Exhibit 10.23
1. PARTIES: THIS LEASE, is entered into on this 20th day of December, 2000,
("Effective Date") between ARDENWOOD CORPORATE PARK ASSOCIATES, a California
limited partnership, whose address is 00000 Xxxxx Xx Xxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000 and NETWORK EQUIPMENT TECHNOLOGIES, INC., a Delaware
corporation (doing business as Xxx.xxx), whose address is 0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx, Xxxxxxxxxx, 00000, hereinafter called respectively "Landlord"
and "Tenant".
2. PREMISES:
A. Demise of Premises: Landlord hereby leases to Tenant, and Tenant hires
from Landlord those certain Premises with the appurtenances, situated in the
City of Fremont, County of Alameda, State of California, consisting of the Land
and the Improvements described in Section 2.B below.
B. Description of Premises: References in this Lease to the "Premises"
mean the real property described in Exhibit "A" to this Lease (the "Land") and
all improvements to be constructed on the Land pursuant to this Lease
(collectively, the "Improvements"). The Improvements include, without
limitation, a two-story building containing approximately 97,747 square feet of
rentable area ("Building 1"), a three-story building containing approximately
88,043 square feet of rentable area ("Building 2", with Building 1 and Building
2 being collectively referred to as the "Buildings"), parking areas, driveways,
sidewalks and landscaped areas, all as generally depicted on Exhibit "B" to this
Lease.
C. Rentable Area of Buildings: Upon completion of the shell for each
Building (individually, a "Building Shell" and collectively, the "Building
Shells"), Landlord shall cause its independent architect to certify the rentable
area of the Buildings calculated from the outside finished surfaces of outer
walls, without deductions, and not including overhangs, which method of
calculation is in accordance with the Standard Method for Measuring Floor Area
in Office Buildings, ANSI Z65.1-1996, for a single-tenant building as published
by Building Owners and Managers Association International (the "BOMA Standard").
Such certification shall be accompanied by supporting data as may be required
for another architect to independently verify such calculations in accordance
with the BOMA Standard. Within thirty days after receipt of such certification,
Tenant may object to the calculation of rentable area as stated therein, in
which case the rentable area shall be determined in accordance with the BOMA
Standard by Xxxxxxxxx Systems, Inc. At such time as the rentable area of the
Buildings has been agreed upon or otherwise determined as provided in this
section, the parties shall execute and Amendment to this Lease specifying the
rentable area.
3. USE:
A. Permitted Uses: 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: general office; sales and marketing; research and
development; light manufacturing; production; repair, sales and servicing of
computer hardware and software and telecommunications equipment; information
management equipment; ancillary storage, other incidental uses, including, but
not limited to, training rooms, cafeteria and health club for Tenant's
employees. Tenant also shall have the right to use the Premises for any other
legal use, provided that Tenant obtains Landlord's prior written consent, not to
be unreasonably withheld, delayed or conditioned. All parking areas and other
areas of the Premises located outside of the Buildings shall be for the Tenant's
exclusive use and Tenant may install and use therein a generator (properly
screened from view), benches, tables, chairs, umbrellas, and other outdoor
amenities, security cameras, and other similar removable equipment. Landlord
makes no representation or warranty that any specific use of the Premises
desired by Tenant is permitted pursuant to any Laws.
B. Uses Prohibited: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Project, nor allow any sale
by auction or any other use of the Premises for an unlawful purpose. Tenant
shall not (i) damage or overload the electrical, mechanical or plumbing systems
of the Premises, (ii) attach, hang or suspend anything from the ceiling or
columns of the building or set any load on the floor in excess of the load
limits for which such items are designed, or (iii)
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generate dust, fumes or waste products which create a fire or health hazard or
damage the Premises or any portion of the Project, including without limitation
the soils or ground water in or around the Project. 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 (excluding items stored in permitted storage enclosures designed
for such purpose) without Landlord's prior approval, which approval may be
withheld in its sole discretion.
C. Advertisements and Signs: Tenant will not place or permit to be placed,
in, upon or about the Premises (excluding the interior of the Buildings) any
signs not approved by the city and other governing authority having
jurisdiction. Subject to the foregoing requirement, Tenant shall have the right
to place two (2) signs mounted on each of the Buildings and one (1) ground
mounted monument sign adjacent to each Building. The design and placement of the
monument signs shall be subject to the reasonable approval of Landlord. Any sign
placed on the Premises shall be removed by Tenant, at its sole cost, prior to
the Expiration Date or promptly following the earlier termination of the Lease,
and Tenant shall repair, at its sole cost, any damage or injury to the Premises
caused thereby, and if not so removed, then Landlord may have same so removed at
Tenant's expense.
D. Covenants, Conditions and Restrictions: This Lease is subject to the
effect of (i) any easements, rights of way of record and any other matters or
documents of record on the Effective Date; (ii) that certain Deed of Trust with
Assignment of Rents naming Bank of America as Beneficiary, originally recorded
in the official Records of Alameda County, California on June 19, 1998, as
Instrument No. 98-207750 (the "Deed of Trust"), which Deed of Trust will be
re-recorded on or after the Effective Date for the purpose of encumbering
thereby the Premises; and (iii) any zoning laws of the city, county and state
where the Buildings are situated (collectively referred to herein as
"Restrictions") and Tenant and Landlord will conform to and will not violate the
terms of any such Restrictions.
4. TERM AND RENTAL:
A. Base Monthly Rent: The term ("Lease Term") shall be for ten (10) years,
commencing on Substantial Completion of construction, as determined pursuant to
Section 5.B, of Building 1 or Building 2, whenever first occurs, (the
"Commencement Date") and ending ten (10) years thereafter ("Expiration Date").
In addition to all other sums payable by Tenant under this Lease, beginning on
the Commencement Date Tenant shall pay as net base monthly rent ("Net Base
Monthly Rent") for the Premises an amount equal to the product of $1.35
multiplied by the rentable square footage of the Building (as determined under
Section 2.C above) which then is substantially complete. Upon Substantial
Completion of the second of the Buildings, the Net Monthly Base Rent shall
increase to the product of $1.35 multiplied by the rentable square footage
(again as determined under Section 2.C) of both Buildings. In addition to the
Net Base Monthly Rent and concurrently with the payment thereof, Tenant shall
pay to Landlord an amount per month (the "Added Base Monthly Rent") sufficient
to fully amortize over the Lease Term with ten percent (10%) interest the sum of
$2,040,647, which represents the stipulated cost of certain repairs (the
"Stipulated Repair Cost") to the three (3) buildings adjacent to the Project
which Tenant currently leases (the "Paseo Padre Buildings") under leases with
Landlord dated in April of 1997 (the "Existing Leases"). The Added Base Monthly
Rent for each Building shall be calculated as follows: (i) for Building 2 (which
the parties anticipate will be the first Building to be substantially completed)
47.39% of the Stipulated Repair Cost (or the sum of $967,062.61) shall be
discounted over 120 months using a 10% interest rate, for an Added Base Monthly
Rent payment of $12,779.80; and (ii) for Building 1 52.61% of the Stipulated
Repair Cost (or the sum of $1,073,584.39) shall be discounted over the number of
full calendar months remaining in the Lease Term after the Substantial
Completion of Building 1, also using a 10% interest rate, for an estimated Added
Base Monthly Rent payment (assuming 118 full calendar months then remain in the
Lease Term) of $14,327.17. Tenant shall have the option, at any time during the
Lease Term, of prepaying the Added Base Monthly Rent in a lump sum, by
discounting the Added Base Monthly Rent for the remainder of the term using a
ten percent (10%) discount rate. If Tenant prepays the Added Base Monthly Rent,
Tenant thereafter shall be obligated to pay as
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base rent only the Net Base Monthly Rent. As used in this Lease, the term "Base
Monthly Rent" shall mean the Net Base Monthly Rent plus the Added Base Monthly
Rent.
B. Rental Adjustment: On March 1, 2002 and every twenty-four (24) months
thereafter (each an "Adjustment Date"), the then payable Net Base Monthly Rent
shall be subject to adjustment to based on the increase, if any, in the Consumer
Price Index that has occurred during the twenty-four (24) months preceding the
then applicable Adjustment Date. The basis for computing the adjustment shall be
the United States Department of Labor, Bureau of Labor Statistics Consumer Price
Index for all urban consumers, all items, and 1982-1984 = 100 for the San
Francisco-Oakland-San Xxxx Area (the "Index"). The Index most recently published
preceding the previous Adjustment Date (or, with respect to the first Adjustment
Date, the Index for March 1, 2000) shall be the "Base Index". If the Index most
recently published preceding the Adjustment Date ("Comparison Index") is greater
that the Base Index, the then payable Net Base Monthly Rent shall be increased
by multiplying the then payable Net Base Monthly Rent by a fraction, the
numerator of which is the Comparison Index and the denominator of which is the
Base Index. Notwithstanding any subsequent decrease or increase in the Index,
the rent adjustment pursuant to this section for any calendar year shall never
be less than three percent (3%) nor more than eight percent (8%) per year
compounded annually. Upon any adjustment of the Net Base Monthly Rent, Landlord
shall notify Tenant by letter stating the new Net Base Monthly Rent. Landlord's
calculation of the Net Base Monthly Rent escalation shall be conclusive and
binding unless Tenant objects to such calculation within sixty (60) days after
Tenant's receipt from Landlord of such calculation. Landlord's failure to adjust
Net Base Monthly Rent on any Adjustment Date shall not prevent Landlord from
retroactively adjusting Net Base Monthly Rent at any subsequent time during the
Lease Term. If the Index base year has changed so that it differs from
1984-1984=100, the Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. If the Index is changed, revised or discontinued for any reason,
there shall be substituted in lieu thereof, and the term "Consumer Price Index"
shall thereafter refer to, the most nearly comparable official price index
published by the United States Government in order to obtain substantially the
same result as would have been obtained had the original Consumer Price Index
not been discontinued, revised or changed, which alternative index shall be
selected by Landlord and shall be subject to Tenant's written approval.
C. Payment and Prorations: Base Monthly Rent shall be due in advance on or
before the first day of each calendar month during the Lease Term. All sums
payable by Tenant under this Lease shall be paid to Landlord in lawful money of
the United States of America, without offset or deduction, except as set forth
herein, and without prior notice or demand, at the address specified in Section
1 of this Lease or at such place or places as may be designated in writing by
Landlord during the Lease Term. Net Base Monthly Rent for any period at the
beginning or end of the Lease Term which is less than a calendar month shall be
a pro rata portion of the monthly installment. Net Base Monthly Rent likewise
shall be prorated if Substantial Completion of the second of the Buildings
occurs on a date other than the first day of a calendar month. Added Base
Monthly rent shall be payable only on the first day of a calendar month and only
for the number of calendar months as are necessary to fully amortize the
Stipulated Repair Cost allocable to each Building as provided in Section 4.A
above.
D. 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 is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, 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
other sum due from Tenant shall not be received by Landlord or its designee
within five (5) days after the rent is due, 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 on the same date that the overdue amount was due. The
foregoing notwithstanding, Tenant shall be granted one exception per calendar
year when Base Monthly Rent may be received by Landlord up to ten (10)
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days after notice to Tenant that such Base Monthly Rent is past due before
Tenant incurs the 5% late charge. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant, excluding interest and attorneys fees and
costs. If any rent or other sum due from Tenant remains delinquent for a period
in excess of thirty (30) days then, in addition to such late charge, Tenant
shall pay to Landlord interest on any rent that is not paid when due at the
Agreed Interest Rate specified in Section 19.J and calculated from the date
thirty (30) days following the date such amount became due until the date such
rent is paid. Acceptance by Landlord of such late charge shall not 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.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Monthly Rent, then the Base
Monthly Rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding any provision of this Lease to the
contrary.
E. Security Deposit: Prior to the Commencement Date, Tenant shall deposit
with Landlord cash equal to the first month's rent ("Security "Deposit").
