Media Arts Group Inc. Contracts
Sample Business Contracts
California-Morgan Hill-Lightpost Way (Building 2) Lease - TBI-Mission West LLC and Media Arts Group Inc.
Lease Forms
- Start a state-specific lease for the rental of commercial property. Specify the term and rent due, as well as whether the landlord or tenant is responsible for property taxes, insurance, and maintenance and repairs.
- When a tenant vacates commercial property before the lease term has expired, it may be able to rent the premises to a third party. The tenant would be the sublessor and the third party would be the sublessee. Besides preparing a sublease, both parties will want to review the provisions for assignment or subletting in the original lease agreement between the landlord and the sublessor.
- Tenants of residential property should prepare a sublease agreement if they are seeking to sublease a room or the entire apartment or house to a third party. All parties should review the original lease agreement to see if there are any restrictions on subletting or assigning the premises.
- Triple net leases are a type of commercial leases where the tenant has to pay for property taxes, insurance, utilities, and maintenance, in addition to the monthly rent.
- When renting an office space, tenants should understand the amount of the rent and duration of the lease. Other important terms include whether the space can be subleased, which parties are responsible for maintenance, and whether any furniture and furnishings will be provided.
STANDARD SINGLE-TENANT LEASE - TRIPLE NET
1960 The Alameda, San Jose, CA 95126 (408) 246-3691
THIS LEASE (the "Lease"), for reference purposes only dated December ----,
1999, is entered into by and between TBI-Mission West, LLC, a California
limited liability company ("Landlord"), whose address is c/o Toeniskoetter
& Breeding, Inc. Development, 1960 The Alameda, San Jose, California 95126
and Media Arts Group, Inc., a Delaware corporation ("Tenant"), whose
address is 521 Charcot Avenue, San Jose, CA 95131.
1. Basic Lease Provisions.
1.1 Premises. Those premises consisting of approximately one hundred
fifty-five thousand five hundred twenty (155,520) square feet located in
the Building described in Paragraph 1.2 and more particularly shown on
EXHIBIT A.
1.2 Building. That certain one-story building to be constructed on the
Property, consisting of approximately one hundred fifty-five thousand five
hundred twenty (155,520) square feet, and located on Lightpost Way in
Morgan Hill, California. The Building is referred to sometimes as
"Building 2."
1.3 Anticipated Commencement Date. April 1, 2001.
1.4 Term. Fifteen (15) years.
1.5 Use. General and administrative offices, assembly and light
manufacturing.
1.6 Monthly Rent. $171,072.00/month, subject to adjustment as provided in
Paragraph 5.2.
1.7 Security Deposit. None.
1.8 Property. The real property consisting of approximately 8.54 acres,
located in the City of Morgan Hill ("City"), County of Santa Clara
("County"), California, and more particularly described on EXHIBIT B,
together with the Building to be constructed thereon.
1.9 Brokers. Saratoga Investment Company.
2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises.
3. Definitions. The following terms shall have the following meanings in
this Lease:
3.1 Alterations. Any alterations, additions or improvements made in, on
or about the Building by Tenant after the Commencement Date, including,
but not limited to, lighting, heating, ventilating, air conditioning,
electrical, drapery and carpentry installations.
3.2 CC&R's. Those certain covenants, conditions and restrictions for
Madrone Business Park to be recorded in the Official Records of the Santa
Clara County. Landlord shall provide Tenant with a copy of the CC&R's
prior to the Commencement Date.
3.3 Commencement Date. The Commencement Date shall be the earlier
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occurring of the following:
3.3.1 Thirty (30) days from the date the City has issued an occupancy
permit for the Premises, as evidenced by the City's completion of a final
inspection and written approval of the Building Shell and Tenant
Improvements as having been completed in accordance with the building
permit issued for such improvements; or
3.3.2 Thirty (30) days from the date Tenant substantially commences
occupancy of the Premises.
Once the actual Commencement Date has been determined pursuant to the
foregoing, the parties shall execute a Commencement Date Memorandum in the
form attached hereto as EXHIBIT C.
3.4 HVAC. Heating, ventilating and air conditioning.
3.5 Interest Rate. Ten and one-half percent (10 1/2%) per annum, however,
in no event to exceed the maximum rate of interest permitted by law.
3.6 Landlord's Agents. Landlord's authorized agents, partners,
subsidiaries, directors, officers, and employees.
3.7 Outside Area. All areas and facilities within the Property which are
exclusive of the Building, including, without limitation, the parking
areas, access and perimeter roads, sidewalks, landscaped areas, service
areas, trash disposal facilities, and similar areas and facilities
designated by Landlord. Landlord shall at all times have exclusive
control of the Outside Area and may at any reasonable time temporarily
close any part thereof, exclude and restrain anyone from any part thereof,
except the bona fide customers, employees and invitees of Tenant, and may
reasonably change the configuration or location of the Outside Area with
the prior written consent of Tenant, which consent shall not be
unreasonably withheld. In exercising any such rights, Landlord shall use
diligent efforts to minimize any disruption of Tenant's business.
Landlord shall have the right to reconfigure the parking area and ingress
to and egress from the parking area, and to modify the directional flow of
traffic of the parking area at Landlord's sole expense.
3.8 Real Property Taxes. Any form of assessment, license, fee, rent tax,
levy, penalty (if a result of Tenant's delinquency), or tax (other than
net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by any authority having the direct or indirect power to tax, or by
any city, county, state or federal government or any improvement or other
district or division thereof, whether such tax is: (i) determined by the
area of the Property or any part thereof or the rent and other sums
payable hereunder by Tenant, including, but not limited to, any gross
income or excise tax levied by any of the foregoing authorities with
respect to receipt of such rent or other sums due under this Lease; (ii)
upon any legal or equitable interest of Landlord in the Property or the
Building or any part hereof; (iii) upon this transaction or any document
to which Tenant is a party creating or transferring any interest in all or
any part of the Property; or (iv) levied or assessed in lieu of, in
substitution for, or in addition to, existing or additional taxes against
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the Property whether or not now customary or within the contemplation of
the parties.
3.9 Rent. The net Monthly Rent plus the Additional Rent described in
Paragraph 5.2.
3.10 Sublet. Any transfer, sublet, assignment, license or concession
agreement, change of ownership, of this Lease or the Tenant's interest in
the Lease or any portion thereof.
3.11 Subtenant. The person or entity with whom a Sublet agreement is
proposed to be or is made.
3.12 Tenant Improvements. Those interior improvements to the Premises to
be constructed by Landlord pursuant to EXHIBIT D.
3.13 Tenant's Agents. Tenant's authorized agents, partners, subsidiaries,
directors, officers, and employees.
3.14 Tenant's Personal Property. Tenant's trade fixtures, furniture,
equipment and other personal property in the Premises.
4. Lease Term.
4.1 Term. The Term shall be fifteen (15) years, commencing on the
Commencement Date, and ending fifteen (15) years thereafter, unless sooner
terminated as provided herein.
4.2 Tenant Delays. If the Commencement Date has not occurred on or before
the Anticipated Commencement Date set forth in Paragraph 1.3, due solely
to the fault of Tenant, then notwithstanding any other provision hereof,
Tenant shall pay one day's net Monthly Rent for each day of delay in
completion of the Tenant Improvements beyond the Anticipated Commencement
Date caused by Tenant's fault. Delays "due solely to the fault" of Tenant
shall include those caused by:
4.2.1 Tenant's failure to furnish information to Landlord for the
preparation of the Space Plan or Final Plans for the Tenant Improvements
in accordance with EXHIBIT D;
4.2.2 Tenant's request for special materials, finishes or installations
which are not readily available, provided, however, Landlord shall make a
reasonable effort to notify Tenant of any delays concerning any special
materials, finishes or installations of which Landlord has commercially
reasonable knowledge;
4.2.3 Tenant's failure to reasonably approve the Space Plan for the Tenant
Improvements in accordance with the time period set forth in EXHIBIT D;
4.2.4 Tenant's changes in the Space Plan or the Final Plans after their
approval by Landlord;
4.2.5 Tenant's failure to complete any of its own improvement work to the
extent Tenant delays completion by the City of its final inspection and
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approval of the Tenant Improvements described in EXHIBIT D; or
4.2.6 Interference with Landlord's work caused by Tenant or by Tenant's
contractors or subcontractors.
4.3 Landlord Delays. If the Commencement Date is delayed for any reason
other than delays caused by Tenant as defined in Paragraph 4.2 above, then
there shall be an abatement of Rent covering the period between the
Anticipated Commencement Date and the date when Landlord delivers
possession of the Premises to Tenant with the Tenant Improvements
substantially completed and all other terms and conditions of this Lease
shall remain in full force and effect. If, however, the Commencement
Date does not occur within six (6) months after the Anticipated
Commencement Date for any reason other than delays caused by Tenant or
delays caused by Force Majeure Conditions, as defined herein, then Tenant
shall have the right to terminate this Lease by delivery of written notice
to Landlord no later than the date which is seven (7) months from the
Anticipated Commencement Date. If the Commencement Date is delayed due
to inclement weather, strikes or other labor disturbances, material
shortages, casualties, or other causes beyond Landlord's reasonable
control ("Force Majeure Conditions"), then the date for substantial
completion of the Tenant Improvements, or the period for reconstructing
the Premises after any damage, destruction, or condemnation, as the case
may be, shall be extended for the period of time reasonably attributable
to the occurrence of such Force Majeure Condition.
4.4 Early Entry. Tenant shall be permitted to enter the Premises prior to
the Commencement Date for the purpose of installing Tenant's Personal
Property in the Premises. Such early entry shall be at Tenant's sole risk
and subject to all the terms and provisions hereof, except for the payment
of net Monthly Rent which shall commence on the Commencement Date.
