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LEASE
149 NEW MONTGOMERY
149 NEW MONTGOMERY, LLC,
a California limited liability company
as Landlord,
and
REDENVELOPE, INC.,
a Delaware corporation
as Tenant
<PAGE>
149 NEW MONTGOMERY
SUMMARY OF BASIC LEASE INFORMATION
The undersigned hereby agree to the following terms of this Summary of
Basic Lease Information (the "Summary"). This Summary is hereby incorporated
into and made a part of the attached Lease (this Summary and the Lease to be
known collectively as the "Lease") which pertains to the building which is
located at 149 New Montgomery Street, San Francisco, California (the
"Building"). Each reference in the Lease to any term of this Summary shall have
the meaning as set forth in this Summary for such term. In the event of a
conflict between the terms of this Summary and the Lease, the terms of the Lease
shall prevail. Any capitalized terms used herein and not otherwise defined
herein shall have the meaning as set forth in the Lease.
TERMS OF LEASE
(References are to the Lease) DESCRIPTION
----------------------------- -----------
1. Date: July 22, 2004.
2. Landlord: 149 NEW MONTGOMERY, LLC, a California
limited liability company
3. Address of Landlord 149 NEW MONTGOMERY, LLC
(Article 28.14): 1101 Fifth Avenue, Suite 300
San Rafael, CA 94901
Attention: Jonathan Parker
and
Allen Matkins Leck Gamble & Mallory LLP
Three Embarcadero Center, 12th Floor
San Francisco, California 94111
Attention: Nancy Lundeen, Esq.
4. Tenant: REDENVELOPE, INC., a Delaware corporation
5. Address of Tenant 149 New Montgomery Street
(Article 28.14): San Francisco, California 94105
Attention: Christopher Nordquist, Esq.
and
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Attention: Craig B. Etlin, Esq.
6. Premises (Article 1): Approximately 28,000 rentable square feet
of space consisting of the entire 2nd and
3rd floors and a portion of the ground
floor of the Building, as set forth on
Exhibit A attached hereto. The rentable
area of the Premises is comprised of
11,195 rentable square feet on the 2nd
floor, 11,087 rentable square feet on the
3rd floor and 5,718 rentable square feet
on the ground floor.
<PAGE>
7. Term (Articles 2 and 29).
7.1 Lease Term: Five (5) years, with two (2) options to
extend, the first of which shall be for
an additional two (2) years and the
second of which shall be for an
additional five (5) years.
7.2 Lease Commencement Date The earlier of (i) the date upon which
Landlord delivers the Premises to Tenant
with that portion of Landlord's Work
described in Sections 1.1, 1.2.1 and
1.2.2 of the Tenant Work Letter
substantially complete or (ii) the date
upon which Tenant first commences to
conduct business in the Premises.
7.3 Lease Expiration Date The last day of the month in which the
fifth (5th) anniversary of the Lease
Commencement Date occurs.
7.4 Rent Commencement Date The earlier of (i) three (3) months
following the date upon which Tenant
first commences to conduct business in
the Premises or (ii) January 1, 2005
8. Base Rent (Article 3):
Lease Monthly Installment of
Period Base Rent
Years 1-5 $51,332
9. Additional Rent (Article 4).
9.1 Base Year: Calendar year 2005
9.2 Tenant's Share of Direct Expenses: 41.03%
10. Use (Article 5): General office use and/or professional
business purposes only.
11. Security Deposit (Article 21): $205,332, subject to the terms of Article 21
12. Brokers (Section 28.21): BT Commercial Real Estate (Landlord's
Broker) Tory Corporate Real Estate
Advisors, Inc. dba The Staubach Company
(Tenant's Broker)
ii
<PAGE>
TABLE OF CONTENTS
Page
----
1. REAL PROPERTY, BUILDING AND PREMISES................................ 1
2. LEASE TERM.......................................................... 2
3. BASE RENT........................................................... 2
4. ADDITIONAL RENT..................................................... 2
5. USE OF PREMISES..................................................... 7
6. SERVICES AND UTILITIES.............................................. 8
7. REPAIRS............................................................. 9
8. ADDITIONS AND ALTERATIONS........................................... 9
9. COVENANT AGAINST LIENS.............................................. 10
10. INSURANCE........................................................... 11
11. DAMAGE AND DESTRUCTION.............................................. 12
12. NO WAIVER........................................................... 14
13. CONDEMNATION........................................................ 14
14. ASSIGNMENT AND SUBLETTING........................................... 14
15. OWNERSHIP AND REMOVAL OF TRADE FIXTURES............................. 16
16. HOLDING OVER........................................................ 17
17. ESTOPPEL CERTIFICATES............................................... 17
18. SUBORDINATION....................................................... 17
19. DEFAULTS; REMEDIES.................................................. 18
20. FORCE MAJEURE....................................................... 19
21. SECURITY DEPOSIT.................................................... 19
22. SECURITY MEASURES................................................... 20
23. SIGNS............................................................... 20
24. COMPLIANCE WITH LAW................................................. 21
25. LATE CHARGES........................................................ 21
26. LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT................ 21
27. ENTRY BY LANDLORD................................................... 22
28. MISCELLANEOUS PROVISIONS............................................ 22
29. OPTION TERM......................................................... 26
30. RIGHT OF FIRST OFFER................................................ 28
31. STORAGE SPACE. .................................................... 29
32. LEASE OF PERSONAL PROPERTY.......................................... 29
33. SECURITY DESK....................................................... 29
<PAGE>
EXHIBITS
A OUTLINE OF PREMISES
B TENANT WORK LETTER
C NOTICE OF LEASE TERM DATES
D RULES AND REGULATIONS
E ESTOPPEL CERTIFICATE
F JANITORIAL SPECIFICATIONS
G LEASED PERSONAL PROPERTY
<PAGE>
LEASE
This Lease, which includes the preceding Summary of Basic Lease
Information (the "Summary") attached hereto and incorporated herein by this
reference (the Lease and Summary to be known sometimes collectively hereafter as
the "Lease"), dated as of the date set forth in Section 1 of the Summary, is
made by and between 149 NEW MONTGOMERY, LLC, a California limited liability
company ("Landlord"), and REDENVELOPE, INC., a Delaware corporation ("Tenant").
1. REAL PROPERTY, BUILDING AND PREMISES.
1.1 Lease of the Premises. Upon and subject to the terms, covenants and
conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord the premises set forth in Section 6 of
the Summary (the "Premises"), which Premises are located in and are a part of
that certain building (the "Building") located at 149 New Montgomery Street, San
Francisco, California. The Building shall be measured in accordance with the
standards promulgated by the Building Owners and Managers Association (1996).
The Building, any outside plaza areas, the land and other improvements
surrounding the Building which are designated from time to time by Landlord as
"Common Areas" (as defined below) appurtenant to or servicing the Building, and
the land upon which any of the foregoing are situated, are herein sometimes
collectively referred to as the "Real Property." Tenant shall have the
non-exclusive right to use and enjoy in common with other tenants in the
Building those portions of the Real Property which are provided for use in
common by Tenant and any other tenants of the Real Property (the "Common
Areas"). Subject to Landlord's reasonable rules and regulations and access
control procedures, Tenant shall have the right of access to the Premises
twenty-four (24) hours per day, seven (7) days per week during the Lease Term
(as defined in Article 2). Except as specifically set forth in this Lease and in
the Tenant Work Letter attached hereto as Exhibit B, Landlord shall not be
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant also acknowledges that Landlord has made no
representation or warranty regarding the condition of the Premises or the
Building except as specifically set forth in this Lease and the Tenant Work
Letter.
1.2 Condition of the Premises. Landlord warrants to Tenant that on the
Lease Commencement Date, the Premises and the Building (including all
structural, mechanical, plumbing, HVAC and electrical systems, but excluding the
Tenant Improvements constructed by Tenant pursuant to the Tenant Work Letter)
shall be in good working condition and shall comply with all applicable
requirements of building codes, California accessibility codes, laws and
regulations (including, but not limited to, the Americans with Disabilities Act
[42 U.S.C. SECTION 12101 ET SEQ.] (the "ADA")), and covenants or restrictions of
record as in effect on the Lease Commencement Date (the "Building Warranty").
The Building Warranty shall not apply to any improvements or alterations made by
Tenant, except as specifically set forth in the Work Letter Agreement. If the
Premises do not comply with the Building Warranty, promptly after Landlord's
receipt of written notice from Tenant given within one hundred twenty (120) days
after the Lease Commencement Date specifying in detail the nature and extent of
such non-compliance, Landlord, at Landlord's sole cost and expense, shall take
such action as is reasonably necessary to remedy such non-compliance. Landlord
further represents and warrants to Tenant that there is no Hazardous Material in
or about the Building in violation of any applicable laws, and that if any such
Hazardous Material is discovered in the Building and if removal of the same is
required by law, then Landlord shall promptly remove such Hazardous Material at
Landlord's sole cost and expense. Landlord agrees to indemnify and hold harmless
Tenant from and against any and all claims, losses, liabilities and expenses
(including reasonably attorneys' fees) sustained by Tenant attributable to (i)
any Hazardous Materials placed on or about the Premises or the Building (other
than by Tenant or its officers, directors, employees, agents, or guests), or
(ii) Landlord's breach of any provision of this Section 1.2. As used herein, the
term "Hazardous Material" means any hazardous or toxic substance, material or
waste (including asbestos) which is regulated by any local governmental
authority, the State of California or the Federal government.
<PAGE>
2. LEASE TERM. The terms and provisions of this Lease shall be effective as of
the later of (i) date of this Lease, or (ii) the date Tenant receives a fully
executed SNDA (as defined in Section 18 below). The term of this Lease (the
"Lease Term") shall be as set forth in Section 7.1 of the Summary and shall
commence on the date (the "Lease Commencement Date") set forth in Section 7.2 of
the Summary (subject to the terms of the Tenant Work Letter) and shall terminate
on the date (the "Lease Expiration Date") set forth in Section 7.3 of the
Summary, unless sooner terminated or extended as hereinafter provided. At any
time during the Lease Term, Landlord may deliver to Tenant a notice of Lease
Term dates in the form as set forth in Exhibit C attached hereto, which notice
Tenant shall execute and return to Landlord within five (5) days of receipt
thereof.
