1
OFFICE LEASE
between
SYSTRON BUSINESS CENTER, LLC
Landlord
and
PINNACLE DATA COPORATION
Tenant
January 1, 1998
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TABLE OF CONTENTS
PAGE
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Article 1 REAL PROPERTY, BUILDING, AND PREMISES.............................................................2
1.1 Lease of Premises............................................................................2
1.2 Appurtenant Rights...........................................................................2
1.3 Landlord's Reservation of Rights.............................................................2
1.4 Preparation of Premises; Acceptance..........................................................2
1.5 Rentable Area................................................................................2
1.6 Right of First Offer.........................................................................2
Article 2 LEASE TERM........................................................................................3
2.1 Lease Term. .................................................................................3
2.2 Confirmation of Lease Information............................................................3
2.3 Lease Year...................................................................................3
2.4 Delay in Delivery of Premises................................................................3
2.5 Option To Extend Term........................................................................4
Article 3 BASE RENT.........................................................................................5
3.1 Definition of "Base Rent"--Limited Setoff....................................................5
3.2 Initial Payment; Proration...................................................................5
3.3 Application of Payments......................................................................5
Article 4 ADDITIONAL RENT...................................................................................5
4.1 Additional Rent; Rent........................................................................5
4.2 Definitions..................................................................................5
4.3 Calculation and Payment of Additional Rent...................................................9
4.4 Taxes and Other Charges for Which Tenant Is Directly Responsible.............................9
4.5 Landlord's Books and Records; Tenant's Audit Rights..........................................9
Article 5 SECURITY DEPOSIT.................................................................................10
Article 6 USE..............................................................................................10
6.1 Permitted Use. .............................................................................10
6.2 Rules and Regulations.......................................................................10
6.3 Additional Restrictions on Use..............................................................10
Article 7 COMPLIANCE WITH LAWS.............................................................................10
7.1 Definition of "Laws and Orders."............................................................10
7.2 Repairs, Replacements, Alterations, and Improvements........................................10
7.3 Collateral Estoppel.........................................................................10
Article 8 HAZARDOUS MATERIAL...............................................................................11
8.1 Use of Hazardous Material...................................................................11
8.2 Indemnification.............................................................................11
8.4 Remediation Obligations; Tenant's Rights on Cleanup by Landlord.............................11
8.5 Definition of "Hazardous Material.".........................................................11
Article 9 UTILITIES AND SERVICES...........................................................................11
9.1 Standard Tenant Utilities and Services......................................................11
9.2 Overstandard Tenant Use.....................................................................12
9.3 Interruption of Utilities...................................................................12
Article 10 REPAIRS AND MAINTENANCE..........................................................................12
10.1 Tenant's Repair and Maintenance Obligations................................................12
10.2 Landlord's Repair and Maintenance Obligations..............................................13
Article 11 ALTERATIONS AND ADDITIONS........................................................................13
11.1 Landlord's Consent to Alterations..........................................................13
11.2 Compliance of Alterations With Laws and Insurance Requirements.............................14
11.3 Manner of Construction.....................................................................14
11.4 Payment for Improvements...................................................................14
11.5 Construction Insurance.....................................................................14
11.6 Landlord's Property........................................................................14
11.7 Initial Improvements.......................................................................15
Article 12 COVENANT AGAINST LIENS...........................................................................15
Article 13 EXCULPATION, INDEMNIFICATION, AND INSURANCE......................................................15
13.2 Exculpation................................................................................15
13.3 Indemnification............................................................................15
13.4 Compliance With Insurer Requirements.......................................................16
13.5 Tenant's Liability Coverage................................................................16
13.6 Tenant's Workers' Compensation and Employer Liability Coverage.............................17
13.7 Tenant's First Party Insurance.............................................................17
13.8 Other Insurance Coverage...................................................................18
13.9 Form of Policies and Additional Requirements...............................................18
13.10 Waiver of Subrogation......................................................................18
13.11 Disclosures Regarding Real Property........................................................18
Article 14
DAMAGE AND DESTRUCTION ..........................................................................19
14.1 Repair of Damage by Landlord...............................................................19
14.2 Repair Period Notice.......................................................................19
14.3 Landlord's Option To Terminate or Repair...................................................19
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TABLE OF CONTENTS
(CONTINUED)
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14.4 Tenant's Option To Terminate..................................................................19
14.5 Rent Abatement Due to Casualty................................................................19
14.6 Damage Near End of Term.......................................................................19
14.7 Effective Date of Termination; Rent Apportionment.............................................19
14.8 Waiver of Statutory Provisions................................................................19
Article 15 CONDEMNATION........................................................................................20
15.1 Definition of "Condemnation.".................................................................20
15.2 Effect on Rights and Obligations..............................................................20
15.3 Termination of Lease..........................................................................20
15.4 Effect of Condemnation if Lease Is Not Terminated.............................................20
15.5 Allocation of Award...........................................................................20
15.6 Temporary Taking.............................................................................21
Article 16 ASSIGNMENT AND SUBLEASING...........................................................................21
16.1 Restricted Transfers..........................................................................21
16.2 Transfer Procedure............................................................................21
16.3 Landlord's Consent............................................................................22
16.4 Transfer Premium..............................................................................22
16.5 Effect of Transfer............................................................................22
16.6 Transfers of Ownership Interests and Other Organizational Changes.............................22
Article 17 SURRENDER OF PREMISES...............................................................................23
17.1 Surrender of Premises.........................................................................23
17.2 Removal of Tenant Property by Tenant..........................................................23
Article 18 HOLDING OVER........................................................................................23
18.1 Holdover Rent.................................................................................23
Article 19 ESTOPPEL CERTIFICATES ...........................................................23
19.1 Obligation To Provide Estoppel Certificates...................................................23
19.2 Failure To Deliver............................................................................23
Article 20 SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT.......................................................24
20.1 Automatic Subordination; Nondisturbance Agreement To Include Specified Terms..................24
20.2 Subordination Agreement.......................................................................24
20.3 Attornment....................................................................................24
20.4 Notice of Default; Right To Cure..............................................................24
Article 21 DEFAULTS AND REMEDIES...............................................................................24
21.1 Tenant's Default..............................................................................24
21.2 Replacement of Statutory Notice Requirements..................................................24
21.3 Landlord's Remedies on Tenant's Default.......................................................25
21.4 Form of Payment After Default.................................................................25
21.5 Efforts To Relet..............................................................................25
21.6 Acceptance of Rent Without Waiving Rights.....................................................25
21.7 Tenant's Remedies on Landlord's Default.......................................................25
Article 22 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS....................................................26
22.1 Landlord's Right To Perform Tenant's Obligations..............................................26
22.2 Reimbursement by Tenant.......................................................................26
Article 23 LATE PAYMENTS.......................................................................................26
23.1 Late Charges..................................................................................26
23.2 Interest......................................................................................26
Article 24 NONWAIVER...........................................................................................26
24.1 Nonwaiver.....................................................................................26
24.2 Acceptance and Application of Payment; Not Accord and Satisfaction............................26
Article 25 DISPUTE RESOLUTION..................................................................................26
25.1 Waiver of Right to Jury Trial.................................................................26
25.2 Resolving Disagreement Over Fair Market Rental Value..........................................27
Article 26 ATTORNEY FEES AND COSTS.............................................................................27
26.1 Attorney Fees and Costs.......................................................................28
Article 27 LANDLORD'S ACCESS TO PREMISES.......................................................................28
27.1 Landlord's Access to Premises.................................................................28
27.2 Restrictions on Entry; Tenant's Waiver........................................................28
27.3 Method of Entry...............................................................................28
27.4 Emergency Entry...............................................................................28
Article 28 SIGNS...............................................................................................28
28.1 Building Name; Landlord's Signage Rights......................................................28
28.2 Tenant's Signage Rights.......................................................................28
Article 29 TENANT PARKING......................................................................................29
29.1 Number of Parking Spaces......................................................................29
29.2 Changes in Location, Layout, and Service......................................................29
Article 30 MISCELLANEOUS.......................................................................................29
30.1 Captions......................................................................................29
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30.2 Word Usage...................................................................................29
30.3 Counting Days................................................................................29
30.4 Entire Agreement; Amendments.................................................................29
30.5 Exhibits.....................................................................................29
30.6 Partial Invalidity...........................................................................29
30.7 Binding Effect...............................................................................29
30.8 Independent Covenants........................................................................29
30.9 Governing Law................................................................................29
30.10 Notices......................................................................................29
30.11 Force Majeure--Specific Exceptions...........................................................30
30.12 Time of the Essence..........................................................................30
30.13 Modifications Required by Landlord's Lender..................................................30
30.14 Recording....................................................................................30
30.15 Liability of Landlord........................................................................30
30.16 Transfer of Landlord's Interest..............................................................30
30.17 Submission of Lease..........................................................................31
30.18 Legal Authority..............................................................................31
30.19 Right To Lease...............................................................................31
30.20 No Air Rights................................................................................31
30.21 Brokers......................................................................................31
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OFFICE LEASE
This Office Lease is made by the Landlord and Tenant named below, who
agree as follows:
Part I
SUMMARY OF BASIC LEASE INFORMATION
The basic terms of this Lease are:
1. Date of Lease: January 1, 1998
2. Landlord: Systron Business Center, LLC, a California limited
liability company
3. Tenant: Pinnacle Data Corporation, a California corporation
4. Premises and Building:
(a) Building (Section 1.1): ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇.
The "Building" located on the Real Property is shown on the attached Exhibit A.
(b) Total Number of Rentable Square Feet in the Building
(Section 1.1): 90,948
(c) Premises (Section 1.1): Approximately 30,000 Rentable
Square Feet of space located in the Building, as shown on Exhibit A.
(d) Expansion of Premises (Section 1.6): Tenant has a right of
first refusal to expand the Premises to include additional space that may become
available, as shown on Exhibit A, during the term of the Lease, such right of
first refusal to be exercised in accordance with Section 1.6.
5. Lease Term:
(a) Duration (Section 3.1): Ten (10) years and zero (0) months.
(b) Lease Commencement Date (Section 3.1): March 15, 1998.
(c) Lease Expiration Date (Section 2.1): The last day of the
month in which the tenth (10th) anniversary of the Lease Commencement Date
occurs.
(d) Optional Term Extensions (Section 2.5): Two (2) extensions
for five (5) years each.
6. Base Rent (Section 3.1): (Measured From Lease Commencement
Date) Base Rent is subject to adjustment as set forth in Section 3.1.
Months Monthly Base Rent
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3/15/98-10/31/98 Rental Abatement
11/1/98-2/28/03 $40,500
3/1/03-8/31/05 $42,000
9/1/05-Lease Expiration Date $45,000
7. Additional Rent (Article 4): Tenant's Share of Increased Direct
Expenses (Section 4.2.6): Approximately 32.99%.
8. Security Deposit (Article 5): None
9. Permitted Use (Section 6.1): General office.
10. Liability insurance (minimum) (Section 13.5.10):
(a) General aggregate limit: $3,000,000.
(b) Personal injury and advertising injury limit: $3,000,000.
(c) Each occurrence limit: $2,000,000
(d) Fire damage liability limit (any one fire): $2,000,000.
11. Late charge and interest (Article 23):
(a) Late charge (Section 23.1): Three percent (3%).
(b) Interest on delinquent Rent (Section 23.2): Wall Street
Journal Prime Rate (or if such rate is no longer published such other prime rate
reasonably selected by Landlord) plus two percent (2%).
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2.4 Delay in Delivery of Premises. If Substantial Completion of the
Tenant Improvements has not occurred by the Outside Date, as defined in Section
2.4.1, Tenant's sole remedy, in addition to those stated in Section 3.1, shall
be to terminate this Lease as provided in this Section 2.4.
2.4.1. Definition of "Outside Date." For purposes of this Section
2.4, the Outside Date shall be April 15, 1998, as extended by the number of days
of Tenant Delays described in Exhibit B and by the number of days of Force
Majeure delays as defined in Section 30.11.
2.4.2. Tenant's Termination Notice. If Substantial Completion of
the work that Landlord is required to do pursuant to the Leasehold Improvement
Agreement has not occurred by the Outside Date, Tenant's sole remedy shall be
the right to deliver a notice to Landlord ("Outside Date Termination Notice")
electing to terminate this Lease effective on Landlord's receipt of the Outside
Date Termination Notice ("Effective Date"). The Outside Date Termination Notice
must be delivered by Tenant to Landlord, if at all, no earlier than the Outside
Date and no later than thirty (30) days after the Outside Date.
2.5 Option To Extend Term. Landlord grants to Tenant two (2) options
to extend the Lease Term (each, an Extension Option) for a period of five (5)
years (each an Option Term) each, subject to the conditions described in this
Section 2.5. Tenant shall have no other right to extend the term beyond the last
Option Term.
2.5.1. Conditions of Option. Each Extension Option shall be
subject to the following conditions:
(a) The Extension Option may be exercised only by
written notice delivered by Tenant to Landlord as provided in Section 2.5.3 and
only if, as of the date of delivery of the notice or as of the commencement of
the applicable Option Term, Tenant is not in Default under this Lease after the
expiration of any applicable cure periods.
(b) The rights contained in this Section 2.5 may be
exercised only by the originally named Tenant.
(c) If Tenant properly exercises the Extension Option,
the Lease Term, as it applies to the entire Premises then leased by Tenant,
shall be extended for the applicable Option Term.
2.5.2. Option Rent. The Rent payable by Tenant during the Option
Term ("Option Rent") shall be equal to ninety-five percent (95%) of the Fair
Market Rental Value of the Premises as of the commencement of the applicable
Option Term. For purposes of this Section 2.5, Fair Market Rental Value of the
Premises shall be the rental rate, including all escalations, at which tenants
lease comparable space as of the commencement of the Option Term. No
over-standard tenant improvements installed by Tenant will have an impact on the
determination of the Fair Market Rental Value. For purposes of this Section
2.5.2, "comparable space" shall be office space that is:
(a) Not subleased; (b) not subject to another tenant's
expansion rights; (c) comparable in size, location, floor
height and quality to the Premises; (d) leased for a term
comparable to the Option Term; and (e) located in comparable
buildings in the Concord/Walnut Creek area.
2.5.3. Exercise of Option. The Extension Option must be exercised
by Tenant, if at all, only at the time and in the manner provided in this
Section 2.5.3.
2.5.3.1 Interest Notice. If Tenant wishes to exercise an
Extension Option, Tenant shall deliver written notice ("Interest Notice") to
Landlord no less than six (6) months before the expiration of the initial Lease
Term.
2.5.3.2 Option Rent Notice. After receipt of Tenant's
Interest Notice, Landlord shall deliver notice ("Option Rent Notice") to Tenant
no less than four (4) months before the expiration of the initial Lease Term,
stating the Option Rent, based on Landlord's determination of the Fair Market
Rental Value of the Premises as of the date that is four (4) months before the
commencement date of the Option Term.
2.5.3.3 Exercise Notice. If Tenant wishes to exercise the
Extension Option, Tenant must, on or before the earlier of (a) the date
occurring ninety (90) days before the expiration of the initial Lease Term or
the first Option Term, as the case may be or (b) the date occurring thirty (30)
days after Tenant's receipt of the Option Rent Notice, exercise the Extension
Option by delivering written notice ("Exercise Notice") to Landlord.
2.5.3.4 Objection to Option Rent. If Tenant wishes to
contest the Option Rent stated in the Option Rent Notice, Tenant must provide,
with the Exercise Notice, written notice to Landlord that Tenant objects to the
stated Option Rent. If Tenant provides such written objection, the parties shall
follow the procedure described in Section 25.2, and the Option Rent shall be
determined as set forth in that Section.
2.5.3.5 Failure To Deliver Timely Notice. If Tenant fails to
deliver a timely Interest Notice:
(a) Tenant shall not lose its right to exercise the
Extension Option and shall still be entitled to deliver the Exercise Notice; (b)
Landlord shall not be required to deliver the Option Rent Notice; (c) Tenant
shall be considered to have objected to the Option Rent; and (d) The parties
shall follow the procedure described in Section 25.2, and the Option Rent shall
be determined as set forth in that Section.
2.5.4. Amendment to Lease. If Tenant timely exercises its
Extension Option, Landlord and Tenant shall, within fifteen (15) days after the
Option Rent is determined under this Section 2.5 or Article 25, execute an
amendment to this Lease extending the Lease Term on the terms and conditions set
forth in this Section 2.5. Such amendment shall provide for the Base Year to be
adjusted to the first year of each Option Term.
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(d) The cost of licenses, certificates, permits, and
inspections.
(e) The cost of contesting the validity or
applicability of any government enactments that may affect the Operating
Expenses.
(f) The costs incurred in connection with the
implementation and operation of a transportation system management program or
similar program.
(g) The cost of insurance carried by Landlord, in
amounts reasonably determined by Landlord, provided, however, that earthquake
insurance shall be maintained only to the extent it is available at a
commercially reasonable price and, if earthquake insurance is not included in
the Base Year but is subsequently carried by Landlord, the Base Year Operating
Expenses will be adjusted as if earthquake insurance had been carried.
(h) Fees, charges, and other costs including management
fees (or amounts in lieu of such fees), which management fees shall not exceed
three percent (3%) of rents, consulting fees, legal fees, and accounting fees of
all persons engaged by Landlord or otherwise reasonably incurred by Landlord in
connection with the operation, management, maintenance, and repair of the Real
Property.
(i) The cost of parking area maintenance, repair, and
restoration, including resurfacing, repainting, restriping, and cleaning.
