EXHIBIT 10.12
CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENTS DATED
SEPTEMBER 1, 1997, BY AND BETWEEN P/A CHARLESTON ROAD LLC,
A CALIFORNIA LIMITED LIABILITY CORPORATION, AS LANDLORD,
AND ALZA CORPORATION, A DELAWARE CORPORATION, AS TENANT,
FOR ALL OF THOSE THREE CERTAIN BUILDINGS TO BE CONSTRUCTED
BY TENANT AND ASSOCIATED SITE IMPROVEMENTS, LOCATED AT
AMPHITHEATRE PARKWAY AND CHARLESTON ROAD, IN MOUNTAIN VIEW,
CALIFORNIA
THIS AGREEMENT ("Construction Agreement") sets forth the
agreement of P/A Charleston Road LLC, a California limited
liability company ("Landlord"), and ALZA Corporation, a Delaware
corporation ("Tenant", with Landlord and Tenant sometimes
hereinafter collectively referred to as the "Parties"), relative
to the design and construction of the Site Work (which includes
the Common Areas), Cold Shell Improvements, Warm Shell
Improvements (with Cold Shell Improvements, Warm Shell
Improvements and Site Work hereinafter collectively referred to
as "Shell Improvements") and Interior Improvements for three
buildings (collectively referred to as the "Buildings" and
individually as a "Building" (and as to a respective Building as
"Building One", "Building Two" and "Building Three")) suitable
for office and for research and development use to be constructed
pursuant to the terms and conditions of this Construction
Agreement at that certain undeveloped real property owned by
Landlord and consisting of approximately 13.48 acres located at
Amphitheatre Parkway and Charleston Road, in Mountain View,
California (the "Property"). Each of the Buildings is separately
the subject of a separate Lease each dated as of the date of this
Construction Agreement by and between Landlord and Tenant and
respectively referred to as the Building One Lease, the Building
Two Lease and the Building Three Lease (each a "Lease" and
collectively the "Leases"). The aggregate square footage of all
three Buildings is currently anticipated to be in the range of
approximately 300,000 to 360,000 square feet, dependent upon what
square footage is ultimately approved by the City of Mountain
View during the Planned Community Permit process, and ultimately
subject to final measurement as provided in Section 7 below. As
provided in Section 2.A below, Tenant is obligated to exercise
due diligence to maximize the size of the permitted development.
1. DEFINITIONS: In addition to the defined terms set
forth above, as used in this Construction Agreement, the
following terms shall have the following meanings, and any
initially capitalized terms used in this Construction Agreement
which are not defined in this Construction Agreement, but which
are defined in the form of the Leases, shall have the meanings
ascribed to them by the form of the Leases:
A. Approved Specifications: The term "Approved
Specifications" means those certain plans and specifications for
the Shell Improvements and Interior Improvements to be
constructed by Tenant, which are from time to time referenced or
described on Schedule "A-1" to this Construction Agreement. The
Parties acknowledge that as of the date of this Construction
Agreement, the plans and specifications have not been completed
and accordingly will not be attached until agreed to by the
Parties in accordance with the terms of this Construction
Agreement (and despite the fact that such plans and
specifications are not yet completed, that except for Damage
Delays (as defined in Section 1.M), Landlord Delays (as defined
in Section 1.N), and Weather Delays (as defined in Section 1.O),
neither any delay in completing or failure to complete such plans
and specifications nor any delay in completing or failure to
complete the construction of the Improvements shall affect
Tenant's obligation to pay Rent in accordance with the terms of
the respective Lease on the Rent Commencement Date (as defined in
Section 1.K)).
B. Shell Improvements: The term "Shell Improvements"
shall mean the combination of the Cold Shell Improvements, Warm
Shell Improvements and Site Work which are to be constructed by
Tenant and paid for by the Parties as set forth in Section 3.F.
C. Cold Shell Improvements: The term "Cold Shell
Improvements" shall mean the following: (i) the shell of each of
the three (3) Buildings, consisting of a pile or spread footing
foundation, the exterior walls (including the architectural skin
of each Building), the floor slab for each story, the floor deck
for each story, the load bearing walls, the roof system, the roof
membrane with insulation, two standard width interior stairways,
exterior doors and exterior door hardware, duct shafts and the
shafts (but not equipment) for the elevators, (ii) the
underground parking that will serve all three Buildings,
including any lighting for such underground area, and (iii) all
paving and other parking areas, striping, sidewalks, loading
docks, monument sign for the Complex and each Building, parking
curbs, ramps, dumpsters, gutters, irrigation system, landscaping,
storm sewer, 4,000 amp electrical service per Building at 480
volts with primary transmitter, bus duct, pull section, switch,
main utility service conduits (excluding electrical panel) from
the street to each Building's perimeter, transformer pad, the
main plumbing line into each Building, water, gas and sewer
connection fees including cost to hook up to Mountain View sewer
system, any building permit fees, school fees, or other building
mitigation fees, premiums for any insurance required to be
carried hereunder (whether by Tenant or any Prime Contractors)
during the course of construction of the Cold Shell Improvements,
and any contractor's fees, architect's fees and engineer's fees,
applicable to the design or construction of any Cold Shell
Improvements, but excluding (w) roof screens, (x) building
connectors, (y) outside parking lot lighting, and (z) utility
pads (including exterior walls and all other construction
elements of any such utility pads and electrical panels).
D. Warm Shell Improvements: The term "Warm Shell
Improvements" shall mean the following for each of the three
Buildings: the core electrical systems (including distribution
panels, HVAC, main electrical power risers and energized
electrical power panels located in an electrical room (one on
each floor) as required by code, and similar items), the core
mechanical systems (including package units and shafts), fire
protection and life safety systems and equipment as required by
code to obtain a temporary occupancy permit (for shell
distribution, including master fire sprinkler grid system), main
plumbing and HVAC risers in the Building's core, main telephone
risers connected to telephone backboards located in a telephone
room/closet (one on each floor) as required by code, janitorial
closet (one on each floor), perimeter exterior and building core
walls finished with gypsum wall board (taped), core toilets (one
pair of toilet rooms per floor), building connectors (open on all
building levels, to the extent counterpart floors exist in the
other Buildings), elevators for passengers and freight in each
Building (with elevator cabs finished), exposed ceiling
structure, painting of the garage interior, loading docks, roof
screens, parking lot lighting (other than lighting in the
basement parking area that services all three Buildings), utility
pads (including all construction elements of utility pads such as
any exterior walls), any governmental or utility charges or fees
for connection to utilities (other than water, gas and sewer
connection fees), any building permit fees, school fees, or other
building mitigation fees associated with the Warm Shell
Improvements, premiums for any additional amount or period of
coverage of insurance required to be carried hereunder (whether
by Tenant or any Prime Contractors) with respect to the
construction of the Warm Shell Improvements, and any contractor's
fees, architect's fees and engineer's fees, applicable to the
design or construction of any Warm Shell Improvements.
E. Site Work: The term "Site Work", which includes Common
Area, shall mean onsite and offsite work to be constructed by
Tenant and paid for by the Parties as set forth in Section 3.F as
reasonably required to prepare the Property for development as
contemplated in this Construction Agreement (including any
additional onsite or offsite work that may be required in order
to obtain any required governmental approvals (including, but not
limited to, the Planned Community Permit and any building
permits) or to obtain approval for any increased size of
development on the Property), including, without limitation,
construction and improvement of the Common Areas of the Complex,
grading, any required street improvements, any required onsite or
offsite extension of utilities, any required onsite or offsite
landscaping, any required levee reinforcement, and the Property's
share (which is equal to 66% of the total) of any required onsite
or offsite burrowing owl mitigation. Tenant's legal fees and
consultant's fees associated with Tenant's due diligence review
of the Property and any costs related thereto (including, but not
limited to, any fees or costs related to the drafting and
negotiating of this Construction Agreement, the Leases, the
Ground Lease being entered into by Tenant and certain members of
Landlord, or the limited liability company formation documents
related to Landlord), shall not be included in the cost of the
Site Work but Tenant's legal fees and consultant's fees
associated with seeking or obtaining any governmental approvals
or permits associated with (or imposed as a condition to)
developing the Complex shall be included in the cost of the Site
Work (including by way of example, 66% of the legal fees and
consultant's fees associated with the negotiation, preparation
and review of the applications, reports, license agreements and
memorandums of understanding relating to the burrowing owl
mitigation plan).