3. BASE RENT. From and after the Rent Commencement Date, Tenant shall pay,
without notice or demand, except as otherwise set forth in this Lease, to
Landlord at its office located at 1101 - 5th Avenue, Suite 300, San Rafael,
California 94901, in lawful money of the United States of America, base rent
("Base Rent") as set forth in Section 8 of the Summary, payable in equal monthly
installments as set forth in Section 8 of the Summary in advance on or before
the first day of each month during the remainder of the Lease Term, without any
setoff or deduction whatsoever, except as otherwise set forth in this Lease. The
Base Rent for the first full month of the Lease Term, which occurs after the
expiration of any free rent period, shall be paid at the time of Tenant's
execution of this Lease. If any rental payment date (including the Rent
Commencement Date) falls on a day of the month other than the first day of such
month or if any rental payment is for a period which is shorter than one month,
then the rental for any such fractional month shall be a proportionate amount of
a full calendar month's rental. All other payments or adjustments required to be
made under the terms of this Lease that require proration on a time basis shall
be prorated on the same basis.
4. ADDITIONAL RENT.
4.1 Additional Rent. In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay as additional rent Tenant's Share of
the annual Direct Expenses, which are in excess of Direct Expenses incurred in
the Base Year (as defined in Section 4.2.1 below); provided, however, that in no
event shall Tenant's Share of the annual Direct Expenses (excluding Tax
Expenses, insurance costs and utility costs) for any Expense Year increase by
more than five percent (5%) over Tenant's Share of such expenses that Tenant was
obligated to pay for the previous Expense Year. Such additional rent, together
with any and all other amounts payable by Tenant to Landlord pursuant to the
terms of this Lease, shall be hereinafter collectively referred to as the
"Additional Rent." The Base Rent and Additional Rent are herein collectively
referred to as the "Rent." Without limitation on other obligations of Tenant
which shall survive the expiration of the Lease Term, the obligations of Tenant
to pay the Additional Rent provided for in this Article 4 shall survive the
expiration of the Lease Term.
4.2 Definitions. As used in this Article 4, the following terms shall have
the meanings hereinafter set forth:
4.2.1 "Base Year" shall be the period set forth in Section 9.1 of
the Summary.
4.2.2 "Direct Expenses" shall mean Operating Expenses and Tax
Expenses.
4.2.3 "Expense Year" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and in the event of any such change, Tenant's Share of Direct
Expenses shall be equitably adjusted for any Expense Year involved in any such
change; provided further that Landlord shall not change the original Base Year.
4.2.4 "Operating Expenses" shall mean all expenses, costs and
amounts of every kind and nature which Landlord shall pay during any Expense
Year because of or in connection with the ownership, management, maintenance,
repair, replacement, restoration or operation of the Real Property, including,
without limitation, any amounts paid for (i) the cost of supplying all utilities
to the Common
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<PAGE>
Areas, the cost of operating, maintaining, repairing, renovating and managing
the utility systems serving the Building, mechanical systems, sanitary and storm
drainage systems, and elevator systems, and the cost of supplies and equipment
and maintenance and service contracts in connection therewith; (ii) the cost of
licenses, certificates, permits and inspections and the cost of contesting the
validity or applicability of any governmental enactments which may affect
Operating Expenses (provided that the cost of such contests shall not exceed the
financial benefit if such contest is successful), and the costs incurred in
connection with the implementation and operation of a transportation system
management program or similar program, if required by applicable law; (iii) the
cost of insurance carried by Landlord, in such amounts as Landlord may
reasonably determine or as may be required by any mortgagees or the lessor of
any underlying or ground lease affecting the Real Property and/or the Building,
provided further that such amounts shall not be more than amounts carried by
landlords of Comparable Buildings (as defined below); (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation, repair and maintenance of the Building; (v) fees, charges and
other costs, including reasonable consulting fees, reasonable legal fees and
reasonable accounting fees, of all contractors engaged by Landlord or otherwise
reasonably incurred by Landlord in connection with the management, operation,
maintenance and repair of the Building and Real Property; (vi) any equipment
rental agreements or management agreements (including the cost of any management
fee and the fair rental value of any office space provided thereunder); (vii)
wages, salaries and other compensation and benefits of all persons at or below
the level of Building manager engaged in the operation, management, maintenance
or security of the Building, and employer's Social Security taxes, unemployment
taxes or insurance, and any other taxes which may be levied on such wages,
salaries, compensation and benefits; provided, that if any employees of Landlord
at or below the level of Building manager provide services for more than one
building of Landlord, then a prorated portion of such employees' wages, benefits
and taxes shall be included in Operating Expenses based on the portion of their
working time devoted to the Building; (viii) payments under any easement,
license, operating agreement, declaration, restrictive covenant, underlying or
ground lease (excluding rent), or instrument pertaining to the sharing of costs
by the Building; (ix) operation, repair, maintenance and replacement of all
Building systems and equipment and components thereof; (x) the cost of
janitorial service to the Building, alarm and security service, window cleaning,
trash removal from the Building, replacement of wall and floor coverings,
ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or
public areas or facilities, maintenance and replacement of curbs and walkways,
repair to roofs and re-roofing; (xi) amortization (including interest on the
unamortized cost) of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Building and Real
Property; and (xii) the cost of any capital improvements or other costs (I)
which will significantly act as a labor-saving device or significantly effect
other economies in the operation or maintenance of the Building, (II) made to
the Building that are required under any governmental law or regulation or any
amendment thereto enacted or otherwise first effective after the Lease
Commencement Date, or (III) which are reasonably determined by Landlord to be
necessary for the health, welfare and safety of the tenants of the Building
and/or the Real Property; provided, however, that if any such cost described in
(I). (II) or (III), above, is a capital expenditure, such cost shall be
amortized (including interest on the unamortized cost) over its useful life as
Landlord shall reasonably determine. If Landlord is not furnishing any
particular work or service (the cost of which, if performed by Landlord, would
be included in Operating Expenses) to a tenant who has undertaken to perform
such work or service in lieu of the performance thereof by Landlord, provided
that such work or service is not provided or offered to Tenant, Operating
Expenses shall be deemed to be increased by an amount equal to the additional
Operating Expenses which would reasonably have been incurred during such period
by Landlord if it had at its own expense furnished such work or service to such
tenant. If the Building is not fully occupied during all or a portion of the
Base Year or any Expense Year, Landlord shall make an appropriate adjustment to
the variable components of Operating Expenses for such year or applicable
portion thereof, employing sound accounting and management principles, to
determine the amount of Operating Expenses that would have been paid had the
Building been fully occupied; and the amount so determined shall be deemed to
have been the amount of Operating Expenses for such year, or applicable portion
thereof. Landlord shall have the right, from time to time, to equitably allocate
some or all of the Operating Expenses among different classification of tenants
of the Building (the "Cost Pools"). Such Cost Pools may include, but shall not
be limited to, the office space tenants of the Building and the retail space
tenants of the Building. Notwithstanding anything to the contrary set forth in
this Article 4, when calculating Direct Expenses for the Base Year, Operating
Expenses shall exclude market-
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<PAGE>
wide labor-rate increases due to extraordinary circumstances, including, but not
limited to, boycotts and strikes, and utility rate increases due to
extraordinary circumstances including, but not limited to, conservation
surcharges, boycotts, embargoes or other shortages.
4.2.5 Exclusions to Operating Expenses. In addition to any
exclusions to Operating Expenses set forth in Section 4.2.4 above, the following
shall also not be included in Operating Expenses: (i) costs, including marketing
costs, legal fees, space planners' fees, advertising and promotional expenses,
and brokerage fees incurred in connection with the leasing of the Building, and
costs, including permit, license and inspection costs, incurred with respect to
the installation of tenant improvements made for tenants occupying space in the
Building; (ii) rental concessions granted to specific tenants and expenses
incurred in renovating or otherwise improving or decorating, painting, or
redecorating space for specific tenants, other than ordinary repairs and
maintenance provided to all tenants; (iii) depreciation and other "non-cash"
items; (iv) costs, fines, interest and penalties incurred due to the late
payment of Taxes; (v) interest and principal payments on mortgages and other
debt costs, if any; (vi) costs for which Landlord is actually reimbursed (x) by
any tenant or occupant of the Building, or (y) by insurance by its carrier or
any tenant's carrier or by anyone else; (vii) any bad debt loss, rent loss, or
other reserves of any kind or nature; (viii) management fees in excess of three
percent (3%) of the annual gross revenues of the leases in the Building, (ix)
costs associated with the operation of the business of the partnership or entity
which constitutes Landlord include costs of partnership, accounting and legal
matters (excluding accounting and legal matters related to the Building), costs
of defending any lawsuits with any mortgagee, costs of selling, syndicating,
financing, mortgaging or hypothecating any of Landlord's interest in the
Building, and costs incurred in connection with any disputes between Landlord
and its employees, between Landlord and Building management, or between Landlord
and other tenants or occupants, and Landlord's general corporate overhead and
general and administrative expenses; (x) [intentionally deleted] (xi) the cost
of any services in the Building provided by Landlord or any Landlord Affiliate
(as defined below) to the extent the same exceeds the costs of such services
rendered by qualified, unaffiliated third parties on a competitive basis in the
San Francisco area (as used herein, a "Landlord Affiliate" shall mean an entity
that (i) controls, is controlled by or is under common control with, Landlord,
or (ii) acquires all or substantially all of the business and assets of Landlord
or a division thereof or results from a merger with Landlord or such a division;
and a party shall be deemed to "control" another party for purposes of the
aforesaid definition only if the first party owns more than fifty percent (50%)
of the stock or other beneficial interests of the second party); (xii) any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord; (xiii) costs, other than those incurred in
ordinary maintenance and repair, for sculpture, paintings or other objects of
art; (xiv) any costs expressly excluded from Operating Expenses elsewhere in
this Lease; (xv) rent for any office space occupied by Building management
personnel to the extent (x) the size or rental rate of such office space exceeds
the size or fair market rental value of office space occupied by management
personnel of the Comparable Buildings, with adjustment where appropriate for the
size of the applicable Building, (y) the size of such office exceeds 1,500
useable square feet, or (z) the base rent for such office exceeds the then base
rental rate for the Premises; (xvi) costs arising from the uninsured gross
negligence or willful misconduct of Landlord or Landlord's Agents; (xvii) costs
arising from the presence of Hazardous Materials in or about the Building that
were present at the Building prior to the Lease Commencement Date or costs
arising from the use, disposal or release of Hazardous Materials by other
tenants in the Building; (xviii) costs arising from Landlord's charitable or
political contributions; (xix) any gifts provided to any entity whatsoever,
including, but not limited to, Tenant, other tenants, employees, vendors,
contractors, prospective tenants and agents; (xx) the cost of any magazine,
newspaper, trade or other subscriptions; (xxi) costs incurred by Landlord for
the repair of damage to the Building, to the extent that Landlord is (x)
reimbursed in insurance proceeds or would have been reimbursed had Landlord
obtained the insurance policies that Landlord is required to carry pursuant to
this Lease, or (y) reimbursed by warranties that Landlord has obtained in
connection with the construction of the Building; (xxii) costs incurred in
connection with the sale, financing or refinancing of the Building; (xxiii) any
penalties or damages that Landlord pays to Tenant under this Lease or to other
tenants in the Building under their respective leases; (xxiv) Landlord's costs
of electricity and other services sold or provided to tenants in the Building
and for which Landlord is entitled to be reimbursed by such tenants as a
separate additional charge or rental over and above the base rental or
additional base rental payable under the lease with such tenant; (xxv) all items
(including repairs) and services for which Tenant or other tenants pay directly
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<PAGE>
to third parties or for which Tenant or other tenants reimburse Landlord (other
than through Operating Expenses); (xxvi) advertising and promotional
expenditures; (xxvii) attorneys' fees, costs and disbursements and other
expenses incurred in connection with negotiations or disputes with tenants or
other occupants of the Building or with prospective tenants (other than
attorneys' fees, costs and disbursements and other expenses incurred by Landlord
in seeking to enforce Building rules and regulations); (xxviii) reserves,
including reserves for capital items, bad debts, or rental losses; and (xxix)
any other expense or charge which, in accordance with general industry practice
with respect to the operation of a first-class office building, would not be
construed as an operating expense.