(j) Wages, salaries, and other compensation and
benefits of all persons providing services to the Real Property, including those
engaged in the operation, maintenance, or security of the Real Property plus
employer's Social Security taxes, unemployment taxes, insurance, and any other
taxes imposed on Landlord that may be levied on those wages, salaries, and other
compensation and benefits. Notwithstanding anything to the contrary in this
Section 4.2.3.1(j), Landlord's general overhead expenses shall not be included
in Operating Expenses. If any of Landlord's employees provide services for more
than one building of Landlord, only the prorated portion of those employees'
wages, salaries, other compensation and benefits, and taxes reflecting the
percentage of their working time devoted to the Real Property shall be included
in Operating Expenses.
(k) Payments under any easement, license, operating
agreement, declaration, restrictive covenant, or instrument relating to the
sharing of costs by the Real Property.
(l) Amortization (including interest on the unamortized
cost at a rate equal to the floating commercial loan rate announced from time to
time by Bank of America, N.T.&S.A. (or such other bank reasonably selected by
Landlord) as its prime rate plus two (2) percentage points per annum of the cost
of acquiring or renting personal property used in the maintenance, repair, and
operation of the Building and Real Property.
(m) The cost of capital improvements or other costs
incurred in connection with the Real Property that are intended as a
labor-saving device or to effect other economies in the maintenance or operation
of all or part of the Real Property to the extent of Landlord's reasonable
estimate of savings in Operating Expenses as a result of such costs. All such
permitted capital expenditures shall be amortized (including interest on the
unamortized cost at the rate stated in Section (l)) over their useful life, as
reasonably determined by Landlord.
(n) The cost to clean, paint and waterproof the Real
Property. Notwithstanding the foregoing, to the extent that any such costs are
considered capital expenditures per Generally Accepted Accounting Principles,
such capital expenditures shall be amortized (including interest on the
unamortized costs at the rate stated in Section (l)) over their useful life as
reasonably determined by Landlord.
4.2.4. Adjustment of Operating Expenses. Operating Expenses shall
be adjusted as follows:
4.2.4.1 Gross-Up Adjustment When Building Is Less Than Fully
Occupied. If the occupancy of the Building during any part of the Base Year is
less than 100 percent, Landlord shall make an appropriate adjustment of the
variable components of Operating Expenses for the Base Year, as reasonably
determined by Landlord using sound accounting and management principles, to
determine the amount of Operating Expenses that would have been incurred had the
Building been 100 percent occupied. This amount shall be considered to have been
the amount of Operating Expenses for the Base Year. For purposes of this Section
4.2.4.1, "variable components" include only those component expenses that are
affected by variations in occupancy levels.
4.2.4.2 Exclusions From Operating Expenses. Despite any other
provision of Section 4.2, Operating Expenses shall not include:
(a) Depreciation, interest, or amortization on
mortgages or ground lease payments, except as otherwise stated in this Section
4.2.
(b) Legal fees incurred in negotiating and enforcing
tenant leases.
(c) Real estate brokers' leasing commissions.
(d) Initial improvements or alterations to tenant
spaces.
(e) The cost of providing any service directly to and
paid directly by any tenant.
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(f) Any costs expressly excluded from Operating
Expenses elsewhere in this Lease.
(g) Costs of any items for which Landlord receives
reimbursement from insurance proceeds or a third party. Insurance proceeds shall
reduce Operating Expenses in the year in which they are received, except that
any deductible amount under any insurance policy shall be included within
Operating Expenses.
(h) Costs of capital improvements, except as otherwise
stated in this Section 4.2.
4.2.4.3 Additional Operating Expense Exclusions. Despite any
other provision of Section 4.2, Operating Expenses shall also not include:
(a) Interest, principal, depreciation, attorney fees,
costs of environmental investigations or reports, points, fees, and other lender
costs and closing costs on any mortgage or mortgages, ground lease payments, or
other debt instrument encumbering the Real Property.
(b) Insurance premiums to the extent of any refunds of
those premiums.
(c) Any bad debt loss, rent loss, or reserves for bad
debt or rent loss.
(d) Landlord's costs of electricity and other
utilities, items, benefits, and services that are provided to other tenants or
occupants at no special cost but that are only offered or provided to Tenant at
a special or increased cost.
(e) Interest or penalties resulting from late payment
of any operating expense by Landlord due to Landlord's negligence or willful
misconduct (unless Landlord in good faith disputes a charge and subsequently
loses or settles that dispute) or due to the negligence or willful misconduct of
another tenant.
(f) Costs, fees, and compensation paid to Landlord, or
to Landlord's subsidiaries or affiliates, for services in or to the Real
Property to the extent that they exceed the charges for comparable services
rendered by an unaffiliated third party of comparable skill, competence,
stature, and reputation.
(g) Costs associated with:
(1) Operation of the business of the ownership of
the Real Property or entity that constitutes Landlord or Landlord's property
manager, as distinguished from the cost of Building operations, including the
costs of partnership or corporate accounting and legal matters; defending or
prosecuting any lawsuit with any mortgagee, lender, ground lessor, broker,
tenant, occupant, or prospective tenant or occupant; selling or syndicating any
of Landlord's interest in the Real Property; and disputes between Landlord and
Landlord's property manager;
(2) Landlord's general corporate or partnership
overhead and general administrative expenses, including the salaries of
management personnel who are not directly related to the Real Property and
primarily engaged in the operation, maintenance, and repair of the Real
Property, except to the extent that those costs and expenses are included in the
management fees, so long as these costs do not exceed reasonable industry
standards; or
(3) Wages, salaries, and other compensation paid
to any executive employee of Landlord or Landlord's property manager above the
grade of building manager for the Building or paid to any off-site personnel, so
long as these costs do not exceed reasonable industry standards.
(h) Advertising and promotional expenditures primarily
directed toward leasing tenant space in the Real Property.
(i) Leasing commissions, space-planning costs, attorney
fees and costs, disbursements, and other expenses:
(1) Incurred in connection with leasing, other
negotiations, or disputes with tenants, occupants,
prospective tenants, or other prospective occupants of
the Building; or (2) associated with the enforcement of
any leases.
(j) Costs incurred (including permit, license, and
inspection fees but excluding utilities) or cash consideration paid in
renovating or otherwise improving, decorating, painting, or redecorating space
for tenants, prospective tenants, or other occupants or in renovating or
redecorating vacant space available for those tenants, prospective tenants, or
other occupants. This exclusion does not apply to remove from Operating Expenses
the costs of ordinary maintenance supplied to the tenants of the Building or the
costs for renovating or otherwise improving, decorating, painting, or
redecorating the common areas of the Real Property.
(k) Costs arising from:
(1) Hazardous Material, as defined in Section 8.5, that was
installed by Landlord, its agents, or employees and that, at the time of
installation, Landlord knew or should have known was Hazardous Material; or (2)
despite any other provision of this Lease (including any provision relating to
capital expenditures), the presence of any Hazardous Material in or about the
Premises, Building, or Real Property (including Hazardous Material in the
ground, water, or soil) that was not placed in the Premises, Building, or Real
Property by Tenant and/or Tenant Parties as defined in Section 13.1.
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(l) Expenses, costs, and disbursements relating to, or
arising directly or indirectly from, the testing for or analysis, handling,
removal, treatment, disposal, remediation, or replacement of asbestos or
asbestos-containing materials in, on, around, beneath, or from the Real
Property.
(m) Costs incurred because the Building or common areas
violate any valid, applicable building code, regulation, or law in effect and as
interpreted by government authorities before the date of this Lease.
(n) Except as provided in Section 4.2.3.1(m) Capital
improvement, capital replacement, or related costs.
4.2.5. Tax Expenses. "Tax Expenses" means all federal, state,
county, or local government or municipal taxes, fees, charges, or other
impositions of every kind (whether general, special, ordinary, or extraordinary)
that are paid or incurred by Landlord during any Expense Year (without regard to
any different fiscal year used by any government or municipal authority) because
of or in connection with the ownership, leasing, and operation of the Real
Property. Tax Expenses shall include taxes, fees, and charges such as real
property taxes, general and special assessments, transit taxes, leasehold taxes,
and taxes based on the receipt of rent (including gross receipts or sales taxes
applicable to the receipt of rent, unless required to be paid by Tenant);
personal property taxes imposed on the fixtures, machinery, equipment,
apparatus, systems, and equipment; appurtenances; furniture; and other personal
property used in connection with the Real Property. Tax Expenses shall also
include taxes, assessments or charges imposed on a real property tax ▇▇▇▇ for
the Real Property for the implementation and operation of a transportation
system management program or similar program, in each case if required by law.
4.2.5.1 Adjustment of Taxes. Tenant hereby acknowledges that
title to the Real Property was transferred to Landlord during 1997 before the
execution of this Lease, that the Real Property has been or is in the process of
being permanently reassessed (as distinguished from a so-called "Proposition 8"
reassessment) to reflect Landlord's purchase price for the Real Property and
that Tax Expenses for the Base Year shall take into account such reassessment.
In addition, for purposes of this Lease, Tax Expenses shall be calculated as if
the tenant improvements in the Building were fully constructed and the Real
Property, the Building, and all tenant improvements in the Building were fully
assessed for real estate tax purposes for the entire Base Year. These provisions
shall survive the Lease Expiration Date or other termination of this Lease.
4.2.5.2 Included Tax Expenses. Tax Expenses shall include:
(a) Any assessment, tax, fee, levy, or charge in
addition to, or in partial or total substitution of, any assessment, tax, fee,
levy, or charge previously included within the definition of "real property
tax." Tenant and Landlord acknowledge that Proposition 13 was adopted by the
voters of the State of California in June 1978 and that assessments, taxes,
fees, levies, and charges may be imposed by government agencies for services
such as fire protection; street, sidewalk, and road maintenance; conservation;
refuse removal; and other government services formerly provided without charge
to property owners or occupants. In further recognition of the decrease in the
level and quality of government services and amenities as a result of
Proposition 13 (or as a result of any other restriction on real property taxes
whether by law or by choice of the applicable legislative or assessing body),
Tax Expenses shall also include any government or private assessments (or the
Building's contribution toward a government or private cost-sharing agreement)
for the purpose of augmenting or improving the quality of services and amenities
normally provided by government agencies. Tenant and Landlord intend that all
new and increased assessments, taxes, fees, levies, and charges and all similar
assessments, taxes, fees, levies, and charges be included within the definition
of "Tax Expenses" for purposes of this Lease.
(b) Any assessment, tax, fee, levy, or charge allocable
to, or measured by, the area of the Premises or the rent payable under this
Lease, including any gross income tax with respect to the receipt of that rent,
or on or relating to the possession, leasing, operating, management,
maintenance, alteration, repair, use, or occupancy by Tenant of the Premises or
any portion of the Premises.
(c) Any assessment, tax, fee, levy, or charge on this
transaction or any document to which Tenant is a party, creating or transferring
an interest or an estate in the Premises.
(d) Any possessory taxes charged or levied in place of
real property taxes.
4.2.5.3 Contest Costs; Refunds. Any expenses incurred by
Landlord in attempting to protest, reduce, or minimize Tax Expenses shall be
included in Tax Expenses in the Expense Year in which those expenses are paid.
Such tax refunds shall be deducted from Tax Expenses in the Expense Year in
which they are received by Landlord.
4.2.5.4 Excluded Taxes. Despite any other provision of
Section 4.2.5 (except as provided in Section 4.2.5.2 or levied entirely or
partially in lieu of Tax Expenses), the following shall be excluded from Tax
Expenses:
(a) All excess profits taxes, franchise taxes, gift
taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and state income taxes, and other taxes applied or measured by
Landlord's general or net income (as opposed to rents, receipts, or income
attributable to operations at the Building);
(b) Any items included as Operating Expenses; and
(c) Any items paid by Tenant under Section 4.4.
4.2.5.5 Proposition 13 Protection. Despite any other
provision of this Lease, if during the Lease Term, any sale, refinancing, or
change in ownership of all or part of the Real Property is consummated and, as a
result, all or part of the Real Property is reassessed ("Reassessment") for real
estate tax purposes by the appropriate government authority, the terms of this
Section 4.2.5.5 shall apply. Tenant hereby acknowledges that title to the Real
Property was transferred to Landlord
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during 1997 before the execution of this Lease, that the Real Property has been
or is in the process of being permanently reassessed (as distinguished from a
so-called "Proposition 8" reassessment) to reflect Landlord's purchase price for
the Real Property and that Tax Expenses for the Base Year shall take into
account to such reassessment.
(a) Tenant shall not be obligated to pay any portion of
the Tax Increase relating to a Reassessment occurring during the Term.
(b) For purposes of this Section 4.2.5.5, the term "Tax
Increase" shall mean that portion of the Tax Expenses, as calculated immediately
following the Reassessment, that is attributable solely to the Reassessment.
Accordingly, a Tax Increase shall not include any portion of the Tax Expenses,
as calculated immediately following the Reassessment, that is:
(1) Attributable to the initial assessment of the value of the
Real Property, the Base Building, or the tenant improvements located in the
Building; (2) attributable to assessments or adjustments to assessments pending
immediately before the Reassessment that were conducted during, and included in,
that Reassessment or that were otherwise rendered unnecessary following the
Reassessment; or (3) attributable to the annual inflationary increase in real
estate taxes.
4.2.6. Tenant's Share. "Tenant's Share" means the percentage
stated in Summary Section 7(a). Tenant's Share is calculated by multiplying the
number of Rentable Square Feet of the Premises by 100 and dividing the product
by the total Rentable Square Feet in the Building. If either the Premises or the
Building is expanded or reduced, Tenant's Share shall be appropriately adjusted.
Tenant's Share for the Expense Year in which that change occurs shall be
determined on the basis of the number of days during the Expense Year in which
each such Tenant's Share was in effect.
4.3 Calculation and Payment of Additional Rent. Tenant's Share of any
Direct Expenses for any Expense Year shall be calculated and paid as follows:
4.3.1. Calculation. Tenant shall pay Tenant's Share of Direct
Expenses for each Expense Year in the manner stated in Section 4.3.2.
4.3.2. Statement of Actual Increased Direct Expenses and Payment
by Tenant. Landlord shall endeavor to give to Tenant on or before the first day
of April following the end of each Expense Year a statement ("Statement")
stating the Direct Expenses incurred or accrued for that preceding Expense Year
and the amount of the Increased Direct Expenses. On receipt of the Statement for
each Expense Year ending during the Lease Term, Tenant shall pay, with its next
installment of Base Rent due, the full amount of Tenant's Share of such
Increased Direct Expenses, less the amounts (if any) paid during that Expense
Year as Estimated Increased Direct Expenses (as defined in Section 4.3.3).
Landlord's failure to furnish the Statement for any Expense Year in a timely
manner shall not prejudice Landlord from enforcing its rights under this Article
4. Even if the Lease Term has expired and Tenant has vacated the Premises, if
when the final determination is made of Tenant's Share of the Increased Direct
Expenses for the Expense Year in which this Lease terminates it is determined
that Tenant owes Tenant's Share of Increased Direct Expenses, Tenant shall
immediately pay to Landlord the amount calculated under Section 4.3.1. The
provisions of this Section 4.3.2 shall survive the expiration or earlier
termination of the Lease Term.
Tenant shall not be obligated to pay the amount of Increased
Direct Expenses with respect to any Expense Year if Landlord fails to deliver to
Tenant a Statement with respect to such Expense Year within one (1) year after
the end of such Expense Year. Landlord may deliver a corrected Statement to
Tenant with respect to any Expense Year if the corrected Statement is delivered
to Tenant within eighteen (18) months after the end of such Expense Year, and
Tenant shall pay the Increased Direct Expenses as provided on the corrected
Statement. Notwithstanding the foregoing, Landlord may deliver a Statement or
corrected Statement to Tenant with respect to Tax Expenses for any Expense Year
within ninety (90) days after receipt of a ▇▇▇▇ for Tax Expenses for any prior
Expense Year. If any corrected Statement shall evidence a refund due to Tenant,
Landlord shall promptly deliver the same together with such refund to Tenant,
notwithstanding the expiration of the aforesaid periods.
4.3.3. Statement of Estimated Increased Direct Expenses. Landlord
shall give Tenant a yearly expense estimate statement ("Estimate Statement")
stating Landlord's reasonable estimate ("Estimate") of the total amount of
Increased Direct Expenses for the then current Expense Year and Tenant's Share
of such Increased Direct Expenses ("Estimated Expenses").
Landlord's failure to furnish the Estimate Statement for any Expense
Year in a timely manner shall not preclude Landlord from enforcing its rights to
collect Increased Direct Expenses under this Article 4. Tenant shall pay with
each installment of Base Rent due, one-twelfth (1/12) of the Estimated Expenses
for the then-current Expense Year. Until a new Estimate Statement is furnished,
Tenant shall pay monthly, along with the monthly Base Rent installments, an
amount equal to one twelfth (1/12th) of the total Estimated Expenses stated in
the previous Estimate Statement delivered by Landlord to Tenant.
4.3.4. Refund of Overpayment of Direct Expenses. If the Statement
shows that the Direct Expenses for any Expense Year ending or beginning within
the Lease Term is less than the Estimated Expenses actually paid by Tenant for
that Expense Year, Landlord shall credit Tenant's next payment of Base Rent and
Estimated Expenses with the amount by which Tenant's payments of Estimated
Expenses exceed the actual Direct Expenses due for that Expense Year. If the
Statement shows that Tenant's payments of Estimated Expenses exceed the actual
Direct Expenses due for that Expense Year by more than three and one-half
percent (3 1/2%), the Landlord shall pay to Tenant annual interest on the
overpaid amount, from the date overpaid until credited or refunded, at
theinterest rate stated in Section 23.2 of this Lease. If the Statement is
provided to Tenant after the end of the Lease Term, Landlord shall include with
the Statement a refund of the amount by which Tenant's payments of Estimated
Expenses exceed the actual Direct Expenses due for that Expense Year, along with
any interest due in accordance with this Section 4.3.4.
