EXHIBIT 10.9
LEASE
ADI MESA PARTNERS - AMCC, L.P., A CALIFORNIA LIMITED PARTNERSHIP
Landlord
APPLIED MICRO CIRCUITS CORPORATION,
A DELAWARE CORPORATION
Tenant
TABLE OF CONTENTS
ARTICLE I
TERM OF LEASE
1.1 Initial Term............................................................... 1
1.2 Option to Extend........................................................... 1
ARTICLE II
CONSTRUCTION OF THE IMPROVEMENTS
2.1 The Improvements........................................................... 2
2.2 Plans and Specifications................................................... 2
2.3 Substantial Completion of the Improvements................................. 5
2.4 Delay in Substantial Completion or Lease Execution......................... 6
2.5 Liquidated Damages for Delay in Substantial Completion..................... 6
2.6 Building Permit for the Improvements....................................... 7
2.7 Construction Warranties.................................................... 7
2.8 Condition of Demised Premises; Limited Warranty............................ 7
2.9 Tenant Improvement Allowance; Tenant Responsibility........................ 7
2.10 Responsibility for Excess Shell Costs and Excess Tenant Improvement Costs.. 8
2.11 Contractor................................................................. 9
2.12 Tenant's Entry Into the Building Prior to Substantial Completion........... 9
ARTICLE III
RENT
3.1 Base Rent.................................................................. 10
3.2 Base Rent During Option Term............................................... 10
3.3 Additional Obligations; Additional Rent.................................... 12
3.4 Delinquent Rental Payments................................................. 12
ARTICLE IV
USED OF DEMISED PREMISES
4.1 Permitted Use.............................................................. 12
4.2 Preservation of Demised Premises........................................... 13
4.3 Hazardous Substances....................................................... 13
ARTICLE V
PAYMENT OF TAXES, ASSESSMENTS, ETC.
5.1 Payment of Impositions.................................................. 15
5.2 Tenant's Right to Contest Impositions................................... 16
5.3 Levies and Other Taxes.................................................. 16
5.4 Evidence of Payment..................................................... 16
5.5 Escrow for Taxes and Assessments........................................ 17
5.6 Landlord's Right to Contest Impositions................................. 17
ARTICLE VI
INSURANCE
6.1 Casualty Insurance...................................................... 17
6.2 Public Liability Insurance.............................................. 18
6.3 Other Insurance......................................................... 18
6.4 Certain Insurance Provisions............................................ 18
6.5 Waiver of Subrogation................................................... 19
6.6 Tenant's Indemnification of Landlord.................................... 19
6.7 Unearned Premiums....................................................... 19
6.8 Blanket Insurance Coverage.............................................. 19
6.9 Landlord's Liability Insurance Coverage................................. 19
ARTICLE VII
UTILITIES
7.1 Payment of Utilities.................................................... 19
7.2 Additional Charges...................................................... 19
7.3 Landlord's Responsibility for Utility Hook-Up Charges and Fees.......... 20
ARTICLE VIII
REPAIRS AND MAINTENANCE OF DEMISED PREMISES
8.1 Tenant's Responsibilities............................................... 20
8.2 Landlord's Responsibilities............................................. 20
8.3 Sharing of Expenses of Capital Items.................................... 20
8.4 Tenant's Waiver of Claims Against Landlord.............................. 21
8.5 Prohibition Against Waste............................................... 21
ARTICLE IX
COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS
9.1 Compliance with Applicable Laws and Restrictions...................... 21
9.2 Tenant's Obligations.................................................. 22
9.3 Tenant's Right to Contest Laws and Ordinances......................... 22
ARTICLE X
MERCHANIC'S LIENS AND OTHER LIENS
10.1 Mechanic's Liens...................................................... 22
10.2 Landlord's Indemnification............................................ 23
10.3 Removal of Liens...................................................... 23
10.4 Equipment and Trade Fixtures.......................................... 23
ARTICLE XI
LANDLORD'S PERFORMANCE OF TENANT'S OBLIGATIONS........................ 23
ARTICLE XII
DEFAULTS OF TENANT
12.1 Events of Default..................................................... 24
12.2 Landlord's Remedies................................................... 24
12.3 Right to Collect Rent as Due.......................................... 25
12.4 New Lease Following Termination....................................... 25
12.5 Cumulative Rights; No Waiver.......................................... 25
12.6 Surrender of Demised Premises......................................... 25
12.7 Interest on Unpaid Amounts............................................ 26
ARTICLE XIII
DESTRUCTION AND RESTORATION
13.1 Destruction and Restoration........................................... 26
13.2 Application of Insurance Proceeds..................................... 26
13.3 Continuance of Tenant's Obligations................................... 27
13.4 Availability of Insurance Proceeds.................................... 27
13.5 Completion of Restoration............................................. 27
13.6 Termination of Lease.................................................. 27
ARTICLE XIV
CONDEMNATION
14.1 Condemnation of Entire Demised Premises................................ 28
14.2 Partial Condemnation/Termination of Lease.............................. 28
14.3 Partial Condemnation/Continuation of Lease............................. 29
14.4 Continuance of Obligations............................................. 29
14.5 Adjustment of Rent..................................................... 29
ARTICLE XV
ASSIGNMENT, SUBLETTING, ETC.
15.1 Restriction on Transfer................................................ 30
15.2 Transfer to Affiliates; Sale or Merger................................. 30
15.3 Restriction Against Further Assignment................................. 31
15.4 Tenant's Failure to Comply............................................. 31
ARTICLE XVI
SUBORDINATION, NONDISTURBANCE,
NOTICE TO MORTGAGEE AND ATTORNMENT
16.1 Subordination by Tenant................................................ 31
16.2 Landlord's Default..................................................... 31
16.3 Attornment............................................................. 32
ARTICLE XVII
SIGNS..................................... 33
ARTICLE XVIII
FINANCIAL STATEMENTS OF TENANT....................... 33
ARTICLE XIX
CHANGES AND ALTERATIONS........................... 33
ARTICLE XX
MISCELLANEOUS PROVISIONS
20.1 Entry by Landlord...................................................... 35
20.2 Exhibition of Demised Premises......................................... 35
20.3 Indemnification by Tenant............................................ 35
20.4 Notices.............................................................. 36
20.5 Quiet Enjoyment...................................................... 36
20.6 Landlord's Continuing Obligations.................................... 36
20.7 Estoppel............................................................. 37
20.8 Delivery of Corporate Documents...................................... 37
20.9 Memorandum of Lease.................................................. 38
20.10 Severability......................................................... 38
20.11 Successors and Assigns............................................... 38
20.12 Captions............................................................. 38
20.13 Relationship of Parties.............................................. 38
20.14 Entire Agreement..................................................... 38
20.15 No Merger............................................................ 38
20.16 Possession and Use................................................... 38
20.17 Surrender of Demised Premises........................................ 38
20.18 Holding Over......................................................... 38
20.19 Survival............................................................. 39
20.20 Broker's Commission.................................................. 39
20.21 Applicable Law....................................................... 39
20.22 Counterparts......................................................... 39
20.23 Attorneys' Fees...................................................... 39
Exhibit "A"
LEGAL DESCRIPTION OF PROPERTY........................40
Exhibit "B"
PRELIMINARY PLANS AND SPECIFICATIONS.....................41
Exhibit "C"
TENANT IMPROVEMENTS BUDGET ESTIMATE......................42
Exhibit "D"
MEMORANDUM OF LEASE.............................43
LEASE
THIS LEASE ("Lease") is made this 29th day of October, 1996, by and
between ADI MESA PARTNERS-AMCC, L.P., a California limited partnership
("Landlord"), and APPLIED MICRO CIRCUITS CORPORATION, a Delaware corporation
("Tenant").
WITNESSETH:
"LAND" means an approximately 5.0 acre-sized parcel of land situated
in the Xxxx Xxxx Mesa Business Park East II, Unit 2, in San Diego, California,
together with any appurtenant easements, which shall be a separate legal parcel
created from a portion of the property which is described in Exhibit "A"
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attached hereto and made a part hereof, and which is located on Sequence Drive
in San Diego, California. Landlord is currently pursuing creation of such
separate legal parcel.
"BUILDING" means the headquarters, research and development, assembly,
light manufacturing and distribution facility, which shall consist of
approximately 90,000 square feet (as measured in accordance with the method
established by the American Industrial Real Estate Association for measuring the
"gross" size of buildings of similar type and character, provided that up to 300
square feet of "drip-line" may be included in such calculation) and which shall
be constructed on the Land by Landlord in accordance with the Preliminary Plans
and Specifications and the Plans and Specifications, as those terms are defined
in Section 2.2 of this Lease.
"IMPROVEMENTS" means the Building and all improvements, machinery,
equipment, fixtures and other property, real, personal or mixed (except Tenant's
trade fixtures, machinery and equipment) installed or constructed on the Land or
in the Building by Landlord (including, without limitation, the parking facility
and other site improvements and landscaping), together with all additions,
alterations and replacements thereof.
"DEMISED PREMISES" means the Land and the Improvements.
Landlord, for and in consideration of the rents, covenants and
agreements hereinafter reserved, mentioned and contained on the part of Tenant,
its successors and assigns, to be paid, kept, observed and performed under this
Lease, hereby leases, rents, lets and demises to Tenant, and upon and subject to
the conditions and limitations expressed in this Lease, Tenant takes and hires
from Landlord, the Demised Premises.
ARTICLE I
TERM OF LEASE
1.1 Initial Term. This Lease shall be effective and binding upon the
------------
parties hereto upon mutual execution hereof (the "EFFECTIVE DATE"). The term of
this Lease (the "INITIAL TERM") shall commence upon the Commencement Date and
shall end one hundred twenty (120) months after the Commencement Date (as
defined below) of the Improvements, subject to extension pursuant to Section
1.2, below. The "COMMENCEMENT DATE" (as that term is used in this Lease) shall
mean the date upon which Substantial Completion (as defined in Section 2.3
below) of the Improvements occurs. Substantial Completion of the Improvements
and the Commencement Date are currently anticipated to be September 18, 1997
(the "TARGET COMMENCEMENT DATE"); provided, however, that in no event shall the
Commencement Date occur (or be deemed to occur) prior to September 18, 1997. In
-----
the event the Commencement Date is September 18, 1997, the Initial Term of this
Lease would end on September 17, 2007.
1.2 Option to Extend. Tenant shall have two (2) options to extend (the
----------------
"EXTENSION OPTIONS") the Initial Term for consecutive five- (5) year periods
(the foregoing option terms shall be referred to hereinafter sometimes as the
"OPTION TERMS"), by delivering a binding written notice of exercise to Landlord
("Extension Notice"), so that Landlord receives the EXTENSION NOTICE with
respect to the first Option Term at least three hundred sixty (360) days prior
to the end of the Initial Term and with respect to the second Option Term, at
least three hundred sixty (360) days prior to the end of the first Option Term.
Tenant may exercise the Extension Options only if this Lease is in full force
and effect and there is no uncured Event of Default, or any breach of Tenant's
obligations under this Lease which with the passage of time or the giving of
notice, or both, would constitute an Event of Default if not cured within any
applicable cure period (an "Incipient Default"), at the time of exercise of the
right of renewal or at the time of the commencement of the Option Term, but
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Landlord shall have the right at its sole discretion to waive the non-default
conditions herein; provided, however, that if an Event of Default or Incipient
Default exists at the time Tenant exercises the Extension Option and Landlord
does not elect to waive, Landlord shall provide written notice to Tenant of the
existence and nature of such Event of Default or Incipient Default and Tenant
shall be allowed an amount of time to cure such Event of Default or Incipient
Default as is otherwise provided for curing defaults of that type under this
Lease, and, if timely cured, Tenant's exercise of the Extension Option shall be
reinstated effective as of the time of exercise. The Initial Term, together with
any Option Term, are referred to in this Lease as the "Term."
ARTICLE II
CONSTRUCTION OF THE IMPROVEMENTS
2.1 The Improvements. Landlord agrees to furnish all of the material,
----------------
labor and equipment for the construction of the Improvements in a good and
workmanlike manner in conformance with the Plans and Specifications (as defined
in Section 2.2) and in compliance with all covenants, conditions and
restrictions to which the Land is subject and all then applicable building laws,
ordinances, orders, rules, regulations and requirements of all federal, state
and municipal governments with jurisdictional authority over the development of
the Land and the construction of the Improvements, including, but not limited
to, the Americans With Disabilities Act and Title 24 (the "APPLICABLE LAND USE
LAWS AND RESTRICTIONS"). Landlord shall use its diligent, best efforts to
achieve Substantial Completion of the Improvements by the Target Commencement
Date.
2.2 Plans and Specifications. The Plans and Specifications for the
------------------------
development of the Property and the construction of the Improvements shall be
developed on a "two-track" basis, with one "track" related to the creation of
Plans and Specifications for the Shell Improvements (as defined in Section
2.9(a) hereof) and a second "track" related to the creation of Plans and
Specifications for the Tenant Improvements (as defined in Section 2.9(b)
hereof).
(a) Shell Improvements Plans and Specifications. The Plans and
-------------------------------------------
Specifications for the development of the Shell Improvements shall be developed
as follows:
(i) As used in this Lease, the term "Shell Improvements Plans and
Specifications" shall mean collectively the "Preliminary Plans and
Specifications," the "Shell Improvements Schematic Design Drawings," the "Shell
Improvements Design Development Drawings", the "Shell Improvements Construction
Drawings" (all as defined herein), and all related plans, drawings,
specifications and notes. The Shell Improvements Plans and Specifications shall
be prepared by Landlord in compliance with all Applicable Land Use Laws and
Regulations.
(ii) Landlord and Tenant have agreed on a set of preliminary plans
and specifications for the Shell Improvements prepared by Pacific Cornerstone
Associates which (i) describe and depict the Shell Improvements, (ii) specify
the components of the Shell Improvements, and (iii) preliminarily depict the
Tenant Improvements. These preliminary plans and specifications (the
'Preliminary Plans and Specifications') are attached to this Lease as Exhibit
"B" and Landlord and Tenant intend that they shall serve as the basis upon which
the Shell Improvements Plans and Specifications will be prepared and finalized,
in accordance with the provisions of this Section 2.2 (a).
(iii) As soon as is reasonably possible following execution of this
Lease, Landlord shall submit to Tenant reasonably detailed and dimensioned 1/8
scale preliminary schematic design drawings ('SHELL IMPROVEMENTS SCHEMATIC
DESIGN DRAWINGS') for the Shell Improvements elements of the Demised Premises
consistent with the Preliminary Plans and Specifications. Within five (5)
business days after Landlord delivers to Tenant the Shell Improvements Schematic
Design Drawings, Tenant shall deliver to Landlord written notice of its approval
or disapproval thereof. Tenant shall not unreasonably withhold its approval of
the Shell Improvements Schematic Design Drawings or use the approval process as
a vehicle for expanding the scope of the Shell Improvements. If Tenant
disapproves any portion of the Shell Improvements Schematic Design Drawings,
then Tenant shall specifically and in writing (a) approve those portions which
are acceptable to Tenant and (b) disapprove those portions which are not
acceptable to Tenant, specifying the reasons for such disapproval and describing
in detail the change Tenant requests for each item disapproved. In the event the
Shell Improvements Schematic Design Drawings have not been fully approved by
Tenant, and Tenant and Landlord are unable to resolve the basis for Tenant's
disapproval after good faith efforts to do so over a period of five (5) business
days after delivery of Tenant's notice disapproving the Schematic Shell
Improvements Design Drawings, Landlord shall have the right to terminate this
Lease by giving Tenant written notice of its election to do so.
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(iv) As soon. as is reasonably possible following approval of the
Shell Improvements Schematic Design Drawings, Landlord shall submit to Tenant
reasonably detailed preliminary construction drawings for the Shell Improvements
elements of the Demised Premises ("Shell Improvements Design Development
Drawings"). Within five (5) business days after Tenant receives the Shell
Improvements Design Development Drawings, Tenant shall deliver to Landlord
written notice of Tenant's approval or disapproval of the Shell Improvements
Design Development Drawings. Tenant shall not unreasonably withhold its approval
of the Shell Improvements Design Development Drawings or use the approval
process as a vehicle for expanding the scope of the Shell Improvements. If
Tenant disapproves any portion of the Shell Improvements Design Development
Drawings, then Tenant shall specifically and in writing (a) approve those
portions which are acceptable to Tenant and (b) disapprove those portions which
are not acceptable to Tenant, specifying the reasons for such disapproval and
describing in detail the change Tenant requests for each item disapproved. In
the event the Shell Improvements Design Development Drawings have not been fully
approved by Tenant, and Tenant and Landlord are unable to resolve the basis for
Tenant's disapproval after good faith efforts to do so over a period of five (5)
business days after delivery of Tenant's notice disapproving the Shell
Improvements Design Development Drawings, Landlord shall have the right to
terminate this Lease by giving Tenant written notice of its election to do so.
(v) As soon as is reasonably possible following approval of the
Shell Improvements Design Development Drawings, Landlord shall submit to Tenant
1/4 or 1/8 scale construction drawings for the Shell Improvements elements of
the Demised Premises ("Construction Drawings"). These Construction Drawings
shall include all information reasonably necessary to construct the Shell
Improvements. Within five (5) business days after Tenant receives the Shell
Improvements Construction Drawings, Tenant shall deliver to Landlord written
notice of Tenant's approval or disapproval of the Shell Improvements
Construction Drawings. Tenant shall not unreasonably withhold its approval of
the Shell Improvements Construction Drawings or use the approval process as a
vehicle for expanding the scope of the Shell Improvements. If Tenant disapproves
any portion of the Shell Improvements Construction Drawings, then Tenant shall
specifically and in writing (a) approve those portions which are acceptable to
Tenant and (b) disapprove those portions which are not acceptable to Tenant,
specifying the reasons for such disapproval and describing in detail the change
Tenant requests for each item disapproved. In the event the Shell Improvements
Construction Drawings have not been fully approved by Tenant, and Tenant and
Landlord are unable to resolve the basis for Tenant's disapproval after good
faith efforts to do so over a period of five (5) business days after delivery of
Tenant's notice disapproving the Shell Improvements Construction Drawings,
Landlord shall have the right to terminate this Lease by giving Tenant written
notice of its election to do so.
(vi) Upon approval of the Shell Improvements Construction Drawings,
the Shell Improvements Plans and Specifications shall be deemed approved by
Landlord and Tenant and shall, thereafter, be the Shell Improvements element of
the Plans and Specifications for the construction of the Improvements.
(b) Tenant Improvements Plans and Specifications. The Plans and
--------------------------------------------
Specifications for the development of the Tenant Improvements shall be developed
as follows:
(i) As used in this Lease, the term "Tenant Improvements Plans and
Specifications" shall mean collectively the "Preliminary Plans and
Specifications," the "Tenant Improvements Schematic Design Drawings," the
"Tenant Improvements Design Development Drawings", the "Tenant Improvements
Construction Drawings" (all as defined herein), and all related plans, drawings,
specifications and notes. The Tenant Improvements Plans and Specifications shall
be prepared by Landlord in compliance with all Applicable Land Use Laws and
Regulations.
(ii) As soon as is reasonably possible following execution of this
Lease, Landlord shall submit to Tenant reasonably detailed and dimensioned 1/8
scale preliminary schematic design drawings ("TENANT IMPROVEMENTS SCHEMATIC
DESIGN DRAWINGS") for the Tenant Improvements elements of the Demised Premises
consistent with the Preliminary Tenant Improvements Plans and Specifications.
Within five (5) business days after Landlord delivers to Tenant the Tenant
Improvements Schematic Design Drawings, Tenant shall deliver to Landlord written
notice of its approval or disapproval thereof. Tenant shall not unreasonably
withhold its approval of the Tenant Improvements Schematic Design Drawings. If
Tenant disapproves any portion of the Tenant Improvements Schematic Design
Drawings, then Tenant shall specifically and in writing (a) approve those
portions which are acceptable to Tenant and (b) disapprove those portions which
are not acceptable to Tenant, specifying the reasons for such disapproval and
describing in detail the change Tenant requests for each item disapproved. In
the event the Tenant Improvements Schematic Design Drawings have not been fully
approved by Tenant, and Tenant and Landlord are unable to resolve the basis for
Tenant's disapproval after good faith efforts to do so over a period of five (5)
business days after delivery of Tenant's notice disapproving the Tenant
Improvements Schematic Design Drawings, Landlord shall have the right to
terminate this Lease by giving Tenant written
5
notice of its election to do so.
(iii) As soon as is reasonably possible following approval of the
Tenant Improvements Schematic Design Drawings, Landlord shall submit to Tenant
reasonably detailed preliminary construction drawings for the Tenant
Improvements elements of the Demised Premises ("Tenant Improvements Design
Development Drawings"). Within five (5) business days after Tenant receives the
Tenant Improvements Design Development Drawings, Tenant shall deliver to
Landlord written notice of Tenant's approval or disapproval of the Tenant
Improvements Design Development Drawings. Tenant shall not unreasonably withhold
its approval of the Tenant Improvements Design Development Drawings. If Tenant
disapproves any portion of the Tenant Improvements Design Development Drawings,
then Tenant shall specifically and in writing (a) approve those portions which
are acceptable to Tenant and (b) disapprove those portions which are not
acceptable to Tenant, specifying the reasons for such disapproval and describing
in detail the change Tenant requests for each item disapproved. In the event the
Tenant Improvements Design Development Drawings have not been fully approved by
Tenant, and Tenant and Landlord are unable to resolve the basis for Tenant's
disapproval after good faith efforts to do so over a period of five (5) business
days after delivery of Tenant's notice disapproving the Tenant Improvements
Design Development Drawings, Landlord shall have the right to terminate this
Lease by giving Tenant written notice of its election to do so.
(iv) As soon as is reasonably possible following approval of the
Tenant Improvements Design Development Drawings, Landlord shall submit to Tenant
1/4 or 1/8 scale construction drawings for the Tenant Improvements elements of
the Demised Premises ("Construction Drawings"). These Construction Drawings
shall include all information reasonably necessary to construct the Tenant
Improvements. Within five (5) business days after Tenant receives the Tenant
Improvements Construction Drawings, Tenant shall deliver to Landlord written
notice of Tenant's approval or disapproval of the Tenant Improvements
Construction Drawings. Tenant shall not unreasonably withhold its approval of
the Tenant Improvements Construction Drawings. If Tenant disapproves any portion
of the Tenant Improvements Construction Drawings, then Tenant shall specifically
and in writing (a) approve those portions which are acceptable to Tenant and (b)
disapprove those portions which are not acceptable to Tenant, specifying the
reasons for such disapproval and describing in detail the change Tenant requests
for each item disapproved. In the event the Tenant Improvements Construction
Drawings have not been fully approved by Tenant, and Tenant and Landlord are
unable to resolve the basis for Tenant's disapproval after good faith efforts to
do so over a period of five (5) business days after delivery of Tenant's notice
disapproving the Tenant Improvements Construction Drawings, Landlord shall have
the right to terminate this Lease by giving Tenant written notice of its
election to do so.