4.2.6 "Tax Expenses" shall mean, subject to Section 4.5 below, all
federal, state, county, or local governmental or municipal taxes, fees, charges
or other impositions of every kind and nature, whether general, special,
ordinary or extraordinary (including, without limitation, real estate taxes,
general and special assessments, special assessment district payments, transit
taxes, leasehold taxes or taxes based upon the receipt of rent, including gross
receipts or sales taxes applicable to the receipt of rent, unless required to be
paid by Tenant, personal property taxes imposed upon the fixtures, machinery,
equipment, apparatus, systems and equipment, appurtenances, furniture and other
personal property used in connection with the Building), which Landlord shall
pay because of or in connection with the ownership, leasing and operation of the
Real Property or Landlord's interest therein. Tax Expenses shall include,
without limitation: (i) any tax on Landlord's rent, right to rent or other
income from the Real Property or as against Landlord's business of leasing any
of the Real Property; (ii) any assessment, tax, fee, levy or charge in addition
to, or in substitution, partially or totally, of any assessment, tax, fee, levy
or charge previously included within the definition of real property tax, it
being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("Proposition 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies, and charges and all similar assessments, taxes, fees, levies and charges
be included within the definition of Tax Expenses for purposes of this Lease;
(iii) any assessment, tax, fee, levy, or charge allocable to or measured by the
area of the Premises or the rent payable hereunder, including, without
limitation, any gross income tax with respect to the receipt of such rent, or
upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof; and (iv) any assessment, tax, fee, levy or charge, upon
this transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises. Notwithstanding the
foregoing, in no event shall Tenant's Share of annual Tax Expenses for any
Expense Year increase by more than two percent (2%) over Tenant's Share of Tax
Expenses for the previous Expense Year.
4.2.7 "Tenant's Share" shall mean the percentage set forth in
Section 9.2 of the Summary.
4.3 Calculation and Payment of Additional Rent.
4.3.1 Calculation of Excess and Underage. If for any Expense Year
ending or commencing within the Lease Term, Tenant's Share of Direct Expenses
for such Expense Year exceeds Tenant's Share of Direct Expenses for the Base
Year, then Tenant shall pay to Landlord, in the manner set forth in Section
4.3.2 below, and as Additional Rent, an amount equal to such excess (the
"Excess").
4.3.2 Statement of Actual Direct Expenses and Payment by Tenant.
Within one hundred twenty (120) days following the end of each Expense Year,
Landlord shall give to Tenant a statement (the "Statement") which Statement
shall state the actual Direct Expenses incurred or accrued for such preceding
Expense Year, and which shall indicate the amount, if any, of any Excess or
underage. Upon receipt of the Statement for each Expense Year ending during the
Lease Term, if an Excess is present, Tenant shall pay, with its next installment
of Base Rent, the full amount of the Excess for such Expense Year, less the
amounts, if any, paid during such Expense Year as Estimated Excess (as defined
in Section 4.3.3 below). Any overpayment by Tenant of Tenant's Share of Direct
Expenses
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<PAGE>
for the applicable Expense Year set forth in the Statement shall be credited
towards the Rent next due or returned to Tenant in a lump sum payment within
thirty (30) days after delivery of such Statement. Even though the Lease Term
has expired and Tenant has vacated the Premises, when the final determination is
made of Tenant's Share of the Direct Expenses for the Expense Year in which this
Lease terminates, if an Excess is present, Tenant shall, within thirty (30) days
of receipt of a Statement setting forth the Excess, pay to Landlord and if an
underage is present, Landlord shall, within thirty (30) days after delivery of
such Statement, pay to Tenant, an amount as calculated pursuant to the
provisions of Section 4.3.1 of this Lease. The provisions of this Section 4.3.2
shall survive the expiration or earlier termination of the Lease Term.
4.3.3 Statement of Estimated Direct Expenses. Within one hundred
twenty (120) days following the start of the applicable Expense Year, Landlord
shall give Tenant a yearly expense estimate statement (the "Estimate Statement")
which Estimate Statement shall set forth Landlord's reasonable estimate (the
"Estimate") of what the total amount of Direct Expenses for the then-current
Expense Year shall be and the estimated Excess (the "Estimated Excess") as
calculated by comparing Tenant's Share of Direct Expenses, which shall be based
upon the Estimate, to Tenant's Share of Direct Expenses for the Base Year. The
failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Estimated Excess under this Article 4. If pursuant to the Estimate Statement an
Estimated Excess is calculated for the then-current Expense Year, Tenant shall
pay, with its next installment of Base Rent, a fraction of the Estimated Excess
for the then-current Expense Year (reduced by any amounts paid pursuant to the
last sentence of this Section 4.3.3). Such fraction shall have as its numerator
the number of months which have elapsed in such current Expense Year to the
month of such payment, both months inclusive, and shall have twelve (12) as its
denominator. Until a new Estimate Statement is furnished, Tenant shall pay
monthly, with the monthly Base Rent installments, an amount equal to one-twelfth
(1/12) of the total Estimated Excess set forth in the previous Estimate
Statement delivered by Landlord to Tenant.
4.3.4 Audit Rights. Tenant may, within ninety (90) days after
receiving the Statement, give Landlord written notice ("Review Notice") that
Tenant intends to review Landlord's records of the Direct Expenses set forth in
the Expense Year covered by such Statement; provided that (i) there exists no
uncured Event of Default, (ii) Tenant has paid all amounts required to be paid
under such Statement, and (iii) any accounting firm engaged by Tenant to perform
such review and/or audit may not be retained on a contingency fee basis. Within
a reasonable time after receipt of the Review Notice, Landlord shall make all
pertinent records available for inspection that are reasonably necessary for
Tenant to conduct its review. If any records are maintained at a location other
than the office of the Building, Tenant may either inspect the records at such
other location or pay for the reasonable cost of copying and shipping the
records. Tenant may conduct a review of Landlord's books and records in-house.
Except as set forth below, Tenant shall be solely responsible for all costs,
expenses and fees incurred for the audit. Within sixty (60) days after the
records are made available to Tenant, Tenant shall have the right to give
Landlord written notice (an "Objection Notice") stating in reasonable detail any
objection to the Statement. If Tenant fails to give Landlord an Objection Notice
within the sixty (60) day period or fails to provide Landlord with a Review
Notice within the ninety (90) day period described above, Tenant shall be deemed
to have approved the Statement and shall be barred from raising any claims
regarding the Direct Expenses set forth in the Statement. In the event that
Tenant determines on the basis of its review of Landlord's books and records
that the amount of Direct Expenses paid by Tenant pursuant to this Section 4 or
the period covered by such Statement is less than or greater than the actual
amount properly payable by Tenant under the terms of this Lease, If as the
result of such review and/or audit Tenant disputes the amount of Direct Expenses
for the Expense Year under inspection, Landlord and Tenant shall meet and
attempt in good faith to resolve the dispute. If the parties are unable to
resolve the dispute within sixty (60) days after completion of such review
and/or audit, then Tenant shall have the right to submit the dispute to
arbitration, which right shall be exercised, if at all, by delivering a notice
of election to arbitrate to Landlord not later than the last day of said sixty
(60) day period. Landlord and Tenant shall agree, within fifteen (15) days after
Tenant's delivery of the arbitration election, to retain an arbitrator who shall
be an unaffiliated, reputable certified public accountant who is a member of a
reputable independent nationally or regionally recognized certified public
accounting firm, and who has had at least five (5) years of experience in
reviewing financial operating records of landlords of office buildings. The
arbitration shall
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be limited to the determination of the appropriate amount of Direct Expenses, as
relevant to the subject of the dispute, for the Expense Year under review. The
decision of the arbitrator shall be delivered simultaneously to Landlord and
Tenant, and shall be final and binding upon Landlord and Tenant. If the
arbitrator determines that the amount of Direct Expenses billed to Tenant was
incorrect, the appropriate party shall pay to the other party the deficiency or
overpayment, as applicable, within thirty (30) days following delivery of the
arbitrator's decision, without interest. All costs and expenses of the
arbitration shall be paid by Tenant unless the final determination in such
arbitration is that Landlord overstated operating expenses for the applicable
calendar year by more than three percent (3%) of the originally reported Direct
Expenses, in which case Landlord shall pay all costs and expenses of the
arbitration. Tenant shall keep any information gained from its review and/or
audit of Landlord's books and records confidential and shall not disclose such
information to any other party, except Tenant's consultants or as required by
law.
4.4 Taxes and Other Charges for Which Tenant Is Directly Responsible.
Tenant shall reimburse Landlord upon demand for any and all taxes or assessments
required to be paid by Landlord (except to the extent included in Tax Expenses
by Landlord), excluding state, local and federal personal or corporate income
taxes measured by the net income of Landlord from all sources and estate and
inheritance taxes, whether or not now customary or within the contemplation of
the parties hereto, when:
4.4.1 Said taxes are measured by or reasonably attributable to the
cost or value of Tenant's equipment, furniture, fixtures and other personal
property located in the Premises, or by the cost or value of any leasehold
improvements made in or to the Premises by or for Tenant, to the extent the cost
or value of such leasehold improvements exceeds the cost or value of a building
standard build-out as determined by Landlord regardless of whether title to such
improvements shall be vested in Tenant or Landlord;
4.4.2 Said taxes are assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Real Property;
4.4.3 Said taxes are assessed upon this transaction or any document
to which Tenant is a party creating or transferring an interest or an estate in
the Premises; or
4.4.4 Said assessments are levied or assessed upon the Real Property
or any part thereof or upon Landlord and/or by any governmental authority or
entity, and relate to the construction, operation, management, use, alteration
or repair of mass transit improvements.