F. Interior Improvements: The term "Interior
Improvements" shall mean all improvements to be constructed by
Tenant and paid for by Tenant, both within the Building shell of
each Building and any additional improvements which Tenant may,
with the approval of Landlord, desire to make to the Property, to
the extent not included in the definition of Shell Improvements
as set forth above. By way of example, Interior Improvements
shall include, but not be limited to, what are customarily
considered tenant space improvements as applicable to the use
being made of any interior portion of the Building, such as
carpeting, vinyl floor covering, drop ceilings, interior
plumbing, heating and air conditioning distribution systems,
electrical distribution systems, painting, interior walls, floor
to ceiling partitioning, the installation or distribution within
any tenant spaces of any fire sprinkler, fire protection and life
safety systems and equipment, any clean room modules, any
monument signs for a particular Building (to the extent not
constructed or completed as part of the Shell Improvements), any
building permit fees, school fees, or other building mitigation
fees associated with any Interior Improvements, premiums for any
additional amount or period of coverage of insurance required to
be carried hereunder (whether by Tenant or any Prime Contractors)
with respect to the construction of any Interior Improvements and
any contractor's fees, architect's fees and engineer's fees,
applicable to the design or construction of any Interior
Improvements. Interior Improvements as used herein shall include
only the initial full buildout of any portion of the Building
sufficient to obtain a certificate of occupancy or its equivalent
for the use of such portion of the Building (and shall not
include any subsequent alterations or additions to the initial
buildout of such portion of the Building). Section 4.A of this
Construction Agreement sets forth the obligation of Tenant as to
causing Interior Improvements to be constructed in each of the
Buildings.
G. Improvements: The term "Improvements" shall mean the
Shell Improvements and the Interior Improvements.
H. Architect: The term "Architect" shall mean such
licensed architect(s) as (i) are selected by Tenant and approved
by Landlord for the design of the Shell Improvements, with the
approval of Landlord not to be unreasonably withheld or delayed,
and with Xxxxxx & Associates and EDAW Inc. being hereby approved
by Landlord as the building architect and landscape architect,
respectively, but without any obligation of Tenant to continue to
use either of such architects in the future, but in the event
either or both are to be replaced by Tenant, Tenant shall obtain
the approval of Landlord to the replacement Architect. While
Tenant has not committed to use any particular Architect for the
design of any of the Interior Improvements, and Tenant may use
different Architects for different portions of a Building,
Landlord hereby preapproves the use of each of Xxxxxx &
Associates, RMW, Inc., MBI Inc., and Xxx Xxxxxxxx & Associates,
Inc. as an interior architect for all or any portion of the
Interior Improvements
I. Prime Contractor(s): The term "Prime Contractor" shall
mean such licensed general contractor(s) (i) as is jointly
selected by Landlord and Tenant after consideration of a number
of potential candidates (which candidates shall include Xxxxx
Xxxxx, DPR Construction Inc., South Bay Construction Company,
Swinerton and Xxxxxxx and Xxxxxxx & Xxxxxxx ), each of whose
approval shall not be unreasonably withheld, for the construction
of the Shell Improvements and (ii) as selected by Tenant, and
approved by Landlord, with respect to the construction of all or
any portion of the Interior Improvements. Xxxxx Xxxxx is
approved by Landlord and conditionally approved by Tenant as the
Prime Contractor for the Shell Improvements, but without any
obligation of Tenant to continue to use Xxxxx Xxxxx as the Prime
Contractor in the future. In the event Xxxxx Xxxxx is to be
replaced by Tenant, Landlord's approval of the replacement Prime
Contractor for the Shell Improvements shall be obtained. While
Tenant has not committed to use any particular Prime Contractor
for the construction of any of the Interior Improvements, and
Tenant may use different Prime Contractors for different portions
of a Building, Landlord hereby preapproves the use of any of the
following contractors: Xxxxx Xxxxx, DPR Construction Inc., South
Bay Construction Company, Swinerton and Xxxxxxx and Xxxxxxx &
Xxxxxxx.
J. Substantial Completion: The term "Substantial
Completion" and "Substantially Completed", shall mean separately
as to each of the three (3) Buildings:
(1) As to the Shell Improvements, the date when all of
the following have occurred with respect to the Shell
Improvements with respect to each such Building, on a Building by
Building basis: (i) the construction of the Shell Improvements in
question have been substantially completed in accordance with the
approved plans therefor and with all applicable laws, statutes,
codes, rules and regulations (collectively, "Laws") except for
minor punch list items which do not prevent Tenant from
reasonably proceeding with the construction of the Interior
Improvements; (ii) the Architect has executed a certificate or
statement representing that, to its knowledge, such Shell
Improvements have been substantially completed in accordance with
the plans and specifications therefor and all applicable Laws,
except for minor punch list items which do not prevent Tenant
from reasonably proceeding with the construction of the Interior
Improvements; (iii) the Building Department of the City of
Mountain View has completed its final inspection of such Shell
Improvements and has "signed off" the building inspection card
approving such work as complete, except for minor punch list
items which do not prevent Tenant from reasonably proceeding with
the construction of the Interior Improvements; (iv) a Certificate
of Occupancy or other approval as to the Shell Improvements is
issued by the City of Mountain View (provided, however, that such
Certificate of Occupancy or other approval as to the Shell
Improvements may be issued subject to the condition that the
Interior Improvements be likewise approved); (v) Landlord has
received unconditional lien releases in form sufficient to
satisfy the applicable requirements of California Civil Code
Section 3262 from all contractors, subcontractors and materialmen
that have provided services or materials for the applicable Shell
Improvements, together with such other evidence of lien-free
completion of such Shell Improvements as Landlord may reasonably
request; and (vi) all Site Work improvements have been
sufficiently concluded and completed so as not unreasonably to
interfere with access to the applicable Building and the use of
the parking area and other outside areas (including the
elimination of any outside storage of construction materials and
the removal of any construction trailers from the Property); and
(2) As to all or any portion of the Interior
Improvements, the date when all of the following have occurred
with respect to such Interior Improvements, on a space by space
basis: (i) the construction of the Interior Improvements in
question have been substantially completed in accordance with the
approved plans therefor and with all applicable Laws except for
minor punch list items which do not prevent Tenant from occupying
the applicable portion of the Building for the purposes of
conducting business therein; (ii) the Architect has executed a
certificate or statement representing that, to its knowledge,
such Interior Improvements have been substantially completed in
accordance with the plans and specifications therefor and all
applicable Laws, except for minor punch list items which do not
prevent Tenant from occupying the applicable portion of the
Building for the purposes of conducting business therein; (iii)
the Building Department of the City of Mountain View has
completed its final inspection of such Interior Improvements and
has "signed off" the building inspection card approving such work
as complete, except for minor punch list items which do not
prevent Tenant from occupying the applicable portion of the
Building for the purposes of conducting business therein; (iv) a
Certificate of Occupancy or other approval as to the Interior
Improvements is issued by the City of Mountain View; and (v)
Landlord has received unconditional lien releases in form
sufficient to satisfy the applicable requirements of California
Civil Code Section 3262 from all contractors, subcontractors and
materialmen that have provided services or materials for the
applicable Interior Improvements, together with such other
evidence of lien-free completion of such Interior Improvements as
Landlord may reasonably request.
The Parties acknowledge that the Rent Commencement Date
of each respective Lease is fixed so as to be the earlier of:
(i) the Scheduled Rent Commencement Date (as defined in
Section 1.K) subject only to any extension arising from any
Landlord Delay (as defined in Section 1.N), any Damage Delay
(as defined in Section 1.M) or any Weather Delay (as defined
in Section 1.O) pursuant to Section 9 below, regardless of
the status of the completion of the Shell Improvements
and/or Interior Improvements as of the Scheduled Rent
Commencement Date, or
(ii) the applicable Substantial Completion Date (as
defined in Section 1.K) of the Building Shell and Tenant
Improvements as to the applicable Building.
K. Rent Commencement Date: The term "Rent Commencement
Date" for each of the three (3) Buildings shall mean the earlier
of:
(i) eighteen (18) months (the "Agreed Construction
Period") following the earlier of the following dates
(regardless of whether or not Tenant has completed the
Improvements as set forth in this Construction Agreement):
(a) the date that Tenant obtains from the City of
Mountain View a Planned Community Permit (the "PCP
Permit") permitting Tenant to proceed generally
thereafter with seeking the issuance of building
permits for the construction of the three (3) Buildings
(but the issuance of a building permit is not a
condition to the commencement of the Agreed
Construction Period), or
(b) the date of October 31, 1997 (the "Outside
Date") subject to the right of Landlord to extend such
Outside Date pursuant to Section 2.C below (with the
date as so determined pursuant to clause (i) hereof,
including as affected by any extension of the Outside
Date by Landlord pursuant to Section 2.C below, herein
referred to as the "Scheduled Rent Commencement Date");
or
(ii) the Substantial Completion of the Shell
Improvements and Interior Improvements on a Building by
Building basis (the "Substantial Completion Date").
Subject to the following sentence, the Agreed Construction
Period shall be subject to an automatic extension on a day for
day basis in the event and to the extent of the aggregate of (i)
any Landlord Delay, (ii) any Damage Delay, and (iii) any Weather
Delay, but shall not otherwise be subject to extension regardless
of the status of the completion of the Shell Improvements or
Interior Improvements and regardless of whether the actual
construction period exceeded the Agreed Construction Period. Any
delay in Substantial Completion of the Improvements caused by any
combination of Landlord Delay, Damage Delay and Weather Delay
shall not be double counted, to the effect that each single day
of delay in Substantial Completion of the Improvements occasioned
by more than one cause shall nevertheless be allocated to a
single category of delay (i.e. either Landlord Delay, Damage
Delay or Weather Delay).
