California-Morgan Hill-Madrone Parkway (Building 3) Lease - TBI-Mission West LLC and 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 December __, 1999,
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 fifty-six thousand five
hundred forty-eight (56,548) 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 fifty-six thousand five hundred forty-eight (56,548)
square feet, and located on Madrone Parkway in Morgan Hill, California. The
Building is referred to sometimes as "Building 3."
1.3 Anticipated Commencement Date. April 1, 2001.
1.4 Term. Fifteen (15) years.
1.5 Use. Assembly, light manufacturing and distribution.
1.6 Monthly Rent. $42,900.00/month, subject to adjustment as provided in
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Paragraph 5.2.
1.7 Security Deposit. None.
1.8 Property. The real property consisting of approximately 4.11 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&R's. 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 Agents. Landlord's authorized agents, partners,
subsidiaries, directors, officers, and employees.
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
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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
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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.
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.
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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
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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.
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
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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.
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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 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
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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
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as EXHIBIT D.
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
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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 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
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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 not to exceed three
percent (3%) of the Monthly Rent. 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.
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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,
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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, 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
<PAGE>
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.
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.
<PAGE>
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:
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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. Option to Expand.
41.1 Expansion Option Period. Provided that Tenant is not, at the time of
exercise, in material default of this Lease or the lease for Building 2 Tenant
shall have the option to lease the building to be constructed by Landlord on
that certain parcel in Madrone Business Park known as Parcel M, consisting of
approximately 2.68 acres (the "Expansion Building") on the following terms and
conditions. Tenant may exercise its option at any time prior to February 28,
2003 (the "Expansion Option Period"). Tenant shall exercise the option by
delivery of written notice to Landlord prior to the expiration of the Expansion
Option Period. If Tenant fails to exercise the option to lease the Expansion
Building prior to the expiration of the Expansion Option Period, Tenant shall be
deemed to have waived its right to lease the Expansion Building pursuant to the
terms of this Paragraph 41 and thereafter Landlord shall be free to lease the
Expansion Building to any third party on such terms as Landlord shall elect
without further notice to Tenant. The expansion option granted to Tenant under
this Paragraph 41 is personal to Media Arts Group, Inc., its
<PAGE>
subsidiaries and successors and shall not be transferred or assigned to any
third party.
41.2 Rent for Expansion Buildings. If Tenant timely exercises its option to
lease the Expansion Building, Landlord and Tenant shall enter into a lease for
the Expansion Building on the same terms and conditions set forth herein, except
that (i) Landlord shall provide an allowance for the design and construction of
tenant improvements to the Expansion Building that is commensurate with the
allowance provided under this Lease and the lease for Building 2 considering the
size and proposed use of the Expansion Building; and (ii) the initial monthly
rent for the Expansion Building shall be determined as follows. If Tenant
exercises the option on or before February 28, 2002, the initial monthly rent
shall be calculated based on a twelve percent (12%) return on total project
costs for the Expansion Building, using a land value fixed at $9.00 per square
foot. If Tenant exercises the option at any time from March 1, 2002 through
February 28, 2003, the initial monthly rent shall be calculated based on a
twelve percent (12%) return on total project costs for the Expansion Building,
using a land value fixed at $10.00 per square foot. In addition, if Tenant
exercises the option at any time after February 28, 2002, then Tenant shall be
responsible for payment of the real property taxes and assessments allocable to
Parcel M commencing March 1, 2002.