Landlord shall have the right to impose such additional conditions on
Tenant's early entry as Landlord shall deem reasonably appropriate, and
shall further have the right to require that Tenant execute an early entry
agreement containing such conditions prior to Tenant's early entry.
5. Rent.
5.1 Monthly Rent. Tenant shall pay to Landlord, in lawful money of the
United States, commencing on the first day of the first month of the Term
and continuing thereafter on the first (1st) day of each calendar month
throughout the Term, net Monthly Rent in the amount set forth in Paragraph
1.6, subject to adjustment as provided in Paragraph 5.2. Net Monthly Rent
shall be payable in advance, without abatement, deduction, claim, offset,
prior notice or demand, except as otherwise specifically provided herein.
The net Monthly Rent due for the first month of the Term shall be paid by
Tenant upon execution of this Lease or secured by a letter of credit until
the Commencement Date.
5.2 Adjustments to Monthly Rent. The Monthly Rent shall be adjusted as of
the first day of the thirteen (13th) month of the Term and every twelve
(12) months thereafter (each, an "Adjustment Date") by the percentage
increase in the Consumer Price Index, All Urban Consumers, All Items,
published by the U.S. Department of Labor, Bureau of Labor Statistics for
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the San Francisco-Oakland-San Jose Metropolitan Area (1982-84=100) (the
"Index"). The Index published for the month immediately preceding each
Adjustment Date shall be compared with the Index published for the month
immediately preceding the prior Adjustment Date, or in case of the first
Adjustment Date, the Index published for the month immediately preceding
the Commencement Date, to determine the percentage increase in the Monthly
Rent for the next twelve (12) months of the Term; provided, however, that
in no event shall the Monthly Rent increase by less than three percent
(3%) per annum nor more than eight percent (8%) per annum. If no Index is
published for either of the months set forth above, the Index for the next
preceding month shall be used. If the base of the Index is revised, the
Index increases, if any, shall be calculated with a common base year. If
the Index is discontinued or revised, such other governmental index with
which it is replaced, with appropriate conversion factors, shall be the
basis of the adjustment.
5.3 Development Cost Reductions Based on Financial Assistance from City.
If the City of Morgan Hill or the Redevelopment Agency of Morgan Hill
provides any financial assistance to Landlord that directly reduces
Landlord's cost to develop the Property and/or any of the other
properties leased by Tenant at Madrone Business Park, Landlord shall pay
to Tenant the amount of such reduction in Landlord's cost in cash or its
equivalent.
5.4 Additional Rent. This Lease is intended to be a triple net lease.
All monies required to be paid by Tenant under this Lease, including,
without limitation, Real Property Taxes pursuant to Paragraph 14,
Operating Expenses pursuant to Paragraph 16, and insurance premiums
pursuant to Paragraph 20, shall be deemed Additional Rent and shall be
payable as of the Commencement Date.
6. Late Payment Charges. Tenant acknowledges that late payment by Tenant
to Landlord of Rent and other charges provided for under this Lease will
cause Landlord to incur costs not contemplated by this Lease, the exact
amount of such costs being extremely difficult or impracticable to fix.
Therefore, notwithstanding the notice provision in Paragraph 25.1.1, if
any installment of Rent or any other charge due from Tenant is not
received by Landlord within five (5) days after the date such Rent or
other charge is past due, Tenant shall pay to Landlord an additional sum
equal to five percent (5%) of the amount overdue as a late charge. The
parties agree that this late charge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of the late
payment by Tenant. Notwithstanding the foregoing, Landlord agrees to
waive the late charge for the first five times during the Term of this
Lease that any installment of Rent or charge is late provided that (i)
Tenant is not late more than once per year, and (ii) Tenant is not more
than fifteen days late in the payment of the Rent or other charge due
(i.e., Rent must be paid by the fifteenth day of the month).
Initials:
/s/ CT /s/ CF /s/ TSG
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Landlord Tenant
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7. Security Deposit. None.
8. Holding Over. If Tenant remains in possession of all or any part of
the Premises after the expiration of the Term, with or without the express
or implied consent of Landlord, such tenancy shall be from month-to-month
only and not a renewal hereof or any extension for any further term, and
in such case, the net Monthly Rent shall be one hundred fifty percent
(150%) of the net Monthly Rent payable during the last month of the Term
and such month-to-month tenancy shall be subject to every other term,
covenant and agreement of this Lease.
9. Condition of Premises. Within thirty (30) days after completion of the
Tenant Improvements, Tenant shall conduct a walk-through inspection of the
Premises with Landlord and complete a punch-list of items needing
additional work by Landlord. Other than the items specified in the punch-
list, by taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as improved with the Tenant Improvements in good,
clean and completed condition and repair, subject to all applicable laws,
codes and ordinances. The punch-list to be prepared by Tenant shall not
include any damage to the Premises caused by Tenant's move-in, which
damage shall be repaired or corrected by Tenant, at its expense. Tenant
acknowledges that neither Landlord nor its Agents have agreed to undertake
any Alterations or construct any Tenant Improvements to the Premises
except as expressly provided in this Lease. If Tenant fails to submit a
punch-list to Landlord within such thirty (30) day period, it shall be
deemed that there are no items needing additional work or repair.
Landlord's contractor shall complete all reasonable punch-list items
within thirty (30) days after the walk-through inspection or as soon as
practicable thereafter. Upon completion of such punch-list items,
Landlord shall so notify Tenant. Tenant shall approve such completed
items in writing to Landlord. If Tenant fails to reasonably approve such
items within fifteen (15) days of notice of completion by Landlord, such
items shall be deemed approved by Tenant.
10. Use of the Premises.
10.1 Tenant's Use. Tenant shall use the Premises solely for the purposes
specified in Paragraph 1.5 and shall not use the Premises for any other
purpose without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant acknowledges that the
Property is subject and this Lease is subordinate to the CC&R's.
Throughout the Term, Tenant shall faithfully and timely perform and comply
with the CC&R's and any modification or amendments thereof, including the
payment by Tenant of any periodic or special dues, assessments, and
owners' association fees against the Property. Tenant shall indemnify and
hold Landlord and it Agents harmless from and against any liability, loss,
expense, damage, attorneys' fees and costs arising out of or in connection
with Tenant's failure to perform or comply with the CC&R's.
10.2 Compliance. Tenant shall not use the Premises or suffer or permit
anything to be done in or about the Premises which will in any way
conflict with any law, statute, zoning restriction, ordinance or
governmental law, rule, regulation or requirement of duly constituted
<PAGE>
public authorities now in force or which may hereafter be in force or the
requirements of the Board of Fire Underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises. Tenant shall not commit any public or private
nuisance or any other act or thing which might or would disturb the quiet
enjoyment of any other tenant of Landlord or any occupant of nearby property.
Tenant shall place no loads upon the floors, walls or ceilings in excess of
the maximum designed load determined by Landlord or which endanger the
structure; nor place any harmful liquids in the drainage systems; nor dump or
store waste materials or refuse or allow such to remain outside the Building
proper, except in the enclosed trash areas provided, if any. Tenant shall
not store or permit to be stored or otherwise placed any other material of
any nature whatsoever outside the Building without the prior written consent
of Landlord, which shall not be unreasonably withheld. Tenant shall be
permitted, however, to park company-owned vehicles and employee vehicles in
the parking areas overnight and for short-term periods provided, however,
that any vehicles which are larger than an automobile, mini-van or pick-up
truck must be screened from view as provided in the CC&R's.
10.3 Hazardous Materials. Tenant, at its sole cost, shall comply with all
laws relating to Tenant's storage, use and disposal of hazardous, toxic or
radioactive matter, including those materials identified in 22 California
Code of Regulations Sections 66261.1 et seq., as they may be amended from
time to time (collectively "Hazardous Materials"). If Tenant does store,
use or dispose of any Hazardous Materials in, on or about the Premises,
other than office supplies and cleaning supplies typically used in
administrative offices, Tenant shall notify Landlord in writing at least
ten (10) days prior to their first appearance on the Premises. Tenant
shall be solely responsible for and shall defend, indemnify and hold
Landlord harmless from and against any liabilities, penalties, damages,
costs or expenses (including reasonable attorneys' fees), causes of
action, claims and/or judgments arising out of or in connection with any
storage, use or disposal of Hazardous Materials in, on or about the
Premises or the Property by Tenant, its agents, employees, contractors or
invitees. Tenant's obligations hereunder shall survive the termination of
this Lease. Landlord represents and warrants, to the best of its actual
knowledge, that as of the date of this Lease there are no Hazardous
Materials on the Property and the Property is in compliance with all
applicable laws, regulations, ordinances and requirements of any
governmental agency relating to Hazardous Materials.
11. Quiet Enjoyment. Landlord represents that Landlord has the full right
and authority to enter into this Lease and will, as of the Commencement
Date, be the fee simple owner of the Property. Landlord covenants that
Tenant, upon performing the terms, conditions and covenants of this Lease,
shall have quiet and peaceful possession of the Premises as against any
person claiming the same by, through or under Landlord.