Landlord shall not be deemed a trustee of the Security Deposit, may use the
Security Deposit in business, and shall not be required to segregate it from its
general accounts. Tenants shall not be entitled to interest on the Security
Deposit. Landlord shall credit to the Security Deposit required under this Lease
any unused portion of the security deposits held by Landlord under the Existing
Leases. Furthermore, Landlord agrees that in lieu of a cash Security Deposit,
Tenant may deposit a letter of credit in a form reasonably acceptable to
Landlord. Landlord shall be entitled to draw against the letter of credit at any
time provided only that Landlord certifies to the issuer of the letter of credit
that Tenant is in default under the Lease. Tenant shall keep the letter of
credit in effect (by renewal, extension or replacement) during the entire Lease
Term, as the same may be extended, plus a period of four (4) weeks after
expiration of the Lease Term. At least thirty (30) days prior to expiration of
any letter of credit, the term thereof shall be renewed or extended for a period
of at least one (1) year or the letter of credit shall be replaced by a new
letter of credit meeting the requirements of this section. Tenant's failure to
so renew, extend or replace the letter of credit shall entitle Landlord to draw
down the letter of credit in full and hold the proceeds as a cash Security
Deposit until such time as Tenant delivers a replacement letter of credit
meeting all the requirements of this Section 4.E. In the event Landlord draws
against the letter of credit, Tenant shall replenish the existing letter of
credit or cause a new letter of credit to be issued such that the aggregate
amount of letters of credit available to Landlord at all time during the Lease
Term is the amount of the Security Deposit originally required. If Tenant
defaults with respect to any provisions of the Lease, including but not limited
to the provisions relating to payment of Base Monthly Rent or other charges,
Landlord may, to the extent reasonably necessary to remedy Tenant's default, use
any or all of the Security Deposit towards payment of the following: (i) Base
Monthly Rent or other charges in default; and (ii) any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default
including, but not limited to Tenant's failure to restore or clean the Premises
following vacation thereof. If any portion of the Security Deposit is so used or
applied, Tenant shall, within (10) days after written demand from Landlord,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its full original amount, and shall pay to Landlord such other sums
as necessary to reimburse Landlord for any sums paid by Landlord. If Tenant
shall monetarily default after expiration of any applicable cure period more
than three (3) times in any twelve (12) month period, then the Security Deposit
shall, within ten (10) days after demand by Landlord, be increased by Tenant to
an amount equal to three (3) times the Base Monthly Rent. Tenant may not assign
or encumber the Security Deposit without the consent of Landlord. Any attempt to
do so shall be void and shall not be binding on Landlord. The Security Deposit
shall be returned to Tenant within thirty (30) days after the Expiration Date
and surrender of the Premises to Landlord, less any amount deducted in
accordance with this Section, together with Landlord's written notice itemizing
the amounts and purposes for such deduction. In the event of termination of
Landlord's interest in this Lease, Landlord may deliver or credit the Security
Deposit to Landlord's successor in interest in the Premises and thereupon be
relieved of further
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responsibility with respect to the Security Deposit.
F. Termination of Paseo Padre Leases: As a material consideration for
Tenant entering this Lease, Landlord agrees to the termination of the Existing
Leases of the Paseo Padre Buildings and to accept Tenant's surrender of such
buildings "AS-IS" and "WITH ALL FAULTS" and Tenant shall have no further
responsibility repairs in such buildings, including, without limitation, those
needed due to further deterioration from water intrusion. Landlord and Tenant
shall, concurrently with their execution of this Lease and as a condition to the
effectiveness hereof, cause the parties to execute a separate Lease Termination
and Settlement Agreement for the purpose of terminating the Existing Leases of
the Paseo Padre Buildings.
5. CONSTRUCTION:
A. Building Shell Construction: Prior to the Commencement Date, Landlord
shall complete construction of the Building Shells, the scope of which
improvements are outlined in the plans and specifications attached as Exhibit
"C" ("Shell Plans and Specifications"). Landlord shall be responsible and pay
for all costs and expenses associated with the Building Shells, except for the
items identified under the heading "TENANT IMPROVEMENT DOLLARS" on the budget
attached hereto as Exhibit C-1. Tenant shall pay as part of its Tenant
Improvement costs all costs shown on Exhibit C-1 as TENANT IMPROVEMENT DOLLARS.
The Building Shells shall be constructed in a good and workmanlike fashion and
in compliance with all codes, laws, rules and regulations of applicable
governmental authority. Without limiting the generality of the foregoing,
Landlord warrants to Tenant that each Building Shell shall be constructed in a
watertight fashion, with no moisture intrusion through the roof, walls or floor
slab. Landlord shall assign to Tenant any warranties related to the Building
Shells which would reduce Tenant's maintenance obligations hereunder and shall
cooperate with Tenant to enforce all such warranties. Landlord's liability for
damage for breach of any warranty under this Section 5 shall be limited to the
cost of correcting any deficiency covered by the warranty and shall not include
any liability for consequential damages including, but not limited to, loss of
use, business interruption, loss of profit or impairment of value, and Tenant
waives any claim for consequential damages on account of breach of any such
warranty.
B. Tenant Improvement Plans: Tenant, at Tenant's sole cost and expense,
shall retain an interior architect ("Architect") to prepare plans and outline
specifications to be attached as Exhibit "D" ("Tenant Improvement Plans and
Specifications") with respect to the construction of the improvements with the
Buildings ("Tenant Improvements") necessary for Tenant's use and occupancy
thereof. Landlord shall cause Tenant Improvements to be constructed by Devcon
Construction ("General Contractor"), in accordance with the Tenant Improvement
Plans and Specifications. The Tenant Improvement Plans and Specifications shall
be completed for all aspects of the work by April 1, 2001. The Tenant
Improvement Plans and Specifications shall include all detail necessary for
submittal to the City of Fremont for issuance of building permits and for the
construction of the Tenant Improvements, and shall include any information
required by the relevant agencies regarding Tenant's use of Hazardous Materials
if applicable. The Tenant Improvements shall consist of all items not included
within the scope of the Building Shell. All Tenant Improvements shall be subject
to Landlord's approval, which approval which shall not be unreasonably withheld,
conditioned or delayed. The Tenant Improvement Plans and Specifications shall be
prepared in sufficient detail to allow the General Contractor to construct the
Tenant Improvements. The Tenant Improvements shall not be removed or altered by
Tenant without the prior written consent of Landlord as provided in Section 7.
Tenant shall have the right to depreciate and claim and collect any investment
tax credits in the Tenant Improvements paid for by Tenant. Upon expiration of
the Lease Term or any earlier termination of the Lease, the Tenant Improvements
shall become the property of Landlord and shall remain upon and be surrendered
with the Premises, and title thereto shall automatically vest in Landlord
without any payment therefor, except as otherwise expressly provided in Section
15 (with respect to insurance proceeds) and Section 16 (with respect to any
condemnation award). Landlord shall use its reasonable best efforts to obtain a
building permit from the City of Fremont for the Tenant Improvements as soon as
possible after submittal of the Tenant Improvement Plans and
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Specifications, and thereafter to cause the General Contractor to Substantially
Complete the Building, including the Tenant Improvements therein. Each Building
shall be deemed "Substantially Complete" (and "Substantial Completion" shall
occur) when: (i) Tenant Improvements have both been substantially completed in
accordance with the Tenant Improvement Plans and Specifications, as evidenced by
the issuance of a certificate of occupancy or a temporary certificate of
occupancy or its equivalent by the appropriate governmental authority, (ii)
Tenant's Architect has certified that the Tenant Improvements have been
completed in accordance with the Tenant Improvement Plans and Specifications,
and Landlord's Architect has certified to Tenant that the Building Shell has
been completed, and all necessary elements of the Project needed for beneficial
occupancy of the Building have been completed, all in accordance with the
Building Shell Plans and Specifications; and (iii) the Building systems
including, but not limited to, mechanical, electrical and plumbing, are
operational to the extent necessary to service the Premises, and Tenant has use
of substantially all parking spaces called for under this Lease. Installation of
(x) Tenant's data and phone cabling, (y) Tenant's furniture, or (z) the exterior
landscaping shall not be required in order to deem a Building Substantially
Complete. Landlord agrees to provide Tenant a permit which allows Tenant to
occupy the Premises from the City of Fremont (or its equivalent) within sixty
(60) days following the Commencement Date.
C. Pricing: Within ten (10) days after completion of the Tenant
Improvements Plans and Specifications, Landlord shall cause the General
Contractor to submit to Tenant copies of competitive bids (including a schedule
of values for each bid) from at least three (3) subcontractors (at least one of
which such subcontractors may be specified by Tenant, subject to Landlord's
reasonable approval) for each aspect of the work in excess of Five Thousand and
No/100 Dollars ($5,000.00) related to the Tenant Improvements. The foregoing
notwithstanding, Tenant shall have the right to sole-source to designated
subcontractors (subject to Landlord's reasonable approval) for specialty rooms.
General Contractor shall not do any self-performed work over $10,000.00 without
first providing Tenant with 3 bids for comparison purposes. Landlord shall cause
the General Contractor to utilize the low bid in each case unless Tenant
approves or directs General Contractor's use of another subcontractor, and the
cost of the Tenant Improvements shall be based upon construction expenses equal
to (i) the bid amounts as approved by Tenant, and (ii) the general contractor
fee specified in Section 5.H below ("Tenant Improvement Budget"). Upon Tenant's
written approval of the Tenant Improvement Budget, which approval shall not be
unreasonably withheld or delayed, Landlord and Tenant shall be deemed to have
given their respective approvals of the final Tenant Improvement Plans and
Specifications on which the cost estimate was made, and Landlord shall cause the
General Contractor to proceed with the construction of the Tenant Improvements
in accordance with the terms of Section 5.G below. If Tenant does not
specifically approve or disapprove the bids within seven (7) days, Tenant shall
be deemed to have approved the bids.
D. Change Orders: Tenant shall have the right to order changes in the
manner and type of construction of the Building Shell or Tenant Improvements.
Upon request and prior to Tenant's submitting any binding change order, Landlord
shall cause the General Contractor to promptly provide Tenant with written
statements of the cost to implement, cost breakdown, and the time delay and
increased construction costs associated with any proposed change order, which
statements shall be binding on General Contractor. 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
cause the General Contractor to implement such change order and the cost of
constructing the Tenant Improvements shall be increased or decreased in
accordance with the cost statement previously delivered by General Contractor to
Tenant for any such change order. The fee charged by General Contractor in
addition to any such change order shall be consistent with Section 5.H. below.
E. Letter of Credit to Secure Tenant Improvement Construction: On or
before the date Landlord commences construction of the Tenant Improvements in
Building 2, Tenant shall deposit with Landlord a letter of credit ("TI Letter of
Credit") in an
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amount of Nine Million Dollars ($9,000,000) to secure Tenant's obligation to pay
for the Tenant Improvements pursuant to this Lease. The TI Letter of Credit
shall thereafter be promptly reduced upon presentation to Landlord of evidence
reasonably satisfactory to Landlord that a percentage of the Tenant Improvements
equal to the requested reduction has been satisfactorily completed and paid for
including partial lien waivers and architects' certificates. Upon Landlord's
receipt of reasonably satisfactory evidence that the Tenant Improvements have
been completed free of liens and that Tenant has fully paid for the cost of all
of Tenant Improvements, the TI Letter of Credit shall be cancelled and returned
to Tenant by Landlord. Landlord shall be entitled to draw against the full
amount of the TI Letter of Credit at any time provided only that Landlord
certifies to the issuer of the TI Letter of Credit that Tenant has failed to
make a payment for Tenant Improvement costs as provided in 5.F, that Tenant has
failed to timely renew or extend the TI Letter of Credit as required by this
paragraph, or that Tenant has failed to amend the TI Letter of Credit or obtain
a new TI Letter of Credit as required by this paragraph. Tenant shall keep the
TI Letter of Credit in effect at all times prior to payment in full for the
Tenant Improvements. The TI Letter of Credit shall provide for an outside expiry
date not earlier than two (2) years after its original issuance and an automatic
renewal unless the issuer provides Landlord with notice of non-renewal at least
forty-five (45) days before each anniversary of such original issuance. If the
TI Letter of Credit is not so renewed or extended, or a new Letter of Credit
meeting the requirements of this section is not delivered to Landlord at least
thirty (30) days prior to the expiration of the TI Letter of Credit, Landlord
shall be entitled to draw down the entire amount of the TI Letter of Credit. Any
amounts drawn on the TI Letter of Credit shall be used to pay for the cost of
the Tenant Improvements. In the event the TI Letter of Credit is drawn by
Landlord, then promptly following Landlord's completion of the Tenant
Improvements Landlord shall refund to Tenant any excess proceeds from the TI
Letter of Credit.
