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EXHIBIT 10.4
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS
("BASIC PROVISIONS")
1.1
PARTIES: This Lease ("Lease"), dated for reference purposes only
May
19, 1999, is made by and between Griswold
Industries, a California corporation
("LESSOR") and Stone Boardwear, a
California corporation, dba Volcom ("LESSEE"),
(collectively the "PARTIES," or
individually a "PARTY").
1.2
PREMISES: That certain real property, including all
improvements
therein or to be provided by Lessor under
the terms of this Lease, and commonly
known as 1740 Monrovia Avenue, Costa Mesa,
located in the County of Orange ,
State of California, and generally described as
(describe briefly the nature
of the property and, if applicable, the
"PROJECT", if the property is located
within a Project) approximately 86,415
-square-foot concrete tilt-up industrial
building on the site commonly known as APN
424-071-007 ("PREMISES"). (See also
Paragraph 2)
1.3 TERM:
Five (5) years and -0- months ("ORIGINAL TERM") commencing on
or
about Aug. 1, 1999 ("COMMENCEMENT DATE")
and ending July 31, 2004 ("EXPIRATION
DATE"). (See also Paragraph 3)
1.4 EARLY
POSSESSION: upon vacancy by current tenant ("EARLY POSSESSION
DATE"). (See also Paragraphs 3.2 and
3.3)
1.5 BASE
RENT: $38,887.00 per month ("BASE RENT"), payable on the first
(1st) day of each month commencing August
1, 1999 (See also Paragraph 4)
[X] If
this box is checked, there are provisions in this Lease for the
Base Rent to be adjusted.
1.6 BASE
RENT $38,887.00, due 30 days prior to Lease commencement as
Base Rent for the period August 1, 1999 to
August 31, 1999.
1.7
SECURITY DEPOSIT: $38,887.00, due upon execution ** ("SECURITY
DEPOSIT"). (See also Paragraph 5)
1.8 AGREED
USE: Manufacture, distribution and sales of clothing,
accessories, videos, and compact disc
recordings. (See also Paragraph 6)
1.9
INSURING PARTY. Lessor is the "INSURING PARTY" unless otherwise
stated
herein. (See also Paragraph 8)
1.10 REAL
ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers
(collectively,
the "BROKERS") and brokerage relationships
exist in this transaction (check
applicable boxes):
[X] Lee & Associates represents Lessor
exclusively ("LESSOR'S BROKER");
[X] Truesdell International represents
Lessee exclusively ("LESSEE'S BROKER");
or
[ ]
_____________________________________________represents both Lessor
and
Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease
by
both Parties, Lessor shall pay to the
Broker the fee agreed to in their separate
written agreement (or if there is no such
agreement, the sum of *% of the total
Base Rent for the brokerage services
rendered by said Broker). *per separate
agreement
1.11
GUARANTOR. The obligations of the Lessee under this Lease are to
be
guaranteed
by___________________________________________________________________
___________________________________("GUARANTOR"). (See also
Paragraph 37)
1.12 ADDENDA AND EXHIBITS.
Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 54 and
Exhibits_______________, all of which
constitute a part of this Lease.
2. PREMISES.
2.1
LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases
from Lessor, the Premises, for the term, at
the rental, and upon all of the
terms, covenants and conditions set forth
in this Lease. Unless otherwise
provided herein, any statement of size set
forth in this Lease, or that may have
been used in calculating rental, is an
approximation which the Parties agree is
reasonable and the rental based thereon is
not subject to revision whether or
not the actual size is more or less.
2.2
CONDITION. Lessor shall deliver the Premises to Lessee broom
clean
and free of debris on the Commencement Date
or the Early Possession Date,
whichever first occurs ("START DATE"), and,
so long as the required service
contracts described in Paragraph 7.1(b)
below are obtained by Lessee within
thirty (30) days following the Start Date,
warrants that the existing
electrical, plumbing, fire sprinkler,
lighting, heating, ventilating and air
conditioning systems ("HVAC"), loading
doors, if any, and all other such
elements in the Premises, other than those
constructed by Lessee, shall be in
good operating condition on said date and
that the structural elements of the
roof, bearing walls and foundation of any
buildings on the Premises (the
"BUILDING") shall be free of material
defects. If a non-compliance with said
warranty exists as of the Start Date,
Lessor shall, as Lessor's sole obligation
with respect to such matter, except as
otherwise provided in this Lease,
promptly after receipt of written notice
from Lessee setting forth with
specificity the nature and extent of such
non-compliance, rectify same at
Lessor's expense. If, after the Start Date,
Lessee does not give Lessor written
notice of any non-compliance with this
warranty within: (i) one year as to the
surface of the roof and the structural
portions of the roof, foundations and
bearing walls, (ii) six (6) months as to
the HVAC systems, (iii) thirty (30)
days as to the remaining systems and other
elements of the Building, correction
of such non-compliance shall be the
obligation of Lessee at Lessee's sole cost
and expense.
