LEASE AGREEMENT

EXHIBIT 10(qq)

 

TO FORM 10-K OF

WELLS REAL ESTATE FUND IX, L.P.

 

 

 

SECOND AMENDED AND RESTATED

OFFICE LEASE

 

FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE

“LANDLORD”

 

and

 

GAIAM, INC.

“TENANT”

 

360 Interlocken Boulevard

Broomfield, Colorado

TABLE OF CONTENTS

 

 

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SECOND AMENDED AND RESTATED

OFFICE LEASE

 

360 INTERLOCKEN BOULEVARD

BROOMFIELD, COLORADO

 

THIS SECOND AMENDED AND RESTATED OFFICE LEASE (the “Second Restated Lease” or the “Lease”) is made this 28th day of May, 2004, to be effective as of June 1, 2004, by and between FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE, a Georgia joint venture (“Landlord”) and GAIAM, INC., a Colorado corporation (“Tenant”).

 

W I T N E S S E T H:

 

WHEREAS, prior to the date hereof, Landlord and Tenant entered into that certain Amended and Restated Office Lease, dated as of February 14, 2002, as amended by that certain First Amendment to Amended and Restated Lease Agreement, dated as of March 31, 2003, and as further amended by that certain Second Amendment to Amended and Restated Office Lease Agreement of even date herewith (said Amended and Restated Lease, as so amended, is herein referred to as the “First Restated Lease”, and said Second Amendment is herein referred to as the “Second Amendment to First Restated Lease”), pursuant to the terms of which Landlord has leased to Tenant, and Tenant has leased from Landlord, certain premises (the “Premises”) containing 36,159 square feet of Rentable Area and consisting of the entire second (2 ^nd ) and third (3 ^rd ) floors of that certain building known as the 360 Interlocken (the “Building”) located at 360 Interlocken Boulevard, Broomfield, Colorado 80021, on that certain real property more particularly described on Exhibit A attached hereto and made a part hereof (the “Property”);

 

WHEREAS, Landlord and Tenant desire to extend the Lease Term as to the existing Premises, to modify the rental rate for the existing Premises, to provide for certain rights of first offer to lease unencumbered space on the first floor of the Building, and to provide for certain other options and rights all on the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, for and in consideration of the premises, the covenants and agreements hereinafter contained, and for Ten Dollars ($10.00) and other good and valuable consideration in hand paid by each party hereto to the other, the receipt and sufficiency of which are hereby acknowledged, Tenant and Landlord hereby covenant and agree to amend and restate the First Restated Lease, as follows:

 

ARTICLE 1

 

DEMISE

 

1.1 Demise . Effective as of June 1, 2004, Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord those certain premises (the “Premises”) consisting of the entire second (2 ^nd ) and third (3 ^rd ) floors of the Building, which Premises are generally depicted

 

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on the floor plans attached hereto as Exhibit B , together with a non-exclusive right subject to the provisions hereof, to use all appurtenances thereto, including, but not limited to, any plazas, common areas, walkways or other areas in the Building or on the Property designated by Landlord for the exclusive or non-exclusive use of the tenants of the Building, all of which inclusive of the Building are hereinafter collectively called the “Building Complex”. For purposes of this Second Restated Lease, Landlord and Tenant hereby agree that the Premises contain a total of 36,159 square feet of Rentable Area, and that the Building contains a total of 51,974 square feet of Rentable Area. Such letting and hiring is upon and subject to the terms, conditions and covenants herein set forth, and Tenant covenants as a material part of the consideration for this Second Restated Lease to keep and perform each and all of said terms, conditions and covenants by it to be kept and performed and that this Second Restated Lease is made upon the condition of such performance.

 

ARTICLE 2

 

TERM

 

2.1 Term . The term of this Second Restated Lease shall commence on June 1, 2004 (the “Commencement Date”) and shall end at 5:00 p.m. on May 31, 2008, unless extended or sooner terminated as herein provided (the “Lease Term”).

 

2.2 Landlord’s Work . Landlord shall have no obligation for making any improvements in the Premises and Tenant hereby accepts the Premises in its “AS IS” condition.

 

ARTICLE 3

 

RENT

 

3.1 Base Rent . Beginning on the Commencement Date, Tenant shall pay to Landlord, at P. O. Box 926040, Norcross, Georgia 30010-6040, or at such other place as Landlord may designate in writing to Tenant, annual base rent (“Base Rent”) in the amounts set forth below for the Premises, based on the Premises containing 36,159 square feet of Rentable Area:

 

 

The Base Rent for each Lease Year shall be payable in equal monthly installments, due on the first day of each calendar month, in advance, in legal tender of the United States of America, without abatement, demand, deduction or offset whatsoever, except as may be expressly provided in this Lease. One full monthly installment of Base Rent shall be due and

 

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payable on the Commencement Date by Tenant and a like monthly installment of Base Rent shall be due and payable on or before the first day of each calendar month following the Commencement Date during the Lease Term hereof. Tenant shall pay, as Additional Rent, all other sums due from Tenant under this Lease. The term “Rent”, as used herein, means all Base Rent, Additional Rent and all other amounts payable hereunder from Tenant to Landlord. If the Lease Term commences or terminates on a day other than the first or last day of a calendar month respectively, then the installments of Base Rent for such month or months shall be prorated and the installments so prorated shall be paid in advance. If the Premises shall be expanded in accordance with the terms of this Second Restated Lease, then the amount of Base Rent shall be appropriately adjusted in accordance with the terms of this Second Restated Lease.

 

3.2 Additional Rent . Any other sums of money or charges to be paid by Tenant pursuant to the provisions of this Lease may be designated as “Additional Rent”. A failure to pay Additional Rent shall be treated in all events as the failure to pay Rent.