4.4 Taxes and Other Charges for Which Tenant Is Directly Responsible.
Tenant shall reimburse Landlord, on demand, as Additional Rent for any taxes
required to be paid by Landlord that are not already included in Tax Expenses
(excluding state,
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local, and federal personal or corporate income taxes measured by the net income
of Landlord from all sources and estate and inheritance taxes) regardless of
whether such taxes are now customary or within the contemplation of the parties
to this Lease, when those taxes are:
(a) Measured by or reasonably attributable to:
(1) The cost or value of Tenant's equipment, furniture,
fixtures, and other personal property located in the Premises; or (2) the cost
or value of any leasehold improvements made in or to the Premises by or for
Tenant (to the extent that the cost or value of those leasehold improvements
exceeds the cost or value of a building-standard build-out, as determined by
Landlord, regardless of whether title to those improvements is vested in Tenant
or Landlord); or
(b) Assessed either on this transaction or on any document to
which Tenant is a party that creates or transfers an interest or an estate in
the Premises.
4.5 Landlord's Books and Records; Tenant's Audit Rights. Tenant and
its authorized representatives may examine, inspect, audit, and copy the records
of Landlord regarding each Statement at Landlord's office during normal business
hours within six (6) months after the furnishing of the Statement. Unless Tenant
takes written exception to any item within one (1) year after the furnishing of
that Statement, the Statement shall be considered as final and accepted by
Tenant except that Landlord may, at any time during the one-year period,
following the delivery of the statement submit a corrected Statement to Tenant
if Operating Expenses and Tax Expenses on the original Statement were overstated
or understated.
Tenant and its authorized representatives shall have the right, at
Tenant's cost and on no less than ten (10) days' prior written notice to
Landlord and during Landlord's normal business hours, to audit Landlord's
records regarding Operating Expenses and Tax Expenses. Such an audit shall be
performed at Landlord's principal accounting offices by a certified public
accounting firm. That firm's primary business must be certified public
accounting and may not be compensated on the basis of the amount of Direct
Expenses saved by Tenant as a result of such audit, and that firm shall be
selected by Tenant and approved by Landlord. Landlord's approval shall not be
unreasonably delayed or withheld. There shall be no more than one (1) audit of
Operating Expenses or Tax Expenses for any twelve-month (12-month) period.
To facilitate an audit by Tenant, Landlord shall keep its books and
records applicable to Operating Expenses and Tax Expenses available to Tenant on
a reasonable basis for the longer of (1) two (2) years after the Lease
Expiration Date or (2) one (1) year after the resolution of any dispute
concerning Operating Expenses and Tax Expenses. Any audit of Operating Expenses
and Tax Expenses for any calendar year must be begun one (1) year after
Landlord's delivery of the Statement for that year, or the right to audit
Operating Expenses and Tax Expenses for that year shall be deemed waived.
Tenant agrees diligently to pursue and complete (or to drop) any
audit begun by Tenant, and Landlord agrees it shall not unreasonably interfere
with the execution of Tenant's audit rights. Tenant shall bear all fees and
costs of the audit, unless the parties determine that Operating Expenses and Tax
Expenses taken as a whole for the Real Property for any Expense Year, were
overstated by more than three and one-half percent (3.5%). In that event,
Landlord shall pay for the reasonable costs of that audit. Pending resolution of
any disputes over Operating Expenses and Tax Expenses, Tenant shall pay to
Landlord any Additional Rent alleged to be due from Tenant as reflected on
Landlord's Statement or any invoice issued on the basis of Landlord's Statement.
Article 5
SECURITY DEPOSIT
[Intentionally Omitted]
Article 6
USE
6.1 Permitted Use. Tenant shall use and occupy the Premises solely
for the "Permitted Use," as defined in the Summary. Tenant shall not use or
occupy, or permit the Premises to be used or occupied, for any other purpose
without Landlord's prior written consent, which may be withheld in Landlord's
sole and absolute discretion.
6.2 Rules and Regulations. Tenant shall comply with the rules
attached to this Lease as Exhibit D and any reasonable non discriminatory
amendments or additions promulgated by Landlord from time to time for the
safety, care, and cleanliness of the Premises, Building, and Real Property or
for the preservation of good order ("Rules and Regulations") as long as the
Rules and Regulations do not take precedence over the specific terms and
conditions of this Lease. Landlord shall not be responsible to Tenant for the
failure of any other tenants or occupants of the Building to comply with the
Rules and Regulations.
6.3 Additional Restrictions on Use. In addition to complying with
other provisions of this Lease concerning use of the Premises:
(a) Tenant shall not use or allow any person to use the
Premises for any purpose that is contrary to the Rules and Regulations, that
violates any Laws and Orders, that constitutes waste or nuisance, that would
unreasonably interfere with another occupant's permitted use of the Building or
that does not comply with the standards set forth in Section 6.4;
(b) Tenant shall not use or allow any person to use the
Premises for any purpose that violates any recorded covenants, conditions, and
restrictions that now or later affect the Real Property; and
(c) Tenant shall not use or allow any person to use the
Premises for any purpose, use or manner of use that would generate unreasonable
noise, unreasonable risk of fire or unreasonable odors, or for any purpose that
would directly or materially interfere with other tenants' permitted uses of
their demised premises.
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Article 7
COMPLIANCE WITH LAWS
7.1 Definition of "Laws and Orders." For purposes of this Lease, the
term "Laws and Orders" includes all federal, state, county, city, or government
agency laws, statutes, ordinances, standards, rules, requirements, or orders now
in force or hereafter enacted, promulgated, or issued. The term also includes
government measures regulating or enforcing public access or occupational or
health or safety standards for employers, employees, landlords, or tenants.
7.2 Repairs, Replacements, Alterations, and Improvements. Tenant, at
Tenant's sole expense, shall promptly make all repairs, replacements,
alterations, or improvements needed to comply with all Laws and Orders to the
extent that the Laws and Orders relate to or are triggered by (a) Tenant's
particular use of the Premises, or (b) any Alterations made in the Premises.
Except for compliance required as a result of Tenant's particular use of the
Premises and/or any Alternation made in the Premises, Landlord, at Landlord's
sole expense, shall promptly make all repairs, replacements, alterations, or
improvements in the Premises and/or the Common Area needed to comply with all
Laws and Orders.
7.3 Collateral Estoppel. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any judicial or administrative
action or proceeding that Tenant has violated any Laws and Orders shall be
conclusive, between Landlord and Tenant, of that fact, whether or not Landlord
is a party to that action or proceeding.
Article 8
HAZARDOUS MATERIAL
8.1 Use of Hazardous Material. Tenant shall not cause or permit any
Hazardous Material, as defined in Section 8.5, to be generated, brought onto,
used, stored, or disposed of in or about the Premises or the Real Property by
Tenant or its agents, employees, contractors, subtenants, or invitees, except
for such office products that are required in the ordinary course of Tenant's
business conducted on the Premises or are otherwise approved by Landlord. Tenant
shall:
(a) Use, store, and dispose of all such Hazardous Material in
strict compliance with all applicable statutes, ordinances, and regulations in
effect during the Lease Term that relate to public health and safety and
protection of the environment ("Environmental Laws"), including those
Environmental Laws identified in Section 8.4; and
(b) Comply at all times during the Lease Term with all
Environmental Laws.
8.2 Indemnification. Tenant shall, at Tenant's sole expense and with
counsel reasonably acceptable to Landlord, indemnify, defend, and hold harmless
the Landlord and the Landlord's shareholders, directors, officers, employees,
partners, affiliates, and agents with respect to all losses arising out of or
resulting from the release of any Hazardous Material in or about the Premises or
the Real Property, or the violation of any Environmental Law, by Tenant or
Tenant's agents, contractors, or invitees. This indemnification includes all
losses, liabilities, obligations, penalties, fines, claims, actions (including
remedial or enforcement actions of any kind and administrative or judicial
proceedings, orders, or judgments), damages (including consequential and
punitive damages), and costs (including attorney, consultant, and expert fees
and expenses) resulting from the release or violation. This indemnification
shall survive the expiration or termination of this Lease.
8.3 Indemnification by Landlord. Tenant acknowledges receipt of the
"Report of Soil and Groundwater Assessment, ASE Job No. 3106, Former
Systron/▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ Facility," prepared by AquaScience Engineers, dated May
29, 1997 ("Environmental Report"). Landlord shall, at Landlord's sole expense
and with counsel reasonably acceptable to Tenant, indemnify, defend, and hold
harmless the Tenant Parties to the extent of all losses arising out of or
resulting from the release of any Hazardous Material in or about the Premises or
the Real Property or the violation of any Environmental Law occurring before the
Lease Commencement Date, including without limitation the Hazardous Material
identified in the Environmental Report, and all losses arising out of or
resulting from the release of any Hazardous Material in or about the Premises or
the Real Property or the violation of any Environmental Law by Landlord Parties
or any party other than Tenant, occurring after the Lease Commencement Date.
This indemnification includes all losses, liabilities, obligations, penalties,
fines, claims, actions (including remedial or enforcement actions of any kind
and administrative or judicial proceedings, orders, or judgments), damages
(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation. This indemnification shall survive the expiration or termination of
this Lease.
8.4 Remediation Obligations; Tenant's Rights on Cleanup by Landlord.
If the presence of any Hazardous Material brought onto the Premises or the Real
Property by Tenant or by Tenant's employees, agents, contractors, or invitees
results in contamination of the Real Property, Tenant shall promptly take all
necessary actions, at Tenant's sole expense, to return the Real Property to the
condition that existed before the introduction of such Hazardous Material.
Tenant shall first obtain Landlord's approval of the proposed remedial action.
This provision does not limit the indemnification obligations set forth in
Section 8.2.
8.5 Definition of "Hazardous Material." As used in this Article 8,
the term "Hazardous Material" shall mean any hazardous or toxic substance,
material, or waste that is or becomes regulated by the United States, the State
of California, or any local government authority having jurisdiction over the
Building. Hazardous Material includes:
(a) Any "hazardous substance," as that term is defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) (42 United States Code Sections 9601-9675); (b) "Hazardous waste," as
that term is defined in the Resource Conservation and Recovery Act of 1976
(RCRA) (42 United States Code Sections 6901-6992k); (c) any pollutant,
contaminant, or hazardous, dangerous, or toxic chemical, material, or substance,
within the meaning of any other applicable federal, state, or local law,
regulation, ordinance, or requirement (including consent decrees and
administrative orders imposing liability or standards of conduct concerning any
hazardous, dangerous, or toxic waste, substance,
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or material, now or hereafter in effect); (d) petroleum products; (e)
radioactive material, including any source, special nuclear, or byproduct
material as defined in 42 United States Code Sections 2011-2297g-4; (f) asbestos
in any form or condition; and
(g) polychlorinated biphenyls ("PCBs") and substances or
compounds containing PCBs.
Article 9
UTILITIES AND SERVICES
9.1 Standard Tenant Utilities and Services. Subject to applicable
government rules, regulations, and guidelines and the rules or actions of the
public utility furnishing the service, Landlord shall provide the following
utilities and services unless otherwise stated in this Lease:
9.1.1. Heating and Air-Conditioning.
9.1.1.1 Hours and Specifications. Landlord shall provide
heating, ventilation, and air-conditioning ("HVAC") on Mondays through Fridays
from 8 a.m. through 7 p.m. ("Building Hours") except for the dates of
observation of New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, and other locally and nationally recognized
holidays that are observed by a majority of the Comparable Buildings
("Holidays").
9.1.2. Electricity. Landlord shall provide electricity for
lighting and power in the Premises during Building Hours except for Holidays.
All costs for electricity for lighting and power used by Tenant outside of
Building Hours or on Holdidays shall be paid by Tenant. Electricity for Tenant's
lighting and other power purposes shall be at a nominal 208/220 volts. No
electrical circuit for the supply of power shall require a current capacity
exceeding twenty (20) amperes. Landlord shall replace lamps, starters, and
ballasts for Building Standard lighting fixtures within the Premises on Tenant's
request. The cost of such replacement shall be included in Operating Expenses.
Tenant shall replace lamps, starters, and ballasts for non-Building Standard
lighting fixtures within the Premises at Tenant's expense. All lighting
installed as a part of the initial Tenant Improvements shall be considered
"Building Standard".
9.1.3. Water. Landlord shall provide city water from the regular
outlets for drinking, lavatory, and toilet purposes.
9.1.4. Janitorial Services. Landlord shall provide janitorial
services in and about the Premises and the restrooms in the Common Areas serving
the Premises on Mondays through Fridays, except on Holidays, in accordance with
the specifications attached to this Lease as Exhibit E.
9.2 Overstandard Tenant Use. Tenant shall not, without Landlord's
prior written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
building standard lights in the Premises that may materially adversely affect
the temperature otherwise maintained by the air-conditioning system or
materially increase the water normally furnished to the Premises by Landlord
under Section 9.1.
Landlord shall have the right to install supplementary
air-conditioning units or other facilities at locations in the Premises
reasonably approved by Tenant, including supplementary or additional metering
devices. Within thirty (30) days after billing by Landlord, Tenant shall pay
Landlord's actual cost for such supplementary facilities, including the cost of
(a) installation, operation, and maintenance; and (b) increased wear and tear on
existing equipment.
If Tenant uses water, electricity, heat, or air-conditioning in
excess of that required to be supplied by Landlord under Section 9.1, Tenant
shall pay to Landlord, within thirty (30) days after billing, Landlord's actual
cost of providing such excess service, without profit or overhead but including
the cost of (a) installation, operation, and maintenance of equipment installed
to supply the excess service; and (b) increased wear and tear on existing
equipment caused by Tenant's excess consumption. Landlord may install devices to
separately meter any increased use. Within thirty (30) days after billing by
Landlord, Tenant shall pay the increased cost directly to Landlord, including
the cost of the additional metering devices.
Tenant's use of electricity shall never exceed the capacity of the
feeders serving the Building and Premises or the risers or wiring installation.
Landlord and Tenant agree that Tenant's use shall not be considered to exceed
such capacity as long as Tenant's use of lighting fixtures and incidental use
equipment in the Premises does not exceed 20 ▇▇▇▇▇ of connected load per
rentable square foot of the Premises to the applicable bus riser. If Tenant
wishes to use heat, ventilation, or air-conditioning during hours other than
those for which Landlord is obligated to supply such utilities under Section
9.1, Tenant shall give Landlord reasonable prior notice of Tenant's desired use,
and Landlord shall supply such utilities to Tenant at an hourly cost to Tenant
as shall be calculated to reimburse Landlord for Landlord's actual cost of
supplying such utilities, without profit or overhead but including the cost of
increased wear and tear on existing equipment caused by such non- Building-Hour
use. Amounts payable by Tenant to Landlord under this Section 9.2 for use of
additional utilities and services shall be considered Additional Rent under this
Lease and shall be billed on a monthly basis.
9.3 Interruption of Utilities. Except as provided in Section 21.7.2,
Tenant agrees that Landlord shall not be liable for damages, by abatement of
Rent or otherwise, for failure to furnish or delay in furnishing any service
(including telephone and telecommunication services) or for diminution in the
quality or quantity of any service when the failure, delay, or diminution is
entirely or partially caused by:
(a) Repairs, replacements, or improvements; (b) strike,
lockout, or other labor trouble; (c) inability to secure electricity, gas,
water, or other fuel at the Building after reasonable effort to do so; (d)
accident or casualty; (e) act or Default of Tenant or other parties; or (f) any
other cause beyond Landlord's reasonable control.
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Such failure, delay, or diminution shall not be considered to constitute an
eviction or a disturbance of Tenant's use and possession of the Premises or
relieve Tenant from paying Rent or performing any of its obligations under this
Lease, subject to Section 21.7.2.
Landlord shall not be liable under any circumstances for a loss of or
injury to property or for injury to or interference with Tenant's business,
including loss of profits through, in connection with, or incidental to a
failure to furnish any of the utilities or services under this Article 9.
Landlord may comply with mandatory or voluntary controls or guidelines
promulgated by any government entity relating to the use or conservation of
energy, water, gas, light, or electricity or the reduction of automobile or
other emissions without creating any liability of Landlord to Tenant under this
Lease, subject to Section 21.7.2, as long as compliance with voluntary controls
or guidelines does not materially and unreasonably interfere with Tenant's use
of the Premises.
Article 10
REPAIRS AND MAINTENANCE
10.1 Tenant's Repair and Maintenance Obligations. Subject to Articles
14 and 15, and except as provided in Section 10.2, Tenant shall, at Tenant's
sole expense and in accordance with the terms of this Lease (including Article
11), repair and maintain in good order and condition (reasonable wear and tear
excepted) the interior of the entire Premises, including without limitation all
heating, ventilation, air conditioning, plumbing, electricity, life safety, rest
rooms, lavatories, and other Building systems located within the Premises.
