Lease between
Sobrato Development Companies #871 and Komag Incorporated
Section Page #
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Parties........................................................................1
Premises.......................................................................1
Use............................................................................1
Term and Rental................................................................2
Adjustment for Variance in Building Square Footage......................2
Security Deposit...............................................................2
Late Charges...................................................................2
Construction and Possession....................................................3
Building Shell Construction.............................................3
Tenant Improvement Plans................................................3
Preliminary Cost Estimates..............................................3
Final Pricing...........................................................4
Change Orders...........................................................5
Building Shell Costs....................................................5
Tenant Improvement Costs................................................5
Construction............................................................6
Documents...............................................................6
Landlord Overhead & Profit..............................................6
Insurance/Indemnity.....................................................7
Punchlist Items.........................................................7
Other Work by Tenant....................................................7
Parking Lot.............................................................7
Tank Farm...............................................................8
Acceptance of Possession and Covenants to Surrender............................8
Uses Prohibited................................................................8
Alterations and Additions......................................................8
Maintenance of Premises........................................................9
Tenant's Obligations....................................................9
Landlord's Obligations.................................................10
Hazard Insurance..............................................................10
Tenant's Use...........................................................10
Landlord's Liability Insurance.........................................11
Property Insurance.....................................................11
Tenant's Insurance.....................................................11
Waiver.................................................................12
Taxes.........................................................................12
Utilities.....................................................................13
Free From Liens...............................................................14
Compliance With Governmental Regulations......................................14
Toxic Waste and Environmental Damage..........................................15
Landlord's Responsibility..............................................15
Tenant's Responsibility................................................15
Tenant's Indemnity Regarding Hazardous Materials.......................16
Actual Release by Tenant...............................................16
Environmental Monitoring...............................................17
Indemnity.....................................................................17
Advertisements and Signs......................................................18
Attorney's Fees...............................................................18
Tenant's Default..............................................................18
Remedies...............................................................19
Right to Re-enter......................................................19
Abandonment............................................................20
No Termination.........................................................20
Surrender of Lease............................................................20
Habitual Default..............................................................21
Landlord's Default............................................................21
Notices.......................................................................21
Entry by Landlord.............................................................21
Destruction of Premises.......................................................22
Destruction by an Insured Casualty.....................................22
Destruction by an Uninsured Casualty...................................22
Damage or Destruction at End of Term...................................23
Assignment or Sublease........................................................23
Consent by Landlord....................................................23
Assignment or Subletting Consideration.................................23
No Release.............................................................24
Effect of Default......................................................24
Excluded Transfers.....................................................25
Condemnation..................................................................25
Effects of Conveyance.........................................................25
Subordination.................................................................26
Waiver........................................................................26
Holding Over..................................................................27
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Successors and Assigns........................................................27
Estoppel Certificates.........................................................27
Option to Extend the Lease Term...............................................27
Grant and Exercise of Option...........................................27
Determination of Fair Market Rental....................................28
Resolution of a Disagreement over the Fair Market Rental...............29
Tenant's Right of First Refusal...............................................29
Grant..................................................................29
Covenants of Landlord..................................................29
Exercise of Tenant's Right of First Refusal to Purchase................30
Terms for Right of First Refusal to Purchase...........................30
Continuing Right.......................................................30
Exclusive Nature of Option.............................................30
Successors and Assigns.................................................30
Options.......................................................................31
Quiet Enjoyment...............................................................31
Brokers.......................................................................31
Landlord's Liability.........................................................31
Authority of Parties..........................................................32
Transportation Demand Management programs.....................................32
Dispute Resolution............................................................32
Miscellaneous Provisions......................................................32
Rent...................................................................32
Performance by Landlord................................................33
Interest...............................................................33
Rights and Remedies....................................................33
Survival of Indemnities................................................33
Severability...........................................................33
Choice of Law..........................................................33
Time...................................................................33
Entire Agreement.......................................................33
Representations........................................................33
Headings...............................................................34
Exhibits...............................................................34
Approvals..............................................................34
Recordation............................................................34
EXHIBIT "A" - Premises........................................................35
EXHIBIT "B" - Formula for Determination of Base Monthly Rent..................36
EXHIBIT "C" - Shell Plans and Specifications..................................37
EXHIBIT "D" - Building Shell Definition.......................................38
EXHIBIT "E" - Tenant Improvement Plans and Specifications.....................39
Page iii
EXHIBIT "F" - Tenant's Trade Fixtures.........................................40
EXHIBIT "G" - Fee Agreement...................................................41
Page iv
1. Parties: THIS LEASE, is entered into on this 24th day of May, 1996
("Execution Date"), between Sobrato Development Companies #871, a California
Limited Partnership, whose address is 00000 Xxxxx Xx Xxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000 and Komag Incorporated, a Delaware corporation, whose
address is 000 X. Xxxxxxxx Xxxxx, Xxxxxxxx, XX 00000, hereinafter called
respectively Landlord and Tenant.
2.Premises: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
San Xxxx, County of Santa Xxxxx, State of California, and more particularly
described as follows, to-wit:
A 5.60 acre parcel ("Parcel") on the north side of Automation Parkway, San Jose,
California, including all appurtenances and buildings now or during the Term
located thereon. Pursuant to the terms of this Lease, Landlord is obligated to
construct a single story building of approximately 81,778 rentable square feet
("Building"), a parking lot consisting of a minimum of 303 parking spaces
expandable to approximately 341 spaces described as Building 11 on Exhibit "A"
attached hereto. Landlord represents and warrants that Landlord is the fee
simple owner of the Premises. Prior to the Commencement Date, Landlord shall use
its best efforts to record a parcel map to subdivide the Parcel into two
parcels, one for the Premises and the balance for a second building to be
constructed for Tenant pursuant to that certain lease between the parties of
even date herewith.
3. Use: Tenant shall use the Premises only for the following purposes and
shall not change the use of the Premises without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed: Office,
research, development, testing, manufacturing, ancillary warehouse, and other
legal uses. Landlord makes no representation or warranty that any specific use
of the Premises desired by Tenant is permitted pursuant to any Laws. Landlord
represents and warrants to Tenant that, as of the Commencement Date, (i) the
Premises are in compliance with all municipal, county, state and federal
statutes, laws, ordinances, including zoning ordinances, and regulations
governing and relating to the Building Shell; (ii) there shall exist no patent
or, to the best of Landlord's knowledge, latent defect in the Premises; and
(iii) the Premises shall be in good condition and repair and fit for Tenant's
particular purposes. Landlord represents and warrants to Tenant that, as of the
Commencement Date, the land is zoned industrial ("I").
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4. Term and Rental: The term ("Lease Term") shall be for one hundred twenty
(120) months, commencing on the date on which the Building Shell and Tenant
Improvements are Substantially Complete as defined in Article 7.H below
("Commencement Date"), and ending one hundred twenty (120) months thereafter,
("Expiration Date"). In addition to all other sums payable by Tenant under this
Lease, Tenant shall pay as base monthly rent ("Base Monthly Rent") below for the
Premises in an amount determined pursuant to Exhibit "B" attached hereto. Base
Monthly Rent shall increase at the end of the forty-second and eighty fourth
month of the Lease Term by the product of the Base Monthly Rent payable for the
preceding month and one and 147/1000 (1.147). The parties agree to enter into an
amendment to this Lease setting forth the exact amount of the Base Monthly Rent
payable during the Lease Term within fourteen (14) days following determination
by Landlord.
Base Monthly Rent shall be due on or before the first day of each calendar month
during Lease Term. All sums payable by Tenant under this Lease shall be paid in
lawful money of the United States of America, without offset or deduction, and
shall be paid to Landlord at the address specified in Article 1 of this Lease or
at such place or places as may be designated from time to time by Landlord. Base
Monthly Rent for any period less than a calendar month shall be a pro rata
portion of the monthly installment.
A. Adjustment for Variance in Building Square Footage: In the event the
square footage of the Building is other than 81,778 determined by measurement
after completion of construction, within thirty (30) days after the Commencement
Date, Landlord and Tenant shall execute an amendment to the Lease setting forth
the actual rentable square feet of the Building, which calculation shall be
consistent with the BOMA standard for Industrial Buildings (i.e. outside of
outside wall to outside of outside wall without deduction).
5. Security Deposit: None required.
6. Late Charges: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
administrative, processing, accounting charges, and late charges, which may be
imposed on Landlord by the terms of any contract, revolving credit, mortgage or
trust deed covering the Premises. Accordingly, if any installment of Base
Monthly Rent or any other sum due from Tenant shall not be received by Landlord
or Landlord's designee within ten (10) days after Tenant's receipt of written
notice from Landlord that such amount is delinquent, Tenant shall pay to
Landlord a late charge equal to five (5%) percent of such overdue amount which
late charge shall be due and payable with the payment then delinquent. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by
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reason of late payment by Tenant. Acceptance of such late charge by Landlord
shall in no event constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:
7. CONSTRUCTION AND POSSESSION:
A. Building Shell Construction. Landlord shall cause the shell of the
Building ("Building Shell") to be constructed by independent contractors to be
employed by and under the supervision of Landlord, in accordance with the
building shell plans prepared by Comprehensive Architectural Services ("Tenant's
Architect") and approved by Landlord and Tenant and guideline specifications,
which are attached hereto as Exhibit "C" and are incorporated herein by this
reference ("Shell Plans and Specifications"). Landlord shall construct the
Building Shell in accordance with all applicable municipal, local, state and
federal laws, statutes, rules, regulations and ordinances. Landlord shall pay
for all costs and expenses associated with the construction of the Building
Shell up to a maximum amount of Three Million One Hundred Thousand and No/100
Dollars ($3,100,000.00) ("Building Shell Allowance"). The Building Shell shall
include all items customarily included within the definition of a speculative
"building shell," including without limitation, those items set forth in the
Building Shell Definition, attached hereto as Exhibit "D", and incorporated
herein by this reference. Landlord shall provide Tenant half-size vellum
as-built drawings of the Building Shell within thirty (30) days following
completion of construction thereof.
B. Tenant Improvement Plans. Tenant, at Tenant's sole cost and expense,
has also hired Tenant's Architect, to prepare plans and outline specifications
("Tenant Improvement Plans and Specifications") which are attached hereto as
Exhibit "E" with respect to the construction of improvements to the interior
premises ("Tenant Improvements"). The Tenant Improvements shall consist of all
those items not included within in the scope of the Building Shell definition
pursuant to Article 7.A above and Exhibit "D". The Tenant Improvement Plans and
Specifications shall be prepared in sufficient detail to allow Landlord to
construct the Tenant Improvements. Landlord shall construct the Tenant
Improvements in accordance with all Tenant Improvement Plans and Specifications.
Tenant shall pay for all costs and expenses associated with the construction of
the Tenant Improvements.
C. Preliminary Cost Estimates.
i. Building Shell. Within fourteen (14) days after Tenant's
delivery of the Shell
Page 3
Plans and Specifications to Landlord, Landlord shall deliver to Tenant a
preliminary cost estimate of the cost to construct the Building Shell. The
preliminary cost estimate shall contain sufficient detail for Tenant to
understand the cost element of each portion of the proposed Building Shell.
ii. Tenant Improvements. Within fourteen (14) days after
Tenant's delivery of the Tenant Improvement Plans and Specifications to
Landlord, Landlord shall also deliver to Tenant a preliminary cost estimate of
the cost to construct the Tenant Improvements. The preliminary cost estimate
shall contain sufficient detail for Tenant to understand the cost element of
each portion of the proposed Tenant Improvements.
