California-Morgan Hill-Madrone Parkway Lease - TBI-Mission West LLC and Media Arts Group Inc.
MEDIA ARTS GROUP, INC.
STANDARD SINGLE-TENANT LEASE - TRIPLE NET
1960 The Alameda, San Jose, CA 95126 (408) 246-3691
THIS LEASE (the "Lease"), for reference purposes only dated June 30, 2000, is
entered into by and between TBI - Mission West, LLC, a California limited
liability company ("Landlord"), whose address is c/o Toeniskoetter & Breeding,
Inc. Development, 1960 The Alameda, San Jose, California 95126 and Media Arts
Group, Inc., a Delaware corporation ("Tenant"), whose address is 521 Charcot
Avenue, San Jose, CA 95131.
1. BASIC LEASE PROVISIONS
1.1 PREMISES Those premises consisting of approximately one hundred
twenty-six thousand three hundred seventy-eight (126,378) square feet located in
the Building described in Paragraph 1.2 and more particularly shown on EXHIBIT
A.
1.2 BUILDING That certain one-story building to be constructed on the
Property, consisting of approximately one hundred twenty-six thousand three
hundred seventy-eight (126,378) square feet, and located on Madrone Parkway in
Morgan Hill, California. The Building is referred to sometimes as "Building 5."
1.3 ANTICIPATED COMMENCEMENT DATE September 1, 2001.
1.4 TERM Fifteen (15) years.
1.5 USE Assembly, light manufacturing and distribution.
1.6 MONTHLY RENT $96,047.28/month, subject to adjustment as provided in
Paragraphs 5.2 and 5.3.
1.7 SECURITY DEPOSIT None.
1.8 PROPERTY The real property consisting of approximately 7.25 acres,
located in the City of Morgan Hill ("City"), County of Santa Clara ("County"),
California, and more particularly described on EXHIBIT B, together with the
Building to be constructed thereon.
1.9 BROKERS Saratoga Investment Company.
2. PREMISES landlord hereby leases to tenant and tenant hereby leases
from landlord the premises.
3. DEFINITIONS the following terms shall have the following meanings in
this lease:
3.1 ALTERATIONS Any alterations, additions or improvements made in, on or
about the Building by Tenant after the Commencement Date, including, but not
limited to, lighting, heating, ventilating, air conditioning, electrical,
drapery and carpentry installations.
3.2 CC&RS Those certain covenants, conditions and restrictions for Madrone
Business Park to be recorded in the Official Records of the Santa Clara County.
Landlord shall provide Tenant with a copy of the CC&R's prior to the
Commencement Date.
3.3 COMMENCEMENT DATE The Commencement Date shall be the earlier occurring
of the following:
3.3.1 Thirty (30) days from the date the City has issued an occupancy permit
for the Premises, as evidenced by the City's completion of a final inspection
and written approval of the Building Shell and Tenant Improvements as having
been completed in accordance with the building permit issued for such
improvements; or
3.3.2 Thirty (30) days from the date Tenant substantially commences occupancy
of the Premises. Once the actual Commencement Date has been determined pursuant
to the foregoing, the parties shall execute a Commencement Date Memorandum in
the form attached hereto as EXHIBIT C.
3.4 HVAC Heating, ventilating and air conditioning.
3.5 INTEREST RATE Ten and one-half percent (10 1/2%) per annum, however,
in no event to exceed the maximum rate of interest permitted by law.
3.6 LANDLORD'S AGENT Landlord's authorized agents, partners, subsidiaries,
directors, officers, and employees.
<PAGE>
3.7 OUTSIDE AREA All areas and facilities within the Property which are
exclusive of the Building, including, without limitation, the parking areas,
access and perimeter roads, sidewalks, landscaped areas, service areas, trash
disposal facilities, and similar areas and facilities designated by Landlord.
Landlord shall at all times have exclusive control of the Outside Area and may
at any reasonable time temporarily close any part thereof, exclude and restrain
anyone from any part thereof, except the bona fide customers, employees and
invitees of Tenant, and may reasonably change the configuration or location of
the Outside Area with the prior written consent of Tenant, which consent shall
not be unreasonably withheld. In exercising any such rights, Landlord shall use
diligent efforts to minimize any disruption of Tenant's business. Landlord shall
have the right to reconfigure the parking area and ingress to and egress from
the parking area, and to modify the directional flow of traffic of the parking
area at Landlord's sole expense.
3.8 REAL PROPERTY TAXES Any form of assessment, license, fee, rent tax,
levy, penalty (if a result of Tenant's delinquency), or tax (other than net
income, estate, succession, inheritance, transfer or franchise taxes), imposed
by any authority having the direct or indirect power to tax, or by any city,
county, state or federal government or any improvement or other district or
division thereof, whether such tax is: (i) determined by the area of the
Property or any part thereof or the rent and other sums payable hereunder by
Tenant, including, but not limited to, any gross income or excise tax levied by
any of the foregoing authorities with respect to receipt of such rent or other
sums due under this Lease; (ii) upon any legal or equitable interest of Landlord
in the Property or the Building or any part hereof; (iii) upon this transaction
or any document to which Tenant is a party creating or transferring any interest
in all or any part of the Property; or (iv) levied or assessed in lieu of, in
substitution for, or in addition to, existing or additional taxes against the
Property whether or not now customary or within the contemplation of the
parties.
3.9 RENT The net Monthly Rent plus the Additional Rent described in
Paragraph 5.2.
3.10 SUBLET Any transfer, sublet, assignment, license agreement, change of
ownership, of this Lease or the Tenant's interest in the Lease or any portion
thereof.
3.11 SUBTENANT The person or entity with whom a Sublet agreement is
proposed to be or is made.
3.12 TENANT IMPROVEMENTS Those interior improvements to the Premises to be
constructed by Landlord pursuant to EXHIBIT D.
3.13 TENANT'S AGENTS Tenant's authorized agents, partners, subsidiaries,
directors, officers, and employees.
3.14 TENANT'S PERSONAL PROPERTY Tenant's trade fixtures, furniture,
equipment and other personal property in the Premises.
4. LEASE TERM
4.1 TERM The Term shall be fifteen (15) years, commencing on the
Commencement Date, and ending fifteen (15) years thereafter, unless sooner
terminated as provided herein.
4.2 TENANT DELAYS If the Commencement Date has not occurred on or before
the Anticipated Commencement Date set forth in Paragraph 1.3, due solely to the
fault of Tenant, then notwithstanding any other provision hereof, Tenant shall
pay one day's net Monthly Rent for each day of delay in completion of the Tenant
Improvements beyond the Anticipated Commencement Date caused by Tenant's fault.
Delays "due solely to the fault" of Tenant shall include those caused by:
4.2.1 Tenant's failure to furnish information to Landlord for the preparation
of the Space Plan or Final Plans for the Tenant Improvements in accordance with
EXHIBIT D;
4.2.2 Tenant's request for special materials, finishes or installations which
are not readily available, provided, however, Landlord shall make a reasonable
effort to notify Tenant of any delays concerning any special materials, finishes
or installations of which Landlord has commercially reasonable knowledge;
4.2.3 Tenant's failure to reasonably approve the Space Plan for the Tenant
Improvements in accordance with the time period set forth in EXHIBIT D;
4.2.4 Tenant's changes in the Space Plan or the Final Plans after their
approval by Landlord;
4.2.5 Tenant's failure to complete any of its own improvement work to the
extent Tenant delays completion by the City of its final inspection and approval
of the Tenant Improvements described in EXHIBIT D; or
4.2.6 Interference with Landlord's work caused by Tenant or by Tenant's
contractors or subcontractors.
<PAGE>
4.3 LANDLORD DELAYS If the Commencement Date is delayed for any reason
other than delays caused by Tenant as defined in Paragraph 4.2 above, then there
shall be an abatement of Rent covering the period between the Anticipated
Commencement Date and the date when Landlord delivers possession of the Premises
to Tenant with the Tenant Improvements substantially completed and all other
terms and conditions of this Lease shall remain in full force and effect. If,
however, the Commencement Date does not occur within six (6) months after the
Anticipated Commencement Date for any reason other than delays caused by Tenant
or delays caused by Force Majeure Conditions, as defined herein, then Tenant
shall have the right to terminate this Lease by delivery of written notice to
Landlord no later than the date which is seven (7) months after the Anticipated
Commencement Date. If the Commencement Date is delayed due to inclement weather,
strikes or other labor disturbances, material shortages, casualties, or other
causes beyond Landlord's reasonable control ("Force Majeure Conditions"), then
the date for substantial completion of the Tenant Improvements, or the period
for reconstructing the Premises after any damage, destruction, or condemnation,
as the case may be, shall be extended for the period of time reasonably
attributable to the occurrence of such Force Majeure Condition.