(v) Upon approval of the Tenant Improvements Construction Drawings,
the Tenant Improvements Plans and Specifications shall be deemed approved by
Landlord and Tenant and shall, thereafter, be the Tenant Improvements element of
the Plans and Specifications for the construction of the Improvements.
(vi) During the process of preparing and reviewing the Tenant
Improvements Schematic Design Drawings, Tenant Improvements Design Development
Drawings and Tenant Improvements Construction Drawings, Landlord shall
reasonably cooperate with Tenant, and Landlord shall cause its contractor and
design professionals to reasonably cooperate with Tenant, in Tenant's efforts to
control the cost of the Tenant Improvements through "value engineering." Nothing
in this subsection (vii) nor related to the "value engineering" of the Tenant
Improvements shall extend the dates by which Tenant must review the plans and
specifications delivered to it under this Section 2.2 or otherwise delay the
completion of the Tenant Improvements Plans and Specifications.
(c) Final Plans and Specifications. The final Shell Improvements
------------------------------
Plan and Specifications and the final Tenant Improvements Plans and
Specifications are sometimes collectively referred to in this Lease as the
"Plans and Specifications" and shall be the final plans and specifications for
the development of the Improvements. Tenant shall not assume any liability for
defects in the design of the Shell Improvements or the Tenant Improvements as a
result of Tenant's involvement in the process described in this Section 2.2 and
shall not diminish Landlord's responsibilities under this Lease for any such
defects.
2.3 Substantial Completion of the Improvements.
------------------------------------------
(a) "Substantial Completion" of the Improvements shall be deemed to
have occurred on the earlier to occur of when (i) (A) the Improvements have been
completed in conformance with the Plans and Specifications, subject to the
completion of "punch-list" items (the "Punchlist") identified by Landlord and
Tenant as described in Section 2.3(c) below ("punch-list items" being defined to
mean minor items needing correction or repair which do not or will not
materially interfere with Tenant's use and enjoyment of the Building), (B) the
parking facilities to which Tenant is entitled under this
6
Lease have been completed other than as identified on the Punchlist, (C) all
systems of the Building are in good working order, and (D) Tenant can physically
and legally occupy the Demised Premises (e.g., a permanent Certificate of
Occupancy or temporary certificate of occupancy which is subsequently converted
into or replaced without any lapse by a permanent certificate of occupancy
("CERTIFICATE OF OCCUPANCY") has been issued for the Demised Premises by the
City of San Diego ("City")), or (ii) the Improvements would have been so
completed and Tenant legally entitled to occupy the Demised Premises but for any
Tenant-Caused Delays in Landlord (A) achieving Substantial Completion or (B) or
obtaining the Certificate of Occupancy. Landlord shall deliver to Tenant a copy
of any Certificate of Occupancy issued by City for the Demised Premises promptly
upon receipt. Landlord will use its best efforts to (i) keep Tenant informed on
a monthly basis following execution of this Lease of the anticipated
Commencement Date, and (ii) provide Tenant with no less than thirty (30) days
advance notice of the actual Commencement Date. Landlord shall deliver to Tenant
a certificate from the Architect (as defined below) certifying Substantial
Completion of the Improvements on or before the Commencement Date.
(b) "TENANT-CAUSED DELAY" shall be defined as (i) the failure of
Tenant, its officers, directors, partners, agents, employees, or contractors to
(A) perform some act or pay some amount within the time provided in this Lease,
or (B) approve or reasonably disapprove any draft of the Plans and
Specifications within the time period specified in Section 2.2 above, (ii) any
change to the Plans and Specifications requested by Tenant, including both
during preparation of the Plans and Specifications and during construction of
the Demised Premises, including as a result of Tenant's efforts to control
Tenant Improvements Cost through "value engineering" (as provided in Section
2.2(b)(vii) hereof) (a "TENANT CHANGE ORDER"), or (iii) any other act or
omission by Tenant, its officers, directors, partners, agents, employees, or
contractors to the extent it causes a delay in Substantial Completion or in the
issuance of the Certificate of Occupancy (including, without a limitation, a
delay caused by a delay in finalization of the Plans and Specifications);
provided, however, that Landlord shall have given written notice to Tenant of
the number of days of Tenant-Caused Delay due to such requested Tenant Change
Order. Tenant may revoke a Tenant Change Order if it notifies Landlord of such
revocation within two (2) business days following receipt of Landlord's written
notice. Landlord shall notify Tenant in writing of the occurrence of any Tenant-
Caused Delay within two (2) business days after learning of the same. If
Landlord fails to timely notify Tenant of an event which would otherwise be a
Tenant-Caused Delay, the Tenant-Caused Delay shall not commence until such
notice is delivered.
(c) On or immediately before the Commencement Date, Landlord and
Tenant shall conduct a walk-through inspection of the Demised Premises and shall
jointly prepare the Punchlist which shall be a list of items which have not been
completed in substantial conformance with the Plans and Specifications that need
to be corrected. Landlord shall cause such items to be corrected within thirty
(30) days thereafter, provided, however, if, by the nature of such punch-list
item, more than thirty (30) days is required to effect such correction, Landlord
shall not be in default hereunder if such correction is commenced within such
thirty (30) day period and is diligently pursued to completion. Approximately
thirty (30) days following the Commencement Date, Landlord and Tenant shall
again conduct a walk-through inspection to determine if any remaining punch-list
items require correction, and Landlord shall cause all such corrective work to
be undertaken and completed promptly thereafter. If, thereafter, Landlord fails
to diligently pursue completion of the Punchlist items with due diligence, and
such failure continues for five (5) days after notice from Tenant, Tenant may
complete such items and offset the reasonable cost thereof against Base Rent and
Additional Rent.
(d) Tenant shall not be liable to Landlord for the payment of Base
Rent, Additional Rent (as hereinafter defined) or any other amount to be paid by
Tenant under this Lease (except as specifically provided elsewhere in this
Lease) until the Commencement Date. The failure of Tenant to take possession of
or to occupy the Demised Premises on or after the Commencement Date shall not
serve to relieve Tenant of its obligations or delay Tenant's obligation to pay
Rent, Additional Rent, or any other amount to be paid by Tenant to Landlord
under this Lease.
(e) If the Commencement Date has not occurred by the Target
Commencement Date, as such Target Commencement Date may be extended pursuant to
Section 2.4, below) Landlord shall not be liable for any damages caused thereby,
except as provided in Section 2.5, below, and this Lease shall remain in full
force, except as provided in Section 2.5 below.
2.4 Delay in Substantial Completion or Lease Execution. Landlord
--------------------------------------------------
shall diligently proceed with the construction of the Improvements and complete
the same and deliver possession thereof to Tenant on the Target Commencement
Date, provided, however, to the extent (i) a Tenant-Caused Delay, or (ii) a
Force Majeure (as defined below), results in a delay in Substantial Completion
of the Improvements, the Target Commencement Date shall be extended for the
amount of time the Substantial Completion of the Improvements is delayed
thereby. "FORCE MAJEURE" shall be defined as any factor or condition which is
outside the control of either Tenant or Landlord and for which neither could
have reasonably been anticipated or expected to plan, including, without
limitation, (i) unusually inclement weather, or inclement weather which occurs
at unusual times, (ii) other acts of God, (iii) labor disputes, (iv) casualties,
(v) embargo,
7
(vi) governmental restrictions, (vii) shortages of fuel, labor, or building
materials, (viii) civil unrest, (ix) action or non-action of public utilities,
or of local, state or federal governments which delay the Substantial Completion
of the Demised Premises, and (x) action or non-action of local, state or federal
governments which prevent, prohibit or stop construction of the Demised
Premises. Notwithstanding the foregoing, (A) those events described in
subsections (iii), (v), (vi), (vii), (ix) and (x) of the preceding sentence will
constitute Force Majeure events only if they are generally applicable to the
construction industry in San Diego, and (B) no Force Majeure event, or any
combination thereof, will result in a delay in the Target Commencement Date for
more than thirty (30) days, other than those described in subsections (ii),
(viii) and (x) of the preceding sentence. Landlord shall give written notice to
Tenant of the estimated number of days of delay due to Force Majeure within two
(2) business days after Landlord learns of such delay. If Landlord fails to
timely notify Tenant of an event which would otherwise be a delay due to Force
Majeure, the Force Majeure delay shall not commence until such notice is
delivered.
2.5 Liquidated Damages for Delay in Substantial Completion. If the
------------------------------------------------------
Commencement Date has not occurred (or been deemed to have occurred) by the
Target Commencement Date, as it may be adjusted as described in Section 2.4,
above, then Landlord shall pay Tenant liquidated damages of Two Thousand Five
Hundred Dollars ($2,500) per day for each day the Commencement Date is delayed
beyond the Target Commencement Date (as adjusted pursuant to Section 2.4, above)
for up to six (6) months after the Target Commencement Date (as adjusted
pursuant to Section 2.4, above). Such liquidated damages shall be paid within
thirty (30) days after the end of each month of delay beyond the Target
Commencement Date. In addition to Tenant's rights to such liquidated damages,
Tenant shall have the right to terminate this Lease if the delay in the
Commencement Date beyond the Target Commencement Date (as adjusted pursuant to
Section 2.4, above) exceeds six (6) months in length. If Tenant elects not to
terminate this Lease at that time, (i) Landlord's liability for such delay shall
be limited to the liquidated damages already paid or accrued, (ii) Landlord
shall not be liable for any additional liquidated damages, and (iii) Landlord
shall have no liability for damages related to the additional delay unless such
delay is caused by Landlord's intentional misconduct. If Tenant elects not to
terminate this Lease at the end of such six (6) month period, Landlord shall
endeavor to achieve Substantial Completion of the Demised Premises with due
diligence, provided Tenant may terminate the Lease at any time thereafter, which
termination shall be effective ninety (90) days following delivery by Tenant to
Landlord of a written notice of such termination, unless Substantial Completion
and the Commencement Date occurs within such ninety (90) day period, in which
case the termination notice shall be deemed withdrawn and of no further force or
effect. If the Commencement Date has not occurred (or been deemed to have
occurred) by one (1) year after the Target Commencement Date (as that date may
be adjusted pursuant to Section 2.4, above), either Tenant or Landlord (provided
that Landlord may only so terminate this Lease if the delay is not within
Landlord's reasonable control), upon written notice to the other, may terminate
the Lease. If Landlord fails to timely pay Tenant the liquidated damages, Tenant
may, in addition to its other rights and remedies, offset the amount thereof
against any rent or other amount due hereunder to Landlord.
LANDLORD AND TENANT AGREE THAT TENANT'S ACTUAL DAMAGES IN
THE EVENT OF A DELAY IN THE COMMENCEMENT DATE BEYOND THE
TARGET COMMENCEMENT DATE (AS ADJUSTED PURSUANT TO SECTION
2.4, ABOVE), WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE
TO DETERMINE AND THAT THE AMOUNTS DESIGNATED ABOVE AS
LIQUIDATED DAMAGES PAYABLE BY LANDLORD TO TENANT IN SUCH
EVENTS ARE EACH REASONABLE AMOUNTS TO BE SET AS DAMAGES FOR
SUCH EVENTS UNDER THE CIRCUMSTANCES EXISTING AT THE TIME
THIS LEASE HAS BEEN ENTERED INTO. IN CONSIDERATION OF THE
PAYMENT OF LIQUIDATED DAMAGES, TENANT SHALL BE DEEMED TO
HAVE WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW
OR IN EQUITY DUE TO SUCH DELAY INCLUDING ANY RIGHTS TO
SPECIFIC PERFORMANCE TENANT MAY OTHERWISE HAVE.
Tenant: ____________ Landlord:___________
2.6 Building Permit for the Improvements. Landlord shall be
------------------------------------
responsible (at its sole cost and expense) for obtaining from any relevant and
jurisdictional governmental authority necessary (generally an "Authority"), all
governmental approvals including a building permit for the construction of the
Improvements ("Building Permit"). If a change to the Plans and Specifications or
Approved Working Drawings is required by the Authority, such change shall be
made to the Plans and Specifications or Approved Working Drawings by Landlord.
Tenant shall not unreasonably withhold its consent to any such change.
2.7 Construction Warranties. Landlord shall obtain the
-----------------------
manufacturer's warranties for the elements or
8
systems which are part of the Demised Premises and which are customarily given
by such manufacturers without additional cost to Landlord and warranties and
guaranties from the contractors and subcontractors with respect to the
Improvements and which are customarily given by such contractors and
subcontractors without additional cost to Landlord. Landlord shall assign to
Tenant (or, should Tenant not be legally capable of doing so itself, at Tenant's
expense, prosecute on Tenant's behalf), on a non-exclusive basis, all statutory
and contractual warranties and guaranties to which Landlord is entitled in
connection with the Demised Premises, express or implied, including, without
limitation the warranties arising under any construction contract between
Landlord and Landlord's contractors and/or subcontractors involved in the
construction of the Demised Premises. Other than the assignment to Tenant of
such warranties, or as otherwise specifically provided in this Lease, Landlord
shall have no obligation or responsibility to Tenant, or its successors, with
respect to any condition of the Improvements. Landlord, at no cost or expense to
Landlord, shall cooperate with Tenant in the enforcement by Tenant, at Tenant's
sole cost and expense, of any such warranties or guaranties.
2.8 Condition of Demised Premises; Limited Warranty. Except as
-----------------------------------------------
specifically provided in this Section 2.8, Landlord makes no warranties or
representations with regard to the Demised Premises, or any portion thereof, and
Tenant shall accept the Demised Premises in the condition in which they are
delivered on the Commencement Date, provided that (i) the Demised Premises shall
be constructed in (A) conformance with the Plans and Specifications and Approved
Working Drawings, and (B) conformance with all Applicable Land Use Laws and
Restrictions then in effect and (ii) for the Term of this Lease, the
Improvements shall be free of latent defects in design and construction of the
Demised Premises, including, without limitation, the drainage of surface water
runoff from adjacent properties, and Landlord shall be responsible, at
Landlord's sole cost and expense, for the prompt and diligent repair of any such
latent defects which manifest themselves during the Term.
2.9 Tenant Improvement Allowance; Tenant Responsibility.
---------------------------------------------------
(a) Landlord shall be responsible for constructing, entirely at its
expense, subject to the provisions of Section 3.3 of this Lease, the Shell
Improvements (as that term is defined below). The Shell Improvements shall
consist of (and the term "SHELL IMPROVEMENTS" shall be used in this Lease to
mean) those components of the Demised Premises which are identified in the
Preliminary Plans and Specifications, which are attached to this Lease, and
ultimately in the final Plans and Specifications, as elements of the basic
Building shell or specifically as "Shell Improvements," land, land preparation
and landscaping or as otherwise mutually identified by Landlord and Tenant, in
writing, concurrent with or subsequent to the execution of this Lease, including
all utilities (including fiber optic cabling) stubbed to the Building. The Base
Rent specified in this Lease includes Landlord's obligation to complete and
deliver to Tenant the Shell Improvements in accordance with this Lease. The cost
of constructing the Shell Improvements are referred to in this Lease as the
"SHELL IMPROVEMENTS COST." Shell Improvements Cost shall include a developer fee
of $2.00 per square foot, payable to Landlord, or an affiliate (with no direct
obligation to Tenant to pay such fee).
(b) Landlord shall be responsible for constructing, subject to the
provisions of this Section 2.9 and 2.10, the Tenant Improvements (as that term
is defined below). The Tenant Improvements shall consist of (and the term
"TENANT IMPROVEMENTS" shall be used in this Lease to mean) those portions of the
Demised Premises which are not identified in the Preliminary Plans and
Specifications (or ultimately the final Plans and Specifications) as part of the
Shell Improvements, or as otherwise mutually identified by Landlord and Tenant,
in writing, concurrent with or subsequent to the execution of this Lease.
(c) Landlord shall provide an allowance to be applied by Landlord
towards paying the costs of designing and constructing the Tenant Improvements
(the "TENANT IMPROVEMENTS COST"), which shall be comprised of (i) fees and
reimbursables for project programming, design, architecture and engineering,
reimbursables, (ii) One Hundred Forty Six Thousand Dollars ($146,000) in leasing
commissions and (iii) the direct construction cost (excluding any overhead or
profit to Landlord or any affiliate) of the Tenant Improvements paid to the
Contractor (as defined below) or others performing such construction work. The
allowance shall be in the amount of Two Million Three Hundred Seventy Thousand
Dollars ($2,370,000) (the "ALLOWANCE"). The Allowance shall not be used, nor
shall Shell Improvements include, the costs of building signage, security
systems, specialized cabling (except as set forth above) or Tenant's moving
expenses, such items being Tenant's sole financial responsibility; provided,
however, that Tenant may utilize the Allowance to pay for building signage to
the extent there is Allowance remaining available and unused after paying all
other Tenant Improvement Costs.
(d) In the event that the Allowance is insufficient in amount to pay
the Tenant Improvements Costs, Tenant shall pay such excess as Tenant's Share
pursuant to the procedure set forth in Section 2.10 below.
9
(e) Upon execution of this Lease and again, upon submittal of the
Tenant Improvements Schematic Design Drawings, the Tenant Improvements Design
Development Drawings, and the Tenant Improvements Construction Drawings,
Landlord shall also provide Tenant with an estimate of the Tenant Improvements
Cost. An estimate of the Tenant Improvements Cost which has been prepared based
on the Preliminary Plans and Specifications, is attached to this Lease as
Exhibit "C" (the "TENANT IMPROVEMENTS BUDGET ESTIMATE"). Within fifteen (15)
days prior to the commencement of construction of the Improvements, and no less
than monthly thereafter during the course of construction of the Improvements,
Landlord shall deliver to Tenant a revised Tenant Improvements Budget Estimate,
whether reflecting an increase or a decrease in the Tenant Improvement Costs,
together with an explanation in reasonable detail of the cause of such cost
change and an accounting of actual costs to date ("PERIODIC COST REPORT").
Additionally, prior to any Tenant Change Order being effective, Landlord will
provide Tenant with an estimate of the cost of said Tenant Change Order and
obtain Tenant's prior approval thereof, which Tenant shall grant or withhold
within two (2) business days following receipt of such estimated Tenant Change
Order cost. In addition, Landlord shall deliver a Period Cost Report to Tenant
no later than five (5) business days after Landlord learns of a material change
affecting the Tenant Improvements Budget Estimate. Similarly, Landlord shall
provide Tenant with an estimate of the cost of any Tenant-Caused Delay claimed
by Landlord as soon as reasonably possible after Landlord learns of the Tenant-
Caused Delay.
2.10 Responsibility for Excess Shell Costs and Excess Tenant
-------------------------------------------------------
Improvement Costs.
------------------
(a) The Base Rent has been determined based on the assumption (i) that
the Preliminary Plans and Specifications will not be materially altered at
Tenant's request during the preparation of the final Plans and Specifications,
(ii) that the final Plans and Specifications will not be altered as a result of
Tenant Change Orders, and (iii) that no costs will be incurred in connection
with the construction of the Demised Premises resulting from Tenant-Caused
Delays.
(b) Tenant shall be directly responsible, as additional rent, for any
increases in the cost to Landlord of the construction of the Shell Improvements
(including financing costs), (A) subject to section 2.9(e) above, resulting
directly from Tenant Change Orders and which have not been offset by savings
resulting directly from Tenant Change Orders, or (B) subject to section 2.9(e)
above, resulting directly from Tenant-Caused Delays ("EXCESS SHELL COSTS"). Each
Periodic Cost Report and the Final Cost Report (as defined below), shall include
notification of any Excess Shell Costs and shall include reasonably detailed
documentation supporting the determination of such Excess Shell Cost. Tenant
shall pay the Excess Shell Costs to Landlord (i)upon commencement of
construction, if Landlord has notified Tenant of Excess Shell Costs prior
thereto, (ii) if later, within ten (10) business days after notification to
Tenant by Landlord of any Excess Shell Costs in a Periodic Cost Notice, (iii)
within ten (10) business days after the Final Cost Report, if such report
includes Excess Shell Costs which have not been previously paid to Landlord, or
(iv) as otherwise required by Landlord's construction lender.
(c) Tenant shall be responsible, as additional rent, for any Tenant
Improvements Costs to the extent they exceed the Allowance ("EXCESS TENANT
IMPROVEMENTS COSTS"). Tenant shall pay the Excess Tenant Improvements Costs to
Landlord upon the earlier to occur of (i) funding of Landlord's construction
loan or commencement of construction, whichever is later, if the then applicable
Tenant Improvements Budget Estimate reflects that the Allowance will be
insufficient to fully fund the Tenant Improvements Costs anticipated to be
incurred as of that date, provided that date shall not be before December 1,
1996, (ii) within ten (10) business days after notification to Tenant by
Landlord that it has determined, in a periodic review of the Tenant Improvements
Costs during construction of the Tenant Improvements, pursuant to subsection
2.9|e), above, that the Allowance will be insufficient to cover all the Tenant
Improvements Costs anticipated to be incurred, or (iii) within ten (10) business
days after Landlord has notified Tenant that it has made a final determination,
pursuant to subsection (g), below, that the Allowance is insufficient to cover
all the Tenant Improvements Costs which have been incurred, or (iv) as otherwise
required by Landlord's construction lender, but in no event before December 1,
1996.
(d) Landlord shall deposit the funds paid to it by Tenant under
subsections (b) or (c) of this Section 2.10 in its construction loan control
account with the construction Lender (as that term is defined in Section 3.4
hereof) and those funds shall be applied to the cost of construction of the
Shell Improvements and Tenant Improvements as provided under Landlord's
construction loan.
(e) Within ninety (90) days following Substantial Completion of the
Improvements, Landlord shall calculate, and report to Tenant, in writing, (i)
the final Shell Improvements Cost and the final Tenant Improvements Cost, and
(ii) the amount of any Excess Shell Costs or Excess Tenant Improvements Costs
(the "FINAL COST REPORT"). In the event that there is an amount which has not
been paid by Tenant at the time of such final determination (i.e. Excess Shell
Improvements Costs or Excess Tenant Improvements Costs) then Tenant shall pay
such additional amount to Landlord
10
within ten (10) business days following such final determination.