Subject to the right of Landlord to extend such Outside Date
pursuant to Section 2.C below, either Landlord or Tenant shall
have the right, as provided in Section 2.C below, to terminate
this Construction Agreement and the Leases upon written notice to
the other within five (5) business days after the Outside Date if
the City Council of the City of Mountain View, California fails
to finally approve and cause the issuance by the City of Mountain
View of a PCP Permit on or before the Outside Date, where the PCP
Permit is consistent with the application for such PCP Permit
submitted by Tenant to the City of Mountain View on August 21,
1997 (or which PCP is otherwise reasonably acceptable to Landlord
and Tenant considering the standards for acceptability set forth
in the following sentence). Any conditions which may be imposed
by the City Council of the City of Mountain View, California in
otherwise approving the issuance of the PCP Permit shall not be
grounds for either Landlord or Tenant to elect, pursuant to
Section 2.C below, to terminate this Construction Agreement and
the Leases, unless one or more of such conditions would result in
any of the following: (i) any major change in the footprint of
any of the buildings to be located on the Complex or on the
Adjoining Property (as defined in Section 2.A below), (ii) any
major change in the conceptual architectural design of any of the
buildings to be located on the Complex or on the Adjoining
Property (where, for example, any requirement to redesign the
Buildings to be of a more avant-garde design (such as the nearby
Silicon Graphics building), or to adopt a stairstep indentation
design to the building floors, or to reduce the Three Buildings
to less than an aggregate of 300,000 square feet, or the like
would be a major change, whereas any required changes to on-site
landscaping, columns, window moulins or the like would not be
considered major changes), (iii) any major restriction imposed
on any use currently permitted by the applicable zoning for the
Complex or the Adjoining Property, or (iv) any requirements which
collectively are reasonably estimated to increase the cost to
Tenant (a) of designing or constructing the Complex or (b) of
contributing to or constructing any significant offsite
improvements (such as a fire or police station) where the cost
thereof is not being shared with all future developments in the
general area, by an aggregate amount for (a) and (b) above in
excess of Four Million Dollars.
L. Lease Commencement Date: The term "Lease Commencement
Date" for each of the three (3) Buildings shall be the earlier of
(i) the Rent Commencement Date or (ii) the date of commencement
of any "Early Occupancy Period" of a portion of the Building as
defined and provided in Xxxxxxxxx 0X of the respective Lease.
Absent any early occupancy by Tenant of a portion of the
respective Building, the Lease Commencement Date shall be the
same as the Rent Commencement Date.
M. Damage Delay: The term "Damage Delay" shall mean, as
to the Complex and respectively as to each Building, as
applicable, the period of delay in the Substantial Completion of
construction of the applicable Improvements occasioned by any
damage to or destruction of the Improvements occurring during the
course of construction which results in damage or destruction to
the Improvements having an estimated cost of repair or
restoration equal to or in excess of One Million Dollars
($1,000,000) per occurrence.
N. Landlord Delay: The term "Landlord Delay" shall mean,
as to the Complex and respectively as to each Building, as
applicable, any material delay in the Substantial Completion of
the construction of the Improvements to the Complex or to any
particular Building caused solely by one or more of the following
reasons: (i) the failure of Landlord to timely make any payment
of the Improvement Allowance or (ii) the failure of Landlord to
timely or reasonably approve or execute any reasonably
appropriate plans and specifications, working drawings, permits,
utility easements or other related documents which Landlord is
responsible for approving or executing under the provisions of
this Construction Agreement, in each case, provided that Tenant,
after the observation or occurrence of any matter constituting an
event which will cause or likely cause a Landlord Delay, within
ten (10) days thereafter notifies Landlord in writing of the
observation or occurrence of such event and the then estimated
amount of any Landlord Delay that will be experienced as a result
thereof.
O. Weather Delay: The term "Weather Delay" shall mean, as
to the Complex and respectively as to each Building, as
applicable, the period of delay in the Substantial Completion of
construction of the applicable Improvements occasioned by any
abnormally adverse weather conditions (compared to the average
seasonal weather conditions experienced in Mountain View,
California during the relevant period of construction) in the
nature of abnormal rains (and any resultant flooding) such as
might occur due to an el nino, provided that there shall not be
considered to be any Weather Delay unless the aggregate affect of
all Weather Delays (excluding average seasonal weather
conditions) are reasonably estimated to have delayed the
Substantial Completion of the respective Improvements by a period
in excess of thirty (30) calendar days where such days of delay
are attributable solely to a Weather Delay.
2. PERFORMANCE: Landlord and Tenant shall each be
obligated to use commercially reasonable efforts to perform their
respective obligations under this Construction Agreement. The
Parties acknowledge that the failure of either Party to
accomplish any matter set forth in this Construction Agreement
within any particular time period shall not constitute a default
(sometimes referred to herein as an "Event of Default") by either
Party unless such failure constitutes a breach of the obligation
of a Party to use commercially reasonable efforts to perform such
obligation and appropriate written notice has been given and a
reasonable cure period has expired (which shall in any event be
not less than thirty (30) days) without such breach being cured.
Upon the occurrence and during the continuance of an Event of
Default by Tenant under this Construction Agreement, such shall
constitute a default under the respective Lease or Leases to
which such obligation hereunder relates (and if the cross-default
provision of Section 5.A hereof then remains in effect, such
Event of Default under this Construction Agreement with respect
to any Lease shall constitute a default under all Three Leases),
and Landlord may, at its option, exercise the right to terminate
such Lease or Leases at any time thereafter that such Event of
Default remains uncured, in accordance with the respective terms
of such Lease or Leases as a result of such Event of Default,
upon written notice by Landlord to Tenant in accordance with the
provisions of each such Lease, and Landlord shall have any and
all other rights and remedies thereunder against Tenant for
breach of such Lease.
A. Planned Community Permit: Tenant shall exercise due
diligence and commercially reasonable efforts to seek and obtain
approval of the City of Mountain View to the issuance of the PCP
Permit by October 31, 1997, which PCP Permit is required for
Tenant to proceed with the completion of the detailed design of
the Shell Improvements and, thereafter, to obtain building
permits for the construction of the Shell Improvements. Tenant
shall exercise due diligence to have the City of Mountain View
issue a PCP Permit which permits the maximum square footage of
improvements to be developed at the Property and Landlord agrees,
upon request of Tenant, to cooperate with and assist Tenant in
Tenant's efforts to obtain the PCP Permit for the maximum square
footage of Improvements, including seeking any available bonus
density that may be obtainable with respect to the Property
including assigning to the Property any bonus density that may be
obtainable with respect to the adjoining approximately 6.925 acre
undeveloped parcel of land (the "Adjoining Property") owned
jointly by the Xxxxxxx X. Xxxxx Separate Property Trust and Xxxx
Xxxxxxxxx Survivor's Trust, formerly known as the Arrillaga
Family Trust (which are members of Landlord hereunder), which
Adjoining Property is separately the subject of a Ground Lease
between such members as landlord and Tenant as tenant, and which
Adjoining Property is required by the City of Mountain View to be
considered at the time of issuance of the PCP Permit. Tenant
acknowledges that pursuant to the terms of the Ground Lease for
the Adjoining Property, Tenant is prohibited from seeking any
approval for more than 120,000 square feet of occupiable space
(as defined by the City of Mountain View for PCP Permit purposes)
to be constructed on the Adjoining Property under the PCP Permit.
B. Landlord's Termination Rights in the Event of Tenant's
Default: In the event (i) Tenant defaults in the performance of
any of its material obligations under this Construction Agreement
beyond the applicable cure period provided herein and (ii) the
cross-default condition set forth in Section 5.A hereof remains
in effect, then Landlord shall have the right to elect to
terminate all Three Leases as provided in Section 5.A, and if all
Three Leases are so terminated, then pursuant to the terms of
Section 2.7 of that certain LLC Operating Agreement of P/A
Charleston Road LLC among Xxxxx and Xxxxxxxxx Trusts and ALZA
Land Management, Inc. ("ALM"), dated as of the date of this
Construction Agreement (the "LLC Operating Agreement"), the Xxxxx
and Xxxxxxxxx Trusts may elect to repurchase the interest of ALM
in the LLC Operating Agreement in accordance with the terms set
forth therein.