12. Alterations. After the Commencement Date, Tenant shall not make or
permit any Alterations in, on or about the Premises, except for
nonstructural Alterations not exceeding Twenty-Five Thousand and no/100ths
Dollars ($25,000.00) in cost during any twelve (12) month period, without
the prior written consent of Landlord, which consent shall not be
<PAGE>
unreasonably withheld, and according to plans and specifications
reasonably approved in writing by Landlord. Notwithstanding the
foregoing, Tenant shall not, without the prior written consent of
Landlord, make any (i) alterations to the exterior of the Building; (ii)
alterations to and penetrations of the roof of the Building; or (iii)
alterations visible from outside the Building to which Landlord may
withhold Landlord's consent on wholly aesthetic grounds. All Alterations
shall be installed at Tenant's sole expense, in compliance with all
applicable laws and permit requirements by a licensed contractor, shall be
done in a good and workmanlike manner conforming in quality and design
with the Premises existing as of the Commencement Date, and shall not
diminish the value of either the Building or the Premises. All Alterations
made by Tenant shall be and become the property of Landlord upon
installation and shall not be deemed Tenant's Personal Property; provided,
however, that Landlord may, at its option, require that Tenant, at
Tenant's expense, remove any or all Alterations installed by Tenant and
return the Premises to their condition as of the Commencement Date of this
Lease, normal wear and tear excepted and subject to the provisions of
Paragraph 23. If Tenant removes any Alterations as required or permitted
herein, Tenant shall repair any and all damage to the Premises caused by
such removal and return the Premises to their condition as of the
Commencement Date, normal wear and tear excepted and subject to the
provisions of Paragraph 22. Notwithstanding any other provision of this
Lease, Tenant shall be solely responsible for the maintenance and repair
of any Alterations made by it to the Premises. The provisions of this
Paragraph 12 shall not apply to the Tenant Improvements which shall be
governed by the provisions set forth in the Work Letter Agreement attached
as EXHIBIT D.
13. Surrender of the Premises. Upon the expiration or earlier termination
of the Term, Tenant shall surrender the Premises to Landlord in its
condition existing as of the Commencement Date, normal wear and tear and
fire or other casualty excepted, with all interior walls repaired and
repainted if marked or damaged, all carpets shampooed and cleaned, all
broken, marred or nonconforming acoustical ceiling tiles replaced, all
windows washed, the plumbing and electrical systems and lighting in good
order and repair, including replacement of any burned out or broken light
bulb or ballasts, the HVAC equipment serviced and repaired by a reputable
and licensed service firm (if the HVAC system is maintained by Tenant
during the Term of this Lease), and all floors cleaned and waxed, all to
the reasonable satisfaction of Landlord. Tenant shall remove from the
Premises all of Tenant's Alterations required to be removed pursuant to
Paragraph 12, and all Tenant's Personal Property and repair any damage and
perform any restoration work caused by such removal. If Tenant fails to
remove such Alterations and Tenant's Personal Property, and such failure
continues for ten (10) days after written notice from Landlord, then
Landlord may retain such property and all rights of Tenant with respect to
it shall cease, or Landlord may place all or any portion of such property
in public storage for Tenant's account. Tenant shall be liable to
Landlord for costs of removal of any such Alterations and Tenant's
Personal Property and storage and transportation costs of same, and the
cost of repairing and restoring the Premises, together with interest at
the Interest Rate from the date of expenditure by Landlord.
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14. Real Property Taxes.
14.1 Payment by Tenant. Tenant shall pay to Landlord, as Additional
Rent, the Real Property Taxes for the Property as set forth on the most
current County assessor's tax statement. Tenant shall reimburse Landlord
monthly, on the first day of each calendar month of the Term, one-twelfth
(1/12th) of the annual Real Property Taxes for the applicable fiscal year,
prorated for any partial month. Upon Landlord's receipt of the Real
Property Tax payment from Tenant, Landlord shall pay the Real Property
Taxes to the County prior to delinquency. If any Real Property Taxes
increase from time to time due to a new tax statement from the County
assessor, Tenant shall pay such increase within thirty (30) days after
receipt of a statement from Landlord. Assessments, taxes, fees, levies
and charges may be imposed by governmental agencies for such purposes as
fire protection, street, sidewalk, road, utility construction and
maintenance, refuse removal and for other governmental services which may
formerly have been provided without charge to property owners or
occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges are to be included within
the definition of Real Property Taxes for purposes of this Lease.
14.2 Taxes on Tenant Improvements and Personal Property. Notwithstanding
any other provision hereof, Tenant shall pay the full amount of any
increase in Real Property Taxes during the Term resulting from any and all
Alterations and Tenant Improvements of any kind whatsoever placed in, on
or about the Premises for the benefit of, at the request of, or by Tenant.
Tenant shall pay prior to delinquency all taxes assessed or levied against
Tenant's Personal Property in, on or about the Premises. When possible,
Tenant shall cause its Personal Property to be assessed and billed
separately from the real or personal property of Landlord.
14.3 Proration. Tenant's liability to pay Real Property Taxes shall be
prorated on the basis of a 365-day year to account for any fractional
portion of a fiscal tax year included at the commencement or expiration of
the Term.
15. Utilities and Services. Tenant shall be responsible for and shall pay
promptly all charges for water, gas, electricity, sewer, telephone, refuse
pickup, janitorial service and all other utilities, materials and services
furnished directly to or used by Tenant in, on or about the Premises
during the Term, together with any taxes thereon. Landlord shall not be
liable in damages or otherwise for any failure or interruption of any
utility service or other service furnished to the Premises, except that
resulting from the negligence or willful misconduct of Landlord. Landlord
shall use diligent efforts to promptly correct any failure or interruption
caused by the act or neglect of Landlord.
16. Repair and Maintenance.
16.1 Landlord's Obligations. Landlord shall at all times and at its own
expense clean, keep and maintain in good order, condition and repair the
structural parts of the Building, which structural parts include only the
foundation, subflooring, roof structure, and exterior walls, except for
any damage thereto caused by the negligence or willful acts or omissions
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of Tenant or of Tenant's agents, employees or invitees, or by reason of
the failure of Tenant to perform or comply with any terms, conditions or
covenants in this Lease, or cause by Alterations made by Tenant or by
Tenant's agents, employees or contractors, which shall be Tenant's
responsibility. Landlord shall also maintain, repair and replace the roof
membrane of the Building, the HVAC system for the Premises, and the
Outside Area and Tenant shall reimburse Landlord for the reasonable costs
thereof, as provided in paragraph 16.3. At Landlord's option, Landlord
shall have the right to require Tenant to maintain and repair the HVAC
system for the Premises. In such case, Tenant shall cause the HVAC system
for the Premises to be maintained in good condition at all times and
Tenant shall obtain an HVAC system preventative maintenance contract with
monthly service which shall be subject to the reasonable approval of
Landlord and paid for by Tenant and which shall provide for and include
replacement of filters, oiling and lubricating of machinery, parts
replacement, adjustment of drive belts, oil changes and other preventative
maintenance. If Tenant is performing the repair and maintenance of the
HVAC system, Tenant shall have the benefit of all warranties available to
Landlord regarding such equipment. Other than regularly scheduled
maintenance of the Premises, it is a condition precedent to all
obligations of Landlord to repair and maintain under this Paragraph 16.1
that Tenant shall have notified Landlord in writing of the need for such
repairs or maintenance.
16.2 Tenant's Obligations. Tenant shall at all times and at its own
expense, clean, keep and maintain in good, safe and sanitary order,
condition and repair every part of the interior of the Premises which is
not within Landlord's obligation pursuant to Paragraph 16.1. Tenant's
repair and maintenance obligations shall include, without limitation, all
plumbing and sewage facilities within the Premises, fixtures, interior
walls, floors, ceilings, interior windows, store front, doors, entrances,
plateglass, showcases, all electrical facilities and equipment, including
lighting fixtures, lamps, fans and any exhaust equipment and systems, any
automatic fire extinguisher equipment within the Premises, electrical
motors and all other appliances and equipment of every kind and nature
located in, upon or about the Premises. Tenant shall also be responsible
for all pest control within the Premises. All glass is at the sole risk
of Tenant, and any broken glass shall promptly be replaced by Tenant at
Tenant's expense with glass of the same kind, size and quality.
16.3 Tenant to Pay Operating Expenses. Tenant shall pay, as Additional
Rent, all reasonable costs and expenses as may be paid or incurred by
Landlord in maintaining, operating and repairing the roof membrane of the
Building, the HVAC system for the Premises, and the Outside Area
("Operating Expenses"). The Operating Expenses may include, without
limitation, the cost of labor, materials, supplies and services used or
consumed in operating, maintaining, repairing and replacing the roof
membrane, the HVAC system and the Outside Area, including landscaping and
sprinkler systems, concrete walkways and paved parking areas; maintaining
and repairing signs and site lighting; all utilities provided to the
Outside Area; any alterations or improvements required by governmental
authority to comply with laws effective after the Commencement Date; the
cost of maintaining, repairing and replacing exterior windows and the non-
structural components of the roof of the Building; and a management fee
<PAGE>
not to exceed three percent (3%) of the Monthly Rent. Operating Expenses
shall not include costs paid directly by Tenant, principal and interest
payments on loans secured by deeds of trust recorded against the Premises
or the Property, real estate sales or leasing brokerage commissions, or
executive salaries of off-site personnel employed by Landlord except for
the charge (or pro rata share) of the property manager of the Property.