F. Tenant Improvement Costs: The cost of Tenant Improvements shall consist
of only the following to the extent actually incurred by General Contractor in
connection with the construction of Tenant Improvements: construction costs, all
permit fees, all fees associated with Tenant's Architect, engineers and
consultants, construction taxes or other costs imposed by governmental
authorities related to the Tenant Improvements, and the General Contractor Fee
as described in Section 5.H below. During the course of construction of Tenant
Improvements, Landlord shall cause the General Contractor to deliver to Tenant
not more than once each calendar month a written request for payment ("Progress
Invoice") which shall include and be accompanied by General Contractor's
certified statements setting forth the amount requested and certifying the
percentage of completion of each item for which reimbursement is requested.
Tenant shall have a right of reasonable review and approval of the Progress
Invoice. Tenant shall pay directly to the General Contractor the amount due
pursuant to the Progress Invoice, within fifteen (15) days after Tenant's
receipt of the above items. Notwithstanding the foregoing, Tenant shall be
entitled to retain ten percent (10%) of the amount invoiced by General
Contractor until the Tenant Improvements are Substantially Complete as defined
in Section 5.B. All costs for Tenant Improvements shall be fully documented to
and verified by Tenant.
G. Force Majeure: Any prevention, delay or stoppage due to strikes,
lockouts, inclement weather, labor disputes, inability to obtain labor,
materials, fuel or reasonable substitutes therefor, governmental restrictions,
regulations, controls, civil commotion, fire or other act of God, and another
causes beyond the reasonable control of Landlord (except financial inability)
shall extend the dates contained in this Section 5 by a period equal to the
period of any said prevention, delay or stoppage; provided, however, that in the
event of any such prevention, delay or stoppage, Landlord shall notify Tenant in
writing within five (5) business days of Landlord's discovery of such. If
Landlord fails to do so, Landlord may not claim that any such delay extends the
date for Substantial Completion. If Landlord cannot obtain building permits or
Substantially Complete construction by the dates set forth herein, this Lease
shall not be void or voidable nor shall Landlord be liable for any loss or
damage resulting therefrom.
In the event Landlord has failed to achieve Substantial Completion of Building 2
by January 4, 2002, or Substantial Completion of Building 1 by March 15, 2002
(as such dates may be
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extended by Tenant Delays), Tenant shall have the right to terminate the
involvement of Landlord and the General Contractor in the construction process
by providing Landlord written notice of such election. Tenant shall thereafter
be entitled to complete construction using a general contractor and/or
construction manager selected by Tenant. In such event, Tenant shall be entitled
to deduct from the Base Monthly Rent initially payable hereunder any Tenant
Improvement costs incurred by Tenant in excess of the Tenant Improvement Budget
approved by Tenant pursuant to Section 5.C as a result of Landlord's failure to
achieve Substantial Completion.
H. General Contractor Overhead & Profit: As compensation to General
Contractor for its services related to construction of the Building Shell and
Tenant Improvements, General Contractor shall receive a fee of three percent
(3%) of the "hard" construction costs plus a payment for general conditions of
not more than One Hundred Twenty-Seven Three Hundred Eighty Dollars ($127,380)
(collectively, the "General Contractor's Fee") to cover all of the following:
construction supervision and administration, temporary on-site facilities, home
office administration, supervision, project executive, general superintendent,
general overhead, office supplies, accounting services, computer charges,
telephone expenses, fax office/job site, data processing, secretarial services,
mail, express mail, insurance, City licenses, project manager, estimator,
project engineer, scheduling, reconstruction services, superintendent, general
labor, daily clean-up and final clean-up, protection of work, xxxxx cash, safety
enforcement and safety signage, small tools, first aid facilities, general field
coordination, project field office, Tenant vendor coordination, blueprinting,
job trailer, temporary structures, utilities, and coordination and construction
profit. Except as provided therein, Landlord or General Contractor shall not
receive any other fee or payment from Tenant in connection with General
Contractor's services.
I. Tenant Delays: A "Tenant Delay" shall mean any delay in Substantial
Completion of the Building as a result of any of the following: (i) Tenant's
failure to complete or approve the Tenant Improvement Plans by the dates set
forth in Section 5.B, (ii) Tenant's failure to approve the bids for construction
by the dates set forth in Section 5.C, (iii) changes to either the Shell Plans
and Specifications or the Tenant Improvement Plans requested by Tenant which
delay the progress of the work, (iv) Tenant's request for materials, components
or finishes which are not available in a commercially reasonable time given the
target Commencement Date, (v) Tenant's failure to make a progress payment for
Tenant Improvement costs as provided in Section 5.F, (vi) Tenant's request for
more than one (1) rebidding of the cost of all or a portion of the work, and
(vii) any errors or omissions in the Tenant Improvement Plans provided by
Tenant's architect. In the event Landlord believes Tenant is causing a Tenant
Delay, Landlord shall notify Tenant in writing, state the action or inaction
that it believes is causing the Tenant Delay, and state the date from which a
Tenant Delay is being calculated. Claim of Tenant Delay shall be made within
five (5) days after Landlord's discovery of the occurrence of the event giving
rise to such claim. Tenant shall have the right to expedite work, at its sole
cost, to minimize the effect of any Tenant Delays, to the extent it is
practicable to do so. However, no Tenant Delay shall advance the Commencement
Date to a date before the estimated Commencement Date of October 1, 2001.
Notwithstanding anything to the contrary set forth in this Lease and regardless
of the actual date the Premises are Substantially Complete (but subject to the
limitation in the preceding sentence), the Commencement Date shall be deemed to
be the date the Commencement Date would have occurred if no Tenant Delay had
occurred as reasonably determined by Landlord. In addition, if a Tenant Delay
results in an increase in the cost of the labor or materials, Tenant shall pay
the cost of such increases.
J. Insurance: Landlord shall cause the General Contractor to procure (as a
cost of the Building Shell) a "Broad Form" liability insurance policy in the
amount of Three Million Dollars ($3,000,000.00). Landlord shall also procure (as
a cost of the Building Shells) builder's risk insurance for the full replacement
cost of the Building Shells and Tenant Improvements while the Buildings and
Tenant Improvements are under construction, up until the date that the casualty
insurance policy described in Section 9 is in full force and effect.
K. Punch List & Warranty: After the Building Shells and Tenant
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Improvements are Substantially Complete, Landlord shall cause the General
Contractor to immediately correct any construction defect or other "punch list"
item which Tenant brings to General Contractor's attention. All such work shall
be performed so as to reasonably minimize the interruption to Tenant and its
activities on the Premises. General Contractor shall provide a standard
contractor's warranty with respect to the Building Shells and the Tenant
Improvements for one (1) year from the Commencement Date. Such warranty shall
exclude routine maintenance, damage caused by Tenant's negligence or misuse, and
acts of God.
In addition Landlord shall warrant the Building Shells and Tenant
Improvements against defects in workmanship or materials, including, but not
limited to, HVAC systems, electrical system and devices, plumbing system and
devices (but excluding Tenant Improvements performed by subcontractors
sole-sourced pursuant to Section 5.C. above), for one (1) year from the
Commencement Date. Such warranty shall exclude (i) routine maintenance, (ii)
damage caused by the negligence or misuse by Tenant, and (iii) acts of God.
L. Other Work by Tenant: All work 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 at Tenant' cost. Prior to Substantial
Completion, Tenant shall be obligated to (i) provide active phone lines to any
elevators, and (ii) contract with a firm to monitor the fire system. When the
construction of the Tenant Improvements has proceeded to the point where
Tenant's work of installing its fixtures and equipment in the Premises can be
commenced, General Contractor shall notify Tenant and shall permit Tenant and
its authorized representatives and contractors access to the Premises before the
Commencement Date for the purpose of installing Tenant's trade fixtures and
equipment. Any such installation work by Tenant or its authorized
representatives and contractor shall be undertaken upon the following
conditions: (i) the entry into the Premises by Tenant or its representatives or
contractors shall not materially interfere with or delay General Contractor's
work, (ii) the entry into the Premises by Tenant or its representatives or
contractors shall be under all the terms and conditions of the Lease except for
payment of Base Monthly Rent and other expenses due under the Lease, and (iii)
any contractor used by Tenant in connection with such entry shall not
unreasonably interfere with the ability of the General Contractor to complete
construction using union labor.
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER :
A. Delivery and Acceptance: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Premises on the Commencement Date. Except as otherwise
specifically provided herein, Tenant agrees to accept possession of the Premises
in its then existing condition, subject to all Restrictions and without
representation or warranty by Landlord except as provided in this Lease.
Tenant's taking possession of any part of the Premises shall be deemed to be an
acceptance of any work of improvement done by Landlord in such part as complete
and in accordance with the terms of this Lease except for "Punch List" type
items of which Tenant has given Landlord written notice prior to the time Tenant
takes possession, subject to: (i) any claims with respect to latent defects,
(ii) the warranties from Landlord contained in this Lease, (iii) Landlord's
obligations to correct construction defects, and (iv) any failure of the
Premises to comply with laws in effect as of the date of completion. At the time
Landlord delivers possession of the Premises to Tenant, Landlord and Tenant
shall together execute an acceptance agreement. Landlord shall have no
obligation to deliver possession, nor shall Tenant be entitled to take
occupancy, of the Premises until such acceptance agreement has been executed,
and Tenant's obligation to pay Base Monthly Rent and Additional Rent shall not
be excused or delayed because of Tenant's failure to execute such acceptance
agreement. Within sixty (60) days after the Commencement Date, Tenant agrees to
be in occupancy of at least fifty percent (50%) of the rentable square footage
of the Premises.
B. Condition Upon Surrender: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear, damage due to
casualty or condemnation and maintenance otherwise the responsibility of
Page 9
Landlord pursuant to this Lease excepted. In this regard, "normal wear and tear"
shall be construed to mean wear and tear caused to the Premises by the natural
aging process which occurs in spite of prudent application of the best
commercially reasonable standards for maintenance, repair replacement, and
janitorial practices, and does not include items of neglected or deferred
maintenance. In any event, Tenant shall cause the following to be done prior to
the Expiration Date or sooner termination of this Lease: (i) all interior walls
shall be cleaned, patched, and otherwise made paint-ready, (ii) all tiled floors
shall be cleaned and waxed, (iii) all carpets shall be cleaned and shampooed,
(iv) all broken, marred, stained or nonconforming acoustical ceiling tiles shall
be replaced, (v) all cabling placed above the ceiling by Tenant or Tenant's
contractors shall be removed, (vi) all windows shall be washed; (vii) the HVAC
system shall be serviced by a reputable and licensed service firm and left in
"good operating condition and repair" as so certified by such firm, (viii) the
plumbing and electrical systems and lighting shall be placed in good order and
repair (including replacement of any burned out, discolored or broken light
bulbs, ballasts, or lenses). On or before the Expiration Date or sooner
termination of this Lease, Tenant shall remove all its personal property and
trade fixtures from the Premises. All property and fixtures not so removed shall
be deemed as abandoned by Tenant. At the expiration of the Lease Term, Landlord
shall not have the right to require that Tenant remove from the Premises any of
the Tenant Improvements or any Alterations made with Landlord's consent unless
Landlord, at the time of granting such consent, indicates that the subject
Alteration must be removed upon the expiration of the Lease Term. With respect
to Permitted Alterations as defined in Section 7A. below, Tenant shall ascertain
from Landlord within ninety (90) days before the Expiration Date whether
Landlord desires to have any such Permitted Alterations removed. If Landlord
shall so desire, Tenant shall, at Tenant's sole cost and expense, remove such
Alterations and Permitted Alterations as Landlord requires and shall repair any
damage to the Building which results from Tenant's removal of any Alterations,
Permitted Alterations and any improvements and/or Tenant's equipment, fixtures,
and component and shall repair and restore said Premises or such parts thereof
before the Expiration Date. Such repair and restoration shall include causing
the Premises to be brought into compliance with all applicable building codes
and laws in effect at the time of the removal to the extent such compliance is
necessitated by the repair and restoration work.
C. Failure to Surrender: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required by
this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to this
Section 6.C and Tenant shall indemnify, defend, and hold Landlord harmless
against loss or liability resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any claims made by any succeeding tenant
founded on such delay and costs incurred by Landlord in returning the Premises
to the required condition, plus interest at the Agreed Interest Rate provided,
however, that Landlord shall be required to give Tenant at least thirty (30)
days' advance notice of any potential loss or liability resulting from such
delay. Any holding over after the termination or Expiration Date with Landlord's
express written consent, shall be construed as month-to-month tenancy,
terminable on thirty (30) days written notice from either party, and Tenant
shall pay as Base Monthly Rent to Landlord 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, 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. If Tenant
remains in possession of the Premises after the Expiration Date or sooner
termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as rent during the holdover period an amount equal to one hundred fifty percent
(150%) of the Base Monthly Rent due in the month preceding the termination or
Expiration Date, plus all other amounts payable by Tenant under this Lease. This
provision shall survive the termination or expiration of the Lease.