D. Final Pricing.
i. Building Shell. Within ten (10) days after Tenant's
approval of the preliminary cost estimate for the Building Shell, Landlord shall
submit to Tenant competitive bids from a minimum of three (3) subcontractors for
each aspect of the work which is to be performed. Landlord must utilize the low
bid in each case, unless Tenant approves Landlord's use of another
subcontractor, and the cost of the Building Shell shall be based upon
construction expenses equal to the sum of the bid amounts as approved by Tenant.
Upon Tenant's written approval of the contract bids, Landlord and Tenant shall
each be deemed to have given their approval of the final Shell Plans and
Specifications on which the cost estimate was made, and Landlord shall proceed
with the construction of the Building Shell in accordance with the terms of
Article 7.H below. If Tenant does not specifically approve or disapprove the
bids within seven (7) days, Tenant shall be deemed to have approved the bids.
ii. Tenant Improvements. Within ten (10) days after Tenant's
approval of the preliminary cost estimate for the Tenant Improvements, Landlord
shall submit to Tenant competitive bids from a minimum of three (3)
subcontractors for each aspect of the work which is to be performed. Landlord
must utilize the low bid in each case, unless Tenant approves Landlord's use of
another subcontractor, and the cost of the Tenant Improvements shall be based
upon construction expenses equal to the sum of the bid amounts as approved by
Tenant. Upon Tenant's written approval of the contract bids, Landlord and Tenant
shall each be deemed to have given their approval of the final Tenant
Improvement Plans and Specifications on which the cost estimate was made, and
Landlord shall proceed with the construction of the Tenant Improvements in
accordance with the terms of Article 7.H below. If Tenant does not specifically
approve or disapprove the bids within seven (7) days, Tenant shall be deemed to
have approved the bids.
Page 4
E. Change Orders. Tenant shall have the right to order changes in the
manner and type of construction of the Building Shell or the Tenant
Improvements. Any change orders which are submitted by Tenant after the date
which is ten (10) days after the issuance by the City of San Xxxx of a building
permit for the construction of the Building Shell, which cause Landlord's
construction schedule to be delayed shall cause the Commencement Date to occur
one (1) day in advance of the date the Building Shell is Substantially Complete,
as defined in Article 7.H, for each day of delay. Upon request and prior to
Tenant's submitting any binding change order, Landlord shall promptly provide
Tenant with written statements of the cost to implement and the time delay and
increased construction costs associated with any proposed change order, which
statements shall be binding on Landlord. If no time delay or increased
construction cost amount is noted on the written statement, the parties agree
that there shall be no adjustment to the construction cost or the Commencement
Date associated with such change order. If ordered by Tenant, Landlord shall
implement such change order, and the cost of constructing the Tenant
Improvements shall be increased in accordance with the cost statement previously
delivered by Landlord to Tenant for any such change order.
F. Building Shell Costs. Landlord shall pay all costs associated with
the Building Shell. The costs of the Building Shell shall consist of only the
following costs to the extent actually incurred by Landlord in connection with
the construction of the Building Shell: costs of construction, costs of permits,
and the general contractor overhead described in Article 7.J below. During the
course of construction of the Building Shell, Landlord may deliver to Tenant not
more than once each calendar month a written request for payment which shall
include and be accompanied by: (i) Landlord's certified statements setting forth
the amount requested certifying the percentage of completion of each item for
which reimbursement is requested and certifying that the progress payment
requested is due to a subcontractor of Landlord pursuant to a contract between
Landlord and Landlord's subcontractor. Tenant shall pay to Landlord, within
fifteen (15) days after Tenant's receipt of the above items, any costs incurred
by Landlord in excess of the Building Shell Allowance in connection with the
Building Shell in accordance with the Shell Plans and Specifications minus the
retainage set forth below. Tenant shall be entitled to retain ten percent (10%)
of the amount invoiced by Landlord until the Building Shell is "Substantially
Complete" (defined in Article 7.H below). Tenant shall pay the retained balance
owing to Landlord within fifteen (15) days following the date that the Building
Shell is Substantially Complete. All costs for Building Shell shall be fully
documented to and verified by Tenant. The amounts charged to Tenant shall be
limited as provided in Article 7.D.i above.
G. Tenant Improvement Costs. The costs of the Tenant Improvements shall
consist of only the following costs to the extent actually incurred by Landlord
in connection with the construction of the Tenant Improvements: costs of
construction, costs of permits, and the Landlord overhead described in Article
7.J below. During the course of construction of the Tenant Improvements,
Landlord may deliver to Tenant not more than once each calendar month a written
Page 5
request for payment which shall include and be accompanied by: (i) Landlord's
certified statements setting forth the amount requested certifying the
percentage of completion of each item for which reimbursement is requested and
certifying that the progress payment requested is due to a subcontractor of
Landlord pursuant to a contract between Landlord and Landlord's subcontractor.
Tenant shall pay to Landlord, within fifteen (15) days after Tenant's receipt of
the above items, the costs incurred by Landlord in connection with the Tenant
Improvements installed in the Building in accordance with the Tenant Improvement
Plans and Specifications minus the retainage set forth below. Tenant shall be
entitled to retain ten percent (10%) of the amount invoiced by Landlord until
the Tenant Improvements are "Substantially Complete" (defined in Article 7.H
below). Tenant shall pay the retained balance owing to Landlord within fifteen
(15) days following the date that the Tenant Improvements are Substantially
Complete. All costs for Tenant Improvements shall be fully documented to and
verified by Tenant. The amounts charged to Tenant shall be limited as provided
in Article 7.D.ii above.
H. Construction. Landlord shall use its best efforts to obtain a
building permit from the City of San Xxxx as soon as possible after Tenant's
approval of the Shell Plans and Specifications. The Building Shell and Tenant
Improvements shall be deemed substantially complete ("Substantially Complete")
when the Building Shell and Tenant Improvements have been substantially
completed in accordance with the Shell Plans and Specifications and Tenant
Improvement Plans and Specifications, as evidenced by the issuance of a
certificate of occupancy or its equivalent by the appropriate governmental
authority for the Building Shell and Tenant Improvements, and the issuance of a
certificate by Tenant's Architect certifying that the Building Shell and Tenant
Improvements have been completed in accordance with the plans.
I. Documents. Landlord shall at all times keep one (1) complete set of
all contract documents (i.e., approved drawings, shop and setting drawings,
specifications, samples, addenda and change orders) current and in good order on
the job site. Such documents shall be available for review by representatives of
Tenant, its consultants and any public officials at any time. Record drawings
marked with all changes made during the job shall be kept on the job site by
Landlord. Upon acceptance of the work, the record document print set shall be
immediately forwarded to Tenant's Architect for changes to the originals. The
changes shall be noted on the originals and one (1) mylar reproducible set of
the originals shall be forwarded to Tenant. Tenant shall be provided with two
(2) copies of these specifications.
J. Landlord Overhead & Profit. As compensation to Landlord for its
services as general contractor for the Building Shell and Tenant Improvements,
Landlord shall be entitled to a fee as specified in the Fee Agreement attached
as Exhibit "G". Except as provided therein, Landlord
Page 6
shall not be entitled to any other fee or payment from Tenant in connection with
Landlord's services as general contractor.
K. Insurance/Indemnity. Landlord shall indemnify, protect, defend and
hold Tenant harmless from and against all liability, cost, expense, or damage
(including, without limitation, attorneys fees) arising from: (i) the
construction of the Building Shell or the Tenant Improvements; or (ii) any
construction defects, or (iii) any failure to properly construct the Building
Shell or Tenant Improvements in accordance with the approved Shell Plans and
Specifications or Tenant Improvement Plans and Specifications. Tenant's review
and approval of any plans, specifications, or any other documents shall not
relieve Landlord from Landlord's obligations under the foregoing
indemnification. Landlord shall procure (as a cost of the Building Shell) and
keep in effect from the execution date of this Lease until the termination of
this Lease a "Broad Form" liability insurance policy in the amount of Three
Million Dollars ($3,000,000.00), insuring all of Landlord's activities with
respect to the Building and Premises, including Landlord's indemnity obligations
under this Article 7.K. In addition, Landlord shall procure (as a cost of the
Building Shell) builder's risk insurance, insuring the Building Shell and Tenant
Improvements for their full replacement cost while the Building and Tenant
Improvements are under construction, and until the date that the fire insurance
policy described in Article 12 of the Lease is in full force and effect.
L. Punchlist Items. After the Building Shell and Tenant Improvements
are Substantially Complete, Landlord shall immediately correct any construction
defect or other "punchlist" item which Tenant brings to Landlord's attention.
All such work shall be performed in a manner designed to cause the least
possible interruption to Tenant and Tenant's activities on the Premises.
M. Other Work by Tenant. All work not within the scope of work normally
constructed by the construction trades employed on the Building and not
described in the Shell Plans and Specifications or Tenant Improvement Plans and
Specifications, such as furniture, telephone equipment, telephone wiring and
office equipment work, shall be furnished and installed by Tenant.
O. Parking Lot. Landlord, at Landlord's sole cost and expense, shall
construct a parking lot, with a minimum of approximately 303 parking spaces, on
the Premises in the location set forth in Exhibit "C". Landlord shall cause the
parking lot to comply in all respects with all applicable governmental rules,
regulations, and orders, and shall create a sufficient number of parking spaces
to comply with all governmental requirements in connection with the Building.
Page 7
8. Acceptance of Possession and Covenants to Surrender: Tenant agrees
on Expiration Date, or on the sooner termination of this Lease, to surrender the
Premises to Landlord in good condition and repair, reasonable wear and tear,
actions of Landlord or Landlord's Parties, or damage due to casualty excepted.
"Good Condition" shall mean that the interior walls of all office and warehouse
areas, the floors of all office and warehouse areas, all suspended ceilings and
carpeting will be cleaned and free of any major defacements. Tenant on or before
the Expiration Date or sooner termination of this Lease, shall remove all its
personal property and trade fixtures from the Premises, and all property and
fixtures not so removed shall be deemed to be abandoned by Tenant. Tenant shall
ascertain from Landlord at the time Tenant desires to make any Alteration
(including Permitted Alterations), whether Landlord desires to have such
Alteration removed at the Expiration Date or to cause Tenant to surrender the
Alteration to Landlord. If Landlord so notifies Tenant in writing within fifteen
(15) days after Tenant's notice to Landlord that Tenant intends to alter the
Building, then Tenant shall remove such Alteration, as Landlord may require in
such written notice, and shall repair and restore said Building or such part or
parts thereof before the Expiration Date at Tenant's sole cost and expense. If
Landlord has not provided Tenant with such written notice within said fifteen
(15) day period, then Tenant shall have no obligation to remove such Alteration
from the Premises upon the Expiration Date or earlier termination of this Lease.
Notwithstanding the terms of this Article 8, Tenant shall not have an obligation
to remove any Tenant Improvements installed prior to the first anniversary of
the Commencement Date from the Premises at any time.
9. Uses Prohibited: Tenant shall not commit, or suffer to be committed,
any waste upon the said Premises, or any nuisance, or allow any sale by auction
upon the Premises, or allow the Premises to be used for any unlawful purpose, or
place any loads upon the floor, walls, or ceiling which endanger the structure,
or use any machinery or apparatus which will in any manner vibrate or shake the
Premises. Except for materials which may be stored in the enclosed tank farm
area outside the Building, no materials, supplies, equipment, finished products
or semi-finished products, raw materials or articles of any nature or any waste
materials, refuse, scrap or debris shall be stored upon or permitted to remain
on any portion of the Premises outside of the Building proper without Landlord's
prior approval, which approval shall not be unreasonably withheld.
