EXHIBIT 10.1
LEASE BETWEEN
SOBRATO INTERESTS III AND NETWORK EQUIPMENT TECHNOLOGIES
(OFFICE BUILDING 1)
Section Page #
Parties.............................................................. 1
Premises............................................................. 1
Use.................................................................. 1
PERMITTED USES....................................................... 1
USES PROHIBITED...................................................... 1
ADVERTISEMENTS AND SIGNS............................................. 2
Term and Rental...................................................... 2
BASE MONTHLY RENT.................................................... 2
RENTAL ADJUSTMENT.................................................... 2
LATE CHARGES......................................................... 3
SECURITY DEPOSIT..................................................... 3
Construction and Possession.......................................... 4
BUILDING SHELL CONSTRUCTION.......................................... 4
TENANT IMPROVEMENT PLANS............................................. 5
FINAL PRICING........................................................ 5
CHANGE ORDERS........................................................ 5
BUILDING SHELL COSTS................................................. 5
TENANT IMPROVEMENT COSTS............................................. 6
CONSTRUCTION......................................................... 6
GENERAL CONTRACTOR OVERHEAD & PROFIT................................. 6
TENANT DELAYS........................................................ 6
INSURANCE............................................................ 7
PUNCH LIST & WARRANTY................................................ 7
OTHER WORK BY TENANT................................................. 7
Acceptance of Possession and Covenants to Surrender.................. 7
DELIVERY AND ACCEPTANCE.............................................. 7
CONDITION UPON SURRENDER............................................. 8
FAILURE TO SURRENDER................................................. 8
Alterations and Additions............................................ 9
TENANT'S ALTERATIONS................................................. 9
EXEMPTED ALTERATIONS................................................. 10
FREE FROM LIENS...................................................... 10
COMPLIANCE WITH GOVERNMENTAL REGULATIONS............................. 10
Maintenance of Premises.............................................. 10
LANDLORD'S OBLIGATIONS............................................... 10
TENANT'S OBLIGATIONS................................................. 11
LANDLORD AND TENANT'S OBLIGATIONS REGARDING COMMON AREA COSTS........ 11
COMMON AREA COSTS.................................................... 11
TENANT'S ALLOCABLE SHARE............................................. 12
WAIVER OF LIABILITY.................................................. 12
Hazard Insurance..................................................... 13
TENANT'S USE......................................................... 13
LANDLORD'S INSURANCE................................................. 13
TENANT'S INSURANCE................................................... 13
WAIVER............................................................... 14
Taxes................................................................ 14
Utilities............................................................ 14
Toxic Waste and Environmental Damage................................. 14
TENANT'S RESPONSIBILITY.............................................. 15
TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS..................... 15
ACTUAL RELEASE BY TENANT............................................. 15
ENVIRONMENTAL MONITORING............................................. 16
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Tenant's Default..................................................... 16
REMEDIES............................................................. 17
RIGHT TO RE-ENTER.................................................... 17
ABANDONMENT.......................................................... 17
NO TERMINATION....................................................... 18
NON-WAIVER........................................................... 18
PERFORMANCE BY LANDLORD.............................................. 18
Landlord's Liability................................................ 18
LIMITATION ON LANDLORD'S LIABILITY................................... 18
LIMITATION ON TENANT'S RECOURSE...................................... 19
INDEMNIFICATION OF LANDLORD.......................................... 19
Destruction of Premises.............................................. 19
DESTRUCTION BY AN INSURED CASUALTY................................... 19
DESTRUCTION BY AN UNINSURED CASUALTY................................. 20
TENANT'S RIGHT TO CANCEL ADJACENT LEASES............................. 20
Condemnation......................................................... 20
Assignment or Sublease............................................... 21
CONSENT BY LANDLORD.................................................. 21
ASSIGNMENT OR SUBLETTING CONSIDERATION............................... 21
NO RELEASE........................................................... 22
REORGANIZATION OF TENANT............................................. 22
PERMITTED TRANSFERS.................................................. 22
EFFECT OF DEFAULT.................................................... 22
EFFECTS OF CONVEYANCE................................................ 23
SUCCESSORS AND ASSIGNS............................................... 23
Option to Extend the Lease Term...................................... 23
GRANT AND EXERCISE OF OPTION......................................... 23
DETERMINATION OF FAIR MARKET RENTAL.................................. 23
RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL............. 24
PERSONAL TO TENANT................................................... 24
Option to Lease, Option to Purchase.................................. 25
General Provisions................................................... 25
ATTORNEY'S FEES...................................................... 25
AUTHORITY OF PARTIES................................................. 25
BROKERS.............................................................. 25
CHOICE OF LAW........................................................ 25
DISPUTE RESOLUTION................................................... 25
ENTIRE AGREEMENT..................................................... 26
ENTRY BY LANDLORD.................................................... 26
ESTOPPEL CERTIFICATES................................................ 26
EXHIBITS............................................................. 27
INTEREST............................................................. 27
MODIFICATIONS REQUIRED BY LENDER..................................... 27
NO PRESUMPTION AGAINST DRAFTER....................................... 27
NOTICES.............................................................. 27
RENT................................................................. 27
REPRESENTATIONS...................................................... 27
RIGHTS AND REMEDIES.................................................. 27
SEVERABILITY......................................................... 28
SUBORDINATION........................................................ 28
SUBMISSION OF LEASE.................................................. 28
SURVIVAL OF INDEMNITIES.............................................. 28
TIME................................................................. 28
TRANSPORTATION DEMAND MANAGEMENT PROGRAMS............................ 28
WAIVER OF RIGHT TO JURY TRIAL........................................ 29
USE OF ROOF.......................................................... 29
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RECORDATION.......................................................... 29
EXHIBIT A - Project.................................................. 31
EXHIBIT B-2 - Shell Plans and Specifications......................... 32
EXHIBIT C - Building Shell Definition................................ 33
BUILDING STRUCTURE................................................... 33
SITEWORK............................................................. 33
PLUMBING............................................................. 34
ELECTRICAL........................................................... 34
FIRE SPRINKLER....................................................... 34
SITE AMENITIES....................................................... 34
EXHIBIT C - Building Shell Definition................................ 34
EXHIBIT D - Tenant Improvement Plans and Specifications.............. 35
EXHIBIT E - Option to Lease.......................................... 36
GRANT OF OPTION...................................................... 36
TERM OF OPTION....................................................... 36
EXERCISE OF OPTION................................................... 36
CONDITIONS PRECEDENT................................................. 36
LEASE OF THE OPTION BUILDING......................................... 36
CONSTRUCTION OF SHELL AND TENANT IMPROVEMENTS........................ 38
SUCCESSORS........................................................... 38
EXHIBIT D - Tenant Improvement Plans and Specifications.............. 39
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1. PARTIES: THIS LEASE, is entered into on this ____ day of April, 1997,
between SOBRATO INTERESTS III, a California Limited Partnership, whose address
is ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and NETWORK
EQUIPMENT TECHNOLOGIES, a Delaware Corporation, whose address is ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, hereinafter called respectively
Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City
of Fremont, County of Alameda, State of California, consisting of a two-story
office building of approximately 100,000 square feet ("Building 1") and 350
parking places which shall be available for Tenant's exclusive use but shall
not be designated or segregated from the balance of the parking area, in a
project initially consisting of 3 buildings totaling approximately 280,000
square feet on an approximately 17.5-acre first phase portion of a larger
33.5-acre site ("Project) as outlined in red on EXHIBIT "A". In addition,
Tenant shall have the non-exclusive right to use the common area ("Common
Area") surrounding the Building and additional buildings constructed within
the Project. Unless expressly provided otherwise, the term Premises as used
herein shall include the Tenant Improvements (defined in Section 5.B)
constructed by Tenant pursuant to Section 5.B. Tenant acknowledges
Landlord's right to and hereby consents to construction of additional
building(s) on adjacent land in the Project owned by Landlord, so long as
such construction does not involve the removal of site amenities such as the
volleyball court and outdoor seating or a reduction in size of the
approximately 79,000 square foot amphitheatre area and water feature ("Quad")
adjacent to the Building.
Notwithstanding the provisions of this Section 2, Tenant shall be
permitted to schedule with Landlord and reserve the Quad for its exclusive
use from time to time for the purpose of conducting company meetings and
events.
3.USE:
A. PERMITTED USES: Tenant shall use the Building only for the following
purposes and shall not change the use of the Building without the prior
written consent of Landlord: Office, research and development, marketing,
light manufacturing, storage and other incidental uses such as training
rooms, cafeteria and health club. Tenant shall use only the
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number of parking spaces allocated to Tenant. All trucks and delivery
vehicles shall (i) be parked at the rear of the Building near the loading
areas, (ii) loaded and unloaded in a manner which does not interfere with the
businesses of other occupants of the Project, and (iii) permitted to remain
on the Project only so long as is reasonable necessary to complete the
loading and unloading. Landlord makes no representation or warranty that any
specific use of the Premises desired by Tenant is permitted pursuant to any
Laws.
B. USES PROHIBITED: Tenant shall not commit or suffer to be committed
on the Premises any waste, nuisance, or other act or thing which may
unreasonably disturb the quiet enjoyment of any other tenant in or around the
Premises, nor allow any sale by auction or any other use of the Premises for
an unlawful purpose. Tenant shall not (i) damage or overload the electrical,
mechanical or plumbing systems of the Premises, (ii) attach, hang or suspend
anything from the ceiling, walls or columns of the building in excess of the
load limits for which such items are designed or set any load on the floor in
excess of the load limits for which the floor is designed, or (iii) generate
dust, fumes or waste products which create a fire or health hazard or damage
the Premises or in the soils surrounding the Building. No materials,
supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature, or any waste materials, refuse, scrap or
debris, shall be stored upon or permitted to remain on any portion of the
Premises outside of the Building without Landlord's prior approval, which
approval may be withheld in its sole discretion.
C. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the Premises (excluding the interior of the
Building) any signs not approved by the city or other governing authority.
Tenant will not place or permit to be placed upon the Premises any signs,
advertisements or notices without the written consent of Landlord as to type,
size, design, lettering, coloring and location, which consent will not be
unreasonably withheld. Any sign placed on the Premises shall be removed by
Tenant, at its sole cost, prior to the Expiration Date or promptly following
the earlier termination of the lease, and Tenant shall repair, at its sole
cost, any damage or injury to the Premises caused thereby, and if
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not so removed, then Landlord may have same so removed at Tenant's expense.
Landlord hereby approves the general size and location of the exterior signs
as shown in green on Exhibit "B-1".
4.TERM AND RENTAL:
A. BASE MONTHLY RENT: The term ("Lease Term") shall be for one hundred
forty-four (144) months, commencing on the Commencement Date, estimated to
occur on April 1, 1998, but finally determined pursuant to Section 5.G, and
ending one hundred forty-four (144) months thereafter ("Expiration Date").
In addition to all other sums payable by Tenant under this Lease, Tenant
shall pay as base monthly rent ("Base Monthly Rent") for the Premises an
amount equal to the product of multiplying One Dollar and Twenty-Five Cents
($1.25) by the Rentable Square Footage (as hereinafter defined) of the
Building. "Rentable Square Footage" is defined as the square footage of the
Building when measured from outside exterior wall/glass to outside exterior
wall/glass of each floor, including covered docks, covered entries, covered
patios and covered balconies, but excluding roof overhangs. The Rentable
Square Footage shall be derived based on Exhibit "B-2" as defined below and
attached hereto. Base Monthly Rent shall be due in advance on or before the
first day of each calendar month during the Lease Term. All sums payable by
Tenant under this Lease shall be paid to Landlord in lawful money of the
United States of America, without offset or deduction, except as set forth
herein, and without prior notice or demand, at the address specified in
Section 1 of this Lease or at such place or places as may be designated by
Landlord during the Lease Term. Base Monthly Rent for any period less than a
calendar month shall be a pro rata portion of the monthly installment.
B. RENTAL ADJUSTMENT: Beginning twenty four (24) months after the
Commencement Date, and every twenty four (24) months thereafter (an
"Adjustment Date"), the then-payable Base Monthly Rent shall be subject to
adjustment based on the increase, if any, in the Consumer Price Index that
has occurred during the twenty four (24) months preceding the
then-applicable Adjustment Date. The basis for computing the adjustment
shall be the U.S. Department of Labor, Bureau of Labor Statistic's Consumer
Price Index for All Urban Consumers, All Items, 1982-84=100, for the San
Francisco-Oakland-San ▇▇▇▇ area ("Index"). The Index most recently published
preceding the Commencement Date for the first Adjustment (or previous
Adjustment Date, as applicable), shall be considered the "Base Index". If
the Index most recently published preceding the Adjustment Date ("Comparison
Index") is greater than the Base Index, the then-payable Base Monthly Rent
shall be increased by multiplying the then-payable Base Monthly Rent by a
fraction, the numerator of which is the Comparison Index and the denominator
of which is the Base Index. Notwithstanding
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any subsequent decrease in the Index, the increase in the CPI for any
calendar year shall never be less than three percent (3%) nor more than eight
percent (8%) per year compounded annually. On adjustment of the Base Monthly
Rent, Landlord shall notify Tenant by letter stating the new Base Monthly
Rent. Landlord's calculation of the Base Monthly Rent escalation shall be
conclusive and binding unless Tenant objects to said calculation within sixty
(60) days of Tenant's receipt from Landlord of such calculation. Landlord's
failure to adjust Base Monthly Rent on an Adjustment Date shall not prevent
Landlord from retroactively adjusting Base Monthly Rent at any subsequent
time during the Lease Term. If the Index base year is changed so that it
differs from 1982-84=100, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is changed, revised or discontinued for
any reason, there shall be substituted in lieu thereof and the term "Consumer
Price Index" shall thereafter refer to the most nearly comparable official
price index of the United States Government in order to obtain substantially
the same result as would have been obtained had the original Consumer Price
Index been not been discontinued, revised or changed, which alternative index
shall be selected by Landlord and shall be subject to Tenant's written
approval.
C. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant
to Landlord of Base Monthly Rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which is extremely difficult to ascertain. Such costs include but are not
limited to: administrative, processing, accounting, and late charges which
may be imposed on Landlord by the terms of any contract, revolving credit,
mortgage, or trust deed covering the Premises. Accordingly, if any
installment of Base Monthly Rent or other sum due from Tenant shall not be
received by Landlord or its designee within five (5) days after that Rent is
due, Tenant shall pay to Landlord a late charge equal to five (5%) percent of
such overdue amount, which late charge shall be due and payable on the same
date that the overdue amount was due. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant, excluding interest and attorneys fees and
costs. If any rent remains delinquent for a period in excess of thirty (30)
days then, in addition
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to such late charge, Tenant shall pay to Landlord interest on any rent that
is not paid when due at the Agreed Interest Rate specified in Section 19.J
and calculated from the date thirty (30) days following the date such amount
became due until the date such rent is paid. Acceptance by Landlord of such
late charge shall not constitute a waiver of Tenant's default with respect to
such overdue amount nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
Notwithstanding the foregoing, Tenant shall be granted one exception per
calendar year when Base Monthly Rent may be received by Landlord up to ten
(10) days after notice to Tenant that such Base Monthly Rent is past due
before Tenant incurs the 5% late charge.
D. SECURITY DEPOSIT: Prior to the Lease Commencement Date, Tenant shall
deposit with Landlord the sum of One Hundred Twenty Five Thousand and No/100
Dollars ($125,000.00) ("Security "Deposit"). Landlord agrees that in lieu of
a cash Security Deposit, Tenant may deposit a letter of credit in a form
reasonably acceptable to Landlord. Landlord shall be entitled to draw
against the letter of credit at any time provided only that Landlord
certifies to the issuer of the letter of credit that Tenant is in default
under the Lease. Tenant shall keep the letter of credit in effect during the
entire Lease Term, as the same may be extended, plus a period of four (4)
weeks after expiration of the Lease Term. At least thirty (30) days prior to
expiration of any letter of credit, the term thereof shall be renewed or
extended for a period of at least one (1) year. Tenant's failure to so renew
or extend the letter of credit shall be a material default of this Lease by
Tenant. In the event Landlord draws against the letter of credit, Tenant
shall replenish the existing letter of credit or cause a new letter of credit
to be issued such that the aggregate amount of letters of credit available to
Landlord at all times during the Lease Term is the amount of the Security
Deposit originally required.
Landlord shall not be deemed a trustee of the Security Deposit, may use the
Security Deposit in business, and shall not be required to segregate it from
its general accounts. Tenant shall not be entitled to interest on the
Security Deposit.. If Tenant defaults with respect to any provisions of the
Lease, including but not limited to the provisions relating to payment of
Base Monthly Rent or other charges, Landlord may, to the extent reasonably
necessary to remedy Tenant's default, use any or all of the Security Deposit
towards payment of the following: (i) Base Monthly Rent or other charges in
default; (ii) any other amount which Landlord may spend or become obligated
to spend by reason of Tenant's default; and (iii) any other loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of
the Security Deposit is so
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used or applied, Tenant shall, within ten (10) days after written demand from
Landlord, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its full original amount, and shall pay to Landlord such
other sums as necessary to reimburse Landlord for any sums paid by Landlord.
If Tenant shall default more than three (3) times in any twelve (12) month
period, irrespective of whether or not such default is cured, then the
Security Deposit shall, within ten (10) days after demand by Landlord, be
increased by Tenant to an amount equal to three (3) times the Base Monthly
Rent. Tenant waives the provisions of California Civil Code Section 1950.7,
and all other provisions of law now in force or that become in force after
the date of execution of this Lease, that provide that Landlord may claim
from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of Rent, to repair damage caused by Tenant, or to
clean the Premises. Landlord and Tenant agree that Landlord may, in
addition, claim those sums reasonably necessary to compensate Landlord for
any other foreseeable or unforeseeable loss or damage caused by the act or
omission of Tenant or Tenant's agents, employees, contractors and invitees
("Tenant's Agents"). Tenant may not assign or encumber the Security Deposit
without the consent of Landlord. any attempt to do so shall be void and
shall not be binding on Landlord. If Tenant performs every provision of this
Lease to be performed by Tenant, the Security Deposit shall be returned to
Tenant within thirty (30) days after the Expiration Date and surrender of the
Premises to Landlord, less any amount deducted in accordance with this
Section, together with Landlord's written notice itemizing the amounts and
purposes for such deduction. In the event of termination of Landlord's
interest in this Lease, Landlord may deliver or credit the security Deposit
to Landlord's successor in interest in the Premises and thereupon be relieved
of further responsibility with respect to the Security Deposit.
5. CONSTRUCTION AND POSSESSION:
A. BUILDING SHELL CONSTRUCTION: Landlord shall cause the shell of the
Building ("Building Shell") to be constructed by independent contractors to
be employed by and under the supervision of South Bay Construction ("General
Contractor"), in general accordance with preliminary shell and site plans
attached hereto as EXHIBIT "B-1" ("Preliminary Site
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Plan and Specifications"). Final Building Shell plans and guideline
specifications shall be prepared by Arctec ("Architect") consistent with
Exhibit "B-1" and approved by Landlord and Tenant for attachment by June 15,
1997 as EXHIBIT "B-2" ("Shell Plans and Specifications"). Landlord shall
pay for all costs and expenses associated with the construction of the
Building Shell. The Building Shell shall include those items set forth in
the attached EXHIBIT "C" ("Building Shell Definition").
B. TENANT IMPROVEMENT PLANS: Tenant, at Tenant's sole cost and expense,
has hired ▇▇▇▇▇▇▇ & Associates ("Gensler") to prepare plans and outline
specifications ("Tenant Improvement Plans and Specifications") which shall be
attached as EXHIBIT "D" by August 29, 1997 with respect to the construction
of improvements to the interior premises ("Tenant Improvements"). In
addition, Gensler shall provide the Architect no later than April 21, 1997
with the interior stair and elevator locations and any other information
related to the Tenant Improvement Plans and Specifications that Tenant wishes
to be incorporated into the Shell Plans and Specifications. The Tenant
Improvements shall consist of all items not included within the scope of the
Building Shell Definition. The Tenant Improvement Plans and Specifications
shall be prepared in sufficient detail to allow General Contractor to
construct the Tenant Improvements. The General Contractor shall contract
directly with Tenant for construction of the Tenant Improvements and shall
construct the Tenant Improvements in accordance with all Tenant Improvement
Plans and Specifications. Landlord shall provide Tenant a work allowance to
be utilized by Tenant for the construction of Tenant Improvements ("Work
Allowance") in an amount equal to the product of multiplying the Rentable
Square Footage by Twenty-Five Dollars and Twenty-Five Cents ($25.25). The
Work Allowance shall be paid by Landlord to Tenant as payments become due
from Tenant to General Contractor. The Tenant Improvements shall not be
removed or altered by Tenant without the prior written consent of Landlord as
provided in Section 7. Tenant shall have the right to depreciate and claim
and collect any investment tax credits in the Tenant Improvements during the
initial Lease Term. Upon expiration of the Lease Term or any earlier
termination of the Lease, the Tenant Improvements shall become the property
of Landlord and shall remain upon and be surrendered with the Premises, and
title thereto shall automatically vest in Landlord without any payment
therefore.
C. PRICING: Within ten (10) days after completion of the Tenant
Improvements Plans and Specifications, General Contractor shall submit to
Tenant competitive bids from at least three (3) subcontractors for each
aspect of the work related to the Tenant improvements. General Contractor
must
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utilize the low bid in each case unless Tenant approves General Contractor's
use of another subcontractor, and the cost of the Tenant Improvements shall
be based upon construction expenses equal to the sum of the bid amounts as
approved by Tenant. Upon Tenant's written approval of the contract bids,
which approval shall not be unreasonably withheld or delayed, Landlord and
Tenant shall be deemed to have given their respective approvals of the final
Tenant Improvement Plans and Specifications on which the cost estimate was
made, and General Contractor shall proceed with the construction of the
Tenant Improvements in accordance with the terms of Section 5.G below. If
Tenant does not specifically approve or disapprove the bids within seven (7)
days, Tenant shall be deemed to have approved the bids.
D. CHANGE ORDERS: Tenant shall have the right to order changes in the
manner and type of construction of the Building Shell or the Tenant
Improvements. Upon request and prior to Tenant's submitting any binding
change order, General Contractor shall promptly provide Tenant with written
statements of the cost to implement and the time delay and increased
construction costs associated with any proposed change order, which
statements shall be binding on Landlord. If no time delay or increased
construction cost amount is noted on the written statement, the parties agree
that there shall be no adjustment to the construction cost or the
Commencement Date associated with such change order. If ordered by Tenant,
General Contractor shall implement such change order and the cost of
constructing the Tenant Improvements shall be paid by Tenant in accordance
with the cost statement previously delivered by General Contractor to Tenant
for any such change order.
E. BUILDING SHELL COSTS: Landlord shall pay all costs associated with
the Building Shell.
F. TENANT IMPROVEMENT COSTS: The cost of Tenant Improvements shall
consist of only the following to the extent actually incurred by General
Contractor in connection with the construction of Tenant Improvements:
construction costs, all permit fees, construction taxes or other costs
imposed by governmental authorities related to the Tenant Improvements, and
Landlord overhead as described in Section 5.H below. During the course of
construction of Tenant Improvements, General Contractor may deliver to Tenant
not more than once each calendar month a
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written request for payment which shall include and be accompanied by General
Contractor's certified statements setting forth the amount requested,
certifying the percentage of completion of each item for which reimbursement
is requested, and certifying that the progress payment requested is due to a
subcontractor of General Contractor pursuant to a contract between General
Contractor and the subcontractor. Tenant shall pay General Contractor, within
fifteen (15) days after Tenant's receipt of the above items, the costs
incurred by General Contractor in connection with Tenant Improvements
installed in the Building in accordance with the Tenant Improvement Plans and
Specifications, minus the retention set forth below. Tenant shall be
entitled to retain ten percent (10%) of the amount invoiced by General
Contractor until the Tenant Improvements are Substantially Complete as
defined in Section 5.G below. Tenant shall pay the retained balance owing to
General Contractor within fifteen (15) days following the date that the
Tenant Improvements are Substantially Complete. All costs for Tenant
Improvements shall be fully documented to and verified by Tenant.
G. CONSTRUCTION: Landlord shall use its reasonable efforts to obtain a
building permit from the City of Fremont as soon as possible after Tenant's
approval of the Shell Plans and Specifications and to "Substantially
Complete" construction of the Premises by April 1, 1998. The Building Shell
and Tenant Improvements shall be deemed substantially complete
("Substantially Complete" or "Substantial Completion") when the Building
Shell and Tenant Improvements have been substantially completed in accordance
with the Shell Plans and Specifications and Tenant Improvement Plans and
Specifications, and the issuance of a certificate of occupancy or its
equivalent by the appropriate governmental authority for the Building Shell
and Tenant Improvements, as well as the issuance of a certificate by the
Architect certifying that the Building Shell has been substantially completed
in accordance with the plans and the issuance of a certificate by Gensler
certifying that the Tenant Improvements have been substantially completed in
accordance with the plans. Completion of the landscaping shall not be
required to deem the Premises "Substantially Complete" if inclement weather
prevents Landlord from finishing this portion of the work. Any prevention,
delay or stoppage due to strikes, lockouts, inclement weather, labor
disputes, inability to obtain labor, materials, fuel or reasonable
substitutes therefor, governmental restrictions, regulations, controls,
action or inaction, civil commotion, fire or other act of God, and another
causes beyond the reasonable control of Landlord (except financial inability)
shall extend the dates contained in this Section 5.G by a period equal to the
period of any said prevention, delay or stoppage.
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H. GENERAL CONTRACTOR PROFIT: As compensation to General Contractor for
its services related to construction of the Building Shell and Tenant
Improvements, General Contractor shall receive as profit a fee of 3% of the
total construction costs incurred by General Contractor. The General
Contractor's fee for profit and overhead related to construction of the
Building Shell shall be the same percentage rate as the fee charged by the
General Contractor to Tenant for construction of the Tenant Improvements.