16.4 Monthly Payments. From and after the Commencement Date, Tenant shall
pay to Landlord on the first day of each calendar month of the Term the
estimated monthly Operating Expenses. Such estimated monthly Operating
Expenses may be adjusted by Landlord at the end of any calendar quarter on
the basis of Landlord's experience and reasonably anticipated costs. Any
such adjustment shall be effective as of the calendar month next
succeeding receipt by Tenant of written notice of the adjustment. Within
one hundred twenty (120) days following the end of each calendar year
Landlord shall furnish Tenant a statement of actual Operating Expenses
(the "Actual Expenses") for the calendar year and the payments made by
Tenant with respect to such period. If Tenant's payments for the
Operating Expenses are less than the Actual Expenses, Tenant shall pay
Landlord the deficiency within thirty (30) days after receipt of such
statement. If Tenant's payments exceed the Actual Expenses, Landlord
shall either offset the excess against the Operating Expenses next
thereafter to become due to Landlord, or shall refund the amount of the
overpayments to Tenant, in cash, as Landlord shall elect. There shall be
appropriate adjustments of the Operating Expenses as of the Commencement
Date and expiration of the Term.
16.5 Operating Expense Audit. Within twelve (12) months of Tenant's
receipt of Landlord's statement of the Actual Expenses, and upon thirty
(30) days prior written notice to Landlord, Tenant shall have the right to
examine, to copy and to have an audit conducted of all books and records
at Landlord's office pertaining to the Actual Expenses for the period
covered by Landlord's statement. If Tenant disputes the inclusion or
amount of any item or items, Landlord and Tenant will use good faith
efforts to settle such dispute within thirty (30) days after notice of
such dispute. If the dispute is not settled within this time period, the
dispute shall be resolved by a firm of real estate audit professionals
("Audit Professionals") mutually acceptable to Landlord and Tenant. Audit
Professionals shall mean, for the purposes of this Paragraph 16.5, an
independent firm of certified public accountants with experience in real
estate expense reviews. If Landlord and Tenant cannot agree on the Audit
Professionals within fifteen (15) days, the Landlord and Tenant shall
each, within fifteen (15) days, select one independent firm of Audit
Professionals, and the two firms of Audit Professionals shall together,
within fifteen (15) days after the last of the two Audit Professionals has
been selected, select a third firm of Audit Professionals, which third
firm shall be the Audit Professionals to resolve the dispute. The Audit
Professionals shall be entitled to review all records relating to the
disputed items. The determination of the Audit Professionals shall be
final and binding upon both Landlord and Tenant. The expenses of the
Audit Professionals shall be borne by Tenant unless the audit discloses an
overall overstatement of the Actual Expenses of five percent (5%) or more
for the period being audited, in which case Landlord shall pay the audit
expenses. If the Audit Professionals determine that Tenant has made an
<PAGE>
over-payment or under-payment of Operating Expenses then the procedures in
Paragraph 16.4 shall be followed.
16.6 Waiver. Tenant waives the provisions of Sections 1941 and 1942 of
the California Civil Code and any similar or successor law regarding
Tenant's right to make repairs and deduct the expenses of such repairs
from the Rent due under this Lease.
16.7 Compliance with Government Regulations. Tenant shall, at its cost,
comply with, including the making by Tenant of any Alteration to the
Premises, all present and future regulations, rules, laws, ordinances, and
requirements of all governmental authorities (including state, municipal,
County and federal governments and their departments, bureaus, boards and
officials) arising from the use or occupancy of the Premises.
17. Liens. Tenant shall keep the Premises and the Property free from any
liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Tenant and hereby indemnifies and
holds Landlord and its Agents harmless from all liability and cost,
including attorneys' fees and costs, in connection with or arising out of
any such lien or claim of lien. Tenant shall cause any such lien imposed
to be released of record by payment or posting of a proper bond acceptable
to Landlord within twenty (20) days after written request by Landlord.
Tenant shall give Landlord written notice of Tenant's intention to perform
work on the Premises which might result in any claim of lien at least ten
(10) days prior to the commencement of such work to enable Landlord to
post and record a Notice of Nonresponsibility or other notice reasonably
deemed proper by Landlord. If Tenant fails to so remove any such lien
within the prescribed twenty (20) day period, then Landlord may do so and
Tenant shall reimburse Landlord upon demand. Such reimbursement shall
include all sums incurred by Landlord including Landlord's reasonable
attorneys' fees, with interest thereon at the Interest Rate.
18. Landlord's Right to Enter the Premises. Tenant shall permit Landlord
and Landlord's Agents to enter the Premises to inspect the same, to post
Notices of Nonresponsibility and similar notices, to show the Premises to
interested parties such as prospective lenders and purchasers, to make
necessary repairs, to discharge Tenant's obligations hereunder when Tenant
has failed to do so within a reasonable time after written notice from
Landlord, and at any reasonable time within two hundred seventy (270) days
prior to the expiration of the Term to show the Premises to prospective
tenants. Landlord shall also have the right to place ordinary "For Lease"
signs on the Outside Area. The above rights of entry are subject to
reasonable security regulations of Tenant, including the requirement that
Landlord or Landlord's Agents be accompanied by an employee of Tenant when
entering the Premises, and to the requirement that Landlord shall at all
times act in a manner to cause the least possible interference with
Tenant's business.
19. Signs. Landlord shall provide space for Tenant's identification sign
on an exterior monument sign to be constructed in the Outside Area. In
addition, Tenant shall have the right to install a Tenant identification
sign on the exterior of the Building, subject to Tenant's receipt of all
necessary approvals from the City. All costs of the monument sign
<PAGE>
structure shall be paid for by Landlord; any costs associated with
Tenant's monument sign lettering and/or any Building signage installed by
Tenant shall be paid for by Tenant. Tenant shall have no other right to
maintain Tenant identification signs in any other location in, on or about
the Premises, the Building or the Outside Area and shall not display or
erect any other Tenant identification sign, display or other advertising
material that is visible from the exterior of the Building. The location,
size, design, color and other physical aspects of Tenant's identification
sign(s) shall be subject to the Landlord's written reasonable approval
prior to installation, and any appropriate municipal or other governmental
approvals. The cost of maintaining Tenant's identification signs shall be
an Operating Expense. The cost of removal of the signs shall be Tenant's
sole expense. If Tenant fails to remove any such signs upon termination
of this Lease, Landlord may do so at Tenant's expense and Tenant's
reimbursement to Landlord for such amounts shall be deemed Additional
Rent.
20. Insurance.
20.1 Tenant's Indemnification. Except to the extent caused by the
negligence or willful misconduct of Landlord, and subject to the
provisions of Paragraph 21, Tenant hereby agrees to defend, indemnify and
hold harmless Landlord and Landlord's Agents from and against any and all
damage, loss, liability or expense including, without limitation,
attorneys' fees and legal costs suffered directly or by reason of any
claim, suit or judgment brought by or in favor of any person or persons
for damage, loss or expense due to, but not limited to, bodily injury and
property damage sustained by such person or persons which arises out of,
is occasioned by or in any way attributable to the use or occupancy of the
Premises or any part thereof and adjacent areas by the Tenant, the acts or
omissions of the Tenant, Tenant's agents, or any contractors brought onto
the Premises by Tenant. Tenant agrees that the obligations assumed herein
shall survive this Lease.
20.2 Landlord's Indemnification. Subject to the provisions of Paragraph
21, Landlord hereby agrees to defend, indemnify and hold harmless Tenant
and Tenant's agents, directors, officers and employees from and against
any and all damage, loss, liability or expense including, without
limitation, attorneys' fees and legal costs suffered directly or by reason
of any claim, suit or judgment brought by or in favor of any person or
persons for damage, loss or expense due to, but not limited to, bodily
injury and property damage sustained by such person or persons which
arises out of, is occasioned by or attributable to the negligence or
willful misconduct of Landlord or any contractors brought onto the
Premises by Landlord. Landlord agrees that the obligations assumed herein
shall survive this Lease.
20.3 Tenant's Insurance. Tenant agrees to maintain in full force and
effect at all times during the Term, at its own expense, for the
protection of Tenant and Landlord, as their interests may appear, policies
of insurance issued by a responsible carrier or carriers reasonably
acceptable to Landlord which afford the following coverages:
20.3.1 Liability. Commercial general liability insurance in an amount not
<PAGE>
less than Two Million and no/100ths Dollars ($2,000,000.00) combined
single limit for both bodily injury and property damage which includes
blanket contractual liability broad form property damage, personal injury,
completed operations, products liability, and fire damage legal (in an
amount not less than Twenty-Five Thousand and no/100ths Dollars
($25,000.00)), naming Landlord and Landlord's Agents as additional
insureds.
20.3.2 Personal Property. All risk or causes of loss - special form
property insurance (including, without limitation, vandalism, malicious
mischief, inflation endorsement, and sprinkler leakage endorsement) on
Tenant's Personal Property located on or in the Premises. Such insurance
shall be in the full amount of the replacement cost, as the same may from
time to time increase as a result of inflation or otherwise, and shall be
in a form providing coverage comparable to the coverage provided in the
standard ISO All-Risk form.
20.4 All-Risk Insurance. During the Term Landlord shall maintain all risk
or causes of loss - special form property insurance, including inflation
endorsement, sprinkler leakage endorsement, at Landlord's option,
earthquake and flood coverage, on the Building, excluding coverage of all
Tenant's Personal Property located on or in the Premises, but including
the Tenant Improvements. Such insurance shall also include insurance
against loss of rents on an "All Risk" basis, including, at Landlord's
option, earthquake and flood, in an amount equal to the Monthly Rent and
Additional Rent, and any other sums payable under the Lease, for a period
of twelve (12) months commencing on the date of loss. Such insurance
shall name Landlord and its Agents as named insureds and include a
lender's loss payable endorsement in favor of Landlord's lender (Form 438
BFU Endorsement). Tenant shall reimburse Landlord monthly, as Additional
Rent, on the first day of each calendar month of the Term, one-twelfth
(1/12th) of the annual premiums for such insurance, prorated for any
partial month, or on such other periodic basis as Landlord shall elect.
