, for the cost thereof.
Lessor agrees to service HVAC system.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10)
days' prior written notice to Lessee (except in the case of an
emergency, in which case no notice shall be required), perform such
obligations on Lessee's behalf, and put the Premises in good order,
condition and repair, In accordance with Paragraph 13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of
Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants,
Restrictions and Building Code), 4.2 (Common Area Operating
Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or
Destruction) and 14 (Condemnation), Lessor, subject to
reimbursement pursuant to Paragraph 4.2, shall keep in good order,
condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire
sprinkler and/or standpipe and hose (if located in the Common
Areas) or other automatic fire extinguishing system including fire
alarm and/or smoke detection systems and equipment, fire hydrants,
parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts
thereof as well as providing the services for which there is a
Common Area Operating Expense pursuant to Paragraph 4.2. Lessor
shall not be obligated to paint the exterior or interior surfaces
of exterior walls nor shall Lessor be obligated to maintain, repair
or replace windows, doors or plate glass of the Premises. Lessee
expressly waives the benefit of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the Building, Industrial Center or Common
Areas in good order, condition and repair. See Rider 4(A)
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all air lines,
power panels, electrical distribution, security, fire protection
systems, communications systems, lighting fixtures, heating
ventilating and air conditioning equipment, plumbing, and fencing
in, on or about the Premises. The term "Trade Fixtures" shall mean
Lessee's machinery equipment and other personal property and
fixtures which can be removed without doing material damage to the
Premises. The term "Alterations" shall mean any modification
of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or
Trade Fixtures."Lessee-Owned Alterations and/or Utility
Installations" are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor
pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under of
about the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof) without Lessor's
consent but upon notice to Lessor so long as they are not visible
from the outside of the Promises, do not involve puncturing,
relocating or removing the roof, floors or any existing walls, or
changing or interfering with the fire sprinkler or fire defection
systems and the cumulative cost thereof during the term of this
Lease as extended does not exceed $10,000.
(b) Consent. Any Alterations or Utility installations
that Lessee shall desire to make and which require the consent of
the Lessor shall be presented to Lessor in written form with
detailed plans. All consents given by Lessor, whether by virtue of
Paragraph 7.3(a) or by subsequent specific consent, shall he deemed
conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies
of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to
Lessor prior to commencement of the work thereon; and (iii) the
compliance by Lessee with all conditions of said permits in a
prompt and expeditious manner Any Alterations or Utility
Installations by Lessee during the term of this Lease shall be done
in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements.
Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor.
(c) Lien Protection. Lessee shall pay when due all claims for
labor or materials furnished to or for Lessee at or for use on the
Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Promises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on, or about the Premises, and
Lessor shall have the right to post notices of non responsibility
in or on the Premises as provided by law. If Lessee shall, in good
faith, contest the validity or any such lien, claim or demand, then
Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy
any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor
shall require, Lessee shall furnish to Lessor a surety bond
satisfying the requirements of California law for releasing
from the effect act of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in
participating such action prior to recordation of such surety
bond if Lessor shall decide it is to its best interest to do so.
7.4 Ownership, Removal, Surrender and Restoration
(a) Ownership. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as
hereinafter provided in this Paragraph 7.4, all Alterations and
Utility Installations made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the
Premises. Unless otherwise instructed per Subparagraph 7.4(b)
hereof, all Lessee-Owned Alterations and Utility Installations
shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Promises and be
surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor
may require that any or all Lessee Owned Alterations or Utility
Installations except data & telecommunications cabling be removed
by the expiration or earlier termination of this Lease,
notwithstanding that their installation may have been consented
to by Lessor. Lessor may require the removal at any time of all or
any part of any Alterations or Utility Installations made without
the required consent of Lessor. See Rider 4(B)
(c) Surrender/Restoration. Lessee shall surrender the
Premises by the end of the last day of the Lease term or any
earlier termination date, clean and free of debris and in
good operating order, condition and state of repair, ordinary
wear and tear excepted. Ordinary wear and tear shall not include
any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations
under this Lease. Except as otherwise agreed or specified herein,
the Premises, as surrendered, shall include the Alterations and
Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned to the installation, maintenance or
removal of Lessee's Trade Fixtures, furnishings, equipment,
and Lessee Owned Alterations and Utility Installations, as well
as the removal of any storage tank installed by or for Lessee, and
the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by
Applicable Requirements and/or good practice. Lessee's Trade
Fixtures shall remain the property of Lessee and shall be removed
by Lessee subject to its obligation to repair and restore the
Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost Increase"
is defined as, any increase in the actual cost of the insurance
applicable to the Building and the common areas and required to be
carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b)
("Required Insurance"), over and above the Base Premium, as
hereinafter defined, calculated on an annual basis. "Insurance Cost
Increase" shall include, but not be limited to, requirements of
the holder of a mortgage or deed of trust covering the Premises,
increased valuation of the Premises, and/or a general premium
rate increase. The term "Insurance Cost Increase" shall not,
however, include any premium increases resulting from the nature of
the occupancy of any other lessee of the Building. If the parties
insert a dollar amount in Paragraph 1.9, such amount shall be
considered the "Base Premium." If a dollar amount has not been
inserted in Paragraph 1,9 and if the Building has been previously
occupied during the twelve (12) month period immediately preceding
the Commencement Date, the "Base Premium" shall be the annual
premium applicable to such twelve (12) month period. If the
Building was not fully occupied during such twelve (12) month
period, the "Base Premium" shall be the lowest annual premium
reasonably obtainable for the Required Insurance as of the
Commencement Date, assuming reasonable & customary use of the
Building. In no event, however, shall Lessee be responsible for any
portion of the premium cost attributable to liability insurance
coverage in excess of $1,000,000 procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to
Lessor pursuant to Paragraph 4.2. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease
shall be prorated to coincide with the corresponding Commencement
Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in
force during the term of this Lease a Commercial General
Liability policy of insurance protecting Lessee, Lessor and any
Lender(s) whose names have been provided to Lessee in writing (as
additional insureds) against claims for bodily injury, personal
injury and properly damage based upon, involving or arising out of
the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount
not less than $1,000,000 per occurrence with an "Additional
Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage
caused by heat, smoke or fumes from a hostile fire. The policy
shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for
liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under
this Lease. The limits of said insurance required by this Lease
or as carried by Lessee shall tint, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain
liability insurance described in Paragraph 8.2(a) above for the
Industrial Center, in addition to and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as
an additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental
Value.
(a) Building and Improvements. Lessor shall obtain and
keep in force during the term of his Lease a policy or policies
in the name of Lessor, with loss payable to Lessor and to any
Lender(s), insuring against loss or damage to the Industrial
Center. Such insurance shall be for full replacement cost, as the
same shall exist from time to time, or the amount required by any
Lender(s), but in no event more than the commercially reasonable
and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is
less than full replacement cost. Lessee Owned Alterations and
Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If
the coverage is available and commercially appropriate, Lessor's
policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base
Premium), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction
or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a
covered loss, but not including plate glass insurance. Said policy
or policies shall also contain an agreed valuation provision
in lieu of any co-insurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All
Urban Consumers for the city nearest to where the Premises are
located.
(b) Rental Value. Lessor shall also obtain and keep in
force during the term of this Lease a policy or policies in the
name of Lessor, with loss payable to Lessor and any Lender(s),
insuring the loss of the full rental and other charges payable by
all lessees of the Building to Lessor for one year (including all
Real Properly Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an
insured loss, the period of indemnity for such coverage shall be
extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's
loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of
any co-insurance clause, and the amount of coverage shelf be
adjusted annually to reflect the projected rental income, Real
Properly Taxes, Insurance premium costs and other expenses, If any,
otherwise payable, for the next 12-month period
(c) Adjacent Promises. Lessee shall pay for any increase
in the premiums for the property insurance of the Building and
for the Common Areas or other buildings In the Industrial Center
if said increase is caused by Lessee's acts, omissions, use or
occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor Is the Insuring
Party, Lessor shall not be required to insure Lessee-Owned
Alterations and Utility Installations unless the Item in question
has become the property of Lessor under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements
of Paragraph 8.5, Lessee at its cost shall either by separate
policy or, at Lessee's option, by endorsement to a policy already
carried, maintain insurance coverage on all of Lessee's personal
property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar
in coverage to that carried by Lessor as the Insuring Party under
Paragraph 8.3(a). Such insurance shall be full replacement cost
coverage. The proceeds from any such insurance shall be used by
Lessee for the replacement of personal property and the restoration
of Trade Fixtures and Lessee-Owned Alterations and Utility
Installations. Upon request from Lessor, Lessee shall provide
Lessor with written evidence that such insurance is in force. See
Rider 5(A)
8.5 Insurance Policies. Insurance required hereunder shall
be in companies duly licensed to transact business in the state
where the Premises are located, and maintaining during the policy
term a "General Policyholders Rating" of at least B+, V, or such
other rating as may be required by a Lender, as set forth In
the most current issue of "Best's Insurance Guide." Lessee
shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8. Lessee
shall cause to be delivered to Lessor, within seven (7) days after
the earlier of the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and
amounts of, the insurance required under Paragraph 8.2(a) and 8.4.
No such policy shall be cancelable or subject to modification
except after thirty (30) days' prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order
on at least 10 days prior written notice to Lessee such insurance
and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other
rights or remedies, Lessee and Lessor each hereby release
and relieve the other, and waive their entire right recover damages
(whether in contract or in tort) against the other, for loss or
damage to their property arising out of or incident to the perils
required to be insured against under Paragraph 8 to the extent of
insurance proceeds actually received. Lessor and Lessee agree to
have their respective Insurance companies issuing property damage
Insurance waive any right to subrogation that such companies
may have against Lessor or Lessee, as the case may be, so long as
the insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach
of express warranties, Lessee shall indemnify, protect, defend
and hold harmless the Premises, Lessor and its agents, Lessor's
master or ground lessor, partners and Lenders, from and against any
and all claims, loss of rents and/or damages, costs, liens,
judgments, penalties, logs of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in
connection with, the occupancy of the Premises by Lessee, the
conduct of Lessee's business, any act, omission or neglect of
Lessee, its agents, contractors, employees or invitees, and out of
any Default or Breach by Lessee in the performance in a timely
manner of any obligation on Lessee's part to be performed
under this Lease. The foregoing shall include, but not be
limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of
claims made against Lessor) litigated and/or reduced to judgment.
In case any action or proceeding be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with
Lessee in such defense. Lessor need not have first paid any such
claim in order to be so indemnified. See Rider 5(B)
8.8 Exemption of Lessor from Liability. Except to the
extent due to the negligence of Lessor, its employees or agents,
or Lessor's default or breach of this lease, Lessor shall not be
liable for injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee's employees,
contractors, invitees, customers, or any other person in or about
the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause,
whether said Injury or damage results from conditions arising
upon the Premises or upon other portions of the Building of which
the Premises are a part, from other sources or places, and
regardless of whether the cause of such damage or injury or the
means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or
neglect of any other lessee of Lessor nor from the failure by
Lessor to enforce the provisions of any other lease in the
Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable
for injury to Lessee's business or for any loss of income or profit
therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations
and Utility Installations, the repair cost of which damage or
destruction is less than fifty percent (50%) of the then
Replacement Cost (as defined in Paragraph 9.1 (d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and
Trade Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations
and Utility Installations, the repair cost of which damage or
destruction is fifty percent (50%) or more of the then Replacement
Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such
damage or destruction. In addition, damage or destruction to the
Building, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building,
the cost of which damage or destruction is fifty percent (50%) or
more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building) of the Building shall, at the option of
Lessor, be deemed to be Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event
required to be covered by the insurance described in Paragraph
8.3(a) irrespective of any deductible amounts or coverage limits
involved.
(d) "Replacement Cost" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the
occurrence to their condition existing immediately prior thereto,
including demolition, debris removal and upgrading required by the
operation of applicable building codes, ordinances or laws, and
without deduction for depreciation. (a) "Hazardous Substance
Condition" shall mean the occurrence or discovery of a condition
involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage-Insured Loss. If Premises
Partial Damage that is an Insured Loss occurs, then Lessor shall,
at Lessor's expense, repair such damage (but not Lessee's Trade
Fixtures or Lessee-Owned Alterations and Utility Installations) as
soon as reasonably possible and this Lease shall continue in full
force and effect. In the event, however, that there is a shortage
of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises,
full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay
for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten
(10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as reasonably possible and this Lease shall
remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days
thereafter to make such restoration and repair as is
commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain In full force and
effect. If Lessor does not receive such funds or assurance within
such ten (10) day period, and if Lessor does not so elect to
restore and repair, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction. Unless
otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any
such insurance shall be made available for the repairs if made by
either Party.
9.3 Partial Damage-Uninsured Loss. If Premises Partial
Damage that is not an Insured Loss occurs, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall
make the repairs at Lessee's expense and this Lease shall continue
in full force and effect), Lessor may at Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full
force and effect, or (ii) Rider 5(C) give written notice to
Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's
desire to terminate this Lease as of 5(c) the date sixty (60) days
following the date of such notice. In the event Lessor elects to
give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt
of such notice to give written notice to Lessor of Lessee's
commitment to pay Rider 5(D). Lessee shall provide Lessor with the
required funds or commercially reasonable assurance thereof within
thirty (30) days following such commitment from Lessee. In such
event this Lease shall continue in full force and effect,
and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not
give such notice and provide the funds or assurance thereof within
the times specified above, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision
hereof, if Premises Total Destruction occurs (including any
destruction required by any authorized public authority), this
Lease shall terminate sixty (60) days following the date of such
Premises Total Destruction, whether or not the damage or
destruction is an Insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or
destruction was caused by Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee except as released and waived
in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last
six (6) months of the term of this Lease there is damage for
which the cost to repair exceeds one month's Base Rent, whether or
not an Insured Loss, Lessor may, at Lessor's option, terminate this
Lease effective sixty (60) days following the date of occurrence of
such damage by giving written notice to Lessee of Lessor's election
to do so within thirty (30) days after the date of occurrence of
such damage. Provided, however, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the
Promises, then Lessee may preserve this Lease by (a) exercising
such option, and (b) providing Lessor with any Rider 5(E) needed to
make repairs on or before the earlier of (i) The date which is ten
(10) days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (i) the day prior to the
date upon which such option expires. If Lessee duly exercises
such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover its obligations under Section
9.2 or 9.3, whichever is applicable. Lessor shall at Lessor's
expense repair such damage as soon as reasonably possible and this
Lease shall continue in full force and affect. If Lessee fails to
exercise such option and provide such funds or assurance during
such period, then this Lease shall terminate as of the date
set forth in the first sentence of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Lessee is not legally
responsible, the Base Rent, Common Area Operating Expenses and
other charges, if any, payable by Lessee hereunder for the period
during which such damage or condition, its repair, remediation or
restoration continues, shall be abated in proportion to the degree
to which Lessee's use of the Premises and/or common areas is
impaired. Except for abatement of Base Rent, Common Area Operating
Expenses and other charges, if any, as aforesaid, all other
obligations of Lessee hereunder shall be performed by Lessee, and
Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or
restoration, except to the extent due to the negligence or Lessor,
its employees or agents, or Lessors default or breach of this
Lease.
(b) If Lessor shall be obligated to repair or restore the
Promises under the provisions of this Paragraph 9 and shall
not commence, in a substantial and meaningful way, the repair or
restoration of the Premises within ninety (90) days after such
obligation shall accrue, Lessee may, at any time at least 60 days
after the date such damage occurs and prior to the commencement
moral of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of
Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee
gives such notice to Lessor and such Lenders and such repair or
restoration is not commenced within thirty (30) days after receipt
of such notice, this Lease shall terminate as of the date specified
in said notice, If Lessor or a Lender commences the repair or
restoration of the Premises within thirty (30) days after the
receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean Rider
6(A).
9.7 Hazardous Substance Conditions. If a Hazardous
Substance Condition occurs, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and
remediation thereof required by Applicable Requirements and this
Lease shall continue in full force and effect, but subject to
Lessor's rights under Paragraph 6.2(C) and Paragraph 13),
Lessor may at Lessor's option either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon
as reasonably possible at Lessor's expense, in which event this
Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds
twelve (12) times the then monthly Base Rent or $100,000
whichever is greater, give written notice to Lessee within thirty
(30) days after receipt by Lessor of knowledge of the occurrence of
such Hazardous Substance Condition of Lessor's desire to terminate
this Lease as of the date sixty (60) days following the date of
such notice. In the event Lessor elects to give such notice of
Lessor's intention to terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the
excess costs of (a) investigation and remediation of such Hazardous
Substance Condition to the extent required by Applicable
Requirements, over (b) an amount, equal to twelve (12) times the
then monthly Base Rent or $100,000, whichever is greater. Lessee
shall provide Lessor with the funds required of Lessee or
reasonable assurance thereof within thirty (30) days following
said commitment by Lessee. In such event this Lease shall continue
in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible If
Lessee does not give such notice and provide the required funds
or assurance thereof within the time period specified above, this
Lease shall terminate as of the date specified in Lessor's notice
of termination.
9.8 Termination-Advance Payments. Upon termination of this
Lease pursuant to this Paragraph 9, Lessor shall return to
Lessee any advance payment made by Lessee to Lessor and so much of
Lessee's Security Deposit as has not been, or is not then required
to be, used by Lessor under the terms of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that
the terms of this Lease shall govern the effect of any damage to
or destruction of the Premises and the Building with respect to the
termination of this Lease and hereby waive the provisions of any
present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property
Taxes, as defined in Paragraph 10.2(a), applicable to the
Industrial Center, and except as otherwise provided in
Paragraph 10.3 and in Paragraph F of the Addendum, any increases
in such amounts over the Base Real Property Taxes shall be
included in the calculation of Common Area Operating Expenses in
accordance with the provisions of Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes" shall
include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial
rental tax. improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the
Industrial Center by any authority having the direct or indirect
power to tax, including any city, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any
portion thereof, Lessor's right to rent or other income therefrom,
and/or Lessor's business of leasing the Premises. The term "Real
Properly Taxes" shall also include any tax, fee, levy. assessment
or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the
term of this Lease, including but not limited to a change in the
ownership of the Industrial Center or in the improvements thereon,
the execution of this Lease, or any modification, amendment or
transfer thereof, and whether or not contemplated by the Parties.
(b) As used herein, the term "Base Real Properly Taxes"
shall be the amount of Real Property Taxes, which are assessed
against the Premises, Building or Common Areas in the calendar year
during which the Lease is executed. In calculating Real Properly
Taxes for any calendar year, the Real Property Taxes for any real
estate tax year shall be included in the calculation of Real
Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating
Expenses shall not include Real Property Taxes specified in the
tax assessor's records and work sheets as being caused by
additional improvements placed upon the Industrial Center by other
lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof. Lessee shall,
however, pay to Lessor at the time Common Area Operating Expenses
are payable under Paragraph 4.2, the entirety of any Increase in
Real Property Taxes if assessed solely by reason of Alterations,
Trade Fixtures or Utility Installations placed upon the Promises by
Lessee or at Lessee's request.
10.4 Joint Assessment. It the Building is not
separately assessed, Real Property Taxes allocated to the
Building shall be an equitable proportion at the Real Property
Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from
the respective valuations assigned in the assessor's work sheets or
such other information as may be reasonably available, Lessor's
reasonable determination thereof, in good faith, shall be
conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior
to delinquency all taxes assessed against and levied upon
Lessee-Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all personal property of Lessee
contained in the Premises or stored within the Industrial Center.
When possible, Lessee shall cause its Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately
from the real property of Lessor If any of Lessee's said property
shall be assessed with Lessor's real property, Lessee shall pay
Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities
and services supplied to the Premises, including but not limited
to electricity, telephone, security, gas and cleaning of the
Premises, together with any taxes thereon. If any such utilities or
services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly
metered or billed with other premises in the Building, in the
manner and within the time periods set forth in Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber
(collectively, "assign") or sublet all or any part of Lessee's
interest in this Lease or in the Premises without Lessor's prior
written consent given under and subject to the terms of Paragraph
36.
(b) A change in the control of Lessee shall constitute
an assignment requiring Lessor's consent. The transfer, on a
cumulative basis, of twenty-five percent (25%) or more of the
voting control of Lessee shall constitute a change In control for
this purpose. Rider 6(B)
(c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale,
acquisition, financing, refinancing, transfer, leveraged buy-out or
otherwise), whether or not a formal assignment or hypothecation of
this Lease or Lessee's assets occurs, which results or will result
In a reduction of the Net Worth of Lessee, as hereinafter defined,
by an amount equal to or greater than twenty-five percent (25%)
of such Net Worth of Lessee as it was represented to Lessor at the
time of full execution and delivery of this Lease or at the time of
the most recent assignment to which Lessor has consented, or as it
exists immediately prior to said transaction or transactions
constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this
Lease by Lessee to which Lessor may reasonably withhold its
consent. "Net Worth of Lessee" for purposes of this Lease shall
be the net worth of Lessee (excluding any Guarantors) established
under generally accepted amounting principles consistently
applied Rider 6(B)
(d) An assignment or subletting of Lessee's interest in
this Lease without, Lessors prior written consent shall, at
Lessor's option, be a Default curable after notice per paragraph,
13.1.
(e) Lessee's, remedy breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive
relief. Rider 6(D) - (New Paragraph F)
12.2 Terms and Conditions Applicable to Assignment and
Subletting.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written
assumption by such assignee or sublessee of the obligations of
Lessee under this Lease, (ii) release Lessee of any obligations
hereunder, nor (iii) alter the primary liability of Lessee for the
payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee
under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or
disapproval of an assignment. Neither a delay in the approval or
disapproval of such assignment nor the acceptance of any rent for
performance shall constitute a waiver or disapproval of Lessor's
right to exercise its remedies for the Default or Breach by Lessee
of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or
subletting by Lessee or to any subsequent or successive assignment
or subletting by the assignee or sublessee. However, Lessor may
consent to subsequent sublettings and assignments of the sublease
or any amendments or modifications thereto without notifying Lessee
or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's
obligation under this Lease, Lessor may proceed directly against
Lessee, any Guarantors or anyone else responsible for the
performance of the Lessee's obligations under this Lease, including
any sublessee, without first exhausting Lessor's remedies against
any other person or entity responsible therefor to Lessor, or
any security held by Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to
Lessor's determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or
sublessee, including but not limited to the intended use and/or
required modification of the Promises, if any, together with a
non-refundable deposit of $1,000 or ten percent (10%) of the
monthly Base Rent applicable to the portion of the Premises which
is the subject of the proposed assignment or sublease, whichever is
greater, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor
with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease,
be deemed, for the benefit of Lessor, to have assumed and agreed to
conform and comply with each and every term, covenant, condition
and obligation herein to be observed or performed by Lessee during
the term of said assignment or sublease, other than such
obligations as are contrary to or inconsistent with provisions of
an assignment or sublease to which Lessor has specifically
consented in writing.