4.4 EARLY ENTRY Tenant shall be permitted to enter the Premises prior to
the Commencement Date for the purpose of installing Tenant's Personal Property
in the Premises. Such early entry shall be at Tenant's sole risk and subject to
all the terms and provisions hereof, except for the payment of net Monthly Rent
which shall commence on the Commencement Date. Landlord shall have the right to
impose such additional conditions on Tenant's early entry as Landlord shall deem
reasonably appropriate, and shall further have the right to require that Tenant
execute an early entry agreement containing such conditions prior to Tenant's
early entry.
5. RENT
5.1 MONTHLY RENT Tenant shall pay to Landlord, in lawful money of the
United States, commencing on the first day of the first month of the Term and
continuing thereafter on the first (1st) day of each calendar month throughout
the Term, net Monthly Rent in the amount set forth in Paragraph 1.6, subject to
adjustment as provided in Paragraph 5.2. Net Monthly Rent shall be payable in
advance, without abatement, deduction, claim, offset, prior notice or demand,
except as otherwise specifically provided herein. The net Monthly Rent due for
the first month of the Term shall be paid by Tenant upon execution of this Lease
or secured by a letter of credit until the Commencement Date.
5.2 ADJUSTMENTS TO MONTHLY RENT The Monthly Rent shall be adjusted as of
the first day of the thirteen (13th) month of the term and every twelve (12)
months thereafter (each, an "Adjustment Date") by the percentage increase in the
Consumer Price Index, All Urban Consumers, All Items, published by the U.S.
Department of Labor, Bureau of Labor Statistics for the San
Francisco-Oakland-San Jose Metropolitan Area (1982-84=100) (the "Index"). The
Index published for the month immediately preceding each Adjustment Date shall
be compared with the Index published for the month immediately preceding the
prior Adjustment Date, or in case of the first Adjustment Date, the Index
published for the month immediately preceding the Commencement Date, to
determine the percentage increase in the Monthly Rent for the next twelve (12)
months of the term; provided, however, that in no event shall the Monthly Rent
increase by less than three percent (3%) per annum nor more than eight percent
(8%) per annum. If no Index is published for either of the months set forth
above, the Index for the next preceding month shall be used. If the base of the
Index is revised, the Index increases, if any, shall be calculated with a common
base year. If the Index is discontinued or revised, such other governmental
index with which it is replaced, with appropriate conversion factors, shall be
the basis of the adjustment.
5.3 DEVELOPMENT COST REDUCTIONS BASED ON FINANCIAL ASSISTANCE FROM CITY
If the City of Morgan Hill or the Redevelopment Agency of Morgan Hill provides
any financial assistance to Landlord that directly reduces Landlord's cost to
develop the Property and/or any of the other properties leased by Tenant at
Madrone Business Park, Landlord shall pay to Tenant the amount of such reduction
in Landlord's cost in cash or its equivalent.
5.4 ADDITIONAL RENT This Lease is intended to be a triple net lease. All
monies required to be paid by Tenant under this Lease, including, without
limitation, Real Property Taxes pursuant to Paragraph 14, Operating Expenses
pursuant to Paragraph 16, and insurance premiums pursuant to Paragraph 20, shall
be deemed Additional Rent and shall be payable as of the Commencement Date.
<PAGE>
6. LATE PAYMENT CHARGES Tenant acknowledges that late payment by Tenant
to Landlord of Rent and other charges provided for under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult or impracticable to fix. Therefore,
notwithstanding the notice provision in Paragraph 25.1.1, if any installment of
Rent or any other charge due from Tenant is not received by Landlord within five
(5) days after the date such Rent or other charge is past due, Tenant shall pay
to Landlord an additional sum equal to five percent (5%) of the amount overdue
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of the late
payment by Tenant. Notwithstanding the foregoing, Landlord agrees to waive the
late charge for the first five times during the Term of this Lease that any
installment of Rent or charge is late provided that (i) Tenant is not late more
than once per year, and (ii) Tenant is not more than fifteen days late in the
payment of the Rent or other charge due (i.e., Rent must be paid by the
fifteenth day of the month).
INITIALS:
/s/ CT /s/ CF /s/ TSG
----------------- -----------------
Landlord Tenant
7. SECURITY DEPOSIT None.
8. HOLDING OVER If Tenant remains in possession of all or any part of the
Premises after the expiration of the Term, with or without the express or
implied consent of Landlord, such tenancy shall be from month-to-month only and
not a renewal hereof or any extension for any further term, and in such case,
the net Monthly Rent shall be one hundred fifty percent (150%) of the net
Monthly Rent payable during the last month of the Term and such month-to-month
tenancy shall be subject to every other term, covenant and agreement of this
Lease.
9. CONDITION OF PREMISES Within thirty (30) days after completion of the
Tenant Improvements, Tenant shall conduct a walk-through inspection of the
Premises with Landlord and complete a punch-list of items needing additional
work by Landlord. Other than the items specified in the punch-list, by taking
possession of the Premises, Tenant shall be deemed to have accepted the Premises
as improved with the Tenant Improvements in good, clean and completed condition
and repair, subject to all applicable laws, codes and ordinances. The punch-list
to be prepared by Tenant shall not include any damage to the Premises caused by
Tenant's move-in, which damage shall be repaired or corrected by Tenant, at its
expense. Tenant acknowledges that neither Landlord nor its Agents have agreed to
undertake any Alterations or construct any Tenant Improvements to the Premises
except as expressly provided in this Lease. If Tenant fails to submit a
punch-list to Landlord within such thirty (30) day period, it shall be deemed
that there are no items needing additional work or repair. Landlord's contractor
shall complete all reasonable punch-list items within thirty (30) days after the
walk-through inspection or as soon as practicable thereafter. Upon completion of
such punch-list items, Landlord shall so notify Tenant. Tenant shall approve
such completed items in writing to Landlord. If Tenant fails to reasonably
approve such items within fifteen (15) days of notice of completion by Landlord,
such items shall be deemed approved by Tenant.
10. USE OF THE PREMISES
10.1 TENANT'S USE Tenant shall use the Premises solely for the purposes
specified in Paragraph 1.5 and shall not use the Premises for any other purpose
without obtaining the prior written consent of Landlord, which consent shall not
be unreasonably withheld. Tenant acknowledges that the Property is subject and
this Lease is subordinate to the CC&R's. Throughout the Term, Tenant shall
faithfully and timely perform and comply with the CC&R's and any modification or
amendments thereof, including the payment by Tenant of any periodic or special
dues, assessments, and owners' association fees against the Property. Tenant
shall indemnify and hold Landlord and it Agents harmless from and against any
liability, loss, expense, damage, attorneys' fees and costs arising out of or in
connection with Tenant's failure to perform or comply with the CC&R's.
10.2 COMPLIANCE Tenant shall not use the Premises or suffer or permit
anything to be done in or about the Premises which will in any way conflict with
any law, statute, zoning restriction, ordinance or governmental law, rule,
regulation or requirement of duly constituted public authorities now in force or
which may hereafter be in force or the requirements of the Board of Fire
Underwriters or other similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Premises. Tenant
<PAGE>
shall not commit any public or private nuisance or any other act or thing which
might or would disturb the quiet enjoyment of any other tenant of Landlord or
any occupant of nearby property. Tenant shall place no loads upon the floors,
walls or ceilings in excess of the maximum designed load determined by Landlord
or which endanger the structure; nor place any harmful liquids in the drainage
systems; nor dump or store waste materials or refuse or allow such to remain
outside the Building proper, except in the enclosed trash areas provided, if
any. Tenant shall not store or permit to be stored or otherwise placed any other
material of any nature whatsoever outside the Building without the prior written
consent of Landlord, which shall not be unreasonably withheld. Tenant shall be
permitted, however, to park company-owned vehicles and employee vehicles in the
parking areas overnight and for short-term periods provided, however, that any
vehicles which are larger than an automobile, mini-van or pick-up truck must be
screened from view as provided in the CC&R's.
10.3 HAZARDOUS MATERIALS Tenant, at its sole cost, shall comply with all
laws relating to Tenant's storage, use and disposal of hazardous, toxic or
radioactive matter, including those materials identified in 22 California Code
of Regulations Sections 66261.1 et seq., as they may be amended from time to
time (collectively "Hazardous Materials"). If Tenant does store, use or dispose
of any Hazardous Materials in, on or about the Premises, other than office
supplies and cleaning supplies typically used in administrative offices, Tenant
shall notify Landlord in writing at least ten (10) days prior to their first
appearance on the Premises. Tenant shall be solely responsible for and shall
defend, indemnify and hold Landlord harmless from and against any liabilities,
penalties, damages, costs or expenses (including reasonable attorneys' fees),
causes of action, claims and/or judgments arising out of or in connection with
any storage, use or disposal of Hazardous Materials in, on or about the Premises
or the Property by Tenant, its agents, employees, contractors or invitees.
Tenant's obligations hereunder shall survive the termination of this Lease.