Despite the foregoing, if Landlord is responsible for construction of
the improvements under the Leasehold Improvement Agreement, Tenant shall not be
responsible for the repair of any latent defects in such improvements that
Landlord was required to construct to the extent that such defects existed as of
the Lease Commencement Date and were of such a nature that Tenant could not
normally discover them in the exercise of reasonable diligence in Tenant's
inspection of the Premises on or before the Lease Commencement Date and are
reported to Landlord within one (1) year after the Commencement Date. Any repair
and maintenance work affecting the Building systems shall be performed only by
the contractor used by Landlord in the Real Property for such work, unless that
contractor is unwilling or unable to perform the work, in which event Tenant may
use the services of another qualified contractor reasonably approved by
Landlord.
Landlord may, but need not, make such repairs and maintenance if:
(a) Tenant fails to perform any repair and maintenance obligation
within thirty (30) days after written notice by Landlord to Tenant of the need
for such repairs and maintenance; or
(b) Tenant fails to commence any repair and maintenance
obligation for which the reasonable completion period exceeds thirty (30) days,
and to diligently prosecute this obligation to completion.
Within thirty (30) days after a written demand from Landlord (including a
reasonably particularized statement), Tenant shall pay Landlord Landlord's
reasonable, actual, out-of-pocket costs incurred in connection with the repairs
and maintenance plus interest at the Lease Rate from the date these costs are
incurred until the date of Tenant's repayment. Despite any other provision of
this Section 10.1, in the event of an emergency Landlord shall have the right to
perform any Tenant repair and maintenance obligation that Tenant fails to
perform promptly. Within thirty (30) days after written demand (including a
reasonably particularized statement), Tenant shall pay Landlord Landlord's
reasonable costs incurred in connection with the repair and maintenance
obligation.
10.2 Landlord's Repair and Maintenance Obligations. Subject to
Articles 14 and 15, Landlord shall, as part of the Operating Expenses (to the
extent permitted by Article 4), repair and maintain in good order and condition
(reasonable wear and tear excepted):
(a) All portions of the Building that are outside the Premises,
including the structural portions of the Premises, areas and building systems
above the ceiling of the Premises and on the inside of each of the walls to the
Premises, the roof and foundations, the life safety systems, and any maintenance
of perimeter walls, including glazing of exterior windows; b) All other Common
Areas located on the Real Property.
Repairs shall be made promptly after written notice from Tenant or other actual
notice to Landlord of the need for such repair to keep the applicable portion of
the Premises, Building, Real Property, and other items in the condition
described in this clause. Landlord shall not be in Default of its repair and
maintenance obligations under this Section 10.2 if Landlord performs the repairs
and maintenance within thirty (30) days after written notice by Tenant to
Landlord of the need for such repairs and maintenance, except that in the event
Tenant notifies Landlord that repairs are required on an emergency basis to
prevent injury to persons, significant damage to property, or material
interference with Tenant's operation of its business, then Landlord shall
commence the repair as soon as is reasonably possible. If, due to the nature of
the particular repair or maintenance obligation, more than thirty (30) days are
reasonably required to complete it, Landlord shall not be in Default under this
Section 10.2 if Landlord begins work within this thirty-day (30-day) period and
diligently prosecutes this work to completion. Except as provided in Section
21.7.2, no abatement of rent and no liability of Landlord shall result for any
injury to or interference with Tenant's business arising from the making of or
failure to make any repairs, replacements, alterations, or improvements in or to
any portion of the Premises, Building, Real Property, fixtures, appurtenances,
or equipment. Tenant waives and releases its rights, including its right to make
repairs at Landlord's expense, under California Civil Code Sections 1941-1942 or
any similar law, statute, or ordinance now or hereafter in effect.
Article 11
ALTERATIONS AND ADDITIONS
11.1 Landlord's Consent to Alterations. Tenant may not make any
improvements, alterations, additions, or changes to the Premises ("Alterations")
without obtaining Landlord's prior written consent.
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11.1.1. Consent Procedure. Tenant shall request such consent by
written notice to Landlord, which must be accompanied by the plans and
specifications for the proposed work. Landlord shall either give or withhold its
consent within fifteen (15) days of the receipt by Landlord of Tenant's request
for consent.
11.1.2. Reasonable Consent. Landlord shall not unreasonably
withhold its consent to proposed Alterations. The Alterations for which Landlord
may reasonably withhold consent include but are not limited to those that would
or could:
(a) Affect the structure of the Building; (b) affect the
Building systems of the Building; (c) result in Landlord's being required under
Laws and Orders to perform any work that Landlord could otherwise avoid or defer
("Additional Required Work"), unless Tenant agrees in writing to pay for the
entire cost of the design and construction of the Additional Required Work; (d)
result in a material increase in the demand for utilities or services that
Landlord is required to provide, unless Tenant agrees to pay the additional
cost; or (e) cause an increase in the premiums for hazard or liability insurance
carried by Landlord, unless Tenant agrees to pay the amount of the increase in
premiums.
11.1.3. Costs of Review. If it is reasonably necessary for
Landlord to obtain the assistance of architects, engineers, or other consultants
to evaluate the proposed Alterations, Tenant shall reimburse Landlord for
amounts paid by Landlord for the reasonable fees and costs of those consultants
in reviewing the proposed Alterations.
11.1.4. Minor Alterations. Despite any other provision of this
Section 11.1 but subject to all other provisions of this Article 11, Tenant
shall be permitted to make Alterations to the interior improvements of the
Premises without Landlord's prior written consent but only if:
(a) At least fifteen (15) days before construction is begun,
Tenant gives Landlord written notice of the nature and extent of the intended
Alterations, specifying the contractor that Tenant intends to use; (b) the
proposed Alterations do not affect the exterior appearance or structure of the
Building or the Building systems or otherwise require a building permit; (c) the
proposed Alterations could not result in Landlord's being required to perform
any Additional Required Work; (d) the proposed Alterations do not involve the
installation of stairways, vaults, or other equipment or improvements that would
cost more to remove than ordinary improvements for general office use; (e) the
proposed Alterations do not involve or affect any asbestos or
asbestos-containing materials in the Building; and (f) the particular
Alteration, together with all other Alterations made within twelve (12) months
of the particular Alteration, does not cost more than Twenty Thousand Dollars
($20,000) in the aggregate.
11.1.5. Removal of Alterations. When Tenant requests Landlord's
consent to a proposed Alteration, or before the commencement of any Alteration
for which Landlord's consent is not required, Tenant may ask Landlord in writing
whether Landlord will require that the Alteration be removed on expiration or
earlier termination of the Lease Term. Landlord shall respond to this inquiry in
writing within fifteen (15) days. If Landlord states in its response that it
will not require removal, Tenant shall not be required to remove this
Alteration.
11.2 Compliance of Alterations With Laws and Insurance Requirements.
Tenant shall cause all Alterations to comply with the following:
(a) Applicable Laws and Orders; and (b) applicable
requirements of a fire-rating bureau.
Tenant shall also comply with those requirements in the course of
constructing the Alterations. Before beginning construction of any Alteration,
Tenant shall obtain a valid building permit and any other permits that may be
required by any government entity having jurisdiction over the Premises. Tenant
shall provide copies of those permits to Landlord before the work begins.
Tenant shall, at Tenant's sole expense, perform any Additional
Required Work which shall be subject to the same requirements as any Alteration.
If any Additional Required Work must be performed outside the Premises, Landlord
may elect to perform that work at Tenant's expense.
11.3 Manner of Construction. Tenant shall build Alterations entirely
within the Premises and in conformance with Landlord's construction rules and
regulations, using only contractors and subcontractors reasonably approved in
writing by Landlord. All work relating to any Alterations shall be done in a
good and workmanlike manner, using new materials equivalent in quality to those
used in the construction of the initial improvements to the Premises. All work
shall be diligently prosecuted to completion.
Tenant shall ensure that all work is performed in a manner that does
not obstruct access to or through the Real Property or its Common Areas and that
does not interfere either with other tenants' use of their premises or with any
other work being undertaken or the Real Property. Tenant shall take all measures
necessary to ensure that labor peace is maintained at all times.
Within twenty (20) days after completion of any Alterations, Tenant
shall deliver to Landlord a reproducible copy of the drawings of Alterations as
built.
11.4 Payment for Improvements. Tenant shall promptly pay all charges
and costs incurred in connection with any Alteration, as and when required by
the terms of any agreements with contractors, designers, or suppliers. At least
seven (7) days before beginning construction of any Alteration, Tenant shall
give Landlord written notice of the expected commencement date of that
construction to permit Landlord to post and record a notice of
nonresponsibility.
On completion of any Alteration, Tenant shall:
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(a) Cause a timely notice of completion to be recorded in
the office of the recorder of the county in which the Building is located, in
accordance with Civil Code Section 3093 or any successor statute;
(b) Deliver to Landlord evidence of full payment and final
unconditional waivers of all liens for labor, services, or materials; and
(c) Reimburse Landlord for any actual expenses paid to third
parties or for additional expenses reasonably incurred by Landlord in connection
with the construction of any Alteration (in addition to the expenses described
in Section 11.1.3).
11.5 Construction Insurance. Before construction begins, Tenant shall
deliver to Landlord reasonable evidence that damage to, or destruction of, the
Alterations during construction will be covered either by the policies that
Tenant is required to carry under Article 13 or by a policy of builder's
all-risk insurance in an amount approved by Landlord.
If Landlord requires Tenant to provide builder's all-risk insurance
for the proposed Alterations, Tenant shall provide a copy of the policy, any
endorsements, and an original certificate of insurance that complies with
Section 13.9.3.
Tenant shall cause each contractor and subcontractor to maintain all
workers' compensation insurance required by law and liability insurance
(including property damage) in amounts reasonably required by Landlord. Tenant
shall provide evidence of that insurance to Landlord before construction begins.
11.6 Landlord's Property.
By written notice to Tenant at least either sixty (60) days before
expiration of the Lease Term or fifteen (15) days after any earlier termination
of this Lease, Landlord may require Tenant, at Tenant's sole expense, to remove
any Alterations specified by Landlord and restore the Premises to their
configuration and condition before the Alterations were made (unless Landlord
previously notified Tenant that such removal would not be required, under
Section 11.1.5). If Tenant fails to complete that restoration before expiration
of the Lease Term or, in the case of earlier termination, within fifteen (15)
days after written notice from Landlord requesting the restoration, Landlord may
do so and charge the cost of the restoration to Tenant.
11.7 Initial Improvements. The construction of the initial
improvements to the Premises shall be governed by the terms of the Leasehold
Improvement Agreement, attached to this Lease as Exhibit B, and not the terms of
this Article 11.
Article 12
COVENANT AGAINST LIENS
Tenant shall not be the cause of any liens or allow such liens to
exist, attach to, be placed on, or encumber Landlord's or Tenant's interest in
the Premises, Building, or Real Property by operation of law or otherwise.
Tenant shall not suffer or permit any lien of mechanics, material suppliers, or
others to be placed against the Premises, Building, or Real Property with
respect to work or services performed or claimed to have been performed for
Tenant or materials furnished or claimed to have been furnished to Tenant or to
the Premises on behalf of or for the benefit of Tenant. Landlord has the right
at all times to post and keep posted on the Premises any notice that it
considers necessary for protection from such liens.
If any such lien attaches or Tenant receives notice of any such lien,
Tenant shall cause the lien to be released and removed of record within ten (10)
days after Landlord's demand. Despite any other provision of this Lease, if the
lien is not released and removed within ten (10) days after Landlord delivers
notice of the lien to Tenant, Landlord may immediately take all action necessary
to release and remove the lien, without any duty to investigate the validity of
it. All expenses (including reasonable attorney fees) incurred by Landlord in
connection with release of the lien shall be considered Additional Rent under
this Lease and be immediately due and payable by Tenant.
Article 13
EXCULPATION, INDEMNIFICATION, AND INSURANCE
13.1 Definition of "Tenant Parties" and "Landlord Parties." For
purposes of this Article 13, the term "Tenant Parties" refers singularly and
collectively to Tenant and Tenant's officers, directors, shareholders, partners,
trustees, members, agents, employees, and independent contractors as well as to
all persons and entities claiming through any of these persons or entities. The
term "Landlord Parties" refers singularly and collectively to Landlord and
Landlord's officers, directors, shareholders, partners, trustees, members,
agents, employees, and independent contractors as well as to all persons and
entities claiming through any of these persons or entities.
13.2 Exculpation.
13.2.1. Exculpation. To the fullest extent permitted by law,
Tenant, on its behalf and on behalf of all Tenant Parties, waives all claims (in
law, equity, or otherwise) against Landlord Parties arising out of, knowingly
and voluntarily assumes the risk of, and agrees that Landlord Parties shall not
be liable to Tenant Parties for any of the following to the extent the same
occur on or about the Premises:
(a) The injury or death of any person; or
(b) The loss of, injury or damage to, or
destruction of any tangible or intangible property,
including the resulting loss of use, economic losses, and consequential or
resulting damage of any kind from any cause.
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This exculpation clause shall not apply to claims against Landlord
Parties to the extent that a final judgment of a court of competent jurisdiction
establishes that the injury, loss, damage, or destruction was proximately caused
by Landlord Parties' negligence, fraud, willful injury to person or property, or
violation of law.
13.3 Indemnification.
13.3.1. Tenant's Indemnification of Landlord Parties. To the
fullest extent permitted by law but subject to this Section 13.3, Tenant shall,
at Tenant's sole expense and with counsel reasonably acceptable to Landlord,
indemnify, defend, and hold harmless Landlord Parties from and against all
Claims, as defined in Section 13.3.2, from any cause arising out of or relating
(directly or indirectly) to this Lease, the tenancy created under this Lease, or
the Premises, including:
(a) The use or occupancy, or manner of use or
occupancy, of the Premises or Real Property by Tenant Parties;
(b) Any act, error, omission, or negligence of Tenant
Parties in, on, or about the Real Property;
(c) Tenant's conducting of its business;
(d) Any alterations, activities, work, or things done,
omitted, or permitted by Tenant Parties in, at, or about the Premises or Real
Property, including the violation of or failure to comply with any applicable
laws, statutes, ordinances, standards, rules, regulations, orders, decrees, or
judgments in existence on the Lease Commencement Date or enacted, promulgated,
or issued after the date of this Lease, except to the extent that compliance
with such legal requirements is expressly made the responsibility of Landlord in
Article 7 or 10, and
(e) Any breach or Default in performance of any
obligation on Tenant's part to be performed under this Lease.
13.3.2. Definition of Claims. For purposes of this Lease,
"Claims" means any and all claims, losses, costs, damage, expenses, liabilities,
liens, actions, causes of action (whether in tort or contract, law or equity, or
otherwise), charges, assessments, fines, and penalties of any kind (including
consultant and expert expenses, court costs, and attorney fees actually
incurred).
13.3.3. Type of Injury or Loss. This indemnification extends to
and includes Claims for:
(a) Injury to any persons (including death at any time
resulting from that injury);
(b) Loss of, injury or damage to, or destruction of
tangible property (including all loss of use resulting from that loss, injury,
damage, or destruction); and
(c) Economic losses and consequential or resulting
damage.
13.3.4. Indemnification; Consequential Damages. Despite any other
provision of this Lease:
(a) Tenant's indemnification in Section 13.3.1 shall
not apply to any Claim caused by or arising out of the negligence of Landlord
Parties or to the extent that a Claim against Landlord Parties actually arises
out of the misconduct of Landlord Parties; and
(b) Nothing in this Lease shall impose any obligation
on Landlord to be responsible or liable for, and Tenant releases Landlord from
all liability for, consequential damages suffered by Tenant.
13.3.5. Relationship of Indemnity to Other Lease Obligations.
Tenant's agreement to indemnify Landlord under this Article 13 are not intended
to and shall not:
(a) Restrict, limit, or modify the parties' respective
insurance and other obligations under this Lease, such indemnity covenants being
independent of the parties' insurance and other obligations;
(b) Be restricted, limited, or modified by compliance
with their respective insurance requirements and other obligations under this
Lease;
(c) Relieve any insurance carrier of its obligations
under policies required to be carried under this Lease, to the extent that such
policies cover, or if carried would have covered, the matters subject to the
parties' respective indemnification obligations; or
(d) Supersede any inconsistent agreement of the parties
set forth in any other provision of this Lease.
13.3.6. Attorney Fees. The prevailing party shall be entitled to
recover its actual attorney fees and court costs incurred in enforcing the
indemnification clauses set forth in this Section 13.3.
13.4 Compliance With Insurer Requirements. Tenant shall, at Tenant's
sole expense, comply with all reasonable requirements, guidelines, rules,
orders, and similar mandates and directives in effect on the Lease Commencement
Date that (a) have been disclosed to Tenant by Landlord and (b) pertain to
Tenant's business operations, conduct, or use of the Premises and the Building,
whether imposed by Tenant's insurers, Landlord's insurers, or both. If Tenant's
business operations, conduct, or use of the Premises, other than for normal
office purposes, later cause any increase in the premium for any insurance
policies carried
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by Landlord, Tenant shall, within ten (10) Business Days after receipt of
written notice from Landlord, reimburse Landlord for the increase. Tenant shall,
at Tenant's sole expense, comply with all rules, orders, regulations, or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and of any similar body in effect during the term of this
Lease and any renewal term that (a) have been disclosed to Tenant by Landlord
and (b) pertain to Tenant's business operations, conduct, or use of the Premises
or the Building.
13.5 Tenant's Liability Coverage. Tenant shall, at Tenant's sole
expense, maintain the coverages set forth in this Section 13.5.
13.5.1. Commercial General Liability Insurance. Tenant shall
obtain commercial general liability insurance written on an "occurrence" policy
form, covering bodily injury, property damage, personal injury, and advertising
injury arising out of or relating (directly or indirectly) to Tenant's business
operations, conduct, assumed liabilities, or use or occupancy of the Premises or
the Building.