12.3 Additional Terms and Conditions Applicable to
Subletting. The following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall
be deemed included in all subleases under this Lease whether or not
expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any
sublease of all or a portion of the Premises heretofore or
hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee's obligations under this Lease;
provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Lessee's obligations under
this Lease, Lessee may, except as otherwise provided in this Lease,
receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublessee, be deemed liable to
the sublessee for any failure of Lessee to perform and comply with
any of Lessee's obligations to such sublessee under such Sublease,
Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents and other
charges due and to become due under the sublease. Sublessee shall
rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists
and notwithstanding any notice from or claim from Lessee to the
contrary. Lessee shall have no right or claim against such
sublessee, or, until the Breach has been cured, against Lessor, for
any such rents and other charges so paid by said sublessee to
Lessor.
(b) In the event of a Breach by Lessee in the
performance of its obligations under this Lease, Lessor, at its
option and without any obligation to do so, may require any
sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from
the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any
prepaid rents or security deposit paid by such sub-lessee to such
sublessor or for any other prior defaults or breaches of such
sublessor under such sublease.
(c) Any matter or thing requiring the consent of the
sublessor under a sublease shall also require the consent of
Lessor herein.
(d) No sublessee under a sublease approved by Lessor
shall further assign or sublet all or any part of the Premises
without Lessors prior written consent.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to the sublessee, who shall have the right to
cure the Default of Lessee within the grace period, if any,
specified in this lease. The sublessee shall have a right of
reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an
attorney is consulted by Lessor In connection with a Lessee
Default or Breach (as hereinafter defined), $350.00 is a reasonable
minimum sum per such occurrence for legal services and costs in the
preparation and service of a notice of Default, and that Lessor may
include the cost of such services and costs in said notice as rent
due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to
Lessee under this Lease. A "Breach" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where
a grace period for cure after notice is specified herein, the
failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the
remedies set forth in Paragraphs 13.2 and/or 13.3:
(b) Except as expressly otherwise provided in this
Lease, the failure by Lessee to make any payment of Base Rent,
Lessee's Share of Common Area Operating Expenses, or any other
monetary payment required to be made by Lessee hereunder as and
when due, the failure by Lessee to provide Lessor with reasonable
evidence of Insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure
continues for a period of three (3) days following written notice
thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this
Lease, the failure by Lessee to provide Lessor with reasonable
written evidence (in duly executed original form, if applicable) of
(i) compliance with Applicable Requirements per Paragraph 6.3, (ii)
the Inspection, maintenance and service contracts required under
Paragraph 7.1(b), (iii) the rescission of an unauthorized
assignment or subletting par Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or
non-subordination of this Lease per Paragraph 30, (vi) the guaranty
of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any
document requested under Paragraph 42 (easements), or (viii) any
other documentation or information which Lessor may reasonably
require of Lessee under the terms of this lease, where any such
failure continues for a period of ten (10) days following written
notice by or on behalf of Lessor to Lessee. Rider 70(A)
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted
under Paragraph 40 hereof that are to be observed, complied with or
performed by Lessee, other than those described In Subparagraphs
13.1 (a), (b) or (c), above, where such Default continues for a
period of thirty (30) days after written notice thereof by or
on behalf of Lessor to Lessee; provided, however, that if the
nature of Lessee's Default is such that more than thirty (30) days
are reasonably required for its cure, then it shall not be deemed
to be a Breach of this Lease by Lessee it Lessee commences such
cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events (i)
the making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee's becoming a "debtor" as
defined in 11 U.S. Code Section 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee,
the same is dismissed within sixty (60) days (iii) the
appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Promises or
of Lessee's Interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially
all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, In the event that any
provision of this Subparagraph 13.1 (e) is contrary to any
applicable law, such provision shall be of no force or and shall
not affect the validity of the remaining provisions.
(f) Deleted.
(g) If the performance of Lessee's obligations under
this Lease is guaranteed: (i) the death of a Guarantor, (ii) the
termination of a Guarantor's liability with respect to this Lease
other than in accordance with the terms of such guaranty, (iii) a
Guarantor's becoming insolvent or the subject of a bankruptcy
filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory
breach basis, and Lessee's failure, within sixty (60) days
following written notice by of on behalf of Lessor to Lessee of any
such event, to provide Lessor with written alternative assurances
of security, which, when coupled with the then existing resources
of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of
this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative
duty or obligation of Lessee under this Lease, within thirty (30)
days after written notice to Lessee (or in case of an emergency,
Rider 7(B)), Lessor may at its option (but without obligation to do
so), perform such duty or obligation on Lessee's behalf, including
but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals.
The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any
check given to Lessor by Lessee shall not be honored by the bank
upon which it is drawn, Lessor, at its own option, may require all
future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further
notice or demand, and without limiting Lessor in the exercise of
any right or remedy which Lessor may have by reason of such Breach,
Lessor may:
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, In which case this Lease and the
term hereof shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the worth at the time of
the award of the unpaid rent which had been earned at the
time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other
amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not
limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with
this Lease applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision
(iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank
District in which the Premises are located at the time of award
plus one percent (1%). Efforts by Lessor to mitigate damages caused
by Lessee's Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph 13.2. If
termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover
in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any
part thereof in a separate suit for such rent and/or damages. If a
notice and grace period required under Subparagraph 13. 1 (b), (c)
or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any
statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period
purposes required by Subparagraph 13.1(b),(c) or (d). In such case,
the applicable grace period under the unlawful detainer statue
shall run concurrently after the one such statutory notice, and the
failure of Lessee to cure the Default within the greater of the two
(2) such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession
in effect (in California under California Civil Code Section
1951.4) after Lessee's Breach and recover the rent as it becomes
due, provided Lessee has the right to sublet or assign, subject
only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are
reasonable. Acts of maintenance or preservation, efforts to refer
the Premises, or the appointment of a receiver to protect the
Lessor's interest under this Lease, shall not constitute a
termination of the Lessee's right to possession,
(c) Pursue any other remedy now or hereafter available
to Lessor under the laws or judicial decisions of the state
wherein the Premises are located.
(d) The expiration or termination of this Lease and/or
the termination of Lessee's right to possession shall not relieve
Lessee from liability of under any indemnity provisions of this
Lease as to matters occurring or accruing during the term hereof or
by reason of Lessee's occupancy of the Premises.
13.4 Deleted.
13.4 Late Charges. Lessee hereby acknowledges that late
payment by Lessee to Lessor of rent and other sums due hereunder
will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed
upon Lessor by the terms of any ground lease, mortgage or deed of
trust covering the Premises. Accordingly, if any installment of
rent or other sum due from Lessee shall not be received by Lessor
or Lessor's designee within ten (10) days after such amount
shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to six
percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to
such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected, for
three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this
Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly and in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to
perform an obligation required to be performed by Lessor. For
purposes of this Paragraph 13.5, a reasonable time shall in no
event be less than thirty (30) days after Lessee gives written
notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor's
obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor
shall not be in breach of this Lease if performance is commenced
within such thirty (30) day period and thereafter diligently
pursued to completion. See Rider 8(A)
14. Condemnation. If the Premises or any portion thereof are
taken under the power of eminent domain or sold under the threat
of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken
as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of the
floor area of the Premises, or more than twenty-five percent
(25%) of the portion of the Common Areas designated for Lessee's
parking, is taken by condemnation, Lessee may, at Lessee's option,
to be exercised in writing within ten (10) days after Lessor shall
have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning
authority shall have taken possession terminate this Lease as of
the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing,
this Lease shall remain in full force and effect as to the portion
of the Premises remaining, except that the Base Rent shall be
reduced to the degree to which Lessee's use of the Premises and
Common Areas is impaired. No reduction of Base Rent shall occur
if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property
of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee
for Lessee's relocation expenses and/or loss of Lessee's Trade
Fixtures. In the event that this lease is not terminated by
reason of such condemnation, Lessor shall to the extent of its net
severance damages received, over and above Lessee's share of the
legal and other expenses incurred by Lessor in the condemnation
matter, repair and any damage to the Premises caused by such
condemnation authority.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10
is/are the procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have
otherwise agreed in writing, Lessor agrees that: (a) if Lessee
exercises any Option (as defined in Paragraph 39.1) granted under
this Lease or any Option subsequently granted, or (b) if Lessee
acquires any rights to the
Premises
or other premises in which
Lessor has an interest, or (c) if Lessee remains in
possession of the Premises with the consent of Lessor after the
expiration of
the term of this Lease after having
failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between
the
Parties pertaining to the Premises
and/or any adjacent property in which Lessor has an interest,
or (e) if Base Rent is increased, whether by agreement or
operation
of an escalation clause herein,
then as to any of said transactions, Lessor shall pay said
Broker(s) a fee in accordance with the schedule of said Broker(s)
in
effect at the time of the execution of
this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of
Lessor's interest in this Lease, whether such transfer is by
agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this Paragraph 15. Each Broker shall be
an intended third party beneficiary of the provisions of Paragraph
1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.4 Representations and Warranties. Lessee and Lessor each
represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder other than as named in
Paragraph 1.10(a) in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated
hereby, and that no broker or other person, firm or entity
other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction. Lessee and
Lessor do each hereby agree to indemnity, protect, defend and
hold the other harmless from and against liability for compensation
or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the
indemnifying Party, including any costs, expenses, and/or
attorneys' fees reasonably incurred with respect thereto. Lessor
agrees to pay all commissions due to Broker(s)
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party")
shall within ten (10) days after written notice from the other
Party (the "Requesting Party") execute, acknowledge and deliver to
the Requesting Party a statement in writing in a form similar to
the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance,
refinance, or sell the Premises or the Building, or any part
thereof, Lessee and all Guarantors shall deliver to any potential
tender or purchaser designated by Lessor such financial statements
of Lessee and such Guarantors as may be reasonably required by
such lender or purchaser, including but not limited to Lessee's
financial Statements for the past three (3) years. All such
financial Statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes
herein set forth. See Rider 8(B).
17. Lessor's Liability. The term "Lessor" as used herein
shall mean the owner or owners at the time in question of the fee
title to the Premises. In the event of a transfer of Lessor's title
or interest in the Premises or in this Lease, Lessor shall deliver
to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as
aforesaid, the prior Lessor shall be relieved of all liability with
respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove
defined.
18. Severability. The invalidity of any provision of this Lease,
as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision hereof.
19. Interest on Post-Due Obligations. Any monetary payment
due Lessor hereunder, other than late charges, not received by
Lessor within ten (10) days following the date on which it was due,
shall bear interest from the date due at the prime rate charged
by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but
not exceeding the maximum rate allowed by law, in addition to the
potential late charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to
the performance of all obligations to be performed or observed by
the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor
under the terms of this Lease are deemed to be rent. 22. No
Prior or other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement
or understanding shall be effective. Lessor and Lessee each
represents and warrants to the Brokers that it has made, and is
relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the
other Party to this Lease and as to the nature, quality and
character of the Premises. Brokers have no responsibility with
respect thereto or with respect to any default or breach hereof by
either Party. Each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted
by this Lease shall be in writing and may be delivered in person
(by hand or by messenger or courier service) or may be sent by
certified or registered mail or U.S. Postal Service Express Mail,
with postage prepaid, and shall be deemed sufficiently given if
served in a manner specified in this Paragraph 23. The addresses
noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different
address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently
transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to
Lessee.
23.2 Date of Notice. Any notice sent by registered or
certified mail, return receipt requested, shall be deemed given
on the date of delivery shown on the receipt card, or if no
delivery date is shown, forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight
courier that guarantees next day delivery shall be deemed given one
day after delivery of the same to the United States Postal Service
or courier. If notice is received on a Saturday or a Sunday or a
legal holiday, It shall be deemed received on the next business
day.
24. Waivers. No waiver by Lessor of the Default or Breach of any
term, covenant or condition hereof by Lessee, shall be deemed a
waiver of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Lessee of the same or any other
term, covenant or condition hereof. Lessor's consent to, or
approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of,
any subsequent or similar act by Lessee, or be construed as the
basis of an estoppel to enforce the provision or provisions of this
requiring such consent. Regardless of Lessor's knowledge of a
Default or Breach at the time of accepting rent, the acceptance of
rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee
may be accepted by Lessor on amount of moneys or damages due
Lessor, notwithstanding any qualifying statements or conditions
made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor.
25. Recording. Either Lessor or Lessee shall, upon request of the
other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes. The Party
requesting recordation shall be responsible for payment of any
fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain
possession of the Premises or any part thereof beyond the
expiration or earlier termination of this Lease. In the event that
Lessee holds over in violation of this Paragraph 26 then the Base
Rent payable from and after the time of the expiration or earlier
termination of this Lease shall be increased to one hundred fifty
percent (150%) of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination.
Nothing contained herein shall be construed as a consent by Lessor
to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder
shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
28. Covenants and Conditions. All provisions of this Lease to
be observed or performed by Lessee are both covenants and
conditions.
29. Binding Effect; Choice of Law. This Lease shall be
binding upon the Parties, their personal representatives,
successors and assigns and be governed try the laws of the State in
which the Premises are located. Any litigation between the Parties
hereto concerning this Lease shall be initiated in the county in
which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted
hereby shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or security device
(collectively, "Security Device"), now or hereafter placed by
Lessor upon the real property of which the Premises are a part, to
any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and
extensions thereof. Lessee agrees that the Lenders holding any such
Security Device shall have no duty, liability or obligation to
perform any of the obligations of Lessor under this Lease, but that
in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address
have been furnished Lessee in writing for such purpose notice of
Lessor's default pursuant to Paragraph 13.5. If any Lender shall
elect to have this Lease and/or any Option granted hereby superior
to the lien of Its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates
of the documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions
of Paragraph 30.3, Lessee agrees to attorn to a Lender or any
other party who acquires ownership of the Premises by reason of a
foreclosure of a Security Device, and that in the event of such
foreclosure, such new owner shall not: (i) be liable for any act or
omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets
or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices
entered into by Lessor after the execution of this lease,
Lessee's subordination of this Lease shall be subject to receiving
assurance (a "non-disturbance agreement") from the Lender that
Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not
in Breach hereof and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this
Paragraph 30 shall be effective without the execution of any
further documents; provided, however, that upon written request
from Lessor or a Lender in connection with a sale, financing or
refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately
document any such subordination or non-subordination, attornment
and/or non-disturbance agreement as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights
hereunder, the Prevailing Party (as here after defined) in any such
proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term
"Prevailing Party" shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sought, as
the case may be, whether by compromise, settlement, judgment, or
the abandonment by the other Party or Broker of its claim or
defense. The attorneys' fee award shall not be computed in
accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. Lessor
shall be entitled to reasonable attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal
action is subsequently commenced in connection with such Default or
resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs.
Lessor an Lessor's agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at
reasonable times upon reasonable prior notice for the purpose of
showing the same to prospective purchasers, lenders, or (during the
last 6 months of the term) lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the
Building, as Lessor may reasonably deem necessary. Lessor may at
any time place on or about the Premises or Building any ordinary
"For Sale" signs and Lessor may at any time during the last one
hundred eighty (180) days of the term hereof place on or about
the Premises any ordinary "For Lease" signs. All such activities of
Lessor shall be without abatement of rent or liability to
Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon
the Premises without first having obtained Lessor's prior written
consent. Notwithstanding anything to the contrary in this Lease,
Lessor shall not be obligated to exercise any standard of
reasonableness in determining whether to grant such consent
34. Signs. Except as otherwise provided in Section 2.11(See Rider
2(A)Lessee shall not place any sign upon the exterior of the
Premises or the Building without Lessor's consent, except that
Lessee may, with Lessor's prior written consent, install (but not
on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location
approved by Lessor and comply with Applicable Requirements and the
signage criteria established for the Industrial Center by Lessor.
The installation of any sign on the Premises by or for Lessee shall
be subject to the provisions of Paragraph 7 (Maintenance, Repairs,
Utility Installations, Trade Fixtures and Alterations). Unless
otherwise expressly agreed herein, Lessor reserves all rights to
the use of the roof of the Building, and the right to install
advertising signs on the Building, including the roof, which do
not unreasonably interfere with the conduct of Lessee's
business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger. Unless specifically stated otherwise
in writing by Lessor, the voluntary or other surrender of this
Lease by Lessee, the mutual termination or cancellation hereof. or
a termination hereof by Lessor for Breach by Lessee, shall
automatically terminate any sublease or lessor estate in the
Promises; provided, however, Lessor shall, in the event of any such
surrender, termination or cancellation, have the option to
continue any one or all of any existing subtenancies. Lessor's
failure within ten (10) days following any such event to make a
written election to the contrary by written notice to the holder of
any such lesser interest, shall constitute Lessor's election to
have such event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is
required to an act by or for the other Party, such consent shall
not be unreasonably withheld or delayed. Lessor's actual reasonable
costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Promises, including
but not limited to consents to an assignment a subletting or the
presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting
documentation therefor. In addition to the deposit described in
Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an
amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the
cost Lessor will incur in considering and responding to Lessee's
request. Any unused portion of said deposit shall be refunded to
Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not
constitute an acknowledgment that no Default or Breach by
Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of
such consent.
(b) All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to
specify herein any particular condition to Lessor's consent shall
not preclude the Impositions by Lessor at the time of consent of
such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being
given.
37. Deleted
38. Quiet Possession. Upon payment by Lessee of the rent for
the Premises and the performance of all of the covenants,
conditions and provisions on Lessee's part to be observed and
performed under this Lease, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the
provisions o this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option"
has the following meaning: (a) the right to extend the term of
this Lease or to renew this Lease or to extend or renew any lease
that Lessee has on other property of Lessor; (b) the right of first
refusal to lease the Premises or the right of first offer to lease
the Premises or the right of first refusal to lease other property
of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer
to purchase the Premises, or the right to purchase other property
of Lessor or the right of first refusal to purchase other property
of Lessor. See Rider 10(A)
39.3 Multiple Options. In the event that Lessee has any
multiple Options to extend or renew this Lease, a later option
cannot be exercised unless the prior Options to extend or renew
this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the
contrary: (i) during the period commencing with the giving of any
notice of Default under Paragraph 13.1 and continuing until the
noticed Default is cured, or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor he given to
Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during the twelve (12) month period immediately
preceding the exercise of the Option, whether or not the Defaults
are cured.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's
inability to exercise an Option because of the provisions of
Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an
Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and during the term of this Lease, (i) Lessee
fails to pay to Lessor a monetary obligation of Lessee for a period
or thirty (30) days after such obligation becomes due provided
notice of Default with respect to such payment has been given and
the due period has expired. (ii) Lessor gives to Lessee three (3)
or more notices of separate Defaults under Paragraph 13.1 during
any twelve (12) month period, whether or not the Defaults are
cured, or (iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide
by, and keep and observe all reasonable rules and regulations
("Rules and Regulations") which Lessor may make from time to time
for the management, safety, care, and cleanliness of the grounds,
the parking and unloading of vehicles and the preservation of good
order, as well as for the convenience of other occupants or tenants
of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the
rental payable to Lessor hereunder does not include the cost of
guard service or other security measures, and that Lessor shall
have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee, its
agents and invitees and their property from the acts of third
parties.
42. Reservations. Lessor reserves the right, from time to
time, to grant, without the consent or joinder of Lessee, such
easements, rights of way, utility raceways, and dedications that
Lessor deems necessary, and to cause the recordation of parcel maps
and restrictions, so long as such easements, rights of way, utility
raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Promises by Lessee. Lessee agrees
to sign any documents reasonably requested by Lessor to effectuate
any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall
arise as to any amount or sum of money to be paid by one Party to
the other under the provisions hereof, the Party against whom the
obligation to pay the money is asserted shall have the right to
make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the
right on the part of said Party to institute suit for recovery of
such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part
thereof, said Party shall be entitled to recover such sum or so
much thereof as it was not legally required to pay under the
provisions of this Lease.
44. Authority. If either Party hereto is a corporation,
trust, or general or limited partnership, each individual
executing this Lease on behalf of such entity represents and
warrants that he or she is duly authorized to execute and deliver
this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by
Lessor, deliver to Lessor evidence satisfactory to Lessor of such
authority.
45. Conflict. Any conflict between the printed provisions of
this Lease and the typewritten or handwritten provisions shall be
controlled by the typewritten or hand written provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or
Lessor's agent or Lessee's agent and submission of same to
Lessee or Lessor shall not be deemed an offer to lease. This Lease
is not intended to be binding until executed and delivered by all
Parties hereto.
47. Amendments. This Lease may be modified only in writing,
signed by the parties in interest at the time of the
modification. The Parties shall amend this Lease from time to time
to reflect any adjustments that are made to the Base Rent or other
rent payable under this Lease.
48. Multiple Parties. Except as otherwise expressly provided
herein, if more than one person or entity is named herein as either
Lessor or Lessee, the obligations of such multiple parties shall be
the joint and several responsibility of all persons or entities
named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE
AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE
EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT
THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT
TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEYS REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE
POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS
OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES
AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF
THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY
IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE
WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and
on the dates specified above their respective signatures.
Executed at: SANTA ROSA Executed at: SANTA ROSA
on: February 19, 1999 on: February 16 1999
By LESSOR: By LESSEE:
By:[S] RD BEEMAN By:[S]RA ZELL
RD Beeman RA Zell
Name Printed: RD Beeman Name Printed: RA Zell
Title: Owner & landlord Title: President
NOTE: These forms are often modified to meet changing
requirements of law and needs of the industry. Always write or
call to make sure you are utilizing the most current form: AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower Street, Suite
600, Los Angeles, CA 90017. (213) 687-8777.
STANDARD LEASE CONDITIONS ADDENDUM
To Lease dated January 20, 1999 by and between Lessor Robert &
Toshiko Beeman and Lessee Real Goods Trading Corporation
A. Tenant Improvement Scope:
Lessor and Lessee have approved plans and specifications covering
the layout of the premises and the scope of responsibility of the
Tenant Improvements between Lessor and Lessee as stipulated in the
Exhibit B1 of lease (Work Letter).
Lessor to install Tenant Improvements in a quality good workmanlike
manner in accordance with approved plans and specification prior to
Commencement Date.
Lessee shall inspect said premises within three (3) days of
completion to ascertain that Tenant Improvements have been
installed in accordance with plans and specifications. Lessee shall
provide a "punch list" of items not in accordance with plans and
specifications or not installed in a good workmanlike manner.
Lessor shall have thirty (30) days to correct said punch list
items.
If Lessee installs any portion of the tenant improvements, he
shall have the same responsibility as indicated above for Lessor
and additionally Lessee shall remove all mechanic's liens, to
satisfy all claims and meet all contract requirements with
suppliers, contractors and employees arising out of said
installation of improvements. Lessee to have workman's
compensation and liability insurance with a minimum
$500,000 per occurrence for said installation and to name Lessor
additional insured. Lessee shall indemnify and hold harmless Lessor
for all claims of employees, invitees, materialmen, supplier
arising out of said installation.
B. Financial Information
Lessor has reviewed and approved financial statements
regarding Lessee.
Lessor may deliver such financial information in Lessor's
possession to lending institutions, mortgage brokers, investors in
the Industrial Center or prospective purchasers.