10. Alterations and Additions: Except for those improvements installed
prior to the first anniversary of the Commencement Date and Permitted
Alterations (as defined below), Tenant shall not make, or suffer to be made, any
alteration or addition to the said Premises ("Alterations"), or any part
thereof, without (i) the written consent of Landlord first had and
Page 8
obtained, which consent shall not be unreasonably withheld or delayed, and (ii)
delivering to Landlord the proposed architectural and structural plans, if any,
for all such Alterations. After having obtained Landlord's consent, Tenant
agrees that it shall not proceed to make such Alterations until Tenant has
obtained all required governmental approvals and permits. Tenant further agrees
to provide Landlord (i) written notice of the anticipated start date and actual
start date of the work, and (ii) a complete set of half-size (15" X 21") vellum
as-built drawings. All Alterations shall be constructed in compliance with
applicable buildings codes and laws. Alterations which are not to be deemed as
trade fixtures shall include heating, lighting, electrical systems, air
conditioning, partitioning, carpeting, or any other installation which has
become affixed to the Premises. All Alterations shall be maintained, replaced or
repaired by Tenant at Tenant's sole cost and expense, except as provided in
Section 11 below. Notwithstanding the above, Tenant shall have the right to
remove any trade fixtures, furniture, or process equipment paid for by Tenant
from the Premises at the expiration of the Lease, which items shall include,
without limitation, the items set forth in Exhibit "F" attached hereto and
incorporated herein by this reference.
Notwithstanding the foregoing, Tenant shall have the right, without the
prior written consent of Landlord, to make certain alterations, additions or
improvements (the "Permitted Alterations") which (i) do not affect the Building
systems or structural components of the Building and (ii) which cost less, on an
individual basis, than One Hundred Fifty Thousand Dollars ($150,000), provided
that each such Permitted Alteration is otherwise performed in accordance with
the terms of this Section 10. Ownership of any Alterations, Permitted
Alterations or Tenant Improvements paid for by Tenant shall remain in Tenant
throughout the Term of this Lease, and Tenant shall be entitled to the benefit
of any depreciation or other tax benefits arising therefrom, provided that
Landlord shall, upon the Expiration Date or earlier termination of the Term
hereof, become the owner of any Alterations or Tenant Improvements made to the
Premises which, pursuant to the terms of this Lease, are left on the Premises by
Tenant. Tenant shall give Landlord at least ten (10) days' prior written notice
of any Alteration or Permitted Alteration so that Landlord can post a notice of
non-responsibility with respect thereto.
11. Maintenance of Premises:
A. Tenant's Obligations: Tenant shall, at its sole cost, keep and
maintain and repair and said Premises and appurtenances and every part hereof,
including but not limited to, roof membrane, glazing, sidewalks, parking areas,
telephone, plumbing, electrical and HVAC systems, and all the Tenant
Improvements in good and sanitary order, condition, and repair. Tenant shall
enter into a service contract with a licensed air-conditioning and heating
contractor which contract shall provide for maintenance of all air conditioning
and heating equipment at the Premises in accordance with general industry
practices. Tenant shall pay the cost of all air-conditioning heating, and
elevator equipment repairs which are either excluded from such service contract
or any existing equipment warranties. All wall surfaces and floor tile are to be
maintained in an as good a condition
Page 9
as when Tenant took possession free of holes, gouges, or defacements, except for
damage resulting from normal wear and tear, casualty or other acts of God,
Landlord, Landlord's agents, employees, contractors or invitees ("Landlord
Parties") In no event, however, shall Tenant's obligation to repair under this
subsection extend to (i) damage and repairs covered under any insurance policy
carried by Landlord in connection with the Building; (ii) damage caused in whole
or in part by the negligence or willful misconduct of Landlord or Landlord's
agents, employees, invitees or licensees, (iii) reasonable wear and tear; (iv)
conditions covered under any warranties of contractors; or (v) damage by fire
and other casualties, or acts of governmental authorities, or acts of God and
the elements.
Tenant shall also be responsible, at its sole cost and expense for the
preventive maintenance of the membrane of the roof, which responsibility shall
be deemed properly discharged if (i) Tenant contracts with a licensed roof
contractor who is reasonably satisfactory to both Tenant and Landlord, at
Tenant's sole cost, to inspect the roof membrane at least every six (6) months,
with the first inspection due the sixth (6th) month after the Commencement Date,
and (ii) Tenant performs, at Tenant's sole cost, all preventive maintenance
recommendations made by such contractor within a reasonable time after such
recommendations are made. Such preventive maintenance might include acts such as
clearing storm gutters and drains, removing debris from the roof membrane,
trimming trees overhanging the roof membrane, applying coating materials to seal
roof penetrations, repairing blisters, and other routine measures. Tenant make
available for Landlord's inspection such preventive maintenance contracts and
paid invoices for the recommended work. Tenant agrees, at its expense, to water,
maintain and replace, when necessary, any shrubbery and landscaping. Nothing
herein shall require either Landlord or Tenant to replace any Tenant
Improvements.
B. Landlord's Obligations: Landlord at its sole cost and expense, and
without reimbursement of all or any such costs from Tenant, shall (i) maintain
in good condition, order, and repair, and replace as and when necessary the
structural portions of the building including: the foundation, exterior walls,
structure and structural members, and roof structure of the Building; and (ii)
repair and damage caused by the acts or omissions of Landlord or Landlord's
Parties. Subject to the obligations of Tenant to provide periodic inspections
and perform maintenance of the membrane of the roof in accordance with the
provisions set forth in Article 11.A above, Landlord shall also replace as and
when necessary, the membrane of the roof. Tenant may give Landlord notice of any
repairs or replacements that are required of Landlord under the terms of this
Lease and Landlord shall proceed forthwith to effect the same with reasonable
diligence. In the event of an emergency Tenant shall be empowered to undertake
immediate repairs of such nature as would be Landlord's responsibility and
notify Landlord promptly after such repairs have been undertaken.
12. Hazard Insurance:
A. Tenant's Use: Tenant shall not use, or permit said Premises, or any
part thereof, to
Page 10
be used, for any purpose other than that for which the said Premises are hereby
leased; and no use shall be made or permitted to be made of the said Premises,
nor acts done, which will cause a cancellation of any insurance policy covering
said Building, or any part thereof, nor shall Tenant sell or permit to be kept,
used or sold, in or about said Premises, any article which may be prohibited by
the standard form of fire insurance policies. Tenant shall (subject to the
provisions of Article 17 as to Alterations required which are not a result of
Tenant's specific use), at its sole cost and expense, comply with any and all
reasonable requirements, pertaining to said Premises, of any insurance
organization or company, necessary for the maintenance of reasonable fire and
public liability insurance, covering said Premises and appurtenances.
B. Landlord's Liability Insurance. Landlord shall procure and maintain
during the Term of this Lease a policy of (i) commercial general liability
insurance having a combined single limit for bodily injury and property damage
of not less than One Million Dollars ($1,000,000.00) per occurrence; and (ii) a
general aggregate insurance in an amount of not less than Five Million Dollars
($5,000,000.00). The policy shall provide coverage for blanket contractual
liability (except for the negligence or willful misconduct of the non-insured
party) premises and personal injury coverage. Landlord shall furnish to Tenant
prior to the Commencement Date, and thereafter within thirty (30) days prior to
the expiration of each such policy, a certificate of insurance issued by the
insurance carrier of each policy of insurance carried hereunder.
C. Property Insurance: Landlord agrees to purchase and keep in force
fire, and extended coverage ("All Risk" excluding earthquake) insurance covering
the Premises pursuant to the provisions of Article 10) in amounts not less than
the replacement cost of said Premises as mutually determined by Landlord and
Tenant. Tenant agrees to pay to the Landlord as additional rent, on demand, the
full cost of said insurance as evidenced by insurance xxxxxxxx to the Landlord,
and in the event of damage covered by said insurance which does not result in a
termination of this Lease, the amount of any deductible under such policy,
provided such deductible is not greater than $20,000.00. Payment shall be due to
Landlord within ten (10) days after written invoice to Tenant. It is understood
and agreed that Tenant's obligation under this Article will be prorated to
reflect the commencement and termination dates of this Lease.
Notwithstanding the forgoing, Tenant shall have the right to provide
the hazard insurance for the Premises provided (i) Tenant can obtain such
insurance at a more favorable rate than Landlord; (ii) the form of coverage and
insurer are satisfactory to Landlord and its lender; (iii) Landlord and its
lender are named as additional insured; (iv) such insurance provides that it may
not be subject to cancellation or change except after at least thirty (30) days
written notice to Landlord; and (v) Tenant has delivered to Landlord a
certificate of insurance and additional insured endorsement evidencing such
policy is in effect.
E. Tenant's Insurance: In addition, Tenant agrees to insure its
personal property, the
Page 11
Tenant Improvements, any Alterations not owned by Landlord pursuant to the terms
of Article 10 and to obtain worker's compensation and public liability and
property damage insurance for occurrences within the Premises with combined
limits for bodily injury and property damage of not less than $1,000,000.00 per
occurrence and a general aggregate limit of not less than $5,000,000.00. Tenant
shall name Landlord and Landlord's lender as an additional insured, shall
deliver a copy of the policies and renewal certificates to Landlord. All such
policies shall provide for thirty (30) days' prior written notice to Landlord of
any cancellation, termination, or reduction in coverage.
D. Waiver: Landlord and Tenant hereby waive any and all rights each may
have against the other on account of any loss or damage occasioned to the
Landlord or the Tenant as the case may be, or to the Premises or its contents,
and which may arise from any risk covered by their respective insurance policies
(or which would have been covered had such insurance policies been maintained in
accordance with this Lease), as set forth above. The parties shall obtain from
their respective insurance companies a waiver of any right of subrogation which
said insurance company may have against the Landlord or the Tenant, as the case
may be.
E. General: Insurance required hereunder shall be written by companies
licensed to do business in the state in which the Premises are located and have
a General Policyholder's rating of at least A8 (or such higher rating as may be
required by a lender having a lien on the Property) as set forth in the most
current issue of Best's Insurance Guide. All insurance shall expressly provide
that such policies shall not be cancelable or subject to reduction of coverage
or otherwise be subject to modification except after thirty (30) days prior
written notice to any other party named as additional insureds.
13. Taxes: Tenant shall be liable for, and shall pay prior to delinquency,
all taxes and assessments levied against personal property and trade or business
fixtures, and agrees to pay, as additional rental, all real estate taxes and
assessment installments (special or general) or other impositions or charges
which may be levied on the Premises, upon the occupancy of the Premises and
including any substitute or additional charges which may be imposed during, or
applicable to the Lease Term including real estate tax increases due to a sale
or other transfer of the Premises, as they appear on the City and County tax
bills during the Lease Term, and as they become due. It is understood and agreed
that Tenant's obligation under this Article will be prorated to reflect the
Commencement and Expiration Dates. If, at any time during the Lease Term a tax,
excise on rents, business license tax, or any other tax, however described, is
levied or assessed against Landlord, as a substitute or addition in whole or in
part for taxes assessed or imposed on land or Buildings, Tenant shall pay and
discharge his pro rata share of such tax or excise on rents or other tax before
it becomes delinquent. In the event that a tax is placed, levied, or assessed
against Landlord and the taxing authority takes the position that the Tenant
cannot pay and discharge his pro rata share of such tax on behalf of the
Landlord, then at the sole election of the Landlord, the Landlord may increase
the rental charged hereunder by the exact amount of such tax and Tenant shall
pay such increase as
Page 12
additional rent hereunder. Landlord hereby grants to Tenant the right to
contest, on behalf and in the name of Landlord, all taxes and assessments which
are imposed upon the Premises; Landlord agrees to cooperate fully with Tenant
and to execute all documents requested by Tenant, in connection with any such
contest. If by virtue of any application or proceeding brought by Landlord
results a reduction in the assessed value of the Building during the Lease Term,
Tenant agrees to reimburse Landlord its reasonable, actual third party out of
pocket costs incurred by Landlord in connection with such application or
proceeding.