13.5.2. Broad Form Coverage. Tenant's liability coverage shall
include all the coverages typically provided by the Broad Form Comprehensive
General Liability Endorsement, including broad form property damage coverage
(which shall include coverage for completed operations). Tenant's liability
coverage shall further include premises-operations coverage, owners and
contractors protective (OCP) coverage (when reasonably required by Landlord),
and the broadest available form of contractual liability coverage. It is the
parties' intent that Tenant's contractual liability coverage provide coverage to
the maximum extent possible of Tenant's indemnification obligations under this
Lease.
13.5.3. Primary Insured. Tenant shall be the first or primary
named insured.
13.5.4. Additional Insureds. Landlord and any lender of Landlord
shall be named by endorsement as additional insureds under Tenant's general
liability coverage. The additional insured endorsement must be on ISO Form CG 20
11 11 85 or an equivalent reasonably acceptable to Landlord.
13.5.5. Cross-Liability; Severability of Interests. Tenant's
general liability policies shall be endorsed as needed to provide
cross-liability coverage for Tenant, Landlord, and any lender of Landlord and to
provide severability of interests.
13.5.6. Primary Insurance Endorsements for Additional Insureds.
Tenant's general liability policies shall be endorsed as needed to provide that
the insurance afforded by those policies to the additional insureds is primary
and that all insurance carried by Landlord Parties is strictly excess and
secondary and shall not contribute with Tenant's liability insurance.
13.5.7. Scope of Coverage for Additional Insureds. The coverage
afforded to Landlord and any lender of Landlord must be at least as broad as
that afforded to Tenant and may not contain any terms, conditions, exclusions,
or limitations applicable to Landlord or any lender of Landlord that do not
apply to Tenant.
13.5.8. Delivery of Certificate, Policy, and Endorsements. Before
the Lease Commencement Date, Tenant shall deliver to Landlord the endorsements
referred to in this Section 13.5 as well as a certified copy of Tenant's
liability policy or policies and an original certificate of insurance, executed
by an agent of the insurer or insurers, evidencing compliance with the liability
insurance requirements. Tenant shall obtain a certificate that provides for no
less than thirty (30) days' advance written notice to Landlord from the insurer
or insurers of any cancellation, nonrenewal, or material change in coverage or
available limits of liability and that shall confirm compliance with the
liability insurance requirements in this Lease.
13.5.9. Concurrency of Primary, Excess, and Umbrella Policies.
Tenant's liability insurance coverage may be provided by a combination of
primary, excess, and umbrella policies, but those policies must be absolutely
concurrent in all respects regarding the coverage afforded by the policies. The
coverage of any excess or umbrella policy must be at least as broad as the
coverage of the primary policy.
13.5.10. Liability Limits. The minimum acceptable limits of
liability for Tenant's liability insurance are set forth in Summary Section 10.
13.5.11. "Per Location" Endorsement. Tenant shall, at Tenant's
sole expense, procure a "per location" endorsement or equivalent reasonably
acceptable to Landlord so that the general aggregate and other limits apply
separately and specifically to the Premises.
13.5.12. Survival of Insurance Requirements. Tenant shall, at
Tenant's sole expense, maintain in full force and effect the liability insurance
coverages required under this Lease and shall maintain Landlord Parties and any
lender specified by Landlord as additional insureds, as required by Section
13.5.4 of this lease, for a period of no less than two (2) years after
expiration or earlier termination of this Lease.
13.6 Tenant's Workers' Compensation and Employer Liability Coverage.
Tenant shall procure and maintain workers' compensation insurance as required by
law.
13.7 Tenant's First Party Insurance. Tenant shall, at Tenant's sole
expense, procure and maintain the first party insurance coverages described in
this Section 13.7.
13.7.1. Property Insurance. Tenant shall procure and maintain
property insurance coverage for all office furniture, trade fixtures, office
equipment, merchandise, and all other items of Tenant's property in, on, at, or
about the Premises and the Building, including property installed by, for, or at
the expense of Tenant but excluding:
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(a) "Tenant Improvements," as defined in the Leasehold
Improvement Agreement; and
(b) Other improvements, betterments, alterations, and
additions to the Premises that are insured by Landlord under this Lease.
Tenant's property insurance shall fulfill the following
requirements:
(a) It must be written on the broadest available
"all-risk" (special-causes-of-loss) policy form or an equivalent form acceptable
to Landlord;
(b) It must include an agreed-amount endorsement for no
less than one hundred (100) percent of the full replacement cost (new without
deduction for depreciation) of the covered items and property; and
(c) The amounts of coverage must meet any coinsurance
requirements of the policy or policies.
It is the parties' intent that Tenant shall structure its
property insurance program so that no coinsurance penalty shall be imposed and
there shall be no valuation shortfalls or disputes with any insurer or with
Landlord. Tenant's property insurance coverage shall include vandalism and
malicious mischief coverage, sprinkler leakage coverage, and earthquake
sprinkler leakage coverage.
Landlord shall maintain full replacement cost property insurance
coverage for the "Tenant Improvements," as defined in the Leasehold Improvement
Agreement, and for all other improvements, betterments, alterations, and
additions to the Premises approved in writing by Landlord.
13.7.2. Business Income and Extra Expense Coverage. Tenant shall
further procure and maintain business income (business interruption) insurance
and extra expense coverage with coverage amounts that shall reimburse Tenant for
all direct or indirect loss of income and charges and costs incurred arising out
of all perils insured against by Tenant's property insurance coverage, including
prevention of, or denial of use of or access to, all or part of the Premises or
the Building, as a result of those perils.
The business income and extra expense coverage shall provide
coverage for no less than twelve (12) months of the loss of income, charges, and
costs contemplated under the Lease and shall be carried in amounts necessary to
avoid any coinsurance penalty that could apply. The business income and extra
expense coverage shall be issued by the insurer that issues Tenant's other first
party coverage.
13.8 Other Insurance Coverage. Once every three (3) years during the
Lease Term and on the commencement of any renewal term, Landlord shall have the
right to engage insurance consultants to review the insurance coverages
maintained by Tenant. If, in the opinion of those consultants, any aspect of
Tenant's general liability, property, or other insurance program is inadequate
to protect the interests of Landlord, as contemplated by this Article 13, Tenant
shall, at its sole expense, comply promptly with the consultant's
recommendations. Tenant, however, shall not be required to procure or maintain
other or further coverages that are:
(a) Beyond those typically maintained by similarly
situated parties leasing reasonably similar amounts and types of space for use
in comparable buildings in the same submarket; or
(b) Not available at commercially reasonable rates.
13.9 Form of Policies and Additional Requirements.
13.9.1. Insurance Independent of Exculpation and
Indemnification. Tenant's insurance obligations set forth in Sections 13.4-
13.10 are independent of Tenant's exculpation, indemnification, and other
obligations under this Lease and shall not be construed or interpreted in any
way to restrict, limit, or modify Tenant's exculpation, indemnification, or
other obligations or to limit Tenant's liability under this Lease.
13.9.2. Form of Policies. In addition to the requirements set
forth in Section 13.5.8, the insurance required of Tenant under this Article 13
must:
(a) Name Landlord and any other party Landlord specifies
by endorsement as an additional insured;
(b) Be issued by an insurance company with a rating of
no less than A-X in the current Best's Insurance Guide, or that is otherwise
acceptable to Landlord, and admitted to engage in the business of insurance in
the State of California;
(c) Be primary insurance for all claims under it and
provide that any insurance carried by Landlord Parties and Landlord lenders is
strictly excess, secondary, and noncontributing with any insurance carried by
Tenant; and
(d) Provide that insurance may not be canceled,
nonrenewed, or the subject of material change in coverage or available limits of
coverage, except on thirty (30) days' prior written notice to Landlord and
Landlord's lenders.
13.9.3. Tenant's Delivery of Policy, Endorsements, and
Certificates. Tenant shall deliver the policy or policies, along with any
endorsements to them and certificates required by this Article 13, to Landlord:
(a) On or before the Lease Commencement Date;
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(b) At least thirty (30) days before the expiration date
of any policy; and
(c) On renewal of any policy.
13.9.4. Blanket Insurance. Tenant shall be permitted to provide
the insurance required under this Lease by obtaining a blanket policy or
policies to be maintained by Tenant. The coverages afforded to Landlord and
Landlord's lenders under this Lease shall in no way be limited, diminished, or
reduced under such blanket policy or policies.
13.10 Waiver of Subrogation. Landlord and Tenant agree to cause the
insurance companies issuing their respective property (first party) insurance to
waive any subrogation rights that those companies may have against Tenant or
Landlord, respectively, as long as the insurance is not invalidated by the
waiver. If the waivers of subrogation are contained in their respective
insurance policies, Landlord and Tenant waive any right that either may have
against the other on account of any loss or damage to their respective property
to the extent that the loss or damage is insured under their respective
insurance policies.
13.11 Disclosures Regarding Real Property. The Real Property and the
Premises are located in a special studies zone as designated under the
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Special Studies Zone Act (California Public Resources Code
Sections 2621-2630) and is located within a special Flood Hazard Area as
set forth on a Federal Emergency Management Agency "Flood Insurance Rate Map" or
"Flood Hazard Boundary Map" (12 CFR Section 339.6).
Article 14
DAMAGE AND DESTRUCTION
14.1 Repair of Damage by Landlord. Tenant agrees to notify Landlord
in writing promptly of any damage to the Premises resulting from fire,
earthquake, or any other identifiable event of a sudden, unexpected, or unusual
nature ("Casualty"). If the Premises are damaged by a Casualty, any Common Areas
of the Real Property providing access to the Premises are damaged to the extent
that Tenant does not have reasonable access to the Premises, and if neither
Landlord nor Tenant has elected to terminate this Lease under this Article 14,
Landlord shall promptly and diligently restore such Common Areas, and the Tenant
Improvements originally constructed by Landlord, to substantially the same
condition as existed before the Casualty, except for modifications required by
building codes and other laws.
14.2 Repair Period Notice. Landlord shall, within thirty (30) days
after the date of the Casualty, provide written notice to Tenant indicating the
anticipated period for repairing the Casualty ("Repair Period Notice"). The
Repair Period Notice shall be accompanied by a certified statement executed by
the contractor retained by Landlord to complete the repairs or, if Landlord has
not retained a contractor, a licensed contractor not affiliated with landlord,
certifying the contractor's opinion about the anticipated period for repairing
the Casualty. The Repair Period Notice shall also state, if applicable,
Landlord's election either to repair or to terminate the Lease under Section
14.3.
14.3 Landlord's Option To Terminate or Repair. Landlord may elect
either to terminate this Lease or to effectuate repairs if:
(a) The Repair Period Notice estimates that the period for
repairing the Casualty exceeds one-hundred and eighty (180) days from the date
of the Casualty;
(b) The estimated repair cost of the Premises or the Building,
even though covered by insurance, exceeds fifty percent (50%) of the full
replacement cost; or
(c) Insurance proceeds actually received by Landlord are
insufficient to pay for at least 95% of the total cost of restoration.
Landlord's election shall be stated in the Repair Period Notice.
Despite any other provision of this Article 14, Landlord may not elect to
terminate this Lease under this Article unless Landlord elects also to terminate
the Leases of all similarly situated Tenants, provided that Landlord has the
right under each applicable lease to terminate based on the extent of the
Casualty.
14.4 Tenant's Option To Terminate. If the Repair Period Notice
provided by Landlord indicates that the anticipated period for repairing the
Casualty exceeds two-hundred and seventy (270) days, Tenant may elect to
terminate this Lease by providing written notice ("Tenant's Termination Notice")
to Landlord within thirty (30) days after receiving the Repair Period Notice. If
Tenant does not elect to terminate within this thirty-day (30-day) period,
Tenant shall be considered to have waived the option to terminate.
14.5 Rent Abatement Due to Casualty. Landlord and Tenant agree that
Tenant's Rent shall be fully abated during the period beginning on the later of
(a) the date of the Casualty or (b) the date on which Tenant ceases to occupy
the Premises and ending on the date of substantial completion of Landlord's
restoration obligations as provided in this Article 14 ("Abatement Period"). If,
however, Tenant is able to occupy or does occupy a portion of the Premises, Rent
shall be abated during the Abatement Period only for the portion of the Premises
not able to be occupied by Tenant. Subject to Section 14.4, the Rent abatement
provided in this Section 14.5 is Tenant's sole remedy due to the occurrence of
the Casualty. Landlord shall not be liable to Tenant or any other person or
entity for any direct, indirect, or consequential damage (including lost profits
of Tenant or loss of or interference with Tenant's business), whether or not
caused by the negligence of Landlord or Landlord's employees, contractors,
licensees, or invitees, due to, arising out of, or as a result of the Casualty
(including but not limited to the termination of the Lease in connection with
the Casualty). Tenant agrees to maintain business interruption insurance in
amounts and with coverage no less than that required by Section 13.7.2 to
provide coverage regarding such matters.
14.6 Damage Near End of Term. Despite any other provision of this
Article 14, if the Premises is destroyed or damaged by a Casualty during the
last twelve (12) months of the Lease Term, Landlord and Tenant shall each have
the option to terminate
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this Lease by giving written notice to the other of the exercise of that option
within thirty (30) days after that damage or destruction. If Tenant is not then
in Default under this Lease, however, Tenant may negate Landlord's election to
terminate under this Section 14.6 by electing, within ten (10) days after
receipt of Landlord's termination notice, to exercise any unexercised option to
extend this Lease. If Tenant negates Landlord's election, this Lease shall
continue in effect unless Landlord has the right to, and elects to, terminate
this Lease under Section 14.3.
14.7 Effective Date of Termination; Rent Apportionment. If Landlord
or Tenant elects to terminate this Lease under this Article 14 in connection
with a Casualty, this termination shall be effective thirty (30) days after
delivery of notice of such election. Tenant shall pay Rent, properly apportioned
up to the date of the Casualty. After the effective date of the termination,
Landlord and Tenant shall be discharged of all future obligations under this
Lease, except for those provisions that, by their terms, survive the expiration
or earlier termination of the Lease.
14.8 Waiver of Statutory Provisions. The provisions of this Lease,
including those in this Article 14, constitute an express agreement between
Landlord and Tenant that applies in the event of any Casualty to the Premises,
Building, or Real Property. Tenant, therefore, fully waives the provisions of
any statute or regulation, including California Civil Code Sections 1932(2) and
1933(4), for any rights or obligations concerning a Casualty.
Article 15
CONDEMNATION
15.1 Definition of "Condemnation." As used in this Lease, the term
"Condemnation" means a permanent taking through (a) the exercise of any
government power (by legal proceedings or otherwise) by any public or
quasi-public authority or by any other party having the right of eminent domain
("Condemnor") or (b) a voluntary sale or transfer by Landlord to any Condemnor,
either under threat of exercise of eminent domain by a Condemnor or while legal
proceedings for condemnation are pending.
15.2 Effect on Rights and Obligations. If, during the Lease Term or
the period between the date of execution of this Lease and the date on which the
Lease Term begins, there is any Condemnation of all or part of the Premises,
Building, or Real Property on which the Premises and Building are constructed,
the rights and obligations of the parties shall be determined under this Article
15, and Rent shall not be affected or abated except as expressly provided in
this Article. Landlord shall notify Tenant in writing of any Condemnation within
thirty (30) days after the later of (a) the filing of a complaint by Condemnor
or (b) the final agreement and determination by Landlord and Condemnor of the
extent of the taking ("Condemnation Notice").
15.3 Termination of Lease.
15.3.1. Definition of "Termination Date." The "Termination Date"
shall be the earliest of:
(a) The date on which Condemnor takes possession of the
property that is subject to the Condemnation; (b) the date on which title to the
property subject to the Condemnation is vested in Condemnor; (c) if Landlord has
elected to terminate, the date on which Landlord requires possession of the
property in connection with the Condemnation, as specified in written notice
delivered to Tenant no less than thirty (30) days before that date; or (d) if
Tenant has elected to terminate, thirty (30) days after Landlord's receipt of
written notice of termination from Tenant.
If both Landlord and Tenant have elected to terminate under this
Article 15, the Termination Date shall be the earliest of the dates described in
Sections (a)-(c).
15.3.2. Automatic Termination. If the Premises are totally taken
by Condemnation, this Lease shall terminate as of the Termination Date, and the
Award shall be allocated between Landlord and Tenant in accordance with Section
15.5.
15.3.3. Landlord's Right To Terminate. Landlord shall have the
option to terminate this Lease if:
(a) Ten percent (10%) or more of the Rentable Square
Feet of the Building; (b) any portion of the Building or Real Property
reasonably necessary for Landlord to operate the Building is taken through
Condemnation, and Landlord also terminates the leases of all other similarly
situated tenants (as reasonably determined by Landlord) in the Building; or (c)
any other areas providing access to the Real Property are taken through
Condemnation, and Landlord also terminates the leases of all other similarly
situated tenants (as reasonably determined by Landlord) in the Building.
15.3.4. Tenant's Right To Terminate. Tenant shall have the
option to terminate this Lease by providing thirty (30) days' written notice to
Landlord if one or more of the following are taken through Condemnation:
(a) Thirty percent (30%) or more of the Rentable square
feet of the Premises; or (b) any portion of the common area that provides Tenant
with its primary access to the Premises and that, if taken, would materially
impair Tenant's access to and business activities on the Premises during normal
Business Hours.
Tenant's notice must be given within thirty (30) days after
Tenant's receipt of the Condemnation Notice required by Section 15.2.