C. Permits
Lessee will apply for a use permit, a wastewater discharge
permit and other municipal permits if required from the appropriate
municipality within five (5) days of acceptance hereof Lessee shall
use due diligence in pursuing such permits and pay all costs
associated with them. Lessee shall have the responsibility to
maintain any use permits and to comply with all terms and
conditions of said use permits during the term of this Lease. If
Lessee's application for a use permit is denied, or the conditions
of which the Lessee does not approve, then the Lessee may cancel
the lease during the 30 day approval period.
D. Hazardous Waste
"If Lessee uses, stores, or becomes aware of any hazardous
waste or substances as listed by Proposition 65, he will advise
Lessor within three (3) days of such existence and (if caused by
Lessee), either obtain approval from Lessor and the
appropriate governing agencies within thirty (30) days from notice
or remove and clean up said hazardous waste to standards
required by the Lessor and the appropriate governing agencies
within sixty (60) days from notice. "If Lessee, his invitees,
employees, or agents cause a spill, or contamination of the
premises, common area, soil or surrounding area, then it will be
the responsibility of Lessee to clean up said hazard to the degree
required and within the time frame set by any public entity which
has jurisdiction and particularly in response to the Super
Fund Act and Proposition 65. "
E. Area Measurement:
Lessee has reviewed and approved the system of measurement,
the usable and rentable square footage of the subject premises.
F. See Rider F- I
G. Rental Increases :
The Monthly Base Rent shall be increased over term as follows:
Year 1-$8,500; Year 2-$9,000; Year 3-$9,500; Year 4-$10,000;
Year 5-$10,500
H. Non-Smoking Building:
Lessee shall not permit smoking by its employees or guests either
within The Premises or within twenty-five (25) feet of the
building.
Agreed by: Lessee:[S]RAZ Date: February 16, 1999
RAZ
Agreed by: Lessor:[S]RDB Date: February 16, 1999
RDB
Exhibit B1
Work Letter
BEEMAN BUILDING - LEASEHOLD MODIFICATIONS
FOR
REAL GOODS TRADING CORPORATION
Planned completion date: 1 March 1999
This is a complete list of all leasehold modifications and
redecorating to be done at landlord's expense. Note that one room
may be listed in more than one modification category. Designations
are as per December 1998.
STREET LEVEL- NORTH SIDE OF BUILDING - Eastern three building
modules,
Ceiling Work:
Install dropped ceilings, similar to upstairs offices, over
areas now designated as rooms 103 A&B, 108, 109, and 104. (Dropped
ceilings already in rooms 107, 111, 112,114,115, and 106.)
Install new sprinkler system as needed to meet fire code for
above changes.
Modify HVAC ceiling ducts to combine system serving 103A&B with
104.
Wall Removals: Remove all walls between rooms 103A and
108,103A/108 and 109,109 and 104 except as Real Goods specifies
below for added rooms. Reroute or stub off electrical and utility
lines as needed.
New Rooms: Construct walls to create a total of five rooms,
plus central open space, to be specified for above area of new
dropped ceilings. Room 103B to be left as is (very desirable as
walls go all the way to actual ceiling), as one of the five rooms.
Note to Real Goods: in space planning of this area, please try to
use existing walls if possible, and note that steel support post
in 104 cannot be modified.
Electrical: Remove old surface conduits and boxes from south
side of room 104. Remove all warehouse #121 circuits from sub-panel
B in 110 and redirect to sub-panel H in 120D.
Floor Coverings: New carpet, similar to that just installed
in upstairs offices, to be cemented to floors in rooms 103A&B
108,109,104,114, and in hallway 107. Lino in room 106. New lino or
carpet in 115. New, or like new, power-cleaned, existing lino to be
in restrooms 111 and 112.
Door Changes: Four new doors as needed for above four new
rooms. Add new door between lunchroom 106 and storage 105. Deadbolt
existing door between 104 and 105.
Painting: Remaining and new walls in rooms 103A&B, 108,109,
and 104 to be textured, as necessary, and repainted.
Beeman Building Modifications for Real Goods, continued:
UPSTAIRS: Northern half of building. All six, northern,
upstairs, buildingmodules
Wall Removals: Remove walls, including removal, rerouting,
and stubbing off of thermostat, electrical, phone, and other
utility lines, patching of carpet, and repair of dropped ceilings,
as needed, between rooms 209 and 204, 200 and 201, 201, and 202,
203 and 204, 203 and 211, 205 and 206, 216 and 211 /hallway.
Former junctions of above walls to be repaired, retextured,
and repainted in a workmanship-like manner. Above removal of wall
between 205 and 206 to leave approx. two foot wide side section as
raceway for existing electrical sub-panel and as attachment area
for new computer dedicated sub-panel discussed below. Remove sink
and cabinet unit in 208, stub off utilities in wall, and repair,
retexture, and repaint associated walls as needed.
New Wall: To be built down center of existing room 201, thus
creating two larger rooms where rooms 200, 201, and 202 are now.
These rooms, each with three window units, will now be known as
rooms 200 and 202 respectively. Remove window between rooms 201 and
204, as needed to accommodate the above new division wall. Texture
and paint new work as needed to match existing wall surfaces.
Door Changes: Install door between 210 and 209. Bolt door
between 205 and 203.Install new door between restroom 215 and 218A.
Install deadbolt on 214 side of restroom 215 door.
Floor Coverings: New carpet, similar to new carpet now in most
upstairs rooms, to be installed in rooms 207 and 208. Restrooms 220
and 221 have had their lino power cleaned to like new and have new
baseboards all around. New lino and baseboards just installed in
220A. Carpets in 205 and 206 to be removed, as per Jan 14 telecons
with Will Russ, Real Goods Computer Manager, and replaced with
rigid sub-flooring, over existing, suspended plywood flooring,
suitable for direct securement bolting of computer equipment.
Electrical: As per extended telecons with Will Russ, assisted
by electrician at Real Goods: Request for special power source has
been increased to: New, dedicated 208V, 60 amp, 12 position
sub-panel to be surface mounted on the vertical raceway mentioned
above in wall removal section, on the 205 side. Note that newly
combined room 205/206 is served with air-conditioning/heating air
flow, plus an existing, purpose-built, exhaust fan for removing
excessive computer heat. There is extra capacity, in the HVAC zone
system serving this room , which can be more strongly directed to
this room, if desired. Power outages in this area generally are
rare and relatively short and this room is quite far removed from
the external environment.
Install pilot light, or fiber optic rod, to indicate to President's
office 214, when restroom 215 light is on. Install new light switch
(PIR?).in restroom 215.
Exhibit C
LEASING DISCLOSURE REGARDING
REAL ESTATE AGENCY RELATIONSHIP
When you enter into a discussion With a real estate agent
regarding a real estate transaction, you should from the outset
understand what type of agency relationship or representation you
wish to have with the agent in the transaction.
LANDLORD'S AGENT
A Landlord's agent under a listing agreement with the
Landlord acts as the agent for the Landlord. A Landlord's agent
or a subagent of that agent has the following affirmative
obligations:
To the Landlord:
(a) A fiduciary duty of utmost care, integrity, honesty and
loyalty in dealing with the Landlord.
To the Tenant and the Landlord:
(a) Diligent exercise of reasonable skill and care in
performance of the agent's duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent
materially affecting the value or desirability of the
property that are not known to, or within the diligent
attention and observation of, the parties.
An agent is not obligated to reveal to either party any
confidential information obtained from the other party which does
not involve the affirmative duties set forth above.
TENANT'S AGENT
A Tenant's agent can, with a Tenant's consent, agree to act
as agent for the Tenant only. In these situations, the agent is
not the Landlord's agent, even if by agreement the agent may
receive compensation for services tendered, either in full or in
part from the Landlord. An agent acting only for a Tenant has the
following affirmative obligations.
To the Tenant:
(a) A fiduciary duty of utmost care, integrity, honesty and
loyalty in dealings with the Tenant.
To the Tenant and the Landlord:
(a) Diligent exercise of reasonable skill and care in
performance of the agent's duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty in disclose all facts known to the agent
materially affecting the value or desirability of the
property that are not known to, or within the diligent
attention and observation of, the parties.
An agent is not obligated to reveal to either party any
confidential information obtained from die other party which does
not involve the affirmative duties set forth above.
AGENT REPRESENTING BOTH LANDLORD AND TENANT
A real estate agent, either acting directly or through one or
more associate licensees, can legally be the agent of both the
Landlord and the Tenant in a transaction, but only with knowledge
and consent of both the landlord and the Tenant.
In a dual agency situation, the agent has the following
affirmative obligations to both the Landlord and the Tenant.
(,a) A fiduciary duty of utmost care, integrity, honest and
loyalty in the dealings with either Landlord or Tenant.
(b) Other duties to the Landlord and the Tenant as stated
above in their respective sections.
In representing both Landlord and Tenant, the agent may not,
without the express permission of the respective party, disclose
to the other party that the Landlord will accept a rent less than
the listed rent or that the Tenant will pay a rent greater than the
rent offered.
The above duties (if the agent in a real estate transaction
do not relieve a Landlord or Tenant from the responsibility to
protect their own interests. You should carefully read all
agreements to assure that they adequately express your
understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is
desired, consult a competent professional.
You should read its contents each time it is presented to
you, considering the relationship between you and the real estate
agent in your specific transaction.
We acknowledge receipt of a copy or this disclosure.
Landlord/Tenant Date
Landlord/Tenant Date
SIGN BELOW TO AUTHORIZE TYPE OF AGENCY
Keegan & Coppin Company, Inc., is the agent of (check one).
(Name of Listing Agent)
The Landlord exclusively; or
X Both the Tenant and Landlord
CONFIRMED AND AUTHORIZED:
Landlord Date
Landlord Date
Agent Keegan & Coppin Company. Inc. By Date
Keegan & Coppin.Company, Inc. is the agent of (check one):
(Name of Tenant's agent)
The Tenant exclusively; or
The Landlord exclusively; or
X Both the Tenant and Landlord
CONFIRMED AND AUTHORIZED:
Tenant Date
Tenant Date
Agent Keegan & Coppin Company, Inc. By Date
EXHIBIT D
STANDARD LEASE DISCLOSURE ADDENDUM
Notice to Owners Buyers and Tenants Regarding Hazardous
Wastes or Substances and Underground Storage Tanks. Comprehensive
federal and state laws and regulations have been enacted in the
last few years in an effort to develop controls over the use,
storage, handling, cleanup, removal and disposal of hazardous
wastes or substances. Some of these laws and regulations, such as,
for example, the so-called "Super-Fund Act", provide for broad
liability schemes wherein an owner, tenant or other user of the
property may be liable for cleanup costs and damages regardless
of fault. Other laws and regulations set standards for the handling
of asbestos or establish requirements for the use, modification,
abandonment, or closing of underground storage tanks.
It is not practical or possible to list all such laws and
regulations in this Notice. Therefore, lessors and lessees are
urged to consult legal counsel to determine their respective rights
and liabilities with respect to the issues described in this
Notice as well as other aspects of the proposed transaction. If
various materials that have been or may be in the future determined
to be toxic, hazardous or undesirable, or are going to be used,
stored, handled or disposed of on the property, or if the
property has or may have underground storage tanks for storage of
such hazardous materials, or that such materials may be in the
equipment, improvements or soil, it is essential that legal and
technical advice be obtained to determine, among other things,
what permits and approvals have been or may be required, if any,
the estimated costs and expenses associated with the use,
storage, handling, cleanup, removal or disposal of the hazardous
wastes or substances and what contractual provisions and
protection are necessary or desirable. It may also be important
to obtain expert assistance for site investigations and building
inspections. The past uses of the property may provide valuable
information as to the likelihood of hazardous wastes or
substances, or underground storage tanks being on the property.
The term "hazardous wastes or substances" is used in this
Notice in its very broadest sense and includes, but is not
limited to, all those listed under Proposition 65, petroleum base
products, paints and solvents, lead, cyanide, DDT, printing inks,
acids, pesticides, ammonium compounds, asbestos, PCBs and other
chemical products. Hazardous wastes or substances and underground
storage tanks may be present on all types of real property. This
Notice is, therefore, meant to apply to any transaction involving
any type of real property, whether improved or unimproved.
Although Keegan & Coppin Co., Inc. or its salespeople, will
disclose any knowledge it actually possesses with respect to the
existence of hazardous wastes or substances, or underground
storage tanks on the property, Keegan & Coppin Co., Inc. has
not made investigations or obtained reports regarding the
subject matter of this Notice, except as may be described in a
separate written document, studies or investigation by
experts. Therefore, unless there are additional documents or
studies attached to this notice, lease or contract, this will serve
as notification that Keegan & Coppin Co., Inc. or its salespeople
make no representation regarding the existence or
non-existence of hazardous wastes or substances, or underground
storage tanks on the property. You should contact a professional,
such as a civil engineer, geologist, industrial hygienist or
other persons with experience in these matters to advise you
concerning the property.
Americans with Disabilities Act (ADA).
On July 26, 1991, the federal legislation known as the
Americans with Disabilities Act (ADA) was signed into law by
President Bush. The purpose of the ADA is to integrate
persons with disabilities into the economic and social mainstream
of American life. Title III of the ADA applies to Lessors and
Lessees of "places of public accommodation" and "commercial
facilities", and requires that places of public accommodation
undertake "readily achievable" removal of communication and
access barriers to the disabled. This requirement of Title
III of the ADA is effective January 26, 1992.
It is important that building owners identify and undertake
"readily achievable" removal of any such barriers in the common
areas, sidewalks, parking lots and other areas of the
building under their control.
The lessor and lessee is responsible for compliance with ADA
relating to removal of barriers within the workplace i.e.,
arrangement of interior furnishings and access within the
premises, and any improvements installed by lessor and lessee.
Keegan & Coppin Company, Inc. recommends that both parties
seek expert advice regarding the implications of the Act as it
affects this agreement.
Alquist-Priolo:
"The property which is the subject of this contract may be
situated in a Special Study Zone as designated under the Alquist-
Priolo Geologic Hazard Act, Sections 2621-2625, inclusive, of
the California Public Resources Code; and, as such, the
construction or development on this property of any structure
for human occupancy may be subject to the findings of a
geologic report prepared by a geologist registered in the
State of California, unless such report is waived by the City or
County under the terms of that act. No representations on the
subject are made by the lessor or agent, and the lessee should
make his own inquiry or investigation".
Flood Hazard Area Disclosure:
The subject property may be situated in a "Special Flood
Hazard Area" as set forth on a Federal Emergency Management
Agency (FEMA) "Flood Insurance Rate Map" (FIRM) or "Flood
Hazard Boundary Map" (FHBM). The law provides that, as a condition
of obtaining financing on most structures located in a "Special
Floods Hazard Area", lender requires flood insurance where the
property or its attachments are security for a loan. Lessee should
consult with experts concerning the possible risk of flooding.
Acknowledgment:
Lessee:[S]RAZ Date:February 19, 1999
RAZ
Lessor:[S]RDB Date:February 19, 1999
RDB
EXHIBIT E
OPTION(S) TO EXTEND
STANDARD LEASE ADDENDUM
Dated February 9, 1999
By and Between (Lessor) Robert & Toshiko Beeman
(Lessee) Real Goods Trading Corporation
Address of Premises: 3440 Airway Drive, Suite F, Santa Rosa,
CA
Paragraph
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee the option to extend the term
of this Lease for One additional 36 month period(s)
commencing when the prior term expires upon each and all of
the following terms and conditions:
(i) In order to exercise an option to extend,
Lessee must give written notice of such election to Lessor at
least 6 but not more than 9 months prior to the date that
the option period would commence, time being of the
essence. If proper notification of the exercise of an option is not
given such option shall automatically expire. Options (if
there are more than one) may only be exercised consecutively.
(ii) The provisions of paragraph 39, including
those relating to Lessee's Default set forth in paragraph 39.4 of
this Lease, are conditions of this Option.
(iii) Except for the provisions of this Lease granting
an option or options to extend the term, all of the terms and
conditions of this Lease except where specifically modified by this
option shall apply.
(iv) Except as otherwise specified in the Lease, this
Option is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only
while the original Lessee is in full possession of the Premises and
without the intention of thereafter assigning or
subletting.
(v) The monthly rent for each month of the option
period shall be calculated as follows, using the method(s)
indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
I. Cost of Living Adjustment(s) (COLA)
a. On (Fill in COLA Dates): each anniversary of the
extension term the Base Rent shall be adjusted by the change, if
any, from the Base Month specified below, in the Consumer Price
Index of the Bureau of Labor Statistics of the U.S. Department of
Labor for (select one):
CPl W (Urban Wage Earners and Clerical Workers) or
X CPI U (All Urban Consumers), for (Fill in Urban Area): San
Francisco-Oakland-San Jose All Items (1982-1984 = 100), herein
referred to as "CPI"
b. The monthly rent payable in accordance with paragraph
A.I.a, of this Addendum shall be calculated as follows: the Base
Rent set forth in paragraph 1.5 of the attached Lease, shall be
multiplied by a fraction the numerator of which shall be the CPI
of the calendar month two months prior to the month(s) specified in
paragraph A.I.a. above during which the adjustment is to take
effect, and the denominator of which shall be the CPI of the
calendar month which is two months prior to (select one): the first
month of the term of this Lease as set forth in paragraph 1.3
("Base Month") or F1 (Fill in Other "Base Month"): March 2003.The
sum so calculated shall constitute the new monthly rent hereunder,
but in no event, shall any such new monthly rent be less than 103%,
nor more that 105% of the rent payable for the month immediately
preceding the rent adjustment.
c. In the event the compilation and/or publication of the CPI
shall be transferred to any other governmental department or
bureau or agency or shall be discontinued, then the index most
nearly the same as the CPI shall be used to make such calculation.
In the event that the Parties cannot agree on such alternative
index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules
of said Association and the decision of the arbitrators shall be
binding upon the parties. The cost of said Arbitration shall be
paid equally by the Parties.
II. Market Rental Value Adjustment(s) (MRV)
a. On (Fill in MRV Adjustment Date(s))
the Base Rent shall be adjusted to the "Market Rental Value"
of the property as follows:
1) Four months prior to each Market Rental Value
Adjustment Date described above, the Parties shall attempt to
agree upon what the new MRV will be on the adjustment date. If
agreement cannot be reached, within thirty days, then:
(a) Lessor and Lessee shall immediately appoint a
mutually acceptable appraiser or broker to establish the new MRV
within the next thirty days. Any associated costs will be split
equally between the Parties, or
(b) Both Lessor and Lessee shall each immediately
make a reasonable determination of the MRV and submit such
determination, in writing, to arbitration in accordance with
the following provisions:
(i) Within fifteen days thereafter, Lessor and
Lessee shall each select an appraiser or [] broker ("Consultant"-
check one) of their choice to act as an arbitrator. The two
arbitrators so appointed shall immediately select a third
mutually acceptable Consultant to act as a third arbitrator.
Initials:[S]RAZ
RAZ
Initials:[S]RDB
RDB
For this form, write: American Industrial Real Estate
Association, 700 S. Flower Street, Suite 600, Los Angeles, Calif.
90017
1997 - American Industrial Real Estate Association FORM OE-2-3/97
(ii) The three arbitrators shall within thirty days of the
appointment of the third arbitrator reach a decision as to what
the actual MRV for the Premises is, and whether Lessor's or
Lessee's submitted MRV is the closest thereto. The decision of a
majority of the arbitrators shall be binding on the Parties. The
submitted MRV which is determined to be the closest to the actual
RV shall thereafter be used by the Parties.
(iii) If either of the Parties fails to appoint an arbitrator
within the specified fifteen days, the arbitrator timely appointed
by one of them shall reach a decision on his or her own, and said
decision shall be binding on the Parties.
(iv)The entire cost of such arbitration shall be paid by the party
whose submitted MRV is not selected, ie. the one that is NOT
closest to the actual MRV.
2) Notwithstanding the foregoing, the new MRV shall not
be less than the rent payable for the month immediately Preceding
the rent adjustment.
b. Upon the establishment of each New Market Rental Value:
1) the new MRV will become the new "Base Rent" for the
purpose of calculating any further Adjustments, and
2) the first month of each Market Rental Value term shall
become the new "Base Month" for the purpose of calculating any
further Adjustments.
III. Fixed Rental Adjustment(s) (FRA)
The Base Rent shall be increased to the following amounts on
the dates set forth below:
On (Fill in FRA Adjustment Date(s)): The New Base rent shall be:
B. NOTICE:
Unless specified otherwise herein, notice of any rental
adjustments, other than Fixed Rental Adjustments, shall be made
as specified in paragraph 23 of the Lease.
C. BROKER'S FEE:
Initials:[S]RAZ
RAZ
Initials:[S]RDB
RDB
OPTION(S) TO EXTEND
NOTICE: These forms are often modified to meet changing
requirements of law and industry needs. Always write or call to
make sure you are utilizing the most current form: American
Industrial Real Estate Association, 700 S. Flower Street, Suite
600, Los Angeles, CA 90017.(213) 687-8777. Fax No. (213) 687-8616.
01997 - American Industrial Real Estate Association
FORM OE-2-3/97
Riders
To Lease dated as of February 9 1999
Between Robert & Toshiko Beeman (as Lessor)
and Real Goods Trading Corporation (as Lessee)
Rider 2A:
2.11 Common Areas - Signage, Roof. Notwithstanding Sections 1 .2
and 34, Lessee shall have the exclusive right during the term of
this Lease (and any extension) to place a sign identifying Lessee
and Lessee's business on the large sign pad located on the north
face (northwest corner) of the exterior of the Building. Lessee
will pay the cost of such sign. In addition, Lessee shall have the
right to install within the Common Areas a backup generator
for the electrical system serving the Premises. The generator may
be located (at Lessee's option) either on the Building roof or in
the Common Areas adjacent to the Building. Lessee will be
responsible for the installation and maintenance of its electrical
generator. In addition, Lessor agrees to install, at Lessee's
expense, one or more signs which will be reasonably visible to
vehicular traffic at the driveway entrances to the Industrial
Center, which will direct customers and others to Lessee's
Premises. All signs will be subject to City regulations.
Installation of Lessee's generator shall be subject to Lessor's
written approval of plans.
Rider 3A:
or, for the year in which the lease expires or otherwise
terminates, shall be paid by Lessor to Lessee when such statement
is delivered.
Rider 3B:
Notwithstanding the foregoing, Lessee shall not be
required to make structural alterations to the Building, or
otherwise make capital expenditure in excess of one month's rent
and a useful life greater than the balance of the term of this
Lease at the time, unless Lessor agrees to pay (or reimburse by
appropriate credits against rent) an equitable share of the cost of
any such capital expenditures. The foregoing shall not, however,
limit Lessee's obligations with respect to the remediation of any
Hazardous Substances brought onto the Premises by Lessee or anyone
under Lessee's control.
Rider 3C:
Notwithstanding the foregoing, Lessee shall not be required
to repair or replace any electrical, plumbing, HVAC or other
utility facilities which are located within the walls, or beneath
the floors of the Premises; or make structural alterations or
repairs to the Building; or make capital expenditures in
respect of the Premises having a cost in excess of one month's rent
and a useful life greater than the balance of the term of this
Lease at the time, unless Lessor agrees to pay (or reimburse by
appropriate credits against rent) an equitable share of the cost of
any such capital expenditures.