(f) If the Final Cost Report, shows that the amounts previously paid
by Tenant under subsections (b) and (c) of this Section 2.10 exceeded the final
amount of Excess Shell Improvements Costs or Excess Tenant Improvements Costs,
as the case may be (i.e. Tenant has paid to Landlord more than was ultimately
needed), then such overpayment shall be refunded to Tenant within ten (10)
business days following delivery to Tenant of such Final Cost Report. In any
event, whether additional amounts are owed or a refund is due, within ten (10)
business days following the delivery to Tenant of the Final Cost Report,
Landlord shall pay to Tenant any amount equal to the the product of (i) the
amount paid to Landlord by Tenant under subsections (b)(i) and (c)(i) of this
Section 2.10, (ii) multiplied by five percent (.05), (iii) divided by two (2).
(g) All of the Periodic Cost Reports and the Final Cost Report shall
include reasonably detailed supporting explanations and documentation. Landlord
shall maintain accurate and complete books and records of all Shell Improvement
Costs and Tenant Improvement Costs. Tenant shall have the right to inspect,
audit and copy such books and records at Landlord's office in San Diego,
California.
2.11 Contractor. Reno Contracting, Inc., a California corporation
----------
("Contractor"), shall act as the general contractor for the construction of the
Shell Improvements and the Tenant Improvements. Contractor's contract shall be
on a "cost-plus" basis, with Contractor entitled to (i) reimbursement for direct
insurance expenses and direct "G&A" or "General Conditions" expenses, as
provided in the Estimated Budget and (ii) a profit of no more than five percent
(5%). Landlord shall cause the Contractor to bid each component of the
Improvements to at least three (3) qualified subcontractors and, unless Landlord
and Tenant agree otherwise, shall select the lowest qualified bidder. Tenant
shall have the right to approve the list of subcontractors to be solicited for
bids and to designate subcontractors to participate in the bidding process.
Tenant shall also have the right to select subcontractors to perform components
of the Improvements if Tenant agrees to pay any Excess Shell Costs or Excess
Tenant Improvements Costs attributable to such election, provided such
subcontractor is reasonably acceptable to Landlord and Contractor.
2.12 Tenant's Entry Into the Building Prior to Substantial
-----------------------------------------------------
Completion. Provided that Tenant and its agents, employees and contractors
----------
do not materially interfere with the Contractor's work on the Demised Premises
(any such interference constituting a basis for a Tenant-Caused Delay), Landlord
shall allow and shall require the Contractor to allow, Tenant and Tenant's
agents, employees and contractors access to the Building prior to Substantial
Completion of the Improvements so that Tenant may install its furniture, trade
fixtures, data and telecommunications wiring and equipment, photocopy equipment
and other business equipment in the Building. Prior to Tenant's entry into the
Building as permitted by the terms of this Section 2.12, Tenant shall arrange a
schedule with Landlord and the Contractor in order to coordinate the timing of
Tenant's entry with the actions of the Contractor. Prior to any such entry,
Tenant or its agents and contractors (as applicable) shall provide evidence of
insurance reasonably satisfactory to Landlord. Tenant acknowledges that Section
20.3 below shall apply with respect to any and all claims which may arise as a
result of the entry by Tenant, its agents, employees and contractors on the
Demised Premises in accordance with this Section 2.12. Tenant's responsibilities
under Section 7.1 of this Lease shall commence upon such early occupancy as
opposed to the Commencement Date.
ARTICLE III
RENT
3.1 Base Rent. In consideration of the lease of the Demised Premises
---------
evidenced by this Lease, Tenant covenants to pay Landlord, without previous
demand therefor and without any right of set-off or deduction whatsoever except
as expressly provided in this Lease, at the office of Landlord at:
ADI Mesa Partners - AMCC, L.P.
c/o The Xxxxx Group
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Attention: Xx. Xxxxxx X. Xxxxx
or at such other place as Landlord may from time to time designate in writing, a
rental for the Initial Term of this Lease as hereinafter set forth, payable
monthly, in advance, in equal installments as hereinafter set forth, with the
first payment due on the Commencement Date, and continuing on the first day of
each month thereafter for the succeeding months during the balance of the Term
("Base Rent").
11
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
Months 1-36 $847,858 $70,655
Months 37-72 $889,358 $74,113
Months 73-108 $931,358 $77,613
Months 109-120 $973,858 $81,155
In the event the Commencement Date occurs on other than the first
(1st) day of a month, the amount of the first and last monthly payment of Base
Rent shall be apportioned to account for the fact that the last month of the
Initial Term shall be less than a full calendar month.
3.2 Base Rent During Option Term. The Base Rent during the Option
----------------------------
Term ("OPTION TERM BASE RENT") shall be an amount equal to the greater of (i)
ninety five percent (95%) of the then fair market rental value of the Demised
Premises ("FAIR MARKET RENTAL VALUE"), as stated on a monthly basis and
determined pursuant to this Section 3.2, or (ii) the Base Rent during the last
month of the Initial Term, multiplied by 1.05. The Option Term Base Rent shall
be increased to an amount equal to 1.04 times the then applicable Option Term
Base Rent, as may have been previously adjusted pursuant to this Section 3.2,
every twenty-four (24) months during the Option Term. Upon receipt by Landlord
of Tenant's Extension Notice under Section 1.2, above, Landlord and Tenant shall
meet in an effort to negotiate, in good faith, the Option Term Base Rent which
shall become effective as of the first day of the Option Term ("OPTION TERM
COMMENCEMENT DATE"). If Landlord and Tenant have not agreed upon the Option Term
Base Rent within thirty (30) days after the delivery of Tenant's Extension
Notice, the Option Term Base Rent shall be determined as follows:
(a) Landlord and Tenant shall attempt to agree in good faith upon a
single appraiser not later than thirty-five (35) days after delivery of Tenant's
Extension Notice. If Landlord and Tenant are unable to agree upon a single
appraiser within such time period, then Landlord and Tenant shall each appoint
one appraiser not later than five (5) days after the deadline for selecting a
single appraiser. Landlord and Tenant shall each give written notice to the
other as to the name of the appraiser it has selected, as soon as the selection
is made. Within ten (10) days thereafter, the two appointed appraisers shall
appoint a third appraiser. All appraisers shall be independent from, and
disinterested in, both Landlord and Tenant.
(b) The only task which the appraiser(s) shall perform shall be
forming and reporting to Landlord and Tenant an opinion of the Fair Market
Rental Value of the Demised Premises for use in determining the Option Term Base
Rent.
(c) If either Landlord or Tenant fails to appoint its appraiser within
the prescribed time period, the single appraiser appointed shall determine the
Fair Market Rental Value of the Demised Premises. If both parties fail to
appoint appraisers within the prescribed time periods, then the first appraiser
thereafter selected by a party shall determine the Fair Market Rental Value of
the Demised Premises.
(d) Each party shall bear the cost of its own appraiser and the
parties shall share equally the cost of any single or third appraiser, if
applicable. All appraisers so designated herein shall have at least five (5)
years' experience in the appraisal of commercial properties similar to the
Demised Premises in San Diego County, California and shall be members of
professional organizations such as MAI or its equivalent.
(e) For the purpose of such appraisal and this subsection (d), the
term "Fair Market Rental Value" shall mean the price that a ready and willing
single tenant would pay, as of the Option Term Commencement Date, as annual rent
to a ready and willing landlord of a property comparable to the Demised Premises
on the terms of this Lease, if such property were exposed for lease on the open
market for a reasonable period of time. A "COMPARABLE PROPERTY" shall mean a
headquarters, assembly and research and development facility located in the
northern portion of the City of San Diego, California (the "MARKET AREA"), with
improvements similar in age and character to the Demised Premises, which has
been improved with the tenant improvements comparable to those constructed in
the Demised Premises; provided, however, that the appraisal shall disregard the
value of the equipment which Tenant is entitled to remove at the expiration or
termination of the Term of this Lease. The appraiser shall give appropriate
consideration to all relevant factors, including, without limitation, (i)the
fact that this Lease is a "triple net" lease, (ii)rental concessions and tenant
improvement allowances generally being offered by landlords of comparable
properties, (iii) the age of the Improvements, (iv) the condition of the Demised
Premises on the assumption that Tenant has complied with its obligations to
maintain and repair the Demised Premises, (v)rental market conditions then in
existence, (vi) whether Landlord will or will not be required to pay a real
estate brokerage commission in connection with Tenant's exercise of the
Extension Option, and (vii) the fact that the Tenant will be accepting the
Demised Premises in an "As-Is" condition.
12
(f) If a single appraiser is chosen, then such appraiser shall
determine the Fair Market Rental Value of the Demised Premises. Otherwise, the
Fair Market Rental Value of the Demised Premises shall be the arithmetic average
of the two (2) appraisals which are closest in amount, and the third appraisal
shall be disregarded.
(g) Landlord and Tenant shall instruct the appraiser(s), in writing,
to complete their written determination of the Fair Market Rental Value not
later than thirty (30) days after their selection. If the Fair Market Rental
Value has not been determined by such date, then the Fair Market Rental Value
shall be determined thereafter, and if it has not been determined by the Option
Term Commencement Date, then Tenant shall continue to pay Landlord monthly
installments of Annual Rent in the amount applicable to the Demised Premises
immediately prior to the Option Term Commencement Date until the Fair Market
Rental Value is determined. When the Fair Market Rental Value of the Demised
Premises is determined, Landlord shall deliver notice thereof to Tenant, and
Tenant shall pay to Landlord, within ten (10) days after receipt of such notice,
the difference between the monthly installments of Base Rent actually paid by
Tenant to Landlord subsequent to the Option Term Commencement Date and the new
monthly installments of Base Rent which are determined to have been actually
owing during such period in accordance with this Section 3.2.
(h) On or before the date which is fifteen (15) months prior to the
expiration of the Initial Term or the first Option Term, as the case may be,
Tenant may deliver to Landlord a notice that it intends to exercise an Extension
Option provided in Section 1.2 hereof (a "PRE-EXERCISE NOTICE"). If a Pre-
Exercise Notice is timely delivered by Tenant, the provisions of this Section
3.2 regarding the determination of the Option Term Base Rent shall be
implemented as if Tenant had delivered the Extension Notice pursuant to Section
1.2. If the Option Term Base Rent has not been determined in accordance with
this Section 3.2 on or before the date which is three hundred sixty (360) days
prior to the end of the Initial Term or the first Option Term, as the case may
be, then when it is thereafter determined, Tenant shall have the option, to be
exercised within two (2) business days after notice of such determination is
given to Tenant, of (i) delivering to Landlord a written notice rescinding
Tenant's Pre-Exercise Notice (i.e. electing not to extend the Lease), in which
case the Initial Term or the first Option Term, as the case may be, shall be
extended to the date which is three hundred sixty (360) days after the date such
rescission notice is delivered, or (ii) delivering its Extension Notice, in
which case such Extension Notice shall be deemed timely delivered in accordance
with Section 1.2. If the Option Term Base Rent has been determined in accordance
with this Section 3.2 prior to the date which is three hundred sixty (360) days
prior to the end of the Initial Term or the first Option Term, as the case may
be, then provisions of this subsection (h) shall not apply. If the provisions of
this subsection (h) apply, and Tenant fails to deliver either a rescission
notice or the Extension Notice, Tenant shall be deemed to have rescinded the
Pre-Exercise Notice and not to have timely delivered the Extension Notice.
3.3 Additional Obligations; Additional Rent. The Base Rent shall be
----------------------------------------
absolutely "net" to Landlord so that this Lease shall yield to Landlord the Base
Rent specified in Section 3.1 and that all Impositions, insurance premiums,
utility charges, maintenance, repair and replacement expenses, all expenses
relating to compliance with all present or future applicable governmental laws,
rules and regulations, and all other costs, fees, charges, expenses,
reimbursements and obligations of every kind and nature whatsoever relating to
the Demised Premises which may arise or become due during the term or by reason
of events occurring during the term of this Lease (all such items being
sometimes referred to as "ADDITIONAL OBLIGATIONS") shall be paid or discharged
by Tenant, except to the extent they are expressly the responsibility of
Landlord under this Lease. To the extent the following are the obligations of
Tenant under this Lease, Tenant hereby agrees to indemnify, defend and save
Landlord harmless from and against such Impositions, insurance premiums, utility
charges, maintenance, repair and replacement expenses, all expenses relating to
compliance with all present and future governmental laws, rules and regulations
becoming effective during the Term, and all other costs, fees, charges,
expenses, reimbursements and obligations referred to above. Any amounts referred
to in this Lease as additional rent (including, without limitation, the
Additional Obligations) are referred to collectively as "ADDITIONAL RENT."
3.4 Delinquent Rental Payments. All payments of Base Rent and
---------------------------
Additional Rent shall be payable without previous demand therefor and without
any right of set-off or deduction whatsoever (except as expressly provided in
this Lease), and in case of nonpayment of any item of Additional Rent by Tenant
when the same is due, Landlord shall have, in addition to all its other rights
and remedies, all of the rights and remedies available to Landlord under the
provisions of this Lease or by law in the case of nonpayment of Base Rent. The
performance and observance by Tenant of all the terms, covenants, conditions and
agreements to be performed or observed by Tenant hereunder shall be performed
and observed by Tenant at Tenant's sole cost and expense. Any installment of
Base Rent or Additional Rent or any other charges payable by Tenant under the
provisions hereof which shall not be paid within five (5) days after they are
due shall, (i) be subject to a late charge of five percent (5%) of the amount
due and not timely paid, and (ii) bear interest from the date when such payment
was due at the lesser of (A) the default rate of interest under Landlord's most
senior debt obligation encumbering the Demised Premises, or (B) an annual rate
of eighteen percent (18%) per annum, but in no event in excess of the maximum
lawful rate permitted to be charged by Landlord against Tenant. Said rate of
interest is sometimes hereinafter referred to as the "MAXIMUM RATE OF INTEREST."
Notwithstanding the foregoing provisions of this
13
Section 3.4, if any mortgagee under any mortgage, beneficiary under any deed of
trust, or ground lessor under any ground lease, which encumbers the Land (a
"LENDER"), imposes fees, charges, penalties or interest on Landlord for late
payments under such instrument which fees, charges, penalties or interest are
less in amount than those described in this Section 3.4, Landlord will not
impose any late payment charge or interest which is greater than the amounts
charged by such Lender.
ARTICLE IV
USE OF DEMISED PREMISES
4.1 Permitted Use. Tenant intends to use the Demised Premises
--------------
primarily as a corporate headquarters, research and development, assembly, light
manufacturing and distribution facility and related lawful purposes, and they
shall be used for no other purpose without first securing the prior written
consent of Landlord, which consent shall not be unreasonably withheld. Tenant
shall not use or occupy the same, or knowingly permit them to be used or
occupied, contrary to any statute, rule, order, ordinance, requirement or
regulation applicable thereto, or in any manner which would violate any
certificate of occupancy affecting the same, or which would make void or
voidable any insurance then in force with respect thereto (provided Tenant has
received a copy of the policy) or which would make it impossible to obtain fire
or other insurance thereon required to be furnished hereunder by Tenant, or
which would cause structural injury to the improvements, or which would
constitute a public or private nuisance or waste, and Tenant agrees that it will
promptly, upon discovery of any such use, take all necessary steps to compel the
discontinuance of such use.
4.2 Preservation of Demised Premises. Tenant shall not use, or permit
---------------------------------
the Demised Premises, or any portion thereof, to be used by Tenant, any third
party or the public in such manner as might reasonably tend to impair Landlord's
title to the Demised Premises, or any portion thereof, or in such manner as
might reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or third persons, or of implied dedication of
the Demised Premises, or any portion thereof. Nothing contained in this Lease,
and no action or inaction by Landlord, shall be deemed or construed to mean that
Landlord has granted to Tenant any right, power or permission to do any act or
make any agreement that may create, or give rise to or be the foundation for any
right, title, interest, lien, charge or other encumbrance upon the estate of
Landlord in the Demised Premises other than as expressly set forth in this
Lease.
4.3 Hazardous Substances.
---------------------
(a) Subject to Section 4.3(f), Tenant shall at all times and in all
respects comply with all federal, state and local laws, ordinances and
regulations ("HAZARDOUS MATERIALS LAWS") relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, flammable explosives, asbestos,
urea formaldehyde, polychlorinated biphenyIs, radioactive materials or waste, or
other hazardous, toxic, contaminated or polluting materials, substances or
wastes, including without limitation any "hazardous substances," "hazardous
wastes," "hazardous materials" or toxic substances" under any such laws,
ordinances or regulations (collectively, "HAZARDOUS MATERIALS") at the Demised
Premises.
(b) Subject to Section 4.3(f), Tenant shall at its own expense procure
(other than a certificate of occupancy), maintain in effect and comply with all
conditions of any and all permits, licenses and other governmental and
regulatory approvals required for Tenant's use of the Demised Premises,
including, without limitation, discharge of (appropriately treated) materials or
waste into or through any sanitary sewer system serving the Demised Premises.
Tenant shall in all respects handle, treat, deal with and manage any and all
Hazardous Materials in, on, under or about the Demised Premises in complete
conformity with all applicable Hazardous Materials Laws and prudent industry
practices regarding the management of such Hazardous Materials. Subject to
Section 4.3[f), all reporting obligations imposed by Hazardous Materials Laws
are solely the responsibility of Tenant. Upon expiration or earlier termination
of this Lease and subject to Section 4.3(f), Tenant shall cause all Hazardous
Waste Materials (as defined in 22 CCR 66261.3) to be removed from the Demised
Premises and transported for use, storage or disposal in accordance with and in
complete compliance with all applicable Hazardous Materials Laws. Tenant shall
not take any remedial action in response to the presence of any Hazardous
Materials in, on, about or under the Demised Premises or in any Improvements
situated on the Land other than in the normal course of Tenant's business
operations as now contemplated in accordance with all Hazardous Materials Laws
or as necessitated by emergency considerations in accordance with all applicable
Hazardous Materials Laws, nor enter into any settlement agreement, consent
decree or other compromise in respect to any claims relating to any Hazardous
Materials in any way connected with the Demised Premises or the Improvements on
the Land without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, at
14
the expiration of the term of this Lease, Tenant shall remove all tanks or
fixtures which were placed on the Demised Premises during the term of this Lease
and which contain, have contained or are contaminated with Hazardous Waste
Materials.
(c) Tenant shall immediately notify Landlord in writing of (i) any
enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Landlord or the Demised
Premises relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any non-routine reports made to any environmental agency arising out of or
in connection with any Hazardous Materials in, on or about the Demised Premises
or with respect to any Hazardous Materials removed from the Demised Premises,
including any complaints, notices, warnings, reports or asserted violations in
connection therewith. Tenant shall also provide to Landlord, as promptly as
possible, and in any event within five (5) business days after Tenant first
receives or sends the same, copies of all claims, reports, complaints, notices,
warnings or asserted violations from any governmental agency of any Hazardous
Materials Laws relating in any way to the Demised Premises or Tenant's use
thereof. Upon written request of Landlord (to enable Landlord to defend itself
from any claim or charge related to any Hazardous Materials Laws), Tenant shall
promptly deliver to Landlord notices of hazardous waste manifests reflecting the
legal and proper disposal of all such Hazardous Materials removed from the
Demised Premises. Subject to Section 4.3(f), all such manifests shall list the
Tenant or its agent as a responsible party and in no way shall attribute
responsibility for any such Hazardous Materials to Landlord.
(d) Subject to Section 4.3(f), Tenant shall indemnify, defend (with
counsel reasonably acceptable to Landlord), protect and hold Landlord and each
of Landlord's officers, directors, partners, shareholders, affiliates,
employees, agents, attorneys, successors and assigns free and harmless from and
against any and all claims, liabilities, damages, costs, penalties, forfeitures,
losses or expenses (including attorneys' fees) for death or injury to any person
or damage to any property whatsoever (including water tables and atmosphere) to
the extent arising or resulting in whole or in part, directly or indirectly,
from the presence or discharge of Hazardous Materials in, on, under, upon or
from the Demised Premises or the Improvements located thereon or from the
transportation or disposal of Hazardous Materials to or from the Demised
Premises to the extent brought onto the Demised Premises by Tenant whether
knowingly or unknowingly, the standard herein being one of strict liability. For
purposes of the indemnity provided herein, any act or omission of Tenant or its
agents, employees, contractors or subcontractors (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant. Subject to Section 4.3(f), Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repairs, clean-up or detoxification or decontamination of
the Demised Premises or the Improvements, and the presence and implementation of
any closure, remedial action or other required plans in connection therewith,
and shall survive the expiration of or early termination of the term of this
Lease. For purposes of the indemnity provided herein, any acts or omissions of
Tenant or its employees, agents, customers, sublessees, assignees, contractors
or subcontractors (whether or not they are negligent, intentional, willful or
unlawful) shall be strictly attributable to Tenant.
(e) Landlord may, at its expense, commission an environmental audit of
the Demised Premises at any time after prior written notice thereof to Tenant;
provided that such environmental audit does not unreasonably interfere with
Tenant's use of the Demised Premises, or any portion thereof, and provided
further that Landlord indemnifies, defends and holds harmless Tenant and its
officers, agents, employees and customers from and against any loss, liabilities
or damages to Tenant's machinery, equipment, fixtures and personal property, and
all liability, loss or damage arising from an injury to the property of Tenant,
or its officers, agents, employees or customers, and any death or personal
injury to any person or persons to the extent arising out of such environmental
audit except for liability, loss or damage caused by Tenant's gross negligence
or willful misconduct. However, should Tenant breach any of its obligations set
forth in this Section 4.3 in a manner that may expose Landlord to liability, and
Landlord provides written notice to Tenant of the reasonable basis upon which it
believes it has been exposed to liability, then Landlord shall have the right to
require Tenant to undertake and submit to Landlord an environmental audit from
an environmental company reasonably acceptable to Landlord, which audit shall
evidence Tenant's compliance with this Section 4.3.
(f) Landlord represents and warrants that as of the date of this Lease
there are, and as of the Commencement Date there will be, no Hazardous Materials
located on the Demised Premises, other than an as required for the normal
operation of the Demised Premises and in accordance with all Hazardous Materials
Laws. Landlord shall indemnify, defend (with counsel reasonably acceptable to
Tenant), protect and hold Tenant and each of Tenant's officers, directors,
partners, shareholders, affiliates, employees, agents, attorneys, successors and
assigns free and harmless from and against any and all claims, liabilities,
damages, costs, penalties, forfeitures, losses or expenses (including attorneys'
fees) for death or injury to any person or damage to any property whatsoever
(including water tables and atmosphere) arising or resulting in whole or in
part, directly or indirectly, from the presence of Hazardous Materials in, on,
under, upon
15
or from the Demised Premises or the Improvements located thereon prior to the
Commencement Date, or from the transportation or disposal of Hazardous Materials
to or from the Demised Premises to the extent caused by Landlord whether
knowingly or unknowingly, the standard being one of strict liability.