2.3
COMPLIANCE. Lessor warrants that the improvements on the
Premises
comply with all applicable laws, covenants
or restrictions of record, building
codes, regulations and ordinances
("APPLICABLE REQUIREMENTS") in effect on the
Start Date. Said warranty does not apply to
the use to which Lessee will put the
Premises or to any Alterations or Utility
Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE:
Lessee is responsible for
determining whether or not the zoning is
appropriate for Lessee's intended use,
and acknowledges that past uses of the
Premises may no longer be allowed. If the
Premises do not comply with said warranty,
Lessor shall, except as otherwise
provided, promptly after receipt of written
notice from Lessee setting forth
with specificity the nature and extent of
such non-compliance, rectify the same
at Lessor's expense. If Lessee does not
give Lessor written notice of a
non-compliance with this warranty within
six (6) months following the
Start Date, correction of that
non-compliance shall be the obligation of Lessee
at Lessee's sole cost and expense. If the
Applicable Requirements are hereafter
changed (as opposed to being in existence
at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require
during the term of this Lease the
construction of an addition to or an
alteration of the Building, the remediation
of any Hazardous Substance, or the
reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"),
Lessor and Lessee shall allocate the
cost of such work as follows:
**Security deposit, Lessor in receipt of
$23,400.00 ($15,487.00 due upon
execution)
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(C)1997 - AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION
FORM 204N-R-2/97
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(a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures
are required as a result of the specific
and unique use of the Premises by
Lessee as compared with uses by tenants in
general, Lessee shall be fully
responsible for the cost thereof, provided,
however that if such Capital
Expenditure is required during the last two
(2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent,
Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in
writing, within ten (10) days after
receipt of Lessee's termination notice that
Lessor has elected to pay the
difference between the actual cost thereof
and the amount equal to six (6)
months' Base Rent. If Lessee elects
termination, Lessee shall immediately cease
the use of the Premises which requires such
Capital Expenditure and deliver to
Lessor written notice specifying a
termination date at least ninety (90) days
thereafter. Such termination date shall,
however, in no event be earlier than
the last day that Lessee could legally
utilize the Premises without commencing
such Capital Expenditure.
See paragraph 54.
(c) Notwithstanding the above, the provisions concerning
Capital
Expenditures are intended to apply only to
non-voluntary, unexpected, and new
Applicable Requirements. If the Capital
Expenditures are instead triggered by
Lessee as a result of an actual or proposed
change in use, change in intensity
of use, or modification to the Premises
then, and in that event, Lessee shall be
fully responsible for the cost thereof, and
Lessee shall not have any right to
terminate this Lease.
2.4
ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been advised
by
Lessor and/or Brokers to satisfy
itself with respect to the condition of the
Premises (including but not
limited to the electrical, HVAC and fire sprinkler
systems, security, environmental
aspects, and compliance with Applicable
Requirements), and their
suitability for Lessee's intended use, (b) Lessee has
made such investigation as it
deems necessary with reference to such matters
and assumes all responsibility
therefor as the same relate to its occupancy of
the Premises, and (c) neither
Lessor, Lessor's agents, nor any Broker has made
any oral or written
representations or warranties with respect to said matters
other than as set forth in this
Lease. In addition, Lessor acknowledges that:
(a) Broker has made no
representations, promises or warranties concerning
Lessee's ability to honor the
Lease or suitability to occupy the Premises, and
(b) it is Lessor's sole
responsibility to investigate the financial capability
and/or suitability of all proposed
tenants.
2.5 LESSEE
AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect
if immediately prior to the Start
Date Lessee was the owner or occupant of
the Premises. In such event, Lessee
shall be responsible for any necessary
corrective work.
3. TERM.
3.1 TERM.
The Commencement Date, Expiration Date and Original Term of
this
Lease are as specified in Paragraph
1.3.
3.2 EARLY
POSSESSION. If Lessee totally or partially occupies the
Premises
prior to the Commencement Date, the
obligation to pay Base Rent shall be abated
for the period of such early possession.
All other terms of this Lease
(including but not limited to the
obligations to pay Real Property Taxes and
insurance premiums and to maintain the
Premises) shall, however, be in effect
during such period. Any such early
possession shall not affect the Expiration
Date.