 

3.3 Interest on Late Payments and Late Payment Charge . Any Rent (whether Base Rent or Additional Rent) or other amount due from Tenant to Landlord under this Lease not paid within five (5) days of the date due shall bear interest from the date due until the date paid at the rate of two percent (2%) per month (the “Default Rate”), but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. Failure to charge or collect such interest in connection with any one or more such late payments shall not constitute a waiver of Landlord’s right to charge and collect such interest in connection with any other or similar or like late payments.

 

Furthermore, in the event any rent or other amounts owing hereunder are not paid within five (5) days after the due date, then Landlord and Tenant agree that Landlord will incur additional administrative expenses, the amount of which will be difficult if not impossible to determine. Accordingly, in addition to such required payment, Tenant shall pay to Landlord an additional one time late charge for any such late payment in the amount of five percent (5%) of the amount of such late payment.

 

Notwithstanding the above, Landlord agrees that it shall waive such late charge and interest twice during any calendar year provided Tenant is not otherwise in default hereunder. Tenant shall not be deemed late if the Rent payment is postmarked by the United States Post Office no later than the last day of the five (5) day period set forth above, the payment is actually received and Tenant uses all reasonable efforts to make all payments when due.

 

ARTICLE 4

 

OPERATING EXPENSE ADJUSTMENT

 

4.1 Definitions . The following terms shall have the following meanings with respect to the provisions of this Section 4.1 :

 

(a) Tenant’s “Prorata Share” shall mean that fraction, the numerator of which is the Rentable Area of the Premises (36,159 rentable square feet) and the denominator of which is 51,974 square feet being the total Rentable Area of the Building Complex and is equal to

 

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69.57%, which calculation shall be final except as specifically set forth herein. At such time, if ever, any space is added to or subtracted from the Premises, Tenant’s Prorata Share shall be adjusted accordingly.

 

(b) “Real Estate Taxes” shall include (a) any form of assessment (including any so-called “special” assessments), license tax, business license fee, business license tax, commercial rental tax, levy, charge, penalty or tax, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, water, drainage or other improvement or special district thereof, against the Premises, the Building, Property, or Building Complex or any legal or equitable interest of Landlord therein; (b) any tax on Landlord’s right to rent or other income from the Premises or against Landlord’s business of leasing the Premises; and (c) any assessments, tax, fee, levy or charge in substitution, partially or totally, of or in addition to any assessment, tax, fee, levy or charge previously included within the definition of Real Estate Taxes which may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Landlord and Tenant that all such new and increased assessments, taxes, fees, levies and charges be included within the definition of Real Estate Taxes for purposes of this Lease. The following shall also be included within the definition of Real Estate Taxes for purposes of this Lease, provided, however, that Tenant shall pay Landlord the entire amount thereof: (i) any tax allocable to or measured by the area of the Premises or the rental payable hereunder, including without limitation, any gross income, privilege, sales or excise tax levied by the State, any political subdivision thereof, city, municipal or federal government, with respect to the receipt of such, rental, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; and (ii) any tax upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises. “Real Estate Taxes” shall not include Landlord’s federal or state income, franchise, inheritance, or estate taxes. “Real Estate Taxes” included in this definition mean taxes or assessments in the year assessed, without regard to the year in which same become due or payable.

 

(c) “Operating Expenses” shall mean for all purposes and throughout the Term of this Lease all maintenance and operating costs of any kind or nature with respect to the operation, ownership and maintenance of the Building Complex and shall include, but not be limited to, Real Estate Taxes, the cost of building supplies, window cleaning, costs incurred in connection with all energy sources for the Building such as propane, butane, natural gas, steam, electricity, solar energy and fuel oil; the costs of water and sewer service, janitorial services, both interior and exterior, general maintenance and repair of the Building Complex including the heating and air conditioning systems and structural components of the Building; landscaping, maintenance, repair and striping of all parking areas; insurance, including fire and extended coverage and public liability insurance and any rental insurance and all risk insurance carried by Landlord pursuant to Section 10.2 ; labor costs incurred in the operation and maintenance of the Building Complex, including wages and other payments; costs to Landlord for worker’s compensation and disability insurance; payroll taxes and welfare fringe benefits; professional building management fees which shall not exceed four percent (4%) of gross receipts for the

 

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Building Complex [it being mutually understood and agreed that for purposes of computing management fees, “gross receipts” of the Building Complex shall include all base rent and all amounts paid by all tenants of the Building Complex (including Tenant) as reimbursement for Operating Expenses and other incidental income of the Building Complex, but shall not include property management fees payable to any person or entity]; legal, inspection and consultation fees incurred in connection with the Building Complex; any association fees due in accordance with or as referenced in recorded documents; any expense attributable to costs incurred by Landlord for any capital improvements or structural repairs to the Building or Property required by any change in the laws, ordinances, rules, regulations or otherwise which were not in effect on the date Landlord obtained its building permit to construct the Building required by any governmental or quasi-governmental authority having jurisdiction over the Building which costs shall be amortized over the useful life of the capital improvements or structural repair; and any costs incurred by Landlord in making capital improvements or other modifications to the Building or any part thereof, which costs shall be amortized over the useful life of such improvement or modification with interest at the rate of ten percent (10%) per annum on the unamortized amount, in accordance with such reasonable life and amortization schedules and shall be determined by Landlord in accordance with generally accepted accounting principles. For all purposes and throughout the term of this Lease, Operating Expenses shall expressly exclude costs of maintenance and repair reimbursed by insurance proceeds, alterations or other specific costs attributable solely to other tenant’s space in the Building which was under the respective terms of the lease such tenant’s responsibility and thereupon billed to such tenants, and legal fees for financing, sales of the Building Complex, preparing and enforcing leases and any other legal fees which do not specifically relate to the operation and maintenance of the Building Complex.