C. Landlord's and Tenant's Termination Rights in the Event
of Delay in the Approval of the PCP Permit: In the event a PCP
Permit satisfying the requirements of Section 1.K is not approved
and issued by the Outside Date (as defined in Section 1.K),
either Landlord or Tenant shall have the right by written notice
to the other within five (5) business days after the Outside Date
to elect to cause all, but not less than all, of the following to
occur: (i) terminate this Construction Agreement effective as of
the Outside Date, (ii) terminate all Three Leases effective as of
the Outside Date, (iii) pursuant to the terms of Section 2.8 of
the LLC Operating Agreement, to have the LLC reacquire the
interest of ALM in the LLC Operating Agreement in accordance with
the terms set forth therein and (iv) pursuant to the terms of
Paragraph 3.3 of the Ground Lease for the Adjoining Property, to
rescind the Ground Lease effective as of the stated commencement
date of the Ground Lease in accordance with the terms set forth
therein. Landlord shall have the right upon written notice to
Tenant at any time prior to the occurrence of the Outside Date,
to extend the Outside Date from time to time for reasonable
additional periods of time based upon Landlord's good faith
belief that within the respective additional period established
by such extended Outside Date, Tenant will be able to obtain the
approval and issuance of a PCP Permit satisfying the requirements
of Section 1.K. The respective termination and extension rights
of Tenant and Landlord as provided in this Section 2.C shall
again apply if a PCP Permit satisfying the requirements of
Section 1.K is not approved and issued by such extended Outside
Date.
3. DESIGN AND CONSTRUCTION OF SITE WORK AND SHELL
IMPROVEMENTS: Subject to obtaining all required governmental
approvals, Tenant shall exercise due diligence to cause the Shell
Improvements to be expeditiously constructed in the approximate
locations shown on the Site Plan attached hereto and incorporated
herein as Schedule A-2 (as such Schedule may be amended by the
Parties in response to any changes, conditions or limitations
imposed by any governmental authorities or applicable Laws), in
accordance with the following:
A. Development and Approval of Approved Specifications:
Tenant shall exercise due diligence (i) to expedite the
processing of the PCP Permit and (ii) to expeditiously prepare
and deliver to Landlord for its review and approval
specifications for the Shell Improvements (the "Specifications").
Within ten (10) business days after presentation to Landlord,
Landlord shall either approve such Specifications or notify
Tenant in writing of its specific objections to such
Specifications, with Landlord's approval not to be unreasonably
withheld. If Landlord reasonably objects to such Specifications,
the Parties shall meet and confer to develop Specifications that
are acceptable to both Landlord and Tenant within five (5)
business days after Landlord has notified Tenant of its
objections. The Parties agree to act reasonably to finalize the
Specifications, and once finalized, the Specifications shall be
referenced or described on Schedule "A-1" to this Construction
Agreement as the "Approved Specifications". The Approved
Specifications shall be revised by the Parties as necessary to
respond to any changes, conditions or limitations imposed by any
governmental authorities or applicable Laws.
B. Development and Approval of Preliminary Site Work and
Cold Shell Improvement Plans: Tenant shall exercise due
diligence to expeditiously prepare and deliver to Landlord for
its review and approval preliminary plans for the Site Work and
Cold Shell Improvements that are consistent with and conform to
the Approved Specifications, together with a detailed, line item
budget for the construction of the Site Work and Cold Shell
Improvements (collectively, the "Preliminary Cold Shell
Improvement Plans"). Within ten (10) business days after
presentation to Landlord, Landlord shall either approve such
Preliminary Cold Shell Improvement Plans or notify Tenant in
writing of its specific objections to the Preliminary Cold Shell
Improvement Plans, with Landlord's approval not to be
unreasonably withheld. If Landlord reasonably so objects to the
Preliminary Cold Shell Improvement Plans, the Parties shall meet
and confer to develop Preliminary Cold Shell Improvement Plans
that are acceptable to both Landlord and Tenant within five (5)
business days after Landlord has notified Tenant of its
objections. The Parties agree to act reasonably to finalize the
Preliminary Cold Shell Improvement Plans.
C. Development and Approval of Final Shell Improvement
Plans: Once the Preliminary Cold Shell Improvement Plans have
been approved by Landlord and Tenant, Tenant shall informally
consult with the staff of the City of Mountain View to obtain
comfort that the Preliminary Cold Shell Improvement Plans do not
incorporate any design element that would likely preclude the
future issuance of any required permits and approvals for the
construction of the Site Work and the Cold Shell Improvements.
Thereafter, Tenant shall exercise due diligence to expeditiously
complete and submit to Landlord for its approval final working
drawings for the Shell Improvements (i.e. for the Site Work, the
Cold Shell Improvements and the Warm Shell Improvements). Within
ten (10) business days after presentation to Landlord, Landlord
shall approve the final working drawings for the Shell
Improvements or notify Tenant in writing of its specific
objections, which approval shall not be unreasonably withheld.
If Landlord reasonably so objects, the Parties shall confer and
reach agreement upon final working drawings for the Shell
Improvements within five (5) business days after Landlord has
notified Tenant of its objections. The Parties agree to act
reasonably so as to promptly finalize the plans for the Shell
Improvements ("Final Shell Improvement Plans").
D. Governmental Approvals: Tenant shall exercise due
diligence to expeditiously obtain all required permits and
approvals from the City of Mountain View of the Final Shell
Improvement Plans, or which may otherwise be required under
applicable Laws for the construction of the Shell Improvements,
with copies of all such permits and approvals to be delivered to
Landlord, by Tenant, at no cost to Landlord. Landlord shall
cooperate with Tenant in such approval process. Tenant shall
diligently prosecute to completion such approval process.
Landlord agrees, upon Tenant's request, at no cost or liability
to Landlord, to reasonably assist Tenant in accordance with the
provisions of Section 13 hereof, to obtain all required permits
and approvals.
E. Commencement of Construction: Promptly after all
building permits (and any other required permits or approvals)
for the construction of the Shell Improvements are issued, Tenant
shall instruct the Prime Contractor to commence construction of
the Shell Improvements and to diligently prosecute such
construction to completion in accordance with the Final Shell
Improvement Plans, including the detailed, line item budget for
the Shell Improvements (the "Shell Budget"), and all applicable
Laws, using commercially reasonable efforts to achieve
Substantial Completion of the Shell Improvements as soon as
reasonably practicable, consistent with the orderly construction
of the Shell Improvements and any Interior Improvements then
being constructed.
F. Payment of Cost of Design and Construction of Shell
Improvements: The cost of the design and construction of the
Shell Improvements shall be paid as provided in this Section 3.F.
It is acknowledged that Tenant has advanced (i) costs of design
of the Shell Improvements, (ii) costs associated with the
planning for, obtaining governmental approval of, and
implementing mitigation measures associated with the relocation
of the burrowing owls located near the Property (only 66% of
which are allocable to the Property), and (iii) costs of seeking
design review approval for the issuance of the PCP Permit prior
to the date of this Construction Agreement (collectively "Prior
Expenditure"), with the amount of any Prior Expenditure to be
included as amounts paid by Tenant towards the cost of the Cold
Shell Improvements and Site Improvements as provided in this
Section 3.F. Except as provided herein, Landlord shall be
responsible for the payment of all costs incurred in connection
with the design and construction of the Shell Improvements, up to
the total amount of $31,707,000 (the "Improvement Allowance").
In addition, if the cost of the Cold Shell Improvements and Site
Work exceed an aggregate amount equal to $86 per occupiable
square foot based upon the square footage of the three Buildings,
(as measured by the City for purposes of approval of the PCP
Permit), then Landlord shall, at the request of Tenant, increase
the Improvement Allowance by an additional amount equal to the
lesser of (i) the difference between $31,707,000 and the total
cost of the Cold Shell Improvements and Site Work, and (ii)
$4,000,000, to pay (or assist in paying) the excess costs of the
Cold Shell Improvements and Site Work. All costs of designing
and constructing the Shell Improvements in excess of the
Improvement Allowance of $31,707,000 (plus the additional amount
of up to $4,000,000, if applicable) shall be the obligation of
Tenant, as provided in the balance of this Section 3.F, with the
portion to be so borne by Tenant referred to herein as "Tenant's
Share". Landlord shall not be obligated to reimburse Tenant for
any Prior Expenditure, but such Prior Expenditure shall be deemed
part of the cost of the Cold Shell Improvements and Site Work as
applicable, and shall be deemed amounts paid by Tenant which
shall be credited against Tenant's Share. Such Prior Expenditure
shall be credited dollar for dollar against Tenant's Share of the
first installment or installments of progress payments until
Tenant's Prior Expenditure is fully credited against Tenant's
Share and such Prior Expenditure shall be considered part of the
cost of the Shell Improvements which are included in the first
installment or installments of progress payments until such point
as Tenant has received full credit for its Prior Expenditure, but
in no event shall Landlord be obligated to directly reimburse
Tenant for any Prior Expenditure. Landlord shall have no
obligation to fund and Tenant shall have no right to request any
payments by Landlord of any portion of the Improvement Allowance
prior to the later of (i) the approval and issuance of a PCP
Permit and associated lapse of the respective termination rights
of Landlord and Tenant as provided in Section 2.C above and (ii)
the funding of P/A Charleston Road LLC by the required
contribution by ALZA Land Management, Inc. of the amount required
by Paragraph 2.1.A of the First Amended and Restated Operating
Agreement for P/A Charleston Road LLC dated September 1, 1997
(which funding amount exceeds the amount provided herein as the
maximum amount of the Improvement Allowance).