Rider 4A:
Lessor will maintain in good and serviceable condition and
repair all HVAC and life-safety systems (i.e., fire sprinklers and
alarm system) serving the Premises, provided that Lessee will
reimburse Lessor for the reasonable cost of such maintenance and
repair of Utility Installations which serve the Premises
exclusively.
Rider 4B:
Lessee shall not be required to remove data and telecommunications
cabling installed by Lessee. In such case, Lessor may require
Lessee to stub back Lessee-installed cabling to the point where it
emerges from conduit within the finished interior of the Premises.
Rider 5A:
Lessee shall have the right to self-insure its personal property
and Trade Fixtures, or to provide such insurance by a blanket
policy.
Rider 5B:
Except for Lessee's negligence and/or breach of express
warranties, Lessor shall indemnify, protect, defend and hold
harmless Lessee and its agents, partners, officers, directors and
employees, from and against any and all claims and/or damages,
costs, liens, judgments, penalties, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving,
or in connection with, the ownership, operation and management of
the industrial Center (other than the Premises), including, but not
limited to, the Commons Areas; the provision of services required
to be provided under this Lease by Lessor; any act, omission or
neglect of Lessor, its agents, contractors, employees,
or invitees; and/or any default or breach by Lessor in the
performance in a timely manner of any obligation on Lessor's part
to be performed under this Lease. The foregoing shall include, but
not be limited to, the defense or pursuit of any claim or any
action or proceeding involved therein, and whether or not (in any
case of claims made against Lessee) litigated and/or reduced to
judgment. In case any action or proceeding be brought against
Lessee by reason of any of the foregoing matters, Lessor upon
notice from Lessee shall defend the same at Lessor's expense by
counsel reasonably satisfactory to Lessee, and Lessee shall
cooperate with Lessor in such defense. Lessee need not have first
paid any such claim in order to be so indemnified.
Rider 5C:
if the estimated cost of repairs exceeds twelve (12) times the
then-current monthly Base Rent,
Rider 5D:
the amount by which the cost to repair such damage exceeds twelve
(12) times the then-current monthly Base Rent.
Rider 5E:
funds (or adequate assurance thereof) which Lessee is
required to contribute under Paragraph 9.2 or 9.3, as applicable.
Rider 6A:
in addition, if such work is not completed within twelve (12)
months following the date such damage occurs, Lessee shall have the
right to terminate this Lease by written notice to Lessor,
effective as of the date thirty (30) days after Lessee gives such
notice, or the date Lessee surrenders possession of the Premises to
Lessor, whichever is later.
Rider 6B:
The provisions of this Paragraph 12. 1 (b) shall not apply,
however, for so long as the stock or other securities of Lessee are
publicly traded on a recognized securities exchange.
Rider 6C:
The provisions of this Paragraph 12.l(c) shall not apply,
however, for so long as the stock or other securities of Lessee are
publicly traded on a recognized securities exchange.
Rider 6D:
Notwithstanding any other provision of this Paragraph 12.1, Lessee
may assign or sublet the Premises, or any portion thereof, without
Lessor's consent, to any corporation or other entity which
controls, is controlled by, or is under common control with Lessee,
or to any corporation or other entity resulting from the merger or
consolidation of Lessee, or to any person or entity which acquires
substantially all of the assets of Lessee as a going concern (any
of the foregoing, a "Lessee Affiliate"); provided that before any
such assignment shall be effective, the assignee shall assume in
full the obligations of Lessee under this Lease, and Lessor shall
be given written notice of such assignment and assumption.
Rider 7A:
provided, however, if the nature of Lessee's default is such
that more than ten (10) days are reasonably required for its cure,
then it shall not be a Breach of this Lease by Lessee if Lessee
commences such cure within said ten (10) day period and thereafter
diligently prosecutes such cure to completion. Further, with
respect to failures by Lessee to execute and deliver documents to
Lessor (including easements under Paragraph 42 and Tenancy
Statements under Section 16), Lessee shall not be in Breach of this
lease unless such failure continues for ten (10) days following the
giving of a written notice to Lessee which clearly advised Tenant
that its failure to deliver such document within ten (10)
days will constitute a Breach of this Lease. Such notice may be
given with the original request for execution of such document, or
at any later time until such document has been executed and
returned.
Rider 7B:
within such lesser time following written or oral notice
as may be reasonable under all of the facts and circumstances of
such emergency, provided that in such event Lessor shall perform
only such acts as are reasonably necessary to resolve the
emergency.
Rider 8A:
Lessee agrees to deliver to any Lender whose name and address
has been provided by Lessor to Lessee in writing for such purpose,
a copy of any notice given by Lessee asserting a default by Lessor.
Rider 8B:
If Lessee files Forms 10-K and/or 10-Q with the Securities
and Exchange Commission, delivery of copies thereof shall be deemed
to fully satisfy the requirements of this Paragraph 16.2.
Rider 10A:
Each Option granted to Lessee in this Lease is personal to
the original Lessee named in Paragraph 1.1 hereof, and cannot be
voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee, except that an Option may
be assigned to an assignee of Lessee's entire interest in this
Lease (but not to any sublessee) provided (1) the assignee is a
Lessee Affiliate, or (2) Lessor's prior written consent to the
assignment of such Option has been obtained. Under no circumstances
may a sublessee of a portion of the Premises exercise any Option.
Rider F-1:
F. Common Area Operating Expenses/Utilities:
Lessee's Share of Real Estate Taxes and Lessee's Share of
Common Area Operating Expenses (other than Real Estate Taxes) shall
each be subject to a 3% maximum annual increase. Common Area
Operating Expenses shall exclude any expenditure which under
generally accepted accounting principles, would be treated as a
capital expense or expenditure. Lessee shall contract directly for
janitorial service and trash removal. Lessor has provided Lessee
with an estimate of Common Area Operating Expenses for the first
year of the term.
</DOC>
ADDENDUM TO COMMERCIAL LEASE AGREEMENT
Property: 207 Clara A, Ukiah, California
Mark P. Mountanos (Landlord) and Real Goods (Tenant) have this 18
day of January Landlord's property at 207 Clara A, enter into a
Commercial Lease agreement for a portion of Landlord's property
at 207 Clara A, Ukiah, California. Landlord and Tenant hereby
make this Addendum to the Commercial Lease:
A. SECTION 1.02 ORIGINAL TERM: The Original Term shall be
for 36 months commencing on the 18 day of January terminating on
the 31 day of January, 2002.
B. SECTION 2.01 EXTENDED TERM:
C. SECTION 2.01 RENT: 1313.35
D. SECTION 2.02 SECURITY DEPOSIT: The Security Deposit
shall be the amount of $ 0.
E. SECTION 3.01 PERMITTED USE: Tenant shall be permitted to
use the premises for the following use and for no other
purpose shipping\receiving\warehouse.
F. SECTION 10.03 NOTICE: All notices and other
communications to Tenant shall be addressed to Tenant at: 555
Leslie St., Ukiah.
G. SECTION 7.03: Signage: Tenant shall be permitted to
use % of the permitted Signage area.
This Addendum to the Commercial Lease is entered into this 18 day
of January 1999 By and between:
LANDLORD TENANT
M.P. Mountanos of Socal Real Goods
By:[S]MARK P. MOUNTANOS [S]DAVID FISSEL
Mark P. Mountanos David Fissel
</PAGE>
COMMERCIAL LEASE
PREAMBLE
This lease is entered into on January 18, 1999 by and
between Mark P. Mountanos ("Landlord") and Real Goods ("Tenant").
Landlord is the owner of that real property located at 207
Clara #A, Ukiah, California ("Property") and hereby leases to
Tenant and Tenant agrees to lease from Landlord that portion of
the Property as is depicted on Exhibit A (collectively referred
to herein as the Premises or the Improvements.)
ARTICLE 1. TERM OF LEASE
ORIGINAL TERM
SECTION 1.01: The Original Term of the lease is set forth
in the attached Addendum. The date on which the Original Term
commences shall be known as the "Commencement Date".
EXTENDED TERM
SECTION 1.02: Tenant shall not have any option or right to
extend the term of this lease beyond the Original Term unless
such right is specifically set forth in the Addendum. The
provisions of this Section 1.02 shall apply only if the Addendum
provides for an Extended Term and shall not be construed to grant
to Tenant any rights beyond the Original Term.
If Tenant elects to extend the term of this lease, Tenant
must give Landlord written notice of Tenant's election to extend
at least 90 days before expiration of the Original Tenn. During
the Extended Term of this lease, if any, Landlord and Tenant
shall be bound by all of the obligations, covenants, and
agreements of this lease except that Tenant shall have no right
to further extend the term of this lease beyond or after
expiration of the one period granted under this section.
References throughout this lease to "the term of this lease"
shall include both the Original Term and the Extended Term, if
any, unless otherwise indicated.
HOLDING OVER
SECTION 1.03: In the event Tenants holds over and continues
in possession of the Premises after expiration of the Original
Term (when Tenant has not validly exercised its option to extend
the term of the lease in accordance with Section 1.02) or after
the expiration of the Extended Term (when Tenant has validly
exercised its option to extend the term of the lease in
accordance with Section 1.02), Tenant's continued occupancy of
the Premises shall be considered a month-to-month tenancy subject
to all the terms and conditions of this lease.
LANDLORD'S INABILITY TO DELIVER POSSESSION
SECTION 1.04: If Landlord is for any reason unable to
deliver possession of the Premises to Tenant on the Commencement
Date set forth in Section 1.01 of this lease,- this lease shall
not be void or voidable nor shall Landlord be liable to Tenant
for any loss or damage resulting from failure to deliver
possession to Tenant so long as Landlord has exercised, and
continues to exercise, reasonable diligence to deliver possession
of the Premises to tenant. No rent shall, however, accrue or
become due from Tenant to Landlord under this lease until the
actual physical possession of the Premises is delivered, or the
right to actual unrestricted physical possession of the Premises
under this lease is tendered by Landlord to Tenant. Furthermore,
the term of this lease shall not be extended by Landlord's
inability to deliver possession of the Premises to Tenant on the
Commencement Date set forth in Section 1.01.
TERMINATION FOR FAILURE OF POSSESSION
SECTION 1.05: Notwithstanding any provision of Section 1.04
of this lease, if Landlord for any reason fails to deliver actual
physical possession of the Premises, or fails to tender actual
unrestricted physical possession of the Premises under this
lease, to Tenant within 30 days after the Commencement Date,
Tenant may terminate this lease by giving Landlord written notice
of its election to do so. In the event Tenant elects to terminate
this lease, this lease shall become null and void as of the date
Tenant delivers its written notice of termination to Landlord,
and thereafter neither party to this lease shall be under any
further obligation or liability to the other because of this
lease and Landlord shall return to Tenant any consideration
received from Tenant pursuant to or for execution of this lease.
If Tenant elects to terminate this lease in accordance with the
provisions of this section, it shall give written notice of its
election to terminate the Landlord not later than 40 days after
the Commencement Date.
ARTICLE 2.
MINIMUM RENT
SECTION 2.01: In consideration for this lease, Tenant
agrees to pay to Landlord all rental payments as described in the
attached Addendum.
SECURITY DEPOSIT
SECTION 2.02: Upon execution of this lease, Tenant shall
deposit with Landlord a security deposit as described in the
Addendum for Tenant's faithful performance of the provisions of
this lease. If Tenant fails to pay rent or other charges due
hereunder or otherwise defaults with respect to any provision of
this lease, Landlord may use the security deposit or any portion
of it to cure the default or to compensate Landlord for all the
damages sustained by Landlord resulting from Tenant's default.
Tenant shall immediately on demand pay to Landlord the sum equal
to that portion of the Security Deposit expended or applied by
Landlord which was provided for in this paragraph so as
to maintain the Security Deposit in the sum initially deposited
with the Landlord. Landlord shall not be required to keep the
Security Deposit separate from its general account nor shall
Landlord be required to pay Tenant interest on the Security
Deposit. If Tenant performs all of Tenant's obligations under
this lease, the Security Deposit or that portion thereof which
has not previously been applied by the Landlord, shall be
returned to Tenant within fourteen days after the expiration of
the term of this lease or after Tenant has vacated the premises,
whichever is later.
ARTICLE 3. USE OF PREMISES
PERMITTED USE
SECTION 3.01: During the term of this lease (including the
Original Term and the Extended Term, if any), the Premises shall
be used for the exclusive purpose as described in the Addendum
and for uses normally incident to that purpose, and for no other
purpose. Tenant shall not use or permit the Premises to be used
for any other purposes without the prior written consent of
Landlord.
INSURANCE HAZARDS
SECTION 3.02: Tenant shall not commit or permit the
commission of any acts on the Premises nor use or permit the use
of the Premises in any manner that will increase the existing
rates for or cause the cancellation of any fire, liability, or
other insurance policy insuring the Premises or the improvements
on the Premises. Tenant shall, at its own cost and expense,
comply with any and all requirements of Landlord's insurance
carriers necessary for the continued maintenance at reasonable
rates of fire and liability insurance policies on the Premises
and the improvements on the Premises.
WASTE OR NUISANCE
SECTION 3.03: Tenant shall not commit or permit the
commission by others of any waste on the Premises; Tenant shall
not maintain, commit, or permit the maintenance or commission of
any nuisance as defined in Civil Code Section 3479 on the
Premises; and tenant shall not use or permit the use of the
Premises for any unlawful purpose.
COMPLIANCE WITH LAWS
SECTION 3.04: Tenant shall at Tenant's own cost and expense
comply with all statutes, ordinances, regulations, and
requirements of all governmental entities, both federal and state
and county or municipal, relating to Tenant's use and occupancy
of the Premises whether those statutes, ordinances, regulations,
and requirements are now in force or are subsequently enacted.
The judgement of any court of competent jurisdiction, or the
admission by Tenant in a proceeding brought against Tenant by any
government entity, that Tenant has violated any such statute,
ordinance, regulation, or requirement shall be conclusive as
between Landlord and Tenant and shall constitute grounds for
termination of this lease by Landlord.
NONCOMPETITION BY LANDLORD
SECTION 3.05: Neither Landlord nor any entity that controls
or is controlled by Landlord shall own, operate, control, or in
any manner become financially involved in any business similar to
that specified in Section 3.01 of this lease located within the
Premises.
ARTICLE 4. TAXES AND UTILITIES
UTILITIES
SECTION 4.01: Tenant shall pay, and hold Landlord and the
property of Landlord free and harmless from all charges for the
furnishing of gas, water, sewer, electricity, telephone service,
garbage pickup and disposal, and other public utilities to the
Premises during the term of this lease. All such charges shall be
paid by Tenant directly to the provider of the service and shall
be paid as they become due and payable but in any event before
delinquency.
PERSONAL PROPERTY TAXES
SECTION 4.02: Tenant shall pay before they become
delinquent all taxes, assessments, and other charges levied or
imposed by any governmental entity on the furniture, trade
fixtures, appliances, and other personal property placed by
Tenant in, on, or about the Premises including, without limiting
the generality of the other terms used in this section, any
shelves, counters,, vaults, vault doors, wall safes, partitions,
fixtures, machinery, plant equipment, office equipment,
television or radio antennas, and communication equipment brought
on the Premises by Tenant.
REAL PROPERTY TAXES
SECTION 4.03: All real property taxes and assessments
levied or assessed against the Premises by any governmental
entity, including any special assessments imposed on or against
the Premises for the construction or improvements of public works
in, on, or about the Premises, shall be paid, before they become
delinquent, by Landlord.
ARTICLE 5. ALTERATIONS AND REPAIRS
SECTION 5.01: Tenant accepts the Premises, as well as the
improvements located on the Premises, in their present
condition and stipulates with Landlord that the Premises and
Improvements are in good, clean, safe, and tenantable condition
as of the date of this lease. Tenant further agrees with and
represents to Landlord that the Premises have been inspected by
Tenant, that it has received assurances acceptable to tenant by
means independent of Landlord or any agent of Landlord of the
truth of all facts material to this lease, and that the Premises
are being leased by tenant as a result of its own inspection and
investigation and not as a result of any representations made by
Landlord or any agent of Landlord except those expressly set
forth in this lease.
MAINTENANCE BY LANDLORD
SECTION 5.02: Landlord shall, at its own cost and expense,
maintain in good condition and repair the structural elements of
the Building. For purposes of this section, "structural elements"
shall mean the exterior roof, exterior walls (except show window
glass), structural supports, and foundation of the Building.
Landlord shall not be liable for any damages to Tenant or the
property of Tenant resulting from Landlord's failure to make any
repairs required by this section unless written notice of the
need for those repairs has been given to Landlord by Tenant and
Landlord has failed for a period of 30 days after receipt of the
notice, unless prevented by causes not the fault of the Landlord,
to make the needed repairs. Notwithstanding anything in this
section to the contrary, Tenant shall promptly reimburse Landlord
for the full cost of any repairs made pursuant to this section
required because of negligence or other fault, other than normal
and proper use, of Tenant or its employees or agents or
subtenants, if any.
Landlord and its agents shall have the right to enter the
Premises at all reasonable times (and at any time during any
emergency) for the purpose of inspecting them or to make any
repairs required to be made by Landlord under this lease.
MAINTENANCE OF PLATE GLASS
SECTION 5.04: Tenant shall, at its own cost and expense,
repair and replace any plate glass in any show window on the
Premises that is broken regardless of any cause, except by fault
of Landlord, or by fault of some employee or agent of Landlord.
Should Tenant fail to repair or replace any glass broken in a
show window, Landlord may replace or repair the broken glass and
Tenant shall promptly reimburse Landlord for the cost of the
repair or replacement. In addition, Tenant shall pay Landlord
interest on those costs at the rate of 10 percent per year from
the date the costs were incurred by Landlord to the date they are
reimbursed to Landlord by Tenant.
ALTERATIONS AND LIENS
SECTION 5.05: Tenant shall not make or permit any other
person to make any alterations to the Premises or to any
Improvements on the Premises without the prior written consent of
Landlord. Landlord shall not unreasonably withhold this consent.
Tenant shall keep the premises free and clear from any and all
liens, claims, and demands for work performed, materials
furnished, or operations conducted on the Premises at the
instance or request of Tenant. Furthermore, any and all
alterations, additions, improvements, and fixtures, except
furniture and trade fixtures, made or placed in or on the
Premises by Tenant or any other person shall on expiration or
earlier termination of this lease, become the property of
Landlord
and remain on the Premises. Landlord shall have the option,
however, on expiration or termination of this lease, of requiring
Tenant, at Tenant's sole cost and expense, to remove any or all
such alterations, additions, improvements, or fixtures from the
Premises.
INSPECTION BY LANDLORD
SECTION 5.06: Tenant shall permit Landlord or Landlord's
agents, representatives, or employees to enter the Premises at
all reasonable times for the purpose of inspecting the Premises
to determine whether Tenant is complying with the terms of this
lease, for the purpose of doing other lawful acts that may be
necessary to protect Landlord's interest in the Premises, or for
the purpose of performing Landlord's duties under this lease.
SURRENDER OF PREMISES
SECTION 5.07: On expiration or earlier termination of this
lease, Tenant shall promptly surrender and deliver the Premises
to Landlord in as good condition as they are now at the date of
this lease, excluding reasonable wear and tear, and repairs
required to be made by Landlord under this lease.
ARTICLE 6. INDEMNITY INSURANCE
HOLD-HARMLESS CLAUSE
SECTION 6.01: Tenant agrees to protect, indemnify, and save
Landlord harmless from and against any and all liability to third
parties resulting from Tenant's occupation and use of the
Premises, specifically including, without limitation, any claim,
liability, loss or damage arising by reason of :
(a) The death or injury of any person or persons, including
Tenant or any person who is an employee or agent of Tenant,
or by instance of the damage to or destruction of any
property, including property owned by Tenant or any person
who is an employee or agent of Tenant, or by reason of the
damage to or destruction of any property, including property
owned by Tenant or any person who is an employee or agent of
Tenant, and caused or allegedly caused by either the
condition of the Premises, or some act or omission of Tenant
or of some agent, contractor, employee, servant, subtenant
or concessionaire of Tenant on the Premises.
(b) Any work performed on the Premises or materials
furnished to The Premises at the instance or request of
Tenant or any agent or employee of Tenant; and
(c) Tenant's failure to perform any provision of this lease
or to comply with any requirement of law or any requirement
imposed on Landlord or the leased premises by any duly
authorized governmental agency or political subdivision.
PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE
SECTION 6.02: Tenant shall, at its own cost and expense,
procure and maintain during the entire term of this lease public
liability insurance and property damage insurance issued by an
insurance company acceptable to Landlord and insuring Landlord
against loss or liability caused by or connected with Tenant's
occupation and use of the Premises under this lease in amounts
not less than:
(a) $250,000 for injury to or death of one person and,
subject to that limitation for the injury or death of one
person, of not less than $1,000,000 for injury to or death
of two or more persons as a result of any one accident or
incident; and
(b) $ 100,000 for damage to or destruction of any property
of others. The insurance required under this section shall be
issued by a responsible insurance company or companies
authorized to do business in California and shall be in a
form reasonably satisfactory to Landlord. Tenant shall
within 20 days of the date of this lease, deposit with
Landlord a certificate showing that insurance to be in full
force and effect.
TENANT'S PERSONAL PROPERTY
SECTION 6.03: Tenant shall, during the full term of this
lease and any renewals or extensions thereof, maintain at
Tenant's own cost and expense an insurance policy issued by a
reputable company authorized to conduct insurance business in
California insuring for their full insurable value all fixtures
and equipment and, to the extent possible, all merchandise that
is, at any time during the term of this lease, in or on the
Premises against damage or destruction by fire, theft, or the
elements.
CANCELLATION REQUIREMENTS
SECTION 6.05: Each of the insurance policies shall be in a
form reasonably satisfactory to Landlord and shall carry an
endorsement that, before changing or canceling any policy, the
issuing insurance company shall give Landlord at least 30 days
prior written notice. Duplicate originals or certificates of all
such insurance policies shall be delivered to Landlord.
ARTICLE 7. SIGNS AND TRADE FIXTURES
INSTALLATION AND REMOVAL OF TRADE FIXTURES
SECTION 7.01: Tenant shall have the right at any time and
from time to time during the term of the lease, at Tenant's sole
cost and expense, to install and affix in, to, or on the Premises
any items, herein called "trade fixtures," for use in Tenant's
trade or business that Tenant may, in Tenant's sole discretion,
deem advisable. Any and all trade fixtures that can be removed
without structural damage to the Premises or any building or
improvements on the Premises shall, subject to Section 7.02 of
this lease, remain the property of the Tenant and may be removed
by Tenant at any time before the expiration or earlier
termination of this lease, provided Tenant repairs any damage
caused by the removal.
UNREMOVED TRADE FIXTURES
SECTION 7.02: Any trade fixtures described in this article
that are not removed from the premises by tenant within 10 days
after the expiration or earlier termination regardless of cause,
of this lease shall be deemed abandoned by Tenant and shall
automatically become the property of Landlord as owner of the
real property to which they are affixed.
SIGNS
SECTION 7.03: Tenant may erect, maintain, permit, and from
time to time remove any signs in or about the Premises that
Tenant may deem necessary or desirable, provided that any signs
erected or maintained by Tenant shall comply with all
requirements of any governmental authority with jurisdiction and
provided that the total signs placed by Tenant do not exceed the
amount set forth in the Addendum.