Landlord represents and warrants, to the best of its actual knowledge, that as
of the date of this Lease there are no Hazardous Materials on the Property and
the Property is in compliance with all applicable laws, regulations, ordinances
and requirements of any governmental agency relating to Hazardous Materials.
11. QUIET ENJOYMENT Landlord represents that Landlord has the full right
and authority to enter into this Lease and will, as of the Commencement Date, be
the fee simple owner of the Property. Landlord covenants that Tenant, upon
performing the terms, conditions and covenants of this Lease, shall have quiet
and peaceful possession of the Premises as against any person claiming the same
by, through or under Landlord.
12. ALTERATIONS After the Commencement Date, Tenant shall not make or
permit any Alterations in, on or about the Premises, except for nonstructural
Alterations not exceeding Twenty-Five Thousand and no/100ths Dollars
($25,000.00) in cost during any twelve (12) month period, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
and according to plans and specifications reasonably approved in writing by
Landlord. Notwithstanding the foregoing, Tenant shall not, without the prior
written consent of Landlord, make any (i) alterations to the exterior of the
Building; (ii) alterations to and penetrations of the roof of the Building; or
(iii) alterations visible from outside the Building to which Landlord may
withhold Landlord's consent on wholly aesthetic grounds. All Alterations shall
be installed at Tenant's sole expense, in compliance with all applicable laws
and permit requirements by a licensed contractor, shall be done in a good and
workmanlike manner conforming in quality and design with the Premises existing
as of the Commencement Date, and shall not diminish the value of either the
Building or the Premises. All Alterations made by Tenant shall be and become the
property of Landlord upon installation and shall not be deemed Tenant's Personal
Property; provided, however, that Landlord may, at its option, require that
Tenant, at Tenant's expense, remove any or all Alterations installed by Tenant
and return the Premises to their condition as of the Commencement Date of this
Lease, normal wear and tear excepted and subject to the provisions of Paragraph
23. If Tenant removes any Alterations as required or permitted herein, Tenant
shall repair any and all damage to the Premises caused by such removal and
return the Premises to their condition as of the Commencement Date, normal wear
and tear excepted and subject to the provisions of Paragraph 22. Notwithstanding
any other provision of this Lease, Tenant shall be solely responsible for the
maintenance and repair of any Alterations made by it to the Premises. The
provisions of this Paragraph 12 shall not apply to the Tenant Improvements,
which shall be governed by the provisions set forth in the Work Letter Agreement
attached as EXHIBIT D.
<PAGE>
13. SURRENDER OF THE PREMISES Upon the expiration or earlier termination
of the Term, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and fire or other
casualty excepted, with all interior walls repaired and repainted if marked or
damaged, all carpets shampooed and cleaned, all broken, marred or nonconforming
acoustical ceiling tiles replaced, all windows washed, the plumbing and
electrical systems and lighting in good order and repair, including replacement
of any burned out or broken light bulb or ballasts, the HVAC equipment serviced
and repaired by a reputable and licensed service firm (if the HVAC system is
maintained by Tenant during the Term of this Lease), and all floors cleaned and
waxed, all to the reasonable satisfaction of Landlord. Tenant shall remove from
the Premises all of Tenant's Alterations required to be removed pursuant to
Paragraph 12, and all Tenant's Personal Property and repair any damage and
perform any restoration work caused by such removal. If Tenant fails to remove
such Alterations and Tenant's Personal Property, and such failure continues for
ten (10) days after written notice from Landlord, then Landlord may retain such
property and all rights of Tenant with respect to it shall cease, or Landlord
may place all or any portion of such property in public storage for Tenant's
account. Tenant shall be liable to Landlord for costs of removal of any such
Alterations and Tenant's Personal Property and storage and transportation costs
of same, and the cost of repairing and restoring the Premises, together with
interest at the Interest Rate from the date of expenditure by Landlord.
14. REAL PROPERTY TAXES
14.1 PAYMENT BY TENANT Tenant shall pay to Landlord, as Additional Rent,
the Real Property Taxes for the Property as set forth on the most current County
assessor's tax statement. Tenant shall reimburse Landlord monthly, on the first
day of each calendar month of the Term, one-twelfth (1/12th) of the annual Real
Property Taxes for the applicable fiscal year, prorated for any partial month.
Upon Landlord's receipt of the Real Property Tax payment from Tenant, Landlord
shall pay the Real Property Taxes to the County prior to delinquency. If any
Real Property Taxes increase from time to time due to a new tax statement from
the County assessor, Tenant shall pay such increase within thirty (30) days
after receipt of a statement from Landlord. Assessments, taxes, fees, levies and
charges may be imposed by governmental agencies for such purposes as fire
protection, street, sidewalk, road, utility construction and maintenance, refuse
removal and for other governmental services which may formerly have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges are to be included within the definition of Real Property Taxes for
purposes of this Lease.
14.2 TAXES ON TENANT IMPROVEMENTS AND PERSONAL PROPERTY Notwithstanding
any other provision hereof, Tenant shall pay the full amount of any increase in
Real Property Taxes during the Term resulting from any and all Alterations and
Tenant Improvements of any kind whatsoever placed in, on or about the Premises
for the benefit of, at the request of, or by Tenant. Tenant shall pay prior to
delinquency all taxes assessed or levied against Tenant's Personal Property in,
on or about the Premises. When possible, Tenant shall cause its Personal
Property to be assessed and billed separately from the real or personal property
of Landlord.
14.3 PRORATION Tenant's liability to pay Real Property Taxes shall be
prorated on the basis of a 365-day year to account for any fractional portion of
a fiscal tax year included at the commencement or expiration of the Term.
15. UTILITIES AND SERVICES Tenant shall be responsible for and shall pay
promptly all charges for water, gas, electricity, sewer, telephone, refuse
pickup, janitorial service and all other utilities, materials and services
furnished directly to or used by Tenant in, on or about the Premises during the
Term, together with any taxes thereon. Landlord shall not be liable in damages
or otherwise for any failure or interruption of any utility service or other
service furnished to the Premises, except that resulting from the negligence or
willful misconduct of Landlord. Landlord shall use diligent efforts to promptly
correct any failure or interruption caused by the act or neglect of Landlord.
16. REPAIR AND MAINTENANCE
16.1 LANDLORD'S OBLIGATIONS Landlord shall at all times and at its own
expense clean, keep and maintain in good order, condition and repair the
structural parts of the Building, which structural parts include only the
foundation, subflooring, roof structure, and exterior walls, except for any
damage thereto caused by the negligence or willful acts or omissions of Tenant
or of Tenant's agents, employees or invitees, or by reason of the failure of
Tenant to perform or comply with any terms, conditions or covenants in this
Lease, or cause
<PAGE>
by Alterations made by Tenant or by Tenant's agents, employees or contractors,
which shall be Tenant's responsibility. Landlord shall also maintain, repair and
replace the roof membrane of the Building, the HVAC system for the Premises, and
the Outside Area and Tenant shall reimburse Landlord for the reasonable costs
thereof, as provided in paragraph 16.3. At Landlord's option, Landlord shall
have the right to require Tenant to maintain and repair the HVAC system for the
Premises. In such case, Tenant shall cause the HVAC system for the Premises to
be maintained in good condition at all times and Tenant shall obtain an HVAC
system preventative maintenance contract with monthly service which shall be
subject to the reasonable approval of Landlord and paid for by Tenant and which
shall provide for and include replacement of filters, oiling and lubricating of
machinery, parts replacement, adjustment of drive belts, oil changes and other
preventative maintenance. If Tenant is performing the repair and maintenance of
the HVAC system, Tenant shall have the benefit of all warranties available to
Landlord regarding such equipment. Other than regularly scheduled maintenance of
the Premises, it is a condition precedent to all obligations of Landlord to
repair and maintain under this Paragraph 16.1 that Tenant shall have notified
Landlord in writing of the need for such repairs or maintenance.
16.2 TENANT'S OBLIGATIONS Tenant shall at all times and at its own expense,
clean, keep and maintain in good, safe and sanitary order, condition and repair
every part of the interior of the Premises which is not within Landlord's
obligation pursuant to Paragraph 16.1. Tenant's repair and maintenance
obligations shall include, without limitation, all plumbing and sewage
facilities within the Premises, fixtures, interior walls, floors, ceilings,
interior windows, store front, doors, entrances, plateglass, showcases, all
electrical facilities and equipment, including lighting fixtures, lamps, fans
and any exhaust equipment and systems, any automatic fire extinguisher equipment
within the Premises, electrical motors and all other appliances and equipment of
every kind and nature located in, upon or about the Premises. Tenant shall also
be responsible for all pest control within the Premises. All glass is at the
sole risk of Tenant, and any broken glass shall promptly be replaced by Tenant
at Tenant's expense with glass of the same kind, size and quality.