 

(d) “Variable Operating Expenses” shall mean those Operating Expenses which vary with occupancy levels or which vary with areas serviced based upon occupied Rentable Area. Landlord agrees that Tenant, if it is paying any utilities directly or performing its own janitorial services (including light bulb replacement), shall be responsible for its Prorata Share of such utilities and services (including light bulbs) only for the common areas of the Building Complex.

 

(e) “Base Year” shall mean calendar year 2005.

 

4.2 Rent Adjustments . Landlord and Tenant agree that the following adjustments to Rent shall be made with respect to each calendar year (or portion thereof) within the Term:

 

(a) Payments of Increases in Operating Expenses . Commencing January 1, 2006, Tenant shall pay to Landlord as Additional Rent an amount equal to Tenant’s Prorata Share of the amount by which the amounts paid or incurred by Landlord for Operating Expenses in any calendar year after the Base Year exceed the amounts paid or incurred by Landlord for Operating Expenses during the Base Year, with appropriate and equitable adjustment for Variable Operating Expenses in the Base Year and each subsequent year (the “Increased Operating Expenses”). It is agreed that Tenant shall, during each calendar year after the Base Year, pay to Landlord an estimate of Tenant’s Prorata Share of such Increased Operating Expenses as

 

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hereinafter set forth. Beginning January 1, 2006, and continuing each calendar year (or portion thereof) during the Lease Term, Tenant shall pay to Landlord each month on the first day of the month an amount equal to one-twelfth (1/12) of Tenant’s Prorata Share of the Increased Operating Expenses for such new calendar year (or portion thereof contained within Lease Term) as reasonably estimated by Landlord, with an adjustment to be made between the parties at a later date as hereinafter provided. Furthermore, Landlord may from time to time but no more than three (3) times during any Lease Year furnish Tenant with notice of a re-estimation of the Increased Operating Expenses and Tenant shall commence paying its re-estimated Prorata Share on the first day of the month following receipt of said notice. As soon as practicable following the end of any calendar year but in no event later than April 15, Landlord shall submit to Tenant a statement setting forth the exact amount of Tenant’s Prorata Share of the Increased Operating Expenses for the calendar year just completed and the difference, if any, between Tenant’s actual Prorata Share of the Increased Operating Expenses for the calendar year just completed and the estimated amount of Tenant’s Prorata Share of the Increased Operating Expenses (which were paid in accordance with this subparagraph) for such year. Such statement shall also set forth the amount of the estimated Increased Operating Expenses reimbursement for the new calendar year computed in accordance with the foregoing provisions. To the extent that Tenant’s Prorata Share of the actual Increased Operating Expenses for the period covered by such statement are higher than the estimated payments which Tenant previously paid during the calendar year just completed, Tenant shall pay to Landlord the difference within thirty (30) days following receipt of said statement from Landlord. To the extent that Tenant’s Prorata Share of the actual Increased Operating Expenses for the period covered by the Statements are less than the estimated payments which Tenant previously paid during the calendar year just completed, Landlord may at its option either refund said amount to Tenant or credit the difference against Tenant’s estimated reimbursement for such Increased Operating Expenses for the current year. In addition, with respect to the monthly reimbursement, until Tenant receives such statement, Tenant’s monthly reimbursement for the new calendar year shall continue to be paid at the then current rate, but Tenant shall commence payment to Landlord of the monthly installments of reimbursement on the basis of the statement beginning on the first day of the month following the month in which Tenant receives such statement.

 

(b) Tenant’s obligation with respect to its Prorata Share of Increased Operating Expenses and Base Rent shall survive the expiration or early termination of this Lease. If Tenant occupies the Premises for less than a full calendar year during the first or last calendar years of the term hereof, Tenant’s Prorata Share for such partial year shall be appropriately prorated to reflect the number of months in such year during which Tenant occupied the Premises. Tenant shall pay all amounts due hereunder within thirty (30) days following receipt of notice thereof.

 

(c) Tenant shall have the right but not more than once per annum, at any time within thirty (30) days after a statement of actual Operating Expenses for a particular calendar year has been rendered by Landlord as provided herein, at Tenant’s sole cost and expense, to examine Landlord’s books and records during normal business hours (upon reasonable prior written notice to Landlord), at Landlord’s office relating to the determination of such Operating Expenses. Unless Tenant objects to the statement provided by Landlord, within said thirty (30) day period, such statement and adjustment shall be deemed conclusive.

 

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4.3 Reimbursement Survives Termination . In the event of the termination of this Lease by expiration of the stated term or for any other cause or reason whatsoever prior to the determination of rental adjustment as hereinafter set forth, Tenant’s agreement to reimburse Landlord up to the time of termination shall survive termination of this Lease and Tenant shall pay any amount due to Landlord within fifteen (15) days after being billed therefor. In the event of the termination of this Lease by expiration of the stated term or for any other cause or reason whatsoever, except default by Tenant of any of the terms or provisions of this Lease, prior to the determination of rental adjustments as hereinabove set forth, Landlord’s agreement to refund any excess additional rental paid by Tenant up to the time of termination shall survive termination of this Lease and Landlord shall pay the amount due to Tenant within fifteen (15) days of Landlord’s determination of such amount. This covenant shall survive the expiration or termination of this Lease.

 

If the last year of the term of this Lease ends on any day other than the last day of December, any payment due to Landlord by reason of any increase in Operating Expenses shall be prorated on the basis by which the number of days in such partial year bears to 365.

