SR 08-08-2017 3L
City Council Report
City Council Meeting: August 8, 2017
Agenda Item: 3.L
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To: Mayor and City Council
From: Rick Cole, City Manager, City Manager's Office, Administration
Subject: Approval of Proposed Lease with the Santa Monica Museum of Flying
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a lease agreement with the Santa Monica Museum of Flying for 3100 Airport
Avenue for a period of 10 years for $1 per year, with one-additional five-year renewal
option on the same terms and conditions.
Executive Summary
The Museum of Flying (Museum) is an important Santa Monica cultural and educational
resource that holds and displays many artifacts reflecting Santa Monica’s aviation
history. Since 2012, the Museum has occupied a City-owned building located at 3100
Airport Avenue. Since its original lease expired in 2015, the Museum has remained and
operated as a holdover tenant of the City. City staff is recommending entering into a
new lease with the Museum that will provide long-term stability and help its financial
viability.
City staff believes preserving the long-term viability of the Museum is an important
public policy goal. Under the terms of the lease agreement, the Museum will pay the
Airport Fund the nominal price of $1 per year in rent. In return, the Museum commits to
providing free tours for schools and allowing the City to use the facility four times per
year for community events at no cost. The Museum would also continue to be
responsible for the interior space, including the floors.
Background
The Museum was originally established in 1979 on the south side of the airport by
Donald Douglas Jr, President and CEO of the Donald Douglas Corporation, as the
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Donald Douglas Museum & Library of Santa Monica. In 1989, the Museum was
renamed the Museum of Flying and opened in a new building, located at 2772 Donald
Douglas Loop North, where it remained until 2003. From 2003 until February 2012, the
Museum was closed. In 2012, the Museum became a tenant of the City when it
reopened at its current location at 3100 Airport Avenue, on the North side of the Santa
Monica Airport. A copy of its lease is provided as Attachment B. All leases at the
Airport, including the Museum’s, expired on June 30, 2015. The Museum has remained
at the Airport as a holdover tenant on a month-to-month basis.
The Museum operates with a Board of Directors as a public non-profit corporation.
Furthermore, the Museum has non-profit status under Internal Revenue Service (IRS)
rule, 501(c)(3). Proof of its public incorporation is provided as Attachment C, and non-
profit status is Attachment D.
The Museum occupies approximately 23,000 square feet of exhibit area and features
nearly two dozen aircraft as well as many artifacts and exhibits related to the Douglas
Aircraft Company, which was founded and based at the Santa Monica Airport for more
than four decades. The museum houses many personal effects belonging to company
founder Donald W. Douglas. It also features a broad collection of aviation art and
photographs, including three very large murals created by noted aviation artist Mike
Machat that depict images of numerous Douglas Aircraft. The Museum has three
permanent “open cockpit” exhibits including the authentic FedEx Boeing 727 cockpit.
The Museum established a subsidiary, the California Aviation Hall of Fame, which is
located on the first floor and features exhibits and displays about various aviation
pioneers, pilots, and industry leaders.
Discussion
The Museum of Flying is an important Santa Monica institution that holds and displays
many artifacts that reflect Santa Monica’s storied aviation history. It hosts
approximately 30,000 visitors annually and provides public school tours free of charge
year round and participates in the annual Santa Monica Airport Art walk event providing
all visitors free admission on the day of the event. The Museum is also used
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extensively for community events and gatherings. Admission to the Museum is $10 for
adults, $8 for seniors & students, and $6 for children aged 3 to 12. Children under 3 are
free.
The Airport is currently operating under the terms of a consent decree with the Federal
Government that permits the City to close the airport in 2028. Though the airport will
close in 2028, honoring the role aviation has played in the economic and community
development of Santa Monica is essential to preserving the history of the City. Despite
the wide variety of views in the community regarding the current operation of Santa
Monica Airport, there is broad consensus regarding the importance of maintaining the
Museum as an operational, stable, and financially viable educational and historical
entity for future generations.
Museum executives recently approached City staff regarding the operation of the
Museum and requested a more supportive relationship. After considering various
alternatives, staff believes the best and most effective means of support available is for
the City to enter into a modified gross lease with a nominal rental rate. Under the terms
of the lease, the City would be responsible for the exterior, roof and foundation. In
return, the Museum would provide free tours for school children and access to the
Museum for four community events at no charge to the City.
To assess the need for below-market rent to the Museum, staff has reviewed the
Museum’s tax returns for 2014, 2015 and 2016. The tax returns show the Museum
does not have excessive surplus cash and a nominal rental rate would improve the
Museum’s cash flow. In addition to the benefit of improved cash flow, the proposed
lease would enhance the Museum’s ability to raise funds because donors would be
assured the Museum has secured space for at least the ten-year term of the lease, and
show the Museum has a strong partnership with the City.
Museum of Flying Lease Term Highlights
Commencement Date August 1, 2017
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Term 5 years
Options One option of 5 years
Base rent $1 per year
Escalations None
Tenant improvements credit None
Parking 9 parking spaces
Community Events 4 free Community Events at the discretion
of the Airport Director
Promotion of aviation Free museum tours for school children
Real estate commission None
As a result of the Consent Decree, the Airport is not a federally obligated airport. While
it is no longer subject to grant assurances, the City’s interim operation of the Airport is
required to conform to standards set forth in enumerated grant assurances. According
to FAA regulations (FAA Order 5190.B6, Section 17.16(a), Exception for Not-for-Profit
Organizations), airports sponsors, such as the City of Santa Monica, are permitted to
provide aviation museums discounted rent as set forth below:
A sponsor may charge reduced rental rates to aviation museums and
aeronautical secondary and post-secondary education programs conducted by
accredited education institutions to the extent that civil aviation receives
reasonable tangible or intangible benefits from such use.
Financial Impacts & Budget Actions
The recommended lease with the Museum of Flying will result in an estimated $30,000
loss of Airport revenues during FY 17/18 and every thereafter for the duration of the
lease. The final revenue impact will be updated during the FY 17/18 mid-year budget
review.
Prepared by:
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Nelson Hernandez, Senior Advisor to the City Manager
Approved:
Forwarded to Council:
Prepared By: Nelson Hernandez, Senior Advisor for Airport Affairs
Approved
Forwarded to Council
Attachments:
A. IRS Forms filed by Museum of Flying 501(c)(3) Tax-Exempt Status
B. Museum of Flying Lease Agreement
C. Museum of Flying Articles of Incorporation
D. IRS Confirmation of Tax Exemption Museum of Flying
SANTA MONICA AIRPORT
LEASE AGREEMENT
by and between
CITY OF SANTA MONICA
(Landlord)
and
THE MUSEUM OF FLYING
(Tenant)
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LEASE AGREEMENT
THIS LEASE AGREEMENT (“Lease” or “Agreement”) is entered into this ___
day of ____________, 2016 (“Execution Date”) and is made by and between the CITY
OF SANTA MONICA (“Landlord” or “City”), a California municipal corporation, and
THE MUSEUM OF FLYING (“Tenant” or “Museum”), a California nonprofit
corporation, with respect to the following:
R E C I T A L S:
A. The City of Santa Monica is a municipal corporation duly organized and
validly existing under the laws of the State of California with the power to carry on its
business that is now being conducted under California law and under the Charter of the
City.
B. The City is the legal owner, operator, and lessor of real property and
improvements commonly known and referred to as the Santa Monica Municipal Airport
(“the Airport”), which is principally located in the City of Santa Monica, County of Los
Angeles, California. In addition to all real property at the Airport, the City is the legal
owner and lessor of all structures and improvements at 3100 Airport Avenue, Santa
Monica, California 90405.
C. Tenant Museum is a California nonprofit corporation whose principal
offices are located at 3100 Airport Avenue, Santa Monica, California 90405. Tenant is
registered with the California Secretary of State and represents to City that it may
lawfully transact business in the State of California.
D. The City and Museum now desire to enter into the Lease Agreement, the
execution of which shall allow the Museum to continue in possession of all space at the
Airport that it currently occupies and to do so upon the terms and conditions set forth
herein.
E. Landlord City hereby leases to Tenant Museum, and Tenant hereby hires
from Landlord, those certain premises located at the Santa Monica Airport and more
particularly defined in Article I, below, upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is mutually agreed by and between the undersigned
parties as follows:
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ARTICLE I
PREMISES
1.1 Premises
Upon and subject to the terms, covenants and conditions hereinafter set forth,
Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, that portion of
space located within certain real property and improvements at the Airport and commonly
known as 3100 Airport Avenue, Santa Monica, California, and more particularly
described and depicted in the map attached hereto as Exhibit 1 which is incorporated by
reference, and collectively referred to hereafter as the “Premises.” The Premises consists
of approximately 21,940 square feet of building and land space. All references to the
Premises in this Lease shall mean the Premises under this Lease in any given Lease year.
1.2 Condition and Suitability of the Premises
Tenant has inspected and accepts the Premises “AS IS” and subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any covenants or restrictions of
record. Tenant acknowledges that neither the City nor the City’s agents have made any
representation or warranty as to the physical condition of the Premises or any present or
future suitability of the Premises for the conduct of Tenant's business. The City, as
Landlord and owner of the Premises, acknowledges that it is responsible for making all
repairs necessary for maintaining the suitability and condition of the Premises. Subject to
City’s obligations under the Lease, Tenant’s continuing in possession of the Premises
under this Agreement establishes that the Premises are in satisfactory condition for
Tenant to conduct its business at the Premises.
ARTICLE II
TERM
2.1 Term
The term of this Lease shall be for a term of years to commence on
______________ (“Commencement Date”) and shall end on June 30, 2018, unless
sooner terminated by the parties as hereinafter provided. If the Lease term ends on a day
other than the last day of a calendar month, either Landlord or Tenant shall have the right
to extend the Lease term to terminate on the last day of such calendar month and in the
case of an extension for such period Tenant shall pay Base Monthly Rent and all other
sums due hereunder for the entire calendar month.
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2.2 Termination
Unless sooner terminated in accordance with the provisions hereof, this Lease shall
terminate at midnight on June 30, 2018 (“Expiration Date”). Tenant hereby waives
notice to vacate or quit the Premises and agrees that Landlord shall be entitled to the
benefit of all provisions of law respecting the summary recovery of possession of the
Premises from a tenant holding over to the same extent as if statutory notice had been
given. Upon the termination or expiration of the Lease, Tenant must return possession of
the Premises to Landlord unless Landlord consents in writing to Tenant remaining in
possession. Tenant agrees that if it fails to return possession of the Premises to Landlord
at the end of the Term in as good order and condition as when Tenant took possession
under this Lease, Tenant shall be liable for any and all damages which Landlord shall
suffer by reason thereof.
2.3 No Holding Over
If Tenant holds over and remains in possession of the Premises after the expiration
of the Lease term, and does so without the express consent of Landlord, Tenant shall
become a tenant at sufferance, or in the sole and absolute discretion of Landlord, a
month-to-month tenant, subject to each and all of terms of this Lease. Neither any
provision hereof nor acceptance by Landlord of monthly rent from Tenant after the
expiration or earlier termination of the Lease shall be deemed Landlord’s consent to a
holdover tenancy or result in a renewal of this Lease or an extension of the Term.
Notwithstanding any provision to the contrary contained herein, Landlord expressly
reserves the right to require that Tenant surrender possession of the Premises to Landlord
upon the termination or expiration of this Lease.