7. ALTERATIONS AND ADDITIONS:
A. Tenant's Alterations: With the exception of Tenant Improvements
installed
Page 10
as part of initial construction of the Premises, Tenant shall not make, or
suffer to be made, any alteration or addition to the Premises ("Alterations"),
or any part thereof, without obtaining Landlord's prior written consent, which
consent shall not be unreasonably withheld, and delivering to Landlord the
proposed architectural and structural plans for all such Alterations at least
fifteen (15) days prior to the start of construction. If such Alterations affect
the structure of the Building, Tenant additionally agrees to reimburse Landlord
its reasonable out-of-pocket costs incurred in reviewing Tenant's plans. After
receipt of Tenant's proposed architectural and structural plans for all such
Alterations Landlord shall have a period of ten (10) business days thereafter to
grant or deny its consent. Failure by Landlord to respond within such ten (10)
business day period shall be deemed approval of such proposed architectural and
structural plans. After obtaining Landlord's consent, which consent shall state
whether or not Landlord will require Tenant to remove such Alteration at the
expiration or earlier termination of this Lease, Tenant shall not proceed to
make such Alterations until Tenant has obtained all required governmental
approvals and permits, and provides Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics' lien
claims. Tenant agrees to provide Landlord (i) written notice of the anticipated
and actual start-date of the work, (ii) a complete set of half-size (15" X 21")
vellum as-built drawings, and (iii) a certificate of occupancy for the work upon
completion of the Alterations. All Alterations shall be constructed in
compliance with all applicable building codes and laws including, without
limitation, the Americans with Disabilities Act of 1990 as amended from time to
time. During the Lease Term, the Alterations shall be the property of the Tenant
and Tenant shall be entitled to all tax benefits associated therewith. Upon the
Expiration Date, all Alterations, except movable furniture and trade fixtures,
shall become a part of the realty and belong to Landlord but shall nevertheless
be subject to removal by Tenant as provided in Section 6 above. Alterations
which are not deemed as trade fixtures include heating, lighting, electrical
systems, air conditioning, walls, carpeting, or any other installation which has
become an integral part of the Premises. All Alterations shall be maintained,
replaced or repaired by Tenant at its sole cost and expense. Notwithstanding the
foregoing, Tenant shall be entitled without obtaining Landlord's consent, to
make Alterations which do not affect the structure of the Building or which do
not cost more than Fifty Thousand Dollars ($50,000.00) per Alteration
("Permitted Alterations); provided, however, that Tenant shall still be required
to comply with all other provisions of this paragraph.
B. Free From Liens: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within twenty (20) days after receiving notice of the
filing, Landlord shall be entitled to discharge the 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.
C. Compliance With Governmental Regulations: The term Laws or Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders now
in force or hereafter enacted, promulgated, or issued. The term also includes
government measures regulating or enforcing public access, traffic mitigation,
occupational, health, or safety standards for employers, employees, landlords,
or tenants. Tenant, at Tenant's sole expense shall make all repairs,
replacements, alterations, or improvements needed to comply with all
Governmental Regulations, except as specifically provided otherwise in this
Lease.
All costs associated with compliance shall be borne by Tenant if the requirement
for compliance is triggered by: (i) Tenant's specific use or change of use of
the Premises; or (ii) Tenant's construction or installation of any Alterations
or trade fixtures. If a capital improvement or replacement to the Premises is
required pursuant to this Section 7.C. for any other reason, then within fifteen
(15) business days after Tenant delivers evidence reasonably satisfactory to
Landlord substantiating Tenant's payment of such capital improvement, Landlord
shall reimburse Tenant for the cost of the improvement or replacement less 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 years remaining in the Lease
Page 11
Term, the denominator of which is the useful life (in years) of the capital
improvement, as reasonably determined by Landlord in accordance with generally
accepted accounting principles. 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 law, regulation or other requirement in its use of the Premises shall be
conclusive of that fact as between Landlord and Tenant.
8. MAINTENANCE OF PREMISES:
A. Landlord's Obligations: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, all structural portions of the Building, including, without
limitation, the foundation, floor slabs, load bearing walls, below-ground
plumbing and sewage facilities, and columns and roof structure of the Building
Shell. Landlord's repair responsibility also includes repairing any Tenant
Improvements which are damaged due to defects in the design or construction of
the Building Shell or the failure of Landlord to repair those components of the
Building Shell for which it assumes responsibility under this Lease.
B. Tenant's Obligations: Tenant shall clean, maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all above-the-foundation
plumbing and sewage facilities, (ii) all heating ventilating and air
conditioning facilities and equipment, (iii) all fixtures, interior walls
floors, carpets and ceilings, (iv) all windows, door entrances, plate glass and
glazing systems including caulking, and skylights, (v) all electrical facilities
and equipment, (vi) all automatic fire extinguisher equipment, (vii) the parking
lot and all underground utility facilities servicing the Premises (other than
below-ground plumbing and sewage facilities, which are the responsibility of
Landlord under Section 8.A.), (viii) all elevator equipment, (ix) the roof
membrane system (subject to the provisions of Section 8.G. below), and (x) all
waterscape, landscaping and shrubbery. All wall surfaces and floor tile are to
be maintained in as good a condition as when Tenant took possession, free of
holes, gouges, or defacements. With respect to items (ii), (viii) and (ix)
above, Tenant shall provide Landlord a copy of a service contract between Tenant
and a licensed service contractor providing for periodic maintenance of all such
systems or equipment in conformance with the manufacturer's recommendations.
Tenant shall provide Landlord a copy of such preventive maintenance contracts
and paid invoices for the recommended work if requested by Landlord. The
foregoing notwithstanding, Tenant shall have no responsibility to perform any
repair, maintenance or improvement: (i) occasioned by fire, acts of God or other
casualty, whether or not covered by insurance, or by the exercise of the power
of eminent domain, (ii) required as a consequence of any violation of laws or
construction defect in the Premises existing as of the Commencement Date, (iii)
for which Landlord has a right of reimbursement from others, or (iv) as to
defects in materials or workmanship which are covered by warranties of Landlord
and/or the General Contractor.
C. Waiver of Liability: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character or by any other cause, similar or dissimilar, unless
due to the gross negligence or willful misconduct of Landlord, shall not render
Landlord liable to Tenant in any respect, including damages to either person or
property, nor be construed as an eviction of Tenant, nor cause an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Should any equipment or machinery utilized in supplying the services listed
herein break down or for any cause cease to function properly, upon receipt of
written notice from Tenant of any deficiency or failure of any services,
Landlord shall use reasonable diligence to repair the same promptly, but Tenant
shall have no right to terminate this Lease and shall have no claim for rebate
of rent or damages on account of any interruptions in service occasioned thereby
or resulting therefrom. Tenant waives the provisions of California Civil Code
Sections 1941 and 1942 concerning the Landlord's obligation of tenantability and
Tenant's right to make repairs and deduct the cost of such repairs from the
rent. Landlord shall not be liable for a loss of or injury to person or
property, however occurring, through or in connection with or incidental to
furnishing, or its failure to furnish, any of the foregoing.
Page 12
D. Replacements: If as a part of Tenant's fulfillment of its obligations
under Section 8.B above, Tenant is required to replace the roof membrane on the
Building in the last two (2) years of the Lease Term, then Landlord shall,
within ten (10) days following receipt of written invoices and supporting
documentation evidencing the reasonable costs incurred by Tenant in making such
replacement, reimburse Tenant for the entire cost of the replacement less 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 years remaining in the Lease
Term, and the denominator of which is the useful life (in years) of the
replacement. If the replacement occurs during the initial Lease Term, Tenant's
share shall initially be based on the initial Lease Term and if Tenant
thereafter exercises its Option pursuant to Section 18 below, then upon the
commencement of the Option Term, an adjustment shall be made so that during the
Option Term Tenant shall pay its additional share determined by multiplying the
cost of the replacement by a fraction, the numerator of which is the sum of the
Lease Term remaining at the time of the replacement and the Option Term and the
denominator of which is the useful life of the replacement.
9. HAZARD INSURANCE:
A. Tenant's Use: Tenant shall not use or permit the Premises, or any part
thereof, to be used for any purpose other than that for which the Premises are
hereby leased; and no use of the Premises shall be made or permitted, nor acts
done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at its
sole cost, comply with all requirements of any insurance company or organization
necessary for the maintenance of reasonable fire and public liability insurance
covering the Premises and appurtenances.
B. Landlord's Insurance: Landlord agrees to purchase and keep in force all
risk and fire coverage insurance in an amount equal to the replacement cost of
the Buildings (not including any Tenant Improvements or Alterations paid for by
Tenant) as determined by Landlord's insurance company's appraisers. Such
insurance shall contain reasonable deductibles. Landlord may obtain earthquake
insurance subject to the terms hereof if available, but only to the extent the
cost thereof does not exceed five cents ($.05) per square foot of the Premises
per month, compounded each year during the Lease term at three percent (3%). If
the premium due for such insurance exceeds the foregoing amount, Landlord may
elect to continue such insurance and pay the excess portion of the premium or to
terminate earthquake coverage upon ten (10) days' notice to Tenant, unless
Tenant notifies Landlord in writing within such ten (10) day period that Tenant
will pay the entire cost of the insurance premium due for that year. In such
event, the parties shall review the earthquake coverage and premiums due
annually during the Lease term in accordance with the foregoing. Landlord shall
be responsible for paying the deductible under the earthquake insurance carried
by Landlord pursuant to the terms hereof and the deductible payable in the event
of an earthquake shall not be subject to reimbursement by Tenant. Additionally,
Landlord may maintain a policy of (i) commercial general liability insurance
insuring Landlord (and such others designated by Landlord) against liability for
personal injury, bodily injury, death and damage to property occurring or
resulting from an occurrence in, on or about the Premises or Project in an
amount as Landlord determines is reasonably necessary for its protection, and
(ii) rental loss insurance covering a twelve (12) month period. Tenant agrees to
pay Landlord as additional rent, on demand, the full cost of said insurance as
evidenced by insurance xxxxxxxx to Landlord, and in the event of damage covered
by said insurance, the amount of any deductible under such policy (except that
Tenant shall not be responsible for the deductible under Landlord's earthquake
insurance policy). Payment shall be due to Landlord within thirty (30) days
after written invoice to Tenant. It is understood and agreed that Tenant's
obligation under this Section will be prorated to reflect the Lease Commencement
and Expiration Dates.
C. Tenant's Insurance: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements and Alterations under an all risk and
fire coverage insurance policy for their full replacement value (without
depreciation). The property casualty insurance provided by Tenant as required by
this Section
Page 13
shall be carried in favor of Landlord and Tenant as their respective interests
may appear and shall provide that any loss to Tenant Improvements shall be
adjusted with and be payable to both Landlord and Tenant. Tenant shall deliver a
copy of the policy and renewal certificate to Landlord. Tenant further agrees,
at its sole cost, to obtain worker's compensation and public liability and
property damage insurance for occurrences within the Premises with a combined
single limit of not less than Five Million Dollars ($5,000,000.00). Tenant's
liability insurance shall be primary insurance containing a cross-liability
endorsement, and shall provide coverage on an "occurrence" rather than on a
"claims made" basis. All such insurance shall provide for severability of
interests; shall provide that an act or omission of one of the named or
additional insureds shall not reduce or avoid coverage to the other named or
additional insureds. Tenant shall name Landlord and Landlord's lender as an
additional insured and 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 all tort, contract or other
rights each may have against the other on account of any loss or damage
sustained by Landlord or Tenant, as the case may be, or to the Premises or its
contents, 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
each obtain from their respective insurance companies a waiver of any right of
subrogation which said insurance company may have against Landlord or Tenant, as
the case may be.
10. TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant's personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increases due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. Tenant's
obligation under this Section shall be prorated to reflect the Lease
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 its pro rata share of such tax or excise on rents or other tax before
it becomes delinquent; except that this provision is not intended to cover net
income taxes, inheritance, gift or estate tax imposed upon Landlord. In the
event that a tax is placed, levied, or assessed against Landlord and the taxing
authority takes the position that Tenant cannot pay and discharge its pro rata
share of such tax on behalf of Landlord, then at Landlord's sole election,
Landlord may increase the Base Monthly Rent by the exact amount of such tax and
Tenant shall pay such increase. If by virtue of any application or proceeding
brought by Landlord, there results a reduction in the assessed value of the
Premises during the Lease Term, Tenant agrees to pay Landlord a fee consistent
with the fees charged by a third party appeal firm for such services. Tenant at
its cost shall have the right, at any time, to seek a reduction in the assessed
valuation of the Premises or to contest any real property taxes that are to be
paid by Tenant. Landlord shall not be required to join in any such proceeding or
contest unless the provisions of any law require that the proceeding or contest
be brought by or in the name of the owner of the Premises. In such event,
Landlord shall join in the proceeding or contest or permit it to be brought in
Landlord's name, provided that Landlord is not required to bear any cost in
connection therewith.
11. UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises. Landlord
shall not be liable for loss of or injury to person or property, however
occurring (unless due to the gross negligence or willful misconduct of
Landlord), through or in connection with or incidental to furnishing or the
utility company's failure to furnish utilities to the Premises, and in such
event Tenant shall not be entitled to abatement or reduction of any portion of
Base Monthly Rent or any other amount payable under this Lease. Notwithstanding
the
Page 14
foregoing, if utility services to the Premises are interrupted for a period of
thirty (30) continuous business days through no fault of Tenant, then Tenant
shall be entitled to an abatement of rent to the extent of the interference with
Tenant's use of the Premises occasioned thereby beginning on the expiration of
such thirty (30) day period.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. Tenant's Responsibility: Without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, conditioned or delayed, Tenant
or Tenant's agents, employees, contractors, subtenants or third-party invitees
("Tenant's Agents") shall not cause or permit any Hazardous Materials (as
defined below) to be generated, brought onto, used, stored, created, released,
or disposed of in or about the Premises, except that Tenant may use and store
those substances customary in typical office uses for which no consent shall be
required. As used herein, the term "Hazardous Material" shall mean any
substance, material or waste (whether liquid, solid or gaseous), which is a
pollutant or contaminant, or which is hazardous, toxic, ignitable, reactive,
corrosive, dangerous, harmful or injurious, or which presents a risk to public
health or the environment, or which is at the time in question regulated by or
under the authority of any Environmental Laws, as defined below, including,
without limitation, asbestos or asbestos containing materials, petroleum
products, pesticides, polychlorinated biphenyls, flammable explosives,
radioactive materials and urea formaldehyde. As used in this Lease, the term
"Environmental Laws" shall mean any present or future federal, state or local
law, whether common law, statute, rule, regulation or ordinance, judgment, order
or other governmental restriction, guideline, listing or requirement, relating
to the environment or any Hazardous Materials, including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. ss.9601 et seq., the Resource Conservation and Recovery Act of 1976,
42 U.S.C. ss.6901 et seq., and applicable provisions of the California Health
and Safety Code and the California Water Code, all as heretofore or hereafter
may be amended from time to time. In order to obtain consent, Tenant shall
deliver to Landlord its written proposal describing the Hazardous Materials to
be brought onto the Premises, measures to be taken for storage and disposal
thereof, safety measures to be employed to prevent pollution or contamination of
the air, soil, ground, surface and ground water. Landlord's approval may be
withheld in its reasonable judgment. In the event Landlord consents to Tenant's
use of Hazardous Materials on the Premises or such consent is not required,
Tenant represents and warrants that it shall comply with all Environmental Laws
applicable to Hazardous Materials including doing the following: (i) adhere to
all reporting and inspection requirements imposed by Federal, State, County or
Municipal laws, ordinances or regulations and provide Landlord a copy of any
such reports or agency inspections; (ii) obtain and provide Landlord copies of
all necessary permits required for the use and handling of 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, creating, releasing, 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 into contact with
Hazardous Materials and obtain a closure certificate from the local
administering agency prior to the Expiration Date.
B. Tenant's Indemnity Regarding Hazardous Materials: Tenant shall, at its
sole cost and expense, comply with all laws pertaining to, and shall with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord's trustees, shareholders, directors, officers, employees,
partners, affiliates, and agents from and against any and all claims,
liabilities, obligations, penalties, fines, actions, costs or expenses incurred
or suffered arising from the bringing, using, permitting, generating, emitting
or disposing of Hazardous Materials by Tenant or Tenant's Agents in or about the
Premises during the Lease Term or the violation of any Environmental Laws by
Tenant or Tenant's Agents. Tenant's indemnification, defense, and hold harmless
obligations include, without limitation, the following: (i) claims, liabilities,
costs or expenses resulting from or based upon administrative, judicial (civil
or criminal) or other action, legal or equitable,
Page 15
brought by any private or public person under any present or future laws,
including Environmental Laws; (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; (iii) all costs of defending
such claims; (iv) losses attributable to diminution in the value of the Premises
or the Building; (v) loss or restriction of use of rentable space in the
Building; (vi) adverse effect on the marketing of any space in the Building; and
(vi) all other liabilities, obligations, penalties, fines, claims, actions
(including remedial or enforcement actions of any kind and administrative or
judicial proceedings, orders or judgments), damages (including consequential and
punitive damages), and costs (including attorney, consultant, and expert fees
and expenses) resulting from the release or violation caused by Tenant or
Tenant's Agents. This Section 12.B shall survive the expiration or termination
of this Lease.
C. Actual Release by Tenant: Tenant and Landlord agree to notify each
other of any known lawsuits or orders which relate to the remedying of or actual
release of Hazardous Materials on or into the soils or ground water at or under
the Premises. Tenant shall also provide 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 or
failure to comply with poses a foreseeable and material risk of contamination of
the ground water or injury to humans (other than injury solely to Tenant or
Tenant's Agents).
In the event of any release on or into the Premises or into the soil or
ground water under the Premises, the Building or the Project of any Hazardous
Materials caused by Tenant or Tenant's Agents, Tenant agrees to comply, at its
sole cost, 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 shall immediately give verbal and follow-up written notice of the release
to Landlord, and 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, modify or reduce the obligation of Tenant under 12.B
of this Lease to indemnify, defend and hold Landlord harmless from any claims
liabilities, costs or expenses incurred or suffered by Landlord. Tenant shall
provide Landlord prompt written notice of Tenant's monitoring, cleanup and
remedial steps.
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 Section 12.C
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 this Lease.
D. Environmental Monitoring: Landlord and its agents shall have the right,
at reasonable times and with reasonable prior notice to Tenant, to inspect,
investigate, sample and monitor the Premises including any air, soil, water,
ground water or other sampling or any other testing, digging, drilling or
analysis to determine whether Tenant is complying with the terms of this Section
12. If Landlord discovers that Tenant is not in compliance with the terms of
this Section 12, any such 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 therefor.
Page 16
13. TENANT'S DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant: (i) Tenant's failure to pay
the Base Monthly Rent including additional rent or any other payment due under
this Lease by the date such amount is due, where such failure continues for
three (3) business days after written notice from Landlord; (ii) the abandonment
of the Premises by Tenant, as defined in California Civil Code Section 1951.3;
(iii) Tenant's failure to observe and perform any other required provision of
this Lease, where such failure continues for thirty (30) days after written
notice from Landlord, provided however that if the nature of the default is such
that it cannot reasonably be cured within the 30-day period, Tenant shall not be
deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion; (iv) Tenant's making of any
general assignment for the benefit of creditors; (v) the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or of a 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); (vi) 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 thirty
(30) days; or (vii) 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 thirty (30)
days.
A. Remedies: In the event of any such default by Tenant, then in addition
to 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 Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at 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; (iii) the worth at
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; (iv) any other amount necessary to
compensate Landlord for all 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; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker's fees, advertising costs or other expenses of reletting
the Premises, and (z) costs of carrying the Premises such as taxes, insurance
premiums, utilities and security precautions; and (v) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted by applicable California law. The term "rent", as used herein, is
defined as the minimum monthly installments of Base Monthly Rent and all other
sums required to be paid by Tenant pursuant to this Lease, all such other sums
being deemed as additional rent due hereunder. As used in (i) and (ii) above,
"worth at the time of award" shall be computed by allowing interest at a rate
equal to the discount rate of the Federal Reserve Bank of San Francisco plus
five (5%) percent per annum. As used in (iii) above, "worth at the time of
award" shall 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 have the right, after terminating this Lease, to re-enter the
Premises and remove all persons and property. 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.
C. Abandonment: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B 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
Page 17
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 elects to so relet, rentals received by Landlord from such reletting
shall be applied in the following order to: (i) the payment of any indebtedness
other than Base Monthly Rent due hereunder from Tenant to Landlord; (ii) the
payment of any cost of such reletting; (iii) the payment of the cost of any
alterations and repairs to the Premises; and (iv) the payment of Base Monthly
Rent due and unpaid hereunder. The residual rentals, 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 the obligation to market
the space but shall have no obligation to relet the Premises following a default
if Landlord has other comparable available space within the Building or Project.
In the event the portion of rentals received from such reletting which is
applied to the payment of rent hereunder during any month be less than the rent
payable during that month by Tenant hereunder, then Tenant shall pay such
deficiency to Landlord immediately upon demand. 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: Landlord's re-entry or taking possession of the
Premises pursuant to 13.B or 13.C shall not be construed as an election to
terminate this Lease unless written notice of such intention is given to Tenant
or unless the termination is 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.
E. Non-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. Landlord may accept Tenant's
payments without waiving any rights under this Lease, including rights under a
previously served notice of default. No payment by Tenant or receipt by Landlord
of a lesser amount than any installment of rent due shall be deemed as other
than payment on account of the amount due. If Landlord accepts partial payments
after serving a notice of default, Landlord may nevertheless commence and pursue
an action to enforce rights and remedies under the previously served notice of
default without giving Tenant any further notice or demand. Furthermore,
Landlord's acceptance of rent from the Tenant when the Tenant is holding over
without express written consent does not convert Tenant's Tenancy from a tenancy
at sufferance to a month to month tenancy. No waiver of any provision of this
Lease shall be implied by any failure of Landlord to enforce any remedy for the
violation of that provision, even if that violation continues or is repeated.
Any waiver by Landlord of any provision of this Lease must be in writing. Such
waiver shall affect only the provision specified and only for the time and in
the manner stated in the writing. No delay or omission in the exercise of any
right or remedy by Landlord shall impair such right or remedy or be construed as
a waiver thereof by Landlord. 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 requires 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.
F. Performance by Landlord: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in its
sole discretion may, with thirty (30) days' written notice and without waiving
any rights or remedies and without releasing Tenant from its obligations
hereunder, perform such obligation, in which event Tenant shall pay Landlord as
additional rent all sums paid by Landlord in connection with such substitute
performance, including interest at the Agreed Interest Rate (as defined in
Section 19.J) within ten (10) days of Landlord's written notice for such
payment.
Page 18
14. LANDLORD'S LIABILITY :
A. Limitation on Landlord's Liability: 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 or commence to cure such failure prior to any claim for breach or
resultant damages, provided, however, that if the nature of the default is such
that it cannot reasonably be cured within the 30-day period, Landlord shall not
be deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion. In addition, upon any such failure
by Landlord, Tenant shall give notice by registered or certified mail to any
person or entity with a security interest in the Premises ("Mortgagee") that has
provided Tenant with notice of its interest in the Premises, and shall provide
Mortgagee a reasonable opportunity to cure such failure. Tenant agrees that each
of the Mortgagees to whom this Lease has been assigned is an expressed
third-party beneficiary hereof. 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 Mortgagee or any purchaser at a foreclosure sale of
Mortgagee's interest unless Mortgagee or such purchaser shall have actually
received and not refunded the applicable payment or deposit. Tenant Further
waives any right to terminate this Lease and to vacate the Premises on
Landlord's default under this Lease. Tenant's sole remedy on Landlord's default
is an action for damages or injunctive or declaratory relief, with the sole
exception that if Landlord fails to perform its maintenance and repair
obligations under Section 8.A. Tenant may, after providing Landlord thirty (30)
days written notice, undertake such maintenance or repair at its own cost if
Landlord has not commenced to do so. This exception does not apply to items
which Landlord and Tenant may disagree as to the scope or necessity of work. If
Tenant undertakes such work, Tenant shall be entitled to recover from Landlord
the reasonable cost of completing such maintenance or repair work, together with
interest thereon at the Agreed Interest Rate from the date of Tenant's
expenditure until the date Landlord reimburses Tenant therefor.