ARTICLE 8. DESTRUCTION OF PREMISES
LANDLORD'S OBLIGATION TO REPAIR
SECTION 8.01: Except as otherwise provided in Section 8.02
below, if at any time during the Original Term of this lease or
any Extended Term, the Building on the Premises is damaged or
destroyed by any cause, Landlord shall promptly repair, rebuild,
or restore the Building to substantially the same condition as
the Building was delivered to Tenant at the commencement of this
lease (i.e., exclusive of tenant fixtures and equipment).
Landlord shall have the obligation to repair, rebuild, or restore
described in this section whether or not the insurance proceeds
paid to Landlord are sufficient to cover the total cost of
repair, restoration, or rebuilding. Landlord shall commence
repair, restoration, or rebuilding, as appropriate, not later
than 60 days after occurrence of the event causing damage or
destruction and shall cause construction to be completed not
later than 120 days after the occurrence of the event causing
damage or destruction. Landlord's obligation to commence and
complete construction within the time periods described in this
section shall not be extended by the fact that Landlord may not
yet have been paid the insurance proceeds. In the event Landlord
does not commence or complete construction within the time
periods described in this section, Tenant shall have the right to
terminate this lease by giving Landlord written notice within 10
days after expiration of either time period.
LANDLORD'S RIGHT TO TERMINATE LEASE
SECTION 8.02: Notwithstanding Section 8.01, Landlord shall
have the right to terminate this lease and shall have no
obligation to repair, restore, or rebuild Premises or the
Building under any of the following circumstances:
(a) Damage or destruction from an insured casualty when the
damage or destruction cannot reasonably be required,
restored, or rebuilt within a period of 120 days;
(b) Damage or destruction from an uninsured casualty when
the cost of repair, restoration, or rebuilding exceeds a
total of 25% of the then replacement cost of the Building;
(c) Damage or destruction from an insured or uninsured
casualty occurring during the last year of the Original Term
of this lease, if Tenant has not before occurrence of the
casualty elected to extend the Original Term of the lease,
or occurring during the last two years of the Extended Term,
if any, of this lease.
If Landlord elects to terminate this lease under any of the
above circumstances, Landlord shall give written notice to Tenant
not later than 30 days after occurrence of the casualty.
ARTICLE 9. DEFAULT, ASSIGNMENT AND TERMINATION
RESTRICTION AGAINST SUBLETTING OR ASSIGNMENT
SECTION 9.01: Tenant shall not encumber, assign, or
otherwise transfer this lease, any right or interest in this
lease, or any right or interest in the Premises or any of the
Improvements that may now or hereafter be constructed or
installed on the Premises without first obtaining the express
written consent of Landlord. Tenant shall not sublet the Premises
or any party of the Premises or allow any other person, other
than Tenant's agents, servants, and employees, to occupy the
Premises or allow any other person, other than Tenant's agents,
servants, and employees, to occupy the Premises or any part of
the Premises without prior written consent of Landlord. A consent
by Landlord to one assignment, one subletting, or one occupation
of the Premises by another person shall not be deemed to be a
consent to any subsequent assignment, subletting, or occupation
of the Premises by another person. Any encumbrance, assignment,
transfer, or subletting without the prior written consent of
Landlord, whether voluntary or involuntary, by operation of the
law or otherwise, is void and shall, at the option of Landlord,
terminate this lease. The consent of Landlord to any assignment
of Tenant's interest in this lease or the subletting by Tenant of
the Premises or parts of the Premises shall not be unreasonably
withheld.
DEFAULT DEFINED
SECTION 9.02: The occurrence of any of the following shall
constitute a material default and breach of this lease by Tenant:
(a) Any failure by Tenant to pay the rent or make any other
payment required to be made by Tenant under this lease (when
failure continues for 10 days after written notice of the
failure is given by Landlord to Tenant).
(b) A failure by Tenant to observe and perform any other
provision of this lease to be observed or performed by
Tenant, when that failure continues for 30 days after
written notice of Tenant's failure is given by Landlord to
Tenant; provided, however, that if the nature of that
default is such that it cannot reasonably be cured within a
30 day period, Tenant shall not be deemed to be in default
if Tenant commences that cure within the 30 day period and
thereafter diligently prosecutes it to completion.
(c) The making by Tenant of any general assignment for the
benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a petition
for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against
Tenant, it is dismissed within 60 days); the appointment of
a trustee or receiver to take possession of substantially
all of Tenant's assets located at the Premises or of
Tenant's interest in this lease, when possession is not
restored to Tenant within 30 days; or the attachment,
execution, or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's
interest in this lease, when that seizure is not discharged
within 30 days.
TERMINATION OF LEASE AND RECOVERY OF DAMAGES
SECTION 9.03: In the event of any default by Tenant under
this lease, in addition to any other remedies available to
Landlord at law or in equity, Landlord shall have the right to
terminate this lease and all rights of Tenant hereunder by giving
written notice of the termination. No act of Landlord shall be
construed as terminating this lease except written notice given
by Landlord to Tenant advising Tenant that Landlord elects to
terminate the lease. In the event Landlord elects to terminate
this lease, Landlord may recover from Tenant:
(a) The worth of time of award of any unpaid rent that had
been earned at the time of termination of the lease;
(b) The worth at the time of award of the amount by which
the unpaid rent that would have been earned after
termination of the lease until the time of award exceeds the
amount of rental loss that Tenant proves could have been
reasonably avoided.
(c) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term of this lease
after the time of award exceeds the amount of rental loss
that Tenant proves could be reasonably avoided; and
(d) Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to
perform its obligations under this lease.
The term "rent" is used in this section shall mean the
Minimum Rent, and all other sums required to be paid by Tenant
pursuant to the terms of this lease. As used in subsections (a)
and (b) above, the "worth at the time of award" is computed by
allowing interest at the rate of 10 percent per year. As used in
subsection (c), the "worth at the time of award" is computed by
allowing interest at the rate of 10 percent per year. As used in
subsection (c), the "worth at the time of award" is computed by
discounting that amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus 1
percent.
LANDLORD'S RIGHT TO CONTINUE LEASE IN EFFECT
SECTION 9.04:
(a) If Tenant breaches this lease and abandons the Premises
before the natural expiration of the term of this lease, Landlord
may continue this lease in effect by not terminating Tenant's
rights to possession of the Premises, in which event Landlord
shall be entitled to enforce all its rights and remedies under
this lease, including the right to recover the rent specified in
this lease as it becomes due under this lease. For as long as
Landlord does not terminate this lease, Tenant shall have the
right to assign or sublease the Premises with the Landlord's
prior written consent. Landlord shall not unreasonably withhold
consent.
(b) No act of Landlord, including but not limited to
Landlord's entry of the Premises, efforts to relet the Premises,
or maintenance of the Premises, shall be construed as an election
to terminate this lease unless a written notice of that
intentions given to Tenant or unless the termination of this
lease is decreed by a court of competent jurisdiction.
LANDLORD'S RIGHT TO RELET
SECTION 9.05: In the event Tenant breaches this lease,
Landlord may enter on and relet the Premises or any party of the
Premises to a third party or third parties for any term, at any
rental, and on any other terms and conditions that Landlord in
its sole discretion may deem advisable and shall have the right
to make alterations and repairs to the Premises. Tenant shall be
liable for all of Landlord's costs in reletting, including but
not limited to remodeling costs required for reletting. In the
event Landlord relets the premises, Tenant shall pay all rent due
under and at the times specified in this lease, less any amount
or amounts actually received by Landlord from the reletting.
LANDLORD'S RIGHT TO CURE TENANT DEFAULTS
SECTION 9.06: If Tenant breaches or fails to perform any of
the covenants or provisions of this lease, Landlord may, but
shall not be required to, cure Tenant's breach. Any sum expended
by Landlord, shall be reimbursed at ten percent interest by
Tenant to Landlord with the next due rent payment under this
lease.
CUMULATIVE REDEDIES
SECTION 9.07: The remedies granted to Landlord in this
Article shall not be exclusive but shall be cumulative and in
addition to all remedies now or hereafter allowed by law or
provided in this lease.
WAIVER OF BREACH
SECTION 9.08: The waiver by Landlord of any breach by
Tenant of any of the provisions of this lease shall not
constitute a continuing waiver or a waiver of any subsequent
breach by Tenant either of the same or another provision of this
lease.
ARTICLE 10. MISCELLANEOUS
UNAVOIDABLE DELAYS
SECTION 10.01: If the performance of any act required by
this lease to be performed by either Landlord or Tenant is
prevented or delayed by reason of an act of God, strike, lockout,
labor troubles, inability to secure materials, restrictive
governmental laws or regulations, or any other cause except
financial inability that is not the fault of the party required
to perform the act, the time for performance of the act will be
extended for a period equivalent to the period of delay, and
performance of the act during the period of delay will be
excused. However, nothing contained in this section shall excuse
the prompt payment of rent by Tenant as required by this lease or
the performance of any act rendered difficult solely because of
the financial condition of the party required to perform the act.
ATTORNEY'S FEES
SECTION 10.02: If any litigation is commenced between the
parties to this lease concerning the Premises, this lease, or the
rights and duties of either in relation to the Premises or to
this lease, the party prevailing in that litigation shall be
entitled to, in addition to any other relief that may be granted
in the litigation, a reasonable sum as and for its attorney's
fees in that litigation or in a separate action brought for that
purpose.
NOTICES
SECTION 10.03: Except as otherwise expressly provided by
law, any and all notices or other communications required or
permitted by this lease or by law to be served on or given to
either party to this lease or by law to be served on or given to
either party to this lease by the other party to this lease shall
be in writing and shall be deemed duly served and given when
personally delivered to the party to whom they are directed, or
in lieu of personal service, when deposited in the United States
mail, first-class postage pre-paid, addressed to 1361 Lowrie
Avenue South San Francisco, California 94080 and to Tenant at the
address set forth in the Addendum. Either party, Tenant or
Landlord, may change its address for the purpose of this section
by giving written notice of that change to the other party in the
manner provided in this section.
BINDING ON HEIRS AND SUCCESSORS
SECTION 10.04: This lease shall be binding on and shall
inure to the benefit of the heirs,, executors, administrators,
successors, and assigns of Landlord and Tenant, but nothing in
this section shall be construed as a consent by Landlord to any
assignment of this lease or any interest therein by Tenant except
as provided in Section 10.01 of this lease.
PARTIAL INVALIDITY
SECTION 10.05: If any provision of this lease is held by a
court of competent jurisdiction to be either invalid, void, or
unenforceable, the remaining provisions of this lease shall
remain in full force and effect unimpaired by the holding.
SOLE AND ONLY AGREEMENT
SECTION 10.06: This instrument constitutes the sole and only
agreement between Landlord and Tenant respecting the Premises,
the leasing of the Premises to Tenant, or the lease term created
under this lease, and correctly sets forth the obligations of the
Landlord and Tenant to each other as of its date. Any agreements
or representations respecting the Premises of their leasing by
Landlord to Tenant not expressly set forth in this instrument are
null and void.
TIME OF ESSENCE
SECTION 10.07: Time is expressly declared to be of the
essence in this lease.
Executed on January 18, 1999 at Ukiah, California.
LANDLORD TENANT
Mark P. Mountanos Real Goods
BY:[S]DAVE DOWNEY BY:[S]DAVID FISSEL
Dave Downey David Fissel
</PAGE>
Mountanos Properties
605 North State Street
Ukiah, CA 95482
707-462-1840 Phone
707-467-2753 Fax
ADDENDUM TO EXISTING LEASE
Landlord hereby notifies Tenant, Real Goods, that your existing
lease identifies 207 Clara Unit A as your address. This addendum
reflects the address has been changed to 205 Clara #A.
This addendum to the Original Lease is entered into today January
26, 1999 by and between:
LANDLORD TENANT
By:[S]DAVE DOWNEY BY:[S]DAVID FISSEL
Dave Downey David Fissel
Property Manager Real Goods
</DOC>
THIS INDENTURE OF LEASE, entered into this day of March, 1996
between Harriet Davis hereinafter called the lessor, and Real Goods
Trading Corp., I hereinafter called the lessee,
WITNESSETH: In consideration of the covenants herein, the
lessor hereby leases unto the lessee those certain premises, as
is, situated in the City of Eugene, County of Lane and State of
Oregon, hereinafter called the premises, described as follows:
Approximately 3,800 sq ft. located at:
77 W. Broadway
To Have and to Hold the premises commencing with the 15th day
of April, 1996* and ending at midnight on the 14th day of April,
1999, for a rental of $ see below for the whole term, which lessee
agrees to pay, at 2100 Stonecrest Drive (97401) City of Eugene,
State of Oregon, at the following times and in the following
amounts, to-wit:
Year 1: $1,900. per month
Year 2: $1,957. per month
Year 3: $2,016. per month
* or the date the improvements (except skylights) to be provided
by Lessor (as set forth in the addendum) are completed, whichever
occurs later.
In consideration of the leasing of the premises and of the
mutual agreements herein contained, the parties agree as follows:
LIABILITY INSURANCE: (11) At all times during the term
hereof, the lessee Will, at the lessee's own expense, keep in
effect and deliver to the lessor liability insurance policies in
form, and with an insurer, satisfactory to the lessor. Such
Policies shall insure both the lessor and the lessee against all
liability for damage to persons or property in, upon, or about the
premises. The amount of such insurance shall be not less than
$1,000,000. for injury to one person, not less than $1,000,000. for
injuries to all persons arising out of any single incident, and not
less than $ 1,000,000. for damage to property, or a combined single
limit of not less than $ 1,000,000. It shall be the responsibility
of lessor to purchase casualty insurance with extended coverage so
as to insure any structure on the premises against damage caused by
lira or the affects of fire (smoke, heat, means of extinguishment,
etc.), or any other means of loss. It shall be the responsibility
of the lessee to insure all of the lessee's belongings upon the
premises, of whatsoever nature, against the same. With respect to
these policies, lessee shall cause the lessor to be named as
an additional insured party. Lessee agrees to and shall indemnify
and hold lessor harmless against any and all claims and demands
arising from the negligence of the lessee, lessees officers,
agents, invitees and/or employees, as well as those arising from
lessee's failure to comply with any covenant of this lease on
lessee's part to be performed, and shall at lessee's own expense
defend the lessor against any and all suits or actions arising out
of such negligence, actual or alleged, and all appeals therefrom
and shall satisfy and discharge any judgment which may be awarded
against lessor in any such suit or action. SEE INSERT 3
FIXTURES: (12) All partitions, plumbing, electrical wiring,
additions to or improvements upon the premises, whether installed
by the lessor or lessee, shall be and become a part of the
building in which the promises are located as soon as installed
and the property of the lessor unless otherwise herein provided.
LIGHT AND AIR: (13) This lease does not grant any rights of
access to light and air over the premises or any adjacent property.
DAMAGE BY CASUALTY, FIRE AND DUTY TO REPAIR: SEE INSERT 4
WAIVER OF SUBROGATION RIGHTS: (15) Neither the lessor nor
the lessee shall be liable to the other for loss arising out of
damage to or destruction of the promises, or the building or
improvement of which the premises are a part or with which they are
connected, or the contents of any thereof, when such loss is caused
by any of the perils which are or could be included within or
insured against by a standard form of fire insurance will, extended
coverage, including sprinkler leakage insurance, if any. All such
claims for any and all loss, however caused, hereby are waived.
Such absence of liability shall exist whether or not the damage or
destruction is caused by the negligence of either lessor or lessee
or by any of their respective agents, servants or employees. If is
the intention and agreement of the lessor and the lessee that the
rentals reserved by this lease have been fixed in contemplation
that both parties shall fully provide their own insurance
protection at their own expense, and that both parties shall took
to their respective insurance carriers for reimbursement of any
such loss, and further, that the insurance carriers involved shall
not be entitled to subrogation under any circumstances against any
party to this lease. Neither the lessor nor the lessee shall have
any interest or claim in the other's insurance policy of policies,
or the proceeds thereof, unless specifically covered therein as a
joint assured.
EMINENT DOMAIN (16) In case of the condemnation or purchase
of all or any substantial part of the premises by any public or
private corporation with the power of condemnation this lease may
be terminated, effective on the date possession is taken, by
either party hereto on written notice to the other and in
that case the lessee shall not be liable for any rent after the
termination date. Lessee shall not be entitled to and hereby
expressly waives any right to any part of the condemnation award or
purchase price.
FOR SALE AND FOR RENT SIGNS: (17) During the period of 90
days prior to the date above fixed for the termination of this
lease, the lessor herein may post on the premises or in the
windows thereof signs of moderate size notifying the public that
the premises are "for sale" or "for lease."
DELIVERING UP PREMISES ON TERMINATION: (18) At the
expiration of the lease term or upon any sooner termination
thereof, the lessee will quit and deliver up lessor's the premises
and all future erections or additions to or upon the same,
broom-clean, to the lessor or those having estate in the promises,
peaceably, quietly, and in as good order and condition, reasonable
use and wear thereof, damage by fire, unavoidable casualty and the
elements alone excepted, as the same are now in or hereafter may be
put in by the lessor.
ADDITIONAL COVENANTS OR EXCEPTIONS: (19) See attached
Addendum to Lease.
ATTACHMENT BANKRUPT DEFAULT: PROVIDED, ALWAYS, and these
presents are upon these conditions, that (1) it the lessee shall be
in arrears in the payment of rent for a period of ten days after
the same becomes due, or (2) it the lessee shall fail or neglect to
perform or observe any of the covenants and agreements contained
herein on lessee's part to be done, kept, performed and observed
and such default shall continue for ten days or more after written
notice of such failure or neglect shall be given to lessee, or (3)
if the lessee shall be declared bankrupt or insolvent according to
law, or (4) if any assignment of lessee's properly shall be made
for the benefit of creditors, or (5) if on the expiration at this
lease lessee fails to surrender possession of the premises, the
lessor or those having lessor's estate in the premises, may
terminate this lease and, lawfully, at lessor's option immediately
of at any time thereafter, without demand or notice, enter into and
upon the premises and every part thereof and reposses the same, and
expel lessee and those claiming by, through and under lessee and
remove lessee's effects at lessee's expense, forcibly if necessary
and store the same, all without being deemed guilty of trespass and
without prejudice. to any remedy which otherwise might be used for
arrears of rent or preceding breach of covenant.
Neither the termination of this lease by forfeiture nor
the taking or recovery of possession of the premises shall
deprive lessor of any other action, right, or remedy against lessee
for possession, rent or damages, nor shall any omission by lessor
to enforce any forfeiture, right or remedy to which lessor may be
entitled be deemed a waiver by lessor of the right to enforce the
performance of all terms and conditions of this lease by lessee.
In the event of any re-entry by lessor, lessor may lease
or relet the premises in whole or in part to any tenant or
tenants who may be satisfactory to lessor, for any duration, and
for the best rent, terms and conditions as lessor may reasonably
obtain. Lessor shall apply the rent received from any such tenant
first to the cost of retaking and reletting the premises, including
remodeling required to obtain any such tenant, and then to any
arrears of rent and future rent payable under this lease and any
other damages to which lessor may be entitled hereunder.
Any property which lessee leaves on the premises after abandonment
or expiration of the lease, or for more than ten days after any
termination of the lease by landlord, shall be deemed to have
been abandoned, and lessor may remove and sell the property at
public or private sale as lessor sees fit, without being liable for
any prosecution therefor or for damages by reason thereof, and the
not proceeds of any such sale shall be applied toward the expenses
of landlord and rent as aforesaid, and the balance of such amounts,
if any, shall be held for and paid to the lessee.
HOLDING OVER: In the event the lessee for any reason shall
hold over after the expiration of this lease, such holding over
shall not be deemed to operate as a renewal or extension of this
lease, but shall only create a tenancy at sufferance which may
be terminated at will at any time by the lessor.
ATTORNEY FEES AND COURT COSTS: In case suit or action is
instituted to enforce compliance with any of the terms, covenants
or conditions of this lease, or to collect the rental which may
become due hereunder, or any portion thereof, the losing party
agrees to pay the prevailing party's reasonable attorney fees
incurred throughout such proceeding, including at trial, on appeal,
and for post judgment collection. The lessee agrees to pay and
discharge all lessor's costs and expenses, including lessor's
reasonable attorney's fees that shall arise from enforcing any
provision or covenants of this lease even though no suit or action
is instituted.
Should the lessee be or become the debtor in any bankruptcy
proceeding, voluntarily, involuntarily or otherwise, either during
the period this lease is in effect or while there exists any
outstanding obligation of the lessee created by this lease in
favor of the lessor, the lessee agrees to pay the lessor's
reasonable attorney fees and costs which the lessor may incur as
the result of lessor's participation in such bankruptcy
proceedings. It is understood and agreed by both parties that
applicable federal bankruptcy law or rules of procedure may affect,
alter, reduce or nullify the attorney fee and cost awards mentioned
in the preceding sentence.
WAIVER: Any waiver by the lessor of any breach of any
covenant herein contained to be kept and performed by the lessee
shall not be deemed or considered as a continuing waiver,
and shall not operate to bar or prevent the lessor from declaring
a forfeiture for any succeeding breach, either of the same
condition or covenant or otherwise. NOTICES Any notice required
by the terms of this lease to be given by one party hereto to the
other or desired so to be given, shall be sufficient if in writing,
contained in a sealed envelope, and sent first class mail, with
postage fully prepaid, and it intended for the lessor herein, then
if addressed to the lessor at 2100 Stonecrest Drive, Eugene, OR
97041 and if intended for the lessee, then if addressed to the
lessee at . Any such notice shall be deemed conclusively to have
been delivered to the addressee forty-eight hours after the deposit
thereof in the U.S. Mail.
HEIRS AND ASSIGNS: All rights, remedies and liabilities
herein given to or imposed upon either of the parties hereto shall
extend to, inure to the benefit of and bind, as the circumstances
may require, the heirs, successors, personal representatives and so
far as this lease is assignable by the terms hereof, to the assigns
of such parties. In construing this lease, it is understood that
the lessor or the lessee may be more than one person; that if the
context so requires, the singular pronoun shall be taken to mean
and include the plural, and that generally all grammatical changes
shall be made, assumed and implied to make the provisions hereof
apply equally to corporations and to individuals.
IN WITNESS WHEREOF, the parties have executed this lease
on the day and year first hereinabove written, any corporation
signature being by authority of its Board of Directors.
SEE ATTACHED ADDENDUM TO LEASE AND INSERTIONS DTD MARCH 21,1996.
The publisher strongly recommends that both the lessor and the
lessee become familiar with the Americans with Disabilities Act of
1990, Public Laws 101-336. The Act may impose certain duties and
responsibilities upon either or both parties to this lease.
These duties and responsibilities may include but not be limited to
the removal of certain architectural barriers and ensuring that
disabled persons are not denied the opportunity to benefit from the
same goods and services as those available to persons without
disabilities. Under the Act, prohibition against discrimination
applies to any person who is the owner, operator, lessor, or
lessee of a place of public accommodation.
LESSEE'S ACCEPTANCE OF LEASE: (1) The lessee accepts this
letting and agrees to pay to the order of the lessor the monthly
rentals above stated for the full form of this lease, in advance,
at the times and in the manner aforesaid.
