Document:

Exhibit 10.13

651 STRATFORD LEASE

 

THIS LEASE AGREEMENT made
this 20th day of June, 2003 between Rafanelli and Nahas, a
California General Partnership (“Owner”), and MWI Veterinary Supply Co,, an
Idaho Corporation (“Tenant”);

 

LEASE OF PREMISES

 

The Owner hereby leases
to the Tenant and the Tenant hereby rents from the Owner, subject to the tens
and provisions of this Lease, including the General Provisions hereafter set
forth and the Exhibits hereafter identified and attached hereto, those certain
premises (hereafter “Premises”) shown and described on “Exhibit B”
attached hereto and made a part hereof, which Premises are located in that
certain building described in Section 1 of the Basic Lease Provisions
below.  As used in this Lease, reference
to the “Building” shall mean the whole of the building structure, parking
areas, landscaping and other improvements, together with the underlying land.

 

BASIC LEASE PROVISIONS

 

1.                                       Building
Name:                                       651
Stratford

 

2.                                       Premises
Address:                     651 Stratford
Drive, Suite 100, Meridian, ID 83642

 

3.                                       Building
Rentable Area:                                         44,304
square feet.

 

4.                                       Net
Rentable Area of Premises:                           26,374
square feet.

 

5.                                       Premises
Percentage:                                59.53%
(Section 3.03).

 

6.                                       Basic
Annual Rent:                                         $189,892.80
($7.20 per square foot per annum);

 

7.                                       Monthly
Rental Installments:                                     Basic
Rent - $15,824.40 (Section 3.02).

Building Operating Expenses - $ 3,846.21 (Section 3.03).

 

8.                                       Rent
Adjustment:                          (Exhibit G
hereof).

 

9.                                       Initial
Term:                                 Seven
(7) years and Two (2) months.

 

10.                                 Target
Commencement Date:               October 1,
2003.

 

11.                                 Option(s)
to Renew:             Three 5-year options
(Exhibit H hereof).

 

12.                                 Security
Deposit:                            None.

 

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13.                                 Tenant’s
Address for Delivery of Notices:                                                                With
copy to:

 

651 Stratford Drive, Suite #100

Meridian, ID 83642

 

14.                                 Owner’s
Address for Payment of Rent and Delivery of Notices:                                                 With
copy to:

 

	
  651 Stratford

  	
   

  	
  Rafanelli and
  Nahas

  
	
  c/o Rafanelli
  and Nahas

  	
   

  	
  1 Bates Blvd.

  
	
  412 E.
  Parkcenter Blvd., Suite 200

  	
   

  	
  Suite 200

  
	
  Boise, Idaho
  83706

  	
   

  	
  Orinda, CA 94563

  

 

Exhibits
Attached:                      Exhibit A
(Site Plan - Legal Description); Exhibit B (Leasing Plan);Exhibit C
(Rules and Regulations); Exhibit D (Construction); Exhibit E
(Commencement and Expiration); Exhibit F (Sign Criteria); Exhibit G
(Adjustment of Basic Annual Rent); Exhibit H (Option to Renew); Exhibit I
(Additional Insureds); Appendix I (Hazardous Waste); and Appendix II
(Bankruptcy or Insolvency).

 

IN WITNESS WHEREOF, the
parties have executed this Lease, consisting of the foregoing provisions and
the General Provisions and Exhibits attached, as of the date first above
written.

 

	
  OWNER

  RAFANELLI AND NAHAS,

  A California General Partnership

  	
  TENANT:

  MWI VETERINARY SUPPLY CO.

  An Idaho Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Ronald C.
  Nahas

  	
   

  	
  /s/ James F.
  Cleary, Jr.

  	
   

  
	
  Date Signed: 

  	
  June 20,
  2003

  	
   

  	
  Date Signed:

  	
  June 20,
  2003

  	
   

  
	
  By: Ronald C.
  Nahas,

  	
   

  	
   

  	
  By: James F.
  Cleary, Jr.

  
	
  Title: General
  Partner

  	
   

  	
  Title: President
  and CEO

  
							

 

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GENERAL PROVISIONS

 

I.  PREMISES AND COMMON AREAS

 

1.01.                        Premises.  The Premises subject to this Lease shall be
that portion of the Building as shown on Exhibit B extending from the top
surface of the subfloor to the bottom surface of the ceiling above, but
excluding any common stairways, stairwells, hallways, access ways, pipes,
ducts, conduits, wires and appurtenant fixtures serving exclusively or in
common with other parts of the Building. 
The Tenant acknowledges that Net Rentable Area of the Premises as set
forth in the Basic Lease Provisions has been determined in accordance with the
BOMA Standards, and that the Net Rentable Area of the Premises as so specified
includes a pro-rata portion of the interior common areas in the Building.  Tenant shall have the right within sixty (60)
days after the Commencement Date to remeasure the Premises using the aforesaid
standards.  If such remeasurement shall
disclose a square footage different that that set forth herein, the Owner shall
have the right to certify such remeasurement and after notification -to Tenant
of such certification, the Owner and Tenant shall promptly enter into an
amendment of this Lease setting forth the correct square footage, and adjusting
the Annual Base Rent, the Premises Percentage and other charges and allowances
based on such corrected square footage.  The
Tenant accepts the Premises “as is” and, except as described on “Exhibit D”
attached hereto and made a part hereof, the Owner shall have no responsibility
to construct or pay for any tenant or other improvements in the Premises.

 

1.02.                        Common Areas.  Subject to reasonable rules from time to
time made by the Owner and delivered to the Tenant, the Tenant shall have the
right to use in common with the Owner and other tenants the following
(hereafter “Common Areas”):

 

(a)                                  Building Common
Area.  The common stairways, access
ways and passage ways and the common pipes, ducts, conduits, wires and
appurtenant equipment serving the Premises.

 

(b)                                 Floor Common Area.  If the Premises include less than the entire
gross leaseable area of any floor, the common lobbies, hallways, lavatories and
other common facilities.

 

(c)                                  Land Common Area.  Common walkways, interior and exterior window
surfaces, sidewalks and driveways necessary for access to the Building,
landscaping and the parking lot appurtenant to the Building.

 

The Tenant shall neither
temporarily or permanently place or store any materials, supplies, equipment or
other property in the Common Areas.

 

1.03.                        Owner’s Reserved Rights in Common Areas.  The Owner reserves the right, from time
to time, without unreasonable interference with the Tenant’s occupancy, to
install, use, maintain, repair, replace and relocate pipes, ducts, conduits,
wires and appurtenant meters and

 

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equipment for service to other parts of the
Building above the ceiling, surfaces, below the floor surfaces, within the
walls and in the central core areas and to expand the Building.

 

1.04.                        Parking.  The Tenant shall be entitled to park in
common with other tenants of the Building in the parking facilities provided
for all tenants of the Building as shown on Exhibit A attached hereto.  During the term of this Lease and any renewal
terms thereof, the Owner shall provide Tenant with the use of at least 150
parking spaces in said parking facilities on a non-reserved basis.  The Tenant agrees not to overburden the
parking facilities and agrees to cooperate with the Owner and other tenants in
the use of the parking facilities.

 

II.  TERM

 

2.01.                        Initial Term.  The initial term (hereafter “Initial Term”)
of this Lease as set forth in the Basic Lease Provisions shall commence on the
Target Commencement Date specified in the Basic Lease Provisions or such later
date as the Owner substantially completes the improvements to be
constructed/installed by the Owner, if any, described on Exhibit D
(hereafter “Commencement Date”).  If the
Tenant is to construct/install all of the tenant improvements within the
Premises, and such is so specified on Exhibit D, the Commencement Date
shall be the Target Commencement Date unless the delay in the completion of the
tenant improvements is extended under Section 17.14, below, or caused by
the failure of the Owner to timely deliver the Premises to the Tenant.  If the Commencement Date is other than the
first day of a calendar month, the Initial Term shall be computed from the
first day of the calendar month next succeeding the Commencement Date.  Within thirty (30) days after the
Commencement Date, the parties hereto shall confirm the Commencement Date and
Expiration Date in writing.

 

2.02.                        Option to Renew.  If an option(s) to renew the term of this
Lease is indicated in the Basic Lease Provisions, such option(s) to renew shall
be on the terms set forth on “Exhibit H” attached hereto and made a part
hereof.

 

III.  RENT

 

3.01.                        Security Deposit.  Intentionally Omitted.

 

3.02.                        Rent. 
The Tenant shall pay to the Owner, without deduction or off-set, the
Basic Annual Rent for the Premises specified in the Basic Lease Provisions, in
equal monthly installments on the first (1st) day of each calendar month, in
advance, commencing on the Commencement Date. 
Basic Annual Rent for any period less than a full calendar month shall
be pro-rated on a per diem basis.  The
Basic Annual Rent shall be escalated as provided in “Exhibit G” attached
hereto and made a part hereof.