For purposes of the indemnity provided herein, any act or omission of
Landlord or its agents, employees, contractors or subcontractors (whether or not
they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Landlord. Subject to Section 4.3(f), Landlord's obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary repairs, clean-up or
detoxification or decontamination of the Demised Premises or the Improvements,
and the presence and implementation of any closure, remedial action or other
required plans in connection therewith, and shall survive the expiration of or
early termination of the term of this Lease.
(g) The obligations of Landlord and Tenant under this Section 4.3
shall survive the expiration or earlier termination of this Lease.
ARTICLE V
PAYMENT OF TAXES, ASSESSMENTS, ETC.
5.1 Payment of Impositions.
-----------------------
(a) Except as provided to the contrary in this Section 5.1 below,
Tenant covenants and agrees to pay during the Term of this Lease, as Additional
Rent, and before any fine, penalty, interest or cost may be added thereto for
the nonpayment thereof, all real estate taxes, regular or special assessments,
water rates and charges, sewer rates and charges, including any sum or sums
payable for present or future sewer or water capacity, (except as set forth in
Section 2.6 above) charges for public utilities, street lighting, excise levies,
licenses, permits, inspection fees, other governmental charges and all other
charges or burdens of whatsoever kind and nature (including costs, fees and
expenses of complying with any restrictive covenants to which the Land is
subject as of the date of this Lease or similar agreements to which the Demised
Premises are subject, incurred in the use, occupancy, ownership, operation,
leasing or possession of the Demised Premises), without particularizing by any
known name or by whatever name hereafter called, and whether any of the
foregoing be general or special, ordinary or extraordinary, foreseen or
unforeseen (all of which are sometimes herein referred to as "IMPOSITIONS"),
which at any time during the Term may have been or may be assessed or levied on
the Demised Premises or any portion thereof or any appurtenance thereto, rents
or income therefrom, and such easements or rights as may now or hereafter be
appurtenant or appertain to the use of the Demised Premises. Tenant shall pay
the current portions of all special (or similar) assessments which during the
Term of this Lease shall be laid, assessed, levied or imposed upon or become
payable or become a lien upon the Demised Premises or any portion thereof;
provided, however, that if by law any special assessment is payable (without
default) or, at the option of the owner, may be paid (without default) in
installments (whether or not interest shall accrue on the unpaid balance of such
special assessment), Tenant may (and shall only be obligated to) pay the same,
in installments as the same respectively become payable and before any fine,
penalty, interest or cost may be added thereto for the nonpayment of any such
installment and the interest thereon. Notwithstanding the generality of the
foregoing, Tenant shall not be responsible (and Landlord shall pay prior to
delinquency) for Impositions charged by any association which includes the Land
to the extent the amount of the Impositions therefrom exceeds the amount which
Tenant would have incurred had Tenant performed the work and provided the
services performed or provided by the association.
(b) Notwithstanding the foregoing provisions of Section 5.1 (a),
Tenant shall not be responsible for (and Landlord shall pay prior to
delinquency) any increase in ad valorem property taxes or other taxes which
might result from the sale or other transfer (deemed a change of ownership for
California tax purposes) of the Demised Premises during the Term of the Lease to
the extent such increase results from the fact that the assessed value of the
Demised Premises exceeds the total cost (including the direct and indirect costs
(including the costs of permits, fees and professional services) of the Land,
Shell Improvements and Tenant Improvements) of the Demised Premises. Payment of
any taxes, assessments or similar charges which are directly related to the
acquisition of the Land or the construction of the Improvements or Demised
Premises will be Landlord's financial responsibility.
(c) Landlord shall pay all installments of special assessments
(including interest accrued on the unpaid balance) which are payable for periods
prior to the Commencement Date and after the termination date of the Term of
this Lease. Landlord will deliver to Tenant the tax bills at least thirty (30)
days prior to any delinquency date. Tenant shall pay all real estate taxes,
whether heretofore or hereafter levied or assessed upon the Demised Premises or
any portion
16
thereof, which are due and payable for periods during the Term of this Lease.
Landlord shall pay all real estate taxes which are payable for periods prior to
the Commencement Date and after the termination date of the Term of this Lease.
Provisions herein to the contrary notwithstanding, Landlord shall pay that
portion of the real estate taxes and installments of special assessments due and
payable in respect to the Demised Premises during the year in which the Initial
Term commences and the year in which the Term ends which the number of days in
said year not within the Term of this Lease bears to 365, and Tenant shall pay
the balance of said current real estate taxes and current installments of
special assessments during said years.
5.2 Tenant's Right to Contest Impositions. Tenant shall have the right
--------------------------------------
at its own expense to contest the amount or validity, in whole or in part, of
any Imposition by appropriate proceedings diligently conducted in good faith;
provided, however, if the payment of such Imposition is necessary to properly
appeal such Imposition, Tenant shall pay such imposition before delinquency;
and, provided further, if there is then an uncured Event of Default hereunder,
Tenant shall have first deposited with Landlord cash or a certificate of deposit
payable to Landlord issued by a national bank or federal savings and loan
association in the amount of the Imposition so contested and unpaid, together
with all interest and penalties which may accrue in Landlord's reasonable
judgment in connection therewith, and all charges that may or might be assessed
against or become a charge on the Demised Premises or any portion thereof during
the pendency of such proceedings. If there is then in an uncured Event of
Default hereunder and if during the continuance of such proceedings, Landlord
shall, from time to time, reasonably deem the amount deposited, as aforesaid,
insufficient, Tenant shall, upon demand of Landlord, make additional deposits of
such additional sums of money or such additional certificates of deposit as
Landlord may reasonably request. If Tenant is required to make such additional
deposits hereunder and Tenant fails to make same, the amount theretofore
deposited may be applied by Landlord to the payment, removal and discharge of
such Imposition, and the interest, fines and penalties in connection therewith,
and any costs, fees (including attorneys' fees) and other liability (including
costs incurred by Landlord) accruing in any such proceedings. Upon the
termination of any such proceedings, Tenant shall pay the amount of such
Imposition or part thereof, if any, as finally determined in such proceedings,
the payment of which may have been deferred during the prosecution of such
proceedings, together with any costs, fees, including attorneys' fees, interest,
penalties, fines and other liability in connection therewith, and upon such
payment, if Landlord had previously received any amounts or certificates as a
deposit, Landlord shall return all amounts or certificates deposited with it
with respect to the contest of such Imposition, as aforesaid, or, at the written
direction of Tenant, Landlord shall make such payment out of the funds on
deposit with Landlord and the balance, if any, shall be returned to Tenant.
Tenant shall be entitled to the refund of any Imposition, penalty, fine and
interest thereon received by Landlord which has been paid by Tenant or which has
been paid by Landlord but for which Landlord has been previously reimbursed in
full by Tenant. Landlord shall not be required to join in any proceedings
referred to in this Section 5.2 unless the provisions of any law, rule or
regulation at the time in effect shall require that such proceedings be brought
by or in the name of Landlord, in which event Landlord shall join in such
proceedings or permit the same to be brought in Landlord's name upon compliance
with such conditions as Landlord may reasonably require. Landlord shall not
ultimately be subject to any liability for the payment of any fees, including
attorneys' fees, costs and expenses in connection with such proceedings. Tenant
agrees to pay all such fees (including reasonable attorneys' fees), costs and
expenses or, on demand, to make reimbursement to Landlord for such payment for
fees reasonably incurred by Landlord in connection with such proceedings as
provided above. During the time when any such certificate of deposit is on
deposit with Landlord, and prior to the time when the same is returned to Tenant
or applied against the payment, removal or discharge of Impositions, as above
provided, Tenant shall be entitled to receive all interest paid thereon. Cash
deposits shall not bear interest.
5.3 Levies and Other Taxes. If, at any time during the Term of this
-----------------------
Lease, any method of taxation shall be such that there shall be levied, assessed
or imposed on Landlord, or on the Base Rent or Additional Rent, or on the
Demised Premises, or any portion thereof, a capital levy, gross receipts tax,
transaction privilege tax or other tax on the rents received therefrom or a
franchise tax, or an assessment, levy or charge measured by or based in whole or
in part upon such rents, Tenant covenants to pay and discharge the same, it
being the intention of the parties hereto that the rent to be paid hereunder,
shall be paid to Landlord absolutely net, without deduction or charge of any
nature whatsoever, foreseeable or unforeseeable, ordinary or extraordinary, or
of any nature, kind or description, except as in this Lease otherwise expressly
provided. Nothing in this Lease contained shall require Tenant to pay any
municipal, state or federal net income, franchise, or excess profits taxes
assessed against Landlord, or any municipal, state or federal capital levy,
estate, succession, inheritance or transfer taxes of Landlord, or corporation
franchise taxes imposed upon any corporate owner of the fee of the Demised
Premises nor shall anything in this Lease require Tenant to pay any income tax
of Landlord or any tax in the nature of income and/or franchise tax or in Iieu
of income tax.
5.4 Evidence of Payment. Tenant covenants to furnish Landlord, within
--------------------
thirty (30) days after Landlord requests the same, official receipts of the
appropriate taxing authority, or other appropriate proof reasonably satisfactory
to Landlord, evidencing the payment of the same. The certificate, advice or xxxx
of the appropriate official designated by law to make or issue the same or to
receive payment of any Imposition or other tax, assessment, levy or charge may
be relied upon by Landlord as sufficient evidence that such Imposition or other
tax, assessment, levy or charge is due and unpaid at
17
the time of the making or issuance of such certificate, advice or xxxx.
5.5 Escrow for Taxes and Assessments. At Landlord's written demand
---------------------------------
after any Event of Default (as hereinafter defined) and for as long as such
Event of Default is uncured, Tenant shall pay to Landlord the known or estimated
yearly real estate taxes and assessments payable with respect to the Demised
Premises in monthly payments equal to one-twelfth (1/12) of the known or
estimated yearly real estate taxes and assessments next payable with respect to
the Demised Premises. From time to time, Landlord may re-estimate the amount of
real estate taxes and assessments, and in such event Landlord shall notify
Tenant, in writing, of such re-estimate and fix future monthly installments for
the remaining period prior to the next tax and assessment due date in an amount
sufficient to pay the re-estimated amount over the balance of such period after
giving credit for payments made by Tenant on the previous estimate. If the total
monthly payments made by Tenant pursuant to this Section 5.5 shall exceed the
amount of payments necessary for said taxes and assessments, such excess shall
be credited on subsequent monthly payments of the same nature; but if the total
of such monthly payments so made under this paragraph shall be insufficient to
pay such taxes and assessments when due, then Tenant shall pay to Landlord such
amount as may be necessary to make up the deficiency. Payment by Tenant of real
estate taxes and assessments under this Section 5.5 shall be considered as
performance of such obligation under the provisions of Section 5.1 hereof.
5.6 Landlord's Right to Contest Impositions. In addition to the right
----------------------------------------
of Tenant under Section (S).2 to contest the amount or validity of Impositions,
Landlord shall also have the right, but not the obligation, to contest the
amount or validity, in whole or in part, of any Impositions not contested by
Tenant, by appropriate proceedings conducted in the name of Landlord or in the
name of Landlord and Tenant. If Landlord elects to contest the amount or
validity, in whole or in part, of any Impositions, such contests by Landlord
shall be at Landlord's expense; provided, however, that if the amounts payable
by Tenant for Impositions are reduced (or if a proposed increase in such amounts
is avoided or reduced) by reason of Landlord's contest of Impositions, Tenant
shall reimburse Landlord for the costs reasonably incurred by Landlord in
contesting such Impositions, but such reimbursements shall not be in excess of
the amount saved by Tenant.
ARTICLE VI
INSURANCE
6.1 Casualty Insurance. Tenant, at its sole cost and expense, shall
-------------------
obtain and continuously maintain in full force and effect during the Term of
this Lease, commencing with the Commencement Date (subject to the provisions of
Section 2.12), policies of insurance covering the Building constructed,
installed or located on the Demised Premises naming the Landlord as an
additional insured, against (a) loss or damage by fire; (b) loss or damage from
such other risks or hazards now or hereafter embraced by an "Extended Coverage
Endorsement," including, but not limited to, windstorm, hail, explosion,
vandalism, riot and civil commotion, damage from vehicles, smoke damage, water
damage and debris removal; (c)loss for flood if the Demised Premises are in a
designated flood or flood insurance area and if such coverage is required by
Landlord's lender, (d) loss or damage caused by earthquake (but only if required
by a Lender) subject to standard deductibles (provided, however, that (i) Tenant
shall not be required to maintain earthquake insurance if it is not reasonably
obtainable and (ii) Tenant's financial responsibility for the premium associated
with earthquake insurance shall not exceed $50,000 per year during the Initial
Term or any Option Term); and (e) loss or damage from such other risks or
hazards of a similar or dissimilar nature which are now or may hereafter be
customarily insured against with respect to improvements similar in
construction, design, general location, use and occupancy to the Improvements.
If the premium associated with earthquake insurance exceeds $50,000.00 per year,
Landlord shall have the option to either pay the excess premium over and above
such $50,000.00 amount or delete the requirement that Tenant obtain earthquake
coverage. At all times, such insurance coverage shall be in an amount equal to
one hundred percent (100%) of the then "Full Replacement Cost" of the
Improvements. "FULL REPLACEMENT COST" shall be interpreted to mean the cost of
replacing the Improvements, without deduction for depreciation or wear and tear,
including costs attributable to improvements or upgrades in the Improvements
required by changes in laws and regulations governing zoning, public access and
accommodation, workplace conditions, public health or safety or similar matter,
and it shall include to the extent reasonably obtainable a reasonable sum for
architectural, engineering, legal, administrative and supervisory fees connected
with the restoration or replacement of the Improvements in the event of damage
thereto or destruction thereof. If a sprinkler system shall be located in the
Improvements, sprinkler leakage insurance shall be procured and continuously
maintained by Tenant at Tenant's sole cost and expense. Any deductible, self-
insured retention or similar limitation on coverage shall be submitted to
Landlord for its prior written approval, which shall be granted or withheld in
Landlord's reasonable discretion.
6.2 Public Liability Insurance. From and after the Commencement Date,
---------------------------
Tenant, at its sole cost and
18
expense, shall obtain and continuously maintain in full force and effect
comprehensive general liability insurance against any loss, liability or damage
on, about or relating to the Demised Premises, or any portion thereof, with
limits of not less than One Million Dollars ($1,000,000), with "umbrella" or
excess liability coverage of not less than Four Million Dollars ($4,000,000)
coverage on an occurrence basis. Any such insurance obtained and maintained by
Tenant shall name Landlord as an additional insured therein or shall include a
"loss payee" endorsement in favor of Landlord, and shall be obtained and
maintained from and with a reputable and financially sound insurance company
authorized to issue such insurance in the state in which the Demised Premises
are located. Such insurance shall to the extent reasonably obtainable
specifically insure (by contractual liability endorsement) Tenant's obligations
under Section 20.3 of this Lease.
6.3 Other Insurance.
----------------
(a) During the Term of this Lease, commencing with the Commencement
Date, Tenant, at its sole cost and expense, shall obtain and continuously
maintain in full force and effect boiler and pressure vessel (including, but not
limited to, pressure pipes, steam pipes and condensation return pipes)
insurance, provided the Building contains a boiler or other pressure vessel or
pressure pipes. Landlord shall be named as an additional insured or loss payee
in such policy or policies of insurance.
(b) During the Term of this Lease commencing with the Commencement
Date, Tenant, at its sole cost and expense, shall obtain and continuously
maintain, in full force and effect, loss of use and business interruption
coverage for the payment for no less than one (1) year of (i) the Base Rent and
(ii) those Impositions which will continue to be payable even during a period
when the Demised Premises are not operational.
(c) During the Term of this Lease, Tenant, at its sole cost and
expense, shall obtain and continuously maintain in full force and effect such
other insurance in such amounts against other insurable hazards which at the
time are commonly insured against in the case of premises and/or buildings or
improvements similar in construction, design, general location, use and
occupancy to the Demised Premises if required by Landlord's construction or
permanent lenders; provided, however, that this Section 6.3(c) is not intended
to, and shall not, supersede the cap on Tenant's financial responsibility for
earthquake insurance premiums specified in Section 6.1(d)(ii), above.
6.4 Certain Insurance Provisions. All policies of insurance required
-----------------------------
by Section 6.1 shall contain deductibles which are no higher than those which
are customarily maintained for casualty and liability insurance in connection
with facilities similar to the Demised Premises and provide that the proceeds
thereof shall be payable to Landlord and if Landlord so requests shall also be
payable to any contract purchaser of the Demised Premises and the holder of any
mortgages now or hereafter becoming a lien on the fee of the Demised Premises,
or any portion thereof, as the interest of such purchase or holder appears
pursuant to a standard named insured or mortgagee clause or as an additional
insured. Tenant shall not, on Tenant's own initiative or pursuant to request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required in Section 6.1 hereof,
unless Landlord is named therein as an additional insured with loss payable as
provided in Section 6.1. Tenant shall immediately notify Landlord whenever any
such separate insurance is taken out and shall deliver to Landlord original
certificates evidencing the same.
Each policy required under this Article VI shall have attached thereto
(a) an endorsement that such policy shall not be cancelled and that the coverage
under such policy will not be materially changed without at least thirty (30)
days prior written notice to Landlord, and (b) to the extent reasonably
obtainable an endorsement to the effect that the insurance as to the interest of
Landlord shall not be invalidated by any act or neglect of Landlord or Tenant.
All policies of insurance shall be written with companies reasonably
satisfactory to Landlord and licensed in the state in which the Demised Premises
are located. Such certificates of insurance shall be in a form reasonably
acceptable to Landlord and shall be delivered to Landlord upon the Commencement
Date and, prior to expiration of such policy, new certificates of insurance
shall be delivered to Landlord not less than twenty (20) days prior to the
expiration of the then current policy term.
Insurance required hereunder shall be obtained from companies duly
licensed to transact business in the state of California, and maintaining during
the policy term a "General Policyholders Rating" of at least "A-" and financial
category rating of "Class VII" in "Best's Insurance Guide."
6.5 Waiver of Subrogation. Landlord and Tenant hereby mutually waive
----------------------
any and all rights of recovery against one another for real or personal property
loss or damage occurring to the Demised Premises, or any part thereof, or any
personal property therein from perils insured against under the insurance
maintained hereunder for the benefit of the respective parties, and to the
extent the proceeds of such insurance are actually recovered, and each shall use
19
commercially reasonable efforts to assure that such insurance permits waiver of
liability and contains a waiver of subrogation.
6.6 Tenant's Indemnification of Landlord. Tenant may maintain
-------------------------------------
insurance coverage upon all personal property of Tenant or the personal property
of others kept, stored or maintained on the Demised Premises against loss or
damage by fire, windstorm or other casualties or causes for such amount as
Tenant may desire. To the extent Tenant maintains such insurance, Tenant agrees
that such policies shall, to the extent obtainable, name Landlord as an
"additional insured" and contain a waiver of subrogation clause as to Landlord.
6.7 Unearned Premiums. Upon expiration or other termination of the
------------------
Term of this Lease, the unearned premiums upon any insurance policies or
certificates thereof lodged with Landlord by Tenant shall, subject to the
provisions of Article XIII hereof, be payable to Tenant, provided that an Event
of Default does not then exist (or if an Event of Default does then exist, any
excess over the amount required to cure such default shall be so payable to
Tenant).
6.8 Blanket Insurance Coverage. Nothing in this Article VI shall
---------------------------
prevent Tenant from taking out insurance of the kind and in the amount provided
for under the preceding paragraphs of this Article VI under a blanket insurance
policy or policies (and certificates thereof reasonably satisfactory to Landlord
shall be delivered to Landlord) which may cover other properties owned, leased
or operated by Tenant as well as the Demised Premises; provided, however, that
any such policy of blanket insurance of the kind provided for shall (a) specify
therein the amounts thereof exclusively allocated to the Demised Premises (or
Tenant shall furnish Landlord and the holder of any fee mortgage with a written
statement from the insurers under such policies specifying the amounts of the
total insurance exclusively allocated to the Demised Premises), and (b) not
contain any clause which would result in the insured thereunder being required
to carry any insurance with respect to the property covered thereby in an amount
not less than any specific percentage of the Full Replacement Cost of such
property in order to prevent the insured therein named from becoming a co-
insurer of any loss with the insurer under such policy; and further provided,
however, that such policies of blanket insurance shall, as respects the Demised
Premises, contain the various provisions required of such an insurance policy by
the foregoing provisions of this Article VI.
6.9 Landlord's Liability Insurance Coverage. Landlord, at its sole
----------------------------------------
cost and expense, shall obtain and continuously maintain in full force and
effect during the Term of this Lease, commencing with the Commencement Date,
comprehensive general liability insurance in such amounts as it shall deem
reasonably appropriate.
ARTICLE VII
UTILITIES
7.1 Payment of Utilities. During the Term of this Lease, Tenant shall
---------------------
pay, when due, all charges of every nature, kind or description for utilities
furnished to the Demised Premises or chargeable against the Demised Premises,
including all charges for water, sewage, heat, gas, light, garbage, electricity,
telephone, steam, power, or other public or private utility services.
7.2 Additional Charges. In the event that any charge or fee is
-------------------
required after the Commencement Date by the state in which the Demised Premises
are located, or by any agency, subdivision or instrumentality thereof, or by any
utility company furnishing services or utilities to the Demised Premises, as a
condition precedent to furnishing or continuing to furnish utilities or services
to the Demised Premises, such charge or fee shall be deemed to be a utility
charge payable by Tenant. The provisions of this Section 7.2 shall include, but
not be limited to, any charges or fees for future water or sewer capacity to
serve the Demised Premises, any charges for the underground installation of gas
or other utilities or services subsequent to the installation thereof, and other
charges relating to the extension of or change in the facilities necessary to
provide the Demised Premises with adequate utility services. In the event that
Landlord has paid any such charge or fee after the Commencement Date, Tenant
shall reimburse Landlord for such utility charge.