Any such amounts to be paid by Landlord to Tenant shall be
paid as follows: For purposes of illustration only, if the total
cost of constructing the Shell Improvements is $40,000,000
(including any Prior Expenditure) then Tenant's Share thereof
would be $4,293,000 (the excess over the total Improvement
Allowance of $35,707,000 ($31,707,000 plus the additional
$4,000,000)), or 10.7325% of the total cost. If the first
progress payment amount is $1,000,000 (with the amount due the
Prime Contractor being $950,000 and the remaining $50,000 being
the credit to Tenant for its Prior Expenditure), then Tenant's
Share of such progress payment would be $107,325.00 (or 10.7325%
of such progress payment) against which would be credited
Tenant's Prior Expenditure of $50,000, to the end that Tenant
would pay to the Prime Contractor the sum of $57,325.00 and
Landlord would be responsible to pay to the Prime Contractor from
the Improvement Allowance the sum of $892,675.00. For each
succeeding progress payment, Tenant would likewise be obligated
for 10.7325% thereof (and Landlord would be obligated for
89.2675%, but in no event in the aggregate more than the
Improvement Allowance). Assuming the same facts, but instead the
Prime Contractor is currently owed $880,000 and Tenant's Prior
Expenditure was $120,000, then (i) a portion of Tenant's Prior
Expenditure would instead offset all of the Tenant's Share of the
first progress payment, (ii) Landlord would be responsible to pay
to the Prime Contractor from the Improvement Allowance the sum of
$880,000, (iii) the total amount of the first progress payment
would instead be deemed to be $985,801 (calculated by treating
Landlord's payment of $880,000 as equating to Landlord's pro rata
share of 89. 2675% of the first progress payment), (iv) Tenant
would be deemed to have had $105,801 of its Prior Expenditure
offset by such first progress payment by Landlord ($985,801 -
$880,000), and (v) Landlord would not be obligated to directly
reimburse Tenant for its excess uncredited Prior Expenditure of
$14,199 ($120,000 - $105,801) but such amount would be available
to be applied as a remaining credit for Tenant's Prior
Expenditure to the next occurring progress payment.
Landlord shall be obligated, but not more than one time per
month, within ten (10) business days after receipt of (i) an
invoice from Tenant for any amounts then due and payable to
Tenant's design and construction professionals or material
suppliers for costs of design and construction of the Shell
Improvements, together with (ii) a detailed accounting reflecting
the full expenditure of said amounts and all other amounts since
paid and to be paid with the current disbursement from Landlord,
to pay Landlord's pro rata share of any amounts properly shown on
such invoice. Unless otherwise agreed by Landlord and Tenant,
Landlord shall make its payment jointly to Tenant and the General
Contractor (or, if applicable, to the respective vendor) except
in those instances where it is clearly demonstrated to Landlord
that Tenant has already paid the amount in full for which
reimbursement is then being sought (and any potentially
applicable mechanic's liens, if any, have been released as
respects the work to which such reimbursement is sought), in
which event such payment shall be made directly to Tenant. Any
portion of the Improvement Allowance which is not applied to the
payment of the cost of constructing the Shell Improvements, may
thereafter be used by Tenant to pay the cost of any Interior
Improvements. Absent the occurrence and continuance of any Event
of Default by Tenant hereunder, Landlord shall not incur any
costs on Tenant's behalf with respect to the design or
construction of the Shell Improvements without Tenant's prior
written consent.
As provided in Section 5.C hereof, any contracts with any
Prime Contractor(s) shall provide for the Prime Contractor to
acknowledge the limitation on Landlord's liability for any costs
incurred thereunder in the manner provided in Section 5.C.
G. Audit Rights: Landlord shall have the right to audit
the books, records and supporting documents of Tenant or, if
Landlord requests, of Tenant's design and construction
professionals and material suppliers, to the extent reasonably
necessary to determine the accuracy of Tenant's statements of the
costs of design and construction of the Shell Improvements,
during normal business hours, after giving Tenant at least five
(5) business days prior notice. Landlord shall bear the cost of
such audit unless such audit discloses a discrepancy whereby
Landlord has on an overall basis paid at least Ten Thousand
Dollars as an Improvement Allowance in excess of the total cost
of the Improvements which would have otherwise been payable or
reimbursable from the Improvement Allowance in accordance with
the provisions of this Construction Agreement. Any such audit of
the Shell Improvements shall be conducted, if at all, within one
(1) year following the date of Substantial Completion of the
Shell Improvements.
4. CONSTRUCTION OF INTERIOR IMPROVEMENTS:
A. Development and Construction Requirements Related to
Interior Improvements: Tenant shall have the right to take such
time as Tenant considers desirable under all the circumstances to
plan for and construct the Interior Improvements and to obtain
all required permits for such Interior Improvements, but in any
event, Tenant shall cause the Interior Improvements to be
constructed as to each Building prior to the expiration or
termination of the term of the respective Lease for such
Building. The Interior Improvements or any portion thereof, as
applicable, which are to be constructed and paid for at Tenant's
sole expense (except to the extent, if any, the Improvement
Allowance is not fully expended in constructing the Shell
Improvements), shall be designed by one or more Architects
approved by Landlord as provided in this Construction Agreement
and in a manner to comply with the Interior Build-Out
Specifications attached as Exhibit C to the Leases. The plans for
the Interior Improvements or any portion thereof, as applicable
(the "Interior Improvement Plans"), shall be subject to the
reasonable approval of Landlord, provided that Landlord's
approval shall be confined to matters which may adversely affect
any structural elements of the Building or which are inconsistent
with the Interior Build-Out Specifications. Any approval by
Landlord of Interior Improvement Plans which do not provide for
baseboards, drop ceilings or standard HVAC for office use in any
portion of the Building which would otherwise be suitable for
office use, shall not affect Tenant's surrender obligations under
Paragraph 7 of any Lease which may require Tenant to install such
improvements in such portion of the Building prior to the
surrender of the Building by Tenant to Landlord upon termination
of the respective Lease. The Interior Improvements or any
portion thereof, as applicable, shall be constructed by one or
more Prime Contractors approved by Landlord as provided in this
Construction Agreement. Copies of all permits and approvals
relating to any Interior Improvements, shall, once obtained by
Tenant, be delivered to Landlord, at no cost to Landlord.
Subsequent to obtaining all such permits and approvals and
Landlord's approval of the Interior Improvement Plans, Tenant
shall be authorized to instruct the applicable Prime Contractor
to construct the Interior Improvements substantially in
accordance with the Interior Improvement Plans.
B. Payment of Interior Improvements Costs: Tenant shall
be responsible for the payment of all costs of design and
construction of the Interior Improvements, including any costs of
the applicable Prime Contractor(s) and Architects in the design
and construction of the Interior Improvements (excepting any
amount thereof which may be payable from any portion of the
Improvement Allowance which is not applied to the cost of
constructing the Shell Improvements). Absent the occurrence and
continuance of any Event of Default by Tenant hereunder, Landlord
shall not incur any costs on Tenant's behalf with respect to the
design or construction of the Interior Improvements without
Tenant's prior written consent.
C. Audit Rights: Landlord shall have the right to audit
the books, records and supporting documents of Tenant or, if
Landlord requests, of Tenant's design and construction
professionals and material suppliers, to the extent reasonably
necessary to determine the accuracy of Tenant's statements of the
costs of design and construction of the Interior Improvements,
during normal business hours, after giving Tenant at least five
(5) business days prior notice. Landlord shall bear the cost of
such audit unless such audit discloses a discrepancy whereby
Landlord has on an overall basis paid at least Ten Thousand
Dollars as an Improvement Allowance in excess of the total cost
of the Improvements which would have otherwise been payable or
reimbursable from the Improvement Allowance in accordance with
the provisions of this Construction Agreement. Any such audit of
the Interior Improvements shall be conducted, if at all, within
one (1) year following the date of Substantial Completion of the
Interior Improvements.
5. GENERAL OBLIGATIONS OF TENANT:
A. Cross Default Remedy: As provided in Section 2 above,
if Tenant commits an uncured Event of Default under this
Construction Agreement, such shall constitute a default under
each of the three Leases until such time as (i) the Shell
Improvements have been Substantially Completed and (ii) either
(a) the Interior Improvements have been Substantially Completed
or (b) Tenant has instead satisfied the provisions of Section 5.B
below as to the posting of either a Letter of Credit or an
Account. Any Event of Default with respect to the construction
of any Interior Improvements as to any particular Building shall
at all times constitute a default with respect to the respective
Lease of that Building that includes such Interior Improvements
(but upon satisfaction of the Letter of Credit Substitution
Condition pursuant to Section 5.B below, shall not constitute a
default as to the respective Lease of any other Building).