4.5 Tax Expenses Relating to a Reassessment of the Building.
Notwithstanding anything to the contrary contained in this Lease, in the event
that, at any time during the Lease Term, any change in ownership of the Building
is consummated (irrespective of whether such change is accomplished by
transferring title to the Building or ownership interest or stock of Landlord)
(the "Sale"), and as a result thereof, and to the extent that in connection
therewith, the Building is reassessed (the "Reassessment") for real estate tax
purposes by the appropriate governmental authority pursuant to the terms of
Proposition 13 or any other applicable law, then Tenant shall not be obligated
to pay any portion of the Tax Increase for the remainder of the Lease Term
(including any Option Term). For purposes of this Section 4.5, the term "Tax
Increase" shall mean that portion of the Tax Expenses, as calculated immediately
following the Reassessment, which is attributable solely to the Reassessment.
Accordingly, the term Tax Increase shall not include any portion of the Tax
Expenses, as calculated immediately following the Reassessment, which is
attributable (i) to assessments which were pending immediately prior to the
Reassessment, which assessments were not related in any way to the Sale, but
were conducted during, and included in, such Reassessment, (ii) to the annual
inflationary increase of real estate taxes, but not in excess of two percent
(2.0%) per annum over the Base Year, or (iii) to Tax Expenses calculated prior
to the Reassessment without including any Proposition 8 reduction.
5. USE OF PREMISES. Tenant shall use the premises only for the purpose as set
forth in Section 10 of the Summary (the "Permitted Use") and for no other use or
purpose, unless first approved
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in writing by Landlord, which approval Landlord may withhold in its sole
discretion. Tenant agrees that it shall not use, or permit any person to use,
the Premises or any part thereof for any use or purpose contrary to the
provisions of the Rules and Regulations set forth in Exhibit D attached hereto,
or in violation of the laws of the United States of America, the State of
California, or the ordinances, regulations or requirements of any local,
municipal or county governing body or other lawful authorities having
jurisdiction over the Building. Tenant shall comply with all recorded covenants,
conditions, and restrictions, and the provisions of all ground or underlying
leases, affecting the Real Property which may be entered into after the date of
this Lease; provided, however, that in no event shall the foregoing documents
adversely affect the rights of Tenant in any material way, and Tenant shall have
received copies of the documents prior to the execution thereof. Tenant shall
not use or allow another person or entity to use any part of the Premises for
the storage, use, treatment, manufacture or sale of any Hazardous Material (as
defined in Section 1.2 above), except for the use of ordinary office supplies in
compliance with all applicable laws and regulations.
6. SERVICES AND UTILITIES.
6.1 Standard Tenant Services. Landlord shall provide the following
services and utilities twenty-four (24) hours per day on every day during the
Lease Term, unless otherwise stated below.
6.1.1 Subject to reasonable change implemented by governmental
rules, regulations and guidelines applicable thereto, Landlord shall provide
heating and air conditioning when necessary for normal comfort for normal office
use in the Premises ("HVAC") from Monday through Friday (excluding Holidays,
"Business Days") from 8 a.m. to 6 p.m., and on Saturday from 9:00 a.m. to 1:00
p.m., except for the date of observation of locally recognized holidays
(collectively, "Holidays"). The daily time periods identified hereinabove are
sometimes referred to as the "Business Hours." Upon reasonable prior notice by
Tenant from time to time, Landlord shall provide HVAC adequate for the
comfortable use and occupancy of the Premises outside Business Hours. Tenant
agrees to pay for such after-hours HVAC at Landlord's direct cost without
start-up charges or markup, subject to a limit on annual increases in the hourly
charge for after-hours HVAC of five percent (5%). There shall be no minimum
usage requirement and notwithstanding the immediately foregoing sentence, Tenant
shall not be charged for cooling and condenser water during the Term (including
any Option Term), and if Landlord is providing HVAC outside Business Hours to
Tenant and another tenant, then the hourly charge for after-hours HVAC shall be
prorated.
6.1.2 Landlord shall at all times provide in the Premises, five (5)
watts of demand load electricity for connectivity and outlets and 1.3 watts per
rentable square foot of demand load for lighting (per Title 24 of the California
Code of Regulations). Landlord shall also provide (i) city water for use in
connection with any plumbing fixtures now or hereafter installed in the Premises
and the Building in accordance with this Lease, and (ii) nonexclusive automatic
passenger elevator service at all times. Landlord may increase the hours or days
during which air conditioning, heating and ventilation are provided to the
Premises and the Building to accommodate the usage by tenants occupying
two-thirds or more of the rentable square feet of the Building or to conform to
practices of other buildings in the area comparable to the Building.
6.1.3 Landlord shall provide janitorial service to the Premises from
Monday through Friday, except on Holidays, as further described on Exhibit F
attached hereto.
6.1.4 Except as otherwise expressly provided in this Lease, Tenant
shall pay to Landlord, within ten (10) days after billing, the cost of all
utilities provided to the Premises, which cost shall be calculated by prorating
the cost of all utilities provided to the Building among all tenants, as
reasonably determined by Landlord.
6.2 Interruption of Use. Subject to the provisions of this Section 6.2,
Tenant agrees that Landlord shall not be liable for damages, by abatement of
rent or otherwise, for failure to furnish or delay in furnishing any service
(including telephone and telecommunication services), or for any diminution in
the quality or quantity thereof (collectively or individually, "Service
Failure"), when such Service Failure or
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delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building after
reasonable effort to do so, by any accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any other cause beyond Landlord's
reasonable control; and such Service Failure or delays or diminution shall never
be deemed to constitute an eviction or disturbance of Tenant's use and
possession of the Premises or relieve Tenant from paying rent or performing any
of its obligations under this Lease. Furthermore, Landlord shall not be liable
under any circumstances for a loss of, or injury to, property or for injury to,
or interference with, Tenant's business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any services or utilities. Notwithstanding anything set forth
herein, if the Premises, or a material portion of the Premises, is made
untenantable (meaning that Tenant is unable to use the Premises in the normal
course of its business) for a period in excess of seven (7) consecutive Business
Days as a result of the Service Failure, then Tenant, as its sole remedy, shall
be entitled to receive an abatement of Rent payable hereunder during the period
beginning on the eighth (8th) consecutive Business Day of the Service Failure
and ending on the day the service has been restored. If the entire Premises has
not been rendered untenantable by the Service Failure, the amount of abatement
that Tenant is entitled to receive shall be prorated based upon the percentage
of the Premises rendered untenantable and not used by Tenant.
7. REPAIRS. Tenant shall, at Tenant's own expense, keep the Premises, including
all improvements, fixtures and furnishings therein, in good order, repair and
condition at all times during the Lease Term. Tenant shall, at Tenant's own
expense, promptly and adequately repair all damage to the Premises and replace
or repair all damaged or broken fixtures and appurtenances; provided however,
that, at Landlord's option, or if Tenant fails to make such repairs within a
reasonable time following such damage, Landlord may, but need not, make such
repairs and replacements, and Tenant shall pay Landlord the reasonable cost
thereof, including a percentage of the cost thereof (to be uniformly established
for the Building) sufficient to reimburse Landlord for overhead, general
conditions, fees and other reasonable costs or reasonable expenses arising from
Landlord's involvement with such repairs and replacements forthwith upon being
billed for same. Landlord may, but shall not be required to, enter the Premises
after twenty-four (24) hours' prior notice to Tenant (except in the event of an
emergency) to make such repairs, alterations, improvements and additions to the
Premises or to the Building or to any equipment located in the Building as
Landlord shall desire or deem necessary or as Landlord may be required to do by
governmental or quasi-governmental authority or court order or decree. Landlord
shall use commercially reasonable efforts to minimize any interference with the
normal course of Tenant's business in conducting the repairs set forth herein,
provided that such repairs may be performed during Business Hours. Tenant hereby
waives and releases its right to make repairs at Landlord's expense under
Sections 1941 and 1942 of the California Civil Code, or under any similar law,
statute, or ordinance now or hereafter in effect. Landlord agrees to maintain
the exterior of the Building facing New Montgomery Street in good and clean
condition, including, but not limited to, the regular removal of any graffiti.
8. ADDITIONS AND ALTERATIONS.
8.1 Landlord's Consent to Alterations. Tenant may not make any
improvements, alterations, additions or changes to the Premises (collectively,
the "Alterations") (i) in excess of Fifty Thousand Dollars ($50,000.00), or (ii)
which affect the Building systems or structure, without first procuring the
prior written consent of Landlord to such Alterations, which consent shall be
requested by Tenant not less than twenty (20) days prior to the commencement
thereof, and which consent shall not be unreasonably withheld, conditioned or
delayed by Landlord. In the event Landlord consents to the Alterations, Landlord
shall notify Tenant at the time Landlord provides its consent ("Removal
Notice"), whether Tenant shall be obligated to remove the Alterations at the
expiration of the Term. The construction of the initial improvements to the
Premises shall be governed by the terms of the Tenant Work Letter attached
hereto as Exhibit B, and not the terms of this Article 8.
8.2 Manner of Construction. All work with respect to any Alterations must
be done by contractors and subcontractors approved by Landlord (which approval
shall not be unreasonably
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withheld, conditioned or delayed), in a good and workmanlike manner in
compliance with all applicable laws and with Landlord's reasonable construction
rules and regulations, and diligently prosecuted to completion to the end that
the Premises shall at all times be a complete unit except during the period of
work. In performing the work of any such Alterations, Tenant shall have the work
performed in such manner as not to obstruct access to the Building or the common
areas for any other tenant of the Building, and as not to obstruct the business
of Landlord or other tenants in the Building, or interfere with the labor force
working in the Building. In the event that Tenant makes any Alterations, Tenant
agrees to carry "Builder's All Risk" insurance in an amount reasonably approved
by Landlord covering the construction of such Alterations, and such other
insurance as Landlord may reasonably require, it being understood and agreed
that all of such Alterations shall be insured by Tenant pursuant to Article 10
of this Lease immediately upon completion thereof. Upon completion of any
Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the
office of the Recorder of the county in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute, and Tenant shall deliver to the Building management office a
reproducible copy of the "as built" drawings of the Alterations.