15.3.5. Tenant's Waiver. Tenant agrees that its rights to
terminate this Lease due to partial Condemnation are governed by this Article
15. Tenant waives all rights it may have under California Code of Civil
Procedure Section 1265.130, or otherwise, to terminate this Lease based on a
partial Condemnation.
15.3.6. Proration of Rent. If this Lease is terminated under
this Article 15, the termination shall be effective on the Termination Date, and
Landlord shall prorate Rent to that date. Tenant shall be obligated to pay Rent
for the period up
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to, but not including, the Termination Date as prorated by Landlord. Landlord
shall return to Tenant prepaid Rent allocable to any period on or after the
Termination Date.
15.4 Effect of Condemnation if Lease Is Not Terminated. If any part
of the Premises is taken by Condemnation and this Lease is not terminated:
(a) Rent shall be proportionately reduced based on the rentable
square footage of the Premises taken; (b) Landlord shall, at Landlord's sole
expense, accomplish all necessary restoration to the Premises and the Building
resulting from the Condemnation; and (c) Rent shall be abated for the portion of
the remaining Premises not usable by Tenant until Landlord completes the
restoration.
15.5 Allocation of Award.
15.5.1. Landlord's Right to Award. Except as provided in Section
15.5.2 in connection with a Condemnation:
(a) Landlord shall be entitled to receive all
compensation and anything of value awarded, paid, or received in settlement or
otherwise ("Award"); and (b) Tenant irrevocably assigns and transfers to
Landlord all rights to and interests in the Award and fully releases and
relinquishes any claim to, right to make a claim on, or interest in the Award.
15.5.2. Tenant's Right to Compensation. Despite Section 15.5.1,
Tenant shall have the right to make a separate claim in the Condemnation
proceeding for: (1) the taking of the unamortized or undepreciated value of any
Alteration owned and paid for by Tenant that Tenant has the right to remove at
the end of the Lease Term and that Tenant elects not to remove; (2) reasonable
removal and relocation costs for any leasehold improvements that Tenant has the
right to remove and elects to remove (if Condemnor approves of the removal); (3)
relocation costs under Government Code Section 7262, the claim for which Tenant
may pursue by separate action independent of this Lease; and (4) the loss of
good will.
15.6 Temporary Taking. If a temporary taking of part of the
Premises occurs through (a) the exercise of any government power (by legal
proceedings or otherwise) by Condemnor or (b) a voluntary sale or transfer by
Landlord to any Condemnor, either under threat of exercise of eminent domain by
a Condemnor or while legal proceedings for condemnation are pending, Rent shall
▇▇▇▇▇ during the time of such taking in proportion to the portion of the
Premises taken. The entire Award relating to the temporary taking shall be and
remain the property of Landlord. Tenant irrevocably assigns and transfers to
Landlord all rights to and interest in the Award and fully releases and
relinquishes any claim to, right to make a claim on, and any other interest in
the Award.
Article 16
ASSIGNMENT AND SUBLEASING
16.1 Restricted Transfers.
16.1.1. Consent Required; Definition of "Transfer." Except as
otherwise provided in this Article 16, Tenant shall obtain Landlord's written
consent before entering into or permitting any Transfer. A "Transfer" consists
of any of the following, whether voluntary or involuntary, and whether effected
by death, operation of law, or otherwise:
(a) Any assignment, mortgage, pledge, encumbrance, or
other transfer of any interest in this Lease; (b) any sublease or occupancy of
any portion of the Premises by any persons other than Tenant and its employees,
invitees, guests, and agents; and (c) any of the changes (e.g., a change of
ownership or reorganization) included in the definition of Transfer in Section
16.6.
Any person to whom any Transfer is made or sought to be made is a "Transferee."
16.1.2. Landlord's Remedies. If a Transfer fails to comply with
this Article 16, Landlord may, at its option, do either or both of the
following: (a) void the Transfer or (b) declare Tenant in Default under Section
21.1. If Landlord declares Tenant in Default under Section 21.1, Tenant has
thirty (30) days in which to cure the Default after receiving written notice of
the Default from Landlord notwithstanding any contrary cure period specified in
Section 21.1.
16.2 Transfer Procedure.
16.2.1. Transfer Notice. Before entering into or permitting any
Transfer, Tenant shall provide in writing to Landlord a "Transfer Notice" at
least thirty (30) days before the proposed effective date of the Transfer. The
Transfer Notice shall include all of the following:
(a) Information regarding the proposed Transferee,
including the name, address, and ownership of Transferee; the nature of
Transferee's business; and, if the Transferee will be an assignee of this Lease
or a subtenant current financial statements of Transferee (certified by an
officer, a partner, or an owner of Transferee); and
(b) All the material terms of the proposed Transfer,
including the consideration payable by Transferee, the portion of the Premises
to be transferred ("Subject Space"), a general description of any planned
alterations or improvements to the Subject Space that Tenant knows of, the
proposed use of the Subject Space, the effective date of the Transfer, and a
copy of all documentation concerning the proposed Transfer to the extent then
available (with updates as soon as they are available).
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Within ten (10) Business Days of receipt of the Transfer Notice,
Landlord shall notify Tenant in writing if the Transfer Notice is complete. If
it is not, Landlord shall inform Tenant what additional information is required
to make the Transfer Notice complete. Within three (3) Business Days of receipt
of any additional information Landlord requests from time to time, Landlord
shall notify Tenant in writing if the Transfer Notice is complete. If Landlord
fails to respond within the required time, the Transfer Notice shall be
considered complete. Although Landlord may condition its consent to a Transfer
on Landlord's reasonable approval of the final Transfer documentation, Landlord
may not require such final documentation for completion of the Transfer Notice.
16.2.2. Transfer Fee. Within thirty (30) days after Landlord's
written request, Tenant shall pay as Additional Rent any reasonable legal fees
that Landlord incurs in reviewing and processing the Transfer Notice ("Transfer
Fee") as long as Tenant shall not be required to pay more than $1,500 as a
Transfer Fee in connection with any one Transfer;
16.2.3. Limits of Consent. If Landlord consents to any Transfer,
the following limits apply:
(a) Landlord does not agree to waive or modify the
terms and conditions of this Lease.
(b) Landlord does not consent to any further Transfer
by either Tenant or Transferee.
(c) Tenant remains liable under this Lease, and any
guarantor of the Lease remains liable under the
guaranty.
(d) Tenant may enter into that Transfer in accordance
with this Article 16 if:
(1) The Transfer occurs within six (6) months
after Landlord's consent; (2) the Transfer is on
substantially the same terms as specified in the
Transfer Notice; and (3) Tenant delivers to
Landlord, promptly after execution, an original,
executed copy of all documentation pertaining to
the Transfer in a form reasonably acceptable to
Landlord (including Transferee's agreement to be
subject and subordinate to the Lease and to assume
Tenant's obligations under the Lease that arise
after the date of the Transfer to the extent that
they apply to the Subject Space). Landlord shall
respond promptly after Tenant requests that
Landlord approve the form of the Transfer
documentation.
(e) If the Transfer occurs after six (6) months or the
terms of the Transfer have materially changed from those in the Transfer Notice,
Tenant shall submit a new Transfer Notice under Section 16.2.1, requesting
Landlord's consent. A material change is one the terms of which would have
entitled Landlord to refuse to consent to the Transfer initially. A change to
the economic terms of the Transfer that makes it more favorable to Transferee
shall not, however, be considered a material change.
16.3 Landlord's Consent. Landlord may not unreasonably withhold its
consent to any proposed Transfer that complies with this Article 16.
16.3.1. Reasonable Grounds For Denying Consent. Reasonable
grounds for denying consent include but are not limited to the following: (a)
Transferee's character, reputation, business, or use is not consistent with the
character or quality of the Building or the uses of other tenants in the
Building; or (b) Transferee's financial condition is inadequate to support the
Lease obligations of Transferee under the Transfer documents, after taking into
account Tenant's continued financial liability under the Lease.
16.3.2. Unreasonable Grounds For Denying Consent.
Notwithstanding anything to the contrary in Section 16.3.1, Transferree's
financial condition shall not be a reasonable ground for denying consent if the
requested Transfer is as a result of a sale of Tenant or its parent company,
National Insurance Group, and the proposed Transferee is the purchasing entity;
and either (a) if the proposed transfer will take place during the period
covered by the Guaranty in Section 30.22, the Transferee has a net worth equal
to that of Tenant at the time of execution of this Lease and an entity with a
net worth equal to or greater than that of National Insurance Group at the time
of execution of this Lease guarantees the Transferee's obligations and
performance under the Lease in a form substantially similar to Exhibit F; or (b)
if the proposed Transfer will take place after the period covered by the
Guaranty in Section 30.22, the Transferee has a net worth of equal or greater
value to that of Tenant at the time of execution of this Lease. For purposes of
this Section 16.3.2, "net worth" shall be calculated according to Generally
Accepted Accounting Principles.
16.3.3. Landlord's Written Response. Within ten (10) days after
receiving the completed Transfer Notice, Landlord shall approve or disapprove
the proposed Transfer in writing.
16.4 Transfer Premium.
16.4.1. Transfer Premium Payment. As a reasonable condition to
Landlord's consent to any Transfer, Tenant shall pay to Landlord fifty percent
(50%) of any Transfer Premium, as defined in Section 16.4.2.
16.4.2. Definition of "Transfer Premium." "Transfer Premium"
means all Rent and other consideration actually received by Tenant from
Transferee (including key money and bonus money and any payment in excess of
fair market value for services rendered by Tenant to Transferee or assets,
fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee
in connection with the Transfer ("Transferee Rent")), after deducting:
(a) The Rent payable by Tenant under this Lease
(excluding the Transfer Premium) for the Subject Space ("Tenant Rent"); (b)
reasonable leasing commissions paid by Tenant; (c) other reasonable
out-of-pocket costs paid by Tenant (including attorney fees, advertising costs,
and expenses of readying the Subject Space for occupancy by Transferee); (d) any
consideration paid by Tenant to Transferee or any third party to induce
Transferee to consummate the Transfer; and (e) any losses Tenant has sustained
due to the Subject Space being vacate for a period of time before the transfer.
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16.4.3. Monthly Payment of Transfer Premium; Calculation. Tenant
shall pay the Transfer Premium on a monthly basis, together with its payment of
Additional Rent under Article 4. In calculating the Transfer Premium, Tenant
shall first deduct all the Transfer Costs from any Transferee Rent received,
provided that Transfer Costs referenced in clauses (b), (c) and (d) above shall
be amortized over the term of the Transfer.
16.4.4. Audit of Transfer Premium. Tenant shall allow Landlord
to review and audit Tenant's books and records for the purpose of verifying
Tenant's calculation of the Transfer Premium.
16.5 Effect of Transfer.
16.5.1. Right To Collect Rent. If this Lease is assigned,
Landlord may collect Rent directly from Transferee. If all or part of the
Premises is subleased and Tenant defaults, Landlord may collect Rent directly
from Transferee. Landlord may then apply the amount collected from Transferee to
Tenant's monetary obligations under this Lease. Collecting Rent from a
Transferee or applying that Rent to Tenant's monetary obligations does not waive
any provisions of this Article 16.
16.6 Transfers of Ownership Interests and Other Organizational
Changes.
16.6.1. Change of Ownership; Reorganization. For purposes of
this Article 16, "Transfer" also includes:
(a) If Tenant is a partnership or limited liability
company, the transfer, within a twelve-month (12-month) period, of fifty percent
(50%) or more of the partnership or membership interests; or the dissolution of
the partnership or limited liability company without its immediate
reconstitution.
(b) For so long as Tenant is a closely held corporation
(i.e., one whose stock is not publicly held and not traded through an exchange
or over the counter), the sale or other transfer, within a twelve-month
(12-month) period, of more than an aggregate of fifty percent (50%) of the
voting shares of Tenant (other than to immediate family members by reason of
gift or death) or the dissolution, merger, consolidation, or other
reorganization of Tenant. Notwithstanding anything to the contrary in this
Section 16.6.1, if Tenant is a closely held corporation, it shall not be a
Transfer if Tenant's stock becomes publicly held and traded.
16.6.2. Permitted Transfers. Despite any other provision of this
Lease, Landlord's consent is not required for any Transfer to an Affiliate, as
defined in Section 16.6.3, as long as the following conditions are met:
(a) Landlord receives written notice of the Transfer (as
well as any documents or information reasonably requested by Landlord regarding
the Transfer or Transferee); and (b) Transferee assumes in writing all of
Tenant's obligations under this Lease subject to the Transfer.
16.6.3. Definition of "Affiliate." An "Affiliate" means any
entity that: (a) controls, is controlled by, or is under common control with
Tenant; (b) is the transferee of all or substantially all of Tenant's assets or
stock; or (c)results from the merger or consolidation of Tenant with another
entity . "Control" means the direct or indirect ownership of more than fifty
percent (50%) of the voting securities of an entity or possession of the right
to vote more than fifty percent (50%) of the voting interest in the ordinary
direction of the entity's affairs.
Article 17
SURRENDER OF PREMISES
17.1 Surrender of Premises. No act of either party or its authorized
representatives shall constitute acceptance of a surrender of the Premises
unless that intent is specifically acknowledged in a writing signed by both
parties. At the option of Landlord, a surrender and termination of this Lease
shall operate as an assignment to Landlord of all subleases or subtenancies.
Landlord shall exercise this option by giving notice of that assignment to all
subtenants within ten (10) days after the effective date of the surrender and
termination.
17.2 Removal of Tenant Property by Tenant. Upon expiration or
termination of the Lease Term, Tenant shall quit the Premises and surrender
possession to Landlord in accordance with this Section 17.2. Tenant shall leave
the Premises in as good order and condition as when Tenant took possession of
the Premises and as thereafter improved by Landlord or Tenant, except for
reasonable wear and tear, obsolescence, and repairs that are specifically made
the responsibility of Landlord and except as provided in Article 15.
Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises:
(a) All debris and rubbish; (b) any items of furniture,
equipment, freestanding cabinet work, and other articles of personal property
owned by Tenant or installed or placed by Tenant at its expense in the Premises;
and (c) any similar articles of any other persons claiming under Tenant that
Landlord requires to be removed.
Tenant shall, at Tenant's sole option and expense, also remove from the Premises
all fixtures and trade fixtures installed on the Premises by Tenant at its
expense. Tenant shall, at Tenant's expense, repair all damage to the Premises
and the Building resulting from that removal.
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Article 18
HOLDING OVER
18.1 Holdover Rent. If Tenant remains in possession of the Premises
after expiration or earlier termination of this Lease without Landlord's
consent, Tenant's continued possession shall be on the basis of a tenancy at
sufferance and Tenant shall pay as rent during the first sixty (60) days of the
holdover period an amount equal to one-hundred and twenty-five percent (125%) of
the Base Rent and Additional Rent payable under this Lease for the last full
month before the date of expiration or termination. For any holdover period in
excess of sixty (60) days, Tenant shall pay an amount equal to one-hundred and
fifty percent (150%) of the Base Rent and Additional Rent payable under this
Lease for the last full month before the date of expiration or termination.
Article 19
ESTOPPEL CERTIFICATES
19.1 Obligation To Provide Estoppel Certificates. Within ten (10)
Business Days after receipt of a written request by Landlord, Tenant shall
execute and deliver to Landlord an estoppel certificate. The certificate shall
contain any information reasonably requested by and/or party or by any existing
or prospective lender, mortgagee, or purchaser.
19.2 Failure To Deliver. The failure of Tenant to execute or deliver
an estoppel certificate in the required time period shall constitute an
acknowledgment by Tenant that the statements requested in the estoppel
certificate are true and correct, without exception. The failure by Tenant to
execute or deliver an estoppel certificate or other document or instrument as
required in this Article 19, for ten (10) Business Days after notice of such
failure from the party requesting the certificate, document, or instrument,
shall constitute a material breach of this Lease.
Article 20
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT
20.1 Automatic Subordination; Nondisturbance Agreement To Include
Specified Terms. This Lease is subject and subordinate to: (a) the lien of any
mortgages, deeds of trust, or other encumbrances ("Encumbrances") of the Real
Property; (b) all present and future ground or underlying leases ("Underlying
Leases") of the Real Property now or hereafter in force against the Real
Property; (c) all renewals, extensions, modifications, consolidations, and
replacements of the items described in Sections (a)-(b); and (d) all advances
made or hereafter to be made on the security of the Encumbrances.
Despite any other provision of this Article 20, any Encumbrance holder or lessor
may elect that this Lease shall be senior to and have priority over that
Encumbrance or Underlying Lease whether this Lease is dated before or after the
date of the Encumbrance or Underlying Lease. No such subordination shall be
effective unless and until Landlord obtains from the holder of the Encumbrance
placed against the premises a commercially-reasonable nondisturbance agreement
in recordable form, providing that in the event of any foreclosure, sale under a
power of sale, ground or master lease termination, or transfer in lieu of any of
the foregoing, or the exercise of any other remedy under any such Encumbrance,
Tenant's use, possession, and enjoyment of the Premises shall not be disturbed
and this Lease shall continue in full force and effect as long as Tenant is not
in Default.
20.2 Subordination Agreement. If Tenant has received the
nondisturbance agreement referred to in Section 20.1, Tenant shall, within ten
(10) Business Days after Landlord's request, execute any further instruments or
assurances in recordable form that Landlord reasonably considers necessary to
evidence or confirm the subordination or superiority of this Lease to any such
Encumbrances or Underlying Leases. Tenant's failure to execute and deliver such
instrument(s) shall constitute a Default under this Lease only if Landlord has
first delivered the nondisturbance agreement to Tenant.