B. Letter of Credit Substitute for Interior Improvement
Construction Obligation: If Tenant desires to eliminate the
cross-default remedy provided in Section 5.A hereof as a result
of the Interior Improvements not then being Substantially
Completed, Tenant may elect to deliver to Landlord an irrevocable
unconditional Letter of Credit issued for a period of at least
one year (the "Letter of Credit") in an amount representing
Twenty Five Dollars ($25) per square foot of such square footage
usable area in the Building as to which the Interior Improvements
are not then Substantially Completed. Said Letter of Credit must
be issued by an institutional lender reasonably acceptable to
Landlord and shall be unconditionally payable upon demand by
Landlord, and Landlord shall be entitled to draw upon the Letter
of Credit, without proof, for the purpose of completing
construction of the Interior Improvements or repayment of any
amounts owed with respect to such construction upon ten (10) days
notice to Tenant, in the event of the occurrence of any of the
following which is not cured within such ten (10) day period: (i)
Tenant fails to pay any sums when due under any construction
contract for the Interior Improvements (unless Tenant is in good
faith contesting such sum and has paid all amounts which Tenant
is not so contesting and bonds any liens that arise therefrom in
accordance with the requirements of Section 5.C hereof) or (ii)
Tenant fails to complete the construction of the Interior
Improvements as to any Building prior to the expiration or
termination of the respective Lease as to such Building or (iii)
Tenant allows any liens to be filed against the Property
associated with such Interior Improvements which are not removed
within the period provided in Section 5.C hereof. Any amount
drawn on the Letter of Credit which is not so applied by Landlord
shall be returned to Tenant. Tenant shall be obligated to cause
the Letter of Credit to be renewed at least twenty (20) days
prior to its expiration in the event that all of the Interior
Improvements are not then Substantially Completed, but the amount
of such Letter of Credit may then be reduced by an amount
representing Twenty Five Dollars ($25) per square foot of such
square footage usable area in the Building as to which the
Interior Improvements have been Substantially Completed since the
date of issuance of the Letter of Credit. In the event the
Letter of Credit is not so renewed as required above, Tenant
shall promptly establish and deposit into the Account (as defined
below) the dollar amount then required hereunder to be so
deposited. In lieu of the foregoing Letter of Credit, Tenant may
instead cause to be deposited in a restricted interest bearing
bank account, at the San Francisco Bay Area office of a major
bank reasonably acceptable to Landlord (the "Account"), an amount
in cash equating to the dollar amount provided for above. The
Account shall permit Landlord to draw upon it from time to time
upon ten (10) days notice to Tenant, solely upon Landlord's
certification to the bank that the amount of such drawing is to
pay the cost of completion of the construction of the Interior
Improvements (if applicable) or to pay the amount of any liens
filed against the Property associated with the construction of
the Interior Improvements (if applicable). The Account shall be
considered a restricted account and the funds contained therein
shall not be reduced by Tenant for any reason, except to pay the
contractor(s) directly for Tenant's Share of the cost of the
Interior Improvements. Upon Substantial Completion of the
Interior Improvements, Tenant shall request from Landlord that
any such Letter of Credit or the Account, as applicable, reduced
by any amount duly drawn thereon by Landlord, be returned to
Tenant, and Landlord shall within ten (10) business days
thereafter return such Letter of Credit or the Account to Tenant.
C. No Liens: During the construction of the Shell
Improvements and the Interior Improvements (including the
installation of any trade fixtures by Tenant), Tenant shall keep
the Property and each Building free from any liens arising out of
any work performed, materials furnished or obligation incurred by
Tenant, except to the extent any lien may arise from the breach
by Landlord of its obligations under this Construction Agreement
as to the making of payments from the Improvement Allowance. In
the event that Tenant shall not, within fifteen (15) days
following notice of the imposition of any such lien, cause the
same to be released of record, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but
not the obligation, to cause the same to be released by such
reasonable means as Landlord shall deem proper, including payment
of the claim giving rise to such lien, except to the extent that
Tenant is diligently contesting any such lien, in which event
Tenant may allow such lien to continue in existence during the
period of such contest, provided that (i) Landlord is satisfied,
in Landlord's reasonable discretion, that such contest will not
result in a foreclosure of all or any portion of the Property or
any Building as a result of such lien and (ii) Tenant bonds said
lien with a bonding company reasonably acceptable to Landlord and
in a form reasonably satisfactory to Landlord with said bond in
the amount of the lien, in which event Landlord shall not be
entitled to pay or discharge the lien, provided the lien is
removed within sixty (60) days from the date the lien is filed.
All sums paid by Landlord for such purpose, and all expenses
incurred by Landlord in connection therewith, shall be payable to
Landlord by Tenant within ten (10) days after written demand with
interest at the rate of Bank of America's Prime Rate (or
equivalent rate) plus five percent (5%), but in no event greater
then the maximum rate of interest permitted by applicable law.
Any construction contract with a Prime Contractor shall provide
therein (or by means of a separate agreement with the Prime
Contractor) that such Prime Contractor acknowledges and agrees
that (i) Landlord's obligations and liability under such
construction contract (and any associated contracts) is limited
to Landlord's payment of the Improvement Allowance as provided
herein, (ii) that Landlord shall have no liability or
responsibility to the Prime Contractor or any third parties for
the payment of any monies in excess thereof, and (iii) it shall
look solely to Tenant for any payment for which Landlord is not
obligated to pay from the Improvement Allowance hereunder.
D. Tenant Delivery: Tenant hereby assigns to Landlord,
effective upon either (i) the date of termination of this
Construction Agreement pursuant to Section 2.C above or (ii) an
Event of Default by Tenant hereunder (following written notice
from Landlord of the occurrence of a default and the expiration
of a reasonable period of time for Tenant to cure such alleged
default without such default having been cured) all of its
interest in and to the plans and specifications prepared for the
Improvements and Interior Improvements, all studies, data and
drawings with respect thereto (excluding any confidential
programming) prepared by or for Tenant, and the contracts and
agreements relating to such plans and specifications or studies,
data and drawings, or to the construction of the Shell
Improvements and Interior Improvements, including but not limited
to the general contracts therefor, in each case, to the extent
assignable and without any representation or warranty. Landlord
shall not have any obligation under any of the contracts unless
Landlord expressly agrees to assume such obligations in writing.
Subject to the requirement for any third party consents to the
foregoing assignment, Landlord shall have the right to exercise
any rights of Tenant under the contracts at any time following
the occurrence of such assignment. Following the completion of
the Improvements and Interior Improvements, Tenant shall, at
Tenant's sole cost, (i) deliver to Landlord a final as-built set
of plans on mylar sepia drawn to 1/8" scale, prepared by a
licensed engineer or architect, of the Final Shell Improvement
Plans and Interior Improvement Plans and (ii) file or cause to be
filed a Notice of Completion in accordance with all applicable
laws, and deliver a copy of said Notice of Completion to
Landlord.
E. Five Day Notice Requirement: Notwithstanding that
Landlord has approved plans as aforesaid, the first Prime
Contractor (or any subcontractor under such Prime Contractor),
shall not enter upon the Property to commence the construction of
the Shell Improvements until at least five (5) days' prior
written notice has been given to Landlord specifying the
construction of the Shell Improvements is about to commence. No
prior notice shall be required as to any subsequent contractors
or subcontractors once the construction of the Shell Improvements
has commenced.
F. Tenant's Indemnification Related to the Shell
Improvements and the Interior Improvements: Except as to the
obligations of Landlord hereunder as to the funding of the
Improvement Allowance, Tenant shall be liable to Landlord for,
and shall fully and completely indemnify and hold Landlord and
its members harmless from, any cost, expense, claim, damage,
loss, obligation or liability of any kind or nature whatsoever
(including Landlord's attorneys' fees) which occurs or accrues
during the course of construction of the Improvements as set
forth herein, including, but not limited to any loss, damage,
injury or death related to the construction of the Shell
Improvements and/or Interior Improvements occurring during the
course of construction of the Shell Improvements and/or Interior
Improvements. This indemnity shall also extend to any claims of
third parties asserting any breach of any license agreements,
memorandums of understanding or other agreements of Tenant (or of
Landlord entered into by Landlord at Tenant's request) related to
any burrowing owl mitigation plan associated with the relocation
of the former burrowing owls located near the Property, whether
any such claim may arise before or after the completion of
construction of the Improvements. In the event any claim is
asserted which is covered by the foregoing indemnity, Tenant
shall defend Landlord with legal counsel reasonably acceptable to
Landlord.