8.3 Payment for Improvements. Upon completion of any Alterations, upon
Landlord's request, Tenant shall deliver to Landlord unconditional waivers and
releases upon final payment with respect to all liens for labor, services or
materials. Tenant shall reimburse Landlord for the reasonable out-of-pocket
costs and expenses actually incurred by Landlord in connection with Landlord's
review of such work and/or the related plans and specifications; provided,
however, that in no event shall such costs and expenses exceed (i) One Thousand
Five Hundred Dollars ($1,500.00), if the cost of the Alterations is Fifty
Thousand Dollars ($50,000.00) or less, or (ii) Three Thousand Dollars
($3,000.00), if the cost of the Alterations exceeds Fifty Thousand Dollars
($50,000.00).
8.4 Landlord's Property. All Alterations, improvements, fixtures and/or
permanently affixed equipment which may be installed or placed in or about the
Premises, and all signs installed in, on or about the Premises, from time to
time, shall be at the sole cost of Tenant and shall be and become the property
of Landlord. If, pursuant to the Removal Notice, Tenant is obligated to remove
the Alterations at the expiration of the Term and Tenant does not desire to do
so, Tenant shall notify Landlord of such fact within ten (10) Business Days
after receipt of the Removal Notice. Landlord may then, at its option, require
Tenant to pay, prior to the expiration of the Term, an amount reasonably
determined by Landlord as necessary to cover the cost of demolishing such
Alterations and/or the cost of returning the Premises to its condition prior to
such Alterations (the "Alterations Removal Deposit"), reasonable wear and tear,
damage by casualty and condemnation excepted. Upon payment of the Alterations
Removal Deposit to Landlord, notwithstanding anything set forth in Landlord's
notice of consent to such Alterations or in this Lease, Tenant shall have no
obligation to remove such Alterations at the expiration of the Term.
Notwithstanding the foregoing, Tenant shall not be required to remove the Tenant
Improvements constructed pursuant to the Tenant Work Letter attached hereto as
Exhibit B. If Tenant fails to complete the removal of any Alterations that
Tenant is required to remove under this Lease and/or to repair any damage caused
by the removal of any such Alterations, Landlord may do so and may charge the
reasonable cost thereof to Tenant. Except as set forth in this Section 8.4,
Tenant hereby indemnifies and holds Landlord harmless from any liability, cost,
obligation, expense or claim of lien in any manner relating to the installation,
placement, removal or financing of any such Alterations, improvements, fixtures
and/or equipment in, on or about the Premises.
9. COVENANT AGAINST LIENS. Tenant has no authority or power to cause or permit
any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed upon the Real
Property, Building or Premises, and any and all liens and encumbrances created
by Tenant shall attach to Tenant's interest only. Landlord shall have the right
at all times to post and keep posted on the Premises any notice which it deems
necessary for protection from such liens. Tenant covenants and agrees not to
suffer or permit any lien of mechanics or materialmen or others to be placed
against the Real Property, the Building or the Premises with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises, and, in case of any such lien attaching or
notice of any lien, Tenant covenants and agrees to cause it to be immediately
released and removed of record. Notwithstanding anything to
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the contrary set forth in this Lease, in the event that such lien is not
released and removed on or before the date notice of such lien is delivered by
Landlord to Tenant, Landlord, at its sole option, may immediately take all
action necessary to release and remove such lien, without any duty to
investigate the validity thereof, and all sums, costs and expenses, including
reasonable attorneys' fees and reasonable costs, incurred by Landlord in
connection with such lien shall be deemed Additional Rent under this Lease and
shall immediately be due and payable by Tenant.
10. INSURANCE.
10.1 Indemnification and Waiver. To the extent not prohibited by law and
as otherwise set forth in this Lease, Landlord, its partners, shareholders and
members and their respective officers, directors, agents, servants, employees,
and independent contractors (collectively, "Landlord Parties") shall not be
liable for any damage either to person or property or resulting from the loss of
use thereof, which damage is sustained by Tenant, its partners, shareholders and
members and their respective officers, directors, agents, servants, employees,
and independent contractors (collectively, "Tenant Parties") or by other persons
claiming through Tenant. Tenant shall indemnify, defend, protect, and hold
harmless Landlord Parties from any and all loss, cost, damage, expense and
liability (including without limitation court costs and reasonable attorneys'
fees) incurred in connection with or arising from any cause in, on or about the
Premises either prior to (only with respect to, or in connection with, the
Tenant Improvement Work described in Exhibit B or the activities of Tenant or
any Tenant Parties in or about the Premises), during, or after the expiration of
the Lease Term, provided that the terms of the foregoing indemnity shall not
apply to the gross negligence or willful misconduct of Landlord. The provisions
of this Section 10.1 shall survive the expiration or sooner termination of this
Lease with respect to any claims or liability occurring prior to such expiration
or termination.
10.2 Tenant's Compliance with Landlord's Fire and Casualty Insurance.
Tenant shall, at Tenant's expense, comply as to the Premises with all insurance
company requirements pertaining to the use of the Premises. If Tenant's conduct
or use of the Premises causes any increase in the premium for such insurance
policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at
Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body.
10.3 Tenant's Insurance. Tenant shall maintain Commercial General
Liability Insurance covering the insured against claims of bodily injury,
personal injury and property damage arising out of Tenant's operations, assumed
liabilities or use of the Premises, including a Broad Form Commercial General
Liability endorsement covering the insuring provisions of this Lease and the
performance by Tenant of the indemnity agreements set forth in Section 10.1 of
this Lease, for limits of liability not less than $2,000,000.00 for each
occurrence and $2,000,000.00 annual aggregate. In addition, Tenant shall carry
Physical Damage Insurance covering (i) all office furniture, trade fixtures,
office equipment, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, and (ii) all other
improvements, alterations and additions to the Premises, including any
improvements, alterations or additions installed at Tenant's request above the
ceiling of the Premises or below the floor of the Premises. Such insurance shall
be written on an "all risks" of physical loss or damage basis, for the full
replacement cost value new without deduction for depreciation of the covered
items and in amounts that meet any co-insurance clauses of the policies of
insurance and shall include a vandalism and malicious mischief endorsement,
sprinkler leakage coverage and earthquake sprinkler leakage coverage.
10.4 Form of Policies. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, and any other
party it so specifies, as an additional insured; (ii) specifically cover the
liability assumed by Tenant under this Lease, including, but not limited to,
Tenant's obligations under Section 10.1 of this Lease; (iii) be issued by an
insurance company having a rating of not less than A-VIII in Best's Insurance
Guide or which is otherwise acceptable to Landlord and licensed to do business
in the state in which the Building is located; (iv) be primary insurance as to
all claims thereunder and provide that any insurance carried by Landlord is
excess and is non-contributing with any insurance requirement
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of Tenant; (v) provide that said insurance shall not be canceled or coverage
changed unless thirty (30) days' prior written notice shall have been given to
Landlord and any mortgagee or ground or underlying lessor of Landlord. Tenant
shall deliver said policy or policies or certificates thereof to Landlord on or
before the Lease Commencement Date and at least thirty (30) days before the
expiration dates thereof. In the event Tenant shall fail to procure such
insurance, or to deliver such policies or certificate, Landlord may, at its
option, procure such policies for the account of Tenant, and the cost thereof
shall be paid to Landlord as Additional Rent within five (5) days after delivery
to Tenant of bills therefor.
10.5 Subrogation. Landlord and Tenant agree to have their respective
insurance companies issuing property damage insurance waive any rights of
subrogation that such companies may have against Landlord or Tenant, as the case
may be, so long as the insurance carried by Landlord and Tenant, respectively,
is not invalidated thereby. As long as such waivers of subrogation are contained
in their respective insurance policies, Landlord and Tenant hereby waive any
right that either may have against the other on account of any loss or damage to
their respective property to the extent such loss or damage is insurable under
policies of insurance for fire and all risk coverage, theft, public liability,
or other similar insurance.
10.6 Additional Insurance Obligations. Tenant shall carry and maintain
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10, and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord; provided, however, that unless otherwise
required by any holder of a deed of trust on the Building, Landlord shall not
increase such coverage amounts (i) more than once in any twelve (12) month
period or (ii) in excess of coverage amounts required of tenants in Comparable
Buildings.
11. DAMAGE AND DESTRUCTION.
11.1 Repair of Damage to Premises by Landlord. If the Premises or any
common areas of the Building serving or providing access to the Premises shall
be damaged by fire or other casualty, Landlord shall promptly and diligently,
subject to reasonable delays for insurance adjustment or other matters beyond
Landlord's reasonable control, and subject to all other terms of this Article
11, restore the base, shell and core of the Premises and such common areas. Such
restoration shall be to substantially the same condition of the base, shell and
core of the Premises and common areas prior to the casualty, except for
modifications required by zoning and building codes and other laws or by the
holder of a mortgage on the Building, or the lessor of a ground or underlying
lease with respect to the Real Property and/or the Building, or any other
modifications to the common areas deemed reasonably necessary by Landlord
(provided that, if there are insufficient insurance proceeds to cover any
increase in cost as a result of such modifications to the common areas that are
not required by zoning and building codes and other laws, when compared to the
cost of restoring the common areas to the condition existing immediately prior
to such casualty (the "Differential"), the Differential shall not be deemed an
Operating Expense and passed through to Tenant); and provided, further, that
access to the Premises and any common restrooms serving the Premises shall not
be materially impaired. Upon occurrence of any damage to the Premises, provided
this Lease is not terminated pursuant to Sections 11.2 or 11.3 below, Tenant may
elect to either (i) restore the damaged Tenant Improvements and/or Alterations
(collectively, "Damaged Improvements") itself in compliance with Article 8
above, or (ii) require Landlord to restore the Damaged Improvements, which upon
completion, such Damaged Improvements will comply with Section 8.2, provided
that if Tenant elects to require Landlord to restore the Damaged Improvements,
then Tenant shall assign to Landlord (or to any party designated by Landlord)
all insurance proceeds payable to Tenant under Tenant's insurance carried under
Section 10.3 of this Lease and Tenant shall pay the Differential with respect to
the Tenant Improvements prior to Landlord's repair of such damage. If such fire
or other casualty shall have damaged the Premises or common areas necessary to
Tenant's occupancy, and if such damage is not the result of the willful
misconduct of Tenant or Tenant's employees, contractors, licensees, or invitees,
from and after the date of such damage, Rent shall abate for the portion of the
Premises that is untenantable and not used by Tenant until the Premises have
been
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restored. Landlord shall not be liable for any inconvenience or annoyance to
Tenant or its visitors, or injury to Tenant's business resulting in any way from
such damage or the repair thereof.