7.3 Landlord's Responsibility for Utility Hook-Up Charges and Fees.
---------------------------------------------------------------
Notwithstanding anything contained in this Article VII to the contrary, (a) as
of the Commencement Date, all utilities contemplated by the Improvements shall
be hooked-up and fully operational and functional to the Demised Premises and
all capacity, hookup and similar charges (except to the extent they constitute
Excess Shell Costs or Excess Tenant Improvement Costs) shall have been paid by
Landlord; and (b) if any utility or service charge or fee related to capital
improvements made during the Term of this Lease, whose tax depreciable life
extends beyond the termination date of this Lease, Tenant shall only pay the pro
rata portion of
20
such charge or fee to the extent that such tax depreciable life is within the
Term of this Lease.
ARTICLE VIII
REPAIRS AND MAINTENANCE OF DEMISED PREMISES
8.1 Tenant's Responsibilities. Except to the extent specifically
--------------------------
identified as Landlord's responsibility in Section 8.2, below, Tenant shall, at
its own expense, keep the Demised Premises, and every part thereof, including,
but not by way of limitation, the grounds, landscaped areas, truck parking and
loading and dock areas, the roof surface and roof membrane (but only as to
routine and ongoing maintenance), drainage xxxxxx, gutters, downspouts, glass,
interior and exterior portions of the Building, and the plumbing, heating, air-
conditioning, wiring, elevators and other mechanical systems therein, the
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, in good
order, appearance, condition and repair (reasonable wear and tear excepted),
free of obstructions, dirt, and rubbish, and so as to comply fully and at all
times with all present and future applicable governmental laws, rules and
regulations, consistent with other comparable business and industrial parks in
the Market Area. Tenant agrees to make all replacements and repairs to the
Demised Premises necessary to maintain the Demised Premises in the condition
described in the preceding sentence. Tenant, at its own expense, shall also seal
(paint) the exterior of the Building periodically during the Term (including any
Option Term) of this Lease in accordance with the recommendations of the
manufacturer of the material used for the exterior of said Building, Tenant
shall maintain regular service contracts for all of the Demised Premises' (i)
HVAC system, and (ii) elevator(s), and shall, upon Landlord's request, provide
Landlord copies of such contracts or any other maintenance or service contracts
maintained by Tenant with respect to the Demised Premises. Any such contract
shall be terminable by Tenant (or its successors, including Landlord or a
Lender) on not less than thirty (30) days notice to the contractor or shall
provide that it does not bind a Lender. All repairs, replacements and renewals
shall be at least equal in quality and class to the original work. Because
Tenant is undertaking the responsibility for most aspects of the ongoing
maintenance of the Demised Premises, Tenant waives the provisions of California
Civil Code Sections 1 941 and 1942 with respect to Landlord's obligations for
tenantability of the Demised Premises and Tenant's right to make repairs and
deduct the expenses of such repairs from Rent. When used in this Article VIII,
"repairs" shall include all necessary replacements, renewals, alterations,
additions and betterments.
8.2 Landlord's Responsibilities. Landlord shall, at its own expense,
----------------------------
repair any failure in the structural elements of the roof, all exterior and
load-bearing walls (except for painting of the exterior walls, which shall be
Tenant's responsibility), the Building foundation and for keeping all
underground utilities in good order, condition and repair. In addition, Landlord
shall be responsible, at Landlord's sole cost and expense, for the prompt and
diligent repair of any latent defects in design and construction of the Demised
Premises which manifest themselves during the Term, including, but not limited
to, latent defects in the design and/or construction of the drainage system
constructed on the Demised Premises as part of the Improvements. Landlord shall
not charge Tenant for any property management fees during the Term of the Lease.
8.3 Sharing of Expenses of Capital Items. Certain items of repair and
-------------------------------------
maintenance which are Tenant's responsibility under Section 8.1, may, under
generally acceptable accounting principles consistently applied, be considered
to have a reasonable useful life which would extend beyond the end of the Term
(a "CAPITAL ITEM"). Landlord and Tenant shall share the expenses associated with
such Capital Items, as follows:
(a) Tenant shall pay all expenses related to Capital Items.
(b) At any time Tenant intends to incur an expense related to a
Capital Item, Tenant shall notify Landlord, in writing, and Landlord shall
approve or disapprove such expenditure, which approval shall not be unreasonably
withheld or delayed. Landlord shall not be required to approve any expenditure
which is not required for the maintenance and operation of the Demised Premises.
(c) At that time, Landlord and Tenant shall also agree on the "useful"
life of the Capital Item and, shall determine a level per-year useful life
allocation (the "Useful Life Allocation") of financial responsibility for that
Capital Item. By way of example only, financial responsibility for a Capital
Item which requires the expenditure of $50,000 and which has a five-year
"useful" life would be assigned a $10,000 per year Useful Life Allocation.
(d) The Useful Life Allocation shall be applied to the item of expense
related to the Capital Item, until the full amount of such expense has been
amortized, although Tenant shall have the responsibility for paying all expenses
21
related to Capital Items when incurred.
(e) If, at the end of the Term of Lease, including any Option Term,
there remains any unamortized Useful Life Allocation(s), Landlord shall, within
thirty (30) days after the end of the Term, refund to Tenant, such unamortized
Useful Life Allocations, in cash.
8.4 Tenant's Waiver of Claims Against Landlord. Except as provided in
-------------------------------------------
Article II, Section 8.2 and Article XIII of this Lease, or as expressly provided
under any other provision hereof, Landlord shall not be required to furnish any
services or facilities or to make any repairs or alterations in, about or to the
Demised Premises or any improvements hereafter erected thereon. Subject to the
requirements of Article II, Section 8.2 and Article XIII of this Lease, or as
expressly provided under any other provision hereof, Tenant hereby assumes the
full and sole responsibility for the condition, operation, repair, replacement,
maintenance and management of the Demised Premises and all improvements
hereafter erected thereon, and Tenant hereby waives any rights created by any
law now or hereafter in force to make repairs to the Demised Premises or
improvements hereafter erected thereon at Landlord's expense.
8.5 Prohibition Against Waste. Tenant shall not do or suffer any
--------------------------
waste, damage, disfigurement or injury to the Demised Premises, or any
improvements hereafter erected thereon, or to the fixtures or equipment therein,
or permit or suffer any overloading of the floors or other use of the
Improvements that would place an undue stress on the same or any portion thereof
beyond that for which the same was designed.
ARTICLE IX
COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS
9.1 Compliance with Applicable Laws and Restrictions. Subject to
-------------------------------------------------
Landlord's obligations under Article II, Section 8.2 and Article XlII of this
Lease, or as expressly provided under any other provision hereof, throughout the
Term of this Lease, and at Tenant's sole cost and expense (except as provided in
Sections 2.8 and 8.3 above), Tenant shall promptly comply or cause compliance
with or remove or cure any violation caused by Tenant of any and all present and
future laws, rules and regulations applicable to the Demised Premises
(including, without limitation, those reflected on the Preliminary Title Report
prepared by First American Title Company, dated October 9, 1996), and the
appropriate departments, commissions, boards, associations and officers
enforcing them, and the orders, rules and regulations of the Board of Fire
Underwriters where the Demised Premises are situated, or any other governmental
body now or hereafter constituted exercising lawful or valid authority over the
Demised Premises, or any portion thereof, or exercising authority with respect
to the use or manner of use of the Demised Premises, whether or not the
compliance, curing or removal of any such violation and the costs and expenses
necessitated thereby shall have been foreseen or unforeseen, ordinary or
extraordinary, and whether or not the same shall be presently within the
contemplation of Landlord or Tenant or shall involve any change of governmental
policy or require structural or extraordinary repairs, alterations or additions
by Tenant and irrespective of the costs thereof. Tenant shall also comply with,
observe and perform all provisions and requirements of all policies of insurance
at any time in force with respect to the Demised Premises and required to be
obtained and maintained under the terms of Article VI hereof, and Tenant shall
comply with all development permits issued by governmental authorities issued in
connection with development of the Demised Premises, copies of which shall be
supplied to Tenant by Landlord promptly after issuance. In addition to the
matters of record to which the Demised Premises are subject as of the date of
this Lease, Tenant acknowledges that, prior to the Commencement Date, the
Demised Premises will become subject to a Reciprocal Easement Agreement the
purpose of which will be to establish certain access and maintenance rights and
obligations with regard to driveway, fire suppression and storm drain facilities
shared by the Demised Premises and the property which is located adjacent to the
Demised Premises, provided that Landlord shall obtain Tenant's approval of such
Reciprocal Easement Agreement prior to the Demised Premises becoming subject
thereto, and to any other modifications to the matters of record to which the
Demised Premises are subject and which would have an affect on Tenant's use and
enjoyment of the Demised Premises, which approval shall not be unreasonably
withheld.
9.2 Tenant's Obligations. Notwithstanding that it may be usual and
---------------------
customary for Landlord to assume responsibility and performance of any or all of
the obligations set forth in this Article IX, and notwithstanding any order,
rule or regulation directed to Landlord to perform, subject to the provisions of
Article II, Section 8.2 and Article XIII of this Lease, Tenant hereby assumes
such obligations because, by nature of this Lease, or as expressly provided
under any other provision hereof, the rents and income derived from this Lease
by Landlord are "net" rentals not to be diminished by any expense incident to
the ownership, occupancy, use, leasing or possession of the Demised Premises or
any portion
22
thereof (except as expressly provided in this Lease).
9.3 Tenant's Right to Contest Laws and Ordinances. After prior
----------------------------------------------
written notice to Landlord, Tenant, at its sole cost and expense and without
cost or expense to Landlord, shall have the right to contest the validity or
application of any Applicable Laws or Restrictions in the name of Tenant or
Landlord, or both, by appropriate legal proceedings diligently conducted but
only if compliance with the terms of any such law or ordinance pending the
prosecution of any such proceeding, may legally be delayed without incurring of
any lien, charge or liability of any kind against the Demised Premises, or any
portion thereof, and without subjecting Landlord or Tenant to any liability,
civil or criminal, for failure so to comply therewith until the final
determination of such proceeding; provided, however, if any lien, charge or
civil liability would be incurred by reason of any such delay, Tenant
nevertheless, on the prior written consent of Landlord, which consent shall not
be unreasonably withheld, may contest as aforesaid and delay as aforesaid,
provided that such delay would not subject Tenant or Landlord to criminal
liability and Tenant (a) furnishes Landlord security, reasonably satisfactory to
Landlord, against any loss or injury by reason of any such contest or delay, (b)
prosecutes the contest with due diligence and in good faith, and (c) agrees to
indemnify, defend and hold harmless Landlord and the Demised Premises from any
charge, liability or expense whatsoever. The security furnished to Landlord by
Tenant shall be in the form of a cash deposit or a Certificate of Deposit issued
by a national bank or federal savings and loan association payable to Landlord.
Said deposit shall be held, administered and distributed in accordance with the
provisions of Section 5.2 hereof relating to the contest of the amount or
validity of any Imposition.
If necessary or proper to permit Tenant so to contest the validity or
application of any such law or ordinance, Landlord shall, at Tenant's sole cost
and expense, including reasonable attorneys' fees incurred by Landlord, execute
and deliver any appropriate papers or other documents; provided, however, that
Landlord shall not be required to execute any document or consent to any
proceeding which would result in the imposition of any cost, charge, expense or
penalty on Landlord or the Demised Premises.
ARTICLE X
MECHANIC'S LIENS AND OTHER LIENS
10.1 Mechanic's Liens.
----------------------
(a) Tenant shall keep the Demised Premises free from any liens
arising out of work performed, materials furnished and obligations incurred by
Tenant. Tenant covenants and agrees that any mechanic's lien filed against the
Demised Premises for work claimed to have been done for, or materials claimed to
have been furnished to, Tenant shall be discharged by Tenant, by bond or
otherwise, within thirty (30) days after the filing thereof, at the sole cost
and expense of Tenant. This provision does not apply to any claim or lien
arising out of the original construction of the Demised Premises by Landlord
pursuant to this Lease.
(b) Tenant shall have the right to contest with due diligence the
validity or amount of any lien or claimed lien created by Tenant if Tenant shall
give to Landlord such security as Landlord may reasonably require to insure
payment thereof and prevent any sale, foreclosure or forfeiture of the Demised
Premises or any portion thereof by reason of such nonpayment. On final
determination of the lien or claim for lien, Tenant shall immediately pay any
judgment rendered with all proper costs and charges and shall have the lien
released or judgment satisfied at Tenant's own expense, and if Tenant shall fail
to do so, Landlord may at its option, pay any such final judgment and clear the
Demised Premises therefrom. If Tenant shall fail to contest with due diligence
the validity or amount of any such lien or claimed lien created by Tenant, or to
give Landlord security as hereinabove provided, Landlord may, but shall not be
required to, contest the validity or amount of any such lien or claimed lien or
settle or compromise the same without inquiring into the validity of the claim
or the reasonableness of the amount thereof. Should any lien be filed against
the Demised Premises or should any action of any character affecting the title
thereto be commenced, Tenant shall give to Landlord written notice thereof as
soon as notice of such lien or action comes to the knowledge of Tenant.
(c) Should Tenant fail to discharge any such lien, Landlord may, at
Landlord's election, pay such claim or post a bond or otherwise provide security
to eliminate the lien as a claim against title, and the cost thereof shall be
immediately due from Tenant as Additional Rent. Tenant shall not suffer or
permit any mechanic's lien or other lien to be filed against the Demised
Premises, or any portion thereof, by reason of work, labor, skill, services,
equipment or materials supplied or claimed to have been supplied to the Demised
Premises at the request of Tenant, or anyone holding the Demised Premises, or
any portion thereof, through or under Tenant.
23
(d) All materialmen, contractors, artisans, mechanics, laborers and
any other person now or hereafter furnishing any labor, services, materials,
supplies or equipment to Tenant with respect to the Demised Premises, or any
portion thereof, are hereby charged with notice that they must look exclusively
to Tenant to obtain payment for the same. Notice is hereby given that Landlord
shall not be liable for any labor, services, materials, supplies, skill,
machinery, fixtures or equipment furnished or to be furnished to Tenant upon
credit, and that no mechanic's lien or other lien for any such labor, services,
materials, supplies, machinery, fixtures or equipment shall attach to or affect
the estate or interest of Landlord in and to the Demised Premises or any portion
thereof.
10.2 Landlord's Indemnification. The provisions of Section 10.1 above
--------------------------
shall not apply to any mechanic's lien or other lien for labor, services,
materials, supplies, machinery, fixtures or equipment furnished to the Demised
Premises in the performance of Landlord's obligations to construct the
Improvements required by the provisions of Article II hereof or in the
performance of Landlord's other obligations under this Lease, and Landlord does
hereby agree to indemnify and defend Tenant against and save Tenant and the
Demised Premises and any portion thereof harmless from all losses, costs,
damages, expenses, liabilities and obligations, including, without limitation,
reasonable attorneys' fees resulting from the assertion, filing, foreclosure or
other legal proceedings with respect to any such mechanic's lien or other lien.
10.3 Removal of Liens. Except as otherwise provided for in this
----------------
Article X, Tenant shall not create, permit or suffer, and shall promptly
discharge and satisfy of record, any other lien, encumbrance, charge, security
interest or other right or interest which shall be or become a lien,
encumbrance, charge or security interest upon the Demised Premises, or any
portion thereof, or the income therefrom, or on the interest of Landlord or
Tenant in the Demised Premises, or any portion thereof, if such lien,
encumbrance, charge, security interest or other right or interest shall result
from the actions of Tenant or others acting on the behalf of or for Tenant
(other than Landlord).
10.4 Equipment and Trade Fixtures. Landlord expressly waives and
-----------------------------
disclaims any lien which it may have by statute or otherwise on the equipment
and trade fixtures which Tenant brings to the Demised Premises. In addition,
Landlord acknowledges that Tenant may, from time to time, offer all or portions
of such equipment and trade fixtures as collateral for obligations to lenders.
Landlord will promptly execute such reasonable documentation as Tenant may
request in order to evidence to any such lender Landlord's lack of any claim to
such equipment and trade fixtures.
ARTICLE XI
LANDLORD'S PERFORMANCE OF TENANT'S OBLIGATIONS
In the event Tenant fails to pay or discharge any Additional
Obligation, Landlord may, but shall not be obligated to, in addition to its
remedies in an Event of Default, provide a factually correct written notice of
such failure, and if Tenant still fails to cure such failure within ten (10)
days after Tenant's receipt of such notice, Landlord may pay or perform the
same, and in that event Tenant shall within ten (10) days after invoice
reimburse Landlord therefor (together with interest at the Maximum Rate of
Interest from the date Landlord made such payment), which amount shall be deemed
Additional Rent; provided, however, that Landlord shall be entitled to pay such
amount without prior notice to Tenant if Landlord reasonably believes that any
further delay would expose Landlord or the Demised Premises to (i) civil or
criminal penalties, (ii) a potential default under a mortgage, deed of trust or
similar obligation, or (iii) lack of insurance coverage as required hereunder,
or is otherwise an emergency. Nothing herein contained shall be deemed as a
waiver or release of Tenant from any obligation of Tenant contained in this
Lease.
ARTICLE Xll
DEFAULTS OF TENANT
12.1 Events of Default. Any one or more of the following events shall
------------------
be an event of default by Tenant ("EVENT OF DEFAULT") under this Lease:
(a) Tenant fails to pay any Base Rent or Additional Rent or any other
sum required by this Lease to be paid by Tenant, within five (5) business days
after the same is due and payable;
(b) Tenant fails to perform or comply with any other term hereof, and
such failure shall continue for more than thirty (30) days after notice thereof
from Landlord, and Tenant shall not within such period commence with due
24
diligence and thereafter dispatch the curing of such default, or, having so
commenced, shall thereafter fail or neglect to prosecute or complete with due
diligence and dispatch the curing of such default;
(c) Tenant makes a general assignment for the benefit of creditors or
admits in writing its inability to pay its debts as they become due or files a
petition in bankruptcy, or is adjudicated as bankrupt or insolvent, or files a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statutes,
law or regulation, or files an answer admitting or fails to reasonably contest
the material allegations of a petition filed against it in any such proceeding,
or seeks or consents to or acquiesces in the appointment of any trustee,
receiver or liquidator of Tenant or any material part of its properties
(provided, however, that this Section 12.1 (c) shall apply only to the extent it
is enforceable under applicable law); or
(d) Within ninety (90) days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding has not been dismissed, or
if, within ninety (90) days after the appointment without the consent or
acquiescence of Tenant of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment has not been vacated
(provided, however, that this Section 12.1 (d) shall apply only to the extent it
is enforceable under applicable law); or
(e) Tenant permits the abandonment or nonoccupancy of the entire
Demised Premises (except for temporary vacancies or portions thereof, or to the
extent caused by damage, destruction or condemnation).
12.2 Landlord's Remedies. Upon the occurrence of an Event of Default,
--------------------
Landlord, at its option, without further notice or demand to Tenant, shall have,
in addition to all other rights and remedies provided in this Lease, at law or
in equity, the option to pursue any one or more of the following remedies, each
and all of which shall be cumulative and nonexclusive, without any notice or
demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Base Rent or Additional Rent, enter upon and take
possession of the Demised Premises and expel or remove Tenant and any other
person who may be occupying the Demised Premises or any part thereof, without
being liable for prosecution or any claim or damages therefor; and Landlord may
recover from Tenant the following:
(i) The worth at the time of award of any unpaid Base Rent and
Additional Rent which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(v) Such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
The term "RENT" as used in this Section 12.2 shall be deemed to be and
to mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in subsections
(i) and (ii), above, the "WORTH AT THE TIME OF AWARD" shall be computed at the
Maximum Rate of Interest. As used in subsection (iii), above, the "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
percent (1%). Nothing herein shall be deemed to relieve Landlord of its
obligation to mitigate its damages following an Event of Default.
12.3 Right to Collect Rent as Due. Landlord shall have the remedy
-----------------------------
described in California Civil Code Section 1951.4 (Landlord may continue lease
in effect after Tenant's breach and abandonment and recover rent as it
25
becomes due, if Tenant has the right to sublet or assign, subject only to
reasonable limitations). Accordingly, if Landlord does not elect to terminate
this Lease on account of any default by Tenant, Landlord may, from time to time,
without terminating this Lease, enforce all of its rights and remedies under
this Lease, including the right to recover all Base Rent and Additional Rent as
they become due.
12.4 New Lease Following Termination. In the event Landlord elects to
--------------------------------
terminate this Lease and relet the Premises, it may execute any new lease in its
own name. Tenant hereunder shall have no right or authority whatsoever to
collect any Base Rent, Additional Rent or other sums from such tenant. The
proceeds of any such reletting shall be applied as follows:
(a) First, to the payment of any indebtedness other than Base
Rent or Additional Rent due hereunder from Tenant to Landlord, including
but not limited to storage charges or brokerage commissions owing from
Tenant to Landlord as the result of such reletting;
(b) Second, to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord
deems reasonably necessary and advisable, and reasonable attorneys' fees
incurred by Landlord in connection with the retaking of the Demised
Premises and such reletting;
(c) Third, to the payment of Base Rent, Additional Rent and
other charges due and unpaid hereunder; and
(d) Fourth, to the payment of future Base Rent, Additional
Charges and other damages payable by Tenant under this Lease.
12.5 Cumulative Rights; No Waiver. All rights, options and remedies of
-----------------------------
Landlord contained in this Lease shall be construed and held to be non-exclusive
and cumulative. Landlord shall have the right to pursue any or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any Event of Default of Tenant hereunder
shall be implied from the acceptance by Lender of any payments due hereunder
(except with respect to the amount so collected) or any omission by Landlord
party to take any action on account of such Event of Default if such Event of
Default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
12.6 Surrender of Demised Premises. Upon any expiration or termination
------------------------------
of this Lease, Tenant shall quit and peaceably surrender the Demised Premises
and all portions thereof to Landlord, and Landlord may, upon or at any time
after any such expiration or termination and without further notice, enter upon
and reenter the Demised Premises and all portions thereof and possess and
repossess itself thereof by force, summary proceeding, ejectment or otherwise,
and may dispossess Tenant and remove Tenant and all other persons and property
from the Demised Premises and all portions thereof and may have, hold and enjoy
the Demised Premises and the right to receive all rental and other income of and
from the same.