 

Any failure of Landlord to furnish Tenant with an estimate of its Prorata Share of Increased Operating Expenses or any statements as set forth in this Section 4 shall not act to relieve Tenant of its liability therefor; and with respect to any deficiencies, Tenant agrees to pay same within thirty (30) days of written demand from Landlord.

 

ARTICLE 5

 

BUILDING SERVICES

 

5.1 Standard Services . Landlord agrees to furnish to the Premises during regular business hours from 7:00 a.m. to 6:00 p.m. Mondays through Fridays and from 8:00 a.m. to 1:00 p.m. Saturdays, except for holidays as the same are determined by Landlord, and subject to the rules and regulations of the Building, heat and air conditioning for the use and occupancy of the Premises, passenger elevator service and freight elevator service, subject to scheduling by Landlord. Landlord shall also furnish: (i) electric current to be supplied for lighting the Premises and public halls, and for the operation of ordinary office equipment, exclusive of heavy-duty equipment and computers, copying equipment which is not standard for general offices, or comparable equipment; (ii) janitorial and cleaning services, and (iii) domestic water in reasonable quantity. Elevator service shall mean service either by non-attended automatic elevators or elevators with attendants at the option of Landlord. Landlord shall also furnish, at rates set from time to time as reasonably determined by Landlord (reflecting actual costs of such additional HVAC), heating and air conditioning and such other items as are not provided for herein, provided if Tenant does not have special HVAC controls for its Premises, then Tenant shall give Landlord reasonable prior notice of Tenant’s needs for such additional heating or air conditioning and Landlord shall use all reasonable efforts to provide same. Landlord shall also, at said times, maintain and keep lighted the common stairs, entries, and toilet rooms in the Building that would reasonably be subject to use by Tenant, its agents and employees during other than

 

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regular business hours. Landlord also has the right to charge Tenant for energy costs incurred because of Tenant’s above Building average usage or by reason of usage of the Premises or the Building during other than regular business hours. However, in no event shall Landlord charge Tenant more for excess utilities or after hours HVAC than it charges other tenants in the Building for such usage. Furthermore, if Landlord were to grant any tenant longer regular business hours, then such hours shall also be applicable to Tenant. Tenant agrees to pay for any excess HVAC within fifteen (15) days of the billing therefor, such billing to occur no more frequently than monthly.

 

5.2 Interruption of Standard Services . Tenant agrees that Landlord shall not be liable for failure to supply any heating, air conditioning, elevator, janitorial services, electric current, or any other service described in Section 5.1 or Section 33.3 during any period when Landlord uses reasonable diligence to restore or to supply such services or electric current, it being further agreed that Landlord reserves the right to temporarily discontinue such services or any of them, or electric current at such times as may be necessary by reason of accident, unavailability of employees, repairs, alterations, or improvements, or whenever by reason of strikes, lockouts, riots, acts of God or any other happening or occurrence beyond the reasonable control of Landlord. If Landlord is unable to furnish such services or electric current for any reason outside of Landlord’s reasonable control, or if such services or electric current shall be interrupted for any reason outside of Landlord’s reasonable control, Landlord shall not be liable for damages to persons or property for any such discontinuance or interruption, nor shall such discontinuance or interruption in any way be construed as a constructive or actual eviction of Tenant or cause an abatement of rent or operate to release Tenant from any of Tenant’s obligations hereunder. Landlord’s obligation to furnish services or electric current shall be conditioned upon the availability of adequate energy sources from the public utility companies presently serving the Building Complex. If Landlord elects for any reason to temporarily discontinue services to Tenant and/or the Building Complex, then Landlord shall give Tenant prior notice thereof and Tenant shall have the right to approve the scheduling thereof, which approval shall not be unreasonably withheld or delayed and in any event Landlord shall use reasonable efforts to restore as soon as possible any service which has been interrupted. Landlord shall have the right to reduce heating, cooling or lighting within the Premises and in the public area in the Building as required by any mandatory fuel or energy-saving program. Furthermore, due to energy code design requirements as promulgated from time to time, Tenant hereby acknowledges that it may on certain days experience discomfort with the heating and air conditioning cycle, and Landlord shall have no responsibility or liability therefor.

 

5.3 Services Paid by Tenant . Unless otherwise provided by Landlord, Tenant shall separately arrange with the applicable local public authorities or utilities, as the case may be, for the furnishing of and payment for all telephone and other communications services as may be required by Tenant in the use of the Premises. Tenant shall directly pay for such telephone and other communications services, including the establishment and connection thereof, at the rates charged for such services by said authority or utility, and the failure of Tenant to obtain or to continue to receive such services for any reason whatsoever shall not relieve Tenant of any of its obligations under this Lease.

 

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5.4 Above-Standard Service Requirements . If unusual heat-generating machines or equipment cause the temperature in the Premises, or any part thereof, to exceed the temperatures the Building’s air conditioning system would be able to maintain in such Premises were it not for such heat-generating equipment, then Landlord reserves the right to install supplementary air conditioning units in the Premises, and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord.

 

Tenant shall not, without the written consent of Landlord, use any apparatus or device which will in any way increase the amount of electricity or water which Landlord determines to be reasonable for use of the Premises as general office space, nor connect with electric current (except through existing electrical outlets in the Premises) or water pipes any apparatus or device for the purposes of using electric current, other energy or water except as set forth in Article 15 hereof. Landlord shall have the right to install one or more separately submetered electrical circuits to serve all of Tenant’s equipment, machinery or appliances which equipment, machinery or appliances requires electrical current supplied to the Premises for general office purposes as the same is determined by Landlord which costs of submetering shall be payable by Tenant to Landlord upon demand. Tenant shall also, at its own cost, have the right to directly meter the electric services for its Premises in which event Landlord shall have no right to object to any equipment that uses “above-standard” amounts of electricity. Tenant agrees to reimburse Landlord for the submetered electrical current utilized by Tenant at the rates charged to Landlord to purchase electrical current for the Building, such reimbursement to be made within fifteen (15) days of the date of the billing therefor; such billing to occur no more frequently than monthly.