11.2 Landlord's Option to Terminate. Notwithstanding the terms of Section
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises and/or Building and instead terminate this Lease by notifying Tenant in
writing of such termination within sixty (60) days after the date of discovery
of such damage, such notice to include a termination date giving Tenant ninety
(90) days to vacate the Premises, but Landlord may so elect only if the Building
shall be damaged by fire or other casualty or cause, whether or not the Premises
are affected, and one or more of the following conditions is present: (i)
repairs cannot reasonably be completed within one hundred eighty (180) days
after the casualty (when such repairs are made without the payment of overtime
or other premiums); (ii) the holder of any mortgage on the Building or ground or
underlying lessor with respect to the Real Property and/or the Building shall
require that the insurance proceeds or any portion thereof be used to retire the
mortgage debt, or shall terminate the ground or underlying lease, as the case
may be; or (iii) the damage is not fully covered, except for deductible amounts,
by Landlord's insurance policies, provided however, that Landlord shall have no
right to terminate this Lease by reason of insufficient insurance proceeds if
the damage is relatively minor (for the purpose of this Section 11.2, damage
shall be deemed to be "relatively minor" if the repair or restoration would cost
less than five percent (5%) of the replacement cost of the Building). In
addition, in the event that the Premises or the Building is destroyed or damaged
to any substantial extent during the last twelve (12) months of the Lease Term,
then notwithstanding anything contained in this Article 11, Landlord shall have
the option to terminate this Lease by giving written notice to Tenant of the
exercise of such option within thirty (30) days after the date of such damage or
destruction, in which event this Lease shall cease and terminate as of the date
of such notice. Upon any such termination of this Lease pursuant to this Section
11.2, Tenant shall pay the Base Rent and Additional Rent, properly apportioned
up to such date of termination, and both parties hereto shall thereafter be
freed and discharged of all further obligations hereunder, except as provided
for in provisions of this Lease which by their terms survive the expiration or
earlier termination of the Lease Term.
11.3 Tenant's Option to Terminate. In the event that the Premises is
destroyed or damaged to any substantial extent (for purposes of this Section
11.3, damage "to any substantial extent" shall mean that more than sixty (60)
days are reasonably required to repair such damage), as reasonably determined by
Landlord, during the last twelve (12) months of the Lease Term, then
notwithstanding anything contained in this Article 11, Tenant shall have the
option to terminate this Lease by giving written notice to Landlord of the
exercise of such option within thirty (30) days after the date of such damage or
destruction, in which event this Lease shall cease and terminate as of the date
of such notice. If the Premises is damaged or destroyed such that the Premises
cannot be substantially repaired or restored by Landlord within one hundred
eighty (180) days after the casualty, then Tenant may terminate this Lease upon
notice thereof to Landlord, which notice shall be given, if at all, within
thirty (30) days after Landlord's reasonable determination that the Premises
cannot be restored within one hundred eighty (180) days after the casualty
without incurring overtime or similar charges. Upon any such termination of this
Lease pursuant to Sections 11.2 or 11.3, Tenant shall pay, if any, the Base Rent
and Additional Rent, properly apportioned up to such date of termination, and
both parties hereto shall thereafter be freed and discharged of all further
obligations hereunder, except as provided for in provisions of this Lease which
by their terms survive the expiration or earlier termination of the Lease Term.
11.4 Waiver of Statutory Provisions. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or any other portion of the Real Property, and any
statute or regulation of the state in which the Building is located, including,
without limitation, Sections 1932(2) and 1933(4) of the California Civil Code,
with respect to any rights or obligations concerning damage or destruction in
the absence of an express agreement between the parties, and any other statute
or regulation, now or hereafter in effect, shall have no application to this
Lease or any damage or destruction to all or any part of the Premises, the
Building or any other portion of the Real Property.
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12. NO WAIVER. No waiver of any provision of this Lease shall be implied by (i)
any failure of either party to insist in any instance on the strict keeping,
observance or performance of any covenant or agreement contained in this Lease
or exercise any election contained in this Lease, or (ii) any failure of either
party to enforce any remedy on account of the violation of such provision, even
if such violation shall continue or be repeated subsequently. Any waiver by
either party of any provision of this Lease may only be in writing, and no
express waiver shall affect any provision other than the one specified in such
waiver and that one only for the time and in the manner specifically stated.
13. CONDEMNATION. If the whole or any part of the Premises or Building shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises or Building, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days' notice, provided such
notice is given no later than one hundred eighty (180) days after the date of
such taking, condemnation, reconfiguration, vacation, deed or other instrument.
If more than twenty-five percent (25%) of the rentable square feet of the
Premises is taken, or if access to the Premises is substantially impaired,
Tenant shall have the option to terminate this Lease upon ninety (90) days'
notice, provided such notice is given no later than one hundred eighty (180)
days after the date of such taking. Landlord shall be entitled to receive the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses. All Rent shall be apportioned as of the date of such
termination, or the date of such taking, whichever shall first occur. If any
part of the Premises shall be taken, and this Lease shall not be so terminated,
the Rent shall be proportionately abated. Tenant hereby waives any and all
rights it might otherwise have pursuant to Section 1265.130 of the California
Code of Civil Procedure.
14. ASSIGNMENT AND SUBLETTING.
14.1 Transfers. Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, pledge, encumber or otherwise transfer, this Lease
or any interest hereunder, permit any assignment or other such foregoing
transfer of this Lease or any interest hereunder by operation of law, or sublet
the Premises or any part thereof (all of the foregoing are hereinafter sometimes
referred to collectively as "Transfers" and any person to whom any Transfer is
made or sought to be made is hereinafter sometimes referred to as a
"Transferee"). To request Landlord's consent to any Transfer, Tenant shall
notify Landlord in writing, which notice (the "Transfer Notice") shall include
(i) the proposed effective date of the Transfer, which shall be not less than
thirty (30) days after the date of delivery of the Transfer Notice (ii) a
description of the portion of the Premises to be transferred (the "Subject
Space"), (iii) all of the terms of the proposed Transfer and the consideration
therefor, including an estimated calculation of the "Transfer Premium," as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing and/or
proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such Transfer, and (iv) current financial
statements of the proposed Transferee certified by an officer, partner or owner
thereof, and any other information reasonably required by Landlord, which will
enable Landlord to determine the financial responsibility of the proposed
Transferee, nature of such Transferee's business and proposed use of the Subject
Space, and such other information as Landlord may reasonably require. In no
event shall Landlord be entitled to take back all or any portion of the Subject
Space. Any Transfer made without Landlord's prior written consent shall, at
Landlord's option, be null, void and of no effect, and shall, at Landlord's
option, constitute an Event of Default. Whether or not Landlord shall grant
consent, Tenant shall pay Landlord's actual and reasonable costs (including, but
not limited to, review and processing fees, as well as any reasonable legal fees
incurred by Landlord), within thirty (30) days after written request by
Landlord.
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14.2 Landlord's Consent. Landlord shall not unreasonably withhold,
condition or delay its consent to any proposed Transfer of the Subject Space to
the Transferee on the terms specified in the Transfer Notice. The parties hereby
agree that it shall be reasonable under this Lease and under any applicable law
for Landlord to withhold consent to any proposed Transfer where one or more of
the following apply, without limitation as to other reasonable grounds for
withholding consent:
14.2.1 The Transferee is engaged in a business which is not
consistent with the quality of the Building;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
14.2.4 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities involved under the
Lease on the date consent is requested;
14.2.5 The proposed Transfer would cause Landlord to be in violation
of another lease or agreement to which Landlord is a party, or would give an
occupant of the Building a right to cancel its lease;
14.2.6 The terms of the proposed Transfer will allow the Transferee
to exercise a right of renewal, right of expansion, right of first offer, or
other similar right held by Tenant; or
14.2.7 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, (i) occupies space in the Building at the time of
the request for consent and there will be comparable space in the Building for
the comparable term when the term of the Transfer shall commence, (ii) is
negotiating with Landlord to lease space in the Building at such time, or (iii)
has negotiated with Landlord during the three (3)-month period immediately
preceding the Transfer Notice and there will be comparable space in the Building
for the comparable term when the term of the Transfer shall commence.
If Landlord consents to any Transfer pursuant to the terms of this Section
14.2, Tenant may within six (6) months after Landlord's consent, but not later
than the expiration of said six-month period, enter into such Transfer of the
Premises or portion thereof, upon substantially the same terms and conditions as
are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to
Section 14.1 of this Lease.
14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any Transfer Premium received by Tenant from
such Transferee. "Transfer Premium" shall mean all rent, additional rent or
other consideration payable by such Transferee in excess of the Rent and
Additional Rent payable by Tenant under this Lease on a per rentable square foot
basis if less than all of the Premises is transferred, less the reasonable costs
incurred by Tenant in connection with such Transfer, including, without
limitation, marketing costs, tenant improvement costs, attorneys' fees and
brokerage fees. "Transfer Premium" shall also include, but not be limited to,
key money and bonus money paid by Transferee to Tenant in connection with such
Transfer, and any payment in excess of fair market value for services rendered
by Tenant to Transferee or any payment in excess of fair market value for
assets, fixtures, inventory, equipment, or furniture transferred by Tenant to
Transferee in connection with such Transfer.
14.4 Non-Transfers. Notwithstanding anything to the contrary contained in
Article 14 of this Lease, an assignment or subletting by Tenant of all or a
portion of the Premises or this Lease to, or the use of all or a portion of the
Premises by, (i) a parent or subsidiary of Tenant, or (ii) any person or entity
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which controls, is controlled by or under common control with Tenant (all such
persons or entities described in (i) and (ii) being sometimes hereinafter
referred to as "Affiliates"), shall not require Landlord's consent and shall not
be deemed a Transfer under Article 14 of this Lease, provided that (a) any such
Affiliate was not formed as a subterfuge to avoid the obligations of Article 14
of this Lease, (b) Tenant gives Landlord at least ten (10) days' prior notice of
any such assignment or sublease to an Affiliate, (c) any such assignment or
sublease or use shall be subject and subordinate to all of the terms and
provisions of this Lease, and such Affiliate shall assume, in a written document
reasonably satisfactory to Landlord and delivered to Landlord upon or prior to
the effective date of such assignment or sublease or other use, all the
obligations of Tenant under this Lease with respect to the portion of the
Premises which is the subject of such assignment or sublease or other use (other
than the amount of Base Rent payable by Tenant with respect to a sublease), and
(d) Tenant shall remain fully liable for all obligations to be performed by
Tenant under this Lease.
14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish within fifteen (15) Business Days after Landlord's request,
a complete statement, certified by Tenant's chief financial officer, setting
forth in detail the computation of any Transfer Premium Tenant has derived and
shall derive from such Transfer, and (v) no Transfer relating to this Lease or
agreement entered into with respect thereto, whether with or without Landlord's
consent, shall relieve Tenant or any guarantor of the Lease from liability under
this Lease. Landlord or its authorized representatives shall have the right upon
five (5) Business Days' prior written notice, to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If an independent certified public accountant finds the Transfer
Premium respecting any Transfer (i) understated, Tenant shall, within thirty
(30) days after demand, pay the deficiency or (ii) overstated, Landlord shall
refund to Tenant within thirty (30) days after determination of such amount, the
amount overstated. If the independent certified public accountant finds that the
Transfer Premium has been understated by more than three percent (3%), Tenant
shall pay the cost of such audit.