Notwithstanding the foregoing, the following shall not constitute real
estate taxes for the purposes of this Lease, and nothing contained herein shall
be deemed to require Tenant to pay any of the following: (i) any state, local,
federal, personal or corporate income tax measured by the income of Landlord;
(ii) any estate or inheritance taxes; (iii) any franchise, succession or
transfer taxes; (iv) interest on taxes or penalties resulting from Landlord's
failure to pay taxes, except to the extent such failure is due to Tenant's
failure to pay such taxes to Landlord when provided under this Lease; (v) any
assessments for public improvements or any taxes initiated by Landlord which are
essentially payments to a governmental agency for the right to make improvements
to the Building or surrounding area, to the extent such assessments are not in
effect as of the Execution Date and have not received the prior written consent
of Tenant; and (vi) any environmental tax, surcharge or other fee affecting the
Premises due to Landlord's activities with respect to Hazardous Materials, as
opposed to general, areawide taxes or surcharges with respect to the remediation
or testing for Hazardous Materials. If any assessments affecting the Premises
are payable in installments and Landlord should prepay such assessments in
advance of the date such installments would become due, Tenant shall be solely
responsible for the portion of such assessment that would have normally come due
as an installment, unless consented to by Tenant in writing.
Notwithstanding anything to the contrary contained in this Lease,
Landlord shall pay, and Tenant shall have no responsibility for, any real
property taxes resulting from any change in ownership, sale, or other transfer
of the Premises or Building during the initial Term of the Lease to the extent
that such amount reflects an assessed valuation of the Premises in excess of one
hundred fifty percent (150%) of the "Commencement Date Valuation." The
"Commencement Date Valuation" shall mean the assessed valuation of the Premises
(as improved with the Building) as determined by the Santa Xxxxx County
Assessor, as of the first date after the Commencement Date that the Santa Xxxxx
County Assessor reassesses the Premises based on the completion of construction
of the Building and Tenant Improvements.
14. Utilities: Tenant shall pay directly to the providing utility all
water, gas, heat, light, power, telephone and other utilities supplied to the
Premises. Except for any damages resulting from the negligence, willful
misconduct, or breach of contract by Landlord, or its agents, or contractors
Landlord shall not be liable for a loss of or injury to property, however
occurring, through or in connection with or incidental to furnishing or failure
to furnish any utilities to the
Page 13
Premises and Tenant shall not be entitled to abatement or reduction of any
portion of the Base Monthly Rent so long as any failure to provide and furnish
the utilities to the Premises is due to a cause beyond the Landlord's reasonable
control, and is not the result of the negligence, willful misconduct, or breach
of contract by Landlord, or its agents, or contractors.
In the event of any interruption in utilities or services to be
provided to the Premises, Tenant's rights and remedies shall be as follows: (i)
if such interruption is due to a failure of Tenant to pay the providing utility
when due, Base Rent due hereunder shall not be abated and Landlord shall have no
liability to Tenant whatsoever as a result of such interruption; (ii) if such
interruption is due to the actions of Landlord or Landlord's Parties, the Base
Rent hereunder shall be equitably abated as of the time such interruption
commenced and Landlord shall be liable to Tenant for loss or injury to property
and Tenant's business as a result thereof; (iii) if such interruption is due to
the failure of the providing utility to provide such utility or service to the
Premises and such interruption continues for more than ninety (90) continuous
days, then Tenant shall be entitled to terminate this Lease by delivery of
written notice to Landlord within five (5) days following the expiration of such
ninety (90) day period; and (iv) if such interruption is due to an event of
damage or destruction, the rights of the parties hereunder shall be as described
in Section 28 below.
15. This paragraph intentionally left blank
16. Free From Liens: Except for obligations arising from the construction
of the Building Shell , Tenant Improvements, and parking lot, Tenant shall keep
the Premises free from any liens arising out of any work performed, materials
furnished, or obligations incurred by Tenant. Landlord shall keep the Premises
free from any liens arising out of any work performed, materials furnished, or
obligations incurred in connection with the Building Shell, Tenant Improvements,
or parking lot. In the event Tenant fails to discharge or bond over any such
lien within thirty (30) days after receiving notice of the filing, Landlord
shall be entitled to discharge such lien at Tenant's expense and all resulting
costs incurred by Landlord, including reasonable attorney's fees shall be due
from Tenant as additional rent.
17. Compliance With Governmental Regulations: Tenant shall, at its sole
cost and expense, comply with all of the requirements of all Municipal, State
and Federal authorities now in force, or which may hereafter be in force, which
are imposed as a result of Tenant's particular and specific use of the Premises,
and shall faithfully observe in the use of the Premises all Municipal ordinances
and State and Federal statutes now in force or which may hereafter be in force.
The judgment of any court of competent jurisdiction, or the admission of Tenant
in any action or proceeding against Tenant, whether Landlord be a party thereto
or not, that Tenant has violated any such ordinance or statute in the use of the
Premises, shall be conclusive of that fact as between Landlord and Tenant. In
the event an Alteration is required to the Building Shell by any law, rule,
Page 14
ordinance or decision not in effect as of the Commencement Date of this Lease
which is not imposed as a result of Tenant's particular and specific use of the
Premises (whether pursuant to Article 12 or this Article 17), Tenant shall only
be required to pay that portion of the cost equal to the product of such total
cost multiplied by a fraction, the numerator of which is the number of months
remaining in the Lease Term, the denominator of which is the useful life (in
months) of the Alteration.
18. Toxic Waste and Environmental Damage:
A. Landlord's Responsibility: Landlord represents and warrants to
Tenant that, except as disclosed in the attached environmental studies dated
June 18, 1990, July 2, 1990, July 25, 1994, and the Burrowing Owl study from
X.X. Xxxxxx & Associates, to the best of Landlord's knowledge, the Premises and
the Building, as of the Commencement Date, do not contain any chemicals, toxic
or hazardous gaseous, liquid or solid materials or waste, including without
limitation, material or substance having characteristics of ignitability,
corrosivity, reactivity, or extraction procedure toxicity or substances or
materials which are listed on any of the Environmental Protection Agency's list
of hazardous wastes or which are identified in Section 66680 through 66685 of
Title 22 of the California Administrative Code, 42 U.S.C. Sections 9601, et
seq., 49 U.S.C. Sections 1801, et seq., 42 U.S.C. Sections 6901, et seq., or
California Health and Safety Code Section 25117, as the same may be amended from
time to time ("Hazardous Materials"). Landlord shall indemnify, protect, defend
and hold Tenant harmless from and against all liability, cost, damage and
expense (including, without limitation attorneys' fees) arising from either: (i)
the failure of the representation and warranty contained in the immediately
preceding sentence; (ii) the presence of any Hazardous Materials or Burrowing
Owls on or about the Premises on or prior to the Commencement Date; or (iii) the
presence, release, storage or use of Hazardous Materials on the Premises during
the Term by any party other than Tenant, Tenant's agents, employees, contractors
or invitees ("Tenant's Parties").
B. Tenant's Responsibility: Landlord hereby approves Tenant's use on or
about the Premises of Hazardous Materials used by Tenant in connection with
Tenant's business. Tenant represents and warrants that Tenant will (i) adhere to
all reporting and inspection requirements imposed by Federal, State, County or
Municipal laws, ordinances or regulations and will make available for inspection
by Landlord a copy of any such reports or agency inspections, (ii) obtain and
make available for inspection by Landlord copies of all necessary permits
required for the use and handling Hazardous Materials on the Premises, (iii)
enforce Hazardous Materials handling and disposal practices consistent with
industry standards, (iv) surrender the Premises free from any Hazardous
Materials arising from Tenant's bringing, using, permitting, generating,
emitting or disposing of Hazardous Materials, and (v) properly close the
facility with regard to Hazardous Materials including the removal or
decontamination of any process piping, mechanical ducting, storage tanks,
containers, or trenches which have come become contaminated with Hazardous
Materials and obtain a closure certificate from the local administering agency
prior to the Expiration
Page 15
Date to the extent required by Law.
C. Tenant's Indemnity Regarding Hazardous Materials: Tenant shall
comply, at its sole cost, with all laws pertaining to, and shall indemnify and
hold Landlord harmless from any claims, liabilities, costs or expenses incurred
or suffered by Landlord arising from such bringing, using, permitting,
generating, emitting or disposing of Hazardous Materials on the Premises by
Tenant or Tenant's Parties. Tenant's indemnification and hold harmless
obligations include, without limitation, (i) claims, liability, costs or
expenses resulting from or based upon administrative, judicial (civil or
criminal) or other action, legal or equitable, brought by any private or public
person under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal
law, ordinance or regulation, (ii) claims, liabilities, costs or expenses
pertaining to the identification, monitoring, cleanup, containment, or removal
of Hazardous Materials from soils, riverbeds or aquifers including the provision
of an alternative public drinking water source, and (iii) all reasonable costs
of defending such claims.
D. Actual Release by Tenant: Tenant agrees to notify Landlord upon
learning of any lawsuits which relate to, or orders which relate to the
remedying of, the actual release by Tenant or Tenant's Parties of Hazardous
Materials on or into the soils or groundwater at or under the Premises. Tenant
shall also provide to Landlord all notices required by Section 25359.7(b) of the
Health and Safety Code and all other notices required by law to be given to
Landlord in connection with Hazardous Materials. Without limiting the foregoing,
Tenant shall also deliver to Landlord, within twenty (20) days after receipt
thereof, any written notices from any governmental agency alleging a material
violation of, or material failure to comply with, any federal, state or local
laws, regulations, ordinances or orders, the violation of which of failure to
comply with, poses a foreseeable and material risk of contamination of the
groundwater or injury to humans (other than injury solely to Tenant, its agents
and employees within the Improvements on the Property).
In the event of any release on or into the Premises or into the soil or
groundwater under the Premises of any Hazardous Materials used, treated, stored
or disposed of by Tenant, Tenant agrees to comply, at its sole cost and expense,
with all laws, regulations, ordinances and orders of any federal, state or local
agency relating to the monitoring or remediation of such Hazardous Materials. In
the event of any such release of Hazardous Materials, Tenant agrees to meet and
confer with Landlord and its Lender to attempt to eliminate and mitigate any
financial exposure to such Lender and resultant exposure to Landlord under
California Code of Civil Procedure section 736(b) as a result of such release
and promptly to take reasonable monitoring, cleanup and remedial steps given,
inter alia, the historical uses to which the Property has and continues to be
used, the risks to public health posed by the release, the then available
technology and the costs of remediation, cleanup and monitoring, consistent with
acceptable customary practices for the type and severity of such contamination
and all applicable laws. Nothing in the preceding sentence shall eliminate,
Page 16
modify or reduce the obligation of Tenant under Article 18.B of this Lease to
indemnify and hold Landlord harmless from any claims liabilities, costs or
expenses incurred or suffered by Landlord as provided in Article 18.B of this
Lease. Tenant shall provide Landlord prompt written notice of Tenant's
monitoring, cleanup and remedial steps. Tenant shall have the right, at Tenant's
expense and in Tenant's name, to contest or object in good faith to any alleged
violation by Tenant of any applicable law relating to the use of Hazardous
Materials by appropriate legal proceedings which are not prejudicial to
Landlord's rights if (i) Tenant shall have demonstrated to Landlord's
satisfaction that such legal proceedings shall conclusively operate to prevent
enforcement prior to final determination of any such proceedings. In the event
that, by non-performance of any such items, the Premises is subject to imminent
loss or forfeiture, Tenant shall perform any such act required by the relevant
governmental authority.