I. TENANT DELAYS: A "Tenant Delay" shall mean any delay in Substantial
Completion of the Building as a result of any of the following: (i) Tenant's
failure to complete or approve the Tenant Improvement Plans by the dates set
forth in Section 5.B, (ii) Tenant's failure to approve the bids for
construction by the dates set forth in Section 5.C, (iii) changes requested
by Tenant to either the Shell Plans and Specifications or the Tenant
Improvement Plans and Specifications which delay the progress of the work,
(iv) Tenant's request for materials components, or finishes which are not
available in a commercially reasonable time given the anticipated
Commencement Date, (v) Tenant's failure to pay, when due, any amounts
requested to be paid by Tenant pursuant hereto, (vi) Tenant's request for
more than one (1) rebidding of the cost of all or a portion of the work, and
(vii) any errors or omissions in the Tenant Improvement Plans provided by
Gensler. Notwithstanding anything to the contrary set forth in this Lease,
and regardless of the actual date the Premises are Substantially Complete,
the Commencement Date shall be deemed to be the date Commencement Date would
have occurred if no Tenant Delay had occurred as reasonable determined by
Landlord. In addition, if a Tenant Delay results in an increase in the cost
of the labor or materials, Tenant shall pay the cost of such increases.
J. INSURANCE: General Contractor shall procure (as a cost of the Building
Shell) a "Broad Form" liability insurance policy in the amount of Three
Million Dollars ($3,000,000.00). Landlord shall also procure (as a cost of
the Building Shell) builder's risk insurance for the full replacement cost of
the Building Shell and Tenant Improvements while the Building and Tenant
Improvements are under construction, up until the date that the fire
insurance
Page 13
policy described in Section 9 is in full force and effect.
K. PUNCH LIST & WARRANTY: After the Building Shell and Tenant
Improvements are Substantially Complete, Landlord shall cause the General
Contractor to immediately correct any construction defect or other "punch
list" item which Tenant brings to General Contractor's attention. All such
work shall be performed so as to reasonably minimize the interruption to
Tenant and its activities on the Premises. General Contractor shall provide
a standard contractor's warranty with respect to the Premises for one (1)
year from the Commencement Date. Such warranty shall exclude routine
maintenance, damage caused by Tenant's negligence or misuse, and acts of God.
L. OTHER WORK BY TENANT: All work not described in the Shell Plans and
Specifications or Tenant Improvement Plans and Specifications, such as
furniture, telephone equipment, telephone wiring and office equipment work,
shall be furnished and installed by Tenant. When the construction of the
Tenant Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Premises can be commenced,
General Contractor shall notify Tenant and shall permit Tenant and its
authorized representatives and contractors access to the Premises before the
Commencement Date for the purpose of installing Tenant's trade fixtures and
equipment. Any such installation work by Tenant or its authorized
representatives and contractor shall be undertaken upon the following
conditions: (i) if the entry into the Premises by Tenant or its
representatives or contractors interferes with or delays General Contractor's
work, Tenant shall cause the party responsible for such interference or delay
to leave the Premises; and (ii) any contractor used by Tenant in connection
with such entry and installation shall not interfere with General
Contractor's work.
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
A. DELIVERY AND ACCEPTANCE: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Building on the Commencement Date. Except as otherwise
specifically provided herein, Tenant agrees to accept possession of the
Premises in its then existing condition with the Building Shell and Tenant
Improvements substantially complete, excepting only latent defects. Tenant's
taking possession of any part of the Premises shall be deemed to be an
acceptance of any work of improvement done by Landlord in such part as
complete and in accordance with the terms of this Lease except for "Punch
List" type items of which Tenant has given Landlord written notice prior to
the time Tenant takes possession. At the time Landlord
Page 14
delivers possession of the Premises to Tenant, Landlord and Tenant shall
together execute an acceptance agreement. Landlord shall have no obligation
to deliver possession, nor shall Tenant be entitled to take occupancy, of the
Premises until such acceptance agreement has been executed, and Tenant's
obligation to pay Base Monthly Rent and Additional Rent shall not be excused
or delayed because of Tenant's failure execute such acceptance agreement.
Within one hundred eighty (180) days after the Commencement Date, Tenant
agrees to be in occupancy of at least fifty percent (50%) of the rentable
square footage of the Premises.
B. CONDITION UPON SURRENDER: Tenant further agrees on Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In
this regard, "normal wear and tear" shall be construed to mean wear and tear
caused to the Premises by the natural aging process which occurs in spite of
prudent application of the best standards for maintenance, repair
replacement, and janitorial practices, and does not include items of
neglected or deferred maintenance. In any event, Tenant shall cause the
following to be done prior to the Expiration Date or sooner termination of
this Lease: (i) all holes in interior walls shall be patched and painted so
as to match the wall, (ii) all tiled floors shall be cleaned and waxed, (iii)
all carpets shall be cleaned and shampooed, (iv) all broken, marred, stained
or nonconforming acoustical ceiling tiles shall be replaced, (v) all cabling
placed above the ceiling by Tenant shall be removed, (vi) all windows shall
be washed; (vii) the HVAC system shall be serviced by a reputable and
licensed service firm and left in good operating condition and repair as so
certified by such firm, (viii) the plumbing and electrical systems and
lighting shall be placed in good order and repair (including replacement of
any burned out, discolored or broken light bulbs, ballasts, or lenses. On or
before the Expiration Date or sooner termination of this Lease, Tenant shall
remove all its personal property and trade fixtures from the Premises. All
property and fixtures not so removed shall be deemed as abandoned by Tenant.
If Landlord requires pursuant to Section 7 below, Tenant shall, at Tenant's
sole cost and expense, remove such Alterations as Landlord requires and shall
repair and restore said Premises or such parts thereof before the Expiration
Date. Such repair and restoration shall include causing the Premises to be
Page 15
brought into compliance with all applicable building codes and laws in effect
at the time of the removal to extent such compliance is necessitated by the
repair and restoration work; provided however, that (i) Tenant shall not be
required to pay for any work related to bringing the foundation, exterior
load bearing walls and roof structure of the Building into compliance with
applicable building codes and laws then in effect; and (ii) Tenant shall not
be required to pay for any work which may be required to bring areas outside
the Building into compliance with then-applicable building codes and laws. .
C. FAILURE TO SURRENDER: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required
by this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to
this Section 7.C and Tenant shall indemnify, defend, and hold Landlord
harmless against loss or liability resulting from delay by Tenant in so
surrendering the Premises including, without limitation, any claims made by
any succeeding tenant founded on such delay and costs incurred by Landlord in
returning the Premises to the required condition, plus interest at the Agreed
Interest Rate. Any holding over after the termination or Expiration Date
with Landlord's express written consent, shall be construed as month-to-month
tenancy, terminable on thirty (30) days written notice from either party, and
Tenant shall pay as Base Monthly Rent to Landlord a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month
preceding the termination or Expiration Date, plus all other amounts payable
by Tenant under this Lease. Any holding over shall otherwise be on the terms
and conditions herein specified, except those provisions relating to the
Lease Term and any options to extend or renew, which provisions shall be of
no further force and effect following the expiration of the applicable
exercise period. If Tenant remains in possession of the Premises after
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 holdover period an amount
equal to one hundred fifty percent (150%) of the Base Monthly Rent due in the
month preceding the termination or Expiration Date, plus all other amounts
payable by Tenant under this Lease. This provision shall survive the
termination or expiration of the Lease.
7. ALTERATIONS AND ADDITIONS:
A. TENANT'S ALTERATIONS: With the exception of Tenant Improvements
installed as part of initial construction of the Premises, Tenant shall not
make, or suffer to be made, any alteration or addition to the Premises
("Alterations"), or any part thereof, without
Page 16
obtaining Landlord's prior written consent and delivering to Landlord the
proposed architectural and structural plans for all such Alterations at least
fifteen (15) days prior to the start of construction. After receipt of
Tenant's architectural and structural plans, Landlord shall have a period of
ten (10) business days thereafter to grant its consent, which consent shall
not be unreasonably withheld. Landlord shall indicate to Tenant at the time
of Tenant's request, whether or not Landlord will require Tenant to remove
such Alterations at the Expiration Date. Tenant shall, at Tenant's sole cost
and expense, remove such Alterations as Landlord requires and shall repair
and restore said Premises or such parts thereof before the Expiration Date,
unless exempted pursuant to Section 7.B below. Such repair and restoration
shall include causing the Premises to be brought into compliance with all
applicable building codes and laws in effect at the time of the removal to
extent such compliance is necessitated by the repair and restoration work;
provided, however, that (i) Tenant shall not be required to pay for any work
related to bringing the foundation, exterior load bearing walls and roof
structure of the Building into compliance with applicable building codes and
laws then in effect; and (ii) Tenant shall not be required to pay for any
work which may be required to bring areas outside the Building into
compliance with then-applicable building codes and laws. If such Alterations
affect the structure of the Building, Tenant additionally agrees to reimburse
Landlord its reasonable out-of-pocket costs incurred in reviewing Tenant's
plans. After obtaining Landlord's consent, Tenant shall not proceed to make
such Alterations until Tenant has obtained all required governmental
approvals and permits, and provided Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics' lien
claims. Tenant agrees to provide Landlord written notice of the anticipated
and actual start-date of the work, and a complete set of half-size (15" X
21") vellum as-built drawings. All Alterations shall be constructed in
compliance with applicable building codes and laws. Any Alterations, except
movable furniture and trade fixtures, shall become at once a part of the
realty and belong to Landlord but shall nevertheless be subject to removal by
Tenant as provided in Section 6 above. Alterations which are not deemed as
trade fixtures include heating, lighting, electrical systems, air
conditioning, partitioning, carpeting, or any other installation
Page 17
which has become an integral part of the Premises. All Alterations shall be
maintained, replaced or repaired by Tenant at its sole cost and expense.
Notwithstanding the foregoing, Tenant shall be entitled without obtaining
Landlord's consent, to make Alterations which do not affect the structure of
the Building or which do not cost more than Twenty Five Thousand Dollars
($25,000.00) per Alteration nor an aggregate of Fifty Thousand Dollars
($50,000.00) in any twelve (12) month period; provided, however, that Tenant
shall still be required to deliver to Landlord the proposed architectural and
structural plans for all such Alterations at least (15) days prior to the
start of construction and comply with all other provisions of the preceding
paragraph.
B. EXEMPTED ALTERATIONS: Notwithstanding the provisions of Section 7.A
above, Landlord shall not have the right to require Tenant to remove any
Alterations at the end of the term of the Lease unless: (i) such Alterations
were of a nature not typically found in manufacturing buildings; (ii) such
Alterations create private offices smaller than 10'x12'; or (iii) such
Alterations create hard wall partitioning that cover more than 35% of the
interior square footage of the Premises or the perimeter window space of the
Premises.
C. FREE FROM LIENS: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred
by Tenant or claimed to have been performed for Tenant. In the event Tenant
fails to discharge any such lien within ten (10) days after receiving notice
of the filing, Landlord shall be entitled to discharge the lien at Tenant's
expense and all resulting costs incurred by Landlord, including attorney's
fees shall be due from Tenant as additional rent.
D. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: The term Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders
now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access,
occupational, health, or safety standards for employers, employees,
landlords, or tenants. Tenant shall continuously and without exception
repair and maintain the Premises, including Tenant improvements, Alterations,
fixtures, and furnishings, in an order and condition in compliance with all
Governmental Regulations. Tenant, at its sole expense, shall make all
repairs, replacements, alterations, or improvements needed to comply with all
Governmental Regulations to the extent that the Governmental Regulations
relate to or are required by and Law because of (i) Tenant's particular use or
Page 18
change of use of the Premises, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Alterations or Trade Fixtures. Landlord, at Landlord's sole expense, shall
promptly make all repairs, replacements, alterations, or improvements needed
to comply with all Governmental Regulations to the extent not required by
Tenant pursuant to the preceding sentence. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action or proceeding
against Tenant (whether Landlord be a party thereto or not) that Tenant has
violated any such law, regulation or other requirement in its use of the
Premises shall be conclusive of that fact as between Landlord and Tenant.
8.MAINTENANCE OF PREMISES:
A. LANDLORD'S OBLIGATIONS: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure of
the Building Shell. Landlord shall also, at Tenant's sole cost and expense
through reimbursement as provided in this Section 8, clean, maintain, repair
and replace when necessary the following parts of the Premises: (i) all
plumbing and sewage facilities, (ii) all heating ventilating and air
conditioning facilities and equipment (excluding adjustments to interior
zones after initial occupancy of the Premises and balancing of the
equipment), (iii) all exterior windows, door entrances, plate glass and
glazing systems including caulking, and skylights, (iv) all automatic fire
extinguisher equipment, (v) the parking lot and all underground utility
facilities servicing the Premises, (vi) all elevator equipment, (vii) the
roof membrane system, and (viii) all waterscape, landscaping and shrubbery.
With respect to items (ii), (vi) and (vii) above, Landlord shall provide
Tenant, upon request from Tenant, a copy of a service contract between
Landlord and a licensed service contractor providing for period maintenance
of all such systems or equipment in conformance with the manufacturer's
recommendations. Landlord shall provide Tenant a copy of such preventive
maintenance contracts and paid invoices for the recommended work if requested
by Tenant.
B. TENANT'S OBLIGATIONS: Unless required by Landlord pursuant to
Section 8.A above or unless such
Page 19
services are shared (in which event the provisions of Sections 8.C, 8.D and
8.D shall apply as to such shared services), Tenant shall clean, maintain,
repair and replace when necessary the Premises and every part thereof through
regular inspections and servicing, including but not limited to: (i) all
fixtures, interior walls, floors, carpets and ceilings, and (ii) all
electrical facilities and equipment. All wall surfaces and floor tile are to
be maintained in an as good a condition as when Tenant took possession free
of holes, gouges, or defacements.
C. LANDLORD AND TENANT'S OBLIGATIONS REGARDING COMMON AREA COSTS:
Tenant agrees to reimburse Landlord for Tenant's Allocable Share (as defined
in Section 8.E below) of the expenses resulting from Landlord's payment of
Common Area Costs (as defined in Section 8.D below). Tenant agrees to pay
its Allocable Share of the Common Area Costs as additional rental within
thirty (30) days of written invoice from Landlord.
D. COMMON AREA COSTS: For purposes of calculating Tenant's Allocable
Share of Building and Project Costs, the term "Common Area Costs" is defined
as all costs and expenses of the nature hereinafter described which are
incurred by Landlord in connection with ownership and operation of the
Project in which the Premises are located, together with such additional
facilities as may be determined by Landlord to be reasonably desirable or
necessary to the ownership and operation of the Building and/or Project. All
costs and expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied (with accruals
appropriate to Landlord's business), including but not limited to the
following: (i) common area utilities, including water, to the extent not
separately metered; (ii) common area maintenance and service agreements for
the Project and the equipment therein, including without limitation,
maintenance of the sidewalks, landscaping, waterscape, roof membrane, parking
areas, driveways, service areas, and the building exterior; (iii) insurance
premiums and costs, including without limitation, the premiums and cost of
fire, casualty and liability coverage and rental abatement and earthquake (if
required pursuant to Section 9.B) insurance applicable to the Building or
Project; (iv) repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and repairs or alterations attributable solely to
tenants of the Building or Project other than Tenant); (v) all real estate
taxes and assessment installments or other impositions or charges which may
be levied on the Building or Project, upon the occupancy of the Building or
Project and including any substitute or additional charges which may be
imposed during, or applicable to the Lease Term including real estate tax
increases due to a sale, transfer or other
Page 20
change of ownership of the Building or Project, as such taxes are levied or
appear on the City and County tax bills and assessment rolls; and (vi) fees
for management services rendered by either Landlord or a third party manager
engaged by Landlord (which may be a party affiliated with Landlord), except
that the total amount charged for management services and included in the
expenses to be reimbursed by Tenant shall not exceed the monthly rate of 5%
of the Base Monthly Rent, which the parties acknowledge as a reasonable and
fair market value for such services. Landlord shall have no obligation to
provide guard services or other security measures for the benefit of the
Project. Tenant assumes all responsibility for the protection of Tenant and
Tenant's Agents from acts of third parties; provided, however, that nothing
contained herein shall prevent Landlord, at its sole option, from providing
security measures for the Project. This is a "Net" Lease, meaning that Base
Monthly Rent is paid to Landlord absolutely net of all costs and expenses.
The provision for payment of Common Area Costs by means of periodic payment
of Tenant's Allocable Share of Building and/or Project Costs is intended to
pass on to Tenant and reimburse Landlord for all costs of operating and
managing the Building and/or Project.
E. TENANT'S ALLOCABLE SHARE: For purposes of prorating Common Area
Costs which Tenant shall pay, Tenant's Allocable Share of Common Area Costs
shall be computed by multiplying the total Common Area Costs by a fraction,
the numerator of which is the Rentable Square Footage of the Building and the
denominator of which is either the total Rentable Square Footage of the
Building if the service is allocable only to the Building, or the total
square footage of the Project if the service is allocable to the entire
Project. Tenant's obligation to share in Common Area Costs shall be adjusted
to reflect the Lease Commencement and Expiration dates and is subject to
recalculation in the event of expansion of the Building or Project.
F. WAIVER OF LIABILITY: Failure by Landlord to perform any defined
services, if any, or any cessation thereof, when such failure is caused by
accident, breakage, repairs, strikes, lockout or other labor disturbances or
labor disputes of any character or by any other cause, similar or dissimilar,
shall not render Landlord liable to Tenant in any respect, including damages
to either person or property, nor be construed as an eviction of Tenant, nor
cause an
Page 21
abatement of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. Should any equipment or machinery utilized in supplying
the services listed herein break down or for any cause cease to function
properly, upon receipt of written notice from Tenant of any deficiency or
failure of any services, Landlord shall use reasonable diligence to repair
the same promptly, but Tenant shall have no right to terminate this Lease and
shall have no claim for rebate of rent or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. Tenant
waives the provisions of California Civil Code Sections 1941 and 1942
concerning the Landlord's obligation of tenantability and Tenant's right to
make repairs and deduct the cost of such repairs from the rent. Landlord
shall not be liable for a loss of or injury to person or property, however
occurring, through or in connection with or incidental to furnishing, or its
failure to furnish, any of the foregoing.
Notwithstanding the foregoing, in the event Landlord fails to perform in its
obligation under Section 8.A above to maintain plumbing and sewage
facilities, HVAC equipment, exterior windows, door entrances, plate glass and
glazing systems, skylights, fire extinguisher equipment, the parking lot,
underground utilities, elevator equipment, the roof membrane or landscaping
related to the Premises, Tenant may, after providing Landlord thirty (30)
days' written notice, undertake such maintenance at its own cost if Landlord
has not commenced such maintenance and Landlord shall reimburse Tenant for
its expenditure. The provisions of this paragraph do not apply to items
about which Landlord and Tenant may disagree as to the scope or necessity of
work.
G. REVIEW: Landlord shall maintain at all times during the term of this
Lease, at the office of Landlord, accurate records with respect to Common
Area Costs for the previous two-year period of the Lease, and shall retain
such records and such other documents as are reasonably necessary to audit
the Common Area Costs. Upon two weeks prior notice from Tenant, Landlord
shall make available for Tenant's inspection (or inspection performed by
Tenant's accountant and/or consultants) at Landlord's office, during normal
business hours, Landlord's records relating to the Common Area Costs for the
most recent two years of the Lease. If an audit, review or inspection by a
Tenant or Tenant's accountant or consultant alleges an overbilling, Tenant
may submit a claim for the overbilled amount to Landlord, detailing the
nature of the overbilling, and Landlord shall have thirty (30) days to pay
such amount or contest the claim by giving notice thereof to Tenant,
detailing the nature of Landlord's contest of Tenant's claims. If Landlord's
statement is determined to be in error by 3% or more, Landlord shall
reimburse Tenant within thirty (30) days
Page 22
following such determination for any overpayment of Common Area Costs, as
well as the cost of Tenant's review of Landlord's books and records not to
exceed $2,500.00 (including the cost of Tenant's accountant or consultant,
neither of which cost may be included as Common Area Costs), together with
interest on such amount, calculated at the Interest Rate, from the dates such
amounts were initially paid by Tenant.
H. RECOVERY: Landlord shall not expend more than the reasonable and fair
market value for any goods, services, labor or materials purchased or
provided by Landlord in connection with the management, operation,
maintenance and repair of the Building or the Common Area.
9. HAZARD INSURANCE:
A. TENANT'S USE: Tenant shall not use or permit the Premises, or any
part thereof, to be used for any purpose other than that for which the
Premises are hereby leased; and no use of the Premises shall be made or
permitted, nor acts done, which will cause an increase in premiums or a
cancellation of any insurance policy covering the Premises or any part
thereof, nor shall Tenant sell or permit to be sold, kept, or used in or
about the Premises, any article prohibited by the standard form of fire
insurance policies. Tenant shall, at its sole cost, comply with all
requirements of any insurance company or organization necessary for the
maintenance of reasonable fire and public liability insurance covering the
Premises and appurtenances.
B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in force
fire, extended coverage insurance in an amount equal to the replacement cost
of the Building (not including any Tenant Improvements or Alterations paid
for by Tenant from sources other than the Work Allowance) as determined by
Landlord's insurance company's appraisers. Tenant agrees to pay Landlord as
additional rent, on demand, the full cost of said insurance as evidenced by
insurance ▇▇▇▇▇▇▇▇ to Landlord, and in the event of damage covered by said
insurance, the amount of any deductible under such policy. Payment shall be
due to Landlord within thirty (30) days after written invoice to Tenant. If
required by the holder of the first deed of trust on the property, such fire
and property damage insurance may be endorsed to cover loss caused by such
additional perils against which Landlord may elect to insure,
Page 23
including earthquake and/or flood, and shall contain reasonable deductibles
which, in the case of earthquake and flood insurance may be up to 15% of the
replacement value of the property. Additionally Landlord may maintain a
policy of (i) commercial general liability insurance insuring Landlord (and
such others designated by Landlord) against liability for personal injury,
bodily injury, death and damage to property occurring or resulting from an
occurrence in, on or about the Premises or Project in an amount as Landlord
determines is reasonably necessary for its protection, and (ii) rental lost
insurance covering a twelve (12) month period. It is understood and agreed
that Tenant's obligation under this Section will be prorated to reflect the
Lease Commencement and Expiration Dates.
Notwithstanding the above, Tenant shall have no obligation to pay premiums
payable with respect to earthquake insurance covering the Premises, unless such
coverage is (i) required by the lender in whose favor a first deed of trust of
the Premises has been granted, and (ii) is also generally required by
institutional lenders on similar properties in Alameda County. In such event,
the amount of the earthquake insurance premium required to be paid by Tenant
shall be limited to an amount equal to four (4) times the premium for casualty
insurance for the Building.
C. TENANT'S INSURANCE: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements (for which it has paid from sources
other than the Work Allowance), and Alterations for their full replacement
value (without depreciation) and to obtain worker's compensation and public
liability and property damage insurance for occurrences within the Premises
with a combined single limit of not less than Five Million Dollars
($5,000,000.00). Tenant's liability insurance shall be primary insurance
containing a cross-liability endorsement, and shall provide coverage on an
"occurrence" rather than on a "claims made" basis. Tenant shall name
Landlord and Landlord's lender as an additional insured and shall deliver a
copy of the policies and renewal certificates to Landlord. All such policies
shall provide for thirty (30) days' prior written notice to Landlord of any
cancellation, termination, or reduction in coverage.
D. WAIVER: Landlord and Tenant hereby waive all rights each may have
against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the Premises or its contents, which may
arise from any risk covered by their respective insurance policies (or which
would have been covered had such insurance policies been maintained in
accordance with this Lease) as set forth above. The parties shall use their
reasonable efforts to obtain from their respective insurance companies a
waiver of any right of subrogation which said insurance company
Page 24
may have against Landlord or Tenant, as the case may be.
10. TAXES: Tenant shall be liable for and shall pay as additional
rental, prior to delinquency, the following: (i) all taxes and assessments
levied against Tenant's personal property and trade or business fixtures;
(ii) all real estate taxes and assessment installments or other impositions
or charges which may be levied on the Premises or upon the occupancy of the
Premises, including any substitute or additional charges which may be imposed
applicable to the Lease Term; and (iii) real estate tax increases due to a
sale, transfer or other change of ownership of the Premises as it appears on
the City and County tax bills during the Lease Term. Tenant's obligation
under this Section shall be prorated to reflect the Lease Commencement and
Expiration Dates. If, at any time during the Lease Term a tax, excise on
rents, business license tax or any other tax, however described, is levied or
assessed against Landlord as a substitute or addition, in whole or in part,
for taxes assessed or imposed on land or Building, Tenant shall pay and
discharge its pro rata share of such tax or excise on rents or other tax
before it becomes delinquent; except that this provision is not intended to
cover net income taxes, inheritance, gift or estate tax imposed upon
Landlord. In the event that a tax is placed, levied, or assessed against
Landlord and the taxing authority takes the position that Tenant cannot pay
and discharge its pro rata share of such tax on behalf of Landlord, then at
Landlord's sole election, Landlord may increase the Base Monthly Rent by the
exact amount of such tax and Tenant shall pay such increase. If by virtue of
any application or proceeding brought by or on behalf of Landlord, there
results a reduction in the assessed value of the Premises during the Lease
Term, Tenant agrees to reimburse Landlord for all costs incurred by Landlord
in connection with such application or proceeding. Tenant at its cost shall
have the right, at any time, to seek a reduction in the assessed valuation of
the Premises or to contest any real property taxes that are to be paid by
Tenant, provided Tenant does not withhold or delay its required payment to
Landlord during such contention. Landlord shall not be required to join in
any such proceeding or contest unless the provisions of any law require that
the proceeding or contest be brought by or in the name of the owner of the
Premises. In such event, Landlord shall join in the proceeding or contest or
permit it to
Page 25
be brought in Landlord's name, provided that Landlord is not required to bear
any cost in connection therewith.
11. UTILITIES: Tenant shall pay directly to the providing utility all
water, gas, electric, telephone, and other utilities supplied to the
Premises. Landlord shall not be liable for loss of or injury to person or
property, however occurring, through or in connection with or incidental to
furnishing or failure to furnish utilities to the Premises, and Tenant shall
not be entitled to abatement or reduction of any portion of Base Monthly Rent
or any other amount payable under this Lease.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. TENANT'S RESPONSIBILITY: Without the prior written consent of
Landlord, Tenant shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance
having characteristics of ignitability, corrosivity, reactivity, or toxicity
or substances or materials which are listed on any of the Environmental
Protection Agency's lists of hazardous wastes or which are identified in
Division 22 Title 26 of the California Code of Regulations as the same may be
amended from time to time ("Hazardous Materials"). In order to obtain
consent, Tenant shall deliver to Landlord its written proposal describing the
toxic material to be brought onto the Premises, measures to be taken for
storage and disposal thereof, safety measures to be employed to prevent
pollution of the air, ground, surface and ground water. Landlord's approval
may be withheld in its reasonable judgment. In the event Landlord consents
to Tenant's use of Hazardous Materials on the Premises, Tenant represents and
warrants that it will do the following: (i) adhere to all reporting and
inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and will provide Landlord a copy of any such
reports or agency inspections; (ii) obtain and provide Landlord copies of all
necessary permits required for the use and handling Hazardous Materials on
the Premises; (iii) enforce Hazardous Materials handling and disposal
practices consistent with industry standards; (iv) surrender the Premises
free from any Hazardous Materials arising from Tenant's bringing, using,
permitting, generating, creating, releasing, emitting or disposing of
Hazardous Materials; and (v) properly close the facility with regard to
Hazardous Materials including the removal or decontamination of any process
piping, mechanical ducting, storage tanks, containers, or trenches which have
come into contact with Hazardous Materials and
Page 26
obtain a closure certificate from the local administering agency prior to the
Expiration Date.
B. TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant shall, at
its sole cost and expense, comply with all laws pertaining to, and shall
with counsel reasonably acceptable to Landlord, indemnify, defend and hold
harmless Landlord and Landlord's shareholders, directors, officers,
employees, partners, affiliates, and agents from, any claims, liabilities,
costs or expenses incurred or suffered by Landlord arising from the bringing,
using, permitting, generating, emitting or disposing of Hazardous Materials
by Tenant through the surface soils of the Premises during the Lease Term or
the violation of any environmental law, by Tenant or Tenant's Agents.
Tenant's indemnification and hold harmless obligations include, without
limitation, the following: (i) claims, liability, costs or expenses
resulting from or based upon administrative, judicial (civil or criminal) or
other action, legal or equitable, brought by any private or public person
under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation
and Recovery Act of 1980 ("RCRA") or any other Federal, State, County or
Municipal law, ordinance or regulation; (ii) claims, liabilities, costs or
expenses pertaining to the identification, monitoring, cleanup, containment,
or removal of Hazardous Materials from soils, riverbeds or aquifers including
the provision of an alternative public drinking water source; (iii) all costs
of defending such claims; (iv) Losses attributable to diminution in the value
of the Premises or the Building; (v) Loss or restriction of use of rentable
space in the Building; (vi) Adverse effect on the marketing of any space in
the Building; and (All other liabilities, obligations, penalties, fines,
claims, actions (including remedial or enforcement actions of any kind and
administrative or judicial proceedings, orders or judgments), damages
(including consequential and punitive damages), and costs (including
attorney, consultant, and expert fees and expenses) resulting from the
release or violation. This indemnification shall survive the expiration or
termination of this Lease.
C. ACTUAL RELEASE BY TENANT:Tenant agrees to notify Landlord of any
lawsuits or orders of which it becomes aware which relate to the remedying of
or actual release of Hazardous Materials on or into the
Page 27
soils or ground water at or under the Premises. Tenant shall also provide
Landlord all notices required by Section 25359.7(b) of the Health and Safety
Code and all other notices required by law to be given to Landlord in
connection with Hazardous Materials. Without limiting the foregoing, Tenant
shall also deliver to Landlord, within twenty (20) days after receipt
thereof, any written notices received from any governmental agency alleging a
material violation of, or material failure to comply with, any federal, state
or local laws, regulations, ordinances or orders, the violation of which of
failure to comply with poses a foreseeable and material risk of contamination
of the ground water or injury to humans (other than injury solely to Tenant,
Tenant's Agents and employees within the Building).
In the event of any release on or into the Premises or into the soil or
ground water under the Premises of any Hazardous Materials used, treated,
stored or disposed of by Tenant, Tenant agrees to comply, at its sole cost,
with all laws, regulations, ordinances and orders of any federal, state or
local agency relating to the monitoring or remediation of such Hazardous
Materials. In the event of any such release of Hazardous Materials, Tenant
agrees to meet and confer with Landlord and its Lender to attempt to
eliminate and mitigate any financial exposure to such Lender and resultant
exposure to Landlord under California Code of Civil Procedure Section 736(b)
as a result of such release, and promptly to take reasonable monitoring,
cleanup and remedial steps given, inter alia, the historical uses to which
the Property has and continues to be used, the risks to public health posed
by the release, the then available technology and the costs of remediation,
cleanup and monitoring, consistent with acceptable customary practices for
the type and severity of such contamination and all applicable laws. Nothing
in the preceding sentence shall eliminate, modify or reduce the obligation of
Tenant under 12.B of this Lease to indemnify and hold Landlord harmless from
any claims liabilities, costs or expenses incurred or suffered by Landlord.
Tenant shall provide Landlord prompt written notice of Tenant's monitoring,
cleanup and remedial steps.
In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other
response action required by applicable law, any dispute arising between
Landlord and Tenant concerning Tenant's obligation to Landlord under this
Section 12.C concerning the level, method, and manner of cleanup, remediation
or response action required in connection with such a release of Hazardous
Materials shall be resolved by mediation and/or arbitration pursuant to the
provisions of Section 19.E of this Lease.
Page 28
D. ENVIRONMENTAL MONITORING: Landlord and its agents shall have the
right to inspect, investigate, sample and monitor the Premises including any
air, soil, water, ground water or other sampling or any other testing,
digging, drilling or analysis to determine whether Tenant is complying with
the terms of this Section 12. If Landlord discovers that Tenant is not in
compliance with the terms of this Section 12, any such costs incurred by
Landlord, including attorneys' and consultants' fees, shall be due and
payable by Tenant to Landlord within thirty (30) days following Landlord's
written demand therefore.
13. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant: (i)
Tenant's failure to pay any rent due under this Lease within ten (10) days
after written receipt of notice from Landlord that such rent is past due,
(ii) the abandonment of the Premises by Tenant, as defined in California
Civil Code Section 1951.3; (iii) Tenant's failure to observe and perform any
other required provision of this Lease, where such failure continues for
thirty (30) days after written notice from Landlord; (iv) Tenant's making of
any general assignment for the benefit of creditors; (v) the filing by or
against Tenant of a petition to have Tenant adjudged a bankrupt or of a
petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant, the same
is dismissed after the filing); (vi) the appointment of a trustee or receiver
to take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; (vii) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days; or (viii) any default by Tenant on other
buildings leased by Tenant within the Project.
A. REMEDIES: In the event of any such default by Tenant, then in
addition to other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event Landlord elects to so terminate this Lease, Landlord
may recover from Tenant all the following: (i) the worth at time
Page 29
of award of any unpaid rent which had been earned at the time of such
termination; (ii) the worth at time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss for the same period that Tenant
proves could have been reasonably avoided; (iii) the worth at time of award
of the amount by which the unpaid rent for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure
to perform its obligations under this Lease, or which in the ordinary course
of things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker's fees, advertising costs or other expenses of
reletting the Premises, and (z) costs of carrying the Premises such as taxes,
insurance premiums, utilities and security precautions. and (v) at Landlord's
election, such other amounts in addition to or in lieu of the foregoing as
may be permitted by applicable California law. The term "rent", as used
herein, is defined as the minimum monthly installments of Base Monthly Rent
and all other sums required to be paid by Tenant pursuant to this Lease, all
such other sums being deemed as additional rent due hereunder. As used in
(i) and (ii) above, "worth at the time of award" shall be computed by
allowing interest at a rate equal to the discount rate of the Federal Reserve
Bank of San Francisco plus five (5%) percent per annum. As used in (iii)
above, "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one (1%) percent.
B. RIGHT TO RE-ENTER: In the event of any such default by Tenant,
Landlord shall have the right, after terminating this Lease, to re-enter the
Premises and remove all persons and property. Such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant, and disposed of by Landlord in any manner permitted by law.
C. ABANDONMENT: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California
Civil Code Section 1951.4, (Landlord may continue the lease in effect after
Tenant's breach and abandonment and recover rent as it becomes due if Tenant
has a right to sublet and assign, subject only to reasonable limitations) as
amended from time to time, shall apply and Landlord may from time to time,
without terminating this Lease, either recover all rental as it becomes due
or relet the Premises or any part thereof for such term or terms and at such
rental or rentals and upon such other terms and conditions as Landlord in its
sole
Page 30
discretion may deem advisable, with the right to make alterations and repairs
to the Premises. In the event that Landlord elects to so relet, rentals
received by Landlord from such reletting shall be applied in the following
order to: (i) the payment of any indebtedness other than Base Monthly Rent
due hereunder from Tenant to Landlord; (ii) the payment of any cost of such
reletting; (iii) the payment of the cost of any alterations and repairs to
the Premises; and (iv) the payment of Base Monthly Rent due and unpaid
hereunder. The residual rentals, if any, shall be held by Landlord and
applied in payment of future Base Monthly Rent as the same may become due and
payable hereunder. Landlord shall have no obligation to relet the Premises
following a default if Landlord has other available space within the Building
or Project. In the event the portion of rentals received from such reletting
which is applied to the payment of rent hereunder during any month be less
than the rent payable during that month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord immediately upon demand. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord
in such reletting or in making such alterations and repairs not covered by
the rentals received from such reletting.
D. NO TERMINATION: Landlord's re-entry or taking possession of the
Premises pursuant to 13.B or 13.C shall not be construed as an election to
terminate this Lease unless written notice of such intention is given to
Tenant or unless the termination is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any default by Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such default.
E. NON-WAIVER: Landlord may accept Tenant's payments without waiving any
rights under this Lease, including rights under a previously served notice of
default. No payment by Tenant or receipt by Landlord of a lesser amount than
any installment of rent due shall be deemed as other than payment on account
of the amount due. If Landlord accepts partial payments after serving a
notice of default, Landlord may nevertheless commence and pursue an action to
enforce rights and remedies under the previously served notice of default
without giving Tenant any further notice or demand.
Page 31
Furthermore, the Landlord's acceptance of Rent from the Tenant when the
Tenant is holding over without express written consent does not convert
Tenants Tenancy from a tenancy at sufferance to a month to month tenancy. No
waiver of any provision of this Lease shall be implied by any failure of
Landlord to enforce any remedy for the violation of that provision, even if
that violation continues or is repeated. Any waiver by Landlord of any
provision of this Lease must be in writing. Such waiver shall affect only
the provision specified and only for the time and in the manner stated in the
writing. No delay or omission in the exercise of any right or remedy by
Landlord shall impair such right or remedy or be construed as a waiver
thereof by Landlord. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute
acceptance of the surrender of the Premises by Tenant before the Expiration
Date. Only written notice from Landlord to Tenant of acceptance shall
constitute such acceptance of surrender of the Premises. Landlord's consent
to or approval of any act by Tenant which requires Landlord's consent or
approvals shall not be deemed to waive or render unnecessary Landlord's
consent to or approval of any subsequent act by Tenant.
F. PERFORMANCE BY LANDLORD: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in
its sole discretion may, without notice, without waiving any rights or
remedies and without releasing Tenant from its obligations hereunder, perform
such obligation, in which event Tenant shall pay Landlord as additional rent
all sums paid by Landlord in connection with such substitute performance,
including interest at the Agreed Interest Rate within ten (10) days of
Landlord's written notice for such payment.
14. LANDLORD'S LIABILITY:
A. LIMITATION ON LANDLORD'S LIABILITY: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease,
Tenant shall give Landlord written notice of such failure and shall give
Landlord thirty (30) days to cure or commence to cure such failure prior to
any claim for breach or resultant damages, provided, however, that if the
nature of the default is such that it cannot reasonably be cured within the
30-day period, Landlord shall not be deemed in default if it commences within
such period to cure, and thereafter diligently prosecutes the same to
completion. In addition, upon any such failure by Landlord, Tenant shall
give notice by registered or certified mail to any person or entity with a
security interest in the Premises ("Mortgagee") that has provided Tenant with
notice of its interest in the Premises, and shall provide Mortgagee a
reasonable opportunity to cure such failure, including such time to obtain
possession of the Premises by power of sale
Page 32
or judicial foreclosure, if such should prove necessary to effectuate a cure.
Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any
right under California Civil Code Section 1950.7 or any other present or
future law to the collection of any payment or deposit from Mortgagee or any
purchaser at a foreclosure sale of Mortgagee's interest unless Mortgagee or
such purchaser shall have actually received and not refunded the applicable
payment or deposit. Tenant Further waives any right to terminate this Lease
and to vacate the Premises on Landlord's default under this Lease. Tenant's
sole remedy on Landlord's default is an action for damages or injunctive or
declaratory relief, with the sole exception that if Landlord fails to perform
in its obligation under Section 8.A to maintain plumbing and sewage
facilities, HVAC equipment, exterior windows, door entrances, plate glass and
glazing systems, skylights, fire extinguisher equipment, the parking lot,
underground utilities, elevator equipment, the roof membrane or landscaping
related to the Premises, Tenant may, after providing Landlord thirty (30)
days' written notice, undertake such maintainence at its own cost if Landlord
has not commenced such maintenance. This exception does not apply to items
about which Landlord and Tenant may disagree as to the scope or necessity of
work.
B. LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation trust,
partnership, joint venture, unincorporated association or other form of
business entity: (i) the obligations of Landlord shall not constitute
personal obligations of the officers, directors, trustees, partners, joint
venturers, members, owners, stockholders, or other principals or
representatives except to the extent of their interest in the Premises.
Tenant shall have recourse only to the interest of Landlord in the Premises
or for the satisfaction of the obligations of Landlord and shall not have
recourse to any other assets of Landlord for the satisfaction of such
obligations.
C. INDEMNIFICATION OF LANDLORD: As a material part of the consideration
rendered to Landlord, Tenant hereby waives all claims against Landlord for
damages to goods, wares and merchandise, and all other personal property in,
upon or about said Premises and for injuries to persons in or about said
Premises, from any cause arising at any time to the fullest extent
Page 33
permitted by law, and Tenant shall indemnify and hold Landlord exempt and
harmless from any damage or injury to any person, or to the goods, wares and
merchandise and all other personal property of any person, arising from the
use of the Premises, Building, and/or Project by Tenant and Tenant's Agents
or from the failure of Tenant to keep the Premises in good condition and
repair as herein provided, except to the extent due to the active negligence
or willful misconduct of Landlord. Further, in the event Landlord is made
party to any litigation due to the acts or omission of Tenant and Tenant's
Agents. Tenant will indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord harmless from any such claim or liability
including Landlord's costs and expenses and reasonable attorney's fees
incurred in defending such claims.
15. DESTRUCTION OF PREMISES:
A. DESTRUCTION BY AN INSURED CASUALTY: In the event of a destruction of
the Premises during the Lease Term by a casualty for which Landlord has
received insurance proceeds sufficient to repair the damage or destruction,
Landlord shall repair the same to the extent of such proceeds. Such
destruction shall not annul or void this Lease; however, Tenant shall be
entitled to a proportionate reduction of Base Monthly Rent while repairs are
being made, such proportionate reduction to be based upon the extent to which
the repairs interfere with Tenant's business in the Premises, as reasonably
determined by Landlord. If the repairs cannot be made in 180 days from the
date of receipt of all governmental approvals necessary under the laws and
regulations of State, Federal, County or Municipal authorities, as reasonably
determined by Landlord, then Landlord or Tenant may terminate this Lease
within fifteen (15) days of Landlord's determination of the foregoing.
Notwithstanding the foregoing, either Landlord or Tenant shall have the
option to terminate the Lease in the event of a total destruction of the
Premises or in the event of a partial destruction occurs in the last year of
the Lease Term and will take more than sixty (60) days to repair. In no
event shall Landlord be required to replace or restore Alterations, Tenant
Improvements paid for by Tenant from sources other than the Work Allowance,
Tenant's fixtures or personal property. With respect to a destruction which
Landlord is obligated to repair or may elect to repair under the terms of
this Section, Tenant waives the provisions of Section 1932, and Section 1933,
Subdivision 4, of the Civil Code of the State of California, and any other
similarly enacted statute, and the provisions of this Section 15 shall govern
in the case of such destruction.
B. DESTRUCTION BY AN UNINSURED CASUALTY: In the event of a total or
partial destruction of the Premises during the Lease Term by a casualty for
which
Page 34
Landlord has not received insurance proceeds sufficient to repair the damage
or destruction, Landlord may elect to either (i) terminate this Lease by
giving written notice to Tenant within fifteen (15) days after determining
the replacement cost and furnishing reasonable evidence thereof to Tenant; or
(ii) rebuild the Premises, provided the damage can be repaired within one
hundred eighty (180) days from the date of receipt of all governmental
approvals necessary under the laws and regulations of State, Federal, County
or Municipal authorities, as reasonably determined by Landlord.
Notwithstanding the foregoing, if the cost to repair the damage from an
uninsured casualty is less than 5% of the then replacement cost of the
Building (excluding Tenant Improvements), then Landlord shall repair the
damage. If Landlord contributes to payment for an uninsured loss, the
contributed amount shall be amortized over the useful life of the
improvements and such amortized amount shall be reimbursed by Tenant to
Landlord as additional rent, together with interest at the prime rate of
Union Bank plus two percent (2%). If Landlord so elects to terminate this
Lease, Tenant, within fifteen (15) days after receiving Landlord's notice to
terminate, can elect to pay to Landlord at the time Tenant notifies Landlord
of its election, the actual cost of restoration, in which case Landlord shall
restore the Premises and this Lease shall not terminate.
C. TENANT'S RIGHT TO CANCEL ADJACENT LEASES: In the event the Lease is
terminated pursuant to Section 15.A or 15.B above, Tenant shall have the
right to simultaneously terminate its leases for the other buildings within
the first phase of the Project leased by Tenant.
16. CONDEMNATION: If any part of the Premises shall be taken for any
public or quasi-public use, under any statute or by right of eminent domain
or private purchase in lieu thereof, and only a part thereof remains which is
susceptible of occupation hereunder, this Lease shall, as to the part so
taken, terminate as of the day before title vests in the condemnor or
purchaser ("Vesting Date") and Base Monthly Rent payable hereunder shall be
adjusted so that Tenant is required to pay for the remainder of the Lease
Term only such portion of Base Monthly Rent as the value of the part
remaining after such taking bears to the value of the entire Premises prior
to such taking; but in such event, Landlord shall have the
Page 35
option to terminate this Lease as of the Vesting Date. If all of the
Premises or such part thereof be taken so that there does not remain a
portion susceptible for occupation hereunder, this Lease shall terminate on
the Vesting Date. If part or all of the Premises be taken, all compensation
awarded upon such taking shall go to Landlord, and Tenant shall have no claim
thereto; but Landlord shall cooperate with Tenant, without cost to Landlord,
to recover compensation for damage to or taking of any Alterations, Tenant
Improvements paid for by Tenant from sources other than the Work Allowance,
or for Tenant's moving costs. Tenant hereby waives the provisions of
California Code of Civil Procedures Section 1265.130 and any other similarly
enacted statue, and the provisions of this Section 16 shall govern in the
case of such taking.
17. ASSIGNMENT OR SUBLEASE:
A. CONSENT BY LANDLORD: Except as specifically provided in this Section
17, Tenant may not assign, sublet, hypothecate, or allow a third party to use
the Premises without the express written consent of Landlord, which consent
shall not be unreasonably withheld as defined below. In the event Tenant
desires to assign this Lease or any interest herein including, without
limitation, a pledge, mortgage or other hypothecation, or sublet the Premises
or any part thereof, Tenant shall deliver to Landlord (i) executed
counterparts of any agreement and of all ancillary agreements with the
proposed assignee/subtenant, (ii) current financial statements of the
transferee covering the preceding three years, (iii) the nature of the
proposed transferee's business to be carried on in the Premises, (v) all
consideration to be given on account of the Transfer, and (vi) a current
financial statement of Tenant. Landlord may condition its approval of any
Transfer to a certification from both Tenant and the proposed transferee of
all consideration to be paid to Tenant in connection with such Transfer. At
Landlord's request, Tenant shall also provide additional information
reasonably required by Landlord to determine whether it will consent to the
proposed assignment or sublease. Landlord shall have a ten (10) day period
following receipt of all the foregoing within which to notify Tenant in
writing that Landlord elects to: (i) permit Tenant to assign or sublet such
space to the named assignee/subtenant on the terms and conditions set forth
in the notice; or (ii) refuse consent. If Landlord should fail to notify
Tenant in writing of such election within the 10-day period, Landlord shall
be deemed to have elected option (ii) above. Landlord's written consent to
the proposed assignment or sublease shall not be unreasonably withheld,
provided and upon the condition that: (i) the proposed assignee or subtenant
is engaged in a business that is limited to the use expressly permitted under
this Lease; (ii) the proposed assignee is a company with sufficient financial
worth and management ability
Page 36
to undertake the financial obligation of this Lease and Landlord has been
furnished with reasonable proof thereof; (iii) the proposed assignment or
sublease is in form reasonably satisfactory to Landlord; and (iv) Tenant
reimburses Landlord on demand for any costs that may be incurred by Landlord
in connection with said assignment or sublease, including the costs of making
investigations as to the acceptability of the proposed assignee or subtenant
and legal costs incurred in connection with the granting of any requested
consent, not to exceed $2,500.00; and (vi) Tenant shall not have advertised
or publicized the availability of the Premises without prior notice to
Landlord. In the event all or any one of the foregoing conditions are not
satisfied, Landlord shall be considered to have acted reasonably if it
withholds its consent.
B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Any rent or other economic
consideration realized by Tenant under any sublease and assignment, in excess
of the rent payable hereunder and reasonable subletting and assignment costs,
shall be divided and paid fifty percent (50%) to Landlord and fifty percent
(50%) to Tenant, after first deducting all direct costs incurred by Tenant in
connection with such transaction. Tenant's obligation to pay over Landlord's
portion of the consideration constitutes an obligation for additional rent
hereunder. The above provisions relating to Landlord's right to terminate
the Lease and relating to the allocation of bonus rent are independently
negotiated terms of the Lease which constitute a material inducement for the
Landlord to enter into the Lease, and are agreed by the parties to be
commercially reasonable. No assignment or subletting by Tenant shall relieve
it of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
C. NO RELEASE: Any assignment or sublease, including assignments or
deemed assignments pursuant to Section 17.D below, shall be made only if and
shall not be effective until the assignee or subtenant shall execute,
acknowledge, and deliver to Landlord an agreement, in form and substance
satisfactory to Landlord, whereby the assignee or subtenant shall assume all
the obligations of this Lease on the part of Tenant to be performed or
observed and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease. Notwithstanding any such sublease
or assignment and the acceptance of rent by
Page 37
Landlord from any subtenant or assignee, Tenant and any guarantor shall
remain fully liable for the payment of Base Monthly Rent and additional rent
due, and to become due hereunder, for the performance of all the covenants,
agreements, terms, provisions and conditions contained in this Lease on the
part of Tenant to be performed and for all acts and omissions of any
licensee, subtenant, assignee or any other person claiming under or through
any subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed a violation
by Tenant. Tenant shall indemnify, defend and hold Landlord harmless from
and against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any real estate brokers
or other persons claiming compensation in connection with the proposed
assignment or sublease.
D. REORGANIZATION OF TENANT: If Tenant is a corporation, the following
shall be deemed a voluntary assignment of Tenant's interest in this Lease:
(i) any dissolution, merger, consolidation, or other reorganization of or
affecting Tenant, whether or not Tenant is the surviving corporation, and
(ii) if the capital stock of Tenant is not publicly traded, the sale or
transfer to one person or entity (or to any group of related persons or
entities) stock possessing more than 50% of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors.
E. PERMITTED TRANSFERS: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be
entitled to receive any part of any subrent resulting therefrom that would
otherwise be due. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to (i) any corporation which controls, is
controlled by, or is under common control with the original Tenant to this
Lease by means of an ownership interest of more than 50%; (ii) a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as such transaction is not
entered into as a subterfuge by Tenant to be relieved of or otherwise
diminish its obligations under this Lease; and (iii) a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant so long as such acquisition is not entered into as a subterfuge by
Tenant to be relieved of or otherwise diminish its obligations under this
Lease.
F. EFFECT OF DEFAULT: In the event of Tenant's default, Tenant hereby
assigns all rents due from any
Page 38
assignment or subletting to Landlord as security for performance of its
obligations under this Lease, and Landlord may collect such rents as Tenant's
Attorney-in-Fact, except that Tenant may collect such rents unless a default
occurs as described in Section 13 above. A Lease termination due to Tenant's
default shall not automatically terminate an assignment or sublease then in
existence; rather at Landlord's election, such assignment or sublease shall
survive the Lease termination, the assignee or subtenant shall attorn to
Landlord, and Landlord shall undertake the obligations of Tenant under the
sublease or assignment; except that Landlord shall not be liable for prepaid
rent, security deposits or other defaults of Tenant to the subtenant or
assignee, or for any acts or omissions of Tenant and Tenant's Agents.
G. CONVEYANCE BY LANDLORD: As used in this Lease, the term "Landlord"
is defined only as the owner for the time being of the Premises, so that in
the event of any sale or other conveyance of the Premises or in the event of
a master lease of the Premises, Landlord shall be entirely freed and relieved
of all its covenants and obligations hereunder, and it shall be deemed and
construed, without further agreement between the parties and the purchaser at
any such sale or the master tenant of the Premises, that the purchaser or
master tenant of the Premises has assumed and agreed to carry out any and all
covenants and obligations of Landlord hereunder. Such transferor shall
transfer and deliver Tenant's security deposit to the purchaser at any such
sale or the master tenant of the Premises, and thereupon the transferor shall
be discharged from any further liability in reference thereto.
F. SUCCESSORS AND ASSIGNS: Subject to the provisions this Section 17,
the covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all parties hereto; and
all parties hereto shall be jointly and severally liable hereunder.
18. OPTION TO EXTEND THE LEASE TERM:
▇. ▇▇▇▇▇ AND EXERCISE OF OPTION: Provided Tenant concurrently exercises
its options to extend the lease terms on all other buildings leased by Tenant
within the first phase portion of the Project, Landlord grants to Tenant,
subject to the terms and conditions
Page 39
set forth in this Section 18.A, two (2) options (the "Options") to extend the
Lease Term for an additional term (the "Option Term"). Each Option Term
shall be for a period of sixty (60) months and shall be exercised, if at all,
by written notice to Landlord no earlier than eighteen (18) months prior to
the Expiration Date but no later than twelve (12) months prior to the
Expiration Date. If Tenant exercises the Option, all of the terms, covenants
and conditions of this Lease except this Section shall apply during the
Option Term as though the expiration date of the Option Term was the date
originally set forth herein as the Expiration Date, provided that Base
Monthly Rent for the Premises payable by Tenant during the Option Term shall
be the greater of either the average of Base Monthly Rent paid during the
previous term, or the then Fair Market Rental as hereinafter defined.