3.3 DELAY
IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of
the Premises to Lessee by the
Commencement Date. If, despite said
efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be
subject to any liability therefor, nor
shall such failure affect the validity of
this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its
other obligations until it receives
possession of the Premises. If possession
is not delivered within sixty (60)
days after the Commencement Date, Lessee
may, at its option, by notice in
writing within ten (10) days after the end
of such sixty (60) day period, cancel
this Lease, in which event the Parties
shall be discharged from all obligations
hereunder. If such written notice is not
received by Lessor within said ten
(10) day period, Lessee's right to cancel
shall terminate. Except as otherwise
provided, if possession is not tendered to
Lessee by the Start Date and Lessee
does not terminate this Lease, as
aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall
run from the date of delivery of
possession and continue for a period equal
to what Lessee would otherwise have
enjoyed under the terms hereof, but minus
any days of delay caused by the acts
or omissions of Lessee. If possession of
the Premises is not delivered within
four (4) months after the Commencement
Date, this Lease shall terminate unless
other agreements are reached between Lessor
and Lessee, in writing.
3.4 LESSEE
COMPLIANCE. Lessor shall not be required to tender possession
of the Premises to Lessee until Lessee
complies with its obligation to provide
evidence of insurance (Paragraph 8.5).
Pending delivery of such evidence, Lessee
shall be required to perform all of its
obligations under this Lease from and
after the Start Date, including the payment
of Rent, notwithstanding Lessor's
election to withhold possession pending
receipt of such evidence of insurance.
Further, if Lessee is required to perform
any other conditions prior to or
concurrent with the Start Date, the Start
Date shall occur but Lessor may elect
to withhold possession until such
conditions are satisfied.
4. RENT.
4.1 RENT
DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the
Security Deposit) are deemed to be rent
("RENT").
4.2
PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor
in lawful money of the United States,
without offset or deduction (except as
specifically permitted in this Lease), on
or before the day on which it is due.
Rent for any period during the term hereof
which is for less than one (1) full
calendar month shall be prorated based upon
the actual number of days of said
month. Payment of Rent shall be made to
Lessor at its address stated herein or
to such other persons or place as Lessor
may from time to time designate in
writing. Acceptance of a payment which is
less than the amount then due shall
not be a waiver of Lessor's rights to the
balance of such Rent, regardless of
Lessor's endorsement of any check so
stating.
5. SECURITY DEPOSIT.
Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for
Lessee's faithful performance of its
obligations under this Lease. If Lessee
falls to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or
retain all or any portion of said
Security Deposit for the payment of any
amount due Lessor or to reimburse or
compensate Lessor for any liability,
expense, loss or damage which Lessor may
suffer or incur by reason thereof. If
Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall
within ten (10) days after written
request therefor deposit monies with Lessor
sufficient to restore said Security
Deposit to the full amount required by this
Lease. If the Base Rent increases
during the term of this Lease, Lessee
shall, upon written request from Lessor,
deposit additional moneys with Lessor so
that the total amount of the Security
Deposit shall at all times bear the same
proportion to the increased Base Rent
as the initial Security Deposit bore to the
initial Base Rent. Should the Agreed
Use be amended to accommodate a material
change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor
shall have the right to increase the
Security Deposit to the extent necessary,
in Lessor's reasonable judgment, to
account for any increased wear and tear
that the Premises may suffer as a result
thereof. If a change in control of Lessee
occurs during this Lease and following
such change the financial condition of
Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee
shall deposit such additional monies
with Lessor as shall be sufficient to cause
the Security Deposit to be at a
commercially reasonable level based on said
change in financial condition.
Lessor shall not be required to keep the
Security Deposit separate from its
general accounts. Within fourteen (14) days
after the expiration or termination
of this Lease, if Lessor elects to apply
the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days
after the Premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor
shall return that portion of the
Security Deposit not used or applied by
Lessor. No part of the Security Deposit
shall be considered to be held in trust, to
bear interest or to be prepayment
for any monies to be paid by Lessee under
this Lease.
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6. USE.
6.1 USE.
Lessee shall use and occupy the Premises only for the Agreed
Use,
or any other legal use which is reasonably
comparable thereto, and for no other
purpose. Lessee shall not use or permit the
use of the Premises in a manner that
is unlawful, creates damage, waste or a
nuisance, or that disturbs owners and/or
occupants of, or causes damage to
neighboring properties. Lessor shall not
unreasonably withhold or delay its consent
to any written request for a
modification of the Agreed Use, so long as
the same will not impair the
structural integrity of the improvements on
the Premises or the mechanical or
electrical systems therein, is not
significantly more burdensome to the
Premises. If Lessor elects to withhold
consent, Lessor shall within five (5)
business-days after such request give
written notification of same, which notice
shall include an explanation of Lessor's
objections to the change in use.