42. Right of First Offer to Purchase. Provided that Tenant is not, at the time
of exercise, in material default of any provision of this Lease or the lease of
that certain building in Madrone Business Park known as Building L, Tenant shall
have the right of first offer to purchase the Property, any other property
leased by Tenant from Landlord at Madrone Business Park, and/or Parcel M (the
"Expansion Parcel") on the following terms and conditions. If at any time during
the Term of this Lease Landlord elects to sell the Property or any other
property leased by Tenant from Landlord at Madrone Business Park, or if at any
time after February 28, 2003, Landlord elects to sell the Expansion Parcel,
Landlord shall notify Tenant which of the foregoing properties Landlord is
offering for sale (the "Offered Property") and the terms and conditions upon
which Landlord would be willing to sell the Offered Property ("Landlord's
Notice"). Tenant shall have thirty (30) days after receipt of Landlord's Notice
to notify Landlord in writing of Tenant's election to purchase the Offered
Property on the terms stated in Landlord's Notice. If Tenant notifies Landlord
within such 30-day period of Tenant's desire to purchase the Offered Property on
such terms, Landlord and Tenant shall enter into a purchase and sale agreement
for the Offered Property on the terms and conditions stated in Landlord's
Notice. If, however, Tenant fails to notify Landlord of Tenant's election to
purchase the Offered Property within such 30-day period or, if Landlord and
Tenant, through no fault of Landlord, fail to execute a purchase and sale
agreement within thirty (30) days after the date of Tenant's notice to Landlord,
Tenant shall be deemed to have waived its right to purchase the Offered Property
and Landlord shall have the right thereafter to offer the Offered Property for
sale and to sell the Offered Property to any third party on substantially the
terms stated in Landlord's Notice without further notice to Tenant. This right
of first offer to purchase is personal to Media Arts Group, Inc., its
subsidiaries and successors and shall not be transferred or assigned to any
third party.
<PAGE>
43. Payment to Tenant Upon Sale of Property. If at any time during the Term of
this Lease Landlord elects to sell the Property or any other property leased by
Tenant from Landlord at Madrone Business Park, and Tenant does not elect to
purchase the Offered Property pursuant to Paragraph 42, then so long as Tenant
is occupying the Property, upon close of escrow for the sale of the Offered
Property Landlord shall pay to Tenant an amount equal to fifteen percent (15%)
of the net sales proceeds for the Offered Property which are in excess of the
base value of the Offered Property as of the date the Offered Property was
completed and first occupied. For purposes of this provision, the "net sales
proceeds" shall mean the gross sales price of the Offered Property less the
costs incurred by Landlord in closing the sale of the Offered Property
including, but not limited to, brokerage commissions, attorneys' fees, title
insurance premiums, escrow fees, recording charges, prorations of real property
taxes and assessments, survey fees (if paid by Landlord), and fees for
environmental site assessments (if paid for by Landlord). The base value shall
be determined by taking the annualized triple net rent for the Offered Property,
reducing it by the operating reserves and vacancy calculated at seven percent of
the triple net rent, then dividing the triple net rent after operating reserves
and vacancy by .09 to establish a base value at a nine percent (9%)
capitalization rate. The base value of the Property is hereby established as
$5,320,000.00. The rights under this Paragraph 43 are personal to Media Arts
Group, Inc., its subsidiaries and successors and shall not be transferred or
assigned to any third party.
44. General.
44.1 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.
44.2 Executed Copy. Any fully executed copy of this Lease shall be deemed an
original for all purposes.
44.3 Time. Time is of the essence for the performance of each term, condition
and covenant of this Lease.
44.4 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.
44.5 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.
44.6 Gender; Singular, Plural. When the context of this Lease requires, the
neuter gender includes the masculine, the feminine, a partnership or
<PAGE>
corporation or joint venture, and the singular includes the plural.
44.7 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.
44.8 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.
44.9 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.
44.10 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.
44.11 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: December 20, 1999
Media Arts Group, Inc., a Delaware corporation
By: /s/ Craig Fleming
-----------------------------
Its: President & CEO
By: /s/ Timothy S. Guster
-----------------------------
Its: Sr. VP & Secretary
<PAGE>
LANDLORD
Dated: January 18, 2000
TBI - Mission West, LLC, a California
limited liability company
By Toeniskoetter & Breeding, Inc. Development, a
California corporation,
Managing Member
By /s/ Charles Toeniskoetter
-----------------------------
Its President