Notwithstanding anything herein to the contrary, if Tenant is in monetary or
material non-monetary default under any of the terms, covenants or conditions
of this Lease either at the time Tenant exercises the Option or at any time
thereafter prior to the commencement date of the Option Term, Landlord shall
have, in addition to all of Landlord's other rights and remedies provided in
this Lease, the right to terminate the Option upon notice to Tenant, in which
event the expiration date of this Lease shall be and remain the Expiration
Date. As used herein, the term "Fair Market Rental" is defined as the rental
and all other monetary payments, including any escalations and adjustments
thereto (including without limitation Consumer Price Indexing) that Landlord
could obtain during the Option Term from a third party desiring to lease the
Premises, based upon the current use and other potential uses of the
Premises, as determined by the rents then being obtained for new leases of
space comparable in age and quality to the Premises in the locality of the
Building.
B. DETERMINATION OF FAIR MARKET RENTAL: If Tenant exercises the Option,
Landlord shall send Tenant a notice setting forth the Fair Market Rental for
the Option Term within thirty (30) days following the Exercise Date. If
Tenant disputes Landlord's determination of Fair Market Rental for the Option
Term, Tenant shall, within thirty (30) days after the date of Landlord's
notice setting forth Fair Market Rental for the Option Term, send to Landlord
a notice stating that Tenant either elects to terminate its exercise of the
Option, in which event the Option shall lapse and this Lease shall terminate
on the Expiration Date, or that Tenant disagrees with Landlord's
determination of Fair Market Rental for the Option Term and elects to resolve
the disagreement as provided in Section 18.C below. If Tenant does not send
Landlord a notice as provided in the previous sentence, Landlord's
determination of Fair Market Rental shall be the basis for determining the
Base Monthly Rent payable by Tenant during the Option Term. If Tenant elects
to resolve
Page 40
the disagreement as provided in Section 18.C and such procedures are not
concluded prior to the commencement date of the Option Term, Tenant shall pay
to Landlord as Base Monthly Rent the Fair Market Rental as determined by
Landlord in the manner provided above. If the Fair Market Rental as finally
determined pursuant to Section 18.C is greater than Landlord's determination,
Tenant shall pay Landlord the difference between the amount paid by Tenant
and the Fair Market Rental as so determined in Section 18.C within thirty
(30) days after such determination. If the Fair Market Rental as finally
determined in Section 18.C is less than Landlord's determination, the
difference between the amount paid by Tenant and the Fair Market Rental as so
determined in Section 18.C shall be credited against the next installments of
rent due from Tenant to Landlord hereunder.
C. RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to Landlord's notice
setting forth the Fair Market Rental, Landlord and Tenant shall meet at least
two (2) times at a mutually agreeable time and place, in an attempt to
resolve the disagreement.
2. If within the 30-day period referred to above, Landlord and Tenant
cannot reach agreement as to Fair Market Rental, each party shall select one
appraiser to determine Fair Market Rental. Each such appraiser shall arrive
at a determination of Fair Market Rental and submit their conclusions to
Landlord and Tenant within thirty (30) days after the expiration of the
30-day consultation period described above.
3. If only one appraisal is submitted within the requisite time period, it
shall be deemed as Fair Market Rental. If both appraisals are submitted
within such time period and the two appraisals so submitted differ by less
than ten percent (10%), the average of the two shall be deemed as Fair Market
Rental. If the two appraisals differ by more than 10%, the appraisers shall
immediately select a third appraiser who shall, within thirty (30) days after
his selection, make and submit to Landlord and Tenant a determination of Fair
Market Rental. This third appraisal will then be averaged with the closer of
the two previous appraisals and the result shall be Fair Market Rental.
Page 41
4. All appraisers specified pursuant to this Section shall be members of
the American Institute of Real Estate Appraisers with not less than ten (10)
years experience appraising office and industrial properties in the Santa
▇▇▇▇▇ Valley. Each party shall pay the cost of the appraiser selected by
such party and one-half of the cost of the third appraiser.
D. PERSONAL TO TENANT: All Options provided to Tenant in this Lease are
personal and granted to Network Equipment Technologies and any entity
resulting from a permitted transfer as set forth in Section 17.E above and
are not exercisable by any third party should Tenant assign or sublet all or
a portion of its rights under this Lease, unless Landlord consents to permit
exercise of any option by any assignee or subtenant, in Landlord's sole and
absolute discretion. In the event Tenant has multiple options to extend this
Lease, a later option to extend the Lease cannot be exercised unless the
prior option has been so exercised.
19. OPTION TO LEASE : Landlord has granted Tenant an option to lease
addition buildings on the terms set forth in EXHIBIT "E".
20. GENERAL PROVISIONS:
A. ATTORNEY'S FEES: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of
any other covenant herein; then the losing party shall pay to the prevailing
party reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall
also be entitled to recover all costs and expenses including reasonable
attorney's fees incurred in enforcing any judgment or award against the other
party. The foregoing provision relating to post-judgment costs is severable
from all other provisions of this Lease.
B. AUTHORITY OF PARTIES: Each party represents and warrants to the other
party that it is duly formed and in good standing, and is duly authorized to
execute and deliver this Lease on behalf of it, and that this Lease is
binding upon the signing party in accordance with its terms. At either
party's request, the other party shall provide the requesting party with
proof in a form acceptable to the requesting party, authorizing the execution
of the Lease.
C. BROKERS: Tenant represents it has not utilized or contacted a real
estate broker or finder with respect to this Lease other than Julien J.
Page 42
▇▇▇▇▇▇▇, Inc. and Tenant agrees to indemnify, defend and hold Landlord harmless
against any claim, cost, liability or cause of action asserted by any other
broker or finder claiming through Tenant.
D. CHOICE OF LAW: This Lease shall be governed by and construed in
accordance with California law. Venue shall be Alameda County.
E. DISPUTE RESOLUTION: Landlord and Tenant and any other party that
may become a party to this Lease or be deemed a party to this Lease including
any subtenants agree to and shall mediate any controversy, dispute, or claim
of whatever nature arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Lease, including any claim
based on contract, tort, or statute,, except for any claim by Landlord for
unlawful detainer, or any action within the jurisdiction of the small claims
court. The mediation shall be held prior to any court action or arbitration.
The mediation shall be confidential and in accordance with California
Evidence Code Section1152.5. In the event the parties are not able to agree
on a mediator within thirty days JAMS or another judicial and mediation
service mutually acceptable to the parties shall appoint a mediator. In the
event the mediator determines that a second mediation session is necessary,
it shall be conducted in accordance with this paragraph. Should the
prevailing party attempt an arbitration or a court action before attempting
to mediate, THE PREVAILING PARTY SHALL NOT BE ENTITLED TO ATTORNEYS FEES THAT
MIGHT OTHERWISE BE AVAILABLE TO THEM IN A COURT ACTION OR ARBITRATION, AND IN
ADDITION THERETO, THE PARTY WHO IS DETERMINED BY THE ARBITRATOR TO HAVE
RESISTED MEDIATION SHALL BE SANCTIONED BY THE ARBITRATOR OR JUDGE. Except
for any claim by Landlord for unlawful detainer or any claim within the
Jurisdiction of the small claims court (which for such claims the parties
agree shall be the sole court of competent jurisdiction), any controversy,
dispute, or claim of whatever nature arising out of, in connection with, or
in relation to the interpretation, performance or breach of this Lease,
including any claim based on contract, tort, or statute, shall be resolved at
the request of any party to this agreement through a two-step dispute
resolution process administered by JAMS or another judicial and mediation
service mutually acceptable to the parties involving first mediation,
followed, if necessary, by final and binding arbitration administered by and
in accordance with the
Page 43
then-existing rules and practice of the judicial and mediation service
selected, and judgment upon any award rendered by the arbitrator(s) may be
entered by any State or Federal Court having jurisdiction thereof. The
parties to the arbitration shall have those rights of discovery that the
arbitrator(s) deem necessary (after application to the arbitrator(s)) to a
full and fair hearing of the matter. However, in no event shall the parties
be entitled to propound interrogatories or requests for admissions during the
arbitration process. The arbitrator shall be a retired judge or a licensed
California Attorney. The venue for any such arbitration's or mediations
shall be in Santa ▇▇▇▇▇ County.
F. ENTIRE AGREEMENT: This Lease contains all of the agreements and
conditions made between the parties hereto and may not be modified orally or
in any other manner other than by written agreement signed by all parties
hereto or their respective successors in interest. This Lease supersedes and
revokes all previous negotiations, letters of intent, lease proposals,
brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent
Landlord or Tenant.
G. ENTRY BY LANDLORD: Upon prior notice to Tenant and subject to
Tenant's reasonable security regulations, Tenant shall permit Landlord and
his agents to enter into and upon the Premises at all reasonable times, and
without any rent abatement or reduction or any liability to Tenant for any
loss of occupation or quiet enjoyment of the Premises thereby occasioned, for
the following purposes: (i) inspecting and maintaining the Premises; (ii)
making repairs, alterations or additions to the Premises; (iii) erecting
additional building(s) and improvements on the land where the Premises are
situated or on adjacent land owned by Landlord; and (iv) performing any
obligations of Landlord under the Lease including remediation of hazardous
materials if determined to be the responsibility of Landlord. Tenant shall
permit Landlord and his agents, at any time within one hundred eighty (180)
days prior to the Expiration Date (or at any time during the Lease if Tenant
is in default hereunder), to place upon the Premises "For Lease" signs and
exhibit the Premises to real estate brokers and prospective tenants at
reasonable hours.
H. ESTOPPEL CERTIFICATES: At any time during the Lease Term, Landlord
or Tenant shall, within ten (10) days following written notice from the other
party, execute and deliver to the requesting party a written statement
certifying, if true, the following: (i) that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification); (ii) the date to which rent and other
Page 44
charges are paid in advance, if any; (iii) acknowledging that there are not,
to such party's knowledge, any uncured defaults on either party's part
hereunder (or specifying such defaults if they are claimed); and (iv) such
other information as either party may reasonably request. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer
of Landlord's interest in the Premises. Landlord or Tenant's failure to
deliver such statement within such time shall be conclusive upon such party
that this Lease is in full force and effect without modification, except as
may be represented by such party, and that there are no uncured defaults in
such party's performance. Tenant agrees to provide, within fifteen (15) days
of Landlord's request, Tenant's most recent three (3) years of audited
financial statements for Landlord's use in financing the Premises or
Landlord's interest therein.
I. EXHIBITS: All exhibits referred to are attached to this Lease and
incorporated by reference.
J. INTEREST: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, plus two percent (2%) per annum from that date until paid
in full ("Agreed Interest Rate"). This provision shall survive the
expiration or sooner termination of the Lease. Despite any other provision
of this Lease, the total liability for interest payments shall not exceed the
limits, if any, imposed by the usury laws of the State of California. Any
interest paid in excess of those limits shall be refunded to Tenant by
application of the amount of excess interest paid against any sums
outstanding in any order that Landlord requires. If the amount of excess
interest paid exceeds the sums outstanding, the portion exceeding those sums
shall be refunded in cash to Tenant by Landlord. To ascertain whether any
interest payable exceeds the limits imposed, any non-principal
payment(including late charges) shall be considered to the extent permitted
by law to be an expense or a fee, premium, or penalty rather than interest.
K. MODIFICATIONS REQUIRED BY LENDER: If any Lender of Landlord
requires a modification of this Lease that will not increase Tenant's cost or
expense or materially or adversely change Tenant's rights and obligations,
this Lease shall be so modified and Tenant
Page 45
shall execute whatever reasonable documents are required and deliver them to
Landlord within ten (10) days after the request.
L. NO PRESUMPTION AGAINST DRAFTER: Landlord and Tenant understand,
agree and acknowledge that this Lease has been freely negotiated by both
parties; and that in any controversy, dispute, or contest over the meaning,
interpretation, validity, or enforceability of this Lease or any of its terms
or conditions, there shall be no inference, presumption, or conclusion drawn
whatsoever against either party by virtue of that party having drafted this
Lease or any portion thereof.
M. NOTICES: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail,
return receipt requested, or by personal delivery addressed to the party to
be notified at the address for such party specified in Section 1 of this
Lease, or to such other place as the party to be notified may from time to
time designate by at least fifteen (15) days prior notice to the notifying
party. When this Lease requires service of a notice, that notice shall
replace rather than supplement any equivalent or similar statutory notice,
including any notices required by Code of Civil Procedure Section 1161 or any
similar or successor statute. when a statute requires service of a notice in
a particular manner, service of that notice (or a similar notice required by
this lease) shall replace and satisfy the statutory service-of-notice
procedures, including those required by Code of Civil Procedure Section 1162
or any similar or successor statute.
N. RENT: All monetary sums due from Tenant to Landlord under this
Lease, including, without limitation those referred to as "additional rent",
shall be deemed as rent.
O. REPRESENTATIONS: Tenant acknowledges that neither Landlord nor any
of its employees or agents have made any agreements, representations,
warranties or promises with respect to the Premises or with respect to
present or future rents, expenses, operations, tenancies or any other matter.
Except as herein expressly set forth herein, Tenant relied on no statement
of Landlord or its employees or agents for that purpose.
P. RIGHTS AND REMEDIES: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law, and are in
addition to all other rights and remedies in law and in equity.
Q. SEVERABILITY: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder
of the Lease shall not be invalidated thereby but shall be
Page 46
enforceable in accordance with its terms, omitting the invalid or
unenforceable term.
R. SUBORDINATION: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to any covenants, conditions or
restrictions of record, and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, if the holder or
holders of any such Encumbrance ("Holder") require that this Lease be prior
and superior thereto, within seven (7) days after written request of Landlord
to Tenant, Tenant shall execute, have acknowledged and deliver all documents
or instruments, in the form presented to Tenant, which Landlord or Holder
deems necessary or desirable for such purposes. Landlord shall have the
right to cause this Lease to be and become and remain subject and subordinate
to any and all Encumbrances which are now or may hereafter be executed
covering the Premises or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made
or to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided only, that in the event of termination of any
such lease or upon the foreclosure of any such mortgage or deed of trust,
Holder agrees to recognize Tenant's rights under this Lease as long as Tenant
is not then in default and continues to pay Base Monthly Rent and additional
rent and observes and performs all required provisions of this Lease. Within
ten (10) days after Landlord's written request, Tenant shall execute any
documents required by Landlord or the Holder to make this Lease subordinate
to any lien of the Encumbrance. If Tenant fails to do so, then in addition
to such failure constituting a default by Tenant, it shall be deemed that
this Lease is so subordinated to such Encumbrance. Notwithstanding anything
to the contrary in this Section, Tenant hereby attorns and agrees to attorn
to any entity purchasing or otherwise acquiring the Premises at any sale or
other proceeding or pursuant to the exercise of any other rights, powers or
remedies under such encumbrance.
Notwithstanding the foregoing, the subordination of this Lease shall be subject
to Tenant's receipt of a
Page 47
Nondisturbance and Attornment Agreement in a
commercially reasonable form.
S. SUBMISSION OF LEASE: Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in
favor of Tenant. This document is not effective as a lease or otherwise
until executed and delivered by both Landlord and Tenant.
T. SURVIVAL OF INDEMNITIES: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive
the expiration or sooner termination of the Lease.
U. TIME: Time is of the essence hereunder.
V. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government agency
or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or program, Tenant agrees that the cost of TDM
imposed facilities required on the Premises, including but not limited to
employee showers, lockers, cafeteria, or lunchroom facilities, shall be paid
by Tenant. Further, any ongoing costs or expenses associated with a TDM
program which are required for the Premises and not provided by Tenant, such
as an on-site TDM coordinator, shall be provided by Landlord with such costs
being included as additional rent and reimbursed to Landlord by Tenant within
thirty (30) days after demand.
W. 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.
X. USE OF ROOF: Tenant shall have the exclusive right to use the roof
of the Building at no charge to place and maintain telecommunications
antennas, microwave or satellite dishes and other communications equipment.
Such use of the roof shall be subject to receipt of all required government
approvals, at Tenant's sole cost. The placements of any such antennas or
satellite dishes or other communications equipment on the roofs, the
modifications of the roof to accommodate such equipment, and the installation
of any such equipment shall be subject to Landlord's reasonable prior
approval of the plans and methods therefore. Such use
Page 48
of the roof shall not restrict, impair or negate any warranty relating to the
roofs and Tenant shall be responsible for any and all damage, leakage or
extraordinary wear and tear to the roof occurring as a result of such use of
the roofs. Installation of such equipment shall be supervised by Landlord
and performed in a first class workmanlike manner. Prior to the Expiration
Date, Tenant shall, at its sole cost and expense, remove all such roof
equipment as Landlord desires and restore the roof to its condition as of the
Commencement Date. Such repair and restoration shall include causing the
roof to be brought into compliance with all applicable building codes and
laws in effect at the time of the removal to the extent such compliance is
necessitated by removal of the roof equipment and restoration work on the
roof.
Y. RECORDATION: Within forty-five (45) days after the execution and
delivery of this Lease by Landlord and Tenant, Landlord shall execute and
notarize a short form Memorandum of Lease, in recordable form, and shall
deliver the same to Tenant for Tenant's recording. Within (45) days
following the finalizing by Landlord of a new parcel map for the Project,
Landlord and Tenant shall execute all necessary documents to eliminate the
Short Form Memorandum of Lease and shall concurrently execute a new short
form Memorandum of Lease for recordation on the parcel affected by this
Lease. At such time, Landlord and Tenant shall also execute a Memorandum of
Lease for recordation on parcels affected by Tenant's Option to Lease
pursuant to Exhibit "E" of this Lease. Prior to the expiration or earlier
termination of the Lease and/or Option to Lease, Tenant agrees to promptly
execute all necessary documents to eliminate the Short Form Memorandum of
Lease as an exception to title.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
LANDLORD: Sobrato Interests IIITENANT:Network Equip-
a California Limited Partnershipment Technologies
a Delaware Corporation
By: _______/S/___________________By: ____________ /S/ ___________________
Its: General PartnerIts:Sr. Vice President
& CFO
Page 49
EXHIBIT - OPTION TO LEASE
RECITALS:
A. As part of the consideration for Tenant entering into the Lease,
Landlord is willing to grant to Tenant an option to lease a maximum of two
(2) buildings to be constructed on two adjacent parcels of land,
approximately 5.3 and 4.5 acres respectively, owned by Landlord and shown on
SCHEDULE 1 ("Option Properties). Such buildings currently do not exist, but
Landlord is willing, subject to the conditions set forth herein, to construct
such buildings if Tenant exercises such option to lease, all pursuant to the
terms and conditions set forth below. Such buildings and property is herein
referred to as the "Option Buildings".
B. The parties now wish to document the terms of such option to lease the
Option Buildings.
NOW, THEREFORE, in consideration of the execution of the Lease by both parties,
and in consideration of the mutual covenants set forth below, the parties agree
as follows:
1. GRANT OF OPTION. Landlord hereby grants to Tenant an option to lease
the Option Buildings (the "Option") subject to the terms and conditions set
forth in this Agreement.
2. TERM OF OPTION. Tenant shall be entitled, subject to paragraph 3
below, to exercise the Option at any time during the period commencing on the
execution date of the Lease and ending on June 1, 1999. Such period shall
herein be referred to as the "Option Period".
3. EXERCISE OF OPTION. Tenant shall exercise the Option only by
delivery of written notice to Landlord within the Option Period of such
exercise ("Exercise Date"). Tenant shall be entitled to exercise the Option
only if at the time of such exercise Tenant is not in default under the terms
of the Lease. In the event the Lease has been terminated for any reason,
this Option shall automatically terminate. At the time Tenant exercises the
Option, Tenant must notify Landlord of the amount of building square footage
it desires to lease pursuant to the Option.
Page 50
4. CONDITIONS PRECEDENT. Landlord's obligation to construct the Option
Buildings are expressly conditioned upon Landlord's ability to within one
hundred twenty (120) days of the Exercise Date to (i) secure a commitment by
an institutional lender to make a fixed rate non-recourse non-participating
loan to Landlord in a minimum amount equal to eighty-five percent (85%) of
Total Project Costs (as defined below), and (ii) obtain all permits and
governmental approvals necessary for the construction of the Option
Buildings.
5. LEASE OF THE OPTION BUILDING. Within thirty (30) days after Tenant's
exercise of the Option, Landlord and Tenant shall enter into a written lease
of the Option Buildings (the "Option Building Lease"). The Option Building
Lease shall be on the same terms as the Lease, except as follows:
(a) The Premises shall be Option Buildings. References in the Lease
format shall be changed in the Option Building Lease to refer to Option
Building.
(b) Landlord shall provide 3.5 parking spaces per 1,000 square feet of
leasable space within the Option Buildings.
(c) The term shall commence upon the date of Substantial Completion (as
the term is defined in the Lease) of the Building Shell and Tenant Improvements
for the Option Building ("Commencement Date"), and end on the twelfth (12th)
anniversary thereof, with options to extend pursuant to the Lease.
(d) Rent shall be payable beginning on the Commencement Date. Base
Monthly Rent shall be equal to one hundred thirty percent (130%) of (i) the
product of the (i) Total Project Costs as defined below and (ii) the best
non-participating twelve (12) year fixed rate permanent loan constant
available prior to the start of construction of the Option Building. In no
event shall the amortization period of the loan exceed twenty (20) years. In
the event that actual project costs have not been determined by the
Commencement Date, the rent shall be based on Landlord's reasonable estimate
of Project Costs until such time as actual Project Costs are available.
Total Project Costs shall be equal to the sum of (i) the Fair Market
Value of the Property, at the time Tenant exercises the Option determined by
appraisal as provided in the Lease, (ii) payments by Landlord for labor and
materials to contractors performing construction work in connection with the
Option Buildings, (iii) fees for building permits, licenses, inspection,
utility connections or extensions, and any other fees imposed by governmental
entities, (iv) fees of engineers, architects, consultants and others providing
professional services in connection with the
Page 51
construction of the Option Buildings, (v) construction loan interest paid by
Landlord including interest on Landlord's equity with respect to the
construction of the Option Buildings, calculated at the reference rate
charged by Union Bank plus one percent (1%), (vi) loan fees payable for the
construction and/or permanent loan for the Option Buildings (vii) real
property taxes and assessments levied against the Property during the period
the Option Buildings is constructed, (viii) liability and builders risk
insurance premiums and completion bond premiums paid by Landlord with respect
to the construction of the Option Buildings, (ix) real estate leasing
commissions or fees payable by Landlord with respect to the Option Buildings
in the event Tenant retains a broker; and (x) a sum equal to seven percent
(7%) of the Total Project Cost, for Landlord's construction and development
services including onsite and offsite supervision and management services
provided by Landlord.
The Base Monthly Rent shall then be increased on the same basis as
provided in Section 4.B of the Lease.
(e) The security deposit (in the form of a letter of credit) shall be
equal to the Base Monthly Rent amount for the Option Buildings for the first
month of the term.
(f) The Work Allowance shall be modified to (i) reflect a Work Allowance
of Twenty Five Dollars ($25.00) times the number of leasable square feet of
space in the Option Buildings, and (ii) require Tenant's submission to
Landlord of its Tenant Improvement Plans as set forth below in this Agreement.
(g) The Lease shall be amended (i) to extend the original Lease Term so as
to be co-terminus with the original term of Option Building Lease; and (ii)
to provide that a default under Lease shall be deemed a default under the
Option Building Lease; and that a default under the Option Building Lease
shall be deemed a default under the Lease. The rent for the Premises under
the Lease during the extended term shall be at Fair Market Value (as the term
is therein defined) but not less than the rent paid in the preceding period
6. CONSTRUCTION OF SHELL AND TENANT IMPROVEMENTS.
(a) Within sixty (60) days after Tenant's exercise of the Option, Landlord
shall deliver to Tenant plans
Page 52
and specifications for construction of the shell of Option Buildings
(together called the "Shell Plans"). The Shell Plans shall contemplate
construction of two buildings of 100,000 leasable square feet each.
"Leasable Square Feet" shall include all square footage within the Option
Buildings when measured from outside exterior wall/glass to outside exterior
wall/glass of each floor, including docks, entries, patios and balconies
covered by a structural roof, but excluding roof overhangs. The Shell Plans
shall contemplate construction of a Building Shell of a design and size
similar to the Building Shell of the Premises.
(b) Within ninety (90) days after Tenant's receipt of the Shell Plans,
Tenant shall submit to Landlord, for Landlord's approval, Tenant Improvement
Plans respecting Tenant Improvements that Tenant desires Landlord to
construct in the Option Buildings. General Contractor shall commence
construction of Option Buildings as soon as reasonably possible after removal
of the conditions precedent outlined in Section 4 of this Exhibit, and
continue diligently to construct the same until completion thereof in
accordance with the Shell Plans. All costs of construction of the Building
Shell of Option Buildings shall be borne solely by Landlord. The costs
included within the Building Shell construction shall be as set forth in
EXHIBIT "C" of the Lease. All costs of Tenant Improvements in excess of the
Work Allowance shall be borne solely by Tenant.
7. SUCCESSORS. The Option provided Tenant in this Exhibit is personal
and granted to Network Equipment Technologies and is not exercisable by any
third party should Tenant assign or sublet all or a portion of its rights
under this Lease, unless Landlord consents to permit exercise of any option
by any assignee or subtenant, in Landlord's sole discretion. Except as
previously provided, the terms and provisions hereof shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto.
In no event, however, shall any lender be obligated to perform the terms
this Option in the event of a foreclosure of Landlord's interest in the
Premises or the Property.