 

5.5 Cleaning . Upon prior written notice to Landlord, Tenant may provide its own janitorial or cleaning services subject to supervision of Landlord, at Tenant’s sole responsibility, and by a janitorial or cleaning contractor or employees at all times satisfactory to Landlord. Landlord shall provide janitorial and cleaning services, in accordance with such reasonable standards generally provided in Class A suburban office buildings in the Denver-Boulder metropolitan area for the common areas of the Building Complex.

 

5.6 Re-Lamping . Exclusive of the Premises, Landlord shall have the exclusive right to make any replacement of electric light bulbs, fluorescent tubes and ballasts in the Building Complex throughout the Lease Term and any renewal thereof. Landlord may adopt a system of relamping and reballasting periodically on a group basis in accordance with good management practice.

 

5.7 Fiber Optic . Landlord shall have no responsibility or liability for bringing either the phone system or fiber optics to the Premises. Nothing herein shall prohibit Landlord from entering into licensing or other agreements with any telecommunications company or entity for the Building nor shall Landlord be prohibited from installing a minimum point of entry fiber optics system and/or updating or replacing any system from time to time in the Building.

 

5.8 After Hours Access . Except as specifically set forth in Sections 15.2, 21.1 and 22.2, and subject to applicable local laws and emergencies, Tenant shall have access to its

 

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Premises twenty-four hours a day, seven days a week. Tenant acknowledges that certain security measures may apply during nonregular business hours or holidays, including the use of keys for access to the Building.

 

ARTICLE 6

 

TENANT REPAIR

 

6.1 Damage by Tenant . If the Building Complex, the Building, the Premises or any portion thereof including but not limited to the elevators, boilers, engines, pipes and other apparatus, or members of elements of the Building (or any of them) used for the purpose of climate control of the Building or operating the elevators, or if the water pipes, drainage pipes, electric lighting or other equipment of the Building or the roof or outside walls of the Building or the Generator or the parking facilities of Landlord and also the Tenant Finish including but not limited to the carpet, wall covering, doors and woodwork, become damaged or are destroyed through the negligence, carelessness or misuse of Tenant, its servants, agents, employees or anyone permitted by Tenant to be in the Building, or through it or them, then the cost of the necessary repairs, replacements or alterations shall be borne by Tenant who shall forthwith pay the same on demand to Landlord as Additional Rent. Landlord shall have the exclusive right, but not the obligation, to make any repairs necessitated by such damage.

 

6.2 Maintenance . Tenant shall keep the Premises in as good order, condition and repair as when they were entered upon. If Tenant fails to keep the Premises in such good order, condition and repair as required hereunder to the satisfaction of Landlord, Landlord may restore the Premises to such good order and condition and make such repairs without liability to Tenant for any loss or damage that may accrue to Tenant’s property or business by reason thereof, and upon completion thereof, Tenant shall pay to Landlord, as Additional Rent, upon demand, the cost of restoring the Premises to such good order and condition and of the making of the repairs.

 

6.3 Good Condition . Tenant shall leave the Premises at the end of each Business Day in a reasonable condition for the purpose of allowing the performance of Landlord’s cleaning services hereinafter described.

 

6.4 Surrender . Tenant shall deliver, at the expiration of the Lease Term hereof or upon sooner termination of the Lease Term, the Premises in good repair as aforesaid and in a state of broom cleanliness.

 

6.5 Broken Glass . Tenant shall pay on demand the cost of replacement with identical quality, size and characteristics of glass broken on the Premises, including outside windows and doors of the perimeter of the Premises (including perimeter windows in the exterior walls) during the continuance of this Lease, unless the glass shall be broken by Landlord, its servants, employees or agents acting on its behalf.

 

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ARTICLE 7

 

ASSIGNMENT AND SUBLETTING

 

7.1 Limitations . Except as specifically set forth in Sections 7.4 and 7.5 below, Tenant shall not assign or in any manner transfer this Lease or any estate or interest therein the Premises or any part thereof, or grant any license, concession or other right to occupy any portion of the Premises without the prior written consent of Landlord which shall not be unreasonably withheld. In no event shall Tenant have any right to assign if there exists any default under this Lease. Consent by Landlord to one or more assignments of this Lease or of the Premises shall not operate as a waiver of Landlord’s rights under this section. Any such assignment or subletting without Landlord’s consent shall be deemed void and confer no rights upon a third party. Notwithstanding any assignment, Tenant and any guarantor of Tenant’s obligations under this Lease shall at all times remain fully responsible and liable for the payment of the rental herein specified and for compliance with all other terms and conditions of this Lease. Without in any way limiting Landlord’s right to refuse to give consent, Landlord reserves the right in the event it does give consent to impose such conditions upon its consent as Landlord deems necessary including the requirement of additional security which in Landlord’s business judgment shall insure the state of the Premises and the rentals due under this Lease. Landlord shall also have the right in the event of such proposed assignment to terminate this Lease in which event Landlord shall have the right, but not the obligation, to enter into a Lease with such proposed assignee.