 

3.03.                        Additional Rent.  The Tenant shall reimburse the Owner, as
additional rent, the Tenant’s proportionate share (“Premises Percentage”) of
the Building Operating Expenses (hereafter defined) paid or incurred by the
Owner.  The Tenant’s Premises Percentage
of the Building Operating Expenses shall be determined by multiplying the total
of the Building Operating Expenses by the Tenant’s Premises Percentage set
forth in the Basic Lease Provisions.

 

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All amounts payable by the Tenant under this Section as
Building Operating Expenses may be estimated and shall be paid in equal monthly
installments in advance at the same time and place as provided herein for the
payment of the monthly rent.  Such payment
shall initially be equal to one-twelfth (1/12th) of the total of the Owner’s
reasonable estimate of the Building Operating Expenses for the calendar year,
adjusted to reflect the Owner’s reasonable estimate of anticipated increases or
decreases in the Building Operating Expenses. 
Within one hundred twenty (120) days of the end of each calendar year,
the Owner shall determine the actual amount of the Building Operating Expenses
for the immediately preceding year and furnish the Tenant with a copy of such
calculation, including a calculation of the Tenant’s proportionate share.  If the amount paid by the Tenant for that
year exceeds the Tenant’s proportionate share, the Tenant shall be given a
credit against the next Building Operating Expenses payment(s) due from the
Tenant or a refund, if the term of the Lease has expired.  If the amount paid by the Tenant for that
year is less than the Tenant’s proportionate share of the Building Operating
Expenses, the Tenant shall pay to the Owner the deficit within thirty (30) days
of receipt of the calculation.  Appropriate
adjustment shall be made for any period of less than one (1) full year.

 

The term “Building
Operating Expenses” as used herein shall include all costs for the maintenance
and operation of the Building and the Common Areas as determined by standard
accounting practices and shall include the following costs by way of
illustration but not limitation: real and personal property taxes and the Owner’s
expenses in contesting any such taxes by appropriate legal proceedings; water
and sewer charges; insurance premiums; electricity, gas and other utility
services used in connection with the operation of the Building, including the
Common Areas; lighting; janitorial, trash removal, maintenance and repair with
respect to the exterior of the Building and the Common Areas, including signage
not installed by a tenant; maintenance and repair of the roof of the Building;
general maintenance, repair and replacement of the equipment, components,
facilities and improvements in the Building and the Common Areas; security
services for the Building and the Common Areas; landscaping maintenance and
replacement; parking lot maintenance, including upkeep, repair, seal-coating,
resurfacing, policing, sweeping and cleaning, painting, restriping, snow
removal and ice treatment; Owners Association assessments; alterations required
by applicable law or codes or to protect the health and safety of the tenants
and other persons using the Building and the Common Areas; and an administrative
and overhead charge equal to ten percent (10.0%) of the total of the Building
Operating Expenses.  It is agreed that
the Building Operating Expenses relating to real property taxes, insurance
premiums, common walkways, sidewalks, driveways, loading dock, landscaping,
parking area and any other exterior common areas shall be allocated to the two (2) buildings
shown on Exhibit A hereto and identified as the 625 Building and the 651
Building (hereafter “Stratford Buildings”), based on the rentable area within
each of said buildings.  Any Building
Operating Expense which relates to less than all of the Stratford Buildings
shall be charged to only the building which benefits therefrom and no part of
such Building Operating Expense shall be charged to the building which receives
no benefit therefrom.

 

Notwithstanding the
foregoing, Building Operating Expenses shall not include (i) any cost
representing an amount paid for services or materials to a related person, firm
or entity to the extent such amount exceeds the amount that would be paid for
such services or materials at

 

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the then existing
market rates to an unrelated person, firm or entity; (ii) structural
repairs to the Building and the exterior walls; and (iii) replacement of
the roof of the Building.

 

The failure of the Tenant
to pay the Tenant’s Premises Percentage of the Building Operating Expenses
within the time provided in this Lease shall constitute a default under the
terms hereof in like manner as the failure of the Tenant to pay the Basic
Annual Rent when due.

 

3.04.                        Late Charges.  The Tenant acknowledges that the late
payment of rent to the Owner will cause the Owner to incur costs not
contemplated by this Lease, the exact amount of which the Owner is not capable
of determining.  Accordingly, if any
monthly installment of the Basic Annual Rent shall not be received by the Owner
within ten (10) days after its due date, the Tenant shall pay to the Owner
a late charge equal to ten percent (10%) of such overdue rent.  Further, and in addition to any late charges,
any sums (including rent) payable by the Tenant to the Owner under the terms of
this Lease which shall be past due for a period of thirty (30) or more days,
shall bear interest from the due date at the rate of eighteen percent (18%) per
annum.  Acceptance of a late charge by
the Owner or interest on overdue amounts shall not constitute a waiver of the
Tenant’s default with respect to such overdue amount nor prevent the Owner from
exercising any other rights or remedies granted hereunder.  No payment by the Tenant of an amount less
than that then due shall be deemed or construed other than a part payment on
account of the most recent rent due nor shall any endorsement or statement on
any check or letter accompanying any payment be deemed to create an accord and
satisfaction.

 

3.05.                        Place of Payment.  Until otherwise directed by the Owner in
writing, the Tenant shall deliver all notices and pay all Basic Annual Rent and
other amounts due under this Lease to the Owner at the address for the Owner
set forth in the Basic Lease Provisions.

 

IV.  USE OF PREMISES

 

4.01.                        Use. 
The Tenant shall use the Premises for general office and light
warehouse purposes only.  Any different
use by the Tenant shall first require the prior written consent of the Owner.  The Tenant’s use of the Premises shall be in
full compliance with all statutes, ordinances, rules, regulations and laws
applicable to the Premises and in a manner which shall not result in a nuisance
to or unnecessary disturbance of other tenants of Building.  In the Tenant’s use of the Premises, the
Tenant shall not use, store or dispose of any substance which is classified or
defined as “hazardous” or “toxic” under any federal, state or local law, statute,
ordinance or regulation, excepting therefrom substances in common commercial
use in a general office.  If the Premises
or the Building become contaminated by reason of the Tenant’s breach of the
Tenant’s obligations contained in this Section, the Tenant shall indemnify,
defend, save and hold the Owner harmless from any and all claims, damages,
fines, judgments, penalties, costs, liabilities or losses, including
consequential damages that may result from such contamination, including but
not limited to loss of rent and a decrease in value of the Premises, and any
and all sums paid for settlement of claims, attorneys’ fees, consultant and
expert fees, arising during or after the lease term and arising as a result of
that contamination by the Tenant.  This
indemnification includes, without limitation, any and all costs paid or
incurred by the Owner because of any investigation of the Premises, and/or any
cleanup, removal or restoration required

 

6

 

by applicable Laws or mandated by any
federal, state or local governmental agency or entity, provided that the
hazardous substance(s) are present as a result of the negligence (misfeasance
or nonfeasance), willful misconduct or other acts of the Tenant.  Without limitation of the foregoing, if the
Tenant causes or permits the presence of any hazardous substance(s) on the
Premises and such results in contamination of the Premises, the Tenant shall
promptly, at the Tenant’s sole expense, take any and all necessary action to
return the Premises to the condition existing prior to the presence of any such
hazardous substance(s) on the Premises.  The
Tenant shall first obtain the Owner’s approval of any such remedial action.  The indemnification obligations of the Tenant
as set forth herein shall survive the expiration or earlier termination of this
Lease.  The Tenant shall comply with all rules and
regulations of the National Fire Protection Association, the applicable Fire
Rating Bureau and any similar body.  The
Tenant shall not maintain any item or do anything in or about the Premises
which would cause the increase of insurance rates or make such insurance
unobtainable.  If the Tenant installs on
the Premises any electrical equipment which causes an overload on the electrical
service to the Premises, the Tenant shall pay for all necessary changes to
comply with the requirements of insurers, the providing utility company and any
governmental authorities having jurisdiction thereover.  The Tenant shall not use the Premises in any
manner which would constitute waste.

 

4.02.                        Suitability.  The Tenant acknowledges that the Owner
(including any agent of the Owner) has not made any representation or warranty
with respect to the Premises or concerning their suitability for the uses
intended by the Tenant.  The Tenant
agrees that the Owner has not agreed to undertake any modification, alteration
or improvement of the Premises except as provided on Exhibit D.  The taking of possession of the Premises by
the Tenant shall conclusively establish that the same were at that time in a
satisfactory condition unless within thirty (30) days after the date of
possession the Tenant gives to the Owner a written notice specifying in
reasonable detail items which are defective or in an unsatisfactory condition.

 

4.03.                        Improvements by Tenant - Obligations of Tenant.  If the Tenant is to construct/install any
of the tenant improvements in the Premises, the obligations of the Tenant set
forth in Articles VII, VIII and IX of this Lease shall commence and be in force
and effect from and after the date the Tenant, or the Tenant’s employees,
contractors or agents, take possession of the Premises, notwithstanding that
the Commencement Date is later than the date of said possession.