16.3 TENANT TO PAY OPERATING EXPENSES Tenant shall pay, as Additional Rent,
all reasonable costs and expenses as may be paid or incurred by Landlord in
maintaining, operating and repairing the roof membrane of the Building, the HVAC
system for the Premises, and the Outside Area ("Operating Expenses"). The
Operating Expenses may include, without limitation, the cost of labor,
materials, supplies and services used or consumed in operating, maintaining,
repairing and replacing the roof membrane, the HVAC system and the Outside Area,
including landscaping and sprinkler systems, concrete walkways and paved parking
areas; maintaining and repairing signs and site lighting; all utilities provided
to the Outside Area; any alterations or improvements required by governmental
authority to comply with laws effective after the Commencement Date; the cost of
maintaining, repairing and replacing exterior windows and the non-structural
components of the roof of the Building; and a management fee. Operating Expenses
shall not include costs paid directly by Tenant, principal and interest payments
on loans secured by deeds of trust recorded against the Premises or the
Property, real estate sales or leasing brokerage commissions, or executive
salaries of off-site personnel employed by Landlord except for the charge (or
pro rata share) of the property manager of the Property.
16.4 MONTHLY PAYMENTS From and after the Commencement Date, Tenant shall
pay to Landlord on the first day of each calendar month of the Term the
estimated monthly Operating Expenses. Such estimated monthly Operating Expenses
may be adjusted by Landlord at the end of any calendar quarter on the basis of
Landlord's experience and reasonably anticipated costs. Any such adjustment
shall be effective as of the calendar month next succeeding receipt by Tenant of
written notice of the adjustment. Within one hundred twenty (120) days following
the end of each calendar year Landlord shall furnish Tenant a statement of
actual Operating Expenses (the "Actual Expenses") for the calendar year and the
payments made by Tenant with respect to such period. If Tenant's payments for
the Operating Expenses are less than the Actual Expenses, Tenant shall pay
Landlord the deficiency within thirty (30) days after receipt of such statement.
If Tenant's payments exceed the Actual Expenses, Landlord shall either offset
the excess against the Operating Expenses next thereafter to become due to
Landlord, or shall refund the amount of the overpayments to Tenant, in cash, as
Landlord shall elect. There shall be appropriate adjustments of the Operating
Expenses as of the Commencement Date and expiration of the Term.
16.5 OPERATING EXPENSE AUDIT Within twelve (12) months of Tenant's receipt
of Landlord's statement of the Actual Expenses, and upon thirty (30) days prior
written notice to Landlord, Tenant shall have the right
<PAGE>
to examine, to copy and to have an audit conducted of all books and records at
Landlord's office pertaining to the Actual Expenses for the period covered by
Landlord's statement. If Tenant disputes the inclusion or amount of any item or
items, Landlord and Tenant will use good faith efforts to settle such dispute
within thirty (30) days after notice of such dispute. If the dispute is not
settled within this time period, the dispute shall be resolved by a firm of real
estate audit professionals ("Audit Professionals") mutually acceptable to
Landlord and Tenant. Audit Professionals shall mean, for the purposes of this
Paragraph 16.5, an independent firm of certified public accountants with
experience in real estate expense reviews. If Landlord and Tenant cannot agree
on the Audit Professionals within fifteen (15) days, the Landlord and Tenant
shall each, within fifteen (15) days, select one independent firm of Audit
Professionals, and the two firms of Audit Professionals shall together, within
fifteen (15) days after the last of the two Audit Professionals has been
selected, select a third firm of Audit Professionals, which third firm shall be
the Audit Professionals to resolve the dispute. The Audit Professionals shall be
entitled to review all records relating to the disputed items. The determination
of the Audit Professionals shall be final and binding upon both Landlord and
Tenant. The expenses of the Audit Professionals shall be borne by Tenant unless
the audit discloses an overall overstatement of the Actual Expenses of five
percent (5%) or more for the period being audited, in which case Landlord shall
pay the audit expenses. If the Audit Professionals determine that Tenant has
made an over-payment or under-payment of Operating Expenses then the procedures
in Paragraph 16.4 shall be followed.
16.6 WAIVER Tenant waives the provisions of Sections 1941 and 1942 of the
California Civil Code and any similar or successor law regarding Tenant's right
to make repairs and deduct the expenses of such repairs from the Rent due under
this Lease.
16.7 COMPLIANCE WITH GOVERNMENT REGULATIONS Tenant shall, at its cost,
comply with, including the making by Tenant of any Alteration to the Premises,
all present and future regulations, rules, laws, ordinances, and requirements of
all governmental authorities (including state, municipal, County and federal
governments and their departments, bureaus, boards and officials) arising from
the use or occupancy of the Premises.
17. LIENS Tenant shall keep the Premises and the Property free from any
liens arising out of any work performed, materials furnished or obligations
incurred by or on behalf of Tenant and hereby indemnifies and holds Landlord and
its Agents harmless from all liability and cost, including attorneys' fees and
costs, in connection with or arising out of any such lien or claim of lien.
Tenant shall cause any such lien imposed to be released of record by payment or
posting of a proper bond acceptable to Landlord within twenty (20) days after
written request by Landlord. Tenant shall give Landlord written notice of
Tenant's intention to perform work on the Premises which might result in any
claim of lien at least ten (10) days prior to the commencement of such work to
enable Landlord to post and record a Notice of Nonresponsibility or other notice
reasonably deemed proper by Landlord. If Tenant fails to so remove any such lien
within the prescribed twenty (20) day period, then Landlord may do so and Tenant
shall reimburse Landlord upon demand. Such reimbursement shall include all sums
incurred by Landlord including Landlord's reasonable attorneys' fees, with
interest thereon at the Interest Rate.
18. LANDLORD'S RIGHT TO ENTER THE PREMISES Tenant shall permit Landlord
and Landlord's Agents to enter the Premises to inspect the same, to post Notices
of Nonresponsibility and similar notices, to show the Premises to interested
parties such as prospective lenders and purchasers, to make necessary repairs,
to discharge Tenant's obligations hereunder when Tenant has failed to do so
within a reasonable time after written notice from Landlord, and at any
reasonable time within two hundred seventy (270) days prior to the expiration of
the Term to show the Premises to prospective tenants. Landlord shall also have
the right to place ordinary "For Lease" signs on the Outside Area. The above
rights of entry are subject to reasonable security regulations of Tenant,
including the requirement that Landlord or Landlord's Agents be accompanied by
an employee of Tenant when entering the Premises, and to the requirement that
Landlord shall at all times act in a manner to cause the least possible
interference with Tenant's business.
19. SIGNS Landlord shall provide space for Tenant's identification sign
on an exterior monument sign to be constructed in the Outside Area. In addition,
Tenant shall have the right to install a Tenant identification sign on the
exterior of the Building, subject to Tenant's receipt of all necessary approvals
from the City. All costs of the monument sign structure shall be paid for by
Landlord; any costs associated with
<PAGE>
Tenant's monument sign lettering and/or any Building signage installed by Tenant
shall be paid for by Tenant. Tenant shall have no other right to maintain Tenant
identification signs in any other location in, on or about the Premises, the
Building or the Outside Area and shall not display or erect any other Tenant
identification sign, display or other advertising material that is visible from
the exterior of the Building. The location, size, design, color and other
physical aspects of Tenant's identification sign(s) shall be subject to the
Landlord's written reasonable approval prior to installation, and any
appropriate municipal or other governmental approvals. The cost of maintaining
Tenant's identification signs shall be an Operating Expense. The cost of removal
of the signs shall be Tenant's sole expense. If Tenant fails to remove any such
signs upon termination of this Lease, Landlord may do so at Tenant's expense and
Tenant's reimbursement to Landlord for such amounts shall be deemed Additional
Rent.
20. INSURANCE
20.1 TENANT'S INDEMNIFICATION Except to the extent caused by the negligence
or willful misconduct of Landlord, and subject to the provisions of Paragraph
21, Tenant hereby agrees to defend, indemnify and hold harmless Landlord and
Landlord's Agents from and against any and all damage, loss, liability or
expense including, without limitation, attorneys' fees and legal costs suffered
directly or by reason of any claim, suit or judgment brought by or in favor of
any person or persons for damage, loss or expense due to, but not limited to,
bodily injury and property damage sustained by such person or persons which
arises out of, is occasioned by or in any way attributable to the use or
occupancy of the Premises or any part thereof and adjacent areas by the Tenant,
the acts or omissions of the Tenant, Tenant's agents, or any contractors brought
onto the Premises by Tenant. Tenant agrees that the obligations assumed herein
shall survive this Lease.
20.2 LANDLORD'S INDEMNIFICATION Subject to the provisions of Paragraph 21,
Landlord hereby agrees to defend, indemnify and hold harmless Tenant and
Tenant's agents, directors, officers and employees from and against any and all
damage, loss, liability or expense including, without limitation, attorneys'
fees and legal costs suffered directly or by reason of any claim, suit or
judgment brought by or in favor of any person or persons for damage, loss or
expense due to, but not limited to, bodily injury and property damage sustained
by such person or persons which arises out of, is occasioned by or attributable
to the negligence or willful misconduct of Landlord or any contractors brought
onto the Premises by Landlord. Landlord agrees that the obligations assumed
herein shall survive this Lease.