B. Limitation on Tenant's Recourse: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their interest in the Premises. Tenant shall have recourse only to
the interest of Landlord in the Premises for the satisfaction of the obligations
of Landlord and shall not have recourse to any other assets of Landlord for the
satisfaction of such obligations.
C. Indemnification of Landlord: As a material part of the consideration
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 arising at any time to the fullest extent permitted by
law, and Tenant shall indemnify, defend with counsel reasonably acceptable to
Landlord and hold harmless Landlord, and their shareholders, directors,
officers, trustees, employees, partners, affiliates and agents from any claims,
liabilities, costs or expenses incurred or suffered arising from the use of
occupancy of the Premises or any part of the Project by Tenant or Tenant's
Agents, the acts or omissions of Tenant or Tenant's Agents, Tenant's breach of
this Lease, or any damage or injury to person or property from any cause, except
to the extent caused by the willful misconduct or active negligence of Landlord.
Further, in the event Landlord is made party to any litigation due to the acts
or omission of Tenant and Tenant's Agents, Tenant will indemnify, defend (with
counsel reasonably acceptable to Landlord) 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.
15. DESTRUCTION OF PREMISES:
A. Landlord's Obligation to Restore: In the event of a destruction of the
Premises during the Lease Term Landlord shall use due diligence to repair as
promptly as practicable, at Landlord's cost (subject to Tenant's reimbursement
for applicable insurance deductibles other than deductible amounts under
Landlord's earthquake insurance policy or policies), the Premises to
substantially the same
Page 19
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent commencing from the date of
destruction, such proportionate reduction to be based upon the extent to which
the repairs interfere with Tenant's business in the Premises, as reasonably
determined by Landlord. In no event shall Landlord be required to replace or
restore Alterations or Tenant Improvements or Tenant's fixtures or personal
property. With respect to a destruction which Landlord is obligated to repair or
may elect to repair under the terms of this Section, Tenant waives the
provisions of Section 1932, and Section 1933, Subdivision 4, of the Civil Code
of the State of California, and any other similarly enacted statute, and the
provisions of this Section 15 shall govern in the case of such destruction.
B. Limitations on Landlord's Restoration Obligation: Notwithstanding the
provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot be
made in one (1) year from the date of receipt of all governmental approvals
necessary under the laws and regulations of State, Federal, County or Municipal
authorities, as reasonably determined by Landlord, (ii) if the holder of the
first deed of trust or mortgage encumbering the Building elects not to permit
the insurance proceeds payable upon damage or destruction to be used for such
repair or restoration, (iii) the damage or destruction is not covered by
insurance maintained by Landlord which is sufficient to pay ninety-five percent
(95%) or more of the cost of repair or restoration, (iv) the damage or
destruction occurs in the last six (6) months of the Lease Term (unless Tenant
elects to exercise any available option to extend the Lease Term), (v) Tenant is
in material default pursuant to the provisions of Section 13 (beyond any notice
and cure period), or (vi) Tenant has vacated the Premises for more than ninety
(90) days before any such damage. In any such event Landlord may elect either to
(i) complete the repair or restoration, or (ii) terminate this Lease by
providing Tenant written notice of its election within sixty (60) days following
the damage or destruction. If (i) the repairs cannot be made within one (1) year
from the date of the damage or destruction or (ii) the damage or destruction
occurs in the last six (6) months of the Lease Term, Tenant may elect to
terminate this Lease by providing Landlord written notice of its election within
sixty (60) days following the date of the damage or destruction. If this Lease
is terminated as provided in this Section 15.B, Tenant shall be entitled to
retain insurance proceeds payable with respect to loss of or damage to the
Tenant Improvements and Alterations in an amount equal to the unamortized cost
of the Tenant Improvements and Alterations.
16. 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 vests in the condemnor or purchaser ("Vesting Date") and Base
Monthly Rent payable hereunder shall be adjusted so that Tenant is required to
pay for the remainder of the Lease Term only such portion of 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. If all of the Premises or such part
thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall terminate on the Vesting Date. If part or
all of the Premises be taken, all compensation awarded upon such taking shall go
to Landlord, and Tenant shall have no claim thereto; except Tenant shall be
entitled to recover compensation for damage to or taking of the Tenant
Improvements and any Alterations up to an amount not in excess of the
unamortized cost of such Tenant Improvements and Alterations. Landlord also
shall cooperate with Tenant, without cost to Landlord, to recover compensation
or for Tenant's moving costs. Tenant hereby waives the provisions of California
Code of Civil Procedures Section 1265.130 and any other similarly enacted
statue, and the provisions of this Section 16 shall govern in the case of a
taking. Notwithstanding anything to the contrary in this Lease, if as a result
of any taking or sale in lieu thereof under this Section 16, the Premises are no
longer reasonably suitable for Tenant's intended use, Tenant, upon written
notice to Landlord, shall be entitled to terminate this Lease as of the Vesting
Date.
17. ASSIGNMENT OR SUBLEASE:
Page 20
A. Consent by Landlord: Except as specifically provided in Section 17.E,
Tenant may not assign, sublet, hypothecate, or allow a third party to use the
Premises without the express written consent of Landlord. In the event Tenant
desires to assign this Lease or any interest herein including, without
limitation, a pledge, mortgage or other hypothecation, or sublet the Premises or
any part thereof, Tenant shall deliver to Landlord (i) the proposed agreements
and all ancillary agreements with the proposed assignee/subtenant, (ii) current
financial statements of the transferee covering the preceding three years (if
available), (iii) the nature of the proposed transferee's business to be carried
on in the Premises, (iv) a statement outlining all consideration to be given on
account of the Transfer, and (v) a current financial statement of Tenant.
Landlord may condition its approval of any Transfer on receipt of a
certification from both Tenant and the proposed transferee of all consideration
to be paid to Tenant in connection with such Transfer. At Landlord's request,
Tenant shall also provide additional information reasonably required by Landlord
to determine whether it will consent to the proposed assignment or sublease.
Landlord shall have a ten (10) business day period following receipt of all the
foregoing within which to notify Tenant in writing that Landlord elects to: (i)
terminate this Lease in the event the proposed sublease or assignment is for
substantially all of space in the Premises; (ii) permit Tenant to assign or
sublet such space to the named assignee/subtenant on the terms and conditions
set forth in the notice; or (iii) refuse consent. If Landlord should fail to
notify Tenant in writing of such election within the 10 business-day period,
Landlord shall be deemed to have elected option (iii) above. In the event
Landlord elects option (i) above, Landlord shall reimburse Tenant for any
unamortized Tenant Improvement and Alteration costs paid by Tenant and this
Lease shall expire with respect to such part of the Premises on the date upon
which the proposed sublease or transfer was to commence, and from such date
forward, Base Monthly Rent and Tenant's Allocable Share of all other costs and
charges shall be adjusted based upon the proportion that the rentable area of
the Premises remaining bears to the total rentable area of the Building. In the
event Landlord elects option (ii) above, Landlord's written consent to the
proposed assignment or sublease shall not be unreasonably withheld, provided and
upon the condition that: (a) the proposed assignee or subtenant is engaged in a
business that is limited to the use expressly permitted under this Lease; (b)
the proposed assignee or subtenant is a company with sufficient financial worth
and management ability to undertake the financial obligation of this Lease and
Landlord has been furnished with reasonable proof thereof; (c) the proposed
assignment or sublease is in form reasonably satisfactory to Landlord; (d)
Tenant reimburses Landlord on demand for any reasonable costs that may be
incurred by Landlord in connection with said assignment or sublease, including
the costs of making investigations as to the acceptability of the proposed
assignee or subtenant, and legal costs not to exceed $2,000.00 incurred in
connection with the granting of any requested consent; and (e) Tenant shall not
have advertised or publicized in any way the availability of the Premises
without prior notice to Landlord. In the event all or any one of the foregoing
conditions are not satisfied, Landlord shall be considered to have acted
reasonably if it withholds its consent. Notwithstanding the foregoing, Landlord
agrees that it will not exercise its right to terminate this Lease as provided
under clause (i) above in connection with (x) any Permitted Transfer, or (y) any
sublease for less than an entire Building.
B. Assignment or Subletting Consideration: Any rent or other economic
consideration realized by Tenant under any sublease and assignment, in excess of
the Base Monthly Rent payable hereunder and reasonable subletting and assignment
costs (including but not limited to legal fees, real estate commissions,
advertising fees, unamortized Tenant Improvements paid for by Tenant, and any
costs of readying the Premises for occupancy by the assignee or subtenant) shall
be divided and paid seventy-five percent (75%) to Landlord and twenty-five
percent (25%) to Tenant. Tenant's obligation to pay over Landlord's portion of
the consideration constitutes an obligation for additional rent, as and when
received, hereunder. The above provisions relating to Landlord's right to
terminate the Lease and relating to the allocation of excess rent are
independently negotiated terms of the Lease which constitute a material
inducement for the Landlord to enter into the Lease, and are agreed by the
parties to be commercially reasonable. No assignment or subletting by Tenant
shall relieve it of any obligation under this Lease. Any assignment or
Page 21
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 reasonably satisfactory
to Landlord, whereby the assignee or subtenant shall assume all the obligations
of this Lease on the part of Tenant to be performed or observed under the
sublease and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease. Notwithstanding any such sublease or
assignment and the acceptance of rent by Landlord from any subtenant or
assignee, Tenant and any guarantor shall remain fully liable for the payment of
Base Monthly Rent and additional rent due, and to become due hereunder, for the
performance of all 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 a
violation by Tenant. Tenant shall indemnify, defend and hold Landlord harmless
from and against 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 compensation in connection with the proposed assignment
or sublease.
D. Reorganization of Tenant: The provisions of this Section 17.D shall
apply if Tenant is a corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer to one person
or entity (or to any group of related persons or entities) of stock possessing
more than 50% of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding and entitled to vote for the election of
directors, and after such sale or transfer of stock Tenant's stock is no longer
publicly traded. In a transaction under clause (i) the surviving corporation
shall promptly execute and deliver to Landlord an agreement in form reasonably
satisfactory to Landlord under which such surviving corporation assumes the
obligations of Tenant hereunder, and in a transaction under clause (ii) the
transferee or buyer shall promptly execute and deliver to Landlord an agreement
in form reasonably satisfactory to Landlord under which such transferee or buyer
assumes the obligations of Tenant under the Lease.
E. Permitted Transfers: Notwithstanding anything to the contrary in this
Article 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (each, a
"Permitted Transfer") without Landlord's prior consent, and Landlord shall not
be entitled to terminate the Lease or to receive any part of any assignment
consideration or subrent resulting therefrom that would otherwise be due
pursuant to Sections 17.A and 17.B. Permitted Transfers include any sublease of
all or part of the Premises or an assignment of this Lease to (i) any
corporation which controls, is controlled by, or is under common control with
Tenant by means of an ownership interest of more than 50%; (ii) a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as the surviving corporation
has a net worth at the time of such assignment that is equal to or greater than
the net worth of Tenant immediately prior to such transaction; and (iii) a
corporation which purchases or otherwise acquires all or substantially all of
the assets of Tenant so long as such acquiring corporation has a net worth at
the time of such assignment that is equal to or greater than the net worth of
Tenant immediately prior to such transaction.
F. Effect of Default: In the event of Tenant's default beyond any
applicable cure period, 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 as Tenant's Attorney-in-Fact,
except that Tenant may collect such rents unless a default occurs as described
in Section 13 above. A termination of the Lease due to Tenant's default shall
not automatically terminate an assignment or sublease then in existence; rather
at Landlord's election, such assignment or sublease shall survive the Lease
termination, the assignee or subtenant shall attorn to Landlord, and Landlord
shall undertake the obligations of Tenant under the sublease or assignment;
except that Landlord
Page 22
shall not be liable for prepaid rent, security deposits or other defaults of
Tenant to the subtenant or assignee, or for any acts or omissions of Tenant and
Tenant's Agents.
G. Conveyance by Landlord: As used in this Lease, the term "Landlord" is
defined only as the owner for the time being (the "Owner") 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, Landlord shall be entirely freed and
relieved of all its covenants and obligations hereunder, and it shall be deemed
and construed, without further agreement between the parties 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 Landlord hereunder. 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 transferor shall be discharged
from any further liability in reference thereto.
H. Successors and Assigns: Subject to the provisions this Section 17, the
covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all parties hereto; and all
parties hereto comprising Tenant shall be jointly and severally liable
hereunder.