 

V.  UTILITIES AND SERVICES

 

5.01.                        Owner’s Obligations.  With respect to the Common Areas and
exterior of the Building, the Owner shall provide all utilities and services,
including janitorial and maintenance of the parking lot and sidewalks, and
maintenance of the landscaped areas; provided that the costs and expenses
incurred by the Owner in connection therefor shall be included in the Building
Operating Expenses as provided in Section 3.03 hereof.  The Owner shall have the exclusive right to
select the companies to provide the utilities and services to be furnished to
the Premises.

 

7

 

5.02.                        Tenant’s Obligations.  From and after the date Owner delivers
possession of the Premises to Tenant and continuing through the term of this
Lease, Tenant shall pay all charges for the rental of a trash dumpster and the
removal of trash deposited in said dumpster in the area designated by Owner,
gas, electricity, water, telephone service, security alarm system, if any,
janitorial services with respect to the Premises, including the replacement of
all light bulbs, tubes, ballasts and starters as needed, and all other charges
for services or utilities of whatsoever kind or nature used in, upon or about
the Premises by Tenant or any of its contractors, subtenants, licensees or
concessionaires.  In the event that any
utility or similar service used or consumed by the Tenant on the Premises is
not separately metered and/or billed to the Tenant, the Tenant shall pay a
portion thereof determined by prorating the cost thereof to all tenants who use
or consume the utility or service based on the square footage within each
tenants’ premises served thereby.  The
Owner shall not be liable for any failure to furnish or the limitation on
furnishing any utilities to the Premises when such is the result of accidents,
strikes, lockouts, government action, shortages or conditions beyond the Owner’s
control and the Tenant shall not be entitled to any damages nor shall any such
failure relieve the Tenant of the obligation to pay the full rent reserved
herein or constitute a constructive or other eviction of the Tenant.

 

In addition, the Tenant
shall pay the Tenant’s Premises Percentage of the Building Operating Expenses
as provided in Section 3.03, above.

 

VI.  TAXES

 

6.01.                        Real Property Taxes.  The Owner shall pay all ad valorem real
property taxes levied and assessed against the Building, subject to the
obligation of the Tenant to reimburse the Owner for the Tenant’s Premises
Percentage thereof in the Building Operating Expenses as provided in Section 3.03,
above.

 

6.02.                        Personal Property Taxes.  The Tenant shall pay all personal
property taxes levied and assessed against the Tenant’s fixtures, equipment and
other property.

 

VII.  INSURANCE

 

7.01.                        Landlord’s Insurance.  All insurance maintained by Owner shall
be for the sole benefit of Owner and under Owner’s sole control.

 

(a)                                  Property
Insurance.  Owner agrees to
maintain property insurance insuring the Building against damage or destruction
due to risks including fire, vandalism and malicious mischief in an amount not
less than the replacement cost thereof, in the form and with deductibles and
endorsements as selected by Owner.  At
its election, Owner may instead obtain “All Risk” coverage, and may also obtain
earthquake, pollution, and/or flood insurance in amounts selected by Owner.

 

(b)                                 Optional
Insurance.  Owner, at Owner’s
option, may also carry insurance against loss of rent, in amount equal to the
amount of Basic Annual Rent

 

8

 

and additional rent that Owner could be
required to abate to all building tenants in the event of condemnation, damage
or destruction for a period of twelve months. 
Owner may also carry such other insurance as Owner may deem prudent or
advisable, including, without limitation, liability insurance in such amounts
and on such terms as Owner shall determine. 
Owner shall not be obligated to insure any furniture, machinery, goods,
inventory or supplies which Tenant may keep or maintain in the Premises, or any
leasehold improvements, additions or alterations within the Premises.

 

7.02.                        Tenant’s Insurance.  Tenant shall procure at Tenant’s sole
cost and expense and keep in force during this Lease the following insurance
issued by an insurance company acceptable to Owner and licensed to do business
in the State of Idaho:

 

(a)                                  Commercial
General Liability (“CGL”) Insurance written on an occurrence basis,
covering the Premises and all operations of Tenant in or about the Premises for
bodily injury, property damage and personal injury liability.  Tenant’s CGL coverage shall be written with
limits of not less than: Two-Million Dollars ($2,000,000) each occurrence
(combined single limit for bodily injury and property damage); One-Million
Dollars ($1,000,000) for personal injury liability; One-Million Dollars
($1,000,000) aggregate for products – completed operations; and Two-Million
Dollars ($2,000,000) general aggregate.  The
general aggregate limit shall apply separately to liability arising in
connection with Tenant’s use and occupancy of the Premises.  Said policy shall provide contractual
liability coverage Insuring Tenant’s indemnification obligations under this
Lease.  Said policy shall name the Owner
and those other persons and entities named on “Exhibit I” attached hereto
and made a part hereof as additional insureds thereunder.  Said policy shall provide that its coverage
shall be “primary” and non-contributing with any insurance maintained by Owner
and any party holding an interest to which this Lease may be subordinated.

 

(b)                                 Workers’
Compensation and Employers’ Liability Insurance.  Workers’ Compensation Insurance
shall be provided as required by any applicable law or regulation.  Employers’ Liability Insurance shall be
provided in amounts not less than One-Million Dollars ($1,000,000) each
accident for bodily injury by accident; One-Million Dollars $1,000,000) policy
limit for bodily injury by disease; and One-Million Dollars ($1,000,000) each
employee for bodily injury by disease.

 

(c)                                  Property
Insurance on Tenant’s Improvements and Betterments on an “all risk”
basis, excluding earthquake peril, for one hundred percent (100%) of
replacement value.

 

9

 

(d)                                 Commercial
Auto Liability Insurance with a combined limit of not less than
One-Million Dollars ($1,000,000) for bodily injury and property damage for each
accident.  Such insurance shall cover
liability arising out of any auto (including owned, hired and non-owned autos).

 

(e)                                  General
Insurance Requirements.  All
coverage described in this paragraph shall provide, or shall be endorsed to
provide: that said insurance shall not be canceled nor materially reduced
unless thirty (30) days prior written notice shall have been given to Owner,
and (b) a waiver of all rights of subrogation by the insurance carrier
against Owner, its agents, employees and any party holding an interest to which
this Lease may be subordinated.  Certificate(s)
of insurance, along with any required endorsements, evidencing the foregoing coverage
requirements shall be delivered to Owner by Tenant before commencement of the
term of this Lease and upon renewal of said insurance.

 

7.03.                        Plate Glass.  The Tenant shall be responsible for the
maintenance, repair or replacement of any plate glass on or in the Premises,
but shall have the option to either insure the risk or to self-insure the same.

 

7.04.                        Policy Form.  All policies of insurance provided for
herein shall be issued by insurance companies with a general policyholder’s
rating of not less than A and a financial rating of AAA (or equivalent ratings
if such are changed) as rated in the most current available “Best’s Insurance
Reports” and qualified to do business in the State of Idaho.  Executed copies of the policies of insurance
to be provided by the Tenant, or certificates thereof, shall be delivered to
the Owner within ten (10) days after the Commencement Date of the Initial
Term of this Lease and thereafter within thirty (30) days prior to the
expiration of the term of each policy.  All
public liability and property damage policies shall contain a provision that
the Owner, although named as an additional insured, shall nevertheless be
entitled to recover under such policies for any loss occasioned by the Owner,
or the employees, agents, contractors or invitees of the Owner.  When any such policy shall expire or
terminate, a like renewal or additional policy shall be purchased and
maintained by the Tenant.  All policies
of insurance provided by the Tenant shall be written as primary policies, not
contributing with or in excess of coverage which the Owner may carry, and shall
contain a provision that the insurer shall give to the Owner twenty (20) days’
prior notice in writing of any cancellation or lapse or of any reduction in the
amounts of insurance.

 

7.05.                        Failure of Tenant to Insure.  In the event the Tenant shall fail to
purchase and keep in force any of the insurance required of the Tenant in this
Article, the Owner may, but shall not be required to, purchase and keep in
force the same, in which event the Tenant shall reimburse the Owner the full
amount of the Owner’s expense with respect thereto, said reimbursement to be
made within ten (10) days after demand for such reimbursement by the Owner.  The election by the Owner to purchase said
insurance on behalf of the Tenant shall not

 

10

 

constitute a curing of the default occasioned
by the Tenant’s failure nor be an election of remedies otherwise available to
the Owner.

 

7.06.                        Waiver of Subrogation.  Any insurance policy carried by either
party as required by this Lease shall include a clause or endorsement denying
to the insurer a right of subrogation against the other party to the extent
rights have been waived by the insured prior to occurrence of an injury or loss.  Each party, notwithstanding any provisions of
this Lease to the contrary, hereby waives any rights of recovery against the
other for injury or loss due to hazards covered by insurance containing such a
clause or endorsement to the extent of the insurance proceeds paid or payable
by reason of the injury or loss covered thereby.