2.4 Surrender
At any point during the term of this Lease or immediately following its
termination, Tenant may choose to quit and surrender possession of the Premises pursuant
to California Civil Code §1933(2). Tenant may only surrender the premises under this
Section by making a written offer to surrender that is accepted in writing by Landlord. In
such event, Tenant must immediately return possession of the Premises to Landlord, after
which Tenant’s obligation to pay rent for the remainder of the term shall be extinguished.
No act or thing done by Landlord or any agent or employee of Landlord during the Lease
term shall be deemed to constitute an acceptance by Landlord of a surrender of the
Premises unless such intent is specifically acknowledged in a writing signed by Landlord.
The delivery of keys to the Premises to Landlord or to any agent or employee of
Landlord shall not constitute a surrender of the Premises or effect a termination of this
Lease.
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If Landlord accepts Tenant’s offer to surrender the Premises, Tenant must perform
the following at its sole cost and expense: (i) undo and remove all trade fixtures, personal
property, unfixed installations, signs, and any unattached leasehold improvements made
by Tenant or Tenant’s employees or agents during the term of the Lease; (ii) undo and
remove any Alterations made by Tenant (as defined in Section 8.4) as requested by
Landlord; (iii) restore the floor, ceiling and walls of the Premises to their condition as of
the Commencement date, but allowing for reasonable wear and tear and obsolescence;
and (iv) deliver the keys of the Premises to Landlord and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took possession
under this Agreement and still subject to Landlord’s maintenance and repair obligations.
2.5 Remaining Personal Property Considered Abandoned
Any remaining personal property of Tenant not removed by Tenant within five (5)
calendar days following the termination or expiration of this Lease, shall be considered
abandoned by Landlord and may be disposed of in accordance with Cal. Civil Code §§
1980-1991 and Cal. Code of Civ. Proc. § 1174.
2.6 Landlord’s Property
All fixtures, Alterations (as defined by Section 8.4), additions, repairs,
improvements and/or appurtenances attached to or built into, on, or about the Premises
prior to or during the Lease term, shall be and remain part of the Premises and shall not
be removed by Tenant at the end of the Lease term, unless otherwise expressly provided
for in this Lease or unless such removal is required by Landlord. Notwithstanding any
other term or condition hereof, Tenant shall remove its personal property, machinery,
equipment, trade fixtures, and furnishings at Lease expiration and/or termination, as
applicable.
2.7 Landlord’s Reservation of Right to Cease Airport Operations
Landlord reserves the right to alter in any way, or to cease operating in whole or in
part, the Airport as a general aviation facility for aeronautical uses when legally permitted
to do so and in a manner consistent with applicable law. Tenant agrees and acknowledges
that, during the Term of this Agreement, Landlord makes no representations concerning
the types of uses that may be permitted on what is currently the Airport property or the
continued use of the Airport as a general aviation facility, including whether, how, or in
what manner, if at all, the Airport may continue to operate, function, provide aeronautical
or other services or be configured. The Parties agree that Tenant’s use and possession of
the Premises shall not be limited by any decision of Landlord under this Reservation of
Rights.
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2.8 Survival.
The provisions of this Article shall survive the expiration or earlier termination of
this Lease.
ARTICLE III
USE
3.1 Permitted Uses
Tenant may use the Premises solely for the following described uses, activities,
and privileges:
a) Operation and maintenance of an aviation museum and an attached
museum store that is open to the general public during regular business hours.
b) Events, gatherings, and ceremonies with the approval from Landlord.
Tenant shall use and occupy the Premises solely in accordance with the use(s)
described in this Section and in accordance with all other requirements of this Lease.
Tenant shall neither use nor permit the Premises to be used or occupied for any other use
or purpose whatsoever without the prior written consent of Landlord. Tenant shall not do
or permit anything to be done in or about the Premises which will in any way obstruct or
interfere with or infringe upon the rights of other Airport tenants, or use or allow the
Premises to be used for any improper, immoral, unlawful, or objectionable purpose.
Furthermore, the permitted uses of the Premises as stated in this Section are
consistent with the City’s contractual obligations under its Grant Assurances to the
Federal Aviation Administration (“FAA”) as set forth in FAA Order 5190-6b and 49
U.S.C. §47107. However, to whatever extent that the City’s assurances to the FAA
remain binding upon City on or after the Execution Date, it is expressly understood and
agreed to by Tenant that in the event Tenant’s use of the Premises hereunder is or
becomes inconsistent with the City’s contractual obligations to the FAA, the rights and
the obligations of the parties hereto will be governed by the City’s obligations to the
federal government and by the applicable laws of the United States, but in no event will
the City bear any responsibility or incur any liability to Tenant as a result of any such
inconsistency.
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3.2 Prohibited Uses and Restrictions
Tenant shall not use, or suffer, or permit any person or persons to use or occupy
the Premises or any part thereof for any of the following prohibited uses, purposes, or in
the following manner:
a) Tenant shall not at any time use or occupy the Premises as a
residence or for any lodging purpose.
b) Tenant shall not at any time use or cause to be used any amplified
sound system in excess of sixty five (65) decibels measured from the exterior of
the Premises. Speaker-paging systems and stereo music systems are prohibited on
the exterior of the Premises.
c) Tenant shall not at any time engage in retail sales of any nature on
the Premises unless specifically permitted to do so in Section 3.1 of this
Agreement.
d) Tenant shall not at any time stack, store, or display goods or
materials on the exterior of the Premises, except for deliveries of materials and
machinery that may be stored outside for no longer than 15 days.
e) Tenant shall not host or allow events or activities involving more
than fifty (50) persons on the Premises without first obtaining an Airport Event
Permit.
f) Tenant shall be able to have pets on the Premises subject to
Landlord’s prior written approval.
g) Tenant shall not permit firearms, explosives or other hazardous
materials to be on or in the Premises. Tenant shall not cause or permit any
hazardous substance to be used, stored, generated, or disposed of on or in the
Premises by Tenant, Tenant’s agents, employees, contractors, or invitees.
h) Tenant shall not at any time use or occupy the Premises, or permit
any act or omission in or about the Premises, in violation of any applicable federal,
state, or local law, now or hereafter in effect, whether or not presently
contemplated. Tenant shall discontinue immediately any use of the Premises
which is declared by any governmental authority or court of competent jurisdiction
to be a violation of applicable law.
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i) Tenant shall not at any time use or occupy the Premises in violation
of any temporary or permanent certificates of occupancy issued for the Premises.
In the event that any court or regulatory agency of competent jurisdiction makes a
finding that the Premises are used or occupied in violation of any such certificate,
Tenant shall immediately discontinue such use of the Premises and otherwise
remedy such violation. The failure by Tenant to discontinue such use shall be
considered a material breach of this Lease and Landlord shall have the right to
exercise any and all rights and remedies provided herein or by law.
j) Tenant shall not engage in, conduct, or provide any aeronautical
service or activity at the Airport unless specifically permitted to do so in Section
3.1 of this Agreement.
3.3 Maximum Hours.
Tenant may have access to the Premises to engage in the permitted uses provided
for in Section 3.1 of this Agreement from the hours of 6:00 a.m. to 11:00 p.m. Monday
through Sunday. Access to the Premises outside of these times must be pre-approved by
Landlord.
ARTICLE IV
RENTAL AND OTHER PAYMENTS
4.1 Monthly Base Rent
Beginning with the Lease Commencement Date, Tenant agrees to pay to Landlord
every month a base rent (“Monthly Base Rent”) in the amount of TWO THOUSAND
dollars ($2,000), which shall be subject to increases as provided for in Section 4.X and
paid to Landlord in the manner set forth in Section 4.X.
4.2 Percentage Rent
In addition to the payment of Monthly Base Rent and Additional Rent, Tenant
shall pay to Landlord as “Percentage Rent” a sum equivalent to six percent (6%) of all
Gross Revenues. As used herein Gross Revenues shall mean receipts from all gross sales
of Tenant or Tenant’s licensees, concessionaires, or sub-tenants, from all business or
commercial activity conducted upon or from the Premises, including the sale of goods,
wares, and merchandise from Tenant’s event rentals, arcade games, and museum store.
For the purposes of this section Gross Revenues shall not include, and thus no Percentage
Rent need be paid for, revenue Tenant receives from museum admissions, museum
memberships, or donations from third parties.
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4.3 Payment of Monthly Base Rent and Percentage Rent
The Monthly Base Rent shall be payable, without prior demand, in equal monthly
installments in advance on the first day of each full calendar month during the Lease term
without deduction or offset or prior demand therefor. The first installment payment of
Monthly Base Rent shall be due to Landlord on or prior to the Commencement Date.
Furthermore, the parties agree that Percentage Rent is to be determined on a
quarterly basis and shall become due and payable to Landlord on the 20th day after the end
of each calendar quarter. For the purposes of determining the Percentage Rent due,
Tenant shall prepare and make available to Landlord a quarterly accounting, in such
manner and detail and upon such forms as are approved by the Airport Manager, of the
Gross Revenues received, derived, or billed by the Tenant from all business or
commercial activity conducted at the Premises for each calendar month. The quarterly
accounting shall be submitted to the Airport no later than 30 days after the end of each
calendar quarter.
Monthly Base Rent and Percentage Rent shall be paid by wire transfer or check
made payable to the City of Santa Monica and delivered to Landlord at the Airport
Administration Building located at 3223 Donald Douglas Loop South, Santa Monica, CA
90405 during City’s regular business hours. Any payment by Tenant and acceptance by
Landlord of an amount less than what is outstanding on Tenant’s account shall be treated
as a payment on the account. The acceptance by Landlord of a check for a lesser amount
with an endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full shall be given no effect, and Landlord may
accept such check without prejudice to any other rights or remedies which Landlord may
have against Tenant.
4.4 Late Charges and Additional Rent
Tenant acknowledges that late payment by Tenant to Landlord of Monthly Base
Rent or other sums due hereunder will cause Landlord to incur administrative costs not
contemplated by this Lease, the exact amount of which is extremely difficult to
ascertain. Accordingly, any Monthly Base Rent or other sums not paid to Landlord
within ten (10) calendar days after such payments become due shall be considered late.
Once payments due to Landlord become late, Landlord will send Tenant written notice
that Tenant’s account is late and the notice shall state the exact amount in arrears.
Tenant shall have twenty (20) calendar days from the date that the last missed Monthly
Base Rent payment was due to pay all outstanding amounts to Landlord, or Tenant shall
pay a late charge equal to ten percent (10%) of the outstanding amounts not paid in the
manner required under this Lease. Late charges shall not be compound or assessed
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against prior late charges.
Landlord shall not be obligated to send Tenant written notice of late payments
more than twice in any lease year. Landlord’s acceptance of late charges does not cure
Tenant’s default with respect to Tenant’s failure to timely make payments to Landlord,
nor does it prevent Landlord from exercising any its rights and remedies granted herein.
Late charges shall be considered Additional Rent and the right to require late charges
shall be in addition to Landlord’s other rights and remedies herein or at law and shall
not be construed as liquidated damages or as limiting Landlord’s remedies in any
manner. Additional Rent shall be payable to Landlord with the next installment of
Monthly Base Rent and in the manner provided for in Section 4.2.
In addition, unpaid and outstanding Monthly Base Rent or Additional Rent, or
other amounts owing hereunder which are not paid to Landlord on the date they are due,
shall bear interest at the Default Rate from the first day due until paid to Landlord.