Page 53
LEASE BETWEEN
SOBRATO INTERESTS III AND NETWORK EQUIPMENT TECHNOLOGIES
(OFFICE BUILDING 2)
Section Page #
------- ------
Parties.............................................................. 1
Premises............................................................. 1
Use.................................................................. 1
PERMITTED USES....................................................... 1
USES PROHIBITED...................................................... 1
ADVERTISEMENTS AND SIGNS............................................. 2
Term and Rental...................................................... 2
BASE MONTHLY RENT.................................................... 2
RENTAL ADJUSTMENT.................................................... 2
LATE CHARGES......................................................... 3
SECURITY DEPOSIT..................................................... 3
Construction and Possession.......................................... 4
BUILDING SHELL CONSTRUCTION.......................................... 4
TENANT IMPROVEMENT PLANS............................................. 5
FINAL PRICING........................................................ 5
CHANGE ORDERS........................................................ 5
BUILDING SHELL COSTS................................................. 5
TENANT IMPROVEMENT COSTS............................................. 6
CONSTRUCTION......................................................... 6
GENERAL CONTRACTOR OVERHEAD & PROFIT................................. 6
TENANT DELAYS........................................................ 6
INSURANCE............................................................ 7
PUNCH LIST & WARRANTY................................................ 7
OTHER WORK BY TENANT................................................. 7
Acceptance of Possession and Covenants to Surrender.................. 7
DELIVERY AND ACCEPTANCE.............................................. 7
CONDITION UPON SURRENDER............................................. 8
FAILURE TO SURRENDER................................................. 8
Alterations and Additions............................................ 9
TENANT'S ALTERATIONS................................................. 9
EXEMPTED ALTERATIONS................................................. 10
FREE FROM LIENS...................................................... 10
COMPLIANCE WITH GOVERNMENTAL REGULATIONS............................. 10
Maintenance of Premises.............................................. 10
LANDLORD'S OBLIGATIONS............................................... 10
TENANT'S OBLIGATIONS................................................. 11
LANDLORD AND TENANT'S OBLIGATIONS REGARDING COMMON AREA COSTS........ 11
COMMON AREA COSTS.................................................... 11
TENANT'S ALLOCABLE SHARE............................................. 12
WAIVER OF LIABILITY.................................................. 12
Hazard Insurance..................................................... 13
TENANT'S USE......................................................... 13
LANDLORD'S INSURANCE................................................. 13
TENANT'S INSURANCE................................................... 13
WAIVER............................................................... 14
Taxes................................................................ 14
Utilities............................................................ 14
Toxic Waste and Environmental Damage................................. 14
TENANT'S RESPONSIBILITY.............................................. 15
TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS..................... 15
ACTUAL RELEASE BY TENANT............................................. 15
ENVIRONMENTAL MONITORING............................................. 16
Page 1
Tenant's Default..................................................... 16
REMEDIES............................................................. 17
RIGHT TO RE-ENTER.................................................... 17
ABANDONMENT.......................................................... 17
NO TERMINATION....................................................... 18
NON-WAIVER........................................................... 18
PERFORMANCE BY LANDLORD.............................................. 18
Landlord's Liability................................................ 18
LIMITATION ON LANDLORD'S LIABILITY................................... 18
LIMITATION ON TENANT'S RECOURSE...................................... 19
INDEMNIFICATION OF LANDLORD.......................................... 19
Destruction of Premises.............................................. 19
DESTRUCTION BY AN INSURED CASUALTY................................... 19
DESTRUCTION BY AN UNINSURED CASUALTY................................. 20
TENANT'S RIGHT TO CANCEL ADJACENT LEASES............................. 20
Condemnation......................................................... 20
Assignment or Sublease............................................... 21
CONSENT BY LANDLORD.................................................. 21
ASSIGNMENT OR SUBLETTING CONSIDERATION............................... 21
NO RELEASE........................................................... 22
REORGANIZATION OF TENANT............................................. 22
PERMITTED TRANSFERS.................................................. 22
EFFECT OF DEFAULT.................................................... 22
EFFECTS OF CONVEYANCE................................................ 23
SUCCESSORS AND ASSIGNS............................................... 23
Option to Extend the Lease Term...................................... 23
GRANT AND EXERCISE OF OPTION......................................... 23
DETERMINATION OF FAIR MARKET RENTAL.................................. 23
RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL............. 24
PERSONAL TO TENANT................................................... 24
Option to Lease, Option to Purchase.................................. 25
General Provisions................................................... 25
ATTORNEY'S FEES...................................................... 25
AUTHORITY OF PARTIES................................................. 25
BROKERS.............................................................. 25
CHOICE OF LAW........................................................ 25
DISPUTE RESOLUTION................................................... 25
ENTIRE AGREEMENT..................................................... 26
ENTRY BY LANDLORD.................................................... 26
ESTOPPEL CERTIFICATES................................................ 26
EXHIBITS............................................................. 27
INTEREST............................................................. 27
MODIFICATIONS REQUIRED BY LENDER..................................... 27
NO PRESUMPTION AGAINST DRAFTER....................................... 27
NOTICES.............................................................. 27
RENT................................................................. 27
REPRESENTATIONS...................................................... 27
RIGHTS AND REMEDIES.................................................. 27
SEVERABILITY......................................................... 28
SUBORDINATION........................................................ 28
SUBMISSION OF LEASE.................................................. 28
SURVIVAL OF INDEMNITIES.............................................. 28
TIME................................................................. 28
TRANSPORTATION DEMAND MANAGEMENT PROGRAMS............................ 28
WAIVER OF RIGHT TO JURY TRIAL........................................ 29
USE OF ROOF.......................................................... 29
Page 2
RECORDATION.......................................................... 29
EXHIBIT A - Project.................................................. 31
EXHIBIT B-2 - Shell Plans and Specifications......................... 32
EXHIBIT C - Building Shell Definition................................ 33
BUILDING STRUCTURE................................................... 33
SITEWORK............................................................. 33
PLUMBING............................................................. 34
ELECTRICAL........................................................... 34
FIRE SPRINKLER....................................................... 34
SITE AMENITIES....................................................... 34
EXHIBIT C - Building Shell Definition................................ 34
EXHIBIT D - Tenant Improvement Plans and Specifications.............. 35
EXHIBIT E - Option to Lease.......................................... 36
GRANT OF OPTION...................................................... 36
TERM OF OPTION....................................................... 36
EXERCISE OF OPTION................................................... 36
CONDITIONS PRECEDENT................................................. 36
LEASE OF THE OPTION BUILDING......................................... 36
CONSTRUCTION OF SHELL AND TENANT IMPROVEMENTS........................ 38
SUCCESSORS........................................................... 38
EXHIBIT D - Tenant Improvement Plans and Specifications.............. 39
Page 3
1. PARTIES: THIS LEASE, is entered into on this ____ day of April,
1997, between SOBRATO INTERESTS III, a California Limited Partnership, whose
address is ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and
NETWORK EQUIPMENT TECHNOLOGIES, a Delaware Corporation, whose address is ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, hereinafter called
respectively Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City
of Fremont, County of Alameda, State of California, consisting of a two-story
office building of approximately 100,000 square feet ("Building 1", as
highlighted in red on Exhibit "B-1) and 350 parking places which shall be
available for Tenant's exclusive use but shall not be designated or
segregated from the balance of the parking area, in a project initially
consisting of 3 buildings totaling approximately 280,000 square feet on an
approximately 17.5-acre first phase portion of a larger 33.5-acre site
("Project) as outlined in red on EXHIBIT "A". In addition, Tenant shall have
the non-exclusive right to use the common area ("Common Area") surrounding
the Building and additional buildings constructed within the Project. Unless
expressly provided otherwise, the term Premises as used herein shall include
the Tenant Improvements (defined in Section 5.B) constructed by Tenant
pursuant to Section 5.B. Tenant acknowledges Landlord's right to and hereby
consents to construction of additional building(s) on adjacent land in the
Project owned by Landlord, so long as such construction does not involve the
removal of site amenities such as the volleyball court and outdoor seating or
a reduction in size of the approximately 79,000 square foot amphitheatre area
and water feature ("Quad") adjacent to the Building.
Notwithstanding the provisions of this Section 2, Tenant shall be permitted
to schedule with Landlord and reserve the Quad for its exclusive use from
time to time for the purpose of conducting company meetings and events.
3. USE:
A. PERMITTED USES: Tenant shall use the Building only for the
following purposes and shall not change the use of the Building without the
prior written consent of Landlord: Office, research and development,
marketing, light manufacturing, storage and other incidental uses such as
training rooms, cafeteria and health club. Tenant shall use only the
Page 4
number of parking spaces allocated to Tenant. All trucks and delivery
vehicles shall (i) be parked at the rear of the Building near the loading
areas, (ii) loaded and unloaded in a manner which does not interfere with the
businesses of other occupants of the Project, and (iii) permitted to remain
on the Project only so long as is reasonable necessary to complete the
loading and unloading. Landlord makes no representation or warranty that any
specific use of the Premises desired by Tenant is permitted pursuant to any
Laws.
B. USES PROHIBITED: Tenant shall not commit or suffer to be
committed on the Premises any waste, nuisance, or other act or thing which
may unreasonably disturb the quiet enjoyment of any other tenant in or around
the Premises, nor allow any sale by auction or any other use of the Premises
for an unlawful purpose. Tenant shall not (i) damage or overload the
electrical, mechanical or plumbing systems of the Premises, (ii) attach, hang
or suspend anything from the ceiling, walls or columns of the building in
excess of the load limits for which such items are designed or set any load
on the floor in excess of the load limits for which the floor is designed, or
(iii) generate dust, fumes or waste products which create a fire or health
hazard or damage the Premises or in the soils surrounding the Building. No
materials, supplies, equipment, finished products or semi-finished products,
raw materials or articles of any nature, or any waste materials, refuse,
scrap or debris, shall be stored upon or permitted to remain on any portion
of the Premises outside of the Building without Landlord's prior approval,
which approval may be withheld in its sole discretion.
C. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the Premises (excluding the interior of the
Building) any signs not approved by the city or other governing authority.
Tenant will not place or permit to be placed upon the Premises any signs,
advertisements or notices without the written consent of Landlord as to type,
size, design, lettering, coloring and location, which consent will not be
unreasonably withheld. Any sign placed on the Premises shall be removed by
Tenant, at its sole cost, prior to the Expiration Date or promptly following
the earlier termination of the lease, and Tenant shall repair, at its sole
cost, any damage or injury to the Premises caused thereby, and if
Page 5
not so removed, then Landlord may have same so removed at Tenant's expense.
Landlord hereby approves the general size and location of the exterior signs
as shown in green on Exhibit "B-1".
4. TERM AND RENTAL:
A. BASE MONTHLY RENT: The term ("Lease Term") shall be for one
hundred forty-four (144) months, commencing on the Commencement Date,
estimated to occur on April 1, 1998, but finally determined pursuant to
Section 5.G, and ending one hundred forty-four (144) months thereafter
("Expiration Date"). In addition to all other sums payable by Tenant under
this Lease, Tenant shall pay as base monthly rent ("Base Monthly Rent") for
the Premises an amount equal to the product of multiplying One Dollar and
Twenty-Five Cents ($1.25) by the Rentable Square Footage (as hereinafter
defined) of the Building. "Rentable Square Footage" is defined as the square
footage of the Building when measured from outside exterior wall/glass to
outside exterior wall/glass of each floor, including covered docks, covered
entries, covered patios and covered balconies, but excluding roof overhangs.
The Rentable Square Footage shall be derived based on Exhibit "B-2" as
defined below and attached hereto. Base Monthly Rent shall be due in advance
on or before the first day of each calendar month during the Lease Term. All
sums payable by Tenant under this Lease shall be paid to Landlord in lawful
money of the United States of America, without offset or deduction, except as
set forth herein, and without prior notice or demand, at the address
specified in Section 1 of this Lease or at such place or places as may be
designated by Landlord during the Lease Term. Base Monthly Rent for any
period less than a calendar month shall be a pro rata portion of the monthly
installment. B. RENTAL ADJUSTMENT: Beginning twenty four (24) months
after the Commencement Date, and every twenty four (24) months thereafter (an
"Adjustment Date"), the then-payable Base Monthly Rent shall be subject to
adjustment based on the increase, if any, in the Consumer Price Index that
has occurred during the twenty four (24) months preceding the
then-applicable Adjustment Date. The basis for computing the adjustment
shall be the U.S. Department of Labor, Bureau of Labor Statistic's Consumer
Price Index for All Urban Consumers, All Items, 1982-84=100, for the San
Francisco-Oakland-San ▇▇▇▇ area ("Index"). The Index most recently published
preceding the Commencement Date for the first Adjustment (or previous
Adjustment Date, as applicable), shall be considered the "Base Index". If
the Index most recently published preceding the Adjustment Date ("Comparison
Index") is greater than the Base Index, the then-payable Base Monthly Rent
shall be increased by multiplying the then-payable Base Monthly Rent by a
fraction, the numerator of which is the Comparison Index and the denominator
of which is the Base Index. Notwithstanding
Page 6
any subsequent decrease in the Index, the increase in the CPI for any
calendar year shall never be less than three percent (3%) nor more than eight
percent (8%) per year compounded annually. On adjustment of the Base Monthly
Rent, Landlord shall notify Tenant by letter stating the new Base Monthly
Rent. Landlord's calculation of the Base Monthly Rent escalation shall be
conclusive and binding unless Tenant objects to said calculation within sixty
(60) days of Tenant's receipt from Landlord of such calculation. Landlord's
failure to adjust Base Monthly Rent on an Adjustment Date shall not prevent
Landlord from retroactively adjusting Base Monthly Rent at any subsequent
time during the Lease Term. If the Index base year is changed so that it
differs from 1982-84=100, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is changed, revised or discontinued for
any reason, there shall be substituted in lieu thereof and the term "Consumer
Price Index" shall thereafter refer to the most nearly comparable official
price index of the United States Government in order to obtain substantially
the same result as would have been obtained had the original Consumer Price
Index been not been discontinued, revised or changed, which alternative index
shall be selected by Landlord and shall be subject to Tenant's written
approval.
C. LATE CHARGES: Tenant hereby acknowledges that late payment by
Tenant to Landlord of Base Monthly Rent and other sums due hereunder will
cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which is extremely difficult to ascertain. Such costs include but
are not limited to: administrative, processing, accounting, and late charges
which may be imposed on Landlord by the terms of any contract, revolving
credit, mortgage, or trust deed covering the Premises. Accordingly, if any
installment of Base Monthly Rent or other sum due from Tenant shall not be
received by Landlord or its designee within five (5) days after that Rent is
due, Tenant shall pay to Landlord a late charge equal to five (5%) percent of
such overdue amount, which late charge shall be due and payable on the same
date that the overdue amount was due. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant, excluding interest and attorneys fees and
costs. If any rent remains delinquent for a period in excess of thirty (30)
days then, in addition
Page 7
to such late charge, Tenant shall pay to Landlord interest on any rent that
is not paid when due at the Agreed Interest Rate specified in Section 19.J
and calculated from the date thirty (30) days following the date such amount
became due until the date such rent is paid. Acceptance by Landlord of such
late charge shall not constitute a waiver of Tenant's default with respect to
such overdue amount nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
Notwithstanding the foregoing, Tenant shall be granted one exception per
calendar year when Base Monthly Rent may be received by Landlord up to ten
(10) days after notice to Tenant that such Base Monthly Rent is past due
before Tenant incurs the 5% late charge.
D. SECURITY DEPOSIT: Prior to the Lease Commencement Date, Tenant
shall deposit with Landlord the sum of One Hundred Twenty Five Thousand and
No/100 Dollars ($125,000.00) ("Security "Deposit"). Landlord agrees that in
lieu of a cash Security Deposit, Tenant may deposit a letter of credit in a
form reasonably acceptable to Landlord. Landlord shall be entitled to draw
against the letter of credit at any time provided only that Landlord
certifies to the issuer of the letter of credit that Tenant is in default
under the Lease. Tenant shall keep the letter of credit in effect during the
entire Lease Term, as the same may be extended, plus a period of four (4)
weeks after expiration of the Lease Term. At least thirty (30) days prior to
expiration of any letter of credit, the term thereof shall be renewed or
extended for a period of at least one (1) year. Tenant's failure to so renew
or extend the letter of credit shall be a material default of this Lease by
Tenant. In the event Landlord draws against the letter of credit, Tenant
shall replenish the existing letter of credit or cause a new letter of credit
to be issued such that the aggregate amount of letters of credit available to
Landlord at all times during the Lease Term is the amount of the Security
Deposit originally required.
Landlord shall not be deemed a trustee of the Security Deposit, may use the
Security Deposit in business, and shall not be required to segregate it from
its general accounts. Tenant shall not be entitled to interest on the
Security Deposit.. If Tenant defaults with respect to any provisions of the
Lease, including but not limited to the provisions relating to payment of
Base Monthly Rent or other charges, Landlord may, to the extent reasonably
necessary to remedy Tenant's default, use any or all of the Security Deposit
towards payment of the following: (i) Base Monthly Rent or other charges in
default; (ii) any other amount which Landlord may spend or become obligated
to spend by reason of Tenant's default; and (iii) any other loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of
the Security Deposit is so
Page 8
used or applied, Tenant shall, within ten (10) days after written demand from
Landlord, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its full original amount, and shall pay to Landlord such
other sums as necessary to reimburse Landlord for any sums paid by Landlord.
If Tenant shall default more than three (3) times in any twelve (12) month
period, irrespective of whether or not such default is cured, then the
Security Deposit shall, within ten (10) days after demand by Landlord, be
increased by Tenant to an amount equal to three (3) times the Base Monthly
Rent. Tenant waives the provisions of California Civil Code Section 1950.7,
and all other provisions of law now in force or that become in force after
the date of execution of this Lease, that provide that Landlord may claim
from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of Rent, to repair damage caused by Tenant, or to
clean the Premises. Landlord and Tenant agree that Landlord may, in
addition, claim those sums reasonably necessary to compensate Landlord for
any other foreseeable or unforeseeable loss or damage caused by the act or
omission of Tenant or Tenant's agents, employees, contractors and invitees
("Tenant's Agents"). Tenant may not assign or encumber the Security Deposit
without the consent of Landlord. any attempt to do so shall be void and
shall not be binding on Landlord. If Tenant performs every provision of this
Lease to be performed by Tenant, the Security Deposit shall be returned to
Tenant within thirty (30) days after the Expiration Date and surrender of the
Premises to Landlord, less any amount deducted in accordance with this
Section, together with Landlord's written notice itemizing the amounts and
purposes for such deduction. In the event of termination of Landlord's
interest in this Lease, Landlord may deliver or credit the security Deposit
to Landlord's successor in interest in the Premises and thereupon be relieved
of further responsibility with respect to the Security Deposit.
5. CONSTRUCTION AND POSSESSION:
A. BUILDING SHELL CONSTRUCTION: Landlord shall cause the shell of the
Building ("Building Shell") to be constructed by independent contractors to
be employed by and under the supervision of South Bay Construction ("General
Contractor"), in general accordance with preliminary shell and site plans
attached hereto as EXHIBIT "B-1" ("Preliminary Site
Page 9
Plan and Specifications"). Final Building Shell plans and guideline
specifications shall be prepared by Arctec ("Architect") consistent with
Exhibit "B-1" and approved by Landlord and Tenant for attachment by June 15,
1997 as EXHIBIT "B-2" ("Shell Plans and Specifications"). Landlord shall
pay for all costs and expenses associated with the construction of the
Building Shell. The Building Shell shall include those items set forth in
the attached EXHIBIT "C" ("Building Shell Definition").
B. TENANT IMPROVEMENT PLANS: Tenant, at Tenant's sole cost and
expense, has hired ▇▇▇▇▇▇▇ & Associates ("Gensler") to prepare plans and
outline specifications ("Tenant Improvement Plans and Specifications") which
shall be attached as EXHIBIT "D" by August 29, 1997 with respect to the
construction of improvements to the interior premises ("Tenant
Improvements"). In addition, Gensler shall provide the Architect no later
than April 21, 1997 with the interior stair and elevator locations and any
other information related to the Tenant Improvement Plans and Specifications
that Tenant wishes to be incorporated into the Shell Plans and
Specifications. The Tenant Improvements shall consist of all items not
included within the scope of the Building Shell Definition. The Tenant
Improvement Plans and Specifications shall be prepared in sufficient detail
to allow General Contractor to construct the Tenant Improvements. The General
Contractor shall contract directly with Tenant for construction of the Tenant
Improvements and shall construct the Tenant Improvements in accordance with
all Tenant Improvement Plans and Specifications. Landlord shall provide
Tenant a work allowance to be utilized by Tenant for the construction of
Tenant Improvements ("Work Allowance") in an amount equal to the product of
multiplying the Rentable Square Footage by Twenty-Five Dollars and
Twenty-Five Cents ($25.25). The Work Allowance shall be paid by Landlord to
Tenant as payments become due from Tenant to General Contractor. The Tenant
Improvements shall not be removed or altered by Tenant without the prior
written consent of Landlord as provided in Section 7. Tenant shall have the
right to depreciate and claim and collect any investment tax credits in the
Tenant Improvements during the initial Lease Term. Upon expiration of the
Lease Term or any earlier termination of the Lease, the Tenant Improvements
shall become the property of Landlord and shall remain upon and be
surrendered with the Premises, and title thereto shall automatically vest in
Landlord without any payment therefore.
C. PRICING: Within ten (10) days after completion of the Tenant
Improvements Plans and Specifications, General Contractor shall submit to
Tenant competitive bids from at least three (3) subcontractors for each
aspect of the work related to the Tenant improvements. General Contractor
must
Page 10
utilize the low bid in each case unless Tenant approves General Contractor's
use of another subcontractor, and the cost of the Tenant Improvements shall
be based upon construction expenses equal to the sum of the bid amounts as
approved by Tenant. Upon Tenant's written approval of the contract bids,
which approval shall not be unreasonably withheld or delayed, Landlord and
Tenant shall be deemed to have given their respective approvals of the final
Tenant Improvement Plans and Specifications on which the cost estimate was
made, and General Contractor shall proceed with the construction of the
Tenant Improvements in accordance with the terms of Section 5.G below. If
Tenant does not specifically approve or disapprove the bids within seven (7)
days, Tenant shall be deemed to have approved the bids.
D. CHANGE ORDERS: Tenant shall have the right to order changes in
the manner and type of construction of the Building Shell or the Tenant
Improvements. Upon request and prior to Tenant's submitting any binding
change order, General Contractor shall promptly provide Tenant with written
statements of the cost to implement and the time delay and increased
construction costs associated with any proposed change order, which
statements shall be binding on Landlord. If no time delay or increased
construction cost amount is noted on the written statement, the parties agree
that there shall be no adjustment to the construction cost or the
Commencement Date associated with such change order. If ordered by Tenant,
General Contractor shall implement such change order and the cost of
constructing the Tenant Improvements shall be paid by Tenant in accordance
with the cost statement previously delivered by General Contractor to Tenant
for any such change order.
E. BUILDING SHELL COSTS: Landlord shall pay all costs associated
with the Building Shell.
F. TENANT IMPROVEMENT COSTS: The cost of Tenant Improvements shall
consist of only the following to the extent actually incurred by General
Contractor in connection with the construction of Tenant Improvements:
construction costs, all permit fees, construction taxes or other costs
imposed by governmental authorities related to the Tenant Improvements, and
Landlord overhead as described in Section 5.H below. During the course of
construction of Tenant Improvements, General Contractor may deliver to Tenant
not more than once each calendar month a
Page 11
written request for payment which shall include and be accompanied by General
Contractor's certified statements setting forth the amount requested,
certifying the percentage of completion of each item for which reimbursement
is requested, and certifying that the progress payment requested is due to a
subcontractor of General Contractor pursuant to a contract between General
Contractor and the subcontractor. Tenant shall pay General Contractor, within
fifteen (15) days after Tenant's receipt of the above items, the costs
incurred by General Contractor in connection with Tenant Improvements
installed in the Building in accordance with the Tenant Improvement Plans and
Specifications, minus the retention set forth below. Tenant shall be
entitled to retain ten percent (10%) of the amount invoiced by General
Contractor until the Tenant Improvements are Substantially Complete as
defined in Section 5.G below. Tenant shall pay the retained balance owing to
General Contractor within fifteen (15) days following the date that the
Tenant Improvements are Substantially Complete. All costs for Tenant
Improvements shall be fully documented to and verified by Tenant.
G. CONSTRUCTION: Landlord shall use its reasonable efforts to
obtain a building permit from the City of Fremont as soon as possible after
Tenant's approval of the Shell Plans and Specifications and to "Substantially
Complete" construction of the Premises by April 1, 1998. The Building Shell
and Tenant Improvements shall be deemed substantially complete
("Substantially Complete" or "Substantial Completion") when the Building
Shell and Tenant Improvements have been substantially completed in accordance
with the Shell Plans and Specifications and Tenant Improvement Plans and
Specifications, and the issuance of a certificate of occupancy or its
equivalent by the appropriate governmental authority for the Building Shell
and Tenant Improvements, as well as the issuance of a certificate by the
Architect certifying that the Building Shell has been substantially completed
in accordance with the plans and the issuance of a certificate by Gensler
certifying that the Tenant Improvements have been substantially completed in
accordance with the plans. Completion of the landscaping shall not be
required to deem the Premises "Substantially Complete" if inclement weather
prevents Landlord from finishing this portion of the work. Any prevention,
delay or stoppage due to strikes, lockouts, inclement weather, labor
disputes, inability to obtain labor, materials, fuel or reasonable
substitutes therefor, governmental restrictions, regulations, controls,
action or inaction, civil commotion, fire or other act of God, and another
causes beyond the reasonable control of Landlord (except financial inability)
shall extend the dates contained in this Section 5.G by a period equal to the
period of any said prevention, delay or stoppage.
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H. GENERAL CONTRACTOR PROFIT: As compensation to General Contractor
for its services related to construction of the Building Shell and Tenant
Improvements, General Contractor shall receive as profit a fee of 3% of the
total construction costs incurred by General Contractor. The General
Contractor's fee for profit and overhead related to construction of the
Building Shell shall be the same percentage rate as the fee charged by the
General Contractor to Tenant for construction of the Tenant Improvements.
I. TENANT DELAYS: A "Tenant Delay" shall mean any delay in
Substantial Completion of the Building as a result of any of the following:
(i) Tenant's failure to complete or approve the Tenant Improvement Plans by
the dates set forth in Section 5.B, (ii) Tenant's failure to approve the bids
for construction by the dates set forth in Section 5.C, (iii) changes
requested by Tenant to either the Shell Plans and Specifications or the
Tenant Improvement Plans and Specifications which delay the progress of the
work, (iv) Tenant's request for materials components, or finishes which are
not available in a commercially reasonable time given the anticipated
Commencement Date, (v) Tenant's failure to pay, when due, any amounts
requested to be paid by Tenant pursuant hereto, (vi) Tenant's request for
more than one (1) rebidding of the cost of all or a portion of the work, and
(vii) any errors or omissions in the Tenant Improvement Plans provided by
Gensler. Notwithstanding anything to the contrary set forth in this Lease,
and regardless of the actual date the Premises are Substantially Complete,
the Commencement Date shall be deemed to be the date Commencement Date would
have occurred if no Tenant Delay had occurred as reasonable determined by
Landlord. In addition, if a Tenant Delay results in an increase in the cost
of the labor or materials, Tenant shall pay the cost of such increases.