 

7.07.                        Non-Liability of Owner.  The Owner shall not be liable for (i) any
bodily or personal injury to any person(s) arising from or occurring on the
Premises, unless caused by the negligence or intentional act of the Owner or
the Owner’s employees, agents or contractors, (ii) any damage to or loss,
by theft or otherwise, of property of the Tenant or of others located on the
Premises, or (iii) injury or damage to property resulting from fire,
explosion, sprinklers, falling plaster, steam, gas, electricity, water, rain,
snow or leaks from the pipes, appliances, plumbing, street or subsurface, or
from any other place or from dampness.  The
Tenant assumes the risk of all property kept or stored on the Premises and
shall hold the Owner harmless from any claims arising out of damage to the same.  The Tenant shall give prompt notice to the
Owner in case of fire or accidents on or in the Premises or defects thereon or
therein.  The Tenant agrees to indemnify,
defend and hold the Owner harmless from any and all claims of and damages for
such bodily and personal injury and property loss.

 

VIII.  MAINTENANCE AND REPAIR

 

8.01.                        Owner’s Obligations.  The Owner shall be responsible for any
structural repairs to the Building, and the exterior walls and roof of the
Building, and for any repairs or maintenance of the Common Areas.  As used herein, “exterior walls” shall not be
deemed to include store front(s), plate glass, including window frames, doors
and appurtenances.  In addition, the
Owner shall be responsible for any maintenance and repairs to any portion of
the Premises and/or the mechanical equipment which maintenance or repairs are
covered by any warranty owned by the Owner. 
The Owner shall be under no obligation to make any repairs, alterations,
replacements or improvements to and upon the Premises or the mechanical
equipment or facilities that exclusively serve the Premises except as provided
in this Lease.  It is further understood
and agreed that the Owner shall not be required to make repairs or perform any
maintenance with respect to the Building, the Premises and/or the mechanical
equipment or facilities necessitated by the negligence or intentional act of
the Tenant (or anyone claiming under the Tenant), or by reason of the failure
of the Tenant to perform or observe any conditions or agreements contained in
this Lease, or caused by alterations, additions or improvements made by the
Tenant or anyone claiming under the Tenant. 
The Tenant shall, at the Tenant’s sole cost and expense, repair any and
all damage to those portions of the Building, the Premises or the Common Areas
to be repaired or maintained by the Owner resulting from the acts or omissions
of the Tenant, the Tenant’s employees, agents, contractors, licensees or
invitees.  The Owner

 

11

 

retains the option of having the Owner’s
contractor repair and maintain the sprinkler system, if any, in the Premises at
the Tenant’s expense.  The Owner shall
not in any way be liable to the Tenant for failure to make repairs as herein
specifically required of the Owner unless the Tenant has previously notified
the Owner, in writing, of the need for such repairs and the Owner has failed to
commence and complete said repairs within a reasonable period of time following
receipt of the Tenant’s written notification. 
As used in the preceding sentence, “reasonable period of time” shall
mean that the Owner has commenced its investigation of the need for such
repairs within ten (10) business days following its receipt of the written
notice of the need therefor from the Tenant and, if such repairs are determined
by the Owner to be necessary and the responsibility of the Owner, the Owner
thereafter diligently commences and completes the same with due allowance being
made for delays occasioned by the time to obtain design services, governmental
approvals and permits, if required, the availability of contractor(s) and
materials and weather.

 

8.02.                        Tenant’s Obligations.  The Tenant shall at all times keep the
Premises in good order, condition and repair, including periodic painting of
the interior of the Premises.  The Tenant’s
duty to maintain and repair includes, but is not limited to: (i) maintaining,
repairing and/or replacement, if required, of all portions of the Premises
and/or the mechanical equipment or facilities that exclusively service the
Premises not to be maintained or repaired by the Owner as provided in Section 8.01
above; provided, however that during the first (1”) year of the Initial Term of
this Lease, the Owner shall be responsible for any repairs or replacements of
the heating, ventilation, and air conditioning (“HVAC”)-equipment serving the
Premises except for any repair or replacement necessitated by the negligence or
intentional act of the Tenant; (ii) maintaining the exterior and interior
of the store front, entrances, doors and windows; (iii) the interior walls
including demising walls; (iv) all utility meters, fixtures, equipment,
heating and air conditioning equipment and systems; (v) lighting,
electrical and plumbing facilities and fixtures; (vi) floor covering,
ceilings and all other interior portions of the Premises; and (vii) the
Tenant’s signs and displays on the exterior of the Premises.  Prior to the Commencement Date of this Lease,
the Owner at the Owner’s sole cost and expense shall have an independent third
party conduct an examination and issue a written report to ascertain that the
HVAC equipment serving the Premises is functioning properly, is in good working
order and is designed in accordance with the “Plans” defined in Exhibit D
of this Lease.  The Owner represents and
warrants to the Tenant that at the Commencement Date of this Lease all plumbing
and electrical equipment and facilities that serve the Premises shall be in
good working order and condition.  Owner
shall contract with a qualified heating and air conditioning service contractor
to perform all routine maintenance to the HVAC equipment serving the Premises,
including the changing of filters as recommended by the manufacturer, and shall
deliver a copy of such service to Tenant. 
Tenant shall reimburse Owner for the cost of such service to Tenant’s
heating, ventilation and air conditioning system within twenty (20) days of
Tenant’s receipt of Owner’s bill for such service.  Any replacements made by the Tenant hereunder
shall be of like or better quality than existed at the Commencement Date of the
Initial Term of this Lease.  The Tenant
shall take good care of the Premises and shall reimburse the Owner for any
repairs thereto or to the Building or Common Areas which are necessitated by
the misuse or negligence of the Tenant, or the Tenant’s employees, agents,
contractors, licensees or invitees.

 

12

 

IX.  INDEMNITY

 

9.01.                        By Tenant.  The Tenant agrees to indemnify and hold
the Owner harmless against all actions, claims, demands, costs, damages or
expenses of any kind on account thereof, including attorneys’ fees and costs of
defense, which may be brought or made against the Owner, or which the Owner may
pay or incur, by reason of the Tenant’s use and occupancy of the Premises or
the Tenant’s failure to perform its obligations under this Lease or which arise
from any accident, incident, injury, damage, from whatever cause, to any person
or property occurring in or about the Premises, except to the extent caused by
negligence or willful acts or omissions of the Owner or any employee, agent or
contractor of the Owner, or the Owner’s breach of this Lease.

 

9.02.                        By Owner.  The Owner agrees to indemnify and hold
the Tenant harmless against all actions, claims, demands, costs, damages or
expense of any kind on account thereof, including attorneys’ fees and costs of
defense, which may be brought or made against the Tenant, or which the Tenant
may pay or incur, by reason of the Owner’s failure to perform its obligations
under this Lease, except to the extent caused by the negligence or willful acts
or omissions of the Tenant or any employee, agent or contractor of the Tenant.

 

9.03.                        Damage to Other Tenants.  The Tenant shall be directly responsible
to other tenants of the Building for any damage caused to them by reason of the
Tenant’s use of the Premises or the Common Areas or by any acts or negligence
of the Tenant, or the Tenant’s employees, agents, contractors or invitees.  As to any damage to the Tenant caused by
other tenants, the Tenant shall look only to such other tenants and not to the
Owner for compensation.

 

X.  ALTERATIONS

 

10.01.                  Consent Required.  The Tenant shall make no alterations,
improvements or additions (“Improvements”) in or about the Premises without the
prior written approval of the Owner.  All
approved Improvements shall be performed at the sole cost of the Tenant in
compliance with all applicable statutes, ordinances, codes and regulations.  Upon expiration of the term of this Lease,
the Improvements shall be considered a part of the Premises and remain therein
unless the Owner shall request their removal, in which event the Improvements
shall be promptly removed by the Tenant and the Premises restored to
substantially the condition existing prior to such Improvements; provided,
however, the Tenant shall have no obligation to remove any improvements to the
Premises installed or made prior to the Commencement Date by the tenant who
previously occupied the Premises or by the Owner pursuant to the “Plans”
defined in Exhibit D of this Lease. 
The granting of the consent by the Owner as provided herein shall not
constitute the appointment of the Tenant as the agent of the Owner with respect
to the approved Improvements.  The Tenant
shall timely perform, at the Tenant’s sole cost, in a good workmanlike manner,
all alterations and/or repairs to the Premises required by any federal, state
or local building, fire, life-safety or similar law, ordinance, code or
regulation adopted or amended after the Commencement Date of this Lease and
applicable to the Premises, or required by reason of any alteration to the
Premises performed by the Tenant or a change in the Tenant’s

 

13

 

use of the Premises, even though such
alteration(s) and/or change in use may be consented to by the Owner.