20.3 TENANT'S INSURANCE Tenant agrees to maintain in full force and effect
at all times during the Term, at its own expense, for the protection of Tenant
and Landlord, as their interests may appear, policies of insurance issued by a
responsible carrier or carriers reasonably acceptable to Landlord which afford
the following coverages:
20.3.1 LIABILITY Commercial general liability insurance in an amount not less
than Two Million and no/100ths Dollars ($2,000,000.00) combined single limit for
both bodily injury and property damage which includes blanket contractual
liability broad form property damage, personal injury, completed operations,
products liability, and fire damage legal (in an amount not less than
Twenty-Five Thousand and no/100ths Dollars ($25,000.00)), naming Landlord and
Landlord's Agents as additional insureds.
20.3.2 PERSONAL PROPERTY All risk or causes of loss - special form property
insurance (including, without limitation, vandalism, malicious mischief,
inflation endorsement, and sprinkler leakage endorsement) on Tenant's Personal
Property located on or in the Premises. Such insurance shall be in the full
amount of the replacement cost, as the same may from time to time increase as a
result of inflation or otherwise, and shall be in a form providing coverage
comparable to the coverage provided in the standard ISO All-Risk form.
20.4 ALL-RISK INSURANCE During the Term Landlord shall maintain all risk or
causes of loss - special form property insurance, including inflation
endorsement, sprinkler leakage endorsement, at Landlord's option, earthquake and
flood coverage, on the Building, excluding coverage of all Tenant's Personal
Property located on or in the Premises, but including the Tenant Improvements.
Such insurance shall also include insurance against loss of rents on an "All
Risk" basis, including, at Landlord's option, earthquake and flood, in an amount
equal to the Monthly Rent and Additional Rent, and any other sums payable under
the Lease, for a period of twelve (12) months commencing on the date of loss.
Such insurance shall name Landlord and its Agents as named insureds and include
a lender's loss payable endorsement in favor of Landlord's lender (Form 438 BFU
Endorsement). Tenant shall reimburse Landlord monthly, as Additional Rent, on
the first day of each calendar month of the Term, one-twelfth (1/12th) of the
annual premiums for
<PAGE>
such insurance, prorated for any partial month, or on such other periodic basis
as Landlord shall elect. Landlord shall provide Tenant with appropriate
documentation evidencing the premium costs for such insurance. If the insurance
premiums are increased after the Commencement Date due to an increase in premium
rates, an increase in the valuation of the Building or its replacement cost,
Tenant shall pay such increase within ten (10) days of notice of such increase
and receipt of appropriate documentation evidencing such increased insurance
premiums.
20.5 CERTIFICATES Tenant shall deliver to Landlord at least thirty (30)
days prior to the time such insurance is first required to be carried by Tenant,
and thereafter at least thirty (30) days prior to expiration of each such
policy, certificates of insurance evidencing the above coverage with limits not
less than those specified above. The certificates shall expressly provide that
the interest of Landlord therein shall not be affected by any breach of Tenant
of any policy provision for which such certificates evidence coverage. All
certificates shall expressly provide that no less than thirty (30) days' prior
written notice shall be given Landlord in the event of cancellation of the
coverages evidenced by such certificates. Landlord shall deliver to Tenant at
the Commencement Date and thereafter at least thirty (30) days prior to the
expiration of each such policy, certificates of insurance evidencing the
coverages required under Paragraph 20.4 of this Lease. Such certificates shall
expressly provide that not less than thirty (30) days prior written notice shall
be given Tenant in the event of any cancellation of the coverage evidenced by
such certificate.
20.6 INSURANCE REQUIREMENTS All insurance shall be in a form satisfactory
to Landlord and shall be carried with companies that have a general policy
holder's rating of not less than "A" and a financial rating of not less than
Class "X" in the most current edition of Best's Insurance Reports; shall provide
that such policies shall not be subject to material alteration or cancellation
except after at least thirty (30) days' prior written notice to Landlord; and
shall be primary and noncontributing with any other insurance available to
Landlord. The policy or policies, or duly executed certificates for them,
together with satisfactory evidence of payment of the premium thereon shall be
deposited with Landlord prior to the Commencement Date, and upon renewal of such
policies, not less than thirty (30) days prior to the expiration of the term of
such coverage. If Tenant fails to procure and maintain the insurance required
hereunder, Landlord may, upon not less than ten (10) days' prior written notice
to Tenant, order such insurance at Tenant's expense and Tenant shall reimburse
Landlord. Such reimbursement shall include all sums incurred by Landlord,
including Landlord's reasonable attorneys' fees and costs, with interest thereon
at the Interest Rate.
20.7 LANDLORD'S DISCLAIMER Landlord and Landlord's Agents shall not be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, glass, tile or sheetrock, steam, gas, electricity,
water or rain which may leak from any part of the Building, or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface, or
from any other cause whatsoever except to the extent any such loss or damage is
caused by the negligence or willful misconduct of Landlord and such loss or
damage is not covered by under any insurance Tenant is required to carry
pursuant to Paragraph 20.3.2 of this Lease or any other insurance Tenant elects
to carry. Landlord and Landlord's Agents shall not be liable for interference
with the light, air, or any latent defect in the Premises. Tenant shall give
prompt written notice to Landlord in case of a casualty, accident or repair
needed in the Premises.
21. WAIVER OF SUBROGATION Notwithstanding any other provision of this
Lease to the contrary, Landlord and Tenant each hereby waive all rights of
recovery against the other on account of loss or damage occasioned to such
waiving party for its property or the property of others under its control to
the extent that such loss or damage is insured against under any insurance
policies which may be in force at the time of such loss or damage, even if such
damage may have been caused by the negligence of the other party, its agents or
employees. Tenant and Landlord shall, upon obtaining policies of insurance
required hereunder, give notice to the insurance carrier that the foregoing
mutual waiver of subrogation is contained in this Lease and Tenant and Landlord
shall cause each insurance policy obtained by such party to provide that the
insurance company waives all right of recovery by way of subrogation against
either Landlord or Tenant in connection with any damage covered by such policy.
22. DAMAGE OR DESTRUCTION
22.1 PARTIAL DAMAGE INSURED If the Premises are damaged by any casualty
which is covered under the all-risk or causes of loss - special form insurance
carried by Landlord pursuant to Paragraph 20.4, then Landlord shall restore such
damage, provided insurance proceeds are available to pay at least ninety-five
<PAGE>
percent (95%) or more of the cost of restoration and provided such restoration
can be completed within one hundred eighty (180) days after the commencement of
the work in the reasonable opinion of a registered architect or engineer
appointed by Landlord for such determination. In such event, this Lease shall
continue in full force and effect, except that Tenant shall be entitled to a
proportionate reduction of net Monthly Rent while such restoration takes place,
such proportionate reduction to be based upon the extent to which the
restoration efforts interfere with Tenant's use of the Premises. Any dispute
between Landlord and Tenant as to the amount of any rent reduction hereunder
shall be resolved by arbitration, and such arbitration shall comply with and be
governed by the California Arbitration Act Sections 1280 through 1294.2 of the
California Code of Civil Procedure. If it is anticipated by Landlord that such
restoration cannot be completed within one hundred eighty (180) days, Tenant
shall have the right to terminate this Lease by written notice to Landlord
within thirty (30) days after receipt of written notice of the estimated repair
period; provided, however, this one hundred eighty (180) day period will be
extended to the extent of any delay caused by Force Majeure Conditions, up to
and including an additional one hundred twenty (120) days. Landlord shall
provide Tenant with written notice of the estimated repair period as soon as
reasonably possible following the damage or destruction. If Tenant does not
elect to terminate this Lease as permitted herein, Landlord shall promptly
commence the process of obtaining the necessary permits and approvals and repair
the Premises and the Tenant Improvements. If, however, this Lease is terminated,
Landlord shall refund to Tenant any Rent previously paid by Tenant which is
allocable to the period after the date of damage or destruction.