 

Neither this Lease nor any interest therein shall be assignable as to the interest of Tenant by operation of law, without the written consent of Landlord. A sale by Tenant of all or substantially all of its assets or all or substantially all of its stock, if Tenant is a publicly traded corporation, a merger of Tenant with another corporation; or the transfer of twenty-five percent (25%) or more of the stock of Tenant if Tenant’s stock is not publicly traded; or the transfer of fifty percent (50%) or more of the beneficial ownership interest in Tenant if Tenant is a partnership without the prior written consent of Landlord, shall constitute a prohibited assignment hereunder, subject to the limitations set forth above. Notwithstanding the foregoing, such assignment shall not be prohibited if Tenant is not in default hereunder and the net worth of Tenant upon such assignment is not less than ten million dollars with not more than ten percent of such net worth attributable to good will. Prior to such assignment being deemed effective Tenant shall deliver to Landlord current financials prepared in accordance with GAAP by an independent certified public accountant.

 

7.2 Acceptance of Performance . If this Lease be assigned or if the Premises or any part thereof be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect the rent from the assignee, subtenant or occupant and apply the net amount collected to the rent herein reserved retaining the remainder, if any, for the account of Landlord, but no such assignment, subletting, occupancy or collection shall be deemed an acceptance of the assignee, subtenant or occupant as Tenant hereof, or constitute a release of Tenant from further performance by Tenant of the covenants on the part of Tenant herein contained.

 

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7.3 Document Review . All documents utilized by Tenant to evidence any subletting or assignment for which Landlord’s consent has been requested, shall be subject to prior reasonable approval by Landlord or its attorney. Wherever Landlord’s prior approval or consent to any assignment or sublease is required pursuant to this Article 7 , then, in such event, Tenant shall submit to Landlord in writing, by notice directed to Landlord’s Vice President of Leasing, at Landlord’s address, at least fifteen (15) business days in advance of the date on which Tenant desires to make such proposed assignment or sublease at least the following information and materials (each, a “Tenant’s Request to Assign or Sublet”): (a) all of the terms of said proposed assignment or sublease, including the proposed effective date thereof, (b) the name and address of each proposed assignee or subtenant, (c) the portion or portions of the Premises as to which the requested assignment or sublease is proposed to apply, and (d) in the case of a requested sublease, the form of such proposed sublease. Landlord may require Tenant to obtain and submit current financial statements of any proposed assignee or subtenant. Landlord shall then have a period of five (5) business days following receipt of Tenant’s Request to Assign or Sublet within which to notify Tenant in writing whether Landlord elects to (i) cancel and terminate this Lease as to the space so affected as of the proposed effective date so specified by Tenant in its notice, in which event Tenant will be relieved of all obligations under the Lease as to such space as the date so specified by Tenant; (ii) permit Tenant to assign this Lease or sublet such space for the duration specified by Tenant in its notice; or (iii) reject the proposed assignment or sublease on reasonable grounds. If Landlord fails to notify Tenant in writing of Landlord’s election within five (5) business days of receipt from Tenant of all of the information and materials required in this Paragraph, Landlord shall be deemed to have approved the proposed assignment or sublease. If Tenant desires to assign the Lease or sublease any portion of the Premises which under the terms of this Article 7 requires Landlord’s prior consent or approval, then Tenant shall pay Landlord’s actual and reasonable out-of-pocket expenses (including, without limitation, attorneys’ fees and expenses) paid to or incurred with any third party in connection with responding to Tenant’s Request to Assign or Sublet.

 

7.4 Subletting . Provided that Tenant is not in default hereunder, Tenant may from time to time sublet all or any portion of the Premises to any subtenant without Landlord’s prior consent, subject, however, to each of the following conditions being fully complied with by Tenant:

 

(a) The subtenant must use the Premises in compliance with the provisions set forth in Article 9 and for no other purpose.

 

(b) A fully executed sublease shall be delivered by Tenant to Landlord within thirty (30) days of full execution thereof. Failure by Tenant to deliver a copy thereof to Landlord within the above time frame shall give Landlord, at its option, the right to terminate the sublease which right of termination shall be in addition to and not in limitation of any other right or remedy of Landlord.

 

(c) Tenant, Gaiam, Inc., shall at all times remain primarily liable under the Lease. This right to sublet without Landlord’s prior consent shall be personal to Gaiam, Inc., and shall terminate if Gaiam, Inc. assigns its interest in the Lease in whole or in part.

 

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(d) No subtenant may further sublease or assign its interest in the sublease without both Gaiam, Inc.’s and Landlord’s prior written consent, which may be given or withheld in their respective sole and absolute discretion.

 

7.5 Affiliated Entity . Provided Tenant is not in default of this Lease, which default has not been cured within any applicable cure period, Tenant may, without Landlord’s prior written consent assign the Lease to: (i) a subsidiary, affiliate, division or corporation controlled or under common control with Tenant; (ii) a successor corporation to Tenant by merger, consolidation, or nonbankruptcy reorganization; (iii) a purchaser of substantially all of Tenant’s assets and who continues to operate as “Tenant” in the Premises (collectively, “Permitted Assignees”). Tenant acknowledges warrants and agrees that the Permitted Assignee shall assume all liabilities and obligations of Tenant under the Lease. Tenant shall notify Landlord of all Permitted Assignee(s) within thirty (30) days of such assignment or subletting. For the purpose of this Lease, sale or transfer of Tenant’s capital stock, including without limitation, a transfer in reorganization of Tenant and any sale through any public exchange, shall not be deemed an assignment, subletting, or any other transfer of the Lease or the Premises, provided that the surviving entity in such transfer assumes the Lease by operation of law.

 

ARTICLE 8

 

TRANSFER BY LANDLORD AND LIMITED LIABILITY

 

8.1 Transfer of Landlord’s Interest . In the event of a sale, conveyance, or assignment by Landlord of Landlord’s interest in the Building Complex (other than a transfer for security purposes only), Landlord shall be relieved from and after the date specified in any such notice of transfer or assignment of all of Landlord’s obligations and liabilities accruing thereafter on the part of Landlord, and Tenant agrees to look only toward such assignee or transferee of Landlord’s interest.