 

10.02.                  Trade Fixtures.  Trade fixtures, equipment and other
personal property which are installed in the Premises by the Tenant and are not
permanently affixed to the walls, ceilings, floors or other part thereof shall
remain the property of the Tenant and, providing the Tenant is not in default
under this Lease, they may be removed by the Tenant at any time during the term
of this Lease provided that the Tenant promptly repairs all damage resulting
from the installation or removal and fully restores the Premises.

 

10.03.                  Liens Prohibited.  The Tenant shall pay all costs for the
work done by or for the Tenant on the Premises and the Tenant shall keep the
Premises and the Building free and clear of all liens of whatever kind or
nature.  The Tenant shall indemnify, save
and hold the Owner and the Building harmless against any liability, loss,
damage, cost, attorneys’ fees and all other expenses on account of any
prohibited lien.

 

XI.  DAMAGE/EMINENT DOMAIN

 

11.01.                  If during the
Lease term the Premises or the Building, or any substantial part thereof, are
damaged materially by fire or other casualty, or a taking occurs through the
exercise of the power of eminent domain, this Lease shall terminate at the
Owner’s election exercised by a written notice delivered to the Tenant within
thirty (30) days after the casualty or taking has occurred.  In case of damage to or a taking of a part of
the Premises, if the remainder is insufficient for use for the Tenant’s
purposes or if the time required to restore the remainder of the Premises in a
proper condition for use by the Tenant will exceed six (6) months, or if
the Owner does not commence to restore the Premises within sixty (60) days
after the occurrence of the casualty or the taking, and proceed thereafter with
reasonable diligence to completion, the Tenant’s sole remedy shall be the right
to terminate this Lease by a written notice delivered to the Owner within
thirty (30) days after the right to terminate arises.  In case of a taking of the parking facilities
or a portion thereof, if the remainder is insufficient to provide 150 parking
spaces for use by the Tenant’s employees and/or customers, the Tenant’s sole
remedy shall be the right to terminate this Lease by a written notice delivered
to the Owner within thirty (30) days after the right to terminate arises.  In no event shall the Tenant have any right
or interest in any insurance proceeds paid or payable by reason of the casualty
or, with respect to a taking, in the damages or compensation paid or payable
except those portions thereof that are specifically allocated as compensation
for actual expenses incurred by the Tenant for relocation expenses, business
interruption, moving the Tenant’s fixtures, stock in trade and inventory and as
compensation for the taking of the Tenant’s fixtures and lease hold
improvements which shall belong to the Tenant and which Tenant has a right to
remove at the expiration of the term of this Lease.  In the event of a termination of this Lease
by the Owner or the Tenant hereunder, all rent and other sums payable shall be
prorated as of the date of such termination. 
In the event of a taking which permanently reduces the floor area of the
Premises, the Basic Annual Rent shall be proportionately reduced for the
remainder of the term of this Lease and the Tenant’s Premises

 

14

 

Percentage shall be redetermined by dividing
the reduced square footage of the Premises by the total reduced leasable area
within the Building.

 

XII.  ASSIGNMENT AND SUBLETTING

 

12.01.                  Restriction.  The Tenant shall not, either voluntarily
or by operation of law, assign, encumber, pledge, sublet or otherwise transfer
or hypothecate (hereafter “transfer”) this Lease or all any part of the Tenant’s
leasehold estate in the Premises without first obtaining the written consent of
the Owner, which consent shall not be unreasonably withheld provided that the
use of the Premises shall be as described in Section 4.01, above.  The Owner further reserves the right to
refuse to give such consent unless the Tenant remains fully liable during the
unexpired term of this Lease or if, in the Owner’s reasonable discretion and
opinion, (i) the assignment and/or the use of the Premises by the assignee
will cause a breach of any provision (such as a radius, location, use or
exclusivity provision) in any other lease, financing agreement or other
agreement relating to the Building, or entitle another tenant or occupant of
the Building to reduce its rent or terminate its lease, (ii) be in breach
of any restrictions applicable to the Building, (iii) involve the storage,
use or disposal of any material or substance which is then classified as “hazardous”
or “toxic” by any law or regulation, (iv) adversely affect the reputation
or image of the Building, as reasonably determined by the Owner, (v) require
the Owner to perform any alterations to the Premises or the Building by reason
of any applicable law, code or regulation, (vi) the nature or quality of
the business to be conducted on the Premises would be a detrimental influence
with respect to other tenants occupying the Building, or (vii) the
creditworthiness of the proposed assignee or sublessee is less than the
creditworthiness of the Tenant at the date of this Lease.  The Tenant agrees to reimburse the Owner the
Owner’s reasonable attorney’s fees and other necessary costs incurred in
connection with the processing and documentation of any such requested transfer
of this Lease or the Tenant’s interest in and to the Premises.  The consent by the Owner to any assignment or
subletting by the Tenant shall not, unless expressly agreed by the Owner in
writing to the contrary, relieve the Tenant of any obligations under this
Lease, whether accruing before or after such assignment or subletting.  The consent by the Owner to any assignment or
subletting shall not constitute a waiver of the requirement to obtain the Owner’s
consent to subsequent assignments or sublettings.  Each assignee shall, by taking possession of
the Premises, be deemed to have expressly assumed all obligations of the Tenant
under this Lease and shall remain jointly and severally liable with the Tenant
for the full and timely performance of this Lease.  Any transfer of this Lease, the leasehold
estate created hereby, or the Premises or any portion thereof, either voluntarily
or involuntarily, whether by operation of law or otherwise, without the prior
written consent of the Owner, shall be null and void and shall, at the option
of the Owner, constitute a default under this Lease.

 

12.02.                  Subsequent Modifications.  The assignment of this Lease by the
Tenant with the consent of the Owner shall, without being specifically so
stated or agreed, constitute the express agreement by the Tenant that
subsequent modifications of this Lease by the Owner and the assignee shall not (i) require
the prior consent or approval of the Tenant (assignor), or (ii) release or
relieve the Tenant (assignor) from liability hereunder, provided that if such
modifications

 

15

 

increase the rent or other obligations of the
Tenant hereunder, the Tenant’s (assignor’s) liability shall be limited to the
terms of this Lease as the same existed on the date of assignment.

 

12.03.                  Sublease Rent.  If the Tenant subleases the Premises to
someone other than an Affiliate as defined below at a rent in excess of the
rent reserved by the Owner hereunder, the Owner shall have the right to refuse
consent thereto unless seventy five percent (75%) of such excess rent to be
paid by the sublessee is agreed to be, and is, paid to the Owner and such
condition is expressly agreed to be a reasonable limitation upon the Tenant’s
right to sublease the Premises.

 

12.04.                  Assignment or Sublease to Affiliate.  Notwithstanding the foregoing, the Tenant
shall have the right, without the prior written consent of the Owner, to (i) assign
its interest in this Lease to an Affiliate (defined below), or (ii) sublease
all or any part of the Premises to an Affiliate, provided, that (a) the
Tenant delivers to the Owner a written notice of such assignment or sublease at
least fifteen (15) days prior to the effective date thereof, (b) the
Affiliate agrees in a writing, for the benefit of the Owner, to be bound by all
of the terms, conditions and covenants of this Lease, and a full and correct
copy of the same is promptly delivered to the Owner, and (c) the Tenant
remains principally liable and responsible for, and complies with, all
obligations of the “Tenant” under this Lease. 
As used herein, the term “Affiliate” shall mean (1) an entity which
is a successor to the Tenant by either merger or consolidation or pursuant to a
sale of all or substantially all of the Tenant’s assets or stock, or (2) an
entity controlled by, or under common control with, or controlling, the Tenant.  For the purposes of the foregoing, “controlled
by” or “under common control with” or “controlling” shall mean, for any entity,
the power and right to direct or cause the direction of management or policies
of an entity through ownership of voting securities, partners, membership or
otherwise.

 

XIII.  RELOCATION

 

13.01.                  Intentionally Omitted.

 

XIV.  SUBORDINATION AND FINANCING

 

14.01.                  The Tenant
agrees that at all times this Lease and the Tenant’s leasehold estate created
hereby shall be subordinate to the lien of any mortgage, deed of trust or other
encumbrance, together with any renewals, extensions or replacements thereof,
now or hereafter placed, charged or enforced against the Owner’s interest in
the Building and the Premises.  Upon the
request of the Owner, the Tenant agrees to execute and deliver (but without
cost to the Tenant) such documents as may be required to effectuate such
subordination.  In the event the Tenant
shall fail, neglect or refuse to execute and deliver any such document within
ten (10) days after receipt by the Tenant of the document(s) to be
executed by it, to effect such subordination, the Tenant hereby irrevocably
appoints the Owner, and the owner’s successors and assigns, the true and lawful
attorney-in-fact of the Tenant to execute and deliver in the Tenant’s own name
any and all such documents for and on behalf of the Tenant in connection with
such subordination.  In connection with
such subordination, the Owner shall use all reasonable efforts to obtain the
agreement in writing of the mortgagee or the beneficiary named in such
mortgage,

 

16

 

deed of trust or other encumbrance, for the
benefit of the Tenant, that so long as the Tenant is not in default under this
Lease beyond the applicable cure period, the rights of the Tenant hereunder
shall not be terminated or modified nor shall the Tenant’s possession and use
of the Premises be disturbed.