6.2
HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE"
as used in this Lease shall mean any
product, substance, or waste whose
presence, use, manufacture, disposal,
transportation, or release, either by
itself or in combination with other
materials expected to be on the Premises, is
either: (i) potentially injurious to the
public health, safety or welfare, the
environment or the Premises, (ii) regulated
or monitored by any governmental
authority, or (iii) a basis for potential
liability of Lessor to any
governmental agency or third party under
any applicable statute or common law
theory. Hazardous Substances shall include,
but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or
any products, by-products or fractions
thereof. Lessee shall not engage in any
activity in or on the Premises which
constitutes a Reportable Use of Hazardous
Substances without the express prior
written consent of Lessor and timely
compliance (at Lessee's expense) with all
Applicable Requirements. "REPORTABLE USE"
shall mean (i) the installation or use
of any above or below ground storage tank,
(ii) the generation, possession,
storage, use, transportation, or disposal
of a Hazardous Substance that requires
a permit from, or with respect to which a
report, notice, registration or
business plan is required to be filed with,
any governmental authority, and/or
(iii) the presence at the Premises of a
Hazardous Substance with respect to
which any Applicable Requirements requires
that a notice be given to persons
entering or occupying the Premises or
neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary
and customary materials reasonably
required to be used in the normal course of
the Agreed Use, so long as such use
is in compliance with all Applicable
Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring
property to any meaningful risk of
contamination or damage or expose Lessor to
any liability therefor. In addition,
Lessor may condition its consent to any
Reportable Use upon receiving such
additional assurances as Lessor reasonably
deems necessary to protect itself,
the public, the Premises and/or the
environment against damage, contamination,
injury and/or liability, including, but not
limited to, the installation (and
removal on or before Lease expiration or
termination) of protective
modifications (such as concrete
encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause
to believe, that a Hazardous Substance has
come to be located in, on, under or
about the Premises, other than as
previously consented to by Lessor, Lessee
shall Immediately give written notice of
such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or
other documentation which it has
concerning the presence of such Hazardous
Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or
released In, on, under, or about the
Premises (including through the plumbing or
sanitary sewer system) and shall
promptly, at Lessee's expense, take all
investigatory and/or remedial action
reasonably recommended, whether or not
formally ordered or required, for the
cleanup of any contamination of, and for
the maintenance, security and/or
monitoring of the Premises or neighboring
properties, that was caused or
materially contributed to by Lessee, or
pertaining to or involving any Hazardous
Substance brought onto the Premises during
the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold
Lessor, its agents, employees, lenders and
ground lessor, if any, harmless from
and against any and all loss of rents
and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys'
and consultants' fees arising out
of or involving any Hazardous Substance
brought onto the Premises by or for
Lessee, or any third party (provided,
however, that Lessee shall have no
liability under this Lease with respect to
underground migration of any
Hazardous Substance under the Premises from
adjacent properties). Lessee's
obligations shall include, but not be
limited to, the effects of any
contamination or injury to person, property
or the environment created or
suffered by Lessee, and the cost of
investigation, removal, remediation,
restoration and/or abatement, and shall
survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR
RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE FROM
ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES,
UNLESS SPECIFICALLY SO AGREED BY LESSOR IN
WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and
assigns
shall indemnify, defend, reimburse and hold
Lessee, its employees and lenders,
harmless from and against any and all
environmental damages, including the cost
of remediation, which existed as a result
of Hazardous Substances on the
Premises prior to the Start Date or which
are caused by the gross negligence or
willful misconduct of Lessor, its agents or
employees. Lessor's obligations, as
and when required by the Applicable
Requirements, shall include, but not be
limited to, the cost of investigation,
removal, remediation, restoration and/or
abatement, and shall survive the expiration
or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any
investigations or remediation measures required
by governmental entities having
jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior
to the Start Date, unless such
remediation measure is required as a result
of Lessee's use (including
"Alterations", as defined in paragraph
7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such
payment. Lessee shall cooperate fully
in any such activities at the request of
Lessor, including allowing Lessor and
Lessor's agents to have reasonable access
to the Premises at reasonable times in
order to carry out Lessor's investigative
and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance
Condition
occurs during the term of this Lease,
unless Lessee is legally responsible
therefor (in which case Lessee shall make
the investigation and remediation
thereof required by the Applicable
Requirements and this Lease shall continue in
full force and effect, but subject to
Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's
option, either (i) investigate and
remediate such Hazardous Substance
Condition, if required, as soon as reasonably
possible at Lessor's expense, in which
event this Lease shall continue in full
force and effect, or (ii) if the estimated
cost to remediate such condition
exceeds twelve (12) times the then monthly
Base Rent or $100,000, whichever is
greater, give written notice to Lessee,
within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of
such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as
of the date sixty (60) days following
the date of such notice. In the event
Lessor elects to give a termination
notice, Lessee may, within ten (10) days
thereafter, give written notice to
Lessor of Lessee's commitment to pay the
amount by which the cost of the
remediation of such Hazardous Substance
Condition exceeds an amount equal to
twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds
or satisfactory assurance thereof
within thirty (30) days following such
commitment. In such event, this Lease
shall continue in full force and effect,
and Lessor shall proceed to make such
remediation as soon as reasonably possible
after the required funds are
available. If Lessee does not give such
notice and provide the required funds or
assurance thereof within the time provided,
this Lease shall terminate as of the
date specified in Lessor's notice of
termination.