In the absence of an order of any federal, state or local governmental
or quasi-governmental agency relating to the cleanup, remediation or other
response action required by applicable law, any dispute arising between Landlord
and Tenant concerning Tenant's obligation to Landlord under this Article 18.D
concerning the Level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by mediation and/or arbitration pursuant to the provisions of
Article 45 of this Lease.
E. Environmental Monitoring: Landlord and its agents shall have the
right, at Landlord's sole cost and expense, (unless Tenant is in violation of
this Article 18 in which event such monitoring shall be at Tenant's expense) to
inspect, investigate, sample and/or monitor the Premises, including any air,
soil, water, groundwater or other sampling or any other testing, digging,
drilling or analysis to determine whether Tenant is complying with the terms of
this Article 18. If Landlord discovers that Tenant is not in compliance with the
terms of this Article 18, any such reasonable costs incurred by Landlord,
including attorneys' and consultants' fees shall be due and payable by Tenant to
Landlord within thirty (30) days following Landlord's written demand therefore.
19. Indemnity: As a material part of the consideration to be rendered to
Landlord, Tenant hereby waives all claims against Landlord for damages to goods,
wares and merchandise, and all other personal property in, upon or about said
Premises and for injuries to persons in or about said Premises, from any cause
except to the extent due to the negligence or willful misconduct of Landlord or
Landlord's Parties to the fullest extent permitted by law, and Tenant shall
indemnify and hold Landlord exempt and harmless from any damage or injury to any
person, or to the goods, wares and merchandise and all other personal property
of any person, arising from the use of the Premises, Building, and/or Project by
Tenant, its employees, contractors, agents and invitees or from the failure of
Tenant to keep the Premises in good condition and repair, as herein provided,
except to the extent due to the negligence or willful misconduct of Landlord or
Landlord's Parties. Further, in the event Landlord is made party to any
litigation due to the acts or omission of Tenant, its
Page 17
employees, contractors, agents and invitees, Tenant will indemnify and hold
Landlord harmless from any such claim or liability including Landlord's costs
and expenses and reasonable attorney's fees incurred in defending such claims.
Landlord shall defend, indemnify by counsel acceptable to Tenant,
protect Tenant, its officers, employees and agents harmless from and against any
liabilities, loss, cost, damage, injury or expense (including reasonable
attorneys' fees and court costs) arising out of or related to the willful
misconduct or negligence of Landlord or Landlord's Parties.
20. Advertisements and Signs: Tenant will not place or permit to be placed,
in, upon or about the exterior of the Building any signs which are prohibited by
the city or other governing authority. The Tenant will not place, or permit to
be placed, upon the exterior of the Building, any signs, advertisements or
notices without the written consent of the Landlord as to type, size, design,
lettering, coloring and location, and such consent will not be unreasonably
withheld. Any sign so placed on the exterior of the Building shall be so placed
upon the understanding and agreement that Tenant will remove same at the
termination of the tenancy herein created and repair any damage or injury to the
exterior of the Building caused thereby, and if not so removed by Tenant then
Landlord may have same so removed at Tenant's expense.
21. Attorney's Fees: In case a suit or alternative form of dispute
resolution should be brought for the possession of the Premises, for the
recovery of any sum due hereunder, or because of the breach of any other
covenant herein, the losing party shall pay to the prevailing party a reasonable
attorney's fee including the expense of expert witnesses, depositions and court
testimony as part of its costs which shall be deemed to have accrued on the
commencement of such action. In addition, the prevailing party shall be entitled
to recover all costs and expenses including reasonable attorney's fees incurred
by the prevailing party in enforcing any judgment or award against the other
party. The foregoing provision relating to post-judgment costs is intended to be
severable from all other provisions of this Lease.
22. Tenant's Default: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant: a) Any failure
by Tenant to pay the rental or to make any other payment required to be made by
Tenant hereunder, where such failure continues for ten (10) days after Tenant's
receipt of written notice thereof by Landlord to Tenant; b) A failure by Tenant
to observe and perform any other provision of this Lease to be observed or
performed by Tenant, where such failure continues for thirty (30) days after
Tenant's receipt of written notice thereof by Landlord; provided, however, that
if the nature of such default is such that the same cannot reasonably be cured
within such thirty (30) day period Tenant shall not be deemed to be in default
if Tenant shall within such period commence such cure and thereafter diligently
prosecute the same to completion; c) The making by Tenant of any general
assignment for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a
Page 18
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
after the filing); the appointment of a trustee or receiver to take possession
of substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within ninety
(90) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within ninety (90)
days. The notice requirements set forth herein are in lieu of and not in
addition to the notices required by California Code of Civil Procedure Section
1161. Any notice given by Landlord to Tenant pursuant to California Civil Code
1161 with respect to any failure by Tenant to pay rent under this Lease on or
before the date the rent is due shall provide Tenant with a period of no less
than ten (10) days to pay such rent or quit.
A. Remedies: In the event of any such default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant: a) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus b) 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
for the same period that Tenant proves could have been reasonably avoided; plus
c) the worth at the time of award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; plus d) any other
amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, and e) at
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable California law.
The term "rent", as used herein, shall be deemed to be and to mean the minimum
monthly installments of Base Monthly Rent and all other sums required to be paid
by Tenant pursuant to the terms of this Lease, all other such sums being deemed
to be additional rent due hereunder. As used in (a) and (b) above, the "worth at
the time of award" is to be computed by allowing interest at the rate of the
discount rate of the Federal Reserve Bank of San Francisco plus five (5%)
percent per annum. As used in (c) above, the "worth at the time of award" is to
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one (1%) percent.
B. Right to Re-enter: In the event of any such default by Tenant,
Landlord shall also have the right, with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant and disposed of by Landlord in any
manner permitted by law.
Page 19
C. Abandonment: In the event of the vacation or abandonment of the
Premises by Tenant or in the event that Landlord shall elect to re-enter as
provided in Article 22.B above or shall take possession of the Premises pursuant
to legal proceeding or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease as provided in Article 22.A above, then
the provisions of California Civil Code Section 1951.4, (Landlord may continue
the lease in effect after Tenant's breach and abandonment and recover rent as it
becomes due, if Tenant has a right to sublet and assign, subject only to
reasonable limitations) as amended from time to time, shall apply and Landlord
may from time to time, without terminating this Lease, either recover all rental
as it becomes due or relet the Premises or any part thereof for such term or
terms and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable with the right to make
alterations and repairs to the Premises. In the event that Landlord shall elect
to so relet, then rentals received by Landlord from such reletting shall be
applied: first, to the payment of any indebtedness other than Base Monthly Rent
due hereunder from Tenant to Landlord; second, to the payment of any cost of
such reletting; third, to the payment of the cost of any alterations and repairs
to the Premises; fourth, to the payment of Base Monthly Rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord and applied in
payment of future Base Monthly Rent as the same may become due and payable
hereunder. Landlord shall have no obligation to relet the Premises following a
default if Landlord has other available space within the Building or Project.
Should that portion of such rentals received from such reletting during any
month, which is applied by the payment of rent hereunder, be less than the rent
payable during that month by Tenant hereunder, then Tenant shall pay such
deficiency to Landlord immediately upon demand therefor by Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
D. No Termination: No re-entry or taking possession of the Premises by
Landlord pursuant to 22.B or 22.C of this Article 22 shall be construed as an
election to terminate this Lease unless a written notice of such intention be
given to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by
Landlord because of any default by Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such default.
23. Surrender of Lease: The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not automatically effect a
merger of the Lease with Landlord's ownership of the Premises. Instead, at the
option of Landlord, Tenant's surrender may terminate all or any existing
sublease or subtenancies, or may operate as an assignment to Landlord of any or
all such subleases or subtenancies, thereby creating a direct Landlord-Tenant
relationship between Landlord and any subtenants.
Page 20
24. Habitual Default: Deleted.
25. Landlord's Default: In the event of Landlord's failure to perform any
of its covenants or agreements under this Lease, Tenant shall give Landlord
written notice of such failure and shall give Landlord thirty (30) days to cure
such failure; provided, however, that if the nature of such default is such that
the same cannot reasonably be cured within such thirty (30) day period Landlord
shall not be deemed to be in default if Landlord shall within such period
commence such cure and thereafter diligently prosecute the same to completion.
In addition, upon any such failure by Landlord, Tenant shall give notice by
registered or certified mail or national overnight courier service to any person
or entity with a security interest in the Premises ("Mortgagee") that has
provided Tenant with written notice (including such Mortgagee's address) of its
interest in the Premises, and shall provide such Mortgagee a period of thirty
(30) days beyond the cure period provided Landlord hereunder to cure such
failure. Tenant shall not make any prepayment of rent more than one (1) month in
advance without the prior written consent of such Mortgagee. Tenant waives any
right under California Civil Code Section 1950.7 or any other present or future
law to the collection of any payment or deposit from such Mortgagee or any
purchaser at a foreclosure sale of such Mortgagee's interest unless such
Mortgagee or such purchaser shall have actually received (or have credited to
it) and not refunded the applicable payment or deposit.
26. Notices: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, national overnight courier service or by personal delivery
addressed to the party to be notified at the address for such party specified in
Article 1 of this Lease, or to such other place as the party to be notified may
from time to time designate by at least five (5) days prior notice to the
notifying party.
27. Entry by Landlord: Upon 24 hours prior notice, Tenant shall permit
Landlord and his agents to enter into and upon said Premises at all reasonable
times subject to any security regulations of Tenant for the purposes of (i)
inspecting the same, (ii) maintaining the Premises, (iii) making repairs,
alterations or additions to the Premises, (iv) erecting additional building(s)
and improvements on the land where the Premises are situated, or on adjacent
land owned by Landlord, or (v) performing any obligations of the Landlord under
the Lease including remediation of hazardous materials if determined to be the
responsibility of Landlord, without any abatement or reduction of rent or
without any liability to Tenant for any loss of occupation or quiet enjoyment of
the Premises thereby occasioned. Tenant shall permit Landlord and Landlord's
Parties, at any time within one hundred eighty (180) days prior to the
Expiration Date, unless Tenant has exercised its option to extend the term
pursuant to Section 37.A (or at any time during the Lease if Tenant is in
default hereunder beyond the applicable cure period), to place upon the Premises
"For Lease" signs and exhibit the Premises to real estate brokers and
prospective tenants at reasonable hours. Landlord agrees that Landlord and
Landlord's Parties shall conduct all of their activities under this
Page 21
Section 27 in a manner which minimizes the interruption to Tenant or Tenant's
activities on the Premises.
28. Destruction of Premises:
A. Destruction by an Insured Casualty: In the event of a partial
destruction of the Premises by a casualty for which Landlord has received
insurance proceeds sufficient to repair the damage or destruction during the
Lease Term from any cause, Landlord shall forthwith repair the same to the
extent of such proceeds, provided such repairs can be made within twelve (12)
months from the date of destruction as reasonably determined by the architect
responsible for the reconstruction such determination to be made within sixty
(60) days of the date of destruction, and such partial destruction shall in no
way annul or void this Lease, except that Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while such repairs are being made,
such proportionate reduction to be based upon the extent to which the making of
such repairs shall interfere with the business carried on by Tenant in the
Premises. For purposes of this Article "partial destruction" shall mean
destruction of no greater than one-third (1/3) of the replacement cost of the
Premises, including the replacement cost of the Tenant Improvements paid for by
Landlord. In the event the Premises (i) are more than partially destroyed, or
(ii) the repairs cannot be made within twelve (12) months from the date of
destruction as reasonably determined by the architect responsible for the
reconstruction such determination to be made within sixty (60) days of the date
of destruction. Landlord shall not be required to restore Alterations or replace
Tenant's fixtures or personal property. In respect to any partial destruction
which Landlord is obligated to repair or may elect to repair under the terms of
this Article, the provision of Section 1932, Subdivision 2, and of Section 1933,
Subdivision 4, of the Civil Code of the State of California and any other
similarly enacted statute are waived by Tenant and the provisions of this
Article 28 shall govern in the case of such destruction. Any disputes between
Landlord and Tenant with respect to the degree of damage or destruction of the
Premises or the time necessary to rebuild shall be resolved by arbitration
pursuant to Section 47 of this Lease.