 

XV.  DEFAULT

 

15.01.                  Events of Default.  Time is of the essence of this Lease.  The occurrence of any of the following events
shall constitute a material default and breach of this Lease by the Tenant:

 

(a)                                  The Tenant fails to
occupy the Premises or once occupied, if the Tenant vacates or abandons the
Premises;

 

(b)                                 The Tenant fails to
pay any installment of rent within ten (10) days following its due date
without the requirement of written notice of demand;

 

(c)                                  The Tenant fails to
pay any other sum payable under this Lease within thirty (30) days after
written demand therefore is delivered to the Tenant;

 

(d)                                 The default by the
Tenant in the performance of any of the Tenant’s covenants, agreement or
obligations hereunder (excluding a default in the payment of rent or other
monies due) which continues for thirty (30) days after written notice thereof
is delivered to the Tenant by the Owner;

 

(e)                                  A general assignment
by the Tenant for the benefit of creditors;

 

(f)                                    The filing of a
voluntary petition in bankruptcy by the Tenant, the filing of a voluntary
petition for an arrangement, the filing of a voluntary or involuntary petition
for reorganization or the filing of an involuntary petition by the Tenant’s
creditors which remains undischarged for a period of sixty (60) days; or

 

(g)                                 The Tenant is the
subject of a receivership, attachment or other judicial seizure of substantially
all of the Tenant’s assets on the Premises, such attachment or other seizure
remaining undismissed or undischarged for a period of sixty (60) days after the
levy thereon.

 

15.02.                  Owner’s Remedies.  In the event of a material default and
breach of this Lease by the Tenant, the Owner shall have all rights and
remedies allowed by law or equity including, but not limited to, the following:

 

(a)                                  Damages.  In addition to any other remedy available to
the Owner at law or in equity, all of which other remedies are reserved unto
the Owner, the Owner shall have the right to immediately terminate the Tenant’s
right to

 

17

 

possession of the Premises and/or this Lease
and all rights of the Tenant hereunder by delivering a written notice of
termination to the Tenant.  In the event
that the Owner elects to so terminate such possession and/or this Lease, such
election shall constitute the election by the Owner to accelerate all future
rents payable under this Lease to be immediately due and payable and the Owner
shall have the right to recover from the Tenant the following:

 

(i)                                     The worth at the
time of award of any unpaid rent which has been earned at the time of such
termination; plus

 

(ii)                                  The worth at the time
of award of the amount by which the unpaid rent which would have been earned
after termination until the time of award exceeds the amount of such rental
loss the Tenant proves could have reasonably been avoided; plus

 

(iii)                               The worth at the time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of such rental loss that the Tenant proves
could have reasonably been avoided; plus

 

(iv)                              Any other amount
necessary to compensate the Owner for all detriment proximately caused by the
Tenant’s failure to perform the obligations under this Lease or which in the
ordinary course of things would likely to result therefrom; plus

 

(v)                                 Reasonable attorneys’
fees incurred by the Owner as the result of such material default and breach
and costs in the event suit is filed by the Owner to enforce any remedy; plus

 

(vi)                              At Owner’s election, such
other amounts in addition to or in lieu of the foregoing as may be permitted
from time to time by applicable law.

 

The term “rent” as used
herein shall be deemed to be the annual rent, additional rent and all other
sums required to be paid by the Tenant pursuant to the terms of this Lease.

 

As used in subparagraphs
(i), (ii) and (iii) above, the “worth at the time of award” shall be
determined by allowing interest or discounting, as the case may be, at the rate
equal to the discount rate of the Federal Reserve Bank of San Francisco at the
time of the award.

 

(b)                                 Re-Entry.  In the event of a material default and breach
by the Tenant, the Owner shall have the right, with or without terminating this
Lease, to

 

18

 

re-enter the Premises and remove all persons
and property from the Premises and to store such property in a public warehouse
or elsewhere at the cost of and for the account of the Tenant.

 

(c)                                  Election.  In the event of the vacation or abandonment
of the Premises by the Tenant or if the Owner shall elect to re-enter the
Premises as provided in subsection (b) above, or shall take
possession of the Premises pursuant to legal proceeding or notice provided by
law, and if the Owner does not elect to terminate this Lease as provided in subsection (a) above,
then the Owner may, from time to time, without terminating this Lease, either
recover all rental as it becomes due or re-let the Premises or any part thereof
for such term or terms and at such rent and upon such other terms and
conditions as the Owner, in the Owner’s sole discretion, may deem advisable
with the right to make alterations and repairs to the Premises, the cost of
which shall be chargeable to the Tenant.

If the Owner shall elect to so re-let the Premises, rents received by the Owner
therefrom shall be applied as follows: first, to reasonable attorneys’ fees
incurred by the Owner as a result of the Tenant’s default; second, to the cost
of suit if an action is filed by the Owner to enforce the Owner’s remedies;
third, to the payment of any indebtedness other than rent due under this Lease
from the Tenant; fourth, to the payment of any cost of such re-letting; fifth,
to the payment of the cost of any alterations and repairs to the Premises; and
sixth, to the payment of rent due and unpaid hereunder and the residue, if any,
shall be held by the Owner and applied in payment of future rent as the same
may become due and payable hereunder.  Should
that portion of such rent received from any re-letting during any month which
is applied to the payment of rent hereunder be less than the rent payable
during the month by the Tenant hereunder, the Tenant shall pay such deficiency
to the Owner.  The Tenant shall also pay
to the Owner as soon as ascertained any costs and expenses incurred by the
Owner in re-letting or in making the alterations and repairs to the Premises,
the cost of which is not covered by the rents received from such re-letting.

 

(d)                                 Termination.  No re-entry or taking possession of the
Premises by the Owner pursuant to the provisions of this Lease shall be
construed as an election to terminate this Lease unless a written notice of
such intention is delivered by the Owner to the Tenant.  Notwithstanding a re-letting without
termination by the Owner due to the default by the Tenant, the Owner may at any
time after such re-letting elect to terminate this Lease for such default.

 

19

 

(e)                                  Owner’s Lien.  In addition to any other rights of the Owner
as provided in this Article, upon the default of the Tenant, the Owner shall
have the right to enter the Premises, change the locks on doors to the Premises
and exclude the Tenant therefrom and, in addition, take and retain possession
of any property on the Premises owned by or in the possession of the Tenant as
and for security for the Tenant’s performance. 
The Tenant hereby grants to the Owner a lien under §45-108, Idaho Code,
on all of said property, which lien shall secure the future performance by the
Tenant of this Lease.  No property
subject to said lien shall be removed by the Tenant from the Premises so long
as the Tenant is in default of any monetary obligations under this Lease.  No action taken by the Owner in connection
with the enforcement of the Owner’s rights as provided in this Article shall
constitute a trespass or conversion and the Tenant shall indemnify, save and
hold the Owner harmless from and against any such claim or demand on account
thereof.

 

15.03.                  Remedies Cumulative.  The rights, privileges, elections and
remedies of the Owner set forth in this Lease or allowed by law or equity are
cumulative and the enforcement by the Owner of a specific remedy shall not
constitute an election of remedies and/or a waiver of other available remedies.

 

15.04.                  Mitigation.  The Owner shall have the obligation to
make reasonable efforts to mitigate the loss or damage occasioned by a default
of the Tenant, provided that said obligation to mitigate shall not relieve the
Tenant of the burden of proof as required in this Article or otherwise
affect the rights and remedies available to the Owner in the event of a default
by the Tenant as provided in this Article, or otherwise allowed by law or
equity.  Nothing herein shall obligate
the Owner to mitigate rental loss by re-letting the Premises so long as the
Owner has other similar premises vacant or by re-letting the Premises to a new
tenant whose use of the Premises would be undesirable in the reasonable
judgment of the Owner, require the Owner to expend any money to remodel, alter
or improve the Premises, or would be result in the Owner being in breach or
default of any contractual obligations of the Owner.

 

15.05.                  Owner’s Default.  If Owner shall be in default of any
covenant of this Lease to be performed by it, Tenant, prior to exercising any
right or remedy it may have against Owner on account thereof, shall give Owner
a thirty (30) day written notice of such default, specifying the nature of such
default.  Notwithstanding anything to the
contrary elsewhere in this Lease, Tenant agrees that if the default specified
in said notice is of such nature that it can be cured by Owner, but cannot with
reasonable diligence be cured within said thirty (30) day period, then such
default shall be deemed cured if Owner within said thirty (30) day period shall
have commenced the curing thereof and shall continue thereafter with all due
diligence to cause such curing to proceed to completion.