22.2 PARTIAL DAMAGE - UNINSURED If the Premises are damaged by a risk not
covered by Landlord's insurance, or the proceeds of available insurance are less
than ninety-five percent (95%) of the cost of restoration, or the restoration
cannot be completed within one hundred eighty (180) days after the commencement
of work, in the reasonable opinion of the registered architect or engineer
appointed by Landlord for such determination, then Landlord shall have the
option either to: (i) repair or restore such damage, this Lease continuing in
full force and effect, but the net Monthly Rent to be proportionately abated as
provided in Paragraph 22.1; or (ii) give notice to Tenant at any time within
thirty (30) days after such damage terminating this Lease as of a date to be
specified in such notice, which date shall be not less than sixty (60) nor more
than ninety (90) days after giving such notice. If notice of termination is
given, this Lease shall expire and all interest of Tenant in the Premises shall
terminate on such date so specified in such notice and the Monthly Rent, reduced
by any proportionate reduction based upon the extent, if any, to which such
damage interfered with the use of the Premises by Tenant, shall be paid to the
date of such termination; provided, however, that if Landlord elects to
terminate this Lease due to an insufficiency in the insurance proceeds available
to complete restoration of the Premises, Tenant shall have the right to
contribute the amount of any shortfall in insurance proceeds and in such event
Landlord shall restore the Premises. Tenant shall notify Landlord of Tenant's
election within thirty (30) days after the date that Landlord has notified
Tenant of Landlord's election to terminate this Lease. If it is anticipated by
Landlord that such restoration cannot be completed within one hundred eighty
(180) days after commencement of work, Tenant shall have the right to terminate
this Lease by written notice to Landlord within thirty (30) days after receipt
of written notice of the estimated repair period; provided, however, this one
hundred eighty (180) day period will be extended to the extent of any delay
caused by Force Majeure Conditions, up to and including an additional one
hundred twenty (120) days. Landlord shall provide Tenant with written notice of
the estimated repair period as soon as reasonably possible following the damage
or destruction. If neither Landlord nor Tenant terminate this Lease as permitted
herein, Landlord shall promptly commence the process of obtaining the necessary
permits and approvals and repair the Premises and the Tenant Improvements. If,
however, this Lease is terminated by either party, Landlord shall refund to
Tenant any Rent previously paid by Tenant which is allocable to the period after
the date of damage or destruction.
22.3 TOTAL DESTRUCTION If the Premises are totally destroyed or the
Premises cannot be reasonably restored under applicable laws and regulations or
due to the presence of hazardous factors such as earthquake faults, chemical
waste and similar dangers, notwithstanding the availability of insurance
proceeds, this Lease shall be terminated effective the date of the damage.
22.4 LANDLORD'S OBLIGATIONS Landlord shall not be required to repair any
injury or damage by fire or other cause to, or to make any restoration or
replacement of, any panelings, decorations, partitions, railings,
<PAGE>
floor coverings, or office fixtures which are Alterations or Personal Property
installed in the Premises by Tenant or at the expense of Tenant. Tenant shall be
required to restore or replace the same excluding those Tenant Improvements
defined in the Work Letter Agreement attached hereto. Except for abatement of
Monthly Rent, if any, Tenant shall have no claim against Landlord for any damage
suffered by reason of any such damage, destruction, repair or restoration; nor
shall Tenant have the right to terminate this Lease as the result of any
statutory provision now or hereafter in effect pertaining to the damage and
destruction of the Premises, except as expressly provided herein.
22.5 DAMAGE NEAR END OF TERM Anything herein to the contrary
notwithstanding, if the Premises are destroyed or significantly damaged during
the last twelve (12) months of the Term, unless the Term is extended pursuant to
the provisions of Paragraph 40 of this Lease, then Landlord may cancel and
terminate this Lease as of the date of the occurrence of such damage. If
Landlord does not elects to so terminate this Lease, the repair of such damage
shall be governed by the other provisions of this Paragraph 22.
23. CONDEMNATION If title to all of the Premises or so much thereof is
taken or appropriated for any public or quasi-public use under any statute or by
right of eminent domain so that reconstruction of the Premises will not, in
Landlord's and Tenant's mutual reasonable judgment, result in the Premises being
suitable for Tenant's continued occupancy for the uses and purposes permitted by
this Lease, this Lease shall terminate as of the date that possession of the
Premises or Building or part thereof be taken, provided that if the parties
disagree, the Lease shall not terminate and the issue as to whether the
remaining Premises are suitable for Tenant's continued occupancy for the uses
permitted by this Lease shall be submitted into arbitration and such arbitration
shall comply and be governed by the California Arbitration Act, Sections 1280
through 1294.2 of the California Code of Civil Procedure. A sale by Landlord to
any authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this paragraph. If
any part of the Premises is taken and the remaining part is reasonably suitable
for Tenant's continued occupancy for the purposes and uses permitted by this
Lease, this Lease shall, as to the part so taken, terminate as of the date that
possession of such part of the Premises is taken. If the Premises is so
partially taken the Rent and other sums payable hereunder shall be reduced in
the same proportion that Tenant's use and occupancy of the Premises is reduced.
If the parties disagree as to the suitability of the Premises for Tenant's
continued occupancy or the amount of any applicable Rent reduction, the matter
shall be resolved by arbitration. No award for any partial or entire taking
shall be apportioned. Tenant assigns to Landlord its interest in any award which
may be made in such taking or condemnation, together with any and all rights of
Tenant arising in or to the same or any part thereof, except that Landlord shall
pay to Tenant from any award received by Landlord an amount allocable to the
value of the Tenant Improvements at the time of such award which shall be
determined using standard accounting methods for depreciation. Nothing contained
herein shall be deemed to give Landlord any interest in or require Tenant to
assign to Landlord any separate award made to Tenant for the taking of Tenant's
Personal Property, for the interruption of Tenant's business, or its moving
costs, or for the loss of its good will. No temporary taking of the Premises
shall terminate this Lease or give Tenant any right to any abatement of Rent
except to the extent of interference with Tenant's use of the Premises;
provided, however, that in any event Rent shall not be abated if Tenant is
separately and directly compensated for such interference by the condemning
authority. Any award made to Tenant by reason of such temporary taking shall
belong entirely to Tenant and Landlord shall not be entitled to share therein.
Each party agrees to execute and deliver to the other all instruments that may
be required to effectuate the provisions of this paragraph.
24. ASSIGNMENT AND SUBLETTING
24.1 LANDLORD'S CONSENT Tenant shall not enter into a Sublet without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any attempted or purported Sublet without Landlord's prior written
consent shall be void and confer no rights upon any third person and shall be
deemed a material default of this Lease. Each Subtenant shall agree in writing,
for the benefit of Landlord, to assume, to be bound by, and to perform the
terms, conditions and covenants of this Lease to be performed by Tenant.
Notwithstanding anything contained herein, Tenant shall not be released from
liability for the performance of each term, condition and covenant of this Lease
by reason of Landlord's consent to a Sublet unless Landlord specifically grants
such release in writing.
<PAGE>
24.2 INFORMATION TO BE FURNISHED If Tenant desires at any time to Sublet
the Premises or any portion thereof, it shall first notify Landlord of its
desire to do so and shall submit in writing to Landlord: (i) the name of the
proposed Subtenant; (ii) the nature of the proposed Subtenant's business to be
carried on in the Premises; (iii) the terms and provisions of the proposed
Sublet and a copy of the proposed Sublet form containing a description of the
subject premises; and (iv) such financial information, including financial
statements, as Landlord may reasonably request concerning the proposed
Subtenant.
24.3 LANDLORD'S ALTERNATIVES At any time within fifteen (15) days after
Landlord's receipt of the information specified in Paragraph 24.2, Landlord may,
by written notice to Tenant, elect: (i) to consent to the Sublet by Tenant; (ii)
to refuse its consent to the Sublet; or (iii) to terminate this Lease. If
Landlord consents to the Sublet, Tenant may thereafter enter into a valid Sublet
of the Premises or portion thereof, upon the terms and conditions and with the
proposed Subtenant set forth in the information furnished by Tenant to Landlord
pursuant to Paragraph 24.2.
24.4 EXECUTED COUNTERPART No Sublet shall be valid nor shall any Subtenant
take possession of the Premises until an executed counterpart of the Sublet
agreement has been delivered to Landlord.
24.5 EXEMPT SUBLETS Notwithstanding the above, Landlord's prior written
consent shall not be required for a Sublet to a subsidiary, affiliate or parent
corporation of Tenant, a corporation or partnership into which Tenant merges or
consolidates, or a purchaser of all or substantially all of the assets of
Tenant, provided that Tenant gives Landlord prior written notice of the name of
any such Subtenant and, in the event of an assignment (i) the assignee has a net
worth, at the time of such assignment, that is equal to or greater than the net
worth of Tenant immediately prior to such assignment, and (ii) the assignee
assumes, in writing, for the benefit of Landlord all of Tenant's obligations
under the Lease.
24.6 SUBLET PROFITS If the Rent received by Tenant from any Sublet exceeds
the Rent payable by Tenant under this Lease, Tenant shall pay one-half (1/2) of
such excess to Landlord monthly as Additional Rent after first deducting
reasonable costs incurred by Tenant in connection with such Sublet for
advertising, brokerage commissions, and attorneys' fees.