J. INSURANCE: General Contractor shall procure (as a cost of the
Building Shell) a "Broad Form" liability insurance policy in the amount of
Three Million Dollars ($3,000,000.00). Landlord shall also procure (as a
cost of the Building Shell) builder's risk insurance for the full replacement
cost of the Building Shell and Tenant Improvements while the Building and
Tenant Improvements are under construction, up until the date that the fire
insurance
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policy described in Section 9 is in full force and effect.
K. PUNCH LIST & WARRANTY: After the Building Shell and Tenant
Improvements are Substantially Complete, Landlord shall cause the General
Contractor to immediately correct any construction defect or other "punch
list" item which Tenant brings to General Contractor's attention. All such
work shall be performed so as to reasonably minimize the interruption to
Tenant and its activities on the Premises. General Contractor shall provide
a standard contractor's warranty with respect to the Premises for one (1)
year from the Commencement Date. Such warranty shall exclude routine
maintenance, damage caused by Tenant's negligence or misuse, and acts of God.
L. OTHER WORK BY TENANT: All work not described in the Shell Plans
and Specifications or Tenant Improvement Plans and Specifications, such as
furniture, telephone equipment, telephone wiring and office equipment work,
shall be furnished and installed by Tenant. When the construction of the
Tenant Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Premises can be commenced,
General Contractor shall notify Tenant and shall permit Tenant and its
authorized representatives and contractors access to the Premises before the
Commencement Date for the purpose of installing Tenant's trade fixtures and
equipment. Any such installation work by Tenant or its authorized
representatives and contractor shall be undertaken upon the following
conditions: (i) if the entry into the Premises by Tenant or its
representatives or contractors interferes with or delays General Contractor's
work, Tenant shall cause the party responsible for such interference or delay
to leave the Premises; and (ii) any contractor used by Tenant in connection
with such entry and installation shall not interfere with General
Contractor's work.
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
A. DELIVERY AND ACCEPTANCE: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Building on the Commencement Date. Except as otherwise
specifically provided herein, Tenant agrees to accept possession of the
Premises in its then existing condition with the Building Shell and Tenant
Improvements substantially complete, excepting only latent defects. Tenant's
taking possession of any part of the Premises shall be deemed to be an
acceptance of any work of improvement done by Landlord in such part as
complete and in accordance with the terms of this Lease except for "Punch
List" type items of which Tenant has given Landlord written notice prior to
the time Tenant takes possession. At the time Landlord
Page 14
delivers possession of the Premises to Tenant, Landlord and Tenant shall
together execute an acceptance agreement. Landlord shall have no obligation
to deliver possession, nor shall Tenant be entitled to take occupancy, of the
Premises until such acceptance agreement has been executed, and Tenant's
obligation to pay Base Monthly Rent and Additional Rent shall not be excused
or delayed because of Tenant's failure execute such acceptance agreement.
Within one hundred eighty (180) days after the Commencement Date, Tenant
agrees to be in occupancy of at least fifty percent (50%) of the rentable
square footage of the Premises.
B. CONDITION UPON SURRENDER: Tenant further agrees on Expiration
Date or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In
this regard, "normal wear and tear" shall be construed to mean wear and tear
caused to the Premises by the natural aging process which occurs in spite of
prudent application of the best standards for maintenance, repair
replacement, and janitorial practices, and does not include items of
neglected or deferred maintenance. In any event, Tenant shall cause the
following to be done prior to the Expiration Date or sooner termination of
this Lease: (i) all holes in interior walls shall be patched and painted so
as to match the wall, (ii) all tiled floors shall be cleaned and waxed, (iii)
all carpets shall be cleaned and shampooed, (iv) all broken, marred, stained
or nonconforming acoustical ceiling tiles shall be replaced, (v) all cabling
placed above the ceiling by Tenant shall be removed, (vi) all windows shall
be washed; (vii) the HVAC system shall be serviced by a reputable and
licensed service firm and left in good operating condition and repair as so
certified by such firm, (viii) the plumbing and electrical systems and
lighting shall be placed in good order and repair (including replacement of
any burned out, discolored or broken light bulbs, ballasts, or lenses. On or
before the Expiration Date or sooner termination of this Lease, Tenant shall
remove all its personal property and trade fixtures from the Premises. All
property and fixtures not so removed shall be deemed as abandoned by Tenant.
If Landlord requires pursuant to Section 7 below, Tenant shall, at Tenant's
sole cost and expense, remove such Alterations as Landlord requires and shall
repair and restore said Premises or such parts thereof before the Expiration
Date. Such repair and restoration shall include causing the Premises to be
Page 15
brought into compliance with all applicable building codes and laws in effect
at the time of the removal to extent such compliance is necessitated by the
repair and restoration work; provided however, that (i) Tenant shall not be
required to pay for any work related to bringing the foundation, exterior
load bearing walls and roof structure of the Building into compliance with
applicable building codes and laws then in effect; and (ii) Tenant shall not
be required to pay for any work which may be required to bring areas outside
the Building into compliance with then-applicable building codes and laws. .
C. FAILURE TO SURRENDER: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required
by this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to
this Section 7.C and Tenant shall indemnify, defend, and hold Landlord
harmless against loss or liability resulting from delay by Tenant in so
surrendering the Premises including, without limitation, any claims made by
any succeeding tenant founded on such delay and costs incurred by Landlord in
returning the Premises to the required condition, plus interest at the Agreed
Interest Rate. Any holding over after the termination or Expiration Date
with Landlord's express written consent, shall be construed as month-to-month
tenancy, terminable on thirty (30) days written notice from either party, and
Tenant shall pay as Base Monthly Rent to Landlord a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month
preceding the termination or Expiration Date, plus all other amounts payable
by Tenant under this Lease. Any holding over shall otherwise be on the terms
and conditions herein specified, except those provisions relating to the
Lease Term and any options to extend or renew, which provisions shall be of
no further force and effect following the expiration of the applicable
exercise period. If Tenant remains in possession of the Premises after
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 holdover period an amount
equal to one hundred fifty percent (150%) of the Base Monthly Rent due in the
month preceding the termination or Expiration Date, plus all other amounts
payable by Tenant under this Lease. This provision shall survive the
termination or expiration of the Lease.
7. ALTERATIONS AND ADDITIONS:
A. TENANT'S ALTERATIONS: With the exception of Tenant Improvements
installed as part of initial construction of the Premises, Tenant shall not
make, or suffer to be made, any alteration or addition to the Premises
("Alterations"), or any part thereof, without
Page 16
obtaining Landlord's prior written consent and delivering to Landlord the
proposed architectural and structural plans for all such Alterations at least
fifteen (15) days prior to the start of construction. After receipt of
Tenant's architectural and structural plans, Landlord shall have a period of
ten (10) business days thereafter to grant its consent, which consent shall
not be unreasonably withheld. Landlord shall indicate to Tenant at the time
of Tenant's request, whether or not Landlord will require Tenant to remove
such Alterations at the Expiration Date. Tenant shall, at Tenant's sole cost
and expense, remove such Alterations as Landlord requires and shall repair
and restore said Premises or such parts thereof before the Expiration Date,
unless exempted pursuant to Section 7.B below. Such repair and restoration
shall include causing the Premises to be brought into compliance with all
applicable building codes and laws in effect at the time of the removal to
extent such compliance is necessitated by the repair and restoration work;
provided, however, that (i) Tenant shall not be required to pay for any work
related to bringing the foundation, exterior load bearing walls and roof
structure of the Building into compliance with applicable building codes and
laws then in effect; and (ii) Tenant shall not be required to pay for any
work which may be required to bring areas outside the Building into
compliance with then-applicable building codes and laws. If such Alterations
affect the structure of the Building, Tenant additionally agrees to reimburse
Landlord its reasonable out-of-pocket costs incurred in reviewing Tenant's
plans. After obtaining Landlord's consent, Tenant shall not proceed to make
such Alterations until Tenant has obtained all required governmental
approvals and permits, and provided Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics' lien
claims. Tenant agrees to provide Landlord written notice of the anticipated
and actual start-date of the work, and a complete set of half-size (15" X
21") vellum as-built drawings. All Alterations shall be constructed in
compliance with applicable building codes and laws. Any Alterations, except
movable furniture and trade fixtures, shall become at once a part of the
realty and belong to Landlord but shall nevertheless be subject to removal by
Tenant as provided in Section 6 above. Alterations which are not deemed as
trade fixtures include heating, lighting, electrical systems, air
conditioning, partitioning, carpeting, or any other installation
Page 17
which has become an integral part of the Premises. All Alterations shall be
maintained, replaced or repaired by Tenant at its sole cost and expense.
Notwithstanding the foregoing, Tenant shall be entitled without obtaining
Landlord's consent, to make Alterations which do not affect the structure of
the Building or which do not cost more than Twenty Five Thousand Dollars
($25,000.00) per Alteration nor an aggregate of Fifty Thousand Dollars
($50,000.00) in any twelve (12) month period; provided, however, that Tenant
shall still be required to deliver to Landlord the proposed architectural and
structural plans for all such Alterations at least (15) days prior to the
start of construction and comply with all other provisions of the preceding
paragraph.
B. EXEMPTED ALTERATIONS: Notwithstanding the provisions of Section
7.A above, Landlord shall not have the right to require Tenant to remove any
Alterations at the end of the term of the Lease unless: (i) such Alterations
were of a nature not typically found in manufacturing buildings; (ii) such
Alterations create private offices smaller than 10'x12'; or (iii) such
Alterations create hard wall partitioning that cover more than 35% of the
interior square footage of the Premises or the perimeter window space of the
Premises. C. FREE FROM LIENS: Tenant shall keep the Premises free
from all liens arising out of work performed, materials furnished, or
obligations incurred by Tenant or claimed to have been performed for Tenant.
In the event Tenant fails to discharge any such lien within ten (10) days
after receiving notice of the filing, Landlord shall be entitled to discharge
the lien at Tenant's expense and all resulting costs incurred by Landlord,
including attorney's fees shall be due from Tenant as additional rent.
D. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: The term Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders
now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access,
occupational, health, or safety standards for employers, employees,
landlords, or tenants. Tenant shall continuously and without exception
repair and maintain the Premises, including Tenant improvements, Alterations,
fixtures, and furnishings, in an order and condition in compliance with all
Governmental Regulations. Tenant, at its sole expense, shall make all
repairs, replacements, alterations, or improvements needed to comply with all
Governmental Regulations to the extent that the Governmental Regulations
relate to or are required by and Law because of (i) Tenant's particular use or
Page 18
change of use of the Premises, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Alterations or Trade Fixtures. Landlord, at Landlord's sole expense, shall
promptly make all repairs, replacements, alterations, or improvements needed
to comply with all Governmental Regulations to the extent not required by
Tenant pursuant to the preceding sentence. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action or proceeding
against Tenant (whether Landlord be a party thereto or not) that Tenant has
violated any such law, regulation or other requirement in its use of the
Premises shall be conclusive of that fact as between Landlord and Tenant.
8. MAINTENANCE OF PREMISES:
A. LANDLORD'S OBLIGATIONS: Landlord at its sole cost and expense,
shall maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure of
the Building Shell. Landlord shall also, at Tenant's sole cost and expense
through reimbursement as provided in this Section 8, clean, maintain, repair
and replace when necessary the following parts of the Premises: (i) all
plumbing and sewage facilities, (ii) all heating ventilating and air
conditioning facilities and equipment (excluding adjustments to interior
zones after initial occupancy of the Premises and balancing of the
equipment), (iii) all exterior windows, door entrances, plate glass and
glazing systems including caulking, and skylights, (iv) all automatic fire
extinguisher equipment, (v) the parking lot and all underground utility
facilities servicing the Premises, (vi) all elevator equipment, (vii) the
roof membrane system, and (viii) all waterscape, landscaping and shrubbery.
With respect to items (ii), (vi) and (vii) above, Landlord shall provide
Tenant, upon request from Tenant, a copy of a service contract between
Landlord and a licensed service contractor providing for period maintenance
of all such systems or equipment in conformance with the manufacturer's
recommendations. Landlord shall provide Tenant a copy of such preventive
maintenance contracts and paid invoices for the recommended work if requested
by Tenant.
B. TENANT'S OBLIGATIONS: Unless required by Landlord pursuant to
Section 8.A above or unless such
Page 19
services are shared (in which event the provisions of Sections 8.C, 8.D and
8.D shall apply as to such shared services), Tenant shall clean, maintain,
repair and replace when necessary the Premises and every part thereof through
regular inspections and servicing, including but not limited to: (i) all
fixtures, interior walls, floors, carpets and ceilings, and (ii) all
electrical facilities and equipment. All wall surfaces and floor tile are to
be maintained in an as good a condition as when Tenant took possession free
of holes, gouges, or defacements.
C. LANDLORD AND TENANT'S OBLIGATIONS REGARDING COMMON AREA COSTS:
Tenant agrees to reimburse Landlord for Tenant's Allocable Share (as defined
in Section 8.E below) of the expenses resulting from Landlord's payment of
Common Area Costs (as defined in Section 8.D below). Tenant agrees to pay
its Allocable Share of the Common Area Costs as additional rental within
thirty (30) days of written invoice from Landlord.
D. COMMON AREA COSTS: For purposes of calculating Tenant's
Allocable Share of Building and Project Costs, the term "Common Area Costs"
is defined as all costs and expenses of the nature hereinafter described
which are incurred by Landlord in connection with ownership and operation of
the Project in which the Premises are located, together with such additional
facilities as may be determined by Landlord to be reasonably desirable or
necessary to the ownership and operation of the Building and/or Project. All
costs and expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied (with accruals
appropriate to Landlord's business), including but not limited to the
following: (i) common area utilities, including water, to the extent not
separately metered; (ii) common area maintenance and service agreements for
the Project and the equipment therein, including without limitation,
maintenance of the sidewalks, landscaping, waterscape, roof membrane, parking
areas, driveways, service areas, and the building exterior; (iii) insurance
premiums and costs, including without limitation, the premiums and cost of
fire, casualty and liability coverage and rental abatement and earthquake (if
required pursuant to Section 9.B) insurance applicable to the Building or
Project; (iv) repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and repairs or alterations attributable solely to
tenants of the Building or Project other than Tenant); (v) all real estate
taxes and assessment installments or other impositions or charges which may
be levied on the Building or Project, upon the occupancy of the Building or
Project and including any substitute or additional charges which may be
imposed during, or applicable to the Lease Term including real estate tax
increases due to a sale, transfer or other
Page 20
change of ownership of the Building or Project, as such taxes are levied or
appear on the City and County tax bills and assessment rolls; and (vi) fees
for management services rendered by either Landlord or a third party manager
engaged by Landlord (which may be a party affiliated with Landlord), except
that the total amount charged for management services and included in the
expenses to be reimbursed by Tenant shall not exceed the monthly rate of 5%
of the Base Monthly Rent, which the parties acknowledge as a reasonable and
fair market value for such services. Landlord shall have no obligation to
provide guard services or other security measures for the benefit of the
Project. Tenant assumes all responsibility for the protection of Tenant and
Tenant's Agents from acts of third parties; provided, however, that nothing
contained herein shall prevent Landlord, at its sole option, from providing
security measures for the Project. This is a "Net" Lease, meaning that Base
Monthly Rent is paid to Landlord absolutely net of all costs and expenses.
The provision for payment of Common Area Costs by means of periodic payment
of Tenant's Allocable Share of Building and/or Project Costs is intended to
pass on to Tenant and reimburse Landlord for all costs of operating and
managing the Building and/or Project.
E. TENANT'S ALLOCABLE SHARE: For purposes of prorating Common Area
Costs which Tenant shall pay, Tenant's Allocable Share of Common Area Costs
shall be computed by multiplying the total Common Area Costs by a fraction,
the numerator of which is the Rentable Square Footage of the Building and the
denominator of which is either the total Rentable Square Footage of the
Building if the service is allocable only to the Building, or the total
square footage of the Project if the service is allocable to the entire
Project. Tenant's obligation to share in Common Area Costs shall be adjusted
to reflect the Lease Commencement and Expiration dates and is subject to
recalculation in the event of expansion of the Building or Project.
F. WAIVER OF LIABILITY: Failure by Landlord to perform any defined
services, if any, or any cessation thereof, when such failure is caused by
accident, breakage, repairs, strikes, lockout or other labor disturbances or
labor disputes of any character or by any other cause, similar or dissimilar,
shall not render Landlord liable to Tenant in any respect, including damages
to either person or property, nor be construed as an eviction of Tenant, nor
cause an
Page 21
abatement of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. Should any equipment or machinery utilized in supplying
the services listed herein break down or for any cause cease to function
properly, upon receipt of written notice from Tenant of any deficiency or
failure of any services, Landlord shall use reasonable diligence to repair
the same promptly, but Tenant shall have no right to terminate this Lease and
shall have no claim for rebate of rent or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. Tenant
waives the provisions of California Civil Code Sections 1941 and 1942
concerning the Landlord's obligation of tenantability and Tenant's right to
make repairs and deduct the cost of such repairs from the rent. Landlord
shall not be liable for a loss of or injury to person or property, however
occurring, through or in connection with or incidental to furnishing, or its
failure to furnish, any of the foregoing.
Notwithstanding the foregoing, in the event Landlord fails to perform in its
obligation under Section 8.A above to maintain plumbing and sewage
facilities, HVAC equipment, exterior windows, door entrances, plate glass and
glazing systems, skylights, fire extinguisher equipment, the parking lot,
underground utilities, elevator equipment, the roof membrane or landscaping
related to the Premises, Tenant may, after providing Landlord thirty (30)
days' written notice, undertake such maintenance at its own cost if Landlord
has not commenced such maintenance and Landlord shall reimburse Tenant for
its expenditure. The provisions of this paragraph do not apply to items
about which Landlord and Tenant may disagree as to the scope or necessity of
work.
G. REVIEW: Landlord shall maintain at all times during the term of
this Lease, at the office of Landlord, accurate records with respect to
Common Area Costs for the previous two-year period of the Lease, and shall
retain such records and such other documents as are reasonably necessary to
audit the Common Area Costs. Upon two weeks prior notice from Tenant,
Landlord shall make available for Tenant's inspection (or inspection
performed by Tenant's accountant and/or consultants) at Landlord's office,
during normal business hours, Landlord's records relating to the Common Area
Costs for the most recent two years of the Lease. If an audit, review or
inspection by a Tenant or Tenant's accountant or consultant alleges an
overbilling, Tenant may submit a claim for the overbilled amount to Landlord,
detailing the nature of the overbilling, and Landlord shall have thirty (30)
days to pay such amount or contest the claim by giving notice thereof to
Tenant, detailing the nature of Landlord's contest of Tenant's claims. If
Landlord's statement is determined to be in error by 3% or more, Landlord
shall reimburse Tenant within thirty (30) days
Page 22
following such determination for any overpayment of Common Area Costs, as
well as the cost of Tenant's review of Landlord's books and records not to
exceed $2,500.00 (including the cost of Tenant's accountant or consultant,
neither of which cost may be included as Common Area Costs), together with
interest on such amount, calculated at the Interest Rate, from the dates such
amounts were initially paid by Tenant.
H. RECOVERY: Landlord shall not expend more than the reasonable and
fair market value for any goods, services, labor or materials purchased or
provided by Landlord in connection with the management, operation,
maintenance and repair of the Building or the Common Area.
9. HAZARD INSURANCE:
A. TENANT'S USE: Tenant shall not use or permit the Premises, or
any part thereof, to be used for any purpose other than that for which the
Premises are hereby leased; and no use of the Premises shall be made or
permitted, nor acts done, which will cause an increase in premiums or a
cancellation of any insurance policy covering the Premises or any part
thereof, nor shall Tenant sell or permit to be sold, kept, or used in or
about the Premises, any article prohibited by the standard form of fire
insurance policies. Tenant shall, at its sole cost, comply with all
requirements of any insurance company or organization necessary for the
maintenance of reasonable fire and public liability insurance covering the
Premises and appurtenances.
B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in
force fire, extended coverage insurance in an amount equal to the replacement
cost of the Building (not including any Tenant Improvements or Alterations
paid for by Tenant from sources other than the Work Allowance) as determined
by Landlord's insurance company's appraisers. Tenant agrees to pay Landlord
as additional rent, on demand, the full cost of said insurance as evidenced
by insurance ▇▇▇▇▇▇▇▇ to Landlord, and in the event of damage covered by said
insurance, the amount of any deductible under such policy. Payment shall be
due to Landlord within thirty (30) days after written invoice to Tenant. If
required by the holder of the first deed of trust on the property, such fire
and property damage insurance may be endorsed to cover loss caused by such
additional perils against which Landlord may elect to insure,
Page 23
including earthquake and/or flood, and shall contain reasonable deductibles
which, in the case of earthquake and flood insurance may be up to 15% of the
replacement value of the property. Additionally Landlord may maintain a
policy of (i) commercial general liability insurance insuring Landlord (and
such others designated by Landlord) against liability for personal injury,
bodily injury, death and damage to property occurring or resulting from an
occurrence in, on or about the Premises or Project in an amount as Landlord
determines is reasonably necessary for its protection, and (ii) rental lost
insurance covering a twelve (12) month period. It is understood and agreed
that Tenant's obligation under this Section will be prorated to reflect the
Lease Commencement and Expiration Dates.
Notwithstanding the above, Tenant shall have no obligation to pay premiums
payable with respect to earthquake insurance covering the Premises, unless
such coverage is (i) required by the lender in whose favor a first deed of
trust of the Premises has been granted, and (ii) is also generally required
by institutional lenders on similar properties in Alameda County. In such
event, the amount of the earthquake insurance premium required to be paid by
Tenant shall be limited to an amount equal to four (4) times the premium for
casualty insurance for the Building.
C. TENANT'S INSURANCE: Tenant agrees, at its sole cost, to insure
its personal property, Tenant Improvements (for which it has paid from
sources other than the Work Allowance), and Alterations for their full
replacement value (without depreciation) and to obtain worker's compensation
and public liability and property damage insurance for occurrences within the
Premises with a combined single limit of not less than Five Million Dollars
($5,000,000.00). Tenant's liability insurance shall be primary insurance
containing a cross-liability endorsement, and shall provide coverage on an
"occurrence" rather than on a "claims made" basis. Tenant shall name
Landlord and Landlord's lender as an additional insured and shall deliver a
copy of the policies and renewal certificates to Landlord. All such policies
shall provide for thirty (30) days' prior written notice to Landlord of any
cancellation, termination, or reduction in coverage.
D. WAIVER: Landlord and Tenant hereby waive all rights each may
have against the other on account of any loss or damage sustained by Landlord
or Tenant, as the case may be, or to the Premises or its contents, which may
arise from any risk covered by their respective insurance policies (or which
would have been covered had such insurance policies been maintained in
accordance with this Lease) as set forth above. The parties shall use their
reasonable efforts to obtain from their respective insurance companies a
waiver of any right of subrogation which said insurance company
Page 24
may have against Landlord or Tenant, as the case may be.
10. TAXES: Tenant shall be liable for and shall pay as additional
rental, prior to delinquency, the following: (i) all taxes and assessments
levied against Tenant's personal property and trade or business fixtures;
(ii) all real estate taxes and assessment installments or other impositions
or charges which may be levied on the Premises or upon the occupancy of the
Premises, including any substitute or additional charges which may be imposed
applicable to the Lease Term; and (iii) real estate tax increases due to a
sale, transfer or other change of ownership of the Premises as it appears on
the City and County tax bills during the Lease Term. Tenant's obligation
under this Section shall be prorated to reflect the Lease Commencement and
Expiration Dates. If, at any time during the Lease Term a tax, excise on
rents, business license tax or any other tax, however described, is levied or
assessed against Landlord as a substitute or addition, in whole or in part,
for taxes assessed or imposed on land or Building, Tenant shall pay and
discharge its pro rata share of such tax or excise on rents or other tax
before it becomes delinquent; except that this provision is not intended to
cover net income taxes, inheritance, gift or estate tax imposed upon
Landlord. In the event that a tax is placed, levied, or assessed against
Landlord and the taxing authority takes the position that Tenant cannot pay
and discharge its pro rata share of such tax on behalf of Landlord, then at
Landlord's sole election, Landlord may increase the Base Monthly Rent by the
exact amount of such tax and Tenant shall pay such increase. If by virtue of
any application or proceeding brought by or on behalf of Landlord, there
results a reduction in the assessed value of the Premises during the Lease
Term, Tenant agrees to reimburse Landlord for all costs incurred by Landlord
in connection with such application or proceeding. Tenant at its cost shall
have the right, at any time, to seek a reduction in the assessed valuation of
the Premises or to contest any real property taxes that are to be paid by
Tenant, provided Tenant does not withhold or delay its required payment to
Landlord during such contention. Landlord shall not be required to join in
any such proceeding or contest unless the provisions of any law require that
the proceeding or contest be brought by or in the name of the owner of the
Premises. In such event, Landlord shall join in the proceeding or contest or
permit it to
Page 25
be brought in Landlord's name, provided that Landlord is not required to bear
any cost in connection therewith.
11. UTILITIES: Tenant shall pay directly to the providing utility all
water, gas, electric, telephone, and other utilities supplied to the
Premises. Landlord shall not be liable for loss of or injury to person or
property, however occurring, through or in connection with or incidental to
furnishing or failure to furnish utilities to the Premises, and Tenant shall
not be entitled to abatement or reduction of any portion of Base Monthly Rent
or any other amount payable under this Lease.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. TENANT'S RESPONSIBILITY: Without the prior written consent of
Landlord, Tenant shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance
having characteristics of ignitability, corrosivity, reactivity, or toxicity
or substances or materials which are listed on any of the Environmental
Protection Agency's lists of hazardous wastes or which are identified in
Division 22 Title 26 of the California Code of Regulations as the same may be
amended from time to time ("Hazardous Materials"). In order to obtain
consent, Tenant shall deliver to Landlord its written proposal describing the
toxic material to be brought onto the Premises, measures to be taken for
storage and disposal thereof, safety measures to be employed to prevent
pollution of the air, ground, surface and ground water. Landlord's approval
may be withheld in its reasonable judgment. In the event Landlord consents
to Tenant's use of Hazardous Materials on the Premises, Tenant represents and
warrants that it will do the following: (i) adhere to all reporting and
inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and will provide Landlord a copy of any such
reports or agency inspections; (ii) obtain and provide Landlord copies of all
necessary permits required for the use and handling Hazardous Materials on
the Premises; (iii) enforce Hazardous Materials handling and disposal
practices consistent with industry standards; (iv) surrender the Premises
free from any Hazardous Materials arising from Tenant's bringing, using,
permitting, generating, creating, releasing, emitting or disposing of
Hazardous Materials; and (v) properly close the facility with regard to
Hazardous Materials including the removal or decontamination of any process
piping, mechanical ducting, storage tanks, containers, or trenches which have
come into contact with Hazardous Materials and
Page 26
obtain a closure certificate from the local administering agency prior to the
Expiration Date.
B. TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant shall,
at its sole cost and expense, comply with all laws pertaining to, and shall
with counsel reasonably acceptable to Landlord, indemnify, defend and hold
harmless Landlord and Landlord's shareholders, directors, officers,
employees, partners, affiliates, and agents from, any claims, liabilities,
costs or expenses incurred or suffered by Landlord arising from the bringing,
using, permitting, generating, emitting or disposing of Hazardous Materials
by Tenant through the surface soils of the Premises during the Lease Term or
the violation of any environmental law, by Tenant or Tenant's Agents.
Tenant's indemnification and hold harmless obligations include, without
limitation, the following: (i) claims, liability, costs or expenses
resulting from or based upon administrative, judicial (civil or criminal) or
other action, legal or equitable, brought by any private or public person
under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation
and Recovery Act of 1980 ("RCRA") or any other Federal, State, County or
Municipal law, ordinance or regulation; (ii) claims, liabilities, costs or
expenses pertaining to the identification, monitoring, cleanup, containment,
or removal of Hazardous Materials from soils, riverbeds or aquifers including
the provision of an alternative public drinking water source; (iii) all costs
of defending such claims; (iv) Losses attributable to diminution in the value
of the Premises or the Building; (v) Loss or restriction of use of rentable
space in the Building; (vi) Adverse effect on the marketing of any space in
the Building; and (All other liabilities, obligations, penalties, fines,
claims, actions (including remedial or enforcement actions of any kind and
administrative or judicial proceedings, orders or judgments), damages
(including consequential and punitive damages), and costs (including
attorney, consultant, and expert fees and expenses) resulting from the
release or violation. This indemnification shall survive the expiration or
termination of this Lease.
C. ACTUAL RELEASE BY TENANT: Tenant agrees to notify Landlord of
any lawsuits or orders of which it becomes aware which relate to the
remedying of or actual release of Hazardous Materials on or into the
Page 27
soils or ground water at or under the Premises. Tenant shall also provide
Landlord all notices required by Section 25359.7(b) of the Health and Safety
Code and all other notices required by law to be given to Landlord in
connection with Hazardous Materials. Without limiting the foregoing, Tenant
shall also deliver to Landlord, within twenty (20) days after receipt
thereof, any written notices received from any governmental agency alleging a
material violation of, or material failure to comply with, any federal, state
or local laws, regulations, ordinances or orders, the violation of which of
failure to comply with poses a foreseeable and material risk of contamination
of the ground water or injury to humans (other than injury solely to Tenant,
Tenant's Agents and employees within the Building).
In the event of any release on or into the Premises or into the soil or
ground water under the Premises of any Hazardous Materials used, treated,
stored or disposed of by Tenant, Tenant agrees to comply, at its sole cost,
with all laws, regulations, ordinances and orders of any federal, state or
local agency relating to the monitoring or remediation of such Hazardous
Materials. In the event of any such release of Hazardous Materials, Tenant
agrees to meet and confer with Landlord and its Lender to attempt to
eliminate and mitigate any financial exposure to such Lender and resultant
exposure to Landlord under California Code of Civil Procedure Section 736(b)
as a result of such release, and promptly to take reasonable monitoring,
cleanup and remedial steps given, inter alia, the historical uses to which
the Property has and continues to be used, the risks to public health posed
by the release, the then available technology and the costs of remediation,
cleanup and monitoring, consistent with acceptable customary practices for
the type and severity of such contamination and all applicable laws. Nothing
in the preceding sentence shall eliminate, modify or reduce the obligation of
Tenant under 12.B of this Lease to indemnify and hold Landlord harmless from
any claims liabilities, costs or expenses incurred or suffered by Landlord.
Tenant shall provide Landlord prompt written notice of Tenant's monitoring,
cleanup and remedial steps.
In the absence of an order of any federal, state or local governmental
or quasi-governmental agency relating to the cleanup, remediation or other
response action required by applicable law, any dispute arising between
Landlord and Tenant concerning Tenant's obligation to Landlord under this
Section 12.C concerning the level, method, and manner of cleanup, remediation
or response action required in connection with such a release of Hazardous
Materials shall be resolved by mediation and/or arbitration pursuant to the
provisions of Section 19.E of this Lease.
Page 28
D. ENVIRONMENTAL MONITORING: Landlord and its agents shall have
the right to inspect, investigate, sample and monitor the Premises including
any air, soil, water, ground water or other sampling or any other testing,
digging, drilling or analysis to determine whether Tenant is complying with
the terms of this Section 12. If Landlord discovers that Tenant is not in
compliance with the terms of this Section 12, any such costs incurred by
Landlord, including attorneys' and consultants' fees, shall be due and
payable by Tenant to Landlord within thirty (30) days following Landlord's
written demand therefore.
13. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant: (i)
Tenant's failure to pay any rent due under this Lease within ten (10) days
after written receipt of notice from Landlord that such rent is past due,
(ii) the abandonment of the Premises by Tenant, as defined in California
Civil Code Section 1951.3; (iii) Tenant's failure to observe and perform any
other required provision of this Lease, where such failure continues for
thirty (30) days after written notice from Landlord; (iv) Tenant's making of
any general assignment for the benefit of creditors; (v) the filing by or
against Tenant of a petition to have Tenant adjudged a bankrupt or of a
petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant, the same
is dismissed after the filing); (vi) the appointment of a trustee or receiver
to take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; (vii) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days; or (viii) any default by Tenant on other
buildings leased by Tenant within the Project.
A. REMEDIES: In the event of any such default by Tenant, then in
addition to other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event Landlord elects to so terminate this Lease, Landlord
may recover from Tenant all the following: (i) the worth at time
Page 29
of award of any unpaid rent which had been earned at the time of such
termination; (ii) the worth at time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss for the same period that Tenant
proves could have been reasonably avoided; (iii) the worth at time of award
of the amount by which the unpaid rent for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure
to perform its obligations under this Lease, or which in the ordinary course
of things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker's fees, advertising costs or other expenses of
reletting the Premises, and (z) costs of carrying the Premises such as taxes,
insurance premiums, utilities and security precautions. and (v) at Landlord's
election, such other amounts in addition to or in lieu of the foregoing as
may be permitted by applicable California law. The term "rent", as used
herein, is defined as the minimum monthly installments of Base Monthly Rent
and all other sums required to be paid by Tenant pursuant to this Lease, all
such other sums being deemed as additional rent due hereunder. As used in
(i) and (ii) above, "worth at the time of award" shall be computed by
allowing interest at a rate equal to the discount rate of the Federal Reserve
Bank of San Francisco plus five (5%) percent per annum. As used in (iii)
above, "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one (1%) percent.
B. RIGHT TO RE-ENTER: In the event of any such default by Tenant,
Landlord shall have the right, after terminating this Lease, to re-enter the
Premises and remove all persons and property. Such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant, and disposed of by Landlord in any manner permitted by law.
C. ABANDONMENT: If Landlord does not elect to terminate this Lease
as provided in Section 13.A or 13.B above, then the provisions of California
Civil Code Section 1951.4, (Landlord may continue the lease in effect after
Tenant's breach and abandonment and recover rent as it becomes due if Tenant
has a right to sublet and assign, subject only to reasonable limitations) as
amended from time to time, shall apply and Landlord may from time to time,
without terminating this Lease, either recover all rental as it becomes due
or relet the Premises or any part thereof for such term or terms and at such
rental or rentals and upon such other terms and conditions as Landlord in its
sole
Page 30
discretion may deem advisable, with the right to make alterations and repairs
to the Premises. In the event that Landlord elects to so relet, rentals
received by Landlord from such reletting shall be applied in the following
order to: (i) the payment of any indebtedness other than Base Monthly Rent
due hereunder from Tenant to Landlord; (ii) the payment of any cost of such
reletting; (iii) the payment of the cost of any alterations and repairs to
the Premises; and (iv) the payment of Base Monthly Rent due and unpaid
hereunder. The residual rentals, if any, shall be held by Landlord and
applied in payment of future Base Monthly Rent as the same may become due and
payable hereunder. Landlord shall have no obligation to relet the Premises
following a default if Landlord has other available space within the Building
or Project. In the event the portion of rentals received from such reletting
which is applied to the payment of rent hereunder during any month be less
than the rent payable during that month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord immediately upon demand. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord
in such reletting or in making such alterations and repairs not covered by
the rentals received from such reletting.
D. NO TERMINATION: Landlord's re-entry or taking possession of the
Premises pursuant to 13.B or 13.C shall not be construed as an election to
terminate this Lease unless written notice of such intention is given to
Tenant or unless the termination is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any default by Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such default.
E. NON-WAIVER: Landlord may accept Tenant's payments without waiving
any rights under this Lease, including rights under a previously served
notice of default. No payment by Tenant or receipt by Landlord of a lesser
amount than any installment of rent due shall be deemed as other than payment
on account of the amount due. If Landlord accepts partial payments after
serving a notice of default, Landlord may nevertheless commence and pursue an
action to enforce rights and remedies under the previously served notice of
default without giving Tenant any further notice or demand.
Page 31
Furthermore, the Landlord's acceptance of Rent from the Tenant when the
Tenant is holding over without express written consent does not convert
Tenants Tenancy from a tenancy at sufferance to a month to month tenancy. No
waiver of any provision of this Lease shall be implied by any failure of
Landlord to enforce any remedy for the violation of that provision, even if
that violation continues or is repeated. Any waiver by Landlord of any
provision of this Lease must be in writing. Such waiver shall affect only
the provision specified and only for the time and in the manner stated in the
writing. No delay or omission in the exercise of any right or remedy by
Landlord shall impair such right or remedy or be construed as a waiver
thereof by Landlord. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute
acceptance of the surrender of the Premises by Tenant before the Expiration
Date. Only written notice from Landlord to Tenant of acceptance shall
constitute such acceptance of surrender of the Premises. Landlord's consent
to or approval of any act by Tenant which requires Landlord's consent or
approvals shall not be deemed to waive or render unnecessary Landlord's
consent to or approval of any subsequent act by Tenant.
F. PERFORMANCE BY LANDLORD: If Tenant fails to perform any
obligation required under this Lease or by law or governmental regulation,
Landlord in its sole discretion may, without notice, without waiving any
rights or remedies and without releasing Tenant from its obligations
hereunder, perform such obligation, in which event Tenant shall pay Landlord
as additional rent all sums paid by Landlord in connection with such
substitute performance, including interest at the Agreed Interest Rate within
ten (10) days of Landlord's written notice for such payment.
14. LANDLORD'S LIABILITY:
A. LIMITATION ON LANDLORD'S LIABILITY: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease,
Tenant shall give Landlord written notice of such failure and shall give
Landlord thirty (30) days to cure or commence to cure such failure prior to
any claim for breach or resultant damages, provided, however, that if the
nature of the default is such that it cannot reasonably be cured within the
30-day period, Landlord shall not be deemed in default if it commences within
such period to cure, and thereafter diligently prosecutes the same to
completion. In addition, upon any such failure by Landlord, Tenant shall
give notice by registered or certified mail to any person or entity with a
security interest in the Premises ("Mortgagee") that has provided Tenant with
notice of its interest in the Premises, and shall provide Mortgagee a
reasonable opportunity to cure such failure, including such time to obtain
possession of the Premises by power of sale
Page 32
or judicial foreclosure, if such should prove necessary to effectuate a cure.
Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any
right under California Civil Code Section 1950.7 or any other present or
future law to the collection of any payment or deposit from Mortgagee or any
purchaser at a foreclosure sale of Mortgagee's interest unless Mortgagee or
such purchaser shall have actually received and not refunded the applicable
payment or deposit. Tenant Further waives any right to terminate this Lease
and to vacate the Premises on Landlord's default under this Lease. Tenant's
sole remedy on Landlord's default is an action for damages or injunctive or
declaratory relief, with the sole exception that if Landlord fails to perform
in its obligation under Section 8.A to maintain plumbing and sewage
facilities, HVAC equipment, exterior windows, door entrances, plate glass and
glazing systems, skylights, fire extinguisher equipment, the parking lot,
underground utilities, elevator equipment, the roof membrane or landscaping
related to the Premises, Tenant may, after providing Landlord thirty (30)
days' written notice, undertake such maintainence at its own cost if Landlord
has not commenced such maintenance. This exception does not apply to items
about which Landlord and Tenant may disagree as to the scope or necessity of
work.
B. LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation
trust, partnership, joint venture, unincorporated association or other form
of business entity: (i) the obligations of Landlord shall not constitute
personal obligations of the officers, directors, trustees, partners, joint
venturers, members, owners, stockholders, or other principals or
representatives except to the extent of their interest in the Premises.
Tenant shall have recourse only to the interest of Landlord in the Premises
or for the satisfaction of the obligations of Landlord and shall not have
recourse to any other assets of Landlord for the satisfaction of such
obligations.
C. INDEMNIFICATION OF LANDLORD: As a material part of the
consideration rendered to Landlord, Tenant hereby waives all claims against
Landlord for damages to goods, wares and merchandise, and all other personal
property in, upon or about said Premises and for injuries to persons in or
about said Premises, from any cause arising at any time to the fullest extent
Page 33
permitted by law, and Tenant shall indemnify and hold Landlord exempt and
harmless from any damage or injury to any person, or to the goods, wares and
merchandise and all other personal property of any person, arising from the
use of the Premises, Building, and/or Project by Tenant and Tenant's Agents
or from the failure of Tenant to keep the Premises in good condition and
repair as herein provided, except to the extent due to the active negligence
or willful misconduct of Landlord. Further, in the event Landlord is made
party to any litigation due to the acts or omission of Tenant and Tenant's
Agents. Tenant will indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord harmless from any such claim or liability
including Landlord's costs and expenses and reasonable attorney's fees
incurred in defending such claims.
15. DESTRUCTION OF PREMISES:
A. DESTRUCTION BY AN INSURED CASUALTY: In the event of a destruction
of the Premises during the Lease Term by a casualty for which Landlord has
received insurance proceeds sufficient to repair the damage or destruction,
Landlord shall repair the same to the extent of such proceeds. Such
destruction shall not annul or void this Lease; however, Tenant shall be
entitled to a proportionate reduction of Base Monthly Rent while repairs are
being made, such proportionate reduction to be based upon the extent to which
the repairs interfere with Tenant's business in the Premises, as reasonably
determined by Landlord. If the repairs cannot be made in 180 days from the
date of receipt of all governmental approvals necessary under the laws and
regulations of State, Federal, County or Municipal authorities, as reasonably
determined by Landlord, then Landlord or Tenant may terminate this Lease
within fifteen (15) days of Landlord's determination of the foregoing.
Notwithstanding the foregoing, either Landlord or Tenant shall have the
option to terminate the Lease in the event of a total destruction of the
Premises or in the event of a partial destruction occurs in the last year of
the Lease Term and will take more than sixty (60) days to repair. In no
event shall Landlord be required to replace or restore Alterations, Tenant
Improvements paid for by Tenant from sources other than the Work Allowance,
Tenant's fixtures or personal property. With respect to a destruction which
Landlord is obligated to repair or may elect to repair under the terms of
this Section, Tenant waives the provisions of Section 1932, and Section 1933,
Subdivision 4, of the Civil Code of the State of California, and any other
similarly enacted statute, and the provisions of this Section 15 shall govern
in the case of such destruction.
B. DESTRUCTION BY AN UNINSURED CASUALTY: In the event of a total or
partial destruction of the Premises during the Lease Term by a casualty for
which
Page 34
Landlord has not received insurance proceeds sufficient to repair the damage
or destruction, Landlord may elect to either (i) terminate this Lease by
giving written notice to Tenant within fifteen (15) days after determining
the replacement cost and furnishing reasonable evidence thereof to Tenant; or
(ii) rebuild the Premises, provided the damage can be repaired within one
hundred eighty (180) days from the date of receipt of all governmental
approvals necessary under the laws and regulations of State, Federal, County
or Municipal authorities, as reasonably determined by Landlord.
Notwithstanding the foregoing, if the cost to repair the damage from an
uninsured casualty is less than 5% of the then replacement cost of the
Building (excluding Tenant Improvements), then Landlord shall repair the
damage. If Landlord contributes to payment for an uninsured loss, the
contributed amount shall be amortized over the useful life of the
improvements and such amortized amount shall be reimbursed by Tenant to
Landlord as additional rent, together with interest at the prime rate of
Union Bank plus two percent (2%). If Landlord so elects to terminate this
Lease, Tenant, within fifteen (15) days after receiving Landlord's notice to
terminate, can elect to pay to Landlord at the time Tenant notifies Landlord
of its election, the actual cost of restoration, in which case Landlord shall
restore the Premises and this Lease shall not terminate.
C. TENANT'S RIGHT TO CANCEL ADJACENT LEASES: In the event the Lease
is terminated pursuant to Section 15.A or 15.B above, Tenant shall have the
right to simultaneously terminate its leases for the other buildings within
the first phase of the Project leased by Tenant.
16. CONDEMNATION: If any part of the Premises shall be taken for any
public or quasi-public use, under any statute or by right of eminent domain
or private purchase in lieu thereof, and only a part thereof remains which is
susceptible of occupation hereunder, this Lease shall, as to the part so
taken, terminate as of the day before title vests in the condemnor or
purchaser ("Vesting Date") and Base Monthly Rent payable hereunder shall be
adjusted so that Tenant is required to pay for the remainder of the Lease
Term only such portion of Base Monthly Rent as the value of the part
remaining after such taking bears to the value of the entire Premises prior
to such taking; but in such event, Landlord shall have the
Page 35
option to terminate this Lease as of the Vesting Date. If all of the
Premises or such part thereof be taken so that there does not remain a
portion susceptible for occupation hereunder, this Lease shall terminate on
the Vesting Date. If part or all of the Premises be taken, all compensation
awarded upon such taking shall go to Landlord, and Tenant shall have no claim
thereto; but Landlord shall cooperate with Tenant, without cost to Landlord,
to recover compensation for damage to or taking of any Alterations, Tenant
Improvements paid for by Tenant from sources other than the Work Allowance,
or for Tenant's moving costs. Tenant hereby waives the provisions of
California Code of Civil Procedures Section 1265.130 and any other similarly
enacted statue, and the provisions of this Section 16 shall govern in the
case of such taking.
17. ASSIGNMENT OR SUBLEASE:
A. CONSENT BY LANDLORD: Except as specifically provided in this
Section 17, Tenant may not assign, sublet, hypothecate, or allow a third
party to use the Premises without the express written consent of Landlord,
which consent shall not be unreasonably withheld as defined below. In the
event Tenant desires to assign this Lease or any interest herein including,
without limitation, a pledge, mortgage or other hypothecation, or sublet the
Premises or any part thereof, Tenant shall deliver to Landlord (i) executed
counterparts of any agreement and of all ancillary agreements with the
proposed assignee/subtenant, (ii) current financial statements of the
transferee covering the preceding three years, (iii) the nature of the
proposed transferee's business to be carried on in the Premises, (v) all
consideration to be given on account of the Transfer, and (vi) a current
financial statement of Tenant. Landlord may condition its approval of any
Transfer to a certification from both Tenant and the proposed transferee of
all consideration to be paid to Tenant in connection with such Transfer. At
Landlord's request, Tenant shall also provide additional information
reasonably required by Landlord to determine whether it will consent to the
proposed assignment or sublease. Landlord shall have a ten (10) day period
following receipt of all the foregoing within which to notify Tenant in
writing that Landlord elects to: (i) permit Tenant to assign or sublet such
space to the named assignee/subtenant on the terms and conditions set forth
in the notice; or (ii) refuse consent. If Landlord should fail to notify
Tenant in writing of such election within the 10-day period, Landlord shall
be deemed to have elected option (ii) above. Landlord's written consent to
the proposed assignment or sublease shall not be unreasonably withheld,
provided and upon the condition that: (i) the proposed assignee or subtenant
is engaged in a business that is limited to the use expressly permitted under
this Lease; (ii) the proposed assignee is a company with sufficient financial
worth and management ability
Page 36
to undertake the financial obligation of this Lease and Landlord has been
furnished with reasonable proof thereof; (iii) the proposed assignment or
sublease is in form reasonably satisfactory to Landlord; and (iv) Tenant
reimburses Landlord on demand for any costs that may be incurred by Landlord
in connection with said assignment or sublease, including the costs of making
investigations as to the acceptability of the proposed assignee or subtenant
and legal costs incurred in connection with the granting of any requested
consent, not to exceed $2,500.00; and (vi) Tenant shall not have advertised
or publicized the availability of the Premises without prior notice to
Landlord. In the event all or any one of the foregoing conditions are not
satisfied, Landlord shall be considered to have acted reasonably if it
withholds its consent.
B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Any rent or other
economic consideration realized by Tenant under any sublease and assignment,
in excess of the rent payable hereunder and reasonable subletting and
assignment costs, shall be divided and paid fifty percent (50%) to Landlord
and fifty percent (50%) to Tenant, after first deducting all direct costs
incurred by Tenant in connection with such transaction. Tenant's obligation
to pay over Landlord's portion of the consideration constitutes an obligation
for additional rent hereunder. The above provisions relating to Landlord's
right to terminate the Lease and relating to the allocation of bonus rent are
independently negotiated terms of the Lease which constitute a material
inducement for the Landlord to enter into the Lease, and are agreed by the
parties to be commercially reasonable. No assignment or subletting by Tenant
shall relieve it of any obligation under this Lease. Any assignment or
subletting which conflicts with the provisions hereof shall be void.
C. NO RELEASE: Any assignment or sublease, including assignments or
deemed assignments pursuant to Section 17.D below, shall be made only if and
shall not be effective until the assignee or subtenant shall execute,
acknowledge, and deliver to Landlord an agreement, in form and substance
satisfactory to Landlord, whereby the assignee or subtenant shall assume all
the obligations of this Lease on the part of Tenant to be performed or
observed and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease. Notwithstanding any such sublease
or assignment and the acceptance of rent by
Page 37
Landlord from any subtenant or assignee, Tenant and any guarantor shall
remain fully liable for the payment of Base Monthly Rent and additional rent
due, and to become due hereunder, for the performance of all the covenants,
agreements, terms, provisions and conditions contained in this Lease on the
part of Tenant to be performed and for all acts and omissions of any
licensee, subtenant, assignee or any other person claiming under or through
any subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed a violation
by Tenant. Tenant shall indemnify, defend and hold Landlord harmless from
and against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any real estate brokers
or other persons claiming compensation in connection with the proposed
assignment or sublease.
D. REORGANIZATION OF TENANT: If Tenant is a corporation, the
following shall be deemed a voluntary assignment of Tenant's interest in this
Lease: (i) any dissolution, merger, consolidation, or other reorganization of
or affecting Tenant, whether or not Tenant is the surviving corporation, and
(ii) if the capital stock of Tenant is not publicly traded, the sale or
transfer to one person or entity (or to any group of related persons or
entities) stock possessing more than 50% of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors.
E. PERMITTED TRANSFERS: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be
entitled to receive any part of any subrent resulting therefrom that would
otherwise be due. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to (i) any corporation which controls, is
controlled by, or is under common control with the original Tenant to this
Lease by means of an ownership interest of more than 50%; (ii) a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as such transaction is not
entered into as a subterfuge by Tenant to be relieved of or otherwise
diminish its obligations under this Lease; and (iii) a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant so long as such acquisition is not entered into as a subterfuge by
Tenant to be relieved of or otherwise diminish its obligations under this
Lease.
F. EFFECT OF DEFAULT: In the event of Tenant's default, Tenant
hereby assigns all rents due from any
Page 38
assignment or subletting to Landlord as security for performance of its
obligations under this Lease, and Landlord may collect such rents as Tenant's
Attorney-in-Fact, except that Tenant may collect such rents unless a default
occurs as described in Section 13 above. A Lease termination due to Tenant's
default shall not automatically terminate an assignment or sublease then in
existence; rather at Landlord's election, such assignment or sublease shall
survive the Lease termination, the assignee or subtenant shall attorn to
Landlord, and Landlord shall undertake the obligations of Tenant under the
sublease or assignment; except that Landlord shall not be liable for prepaid
rent, security deposits or other defaults of Tenant to the subtenant or
assignee, or for any acts or omissions of Tenant and Tenant's Agents.
G. CONVEYANCE BY LANDLORD: As used in this Lease, the term
"Landlord" is defined only as the owner for the time being of the Premises,
so that in the event of any sale or other conveyance of the Premises or in
the event of a master lease of the Premises, Landlord shall be entirely freed
and relieved of all its covenants and obligations hereunder, and it shall be
deemed and construed, without further agreement between the parties and the
purchaser at any such sale or the master tenant of the Premises, that the
purchaser or master tenant of the Premises has assumed and agreed to carry
out any and all covenants and obligations of Landlord hereunder. Such
transferor shall transfer and deliver Tenant's security deposit to the
purchaser at any such sale or the master tenant of the Premises, and
thereupon the transferor shall be discharged from any further liability in
reference thereto.
F. SUCCESSORS AND ASSIGNS: Subject to the provisions this Section
17, the covenants and conditions of this Lease shall apply to and bind the
heirs, successors, executors, administrators and assigns of all parties
hereto; and all parties hereto shall be jointly and severally liable
hereunder.
18. OPTION TO EXTEND THE LEASE TERM:
▇. ▇▇▇▇▇ AND EXERCISE OF OPTION: Provided Tenant concurrently
exercises its options to extend the lease terms on all other buildings leased
by Tenant within the first phase portion of the Project, Landlord grants to
Tenant, subject to the terms and conditions
Page 39
set forth in this Section 18.A, two (2) options (the "Options") to extend the
Lease Term for an additional term (the "Option Term"). Each Option Term
shall be for a period of sixty (60) months and shall be exercised, if at all,
by written notice to Landlord no earlier than eighteen (18) months prior to
the Expiration Date but no later than twelve (12) months prior to the
Expiration Date. If Tenant exercises the Option, all of the terms, covenants
and conditions of this Lease except this Section shall apply during the
Option Term as though the expiration date of the Option Term was the date
originally set forth herein as the Expiration Date, provided that Base
Monthly Rent for the Premises payable by Tenant during the Option Term shall
be the greater of either the average of Base Monthly Rent paid during the
previous term, or the then Fair Market Rental as hereinafter defined.