12.7 Interest on Unpaid Amounts. If Tenant shall commit an Event of
---------------------------
Default, Landlord may cure the same, but shall not be required to do so, as
provided in, and subject to, Section 11.1 above, and in exercising any such
right, may employ counsel and pay necessary and incidental costs and expenses,
including reasonable attorneys' fees. All reasonable sums so paid by Landlord,
and all reasonable and necessary costs and expenses, including reasonable
attorneys' fees, in connection with the performance of any such act by Landlord,
together with interest thereon at the Maximum Rate of Interest from the date of
making such expenditure by Landlord, shall be deemed Additional Rent hereunder
and, except as is otherwise expressly provided herein, shall be payable to
Landlord within ten (10) days after written demand, and Tenant covenants to pay
any such sum or sums, with interest as aforesaid, and Landlord shall have, in
addition to any other right or remedy of Landlord, the same rights and remedies
in the event of nonpayment thereof by Tenant as in the case of default by Tenant
in the payment of monthly Base Rent. Landlord shall not be limited in the proof
of any damages which Landlord may claim against Tenant arising out of or by
reason of Tenant's failure to provide and keep in force insurance as aforesaid,
to the amount of the insurance premium or premiums not paid or not incurred by
Tenant, and which would have been payable upon such insurance, but Landlord
shall also be entitled to recover as damages for such breach the uninsured
amount of any loss (to the extent of any deficiency between the dollar limits of
insurance required by the provisions of this Lease and the dollar limits of the
insurance actually carried by Tenant) and reasonable costs and expenses,
including reasonable attorneys' fees, suffered or incurred by reason thereof
occurring during any period when Tenant shall have failed or neglected to
provide insurance as aforesaid.
26
ARTICLE XIII
DESTRUCTION AND RESTORATION
13.1 Destruction and Restoration. Tenant covenants and agrees that, in
----------------------------
case of damage to or destruction of the Improvements during the Term, whether by
fire or otherwise, Tenant shall make funds available to Landlord and Landlord
shall promptly restore, repair, replace and rebuild the same as nearly as
possible to the condition that the same were in immediately prior to such damage
or destruction with such changes or alterations as may be reasonably acceptable
to Landlord and Tenant or required by Applicable Land Use Laws and Restrictions
then in effect. Tenant shall immediately give Landlord written notice of such
damage or destruction upon Tenant's or any assignee's or subtenant's knowledge
of the occurrence thereof and specify in such notice, in reasonable detail, the
extent thereof. Such restorations, repairs, replacements, rebuilding, changes
and alterations, including the cost of temporary repairs for the protection of
the Demised Premises, or any portion thereof, pending completion thereof are
sometimes hereinafter referred to as the "RESTORATION." Landlord shall be
entitled to recover all "soft" costs incurred in connection with Landlord's
performance of the Restoration including a fee competitive with others providing
similar services. The Restoration shall be carried on and completed in
accordance with the provisions and conditions of Section 13.2 hereof. If the
amount of the insurance proceeds recovered from the policy or policies
maintained (or required to be maintained) by Tenant, as described in Article VI
of this Lease, is reasonably deemed insufficient by a qualified contractor,
reasonably acceptable to Tenant and Landlord (or Landlord's lender, as the case
may be) to complete the Restoration of such Improvements (exclusive of Tenant's
personal property and trade fixtures which shall be restored, repaired or
rebuilt, at Tenant's discretion, out of Tenant's separate funds), except as
provided in this Section 1 3.1 below, Tenant shall, upon request of Landlord (or
by Landlord's lender, as the case may be), deposit with Landlord (or Landlord's
lender, if required) a cash deposit equal to the reasonable estimate of the
amount necessary to complete the Restoration of such Improvements less the
amount of such insurance proceeds available. Notwithstanding the foregoing, if
Landlord is prohibited from effecting the Restoration of the Demised Premises
due to applicable governmental laws, rules or regulations then in effect,
Landlord shall not be required to effect such Restoration. In such an event, any
insurance proceeds shall be paid to, and may be retained by, Landlord or
Landlord's lender, as the case may be, and this Lease, and all obligations of
the parties hereunder (except those which expressly survive the termination
hereof) shall terminate.
13.2 Application of Insurance Proceeds. All monies recovered from the
----------------------------------
insurance policy or policies maintained (or required to be maintained) by
Tenant, shall be paid directly to Landlord (or held by Landlord's lender, if
required) on account of such damage or destruction. Such amounts, less the
reasonable costs, if any, incurred by Landlord in recovering such funds, shall
be applied to the payment of the costs of the Restoration and shall be paid out
from time-to-time as the Restoration progresses upon the written request of
Tenant, accompanied by a certificate of the architect or a qualified
professional engineer in charge of the Restoration stating that as of the date
of such certificate (a) the sum requested is justly due to the contractors,
subcontractors, materialmen, laborers, engineers, architects, or persons, firms
or corporations furnishing or supplying work, labor, services or materials for
such Restoration, and when added to all sums previously paid out does not exceed
the value of the Restoration performed to the date of such certificate by all of
said parties; (b) except for the amount, if any, stated in such certificates to
be due for work, labor, services or materials, there is no outstanding
indebtedness known to the person signing such certificate, after due inquiry,
which is then due for work, labor, services or materials in connection with such
Restoration, which, if unpaid, might become the basis of a mechanic's lien or
similar lien with respect to the Restoration or a lien upon the Demised
Premises, or any portion thereof; and (c) the costs, as estimated by the person
signing such certificate, of the completion of the Restoration required to be
done subsequent to the date of such certificate in order to complete the
Restoration do not exceed the sum of the remaining insurance monies, plus the
amount deposited by the parties (as applicable) after payment of the sum
requested in such certificate.
If the insurance monies and such other sums, if any, deposited with
Landlord (or with Landlord's lender) pursuant to Section 13.1 hereof, shall be
insufficient to pay the entire costs of the Restoration, Tenant agrees to pay
any deficiency promptly upon demand. Upon completion of the Restoration and
payment in full thereof by Tenant, Landlord shall, within a reasonable period of
time, turn over to Tenant all insurance monies or other monies then remaining
upon the parties' joint, good-faith determination that the Restoration has been
paid for in full and the damaged or destroyed Building and other Improvements
repaired, restored or rebuilt as nearly as possible to the condition they were
in immediately prior to such damage or destruction, or with such changes or
alterations as may be made in conformity with Section 13.1 and Article XIX
hereof.
13.3 Continuance of Tenant's Obligations. Except as provided for in
------------------------------------
this Section 13.3 and in Section 13.6, no destruction of or damage to the
Demised Premises, or any portion thereof, by fire, casualty or otherwise shall
permit
27
Tenant to surrender this Lease or shall relieve Tenant from its liability to pay
to Landlord the Base Rent and Additional Rent payable under this Lease or from
any of its other obligations under this Lease, and Tenant waives any rights now
or hereafter conferred upon Tenant by present or future law or otherwise to quit
or surrender this Lease or the Demised Premises, or any portion thereof, to
Landlord or to any suspension, diminution, abatement or reduction of rent on
account of any such damage or destruction, including, without limitation, the
provisions of California Civil Code Sections 1932(2) and 1933(4).
13.4 Availability of Insurance Proceeds. To the extent that any
-----------------------------------
insurance monies which would otherwise be payable and used in the Restoration of
the damaged or destroyed Improvements are paid to any mortgagee of Landlord and
applied in payment of or reduction of the sum or sums secured by any such
mortgage or mortgages made by Landlord on the Demised Premises, Landlord shall
make available, for the purpose of Restoration of such Improvements, an amount
equal to the amount payable to its mortgagee out of such proceeds, and such sum
shall be applied in the manner provided in Section 13.2 hereof.
13.5 Completion of Restoration. The foregoing provisions of this
--------------------------
Article XIII apply only to damage or destruction of the Improvements by fire,
casualty or other cause occurring after the Commencement Date. Any such damage
or destruction occurring prior to such time shall be restored, repaired,
replaced and rebuilt by Landlord.
13.6 Termination of Lease.
---------------------
(a) For purposes of this Lease, the term "THRESHOLD AMOUNT"
shall mean an amount equal to the product of (i) One Million Dollars
($1,000,000.00) multiplied by (ii) a fraction, the numerator of which is
the number of months from the date of damage or destruction until the
expiration of the Term of this Lease, and the denominator of which is
eighteen (18); and the term "THRESHOLD PERIOD" shall mean the product of
(a) one hundred eighty (180) days multiplied by a fraction, the numerator
of which is the number of months from the date of such damage or
destruction until the date of expiration of the Term of this Lease, and the
denominator of which is eighteen (18).
(b) If, within eighteen (18) months prior to the expiration of
the Term of this Lease, the Improvements shall be destroyed or damaged to
such an extent that the Restoration thereof is reasonably estimated to cost
more than the Threshold Amount to complete, Tenant and Landlord shall, as
soon as reasonably possible following such event of damage or destruction,
compute the amount of the insurance proceeds available from the insurance
required to be maintained by Tenant under this Lease and the amount, if
any, over and above the net proceeds of such insurance which will be
necessary for such Restoration, as determined by a qualified contractor,
reasonably acceptable to Tenant and Landlord (or Landlord's Lender, as the
case may be), which latter amount is hereinafter referred to as the "EXCESS
COST." Within five (5) business days following the determination of the
Excess Cost, Tenant shall notify Landlord, in writing, whether Tenant is
willing to pay to such Excess Cost to restore such damage or destruction
for occupancy by Tenant. If Tenant notifies Landlord that it is willing to
pay such Excess Cost, it shall do so in accordance with the provisions of
Sections 13.1, 13.2 and 13.3 hereof.
(c) If, within eighteen (18) months prior to the expiration of
the Term of this Lease, the Improvements shall be destroyed or damaged to
such an extent that, in the opinion of a reasonably qualified contractor
selected by Landlord and Tenant, the Restoration shall take longer than the
Threshold Period to complete, Tenant shall be entitled to notify Landlord,
in writing, of such fact, which notice shall be accompanied by a detailed
statement of the nature and extent of such damage or destruction and the
estimated period of Restoration.
(d) If (i) Tenant elects not to pay the Excess Cost, as
described under subsection (b), above, or (ii) if the period of Restoration
as estimated by the contractor selected by Landlord and Tenant exceeds the
Threshold Period, then Tenant shall have the option, within thirty (30)
days after Tenant's notice to Landlord, to surrender the Demised Premises
to Landlord by a notice, in writing, addressed to Landlord, specifying such
election; provided, however, if Landlord elects to pay such Excess Cost,
which election shall be made within ten (10) business days after Tenant
notifies Landlord of its election not to pay the Excess Cost, then Tenant
shall not have the right to terminate this Lease pursuant to subsection (i)
of this subsection (d) and, provided Tenant has not elected to terminate
this Lease under subsection (ii) of this subsection (d), Landlord shall pay
such Excess Cost. If Tenant terminates this Lease in accordance with this
subsection (d), the applicable notice shall be accompanied by (A) Tenant's
payment of the balance of the Base Rent and Additional Rent due for the
remainder of the term of this Lease and other charges hereafter specified
in this Section 13.6, or, in the alternative, (B) reasonably satisfactory
evidence (e.g. a certificate from the insurer) that the loss of use and
business interruption
28
insurance Tenant is required to maintain shall be paid by the insurer
directly to Landlord in an amount equal to the lesser of (x) if more than
one (1) year of the Term remains, the Base Rent and Additional Rent
provided under this Lease for no less than one (1) year, or (y) the Base
Rent and Additional Rent provided under this Lease for the remainder of the
Term.
(e) In such an event Landlord shall be entitled to the proceeds
of all insurance required to be maintained by Tenant under Section 6.1
above (other than proceeds related to trade fixtures, furniture, equipment
and other personal property of Tenant) and Tenant shall execute all
documents reasonably requested by Landlord to allow such proceeds to be
paid to Landlord or as Landlord may otherwise direct (e.g., to Landlord's
lender).
ARTICLE XIV
CONDEMNATION
14.1 Condemnation of Entire Demised Premises. If, during the Initial
----------------------------------------
Term of this Lease or any extension or renewal thereof, the entire Demised
Premises or the entire Building shall be taken as the result of the exercise of
the power of eminent domain (hereinafter referred to as the "Proceedings"), this
Lease and all right, title and interest of Tenant hereunder shall cease and come
to an end on the date of vesting of title pursuant to such Proceedings.
In any taking of the Demised Premises, or any portion thereof, whether
or not this Lease is terminated as in this Article provided, Tenant shall not be
entitled to any portion of the award for the taking of the Demised Premises or
damage to the Improvements, except as otherwise provided in Section 14.3 with
respect to the restoration of the Improvements, and Tenant hereby waives any
right it now has or may have under present or future law to receive any separate
award of damages for its interest in the Demised Premises or any portion
thereof, except that Tenant shall have, nevertheless, the limited right to prove
in the Proceedings and to receive any award which may be made for damages to or
condemnation of Tenant's movable trade fixtures and equipment, for goodwill and
for Tenant's relocation costs in connection therewith.
14.2 Partial Condemnation/Termination of Lease. If, during the Term of
------------------------------------------
this Lease an amount less than the entire Demised Premises shall be taken in
such Proceedings with the result that it will materially and adversely interfere
with Tenant's enjoyment and intended use (as described in Section 4.1, hereof),
as reasonably determined by Tenant, Tenant may, at its option, terminate this
Lease as to the remainder of the Demised Premises. Tenant shall not have the
right to terminate this Lease pursuant to the preceding sentence unless (a) the
business of Tenant conducted in the portion of the Demised Premises taken cannot
reasonably be carried on with substantially the same utility and efficiency in
the remainder of the Demised Premises, and (b) Tenant (or Landlord for Tenant)
cannot construct or secure on the Demised Premises substantially similar space
to the space so taken and as a substantially integrated whole with the remaining
portion of the Demised Premises. Such termination as to the remainder of the
Demised Premises shall be effected by notice in writing given not more than
sixty (60) days after the date of vesting of title in such Proceedings, and
shall specify a date no more than sixty (60) days after the giving of such
notice as the date for such termination. Upon the date specified in such notice,
the Term of this Lease, and all right, title and interest of Tenant hereunder,
shall cease and come to an end. If this Lease is terminated as provided in this
Section 14.2, Landlord shall be entitled to and shall receive the total award
made in such Proceedings, Tenant hereby assigning any interest in such award,
damages, and compensation to Landlord, and Tenant hereby waiving any right
Tenant now has or may have under present or future law to receive any separate
award of damages for its interest in the Demised Premises or any portion thereof
or its interest in this Lease, except as otherwise provided in Section 14.1. The
right of Tenant to terminate this Lease as provided in this Section 14.2, shall
not cure or otherwise release Tenant from any then existing breach of Tenant's
performance of any of the terms, covenants or conditions of this Lease on its
part to be performed. In the event that Tenant elects not to terminate this
Lease as to the remainder of the Demised Premises, the rights and obligations of
Landlord and Tenant shall be governed by the provisions of Section 14.3 hereof.
14.3 Partial Condemnation/Continuation of Lease. If this Lease is not
-------------------------------------------
terminated as provided in Section 14.2 hereof, then this Lease shall, upon
vesting of title in the Proceedings, terminate as to the parts so taken, and
Tenant shall have no claim or interest in the award, damages, consequential
damages and compensation, or any part thereof except as otherwise provided in
Section 14.1, Tenant hereby waiving any right Tenant now has or may have under
present or future law to receive any separate award of damages for its interest
in the Demised Premises or any portion thereof or its interest in this Lease,
except as otherwise provided in Section 14.1 and except that Tenant shall have
the right to apply to Landlord for reimbursement as hereinafter provided from
such funds as specified in this Section 14.3. The net amount of the award (after
deduction of all costs and expenses, including attorneys' fees) shall be held by
Landlord (or Landlord's
29
lender) and applied as hereinafter provided. Landlord, in such case, covenants
and agrees, at Landlord's sole cost and expense promptly to restore that portion
of the Improvements on the Demised Premises not so taken to a complete
architectural and mechanical unit for the use and occupancy of Tenant as
provided in this Lease. In the event that the net amount of the award (after
deduction of all costs and expenses, including attorneys' fees) that may be
received by Landlord in any such Proceedings for physical damage to the
Improvements as a result of such taking, and held by Landlord (or Landlord's
lender) for restoration of the Demised Premises, is insufficient to pay all
costs of such restoration work, Landlord shall pay the difference. Tenant shall
not be liable for any additional sum.
14.4 Continuance of Obligations. In the event of any termination of
---------------------------
this Lease or any part thereof as a result of any such Proceedings, Tenant shall
pay to Landlord all Base Rent, all Additional Rent and other charges payable
hereunder with respect to that portion of the Demised Premises so taken in such
Proceedings with respect to which this Lease shall have terminated justly
apportioned to the date of such termination. From and after the date of vesting
of possession in such Proceedings, Tenant shall continue to pay the Base Rent,
Additional Rent and other charges payable hereunder as in this Lease provided to
be paid by Tenant, subject to an abatement of a just and proportionate part of
the Base Rent according to the extent and nature of such taking as provided for
in Sections 14.3 and 14.5 hereof in respect to the Demised Premises remaining
after such taking.
14.5 Adjustment of Rent. In the event of a partial taking of the
-------------------
Demised Premises under Sections 14.2 or 14.3 hereof in which case this Lease is
not terminated, the Base Rent for the period from and after the date of vesting
of title in such Proceedings, until the termination of this Lease, shall be
reduced to a sum equal to the product of the Base Rent provided for herein
multiplied by a fraction, the numerator of which is the value of the Demised
Premises after such taking and after the same shall have been restored to a
complete architectural unit, and the denominator of which is the value of the
Demised Premises prior to such taking.
ARTICLE XV
ASSIGNMENT, SUBLETTING, ETC.
15.1 Restriction on Transfer. Tenant shall not sublet the Demised
------------------------
Premises or any portion thereof, nor assign, mortgage, pledge, transfer or
otherwise encumber or dispose of this Lease or any interest therein, or in any
manner assign, mortgage, pledge, transfer or otherwise encumber or dispose of
its interest or estate in the Demised Premises or any portion thereof without
obtaining Landlord's prior written consent in each and every instance. For
purposes of this Article XV, an assignment shall not be deemed to include any
sale or similar transfer of any stock in Tenant in a public offering. Landlord's
consent to an assignment or subletting under this Section 15.1 shall not be
unreasonably withheld or delayed, provided the following conditions are complied
with:
(a) Any assignment of this Lease shall transfer to the assignee
all of Tenant's right, title and interest in this Lease and all of Tenant's
estate or interest in the Demised Premises.
(b) At the time of any assignment or subletting and at the time
Tenant requests Landlord's written consent thereto, this Lease must be in
full force and effect without any uncured Event of Default or Incipient
Default thereunder on the part of Tenant.
(c) Any such assignee shall assume, by written, recordable
instrument, in form and content satisfactory to Landlord, the due
performance of all of Tenant's obligations under this Lease from and after
the time of the effective date of the assignment, and such assumption
agreement shall state that the same is made by the assignee for the express
benefit of Landlord as a third party beneficiary thereof. A copy of the
assignment and assumption agreement, both in form and content satisfactory
to Landlord, fully executed and acknowledged by assignee, together with a
certified copy of a properly executed corporate resolution (if the assignee
be a corporation) authorizing the execution and delivery of such assumption
agreement, shall be sent to Landlord ten (10) days after the effective date
of such assignment.
(d) In the case of a subletting, a copy of any sublease fully
executed and acknowledged by Tenant and the sublessee shall be mailed to
Landlord ten (10) days after to the effective date of such subletting,
which sublease shall be in form and content acceptable to Landlord.
(e) Each sublease permitted under this Section 15.1 shall
contain provisions to the effect that (i) such sublease is only for actual
use and occupancy by the sublessee; (ii) such sublease is subject and
30
subordinate to all of the terms, covenants and conditions of this Lease and
to all of the rights of Landlord thereunder; and (iii) in the event this
Lease shall terminate before the expiration of such sublease, the sublessee
thereunder will, at Landlord's option, attorn to Landlord and waive any
rights the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease.
(f) Any and all compensation paid to Tenant, in whatever form, in
consideration of such assignment or subletting, including any differential
between Base Rent and rent paid to Tenant by such assignee or subtenant, or
any assignment fee or any other amount which can be attributed to the
assignment or subletting, shall be paid directly by such assignee or
subtenant to Landlord; provided, however, that Tenant shall Tenant be
entitled to deduct from such compensation the amount of any (i) leasing
commissions it has incurred in connection with such assignment or
subletting, (ii) the direct cost of improvements constructed and paid for
by Tenant in connection with such assignment or subletting, provided such
improvements have been made in accordance with the terms of this Lease
(including, without limitation, requirements for Landlord's approval and
that they be completed on a lien-free basis), and (iii) the actual cost of
similar concessions actually made by Tenant in connection with such
assignment or subletting.
(g) Tenant agrees to pay on behalf of Landlord any and all
reasonable costs of Landlord, including reasonable attorneys' fees paid or
payable to outside counsel, occasioned by such assignment or subletting,
but not to exceed One Thousand Dollars ($1,000.00).
15.2 Transfer to Affiliates; Sale or Merger. Notwithstanding the
---------------------------------------
foregoing provisions of Section 1 5.1, Tenant shall be permitted to assign or
sublet the Demised Premises or Tenant's rights under this Lease, without
Landlord's prior consent, to (i) an entity in which Tenant, directly or
indirectly, owns or beneficially controls more than fifty percent (50%) of the
outstanding voting interests, (ii) an entity which directly or indirectly owns
or beneficially controls more than fifty percent (50%) of the outstanding voting
interests of Tenant, (iii) an entity, the outstanding voting interests of which
are directly or indirectly owned by the same persons or entities which own or
beneficially control the outstanding voting interests of Tenant (each, a "Sister
Entity"), (iv) an entity in which a Sister Entity owns or beneficially controls
more than fifty percent (50%) of the outstanding voting interests, or (v) an
entity deemed to have been assigned the Lease through a sale of Tenant's stock
or assets or through merger with Tenant, provided, that in any such case Tenant
shall be required to give Landlord written notice of that assignment or
subletting within thirty (30) days thereafter, including written evidence of the
identity of the assignee or sublessee (actual or deemed) and its affiliation
with Tenant. Tenant shall not be entitled to share in any profits Tenant might
obtain as a result of an authorized assignment or sublet of the Demised Premises
and Tenant shall arrange for any such profits which might otherwise be paid to
Tenant by such assignee or sublessee to be paid directly to Landlord.
15.3 Restriction Against Further Assignment. Notwithstanding anything
---------------------------------------
contained in this Lease to the contrary and notwithstanding any consent by
Landlord to any sublease of the Demised Premises or any portion thereof or to
any assignment of this Lease or of Tenant's interest or estate in the Demised
Premises, except as provided in Section 15.2 above, no sublessee shall assign
its sublease nor further sublease the Demised Premises or any portion thereof,
and no assignee shall further assign its interest in this Lease or its interest
or estate in the Demised Premises or any portion thereof, nor sublease the
Demised Premises or any portion thereof, without Landlord's prior written
consent in each and every instance, which consent shall not be unreasonably
withheld or unduly delayed. No such assignment or subleasing shall relieve
Tenant from any of Tenant's obligations contained in this Lease.