USE OF PREMISES: (2a) The lessee shall use the premises
during the term of this lease for the conduct of the following
business:
Retail space, and other related uses, such as lecture and
seminar space for topics related to retail sales and for no other
purpose whatsoever without lessor's written consent.
(2b) The lessee will not make any unlawful, improper or
offensive use of the promises; the lessee will not suffer any
strip or waste thereof; the lessee will not permit any
objectionable noise or odor to escape or to be emitted from the
premises or do anything or permit anything to be done upon or about
the premises in any way lending to create a nuisance; the lessee
will not &all or Permit to be sold any product, substance or
service upon or about the promises, excepting such as lessee may be
licensed by law to sell and as may be herein expressly permitted.
(2c) the losses will not allow the premises at any time to
fall Into such a state of repair or disorder as to increase the
fire hazard thereon; the lessee will not Install any power
machinery on the premises except under the supervision and with
written consent of the lessor; the lessee will not store gasoline
or other highly combustible materials on the premises at any time;
the lessee will not use the premises in such a way or for such a
purpose that the fire insurance rate on the improvements on the
premises is thereby increased or that would prevent the lessor from
taking advantage of any rulings of any agency of the state In which
the premises are situated, or which would allow the lessor to
obtain reduced premium rates for long term fire insurgence
policies.
(2d) The lessee shall comply at lessee's own expense with
all laws and regulations of any municipal, county, state, federal
or other public authority respecting the use of the promises. These
include, without limitation, all laws, regulations and ordinances
pertaining to air and water quality, Hazardous Materials as herein
defined, waste disposal, ale emissions, and other environmental
matters. As used herein, Hazardous Material means any hazardous or
toxic substance, material, or waste, Including but not limited to
those substances, materials, and waste listed in the U.S.
Department of Transportation Hazardous Materials Table or by the
U.S. Environmental Protection Agency as hazardous substances and
Amendments thereto, petroleum products, or such other substances,
materials, and waste that are or become regulated under any
applicable local, state, or federal law.
(2e) The lessee shall regularly occupy and use the
promises for the conduct of lessee's business, and shall not
abandon or vacate the premises for more than ten days without
written approval of lessor.
(2f) Losses shall not cause or permit any Hazardous
Material to be brought upon. kept or used in or about the
premises by lessee, its agents, employees, contractors, or invitees
without the prior written consent of lessor, which consent will
not be unreasonably withhold so long as lessee demonstrates to
lessor's reasonable satisfaction that such Hazardous Material is
necessary or useful to lessee's business and will be used, kept,
and stored in a manner that will comply at all times with all laws
regulating any such Hazardous Material so brought upon or used or
kept on or about the premises.
UTILITIES (3) The lessee shall pay for all host, light,
water, power, and other services or utilities used in the
promises during the term of this lease.
REPAIRS AND IMPROVEMENTS (4a) The lessor shall not be
required to make any repairs, alterations, additions or
improvements to or upon the premises during the form of this lease,
except only those hereinafter specifically provided for; the losses
hereby agrees to maintain and keep interior walls in good order and
repair during the entire term of this lease, at lessee's own cost
and expense, and to replace all glass which may be broken or
damaged during the form hereof in the windows and doors of the
promises with glass of as good or better quality as that now in
use; it is further agreed that the lessee will make no alterations,
additions or improvements to or upon the promises without the
written consent of the lessor first being obtained.
(4b) The lessor agrees to make all necessary structural
repairs to the building, including exterior walls, foundation,
roof, gutters and downspouts, and the abutting sidewalks. The
lessor reserves and at any and all firms shall have the right to
alter, repair or improve the building of which the promises are a
part, or to add thereto, and for that purpose at any firm may erect
scaffolding and all other necessary structures about and upon the
premises and lessor and lessor's representatives, contractors and
workers for that purpose may enter in or about the premises with
such materials as lessor may deem necessary therefor, and lessee
waives any claim to damages, including loss of business exulting
therefrom. INSERT 1
LESSOR'S RIGHT OF ENTRY: (5) It shall be lawful for the
lessor, the lessor's agents and representatives, at any reasonable
time INSERT #2 to enter into or upon the promises for the purpose
of examining into the condition thereof, or for any other lawful
purpose.
RIGHT OF ASSIGNMENT (6) The lessee will not assign, transfer,
pledge, hypothecate, surrender or dispose of this lease, or any
Interest herein, sublet, or permit any other person or persons
whomsoever to occupy the promises without the written consent of
the lessor being first obtained in writing; this lease is personal
to lessee; lessee's interests, in whole or in part, cannot be
sold, assigned, transferred, seized or taken by operation at
law, or under or by virtue of any execution or legal process,
attachment or proceedings institutes against the lessee, or under
or by virtue of any bankruptcy or insolvency proceedings had in
regard to the lessee, or in any other manner, except an above
mentioned.
LIENS: (7) The lessee will not permit any lien of any
kind, type or description to be placed or imposed upon the
improvements in which the premises are situated, or any part
thereof, or the land on which they stand.
ICE, SNOW, DEBRIS: (8) If the promises are located at street
level, then at all firms lessee shall keep the sidewalks in front
of the premises free and clear of ice, snow, rubbish, debris and
obstruction; and if the lessee occupies the entire building, the
lessee will not permit rubbish, debris, ice or snow to accumulate
on the roof of the building so as to stop up or obstruct gutters or
downspouts or cause damage to the roof, and will save harmless and
protect the lessor against any injury whether to lessor or to
lessors property or to any other person or property caused by
lessee's failure in that regard.
OVERLOADING OF FLOORS: (9) The lessee will not overload the
floors of the promises in such a way as to cause any undue or
serious stress or strain upon the building in which the premises
are located, or any part thereof, and the lessor shall have the
right, at any firm, to call upon any competent engineer or
architect whom the lessor may choose, to decide whether or not the
floors of the premises, or any part thereof, are being
overloaded so as to cause any undue or serious stress or strain
on the building, or any part thereof, and the decision of the
engineer or architect shall he final and binding upon the lessee;
and in the event that it is the opinion of the engineer or
architect that the stress or strain is such as to endanger or
injure the building, or any part thereof, then and in that event
the lessee agrees immediately to relieve (the stress or strain,
either by reinforcing the building or by lightening the load which
causes such stress or strain, in a manner satisfactory to the
lessor.
ADVERTISING SIGNS: (10) The lessee will not use the outside
walls of the premises, or allow signs or devices of any kind to be
attached thereto or suspended therefrom, for advertising or
displaying the name or business of the lessee of for any purpose
whatsoever without the written consent of the lessor; however, the
lessee may make use of the windows of the Promises to display
lessee's name and business when the workmanship of such signs shall
be of good quality and permanent nature; provided further that the
lessee may not suspend or place within said windows or paint
thereon any banners, signs, sign-boards or other devices in
violation of the intent and meaning of this section.
ADDENDUM TO LEASE
and
INSERTIONS
Lessee and Lessor hereby agree that notwithstanding anything
contained in the Lease to the contrary, the provisions set forth
below will be deemed to be a part of the Lease and shall, unless
stated otherwise in this Addendum, supersede, to the extent
appropriate, any contrary provision in the Lease.
1. IMPROVEMENT TO BE PROVIDED BY LESSOR: Lessor will provide
the following improvements at Lessors expense:
Repaint interior walls, using non-toxic paint, in a color to
be selected by Lessee and approved by Lessor. Painting to be
completed prior to lease commencement.
Install new carpeting throughout the premises, using non-toxic
carpet and carpet adhesive. Carpeting to be installed prior to
lease commencement. Color to be selected by Lessee and approved by
Lessor. (Cost of non-toxic paint, carpeting and adhesive shall be
subject to Lessor's final approval after selection of the products
is made).
Install a minimum of five (5) skylights, with dimensions
of approximately ten (10) square feet each, with clear glazing.
Location of skylights shall be determined by agreement of both
parties. Lessee acknowledges that installation of skylights may not
be completed prior to lease commencement. Lessee and Lessor agree
that skylights will be installed as soon as possible after the
lease is signed, but no later than September 1, 1996, unless delays
are caused by the permit application process. Lessee to be
responsible for cleaning skylights, and for removal of ice and/or
snow.
2. Handicapped Requirements: If at any time during the lease
term, City, State Or Federal authorities require any changes or
improvements to accommodate handicapped requirements. Lessor shall
be responsible for such changes or improvements, unless such
changes or improvements are caused by Lessee's se or by changes to
the premises made by Lessee. Any other work, however, which is
required by governmental authority pertaining to the Premises,
which would be required, regardless of ours or another retailer's
tenancy, and which is not specified as Lessee's obligation, shall
be done at the sole cost and expense of Lessor.
3. Permissions to Erect Solar Panels and Wind Generator on
Roof: Lessor grants permissions to Lessee to erect solar panels
and wind generator on the roof. All work to erect the solar panels
and wind generator shall be done with the required permits,
according to current building codes, and at Lessee's expense.
Prior to installation of any such equipment, Lessee shall provide
a plan for Lessor's review and approval.
4. Lessee's Right to Remove Ceiling; Lessor agrees that
Lessee may remove ceiling tiles, ceiling grid and light fixtures in
dropped ceiling area, provided, however, that Lessee, at Lessor's
option, reinstalls all ceiling components and lights and restores
the ceiling to its present condition at the end of the lease
term.
5. Option to Renew: Lessee shall have the option to extend
the lease for one term of two (2) years, under the same terms and
conditions as the primary lease term, except that the rent shall be
negotiated between the parties at the time the option is extended.
However, in no case shall rent increase more than 5% per year.
Notice of Lessee's intent to exercise the option shall be given in
writing no less than 120 days prior to expiration of the primary
lease term. If Lessee and Lessor have not agreed to a mutually
acceptable rent within thirty (30) days of Lessee's written notice
of its intent to extend, Lessor shall have the option of marketing
the space and finding another acceptable tenant.
6. Payment of Rent/Late Fee: Rent shall be paid on the 15th
day of each month. At Lessor's option, a penalty of 5% may be
imposed for any rents paid after the 25th day of the month.
7. First Rent Payment and Security Deposit: At lease
execution, Lessee shall pay rent for the first month of the lease
term in the amount of $1900 and a security deposit in an amount
equal to one month's rent, for a total of $3800.
8. Lessor's Responsibilities: Lessor shall pay real property
taxes and building hazard (fire) insurance, and shall provide all
maintenance to the building structural, electrical, plumbing and
mechanical systems and components, except the preventative
maintenance program for heating and air conditioning system, and
interior, janitorial-type maintenance to the leased premises.
9. Lessee's Responsibilities: Lessee shall provide personal
property insurance for Lessee's furnishings, fixtures and
equipment. Lessee shall also provide its own telephone and computer
wiring and systems, and shall provide interior, janitorial-type
maintenance to the leased premises. Lessee shall also schedule and
pay for a preventative maintenance program for the heating and air
conditioning system. The schedule shall include no less than three
(3) inspections per year.
10. Parking: Lessee acknowledges that there is no parking
provided with the subject premises and that the lot directly behind
the building is available for Lessee and Lessee's customers at the
market rate for parking in the area. Lessee to be responsible for
securing its own customer and employee parking.
11. Signage: Lessee shall provide its own signage subject to
prior written approval by Lessor and in compliance with the City of
Eugene Sign Code. Signs may be installed on both the front and rear
of the premises.
12. Corporate Assignments: Lessee shall have the right,
without Lessor's consent, to assign this lease, or sublet the
Premises, to a corporation with which it may merge or
consolidate, or in connection with the sale of all or a
portion of its assets, or to any parent or subsidiary of Lessee's
parent. The sale of stock by Lessee or by any shareholder of Lessee
shall not constitute an assignment under the terms of this Lease.
13. Reasonable Expectations: Regardless of any reference to
the words "sole" and absolute" (but except for matters which will
have an adverse effect on the structural integrity of the Premises,
or the plumbing, heating, life safety, ventilating, air
conditioning, mechanical or electrical systems of the Premises, or
which could affect the exterior appearance of the Premises,
whereupon in each such case Lessor's duty is to act in good faith
and in compliance with the Lease), any time the consent of
Lessor or Lessee is required, such consent shall not be
unreasonably withheld, conditioned or delayed. Whenever the Lease
grants Lessor or Lessee the right to take action, exercise
discretion, establish rules and regulations or make allocations
or other determinations, Lessor and Lessee shall act reasonably and
in good faith and take no action which might result in the
frustration of the reasonable expectations of a sophisticated
landlord and sophisticated tenant concerning the benefits to be
enjoyed under the Lease.
14. Interference with Lessee's Business: In the event that
Lessee's use of all or any significant portion of the Premises is
interfered with for a continuous period in excess of three (3)
business days by reason of cessation of utilities or other
essential services (e.g. electricity, water, sewer or septic, HVAC)
due to a failure of the building's systems, or by the Lessor's
activities in or about the Premises, the payment of rent under the
Lease shall abate for the period of such interference, provided,
however, that in no case shall the provisions of this paragraph
apply if such interference is due in whole or in part to the
negligence or willful misconduct of Lessee, its agents, employees
or contractors.
INSERTIONS
INSERT 1
Lessee shall be responsible for routine maintenance of and
minor repairs or alterations to the heating, ventilating and
cooling systems, interior wiring, plumbing and drain pipes to
sewers or septic tank to keep such, in good working order. However,
except to the extent required of Lessee in Section 4(a), Lessor
shall be responsible for installation of any additional major
utility systems, or any major repair or replacement of above
existing systems should such action become necessary as determined
by an independent contractor or as required by a government agency.
INSERT 2
...upon reasonable prior notice and in such a manner so as
to not interfere with Lessee's business in the Premises,...
INSERT 3
Lessor agrees to and shall indemnify and hold Lesee harmless
against any and all claims and demands arising from the negligence
of Lessor, Lessor's officers, agents invitees and/or employees, as
well as those arising from Lessor's failure to comply with any
covenant of this lease on Lessor's part to be performed, and shall,
at Lessor's own expense, defend Lesee against any and all suits or
actions arising out of such negligence, actual or alleged, and all
appeals therefrom and shall satisfy and discharge any judgment
which may be awarded against Lesee in any such suit or action.
INSERT 4
If the Premises is damaged or destroyed by fire or other casualty
("Casualty"), the risk of which is insured by Lessor or is
typically insured by the type of insurance required to be carried
by Lessor pursuant to Section 11 of the Lease, to the extent that
rebuilding or repairs cannot, in the opinion of an independent
general contractor reasonably selected by Lessor and approved by
Lessee with experience with similar repairs, reasonably be
completed within 240 days from the date of Casualty, Lessee may, at
its option, terminate this Lease as of the date of Casualty by
notice to Lessor. If Lessee does not so terminate this Lease, or if
the improvements are so damaged that rebuilding or repairs may be
completed within 240 days from the date of Casualty, then this
Lease shall not terminate, and Lessor shall proceed forthwith to
repair such improvements to substantially the condition as existed
immediately prior to the Casualty and shall diligently pursue such
Repair to completion.
Lessor shall not be required to repair any Casualty occurring
during the final (18) months of the term of the Lease, unless,
within ten (10) day after receipt of Lessor's notice that it
intends not to effect such repair, Lessee exercises in writing any
option to extend the term given Lessee hereunder.
REAL GOODS TRADING CORPORATION
by:[S]DONNA MONTAG by:[S]HARRIET C. DAVIS
Donna Montag Harriet C. Davis
its: Controller Date: March 21, 1996
Date: March 19, 1996
LEASE EXTENSION
This agreement is entered into this l2th day of April, 1999
as an extension of that certain lease entered into on March, 1996
by and between Real Goods Trading Corp. of 555 Leslie Street,
Ukiah, CA. 95482, as Lessee and Harriet C. Davis of 2100 Stone
Crest Drive, Eugene, OR 97401, as Lessor.
The said lease covers rental of that certain store building
located at 77 West Broadway, Eugene, OR. presently being occupied
by the Lessee.
By this Lease Extension Agreement the above recited lease is
renewed for an additional period of three (3) years on the same
terms and conditions as set forth in the original lease, with the
following changes:
This extension shall run for a period of three years
commencing with the l5th day of April, 1999 and ending at
midnight on the 14th day of April, 2002. Rent shall be due on
on the l5th day of each month at the following amounts:
Year 1: $2077.00 per month
Year 2: $2140.00 per month
Year 3: $2205.00 per month
Lessor also agrees to install double doors in rear of store,
upon her approval of plans, with cost not to exceed $2500.00.
Lessor also agrees to paint and repair walls and ductwork with
cost not to exceed $600.00.
Real Goods Trading Corp.
by:[S]JOHN SCHAEFFER Date: April 12, 1999
John Schaeffer
by:[S]HARRIET C. DAVIS
Harriet C. Davis
</DOC>
COMMERCIAL LEASE
1. PARTIES.
This lease was made and entered into this 18 day of
March 1999 by and between Jo Ann Cortina (hereinafter referred to
as "Landlord") and Real Goods Trading Corporation (hereinafter
referred to as "Tenant").
2. PREMISES.
Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, on the terms and conditions hereinafter set
forth that certain real property and the building and other
improvements located thereon situated in the City of Ukiah ,
County of Mendocino , State of CA, commonly known as 1031 North
State Street and described as a building of approx. 5,500 sq. ft.
recorded under A. P. No. 002-010-09. (said real property is
hereinafter called the "Premises")
3. TERM.
The term of this Lease shall be for 36 Months,
commencing on April 1, 1999 and ending on April 1, 2002, unless
sooner terminated as hereinafter provided.
4. RENT
Tenant shall pay Landlord as rent for the Premises the
following sums per month, in advance on the first day of each
month (there will be a six percent [ 6% ] late charge for any
rent payment not made by the 8th day of any month) during the
term of this Lease: During the first year of the term of this
Lease, the sum of Four thousand ($4.000.00) dollars per month.
During the second year of the term of this lease, the sum of
Four thousand one hundred sixty ($4,160.00) dollars per month.
During the third year of the term of this lease, the sum of
Four thousand three hundred twenty-six and forty cents
($4,326.40) dollars per month.
Tenant shall pay to Landlord upon the execution of this Lease
the sum of Four thousand ($4.000.00) dollars as rent for April
1999. Rent for any period during the term of this Lease which is
for less than one(1) month, shall be a pro rata portion of the
monthly installment. Rent shall be payable without notice or
demand and without any deduction, off -set, or abatement in
lawful money of the United States to the Landlord at the address
stated herein for notices or to such other persons or such other
places as the Landlord may designate to Tenant in writing.
5. SECURITY DEPOSIT.
Tenant shall deposit with Landlord upon execution of this
Lease the sum of Four thousand ($4.000.00) dollars as a security
deposit for the Tenant's faithful performance of the provisions
of this Lease. It Tenant fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of
this Lease, Landlord may use the security deposit, or any portion
of it, to cure the default or compensate Landlord for all damages
sustained by Landlord resulting from Tenant's default. Tenant
shall immediately on demand pay to Landlord the sum equal to
that portion of the security deposit expended or applied by
Landlord which was provided for in this paragraph so as to
maintain the security deposit in the sum initially deposited with
Landlord. Landlord shall not be required to keep the security
deposit separate from its general account nor shall Landlord be
required to pay Tenant any interest on the security deposit. It
Tenant performs all of Tenant's obligations under this Lease, the
security deposit or that portion thereof which has not previously
been applied by the Landlord, shall be returned to Tenant within
fourteen (14) days after the expiration of the term of this Lease,
or after Tenant has vacated the Premises, whichever is later.
6. USE.
Tenant shall use the Premises only for General office and
administration and call center operation for the corporation and
for no other purpose without the Landlord's prior written
consent.
Tenant shall not do, bring or keep anything in or about the
Premises that will cause a cancellation of any insurance covering
the Promises or the building in which the Premises are located.
If the rate of any insurance carried by the Landlord is increased
as a result of Tenant's use, Tenant shall pay to Landlord within
ten (10) days after written demand from Landlord, the amount of
any such increase. Tenant shall comply with all laws concerning
the Premises or Tenant's use of the Premises, including without
limitation, the obligation at Tenant's cost to alter, maintain,
or restore the Premises in compliance and conformity with all
laws relating to the condition, use, or occupancy of the Premises
by Tenant during the term of this Lease. Tenant shall hot use or
permit the use of the Premises in any manner that will tend to
create waste or a nuisance or, if there shall be more than one
tenant of the building containing the Premises, which shall
unreasonably disturb any other tenant.
Tenant hereby accepts the Premises in their condition
existing as of the date that Tenant possesses the Premises,
subject to all applicable zoning, municipal, county and state
laws, ordinances, regulations governing or regulating the use of
the Premises and accepts this Lease subject thereto and to all
matters disclosed thereby. Tenant hereby acknowledges that
neither the Landlord nor the Landlord's agent has made any
representation or warranty to Tenant as to the suitability of the
Premises for the conduct of Tenant's business.
7. TAXES.
(a) Real Property Taxes.
Landlord shall pay all real property taxes and general
assessments levied and assessed against the Premises during the
term of this Lease.
If it shall be Tenant's obligation to pay such real property
taxes and assessments hereunder, Landlord shall use its best
efforts to cause the Premises to be separately assessed from
other real property owned by the Landlord. If Landlord is unable
to obtain such a separate assessment, the assessor's evaluation
based on the building and other improvements that are a part of
the Premises shall be used to determine the real property taxes.
If this evaluation is not available, the parties shall quitably
allocate the property taxes between the building and other
improvements that are a part of the Premises and all buildings
and other improvements included in the tax bill. In making the
allocation, the parties shall reasonably evaluate the factors to
determine the amount of the real property taxes so that the
allocation of the building and other improvements that are a part
of the Premises will not be less than the ratio of the total
number of square feet of the building and other improvements that
are a part of the Premises bears to the total number of square
feet in all buildings and other improvements included in the tax
bill. Real property taxes attributable to land in the Premises
shall be determined by the ratio that the total number of square
feet in the Premises bears to the total number of square feet of
land included in the tax bill.
(b) Personal Property Taxes.
Tenant shall pay prior to the delinquency all taxes assessed
against and levied upon the trade fixtures, furnishings,
equipment and other personal property of Tenant contained in the
Premises. Tenant shall endeavor to cause such trade fixtures,
furnishings and equipment and all other personal property to be
assessed and billed separately from the property of the Landlord.
If any of Tenant's said personal property shall be assessed with
Landlord's property, Tenant shall pay to Landlord the taxes
attributable to Tenant within ten (10) days after the receipt of
a written statement from Landlord setting forth the taxes
applicable to Tenant's property.
8. UTILITIES.
Tenant shall make all arrangements and pay for all water,
gas, heat, light, power, telephone and other utility services
supplied to the Premises together with any taxes thereon and for
all connection charges. If any such services are not separately
metered to Tenant, the Tenant shall pay a reasonable proportion,
to be determined by Landlord, of all charges jointly metered with
other premises.
9. MAINTENANCE AND REPAIRS.
(a) Landlord's Obligations.
Except as provided in Article 12, and except for damage
caused by any negligent or intentional act or omission of Tenant,
Tenant's agents, employees, or invitees, Landlord at its sole
cost and expense shall keep in good condition and repair the
foundations, exterior walls, and exterior roof of the Premises.