 

8.2 Limited Liability of Landlord . Anything contained in this Lease to the contrary notwithstanding, Tenant agrees that Tenant shall look solely to the estate of Landlord in the Building Complex for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms and provisions of this Lease to be observed or performed by Landlord, subject, however, to the prior rights of the holder of any mortgage covering the Building Complex, and no other assets of Landlord, its partners, agents, employees, officers, or employees or officers of any of its partners shall be subject to levy, execution or other judicial process for the satisfaction of Tenant’s claim and Landlord shall not be liable for any such default or breach except to the extent of Landlord’s estate in the Building Complex.

 

8.3 Limited Liability of Tenant . Landlord agrees that the personal assets of Tenant’s employees, directors and officers shall not be subject to levy, execution, or other judicial process for the satisfaction of Landlord’s claim against Tenant.

 

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ARTICLE 9

 

USE OF PREMISES

 

9.1 Use . Except as expressly permitted by prior written consent of Landlord, the Premises shall not be used other than for a video production company and for other general business office purposes. Any other use shall require Landlord’s prior written consent, which shall not be unreasonably withheld provided that such use complies with applicable restrictive covenants and zoning, the use is consistent with a first class suburban office building, and does not generate, store, use, or dispose of any hazardous, toxic or infectious substances in or from the Premises. All use of the Premises shall comply with the terms of this Lease and all applicable laws, ordinances, regulations or other governmental ordinances from time to time in existence.

 

9.2 Compliance with Rules and Regulations . Tenant and employees and all persons visiting or doing business with Tenant in the Premises shall be bound by and shall observe the reasonable Rules and Regulations as set forth in Exhibit C attached hereto and made a part hereof, which may, at Landlord’s sole discretion, be promulgated, amended, or expanded from time to time during the Lease Term by Landlord relating to the Building, the Building Complex and/or the Premises of which notice in writing shall be given to Tenant within thirty (30) days of such clause at which time they will become effective and all such rules and regulations as changed from time to time shall be deemed to be incorporated into and form a part of this Lease. Any default in the performance or observance of such rules and regulations shall be a default hereunder and Landlord shall have all remedies provided for in this Lease in the event of default by Tenant. Landlord however, shall not be responsible to Tenant for nonobservance by any other tenant or person of any tenant or person of any such rules and regulations. Notwithstanding the above except as required by any governmental authority, law, or pursuant to recorded documents, Landlord shall not adversely impose any new rules and regulations upon Tenant without Tenant’s consent, which shall not be unreasonably withheld.

 

9.3 Electronics Testing Lab . Subject to compliance with (i) all other provisions of this Lease, (ii) applicable zoning, use and building code restrictions, (iii) insurance requirements, and (iv) any restrictions and requirements imposed by applicable recorded covenants and regulations, Tenant may use a portion of the Premises for an electronics testing lab.

 

ARTICLE 10

 

INSURANCE

 

10.1 Tenant’s Insurance .

 

(a) Tenant further covenants and agrees that throughout the Lease Term hereof, Tenant will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for:

 

(i) Commercial General and Umbrella Liability Insurance covering the Premises and Tenant’s use thereof against claims for personal injury or death, property damage

 

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and product liability occurring upon, in or about the Premises, such insurance to be written on an occurrence basis (not a claims made basis), with a limit for each occurrence not less than $1,000,000 and to have general aggregate limits of not less than $2,000,000, together with umbrella or excess liability insurance with limits of $15,000,000 for each occurrence and in the aggregate, for each policy year. The insurance coverage required under this Section 10.1(a)(i) shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in Section 14.1 and, if necessary, the policy shall contain a contractual endorsement to that effect. CGL insurance shall be written on ISO occurrence form CG 00 01 01 96 (or a substitute form providing equivalent or better coverage). The certificate of insurance evidencing the Commercial General Liability and Umbrella Liability coverage shall specify all endorsements required herein, shall name all additional insureds via the CG 2011 Additional Insured-Managers/Lessors of Premises endorsement required by Section 10.1(b) below.

 

(ii) Commercial all risk property insurance covering all of the items included in Tenant’s leasehold improvements, heating, ventilating and air conditioning equipment maintained by Tenant, trade fixtures, merchandise and personal property from time to time in, on or upon the Premises, and alterations, additions or changes made by Tenant pursuant to Section 15.1 , in an amount not less than one hundred percent (100%) of their full replacement value from time to time during the Term, providing protection against perils included within the ISO Special Causes of Loss –Form insurance policy (or substitute form providing, in Landlord’s reasonable discretion, equivalent or better coverage), together with insurance against sprinkler damage, vandalism and malicious mischief. Any policy proceeds from such insurance shall be held in trust by Tenant’s insurance company for the repair, construction and restoration or replacement of the property damaged or destroyed unless this Lease shall cease and terminate under the provisions of Section 21.1 of this Lease. The certificate of insurance evidencing such coverage which is delivered by Tenant pursuant to Section 10.1(b) below shall designate Landlord and Wells Management, Inc. as loss payee as their interests may appear with respect to the Building, all leasehold improvements, heating, ventilating and air-conditioning equipment and all fixtures (other than Tenant’s trade fixtures).

 

(iii) Workers’ Compensation and Employer’s Liability insurance affording statutory coverage and containing statutory limits with the Employer’s Liability portion thereof to have minimum limits of $500,000.00.

 

(iv) INTENTIONALLY DELETED.