4.5 Rent Adjustments
4.5.1. Definitions: For purposes of this section, the following definitions
shall apply:
a) The term “Rental Year” shall mean that fiscal year of 12 consecutive
months commencing on July 1, 2015 and continuing through the next
twelve (12) calendar months; provided, however, that in no event
shall a Rental Year be shorter than 12 full calendar months.
b) The term “Base Month” shall mean the month of July, 2015.
c) The term “CPI” shall mean the percentage increase in the cost of
living index as measured by the “Consumer Price Index for All
Urban Consumers” published by the Bureau of Labor Statistics of
the United States Department of Labor for Los Angeles County,
California. In the event the CPI shall hereafter be converted to a
different standard reference base or otherwise revised, such
conversion factor, formula or table for converting the CPI as may be
published by the Bureau of Labor Statistics shall be used, or if the
Bureau of Labor Statistics shall not publish the same, then such
conversion factor, formula or table selected by Landlord as may be
published by any other nationally recognized publisher of similar
statistical information shall be used. In the event the CPI shall cease
to be published, then there shall be substituted for the CPI such other
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index of similar nature as is then generally recognized and accepted
for like determinations of purchasing power, as Landlord shall select.
d) The term “Base Index” shall mean the CPI that shall be in effect in
the Base Month.
4.5.2. Adjustments: The Monthly Base Rent shall be subject to a CPI
increase as of July 1, 2016 and every July 1 thereafter (“Adjustment Date”) for the
remainder of the Lease term. The Monthly Base Rent shall be adjusted as of each
Adjustment Date to an amount calculated by multiplying the Monthly Base Rent for the
month in which the Commencement Date occurred, or the month in which the
immediately preceding Adjustment Date occurred, whichever month is later, by a
fraction, the numerator shall be equal to the CPI published for the third month
immediately preceding such Adjustment Date, and the denominator of which shall be
equal to the Base Index, or the CPI for the month immediately preceding the Adjustment
Date, whichever is later; provided, however, in no event shall the increase in Monthly
Base Rent from year to year be (a) less than two percent (2%) of the Monthly Base Rent
payable for the immediately preceding Rental Year, nor (b) greater than five percent (5%)
of the Monthly Base Rent payable for the immediately preceding Rental Year.
Landlord shall, as promptly as practicable after the beginning of each such Rental
Year, give notice to Tenant of the Anniversary Index for such Rental Year and the
resulting adjustment, if any, in the Monthly Base Rent payable for such rental year as
determined by Landlord. Landlord's computation thereof shall be conclusive and binding
(except for mathematical error), but shall not preclude any further adjustment which may
be required in the event of a published amendment of the Anniversary Index. Until
receipt of Landlord's notice, Tenant shall pay monthly installments of Monthly Base Rent
at the rate applicable to the immediately preceding Rental Year. If at the time of
Landlord's notice the total of the monthly installments of Monthly Base Rent actually paid
by Tenant with respect to the elapsed portion of the current Rental Year is less than the
amount of Monthly Base Rent required to be paid for such period as indicated in
Landlord's notice, Tenant shall pay to Landlord the amount of the deficiency within ten
(10) days of written request to Tenant by Landlord.
4.5.3. No Waiver: In the event that the CPI is unavailable as of the
Adjustment Date, Tenant shall continue to make payments for the Monthly Base Rent
based on the monthly installments at the then current amount until notified by the
Landlord of the CPI increase. Any delay or failure of Landlord in computing or billing
Tenant for the escalation of Monthly Base Rent based upon a CPI increase shall not
constitute a waiver of or in any way impair the continuing obligation of Tenant to pay
such CPI increase. Tenant shall provide a retroactive payment to Landlord of the CPI
increase from Adjustment Date to the date of notification of such increase.
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4.6 Statement of Gross Revenues
4.6.1 Annual Statement of Gross Revenues: Within ninety (90) days after the
close of each Rental Year, a Statement of Gross Revenues for the preceding Rental Year
that is in accordance with generally accepted accounting principles, shall be given to
Landlord by Tenant. The annual Statement shall be accompanied by the certification of
an independent Certified Public Accountant (the “CPA”) stating specifically that (i) the
CPA has examined the Statement of Gross Revenues for the preceding Rental Year, (ii)
the CPA’s examination included such tests of Tenant’s books and records as the CPA
considered necessary or appropriate under the circumstances, (iii) such reports present
fairly the gross receipts of the preceding Rental Year, and (iv) that said receipts conform
with and are computed in compliance with the definition of “Gross Revenues” contained
in Section 4.2 above.
4.6.2 Landlord’s Remedies: If Tenant fails to deliver the annual statement and
certificate required under this Section to Landlord within 90 days, Landlord may retain an
independent Certified Public Accountant (CPA) to examine such books and records,
including, without limitation, all records required by Section 4.7, as may be necessary to
certify the amount of Tenant’s Gross Revenues for such Rental Year. Tenant shall pay to
Landlord any underpayment confirmed by the independent examination and Landlord’s
reasonable costs for retaining the CPA.
If during its examination of Tenant’s business records the CPA concludes that
Tenant’s business records are inadequate to determine Tenant’s Gross Revenues,
Landlord may collect from Tenant an equitable and reasonable amount of Percentage
Rent as determined by the CPA. In addition, the Landlord shall have the right to retain a
qualified consultant to prepare an appropriate record keeping system from which Tenant
and Landlord can determine Tenant’s total Gross Revenues. Tenant shall pay to Landlord
as Additional Rent Landlord’s costs and any other reasonable charges relating to the
consultant’s work.
4.7 Tenant’s Records
4.7.1 Required Records: Tenant agrees that all business conducted at the
Premises shall be done in a manner that allows for the tracking and recording of each
commercial sale or transaction conducted by Tenant at the Premises, whether for cash,
credit, or exchange.
4.7.2 Maintenance of Records: Tenant shall maintain for at least three (3) years
a general ledger and other such records of gross receipts and other supporting
documentation, together with original or duplicate books and records, that disclose in
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detail all information necessary for Landlord to verify Tenant’s Gross Revenues and
which shall be in accordance with generally accepted accounting principles.
4.7.3 Audits: Upon forty-eight (48) hours notice to Tenant, Landlord or its
designated representatives shall have the right during business hours to make examination
or audit any books and records required to be kept by Tenant under this Agreement. If
such an examination or audit discloses that, in any Rental Year, rent due is greater than
the rent paid by Tenant for such period, Tenant shall pay to Landlord within ten (10) days
of notice thereof the amount of such deficiency. In addition, if such audit discloses that
Tenant has underpaid by five percent (5%) or more any Percentage Rent owed by Tenant,
then upon thirty (30) days written notice to Tenant, Tenant shall pay the cost of such
audit, all outstanding Percentage Rent, and interest at the Default Rate on such Percentage
Rent calculated from the date it was originally due and payable.
4.8 Security Deposit
On or prior to the Commencement Date, Tenant shall pay to Landlord an amount
equal to one installment of Monthly Base Rent, or $2,000, as a security deposit to be held
as security for the full and faithful performance by Tenant of all obligations owed to
Landlord under this Lease (“Security Deposit”). If, at any time during the Lease term,
Tenant's Monthly Base Rent is increased above the amount initially paid hereunder, the
Security Deposit shall be increased in the same manner such that the Security Deposit
always equals one current monthly installment of Monthly Base Rent. Upon each
increase of the Monthly Base Rent, Tenant shall deposit with Landlord an amount
sufficient to increase the Security Deposit to the appropriate amount.
Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to interest thereon at the rate earned by
Landlord, less any reasonable administrative handling fees. If Tenant is in Default
(Section 15.1) with respect to any provision of this Lease, including, without limitation,
the provisions relating to the payment of Monthly Base Rent, Additional Rent, or the
cleaning of the Premises upon the termination of this Lease, Landlord may, but shall not
be required to, use, apply or retain all or any part of the Security Deposit for the
following: (i) payment of any Rent or any other sum in default; (ii) payment of any
other expense which Landlord may incur by reason of Tenant's default hereunder; (iii) to
compensate Landlord for any other loss or damage which Landlord may suffer by reason
of Tenant's default hereunder; and (iv) all costs and reasonable attorneys' fees incurred by
Landlord to recover possession of the Premises following a default by Tenant hereunder.
If any portion of the Security Deposit is so used or applied, Tenant shall, upon
demand therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to the appropriate amount, as determined hereunder. If Tenant shall
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fully perform every provision of this Lease to be performed by it, the Security Deposit or
any balance thereof (including any unpaid interest earned thereon) shall be returned to
Tenant (or to Tenant’s assignee approved in writing by Landlord and Tenant) within 14
days following the surrender of the Premises; provided, however, that Landlord may
retain the Security Deposit until such time as any amount due from Tenant in accordance
with this Article IV has been determined and paid to Landlord in full. No right or remedy
available to Landlord as provided in this Section shall preclude or extinguish any other
right or remedy to which Landlord may be entitled.
4.9 Tenant’s Payment of Operating Expenses (Triple Net)
Tenant’s payment of its share of Landlord’s costs and expenses for operating and
maintaining the Santa Monica Airport, including those related to the Premises, are set
forth below in Article V (Taxes), Article X (Utilities), and Article XI (Insurance).
ARTICLE V
TAXES
5.1 Tenant’s Obligation to Pay Taxes
The term "Tax Year" shall mean and refer to each twelve (12) month period
established as the real estate tax year by the taxing authorities having lawful jurisdiction
over the Premises and the Santa Monica Airport. Tenant shall pay in each Tax Year
during the Lease term directly to the appropriate taxing authorities, all real estate taxes,
levies or charges, ad valorem taxes, and assessments applicable to the Premises, or any
other tax imposed upon or levied against real property or personal property allocable to
the Premises, and all land and all buildings and improvement situated thereon. Any taxes
to be paid by Tenant under this Article V shall be paid directly to the proper taxing
authorities on or before the date such taxes are due.
5.2 Personal Property Taxes
This Lease may create a possessory interest in public property which is subject to
taxation by a lawful taxing authority whose jurisdiction includes the Premises. In the
event such possessory interest is created, Tenant shall pay directly to the appropriate
taxing authority any and all taxes levied on such interest. In addition, Tenant shall pay
directly to the appropriate taxing authority or agency any and all applicable taxes or
license fees or other charges levied, imposed or assessed by any taxing or levying
authority, including the State of California and County of Los Angeles, for goods sold or
leasehold improvements, equipment, furniture, or personal property in or about the
Premises. In the event any of Tenant's leasehold improvements, equipment, furniture,
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fixtures, or personal property is assessed with the real property as taxes charged to
Landlord, Tenant shall reimburse Landlord for all such taxes paid by Landlord within ten
(10) days of delivery to Tenant of a statement evidencing the taxes assessed to Landlord
and Landlord’s payment thereof.
ARTICLE VI
AIRPORT OPERATIONS
6.1 Airport Landing Area
Landlord reserves the right to further develop or improve the runways, taxi-ways,
landing areas, aircraft movement areas, or any part of the Airport’s airfield as Landlord
deems necessary.
6.2 Airport Maintenance
Landlord reserves the right to maintain and keep in good repair the runways, taxi-
ways, landing areas, aircraft movement areas, or any part of the Airport’s airfield, or any
publicly-owned facility of the Airport.
6.3 Building Modifications
To the extent that Tenant intends to alter or modify any buildings or structures
located on the Premises, Tenant agrees to comply with the notification and review
requirements set forth in Part 77 of the Code of Federal Regulations.