Landlord shall also maintain the unexposed electrical, plumbing
and sewage systems including, without limitation, those portions
of the systems lying outside the Premises; window frames, gutters
and down spouts on the building, all sidewalks, landscaping and
other improvements that are a part of the Premises or of which
the Premises are a part. The Landlord shall also maintain the
heating, ventilating and air-conditioning systems servicing the
Premises. Landlord shall resurface and restripe the parking area
on or adjacent to the Premises when necessary. Landlord shall
have thirty (30) days after notice from Tenant to commence to
perform its obligations under this Article 9, except that
Landlord shall perform its obligations immediately if the nature
of the problem presents a hazard or emergency situation. If the
Landlord does not perform its obligations within the time limit
set forth in this paragraph, Tenant can perform said obligations
and shall have the right to be reimbursed for the amount that
Tenant actually expends in the performance of Landlord's
obligations. If Landlord does not reimburse Tenant within thirty
(30) days after demand from Tenant, Tenant's sold remedy shall be
to institute suit against the Landlord, and Tenant shall not have
the right to withhold from future rent the sums Tenant has
expended.
(b) Tenant's Obligations.
Subject to the provisions of Sub-paragraph (a) above and
Article 12, Tenant at Tenant's sole cost and expense shall keep
in good order, condition and repair the Premises and every part
thereof including, without limitation, all Tenant's personal
property, fixtures, signs, store fronts, plate glass, show
windows, doors, interior walls, interior ceiling, and lighting
facilities. If Tenant fails to perform Tenant's obligation as
stated herein, Landlord may at its option (but shall not be
required to), enter the Premises, after ten (10) days prior
written notice to Tenant, put the same in good order, condition
and repair, and the costs hereof together with interest thereon
at the rate of ten (10%) percent per annum shall become due and
payable as additional rental to Landlord together with Tenant's
next rental installment.
10. ALTERATIONS AND ADDITIONS.
(a) Tenant shall not, without the Landlord's prior written
consent, make any alterations, improvements or additions in or
about the Premises except for non-structural work which does not
exceed $1,000.00 in cost. As a condition to giving any such
consent, the Landlord may require the Tenant to remove any such
alterations, improvements, or additions at the expiration of the
term, and to restore the Premises to their prior condition by
giving Tenant thirty (30) days written notice prior to the
expiration of the term that Landlord requires Tenant to remove
any such alterations, improvements, or additions that Tenant has
made to the Premises. If Landlord so elects, Tenant at its sole
cost shall restore the Premises to the condition designated by
Landlord in its election before the last day of the term of the
Lease.
Before commencing any work relating to the alterations,
additions, or improvements affecting the Premises, Tenant shall
notify Landlord in writing of the expected date of the
commencement of such work so that Landlord can post and record
the appropriate notices of non-responsibility to protect Landlord
from any mechanic's liens, materialman liens, or any other liens.
In any event, Tenant shall pay, when due, all claims for labor
and materials furnished to or for Tenant at or for use in the
Premises. Tenant shall not permit any mechanic's liens or
materialman's liens to be levied against the Premises for any
labor or material furnished to Tenant or claimed to have been
furnished to Tenant or Tenant's agents or contractors in
connection with work of any character performed or claimed to
have been performed on the Premises by or at the direction of
Tenant. Tenant shall have the right to assess the validity of any
such lien if, immediately on demand by Landlord, Tenant procures
and records a lien release bond meeting the requirements of
California Civil Code Section 3143 and shall provide for the
payment of any sum that the claimant may recover on the claim
(together with the costs of suit, if it is recovered in the
action).
Unless the Landlord requires their removal as set forth
above, all alterations, improvements or additions which are made
on the Premises by the Tenant shall become the property of the
Landlord and remain upon and be surrendered with the Premises at
the expiration of the term. Notwithstanding the provisions of
this paragraph, Tenant's trade fixtures, furniture, equipment and
other machinery, other than that which is affixed to the Premises
so that it cannot be removed without material or structural
damage to the Premises, shall remain the property of the Tenant
and removed by Tenant at the expiration of the term of this
Lease.
11. INSURANCE; INDEMNITY.
(a) Fire Insurance.
Landlord at its cost shall maintain during the term of this
Lease on the Premises a policy or policies of standard fire and
extended coverage insurance to the extent of at least ninety
(90%) percent of full replacement value thereof. Said insurance
policies shall be issued in the names of Landlord and Tenant, as
their interests may appear. Tenant at its cost shall maintain
during the term of this Lease on all its personal property,
Tenant's improvements, and alterations in or about the Premises,
a policy of standard fire and extended coverage insurance, with
vandalism and malicious mischief endorsements, to the extent of
their full replacement value. The proceeds from any such policy
shall be used by Tenant for the replacement of personal property
or the restoration of Tenant's improvements or alterations.
(b) Liability Insurance.
Tenant at its sole cost and expense shall maintain during
the term of this Lease public liability and property damage
insurance with a single combined liability limit of five hundred
thousand ($500,000.00) dollars, and property damage limits of not
less that one hundred thousand ($100,000.00) dollars, insuring
against all liability of Tenant and its authorized
representatives arising out of and in connection with Tenant's
use or occupancy of the Premises. Both public liability insurance
and property damage insurance shall insure performance by Tenant
of the indemnity provisions in Sub-paragraph (d) below, but the
limits of such insurance shall not, however, limit the liability
of Tenant hereunder. Both Landlord and Tenant shall be named as
additional insureds, and the policies shall contain
cross-liability endorsements. if Tenant shall fail to procure and
maintain such insurance the Landlord may, but shall not be
required to, procure and maintain same at the expense of Tenant
and the cost thereof, together with interest thereon at the rate
of ten (10%) percent per annum, shall become due and payable as
additional rental to Landlord together with Tenant's next rental
installment.
(c) Waiver of Subrogation.
Tenant and Landlord each waives any and all rights of
recovery against the other, or against the officers, employees,
agents, and representatives of the other. for loss of or damage
to such waiving party or its property or the property of others
under its control, where such loss or damage is insured against
under any insurance policy in force at the time of such loss or
damage. Each party shall cause each insurance policy obtained by
it hereunder to provide that the insurance company waives all
right of recovery by way of subrogation against either party in
connection with any damage covered by any such policy.
(d) Hold Harmless.
Tenant shall indemnify and hold Landlord harmless from and
against any and all claims arising from Tenant's use or occupancy
of the Premises or from the conduct of its business or from any
activity, work, or things which may be permitted or suffered by
Tenant in or about the Premises including all damage, costs,
attorney's fees, expenses and liabilities incurred in the defense
of any claim or action or proceeding arising therefrom. Except
for Landlord's willful or grossly negligent conduct, Tenant
hereby assumes all risk of damage to property or injury to person
in or about the Premises from any cause, and Tenant hereby waives
all claims in respect thereof against Landlord.
(e) Exemption of Landlord from Liability.
Except for Landlord's willful or grossly negligent conduct,
Tenant hereby agrees that Landlord shall not be liable for any
injury to Tenant's business or loss of income therefrom or for
damage to the goods, wares, merchandise, or other property of
Tenant, Tenant's employees, invitees, customers or any other
person in or about the Premises; nor shall Landlord be liable for
injury to the person of Tenant. Tenant's employees, agents,
contractors, or invitees, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain,
or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air-conditioning,
or lighting fixtures, or from any other cause, whether such
damage results from conditions arising upon the Premises
or upon other portions of the building in which the Premises are
a part. or from any other sources or places. Landlord shall not
be liable to Tenant for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the
Premises are located.
12. DAMAGE OR DESTRUCTION.
(a) Damage - Insured.
If, during the term of this Lease, the Promises and/or the
building and other improvements in which the Premises are located
are totally or partially destroyed rendering the Premises totally
or partially inaccessible or unusable, and such damage or
destruction was caused by a casualty covered under an insurance
policy required to be maintained hereunder, Landlord shall
restore the Premises and/or the building and other improvements
in which the Premises are located into substantially the same
condition as they were in immediately before such damage or
destruction, provided that the restoration can be made under the
existing laws and can be completed within one hundred twenty
(120) working days after the date of such destruction or damage.
Such destruction or damage shall not terminate this Lease.
If the restoration cannot be made in said 120 day period,
then within fifteen (IS) days after the parties hereto determine
that the restoration cannot be made in the time stated in 'his
paragraph, Tenant may terminate this Lease immediately by giving
notice to Landlord and the Lease will be deemed cancelled as of
the date of such damage or destruction. If Tenant fails to
terminate this Lease and the restoration is permitted under
the existing laws, Landlord, at its option, may terminate
this Lease or restore the Premises and/or any other improvements
in which the Premises are located within a reasonable time and
this Lease shall continue in full force and effect. If the
existing laws do not permit the restoration, either party can
terminate this Lease immediately by giving notice to the other
party.
Notwithstanding the above, if the Tenant is the insuring
party and if the insurance proceeds received by Landlord are not
sufficient to effect such repair, Landlord shall give notice to
Tenant of the amount required in addition to the insurance
proceeds to effect such repair. Tenant may, at Tenant's option,
contribute the required amount, but upon failure to do so within
thirty (30) days following such notice, Landlord's sole remedy
shall be, at Landlord's option and with no liability to Tenant,
to cancel and terminate this Lease. If Tenant shall contribute
such amount to Landlord within said thirty (30) day period,
Landlord shall make such repairs as soon as reasonably possible
and this Lease shall continue in full force and effect. Tenant
shall in no event have any right to reimbursement for any amount
so contributed.
(b) Damage - Uninsured.
In the event that the Promises are damaged or destroyed by a
casualty which is not covered by the fire and extended coverage
insurance which is required to be carried by the party designated
in Article 11 (a) above, then Landlord shall restore the same;
provided that if the damage or destruction is to an extent
greater than ten (10%) percent of the then replacement cost of
the improvements on the Premises (exclusive of Tenant's
trade fixtures and equipment and exclusive of foundations and
footings), then Landlord may elect not to restore and to
terminate this Lease. Landlord must give to Tenant written notice
of its intention not to restore within thirty (30) days from the
date of such damage or destruction and, if not given, Landlord
shall be deemed to have elected to restore and in such event
shall repair any damage as soon as reasonably possible. In
the event that Landlord elects to give such notice of Landlord's
intention to cancel and terminate this Lease, Tenant shall have
the right, within ten (10) days after receipt of such notice, to
give written notice to Landlord of Tenant's intention to repair
such damage at Tenant's expense, without reimbursement from
Landlord, in which event the Lease shall continue in full force
and effect and Tenant shall proceed to make such repairs as
soon as reasonably possible. If the Tenant does not give such
notice within such 10 day period, this Lease shall be cancelled
and be deemed terminated as of the date of the occurrence of such
damage or destruction.
(c)Damage Near the End of the Term.
If the Premises are totally or partially destroyed or damaged
during the last twelve 112) months of the term of this Lease,
Landlord may, at Landlord's option, cancel and terminate this
Lease as of the date of the cause of such damage by giving
written notice to Tenant of Landlord's election to do so within
30 days after the date of the occurrence of such damage;
provided, however, that. It the damage or destruction occurs
within the last 12 months of the term and if within fifteen
(15) days after the date of such damage or destruction Tenant
exercises any option to extend the term provided herein, Landlord
shall restore the Premises if obligated to do so as provided in
subparagraph (a) or (b) above.
(d) Abatement of Rent.
If the Premises are partially or totally destroyed or
damaged and Landlord or Tenant repairs or restores them pursuant
to the provisions of this Article 12, the rent payable hereunder
for the period during which such damage, repair or restoration
continues shall be abated in proportion to the degree to which
Tenant's reasonable use of the Premises is impaired. Except for
the abatement of rent, if any, Tenant shall have no claim against
Landlord for any damages suffered by reason of any such
damage, destruction, repair or restoration.
(e) Trade Fixtures and Equipment.
If Landlord is required or elects to restore the Premises as
provided in this Article, Landlord shall not be required to
restore Tenant's improvements, trade fixtures, equipment or
alterations made by Tenant, such excluded items being the sole
responsibility of the Tenant to restore hereunder.
(f) Total Destruction-Multitenant Building.
It the Promises are a part of a multitenant building and
there is destruction to the Premises and/or the building of which
the Premises are a part that exceeds Fifty (50%) percent of the
then replacement value of the Premises and/or the building in
which the Premises are a part from any cause whether or not
covered by the insurance described in Article 11 above, Landlord
may, at its option, elect to terminate this Lease (whether or not
the Premises are destroyed) so long as Landlord terminates
the leases of all other tenants in the building of which the
Premises are a part, effective as of the date of such damage or
destruction.
13. CONDEMNATION.
If the Premises or any portion thereof are taken by the
power of eminent domain, or sold by Landlord under tile threat of
exercise of said power (all of which is herein referred to as
"condemnation"), this Lease shall terminate as to tile part so
taken as of the date the condemning authority takes title or
possession, whichever occurs first. If more than twenty (20%)
percent of the floor area of any buildings on the Premises, or
more than twenty (20%) percent of the land area of the Premises
not covered with buildings, is taken by condemnation, either
Landlord or Tenant may terminate this Lease as of the date the
condemning authority takes possession by notice in writing of
such election within twenty (20) days after Landlord shall have
notified Tenant of such taking or, in the absence of such notice,
then within twenty (20) days after the condemning authority
shall have taken possession.
If this Lease is not terminated by either Landlord or Tenant
as provided hereinabove, then it shall remain in full force and
effect as to the portion of the Premises remaining, provided that
the rental shall be reduced in proportion to the floor area of
the buildings taken within the Premises as it bears to the total
floor area of all buildings located on the Premises. In the event
this Lease is not so terminated, then Landlord agrees at
Landlord's sole cost and expense, to as soon as reasonably
possible restore the Premises to a complete unit of like quality
and character as existed prior to the condemnation. All awards
for the taking of any part of the Premises or any payment made
under the threat of the exercise of the power of eminent domain
shall be the property of the Landlord, whether made as
compensation for the diminution of the value of the leasehold or
for the taking of the fee or as severance damages; provided,
however, that Tenant shall be entitled to any award for loss or
damage to Tenant's trade fixtures and removable personal
property.
Each party hereby waives the provisions of Code of Civil
Procedure 1265.130 allowing either party to petition the Superior
Court to terminate this Lease in the event of a partial taking of
the Premises. Refit shall be abated or reduced during the period
from the date of taking until the completion of restoration by
Landlord, but all other obligations of Tenant tinder this Lease
shall remain in full force and effect. The abatement or reduction
of the rent shall be based on the extent to which the restoration
interferes with Tenant's use of the Premises.
14. ASSIGNMENT AND SUBLETTING.
Tenant shall not voluntarily or by operation of lawssign,
transfer, sublet, mortgage, or otherwise transfer or encumber all
or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent which consent shall not
be unreasonably withheld. Any attempted assignment, transfer,
mortgage, encumbrance, or subletting without Such consent shall
be void and shall constitute a breach of this Lease. If Tenant
is a corporation, any dissolution, merger, consolidation or
other reorganization of Tenant, or the sale or other transfer of
a controlling percentage of the capital stock of Tenant, or the
sale of at least fifty-one (51 %) percent of the value of the
assets of Tenant, shall be deemed a voluntary assignment. The
phrase "controlling percentage" means the ownership of, and the
right to vote, stock possessing at least fifty-one (51 %) percent
of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding, and entitled to vote for the
election of directors. This paragraph shall not apply to
corporations the stock of which is traded through an exchange or
over the counter.
Regardless of Landlord's consent, no subletting or
assignment shall release Tenant or Tenant's obligation to pay the
rent and to perform all other obligations to be performed by
Tenant hereunder for the term of this Lease. The acceptance of
rent by Landlord from any other person shall not be deemed a
waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting.
15. DEFAULT.
(a) Events of Default.
The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant:
(1) Failure to pay refit when due, if the failure
continues for five (5) days after written notice has been given
to Tenant.
(2) Deleted
(3) Failure to perform any other provision of this Lease
if the failure to perform is not cured within thirty (30) days
after written notice thereof has been given to Tenant by
Landlord. If the default cannot reasonably be cured within said
thirty (30) day period, Tenant shall not be in default tinder
this Lease if Tenant commences to cure the default within the
thirty (30) day period and diligently prosecutes the same to
completion.
(4) The making by Tenant of any general assignment, or
general arrangement for the benefit of creditors; the filing by
or against Tenant of if petition to have Tenant adjudged a
bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy unless the same is dismissed
within sixty (60) days; the appointment of a trustee or receiver
to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in the Lease,
where possession is not restored to Tenant within thirty (30)
days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or
of Tenant's interest in the Lease, where such seizure is not
discharged within thirty (30) days.
Notices given tinder this paragraph shall specify the
alleged default and the applicable lease provisions, and shall
demand that Tenant perform the provisions of this Lease or pay
the refit that is in arrears as the case may be, within the
applicable period of time. No such notice shall be deemed a
forfeiture or a termination of this Lease unless Landlord so
elects in the notice.
(b) Landlord's Remedies.
The Landlord shall have the following remedies it Tenant
commits a default under this Lease. These remedies are not
exclusive but are cumulative and in addition to any remedies now
or hereafter allowed by law.
Landlord can continue this Lease in full force and effect,
and the Lease will continue in effect so long as Landlord does
not terminate Tenant's right to possession, and the Landlord
shall have the right to collect refit when due. During the period
that Tenant is in default, Landlord can enter the Premises and
relet them, or any part of them. to third parties for Tenant's
account. Tenant shall be liable immediately to the Landlord for
all costs the Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of
remodeling the Premises required by the reletting, and like
costs. Reletting can be for a period shorter or longer than the
remaining term of this Lease. Tenant shall pay to Landlord
the rent due tinder this Lease on the dates the refit is due,
less the refit Landlord receives from any reletting. No act by
Landlord allowed by this paragraph shall terminate this Lease
unless Landlord notifies Tenant that Landlord elects to terminate
this Lease. After Tenant's default and for so long as Landlord
has not terminated Tenant's right to possession of the Premises,
if Tenant obtains Landlord's consent, Tenant shall have the right
to assume or sublet its interest in the Lease, but Tenant shall
not be released from liability. Landlord's consent to the
proposed assignment or subletting shall not be unreasonably
withheld.
If Landlord elects to relet the Premises as provided in this
paragraph, any rent that Landlord receives from such reletting
shall apply first to the payment of any indebtedness from Tenant
to Landlord other than the rent due from Tenant to Landlord;
secondly, to all costs, including maintenance, incurred by
Landlord in such reletting; and third, to any rent due and unpaid
under this Lease. After deducting the payments referred to in
this paragraph, any sum remaining from the rent Landlord receives
from such reletting shall he held by Landlord and applied in
payment of future rent as rent becomes due under this Lease. In
no event shall tenant be entitled to any excess rent received by
Landlord. If, on the date rent is due under this Lease, the rent
received from the reletting is less than the rent due on that
date, Tenant shall pay to Landlord, in addition to the remaining
rent due, all costs, including maintenance, that Landlord shall
have incurred in reletting that remain after applying the rent
received from reletting as provided in this paragraph.
Landlord can, at its option, terminate Tenant's right to
possession of the Premises at any time. No act by Landlord other
than giving written notice to Tenant shall terminate this Lease.
Acts of maintenance, efforts to relet the Premises, or the
appointment of a receiver on Landlord's initiative to protect
Landlord's interest in this Lease shall not constitute a
termination of Tenant's right to possession. In the event of such
termination, Landlord has the right to recover from Tenant:
(1) The worth, at the time of the award, of the unpaid rent
that had been earned at the time of the termination of this
Lease;
(2) The worth, at the time of the award, of the amount by
which the unpaid rent that would have been earned after the date
of the termination of this Lease until the time of the award
exceeds the amount of the loss of rent that Tenant proves could
have been reasonably avoided;
(3) The worth, at the time of the award, of the amount by
which the unpaid rent for the balance of the term after the time
of the award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided; and (4) Any other
amount, including court costs, necessary to compensate Landlord
for all detriment proximately caused by Tenant's default. "The
worth at the time of the award," as used in (1) and (2) of this
paragraph is to be computed by allowing interest at the maximum
rate all individual is permitted by law to charge. "The worth at
the time of the award," as referred to in (3) (if this paragraph
is to be computed by discounting the amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of the
award, plus one (1%) percent.
Landlord at any time after Tenant commits a default, can
cure the default at Tenant's cost and expense. If Landlord at any
time, by reason of Tenant's default, pays any sum or does any act
that requires the payment of any sum, the sum paid by Landlord
shall be due immediately from Tenant to Landlord at the time the
sum is paid, and if paid at a later date shall bear interest at
the maximum rate an individual is permitted by law to charge from
the date the sum is paid by Landlord until Landlord is reimbursed
by Tenant. The sum, together with interest thereon, shall be
considered additional rent.
16. SIGNS.
Tenant shall not have the right to place, construct or
maintain any sign, advertisement, awning, banner, or other
exterior decorations oil the building or other improvements that
are a part of the Premises without Landlord's prior, written
consent, which consent shall not be unreasonably withheld.
17. EARLY POSSESSION.
In the event that the Landlord shall permit Tenant to occupy
the Premises prior to the commencement date of the term of this
Lease, such occupancy shall be subject to all the provisions of
this Lease. Said early possession shall not advance the
termination date of this Lease.
18. SUBORDINATION.
This Lease, at Landlord's option , shall be subordinate to
any ground lease, mortgage, deed of trust, or any other
hypothecation for security now or hereafter placed upon the real
property of which the Premises are a part and to any and all
advances made on the security thereof and to all renewal,
modifications, and extensions thereof. Notwithstanding any such
subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed if Tenant is not in default and
so long as Tenant shall pay the rent and observe and perform all
the other provisions of this Lease, unless this Lease is
otherwise terminated pursuant to its terms. If any mortgagee,
trustee, or ground lessor shall elect to have this Lease prior to
the lien of its mortgage or deed of trust or ground lease,
and shall give written notice thereof to Tenant, this Lease shall
be deemed prior to such mortgage, deed of trust or ground lease,
whether this Lease is dated prior to or subsequent to the date of
such mortgage deed of trust or ground lease, or the date of
recording thereof. Tenant agrees to execute any documents
requiring to effect such subordination or to make this Lease
prior to the lien of any mortgage. deed of trust, or ground
lease, as the case may be, and failing to do so within ten (10)
days after written demand from Landlord does hereby make,
constitute and irrevocably appoint Landlord as Tenant's attorney
in fact and in Tenant's name, place and stead to do so.
19. SURRENDER.
On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in
good condition, broom clean, ordinary wear and tear accepted.
Tenant shall repair any damage to the Premises occasioned by its
use thereof, or by the removal of Tenant's trade fixtures,
furnishings and equipment which repair shall include the patching
and filling of holes and repair of structural damage. Tenant
shall remove all of its personal property and fixtures on the
Premises prior to the expiration of the term of this Lease and if
required by Landlord pursuant to Article 10(a) above, any
alterations, improvements or additions made by Tenant to the
Premises. If Tenant fails to surrender the Premises to Landlord
on the expiration of the Lease as required by this paragraph,
Tenant shall hold Landlord harmless from all damages resulting
from Tenant's failure to vacate the Premises, including, without
limitation, claims made by any succeeding tenant resulting from
Tenant's failure to surrender the Premises.