14.6 Additional Transfers. For purposes of this Lease, the term "Transfer"
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of more than fifty percent (50%)
of the partners, or transfer of twenty-five percent or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
corporation or a limited liability company, (A) the dissolution, merger,
consolidation or other reorganization of Tenant, (B) the sale or other transfer
of more than an aggregate of fifty percent (50%) of the ownership interests in
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of more than an aggregate of more than fifty percent (50%) of the value
of the unencumbered assets of Tenant within a twelve (12) month period.
15. OWNERSHIP AND REMOVAL OF TRADE FIXTURES
15.1 Surrender of Premises. No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in a writing signed by Landlord. The delivery of keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord, and notwithstanding
such delivery Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated.
15.2 Removal of Tenant Property by Tenant. Upon the expiration of the
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15, quit and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear, casualty
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and condemnation excepted. Upon such expiration or termination, Tenant shall,
without expense to Landlord, remove or cause to be removed from the Premises all
debris and rubbish, and such items of furniture, equipment, free-standing
cabinet work, and other articles of personal property owned by Tenant or
installed or placed by Tenant (or any of its subtenants) at its (or their)
expense in the Premises, and Tenant shall repair at its own expense all damage
to the Premises and Building resulting from such removal.
16. HOLDING OVER. If Tenant holds over after the expiration of the Lease Term
hereof, with or without the express or implied consent of Landlord, such tenancy
shall be from month-to-month only, and shall not constitute a renewal hereof or
an extension for any further term, and in such case Base Rent shall be payable
at a monthly rate equal to one hundred fifty percent (150%) of the Base Rent
applicable during the last rental period of the Lease Term under this Lease.
Such month-to-month tenancy shall be subject to every other term, covenant and
agreement contained herein. Nothing contained in this Article 16 shall be
construed as consent by Landlord to any holding over by Tenant, and Landlord
expressly reserves the right to require Tenant to surrender possession of the
Premises to Landlord as provided in this Lease upon the expiration or other
termination of this Lease. The provisions of this Article 16 shall not be deemed
to limit or constitute a waiver of any other rights or remedies of Landlord
provided herein or at law. If Tenant fails to surrender the Premises upon the
termination or expiration of this Lease, in addition to any other liabilities to
Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold
Landlord harmless from all loss, costs (including reasonable attorneys' fees)
and liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender, and any lost profits to Landlord resulting
therefrom.
17. ESTOPPEL CERTIFICATES. Within fifteen (15) Business Days following a request
in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel
certificate, which, as submitted by Landlord, shall be substantially in the form
of Exhibit E attached hereto (or such other form as may be required by any
prospective mortgagee or purchaser of the Real Property, or any portion
thereof), indicating therein any exceptions thereto that may exist at that time,
and shall also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Failure of Tenant to timely
execute and deliver such estoppel certificate or other instruments shall
constitute an acceptance of the Premises and an acknowledgment by Tenant that
statements included in the estoppel certificate are true and correct, without
exception. In connection with the execution and delivery of each such estoppel
certificate by Tenant other than the first such estoppel certificate delivered
by Tenant hereunder, Landlord shall reimburse Tenant for its reasonable
attorneys' fees.
18. SUBORDINATION. This Lease is subject and subordinate to all present and
future ground or underlying leases of the Real Property and to the lien of any
mortgages or deeds of trust, now or hereafter in force against the Real Property
and the Building, if any, and to all renewals, extensions, modifications,
consolidations and replacements thereof, and to all advances made or hereafter
to be made upon the security of such mortgages or trust deeds, unless the
holders of such mortgages or deed of trust, or the lessors under such ground
lease or underlying leases, require in writing that this Lease be superior
thereto; provided, however, that the subordination of this Lease to any mortgage
or deed of trust or any ground or underlying lease is subject to Tenant's
receipt of a commercially reasonable non-disturbance agreement from the holder
of such mortgage or deed of trust or such ground or underlying lease. Tenant
covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage, or if any ground or underlying lease is
terminated, to attorn, without any deductions or set-offs whatsoever, to the
purchaser upon any such foreclosure sale, or to the lessor of such ground or
underlying lease, as the case may be, if so requested to do so by such purchaser
or lessor, and to recognize such purchaser or lessor as the lessor under this
Lease, provided that such purchaser or lessor agrees that Tenant's use and
possession of the Premises pursuant to the terms of this Lease shall not be
disturbed so long as there is no continuing Event of Default. Tenant shall,
within fifteen (15) Business Days of request by Landlord, execute such further
instruments or assurances as Landlord may reasonably deem necessary to evidence
or confirm the subordination or superiority of this Lease to any such mortgages,
trust deeds, ground leases or underlying leases. So long as Tenant's right to
quiet enjoyment of the Premises is not disturbed, Tenant waives the provisions
of any current or future statute,
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rule or law which may give or purport to give Tenant any right or election to
terminate or otherwise adversely affect this Lease and the obligations of the
Tenant hereunder in the event of any foreclosure proceeding or sale. Landlord
shall provide to Tenant a commercially reasonable non-disturbance agreement from
the holder of the existing deed of trust on the Real Property prior to execution
of this Lease by both parties hereto, provided that Tenant executes such
subordination, non-disturbance and attornment agreement ("SNDA") as may be
required by such lender in form reasonably acceptable to Tenant.
19. DEFAULTS; REMEDIES.
19.1 Events of Default. The occurrence of any of the following shall
constitute a default (an "Event of Default") under this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, within five (5) days
of when due more than twice in any given twelve (12) month period;
19.1.2 Any failure by Tenant to respond to Landlord's request under
Article 17 or 18 within the time permitted therein for such response; or
19.1.3 Any failure by Tenant to observe or perform any other
provision, covenant or condition of this Lease to be observed or performed by
Tenant where such failure continues for thirty (30) days after written notice
thereof from Landlord to Tenant; provided however, that any such notice shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 or any similar or successor law; and provided
further that if the nature of such default is such that the same cannot
reasonably be cured within a thirty (30)-day period, Tenant shall not be deemed
to be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure said default as soon as
possible; or
19.1.4 Abandonment (as defined in California Civil Code Section
1951.3) of the Premises by Tenant.
19.2 Remedies Upon Default. Upon the occurrence of any Event of Default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity, the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following: (i) the worth at the time of
award of any unpaid rent which has been earned at the time of such termination;
plus (ii) the worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided; plus (iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the Lease Term after the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, specifically including but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a
different use, and any special concessions made to obtain a new tenant; and (v)
at Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
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The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
19.3 Sublessees of Tenant. Whether or not Landlord elects to terminate
this Lease on account of any Event of Default, as set forth in this Article 19,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.4 Waiver of Default. No waiver by Landlord or Tenant of any violation
or breach of any of the terms, provisions and covenants herein contained shall
be deemed or construed to constitute a waiver of any other or later violation or
breach of the same or any other of the terms, provisions, and covenants herein
contained. Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon an Event of Default shall not be deemed or construed to
constitute a waiver of such default. The acceptance of any Rent hereunder by
Landlord following the occurrence of any default, whether or not known to
Landlord, shall not be deemed a waiver of any such default, except only a
default in the payment of the Rent so accepted.
20. FORCE MAJEURE. Any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, inability to obtain services, labor, or materials
or reasonable substitutes therefor, governmental actions, civil commotions, fire
or other casualty, and other causes beyond the reasonable control of the party
obligated to perform, except with respect to the obligations imposed with regard
to Rent and other charges to be paid by Tenant pursuant to this Lease
(collectively, "Force Majeure"), notwithstanding anything to the contrary
contained in this Lease, shall excuse the performance of such party for a period
equal to any such prevention, delay or stoppage and, therefore, if this Lease
specifies a time period for performance of an obligation of either party, that
time period shall be extended by the period of any delay in such party's
performance caused by a Force Majeure.
21. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease, Tenant
shall deposit a cash security deposit (the "Security Deposit") with Landlord in
the amount set forth in Section 11 of the Summary. The Security Deposit shall be
held by Landlord as security for the faithful performance by Tenant of all the
terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the Lease Term. Upon an occurrence of an Event of Default,
including, but not limited to, the provisions relating to the payment of Rent,
Landlord may, but shall not be required to, use, apply or retain all or any part
of the Security Deposit for the payment of any Rent or any other amounts due, or
for the payment of any amount that Landlord may spend or become obligated to
spend by reason of an Event of Default, or to compensate Landlord for any other
loss or damage that Landlord may suffer by reason of an Event of Default. If any
portion of the Security Deposit is so used or applied, Tenant shall, within five
(5) days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount, and Tenant's
failure to do so shall be a deemed an Event of Default under this Lease. If
Tenant shall fully and faithfully perform every provision of this Lease to be
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performed by it, the Security Deposit, or any balance thereof, shall be returned
to Tenant within sixty (60) days following the expiration of the Lease Term.
Landlord is not required to keep Tenant's Security Deposit separate from its
general funds, and Tenant is not entitled to interest on such Security Deposit.
Should Landlord sell its interest in the Premises during the Lease Term and
deposit with the purchaser thereof the then unappropriated Security Deposit
funds, Landlord will be discharged from any further liability with respect to
such Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of
the California Civil Code, and all other provisions of law, now or hereafter in
force, which 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, it being agreed that Landlord
may, in addition, claim those sums reasonably necessary to compensate Landlord
for any other loss or damage, foreseeable or unforeseeable, caused by the act or
omission of Tenant or any Tenant Parties (as defined in Section 10.1 above).
Notwithstanding anything to the contrary set forth in this Section 21, it is
hereby agreed that the Security Deposit shall be reduced by Fifty-One Thousand
Three Hundred Thirty-Two Dollars ($51,332) on each of the first three (3)
anniversaries of the Lease Commencement Date, provided that no Event of Default
has occurred and is continuing; provided, however, that the Security Deposit
shall not be reduced below Fifty-One Thousand Three Hundred Thirty-Two Dollars
($51,332).