6.4 Height Limit
Neither Tenant, nor Tenant’s successors and assigns, may erect or permit the
erection of any structure or object, nor permit the growth of any tree on the land leased
herein, above the mean sea level elevation of 208ft. To the extent that any of the
aforesaid covenants and restrictions provided for in this Article are breached, Landlord
reserves the right to enter upon the land leased hereunder and to remove the offending
structure or object and trim the offending tree, all of which shall be at the sole cost and
expense of Tenant.
6.5 Interference with Airport Operations
Neither Tenant, nor Tenant’s successors and assigns, may use the leased Premises
in any manner that may interfere with the landing and taking off of aircraft from Santa
Monica Airport or may otherwise constitute a hazard. To the extent that any of the
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aforesaid covenants and restrictions provided for in this Article are breached, Landlord
reserves the right to enter upon the Premises and cause the abatement of such
interference, the cost and expense of which shall be borne completely by Tenant.
6.6 No Exclusive Rights
It is understood and agreed that nothing herein contained shall be construed to
grant or authorize the granting of an exclusive right within the meaning of Section 308a
of the Federal Aviation Act of 1958 (49 U.S.C. §40103 (e)).
6.7 Federal Government Rights
This Lease and all the provisions hereof shall be subject to whatever right the
United States Government has now, or in the future may have or acquire, affecting the
control, operation, or regulation of the Airport, or the exclusive or non-exclusive use of
the Airport by the United States during a time of war or national emergency.
6.8 Subordination of Lease
This Lease shall be subordinate to the provisions and requirements of any existing
or future agreement or contractual obligation between the City and the United States,
relative to the development, operation, or maintenance of the Airport.
6.9 Flight Easement
An easement for the right of flight and the passage of aircraft in the airspace above
the Premises is reserved to the City and to its successors and assigns for the benefit of the
public and users of the Airport.
ARTICLE VII
PREMISES OPERATIONS
7.1 Operations by Tenant
Tenant agrees, at its sole cost and expense, to do the following: (a) maintain the
interior and exterior doors and glass windows located on the Premises as intact and clean;
(b) replace promptly any cracked or broken glass located on the Premises with glass of
like grade and quality; (c) maintain the Premises in a clean, orderly, and sanitary
condition and free of insects, rodents, vermin and other pests; (d) keep any garbage,
trash, rubbish or other refuse in vermin-proof containers within the interior of the
Premises, or in Landlord designated trash containers until removed; (e) have such
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garbage, trash, rubbish and refuse removed on a daily basis; (f) maintain all mechanical
apparatus reasonably free of vibration and noise which may be transmitted beyond the
Premises; (g) comply with all applicable laws regarding the use and condition of the
Premises; and (h) comply with and observe all rules and regulations established by
Landlord or its designee.
Furthermore, Tenant will not cause, permit, or suffer any nuisance or waste to or
of the Premises, or any disturbance of the quiet enjoyment of any other tenant, licensee,
occupant, visitor or other user of the Airport and shall not: (i) place or maintain any
merchandise (or permit any vendors to display wares in any manner in or about the
Premises), trash, refuse or other articles in any vestibule or entry of the Premises, on the
footwalks or corridors adjacent thereto or elsewhere on the exterior of the Premises, nor
obstruct any driveway, corridor, footwalk, parking area, or any other Common Area; (j)
use or permit the use of any objectionable advertising medium, including, without
limitation, loudspeakers, phonographs, public address systems, sound amplifiers, radio or
television broadcasts which are in any manner audible or visible outside of the Premises;
(k) permit undue accumulations of, burn, or dump, garbage, trash, rubbish or other refuse
within, without or under the Premises; (l) cause or permit foul and offensive odors to
emanate or to be dispelled from the Premises; (m) solicit business outside of the Premises
except in the normal course of advertising and promoting Tenant's business (which
advertising and promoting shall not interfere with other tenants of the Airport); (n)
distribute handbills or other advertising matter to, in or upon any automobiles parked in
the parking areas or in any other Common Area; (o) permit the parking of vehicles so as
to interfere with the use of the Airport or any driveway, corridor, footwalk, parking area,
or any other Common Area outside of the Premises; (p) receive or ship articles of any
kind outside the designated loading areas for the Premises; (q) use any portion outside
the Premises for the sale or display of any merchandise or for any other business,
occupation, or undertaking, except that upon written notice to Landlord; (r) conduct or
permit to be conducted any auction, fire sale, going out of business, bankruptcy, or other
similar type sale in or connected with the Premises; (s) use or permit the use of any
portion of the Premises for any unlawful purpose or for any activity not authorized under
this Lease; (t) place a load upon any floor which exceeds the floor load which the floor
was designed to carry; (u) operate Tenant’s heating or air-conditioning unit/s in such a
manner as to deplete the heating or air-conditioning of the Premises and to the detriment
of any other tenant or other occupant of the Airport; (v) permit animals of any kind, not
approved by Landlord, to be brought into or kept in or about the Premises, except for
support animals assisting the disabled; or (w) permit the Premises, or any part thereof, to
be used for lodging or sleeping.
If Tenant breaches any of the obligations or restrictions set forth in this Section,
such act or omission shall constitute a breach of this Lease and a Default as set forth in
Section 15.1. In such case, Tenant shall indemnify, defend, and hold Landlord harmless
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from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses
which arise during or after the Term as a direct result of Tenant’s breach of the Lease.
However in no case shall Tenant be liable for any damage to the Premises caused by
unauthorized third parties not associated with Tenant. Tenant’s guests, agents,
employees, contractors, vendors, or invitees shall not be considered a third party
unassociated with Tenant.
7.2 Hazardous Materials
7.2.1 Definitions: As used herein, “Hazardous Substance” means any
substance that is toxic, ignitable, reactive, or corrosive and that is now or hereafter
regulated by any local government, the State of California, or the United States
Government. “Hazardous Substance” includes any and all material or substances that are
defined as “hazardous waste,” “extremely hazardous waste,” or a “hazardous substance”
pursuant to state, federal, or local governmental law. “Hazardous Substance” includes,
but is not restricted to, asbestos, polychlorobiphenyls (“PCB’s”), and petroleum.
7.2.2 Prohibition of Use: Tenant shall not cause or permit any Hazardous
Substance to be used, stored, generated, or disposed of on or in the Premises by Tenant,
Tenant’s agents, employees, contractors, or invitees without first obtaining Landlord’s
written consent. If Hazardous Substances are used, stored, generated, or disposed of on
or in the Premises by Tenant or its agents, employees or contractors except as permitted
above, or if the Premises become contaminated in any manner for which Tenant is legally
liable, Tenant shall indemnify, defend and hold harmless the Landlord from any and all
claims, damages, fines, judgments, penalties, costs, liabilities, or losses arising during or
after the Lease Term and arising as a result of that contamination by Tenant. This
indemnification includes, without limitation, any and all costs incurred because of any
investigation of the site or any cleanup, removal, or restoration mandated by a federal,
state, or local agency or political subdivision.
Furthermore, if Tenant use, storage, or disposal of any Hazardous Substance on the
Premises results in contamination, Tenant shall promptly, at its sole expense, take any and
all necessary actions to return the Premises to the condition existing prior to the use,
storage, or disposal of any such Hazardous Substances on the Premises. Tenant shall first
obtain Landlord’s approval for any such remedial action. The provisions of this Section
shall be in addition to any other obligations and liabilities Tenant may have to Landlord at
law or equity and shall survive the transactions contemplated herein and shall survive the
termination of this Lease.
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7.3 Signage and Advertising
Tenant shall not place or suffer to be placed or maintained on the exterior of the
Premises, or any part of the interior visible from the exterior thereof, any sign, advertising
matter, or any other material or object of such kind without first obtaining Landlord’s
written approval. Landlord agrees that Tenant may continue to use the signage existing at
the Premises as of the Commencement Date. Furthermore, Tenant shall not place or
maintain any decoration, lettering, or advertising matter on the glass of any window or
door of the Premises without first obtaining Landlord's prior written approval and any
required governmental permits or licenses. All signage shall be consistent with
applicable law and must be approved by any governmental entity having jurisdiction with
respect thereto.
7.4 Painting of the Premises and Displays by Tenant
Tenant shall not paint or decorate any part of the exterior of the Premises, or any
part of the interior primarily visible from the exterior thereof, without first obtaining
Landlord's written approval. Landlord reserves the right to require Tenant to correct any
non-conformity.
7.5 Trash Removal Service
At its option, Landlord may provide a trash removal service for the Premises that
Tenant may use. If such service is provided, Tenant shall pay to Landlord, as Additional
Rent, Tenant’s pro-rata share of all costs associated with Landlord's providing of trash
removal service to the Premises.
7.6 Locks
Tenant shall not install, cause to be installed, or use any additional locks or bolts of
any kind on any of the doors or windows located on the Premises. Nor shall Tenant make
any changes to any existing locks or the mechanisms thereof unless Landlord is furnished
with a copy of the corresponding key, except for keys to vaults or safes maintained by
Tenant in the ordinary course of business, access to which shall be provided by Tenant to
Landlord upon reasonable prior notice and in the company of a representative of Tenant.
Tenant must, upon the expiration or termination of this Lease, give to Landlord all keys
pertaining to the Premises, either furnished to, or otherwise procured by, Tenant.
7.7 Compliance with Law
Tenant, at its sole cost and expense, shall comply with and shall cause the
Premises to comply with: (a) any and all applicable local, state, and federal laws
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affecting the Premises or any part thereof, or the use thereof; (b) all rules, orders and
regulations of the National Board of Fire Underwriters, the Santa Monica Municipal
Code, Landlord's fire insurance rating organization, or any other entities exercising
similar functions in connection with the prevention of fire or correction of hazardous
conditions which apply to the Premises; (c) all rules, orders, and directions of the Santa
Monica Airport Director, including those stated in the operative Santa Monica Airport
Operations Handbook; and (d) any and all rules and regulations promulgated by any
regulatory or governmental agency having appropriate jurisdiction. Tenant’s failure to
comply with all applicable laws, as stated in this Section, shall be considered a material
breach of this Agreement.
ARTICLE VIII
REPAIRS AND ALTERATIONS
8.1 Landlord Maintenance and Repair
Landlord’s responsibilities and obligation to maintain and repair the exterior
Premises shall be limited to the public parking areas, fire hydrants, Common Areas
including walkways, parkways, and driveways located on the Premises.
Notwithstanding Landlord’s maintenance and repair obligations stated herein, any
damage, degradation, or destruction to the Premises, or to any structure or improvements
located on the Premises, caused by the negligence or willful acts or omissions of Tenant,
its agents, employees, licensees, invitees or contractors, Landlord may make, or cause to
be made, necessary repairs to remedy such damage, degradation, or destruction to the
Premises. In such instance, Tenant agrees to pay to Landlord, as Additional Rent and
within ten (10) days following a demand therefor, Landlord’s costs for repairs made to
the Premises. Landlord agrees to take reasonable measures to mitigate it costs.
In the event Landlord elects not to make such repairs caused by Tenant's
negligence or willful act, Landlord may require Tenant to make such repairs at Tenant's
sole cost and expense, and Tenant agrees to make such repairs at Tenant's sole cost and
expense and within the time periods set forth by Landlord. Failure by Tenant to complete
the repairs during said time period shall constitute a Default under Section 15.1.