18. OPTION TO EXTEND THE LEASE TERM:
X. Xxxxx and Exercise of Option: Landlord grants to Tenant, subject to the
terms and conditions set forth in this Section 18.A, two (2) 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 and shall be
exercised, if at all, by written notice to Landlord no earlier than eighteen
(18) months prior to the date the Lease Term would expire but for such exercise
but no later than twelve (12) months prior to the date the Lease Term would
expire but for such exercise, time being of the essence for the giving of such
notice. If Tenant exercises the Option, all of the terms, covenants and
conditions of this Lease shall apply except for the grant of additional Options
pursuant to this Section, provided that Base Monthly Rent for the Premises
payable by Tenant during the Option Term shall be the greater of (i) the average
amount of Net Base Monthly Rent paid during the initial Lease Term ("Floor
Rent"), and (ii) the Fair Market Rental as hereinafter defined. Notwithstanding
anything herein to the contrary, if Tenant is in monetary or material
non-monetary default under any of the terms, covenants or conditions of this
Lease beyond applicable cure periods 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 Lease Term shall not be extended pursuant to this
Section 18.A. As used herein, the term "Fair Market Rental" is defined as the
rental and all other monetary payments, including any escalations and
adjustments thereto (including without limitation Consumer Price Indexing) that
Landlord could obtain during the Option Term from a third party desiring to
lease the Premises, based upon the current use and other potential uses of the
Premises, as determined by the rents then being obtained for new leases of space
comparable in age and quality to the Premises in the same real estate submarket
as the Building. Fair Market Rental shall further take into account that (i)
Tenant is in occupancy and making functional use of the Premises in its then
existing condition, and (ii) no additional work allowance, tenant improvement
investment, or leasing commission shall be required by Landlord.
B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send Tenant a notice setting forth the Fair Market Rental for the
Option Term within thirty (30) days following the Exercise Date. If Tenant
disputes Landlord's determination of Fair Market Rental for the Option Term,
Tenant shall, within thirty (30) days after the date of Landlord's notice
setting forth Fair Market Rental for the Option Term, send to Landlord a notice
stating that Tenant either 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 that Tenant disagrees with Landlord's determination of Fair
Market Rental for the Option Term and elects to resolve the disagreement as
provided in Section 18.C below. If Tenant does not send Landlord a notice as
provided in the previous sentence, Landlord's
Page 23
determination of Fair Market Rental shall be the Base Monthly Rent payable by
Tenant during the Option Term. If Tenant elects to resolve the disagreement as
provided in Section 18.C and such procedures are not concluded prior to the
commencement date of the Option Term, Tenant shall pay to Landlord as Base
Monthly Rent the Fair Market Rental as determined by Landlord in the manner
provided above. If the Fair Market Rental as finally determined pursuant to
Section 18.C is greater than Landlord's determination, Tenant shall pay Landlord
the difference between the amount paid by Tenant and the Fair Market Rental as
so determined in Section 18.C within thirty (30) days after such determination.
If the Fair Market Rental as finally determined in Section 18.C is less than
Landlord's determination, the difference between the amount paid by Tenant and
the Fair Market Rental as so determined in Section 18.C shall be credited
against the next installments of Base Monthly Rent due from Tenant to Landlord
hereunder.
C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to Landlord's notice
setting forth the Fair Market Rental, Landlord and Tenant shall meet at a
mutually agreeable time and place, in an attempt to resolve the disagreement.
2. If within the 30-day period referred to above, Landlord and Tenant
cannot reach agreement as to Fair Market Rental, each party shall select one
appraiser to determine Fair Market Rental. Each such appraiser shall arrive at a
determination of Fair Market Rental and submit their conclusions to Landlord and
Tenant within thirty (30) days after the expiration of the 30-day consultation
period described above.
3. If only one appraisal is submitted within the requisite time period, it
shall be deemed as Fair Market Rental. If both appraisals are submitted within
such time period and the two appraisals so submitted differ by less than ten
percent (10%), the average of the two shall be deemed as Fair Market Rental. If
the two appraisals differ by more than 10%, the appraisers shall immediately
select a third appraiser who shall, within thirty (30) days after his selection,
make and submit to Landlord and Tenant a determination of Fair Market Rental.
This third appraisal will then be averaged with the closer of the two previous
appraisals and the result shall be Fair Market Rental.
4. All appraisers specified pursuant to this Section shall be members of
the American Institute of Real Estate Appraisers with not less than ten (10)
years experience appraising office and industrial properties in Alameda County.
Each party shall pay the cost of the appraiser selected by such party and
one-half of the cost of the third appraiser.
D. Options Transferable: Provided that Tenant's transferee has a net worth
(as evidenced by its most recent financial statements) comparable to Tenant's,
the Options provided to Tenant in this Lease shall be transferable and may be
exercised by any such third party should Tenant assign or sublet all or a
portion of its rights under this Lease. In the event Tenant has multiple options
to extend this Lease, a later option to extend the Lease cannot be exercised
unless the prior option has been properly exercised.
E. Right to Rescind: If the determination of Fair Market Rental pursuant
to the foregoing provision results in a Fair Market Rental which is in excess of
the Floor Rent, Tenant shall be entitled to rescind its exercise of the Option
within ten (10) days after the date on which Tenant is notified of the
determination of Fair Market Rental, in which event the Lease Term shall be
extended from the date on which the Lease would have expired if the Option were
never exercised plus an additional period of three (3) months at a rate equal to
110% of the rent payable during the last month of the original Lease Term.
19. GENERAL PROVISIONS:
A. Attorney's Fees: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant herein; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be
Page 24
deemed to have accrued on the commencement of such action. The prevailing party
shall also be entitled to recover all costs and expenses including reasonable
attorney's fees incurred in enforcing any judgment or award against the other
party. The foregoing provision relating to post-judgment costs is severable from
all other provisions of this Lease.
B. Authority of Parties: Each party represents and warrants that it is
duly formed and in good standing, and is duly authorized to execute and deliver
this Lease on behalf of such party, and that this Lease is binding upon such
party in accordance with its terms. At Landlord's request, Tenant shall provide
Landlord with corporate resolutions or other proof in a form acceptable to
Landlord, authorizing the execution of the Lease.
C. Brokers: Tenant and Landlord represent it has not utilized or contacted
a real estate broker or finder with respect to this Lease other than CB Xxxxxxx
Xxxxx, Inc. and Tenant and Landlord agree to indemnify, defend and hold each
other harmless against any claim, cost, liability or cause of action asserted by
any other broker or finder claiming through the indemnifying party.
D. Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E, venue shall
proper in be Alameda County.
E. Dispute Resolution: Landlord and Tenant and any other party that may
become a party to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer or
any claim within the jurisdiction of the small claims court (which small claims
court shall be the sole court of competent jurisdiction), 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 Lease, 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 mediation service mutually acceptable
to the parties located in Alameda County, California. The dispute resolution
process shall involve first, mediation, followed, if necessary, by final and
binding arbitration administered by and in accordance with the then existing
rules and practices of JAMS or other judicial mediation service selected. In the
event of any dispute subject to this provision, either party may initiate a
request for mediation and the parties shall use reasonable efforts to promptly
select a JAMS. mediator and commence the mediation. In the event the parties are
not able to agree on a mediator within thirty (30) days, JAMS. or another
judicial mediation service mutually acceptable to the parties shall appoint a
mediator. The mediation shall be confidential and in accordance with California
Evidence Code ss. 1119 et. seq. The mediation shall be held in Alameda County,
California and in accordance with the existing rules and practice of JAMS (or
other judicial and mediation service selected). The parties shall use reasonable
efforts to conclude the mediation within sixty (60) days of the date of either
party's request for mediation. The mediation shall be held prior to any
arbitration or court action (other than a claim by Landlord for unlawful
detainer or any claim within the jurisdiction of the small claims court which
are not subject to this mediation/arbitration provision and may be filed
directly with a court of competent jurisdiction). Should the prevailing party in
any dispute subject to this Section 19.E attempt an arbitration or a court
action before attempting to mediate, THE PREVAILING PARTY SHALL NOT BE ENTITLED
TO ATTORNEY'S FEES THAT MIGHT OTHERWISE BE AVAILABLE TO THEM IN A COURT ACTION
OR ARBITRATION AND IN ADDITION THERETO, THE PARTY WHO IS DETERMINED BY THE
ARBITRATOR TO HAVE RESISTED MEDIATION, SHALL BE SANCTIONED BY THE ARBITRATOR.
IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN EXISTING
RULES AND PRACTICES OF JAMS OR THE OTHER 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 AS PROVIDED BY
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET. SEQ, AS SAID STATUTES THEN
APPEAR, INCLUDING ANY AMENDMENTS
Page 25
TO SAID STATUTES OR SUCCESSORS TO SAID STATUTES OR AMENDED STATUTES, EXCEPT THAT
IN NO EVENT SHALL THE PARTIES BE ENTITLED TO PROPOUND INTERROGATORIES OR REQUEST
FOR ADMISSIONS DURING THE ARBITRATION PROCESS. THE ARBITRATOR SHALL BE A RETIRED
JUDGE OR A LICENSED CALIFORNIA ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR
MEDIATION SHALL BE IN ALAMEDA COUNTY, CALIFORNIA.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED
IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES" PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY
BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION. LANDLORD: ______ TENANT: _______
F. Entire Agreement: This Lease and the exhibits attached hereto 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 written agreement signed
by all parties hereto or their respective successors in interest. This Lease
supersedes and revokes all previous negotiations, letters of intent, lease
proposals, brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent Landlord
or Tenant.
G. Entry by Landlord: Upon prior notice to Tenant and subject to Tenant's
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned, for the following purposes:
(i) inspecting and maintaining the Premises; (ii) making repairs, alterations or
additions to the Premises; (iii) erecting additional building(s) and
improvements on the land where the Premises are situated or on adjacent land
owned by Landlord; (iv) performing any obligations of Landlord under the Lease
including remediation of Hazardous Materials if determined to be the
responsibility of Landlord, (v) posting and keeping posted thereon notices of
non-responsibility for any construction, alteration or repair thereof, as
required or permitted by any law, and (vi) showing the Premises to Landlord's or
the Master Landlord's existing or potential successors, purchaser, and lenders.
Tenant shall permit Landlord and his agents, at any time within one hundred
seventy (180) days prior to the Expiration Date (or at any time during the Lease
if Tenant is in default hereunder beyond any 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. The foregoing
notwithstanding, Landlord and its agents: (i) shall not enter the Premises
without first giving twenty-four (24) hours notice to Tenant of such entry
except in the case of emergency, (ii) shall be accompanied by an employee of
Tenant at all times while in the Premises, (iii) shall comply with Tenant's
security procedures applicable to the Premises, and (iv) shall not unreasonably
interfere with Tenant's use of the Premises.
H. Estoppel Certificates: At any time during the Lease Term, Landlord or
Tenant shall, within ten (10) business days following written notice from the
other party, execute and deliver to the requesting party a written
Page 26
statement certifying, if true, the following: (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 rent and other charges are paid in
advance, if any; (iii) acknowledging that there are not, to such party's
knowledge, any uncured defaults on either party's part hereunder (or specifying
such defaults if they are claimed); and (iv) such other information as either
party may reasonably request. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of Landlord's interest in the
Premises. Landlord's or Tenant's failure to deliver such statement within such
time shall be conclusive upon such party that this Lease is in full force and
effect without modification, and that there are no uncured defaults in
Landlord's performance except in each case as may be represented in such written
statement. If Tenant is not a public company, Tenant agrees to provide, within
fifteen (15) days of Landlord's request, Tenant's most recent three (3) years of
audited financial statements for Landlord's use in financing or sale of the
Premises or Landlord's interest therein.
I. Exhibits: All exhibits referred to are attached to this Lease and
incorporated by reference.
J. Interest: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
Xxxxxxxxx Xxxxxx, plus two percent (2%) per annum from that date until paid in
full ("Agreed Interest Rate"). This provision shall survive the expiration or
sooner termination of the Lease. Despite any other provision of this Lease, the
total liability for interest payments shall not exceed the limits, if any,
imposed by the usury laws of the State of California. Any interest paid in
excess of those limits shall be refunded to Tenant by application of the amount
of excess interest paid against any sums outstanding in any order that Landlord
requires. If the amount of excess interest paid exceeds the sums outstanding,
the portion exceeding those sums shall be refunded in cash to Tenant by
Landlord. To ascertain whether any interest payable exceeds the limits imposed,
any non-principal payment (including late charges) shall be considered to the
extent permitted by law to be an expense or a fee, premium, or penalty rather
than interest.