6.3
LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise
provided in this Lease, Lessee shall, at
Lessee's sole expense, fully,
diligently and in a timely manner,
materially comply with all Applicable
Requirements, the requirements of any
applicable fire insurance underwriter or
rating bureau, and the recommendations of
Lessor's engineers and/or consultants
which relate in any manner to the Premises,
without regard to whether said
requirements are now in effect or become
effective after the Start Date. Lessee
shall, within ten (10) days after receipt
of Lessor's written request, provide
Lessor with copies of all permits and other
documents, and other information
evidencing Lessee's compliance with any
Applicable Requirements specified by
Lessor, and shall immediately upon receipt,
notify Lessor in writing (with
copies of any documents involved) of any
threatened or actual claim, notice,
citation, warning, complaint or report
pertaining to or involving the failure of
Lessee or the Premises to comply with any
Applicable Requirements.
6.4
INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in
Paragraph 30 below) and consultants shall
have the right to enter into Premises
at any time, in the case of an emergency,
and otherwise at reasonable times, for
the purpose of inspecting the condition of
the Premises and for verifying
compliance by Lessee with this Lease. The
cost of any such inspections shall be
paid by Lessor, unless a violation of
Applicable Requirements, or a
contamination is found to exist or be
imminent, or the inspection is requested
or ordered by a governmental authority. In
such case; Lessee shall upon request
reimburse Lessor for the cost of such
inspections, so long as such inspection
is reasonably related to the violation or
contamination.
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7. MAINTENANCE; REPAIRS,
UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1
LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3
(Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations),
9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's
sole expense, keep the Premises,
Utility Installations, and Alterations in
good order, condition and repair
(whether or not the portion of the Premises
requiring repairs, or the means of
repairing the same, are reasonably or
readily accessible to Lessee, and whether
or not the need for such repairs occurs as
a result of Lessee's use, any prior
use, the elements or the age of such
portion of the Premises), including, but
not limited to, all equipment or
facilities, such as plumbing, heating,
ventilating, air-conditioning, .electrical,
lighting facilities, boilers,
pressure vessels, fire protection system,
fixtures,walls (interior and
exterior), foundations, ceilings, roofs,
floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking
lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or
adjacent to the Premises. Lessee, in
keeping the Premises In good order,
condition and repair, shall exercise and
perform good maintenance practices,
specifically including the procurement and
maintenance of the service contracts
required by Paragraph 7.1 (b) below.
Lessee's obligations shall Include
restorations, replacements or renewals when
necessary to keep the Premises and all
Improvements thereon or a part thereof in
good order, condition and state of repair.
Lessee shall, during the term of this
Lease, keep the exterior appearance of the
Building in a first-class condition
consistent with the exterior appearance of
other similar facilities of
comparable age and size In the vicinity,
Including, when necessary, the exterior
repainting of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies
to Lessor, in customary form and
substance for, and with contractors
specializing and experienced in the
maintenance of the following equipment and
improvements, if any, if and when
installed on the Premises: (i) HVAC
equipment, (ii) boiler, and pressure
vessels, (iii) fire extinguishing systems,
including fire alarm and/or smoke
detection, (iv) landscaping and irrigation
systems, (v) roof covering and
drains, (vi) driveways and parking lots,
(vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and
(ix) any other equipment, if
reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor
as
set forth in Paragraph 8.7 below, and
without relieving Lessee of liability
resulting from Lessee's failure to exercise
and perform good maintenance
practices, if the Basic Elements described
in Paragraph 7.1 (b) cannot be
repaired other than at a cost which is in
excess of 50% of the cost of replacing
such Basic Elements, then such Basic
Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between
the Parties and Lessee shall only be
obligated to pay, each month during the
remainder of the term of this Lease, on
the date on which Base Rent is due, an
amount equal to the product of
multiplying the cost of such replacement by
a fraction, the numerator of which
is one, and the denominator of which is the
number of months of the useful life
of such replacement as such useful life is
specified pursuant to Federal income
tax regulations or guidelines for
depreciation thereof (including interest on
the unamortized balance as is then
commercially reasonable in the judgment of
Lessor's accountants), with Lessee
reserving the right to prepay its obligation
at any time.