B. Destruction by an Uninsured Casualty: In the event of a total or
partial destruction of the Premises by a casualty for which Landlord has not
received insurance proceeds sufficient to repair the damage or destruction
during the Lease Term and which would cost in excess of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) to repair, Landlord shall have the
option to terminate this Lease, unless Tenant agrees to contribute the amount of
such uninsured loss beyond the initial $250,000 to repair, which amount shall be
the sole obligation of Landlord. Further if the uninsured damage can not be
repaired within twelve (12) months from the date of destruction as reasonably
determined by the architect responsible for the reconstruction such
determination to be made within sixty (60) days of the date of destruction,
either Landlord or Tenant shall have the option to terminate this lease.
Page 22
C. Damage or Destruction at End of Term: If the Building or Premises is
damaged or destroyed during the last twenty-four (24) months of the Term of the
Lease, and the Premises or Building cannot be fully repaired or restored by
Landlord within ninety (90) days after the date of the damage or destruction,
either Landlord or Tenant may terminate this Lease upon notice to the other,
provided, that Tenant may prevent Landlord's termination of this Lease under
this Section 28.C by exercising Tenant's right to extend the Lease Term as
described in Section 37.
29. Assignment or Sublease:
A. Consent by Landlord: In the event Tenant desires to assign this
Lease or any interest therein including, without limitation, a pledge, mortgage
or other hypothecation, or sublet the Premises or any part thereof, Tenant shall
deliver to Landlord executed counterparts of any such agreement and of all
ancillary agreements with the proposed assignee or subtenant, such assignee or
subtenant's most recent financial statements, and any additional information as
reasonably required by Landlord to determine whether it will consent to the
proposed assignment or sublease. The notice shall give the name and current
address of the proposed assignee/subtenant, proposed use of the Premises, rental
rate and current financial statement; and upon request to Tenant, Landlord shall
be given additional information as reasonably required by Landlord to determine
whether it will consent to the proposed assignment or sublease. Landlord shall
then have a period of ten (10) days following receipt of the foregoing
agreement, statements and additional information within which to notify Tenant
in writing that Landlord elects (i) to permit Tenant to assign or sublet such
space to the named assignee/subtenant on the terms and conditions set forth in
the notice, or (ii) to refuse consent, which consent shall not be unreasonably
withheld or delayed. If Landlord should fail to notify Tenant in writing of such
election within said ten (10) day period, Landlord shall be deemed to have
elected option (i) above. Landlord's consent (which must be in writing and in
form reasonably satisfactory to Landlord) to the proposed assignment or sublease
shall not be unreasonably withheld or delayed. Tenant shall not advertise or
publicize the availability of the Premises without prior notice to Landlord.
B. Assignment or Subletting Consideration: If Tenant shall assign,
sublease or otherwise transfer all or any portion of the Premises to a party
other than Tenant Affiliate (as defined in 29.E below), Landlord and Tenant
shall evenly divide any rent or other consideration paid to Tenant in connection
with such assignment, sublease or other transfer which is in excess of the base
rent due under this Lease, after first deducting out for the Tenant's account
the cost of (i) broker's commissions paid by Tenant with regard to the transfer;
(ii) legal fees; (iii) the cost of improvements made to the Premises at Tenant's
expense to the extent such improvements increase the rent paid under the
sublease over that which would have been paid without such improvements; (iv)
any tenant improvements made by Tenant at Tenant's expense for the purpose of
transfer; (v) all rent paid by Tenant to Landlord while the Premises were vacant
prior to such transfer; and (vi) any other expenses incurred by Tenant in
effectuating the transfer. The terms of this section shall survive the
Page 23
expiration or earlier termination of the Lease. The above provision relating to
the allocation of bonus rent are independently negotiated terms of the Lease,
constitute a material inducement for the Landlord to enter into the Lease, and
are agreed as between the parties to be commercially reasonable. No assignment
or subletting by Tenant shall relieve Tenant of any obligation under this Lease.
Any assignment or subletting which conflicts with the provisions hereof shall be
void.
C. No Release: Any assignment or sublease shall be made only if and
shall not be effective until the assignee or subtenant shall execute,
acknowledge and deliver to Landlord an agreement, in form and substance
satisfactory to Landlord, whereby the assignee or subtenant shall assume all of
the obligations of this Lease on the part of Tenant to be performed or observed
and shall be subject to all of the covenants, agreements, terms, provisions and
con[ditions contained in this Lease, except as expressly provided for therein.
Notwithstanding any such sublease or assignment and the acceptance of rent by
Landlord from any subtenant or assignee, Tenant and any guarantor shall and will
remain fully liable for the payment of the rent and additional rent due
hereunder, and to become due hereunder, for the performance of all of the
covenants, agreements, terms, provisions and conditions contained in this Lease
on the part of Tenant to be performed and for all acts and omissions of any
licensee, subtenant, assignee or any other person claiming under or through any
subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant shall further indemnify, defend and hold Landlord
harmless from and against any and all losses, liabilities, damages, costs and
expenses (including reasonable attorney fees) resulting from any claims that may
be made against Landlord by the proposed assignee or subtenant or by any real
estate brokers or other persons claiming a commission or similar compensation in
connection with the proposed assignment or sublease.
D. Effect of Default: In the event of Tenant's default, Tenant hereby
assigns all rents due from any assignment or subletting to Landlord as security
for performance of its obligations under this Lease and Landlord may collect
such rents, except that Tenant may collect such rents unless a default occurs as
described in Article 22 and 24 above. The termination of this Lease due to
Tenant's default shall not automatically terminate any assignment or sublease
then in existence; at the election of Landlord, such assignment or sublease
shall survive the termination of this Lease and, upon such election, the
assignee or subtenant shall attorn to Landlord and Landlord shall undertake the
obligations of the Tenant under the sublease or assignment; provided the
Landlord shall not be liable for prepaid rent, or security deposits not received
by Landlord or other defaults of the Tenant to the subtenant or assignee, or any
acts or omissions of Tenant, its agents, employees, contractors or invitees.
Notwithstanding anything to the contrary in this Lease, no event of default
shall be deemed to have occurred by virtue of any act or omission of any
subtenant or assignee of Tenant, unless Landlord has delivered to Tenant written
notice of such act or omission, and has given Tenant the period(s) of time
specified in Article 22 to cure such default.
Page 24
E. Excluded Transfers: Tenant may assign this Lease or sublet any
portion of the Premises without Landlord's consent to any of the following (i)
any corporation which controls, is controlled by or under common control with
Tenant; (ii) any corporation resulting from the merger or consolidation of
Tenant if (a) the successor to Tenant has a net worth, computed in accordance
with generally accepted accounting principles, at least equal to the greater of
(1) the net worth of Tenant immediately prior to such transfer or (2) the net
worth of Tenant herein named on the date of this Lease, and (b) proof
satisfactory to Landlord of such net worth shall have been delivered to Landlord
at least ten (10) days prior to the effective date of any such transaction;
(iii) any person or entity which acquires all of the assets of Tenant as a going
concern of the business that is being conducted on the Premises (collectively,
"Tenant Affiliate"), provided that such assignee assumes in full the obligations
of Tenant under the Lease.
30. Condemnation: If any part of the Premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and only a part thereof remains which is susceptible
of occupation hereunder, this Lease shall as to the part so taken, terminate as
of the day before title shall vest in the condemnor or purchaser ("Vesting
Date"), and the Base Monthly Rent payable hereunder shall be adjusted so that
the Tenant shall be required to pay for the remainder of the Lease Term only
such portion of such Base Monthly Rent as the value of the part remaining after
such taking bears to the value of the entire Premises prior to such taking; but
in such event Landlord and Tenant shall have the option to terminate this Lease
as of the Vesting Date. If all of the Premises, or such part thereof be taken so
that the remaining portion is unusable for Tenant's business therein, as
reasonably determined by Tenant, Tenant may terminate this Lease as of Vesting
Date. Landlord shall be entitled to any award paid for if the Premises is wholly
or partially condemned, except that Tenant shall have the right to receive from
either the condemning authority or Landlord, as applicable, all proceeds and
other compensation received in connection with condemnation to the extent paid
for (i) any Tenant Improvements or Alterations made by or at the expense of
Tenant; (ii) Tenant's loss of goodwill; (iii) Tenant's relocation costs; and
(iv) Tenant's loss of business and business interruption. Tenant hereby waives
the provisions of California Code of Civil Procedures Section 1265.130 and any
other similarly enacted statue are waived by Tenant and the provisions of this
Article 30 shall govern in the case of such destruction.
31. Effects of Conveyance: The term "Landlord" as used in this Lease, means
only the owner for the time being of the Premises so that, in the event of any
sale or other conveyance of the Premises, or in the event of a master lease of
the Premises, the Landlord shall be and hereby is entirely freed and relieved of
all covenants and obligations of the "Landlord" hereunder, but only so long as
the new Landlord expressly assumes in writing all the obligations of Landlord
under this Lease, and delivers to Tenant a written agreement by which the new
Landlord assumes such obligations, and it shall be deemed and construed, without
further agreement between the parties
Page 25
and the purchaser at any such sale, or the master tenant of the Premises, that
the purchaser or master tenant of the Premises has assumed and agreed to carry
out any and all covenants and obligations of the Landlord hereunder arising
after the effective date of the transfer to the new Landlord. Such transferor
shall transfer and deliver Tenant's security deposit to the purchaser at any
such sale or the master tenant of the Premises, and thereupon the such
transferor shall be discharged from any further liability in reference thereto.
32. Subordination: Simultaneously with the execution of this Lease,
Landlord shall deliver to Tenant a non-disturbance agreement from Landlord's
existing lender or lenders, if any, in form and substance acceptable to Tenant,
by which such lender or lenders agree not to disturb Tenant's possession of the
Premises so long as Tenant is not in material default of the terms of this Lease
beyond any applicable cure period at the time such lender or lenders foreclose
on the Premises. This Lease shall be subordinate to any future ground lease,
deed of trust, or other hypothecation for security only so long as Landlord
delivers to Tenant prior to the effective of such subordination a written
non-disturbance agreement, in form and substance acceptable to Tenant, by which
such Lender or other party agrees not to disturb Tenant's possession of the
Premises if Tenant is not in material default of Tenant's obligations under this
Lease beyond any applicable cure period at the time such party becomes the fee
owner of the Premises. Subject to the above, in the event Landlord notifies
Tenant in writing, this Lease shall be subordinate to any ground Lease, deed of
trust, or other hypothecation for security now or hereafter placed upon the real
property of which the Premises are a part and to any and all advances made on
the security thereof and to renewals, modifications, replacements and extensions
thereof. Tenant agrees to promptly execute and deliver any documents which may
be required to effectuate such subordination.
33. Waiver: The waiver by Landlord or Tenant of any breach of any term,
covenant or condition, herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment of rent due shall be deemed to be other than payment on account of
the amount due. No delay or omission in the exercise of any right or remedy by
Landlord or Tenant shall impair such right or remedy or be construed as a waiver
thereof by the non-defaulting party. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Premises, shall constitute
acceptance of the surrender of the Premises by Tenant before the Expiration Date
(only written notice from Landlord to Tenant of acceptance shall constitute such
acceptance of surrender of the Premises). Landlord's consent to or approval of
any act by Tenant which require Landlord's consent or approvals shall not be
deemed to waive or render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.