20. HOLDING OVER.
If the Tenant, with the Landlord's consent, remains in
possession of the Premises after the expiration or termination of
the term of this Lease, such possession by Tenant shall be deemed
to be a tenancy from month-to-month at a rental in the amount of
the last monthly rental plus all other charges payable hereunder,
upon all the provisions of this Lease applicable to
month-to-month tenancy.
21. BINDING ON SUCCESSORS AND ASSIGNS.
The terms, conditions and covenants of this Lease shall be
binding upon and shall inure to the benefit of each of the
parties hereto, their heirs, personal representatives, successors
and assigns.
22. NOTICES.
Whenever under this Lease a provision is made for any
demand, notice or declaration of any kind. it shall be in writing
and served either personally or sent by registered or certified
United States mail, postage prepaid, addressed at the addresses
set forth below:
TO LANDLORD AT: Jo Ann Cortina TENANT AT: Real Goods, Inc.
348 Washington Ave. 205B Clara St.
Ukiah, CA 95482 Ukiah, CA 95482
Such notices shall be deemed to be received within
forty-eight (48) hours from the time of mailing, if mailed as
provided for in this paragraph.
23. LANDLORD'S RIGHT TO INSPECTION.
Landlord and Landlord's agent shall have the right to enter
the Premises at reasonable times for the purpose of inspecting
same, showing the same to prospective purchasers or lenders, and
making such alterations, repairs, improvements or additions to
the Premises or to the building of which the Premises are a part
as Landlord may deem necessary or desirable. Landlord may at any
time place on or about the Premises any ordinary "For Sale" signs
and Landlord may at any time during the last one hundred twenty
(120) days of the term of this Lease place on of about the
Premises any ordinary *For Sale or Lease* signs, all without
rebate of rent or liability to Tenant.
24. CHOICE OF LAW.
This Lease shall be governed by the laws of the state where
the Premises are located.
25. ATTORNEY'S FEES.
If either Landlord or Tenant becomes a party to any
litigation or arbitration concerning this Lease, the Premises, or
the building or other improvements in which the Premises are
located, by reason of any act or omission of the other party or
its authorized representatives, and not by reason of any act or
omission of the party that becomes a party to that litigation or
any act or omission of its authorized representatives the party
that causes the other party to become involved in the litigation
shall be liable to that party for reasonable attorney's fees and
court costs incurred by it in the litigation. If either party
commences an action against the other party arising out of or in
connection with this Lease, the prevailing party shall be
entitled to have and recover from the losing party reasonable
attorney's fees and costs of suit.
26. LANDLORD'S LIABILITY.
The term "Landlord" as used in this Lease shall mean only
the owner or owners at the time in question of the fee title or a
Lessee's interest in a ground lease of the Premises, and in the
event of any transfer of such title or interest, Landlord herein
named (and in case of any subsequent transfers to the then
successor) shall be relieved from and after the date of such
transfer of all liability in respect to Landlord's obligations
thereafter to be performed. The obligations contained in this
Lease to be performed by Landlord shall be binding upon the
Landlord's successors and assigns, only during their respective
periods of ownership.
27. WAIVERS.
No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any
subsequent breach by Tenant of the same or any other provision.
Landlord's consent to or approval of any act shall not be deemed
to render unnecessary the obtaining of Landlord's consent to or
approval of any subsequent act by Tenant. The acceptance of rent
hereunder by Landlord shall not be a Waiver of any preceding
breach by Tenant of any provision hereof, 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 its
acceptance of such rent.
28. INCORPORATION OF PRIOR AGREEMENTS.
This Lease contains all agreements of the parties with
respect to any matter mentioned herein. No prior agreement or
understanding pertaining to any such matter shall be effective.
This Lease may be modified only in writing, and signed by the
parties in interest at the time of such modification.
29. TIME.
Time is of the essence of this Lease.
30. SEVERABILITY.
The unenforceability, invalidity, or illegality of any
provision of this Lease shall not render the other provisions
hereof unenforceable, invalid or illegal.
31. ESTOPPEL CERTIFICATES.
Each party, within ten (10) days after notice from the
other party, shall execute and deliver to the other party a
certificate stating that this Lease is unmodified and in full
force and effect, or in fullforce and effect as modified, and
stating the modification. The certificate shall also state the
amount of minimum monthly rent, the dates to which rent has been
paid in advance, and the amount of any security deposit
or prepaid rent, if any, as well as acknowledging that there are
not, to that party's knowledge, any uncured defaults on the part
of the other party, or specifying such defaults, if any, which
are claimed.
32. COVENANTS AND CONDITIONS.
Each provision of this Lease performable by Tenant shall be
deemed both a covenant and a condition.
33. SINGULAR AND PLURAL.
When required by the context of this Lease, the singular
shall indicate the plural.
34. JOINT AND SEVERAL OBLIGATIONS.
"Party" shall mean Landlord and Tenant; and if more than
one person or entity is the Landlord or Tenant, the obligations
imposed on that party shall be joint and several.
35. OPTION TO EXTEND. See attached.
36. ADDENDUM.
Any addendum attached hereto and either signed or initialled
by the parties shall be deemed a part hereof and shall supersede
any conflicting terms or provisions contained in this Lease.
The parties hereto have executed this Lease on the date first
above
written.
LANDLORD: TENANT:
BY:[S]JOANN CORTINA BY:[S]RA ZELL
JoAnn Cortina RA Zell
ADDENDUM ONE
<TABLE>
<CAPTION>
Responsible Party LANDLORD TENANT
<S> <C> <C>
Building meeting all codes X
Exterior and roof of building X
Finish all walls with insulation
and sheet rock X
Complete red painted hvac duct
work throughout facility X
Carpet entire facility except
for break and storage rooms X
Finish parking area behind building X
Finish patio area in back of building X
Remove all Deli signs from street
and building X
Secure parking arrangements
with Goodwill X
Install all plumbing fixtures X
Paint walls & ceilings with
non-toxic, white, semi-gloss
paint X
Complete building to architect
specifications OR use hardware
& fixtures of equal or
superior quality X
Spread gravel or asphalt
in parking area and seal Fairgrounds
Install T8 lighting on ceiling
throughout facility
according to design: X
Financial responsibility
(labor & material) for putting a
window in East (patio) wall X
Financial responsibility
(labor & material) for opening
into SE office X
Maintenance & repair of heating
and air conditioning units including
new 3 or 4 ton AC unit X
Architect bill X
Cable building for computers X
Cable building for phones X
Install electrical outlets where
needed (those additional to
code) X
Burglar alarm X
</TABLE>
At request of Lessee, Lessor will, at own expense, enclose
and finish to similar office space conditions, patio area
located a the rear NE corner of building. The resulting sq.
footage will result in an increase to the monthly lease payment
at a rate equal to the price per foot of the existing area. This
project will not commence until at least five months from date of
Lease signing.
ADDENDUM TWO TO COMMERCIAL LEASE
This Addendum is hereby made a part of that certain
Commercial Lease dated as of March 18th,1999 (the "Lease"), by
and between JO ANN CORTINA ("Landlord") and REAL GOODS TRADING
CORPORATION ("Tenant").
Tenant and Landlord hereby agree that notwithstanding
anything contained in the Lease to the contrary, the provisions
set forth below will be deemed to be a part of the Lease and
shall supersede any contrary provisions in the Lease. All
capitalized terms used in this Addendum, unless specifically
defined herein, shall have the meanings ascribed to them in the
Lease.
1. Except as provided in the following sentence, whenever
the Lease requires Tenant to obtain Landlord's consent such
consent shall not be unreasonably withheld, conditioned or
delayed. The previous sentence shall not apply to a request by
Tenant to make alterations, additions or improvements
("Alterations") which will have a significant adverse effect
on the (i) structural integrity of the building in
which the Premises are located (the "Building"), (ii) the
Building's plumbing, heating, life safety, ventilating.
air-conditioning, mechanical or electrical systems, or (iii)
the exterior appearance of the Building. As to such matters,
Landlord's duty is to act in good faith and in compliance with
the Lease.
2. Tenant shall not without first obtaining Landlord's
written consent, make any Alterations to the Premises except for
non-structural Alterations to the interior of the Premises
costing less than $25,000 in any twelve (12) month period. Tenant
shall not be required to remove at the end of the term,
any Alterations which are normal and customary for general
office use.
3. Prior to April 1, 1999, Landlord will prepare the
Premises for Tenants occupancy by performing all work to be
performed by Landlord under Addendum One to the Lease. If such
work is not complete by April 1, 1999, rent will be abated until
such work is completed and the Premises are delivered to Tenant
If such work is not completed by May 1, 1999, Tenant may
terminate this Lease by giving written termination notice to
Landlord.
4. Landlord represents and warrants to Tenant, that on the
date possession of the Premises is delivered to Tenant (the
"Possession Date"), the Premises and the Building shall comply
with all laws and other legal requirements applicable thereto
(collectively 'Laws'), including, without limitation, the
Americans With Disabilities Act of 1990, as amended, and all
Laws relating to hazardous or toxic materials and substances
("Hazardous Materials"). Landlord further acknowledges and agrees
that Tenant has no responsibility for any condition existing as
of the Possession Date in, on, or about the Building involving
Hazardous Materials.
5. Any repairs, alterations or other improvements required
by governmental authority to be performed in the Premises as a
result of Tenants particular use of the Premises (as
distinguished from ordinary general office use) shall be
performed by Tenant at its expense. Any other work which is
required by governmental authority shall be performed at the
expense of Landlord.
6. Landlord agrees to give Tenant at least ten (10) days
prior written notice before purchasing insurance at Tenants
expense under Section 11 (b)of the Lease.
7. Tenants shall not be required to indemnify Landlord
(Section 11(d) of the Lease), and Landlord shall not be exempted
from liability (Section 11(e) of the Lease) to the extent of
claims and liabilities arising from or in connection with the
negligence or willful misconduct of Landlord or its agents,
contractors or employees, or a breach of Landlord's
obligations under the Lease, Tenants indemnity
obligations are subject to the waiver of subrogation
contained in Section 11(c) of the Lease.
8. If the Premises are damaged or destroyed by any casualty
(whether or not covered by insurance) and necessary repairs
cannot be made within six (6) months after the date of such
damage or destruction, then Tenant may terminate the Lease as of
the date of such damage or destruction by giving written notice
to Landlord. If the Premises are damaged during the last twelve
(12) months of the term, then both Tenant and Landlord shall have
the right to terminate the Lease described in Section 12(c) of
the Lease.
9. Section 15(a)(2) of the Lease is hereby deleted. The
second-to-last paragraph of Section 15(b), giving Landlord the
right to appoint a receiver for Tenants business, is hereby
deleted.
10. If Tenant is prevented from using (and in fact does not
use) the Premises or a portion thereof, for at least five (5)
consecutive days ("Eligibility Period") as a result of (a)
repairs, maintenance or Alterations performed by Landlord, (b)
Landlord's failure to provide services or access to the Premises,
or (c) the presence of Hazardous Materials in, on or around
the Building, Rent shall be abated or reduced, after expiration
of the Eligibility Period, for so long as Tenant continues to be
prevented from using (and does not use) the Premises (or portion
thereof), in the proportion that the area that Tenant is
prevented from using bears to the total area of the Premises.
11. Tenant shall have the right, without Landlord's
consent, to assign Tenants interest in the Lease, or to sublease
the Premises (or a portion thereof), to a person or entity which
(i) is controlled by Tenant, controls Tenant, or is under common
control with Tenant (ii) merges or enters into any similar
business combination with Tenant (iii) acquires all or
substantially all of Tenants assets at the Premises;
or (iv) results from any corporate reorganization,
including a so-called spin-off, of Tenant. The term
"control" as used in this paragraph means the ability to dictate
the business policies of another entity.
12. Any party may change its address for receiving
notices as specified in Section 22 of the Lease, by giving notice
of its new address to the other party.
13. The last sentence of Section 31 of the Lease is hereby
deleted.
14. Section 35 of the Lease is deleted and replaced by the
attached Option to Extend.
Landlord: Tenant:
JO ANN CORTINA REAL GOODS TRADING CORPORATION
By:[S]JOANN CORTINA By:[S]RA ZELL
Joann Cortina RA Zell
(type or print name) (type or print name)
Title: Landlord Title: President
35 OPTION TO EXTEND.
(a) Landlord hereby grants Tenant an option (the
"Option") to extend the term of this Lease for a period of five
years (the "Extension Period") on the terms and conditions
contained in this Section. The Option may be exercised only by
giving written notice to Landlord not later than ninety (90) days
prior to the scheduled expiration of the Term. All of the terms
and conditions of the Lease shall continue to apply during
the Extension Period, except that rent shall be determined in
accordance with paragraphs (b) and (c) below, and there shall be
no further Options after the Extension Period.
(b) Following exercise of the Option, Landlord and
Tenant shall negotiate in good faith to determine the fair market
rent for the Premises for the Extension Period. If the parties
reach agreement, they shall immediately execute an amendment to
this Lease confirming the rent to be paid during the Extension
Period. If Landlord and Tenant have not reached agreement by
the date sixty (60) days prior to the beginning of the Extension
Period, the parties shall meet and simultaneously deliver to each
other their respective written proposals for the rent to be paid
during the Extension Period, with a written statement of reasons
why such proposal is a reasonable estimate of fair market rent
(respectively, "Landlord's Proposal" and "Tenants Proposal"). If
Tenants Proposal is higher than Landlord's Proposal, then
Landlord's Proposal will control. Otherwise, rent for the
Extension Period shall be determined as set forth in paragraph
(c), each party being bound by its Proposal and such Proposals
being the only two choices available to the arbitrators. If
either party fails to deliver its Proposal in a timely
manner, then rent for the Extension Period shall be the
amount specified by the other party in its Proposal. If fair
market rent has not been determined by the first day of the
Extension Period, Tenant shall continue to pay rent at the rate
previously in effect until the rent for the Extension Period is
determined. At such time, Landlord shall credit any overpayment
against Tenants next installment of rent, or Tenant shall pay any
deficiency to Landlord within ten (10) days after demand.
(c) If required by paragraph (b) above, The parties
shall appoint arbitrators who will determine rent for the
Extension Period in accordance with the following procedure:
(1) Within fifteen (15) days after the parties
exchange written Proposals, Landlord and Tenant shall each
appoint a person licensed as a California real estate broker who
has been engaged full-time for at least the immediately preceding
ten (10) years in the retail space brokerage business in the
city and county in which the Property is located.
(2) Within ten (10) days after their appointment, the
two brokers so appointed shall appoint a third broker, similarly
qualified, who has not previously had business dealings with
either Landlord or Tenant and notify the parties of the identity
of the third broker. If the two brokers are unable to agree upon
a third broker, either party may, upon five (5) days written
notice to the other party, apply to the American. Arbitration
Association (at its office nearest the Prop") for appointment of
the third broker. The three brokers are referred to herein as the
"Arbitration Panel."
(3) Within thirty (30) days after the appointment of
the third broker, the Arbitration Panel shall conduct a hearing,
at which Landlord and Tenant may each make supplemental oral
and/or written presentations, with an opportunity for questioning
by the members of the Arbitration Panel, The Arbitration Panel
shall select either Landlord's Proposal or Tenants Proposal as
being closer to the actual fair market rent for the Property, and
shall so notify Landlord and Tenant The determination of the
Arbitration Panel shall be limited solely whether Landlord's
Proposal or Tenants Proposal is closest to the actual fair market
rent. The Arbitration Panel shall have no right to choose a
middle ground or to modify either Proposal or any provisions of
this Lease. The decision of a majority of the Arbitration Panel
shall be binding upon Landlord and Tenant.
(4) If either Landlord or Tenant fails to appoint a
broker within the time period specified hereinabove, the broker
appointed by the other shall act as the Arbitration Panel. If a
broker is unwilling or unable to act a successor shall be
appointed in the same manner as the broker being replaced. The
costs and fees of all brokers shall be shared equally by Landlord
and Tenant.
</DOC>
June 1, 1999
Dear Mark,
We at Real Goods Trading Corporation are very happy to offer you
the position of President of the Company. This letter sets forth
the material terms of our offer. If you wish to accept our offer,
please return (or fax) a copy of this letter so that we receive
it not later than June 5, 1999. If we have not received it by
then, the offer will expire. We apologize for the formality of
this letter, but ongoing state and federal legal developments
require us to document the employment relationship carefully.
Your start date will be no later than June 14, 1999.
1. TITLE. Your title will be President. As such, you will
report to the CEO; we will consider electing you to the Board of
Directors at our September, 1999 meeting. For so long as you are
not a member of our Board of Directors, you will attend all
meetings of the Board except the portions thereof at which your
performance is being discussed. The non-profit Institute for
Solar Living, Real Goods Design and Consulting, and certain other
aspects of the company that we have been discussing through our
roles and responsibilities discussions will report to me as CEO;
all other operations of the company will report to you.
2. SALARY. Your salary will be at the annual rate of $115,000,
payable bi-weekly in accordance with our normal payroll
procedures. We will make customary withholdings. The fact that
your salary is stated in annual terms should not be construed to
create a minimum employment term or notice requirement.
3. STOCK OPTIONS. Our stock option program is administered by
the Compensation Committee of the Board of Directors. We have
agreed to request a grant to you of options to purchase 100,000
shares of the Company's common stock upon hire date at $3.50 per
share or market, as defined in our option plan, whichever is
higher upon your first official day of work on June 14, 1999.
These options will vest at the rate of 20% each year for five
years, at which time they will be fully vested. We will also
grant to you now, at the same price, options to purchase an
additional 100,000 shares. The first 50,000 will vest in equal
thirds annually starting on the first anniversary of the filing
of our form 10-KSB for fiscal 2000, and the second 50,000 will
vest in equal thirds annually starting on the first anniversary
of the filing of our form 10-KSB for fiscal 2001. In the event
that the filing of the form 10-KSB is delayed or does not occur
for reasons beyond your control, the vesting date will be June 14
of the year in which the respective filing was to have taken
place. If terminated without cause, you will have up to twelve
months after termination (but not beyond the closing date of any
transaction in which the company ceases to be a publicly traded
company) to exercise any vested options; this promise to you will
supersede the language of the Option Agreement or the Plan in the
event of inconsistency. We expect that the Compensation Committee
of the Board of Directors will approve this request. In the event
the Company is sold (in a stock or assets transaction), or not
the survivor in a merger, the vesting period of all options will
accelerate by two years effective as of the business day before
the date the transaction closes. Options that are fully vested
may be exercised within ten years after the date of grant.
4. SEVERANCE. If we terminate your employment for any reason
other than cause within twelve months after your start date, you
will be given two months severance pay on the first no normal
bi-weekly payday following the termination. For purposes of this
agreement cause shall mean (a) conviction of a felony or any
misdemeanor involving fraud or dishonesty; (b) financial
dishonesty relating to funds or property of the Company; or (c) a
material or repeated violation, after notice and warning, of
Company written rules or policies. If terminated after your
first year of employment, upon termination you will receive two
months severance pay plus one month of severance for each full
year of your employment, up to a maximum of 12 months of
severance pay.
5. FRINGE BENEFITS. While there can be no assurance that we
will continue any particular program, we hope to be able to
continue to provide useful fringe benefit programs for our
employees. If you or any member of your family has any special
medical problems which may be preexisting conditions as referred
to in the enclosure, please be aware that insurance coverage for
those conditions may not be available under our plan. If you
wish further information either before or after accepting this
position, please let us know.
6. AT WILL EMPLOYMENT. Your employment is "at will". Subject
to paragraph four, there is no fixed term or minimum term.
Either you or we may terminate your employment at any time for
any reason or for no reason. The only way this at will provision
can be modified or amended is in writing signed by the CEO of the
Company specifically addressed to you and specifically modifying
this paragraph.
7. HANDBOOK. The employee handbook, which we are sending to
you, governs the relationship of Real Goods and its employees.
As you know, this type of document is flexible; we may change it
at any time and from time to time. You and all of our employees
will be governed by such changes as they become effective, which
may be with or without notice.
8. PROPRIETARY INFORMATION OF OTHERS. We are hiring you for
your personal skills and character. We expressly do not want you
to bring with you any property or proprietary information
belonging to a prior employer or any other person. If you do
have any property or proprietary information belonging to a prior
employer, please return it forthwith and do not use it in your
employment with us.
9. CONFIDENTIALITY. As is customary, you have special
responsibilities to protect the confidentiality of our own
confidential and proprietary information and confidential
information which may be provided to us by others. It is a
condition precedent to the effectiveness of your employment that
you sign and return a copy of our standard employee
confidentiality agreement. We understand that you are not
reserving any rights to inventions.
10. INS REQUIREMENTS. On your first day of employment, and
possibly from time to time thereafter, you will have to show us
proof of your identity as well as your legal right to work in the
United States as required by the U.S. Immigration and
Naturalization Service. In most cases, your driver's license and
a Social Security card should satisfy the regulations. (Foreign
nationals requiring permission to work in the United States will
be asked to provide documents appropriate to their individual
status.)
11. ARBITRATION. You specifically agree that any disagreement
with respect to termination of your employment or matters leading
up to termination of your employment shall be subject to binding
mandatory arbitration in San Francisco, California before a
single arbitrator, selected in accordance with the rules of the
American Arbitration Association which rules shall govern the
proceedings (except as otherwise expressly provided herein). The
arbitration shall be conducted in accordance with the California
Arbitration Act, California Code of Civil Procedure Sections 1280
et seq. and the provisions of Section 1283.05 are expressly
incorporated into this arbitration agreement. Judgment may be
entered to enforce any arbitral award by any court of competent
jurisdiction. The prevailing party in any legal proceeding or
arbitration shall be entitled to recover its reasonable attorneys
fees, costs and disbursements. We both agree that arbitration is
the sole and exclusive remedy for any disagreement arising out of
such matters.
12. ENTIRE STATEMENT. It is most important that you agree with
us that this letter constitutes the entire statement of our
agreement and that there are no oral agreements or understandings
or any other written agreements which directly or indirectly
affect the employment relationship between us and you. If there
are any, please do not sign this agreement until you have
consulted with our director of human relations and either
modified this agreement to state those understandings or agreed
that there are no such understandings or agreements. This
document is fully integrated with respect to the at-will
component of your employment.
AGREED:
Real Goods Trading Corporation
By:[S] JOHN SCHAEFFER, CEO
John Schaeffer, CEO
Date: June 1, 1999
[S]MARK SWEDLUND, PRESIDENT
Mark Swedlund, President
Date: June 1, 1999
<\DOC>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 333-15991 of Real Goods Trading Corporation on Form
S-8 of our report dated May 21, 1999, appearing in this Annual
Report on Form 10-KSB of Real Goods Trading Corporation for the
year ended March 31, 1999.
Deloitte & Touche LLP
Oakland, California
June 25, 1999
</DOC>
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<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
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<RECEIVABLES> 240
<ALLOWANCES> 6
<INVENTORY> 2080
<CURRENT-ASSETS> 5015
<PP&E> 4561
<DEPRECIATION> 1008
<TOTAL-ASSETS> 9079
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0
0
<COMMON> 7188
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<TOTAL-LIABILITY-AND-EQUITY> 9079
<SALES> 17219
<TOTAL-REVENUES> 17219
<CGS> 9752
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<OTHER-EXPENSES> 8132
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</TABLE>