Landlord shall provide Tenant with appropriate documentation evidencing
the premium costs for such insurance. If the insurance premiums are
increased after the Commencement Date due to an increase in premium rates,
an increase in the valuation of the Building or its replacement cost,
Tenant shall pay such increase within ten (10) days of notice of such
increase and receipt of appropriate documentation evidencing such
increased insurance premiums.
20.5 Certificates. Tenant shall deliver to Landlord at least thirty (30)
days prior to the time such insurance is first required to be carried by
Tenant, and thereafter at least thirty (30) days prior to expiration of
each such policy, certificates of insurance evidencing the above coverage
with limits not less than those specified above. The certificates shall
expressly provide that the interest of Landlord therein shall not be
affected by any breach of Tenant of any policy provision for which such
certificates evidence coverage. All certificates shall expressly provide
that no less than thirty (30) days' prior written notice shall be given
Landlord in the event of cancellation of the coverages evidenced by such
certificates. Landlord shall deliver to Tenant at the Commencement Date
and thereafter at least thirty (30) days prior to the expiration of each
such policy, certificates of insurance evidencing the coverages required
<PAGE>
under Pararaph 20.4 of this Lease. Such certificates shall expressly
provide that not less than thirty (30) days prior written notice shall be
given Tenant in the event of any cancellation of the coverage evidenced by
such certificate.
20.6 Insurance Requirements. All insurance shall be in a form
satisfactory to Landlord and shall be carried with companies that have a
general policy holder's rating of not less than "A" and a financial rating
of not less than Class "X" in the most current edition of Best's Insurance
Reports; shall provide that such policies shall not be subject to material
alteration or cancellation except after at least thirty (30) days' prior
written notice to Landlord; and shall be primary and noncontributing with
any other insurance available to Landlord. The policy or policies, or
duly executed certificates for them, together with satisfactory evidence
of payment of the premium thereon shall be deposited with Landlord prior
to the Commencement Date, and upon renewal of such policies, not less than
thirty (30) days prior to the expiration of the term of such coverage. If
Tenant fails to procure and maintain the insurance required hereunder,
Landlord may, upon not less than ten (10) days' prior written notice to
Tenant, order such insurance at Tenant's expense and Tenant shall
reimburse Landlord. Such reimbursement shall include all sums incurred by
Landlord, including Landlord's reasonable attorneys' fees and costs, with
interest thereon at the Interest Rate.
20.7 Landlord's Disclaimer. Landlord and Landlord's Agents shall not be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, glass, tile or sheetrock, steam, gas,
electricity, water or rain which may leak from any part of the Building,
or from the pipes, appliances or plumbing works therein or from the roof,
street or subsurface, or from any other cause whatsoever except to the
extent any such loss or damage is caused by the negligence or willful
misconduct of Landlord and such loss or damage is not covered by under any
insurance Tenant is required to carry pursuant to Paragraph 20.3.2 of this
Lease or any other insurance Tenant elects to carry. Landlord and
Landlord's Agents shall not be liable for interference with the light,
air, or any latent defect in the Premises. Tenant shall give prompt
written notice to Landlord in case of a casualty, accident or repair needed
in the Premises.
21. Waiver of Subrogation. Notwithstanding any other provision of this
Lease to the contrary, Landlord and Tenant each hereby waive all rights of
recovery against the other on account of loss or damage occasioned to such
waiving party for its property or the property of others under its control
to the extent that such loss or damage is insured against under any
insurance policies which may be in force at the time of such loss or
damage, even if such damage may have been caused by the negligence of the
other party, its agents or employees. Tenant and Landlord shall, upon
obtaining policies of insurance required hereunder, give notice to the
insurance carrier that the foregoing mutual waiver of subrogation is
contained in this Lease and Tenant and Landlord shall cause each insurance
policy obtained by such party to provide that the insurance company waives
all right of recovery by way of subrogation against either Landlord or
Tenant in connection with any damage covered by such policy.
<PAGE>
22. Damage or Destruction.
22.1 Partial Damage Insured. If the Premises are damaged by any casualty
which is covered under the all-risk or causes of loss - special form
insurance carried by Landlord pursuant to Paragraph 20.4, then Landlord
shall restore such damage, provided insurance proceeds are available to
pay at least ninety-five percent (95%) or more of the cost of restoration
and provided such restoration can be completed within one hundred eighty
(180) days after the commencement of the work in the reasonable opinion
of a registered architect or engineer appointed by Landlord for such
determination. In such event, this Lease shall continue in full force and
effect, except that Tenant shall be entitled to a proportionate reduction
of net Monthly Rent while such restoration takes place, such proportionate
reduction to be based upon the extent to which the restoration efforts
interfere with Tenant's use of the Premises. Any dispute between Landlord
and Tenant as to the amount of any rent reduction hereunder shall be
resolved by arbitration, and such arbitration shall comply with and be
governed by the California Arbitration Act Sections 1280 through 1294.2 of
the California Code of Civil Procedure. If it is anticipated by Landlord
that such restoration cannot be completed within one hundred eighty (180)
days, Tenant shall have the right to terminate this Lease by written
notice to Landlord within thirty (30) days after receipt of written notice
of the estimated repair period; provided, however, this one hundred eighty
(180) day period will be extended to the extent of any delay caused by
Force Majeure Conditions, up to and including an additional one hundred
twenty (120) days. Landlord shall provide Tenant with written notice of
the estimated repair period as soon as reasonably possible following the
damage or destruction. If Tenant does not elect to terminate this Lease
as permitted herein, Landlord shall promptly commence the process of
obtaining the necessary permits and approvals and repair the Premises and
the Tenant Improvements. If, however, this Lease is terminated, Landlord
shall refund to Tenant any Rent previously paid by Tenant which is
allocable to the period after the date of damage or destruction.
22.2 Partial Damage - Uninsured. If the Premises are damaged by a risk
not covered by Landlord's insurance, or the proceeds of available
insurance are less than ninety-five percent (95%) of the cost of
restoration, or the restoration cannot be completed within one hundred
eighty (180) days after the commencement of work, in the reasonable
opinion of the registered architect or engineer appointed by Landlord for
such determination, then Landlord shall have the option either to: (i)
repair or restore such damage, this Lease continuing in full force and
effect, but the net Monthly Rent to be proportionately abated as provided
in Paragraph 22.1; or (ii) give notice to Tenant at any time within thirty
(30) days after such damage terminating this Lease as of a date to be
specified in such notice, which date shall be not less than sixty (60) nor
more than ninety (90) days after giving such notice. If notice of
termination is given, this Lease shall expire and all interest of Tenant
in the Premises shall terminate on such date so specified in such notice
and the Monthly Rent, reduced by any proportionate reduction based upon
the extent, if any, to which such damage interfered with the use of the
Premises by Tenant, shall be paid to the date of such termination;
provided, however, that if Landlord elects to terminate this Lease due to
an insufficiency in the insurance proceeds available to complete
<PAGE>
restoration of the Premises, Tenant shall have the right to contribute the
amount of any shortfall in insurance proceeds and in such event Landlord
shall restore the Premises. Tenant shall notify Landlord of Tenant's
election within thirty (30) days after the date Landlord has notified
Tenant of Landlord's election to terminate this Lease. If it is
anticipated by Landlord that such restoration cannot be completed within
one hundred eighty (180) days after commencement of work, Tenant shall
have the right to terminate this Lease by written notice to Landlord
within thirty (30) days after receipt of written notice of the estimated
repair period; provided, however, this one hundred eighty (180) day period
will be extended to the extent of any delay caused by Force Majeure
Conditions, up to and including an additional one hundred twenty (120)
days. Landlord shall provide Tenant with written notice of the estimated
repair period as soon as reasonably possible following the damage or
destruction. If neither Landlord nor Tenant terminate this Lease as
permitted herein, Landlord shall promptly commence the process of
obtaining the necessary permits and approvals and repair the Premises and
the Tenant Improvements. If, however, this Lease is terminated by either
party, Landlord shall refund to Tenant any Rent previously paid by Tenant
which is allocable to the period after the date of damage or destruction.
22.3 Total Destruction. If the Premises are totally destroyed or the
Premises cannot be reasonably restored under applicable laws and
regulations or due to the presence of hazardous factors such as earthquake
faults, chemical waste and similar dangers, notwithstanding the
availability of insurance proceeds, this Lease shall be terminated
effective the date of the damage.
22.4 Landlord's Obligations. Landlord shall not be required to repair any
injury or damage by fire or other cause to, or to make any restoration or
replacement of, any panelings, decorations, partitions, railings, floor
coverings, or office fixtures which are Alterations or Personal Property
installed in the Premises by Tenant or at the expense of Tenant. Tenant
shall be required to restore or replace the same excluding those Tenant
Improvements defined in the Work Letter Agreement attached hereto. Except
for abatement of Monthly Rent, if any, Tenant shall have no claim against
Landlord for any damage suffered by reason of any such damage,
destruction, repair or restoration; nor shall Tenant have the right to
terminate this Lease as the result of any statutory provision now or
hereafter in effect pertaining to the damage and destruction of the
Premises, except as expressly provided herein.
22.5 Damage Near End of Term. Anything herein to the contrary
notwithstanding, if the Premises are destroyed or significantly damaged
during the last twelve (12) months of the Term, unless the Term is
extended pursuant to the provisions of Paragraph 40 of this Lease, then
Landlord may cancel and terminate this Lease as of the date of the
occurrence of such damage. If Landlord does not elects to so terminate
this Lease, the repair of such damage shall be governed by the other
provisions of this Paragraph 22.