22. SECURITY MEASURES. Landlord shall provide a security guard on site at the
Building and primarily stationed in the lobby Monday through Friday, from 7:00
a.m. to 7:00 p.m. In addition, Landlord shall maintain a card reader system for
building access during non-business hours and shall provide key cards to
Tenant's employees free of charge. Tenant hereby acknowledges that Landlord
shall have no obligation to provide any other guard service or other security
measures for the benefit of the Premises or the Building. Tenant hereby assumes
all responsibility for the protection of Tenant and its agents, employees,
contractors, invitees and guests, and the property thereof, from acts of third
parties, including keeping doors locked and other means of entry to the Premises
closed, whether or not Landlord, at its option, elects to provide other security
protection for the Building. Tenant further assumes the risk that any safety and
security devices, services and programs which Landlord provides may not be
effective, or may malfunction or be circumvented by an unauthorized third party,
and Tenant shall, in addition to its other insurance obligations under this
Lease, obtain its own insurance coverage to the extent Tenant desires protection
against losses related to such occurrences. Tenant shall reasonably cooperate in
any reasonable safety or security program developed by Landlord or required by
law.
23. SIGNS.
23.1 In General. Tenant shall be entitled to Building standard signage in
the Building lobby directory on the ground floor of the Building, at Landlord's
sole cost and expense. Tenant shall be further entitled to exterior Building
signage over the main entrance to the Building (similar to the existing tenant's
signage) ("Tenant's Marquee Sign"), and two (2) "blade" signs affixed on the
front of the Building facing New Montgomery Street, south of the main entrance
(collectively, the "Exterior Signage"), provided that neither of such blade
signs may be greater in dimension than the existing Utrecht blade sign (the
"Utrecht Sign"), all at Tenant's sole cost and expense, which Exterior Signage
shall be subject to Landlord's approval, not to be unreasonably withheld,
conditioned or delayed, and subject to City approval; provided, however, that
Tenant shall retain the rights to such Exterior Signage only if Tenant is
occupying and not subletting in the aggregate more than one (1) full floor of
the Building plus the portion of the Premises located on the ground floor of the
Building. Subleased space shall not be considered occupancy for the purpose of
this Section 23.1. If at the time Tenant opens for business in the Premises the
ground floor space adjacent to the Premises has not been leased and is still
vacant, then Tenant shall have the right, at Tenant's sole cost and expense, to
affix a third "blade" sign on the front of the Building facing New Montgomery
Street, between the main entrance and the Utrecht Sign, provided that Tenant
must immediately remove such "blade" sign, at Tenant's sole cost and expense, as
soon as Landlord notifies Tenant that all or a portion of such space has been
leased. Tenant shall have the right to apply a portion of the Tenant Improvement
Allowance (as defined in Exhibit B attached hereto) to add ornamental lighting
to the alcove at the entry to the Building, which lighting shall be subject to
Landlord's approval, not to be unreasonably withheld. In addition, Tenant shall
be entitled, at its sole cost and expense, to identification signage outside of
Tenant's Premises on the floors on which Tenant's Premises are located. The
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location, quality, design, style, lighting and size of such signage shall be
consistent with the Landlord's Building standard signage program and shall be
subject to Landlord's prior written approval, not to be unreasonably withheld,
conditioned or delayed. Upon the expiration or earlier termination of this
Lease, Tenant shall be responsible, at its sole cost and expense, for the
removal of all of its signage, including the Exterior Signage and its
identification signage, and the repair of all damage to the Building caused by
such removal.
23.2 Prohibited Signage and Other Items. Any signs, notices, logos,
pictures, names or advertisements which are installed and that have not been
individually approved by Landlord may be removed without notice by Landlord at
the sole expense of Tenant. Except as otherwise provided in Section 23.1 above,
Tenant may not install any signs on the exterior or roof of the Building or the
common areas of the Building or the Real Property. Any signs, window coverings,
or blinds (even if the same are located behind the Landlord approved window
coverings for the Building), or other items visible from the exterior of the
Premises or Building are subject to the prior approval of Landlord, in its sole
discretion.
24. COMPLIANCE WITH LAW. Tenant shall not do anything or suffer anything to be
done in or about the Premises which will in any way conflict with any law,
statute, ordinance or other governmental rule, regulation or requirement now in
force or which may hereafter be enacted or promulgated. At its sole cost and
expense, Tenant shall promptly comply with all such governmental measures
affecting the Premises or Tenant's use of the Premises, other than the making of
structural changes, changes to the Building's life safety system or Landlord's
Work. Should any standard or regulation now or hereafter be imposed on Landlord
or Tenant by a state, federal or local governmental body charged with the
establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, landlords or tenants, then Tenant agrees, at
its sole cost and expense, to comply promptly with such standards or
regulations. The final, non-appealable judgment of any court of competent
jurisdiction or the admission of Tenant in any judicial action, regardless of
whether Landlord is a party thereto, that Tenant has violated any of said
governmental measures, shall be conclusive of that fact as between Landlord and
Tenant.
25. LATE CHARGES. If any installment of Rent or any other sum due from Tenant
shall not be received by Landlord or Landlord's designee within five (5) days
after said amount is due, or if any check delivered to Landlord by Tenant shall
be returned for insufficient funds, then Tenant shall pay to Landlord a late
charge equal to five percent (5%) of the amount due. In addition to the late
charge, in the event any check is returned for insufficient funds, Tenant shall
pay to Landlord, as additional rent, the sum of $25.00. The late charge shall be
deemed Additional Rent and the right to require it shall be in addition to all
of Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner. In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid when due shall thereafter bear
interest until paid at an annual rate equal to the prime rate published by the
Wall Street Journal from time to time plus two percent (2%) per annum, provided
that in no case shall such rate be higher than the highest rate permitted by
applicable law. In the event that more than one (1) check of Tenant is returned
for insufficient funds in any twelve (12) month period, Landlord shall have the
right to require that any or all subsequent payments by Tenant to Landlord be in
the form of cash, money order, cashier's or certified check drawn on an
institution acceptable to Landlord, notwithstanding any prior practice of
accepting payments in any different form.
26. LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.
26.1 Landlord's Cure. All covenants and agreements to be kept or performed
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent. If Tenant shall fail to perform
any of its obligations under this Lease, within a reasonable time after such
performance is required by the terms of this Lease, Landlord may, but shall not
be obligated to, after reasonable prior notice to Tenant, make any such payment
or perform any such act on Tenant's part without waiving its right based upon
any default of Tenant and without releasing Tenant from any obligations
hereunder.
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26.2 Tenant's Reimbursement. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days
after delivery by Landlord to Tenant of statements therefor: (i) sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with the remedying by Landlord of Tenant's defaults pursuant to the provisions
of Section 26.1; (ii) sums equal to all losses, costs, liabilities, damages and
expenses referred to in Article 10 of this Lease; and (iii) sums equal to all
expenditures reasonably made and obligations incurred by Landlord in collecting
or attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant's obligations
under this Section 26.2 shall survive the expiration or sooner termination of
the Lease Term.
27. ENTRY BY LANDLORD. Landlord reserves the right at all reasonable times and
upon twenty-four (24) hour prior notice to the Tenant (except in the event of an
emergency) to enter the Premises to (i) inspect them; (ii) show the Premises to
prospective purchasers, mortgagees or tenants, or to the ground or underlying
lessors; (iii) post notices of nonresponsibility; (iv) alter, improve or repair
the Premises or the Building if necessary to comply with current building codes
or other applicable laws, or for structural alterations, repairs or improvements
to the Building; (v) perform services required of Landlord under this Lease; or
(vi) perform any covenants of Tenant which Tenant fails to perform beyond any
applicable notice and cure period. During any entry to the Premises as set forth
in this Section 27, Landlord shall use commercially reasonable efforts to
minimize interference with Tenant's business. Any such entries shall be without
the abatement of Rent and shall include the right to take such reasonable steps
as required to accomplish the stated purposes. Tenant hereby waives any claims
for damages or for any injuries or inconvenience to or interference with
Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the
Premises, and any other loss occasioned thereby. For each of the above purposes,
Landlord shall at all times have a key with which to unlock all the doors in the
Premises. In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises. Any entry
into the Premises in the manner hereinbefore described shall not be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or an actual
or constructive eviction of Tenant from any portion of the Premises.
28. MISCELLANEOUS PROVISIONS.
28.1 Binding Effect. Each of the provisions of this Lease shall extend to
and shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective successors or assigns,
provided this clause shall not permit any assignment by Tenant contrary to the
provisions of Article 14 of this Lease.
28.2 No Air Rights. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Building, as long as such
work is being diligently performed, the same shall be without liability to
Landlord and without any reduction or diminution of Tenant's obligations under
this Lease.
28.3 Modification of Lease. Should any current or prospective mortgagee or
ground lessor for the Building require a modification or modifications of this
Lease, which modification or modifications will not cause any increased cost or
expense to Tenant or in any other way materially or adversely change the rights
and obligations of Tenant hereunder, then and in such event, Tenant agrees that
this Lease may be so modified and agrees to execute documents reasonably
required therefor and deliver the same to Landlord within fifteen (15) Business
Days following the request therefor. Should Landlord or any such current or
prospective mortgagee or ground lessor require execution of a short form of
Lease for recording, containing, among other customary provisions, the names of
the parties, a description of the Premises and the Lease Term, Tenant agrees to
execute such short form of Lease and to deliver the same to Landlord within
fifteen (15) Business Days following the request therefor. Landlord shall
promptly reimburse Tenant for all of reasonable, out-of-pocket Tenant's costs
(including, but not limited to
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reasonable attorneys' fees) associated with the review and execution of any of
the documents discussed herein.
28.4 Transfer of Landlord's Interest. Tenant acknowledges that Landlord
has the right to transfer all or any portion of its interest in the Real
Property and Building and in this Lease, and Tenant agrees that in the event of
any such transfer, and in the event that such transferee expressly assumes all
the obligations of Landlord with respect to this Lease, Landlord shall be
released from all liability under this Lease and Tenant agrees to look solely to
such transferee for the performance of Landlord's obligations hereunder after
the date of transfer; provided, however, that if Landlord has not delivered the
Security Deposit to the transferee, then Landlord shall remain liable to Tenant
for that portion of the Security Deposit to which Tenant is entitled pursuant to
Section 21 above. The liability of any transferee of Landlord shall be limited
to the interest of such transferee in the Real Property and Building (or the
proceeds from the sale of the Building) and such transferee shall be without
personal liability under this Lease, and Tenant hereby expressly waives and
releases such personal liability on behalf of itself and all persons claiming
by, through or under Tenant. Tenant further acknowledges that Landlord may
assign its interest in this Lease to a mortgage lender as additional security
and agrees that such an assignment shall not release Landlord from its
obligations hereunder and that Tenant shall continue to look to Landlord for the
performance of its obligations hereunder.
28.5 Prohibition Against Recording. Except as provided in Section 28.3 of
this Lease, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant, and the recording thereof in violation of this
provision shall make this Lease null and void at Landlord's election.
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