8.2 Tenant Maintenance and Repair
Tenant shall be responsible for the maintenance and repair of the interior and
exterior Premises and every part thereof, including the roofs, foundations, exterior walls,
exterior landscaping, exterior lighting and electrical, HVAC units serving the Premises,
exterior plumbing lines, and any ceilings, interior walls, doors, plate glass, utility systems,
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meters, pipes, conduits, fixtures, electrical, plumbing, and other mechanical systems that
serve the Premises and are located within, on top of, or around the Premises, any or all of
which are used by Tenant or Tenant’s employees, agents, or guests.
Tenant also agrees to keep in good working order and condition and free of
graffiti, all of Tenant’s signage, locks, closing devices, window sashes, window frames,
door and door frames, located therein or outside of the Premises. Tenant may not
overload the electrical wiring serving the Premises or within the Premises. Tenant shall
be responsible for any damage or injury to person or property caused by the condition or
failure of mechanical, electrical, plumbing, any equipment or installation systems located
in the interior Premises. In such event, Tenant shall indemnify and hold Landlord
harmless from and against all claims, actions, damages and liability in connection
therewith.
Tenant also consents to periodic inspections by Landlord for the purpose of
determining Tenant’s compliance with this Section. Tenant agrees to immediately correct
each and every violation as identified by Landlord and presented to Tenant. Except in the
event of an emergency, such inspections shall only be conducted during daytime business
hours, shall not be disruptive of Tenant’s business operations, and shall occur only after
Landlord provides Tenant with no less than twenty-four (24) hours written notice.
Landlord will accommodate Tenant’s reasonable security requests to the extent
practicable.
If Tenant fails to correct any unsafe, unclean, or noncompliant condition within 48
hours after being notified in writing to do so by Landlord, then Landlord may enter the
Premises and remedy the condition or conditions, and charge the cost to Tenant, as
Additional Rent, without any liability for any resulting business loss or damage, except
that if a matter reasonably requires more than 48 hours to correct, Landlord's right to enter
and effect repairs provided in this Section shall arise where Tenant fails to begin to
correct the condition within such 48-hour period or fails to diligently pursue such
correction thereafter. In the event of an emergency, Landlord may immediately enter the
Premises to remedy any unsafe, unclean, or noncompliant condition and charge the cost to
Tenant. Landlord shall notify Tenant of such emergency as soon as reasonably possible.
8.3 Damage to Premises
In addition to Sections 8.1 and 8.2 of this Lease, Tenant agrees that it shall repair
promptly at its expense any damage to the Premises caused by or arising from the
installation or removal of Tenant’s property in or from the Premises or by any other
activity in the Premises caused by Tenant or its agents, except where such damage is
caused by the sole negligence of Landlord or its agents.
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8.4 Alterations and Improvements to Premises by Tenant
Following the Commencement Date, Tenant shall not make any alterations,
renovations, improvements, repairs, cut or drill into, or otherwise demolish or remove,
any part of the Premises, including any material alterations to the exterior structure, the
interior structure, or the store front or signs (collectively referred to hereafter as
"Alterations"), unless and until Tenant has completed the following: (a) Tenant shall
obtain the written consent of Landlord prior to proceeding with the proposed Alterations;
(b) Tenant shall obtain all required plans, permits, and approvals from City’s Building
and Safety, Planning, and Public Works departments for the proposed Alterations and
provide copies of same to Landlord; (c) Prior to submission to City’s Building and Safety
Division, Tenant shall provide City’s Airport Director, for review and approval, copies of
all plans, specifications, cost estimates, change orders, design drawings, proposed
signage, and specifications for all proposed work; and (d) Tenant must satisfy all
requirements concerning the proposed work as may arise during the course of such work
and as may be reasonably imposed by Landlord.
Landlord may condition its consent to any proposed work under this Section on
Tenant’s selection of an architect, or structural engineer, or general contractor, all of
whom must be reasonably satisfactory to Landlord. If Landlord consents to Tenant’s
proposed Alternations, Landlord may supervise the work and ensure that such work is
being performed in accordance with the plans and specifications approved in advanced by
Landlord. Tenant shall bear ultimate responsibility for ensuring that the work described
in any approved plans or specifications is performed, promptly, efficiently, competently
and in a good and workmanlike manner by duly qualified or licensed persons or entities,
using comparable quality materials as those currently found on the Premises, and without
interference with, or disruption to, the operations of tenants or other users of the Airport.
All completed work shall comply with applicable law. Upon the completion of the
Alterations, Tenant shall cause a Notice of Completion to be recorded in the Office of the
Los Angeles County Recorder in accordance with Section 3093 of the California Civil
Code.
Tenant may make minor non-structural interior design changes to the interior of
the Premises without Landlord’s approval, but Tenant must give Landlord reasonable
notice of such minor changes prior to proceeding with their installation. For the purposes
of this Section, the cumulative cost of any minor non-structural interior design changes to
the Premises may not exceed $20,000. Any proposed interior changes in excess of this
amount shall be subject to the approval process described herein for Alterations to the
Premises.
Upon the expiration or termination of the Lease, all Alterations made by Tenant to
the Premises shall automatically become the property of Landlord. All personal property,
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furniture, trade fixtures, equipment and signs installed by Tenant or subtenants shall
remain the personal property of the rightful owner and shall be removable at any time
during the term of this Lease so long as Tenant shall not be in default under the terms
hereof. The removal of any such fixtures, equipment, and signs shall be completed within
10 days of the expiration or earlier termination of this Lease, at Tenant's expense, and
Tenant shall repair any damage to the Premises occasioned by the removal thereof and
shall reimburse Landlord for any damage caused thereby.
8.5 Landlord’s Access to the Premises
Tenant shall allow Landlord, its agents, employees and contractors to enter all
parts of the Premises during Tenant's daytime business hours to inspect the same and to
enforce or carry out any provision of this Lease, including, without limitation, any access
necessary for the making of any repairs which are Landlord's obligation or right
hereunder so long as Landlord provides Tenant with no less than twenty-four (24) hours
prior written notice. Landlord will accommodate Tenant’s reasonable security requests to
the extent practicable.
In the case of an emergency, Landlord may enter upon the Premises without notice
to Tenant. In such an emergency situation, access to the Premises shall be allowed at any
time upon Landlord's oral request. In the event Landlord desires to make any repairs to
the Premises, Landlord agrees to minimize to a reasonable extent any interruption to
Tenant's normal business operations therein, and Landlord shall attempt, where
reasonably possible, to arrange any such repairs during Tenant's "off-peak" business
hours.
In addition, Landlord shall have the right to enter the Premises to conduct safety
inspections, to examine the Premises, to perform environmental testing or any other
reasonably necessary environmental work on the Premises, to show the Premises to
prospective purchasers, lenders or tenants of the Premises, and to make such repairs,
alterations, improvements or additions as may be required in connection with the
development or maintenance of the Premises, without the same constituting an eviction of
Tenant, in whole or in part, or a trespass.
ARTICLE IX
COMMON AREAS
9.1 Common Areas Defined
“Common Areas” shall include: those portions of the Santa Monica Airport
located within the physical boundary thereof which are made available for the general
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use, convenience or benefit of all lessees and visitors of the Santa Monica Airport,
including without limitation, transient aircraft tie-down space, taxiways, runways, public
vehicle parking areas, all utility lines and systems, access roads, driveways, sidewalks,
pedestrian walkways, and other similar areas, in addition, to maintenance and equipment
areas.
9.2 Use of Common Areas
A. Landlord may at any time establish or change the nature, use, size, or
composition of the Common Areas. Such actions may include, but not be limited, to the
following: (i) the creation and relocation of driveways, entrances, exits, and parking
spaces; (ii) the installation of landscaping; (iii) the designation of restricted areas; and (iv)
the establishment of disabled parking and loading zones.
B. Landlord shall operate, manage, and maintain the Common Areas. The
manner in which such Common Areas shall be operated, managed, maintained, improved,
or repaired shall be at the sole discretion of Landlord.
C. Tenant and its employees and invitees are, except as otherwise specifically
prohibited by this Lease, authorized to use the Common Areas in common with other
persons during the term of this Lease.
D. Tenant shall not at any time park or permit the parking of its trucks or
vehicles or the trucks or vehicles of its employees, suppliers, customers, or invitees in any
area within the Santa Monica Airport not designated by Landlord for such use by Tenant
and its employees, suppliers, customers, or invitees. If Tenant parks, or permits the
parking of, any vehicle contrary to the foregoing provisions, Landlord may cause the
same to be towed to a public garage or other parking area and the expenses related to such
towing will be paid by Tenant.
E. Landlord shall at all times have the sole and exclusive control of all
Common Areas. Tenant’s rights hereunder in and to the Common Areas shall at all times
be subject to the rights of Landlord, and equal to other tenants of the Santa Monica
Airport to use and benefit from such areas. By way of this Lease, Tenant agrees that it
has a duty: (i) to the extent reasonably within its control, keep all Common Areas adjacent
to the Premises free and clear of any obstructions or nuisances whether created or
permitted by Tenant or its operations; (ii) to use the Common Areas only for normal
ingress and egress by employees, suppliers, customers, and invitees to and from the
Premises and the other lessees of the building in which the Premises located, and such
other use approved in advance and in writing from Landlord; and (iii) not to cause, permit
or suffer to the extent within Tenant’s control, any Common Areas to be used as to
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unreasonably interfere with the rights of Landlord or other tenants of the Santa Monica
Airport or their employees, suppliers, customers, invitees or businesses.
Landlord shall have the right to perform any and all construction to, in or about the
Common Areas which it determines necessary for the maintenance, replacement,
refurbishment, renovation or improvement of the Common Areas, or other premises of
the Santa Monica Airport in general. Landlord shall give Tenant reasonable notice of any
such construction in or about the adjacent Common Areas. In connection therewith,
Landlord shall not be liable to Tenant by reason of any injury to or interference with
Tenant’s business or property or for any other inconvenience or damages caused thereby.
Landlord will complete any such construction within a reasonable period of time and
shall make take all reasonable measures to do so in a manner that does not interfere with
Tenant’s use and enjoyment of the Premises.
9.3 Employee Parking
Subject to City parking enforcement laws and Airport parking rules, Tenant and its
employees may park in any of the parking areas at the Airport designated for Airport
parking. However, if Landlord designates specific parking areas to serve the Premises, or
provides parking passes or any other related parking convenience for Tenant and/or
Tenant's employees, Tenant and its employees shall park their vehicles only in such areas
designated by Landlord. The Parties acknowledge that if Landlord does establish
designated parking areas for the Premises, Landlord may at any time, and at Landlord's
sole discretion, reduce the size of any such parking area, or restrict or revoke any parking
privilege given by Landlord to Tenant under this Agreement.
ARTICLE X
UTILITIES
10.1 Water, Electricity, Gas and Sanitary Sewer
Landlord will provide at points in or near the Premises the facilities necessary to
enable Tenant to supply the Premises with water, electricity, gas, sanitary sewer,
telephone, internet, and television service. Tenant shall not intentionally overburden or
exceed the capacity of the mains, feeders, ducts, conduits, or other facilities by which
such utilities are supplied to, distributed in, or serve the Premises. If Tenant desires to
install any equipment which shall require additional utility facilities, or utility facilities of
a greater capacity than the facilities provided by Landlord, such installation shall be
subject to Landlord's prior written approval of Tenant's plans and specifications therefor.