K. Modifications Required by Lender: If any lender of Landlord or ground
lessor of the Premises requires a modification of this Lease that will not
increase Tenant's cost or expense or materially or adversely change Tenant's
rights and obligations, this Lease shall be so modified and Tenant shall execute
whatever documents are required and deliver them to Landlord within ten (10)
days after the request.
L. No Presumption Against Drafter: Landlord and Tenant understand, agree
and acknowledge that this Lease has been freely negotiated by both parties; and
that in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.
M. 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, nationally recognized overnight carrier, or by personal
delivery addressed to the party to be notified at the address for such party
specified in Section 1 of this Lease, or to such other place as the party to be
notified may from time to time designate by at least fifteen (15) days prior
notice to the notifying party. When this Lease requires service of a notice,
that notice shall replace rather than supplement any equivalent or similar
statutory notice, including any notices required by Code of Civil Procedure
Section 1161 or any similar or successor statute. When a statute requires
service of a notice in a particular manner, service of that notice (or a similar
notice required by this Lease) shall replace and satisfy the statutory
service-of-notice procedures, including those required by Code of Civil
Procedure Section 1162 or any similar or successor statute.
N. Asset Management: In addition, Tenant agrees to pay Landlord along with
the expenses to be reimbursed by Tenant a monthly fee for asset management
services rendered by either Landlord or a third party manager engaged by
Landlord (which may be a party affiliated with Landlord), in the amount of five
percent (5%) of the Net Base Monthly Rent.
Page 27
O. Rent: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as "additional rent", shall be
deemed as rent.
P. 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 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 statement of Landlord or its
employees or agents for that purpose.
Q. Rights and Remedies: Subject to Section 14 above, 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.
R. 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.
S. Submission of Lease: Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in favor
of Tenant. This document is not effective as a lease or otherwise until executed
and delivered by both Landlord and Tenant.
T. Subordination: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the form
presented to Tenant, which Landlord or Holder deems necessary or desirable for
such purposes. Landlord shall have the right to cause this Lease to be and
become and remain subject and subordinate to any and all Encumbrances which are
now or may hereafter be executed covering the Premises or any renewals,
modifications, consolidations, replacements or extensions thereof, for the full
amount of all advances made or to be made thereunder and without regard to the
time or character of such advances, together with interest thereon and subject
to all the terms and provisions thereof; provided only, that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, Holder agrees to recognize Tenant's rights under this Lease as
long as Tenant is not then in default and continues to pay Base Monthly Rent and
additional rent and observes and performs all required provisions of this Lease.
Within ten (10) days after Landlord's written request, Tenant shall execute any
documents required by Landlord or the Holder to make this Lease subordinate to
any lien of the Encumbrance. If Tenant fails to do so, then in addition to such
failure constituting a default by Tenant, it shall be deemed that this Lease is
so subordinated to such Encumbrance. Notwithstanding anything to the contrary in
this Section, Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
encumbrance. Notwithstanding the foregoing, the subordination of this Lease
shall be subject to Tenant's receipt of a Nondisturbance and Attornment
Agreement in a commercially reasonable form.
U. 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.
V. Time: Time is of the essence hereunder.
W. Transportation Demand Management Programs: Should a government agency
or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or programs, Tenant agrees that the cost of TDM
imposed facilities and programs required on the Premises, including but not
limited to employee showers, lockers, cafeteria, or lunchroom facilities, shall
be paid by Tenant. Further, any ongoing costs or
Page 28
expenses associated with a TDM program which are required for the Premises and
not provided by Tenant, such as an on-site TDM coordinator, shall be provided by
Landlord with such costs being included as additional rent and reimbursed to
Landlord by Tenant within thirty (30) days after demand. If TDM facilities and
programs are instituted on a Project wide basis, Tenant shall pay its
proportionate share of such costs in accordance with Section 8 above.
X. Waiver of Right to Jury Trial: Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.
Y. Use of Roof: Tenant shall have the exclusive right to use the roof of
the Building at no charge to place and maintain telecommunications antennas,
microwave or satellite dishes and other communications equipment. Such use of
the roof shall be subject to receipt of all required government approvals, at
Tenant's sole cost. The placements of any such antennas or satellite dishes or
other communications equipment of the roofs, the modifications of the roof to
accommodate such equipment, and the installation of any such equipment shall be
subject to Landlord's reasonable prior approval of the plans and methods
therefor. Such use of the roof shall not restrict, impair or negate any warranty
relating to the roofs and Tenant shall be responsible for any and all damage,
leakage or extraordinary wear and tear to the roof occurring as a result of such
use of the roofs. Installation of such equipment shall be supervised by Landlord
and performed in a first class workmanlike manner. Prior to the Expiration Date,
Tenant shall, at its sole cost and expense, remove all such roof equipment as
Landlord desires and restore the roof to its condition as of the Commencement
Date. Such repair and restorations shall include causing the roof to be brought
into compliance with all applicable building codes and laws in effect at the
time of the removal to the extent such compliance is necessitated by removal of
the roof equipment and restoration work on the roof.
Z. Recordation: Within forty-five (45) days after the execution and
delivery of this Lease by Landlord and Tenant, Landlord shall execute and
notarize a short form memorandum of lease, in recordable form as shown on Ex "E"
(the "Short Form Memorandum of Lease") hereto, and shall deliver the same to
Tenant for Tenant's recording. Prior to the Expiration or earlier termination of
this Lease, Tenant agrees to promptly execute all necessary documents to
eliminate the Short Form Memorandum of Lease as an exception to title
Page 29
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
Landlord: ARDENWOOD CORPORATE Tenant: NETWORK EQUIPMENT
PARK ASSOCIATES TECHNOLOGIES , INC.
a California limited a Delaware Corporation
partnership
By: ______________________________ * By: __________________________________
Its: General Partner Its: _________________________
* By: _________________________
Its: _________________________
* NOTE: This lease must be signed by two (2) officers of such corporation: one
being the chairman of the board, the president, or a vice president, and the
other being the secretary, an assistant secretary, the chief financial officer
or an assistant treasurer. If one (1) individual is signing in two (2) of the
foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer and in such event, Tenant must deliver to Landlord a
certified copy of a corporate resolution authorizing the signatory to execute
this Lease.
Page 30
Exhibit 10.23
EXHIBIT "A" - Legal Description of Land
Exhibit A Page 1
Exhibit 10.23
EXHIBIT "B" - Plot of Premises
Exhibit B Page 1
Exhibit 10.23
EXHIBIT "C" - Shell Plans and Specifications
Exhibit C-1 Page 1
Exhibit 10.23
EXHIBIT "C-1" - Budget Sheet
Exhibit C-1 Page 1
Exhibit 10.23
EXHIBIT "D" - Tenant Improvement Plans and Specifications
(sheet references to be attached upon completion and after Lease execution)
Exhibit D Page 1
Exhibit 10.23
EXHIBIT "E" - Short Form Memorandum of Lease
Exhibit E Page 1
LEASE
BETWEEN
ARDENWOOD CORPORATE PARK ASSOCIATES (LANDLORD)
AND
NETWORK EQUIPMENT TECHNOLOGIES, INC. (TENANT)
Lease between
Ardenwood Corporate Park Associates and
Network Equipment Technologies, Inc.
SECTION PAGE #
------- ------
1. PARTIES....................................................................1
2. PREMISES...................................................................1
A. Demise of Premises.....................................................1
B. Description of Premises................................................1
C. Rentable Area of Buildings.............................................1
3. USE........................................................................1
A. Permitted Uses.........................................................1
B. Uses Prohibited........................................................2
C. Advertisements and Signs...............................................2
D. Covenants, Conditions and Restrictions.................................2
4. TERM AND RENTAL............................................................2
A. Base Monthly Rent......................................................2
B. Rental Adjustment......................................................3
C. Payment and Prorations.................................................3
D. Late Charges...........................................................4
E. Security Deposit.......................................................4
F. Termination of Paseo Padre Leases......................................5
5. CONSTRUCTION...............................................................5
A. Building Shell Construction............................................5
B. Tenant Improvement Plans...............................................6
C. Pricing................................................................7
D. Change Orders..........................................................7
E. Letter of Credit to Secure Tenant Improvement Construction.............7
F. Tenant Improvement Costs...............................................8
G. Force Majeure..........................................................8
H. General Contractor Overhead & Profit...................................9
I. Tenant Delays..........................................................9
J. Insurance.............................................................10
K. Punch List & Warranty.................................................10
L. Other Work by Tenant..................................................10
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER.......................10
A. Delivery and Acceptance...............................................10
B. Condition Upon Surrender..............................................11
C. Failure to Surrender..................................................12
7. ALTERATIONS AND ADDITIONS.................................................12
A. Tenant's Alterations..................................................12
B. Free From Liens.......................................................13
C. Compliance With Governmental Regulations..............................13
8. MAINTENANCE OF PREMISES...................................................14
A. Landlord's Obligations................................................14
B. Tenant's Obligations..................................................14
C. Waiver of Liability...................................................14
D. Replacements..........................................................15
9. HAZARD INSURANCE..........................................................15
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A. Tenant's Use..........................................................15
B. Landlord's Insurance..................................................15
C. Tenant's Insurance....................................................16
D. Waiver................................................................16
10. TAXES.....................................................................16
11. UTILITIES.................................................................17
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE......................................17
A. Tenant's Responsibility...............................................17
B. Tenant's Indemnity Regarding Hazardous Materials......................18
C. Actual Release by Tenant..............................................19
D. Environmental Monitoring..............................................19
13. TENANT'S DEFAULT..........................................................20
A. Remedies..............................................................20
B. Right to Re-enter.....................................................20
C. Abandonment...........................................................21
D. No Termination........................................................21
E. Non-Waiver............................................................21
F. Performance by Landlord...............................................22
14. LANDLORD'S LIABILITY.....................................................22
A. Limitation on Landlord's Liability....................................22
B. Limitation on Tenant's Recourse.......................................22
C. Indemnification of Landlord...........................................23
15. DESTRUCTION OF PREMISES...................................................23
A. Landlord's Obligation to Restore......................................23
B. Limitations on Landlord's Restoration Obligation......................23
16. CONDEMNATION..............................................................24
17. ASSIGNMENT OR SUBLEASE....................................................24
A. Consent by Landlord...................................................24
B. Assignment or Subletting Consideration................................25
C. No Release............................................................26
D. Reorganization of Tenant..............................................26
E. Permitted Transfers...................................................26
F. Effect of Default.....................................................27
G. Conveyance by Landlord................................................27
H. Successors and Assigns................................................27
18. OPTION TO EXTEND THE LEASE TERM...........................................27
X. Xxxxx and Exercise of Option..........................................27
B. Determination of Fair Market Rental...................................28
C. Resolution of a Disagreement over the Fair Market Rental..............28
D. Options Transferable..................................................29
E. Right to Rescind......................................................29
19. GENERAL PROVISIONS........................................................29
A. Attorney's Fees.......................................................29
B. Authority of Parties..................................................29
C. Brokers...............................................................29
D. Choice of Law.........................................................29
E. Dispute Resolution....................................................30
F. Entire Agreement......................................................31
G. Entry by Landlord.....................................................31
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H. Estoppel Certificates.................................................31
I. Exhibits..............................................................32
J. Interest..............................................................32
K. Modifications Required by Lender......................................32
L. No Presumption Against Drafter........................................32
M. Notices...............................................................32
N. Asset Management......................................................33
O. Rent..................................................................33
P. Representations.......................................................33
Q. Rights and Remedies...................................................33
R. Severability..........................................................33
S. Submission of Lease...................................................33
T. Subordination.........................................................33
U. Survival of Indemnities...............................................34
V. Time..................................................................34
W. Transportation Demand Management Programs.............................34
X. Waiver of Right to Jury Trial.........................................34
Y. Use of Roof...........................................................34
Z. Recordation...........................................................35
EXHIBIT "A" - Legal Description of Land
EXHIBIT "B" - Plot of Premises
EXHIBIT "C" - Shell Plans and Specifications
EXHIBIT "C-1" - Budget Sheet
EXHIBIT "D" - Tenant Improvement Plans and Specifications
EXHIBIT "E" - Short Form Memorandum of Lease
- iii -