15.4 Tenant's Failure to CompIy. Tenant's failure to comply with all
---------------------------
of the foregoing provisions and conditions of this Article XV shall, at
Landlord's option, render any purported assignment or subletting null and void
and of no force and effect.
ARTICLE XVI
SUBORDINATION, NONDISTURBANCE,
NOTICE TO MORTGAGEE AND ATTORNMENT
16.1 Subordination by Tenant. This Lease and all rights of Tenant
------------------------
therein and all interest or estate of Tenant in the Demised Premises or any
portion thereof shall be subject and subordinate to the lien of any mortgage,
deed of trust, security instrument or other document of like nature
(collectively, "MORTGAGE"), which at any time after the date of this Lease may
be placed upon the Demised Premises or any portion thereof, and to each and
every advance made under any such Mortgage. Tenant agrees at any time hereafter,
to execute and deliver to Landlord any instruments, releases
31
or other documents that may be reasonably required for the purpose of subjecting
and subordinating this Lease to the lien of any such Mortgage. It is agreed,
nevertheless, that so long as an Event of Default does not exist, that such
subordination agreement or other instrument, release or document shall not
interfere with, hinder or molest Tenant's right to quiet enjoyment under this
Lease, shall not modify the terms of this Lease, nor the right of Tenant to
continue to occupy the Demised Premises and all portions thereof, and to conduct
its business thereon in accordance with the covenants, conditions, provisions,
terms and agreements of this Lease. The lien of any such Mortgage shall not
cover Tenant's trade fixtures or other personal property located in or on the
Demised Premises. Landlord shall deliver to Tenant a commercially reasonably
nondisturbance agreement executed by all lenders having a lien on the Demised
Premises on the Commencement Date as a condition precedent in Tenant's favor,
and from each future lender as a condition to Tenant's subordination or
attornment hereunder.
16.2 Landlord's Default. In the event of any act or omission of
------------------
Landlord constituting a default by Landlord, other than Landlord's failure to
have the Improvements substantially completed on a timely basis as provided in
Article II and to make the same fully available to Tenant as therein provided,
Tenant shall not exercise any remedy until Tenant has given Landlord and any
mortgagee whose name and address have been previously provided to Tenant prior
written notice of such act or omission and until a 30-day period of time to
allow Landlord or the mortgagee to remedy such act or omission shall have
elapsed following the giving of such notice; provided, however, if such act or
omission cannot with due diligence and in good faith be remedied within such 30-
day period, Landlord and/or mortgagee shall be allowed such further period of
time as may be reasonably necessary provided that it shall have commenced
remedying the same with due diligence and in good faith within said 30-day
period. In the event any act or omission of Landlord which constitutes a
Landlord's default hereunder results in an immediate threat of bodily harm to
Tenant's employees, agents or invitees or damage to Tenant's property, or
exposes Tenant to criminal liability, Tenant may proceed to cure the default
without prior notice to Landlord or its mortgagee; provided, however, in that
event Tenant shall give written notice to Landlord and its mortgagee as soon as
possible after commencement of such cure. Nothing herein contained shall be
construed or interpreted as requiring any mortgagee to remedy such act or
omission.
16.3 Attornment. Subject to Section 16.1 above, if any mortgagee shall
-----------
succeed to the rights of Landlord under this Lease or to ownership of the
Demised Premises, whether through possession or foreclosure or the delivery of a
deed to the Demised Premises, then, upon the written request of such mortgagee
so succeeding to Landlord's rights hereunder, Tenant shall attorn to and
recognize such mortgagee as Tenant's landlord under this Lease, and shall
promptly execute and deliver any instrument that such mortgagee may reasonably
request to evidence such attornment (whether before or after making of the
mortgage). In the event of any other transfer of Landlord's interest hereunder,
upon the written request of the transferee and Landlord, Tenant shall attorn to
and recognize such transferee as Tenant's landlord under this Lease and shall
promptly execute and deliver any instrument that such transferee and Landlord
may reasonably request to evidence such attornment.
ARTICLE XVII
SIGNS
Tenant shall be allowed prominent Building and monument signage during
the Term of this Lease, provided that such sign or signs (a) do not cause any
structural damage or other material damage to the Building; (b) comply with and
do not violate applicable governmental laws, ordinances, rules or regulations;
(c) comply with and do not violate any existing restrictions affecting the
Demised Premises and which are of a matter of record as of the date of this
Lease; (d) are compatible with the architecture of the Building and the
landscaped area adjacent thereto, and (e) the design, size and location of such
signs have been mutually approved by Landlord and Tenant, which approval shall
not be unreasonably withheld or delayed. The cost of such signs shall not be
funded from the Tenant Improvement Allowance and shall be entirely Tenant's
separate expense, except as provided in Section 2.9(c).
ARTICLE XVIII
FINANCIAL STATEMENTS OF TENANT
From time to time, at Landlord's request, Tenant shall provide
Landlord with Tenant's most recent financial statements in form and content
reasonably satisfactory to Landlord and Landlord's lenders (which, if Tenant is
an entity which files periodic financial disclosures to securities regulatory
authorities, shall be those which are periodically filed with those
authorities). Landlord may provide copies of those financial statements to
current and prospective lenders, investors
32
and buyers, identified in writing to Tenant, for examination and review.
Landlord shall keep all such financial statements strictly confidential and may
provide copies of such financial statements to such other parties only upon
receiving in return a covenant from each recipient that such recipient shall
keep the financial statements confidential except with the prior written consent
of Tenant.
ARTICLE XIX
CHANGES AND ALTERATIONS
Tenant shall have the right at any time, and from time to time during
the Term of this Lease, to make such changes and alterations, structural or
otherwise, to the Building, improvements and fixtures hereafter erected on the
Demised Premises as Tenant shall deem necessary or desirable in connection with
the requirements of its business, which changes and alterations (other than
changes or alterations of Tenant's movable trade fixtures and equipment) shall
be made in all cases subject to the following conditions, which Tenant covenants
to observe and perform:
(a) Permits. No change or alteration shall be undertaken until Tenant
--------
shall have procured and paid for, so far as the same may be required from time
to time, all municipal, state and federal permits and authorizations of the
various governmental bodies and departments having jurisdiction thereof, and
Landlord agrees to join in the application for such permits or authorizations
whenever such action is necessary, all at Tenant's sole cost and expense,
provided such applications do not cause Landlord to become liable for any cost,
fees or expenses.
(b) Compliance with Plans and Specifications. Before commencement of
-----------------------------------------
any change, alteration, restoration or construction (hereinafter sometimes
referred to as "Work") involving in the aggregate an estimated cost of more than
Fifty Thousand and No/100ths Dollars ($50,000) or which, in Landlord's
reasonable judgment, would materially alter the mechanical, structural or
electrical components of the Demised Premises, Tenant shall (i) furnish Landlord
with detailed plans and specifications of the proposed change or alteration;
(ii)obtain Landlord's prior written consent, which consent shall not be
unreasonably withheld; (iii) obtain Landlord's prior written approval of a
licensed architect or licensed professional engineer selected and paid for by
Tenant who shall approve any such work (hereinafter referred to as "ALTERATIONS
ARCHITECT OR ENGINEER"); (iv) obtain Landlord's prior written approval (which
shall not be unreasonably withheld or delayed) of detailed plans and
specifications prepared and approved in writing by said Alterations Architect or
Engineer and of each amendment and change thereto, and (v) for any Work
involving in the aggregate an estimated cost of more than One Hundred Thousand
Dollars ($100,000), furnish to Landlord a surety company performance bond issued
by a surety company licensed to do business in the state in which the Demised
Premises are located and reasonably acceptable to Landlord in an amount equal to
the estimated cost of such work guaranteeing the completion thereof within a
reasonable time thereafter (1) free and clear of all mechanic's liens or other
liens, encumbrances, security interests and charges, and (2) in accordance with
the plans and specifications approved by Landlord. Tenant shall retain
Contractor as the general contractor for the build-out of any portion of the
Demised Premises which are left in "shell" condition as of the Commencement
Date, provided Contractor's contract is on substantially the same terms as
described in Section 2.11 of this Lease.
(c) Value Maintained. Any change or alteration shall, when completed,
-----------------
be of such character so as not to reduce the value of the Demised Premises or
the Building to which such change or alteration is made below its value or
utility to Landlord immediately before such change or alteration, nor shall such
change or alteration reduce the area or cubic content of the Building to use
without Landlord's express written consent.
(d) Compliance with Laws. All Work done in connection with any change
--------------------
or alteration shall be done promptly and in a good and workmanlike manner and in
compliance with all building and zoning laws of the place in which the Demised
Premises are situated, and in compliance with all laws, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof, and in accordance with the orders, rules and regulations of the Board
of Fire Underwriters where the Demised Premises are located or any other body
exercising similar functions. The cost of any such change or alteration shall be
paid in cash so that the Demised Premises and all portions thereof shall at all
times be free of liens for labor and materials supplied to the Demised Premises
or any portion thereof. The Work or any change or alteration shall be prosecuted
with reasonable dispatch, delays due to strikes, lockouts, acts of God,
inability to obtain labor or materials, governmental restrictions or similar
causes beyond the control of Tenant excepted. Tenant or Tenant's contractor or
subcontractor shall obtain and maintain at its sole cost and expense during the
performance of the Work workers' compensation insurance covering all persons
employed in connection with the Work and with respect to which death or injury
claims could be asserted against Landlord or Tenant or against the Demised
Premises or any interest therein,
33
together with comprehensive general liability insurance for the mutual benefit
of Landlord and Tenant with limits of not less than One Million Dollars
($1,000,000.00) in the event of injury to one person, Three Million Dollars
($3,000,000.00) in respect to any one accident or occurrence, and Five Hundred
Thousand Dollars ($500,000.00) for property damage, and the fire insurance with
"extended coverage" endorsement required by Section 6.1 hereof shall be
supplemented with "builder's risk" insurance on a completed value form or other
comparable coverage on the Work if the cost of such work will be in excess of
Fifty Thousand Dollars ($50,000.00). All such insurance shall be in a company or
companies authorized to do business in the state in which the Demised Premises
are located and reasonably satisfactory to Landlord, and all such policies of
insurance or certificates of insurance shall be delivered to Landlord endorsed
"Premium Paid" by the company or agency issuing the same, or with other evidence
of payment of the premium satisfactory to Landlord.
(e) Property of Landlord. All improvements and alterations (other
---------------------
than Tenant's movable trade fixtures, furniture and equipment) made or installed
by Tenant shall, immediately upon completion or installation thereof, become the
property of Landlord without payment therefor by Landlord, and shall be
surrendered to Landlord on the expiration of the Term of this Lease unless and
to the extent Tenant is required or permitted to remove the same upon
termination or expiration of the Term as provided in subsection (g), below, in
which event they shall become the property of Tenant, provided that Tenant shall
be required to restore the Demised Premises in accordance with Section 19(g),
below.
(f) Location of Improvements. No change, alteration, restoration or
-------------------------
new construction shall be in, or connect the Improvements with, any property,
building or other improvement located outside the boundaries of the parcel of
land described in Exhibit "A" attached hereto, nor shall the same obstruct or
-----------
interfere with any existing easement.
(g) Removal of Improvements. As a condition to granting approval for
------------------------
any changes or alterations, Landlord may require Tenant, by written notice to
Tenant given at or prior to the time of granting such approval, to remove any
improvements, additions or installations installed by Tenant in the Demised
Premises at Tenant's sole cost and expense at the end of the term of this Lease
and repair and restore any damage caused by the installation and removal of such
improvements, additions, or installations; provided, however, the only
improvements, additions or installations which Tenant shall remove shall be
those specified in such notice. All improvements, additions or installations
installed by Tenant which did not require Landlord's prior approval shall be
removed by Tenant as provided for in this Section 19(g), unless such
improvements, additions or installations do not adversely affect Landlord's
ability to re-lease the Demised Premises. Prior to making any improvements,
additions or alterations that do not require Landlord's approval, Tenant may
request Landlord to specify whether Landlord considers such improvements,
additions or installations to be of the type that would adversely affect
Landlord's ability to re-lease the Demised Premises if not removed by Tenant.
Notwithstanding anything to the contrary contained herein, Tenant shall have the
right to remove any improvements, additions or alterations installed by Tenant
and at its expense (specifically not including any of the original Tenant
Improvements) upon expiration or earlier termination of the Term so long as
Tenant repairs any damage caused by such removal at its sole cost and expense
and returns the applicable portion of the Demised Premises to its original
condition prior to the installation of such improvement, addition or alteration.
(h) Reasonable Consent. All consents required of Landlord under this
------------------
Article XIX shall not be unreasonably withheld by Landlord.
(i) Notice to Landlord. Regardless of whether Landlord's consent is
-------------------
required to any change or alteration to the Demised Premises made or to be made
by Tenant, such changes or alterations shall not be commenced until two (2)
business days notice after Landlord has received notice from Tenant stating the
date such changes or alterations are to commence so that Landlord can post and
record an appropriate notice of nonresponsibility.
ARTICLE XX
MISCELLANEOUS PROVISIONS
20.1 Entry by Landlord. Tenant agrees to permit Landlord and
------------------
authorized representatives of Landlord to enter upon the Demised Premises at all
reasonable times during ordinary business hours upon at least two (2) business
day's advance notice to Tenant for the purpose of inspecting the same and making
any repairs required to be made thereto by Landlord under the terms of this
Lease, or as required to be made thereto by Tenant under the terms of this Lease
provided that Landlord shall have first given written notice to Tenant to make
such repairs and Tenant shall have failed to make such repairs within thirty
(30) days after notice; provided, however, Tenant shall be allowed such further
period of time as may be provided in Section 12.1(b); and, provided further,
that Landlord shall be allowed to enter upon the Demised Premises during an
emergency. Nothing herein contained shall imply any duty upon the part of
Landlord to
34
do any such work which, under any provision of this Lease, Tenant may be
required to perform, and the performance thereof by Landlord shall not
constitute a waiver of Tenant's default in failing to perform the same. Landlord
may, during the progress of any work, keep and store upon the Demised Premises
all necessary materials, tools and equipment in areas designated by Tenant.
Landlord shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Tenant by reason of making such
repairs or the performance of any such work in or about the Demised Premises or
on account of bringing material, supplies and equipment into, upon or through
the Demised Premises during the course thereof, and the obligations of Tenant
under this Lease shall not be thereby affected in any manner whatsoever; except
that Landlord shall use its best efforts to not unreasonably interfere with
Tenant's use of the Demised Premises, or any portion thereof, by reason of
Landlord's making such repairs or the performance of any such work in or about
the Demised Premises or on account of bringing materials, supplies and equipment
into, upon or through the Demised Premises during the course thereof. Tenant may
accompany Landlord on any inspection or entry by Landlord.
20.2 Exhibition of Demised Premises. Landlord is hereby given the
-------------------------------
right during usual business hours upon at least two (2) business days' advance
notice to Tenant at any time during the Term of this Lease to enter upon the
Demised Premises and to exhibit the same for the purpose of mortgaging or
selling the same. During the final year of the Term, Landlord shall be entitled
(i) to display on the Demised Premises in such manner as to not unreasonably
interfere with Tenant's business, signs reasonably approved as to design and
location by Tenant indicating that the Demised Premises are for rent and/or sale
and suitably identifying Landlord or its agent, and (ii) upon at least two (2)
business days' advance notice to Tenant, to exhibit the Demised Premises to
prospective tenants.
20.3 Indemnification by Tenant. To the fullest extent allowed by law,
--------------------------
Tenant shall at all times indemnify, defend and hold Landlord harmless against
and from any and all claims by or on behalf of any person or persons, firm or
firms, corporation or corporations, arising from the conduct or management, or
from any work or things whatsoever done in or about the Demised Premises during
the Term of this Lease, other than as a result of the negligence or willful
misconduct of Landlord or its officers, agents, employees, contractors or
subcontractors, or as a result of Landlord's breach of its obligations under
this Lease, and Tenant shall further indemnify, defend and hold Landlord
harmless against and from any and all claims arising during the Term of this
Lease from any condition of the Improvements (other than defects in construction
of the initial Improvements or other items Landlord is required to repair or
maintain), or of any passageways or space therein, other than as a result of the
negligence or willful misconduct of Landlord or its officers, employees, agents,
contractors or subcontractors or as a result of Landlord's breach of its
obligations under this Lease, or arising from any act or gross negligence of
Tenant, its agents, servants, employees or licenses, or arising from any
accident, injury or damage whatsoever caused to any person, firm or corporation
occurring during the Term of this Lease in or about the Demised Premises, other
than as a result of the negligence or willful misconduct of Landlord or its
officers, employees, agents, contractors or subcontractors, or as a result of
Landlord's breach of its obligations under this Lease, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about any such
claim or action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, covenants to defend such action or proceeding by counsel
reasonably satisfactory to Landlord subject to the requirements of Tenant's
insurer. Tenant's obligations under this Section 20.3 shall be insured by
contractual liability endorsement on Tenant's policies of insurance required
under the provisions of Section 6.2 hereof to the extent reasonably obtainable.
20.4 Notices. All notices, demands and requests which may be or are
--------
required to be given, demanded or requested by either party to the other shall
be in writing, and shall be sent by United States registered or certified mail,
postage prepaid, by an independent overnight courier service marked for next
business day delivery, or by telephonic facsimile transmission with automatic
written time and date confirmation of delivery transmitted between the hours of
9:00 a.m. and 5:00 p.m. (time zone of recipient, but only if confirmed within
two (2) business days by receipt of a mailed or personally delivered copy), and
addressed as follows:
To Landlord:
ADI Mesa Partners - AMCC, L.P.
c/o The Xxxxx Group
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xx. Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
35
To Tenant:
Applied Micro Circuits Corporation
61 00 Xxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xx. Xxxx X. Xxxxxxxx
Facsimile: 000-000-0000
or at such other place as a party hereto may from time to time designate by
written notice thereof to the other. Notices, demands and requests which shall
be served upon Landlord by Tenant, or upon Tenant by Landlord, in the manner
aforesaid, shall be deemed received three (3) days after delivery to United
States mail, one (1) business day after delivery to an overnight courier
service, or at the time such notice, demand or request shall be transmitted by
facsimile (if confirmed as written above).
20.5 Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon
---------------
paying the Base Rent and Additional Rent and upon observing and keeping the
covenants, agreements and conditions of this Lease on its part to be kept,
observed and performed, shall lawfully and quietly hold, occupy and enjoy the
Demised Premises (subject to the provisions of this Lease) during the Term of
this Lease without hindrance or molestation by Landlord or by any person or
persons claiming under Landlord.
20.6 Landlord's Continuing Obligations. The term "Landlord," as used
---------------------------------
in this Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the fee of the Demised Premises, and in the event of any
transfer or transfers or conveyance, the then grantor shall be automatically
freed and relieved from and after the date of such transfer or conveyance of all
liability as respects the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed, provided
that any funds in the hands of such landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be turned over to the
grantee, and any amount then due and payable to Tenant by Landlord or the then
grantor under any provision of this Lease, shall be paid to Tenant, and further
provided that the new Landlord expressly assumes in writing for the benefit of
Tenant all obligations of Landlord under this Lease. The covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the aforesaid, be binding on Landlord's successors and assigns during and in
respect of their respective successive periods of ownership. Nothing herein
contained shall be construed as relieving Landlord of its obligations under
Article II of this Lease or releasing Landlord from any obligation to complete
the cure of any breach by Landlord during the period of its ownership of the
Demised Premises. However, Tenant agrees to look solely to Landlord's interest
in the Land, the Building and the Improvements for the recovery of any judgment
from Landlord, it being agreed that, if Landlord is a partnership, Landlord's
partners, whether general or limited, or if Landlord is a corporation, its
directors, officers and shareholders, shall never be personally liable for any
such judgments or damages. Notwithstanding the foregoing, Landlord and its
general partner, Xxxxx Development, Inc., a California corporation, shall be
fully and personally liable for claims by Tenant relating to Landlord's
obligations under Sections 2.1 (The Improvements), 2.5 (Liquidated Damages for
Delay in Substantial Completion) and 2.8 (Condition of Demised Premises; Limited
Warranty).
20.7 Estoppel. Tenant shall, without charge at any time and from time
--------
to time, within ten (10) business days after written request by Landlord,
certify by written instrument, duly executed, acknowledged and delivered to any
mortgagee, assignee of a mortgagee, proposed mortgagee, purchaser or proposed
purchaser, or any other person dealing with Landlord or the Demised Premises:
(a) That this Lease (and all guaranties, if any) is unmodified
and in full force and effect (or, if there have been modifications, that
the same is in full force and effect, as modified and stating the
modifications);
(b) The dates to which the Base Rent or Additional Rent have been
paid in advance.
(c) Whether or not there are then existing any breaches or
defaults by such party or the other party known by such party under any of
the covenants, conditions, provisions, terms or agreements of this Lease,
and specifying such breach or default, if any, or any set-offs or defenses
against the enforcement of any covenant, condition, provision, term or
agreement of this Lease (or of any guaranties) upon the part of Landlord or
Tenant (or any guarantor), as the case may be, to be performed or complied
with (and, if so, specifying the same and the steps being taken to remedy
the same); and
(d) Such other statements or certificates as Landlord or any
mortgagee may reasonably request.
36
It is the intention of the parties hereto that any statement delivered
pursuant to this Section 20.7 may be relied upon by any of such parties dealing
with Landlord or the Demised Premises. Failure by Tenant to timely respond to
such request shall be deemed Tenant's certification of the accuracy of such
matters.
20.8 Delivery of Corporate Documents. In the event that Tenant is a
-------------------------------
corporation or similar business entity (e.g., limited partnership, limited
liability company or limited liability partnership), Tenant shall, without
charge to Landlord, at any time and from time to time within ten (10) business
days after written request by Landlord, deliver to Landlord, in connection with
any proposed sale or mortgage of the Demised Premises, the following instruments
and documents:
(a) Certificate of Good Standing in the state of incorporation of
Tenant and in the state in which the Demised Premises are located issued by the
appropriate state authority and bearing a current date;
(b) A copy of Tenant's articles of incorporation and by-laws (or
partnership or operating agreement, as the case may be) and any amendments or
modifications thereof certified by the secretary or assistant secretary (or
managing partner or member, as the case may be) of Tenant;
(c) A written and certified confirmation from the secretary or
assistant secretary (or managing partner or member, as the case may be) that (i)
this Lease has been duly authorized' by all necessary corporate action and is a
valid and binding agreement enforceable in accordance with its terms; and (ii)
Tenant is a duly organized and validly existing corporation under the laws of
its state of incorporation, is duly authorized to carry on its business, and is
in good standing under the laws of the state in which the Demised Premises are
located, if different from the state of incorporation.