25. DEFAULT
25.1 TENANT'S DEFAULT A default under this Lease by Tenant shall exist if
any of the following events shall occur:
25.1.1 If Tenant fails to pay Rent or any other sum required to be paid
hereunder within seven (7) days after written notice from Landlord; provided,
however, that such notice shall be in lieu of, and not in addition to, any
notice required pursuant to Section 1161 of the California Code of Civil
Procedure regarding unlawful detainer actions; or
25.1.2 If Tenant shall have failed to perform any term, covenant or condition
of this Lease except those requiring the payment of money, and Tenant shall have
failed to cure such breach within thirty (30) days after written notice from
Landlord where such breach could reasonably be cured within such thirty (30) day
period; provided, however, that where such failure could not reasonably be cured
within the thirty (30) day period, that Tenant shall not be in default if it
undertakes commercially reasonable measures to cure such non-performance within
the thirty (30) day period and diligently thereafter prosecutes the same to
completion; or
25.1.3 If Tenant assigns its assets for the benefit of its creditors; or
25.1.4 If a court shall make or enter any decree or order other than under the
bankruptcy laws of the United States adjudging Tenant to be insolvent; or
approving as properly filed a petition seeking reorganization of Tenant; or
directing the winding up or liquidation of Tenant and such decree or order shall
have continued for a period of thirty (30) days.
25.2 REMEDIES Upon a default, Landlord shall have the following remedies,
in addition to all other rights and remedies provided by law or otherwise
provided in this Lease, to which Landlord may resort cumulatively or in the
alternative:
25.2.1 Landlord may continue this Lease in full force and effect, and this
Lease shall continue in full force and effect as long as Landlord does not
terminate this Lease, and Landlord shall have the right to collect Rent when
due.
25.2.2 Landlord may terminate Tenant's right to possession of the Premises at
any time by written notice in accordance with applicable laws, and upon such
termination relet the Premises or any part thereof. No act
<PAGE>
by Landlord other than the giving of express written notice thereof 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 under this Lease shall not constitute termination of Tenant's right to
possession. On termination, Landlord has the right to remove all Tenant's
Personal Property and store same at Tenant's cost and to recover from Tenant as
damages:
(a) The worth at the time of award of unpaid Rent and other sums due and
payable which had been earned at the time of termination; plus
(b) The worth at the time of award of the amount by which the unpaid Rent
and other sums due and payable which would have been payable after termination
until the time of award exceeds the amount of such Rent loss that Tenant proves
could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by which the unpaid Rent
and other sums due and payable for the balance of the Term after the time of
award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; plus
(d) Any other amount necessary which is to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which, in the ordinary course of things, would be likely to
result therefrom, including, without limitation, any costs of expenses incurred
by Landlord: (i) in retaking possession of the Premises; (ii) in maintaining,
repairing, preserving, restoring, replacing, cleaning, or rehabilitating the
Premises or any portion thereof, including such acts for reletting to a new
tenant or tenants; (iii) for leasing commissions; or (iv) for any other costs
necessary or appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by the laws of the State of
California. The "worth at the time of award" of the amounts referred to in
Paragraphs 25.2.2(a) and 25.2.2(b) is computed by allowing interest at the
Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award" of
the amount referred to in Paragraph 25.2.2(c) is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).
25.2.3 Landlord may, upon termination of this Lease in accordance with
applicable laws, re-enter the Premises and remove all persons and property from
the Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.
25.3 LANDLORD'S DEFAULT Landlord shall not be deemed to be in default in
the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty (30)
days after receipt of written notice by Tenant to Landlord specifying the nature
of such default; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall commence such
performance within such thirty (30) day period and thereafter diligently
prosecute the same to completion.
26. SUBORDINATION This Lease is subject and subordinate to any ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Property and to all renewals, modifications,
consolidations, replacements and extensions thereof; provided, however, if the
holder or holders of any such Encumbrance ("Holder") shall require that this
Lease to be prior and superior thereto, within ten (10) days of written request
of Landlord to Tenant, Tenant shall execute, have acknowledged and deliver any
and all reasonable documents or instruments which Landlord or Holder deems
necessary or desirable for such purposes. Landlord shall have the right to cause
this Lease to be and become and remain subject and subordinate to any and all
Encumbrances which are now or may hereafter be executed covering the Premises,
or any renewals, modifications, consolidations, replacements or extensions
thereof, for the full amount of all advances made or to be made thereunder and
without regard to the time or character of such advances, together with interest
thereon and subject to all the terms and provisions thereof, so long as Landlord
obtains from the Holder of any such Encumbrance a non-disturbance agreement
which provides that in the event of termination of any such lease or upon the
foreclosure of any such mortgage or deed of trust the Holder shall recognize
Tenant's rights under this Lease as long as Tenant is not then in default and
continues to pay the Rent and observe and perform all the provisions of this
Lease to be observed
<PAGE>
and performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute any and all documents required by Landlord or the Holder to
make this Lease subordinate to any lien of the Encumbrance so long as such
documents contain non-disturbance provisions substantially in conformance with
the foregoing. Notwithstanding anything to the contrary set forth in this
paragraph, Tenant hereby attorns and agrees to attorn to any entity purchasing
or otherwise acquiring the Property at any sale or other proceeding or pursuant
to the exercise of any other rights, powers or remedies under such Encumbrance.
27. NOTICES Any notice or demand required or desired to be given under
this Lease shall be in writing and shall be personally served or in lieu of
personal service may be given by mail or by Federal Express or other reputable
overnight courier service. If given by mail, such notice shall be deemed to have
been given when seventy-two (72) hours have elapsed from the time when such
notice was deposited in the United States mail, registered or certified, and
postage prepaid, addressed to the party to be served. If given by overnight
courier service, such notice shall be deemed to be effective upon the next
business day after deposit with the courier service. At the date of execution of
this Lease, the addresses of Landlord and Tenant are as set forth in the first
paragraph of this Lease. After the Commencement Date, all notices to Tenant
shall be sent to the Premises with a copy to the address specified in the first
paragraph of this Lease. Either party may change its address by giving notice of
same in accordance with this paragraph.
28. ATTORNEYS' FEES If either party brings any action, legal proceeding or
arbitration proceeding for damages for an alleged breach of any provision of
this Lease, to recover rent, or other sums due, to terminate the tenancy of the
Premises or to enforce, protect or establish any term, condition or covenant of
this Lease or right of either party, the prevailing party shall be entitled to
recover as a part of such action or proceedings, or in a separate action brought
for that purpose, reasonable attorneys' fees and costs.
29. ESTOPPEL CERTIFICATES Tenant shall, within ten (10) days after written
request from Landlord, execute and deliver to Landlord any documents, including
estoppel certificates, in the form prepared by Landlord: (a) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the Rent and other charges are
paid in advance, if any, and (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or, if there are
uncured defaults on the part of Landlord, stating the nature of such uncured
defaults, and (c) otherwise evidencing the status of the Lease, as may be
required by a lender making a loan to Landlord to be secured by deed of trust or
mortgage covering the Premises or a purchaser of the Premises from Landlord.
30. TENANT'S FINANCIAL STATEMENTS Tenant shall, within ten (10) days after
Landlord's written request, deliver to Landlord the current financial statements
of Tenant, and financial statements of the two (2) years prior to the current
financial statements year, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared by or under the direction
of a certified public accountant. Landlord shall keep such financial statements
confidential and shall not disclose such financial statements to any third
party, other than Landlord's members, lenders, prospective lenders and
prospective purchasers, without Tenant's prior written consent.
31. TRANSFER OF THE PROPERTY BY LANDLORD In the event of any conveyance of
the Property and assignment by Landlord of this Lease, Landlord shall be and is
hereby entirely released from all liability under any and all of its covenants
and obligations contained in or derived from this Lease occurring after the date
of such conveyance and assignment, and Tenant agrees to attorn to such
transferee/assignee.
32. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS If Tenant fails to make
any payment or perform any other act on its part to be made or performed under
this Lease, Landlord may, but shall not be obligated to and without waiving or
releasing Tenant from any obligation of Tenant under this Lease, make such
payment or perform such other act to the extent Landlord may deem desirable, and
in connection therewith, pay expenses and employ counsel. All sums so paid by
Landlord and all penalties, interest and costs in connection therewith shall be
due and payable by Tenant upon receipt of written demand by Landlord, together
with interest thereon at the Interest Rate from the date Tenant receives
Landlord's written demand to the date of payment by Tenant to Landlord, plus
collection costs and attorneys' fees. Landlord shall have the same rights and
remedies for the nonpayment thereof as in the case of default in the payment of
Rent.
33. TENANT'S REMEDY If, as a consequence of a default by Landlord under
this Lease, Tenant recovers a money judgment against Landlord, such judgment
shall be satisfied only out of the proceeds of sale received
<PAGE>
upon execution of such judgment and levied thereon against the right, title and
interest of Landlord in the Property and out of Rent or other income from the
Property received by Landlord or out of consideration received by Landlord from
the sale or other disposition of all or any part of Landlord's right, title or
interest in the Property, and neither Landlord nor Landlord's Agents shall be
liable for any deficiency.