Page 26
34. Holding Over: Any holding over after the termination or Expiration
Date, shall be construed to be a tenancy from month to month, terminable on
thirty (30) days written notice from either party, and Tenant shall pay Base
Monthly Rent to Landlord at a rate equal to one hundred twenty five percent
(125%) of the Base Monthly Rent due in the month preceding the termination or
Expiration Date for the first two (2) months of any hold over and one hundred
fifty percent (150%) of the Base Monthly Rent thereafter plus all other amounts
payable by Tenant under this Lease. Any holding over shall otherwise be on the
terms and conditions herein specified, except those provisions relating to the
Lease Term and any options to extend or renew, which provisions shall be of no
further force and effect following the expiration of the applicable exercise
period.
35. Successors and Assigns: The covenants and conditions herein contained
shall, subject to the provisions of Article 29, apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties hereto; and
all of the parties hereto shall be jointly and severally liable hereunder.
36. Estoppel Certificates: Tenant shall at any time during the Lease Term,
within ten (10) days following receipt of written notice from Landlord, respond
to any request by Landlord for a statement in writing certifying (i) that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification); (ii) the date to which the rent and other charges
are paid in advance, if any; (iii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder or specifying
such defaults if they are claimed; and (iv) such other information as Landlord
may reasonably request. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises. Tenant also agrees to
provide the most current three (3) years of audited financial statements within
five (5) days of a request by Landlord for Landlord's use in financing the
Premises with commercial lenders.
37. Option to Extend the Lease Term:
X. Xxxxx and Exercise of Option: Landlord hereby grants to Tenant, upon
and subject to the terms and conditions set forth in this Article 37 four (4)
options (the "Options") to extend the Lease Term for an additional term (the
"Option Term"), each Option Term shall be for a period of sixty (60) months.
Each such Option shall be exercised, if at all, by written notice to Landlord no
earlier than the date that is twenty four (24) months prior to the Expiration
Date but no later than the date that is twelve (12) months prior to the
Expiration Date. Thirteen (13) months prior to the Expiration Date Landlord
shall provide Tenant with a written notice of the fact that the Option will
expire in thirty (30) days. If Tenant exercises the Option, each of the terms,
covenants and conditions of this Lease except this Article shall apply during
the Option Term as though the expiration date of the Option Term was the date
originally set forth herein as the Expiration Date, provided that the Base
Monthly Rent to be paid by Tenant during the Option Term shall be the greater of
(i) the Base
Page 27
Monthly Rent payable on the Commencement Date, or (ii) ninety five percent (95%)
of the Fair Market Rental, as hereinafter defined, for the Premises for the
Option Term. Anything contained herein to the contrary notwithstanding, if
Tenant is in monetary or material non-monetary default beyond any applicable
cure period under any of the terms, covenants or conditions of this Lease either
at the time Tenant exercises the Option or at any time thereafter prior to the
commencement date of the Option Term, Landlord shall have, in addition to all of
Landlord's other rights and remedies provided in this Lease, the right to
terminate the Option upon notice to Tenant, in which event the expiration date
of this Lease shall be and remain the Expiration Date or the expiration of the
then relevant Option Term. As used herein, the term "Fair Market Rental" for the
Premises shall mean the rental and all other monetary payments including any
escalations and adjustments thereto (including without limitation Consumer Price
Indexing) then being obtained for leases of space comparable in age and quality
to the Premises in the locality of the Building that Landlord could obtain
during the Option Term from a third party desiring to lease the Premises for the
Option Term based upon the current use and other potential uses of the Premises.
The appraisers shall be instructed that the foregoing five percent (5%) discount
is intended to reduce comparable rents which include (i) brokerage commissions,
(ii) tenant improvement allowances, and (iii) vacancy costs, to account for the
fact that Landlord will not suffer such costs in the event Tenant exercises its
Option. The Fair Market Rental shall specifically exclude any additional rental
attributable to the value of the Tenant Improvements or Alterations paid for by
Tenant.
B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send to Tenant a notice setting forth the Fair Market Rental for
the Premises for the Option Term within thirty (30) days of Tenant's exercise of
the Option. If Tenant disputes Landlord's determination of the Fair Market
Rental for the Option Term, Tenant shall, within thirty (30) days after the date
of Landlord's notice setting forth the Fair Market Rental for the Option Term,
send to Landlord a notice stating that Tenant either (i) elects to terminate its
exercise of the Option, in which event the Option shall lapse and this Lease
shall terminate on the Expiration Date, or (ii) disagrees with Landlord's
determination of Fair Market Rental for the Option Term and elects to resolve
the disagreement as provided in Article 37.C below. If Tenant does not send to
Landlord a notice as provided in the previous sentence, Landlord's determination
of the Fair Market Rental shall be the basis for determining the Base Monthly
Rent to be paid by Tenant hereunder during the Option Term. If Tenant elects to
resolve the disagreement as provided in Article 37.C below and such procedures
shall not have been concluded prior to the commencement date of the Option Term,
Tenant shall pay as Base Monthly Rent to Landlord the rent due hereunder during
the month preceding the Expiration Date. If the amount of Fair Market Rental as
finally determined pursuant to Article 37.C below is greater than Landlord's
determination, Tenant shall pay to Landlord the difference between the amount
paid by Tenant and the he rent due hereunder during the month preceding the
Expiration Date within thirty (30) days after the determination. If the Fair
Market Rental as finally determined in Article 37.C below is less than
Landlord's determination, the difference between the amount paid by Tenant and
the Fair Market Rental as so determined in
Page 28
Article 37.C below shall be credited against the next installments of rent due
from Tenant to Landlord hereunder.
C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding the Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to
Landlord's notice to Tenant of the Fair Market Rental, Landlord and Tenant shall
meet no less than two (2) times, at a mutually agreeable time and place, to
attempt to resolve any such disagreement.
2. If within the thirty (30) day period referred to in (i)
above, Landlord and Tenant can not reach agreement as to the Fair Market Rental,
they shall each select one appraiser to determine the Fair Market Rental. Each
such appraiser shall arrive at a determination of the Fair Market Rental and
submit their conclusions to Landlord and Tenant within thirty (30) days after
the expiration of the thirty (30) day consultation period described in (i)
above.
3. If only one appraisal is submitted within the requisite
time period, it shall be deemed to be the Fair Market Rental. If both appraisals
are submitted within such time period, and if the two appraisals so submitted
differ by less than ten percent (10%) of the higher of the two, the average of
the two shall be the Fair Market Rental. If the two appraisals differ by more
than ten percent (10%) of the higher of the two, then the two appraisers shall
immediately select a third appraiser who shall within thirty (30) days after his
or her selection shall select one of the two (2) existing determinations of Fair
Market Rental as correct. This third appraiser's conclusion shall be the Fair
Market Rental.
4. All appraisers specified pursuant to this Article shall
be members of the American Institute of Real Estate Appraisers with not less
than five (5) years experience appraising office and industrial properties in
the Santa Xxxxx Valley. Each party shall pay the cost of the appraiser selected
by such party and one-half of the cost of the third appraiser.
38. Tenant's Right of First Refusal:
X. Xxxxx. Landlord hereby grants to Tenant a right of first refusal
during the Term of this Lease and any extension thereof to purchase the Premises
("Right of First Refusal to Purchase").
B. Covenants of Landlord. Landlord hereby covenants and agrees with
Tenant that if, during the Term of the Lease, Landlord shall receive or solicit
a bona fide offer from a prospective buyer to purchase either the Premises,
Landlord shall furnish Tenant with a copy of the proposed contract and notify
Tenant of the intention of Landlord to accept the same (the "Notice of Intention
to Sell"). Such Notice of Intention to Sell shall contain all material business
terms on which
Page 29
Landlord intends to sell the Premises. Landlord shall not sell the space in
question to anyone other than Tenant without first providing Tenant the
opportunity to buy the space in question upon the same terms and conditions
described in the Notice of Intention to Sell.
C. Exercise of Tenant's Right of First Refusal to Purchase. Provided
that Tenant is not in default under the terms and conditions of this Lease
beyond any applicable grace periods, Tenant may exercise Tenant's Right of First
Refusal to Purchase by providing Landlord with written notice thereof within
fifteen (15) days of Tenant's receipt of the Notice of Landlord's Intention to
Sell. If Tenant does not exercise its Right of First Offer to Purchase within
said fifteen (15) day period, then Landlord shall be relieved of Landlord's
obligation to offer the space identified in the Notice of Intention to Sell to
Tenant, except as provided for in Section 38.E below.
D. Terms for Right of First Refusal to Purchase. In the event that
Tenant exercises Tenant's Right of First Refusal to Purchase, Tenant's purchase
shall be on all of the same terms and conditions as are offered to a bona-fide
third-party purchaser of the space identified in the Notice of Intention to
Sell.
E. Continuing Right. In no event shall Tenant's failure to exercise its
Right of First Refusal to Purchase be deemed a waiver or relinquishment by
Tenant of Tenant's Right of First Refusal to Purchase should (i) the space
identified in the Notice of Intention to Sell be offered for sale to a potential
purchaser other than the purchaser specified in the Notice of Landlord's
Intention to Sell during the Term of this Lease or any extension thereof, or
(ii) the space identified in the Notice of Landlord's Intention to Sell be
offered for sale to any purchaser on terms different than those specified in the
Notice of Landlord's Intention to Sell during the Term of this Lease or any
extension thereof.
F. Exclusive Nature of Option. Landlord represents and warrants to
Tenant that no party other than Tenant has any option, right of first offer or
right of first refusal to purchase the Premises. Landlord hereby covenants to
Tenant that Landlord shall not grant an option to purchase, right of first offer
or right of first refusal to purchase the Premises during the Term of this Lease
or any extension thereof
G. Successors and Assigns. Except as provided in this paragraph 38.G,
this Right of First Refusal to Purchase shall be binding on the successors and
assigns of Landlord and Tenant. This Right of First Refusal shall not
specifically not apply to (but shall survive the same and be binding upon any
purchaser or successor of such sale or foreclosure) (i) any transfer of
ownership of the Premises by a judicial foreclosure sale or sale pursuant to a
power of sale provision in any relevant deed of trust or mortgage lien
,transfers of the Building, or (ii) a "Sobrato Family Transfer". A Sobrato
Family Transfer shall be a transfer of the Premises to (i) Xxxx X. Xxxxxxx
and/or Xxxx X. Xxxxxxx (individually and collectively "Sobrato"), (ii) any
immediate family member of Sobrato, (iii)
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any trust established, in whole or in part, for the benefit of Sobrato and/or
any immediate family member of Sobrato, (iv) any partnership in which Sobrato or
any immediate family member, either directly or indirectly (e.g., through a
partnership or corporate entity or a trust) retains a general partner interest,
and/or (v) any corporation under the control, either directly or indirectly, by
Sobrato or any immediate family member of Sobrato.
39. Options: Except with respect to any Tenant Affiliate, all Options
provided Tenant in this Lease are personal and granted to original Tenant and
are not exercisable by any third party should Tenant assign or sublet (except
for any assignment permitted by the third to last paragraph of Article 29) all
or a portion of its rights under this Lease, unless Landlord consents to permit
exercise of any option by any assignee or subtenant, in Landlord's sole
discretion. In the event that Tenant hereunder has any multiple options to
extend this Lease, a later option to extend the Lease cannot be exercised unless
the prior option to extend has been so exercised.
40. Quiet Enjoyment: Landlord covenants with Tenant for itself and
Landlord's successors that so long as no Event of Default on the part of Tenant
has occurred hereunder, (i) Tenant shall and may peaceably and quietly have,
hold and enjoy the Premises for the Term of this Lease, and any renewals or
extensions thereof; and (ii) neither Landlord, nor any party claiming under or
through Landlord, shall disturb the use or the occupancy of the Premises by
Tenant.