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10.2 Tenant’s Use of Utilities
Tenant shall pay directly to the service provider all service charges for all utilities
or any other services used by Tenant and supplied to it by either Landlord, a public utility,
a public authority, or any other entity providing such services. Where utility services are
not separately metered, Landlord’s costs in providing such services will be passed-
through to Airport tenants based on the actual number of interior square feet occupied,
including loft spaces and a proportional share of common areas. Tenant shall only be
responsible for its pro-rata share of Landlord’s costs. If Tenant opts not to utilize all or a
portion of a service, or chooses to obtain an alternative vendor, it will not receive any
commensurate reduction in utility pass-through costs. Tenant is responsible for payment
of pro-rata shares of all non-separately metered utilities customarily or historically
associated with the Premises. Pass-through costs shall be updated and adjusted at least
annually and at Landlord’s discretion.
10.3 Discontinuances and Interruptions of Utility Services
Landlord shall not be liable for any discontinuances or interruptions of utility
services used by Tenant, including: (a) if any utility service shall become unavailable
from any public utility company, public authority, or any other entity providing such
services; or (b) for any interruption in any utility service caused by the failure to pay such
utility services, the making of any necessary repairs or improvements, or by any cause
beyond Landlord's reasonable control. A discontinuance or interruption of utility service
to Tenant shall not constitute a termination of this Lease or an eviction of Tenant.
10.4 Landlord's Right to Alter Utilities
Landlord reserves the right to alter the utility services to the Premises, including,
but not limited to, heating, ventilating and air-conditioning systems and equipment
serving the Airport. In no way shall Landlord’s alteration of these services result in a
prolonged disruption of said services. Tenant agrees to execute and deliver to Landlord
without delay any such documentation as may be required to effect such alteration.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.1 Indemnity by Tenant
Except for Landlord’s gross negligence or willful misconduct, Tenant shall
indemnify, protect, hold harmless and defend the Landlord, the City of Santa Monica, the
City Council, its officers, agents, employees, board members, commissioners,
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volunteers, from and against any and all demands, claims, actions, suits, liens, judgments,
damages, liabilities, costs and expense, arising out of, involving, or in connection with the
use, occupancy, or enjoyment of the Premises or Airport by Tenant or any of its officers,
agents, employees, customers, guests, or invitees. If any action or proceeding is brought
against Landlord by reason of any of the foregoing matters, Tenant shall upon notice
defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord and
Landlord shall cooperate with Tenant in such defense. Landlord need not have first paid
any such claim in order to be defended or indemnified. The obligations pertaining to
indemnification and hold harmless set forth herein shall survive the expiration or
termination of this Lease.
11.2 Indemnity by Landlord.
Except for Tenant’s gross negligence or willful misconduct, Landlord shall
indemnify, protect, defend and hold harmless Tenant, and its directors, officers,
employees and agents, contractors, invitees and customers from and against any and all
claims, damages, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with Landlord’s management of the
Premises, or breach of this Lease by Landlord. If any action or proceeding is brought
against Tenant by reason of any of the foregoing matters, Landlord shall upon notice
defend the same at Landlord’s expense and Tenant shall cooperate with Landlord in such
defense. Tenant need not have first paid any such claim in order to be defended or
indemnified.
11.3 Landlord Not Liable for Acts of Others
Landlord shall not be liable to Tenant for any personal injury, death, loss or
damage to personal property which may occur by or through the acts or omissions of
persons visiting the Premises, the Airport, or the surrounding area; or to persons
occupying space adjoining, adjacent to, or connecting with the Premises or any part of the
Airport. Furthermore, Landlord shall not be liable for injury or damage to the person or
goods, wares, merchandise or other property of Tenant’s, Tenant’s employees,
contractors, invitees, customers, or any other person in or about the Premises, whether
such damage or injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether
the said injury or damage results from conditions arising upon the Premises or upon other
portions of the Building, or from other sources or places on the Airport. Tenant agrees to
use and occupy the Premises and other portions of the Airport at Tenant's own risk.
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11.4 Tenant's Insurance
As of the Commencement Date, and at all times during Tenant’s occupancy of the
Premises, or prior to the start of construction of Alterations or improvements on the
Premises, Tenant shall procure and maintain at Tenant's own cost and expense for the
duration of this Lease insurance against claims for injuries to persons or damages to
property which may arise from or in connection with Tenant's possession, occupancy,
operation or use of the Premises, or that of Tenant’s agents, representatives, employees,
contractors, subcontractors, guests, customers, and invitees.
A. Minimum Scope of Insurance
Coverage shall be at least as broad as:
1. Commercial General Liability (CGL): Insurance Services Office
Form CG 00 01 covering CGL on an “occurrence” basis, including
products and completed operations, property damage, bodily injury
and personal and advertising injury, with limits of no less than
$1,000,000 per occurrence.
2. Workers’ Compensation: Workers’ Compensation insurance as
required by the State of California, with Statutory Limits and
Employers’ Liability Insurance with limits of no less than
$1,000,000 per accident for bodily injury or disease.
3. Property: Insurance against all risks of loss to any tenant
improvements or betterments, at full replacement cost. Policy shall
be endorsed to provide Business Interruption coverage in an amount
no less than twelve months of Monthly Base Rent at the time of the
loss.
If Tenant maintains higher limits than the minimums shown above, Landlord
requires and shall be entitled to coverage for the higher limits maintained by Tenant. Any
available insurance proceeds in excess of the specified minimum limits of insurance and
coverage shall be available to Landlord.
B. Required Policy Provisions
Insurance policies under this Section are to contain, or be endorsed to contain, the
following provisions:
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1. Additional Insured Status: The City of Santa Monica, its officers,
officials, employees, and volunteers are to be covered as additional
insureds on the CGL policy with respect to liability arising out of the
use, occupancy, operations or maintenance of the Premises,
including work or operations performed on behalf of Tenant.
2. Primary Coverage: For any claims arising from Tenant’s use,
occupancy, operations, or maintenance of the Premises, Tenant’s
insurance shall be primary with respect to the City of Santa Monica,
its officers, officials, employees and volunteers. Any insurance or
self-insurance maintained by the City, its officers, officials,
employees, or volunteers shall be in excess of Tenant’s insurance
and shall not contribute with it.
3. Notice of Cancellation: Each insurance policy required herein shall
state that coverage shall not be cancelled except after notice has been
given to the City of Santa Monica.
4. Waiver of Subrogation: Tenant hereby grants to the City of Santa
Monica a waiver of any right of subrogation which any insurer of
Tenant may acquire against the City of Santa Monica by virtue of
payment of any loss. Tenant agrees to obtain any endorsement that
may be necessary to affect this waiver of subrogation, however this
provision shall apply regardless of whether or not the City has
received a waiver of subrogation endorsement from the insurer.
The Workers’ Compensation policy shall be endorsed with a waiver
of subrogation in favor of the City of Santa Monica for all activities
in connection with the use of the premises by Tenant, its employees,
agents, and subcontractors.
5. Loss Payee (Property policy): The property insurance shall name
the City of Santa Monica as Loss Payee as its interests may appear.
C. Deductibles and Self-Insured Retentions
Any deductibles or self-insured retentions must be declared to and approved by
Landlord. Landlord may require Tenant to purchase coverage with a lower deductible or
retention or provide satisfactory proof of ability to pay losses and related investigations,
claim administration, and defense expenses within the retention.
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D. Acceptability of Insurers
Insurance is to be placed with insurers with a current A.M. Best rating of no less
than A:VII, unless otherwise acceptable to Landlord.
E. Verification of Coverage
Tenant shall furnish Landlord with original certificates and amendatory
endorsements or copies of the applicable policy language providing the insurance
coverage required herein. All certificates and endorsements are to be received and
approved by the City of Santa Monica before the lease commences. However, failure to
obtain required documents prior to the work beginning shall not waive the Tenant’s
obligation to provide them. Landlord reserves the right to require complete, certified
copies of all required insurance policies, including the endorsements required herein, at
any time.
F. Failure to Maintain Insurance Coverage
If Tenant, for any reason, fails to maintain insurance coverage which is required
pursuant to this Lease, the same shall be deemed a default by Tenant. Tenant shall have
thirty (30) days to cure its default, after which and upon failing to do so, Landlord may
purchase such coverage (but has no special obligation to do so) on behalf of Tenant and
demand payment from Tenant for any premium costs advanced by Landlord.
G. Subcontractors
Tenant shall require and verify that any contractors or subcontractors hired by
Tenant maintain CGL with limits of no less than $1,000,000 per occurrence and Workers’
Compensation insurance as stated herein for maintenance and repair work performed at
the Premises. For work involving capital improvements, Tenant’s contractors and
subcontractors must maintain CGL limits of no less than $3,000,000 per occurrence. Any
exception to this subsection must be approved in writing by the City’s Risk Manager.
ARTICLE XII
CASUALTY
12.1 Termination of Lease Due to Casualty
For the purposes of this Lease a “Casualty” is defined as any fire, explosion,
earthquake, flood, tidal wave, accident, or act of God causing damage to the Premises or
to any improvements thereon. In the event of damage to the Premises by Casualty, and if
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Tenant is not responsible in part or in whole for such damage, Landlord shall notify
Tenant in writing within thirty (30) days if it intends to restore or rebuild the Premises. If
Landlord elects to restore or rebuild the Premises, where the time to completion of such
work is determined to exceed 180 days for the date of Casualty, then either Landlord or
Tenant may terminate this Lease upon thirty (30) days written notice. Landlord, its City
Council, its respective boards, commissions, officers, agents, servants and employees
shall not be liable for any interruption to Tenant's business or for damage to Tenant's
personal property or to any leasehold improvements installed in the Premises as a result of
a Casualty under this Section.
12.2 Advance Payments
Upon termination of this Lease pursuant to Section 12.1 above, an equitable
adjustment shall be made concerning any advance Monthly Base Rent or Additional Rent
or any other advance payments made by Tenant to Landlord. In addition, Landlord shall
return to Tenant so much of the Security Deposit as has not theretofore been applied by
Landlord.
ARTICLE XIII
CONDEMNATION
13.1 Effect of Taking
If the Premises or any portion thereof is taken under the power of eminent domain,
this Lease shall terminate as to the part so taken on the date Tenant is required to yield
possession thereof to the condemning authority. In the event that only a portion of the
Premises is subject to condemnation, Landlord shall make such repairs and alterations as
may be necessary in order to restore the part not taken to useful condition and all Rental
(other than any Additional Rent due Landlord by reason of Tenant's failure to perform any
of its obligations hereunder) shall be reduced in the same proportion as the number of
square feet contained in the Premises which were so taken bears to the number of square
feet in the Premises immediately before such condemnation. If the remainder of the
Premises becomes unsuitable for the Permitted Use described in Section 3.1 as a result of
the taking, then either party may terminate this Lease as of the date when Tenant is
required to yield possession by giving notice to that effect within thirty (30) days after
such date.
13.2 Condemnation Awards
All compensation awarded for any taking of the Premises or any interest in either
shall belong to Landlord, and Tenant hereby assigns to Landlord all of its rights with
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respect thereto; provided, however, nothing contained herein shall prevent Tenant from
applying for reimbursement from the condemning authority for moving expenses, the
expense of removal of Tenant's trade fixtures, loss of Tenant's business goodwill, loss of
the Leasehold Improvements paid for by Tenant, or any other loss incurred by Tenant, but
only if such action does not reduce the amount of the award or other compensation
otherwise recoverable from the condemning authority by Landlord for improvements paid
for by Landlord.