Notwithstanding anything herein to the contrary, if Tenant is in monetary or
material non-monetary default under any of the terms, covenants or conditions
of this Lease either at the time Tenant exercises the Option or at any time
thereafter prior to the commencement date of the Option Term, Landlord shall
have, in addition to all of Landlord's other rights and remedies provided in
this Lease, the right to terminate the Option upon notice to Tenant, in which
event the expiration date of this Lease shall be and remain the Expiration
Date. As used herein, the term "Fair Market Rental" is defined as the rental
and all other monetary payments, including any escalations and adjustments
thereto (including without limitation Consumer Price Indexing) that Landlord
could obtain during the Option Term from a third party desiring to lease the
Premises, based upon the current use and other potential uses of the
Premises, as determined by the rents then being obtained for new leases of
space comparable in age and quality to the Premises in the locality of the
Building.
B. DETERMINATION OF FAIR MARKET RENTAL: If Tenant exercises the
Option, Landlord shall send Tenant a notice setting forth the Fair Market
Rental for the Option Term within thirty (30) days following the Exercise
Date. If Tenant disputes Landlord's determination of Fair Market Rental for
the Option Term, Tenant shall, within thirty (30) days after the date of
Landlord's notice setting forth Fair Market Rental for the Option Term, send
to Landlord a notice stating that Tenant either elects to terminate its
exercise of the Option, in which event the Option shall lapse and this Lease
shall terminate on the Expiration Date, or that Tenant disagrees with
Landlord's determination of Fair Market Rental for the Option Term and elects
to resolve the disagreement as provided in Section 18.C below. If Tenant does
not send Landlord a notice as provided in the previous sentence, Landlord's
determination of Fair Market Rental shall be the basis for determining the
Base Monthly Rent payable by Tenant during the Option Term. If Tenant elects
to resolve
Page 40
the disagreement as provided in Section 18.C and such procedures are not
concluded prior to the commencement date of the Option Term, Tenant shall pay
to Landlord as Base Monthly Rent the Fair Market Rental as determined by
Landlord in the manner provided above. If the Fair Market Rental as finally
determined pursuant to Section 18.C is greater than Landlord's determination,
Tenant shall pay Landlord the difference between the amount paid by Tenant
and the Fair Market Rental as so determined in Section 18.C within thirty
(30) days after such determination. If the Fair Market Rental as finally
determined in Section 18.C is less than Landlord's determination, the
difference between the amount paid by Tenant and the Fair Market Rental as so
determined in Section 18.C shall be credited against the next installments of
rent due from Tenant to Landlord hereunder.
C. RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to Landlord's
notice setting forth the Fair Market Rental, Landlord and Tenant shall meet
at least two (2) times at a mutually agreeable time and place, in an attempt
to resolve the disagreement.
2. If within the 30-day period referred to above, Landlord and
Tenant cannot reach agreement as to Fair Market Rental, each party shall
select one appraiser to determine Fair Market Rental. Each such appraiser
shall arrive at a determination of Fair Market Rental and submit their
conclusions to Landlord and Tenant within thirty (30) days after the
expiration of the 30-day consultation period described above.
3. If only one appraisal is submitted within the requisite time
period, it shall be deemed as Fair Market Rental. If both appraisals are
submitted within such time period and the two appraisals so submitted differ
by less than ten percent (10%), the average of the two shall be deemed as
Fair Market Rental. If the two appraisals differ by more than 10%, the
appraisers shall immediately select a third appraiser who shall, within
thirty (30) days after his selection, make and submit to Landlord and Tenant
a determination of Fair Market Rental. This third appraisal will then be
averaged with the closer of the two previous appraisals and the result shall
be Fair Market Rental.
Page 41
4. All appraisers specified pursuant to this Section shall be
members of the American Institute of Real Estate Appraisers with not less
than ten (10) years experience appraising office and industrial properties in
the Santa ▇▇▇▇▇ Valley. Each party shall pay the cost of the appraiser
selected by such party and one-half of the cost of the third appraiser.
D. PERSONAL TO TENANT: All Options provided to Tenant in this Lease
are personal and granted to Network Equipment Technologies and any entity
resulting from a permitted transfer as set forth in Section 17.E above and
are not exercisable by any third party should Tenant assign or sublet all or
a portion of its rights under this Lease, unless Landlord consents to permit
exercise of any option by any assignee or subtenant, in Landlord's sole and
absolute discretion. In the event Tenant has multiple options to extend this
Lease, a later option to extend the Lease cannot be exercised unless the
prior option has been so exercised.
19. OPTION TO LEASE : Landlord has granted Tenant an option to lease
addition buildings on the terms set forth in EXHIBIT "E".
20. GENERAL PROVISIONS:
A. ATTORNEY'S FEES: In the event a suit or alternative form of
dispute resolution is brought for the possession of the Premises, for the
recovery of any sum due hereunder, to interpret the Lease, or because of the
breach of any other covenant herein; then the losing party shall pay to the
prevailing party reasonable attorney's fees including the expense of expert
witnesses, depositions and court testimony as part of its costs which shall
be deemed to have accrued on the commencement of such action. The prevailing
party shall also be entitled to recover all costs and expenses including
reasonable attorney's fees incurred in enforcing any judgment or award
against the other party. The foregoing provision relating to post-judgment
costs is severable from all other provisions of this Lease.
B. AUTHORITY OF PARTIES: Each party represents and warrants to the
other party that it is duly formed and in good standing, and is duly
authorized to execute and deliver this Lease on behalf of it, and that this
Lease is binding upon the signing party in accordance with its terms. At
either party's request, the other party shall provide the requesting party
with proof in a form acceptable to the requesting party, authorizing the
execution of the Lease.
C. BROKERS: Tenant represents it has not utilized or contacted a
real estate broker or finder with respect to this Lease other than Julien J.
Page 42
▇▇▇▇▇▇▇, Inc. and Tenant agrees to indemnify, defend and hold Landlord
harmless against any claim, cost, liability or cause of action asserted by
any other broker or finder claiming through Tenant.
D. CHOICE OF LAW: This Lease shall be governed by and construed in
accordance with California law. Venue shall be Alameda County.
E. DISPUTE RESOLUTION: Landlord and Tenant and any other party
that may become a party to this Lease or be deemed a party to this Lease
including any subtenants agree to and shall mediate any controversy, dispute,
or claim of whatever nature arising out of, in connection with, or in
relation to the interpretation, performance or breach of this Lease,
including any claim based on contract, tort, or statute,, except for any
claim by Landlord for unlawful detainer, or any action within the
jurisdiction of the small claims court. The mediation shall be held prior to
any court action or arbitration. The mediation shall be confidential and in
accordance with California Evidence Code Section1152.5. In the event the
parties are not able to agree on a mediator within thirty days JAMS or
another judicial and mediation service mutually acceptable to the parties
shall appoint a mediator. In the event the mediator determines that a second
mediation session is necessary, it shall be conducted in accordance with this
paragraph. Should the prevailing party attempt an arbitration or a court
action before attempting to mediate, THE PREVAILING PARTY SHALL NOT BE
ENTITLED TO ATTORNEYS FEES THAT MIGHT OTHERWISE BE AVAILABLE TO THEM IN A
COURT ACTION OR ARBITRATION, AND IN ADDITION THERETO, THE PARTY WHO IS
DETERMINED BY THE ARBITRATOR TO HAVE RESISTED MEDIATION SHALL BE SANCTIONED
BY THE ARBITRATOR OR JUDGE. Except for any claim by Landlord for unlawful
detainer or any claim within the Jurisdiction of the small claims court
(which for such claims the parties agree shall be the sole court of competent
jurisdiction), any controversy, dispute, or claim of whatever nature arising
out of, in connection with, or in relation to the interpretation, performance
or breach of this Lease, including any claim based on contract, tort, or
statute, shall be resolved at the request of any party to this agreement
through a two-step dispute resolution process administered by JAMS or another
judicial and mediation service mutually acceptable to the parties involving
first mediation, followed, if necessary, by final and binding arbitration
administered by and in accordance with the
Page 43
then-existing rules and practice of the judicial and mediation service
selected, and judgment upon any award rendered by the arbitrator(s) may be
entered by any State or Federal Court having jurisdiction thereof. The
parties to the arbitration shall have those rights of discovery that the
arbitrator(s) deem necessary (after application to the arbitrator(s)) to a
full and fair hearing of the matter. However, in no event shall the parties
be entitled to propound interrogatories or requests for admissions during the
arbitration process. The arbitrator shall be a retired judge or a licensed
California Attorney. The venue for any such arbitration's or mediations
shall be in Santa ▇▇▇▇▇ County.
F. ENTIRE AGREEMENT: This Lease contains all of the agreements and
conditions made between the parties hereto and may not be modified orally or
in any other manner other than by written agreement signed by all parties
hereto or their respective successors in interest. This Lease supersedes and
revokes all previous negotiations, letters of intent, lease proposals,
brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent
Landlord or Tenant.
G. ENTRY BY LANDLORD: Upon prior notice to Tenant and subject to
Tenant's reasonable security regulations, Tenant shall permit Landlord and
his agents to enter into and upon the Premises at all reasonable times, and
without any rent abatement or reduction or any liability to Tenant for any
loss of occupation or quiet enjoyment of the Premises thereby occasioned, for
the following purposes: (i) inspecting and maintaining the Premises; (ii)
making repairs, alterations or additions to the Premises; (iii) erecting
additional building(s) and improvements on the land where the Premises are
situated or on adjacent land owned by Landlord; and (iv) performing any
obligations of Landlord under the Lease including remediation of hazardous
materials if determined to be the responsibility of Landlord. Tenant shall
permit Landlord and his agents, at any time within one hundred eighty (180)
days prior to the Expiration Date (or at any time during the Lease if Tenant
is in default hereunder), to place upon the Premises "For Lease" signs and
exhibit the Premises to real estate brokers and prospective tenants at
reasonable hours.
H. ESTOPPEL CERTIFICATES: At any time during the Lease Term,
Landlord or Tenant shall, within ten (10) days following written notice from
the other party, execute and deliver to the requesting party a written
statement certifying, if true, the following: (i) that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature
of such modification); (ii) the date to which rent and other
Page 44
charges are paid in advance, if any; (iii) acknowledging that there are not,
to such party's knowledge, any uncured defaults on either party's part
hereunder (or specifying such defaults if they are claimed); and (iv) such
other information as either party may reasonably request. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer
of Landlord's interest in the Premises. Landlord or Tenant's failure to
deliver such statement within such time shall be conclusive upon such party
that this Lease is in full force and effect without modification, except as
may be represented by such party, and that there are no uncured defaults in
such party's performance. Tenant agrees to provide, within fifteen (15) days
of Landlord's request, Tenant's most recent three (3) years of audited
financial statements for Landlord's use in financing the Premises or
Landlord's interest therein.
I. EXHIBITS: All exhibits referred to are attached to this Lease
and incorporated by reference.
J. INTEREST: All rent due hereunder, if not paid when due, shall
bear interest at the rate of the Reference Rate published by Bank of America,
San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, plus two percent (2%) per annum from that date until
paid in full ("Agreed Interest Rate"). This provision shall survive the
expiration or sooner termination of the Lease. Despite any other provision
of this Lease, the total liability for interest payments shall not exceed the
limits, if any, imposed by the usury laws of the State of California. Any
interest paid in excess of those limits shall be refunded to Tenant by
application of the amount of excess interest paid against any sums
outstanding in any order that Landlord requires. If the amount of excess
interest paid exceeds the sums outstanding, the portion exceeding those sums
shall be refunded in cash to Tenant by Landlord. To ascertain whether any
interest payable exceeds the limits imposed, any non-principal
payment(including late charges) shall be considered to the extent permitted
by law to be an expense or a fee, premium, or penalty rather than interest.
K. MODIFICATIONS REQUIRED BY LENDER: If any Lender of Landlord
requires a modification of this Lease that will not increase Tenant's cost or
expense or materially or adversely change Tenant's rights and obligations,
this Lease shall be so modified and Tenant
Page 45
shall execute whatever reasonable documents are required and deliver them to
Landlord within ten (10) days after the request.
L. NO PRESUMPTION AGAINST DRAFTER: Landlord and Tenant understand,
agree and acknowledge that this Lease has been freely negotiated by both
parties; and that in any controversy, dispute, or contest over the meaning,
interpretation, validity, or enforceability of this Lease or any of its terms
or conditions, there shall be no inference, presumption, or conclusion drawn
whatsoever against either party by virtue of that party having drafted this
Lease or any portion thereof.
M. NOTICES: All notices, demands, requests, or consents required to
be given under this Lease shall be sent in writing by U.S. certified mail,
return receipt requested, or by personal delivery addressed to the party to
be notified at the address for such party specified in Section 1 of this
Lease, or to such other place as the party to be notified may from time to
time designate by at least fifteen (15) days prior notice to the notifying
party. When this Lease requires service of a notice, that notice shall
replace rather than supplement any equivalent or similar statutory notice,
including any notices required by Code of Civil Procedure Section 1161 or any
similar or successor statute. when a statute requires service of a notice in
a particular manner, service of that notice (or a similar notice required by
this lease) shall replace and satisfy the statutory service-of-notice
procedures, including those required by Code of Civil Procedure Section 1162
or any similar or successor statute.
N. RENT: All monetary sums due from Tenant to Landlord under this
Lease, including, without limitation those referred to as "additional rent",
shall be deemed as rent.
O. REPRESENTATIONS: Tenant acknowledges that neither Landlord nor
any of its employees or agents have made any agreements, representations,
warranties or promises with respect to the Premises or with respect to
present or future rents, expenses, operations, tenancies or any other matter.
Except as herein expressly set forth herein, Tenant relied on no statement
of Landlord or its employees or agents for that purpose.
P. RIGHTS AND REMEDIES: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law, and are in
addition to all other rights and remedies in law and in equity.
Q. SEVERABILITY: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder
of the Lease shall not be
Page 46
invalidated thereby but shall be enforceable in accordance with its terms,
omitting the invalid or unenforceable term.
R. SUBORDINATION: This Lease is subject and subordinate to ground
and underlying leases, mortgages and deeds of trust (collectively
"Encumbrances") which may now affect the Premises, to any covenants,
conditions or restrictions of record, and to all renewals, modifications,
consolidations, replacements and extensions thereof; provided, however, if
the holder or holders of any such Encumbrance ("Holder") require that this
Lease be prior and superior thereto, within seven (7) days after written
request of Landlord to Tenant, Tenant shall execute, have acknowledged and
deliver all documents or instruments, in the form presented to Tenant, which
Landlord or Holder deems necessary or desirable for such purposes. Landlord
shall have the right to cause this Lease to be and become and remain subject
and subordinate to any and all Encumbrances which are now or may hereafter be
executed covering the Premises or any renewals, modifications,
consolidations, replacements or extensions thereof, for the full amount of
all advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon and subject to all
the terms and provisions thereof; provided only, that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, Holder agrees to recognize Tenant's rights under this Lease as
long as Tenant is not then in default and continues to pay Base Monthly Rent
and additional rent and observes and performs all required provisions of this
Lease. Within ten (10) days after Landlord's written request, Tenant shall
execute any documents required by Landlord or the Holder to make this Lease
subordinate to any lien of the Encumbrance. If Tenant fails to do so, then
in addition to such failure constituting a default by Tenant, it shall be
deemed that this Lease is so subordinated to such Encumbrance.
Notwithstanding anything to the contrary in this Section, Tenant hereby
attorns and agrees to attorn to any entity purchasing or otherwise acquiring
the Premises at any sale or other proceeding or pursuant to the exercise of
any other rights, powers or remedies under such encumbrance.
Notwithstanding the foregoing, the subordination of this Lease shall be
subject to Tenant's receipt of a
Page 47
Nondisturbance and Attornment Agreement in a commercially reasonable form.
S. SUBMISSION OF LEASE: Submission of this document for examination
or signature by the parties does not constitute an option or offer to lease
the Premises on the terms in this document or a reservation of the Premises
in favor of Tenant. This document is not effective as a lease or otherwise
until executed and delivered by both Landlord and Tenant.
T. SURVIVAL OF INDEMNITIES: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive
the expiration or sooner termination of the Lease.
U. TIME: Time is of the essence hereunder.
V. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government
agency or municipality require Landlord to institute TDM (Transportation
Demand Management) facilities and/or program, Tenant agrees that the cost of
TDM imposed facilities required on the Premises, including but not limited to
employee showers, lockers, cafeteria, or lunchroom facilities, shall be paid
by Tenant. Further, any ongoing costs or expenses associated with a TDM
program which are required for the Premises and not provided by Tenant, such
as an on-site TDM coordinator, shall be provided by Landlord with such costs
being included as additional rent and reimbursed to Landlord by Tenant within
thirty (30) days after demand.
W. 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.
X. USE OF ROOF: Tenant shall have the exclusive right to use the
roof of the Building at no charge to place and maintain telecommunications
antennas, microwave or satellite dishes and other communications equipment.
Such use of the roof shall be subject to receipt of all required government
approvals, at Tenant's sole cost. The placements of any such antennas or
satellite dishes or other communications equipment on the roofs, the
modifications of the roof to accommodate such equipment, and the installation
of any such equipment shall be subject to Landlord's reasonable prior
approval of the plans and methods therefore. Such use
Page 48
of the roof shall not restrict, impair or negate any warranty relating to the
roofs and Tenant shall be responsible for any and all damage, leakage or
extraordinary wear and tear to the roof occurring as a result of such use of
the roofs. Installation of such equipment shall be supervised by Landlord
and performed in a first class workmanlike manner. Prior to the Expiration
Date, Tenant shall, at its sole cost and expense, remove all such roof
equipment as Landlord desires and restore the roof to its condition as of the
Commencement Date. Such repair and restoration shall include causing the
roof to be brought into compliance with all applicable building codes and
laws in effect at the time of the removal to the extent such compliance is
necessitated by removal of the roof equipment and restoration work on the
roof.
Y. RECORDATION: Within forty-five (45) days after the execution and
delivery of this Lease by Landlord and Tenant, Landlord shall execute and
notarize a short form Memorandum of Lease, in recordable form, and shall
deliver the same to Tenant for Tenant's recording. Within (45) days
following the finalizing by Landlord of a new parcel map for the Project,
Landlord and Tenant shall execute all necessary documents to eliminate the
Short Form Memorandum of Lease and shall concurrently execute a new short
form Memorandum of Lease for recordation on the parcel affected by this
Lease. At such time, Landlord and Tenant shall also execute a Memorandum of
Lease for recordation on parcels affected by Tenant's Option to Lease
pursuant to Exhibit "E" of this Lease. Prior to the expiration or earlier
termination of the Lease and/or Option to Lease, Tenant agrees to promptly
execute all necessary documents to eliminate the Short Form Memorandum of
Lease as an exception to title.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day
and year first above written.
LANDLORD: Sobrato Interests III TENANT: Network Equip-
a California Limited Partnership ment Technologies
a Delaware Corporation
By: /s/ By: /s/
----------------------------- ---------------------------
Its: General Partner Its: Sr. Vice President & CFO
Page 49
EXHIBIT - OPTION TO LEASE
RECITALS:
A. As part of the consideration for Tenant entering into the Lease,
Landlord is willing to grant to Tenant an option to lease a maximum of two
(2) buildings to be constructed on two adjacent parcels of land,
approximately 5.3 and 4.5 acres respectively, owned by Landlord and shown on
SCHEDULE 1 ("Option Properties). Such buildings currently do not exist, but
Landlord is willing, subject to the conditions set forth herein, to construct
such buildings if Tenant exercises such option to lease, all pursuant to the
terms and conditions set forth below. Such buildings and property is herein
referred to as the "Option Buildings".
B. The parties now wish to document the terms of such option to lease
the Option Buildings.
NOW, THEREFORE, in consideration of the execution of the Lease by both
parties, and in consideration of the mutual covenants set forth below, the
parties agree as follows:
1. GRANT OF OPTION. Landlord hereby grants to Tenant an option to
lease the Option Buildings (the "Option") subject to the terms and conditions
set forth in this Agreement.
2. TERM OF OPTION. Tenant shall be entitled, subject to paragraph 3
below, to exercise the Option at any time during the period commencing on the
execution date of the Lease and ending on June 1, 1999. Such period shall
herein be referred to as the "Option Period".
3. EXERCISE OF OPTION. Tenant shall exercise the Option only by
delivery of written notice to Landlord within the Option Period of such
exercise ("Exercise Date"). Tenant shall be entitled to exercise the Option
only if at the time of such exercise Tenant is not in default under the terms
of the Lease. In the event the Lease has been terminated for any reason,
this Option shall automatically terminate. At the time Tenant exercises the
Option, Tenant must notify Landlord of the amount of building square footage
it desires to lease pursuant to the Option.
4. CONDITIONS PRECEDENT. Landlord's obligation to construct the
Option Buildings are expressly conditioned upon Landlord's ability to within
one hundred twenty (120) days of the Exercise Date to (i) secure a
commitment by an institutional lender to make a fixed rate non-recourse
non-participating loan to Landlord in a minimum amount equal to eighty-five
percent (85%) of Total Project Costs (as defined below), and (ii) obtain all
permits and governmental approvals necessary for the construction of the
Option Buildings.
5. LEASE OF THE OPTION BUILDING. Within thirty (30) days after
Tenant's exercise of the Option, Landlord and Tenant shall enter into a
written lease of the Option Buildings (the "Option Building Lease"). The
Option Building Lease shall be on the same terms as the Lease, except as
follows:
(a) The Premises shall be Option Buildings. References in the Lease
format shall be changed in the Option Building Lease to refer to Option
Building.
(b) Landlord shall provide 3.5 parking spaces per 1,000 square feet
of leasable space within the Option Buildings.
(c) The term shall commence upon the date of Substantial Completion
(as the term is defined in the Lease) of the Building Shell and Tenant
Improvements for the Option Building ("Commencement Date"), and end on the
twelfth (12th) anniversary thereof, with options to extend pursuant to the
Lease.
(d) Rent shall be payable beginning on the Commencement Date. Base
Monthly Rent shall be equal to one hundred thirty percent (130%) of (i) the
product of the (i) Total Project Costs as defined below and (ii) the best
non-participating twelve (12) year fixed rate permanent loan constant
available prior to the start of construction of the Option Building. In no
event shall the amortization period of the loan exceed twenty (20) years. In
the event that actual project costs have not been determined by the
Commencement Date, the rent shall be based on Landlord's reasonable estimate
of Project Costs until such time as actual Project Costs are available.
Total Project Costs shall be equal to the sum of (i) the Fair Market
Value of the Property, at the time Tenant exercises the Option determined by
appraisal as provided in the Lease, (ii) payments by Landlord for labor and
materials to contractors performing construction work in connection with the
Option Buildings, (iii) fees for building permits, licenses, inspection,
utility connections or extensions, and any other fees imposed by governmental
entities, (iv) fees of engineers, architects, consultants and others
providing professional services in connection with the
construction of the Option Buildings, (v) construction loan interest paid by
Landlord including interest on Landlord's equity with respect to the
construction of the Option Buildings, calculated at the reference rate
charged by Union Bank plus one percent (1%), (vi) loan fees payable for the
construction and/or permanent loan for the Option Buildings (vii) real
property taxes and assessments levied against the Property during the period
the Option Buildings is constructed, (viii) liability and builders risk
insurance premiums and completion bond premiums paid by Landlord with respect
to the construction of the Option Buildings, (ix) real estate leasing
commissions or fees payable by Landlord with respect to the Option Buildings
in the event Tenant retains a broker; and (x) a sum equal to seven percent
(7%) of the Total Project Cost, for Landlord's construction and development
services including onsite and offsite supervision and management services
provided by Landlord.
The Base Monthly Rent shall then be increased on the same basis as
provided in Section 4.B of the Lease.
(e) The security deposit (in the form of a letter of credit) shall
be equal to the Base Monthly Rent amount for the Option Buildings for the
first month of the term.
(f) The Work Allowance shall be modified to (i) reflect a Work
Allowance of Twenty Five Dollars ($25.00) times the number of leasable square
feet of space in the Option Buildings, and (ii) require Tenant's submission
to Landlord of its Tenant Improvement Plans as set forth below in this
Agreement.
(g) The Lease shall be amended (i) to extend the original Lease Term
so as to be co-terminus with the original term of Option Building Lease; and
(ii) to provide that a default under Lease shall be deemed a default under
the Option Building Lease; and that a default under the Option Building Lease
shall be deemed a default under the Lease. The rent for the Premises under
the Lease during the extended term shall be at Fair Market Value (as the term
is therein defined) but not less than the rent paid in the preceding period
6. CONSTRUCTION OF SHELL AND TENANT IMPROVEMENTS.
(a) Within sixty (60) days after Tenant's exercise of the Option,
Landlord shall deliver to Tenant plans
and specifications for construction of the shell of Option Buildings
(together called the "Shell Plans"). The Shell Plans shall contemplate
construction of two buildings of 100,000 leasable square feet each.
"Leasable Square Feet" shall include all square footage within the Option
Buildings when measured from outside exterior wall/glass to outside exterior
wall/glass of each floor, including docks, entries, patios and balconies
covered by a structural roof, but excluding roof overhangs. The Shell Plans
shall contemplate construction of a Building Shell of a design and size
similar to the Building Shell of the Premises.
(b) Within ninety (90) days after Tenant's receipt of the Shell
Plans, Tenant shall submit to Landlord, for Landlord's approval, Tenant
Improvement Plans respecting Tenant Improvements that Tenant desires Landlord
to construct in the Option Buildings. General Contractor shall commence
construction of Option Buildings as soon as reasonably possible after removal
of the conditions precedent outlined in Section 4 of this Exhibit, and
continue diligently to construct the same until completion thereof in
accordance with the Shell Plans. All costs of construction of the Building
Shell of Option Buildings shall be borne solely by Landlord. The costs
included within the Building Shell construction shall be as set forth in
EXHIBIT "C" of the Lease. All costs of Tenant Improvements in excess of the
Work Allowance shall be borne solely by Tenant.
7. SUCCESSORS. The Option provided Tenant in this Exhibit is personal
and granted to Network Equipment Technologies and is not exercisable by any
third party should Tenant assign or sublet all or a portion of its rights
under this Lease, unless Landlord consents to permit exercise of any option
by any assignee or subtenant, in Landlord's sole discretion. Except as
previously provided, the terms and provisions hereof shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto.
In no event, however, shall any lender be obligated to perform the terms this
Option in the event of a foreclosure of Landlord's interest in the Premises
or the Property.