7.2
LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2
(Condition), 2.3 (Compliance), 9 (Damage or
Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that
Lessor have no obligation, in any
manner whatsoever, to repair and maintain
the Premises, or the equipment
therein, all of which obligations are
intended to be that of the Lessee. It is
the intention of the Parties that the terms
of this Lease govern the respective
obligations of the Parties as to
maintenance and repair of the Premises, and
they expressly waive the benefit of any
statute now or hereafter in effect to
the extent it is inconsistent with the
terms of this Lease.
7.3
UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS"
refers to all floor and window coverings,
air lines, power panels, electrical
distribution, security and fire protection
systems, communication systems,
lighting fixtures, HVAC equipment,
plumbing, and fencing in or on the Premises.
The term "TRADE FIXTURES" shall mean
Lessee's machinery and equipment that can
be removed without doing material damage to
the Premises. The term "ALTERATIONS"
shall mean any modification of the
improvements, other than Utility
installations or Trade Fixtures, whether by
addition or deletion. "LESSEE OWNED
ALTERATIONS AND/OR UTILITY INSTALLATIONS"
are defined as Alterations and/or
Utility Installations made by Lessee that
are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make
any Alterations or Utility
Installations to the Premises without
Lessor's prior written consent. Lessee
may, however, make non-structural Utility
Installations to the interior of the
Premises (excluding the roof) without such
consent but upon notice to Lessor, as
long as they are not visible from the
outside, do not involve puncturing,
relocating or removing the roof or any
existing walls, and the cumulative cost
thereof during this Lease as extended does
not exceed $50,000 in the aggregate
or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee
shall desire to make and which require the
consent of the Lessor shall be
presented to Lessor in written form with
detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring
all applicable governmental permits,
(ii) furnishing Lessor with copies of both
the permits and the plans and
specifications prior to commencement of the
work, and (iii) compliance with all
conditions of said permits and other
Applicable Requirements in a prompt and
expeditious manner. Any Alterations or
Utility Installations shall be performed
in a workmanlike manner with good and
sufficient materials. Lessee shall
promptly upon completion furnish Lessor
with as-built plans and specifications.
For work which costs an amount equal to the
greater of one month's Base Rent, or
$10,000, Lessor may condition its consent
upon Lessee providing a lien and
completion bond in an amount equal to one
and one-half times the estimated cost
of such/Alteration or Utility Installation
and/or upon Lessee's posting an
additional Security Deposit with
Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to
have been furnished to or for Lessee
at or for use on the Premises, which claims
are or may be secured by any
mechanic's or materialmen's lien against
the Premises or any interest therein.
Lessee shall give Lessor not less than ten
(10) days' notice prior to the
commencement of any work in, on or about
the Premises, and Lessor shall have the
right to post notices of
non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand,
then Lessee shall, at its sole
expense defend and protect itself, Lessor
and the Premises against the same and
shall pay and satisfy any such adverse
judgment that may be rendered thereon
before the enforcement thereof. If Lessor
shall require, Lessee shall furnish a
surety bond in an amount equal to one and
one-half times the amount of such
contested lien, claim or demand,
indemnifying Lessor against liability for the
same. If Lessor elects to participate in
any such action, Lessee shall pay
Lessor's attorneys' fees and costs.
7.4
OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or
elect
ownership as hereinafter provided, all
Alterations and Utility Installations
made by Lessee shall be the property of
Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in
writing to be the owner of all or
any specified part of the Lessee Owned
Alterations and Utility Installations.
Unless otherwise instructed per Paragraph
7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations
shall, at the expiration or termination of
this Lease, become the property of Lessor
and be surrendered by Lessee with the
Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor
not
earlier than ninety (90) and not later than
thirty (30) days prior to the end of
the term of this Lease, Lessor may require
that any or all Lessee Owned
Alterations or Utility Installations be
removed by the expiration or termination
of this Lease. Lessor may require the
removal at any time of all or any part of
any Lessee Owned Alterations or Utility
Installations made without the required
consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
by
the Expiration Date or any earlier
termination date, with all of the
improvements, parts and surfaces thereof
broom clean and free of debris, and in
good operating order, condition and state
of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall
not include any damage or deterioration
that would have been prevented by good
maintenance practice. Lessee shall repair
any damage occasioned by the installation,
maintenance or removal of Trade
Fixtures, Lessee Owned Alterations and/or
Utility Installations, furnishings,
and equipment as well as the removal of any
storage tank installed by or for
Lessee, and the removal, replacement, or
remediation of any soil, material or
groundwater contaminated by Lessee. Trade
Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The
failure by Lessee to timely vacate
the Premises pursuant to this Paragraph
7.4(c) without the express written
consent of Lessor shall constitute a
holdover under the provisions of Paragraph
26 below.