G. Insurance Requirements: Tenant shall in its
construction contract with any Prime Contractor, require such
contractor to carry and maintain with insurance companies having
"A.M. Best's" rating of "A" "VII" or better (unless a different
rating is expressly approved in writing by Landlord as to any
particular insurance coverage), the insurance coverage indicated
below as a minimum requirement:
Type of Coverage Limits of Liability
Worker's Compensation * Statutory per State of
California
Employer's Liability $2,000,000.00
Commercial General Liability ** $2,000,000.00
Occurrence Form
Broad Form Contractual Liability
Automobile Liability $2,000,000.00
* Tenant shall cause the Prime Contractor to furnish an
endorsement from its insurer waiving rights of subrogation
against Landlord and its insurers under such insurance
coverage.
** Tenant shall cause the Prime Contractor to have its
insurer or insurance agency furnish Landlord with an
appropriate certificate of insurance reflecting Landlord and
its members named as "Additional Insureds".
Tenant shall cause appropriate Builder's Risk insurance
(covering "all risks", including earthquake and flood) in form
and content reasonably acceptable to Landlord to be carried
during the course of construction of the Shell Improvements and
the Interior Improvements. Landlord and Tenant shall consult as
to any insurance coverage programs which either Landlord or
Tenant may propose with regard to seeking to provide appropriate
insurance coverage at the least expense during the course of
construction of the Improvements. Tenant or its Prime Contractor
shall bear the sole responsibility for the payment of the
premiums for the foregoing insurance policies (but such shall not
preclude Tenant from subsequently including any such premium
costs in any requests for any disbursements of the Improvement
Allowance pursuant to Paragraphs 3 and 4 above to the extent any
such insurance is included within the category of expenses which
are subject to payment from such Improvement Allowance)
H. Application of Lease Terms During Construction Period:
All of the terms of the Lease shall apply to any entry by Tenant
pursuant to this Construction Agreement (including provisions of
said Lease regarding indemnification and insurance) with the
exceptions related to the payment of monthly Basic Rent and
Additional Rent (except as otherwise noted in said Lease or this
Construction Agreement). The obligations of Tenant contained in
this Section 5.H shall survive the expiration of this
Construction Agreement.
I. Ownership and Encumbering of Shell Improvements and
Interior Improvements: Except as otherwise provided in the
respective Lease as to Interior Improvements, all of the
Improvements shall become and remain a part of the Property upon
installation or construction and shall be the property of
Landlord. Tenant shall have only a leasehold interest therein,
subject to all of the terms and conditions of the Lease. None of
the Shell Improvements and/or Interior Improvements shall be
encumbered, liened or pledged, transferred, removed or materially
altered, except as otherwise provided in the Lease.
J. Inspection Following Completion of Shell Improvements
and Interior Improvements: Within ninety (90) days after the
Shell Improvements and Interior Improvements are respectively
Substantially Completed (as that term is defined herein),
Landlord (or Landlord's representative) and Tenant shall conduct
a joint walk-through of the Property, and inspect such Shell
Improvements and Interior Improvements, using due diligence to
discover all incomplete or defective construction. After such
inspection has been completed, Landlord or its representative
shall prepare, and both Parties shall sign, a list of all "punch
list" items which the Parties agree are to be corrected by
Tenant. Tenant shall use reasonable efforts to complete and/or
repair such "punch list" items within thirty (30) days after
executing such list, it being agreed however, that the existence
of any "punch list" items will not result in any delay of the
respective Rent Commencement Date as provided in Section 1.K
above.
6. GENERAL DESIGN AND CONSTRUCTION OBLIGATIONS:
A. Design Requirements: Tenant shall cause all plans,
drawings and specifications for the Shell Improvements and
Interior Improvements, whether preliminary or final, to be
prepared by licensed architects and, where appropriate, licensed
mechanical, electrical and structural engineers. Tenant shall
require the Architect to prepare all plans, drawings and
specifications for the Shell Improvements and Interior
Improvements in strict compliance with the requirements of all
applicable Laws. The review and approval of any plans, drawings
and specifications by Landlord shall not alter or diminish
Tenant's or the Architect's obligations under this Section 6.A.
Landlord's approval of such plans shall not be construed as
approval of any construction detail with respect to conformance
to any applicable City or governmental ordinance or code, and by
approving such plans, Landlord assumes no liability or
responsibility therefor, or for any defect in said plans and/or
the related construction by Tenant.
B. Changes to Approved Final Improvement Plans: Once the
Final Improvement Plans have been approved by Landlord and
Tenant, neither shall have the right to order extra work or
change orders with respect to the construction of the Shell
Improvements (including any Site Work) without the prior written
consent of the other Party, which consent shall not be
unreasonably withheld, provided there is a reasonable basis for
such change or such change is required by any errors or omissions
in the Final Improvement Plans or any requirements of any
applicable Laws.
C. Good Faith: Landlord and Tenant shall act reasonably
and in good faith in considering whether to approve any plans and
specifications contemplated in this Construction Agreement.
D. Contracts with Design and Construction Professionals:
Any Architect or Prime Contractor for the Shell Improvements or
the Interior Improvements shall be selected in the manner
provided in Sections 1.H and 1.I respectively. Tenant shall
enter into the agreements for the design and construction of the
Shell Improvements with the Architect and Prime Contractor so
selected in Tenant's name, but each of such agreements shall be
subject to Landlord's prior review and written approval, and each
shall expressly name Landlord as a third party beneficiary
thereof.
7. DELIVERY OF POSSESSION, PUNCH LIST AND ACCEPTANCE
AGREEMENT: Promptly following the construction of the Shell
Improvements for each Building, the gross leaseable square
footage contained within the applicable building shell shall be
measured by the Prime Contractor for the Shell Improvements; such
measurement shall be from the outside of the exterior walls and
shall include any fully enclosed atriums, and to the extent any
such areas constitute an indentation into the prevailing outside
wall line of any Building, any covered entrance or egress areas
or covered loading areas. The square footage of each of the
three Buildings as so determined shall be used as the square
footage of each respective Building and the total of all three
Buildings for all purposes under the respective Lease; provided,
however, that none of the following areas shall be included when
determining such square footage calculation: enclosed
ground-level or elevated walkways that are not for occupancy
between Buildings, any building tower for connecting or accessing
any elevated walkways, external unoccupied equipment areas
(whether below ground, on the roof, in a roof penthouse or
otherwise), provided that such areas are not considered by the
City of Mountain View to count against the approved maximum
square footage which Tenant may develop pursuant to the
provisions of the PCP Permit. As provided in Section 5.J, within
ninety (90) days after the Shell Improvements and Interior
Improvements are respectively Substantially Completed (as to each
Building), Landlord and Tenant and/or their respective employees
and agents, shall together inspect the Shell Improvements and
Interior Improvements so completed and prepare a punch list.
After such inspection has been completed, each Party shall sign
an acceptance agreement which shall include a list of all punch
list items which are to be corrected by Tenant. Such acceptance
agreement shall neither preclude Landlord or Tenant from later
discovering any additional punch list items or latent defects and
requiring the Prime Contractor or any subcontractors to complete
and/or repair any such additional punch list items or latent
defects which were not readily apparent at the time of such
inspection, nor affect any of Landlord's or Tenant's rights under
any contractor's or subcontractor's warranties.
8. STANDARD OF CONSTRUCTION AND ENFORCEMENT OF WARRANTIES:
Tenant shall cause the architect contract with the respective
Architect for the Building Shell and for any Interior
Improvements to require the Architect to cause the Improvements
being designed by it to be designed in compliance with all
requirements of applicable Laws. Tenant shall cause the
construction contract with the Prime Contractor to require the
Prime Contractor to cause the Improvements being constructed by
it to be constructed (i) in a good and workmanlike manner, (ii)
in material compliance with all requirements of applicable Laws,
(iii) substantially in accordance with the Final Shell
Improvement Plans and Final Interior Improvement Plans as
modified by change orders approved in accordance with the
provisions of this Construction Agreement, and (iv) with all
materials and equipment to be furnished to be new, of good
quality and installed in accordance with the vendor's or
manufacturer's specifications, instructions and requirements.
Tenant shall cause copies of any contractor's, manufacturer's or
installer's warranties received by Tenant to be delivered to
Landlord. Each of the Parties agree that it shall, upon the
other Party's request, cooperate with the other Party in
enforcing any third party warranties with respect to the
construction of any Improvements.
9. EXTENSION OF AGREED CONSTRUCTION PERIOD CAUSED BY
LANDLORD, DAMAGE OR WEATHER DELAYS: If because of any Landlord
Delay, Damage Delay or Weather Delay, Tenant is delayed in
completing any Shell Improvements or Interior Improvements, then
the Agreed Construction Period shall be extended one (1) day for
each day that the substantial completion of such Shell
Improvements and/or Interior Improvements is delayed because of
either a Landlord Delay (as defined in Section 1.N above), a
Damage Delay (as defined in Section 1.M above) or a Weather Delay
(as defined in Section 1.O), which extension of the Agreed
Construction Period may result in a delay in the Rent
Commencement Date (provided that as provided in Section 1.K
above, there shall be no double counting of any delay where the
delay is caused by more than one cause). Absent a willful breach
by Landlord, the remedy provided to Tenant under this Section 9
shall be Tenant's sole and exclusive remedy for any Landlord
Delay, and Landlord shall not be subject to any other liability
of any type whatsoever for any delay in the Substantial
Completion of the Shell Improvements or Interior Improvements.