 

If Owner shall fail to
cure a default of any covenant of this Lease to be performed by it and, as a
consequence of such uncured default, Tenant shall recover a money judgment
against

 

20

 

Owner, such
judgment shall be satisfied solely out of the proceeds of sale received upon
execution of such judgment against the right, title and interest of Owner in
the Building and its underlying realty and out of the rents, or other income
from said property receivable by Owner, or out of the consideration received by
Owner’s right, title and interest in said property, but neither Owner nor any
partner or joint venture of Owner shall be personally liable for any
deficiency.

 

XVI.  SURRENDER OF PREMISES

 

16.01.                  Upon the
expiration or earlier termination of this Lease, the Tenant shall surrender the
Premises to the Owner in as good order and condition as the same are at the
Commencement Date of this Lease or hereafter improved by the Owner or the
Tenant, reasonable wear and tear excepted. 
The Tenant shall, without expense to the Owner, remove from the Premises
all debris, rubbish and property which the Tenant has the right to remove from
the Premises under the terms of this Lease. 
The Tenant agrees that any property of the Tenant not removed by the
Tenant upon the expiration of the term of this Lease (or within seventy-two
(72) hours after termination by reason of the Tenant’s default) shall be deemed
abandoned by the Tenant and the Owner may either (i) retain the same on
the Premises in which case the ownership thereof shall be conclusively deemed
to be transferred to the Owner, or (ii) dispose of the same in any manner
elected by the Owner and the Tenant hereby waives any claim against the Owner
in connection therewith.

 

XVII.  MISCELLANEOUS

 

17.01.                  Owner’s Right of Entry.  The Owner and the Owner’s authorized
representatives shall have the right to enter the Premises at all reasonable
times for the purpose of determining whether the Premises are in good
condition, to make necessary repairs or perform any maintenance, to serve any
notice required or allowed under this Lease or to show the Premises to
prospective brokers, agents, buyers or tenants, in such manner so as to not
unreasonably interfere with Tenant’s business.

 

17.02.                  Quiet Enjoyment.  The Owner agrees that the Tenant, upon
paying the rent and other sums payable by the Tenant under this Lease and
performing the other obligations of the Tenant as set forth in this Lease,
shall quietly have, hold and enjoy the Premises during the term hereof.

 

17.03.                  No Waiver.  The failure of the Owner or the Tenant to
seek redress for violations or to insist upon the strict performance of any
covenant or condition of this Lease shall not be deemed a waiver of such
violation or of any future similar violation and the waiver by the Owner or the
Tenant of any breach shall not be deemed a waiver of any past, present or
future breach of the same or any other term, covenant or condition of this Lease.

 

17.04.                  Notices.  Whenever any notice, approval, consent,
request or election is given or made pursuant to this Lease, it shall be deemed
delivered when it is in writing and personally delivered or deposited in the
United States mail, postage prepaid, certified or registered mail,

 

21

 

return receipt requested and addressed to the
party at the address set forth in the Basic Lease Provisions.

 

17.05.                  Limitation of Owner’s Liability.  The obligations of the Owner under this
Lease do not constitute personal obligations of the Owner or the Owner’s
successors or assigns and the Tenant shall look solely to the real estate that
is the subject of this Lease and to no other assets of the Owner or the Owner’s
successors or assigns for satisfaction of any liability under this Lease.

 

17.06.                  Holding Over.  Should the Tenant continue to occupy the
Premises or any part thereof after the expiration or earlier termination of
this Lease, whether with or against the consent of the Owner, such tenancy
shall be month-to-month at a rent equal to 125% of the Basic Annual Rent in
force and effect for the last month of the term expired or terminated.

 

17.07.                  Attorneys’ Fees and Costs.  If either party shall default under this
Lease and said default is cured with the assistance of an attorney for the
other party, as a part of curing said default, the reasonable attorneys’ fees
incurred by the other party shall be added to the balance due and payable or,
in the case of a non-monetary default, shall be reimbursed to the other party
upon demand.  In the event suit or action
is filed by either party against the other to interpret or enforce this Lease,
the unsuccessful party to such litigation agrees to pay to the prevailing party
all costs and expenses, including attorneys’ fees incurred therein, including
the same with respect to an appeal.

 

17.08.                  Construction.  All parties hereto have either (i) been
represented by separate legal counsel, or (ii) have had the opportunity to
be so represented.  Thus, in all cases,
the language herein shall be construed simply and in accordance with its fair
meaning and not strictly for or against a party, regardless of which party
prepared or caused the preparation of this Lease.

 

17.09.                  Succession.  This Lease shall be binding upon and
shall inure to the benefit of the respective heirs, personal representatives,
successors and assigns of the parties.

 

17.10.                  Estoppel Certificate.  The Tenant shall, at any time upon not
less than ten (10) days’ prior written notice from the Owner, execute,
acknowledge and deliver to the Owner a statement in writing (i) certifying
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect) and the date to which the rent and other
charges are paid in advance, (ii) acknowledging that there are not, to the
Tenant’s knowledge, any uncured defaults on the part of the Owner hereunder, or
specifying such defaults if they are claimed, and (iii) containing any
other certifications, acknowledgments and representations as may be reasonably
requested by the Owner or the party for whose benefit such estoppel certificate
is requested.  Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises or the Real Property.  The
Tenant’s failure to deliver such statement within said time shall be conclusive
upon the Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by the Owner, (ii) that there
are no uncured defaults in the Owner’s performance, (iii) that not more
than an amount equal to one (1) month’s installment of the Basic

 

22

 

Annual Rent has been paid in advance, and (iv) that
such additional certifications, acknowledgments and representations as are
requested under subsection (a) (iii), hereof, are valid, true and
correct as shall be represented by the Owner.  If the Owner desires to finance or refinance
the Premises, the Tenant hereby agrees to deliver to any lender designated by
the Owner such financial statements of the Tenant as may be reasonably required
by such lender.  All such financial
statements shall be received by the Owner in confidence and shall be used only
for the purpose herein set forth.

 

17.11.                  Warranty Re: Financial Statements.  The Tenant and the officer(s) signing
this Lease for a corporate Tenant and each guarantor of this Lease, if any, represent,
wan-ant and certify to the Owner that any financial statement or other
financial information given to the Owner is true, accurate and correct and
truly and accurately represents the financial condition of the Tenant or the
guarantor(s), as the case may be, as of the date of this Lease.  The Tenant and the guarantor(s) acknowledge
that said financial statement(s) and information was given to the Owner to
induce the Owner to execute this Lease and was relied upon by the Owner in so
doing.

 

17.12.                  Notice of ADA Violations.  Within ten (10) days after receipt,
the Owner and the Tenant shall advise the other party in writing, and provide
the other party with copies of any notices claiming or alleging violation of
the Americans with Disabilities Act of 1990 (hereafter “ADA”) relating to the
Premises or the Building, or any claim made or threatened in writing regarding
noncompliance with the ADA and relating to the Premises or the Building, or any
governmental or regulatory actions or investigations instituted or threatened
regarding noncompliance with the ADA and relating to the Premises or the
Building.

 

17.13.                  Severability.  If any term or provision of this Lease
shall be determined by a Court to be invalid or unenforceable, the remainder of
this Lease shall not be affected thereby and each term and provision of this
Lease shall be valid and enforceable to the fullest extent permitted by law.  It is the intention of the parties that if
any provision in this Lease is capable of two constructions, then the provision
shall be interpreted to have the meaning which renders it valid.

 

17.14.                  Force Majeure.  Any prevention, delay or stoppage due
to strikes, lockouts, labor disputes, court orders, acts of God, inability to
obtain labor or materials or reasonable substitutes thereof, government
restrictions, regulations or controls, hostile government action, civil
commotion, fire or other casualty and other causes beyond the reasonable
control of the party obligated to perform shall excuse the performance by such
party for a period equal to any such prevention, delay or stoppage except
the obligations imposed with regard to rent and other charges to be paid by the
Tenant pursuant to this Lease, which obligation shall not be affected thereby.

 

17.15.                  No Recording.  Neither party shall record this Lease or
any memorandum hereof, it being agreed that the Tenant’s possession of the
Premises shall be adequate notice of the Tenant’s leasehold interest.

 

23

 

17.16.                  Article Headings.  The article headings, title and
captions used in this Lease are for convenience only and are not part of this
Lease.

 

17.17.                  Entire Agreement.  This Lease, including the exhibits
attached hereto, contains the entire agreement between the parties as of the
date of this Lease and the execution hereof has not been induced by either
party or any agent of either party, by representations, promises, undertakings
not expressed herein.  There are no
collateral agreements, stipulations, covenants, promises, inducements or
undertakings whatsoever between the parties concerning the subject matter of
this Lease which are not expressly contained herein.