20.9 Memorandum of Lease. Concurrently with their execution and
-------------------
delivery of this Lease, the parties shall execute, acknowledge and deliver to
each other, a Memorandum of Lease in the form attached hereto as Exhibit "D" and
-----------
made a part hereof. Such Memorandum of Lease may be recorded by either party, at
their sole cost and expense.
20.10 Severability. If any covenant, condition, provision, term or
------------
agreement of this Lease shall, to any extent, be held invalid or unenforceable,
the remaining covenants, conditions, provisions, terms and agreements of this
Lease shall not be affected thereby, but each covenant, condition, provisions,
term or agreement of this Lease shall be valid and in force to the fullest
extent permitted by law.
20.11 Successors and Assigns. The covenants and agreements herein
----------------------
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant and its permitted successors and assigns.
20.12 Captions. The caption of each article of this Lease is for
--------
convenience and reference only, and in no way defines, limits or describes the
scope or intent of such article or of this Lease.
20.13 Relationship of Parties. This Lease does not create the
-----------------------
relationship of principal and agent, partnership, joint venture, or any
association or relationship between Landlord and Tenant, the sole relationship
between Landlord and Tenant being that of landlord and tenant.
20.14 Entire Agreement. All preliminary and contemporaneous
----------------
negotiations are merged into and incorporated in this Lease. This Lease,
together with the exhibits attached hereto, contains the entire agreement
between the parties and shall not be modified or amended in any manner except by
any instrument in writing executed by the parties hereto.
20.15 No Merger. There shall be no merger of this Lease or of the
---------
leasehold estate created by this Lease with any other estate or interest in the
Demised Premises by reason of the fact that the same person, firm, corporation
or other entity may acquire, hold or own, directly or indirectly, (a) this Lease
or the leasehold interest created by this Lease or any interest therein, and (b)
any such other estate or interest in the Demised Premises, or any portion
thereof. No such merger shall occur unless and until all persons, firms,
corporations or other entities having an interest (including a security
interest) in (1) this Lease or the leasehold estate created thereby, and (2) any
such other estate or interest in the Demised Premises, or any portion thereof,
shall join in a written instrument expressly affecting such merger and shall
duly record the same.
20.16 Possession and Use. Tenant acknowledges that the Demised
------------------
Premises are the property of Landlord and that Tenant has only the right to
possession and use thereof upon the covenants, conditions, provisions, terms and
agreements set forth in this Lease.
37
20.17 Surrender of Demised Premises. Subject to the other provisions
-----------------------------
of this Lease, at the expiration of the Term of this Lease, Tenant shall
surrender the Demised Premises in the same condition as they were in upon
delivery of possession thereto at the Commencement Date, reasonable wear and
tear, casualty and condemnation excepted, and shall surrender all keys to the
Demised Premises to Landlord at the place then fixed for the payment of Base
Rent, and shall inform Landlord of all combinations on locks, safes and vaults,
if any. Tenant shall at such time remove all of its property therefrom and all
alterations and improvements placed thereon by Tenant if so requested by
Landlord, or otherwise allowed, subject to Sections 19(e) and (g). Tenant shall
repair any damage to the Demised Premises caused by such removal, and any and
all such property not so removed shall, at Landlord's option, become the
exclusive property of Landlord or be disposed of by Landlord, at Tenant's cost
and expense, without further notice to or demand upon Tenant, subject to
applicable law and Sections 19(e) and (g).
All property of Tenant not removed on or before the last day of the
Term of this Lease shall be deemed abandoned in accordance with, and subject to,
applicable law.
20.18 Holding Over. In the event Tenant remains in possession of the
------------
Demised Premises after expiration of this Lease and without the execution of a
new lease, it shall be deemed to be occupying the Demised Premises as a tenant
from month-to-month, subject to all the provisions, conditions and obligations
of this Lease insofar as the same can be applicable to a month-to-month tenancy,
except that the Base Rent shall be escalated to one hundred and twenty-five
percent (125%) of the then current Base Rent for the Demised Premises for the
first three (3) months of such tenancy and one hundred fifty percent (150%) of
such amount thereafter, and from and after such three (3) month period, Tenant
shall indemnify, defend and hold Landlord harmless against loss or liability
resulting from the delay by Tenant in so surrendering the Demised Premises,
including without limitation any claim made by any succeeding occupant founded
on such delay. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease.
20.19 Survival. All obligations of either party (together with
--------
interest or money obligations at the Maximum Rate of Interest) accruing prior to
expiration of the Term of this Lease shall survive the expiration or other
termination of this Lease.
20.20 Broker's Commission. Tenant and Landlord represent that they
-------------------
have dealt only with (i) The Xxxxxx Xxxxxx Group, Inc., and (ii) CB Commercial
Real Estate Group, Inc., as brokers in connection with this Lease. Landlord
shall be responsible for paying the commissions owing to such brokers under
separate written agreements between Landlord and such brokers in the amount of
Three Hundred Seventy Six Thousand Dollars ($376,000), which shall be shared
equally between them. Tenant and Landlord will indemnify, defend and hold the
other harmless from and against any loss, cost or expense, including, but not
limited to, reasonable attorneys' fees and court costs, resulting from any claim
for a fee or commission by any other broker or finder resulting from their own
actions.
20.21 Applicable Law. This Lease shall be governed and interpreted in
--------------
accordance with the laws of the State of California.
20.22 Counterparts. This Lease may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute a single instrument.
20.23 Attorneys' Fees. In the event of any litigation, arbitration,
---------------
mediation or any other action taken by either party to this Lease to enforce any
provision of this Lease, enforce any remedy available upon default under this
Lease, or seek a declaration of the rights of a party under this Lease, the
prevailing party shall be entitled to recover in such action such attorneys'
fees and costs as may be reasonably incurred, including, without limitation, the
costs of reasonable investigation, preparation and professional or expert
consultation, travel expenses, costs on appeal, court reporter fees and
expenses, incurred by reason of such litigation, arbitration or other action.
All other attorneys' fees and cost relating to this Agreement and the
transactions described herein shall be borne by the party incurring the same.
38
IN WITNESS WHEREOF, each of the parties hereto have caused this Lease
to be duly executed as of the day and year first above written.
LANDLORD:
ADI MESA PARTNERS - AMCC, L.P.,
a California limited partnership
By: Xxxxx Development, Inc.,a California corporation
Its General Partner
By:
----------------------------------
Xxxxxx X. Xxxxx
Its: President
TENANT:
APPLIED MICRO CIRCUITS CORPORATION,
A Delaware Corporation
By:
----------------------------------
XXXX X. XXXXXXXX
Its: Vice President, Finance and Administration
By: Xxxxx Development, Inc., a Califoration Corporation
Its General Partner
By: /s/ S L Black
------------------------
Xxxxxx X. Xxxxx
Its: President
TENANT:
APPLIED MICRO CIRCUITS CORPORATION,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxx
--------------------------
Xxxx X. Xxxxxxxx
Its: Vice President, Finance and Administartion
39
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
Parcel 2 of Parcel Map No. 17755 in the City of San Diego, County of
San Diego, State of California, filed in the Office of the County Recorder of
San Diego County September 17, 1996, as File No. 1996-474607 of Official
Records.
A-1
EXHIBIT "B"
PRELIMINARY PLANS AND SPECIFICATIONS
PACIFIC
CORNERSTONE
ARCHITECTS, INC.
LEASE EXHIBIT B
SHELL BUILDING & SITEWORK
OUTLINE SPECIFICATIONS
A
BUILD-TO-SUIT
FOR
AMCC
OCTOBER 17, 1996
PACIFIC CORNERSTONE ARCHITECTS, INC.
0000 XXXXX XXXX, XXXXX 'X'
XXX XXXXX, XX 00000
(000) 000-0000
B-1
PROJECT DATA
PROJECT: AMCC
Parcel 2 of Parcel Map 17755
LOCATION: Xxxx/Xxxx Xxxx Xxxxxxxx Xxxx Xxxx XX, Xxxx 0
DATE: May 6, 1996
July 30, 1996 AND REVISED OCTOBER 17, 1996
1. Construction Type IIIN - Tilt Up Concrete and steel Frame with Glass
Curtainwall
2. Number of Stories One Story with Mezzanine
3. Use Office, Manufacturing, Warehouse
4. Use Zone Planned Industrial Development #88-0499
5. Square Footage 89,190 sf
(Gross)
6. Est. Site Area 4.901 acres (gross)
7. Est. Site Coverage 42%
8. Parking Data 297 cars (3.33/1000)
9. Loading Provide one 12'x14' grade level door
10.Trash and Recycling Provide two enclosures for two standard (4'x7') trash
bins.
11. Floor Height 14'-0"
12. Clear Height 9'-12' ceiling height in manufacturing area
9'-23' ceiling height in office area
24' clear in warehouse
13. Panel Height 34' to parapet
14. Drive Aisle Widths 24'/26' as shown
15. Fire Sprinklers Fully Fire Sprinklered to serve a density of .33 GPM
over the most remote 3,000
s.f. of Warehouse area and .15/2000 s.f. at Office
areas with provision for .33
gpm over 3,000 sf
16. Skylights Provide one (1) 8x8 at lobby and six (6) 4x8 acrylic
skylights in the open office
areas. Any additional skylights shall be included
within the T.I. allowance
17.Electrical 277/480 3000 amp, 3 phase, 4 wire service
DESCRIPTION: The project consists of a build-to-suit on Lot 2.
SCOPE: All building improvements shall be complete in every
respect as defined by, but not limited to, the content of
the schematic drawings and outline
B-2
specifications. AMCC is making a move toward an "open
interactive teaming" environment from its current
compartmentalized atmosphere. An emphasis will be placed on
flexible space where natural light, vision to outdoors and
white board meeting areas will be important to a desirable
workplace.
CODES: The building shall be Type III non-rated, B occupancy. All
construction shall conform to local and state codes and
regulations in effect at the time of construction. All
placement of concrete, reinforcing steel in masonry units
and/or concrete and all field weld plates and field welding
shall be inspected by an independent testing laboratory.
VALUE
ENGINEERING: Contractor(s) are encouraged to provide value engineering
alternates to the attention of the Architect for review and
consideration.
DIVISION I GENERAL REQUIREMENTS
All work shall be in conformance with all applicable codes
and regulations. Contractor shall be responsible for
coordination of all work to be performed and for
conformance to the contract documents.
DIVISION 2 SITEWORK
Earthwork Provide all grading and reshaping of existing site as
required to achieve conformance with new finish grade
elevations. A balanced site is assumed.
Site Utilities Provide all sewer, gas, water, storm drain, electrical,
telephone and cable television services as required.
Irrigation All landscaped areas to be fully irrigated and be operated
by a central automatic controller. Proposed parkway
landscaping is included. Provide planter drainage per
minimum design guideline standards.
Landscaping Provide plant material and soil amendments per minimum
guidelines standards.
Walkway Finishes Provide an allowance of 8000 s.f. of natural color, 4"
nominal thickness over natural grade Finishes enhanced
paving. Enriched paving at entry plaza and patio area as
shown on landscape plan. Finishes to be selected by
Architect.
Asphalt Concrete Asphalt concrete paving over class II crushed aggregate
base minimum thickness to be 3" A.C. over 5" base at
parking; 31/=" A.C. over 6" base at drives and 4" A.C. over
7" base at heavy truck traffic areas; 6" concrete with #3
at 24" O.C. at truck areas, or as specified per soils
report. Provide sand seal finish.
Paving Curb Mow Strips All curb and gutters shall be constructed of concrete in
accordance to City of San Diego & Standards.
B-3
DIVISION 3 CONCRETE
Foundations Continuous and pad footings of reinforced concrete at slab
on grade, columns and shear walls as required.
Floors Slab-on-grade minimum 6" thick 3,000 P.S.I., concrete slab
on grade, reinforced with #3 rebar at 18" o.c., over 4"
sand. Include visqueen at all areas.
Walls 61/2" minimum thick, natural color, reinforced concrete
tilt-up panels with 3/4" deep recesses and reveals.
Sandblasted and/or painted finish where indicated on the
drawings.
Columns 1'-0'x3'-0" natural color, concrete columns. Paint to match
building.
Trash Enclosures 6'-0" high tilt-up concrete with finish to match buildings.
Mechanical 9'-0" high tilt-up concrete with finish to match building,
Iouvers and Iouvered gates as required by mechanical
equipment. Enclosures
DIVISION 4 MASONRY
Split faced natural color concrete as required for
retaining wall. Deep strike and flush strike joints for
pattern in the stacked bond arrangement. (See civil and
architectural drawings.)
DIVISION 5 METALS
Columns 7"x7" steel columns, base plates and connection as
required.(bay spacing per plan)
Miscellaneous Metals Concrete panel embeds, steel guards and metal pipe crash
posts, steel roof access ladder and trash enclosure
hardware will be provided under this section of work. (See
Division 7 for roof access hatch).
Preformed Metal
Sidings Provide 22 gauge galvanized steel siding with ribbed
pattern P-13 by Curoco or equal for trash enclosure gate
covering.
Roof Screen None provided. Roof screening to be achieved by building
parapet.
Metal Roof 24 ga. galvalum standing seam metal roof over one layer,
5/8" duraboard substrate. Framing per structural drawings.
DIVISION 6 WOOD AND PLASTICS
Glue Laminated
Lumber & Wood
Trusses All major roof framing to consist of members as determined
by contractor. Size and length as required. All lumber to
comply with regulations as specified in rough carpentry
regulations below.
B-4
Roof 1/2" nominal plywood over 2 x 6's at 24" o.c. panelized
roof system.
Rough Carpentry All soffit-framing, roof framing and bracing shall conform
to applicable requirements for lumber grading as specified
in West Coast Lumber Inspection Bureau Grading and Dressing
Rule No. 16, the Western Wood Products Association, and the
American Plywood Association. In addition to complying with
applicable codes and regulation, comply with pertinent
recommendations contained in the 1994 edition of the UBC.
Finish Carpentry Included in Tenant Improvement Allowance.
DIVISION 7 MOISTURE AND THERMAL PROTECTION
Membrane All roofs shall have a four-ply fiberglass built-up roofing
system with capsheet (i.e., Manville Roofing specification
roofing 4 GNC). Provide 10 year guarantee/maintenance plan.
Building/Sound
& Thermal
Insulation Included in Tenant Improvement Allowance.
Roof Drainage Provide internal roof and overflow drains. Roof drains to
connect to below grade storm drain where accessible or
daylight at face of curb or building wall in loading areas.
Minimum roof slope to be 1/4" per foot.
Sealants Utilize silicone base sealant at all glazing conditions.
Concrete panel joints are to receive polyurethane sealant
with 1" polyurethane xxxxxx xxx. Sealants used in walking
surfaces shall be polyurethane type. Colors to be selected
by Architect/Tenant.
Sheet Metal Provide all sheet metal work for the building, complete;
including reglets, and counter flashings for roofing.
Materials to be galvanized sheet metal, 24 gauge minimum
thickness.
Roof Accessories Provide roof hatch by "Bilco" Type S-20 (2'-6" X 3'-0").
Locate in telephone room.
Skylights Provide twenty nine (29) skylights by Bristol Fiberlite
Industries model. 4896 ALCMDD (4'-0" x 8'-0") at
conditioned areas. Skylight at Lobby to be (3) 8 x 8
pyramid type double dome skylights by Bristol Fiberlite
Industries. Additional skylights to be included in the
Tenant Improvement Allowance.
Draft Curtains Included in Tenant Improvement Allowance.
DIVISION 8 DOORS AND WINDOWS
Custom Interior
Doors Included in Tenant Improvement Allowance.
Entry Doors Provide (1) pair of herculite doors at lobby. Provide total
of 2 pair and 10 single 3'-0" X 8'-10" X 1-3/4" narrow
stile aluminum and glass system. Frame finish to be as
specified in "Aluminum Framing" below.
B-5
Steel Doors Provide 18-gauge 3'-0" X 8'-10"X 1-3/4" hollow metal steel
doors, frames and stops. Prime and paint (see Division 9,
painting). At all manufacturing areas typical.
All fire-rated doors and frames to comply with UBC sec.
4306
All fire-rated doors and entry doors shall be equipped with
closers.
Hardware All builder's hardware shall be 626 finish (satin stainless
steel finish). Lock and latch sets shall be equal to
Schlage Series L, Full mortise with lever handle design.
All fire rated doors and storefront entry doors shall be
equipped with closures. All hardware shall meet state Title
24 requirements for handicapped accessibility. Provide 12"
high satin stainless kick plates at toilet room doors.
Overhead Coiling
Doors Provide one (1) 12'x14' overhead coiling doors, constructed
of 20-gauge minimum slats. Provide hand-operated chain
drive opening and closing mechanism. Prime and paint (see
Division 9, painting).
Aluminum Framing All extruded aluminum sections shall be 2"x 4-1/2" off-set
flush glazed (silicone butt joint) system. Interior finish
to be black silicone polyester powder coat. Exterior custom
color finish to be factory applied, oven baked, Color to be
selected by the Architect/Owner.
Exterior Glass
& Glazing Glass to be noted on drawings from the following
categories: Curtain Wall Glass: 1/4" High Performance.
Storefront Glass: 1/4" Greylite 14% by PPG Industries.
Glass selections are for general reference only. See plans
for specific glass types and locations.
Interior Glass
& Glazing Included in Tenant Improvement Allowance.
DIVISION 9 FINISHES
Carpeting Included in Tenant Improvement Allowance.
Vinyl Flooring Included in Tenant Improvement Allowance.
Interior Painting Included in Tenant Improvement Allowance.
Wood Caps Included in Tenant Improvement Allowance.
Exterior Wall Finish Concrete tilt-up panels and concrete columns to receive
painted finish. Reveals to be smoothed finished.
B-6
Metal Framing & Furring Steel studs shall be 16,20 and 25 gauge as indicated on
drawings or required. Drywall furring channels shall be 25
gauge "hat" sections. Backing plates shall be 1/8" steel of
proper size to accommodate fastenings and shall be welded
to 20 gauge steel studs, See drawings for specific size and
locations,
Gypsum & Drywall Provide gypsum wallboard at designated locations as
required in Shell Building. Board thickness to be 5/8" at
vertical and 5/8" at horizontal surface applications, In
areas requiring fire ratings, wall board shall be 5/8"
"Type X". In areas subject to moisture, use water resistant
(WR) gypsum board. All gypsum board surfaces shall be
finished as smooth wall to receive a Lo-GIo satin sheen
type paint.
Ceramic Tile Included in Tenant Improvement Allowance.
Slate Tile Included in Tenant Improvement Allowance.
Exterior Soffits Soffits to be constructed from 5/8" moisture resistant
gypsum board. Provide 1/8" thick plaster skim coat. Color
by Architect. Provide allowance of 300 s.f. in Shell
Building.
Suspended
Acoustical Ceilings Included in Tenant Improvement Allowance.
Warehouse Floors Included in Tenant Improvement Allowance.
DIVISION 10 SPECIALTIES
Toilet Accessories Included in Tenant Improvement Allowance.
Window Coverings Included in Tenant Improvement Allowance.
Monument Signage Included in Tenant Improvement Allowance.
Signage Provide all site and building signage necessary for proper
identification of handicapped parking areas, fire lanes and
building address and identification.
Fire Extinguishers Provide as required by Code as part of the Shell Building.
DIVISIONS 11
Lunch Room
Equipment All lunch room and related food preparation appliances to
be provided by Tenant.
Athletic Equipment All athletic and recreational equipment to be provided by
Tenant.
Projection Screen Included in the Tenant Improvement Allowance.
DIVISION 12
Furnishings All interior and exterior desks, tables, chairs, system
furniture, whiteboards, etc. to be provided by Tenant.
B-7
DIVISION 13 NOT USED
DIVISION 14 NOT USED
DIVISION 15 MECHANICAL
Shell Plumbing Provide water stubbed to building and one single sewer line
extending the length of the building.
Fire Protection
System Provide on-site fire hydrants as required by local
jurisdictions. Entire Shell Building to be fire sprinklered
with a density of .33 GPM over the most remote 3,000 square
feet of warehouse area and .15/2000 sf in all other areas
with provision for .33 gpm over 3,000 sf.
Gas Service Stubbed pending design.
Utilities Owner to pay for water and sewer hookups.
Heating,
Ventilating
& Air Conditioning Included in Tenant Improvement Allowance.
Nitrogen Tank
and Piping Tank provided by Tenant. All gas piping, fittings, etc
included in Tenant Improvement Allowance.
DIVISION 16 ELECTRICAL
General Shell electrical work shall include a complete service and
distribution system of metering facilities, conduit,
conductors, main switch board, sub-panels, branch circuits,
and exterior lighting fixtures.
Main service to the building to be 277/480 volt 3 phase 4
wire 3000 amp. minimum voltage.
Building Power
and Lighting Electric room and telephone room will be provided. Provide
electrical per plans and outline.
Electrical work shall include a pull section and main
switchgear, conduit, conductors, main switch board, house
panel, branch circuits, lighting fixtures, wall switches,
receptacles, etc. as required for outdoor lighting.
Power for Equipment Included in Tenant Improvement Allowance.
Installation All electrical work to be in accordance with applicable
codes. All necessary outlets, conduit, wiring, trenching,
and concrete encasing shall be provided as required.
Interior Lighting Included in Tenant Improvement Allowance.
B-8
Exterior Lighting Provide low pressure sodium pole mounted light fixtures on
24" diameter concrete bases as required throughout the
surface parking areas. Use formliner to avoid candy
striping. No candy striping will be allowed.
Provide low pressure sodium wall mounted light fixtures at
rear of building for truck doors only. Provide incandescent
round bollard fixtures and upright fixtures at walkways and
landscape areas.
A system of outdoor landscape, illumination fixtures shall
be provided. Future power for security systems shall be
provided.
Telephone & Data
Communications Included in Tenant Improvement Allowance.
Security System Tenant to provide all necessary devices, conduit, wiring,
access door hardware, etc., for installation, operation and
monitoring of a security system.
UPS system A UPS system to be provided by Tenant, if required.
Fire Suppression
@ Computer Room Special fire suppression system to be provided by Tenant,
if required.
END OF OUTLINE SPECIFICATIONS
B-9
EXHIBIT "C"
TENANT IMPROVEMENTS BUDGET ESTIMATE