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FORM 204N-R-2/97
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8. INSURANCE;
INDEMNITY.
8.1
PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required
under Paragraph 8 except to the extent of
the cost attributable to liability
insurance carried by Lessor under Paragraph
8.2(b) in excess of $2,000,000 per
occurrence. Premiums for policy periods
commencing prior to or extending beyond
the Lease term shall be prorated to
correspond to the Lease term. Payment shall
be made by Lessee to Lessor within ten (10)
days following receipt of an
invoice.
8.2
LIABILITY
INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of
Insurance protecting Lessee and Lessor
against claims for bodily injury, personal
injury and property damage based upon
or arising out of the ownership, use,
occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such
insurance shall be on an occurrence
basis providing single limit coverage in an
amount not less than $2,000,000 per
occurrence with an "ADDITIONAL
INSURED-MANAGERS OR LESSORS OF PREMISES
ENDORSEMENT" and contain the "AMENDMENT OF
THE POLLUTION EXCLUSION ENDORSEMENT"
for damage caused by heat, smoke or fumes
from a hostile fire. The Policy shall
not contain any intra-insured exclusions as
between insured persons or
organizations, but shall include coverage
for liability assumed under this Lease
as an "insured contract" for the
performance of Lessee's indemnity obligations
under this Lease. The limits of said
insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of
any obligation hereunder. All
insurance carried by Lessee shall be
primary to and not contributory with any
similar insurance carried by Lessor, whose
insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance
as
described in Paragraph 8.2(a), in addition
to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee
shall not be named as an additional
insured therein.
8.3 PROPERTY INSURANCE - BUILDING,
IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and
keep in force a policy or policies in the
name of Lessor, with loss payable to
Lessor, any groundlessor, and to any
Lender(s) insuring loss or damage to the
Premises. The amount of such insurance
shall be equal to the full replacement
cost of the Premises, as the same shall
exist from time to time, or the amount
required by any Lenders, but in no event
more than the commercially reasonable
and available insurable value thereof. If
Lessor is the Insuring Party, however,
Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee's
personal property shall be Insured by
Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and
commercially appropriate, such policy
or policies shall insure against all risks
of direct physical loss or damage
(except the perils of flood and/or
earthquake unless required by a Lender),
including coverage for debris removal and
the enforcement of any Applicable
Requirements requiring the upgrading,
demolition, reconstruction or replacement
of any portion of the Premises as the
result of a covered loss. Said policy or
policies shall also contain an agreed
valuation provision in lieu of any
coinsurance clause, waiver of subrogation,
and inflation guard protection
causing an increase in the annual property
insurance coverage amount by a factor
of not less than the adjusted U.S.
Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to
where the Premises are located. If
such insurance coverage has a deductible
clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee
shall be liable for such deductible
amount in the event of an Insured Loss.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in
force
a policy or policies in the name of Lessor
with loss payable to Lessor and any
Lender, insuring the loss of the full Rent
for one (1) year. Said insurance
shall provide that in the event the Lease
is terminated by reason of an insured
loss, the period of indemnity for such
coverage shall be extended beyond the
date of the completion of repairs or
replacement of the Premises, to provide for
one full year's loss of Rent from the date
of any such loss. Said insurance
shall contain an agreed valuation provision
in lieu of any coinsurance clause,
and the amount of coverage shall be
adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the
next twelve (12) month period. Lessee
shall be liable for any deductible amount
in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned
by Lessor which are adjacent to the
Premises, the Lessee shall pay for any
increase in the premiums for the property
insurance of such building or buildings if
said increase is caused by Lessee's
acts, omissions, use or occupancy of the
Premises.
8.4
LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal
property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such
insurance shall be full replacement
cost coverage with a deductible of not to
exceed $1,000 per occurrence. The
proceeds from any such insurance shall be
used by Lessee for the replacement of
personal property, Trade Fixtures and
Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor
with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss
of
income and extra expense insurance in
amounts as will reimburse Lessee for
direct or Indirect loss of earnings
attributable to all perils commonly insured
against by prudent lessees in the business
of Lessee or attributable to
prevention of access to the Premises as a
result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of
coverage of insurance specified
herein are adequate to cover Lessee's
property, business operations or
obligations under this Lease.
8.5
INSURANCE POLICIES. Insurance required herein shall be by
companies
duly licensed or admitted to transact
business in the state where the Premises
are located, and maintaining during the
policy term a "General Policyholders
Rating" of at least B+, V, as set forth in
the most current issue of "Best's
Insurance Guide", or such other rating as
may be required by a Lender. Lessee
shall not do or permit to be done anything
which invalidates the required
insurance policies. Lessee shall, prior to
the Start Date, deliver to Lessor
certified copies of policies of such
insurance or certificates evidencing the
existence and amounts of the required
insurance. No such policy shall be
cancelable or subject to modification
except after thirty (30) days prior
written notice to Lessor. Lessee shall, at
least thirty (30) days prior to the
expiration of such policies, furnish Lessor
with evidence of renewals or
"insurance binders" evidencing renewal
thereof, or Lessor may order such
insurance and charge the cost thereof to
Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such
policies shall be for a term of at least
one year, or the length of the remaining
term of this Lease, whichever is less.