 

17.18.                  Special Provisions.  The following special provisions are a
part of this Lease (if none, write “None”):

 

(a)                                  Right to Lease
Additional Space.  At any time during
the term of this Lease, the Tenant shall have the right of first offer on the
whole of any space which is located in the Building (hereafter “Additional
Space”), which Additional Space was, after the date of this Lease, leased to
and occupied by a third (3rd) party but becomes vacant and available
for lease.  Prior to making or accepting
an offer to lease the Additional Space to or from a third (3rd)
party, the Owner shall deliver to the Tenant a written notice (hereafter “Owner’s
Notice”) advising the Tenant that the Additional Space is available for lease.  If the Tenant is interested in leasing the
Additional Space, the Tenant shall so notify the Owner in writing (hereafter “Tenant’s
Notice”) within Ten (10) business days after the Tenant’s receipt of the
Owner’s Notice.

 

The rent and other
terms of the leasing by the Owner to the Tenant of the Additional Space shall
be at the then prevailing fair market rent and terms, provided, that if, within
ten (10) business days after the delivery by the Tenant to the Owner of
the Tenant’s Notice, the Owner and the Tenant cannot agree on the then
prevailing fair market rent and terms for the Additional Space, rights of the
Tenant to lease the Additional Space shall terminate and end and the Owner shall
have the right to list the Additional Space for lease with a broker and
otherwise solicit third party often for the lease of the Additional Space and
to lease the Additional Spice to a third party without further obligation to
the Tenant.

 

The failure of the
Tenant to deliver the Owner the Tenant’s Notice within the time herein
specified shall be conclusively deemed to be a waiver by the Tenant of its
right of first offer with respect to the Additional Space as provided in this
Section.

 

(b)                                 Cooperation With
Tenant’s Lender.  The Owner agrees
that it shall reasonably cooperate with the Tenant and the Tenant’s lender
(hereafter “Lender”) in connection with the Tenant’s granting to the Lender of
a security interest in any fixtures, equipment or other property owned by the

 

24

 

Tenant and located on the Premises and/or the
assignment of this Lease by the Tenant to the Lender, and shall timely execute
and deliver to the Lender such instruments and documents as may be reasonably
required by the Lender in connection therewith, which instruments and documents
are in a form and content approved by the Owner, in the Owner’s reasonable
discretion; provided, that it shall not be unreasonable for the Owner to
withhold approval of any such instrument or document which (i) grants to
the Lender any rights or remedies which are not in strict conformance with the
rights and remedies granted to the Tenant under this Lease, including, but not
limited to, the right of the Lender to assign the Lease or sublease all or any
portion of the Premises except in accordance with the terms of this Lease
regarding assignment and subletting, (ii) releases the Tenant from the
obligation for the full and timely performance of the Tenant’s obligations
under this Lease, (iii) relieves the Lender from the obligations of the
Tenant under this Lease if the Lender elects to take possession of the
Premises, (iv) expands the time allowed to the Tenant or the Lender for
the curing of any default, (v) does not require the Lender to remove the
collateral from the Premises after receipt of written notice from the Owner
that (a) the Tenant has vacated the Premises or (b) the Owner has
terminated the Lease because of the Tenant’s uncured default, and, further,
provides that any of the collateral not removed from the Premises shall be
deemed abandoned and grants to the Owner the right to remove and dispose of the
same as the Owner elects with all proceeds therefrom to be the property of the
Owner, (vi) does not require the Lender, at its cost, to promptly repair
and restore the Premises after the removal of the collateral from the Premises,
(vii) allows the Lender to conduct an auction sale on the Premises, (viii) does
not require the Lender to indemnify, save and hold the Owner and the Premises
harmless from any loss, damage, claim, lien, cost or expense in connection with
the removal of the collateral from the Premises and the repair and restoration
of the Premises, or (ix) requires the Lender’s prior approval of any
written modification to this Lease signed by the Owner and the Tenant.

 

25Exhibit 10.14

 

FIFTH AMENDMENT

TO CREDIT AGREEMENT

 

This
FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 28, 2005 (this “Amendment”)
by and among MWI VETERINARY SUPPLY CO. and MEMORIAL PET CARE, INC.
(collectively, the “Borrowers”), the Lenders (as defined below) and BANK
OF AMERICA, N.A., as agent for the Lenders (in its capacity as agent, the “Agent”),
is made with reference to that certain Credit Agreement, dated as of June 18,
2002, by and among the Borrowers, the financial institutions from time to time
party thereto (the “Lenders”), and the Agent, as amended by that certain
First Amendment to Credit Agreement, dated as of August 13, 2002, that
certain Second Amendment to Credit Agreement, dated as of December 19,
2003, that certain Third Amendment to Credit Agreement, dated as of September 1,
2004, and that certain Fourth Amendment to Credit Agreement dated as of September 29,
2004 (as so amended and as otherwise modified prior to the date hereof, the “Credit
Agreement”).  Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.

 

RECITAL

 

WHEREAS,
pursuant to Section 11.1 of the Credit Agreement, the Borrowers and the
Lenders desire to amend the Credit Agreement as set forth below to increase the
Letter of Credit Subfacility;

 

NOW,
THEREFORE, in consideration of the premises and the agreements, provisions and
covenants herein contained, the parties hereto agree as follows:

 

AGREEMENT

 

1.                                       Amendments.

 

1.1         Amendment
To Annex A of the Credit Agreement. 
Annex  A of the Credit Agreement
is hereby amended to delete the definitions of “Letter of Credit Subfacility”
and “Unused Letter of Credit Subfacility” in their entirety and to
replace them with the following:

 

“Letter
of Credit Subfacility” means $10,000,000.

 

“Unused
Letter of Credit Subfacility” means an amount equal to $10,000,000 minus
the sum of (a) the aggregate undrawn amount of all outstanding Letters of
Credit plus, without duplication, (b) the aggregate unpaid
reimbursement obligations with respect to all Letters of Credit.

 

 

2.                                       Conditions To Effectiveness Of This
Amendment.  This Amendment
shall be effective only if and when signed by, and when counterparts hereof
shall have been delivered to the Agent (by hand delivery, mail or telecopy) by,
the Borrowers and the Lenders and the Consent of Guarantor in the form attached
hereto shall have been delivered to the Agent by Holdings.

 

3.                                       Miscellaneous.

 

3.1         Reference to and Effect on the Credit Agreement and the other Transaction Documents.

 

(a).                               On
and after the date hereof, each reference in the Credit Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein,” or words of like import referring
to the Credit Agreement, and each reference in the other Transaction Documents
to the “Credit Agreement,” or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement as amended
hereby.

 

(b).                              Except
as specifically amended by this Amendment, the Credit Agreement and the other
documents entered into pursuant to the Credit Agreement and the Liens granted
thereby shall remain in full force and effect and are hereby ratified and
confirmed.

 

(c).                               The
execution, delivery and performance of this Amendment shall not, except as
expressly provided herein, constitute a waiver of any provision of, or operate
as a waiver of any right, power or remedy of the Agent or any Lender under the
Credit Agreement or any of the other Loan Documents.

 

3.2         Headings.  Section and subsection headings in
this Amendment are included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other purpose or be given any
substantive effect.

 

3.3         New York Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

3.4         Counterparts.  This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are
physically attached to the same document.

 

3.5         Complete Agreement.  This Amendment sets forth the complete
agreement of the parties with respect to the subject matter hereof.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Fifth Amendment to Credit Agreement to be duly executed and delivered by
their respective officers thereunto duly authorized as of the date first above
written.

 

 

	
   

  	
  “BORROWERS”

  
	
   

  	
   

  
	
   

  	
  MWI VETERINARY SUPPLY
  CO.,

  
	
   

  	
  an Idaho corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Pat B.
  Thompson

  	
   

  
	
   

  	
   

  	
  Mary Pat B. Thompson

  
	
   

  	
   

  	
  Vice President and
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMORIAL PET CARE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Pat B.
  Thompson

  	
   

  
	
   

  	
   

  	
  Mary Pat B. Thompson

  
	
   

  	
   

  	
  Vice President and Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “AGENT”

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven W. Sharp

  	
   

  
	
   

  	
   

  	
  Steven W. Sharp

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “LENDERS”

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven W. Sharp

  	
   

  
	
   

  	
   

  	
  Steven W. Sharp

  
	
   

  	
   

  	
  Vice President

  

 

 

	
   

  	
  “LENDERS”

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC
  CAPITAL

  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ illegible

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  

 

 

CONSENT OF GUARANTOR

 

The
undersigned is a Guarantor of the Obligations of the Borrower under the Credit
Agreement and hereby (a) consents to the foregoing Amendment, (b) acknowledges
that notwithstanding the execution and delivery of the foregoing Amendment, the
obligations of the undersigned Guarantor are not impaired or affected and the
Guaranty continues in full force and effect, and (c) ratifies its Guaranty
and each of the Loan Documents to which it is a party.

 

IN
WITNESS WHEREOF, the undersigned has executed and delivered this CONSENT OF
GUARANTOR as of the         day of March,
2005.

 

 

	
   

  	
  MWI VETERINARY
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

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