34. MORTGAGEE PROTECTION If Landlord defaults under this Lease, Tenant
will notify by registered or certified mail to any beneficiary of a deed of
trust or mortgagee of a mortgage covering the Premises, of whom Tenant has been
notified in writing, and offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of the
Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure.
35. BROKERS Tenant and Landlord warrant and represent that, other than the
brokers listed in Paragraph 1.9 above, they have had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease, and
that they know of no other real estate broker or agent who is or might be
entitled to a commission in connection with this Lease. Tenant and Landlord each
agree to defend, indemnify and hold the other party and its Agents from and
against any and all liabilities or expenses, including attorneys' fees and
costs, arising out of or in connection with claims made by any other broker or
individual for commissions or fees on the basis of the acts or omissions of the
indemnifying party.
36. ACCEPTANCE Delivery of this Lease, duly executed by Tenant,
constitutes an offer to lease the Premises, and under no circumstances shall
such delivery be deemed to create an option or reservation to lease the Premises
for the benefit of Tenant. This Lease shall only become effective and binding
upon full execution hereof by Landlord and delivery of a signed copy to Tenant.
37. RECORDING Neither party shall record this Lease.
38. MODIFICATIONS FOR LENDER If, in connection with obtaining financing
for the Building or any portion thereof, Landlord's lender shall request
reasonable modification to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent thereto, provided
such modifications do not adversely affect Tenant's rights hereunder.
39. PARKING Tenant shall have the right to use the Property's parking
facilities upon terms and conditions as may from time to time be reasonably
established by Landlord. Landlord may, at Landlord's election, establish
cross-parking easements between the Property and any adjacent property owned by
Landlord or an affiliate of Landlord, provided that such easements do not
unreasonably interfere with Tenant's use of the Property. In no event, however,
may Landlord establish any parking easements that would permit parking for
adjacent properties upon which retail sales activities are conducted.
40. OPTIONS TO EXTEND
40.1 OPTION PERIOD Provided that Tenant is not in material default
hereunder, either at the time of exercise or at the time the extended term
commences, Tenant shall have the option to extend the initial fifteen (15)
year Term of this Lease for three (3) additional periods of five (5) years
each (each, an "Option Period") on the same terms, covenants and conditions
provided herein, except that upon such renewal the Monthly Rent due hereunder
shall be determined pursuant to Paragraph 40.2. Tenant shall exercise its
option by giving Landlord written notice ("Option Notice") at least nine (9)
months prior to the expiration of the initial Term of this Lease, or the
prior Option Period, as applicable.
40.2 OPTION PERIOD RENT The Monthly Rent for each Option Period shall be
determined as follows:
40.2.1 The parties shall have fifteen (15) days after Landlord receives the
Option Notice within which to agree on the Monthly Rent for the Option Period in
question based upon the then fair market rental value of the Premises as defined
in Paragraph 40.2.2. If the parties agree on the Monthly Rent for the Option
Period within fifteen (15) days, they shall immediately execute an amendment to
this Lease stating the Monthly Rent for the Option Period. If the parties are
unable to agree on the Monthly Rent for the Option Period within fifteen (15)
days, then, the Monthly Rent for the Option Period shall be the then current
fair market rental value of the Premises as determined in accordance with
Paragraph 40.2.3, subject to such periodic increases in Monthly Rent as are then
customary, in both amount or percentage amounts and frequency, for leases
similar to this Lease taking into consideration the same items considered in
determining the then fair market rental value of the Premises.
40.2.2 The "then fair market rental value of the Premises" shall be defined to
mean the fair market rental value of the Premises as of the commencement of the
Option Period, taking into consideration the uses
<PAGE>
permitted under this Lease, the quality, size, design and location of the
Premises, and the rent for comparable buildings located in Morgan Hill. In no
event shall the then fair market monthly rental value of the Premises for the
Option Period be less than the Monthly Rent last payable under the Lease.
40.2.3 Within seven (7) days after the expiration of the fifteen (15) day
period set forth in Paragraph 40.2.1., each party, at its cost and by giving
notice to the other party, shall appoint a real estate appraiser with at least
five (5) years' full-time commercial appraisal experience in the area in which
the Premises are located to appraise and set the Monthly Rent. If a party does
not appoint an appraiser within ten (10) days after the other party has given
notice of the name of its appraiser, the single appraiser appointed shall be the
sole appraiser and shall set the Monthly Rent. If the two (2) appraisers are
appointed by the parties as stated in this paragraph, they shall meet promptly
and attempt to set the Monthly Rent. If they are unable to agree within thirty
(30) days after the second appraiser has been appointed, they shall attempt to
elect a third appraiser meeting the qualifications stated in this paragraph
within ten (10) days after the last day the two (2) appraisers are given to set
the Monthly Rent. If they are unable to agree on the third appraiser, either of
the parties to this Lease, by giving ten (10) days' notice to the other party,
can apply to the then Presiding Judge of the Santa Clara County Superior Court,
for the selection of a third appraiser who meets the qualifications stated in
this paragraph. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser and of paying the third appraiser's fee. The
third appraiser, however selected, shall be a person who has not previously
acted in any capacity for either party.
Within thirty (30) days after the selection of the third appraiser, a majority
of the appraisers shall set the Monthly Rent. If a majority of the appraisers
are unable to set the Monthly Rent within the stipulated period of time, the
three (3) appraisals shall be added together and their total divided by three
(3); the resulting quotient shall be the Monthly Rent. If, however, the low
appraisal and/or the high appraisal are/is more than ten percent (10%) lower
and/or higher than the middle appraisal, the low appraisal and/or the high
appraisal shall be disregarded. If only one appraisal is disregarded, the
remaining two (2) appraisals shall be added together and their total divided by
two (2); the resulting quotient shall be the Monthly Rent. If both the low
appraisal and the high appraisal are disregarded as stated in this paragraph,
then only the middle appraisal shall be used as the result of the appraisal.
After the Monthly Rent has been set, the appraisers shall immediately notify the
parties and the parties shall amend this Lease to set forth such amount.
41. GENERAL
41.1 CAPTIONS The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.
41.2 EXECUTED COPY Any fully executed copy of this Lease shall be deemed an
original for all purposes.
41.3 TIME Time is of the essence for the performance of each term,
condition and covenant of this Lease.
41.4 SEPARABILITY If one or more of the provisions contained herein, except
for the payment of Rent, is for any reason held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
41.5 CHOICE OF LAW This Lease shall be construed and enforced in accordance
with the laws of the State of California. The language in all parts of this
Lease shall in all cases be construed as a whole according to its fair meaning
and not strictly for or against either Landlord or Tenant.
41.6 GENDER; SINGULAR, PLURAL When the context of this Lease requires, the
neuter gender includes the masculine, the feminine, a partnership or corporation
or joint venture, and the singular includes the plural.
41.7 BINDING EFFECT The covenants and agreement contained in this Lease
shall be binding on the parties hereto and on their respective successors and
assigns to the extent this Lease is assignable.
41.8 WAIVER The waiver by Landlord or Tenant of any breach of any term,
condition or covenant, of this Lease shall not be deemed to be a waiver of such
provision or any subsequent breach of the same or any other term, condition or
covenant of this Lease. The subsequent acceptance of Rent hereunder by Landlord
or payment of Rent hereunder by Tenant shall not be deemed to be a waiver of any
preceding breach at the time of acceptance or making of such payment. No
covenant, term or condition of this Lease shall be deemed to have been waived by
Landlord or Tenant unless such waiver is in writing signed by Landlord or Tenant
as applicable.
<PAGE>
41.9 ENTIRE AGREEMENT This Lease is the entire agreement between the
parties, and there are no agreements or representations between the parties
except as expressed herein. Except as otherwise provided herein, no subsequent
change or addition to this Lease shall be binding unless in writing and signed
by the parties hereto.
41.10 AUTHORITY If Tenant is a corporation or a partnership, each individual
executing this Lease on behalf of said corporation or partnership, as the case
may be, represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms. Landlord, at its option, may require a copy of such written
authorization to enter into this Lease. The failure of Tenant to deliver the
same to Landlord within fourteen (14) days of Landlord's request therefor shall
be deemed a default under this Lease.
41.11 EXHIBITS All exhibits, amendments, riders and addenda attached hereto
are hereby incorporated herein and made a part hereof.
THIS LEASE is effective as of the date the last signatory necessary to execute
the Lease shall have executed this Lease.
TENANT
Dated: July 21, 2000 Media Arts Group, Inc.,
a Delaware corporation
By: /s/ Craig Fleming
----------------------------
Its: President & CEO
By: /s/ Timothy S. Guster
----------------------------
Its: Sr. VP & Secretary
LANDLORD
Dated: July 21, 2000 TBI - Mission West, LLC,
a California limited liability company
By Toeniskoetter & Breeding, Inc.,
a California corporation,
Managing Member
By /s/ Charles Toeniskoetter
----------------------------
Its President