 

(v) Automobile (and if necessary, commercial umbrella) liability insurance with a limit of not less than $5,000,000 for each accident. Such insurance shall insure liability arising out of any automobiles used in connection with Tenant’s business (including owned, hired, leased and non-owned automobiles).

 

(b) All policies of the insurance provided for in Section 10.1(a) shall be issued in form acceptable to Landlord by insurance companies with a rating and financial size of not less than A-X in the most current available “Best’s Insurance Reports”, and licensed to do business in the state in which Landlord’s Building is located. Landlord, in its sole discretion, shall be permitted to temporarily waive or accept alternative coverages for Tenant’s insurance as required by the terms of this Section 10.1 . Each and every such policy:

 

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(i) shall name Landlord and Wells Management, Inc., Wells Real Estate Funds, Inc. and subsidiary and affiliated companies, officers, directors and employees as an additional insured (as well as any mortgagee of Landlord and any other party reasonably designated by Landlord) and the coverage in Section 10.1(a)(ii) , above, shall also name Landlord as loss payee as its interest may appear with respect to all leasehold improvements, heating, ventilating and air-conditioning equipment and fixtures (other than Tenant’s trade fixtures).

 

(ii) shall (and a certificate thereof shall be delivered to Landlord at or prior to the execution of the Lease) be delivered to each of Landlord and any such other parties in interest within thirty (30) days after delivery of possession of the Premises to Tenant and thereafter within thirty (30) days prior to the expiration of each such policy, and, as often as any such policy shall expire or terminate. Renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent;

 

(iii) shall contain a provision that the insurer will give to Landlord and such other parties in interest at least thirty (30) days notice in writing in advance of any material change, cancellation, termination or lapse, or the effective date of any reduction in the amounts of insurance; and

 

(iv) shall be written as a primary policy which does not contribute to and is not in excess of coverage which Landlord may carry.

 

(c) Any insurance provided for in Section 10.1(a) may be maintained by means of a policy or policies of blanket insurance, covering additional items or locations or insureds, provided, however, that:

 

(i) Landlord and any other parties in interest from time to time designated by Landlord to Tenant shall be named as an additional insured thereunder as its interest may appear;

 

(ii) the coverage afforded Landlord and any such other parties in interest will not be reduced or diminished by reason of the use of such blanket policy of insurance;

 

(iii) any such policy or policies [except any covering the risks referred to in Section 10.1(a) ] shall specify therein (or Tenant shall furnish Landlord with a written statement from the insurers under such policy specifying) the amount of the total insurance allocated to Tenant’s improvements and property more specifically detailed in Section 22(a) ; and

 

(iv) the requirements set forth in this Section 10.1 are otherwise satisfied.

 

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(d) Notwithstanding anything to the contrary set forth hereinabove, Landlord and Tenant do hereby waive any and all claims against one another for damage to or destruction of real or personal property to the extent such damage or destruction can be covered by an ISO Causes of Loss – Special Form property insurance of the type described in Section 10.1(a)(ii) above. Each party shall also be responsible for the payment of any deductible amounts required to be paid under the applicable ISO Causes of Loss – Special Form property insurance carried by the party whose property is damaged. These waivers shall apply if the damage would have been covered by a customary ISO Causes of Loss – Special Form property insurance policy, even if the party fails to obtain such coverage. The intent of this provision is that each party shall look solely to its insurance with respect to property damage or destruction which can be covered by ISO Causes of Loss – Special Form property insurance of the type described in Section 10.1(a)(ii) . To further effectuate the provisions of this Section 10.1(d) , Landlord and Tenant both agree to provide copies of this Lease (and in particular, these waivers) to their respective insurance carriers and to require such insurance carriers to waive all rights of subrogation against the other party with respect to property damage covered by the applicable ISO Causes of Loss – Special Form property insurance policy.

 

(e) Tenant acknowledges and agrees that any contractors (and subcontractors of any tier) hired by Tenant to do work in the Premises will be required to carry sufficient insurance coverage insuring the contractor (or subcontractor), Tenant and Landlord with terms equivalent to those specified in this Section 10.1 , and Tenant shall provide certificates of such insurance to Landlord prior to commencing any work in the Premises.

 

10.2 Landlord’s Insurance . Landlord agrees to carry or cause to be carried during the term hereof Commercial General and Umbrella Liability Insurance coverage on the Building Complex providing coverage against claims for personal injury or death, property damage and product liability occurring upon, in or about the Building Complex, such insurance to be written on an occurrence basis (not a claims made basis), with a limit for each occurrence not less than $1,000,000 and to have general aggregate limits of not less than $5,000,000 for each policy year. The insurance coverage required under this Section 10.2 shall, in addition, extend to any liability of Landlord arising out of the indemnities provided for in Section 14.2 and, if necessary, the policy shall contain a contractual endorsement to that effect. CGL insurance shall be written on ISO occurrence form CG 00 01 01 96 (or a substitute form providing equivalent or better coverage). Landlord also agrees to carry during the term hereof insurance for fire, extended coverage, vandalism and malicious mischief, insuring the Building Complex (excluding foundations, excavations and other non-insurable items) for the full insurable value thereof. Landlord may, but shall not be obligated to, take out and carry any other form or forms of insurance as it or the mortgagees of Landlord may reasonably determine to be advisable. Notwithstanding any contribution by Tenant to the cost of insurance premiums, as provided in Article 4 , Tenant acknowledges that it has no right to receive any proceeds from any such insurance policies carried by Landlord, and that such insurance will be for the sole benefit of Landlord, with no coverage for Tenant for any risk insured against.

 

10.3 Subrogation . The parties hereto agree that any and all fire, extended coverage and/or property damage insurance which is required to be carried by either shall be endorsed with

 

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a subrogation clause, substantially as follows: “This insurance shall not