10. DELIVERY OF DOCUMENTS: Tenant shall, within thirty
(30) days after the same is obtained by Tenant, deliver to
Landlord (i) a copy of any temporary or permanent certificate of
occupancy issued by the City of Mountain View with respect to any
of the Shell Improvements and Interior Improvements, (ii) a
recorded Notice of Completion, (iii) all final lien releases and
(iv) as-built drawings with respect to the Shell Improvements and
Interior Improvements as respectively completed.
11. LANDLORD DISCLAIMER: Except as expressly otherwise
provided in this Construction Agreement or in any Lease, (i)
Landlord shall have no responsibility for the design, engineering
or construction of the Improvements or the maintenance or repair
thereof, and (ii) Landlord makes no representation or warranty
regarding the suitability or quality of the Improvements or any
land entitlements.
12. TAX INCREASES DURING CONSTRUCTION PERIOD:
Notwithstanding anything to the contrary in this Construction
Agreement or the related Leases, in the event prior to the
respective Lease Commencement Date there is an interim or
supplemental reassessment of the Property based upon the added
value of the Shell Improvements and/or Interior Improvements,
then within ten (10) days after Tenant's receipt of the
applicable tax xxxx from Landlord, Tenant shall pay any interim
or supplemental taxes (but no penalties or interest in connection
therewith) that have been levied against the Property and are
attributable to the added value of the Shell Improvements and/or
Interior Improvements during the period prior to the Lease
Commencement Date. As of the Lease Commencement Date, the
provisions of the Lease shall control as to the payment of Real
Property Taxes accruing thereafter.
13. LANDLORD COOPERATION AND COORDINATION: Landlord shall
cooperate with Tenant to the extent reasonably necessary, at no
cost or liability to Landlord, in Tenant's processing of all
necessary building permits for the construction of the
Improvements. Provided there is no cost or liability to Landlord
with respect to the same, upon the request of Tenant and at no
cost to Tenant, Landlord shall reasonably assist Tenant with the
negotiation of any construction contracts or architect contracts
pertaining to any Shell Improvements and/or Interior Improvements
to be constructed. Landlord shall not be entitled to any fee
for its involvement therein. Notwithstanding any implication
herein to the contrary, other than the failure of Landlord to
approve or execute any documents required to be approved or
executed by Landlord as provided herein, any failure of Landlord
to assist Tenant in the obtaining of any governmental approvals
or in negotiating any contracts shall not form the basis for any
Landlord Delay as defined herein or any Event of Default by
Landlord.
Landlord shall cooperate with Tenant, at no cost to
Landlord, to assist Tenant in obtaining the PCP Permit, any
required building permits and any other permits and approvals
which are required or are desirable from the City of Mountain
View or any other governmental authority for the construction of
any of the Improvements, as well as any other required approval
under any applicable Laws. Landlord's cooperation shall extend
to executing any reasonably appropriate applications for permits,
grants of easements to public utilities or other documents as may
be reasonably required or appropriate for obtaining all required
approvals for the construction of the Improvements or for
satisfying any conditions that may be imposed by the City of
Mountain View or any other governmental authority as a condition
to the PCP Permit, as a condition to any building permit, or as a
condition to any other governmental or public utility approval or
permit to the development of the Property in the manner
contemplated by this Construction Agreement, provided such
conditions do not directly and adversely affect any other real
property (other than the Adjoining Property) owned by any of the
members of Landlord, or any affiliate of any such member.
Landlord shall not be entitled to any fee for management or
coordination of any design or construction professionals engaged
by Tenant in the construction of any Improvements, nor shall
Landlord be entitled to reimbursement for any overhead or
administrative costs associated with its cooperation with Tenant
as provided for in this Construction Agreement. Notwithstanding
any implication herein to the contrary, other than the failure of
Landlord to approve or execute any documents required to be
approved or executed by Landlord as provided herein, any failure
of Landlord to assist Tenant in the obtaining of any governmental
approvals or in negotiating any contracts shall not form the
basis for any Landlord Delay as defined herein or any Event of
Default by Landlord.
It is acknowledged that Landlord and Tenant are
required to cooperate in an effort to obtain City of Mountain
View approval of the PCP Permit and City of Mountain View and the
State of California approval of various agreements associated
with the Burrowing Owl Mitigation Plan (including associated
license agreements with the City of Mountain View and Memorandums
of Understandings with the State of California, Department of
Fish and Game) which are considered necessary or desirable for
obtaining approval for the design or construction of the
Improvements. Landlord agrees that it shall upon the request of
Tenant join in executing any reasonable agreements with such
governmental authorities as are appropriate for the purposes of
obtaining or implementing such approvals if such execution by
Landlord is required by the applicable governmental authority,
with it being further agreed between Landlord and Tenant that for
so long as any Lease shall continue in effect, Tenant shall be
solely responsible for performing any obligations of Landlord
under any such agreements and shall hold Landlord harmless from
any costs, expenses and liabilities relating to the performance
of any such obligations under such agreements (including any
attorneys' fees and costs reasonably incurred by Landlord in
defending against any attempt to require Landlord (as opposed to
Tenant) to perform any such obligations under any such
agreements).
14. CHOICE OF LAW; SEVERABILITY: This Agreement shall in
all respects be governed by and construed in accordance with the
laws in the State of California and the jurisdiction of Santa
Xxxxx County. If any provisions of this Construction Agreement
shall be invalid, unenforceable, or ineffective for any reason
whatsoever, all other provisions hereof shall be and remain in
full force and effect.
15. AUTHORITY TO EXECUTE: The Parties executing this
Construction Agreement hereby warrant and represent that they are
properly authorized to execute this Construction Agreement and
bind the Parties on behalf of whom they execute this Construction
Agreement as to all of the terms, covenants and conditions of
this Construction Agreement as they relate to the respective
Parties hereto.
16. MISCELLANEOUS MATTERS:
A. Representatives of the Parties: Each of Landlord and
Tenant shall designate to the other in writing the name of one
individual representative who will work with the other's
representative throughout the respective period of construction
of the Shell Improvements and Interior Improvements upon the
Property and within each Building. At any time, either Landlord
or Tenant may change the identity of its representative by
delivering written notice to the other of the identity of a
replacement representative.
B. No Fee to Landlord or Tenant: Neither Landlord nor
Tenant nor any affiliate of either shall receive any fee for its
involvement as stated in this Construction Agreement in
connection with the design, review, approval or construction of
the Improvements.
C. Cleanup Expenses: In conjunction with the Substantial
Completion of all of the Improvements for each Building, Tenant
shall thoroughly clean the adjoining portion of the Property and
the applicable Building, including, without limitation, removal
of all rubbish and debris.
D. No Miscellaneous Charges: Neither Tenant nor its
design and construction professionals shall be charged for
parking or the use of parking during the construction of any of
the Shell Improvements and/or the Interior Improvements. Any
utilities consumed during construction of the Shell Improvements
and/or Interior Improvements shall be appropriately allocated as
either a cost of the Shell Improvement or a cost of the Interior
Improvements.
E. Bonding: Notwithstanding anything to the contrary set
forth in the Lease, Tenant shall not be required to obtain or
provide any completion or performance bond in connection with any
construction, alteration or improvement work performed by or on
behalf of Tenant in the design and construction of the Shell
Improvements or the Interior Improvements (other than that Tenant
shall be obligated, in accordance with the requirements of
Section 5.C hereof, to bond against any liens that may be filed
against the Property arising out of any work performed, materials
furnished or obligation incurred by Tenant).
F. Consent: Whenever the consent or approval of one Party
to the other Party's requests, actions or submittals is required
hereunder, such consent or approval shall not be unreasonably
withheld.
IN WITNESS WHEREOF, Landlord and Tenant have executed and
delivered this Construction Agreement as of the day and year
first stated above.
LANDLORD: TENANT:
P/A CHARLESTON ROAD LLC, ALZA CORPORATION,
a California limited liability company a Delaware
corporation
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxx X. Xxxxxxxx
Xxxx Xxxxxxxxx, Trustee, UTA
dated 7/20/77 (Xxxx Xxxxxxxxx Title:Senior Vice
President,
Survivor's Trust, formerly known Commercial
Services
as Arrillaga Family Trust), as
amended Xxxx X. Xxxxxxxx
Type or Print Name
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, Trustee, UTA
dated 7/20/77 (Xxxxxxx X. Xxxxx
Separate Property Trust), as
amended
By: ALZA Land Management, Inc.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxx
Title: President
Xxxx X. Xxxxxxxx
Type or Print Name