20.3 Attornment. Tenant covenants and agrees to attorn to the
transferee of Landlord's interest in the Real Property by foreclosure, deed in
lieu of foreclosure, exercise of any remedy provided in any Encumbrance or
Underlying Lease, or operation of law (without any deductions or setoffs) except
as expressly provided in this Lease or in any nondisturbance agreement, if
requested to do so by the transferee, and to recognize the transferee as the
lessor under this Lease. The transferee shall not be liable for:
(a) Any acts, omissions, or Defaults of Landlord that occurred
before the sale or conveyance; or
(b) The return of any security deposit except for deposits
actually paid to the transferee and except as expressly provided in this Lease
or in any nondisturbance agreement.
20.4 Notice of Default; Right To Cure. Tenant agrees to give written
notice of any default by Landlord to the holder of any prior Encumbrance or
Underlying Lease. Tenant agrees that, before it exercises any rights or remedies
under the Lease, the lienholder or lessor shall have the right, but not the
obligation, to cure the default (either by itself or by a receiver for the Real
Property) within the same time, if any, given to Landlord to cure the default,
plus an additional thirty (30) days, except that (i) only ten (10) days shall be
permitted in the case of a default in the payment of money from Landlord to
Tenant; and (ii) in the event of an emergency, the lienholder or lessor shall be
required to commence a cure as soon as is reasonably possible, and in the event
the lender or lienholder fails to do so, Tenant shall have the right to cure to
avoid the risk of in jury to persons, significant damage to property, or
material interference with Tenant's operation of its business. Tenant agrees
that this cure period shall be extended by the time necessary for the lienholder
to begin foreclosure proceedings and to obtain possession of the Building or
Real Property, as applicable, as long as the lienholder:
(a) Notifies Tenant, within twenty (20) days after receipt of
Tenant's notice, of the lienholder's intention to effect this remedy; and
(b) Institutes immediate steps to effect this remedy or
institutes immediate legal proceedings to appoint a receiver for the Real
Property or to foreclose on or recover possession of the Real Property within
the thirty-day (30-day) or
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ten-day (10-day) period and thereafter prosecutes the remedy or legal
proceedings to completion with due diligence and continuity.
Article 21
DEFAULTS AND REMEDIES
21.1 Tenant's Default. The occurrence of any of the following shall
constitute a Default by Tenant under this Lease ("Default"):
(a) Tenant's failure to pay when due any Rent required to be
paid under this Lease if the failure continues for five (5) Business Days after
written notice of the failure from Landlord to Tenant;
(b) Tenant's failure to provide any instrument or assurance as
required by Section 20.2 or estoppel certificate as required by Section 19.1 if
the failure continues for five (5) Business Days after written notice of the
failure from Landlord to Tenant; or
(c) Tenant's failure to perform any other obligation under this
Lease if the failure continues for thirty (30) days after written notice of the
failure from Landlord to Tenant. If the required cure of the noticed Default
cannot be completed within thirty (30) days, Tenant's failure to perform shall
constitute a Default under the Lease unless Tenant undertakes to cure the
failure within thirty (30) days and diligently and continuously attempts to
complete the cure as soon as reasonably possible.
21.2 Replacement of Statutory Notice Requirements. When this Lease
requires service of a notice, that notice shall replace rather than supplement
any equivalent or similar statutory notice, including any notices required by
Code of Civil Procedure Section 1161 or any similar or successor statute. When a
statute requires service of a notice in a particular manner, service of that
notice (or a similar notice required by this Lease) in the manner required by
Section 30.10 shall replace and satisfy the statutory service-of-notice
procedures, including those required by Code of Civil Procedure Section 1162 or
any similar or successor statute.
21.3 Landlord's Remedies on Tenant's Default. On the occurrence of a
Default by Tenant, Landlord shall have the right to pursue any one or more of
the following remedies in addition to any other remedies now or later available
to Landlord at law or in equity. These remedies are not exclusive but
cumulative.
21.3.1. Termination of Lease. Landlord may terminate this Lease
and recover possession of the Premises. Once Landlord has terminated this Lease,
Tenant shall immediately surrender the Premises to Landlord. On termination of
this Lease, Landlord may recover from Tenant all of the following:
(a) The worth at the time of the award of any unpaid
Rent that had been earned at the time of the termination, to be computed by
allowing interest at the rate set forth in Article 23 but in no case greater
than the maximum amount of interest permitted by law;
(b) The worth at the time of the award of the amount by
which the unpaid Rent that would have been earned between the time of the
termination and the time of the award exceeds the amount of unpaid Rent that
Tenant proves could reasonably have been avoided, to be computed by allowing
interest at the rate set forth in Section 23.2 but in no case greater than the
maximum amount of interest permitted by law;
(c) The worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Lease Term after the time of the
award exceeds the amount of unpaid Rent that Tenant proves could reasonably have
been avoided, to be computed by discounting that amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%);
(d) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform
obligations under this Lease, including brokerage commissions and advertising
expenses, expenses of remodeling the Premises for a new tenant (whether for the
same or a different use), and any special concessions made to obtain a new
tenant; and
(e) Any other amounts, in addition to or in lieu of
those listed above, that may be permitted by applicable law.
21.3.2. Continuation of Lease in Effect. Landlord shall have the
remedy described in Civil Code Section 1951.4, which provides that, when a
tenant has the right to sublet or assign (subject only to reasonable
limitations), the landlord may continue the lease in effect after the tenant's
breach and abandonment and recover Rent as it becomes due. Accordingly, if
Landlord does not elect to terminate this Lease on account of any Default by
Tenant, Landlord may enforce all of Landlord's rights and remedies under this
Lease, including the right to recover all Rent as it becomes due.
21.3.3. Tenant's Subleases. If Landlord elects to terminate this
Lease on account of any Default by Tenant, Landlord may:
(a) Terminate any sublease, license, concession, or
other consensual arrangement for possession entered into by Tenant and affecting
the Premises.
(b) Choose to succeed to Tenant's interest in such an
arrangement. If Landlord elects to succeed to Tenant's interest in such an
arrangement, Tenant shall, as of the date of notice by Landlord of that
election, have no further right to, or interest in, the Rent or other
consideration receivable under that arrangement.
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21.4 Form of Payment After Default. If, on three (3) occasions within
a twelve-month (12-month) period, Tenant fails to pay any amount due under this
Lease within five (5) Business Days after the due date or if Tenant draws a
check on an account with insufficient funds, Landlord shall have the right to
require that any subsequent amounts paid by Tenant to Landlord under this Lease
(to cure a Default or otherwise) be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
other form approved by Landlord despite any prior practice of accepting payments
in a different form.
21.5 Efforts To Relet. For purposes of this Article 21, Tenant's
right to possession shall not be considered to have been terminated by
Landlord's efforts to relet the Premises, by Landlord's acts of maintenance or
preservation with respect to the Premises, or by appointment of a receiver to
protect Landlord's interests under this Lease. This list is merely illustrative
of acts that may be performed by Landlord without terminating Tenant's right to
possession.
21.6 Acceptance of Rent Without Waiving Rights. Under Article 24,
Landlord may accept Tenant's payments without waiving any rights under this
Lease, including rights under a previously served notice of Default. If Landlord
accepts partial payments after serving a notice of Default, Landlord may
nevertheless commence and pursue an action to enforce rights and remedies under
the previously served notice of Default, unless the default is entirely cured,
without giving Tenant any further notice or demand.
21.7 Tenant's Remedies on Landlord's Default.
21.7.1. Landlord's Default. Except as provided in Section 10.2,
Landlord's failure to perform any of its obligations under this Lease shall
constitute a default by Landlord under the Lease if the failure continues for
thirty (30) days after written notice of the failure from Tenant to Landlord. If
the required performance cannot be completed within thirty (30) days, Landlord's
failure to perform shall constitute not a default under the Lease unless
Landlord fails to undertake to cure the failure within thirty (30) days and
diligently and continuously attempts to complete this cure as soon as reasonably
possible, except as provided in Section 10.2.
21.7.2. Rent Abatement. If Tenant is unable to use, and does not
use, all or part of the Premises ("Affected Area") as a result of an Abatement
Event, as defined in Section 21.7.2.1, and if this Abatement Event continues for
either (i) three (3) consecutive Business Days, where the cure for the Abatement
Event is reasonably within the control of Landlord, or (ii) ten (10) Business
Days, where the cure for the Abatement Event is not reasonably within the
control of Landlord, after Landlord's receipt of notice from Tenant of the
Abatement Event ("Eligibility Period"), the Rent payable under this Lease shall
be abated or reduced after the expiration of the Eligibility Period for such
time that Tenant continues to be prevented from using, and does not use, the
Affected Area in the proportion that the Rentable Area of the Affected Area
bears to the total Rentable Area of the Premises. Notwithstanding anything to
the contrary in this Section 21.7.2, if an Abatement Event occurs more than once
in a one (1) year period, then the Eligibility Period after which Rent is abated
shall be reduced to one (1) Business Day, where the cure for the Abatement Event
is reasonably within the control of Landlord.
21.7.2.1 Abatement Event. An "Abatement Event" is:
(a) Landlord's performance of or failure to
perform any repair, maintenance, or alteration that substantially interferes
with Tenant's use of the Premises or which concerns an emergency involving risk
of life or injury to persons or significant damage to property;
(b) Any failure of or interruption in utilities
or services required to be supplied by Landlord to the Premises; or
(c) Any failure of Landlord to provide Tenant
with access to the Premises.
Article 22
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
22.1 Landlord's Right To Perform Tenant's Obligations. All
obligations to be performed by Tenant under this Lease shall be performed by
Tenant at Tenant's expense and without any reduction of Rent. If Tenant is in
Default on any obligation, Landlord may, after notice to Tenant as required by
Section 21.2, perform the obligation on Tenant's behalf, without waiving
Landlord's rights for Tenant's failure to perform any obligations under this
Lease and without releasing Tenant from such obligations.
22.2 Reimbursement by Tenant. Within fifteen (15) days after
receiving a statement from Landlord, Tenant shall pay to Landlord the amount of
expense reasonably incurred by Landlord, under Section 22.1, in performing
Tenant's obligation as Additional Rent.
Article 23
LATE PAYMENTS
23.1 Late Charges. If any Rent payment is not received by Landlord or
Landlord's designee within ten (10) days after that Rent is due, Tenant shall
pay to Landlord a late charge of three percent (3%) of such overdue amount
liquidated damages, in lieu of actual damages (other than interest under Section
23.2 and attorney fees and costs under Section 26.1). The parties agree that
this late charge represents a reasonable estimate of the expenses that Landlord
will incur because of any late payment of Rent (other than interest and attorney
fees and costs). Tenant shall pay the late charge as Additional Rent with the
next installment of Rent.
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23.2 Interest. If any Rent payment is not received by Landlord or
Landlord's designee within ten (10) days after that Rent is due, Tenant shall
pay to Landlord annual interest on the past-due amount, from the date due until
paid, at the Prime Rate published by the Wall Street Journal (or if such rate is
no longer published such substitute rate reasonable selected by Landlord plus
two percent (2%) rate per year ("Lease Rate").
Article 24
NONWAIVER
24.1 Nonwaiver. No waiver of any provision of this Lease shall be
implied by any failure of either party to enforce any remedy for the violation
of that provision, even if that violation continues or is repeated. Any waiver
by a party of any provision of this Lease must be in writing. Such written
waiver shall affect only the provision specified and only for the time and in
the manner stated in the writing.
24.2 Acceptance and Application of Payment; Not Accord and
Satisfaction. No receipt by either party of a lesser payment than the Rent
required under this Lease shall be considered to be other than on account of the
earliest amount due, and no endorsement or statement on any check or letter
accompanying a payment or check shall be considered an accord and satisfaction.
Each party may accept checks or payments without prejudice to its right to
recover all amounts due and pursue all other remedies provided for in this
Lease. Either party's receipt of monies from the other party after giving notice
to the other party terminating this Lease in no way reinstates, continues, or
extends the Lease Term or affects that Termination Notice. After the service of
notice terminating this Lease, the beginning of an action, or the entry of final
judgment in any action, either party may receive monies from the other party.
The payment and receipt of the payment shall not waive or affect such prior
notice, action, or judgment.
Article 25
DISPUTE RESOLUTION
25.1 Waiver of Right to Jury Trial. Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.
Landlord's initials /s/ JAW Tenant's initials /s/ DSG
25.2 Resolving Disagreement Over Fair Market Rental Value. If Tenant
timely and effectively objects to Landlord's determination of Fair Market Rental
Value under Section 2.5.2, the disagreement shall be resolved under this Section
25.2.
25.2.1. Negotiated Agreement. Landlord and Tenant shall
diligently attempt in good faith to agree on the Fair Market Rental Value on or
before the tenth (10th) day after Tenant's objection to the Fair Market Rental
Value ("Outside Agreement Date").
25.2.2. Parties' Separate Determinations. If Landlord and Tenant
fail to reach agreement on or before the Outside Agreement Date, Landlord and
Tenant shall each make a separate determination of the Fair Market Rental Value
and notify the other party of this determination within five (5) days after the
Outside Agreement Date.
25.2.2.1 Two Determinations. If each party makes a
timely determination of the Fair Market Rental Value, those determinations shall
be submitted to arbitration in accordance with Section 25.2.3.
25.2.2.2 One Determination. If Landlord or Tenant fails
to make a determination of the Fair Market Rental Value within the five-day
(5-day) period, that failure shall be conclusively considered to be that party's
approval of the Fair Market Rental Value submitted within the five-day (5-day)
period by the other party.
25.2.3. Arbitration. If both parties make timely individual
determinations of the Fair Market Rental Value under Section 25.2.2, the Fair
Market Rental Value shall be determined by arbitration under this Section.
25.2.3.1 Scope of Arbitration. The determination of the
arbitrator(s) shall be limited to the sole issue of whether Landlord's or
Tenant's submitted Fair Market Rental Value is the closest to the actual Fair
Market Rental Value as determined by the arbitrator(s), taking into account the
requirements of Section 2.5.2.
25.2.3.2 Qualifications of Arbitrator(s). The
arbitrator(s) shall each be a licensed real estate broker who has been active in
the leasing or appraising of commercial office properties in the Concord/Walnut
Creek area over the ten-year (10-year) period ending on the date of their
appointment as arbitrator(s).
25.2.3.3 Parties' Appointment of Arbitrators. Within
fifteen (15) days after the Outside Agreement Date, Landlord and Tenant shall
each appoint one arbitrator and notify the other party of the arbitrator's name
and business address.
25.2.3.4 Appointment of Third Arbitrator. If each party
timely appoints an arbitrator, the two (2) arbitrators shall, within ten (10)
days after the appointment of the second arbitrator, agree on and appoint a
third arbitrator (who shall be qualified under the same criteria set forth above
for qualification of the initial two (2) arbitrators) and provide notice to
Landlord and Tenant of the arbitrator's name and business address.
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25.2.3.5 Arbitrators' Decision. Fair Market Rental Value
shall be determined within thirty (30) days of the appointment of the third
arbitrator and the third arbitrator shall notify Landlord and Tenant hereof
immediately. The arbitrators shall have the right to consult experts and
competent authorities for factual information or evidence pertaining to a
determination of Fair Market Rental Value, but any such consultation shall be
made in the presence of both parties, with full right on their parts to
cross-examine. Each party-appointed arbitrator shall state in writing his or her
determination of Fair Market Rental Value, supported by the reasons therefor,
and shall make counterpart copies for each of the other arbitrators. The
arbitrators shall arrange for simultaneous exchange of such proposed resolutions
and the three appraisals shall be added together and their total divided by
three; the resulting quotient shall be the Fair Market Rental Value. If,
however, the low appraisal and/or the high appraisal is/are more than ten
percent (10%) lower and/or higher than the middle appraisal, the appraisal(s)
exceeding such ten percent (10%) limit shall be disregarded. If only one
appraisal is disregarded, the remaining two appraisals shall be added together
and their total divided by two; the resulting quotient shall be the Fair Market
Rental Value. If both the low appraisal and the high appraisal are disregarded
as stated in this Section, the middle appraisal shall be the Fair Market Rental
Value.
25.2.3.6 If Only One Arbitrator Is Appointed. If either
Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after
the Outside Agreement Date, the arbitrator timely appointed by one of them shall
reach a decision and notify Landlord and Tenant of that decision within thirty
(30) days after the arbitrator's appointment. The arbitrator's decision shall be
binding on Landlord and Tenant.
25.2.3.7 If Only Two Arbitrators Are Appointed. If each
party appoints an arbitrator in a timely manner, but the two (2) arbitrators
fail to agree on and appoint a third arbitrator within the required period, the
arbitrators shall be dismissed without delay and the issue of Fair Market Rental
Value shall be submitted to binding arbitration under the Commercial Real Estate
Arbitration rules of the American Arbitration Association ("AAA"), subject to
the provisions of this Section 25.3.
25.2.3.8 If No Arbitrator Is Appointed. If Landlord and
Tenant each fail to appoint an arbitrator in a timely manner, the matter to be
decided shall be submitted without delay to binding arbitration under Commercial
Real Estate Arbitration rules of AAA, subject to the provisions of this Section
25.3.
25.2.3.9 Cost of Arbitration. The cost of the
arbitration shall be paid by the losing party.
Article 26
ATTORNEY FEES AND COSTS
26.1 Attorney Fees and Costs. If either party undertakes litigation
against the other party arising out of or in connection with this Lease, the
prevailing party shall be entitled to recover from the other party reasonable
attorney fees and court costs incurred. The prevailing party shall be determined
under Civil Code Section 1717(b)(1) or any successor statute.