41. Brokers: Landlord and Tenant each warrants and represents for the
benefit of the other that it has had no dealings with any real estate broker or
agent in connection with the negotiation of this Lease, except for XX Xxxxxxx,
and that it knows of no other real estate broker or agent who is or might be
entitled to a real estate brokerage commission or finder's fee in connection
with this Lease. Each party shall indemnify and hold harmless the other from and
against any and all liabilities or expenses arising out of claims made by any
broker (other than XX Xxxxxxx) or individual for commissions or fees resulting
from the actions of the indemnifying party in connection with this Lease.
42. Landlord's Liability: If Tenant should recover a money judgment
against Landlord arising in connection with this Lease, the judgment shall be
satisfied only out of Landlord's interest in the Premises including the
improvements and real property and neither Landlord or any of its partners,
officers, directors, agents, trustees, shareholders or employees shall be liable
personally for any deficiency. And furthermore, Tenant expressly waives any and
all rights to proceed against the individual partners or the officers, directors
or shareholders of any corporate partner, except to the extent of their interest
in said limited partnership.
Notwithstanding the foregoing, the following shall apply with respect
to claims by Tenant directly resulting from any and all defaults by Landlord
with respect to any of its obligations under
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(i) Section 18 with respect to Hazardous Materials, or (ii) Section 28 with
respect to destruction to the Premises (collectively, the "Special Defaults").
In the event of any Special Defaults, Tenant shall be entitled to seek recourse
against any assets of Landlord, and the recourse of Tenant against Landlord for
any Special Default shall not be limited to Landlord's interest in the Premises
and the rents and other forms of income originating therefrom.
43. Authority of Parties: Landlord and Tenant represents and warrants to
each other that it is duly formed and in good standing and is duly authorized to
execute and deliver this Lease on behalf of said corporation or partnership, as
relevant, in accordance with a duly adopted resolution of the Board of Directors
of said corporation or in accordance with the by-laws of said corporation, and
that this Lease is binding upon said corporation or partnership, as relevant in
accordance with its terms. At either party's request, the other party shall
provide the requesting party with corporate resolutions or other proof in a form
acceptable to the requesting party, authorizing the execution of the Lease.
44. Transportation Demand Management Programs: Should a government agency
or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or program, Tenant hereby agrees that the cost of TDM
imposed facilities required on the Premises, including but not limited to
employee showers, lockers, cafeteria, or lunchroom facilities, shall be included
as Tenant Improvement Costs (unless such costs qualify for amortization pursuant
to Article 17) and any ongoing costs or expenses associated with a TDM program,
such as an on-site TDM coordinator, which are required for the Premises and not
provided by Tenant shall be provided by Landlord with such costs being included
as additional rent and reimbursed to Landlord by Tenant.
45. DISPUTE RESOLUTION: Except for the failure by Tenant to timely pay the
Base Monthly Rent, any controversy, dispute, or claim of whatever nature arising
out of, in connection with, or in relation to the interpretation, performance or
breach of this agreement, including any claim based on contract, tort, or
statute, shall be resolved at the request of any party to this agreement through
a two-step dispute resolution process administered by JAMS or another judicial
and mediation service mutually acceptable to the parties involving first
mediation, followed, if necessary, by final and binding arbitration administered
by and in accordance with the then existing rules and practice of the judicial
and mediation service selected, and judgment upon any award rendered by the
arbitrator(s) may be entered by any State or Federal Court having jurisdiction
thereof.
46. Miscellaneous Provisions:
A. Rent: All monetary sums due from Tenant to Landlord under this
Lease, including, without limitation those referred to as "additional rent",
shall be deemed to be rent.
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B. Performance by Landlord: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation and Tenant is not
disputing such law or governmental regulation in accordance with the terms of
this Lease, Landlord, in its sole discretion may without notice and without
releasing Tenant from its obligations hereunder or waiving any rights or
remedies, perform such obligation, in which event Tenant shall pay Landlord as
additional rent all sums reasonably paid by Landlord in connection with such
substitute performance including interest as provided in Article 48.C below
within thirty (30) days following Landlord's written notice for such payment.
C. Interest: All rent due hereunder (but not late charges thereon), if
not paid when due, shall bear interest at the reference rate of Union Bank plus
two percent (2%) accruing from the date due until the date paid to Landlord.
D. Rights and Remedies: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law and are in
addition to all other rights and remedies in law and in equity.
E. Survival of Indemnities: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive the
expiration or sooner termination of the Lease for a period of four (4) years.
F. Severability: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.
G. Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Venue shall be Santa Xxxxx County.
H. Time: Time is of the essence hereunder.
I. Entire Agreement: This instrument contains all of the agreements and
conditions made between the parties hereto and may not be modified orally or in
any other manner other than by an agreement in writing signed by all of the
parties hereto or their respective successors in interest.
J. Representations: Tenant acknowledges that neither Landlord nor any
of its employees or agents have made any agreements, representations, warranties
or promises with respect to the demised Premises or with respect to present or
future rents, expenses, operations, tenancies or any other matter. Except as
herein expressly set forth herein, Tenant relied on no
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statement of Landlord or its employees or agents for that purpose.
K. Headings: The headings or titles to the Articles of this Lease are
not a part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.
L. Exhibits: All exhibits referred to are attached to this Lease and
incorporated by reference.
M. Approvals: With respect to any consent of Landlord which Tenant may
request pursuant to the terms of this Lease, such consent shall not be
unreasonably withheld or delayed by Landlord. If Landlord fails to grant or
withhold such requested consent within five (5) business days after request by
Tenant, such consent shall be deemed granted.
N. Recordation. Within twenty (20) days following the execution of this
Lease, both Landlord and Tenant shall execute, acknowledge and cause to be
recorded in the Official Records of County of Santa Clara, California a short
form memorandum of this Lease in form reasonably acceptable to Landlord and
Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
Landlord: Sobrato Development Cos. #871 Tenant: Komag Incorporated
a California Limited Partnership a Delaware Corporation
By: _____________________________ By: _____________________________
Its: _____________________________ Its: _____________________________
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EXHIBIT "A" - Premises
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EXHIBIT "B" - Formula for Determination of Base Monthly Rent
After receipt of the final pricing for the Building Shell, Landlord shall
determine Total Project Costs (as defined below) based on competitive bids.
During this period Landlord shall also solicit permanent loan quotes from
institutional lenders to determine the best available financing. Based on these
inputs Landlord shall then apply the following formula to determine the Base
Monthly Rent due under this Lease.
Base Monthly Rent shall be equal to one hundred twenty percent of the product of
the (i) Total Project Costs as defined below and (ii) the best non-participating
ten (10) year fixed rate permanent loan constant available prior to the start of
construction of the Option Building. The determination of which loan comprises
the best available financing shall be made in good faith by both Landlord and
Tenant. The parties acknowledge that it is their current intention that such
amortization schedule shall be for a minimum period of twenty (20) years and
Landlord shall use its best efforts to obtain such financing.
Total Project Costs shall be equal to the sum of (i) the value of the land based
on a value of Nine and 90/100 Dollars ($9.90) per land square foot, (ii) the
Building Shell Allowance, (iii) fees for building permits, licenses, inspection,
utility connections or extensions, and any other fees imposed by governmental
entities, (iv) fees of engineers, architects, consultants and others providing
professional services in connection with the construction of the Building, (v)
construction loan interest paid by Landlord including interest on Landlord's
equity with respect to the construction of the Building, calculated at the
reference rate charged by Union Bank plus one percent (1%), (vi) loan fees
payable for the construction and/or permanent loan for the Building (vii) real
property taxes and assessments levied against the Property during the period the
Building is constructed, (viii) liability and builders risk insurance premiums
paid by Landlord with respect to the construction of the Building, and (ix) real
estate leasing commissions or fees payable by Landlord with respect to the
Building.
For example, if Total Project Costs are $6,600,000, and Landlord is able to
obtain a 7.75% loan with a 20 year amortization, the Base Monthly Rent would be
120% X ($6,600,000 X .008209), or $65,015.28.
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EXHIBIT "C" - Shell Plans and Specifications
(sheet references to be attached)
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EXHIBIT "D" - Building Shell Definition
The Building Shell includes the following items:
1. Site Work
a. Asphalt concrete paving, wheel stops, and striping.
b. Concrete sidewalks, curbs, gutter, driveway, approaches, and planter
walls.
c. Landscaping, landscape lighting, waterscape, and irrigation.
d. Underground utilities - water, gas, fire line, sanitary line
(including pump station if required), site storm drainage system, transformers
and primary and secondary electrical lines stubbed into building. The routing of
the under slab utilities shall be done as part of the Building Shell
construction if the location of the lines are determined prior to the pouring of
the floor slab.
e. Offsite improvement work required by the City of San Xxxx to obtain
building permits.
2. Building Structure
Includes all elements necessary to provide for a completely waterproof Building
Shell including but not limited to:
a. Concrete foundation and slab on grade including all reinforcing steel
and wire mesh including four loading docks.
b. Structural steel columns and beams.
c. Steel joist and girder second floor system with concrete and metal
deck (if multi-story building).
x. Xxxx panelized glulam roof structure or steel frame with metal deck
and rigid insulation with fiberglass built-up roofing including roof drainage
plumbing.
e. Glass, glazing and perimeter roll up or hollow metal doors including
normal passage hardware.
f. Concrete tilt up or plaster on metal stud framed exterior walls.
g. Exterior painting.
h. All city permits, fees, and taxes, connection charges related to the
Building Shell construction.
i. Main fire sprinkler grid.
j. All architectural and engineering costs related to the design of the
Building Shell.
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EXHIBIT "E" - Tenant Improvement Plans and Specifications
(sheet references to be attached)
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EXHIBIT "F" - Tenant's Trade Fixtures
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EXHIBIT "G" - Fee Agreement
Tenant shall pay to Sobrato Construction Corporation, an affiliate of Landlord,
a fee of Four Hundred Thousand and No/100 Dollars ($400,000.00) as compensation
to Landlord for its services as general contractor for the Building Shell and
Tenant Improvements ("Construction Fee").
The Construction Fee shall be paid in monthly installments of Forty Thousand and
No/100 Dollars ($40,000.00). In no event, however, shall the final installment
of the Construction Fee be due from Tenant until Substantial Completion of the
Premises has occurred.
The Construction Fee includes the general conditions associated with the
construction of the Building Shell and Tenant Improvements. It is agreed by the
parties that the general conditions included in the Construction Fee consist of
the following costs: (i) all project management and scheduling personnel costs,
(ii) field office expenses including set-up and rent, janitorial, security and
furniture, (iii) general office expenses including supplies, computers, postage,
telephone, reproduction and copying, travel expenses, subsistence, drinking
water, etc., (iv) management vehicles and fuel, (v) general safety costs
including a safety engineer, flagman/traffic control, barricades and signs,
protective equipment and first aid supplies, and fire protection, (vi) temporary
services including temporary electrical (light strings, tempower boxes, cords,
trailer office connection, light stands and transformer), utility
costs/generator, water (installation, connection and utility), heating, ladders
and stairs, and chemical toilets, (vii) field services such as janitorial,
security, interim clean-up, debris boxes, project sign, (viii) worker/employee
parking and drinking water, (ix) insurance (liability and building risk), (x)
City Gross Receipts Tax, (xi) gas, oil, diesel fuel and lubrication for
equipment owned by general contractor, and (xii) site conditions including
temporary roads, staging and storage areas, site dewatering, winter protection
and maintenance, site fencing, tree protection, dust control, tool shed,
walkietalkies, etc.
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