23. Condemnation. If title to all of the Premises or so much thereof is
taken or appropriated for any public or quasi-public use under any statute
or by right of eminent domain so that reconstruction of the Premises will
<PAGE>
not, in Landlord's and Tenant's mutual reasonable judgment, result in the
Premises being suitable for Tenant's continued occupancy for the uses and
purposes permitted by this Lease, this Lease shall terminate as of the
date that possession of the Premises or Building or part thereof be taken,
provided that if the parties disagree, the Lease shall not terminate and
the issue as to whether the remaining Premises are suitable for Tenant's
continued occupancy for the uses permitted by this Lease shall be
submitted into arbitration and such arbitration shall comply and be
governed by the California Arbitration Act, Sections 1280 through 1294.2
of the California Code of Civil Procedure. A sale by Landlord to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be
deemed a taking under the power of eminent domain for all purposes of this
paragraph. If any part of the Premises is taken and the remaining part is
reasonably suitable for Tenant's continued occupancy for the purposes and
uses permitted by this Lease, this Lease shall, as to the part so taken,
terminate as of the date that possession of such part of the Premises is
taken. If the Premises is so partially taken the Rent and other sums
payable hereunder shall be reduced in the same proportion that Tenant's
use and occupancy of the Premises is reduced. If the parties disagree as
to the suitability of the Premises for Tenant's continued occupancy or the
amount of any applicable Rent reduction, the matter shall be resolved by
arbitration. No award for any partial or entire taking shall be
apportioned. Tenant assigns to Landlord its interest in any award which
may be made in such taking or condemnation, together with any and all
rights of Tenant arising in or to the same or any part thereof, except
that Landlord shall pay to Tenant from any award received by Landlord an
amount allocable to the value of the Tenant Improvements at the time of
such award which shall be determined using standard accounting methods for
depreciation. Nothing contained herein shall be deemed to give Landlord
any interest in or require Tenant to assign to Landlord any separate award
made to Tenant for the taking of Tenant's Personal Property, for the
interruption of Tenant's business, or its moving costs, or for the loss of
its good will. No temporary taking of the Premises shall terminate this
Lease or give Tenant any right to any abatement of Rent except to the
extent of interference with Tenant's use of the Premises; provided,
however, that in any event Rent shall not be abated if Tenant is
separately and directly compensated for such interference by the
condemning authority. Any award made to Tenant by reason of such
temporary taking shall belong entirely to Tenant and Landlord shall not be
entitled to share therein. Each party agrees to execute and deliver to
the other all instruments that may be required to effectuate the
provisions of this paragraph.
24. Assignment and Subletting.
24.1 Landlord's Consent. Tenant shall not enter into a Sublet without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any attempted or purported Sublet without Landlord's prior
written consent shall be void and confer no rights upon any third person
and shall be deemed a material default of this Lease. Each Subtenant
shall agree in writing, for the benefit of Landlord, to assume, to be
bound by, and to perform the terms, conditions and covenants of this Lease
to be performed by Tenant. Notwithstanding anything contained herein,
<PAGE>
Tenant shall not be released from liability for the performance of each
term, condition and covenant of this Lease by reason of Landlord's consent
to a Sublet unless Landlord specifically grants such release in writing.
24.2 Information to be Furnished. If Tenant desires at any time to Sublet
the Premises or any portion thereof, it shall first notify Landlord of its
desire to do so and shall submit in writing to Landlord: (i) the name of
the proposed Subtenant; (ii) the nature of the proposed Subtenant's
business to be carried on in the Premises; (iii) the terms and provisions
of the proposed Sublet and a copy of the proposed Sublet form containing a
description of the subject premises; and (iv) such financial information,
including financial statements, as Landlord may reasonably request
concerning the proposed Subtenant.
24.3 Landlord's Alternatives. At any time within fifteen (15) days after
Landlord's receipt of the information specified in Paragraph 24.2,
Landlord may, by written notice to Tenant, elect: (i) to consent to the
Sublet by Tenant; (ii) to refuse its consent to the Sublet; or (iii) to
terminate this Lease. If Landlord consents to the Sublet, Tenant may
thereafter enter into a valid Sublet of the Premises or portion thereof,
upon the terms and conditions and with the proposed Subtenant set forth in
the information furnished by Tenant to Landlord pursuant to Paragraph
24.2.
24.4 Executed Counterpart. No Sublet shall be valid nor shall any
Subtenant take possession of the Premises until an executed counterpart of
the Sublet agreement has been delivered to Landlord.
24.5 Exempt Sublets. Notwithstanding the above, Landlord's prior written
consent shall not be required for a Sublet to a subsidiary, affiliate or
parent corporation of Tenant, a corporation or partnership into which
Tenant merges or consolidates, or a purchaser of all or substantially all
of the assets of Tenant, provided that Tenant gives Landlord prior written
notice of the name of any such Subtenant and, in the event of an
assignment (i) the assignee has a net worth, at the time of such
assignment, that is equal to or greater than the net worth of Tenant
immediately prior to such assignment, and (ii) the assignee assumes, in
writing, for the benefit of Landlord all of Tenant's obligations under the
Lease.
24.6 Sublet Profits. If the Rent received by Tenant from any Sublet
exceeds the Rent payable by Tenant under this Lease, Tenant shall pay one-
half (1/2) of such excess to Landlord monthly as Additional Rent after
first deducting reasonable costs incurred by Tenant in connection with
such Sublet for advertising, brokerage commissions, and attorneys' fees.
25. Default.
25.1 Tenant's Default. A default under this Lease by Tenant shall exist
if any of the following events shall occur:
25.1.1 If Tenant fails to pay Rent or any other sum required to be paid
hereunder within seven (7) days after written notice from Landlord;
provided, however, that such notice shall be in lieu of, and not in
<PAGE>
addition to, any notice required pursuant to Section 1161 of the
California Code of Civil Procedure regarding unlawful detainer actions; or
25.1.2 If Tenant shall have failed to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and
Tenant shall have failed to cure such breach within thirty (30) days after
written notice from Landlord where such breach could reasonably be cured
within such thirty (30) day period; provided, however, that where such
failure could not reasonably be cured within the thirty (30) day period,
that Tenant shall not be in default if it undertakes commercially
reasonable measures to cure such non-performance within the thirty (30)
day period and diligently thereafter prosecutes the same to completion; or
25.1.3 If Tenant assigns its assets for the benefit of its creditors; or
25.1.4 If a court shall make or enter any decree or order other than under
the bankruptcy laws of the United States adjudging Tenant to be insolvent;
or approving as properly filed a petition seeking reorganization of
Tenant; or directing the winding up or liquidation of Tenant and such
decree or order shall have continued for a period of thirty (30) days.
25.2 Remedies. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort
cumulatively or in the alternative:
25.2.1 Landlord may continue this Lease in full force and effect, and this
Lease shall continue in full force and effect as long as Landlord does not
terminate this Lease, and Landlord shall have the right to collect Rent
when due.
25.2.2 Landlord may terminate Tenant's right to possession of the Premises
at any time by written notice in accordance with applicable laws, and
upon such termination relet the Premises or any part thereof. No act by
Landlord other than the giving of express written notice thereof to Tenant
shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises, or the appointment of a receiver on Landlord's initiative to
protect Landlord's interest under this Lease shall not constitute
termination of Tenant's right to possession. On termination, Landlord has
the right to remove all Tenant's Personal Property and store same at
Tenant's cost and to recover from Tenant as damages:
(a) The worth at the time of award of unpaid Rent and other sums due and
payable which had been earned at the time of termination; plus
(b) The worth at the time of award of the amount by which the unpaid Rent
and other sums due and payable which would have been payable after
termination until the time of award exceeds the amount of such Rent
loss that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by which the unpaid Rent
and other sums due and payable for the balance of the Term after the time
of award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; plus
<PAGE>
(d) Any other amount necessary which is to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things,
would be likely to result therefrom, including, without limitation, any
costs of expenses incurred by Landlord: (i) in retaking possession of the
Premises; (ii) in maintaining, repairing, preserving, restoring,
replacing, cleaning, or rehabilitating the Premises or any portion
thereof, including such acts for reletting to a new tenant or tenants;
(iii) for leasing commissions; or (iv) for any other costs necessary or
appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by the laws of the
State of California.
The "worth at the time of award" of the amounts referred to in Paragraphs
25.2.2(a) and 25.2.2(b) is computed by allowing interest at the Interest
Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of
award" of the amount referred to in Paragraph 25.2.2(c) is computed by
discounting such amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent (1%).
25.2.3 Landlord may, upon termination of this Lease in accordance with
applicable laws, re-enter the Premises and remove all persons and property
from the Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.
25.3 Landlord's Default. Landlord shall not be deemed to be in default in
the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty
(30) days after receipt of written notice by Tenant to Landlord specifying
the nature of such default; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required
for its performance, then Landlord shall not be deemed to be in default if
it shall commence such performance within such thirty (30) day period and
thereafter diligently prosecute the same to completion.