If either Party shall fail to procure and
maintain the insurance required to be
carried by it, the other Party may, but
shall not be required to, procure and
maintain the same.
8.6 WAIVER
OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and
relieve the other, and waive their
entire right to recover damages against the
other, for loss of or damage to its
property arising out of or incident to the
perils required to be insured against
herein. The effect of such releases and
waivers is not limited by the amount of
insurance carried or required, or by any
deductibles applicable hereto. The
Parties agree to have their respective
property damage insurance carriers waive
any right to subrogation that such
companies may have against Lessor or Lessee,
as the case may be, so long as the
insurance is not invalidated thereby.
8.7
INDEMNITY. Except for Lessor's gross negligence or willful
misconduct,
Lessee shall indemnify, protect, defend and
hold harmless the Premises, Lessor
and its agents, Lessor's master or ground
lessor, partners and Lenders, from and
against any and all claims, loss of rents
and/or damages, liens, judgments,
penalties, attorneys' and consultants'
fees, expenses and/or liabilities arising
out of, involving, or in connection with,
the use and/or occupancy of the
Premises by Lessee. If any action or
proceeding is brought against Lessor by
reason of any of the foregoing matters,
Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor
shall cooperate with Lessee in such
defense. Lessor need not have first paid any
such claim in order to be defended or
indemnified.
8.8
EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for
injury or damage to the person or goods,
wares, merchandise or other property of
Lessee, Lessee's employees, contractors,
invitees, customers, or any other
person in or about the Premises, whether
such damage or injury is caused by or
results from fire, steam, electricity, gas,
water or rain, or from the
breakage, leakage, obstruction or other
defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or
lighting fixtures, or from any other cause,
whether the said injury or damage results
from conditions arising upon the
Premises or upon other portions of the
Building of which the Premises are a
part, or from other sources or places.
Lessor shall not be liable for any
damages arising from any act or neglect of
any other tenant of Lessor.
Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under
no circumstances be liable for injury to
Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR
DESTRUCTION.
9.1
DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to
the improvements on the Premises, other
than Lessee Owned Alterations
and Utility Installations, which can
reasonably be repaired in six (6) months or
less from the date of the damage or
destruction.
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FORM 204N-R-2JM/97
PAGE 5
<PAGE>
Lessor shall notify Lessee in writing
within thirty (30) days from the data of
the damage or destruction as to whether or
not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to
the Premises, other than Lessee Owned
Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be
repaired in six (6) months or less
from the date of the damage or destruction,
Lessor shall notify Lessee in
writing within thirty (30) days from the
date of the damage or destruction as to
whether or not the damage is Partial or
Total.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements
on the Premises, other than Lessee Owned
Alterations and Utility Installations
and Trade Fixtures, which was caused by an
event required to be covered by the
insurance described in Paragraph 8.3(a),
irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the
improvements owned by Lessor at the time of
the occurrence to their condition
existing immediately prior thereto,
including demolition, debris removal and
upgrading required by the operation of
Applicable Requirements, and without
deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
or
discovery of a condition involving the
presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph
6.2(a), in, on, or under the
Premises.
9.2
PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is
an
Insured Loss occurs, then Lessor shall, at
Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee
Owned Alterations and Utility
Installations) as soon as reasonably
possible and this Lease shall continue in
full force and effect; provided, however,
that Lessee shall, at Lessor's
election, make the repair of any damage or
destruction the total cost to repair
of which is $10,000 or less, and, in such
event, Lessor shall make any
applicable insurance proceeds available to
Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if
the required insurance was not in
force or the insurance proceeds are not
sufficient to effect such repair, the
Insuring Party shall promptly contribute
the shortage in proceeds (except as to
the deductible which is Lessee's
responsibility) as and when required to
complete said repairs. In the event,
however, such shortage was due to the fact
that, by reason of the unique nature of the
improvements, full replacement cost
insurance coverage was not commercially
reasonable and available, Lessor shall
have no obligation to pay for the shortage
in insurance proceeds or to fully
restore the unique aspects of the Premises
unless Lessee provides Lessor with
the funds to cover same, or adequate
assurance thereof, within ten (10) days
following receipt of written notice of such
shortage and request therefor. If
Lessor receives said funds or adequate
assurance thereof within s