ARTICLE XIV
TRANSFERS OF INTEREST
14.1 Transfer By Tenant Requires Landlord’s Consent
Except as provided herein, Tenant shall not assign, sublet, hypothecate or
otherwise transfer this Lease or any interest herein, by operation of law or otherwise, to
any person or entity ("Transferee") without Landlord’s prior written consent, which shall
not be unreasonably withheld. Any attempt to assign, sublet, or transfer this Lease
without complying with the requirements imposed by this Article shall be null and void,
and any assignee, sublessee, lienholder, or Transferee shall acquire no right or interest by
reason of such attempted transfer and shall be liable to Landlord for damages pursuant to
California Civil Code §§ 1995.330, 1995.320. Any attempt by Tenant to assign, sublet, or
transfer its interests under this Lease without Landlord’s consent shall be considered a
material breach of this Lease and a Default under Section 15.1.
14.2 Conditions for Landlord’s Consent to Transfer
Before Landlord may consent to any proposed transfer of any of Tenant’s interests
or obligations under this Lease, the proposed Transferee must provide Landlord with
adequate assurance of future performance of all Lease terms, conditions, and covenants.
In addition, Tenant and/or Transferee must be able to sufficiently demonstrate that the
Transferee satisfies all of the following criteria:
a) The Transferee can provide reliable documentation of sufficient capital to
pay the Monthly Base Rent, Additional Rent, and all other charges
contemplated by the Lease for the entire Lease term; and
b) The Transferee’s assumption of any portion of Tenant’s interest in the
Lease will not cause Landlord to be in violation or in breach of any
provision in any other lease, financing agreement, Airport operating
agreement, or any contractual instrument relating to the Airport; and
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c) The Transferee’s assumption of any portion of Tenant’s interest in the
Lease does not violate any of the terms and conditions in the Lease
Agreement between Landlord and Tenant; and
d) The Transferee’s assumption of any portion of Tenant’s interest in the
Lease will not disrupt or impair any existing tenant or tenant mix at the
Airport; and
e) Tenant is not in default of its Lease obligations at the time of its request for
Landlord’s consent to Tenant’s proposed transfer or at any time prior to
Landlord’s approval of Tenant’s request.
14.3 Procedure for Transfer
Should Tenant choose to transfer some or all of its interest hereunder, Tenant shall,
in each instance, give written notice of its intention to do so to Landlord at least sixty (60)
days prior to the effective date of any such proposed Transfer. The notice to Landlord
should specify the nature of such proposed transfer, the proposed date, the identity and
contact information of the Transferee, and whether Tenant intends to generate a Profit (as
defined in Section 14.6) from the proposed transfer and the expected amount of such
Profit. Such notice shall be accompanied, in the case of a proposed subletting or
licensing, by a copy of the proposed sublease or license and by any other documents or
financial information that Landlord would need for it to make a determination as to the
suitability of the Transferee based upon the criteria set forth in this Article. Landlord
shall, within thirty (30) days of its receipt of Tenant’s notice and supporting
documentation, inform Tenant of its response to the proposed transfer.
14.4 Effect of a Transfer
Any Transferee under this Article shall agree to comply with and be bound by all
of the terms, covenants, conditions, and provisions of this Lease. Tenant shall deliver to
Landlord an executed copy of each transfer document between Tenant and Transferee.
No transfer of this Lease, entered into with or without Landlord’s consent, shall relieve
Tenant or any guarantor of the Lease from liability under this Lease.
14.5 Transfer by Sublease
As a condition to Landlord’s consent to any sublease, such sublease agreement
shall include express language stating that: 1) it is subject and subordinate to this Lease
Agreement; and 2) that in the event of termination of this Lease for any reason, including
without limitation a voluntary surrender by Tenant, Landlord may either terminate the
sublease or take over all of the right, title and interest of Tenant, as sublessor, under such
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sublease, in which case such Transferee shall attorn to Landlord but in such event
Landlord shall not: a) be liable for any previous act or omission of Tenant under such
sublease; or b) be subject to any defense or offset previously accrued in favor of the
Transferee against Tenant; or c) be bound by any previous modification of any sublease
made without Landlord’s written consent.
14.6 Landlord to Share in the Profits from All Transfers
If Landlord consents to Tenant’s transfer of any or all of its interest in the Lease,
and Tenant subleases, assigns, or transfers any or all of the Premises, then Landlord is
entitled to share in all of the Profits generated by Tenant’s transfer agreement, including
any amounts paid to Tenant by Transferee as consideration for the transfer.
For the purposes of this Section, “Profits” shall mean the difference between all
rent and other amounts paid by Transferee to Tenant pursuant to a sublease, assignment,
or transfer agreement; and, which is in excess to, the amount of Monthly Base Rent paid
by Tenant to Landlord for the proportion of the Premises subleased, assigned, or
transferred to Transferee, as measured in square feet. Profits paid to Landlord shall not
include the utility costs paid by Tenant for the proportion of the Premises occupied by
Transferee, or any proceeds from the sale of Tenant’s interest in its businesses or
enterprises.
The following shall apply to Tenant for all transfers of its interest in the Lease
Agreement:
a) Tenant shall pay to Landlord, as Additional Rent and at the same time as
when its installment of Monthly Base Rent is due, fifty percent (50%) of the
Profits paid to Tenant by the Transferee for the upcoming month and
pursuant to the terms of the sublease, assignment, or transfer agreement.
b) If Tenant does not intend to generate or realize any Profits from a transfer
under this Section, then Tenant’s written notice to Landlord under Section
14.3 must state so clearly and unambiguously.
14.7 Landlord’s Assignment
Landlord reserves the right to assign some or all of its interests under this Lease
Agreement to a third party of its choosing. Landlord shall provide Tenant with thirty (30)
days written notice of such assignment.
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ARTICLE XV
DEFAULT
15.1 Default
Any one or more of the following events shall constitute a “Default”:
A. Any failure by Tenant to pay the Monthly Base Rent, Percentage Rent, any
Additional Rent, or any other charge required to be paid to Landlord under this Lease,
within three (3) days of receiving a written notice from Landlord under Cal. Code of Civil
Proc. §§1161, 1161.1 indicating such amount is due. Written notice to tenant under this
Section is separate from and in addition to the notice to tenant under Section 4.3.
B. The sale of Tenant's interest in the Premises by way of an attachment,
execution, or similar legal process; or the filing or execution of an attachment,
encumbrance, lien, or stop notice either against the Premises, Landlord, or Tenant that is
related to the use or possession of the Premises.
C. Tenant is a party to a bankruptcy proceeding in the United States District
Court and is a “debtor” as defined in 11 U.S.C. § 101. However, in the case of a petition
filed against Tenant, Tenant shall not be in default if the petition is dismissed within sixty
(60) days of filing.
D. The appointment of a receiver or trustee for the business or property of
Tenant, or that of any guarantor of Tenant's obligations herein, unless such appointment
shall is vacated within ten (10) days of its entry.
E. Tenant improperly transfers any of its interest in the Lease Agreement
without Landlords prior written consent.
F. Tenant fails to disclose to Landlord, and/or fails to share with Landlord as
is required by Section 14.6, the Profits received by Tenant as a result from Tenant’s
transfer of its interest in the Lease Agreement and the Premises.
G. Tenant abandons the Premises within the meaning of Cal. Civil Code §§
1951.2 - 1951.4.
H. The discovery by Landlord that any material information related to this
Lease Agreement provided to Landlord by Tenant or its agents is materially false.
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I. Tenant’s failure to comply with any and all applicable statutory laws
affecting the Premises or any part thereof, or the use thereof, as set forth in Section 7.7 of
this Lease Agreement.
J. Any act or omission by Tenant that is expressly prohibited by Section 3.2 of
this Agreement.
K. Tenant’s failure to comply with any condition, provision, or obligation
required by this Lease, and where such failure continues uncured for a period of thirty
(30) calendar days after receiving written notice from Landlord to abate such condition or
cure such noncompliance. However, if the nature of Tenant’s noncompliance is such that
more than 30 days are required to cure, Tenant shall not be in default provided that
Tenant has commenced to cure such noncompliance within the noticed 30 day period and
thereafter continues to diligently pursue such cure to completion.
15.2 Remedies
If Tenant is in Default of this Lease, Landlord, without notice to Tenant except
where expressly provided for by the Lease, may do any one or more of the following:
A. Landlord may terminate this Lease and any and all rights of Tenant
hereunder, by any lawful means. In the event of such termination, Tenant shall
immediately return possession of the Premises to Landlord in the manner stated in Section
2.2. Landlord shall also have the right to recover from Tenant all damages incurred by
Landlord by reason of Tenant’s Default, including, but not limited to, any amount of
unpaid Monthly Base Rent or Additional Rent, Landlord’s costs in recovering possession
of the Premises, Landlord’s costs of re-letting the Premises including any necessary
renovations and alterations, and Landlord’s reasonable litigation costs and attorneys’ fees.
Landlord agrees that it will use its best efforts to mitigate its damages from Tenant’s
Default.
B. Landlord may elect to maintain Tenant’s right to possession of the
Premises, in which case this Lease shall continue in full force and effect. In such event,
Landlord shall be entitled to enforce all of Landlord’s rights and remedies under this
Lease, including, without limitation, the right to recover all of the Monthly Base Rent and
Additional Rent as it becomes due.
C. Landlord may pursue all of its rights and remedies under this Lease, which
shall in any event be cumulative and not exclusive, and shall be in addition to any rights
provided by law or in equity. Unpaid installments of Monthly Base Rent or Additional
Rent, or other unpaid monetary obligations of Tenant under the terms of this Lease, shall
bear interest from the date due at the maximum rate then allowable by law.
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ARTICLE XVI
SUBORDINATION AND ATTORNMENT
16.1 Peaceful and Quiet Use and Possession
For as long as Tenant is not in Default, Tenant shall have peaceful and quiet use
and possession of the Premises without hindrance on the part of Landlord, and Landlord
shall warrant and defend Tenant in such peaceful and quiet use and possession against the
claims of all persons claiming by, through, or under Landlord.
16.2 Subordination
Tenant agrees to subordinate all of its right, title and interest in and to this Lease to
the lien of any deed of trust now or hereafter encumbering the Premises or any portion
thereof, and to all advances made or hereafter to be made upon the security thereof,
provided, however, (a) that such beneficiary or beneficiaries agree in writing delivered to
Tenant to recognize all of Tenant's right, title and interest in and to this Lease, and to not
disturb Tenant’s occupancy (which non-disturbance shall be reflected in a Non-
Disturbance Agreement (“NDA”) satisfactory to Tenant, which NDA shall not modify the
terms of this Lease), so long as Tenant performs and complies with each and all of the
covenants, agreements, terms and conditions under this Lease, and (b) that Tenant, for
itself and its subtenants, shall within ten (10) days after Landlord or such beneficiary or
beneficiaries provides Tenant with written notice to do so, execute and deliver to
Landlord a Subordination and/or NDA as is customary and appropriate and to take such
further action as Landlord or such beneficiary or beneficiaries may deem reasonably
necessary or advisable to effect or maintain such Subordination and/or NDA. Tenant also
agrees that any mortgagee or beneficiary may elect to have this Lease constitute a lien
prior to its mortgage or deed of trust, and in the event of such election and upon
notification by such mortgagee or beneficiary to Tenant to that effect, this Lease shall be
deemed a prior lien to such mortgage or deed of trust, whether this Lease is dated prior to
or subsequent to the date of said mortgage or deed of trust.