Article 27
LANDLORD'S ACCESS TO PREMISES
27.1 Landlord's Access to Premises. Landlord and its agents may, at
reasonable times and on reasonable oral or written notice to Tenant, enter the
Premises to:
(a) Inspect the Premises; (b) show the Premises to prospective
purchasers or mortgagees or to ground lessors or underlying lessors; (c) show
the Premises, during the final year of the Lease Term, to prospective tenants;
(d) serve, post, and keep posted notices; (e) repair, alter, or improve the
Premises or Building that Landlord deems necessary or desirable; (f) make
necessary repairs to the Building structure or systems; (g) perform services
required or permitted of Landlord by law or by this Lease; (h) perform any
covenants of Tenant that Tenant fails to perform, in accordance with Article 22;
or (i) such other matters as Landlord reasonably deems necessary or desirable.
27.2 Restrictions on Entry; Tenant's Waiver. To the extent reasonably
practicable, Landlord shall exercise its rights under this Article 27 at such
times and in such a manner as to reasonably minimize the impact on Tenant's
business in and occupancy of the Premises. Except in an emergency or when
accompanied by an authorized representative of Tenant, Landlord shall not enter
Tenant's vaults or the special security areas designated in writing by Tenant.
Landlord may enter the Premises under this Article 27 without the
abatement of Rent, subject to Section 21.7, and may take reasonable steps to
accomplish the stated purposes. Tenant waives any claims for damages caused by
Landlord's entry, in accordance with this Article 27, including damage claims
for (a) injuries; (b) inconvenience to or interference with Tenant's business;
(c) lost profits; and (d) loss of occupancy or quiet enjoyment of the Premises,
except to the extent any of the foregoing are caused by the negligence or
willful misconduct of Landlord or any of Landlord's agents.
27.3 Method of Entry. Landlord shall at all times have a key or, if
applicable, a card key with which to unlock all the doors in the Premises,
excluding Tenant's vaults, safes, and special security areas designated in
writing by notice to Landlord. In an emergency situation, Landlord shall have
the right to use any means that Landlord considers proper to open the doors in
and to the Premises. Any such entry into the Premises by Landlord shall not be
considered a forcible or unlawful entry into, or a detainer of, the Premises or
an actual or constructive eviction of Tenant from any portion of the Premises.
27.4 Emergency Entry. Despite any other provision of this Article 27,
Landlord and Landlord's agents may enter the Premises without any advance notice
when necessary to address emergency situations. For purposes of this Article, an
emergency situation is one that poses a threat of imminent bodily harm or
property damage. If Landlord makes an emergency entry onto the Premises when no
authorized representative of Tenant is present, Landlord shall provide telephone
notice to Tenant as soon as
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reasonably possible within twenty-four (24) hours after that entry and shall
take reasonable steps to secure the Premises until a representative of Tenant
arrives at the Premises.
Article 28
SIGNS
28.1 Building Name; Landlord's Signage Rights. Subject to Tenant's
signage rights under this Article 28, Landlord may at any time change the name
of the Building and install, affix, and maintain all signs on the Real Property
as Landlord may, in Landlord's sole discretion, desire. Tenant shall not have or
acquire any property right or interest in the name of the Building. Tenant may
use the name of the Real Property.
28.2 Tenant's Signage Rights.
28.2.1. Tenant's Monument Sign. Tenant shall have the
non-exclusive right to construct a monument sign located on the Real Property
and fronting on Systron Drive to display Tenant's trade name and direct
visitor's to Tenant's driveway ("Monument Sign"). Tenant's right to maintain its
name on the Monument Sign shall be subject to the following requirements:
(a) All expenses in connection with the construction,
installation, and maintenance of Tenant's sign shall be paid by Tenant.
(b) The design, size, location, materials, colors, and
lighting of the Monument Sign shall be approved by Landlord in Landlord's
reasonable discretion.
(c) Tenant must obtain all applicable permits and
authorizations by government authorities before beginning to install Tenant's
name on the Monument Sign.
(d) Tenant shall maintain repair and insure the Monument
Sign at Tenant's sole cost and expense.
28.2.2. Nontransferability. Tenant's signage rights under this
Section 28.2.2. may not be assigned to any assignee of this Lease or to any
subtenant of Tenant.
28.2.3. Removal, Repair, and Restoration. On termination or
expiration of the Lease Term or on expiration of Tenant's sign rights under this
Section 28, Landlord shall have the right to permanently remove the Monument
Sign or permanently remove Tenant's name (including its logo) from the Monument
Sign, repair any damage to the Monument Sign resulting from the removal of
Tenant's name, and restore the land on which the Monument Sign was located to
the condition that existed before the installation of the Monument Sign. Tenant
shall pay to Landlord, within thirty (30) days after demand, all expenses
incurred in connection with that removal, repair, and restoration.
28.2.4. Prohibited Signs and Other Items. Tenant may not display
any signs on the exterior or roof of the Building or in the Common Areas of the
Building or the Real Property. Tenant may not install or display any signs,
window coverings, blinds (even if located behind the Landlord-approved window
coverings for the Building), or other items visible from the exterior of the
Premises without Landlord's prior written approval, which Landlord may, in
Landlord's sole discretion, grant or withhold. Any signs, notices, logos,
pictures, names, or advertisements that are installed by or for Tenant without
Landlord's approval may be removed without notice by Landlord at Tenant's
expense.
28.2.5. Directory. Landlord shall, at Landlord's sole expense,
provide and maintain throughout the Lease Term a directory on the Real Property
exclusively for the display of the names and suite numbers of tenants on the
Real Property. Tenant is entitled to display its name and Premises address in
the directory without additional expense to Tenant.
Article 29
TENANT PARKING
29.1 Number of Parking Spaces. Tenant shall be entitled to use
throughout the Lease Term the number of unreserved parking spaces for use in
common with other tenants of the Real Property in the Common Area up to the
maximum number set forth in Summary Section 12.
29.2 Changes in Location, Layout, and Service. Landlord specifically
reserves the right to grant reserved spaces, change the location, size,
configuration, design, layout, and all other aspects of the parking facility.
Landlord may close off or restrict access to the parking facility from time to
time to facilitate construction, alteration, or improvements, without incurring
any liability to Tenant and without any abatement of Rent under this Lease.
Landlord shall have no obligation to police or patrol the parking area.
Article 30
MISCELLANEOUS
30.1 Captions. The captions of articles and Sections and the table of
contents of this Lease are for convenience only and have no effect on the
interpretation of the provisions of this Lease.
30.2 Word Usage. Unless the context clearly requires otherwise:
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(a) The plural and singular numbers shall each be
considered to include the other; (b) the masculine, feminine, and neuter genders
shall each be considered to include the others; (c) "shall," "will," "must,"
"agrees," and "covenants" are each mandatory; (d) "may" is permissive; (e) "or"
is not exclusive; and (f) "includes" and "including" are not limiting.
30.3 Counting Days. Days shall be counted by excluding the first day
and including the last day. For purposes of this Agreement, "Business Day" means
any day other than Saturday, Sunday or a holiday observed by national or
federally chartered banks. If the last day is a Saturday, Sunday, or legal
holiday as described in Government Code Sections 6700- 6701, it shall be
excluded. Any act required by this Lease to be performed by a certain day shall
be timely performed if completed before 5 p.m. local time on that date. If the
day for performance of any obligation under this Lease is a Saturday, Sunday, or
legal holiday, the time for performance of that obligation shall be extended to
5 p.m. local time on the first following date that is not a Saturday, Sunday, or
legal holiday.
30.4 Entire Agreement; Amendments. This Lease and all exhibits
referred to in this Lease constitute the final, complete, and exclusive
statement of the terms of the agreement between Landlord and Tenant pertaining
to Tenant's lease of space in the Real Property and supersedes all prior and
contemporaneous understandings or agreements of the parties. Neither party has
been induced to enter into this Lease by, and neither party is relying on, any
representation or warranty outside those expressly set forth in this Lease. This
Lease may be amended only by an agreement in writing signed by Landlord and
Tenant.
30.5 Exhibits. The Exhibits if applicable, attached to this Lease are
a part of this Lease and incorporated into this Lease by reference.
30.6 Partial Invalidity. If a court or arbitrator of competent
jurisdiction holds any Lease clause to be invalid or unenforceable in whole or
in part for any reason, the validity and enforceability of the remaining
clauses, or portions of them, shall not be affected.
30.7 Binding Effect. Subject to Article 16, this Lease shall bind and
benefit the parties to this Lease and their legal representatives and successors
in interest.
30.8 Independent Covenants. This Lease shall be construed as though
its covenants between Landlord and Tenant are independent and not dependent.
30.9 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
30.10 Notices. All notices (including requests, demands, approvals,
or other communications) under this Lease shall be in writing.
30.10.1. Method of Delivery. Notice shall be sufficiently given
for all purposes as follows:
(a) When personally delivered to the recipient, notice
is effective on delivery.
(b) When mailed first class to the last address of the
recipient known to the party giving notice, notice is effective on delivery.
(c) When mailed by certified mail with return receipt
requested, notice is effective on receipt if delivery is confirmed by a return
receipt.
(d) When delivered by overnight delivery Federal
Express/Airborne/United Parcel Service/DHL WorldWide Express with charges
prepaid or charged to the sender's account, notice is effective on delivery if
delivery is confirmed by the delivery service.
(e) When sent by telex or fax to the last telex or fax
number of the recipient known to the party giving notice, notice is effective on
receipt as long as (1) a duplicate copy of the notice is promptly given by
first-class or certified mail or by overnight delivery or (2) the receiving
party delivers a written confirmation of receipt. Any notice given by telex or
fax shall be considered to have been received on the next Business Day if it is
received after 5 p.m. (recipient's time) or on a nonbusiness day.
30.10.2. Refused, Unclaimed, or Undeliverable Notices. Any
correctly addressed notice that is refused, unclaimed, or undeliverable because
of an act or omission of the party to be notified shall be considered to be
effective as of the first date that the notice was refused, unclaimed, or
considered undeliverable by the postal authorities, messenger, or overnight
delivery service.
30.10.3. Addresses. Addresses for purposes of giving notice are
set forth in Summary Section 13. Either party may change its address or telex or
fax number by giving the other party notice of the change in any manner
permitted by this Section 30.11.
30.10.4. Lenders and Ground Lessor. If Tenant is notified of the
identity and address of Landlord's lender or ground or underlying lessor, Tenant
shall give to that lender or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease.
30.11 Force Majeure--Specific Exceptions. The time for performance of
an obligation other than the payment of money under this Lease shall be extended
for the period during which a party is prevented from performing by acts of God,
government, or other force or event beyond the reasonable control of that party.
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30.12 Time of the Essence. Time is of the essence of this Lease and
each of its provisions and Exhibits.
30.13 Modifications Required by Landlord's Lender. If any
institutional lender of Landlord (e.g., bank, savings and loan association,
pension fund, insurance company, real estate investment trust) reasonably
requires a modification of this Lease, Tenant shall agree to that modification
as long as:
(a) Base Rent, Additional Rent, and any other amounts required
to be paid under this Lease, and the time and manner of payment, will not be
changed.
(b) The Term (including any Option Terms and the times governing
Tenant's exercise of any options) will not be changed.
(c) Tenant's possession of the Premises and rights to possession
and use of other parts of the Building and Real Property will not be changed.
(d) Landlord's obligations to Tenant under this Lease will not
be reduced, and Tenant's obligations to Landlord under this Lease will not be
increased.
Tenant shall execute an amendment to this Lease evidencing
modifications required and permitted under this Section 30.13 within a
reasonable time after receipt of a written request.
30.14 Recording. Neither this Lease nor any short form of this Lease
shall be recorded.
30.15 Liability of Landlord. The liability of Landlord (including all
persons and entities that comprise Landlord, and any successor landlord) and any
recourse by Tenant against Landlord under all provision of this Lease shall be
limited to the interest of Landlord and Landlord's successors in interest in and
to the Real Property. On behalf of itself and all persons claiming by, through,
or under Tenant, Tenant expressly waives and releases Landlord from any personal
liability for breach of this Lease.
30.16 Transfer of Landlord's Interest. On a transfer of all of
Landlord's interest in the Building and Real Property and in this Lease,
Landlord shall be released from all liability and obligations under this Lease
that accrue after the effective date of transfer, and the following
restrictions:
(a) Landlord shall not be released from its obligations under
this Lease unless the transferee agrees in writing, for the benefit of Tenant,
to assume Landlord's obligations under this Lease from and after the date of
transfer; and
(b) If Landlord assigns its interest in this Lease to a lender
as additional security, this assignment shall not release Landlord from its
obligations under this Lease;
30.17 Submission of Lease. Submission of this document for
examination or signature by the parties does not constitute an option or offer
to lease the Premises on the terms in this document or a reservation of the
Premises in favor of Tenant. This document is not effective as a lease or
otherwise until executed and delivered by both Landlord and Tenant.
30.18 Legal Authority.
30.18.1. Corporate Authority. If either party is a corporation:
(a) Each individual signing this Lease on behalf of that
corporation represents and warrants that each of them is duly authorized to
execute and deliver this Lease on behalf of the corporation;
(b) That the corporation is duly organized and validly
existing under the laws of a state of the United States; and
(c) That corporation and the individuals signing this
Lease on its behalf covenant that, within thirty (30) days after the date of
this Lease, the corporation shall deliver to the other party a duly certified
copy of a resolution of the corporation's board of directors authorizing
execution of this Lease.
30.18.2. Partnership Authority. If either party is a partnership
or a limited liability partnership, each individual executing this Lease on
behalf of the partnership represents and warrants that:
(a) Each of them is duly authorized to execute and
deliver this Lease on behalf of the partnership in accordance with the
partnership agreement, or an amendment to the partnership agreement, now in
effect; and
(b) That the partnership and the individual signing this
Lease on its behalf covenant that, within fifteen (15) days after the date of
this Lease, the partnership shall deliver to Landlord a duly certified copy of a
resolution, a certificate or other evidence reasonably satisfactory to Landlord
that the partnership has authorized execution of this Lease.
30.18.3. Limited Liability Company Authority. If either party is
a limited liability company, each individual executing this Lease on behalf of
that company represents and warrants that:
(a) The individual(s) executing this Lease on behalf of
the company have full power and authority under the company's governing
documents to execute and deliver this Lease in the name of and on behalf of the
company;
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(b) The company is a limited liability company duly
organized and validly existing under the laws of a state of the United States;
and
(c) The company and the individuals signing this Lease
on his behalf covenant that, within fifteen (15) days after the date of this
Lease, the company shall deliver to the Landlord a duly certified copy of a
resolution or other document reasonably satisfactory to Landlord confirming
authorization of the execution of this Lease.
30.19 Right To Lease. Landlord reserves the absolute right to
contract with any other person or entity to be a tenant in the Building as
Landlord, in Landlord's sole business judgment, determines best to promote the
interests of the Building. Tenant does not rely on the expectation, and Landlord
does not represent, that any specific tenant or type or number of tenants will,
during the Lease Term, occupy any space in the Building.
30.20 No Air Rights. No rights to any view from the Premises or to
exterior light or air to the Premises are created under this Lease.
30.21 Brokers. Landlord and Tenant each represents to the other that
it has had no dealings with any real estate broker or agent in connection with
the negotiation of this Lease, except for the real estate brokers or agents
specified in Summary Section 14 (Brokers) and that they know of no other real
estate broker or agent who is entitled to a commission or finder's fee in
connection with this Lease. Tenant acknowledges that ▇▇▇▇ ▇▇▇▇▇▇, Vice President
of Cornish & ▇▇▇▇▇ Commercial, is the acting broker for Landlord in this
transaction as well as a principal of Landlord. Tenant consents to ▇▇. ▇▇▇▇▇▇'▇
role as a principal of Landlord and waives any potential conflict of interest
arising therefrom. Each party shall indemnify, protect, defend, and hold
harmless the other party against all claims, demands, losses, liabilities,
lawsuits, judgments, and costs and expenses (including reasonable attorney fees)
for any leasing commission, finder's fee, or equivalent compensation alleged to
be owing on account of the indemnifying party's dealings with any real estate
broker or agent other than the Brokers. Landlord agrees to pay a commission to
the Brokers regarding this transaction pursuant to a separate agreement with
such Brokers. The terms of this Section 30.21 shall survive the expiration or
earlier termination of the Lease Term.
30.22 Guaranty. National Insurance Group, Tenant's parent company,
shall guaranty Tenant's performance and obligations under this Lease during the
first three (3) Lease Years in the form attached as Exhibit F (the "Guaranty").
If after the first three (3) Lease Years, Tenant's net worth falls below its
level as of the date of execution of this Lease, the Guaranty shall be
immediately reinstated for an additional three (3) Lease Years. Tenant agrees to
provide Landlord with confidential financial statements establishing its net
worth on an annual basis, or more frequently as requested by Landlord, but in no
event more often than quarterly. Landlord agrees to keep such financial
statements confidential and shall not disclose them to any persons other than
its attorneys or other professional advisors whose review may be reasonably
necessary to assist Landlord in evaluating Tenant's financial status. For
purposes of this Section 30.22, "net worth" shall be calculated according to
Generally Accepted Accounting Principles.
Executed as of the date stated in Summary Section 1.
Landlord: Tenant:
Systron Business Center, LLC Pinnacle Data Corporation
a California limited liability company a California corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------- ----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President/Facilities
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
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