26. Subordination. This Lease is subject and subordinate to any ground
and underlying leases, mortgages and deeds of trust (collectively
"Encumbrances") which may now affect the Property and to all renewals,
modifications, consolidations, replacements and extensions thereof;
provided, however, if the holder or holders of any such Encumbrance
("Holder") shall require that this Lease to be prior and superior thereto,
within ten (10) days of written request of Landlord to Tenant, Tenant
shall execute, have acknowledged and deliver any and all reasonable
documents or instruments which Landlord or Holder deems necessary or
desirable for such purposes. Landlord shall have the right to cause this
Lease to be and become and remain subject and subordinate to any and all
Encumbrances which are now or may hereafter be executed covering the
Premises, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
<PAGE>
together with interest thereon and subject to all the terms and provisions
thereof, so long as Landlord obtains from the Holder of any such
Encumbrance a non-disturbance agreement which provides that in the event
of termination of any such lease or upon the foreclosure of any such
mortgage or deed of trust the Holder shall recognize Tenant's rights under
this Lease as long as Tenant is not then in default and continues to pay
the Rent and observe and perform all the provisions of this Lease to be
observed and performed by Tenant. Within ten (10) days after Landlord's
written request, Tenant shall execute any and all documents required by
Landlord or the Holder to make this Lease subordinate to any lien of the
Encumbrance so long as such documents contain non-disturbance provisions
substantially in conformance with the foregoing. Notwithstanding anything
to the contrary set forth in this paragraph, Tenant hereby attorns and
agrees to attorn to any entity purchasing or otherwise acquiring the
Property at any sale or other proceeding or pursuant to the exercise of
any other rights, powers or remedies under such Encumbrance.
27. Notices. Any notice or demand required or desired to be given under
this Lease shall be in writing and shall be personally served or in lieu
of personal service may be given by mail or by Federal Express or other
reputable overnight courier service. If given by mail, such notice shall
be deemed to have been given when seventy-two (72) hours have elapsed from
the time when such notice was deposited in the United States mail,
registered or certified, and postage prepaid, addressed to the party to be
served. If given by overnight courier service, such notice shall be
deemed to be effective upon the next business day after deposit with the
courier service. At the date of execution of this Lease, the addresses of
Landlord and Tenant are as set forth in the first paragraph of this Lease.
After the Commencement Date, all notices to Tenant shall be sent to the
Premises with a copy to the address specified in the first paragraph of
this Lease. Either party may change its address by giving notice of same
in accordance with this paragraph.
28. Attorneys' Fees. If either party brings any action, legal proceeding
or arbitration proceeding for damages for an alleged breach of any
provision of this Lease, to recover rent, or other sums due, to terminate
the tenancy of the Premises or to enforce, protect or establish any term,
condition or covenant of this Lease or right of either party, the
prevailing party shall be entitled to recover as a part of such action or
proceedings, or in a separate action brought for that purpose, reasonable
attorneys' fees and costs.
29. Estoppel Certificates. Tenant shall, within ten (10) days after
written request from Landlord, execute and deliver to Landlord any
documents, including estoppel certificates, in the form prepared by
Landlord: (a) certifying that this Lease is unmodified and in full force
and effect or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect
and the date to which the Rent and other charges are paid in advance, if
any, and (b) acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord, or, if there are uncured
defaults on the part of Landlord, stating the nature of such uncured
defaults, and (c) otherwise evidencing the status of the Lease, as may be
required by a lender making a loan to Landlord to be secured by deed of
<PAGE>
trust or mortgage covering the Premises or a purchaser of the Premises
from Landlord.
30. Tenant's Financial Statements. Tenant shall, within ten (10) days
after Landlord's written request, deliver to Landlord the current
financial statements of Tenant, and financial statements of the two (2)
years prior to the current financial statements year, including a balance
sheet and profit and loss statement for the most recent prior year, all
prepared by or under the direction of a certified public accountant.
Landlord shall keep such financial statements confidential and shall not
disclose such financial statements to any third party, other than
Landlord's members, lenders, prospective lenders and prospective
purchasers, without Tenant's prior written consent.
31. Transfer of the Property by Landlord. In the event of any conveyance
of the Property and assignment by Landlord of this Lease, Landlord shall
be and is hereby entirely released from all liability under any and all of
its covenants and obligations contained in or derived from this Lease
occurring after the date of such conveyance and assignment, and Tenant
agrees to attorn to such transferee.
32. Landlord's Right to Perform Tenant's Covenants. If Tenant fails to
make any payment or perform any other act on its part to be made or
performed under this Lease, Landlord may, but shall not be obligated to
and without waiving or releasing Tenant from any obligation of Tenant
under this Lease, make such payment or perform such other act to the
extent Landlord may deem desirable, and in connection therewith, pay
expenses and employ counsel. All sums so paid by Landlord and all
penalties, interest and costs in connection therewith shall be due and
payable by Tenant upon receipt of written demand by Landlord, together
with interest thereon at the Interest Rate from the date Tenant receives
Landlord's written demand to the date of payment by Tenant to Landlord,
plus collection costs and attorneys' fees. Landlord shall have the same
rights and remedies for the nonpayment thereof as in the case of default
in the payment of Rent.
33. Tenant's Remedy. If, as a consequence of a default by Landlord under
this Lease, Tenant recovers a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment and levied thereon against the right, title and
interest of Landlord in the Property and out of Rent or other income from
the Property received by Landlord or out of consideration received by
Landlord from the sale or other disposition of all or any part of
Landlord's right, title or interest in the Property, and neither Landlord
nor Landlord's Agents shall be liable for any deficiency.
34. Mortgagee Protection. If Landlord defaults under this Lease, Tenant
will notify by registered or certified mail to any beneficiary of a deed
of trust or mortgagee of a mortgage covering the Premises, of whom Tenant
has been notified in writing, and offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
<PAGE>
35. Brokers. Tenant and Landlord warrant and represent that, other than
the brokers listed in Paragraph 1.9 above, they have had no dealings with
any real estate broker or agent in connection with the negotiation of this
Lease, and that they know of no other real estate broker or agent who is
or might be entitled to a commission in connection with this Lease.
Tenant and Landlord each agree to defend, indemnify and hold the other
party and its Agents from and against any and all liabilities or expenses,
including attorneys' fees and costs, arising out of or in connection with
claims made by any other broker or individual for commissions or fees on
the basis of the acts or omissions of the indemnifying party.
36. Acceptance. Delivery of this Lease, duly executed by Tenant,
constitutes an offer to lease the Premises, and under no circumstances
shall such delivery be deemed to create an option or reservation to lease
the Premises for the benefit of Tenant. This Lease shall only become
effective and binding upon full execution hereof by Landlord and delivery
of a signed copy to Tenant.
37. Recording. Neither party shall record this Lease.
38. Modifications for Lender. If, in connection with obtaining financing
for the Building or any portion thereof, Landlord's lender shall request
reasonable modification to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent
thereto, provided such modifications do not adversely affect Tenant's
rights hereunder.
39. Parking. Tenant shall have the right to use the Property's parking
facilities upon terms and conditions as may from time to time be
reasonably established by Landlord. Landlord may, at Landlord's election,
establish cross-parking easements between the Property and any adjacent
property owned by Landlord or an affiliate of Landlord, provided that such
easements do not unreasonably interfere with Tenant's use of the Proeprty.
In no event, however, may Landlord establish any parking easements that
would permit parking for adjacent properties upon which retail sales
activities are conducted.
40. Options to Extend.
40.1 Option Period. Provided that Tenant is not in material default
hereunder, either at the time of exercise or at the time the extended term
commences, Tenant shall have the option to extend the initial fifteen (15)
year Term of this Lease for three (3) additional periods of five (5) years
each (each, an "Option Period") on the same terms, covenants and
conditions provided herein, except that upon such renewal the Monthly
Rent due hereunder shall be determined pursuant to Paragraph 40.2. Tenant
shall exercise its option by giving Landlord written notice ("Option
Notice") at least nine (9) months prior to the expiration of the initial
Term of this Lease, or the prior Option Period, as applicable.
40.2 Option Period Rent. The Monthly Rent for each Option Period shall be
determined as follows:
40.2.1 The parties shall have fifteen (15) days after Landlord receives
<PAGE>
the Option Notice within which to agree on the Monthly Rent for the Option
Period in question based upon the then fair market rental value of the
Premises as defined in Paragraph 40.2.2. If the parties agree on the
Monthly Rent for the Option Period within fifteen (15) days, they shall
immediately execute an amendment to this Lease stating the Monthly Rent
for the Option Period. If the parties are unable to agree on the Monthly
Rent for the Option Period within fifteen (15) days, then, the Monthly
Rent for the Option Period shall be the then current fair market rental
value of the Premises as determined in accordance with Paragraph 40.2.3,
subject to such periodic increases in Monthly Rent as are then customary,
in both amount or percentage amounts and frequency, for leases similar to
this Lease taking into consideration the same items considered in
determining the then fair market rental value of the Premises.
40.2.2 The "then fair market rental value of the Premises" shall be
defined to mean the fair market rental value of the Premises as of the
commencement of the Option Period, taking into consideration the uses
permitted under this Lease, the quality, size, design and location of the
Premises, and the rent for comparable buildings located in Morgan Hill.
In no event shall the then fair market monthly rental value of the
Premises for the Option Period be less than the Monthly Rent last payable
under the Lease.
40.2.3 Within seven (7) days after the expiration of the fifteen (15) day
period set forth in Paragraph 40.2.1., each party, at its cost and by
giving notice to the other party, shall appoint a real estate appraiser
with at least five (5) years' full-time commercial appraisal experience in
the area in which the Premises are located to appraise and set the Monthly
Rent. If a party does not appoint an appraiser within ten (10) days after
the other party has given notice of the name of its appraiser, the single
appraiser appointed shall be the sole appraiser and shall set the Monthly
Rent. If the two (2) appraisers are appointed by the parties as stated in
this paragraph, they shall meet promptly and attempt to set the Monthly
Rent. If they are unable to agree within thirty (30) days after the
second appraiser has been appointed, they shall attempt to elect a third
appraiser meeting the qualifications stated in this paragraph within ten
(10) days after the last day the two (2) appraisers are given to set the
Monthly Rent. If they are unable to agree on the third appraiser, either
of the parties to this Lease, by giving ten (10) days' notice to the other
party, can apply to the then Presiding Judge of the Santa Clara County
Superior Court, for the selection of a third appraiser who meets the
qualifications stated in this paragraph. Each of the parties shall bear
one-half (1/2) of the cost of appointing the third appraiser and of paying
the third appraiser's fee. The third appraiser, however selected, shall
be a person who has not previously acted in any capacity for either party.
Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the Monthly Rent. If a majority of
the appraisers are unable to set the Monthly Rent within the stipulated
period of time, the three (3) appraisals shall be added together and their
total divided by three (3); the resulting quotient shall be the Monthly
Rent. If, however, the low appraisal and/or the high appraisal are/is
more than ten percent (10%) lower and/or higher than the middle appraisal,
the low appraisal and/or the high appraisal shall be disregarded. If only
<PAGE>
one appraisal is disregarded, the remaining two (2) appraisals shall be
added together and their total divided by two (2); the resulting quotient
shall be the Monthly Rent. If both the low appraisal and the high
appraisal are disregarded as stated in this paragraph, then only the
middle appraisal shall be used as the result of the appraisal. After the
Monthly Rent has been set, the appraisers shall immediately notify the
parties and the parties shall amend this Lease to set forth such amount.
41. Option to Expand.
41.1 Expansion Option Period. Provided that Tenant is not, at the time of
exercise, in material default of this Lease or the lease for that certain
building in Madrone Business Park known as Building 3 Tenant shall have
the option to lease the building to be constructed by Landlord on that
certain parcel in Madrone Business Park known as Parcel M, consisting of
approximately 2.68 acres (the "Expansion Building"), on the following
terms and conditions. Tenant may exercise its option at any time prior to
February 28, 2003 (the "Expansion Option Period"). Tenant shall exercise
the option by delivery of written notice to Landlord prior to the
expiration of the Expansion Option Period. If Tenant fails to exercise
the option to lease the Expansion Building prior to the expiration of the
Expansion Option Period, Tenant shall be deemed to have waived its right
to lease the Expansion Building pursuant to the terms of this Paragraph 41
and thereafter Landlord shall be free to lease the Expansion Building to
any third party on such terms as Landlord shall elect without further
notice to Tenant. The expansion option granted to Tenant under this
Paragraph 41 is personal to Media Arts Group, Inc., its subsidiaries and
successors and shall not be transferred or assigned to any third party.
41.2 Rent for Expansion Building. If Tenant timely exercises its option
to lease the Expansion Building, Landlord and Tenant shall enter into a
lease for the Expansion Building on the same terms and conditions set
forth herein, except that (i) Landlord shall provide an allowance for the
design and construction of tenant improvements to the Expansion Building
that is commensurate with the allowance provided under this Lease and the
lease for Building 3 considering the size and proposed use of the
Expansion Building; and (ii) the initial monthly rent for the Expansion
Building shall be determined as follows. If Tenant exercises the option
on or before February 28, 2002, the initial monthly rent shall be
calculated based on a twelve percent (12%) return on total project costs
for the Expansion Building, using a land value fixed at $9.00 per square
foot. If Tenant exercises the option at any time from March 1, 2002
through February 28, 2003, the initial monthly rent shall be calculated
based on a twelve percent (12%) return on total project costs for the
Expansion Building, using a land value fixed at $10.00 per square foot.
In addition, if Tenant exercises the option at any time after February 28,
2002, then Tenant shall be responsible for payment of the real property
taxes and assessments allocable to Parcel M commencing March 1, 2002.
42. Right of First Offer to Purchase. Provided that Tenant is not in
material default of any provision of this Lease at the time of exercise,
Tenant shall have the right of first offer to purchase the Property, any
other property leased by Tenant from Landlord at Madrone Business Park,
and/or Parcel M (the "Expansion Parcel") on the following terms and
<PAGE>
conditions. If at any time during the Term of this Lease Landlord elects
to sell the Property or any other property leased by Tenant from Landlord
at Madrone Business Park, or if at any time after February 28, 2003,
Landlord elects to sell the Expansion Parcel, Landlord shall notify Tenant
which of the foregoing properties Landlord is offering for sale (the
"Offered Property") and the terms and conditions upon which Landlord would
be willing to sell the Offered Property ("Landlord's Notice"). Tenant
shall have thirty (30) days after receipt of Landlord's Notice to notify
Landlord in writing of Tenant's election to purchase the Offered Property
on the terms stated in Landlord's Notice. If Tenant notifies Landlord
within such 30-day period of Tenant's desire to purchase the Offered
Property on such terms, Landlord and Tenant shall enter into a purchase
and sale agreement for the Offered Property on the terms and conditions
stated in Landlord's Notice. If, however, Tenant fails to notify Landlord
of Tenant's election to purchase the Offered Property within such 30-day
period or, if Landlord and Tenant, through no fault of Landlord, fail to
execute a purchase and sale agreement within thirty (30) days after the
date of Tenant's notice to Landlord, Tenant shall be deemed to have waived
its right to purchase the Offered Property and Landlord shall have the
right thereafter to offer the Offered Property for sale and to sell the
Offered Property to any third party on substantially the terms stated in
Landlord's Notice without further notice to Tenant. This right of first
offer to purchase is personal to Media Arts Group, Inc., its subsidiaries
and successors and shall not be transferred or assigned to any third
party.
43. Payment to Tenant Upon Sale of Property. If at any time during the
Term of this Lease Landlord elects to sell the Property or any other
property leased by Tenant from Landlord at Madrone Business Park, and
Tenant does not elect to purchase the Offered Property pursuant to
Paragraph 42, then so long as Tenant is occupying the Property, upon close
of escrow for the sale of the Offered Property Landlord shall pay to
Tenant an amount equal to fifteen percent (15%) of the net sales proceeds
for the Offered Property which are in excess of the base value of the
Offered Property as of the date the Offered Property was completed and
first occupied. For purposes of this provision, the "net sales proceeds"
shall mean the gross sales price of the Offered Property less the costs
incurred by Landlord in closing the sale of the Offered Property
including, but not limited to, brokerage commissions, attorneys' fees,
title insurance premiums, escrow fees, recording charges, prorations of
real property taxes and assessments, survey fees (if paid by Landlord),
and fees for environmental site assessments (if paid for by Landlord).
The base value shall be determined by taking the annualized triple net
rent for the Offered Property, reducing it by the operating reserves and
vacancy calculated at seven percent of the triple net rent, then dividing
the triple net rent after operating reserves and vacancy by .09 to
establish a base value at a nine percent (9%) capitalization rate. The
base value of the Property is hereby established as $21,213,000.00. The
rights under this Paragraph 43 are personal to Media Arts Group, Inc., its
subsidiaries and successors and shall not be transferred or assigned to
any third party.
44. General.
<PAGE>
44.1 Captions. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
44.2 Executed Copy. Any fully executed copy of this Lease shall be deemed
an original for all purposes.
44.3 Time. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
44.4 Separability. If one or more of the provisions contained herein,
except for the payment of Rent, is for any reason held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Lease, but
this Lease shall be construed as if such invalid, illegal or unenforceable
provision had not been contained herein.
44.5 Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all
parts of this Lease shall in all cases be construed as a whole according
to its fair meaning and not strictly for or against either Landlord or
Tenant.
44.6 Gender; Singular, Plural. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, and the singular includes the plural.
44.7 Binding Effect. The covenants and agreement contained in this Lease
shall be binding on the parties hereto and on their respective successors
and assigns to the extent this Lease is assignable.
44.8 Waiver. The waiver by Landlord or Tenant of any breach of any term,
condition or covenant, of this Lease shall not be deemed to be a waiver of
such provision or any subsequent breach of the same or any other term,
condition or covenant of this Lease. The subsequent acceptance of Rent
hereunder by Landlord or payment of Rent hereunder by Tenant shall not be
deemed to be a waiver of any preceding breach at the time of acceptance or
making of such payment. No covenant, term or condition of this Lease
shall be deemed to have been waived by Landlord or Tenant unless such
waiver is in writing signed by Landlord or Tenant as applicable.
44.9 Entire Agreement. This Lease is the entire agreement between the
parties, and there are no agreements or representations between the
parties except as expressed herein. Except as otherwise provided herein,
no subsequent change or addition to this Lease shall be binding unless in
writing and signed by the parties hereto.
44.10 Authority. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of said corporation or
partnership, as the case may be, represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said entity in
accordance with its corporate bylaws, statement of partnership or
certificate of limited partnership, as the case may be, and that this
Lease is binding upon said entity in accordance with its terms. Landlord,
<PAGE>
at its option, may require a copy of such written authorization to enter
into this Lease. The failure of Tenant to deliver the same to Landlord
within fourteen (14) days of Landlord's request therefor shall be deemed a
default under this Lease.
44.11 Exhibits. All exhibits, amendments, riders and addenda attached
hereto are hereby incorporated herein and made a part hereof.
THIS LEASE is effective as of the date the last signatory necessary to
execute the Lease shall have executed this Lease.
TENANT
Dated: December 20, 1999
Media Arts Group, Inc., a Delaware corporation
By: /s/ Craig Fleming
-----------------------------
Its: President & CEO
By: /s/ Timothy S. Guster
-----------------------------
Its: Sr. VP & Secretary
LANDLORD
Dated: January 18, 2000
TBI-Mission West, LLC, a California
limited liability company
By Toeniskoetter & Breeding, Inc. Development, a
California corporation,
Managing Member
By /s/ Charles Toeniskoetter
-----------------------------
Its President