16.3 Attornment
Tenant agrees that upon delivery to Landlord of the written election of the
beneficiary of any encumbrance affecting the Premises which is superior to this Lease,
that such encumbrance shall be deemed subordinate to this Lease, and, upon such event,
(a) this Lease shall, without the necessity of any further consideration or action
whatsoever, be deemed superior to such encumbrance, whether this Lease was executed
before or after the execution of such encumbrance, and (b) the beneficiary of such
encumbrance shall have the same rights with respect to this Lease as if this Lease had
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been executed and delivered prior to execution and delivery of such encumbrance and had
thereafter been assigned to such beneficiary; and (ii) if, by reason of Landlord's default
under any encumbrance now or hereinafter affecting the Premises in any way, any or all
of Landlord's interest in and to the Premises is terminated, Tenant (a) shall attorn to the
beneficiary after written confirmation that such beneficiary is in fact the new owner of
the Premises, whether by foreclosure, judicial or trustees' sale, deed in lieu of foreclosure
or otherwise, of any or all of Landlord's interest in or to the Premises; (b) shall recognize
such beneficiary as the Landlord under this Lease; and (c) shall execute and deliver to
Landlord and to such beneficiary, within ten (10) days after Landlord or such beneficiary
provides Tenant with written notice to do so, such documents and take such further action
as Landlord or such beneficiary may deem necessary or advisable to effect or maintain
such attornment.
ARTICLE XVII
NOTICES
17.1 Notices
Any notice, request, demand, approval or consent given or required to be given
under this Lease (“Notices”) shall be in writing and shall be served as follows: (i) by
personal delivery; or (ii) by deposit thereof in any mail facility maintained by the United
States, postage prepaid, certified or registered mail, return receipt required; or (iii) by
overnight delivery service, postage prepaid. All Notices shall be addressed as follows:
To Landlord at: Santa Monica Airport
City of Santa Monica
3223 Donald Douglas Loop South
Santa Monica, CA 90405
with a copy to: City Attorney
City of Santa Monica
1685 Main Street, Third Floor
Santa Monica, CA 90401
To the Tenant at: The Museum of Flying
3100 Airport Avenue
Santa Monica, CA 90405
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All Notices shall be deemed effectively served upon hand delivery or three (3)
business days after deposit in the United States mail or overnight delivery service as
provided above. Either party may, at any time, change its address for receipt of Notice by
sending a notice to the other party in accordance with this Article stating the change and
setting forth the new address.
ARTICLE XVIII
MISCELLANEOUS
18.1 Remedies Cumulative
No reference to any specific right or remedy shall preclude Landlord from
exercising any other right or from having any other remedy or from maintaining any
action to which it may otherwise be entitled at law or in equity. No failure by Landlord to
insist upon the strict performance of any agreement, term, covenant or condition hereof,
or to exercise any right or remedy consequent upon a breach thereof, and no acceptance
of full or partial rental payment during the continuance of any such breach, shall
constitute a waiver of any such breach, agreement, term, covenant or condition. No
waiver by Landlord of any Default by Tenant under this Lease or of any Default by any
other tenant under any other lease of any portion of the Airport shall affect or alter this
Lease in any way whatsoever.
18.2 Successors and Assigns
This Lease and the covenants and conditions herein contained shall inure to the
benefit of and be binding upon Landlord, its successors and assigns, and shall be binding
upon Tenant, its successors and assigns and shall inure to the benefit of Tenant and only
such assigns of Tenant to whom the assignment of this Lease by Tenant has been
consented to by Landlord as provided in Article XIV. Upon any sale or other transfer by
Landlord of its interest in the Premises, Landlord shall be relieved of any obligations
under this Lease occurring thereafter.
18.3 Joint and Several Liability
If two or more individuals, corporations, partnerships or other business
associations shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other business association to pay Monthly Base Rent, or
Additional Rent, or any other charge required to be paid to Landlord under this Lease, and
to perform all other obligations hereunder, shall be deemed to be joint and several, and all
notices, payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other business associations shall be deemed to
have been given or made by, with or to all of them. In like manner, if Tenant is a
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partnership or other business association, the members of which are, by virtue of statute
or federal law, subject to personal liability, then the liability of each such member shall be
joint and several.
18.4 Labor Peace
Notwithstanding any other term or provision of this Lease Agreement, and in order
to protect the City’s proprietary interest in revenues under this Agreement from the
adverse economic effects of labor disputes, Tenant agrees that within sixty (60) days of
being presented with written notice that a labor organization is representing, or is seeking
to represent, Tenant’s employees at the Premises, Tenant shall submit to Landlord a copy
of a valid Labor Peace Agreement executed by both Tenant and said labor organization.
The Labor Peace Agreement shall prohibit such labor organizations and their members
from engaging in picketing, work stoppages, boycotts or other economic interference with
Tenant’s operations at the Premises for the duration of the agreement.
18.5 No Discrimination
It is Landlord’s intent for the Airport to be operated in a manner that all
prospective tenants thereof, and all customers, employees, licensees and invitees of all
tenants shall have the opportunity to obtain all the goods, services, accommodations,
advantages, facilities and privileges of the Airport without discrimination because of race,
creed, color, sex, age, disability, national origin, sexual orientation, Acquired Immune
Deficiency Syndrome, or ancestry. To that end, Tenant shall not discriminate in the
conduct and operation of its business in the Premises against any person or group of
persons because of the race, creed, color, sex, age, disability, national origin, sexual
orientation, Acquired Immune Deficiency Syndrome, or ancestry of such person or group
of persons.
18.6 Entire Agreement
This writing is intended by the parties as a final expression of their agreement and
as a complete and exclusive statement of the terms thereof; all prior negotiations,
considerations and representations between the parties are hereby superseded by this
Lease. No course of prior dealings between the parties or their officers, employees,
agents or affiliates shall be relevant or admissible to supplement, explain or vary any of
the terms of this Lease. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement between the parties or their affiliates shall not
be relevant or admissible to determine the meaning of any of the terms of this Lease. No
representations, understandings or agreements have been made or relied upon in the
making of this Lease other than those specifically set forth herein. This Lease can be
modified only by a writing signed by both parties.
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18.7 Severability
If any term or provision, or any portion thereof, of this Lease, or the application
thereof to any person or circumstances shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to persons or
circumstances, other than those as to which it is held invalid or unenforceable, shall not
be affected thereby, and each term and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
18.8 Authority
If Tenant is organized as a corporate entity, the persons executing this Lease on
behalf of Tenant hereby covenant and warrant that: Tenant is a duly constituted
corporation qualified to do business in the State of California and is in good standing; all
future forms, reports, fees and other documents necessary for Tenant to comply with
applicable law will be filed by Tenant when due; and such persons are duly authorized by
the board of directors of such corporation to execute and deliver this Lease on behalf of
the corporation. In the event Tenant is a partnership, the persons executing this Lease on
behalf of Tenant hereby covenant and warrant that such persons are duly authorized by
the partnership to execute and deliver this Lease on behalf of the partnership. Landlord
shall have the right to request and receive from Tenant information and documentation
supporting such covenants and warranties to Landlord's satisfaction.
18.9 Applicable Law
This Lease and the rights and obligations of the parties hereunder shall be
construed in accordance with the laws of the State of California.
18.10 Control of Access
Landlord, at its option and in its sole discretion, may at any time control and limit
access to, in or about, the Airport and surrounding area for the public health, safety,
welfare, or any public purpose. Landlord shall not be liable or responsible for any
damages arising therefrom to the Premises, buildings, structures, installations or
improvements thereon, or any business or operation of Tenant. Tenant further agrees any
such action by Landlord does not entitle Tenant to a proration of any Monthly Base Rent
or other sums due.
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18.11 Landlord’s Right to Lease
Landlord reserves the right to create any other tenancies in other buildings under
its control at the Airport. Landlord, in the exercise of its sole business judgment, shall
determine how best to promote the interests of the Airport. Tenant does not rely upon,
nor does Landlord represent, that any specific tenant or number of tenants shall occupy
any given space on the Airport.
18.12 Force Majeure
In the event that either party is delayed or hindered from the performance of any
act required hereunder by reason of Force Majeure, then performance of such acts shall
be excused for the period of the delay, and the period for the performance of any such act
shall be extended for a period equivalent to the period of such delay (though in no event
shall the excusal or extension granted hereunder exceed in the aggregate the period of six
months). The provisions of this Section 18.12 shall not, however, operate to excuse
Tenant from prompt payment of Monthly Base Rent or Additional Rent or any other
payment of money required under the terms of this Lease. Force Majeure shall mean and
be strictly limited to the unforeseeable refusal to grant or the denial, revocation or
moratorium of or by applicable governmental authorities of approvals and permits or by
strike, unusually inclement weather (but not rain or wind), fire, riot, insurrection or war.
18.13 Attorneys' Fees
If any legal action is necessary to enforce any provision hereof or to recover
damages by reason of an alleged breach of any provisions of this Lease, the prevailing
party shall be entitled to receive from the losing party all costs and expenses and such
amount as the court may adjudge to be reasonable attorneys' fees for the costs incurred or
the value of legal services received by the prevailing party in such action or proceeding.
18.14 Counterparts
This Lease may be executed in several counterparts, each of which is an original,
and all of which together constitute but one and the same document.
18.15 Security Measures
A. Landlord is under no obligation to provide guard service or other security
measures. Tenant assumes all responsibility for the protection of Tenant, its employees
and agents, invitees, customers, other tenants and licensees and property from acts of
third parties within the Premises.
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B. Tenant, at its sole cost and expense, shall provide for any and all security,
including but not limited to security personnel and security systems, needed for the
Premises. Such security measures shall be subject to the review and approval of
Landlord. Landlord may reasonably require that Tenant alter its security measures and/or
add additional security personnel and security systems in order to provide for adequate
crowd control and protection of the general public at all times within the Premises.
Landlord may further require Tenant to coordinate its security measures with those of
Landlord, any agencies of the City (including the City's police department and related
divisions), or any other governmental entities and their respective law enforcement
agencies, or any other tenant.
18.16 Easements
Landlord reserves to itself the right to grant such easements, rights and dedications
that Landlord deems necessary or desirable, and to cause the recordation of parcel maps
and restrictions so long as such easements, rights, dedications, parcel maps and
restrictions do not unreasonably interfere with Tenant’s use of the Premises. Tenant shall
sign any of the aforementioned documents upon request of Landlord and failure to do so
shall constitute a material breach of this Lease.
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18.17 City Municipal Powers
Notwithstanding any language in this Lease to the contrary, Landlord City of Santa
Monica shall not be restrained in any way from acting in its capacity as a municipal
corporation, complete with all powers and rights attendant thereto.
IN WITNESS WHEREOF, the parties have executed this Lease on the date set
forth above.
ATTEST: CITY OF SANTA MONICA,
a municipal corporation
______________________ By: _________________________
DENISE ANDERSON-WARREN RICK COLE
Acting City Clerk City Manager
APPROVED AS TO FORM: THE MUSEUM OF FLYING
_________________________ By: _______________________________
MARSHA JONES MOUTRIE MUSEUM SIGNATORY
City Attorney
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EXHIBIT 1
Premises Map
REFERENCE:
AGREEMENT NO. 10525
(CCS)