LEASE AGREEMENT By and Between WESTPORT OFFICE PARK, LLC, a California limited liability company ("Landlord") and SHUTTERFLY, INC., a Delaware corporation ("Tenant") March18, 2010

 

LEASE AGREEMENT

 

 

 

By and Between

 

 

 

 

 

("Landlord")

 

 

and

 

 

 

 

 

 

("Tenant")

 

March 18, 2010

 

 

 

 

THIS LEASE AGREEMENT, (this "Lease") is made and entered into as of March 18, 2010 ("Effective Date") by and between WESTPORT OFFICE PARK, LLC, a California limited liability company ("Landlord"), and Tenant identified in the Basic Lease Information below.

 

 

Tenant:  SHUTTERFLY, INC., a Delaware corporation.

 

Premises:  collectively:  Suite 100 on the ground floor of the 3000 Bridge Building, containing approximately 24,910 square feet of rentable area, outlined in Exhibit B-1 to this Lease (the "3000 Bridge Premises"), and the entire first and second floors of the 2800 Bridge Building, containing approximately 50,318 square feet of rentable area and outlined on Exhibit B-2 to this Lease (the "2800 Bridge Premises") and the entire second floor of the 3000 Bridge Building, containing approximately 25,448 square feet of rentable area, outlined on Exhibit B-3 to this Lease (the "Must-Take Space" and together with the 3000 Bridge Premises and the 2800 Bridge Premises, the "Premises").

 

Building:  collectively:  The building commonly known as 3000 Bridge Parkway, Redwood City, California 94065 (the "3000 Bridge Building") and the building commonly known as 2800 Bridge Parkway, Redwood City, California 94065 (the "2800 Bridge Building").  The rentable area of the 3000 Bridge Building is 50,358 square feet.  The rentable area of the 2800 Bridge Building is 50,318 square feet.  The 3000 Bridge Building and the 2800 Bridge Building are referred to collectively herein as the "Buildings," and each individually, as a "Building."  If Tenant exercises any of its rights to lease space in buildings in the Project other than the Buildings, then upon the commencement date of the leasing of that applicable expansion space, the term "Buildings" shall also include the applicable building in which that expansion space is located.

 

Base Rent:

 

Period	Annual Base Rent	Monthly Base Rent
10/01/2009 – Effective Date		$  125,620.80
Effective Date – 05/31/2010		$  126,805.50
06/01/2010 – 12/31/2010	N/A	Abated*
01/01/2011 – 5/31/2011	N/A	$    90,273.60
06/01/2011 – 5/31/2012	$1,128,420.00	$    94,035.00
06/01/2012 – 6/30/2012	N/A	$  130,878.80
07/01/2012 – 5/30/2013	N/A	$  130,878.80**
06/01/2013 – 5/31/2014	$1,630,951.20	$  135,912.60
06/01/2014 – 5/31/2015	$1,691,356.80	$  140,946.40
06/01/2015 – 5/31/2016	$1,751,762.40	$  145,980.20
06/01/2016 – 5/31/2017	$1,812,168.00	$  151,014.00

 

*	As an inducement to Tenant entering into this Lease, Base Rent in the amount of $90,273.60 per month shall be abated for the period from June 1, 2010 through and including December 31, 2010.  During such abatement period, Tenant shall still be responsible for the payment of all of its other monetary obligations under the Lease.
**	The Base Rent commencing on July 1, 2012, reflects the Must Take Space Rent Commencement Date.  Any rent paid by Tenant to Landlord for the Must-Take Space from October 1, 2009, through the Effective Date shall be treated as a credit towards Base Rent payable hereunder next coming due after the Effective Date.

Security Deposit Amount:  $0.

 

Tenant's Building Percentage:  100% with respect to the 2800 Bridge Building and 49.47% with respect to the 3000 Bridge Building through the day prior to the Must-Take Space Rent Commencement Date and 100% with respect to the 3000 Bridge Building from and after the Must-Take Space Rent Commencement Date.

 

Must-Take Space Rent Commencement Date:  July 1, 2012.

 

Expiration Date:  May 31, 2017.

 

Landlord's Address:

 

c/o The Prudential Insurance Company of America

4 Embarcadero Center, 27th Floor

San Francisco, CA 94111

Attn:  PRISA II Asset Manager

 

With a copy by the same method to:

 

c/o The Prudential Insurance Company of America

8 Campus Drive, 4th Floor

Parsippany, New Jersey  07054

Attention:  Greg Shanklin, Esquire

 

With a copy by the same method to:

 

Harvest Properties, Inc.

6475 Christie Avenue, Suite 550

Emeryville, California  94608

Attention:  Joss Hanna

 

Address for rental payment:

 

Payments via FedEx/UPS/Courier:

 

JP Morgan Chase

2710 Media Center Dr.

Building #6, Suite #120

Los Angeles, CA 90065

Attn:  PREI's Westport Office Park/100170

 

Payments via regular mail (lockbox address):

 

Remit to:  PREI's Westport Office Park #171201

P. O. Box 100170

Pasadena, CA 91189-0170

 

Payments via either FED wire or ACH wire:

 

Bank Account Name:

Harvest Properties, Inc. LLC,

as agent for PREI's Westport Office Park

Bank Account Number ###-###-####

Bank Name:  Bank One

Bank City & State Location:  Chicago, IL

ABA Routing Number: 071000013

 

Tenant's Address:

 

Shutterfly, Inc.

2800 Bridge Parkway

Redwood City, California 94065

Attn:  Legal Department

Fax:   ###-###-####

E-Mail: ***@***

 

Landlord's Broker:                            NAI BT Commercial Real Estate.

 

Tenant's Broker:                                Studley, Inc.

 

Maximum Parking Allocation:

 

Three hundred twenty-seven (327), which is based on a parking ratio of 3.3 non-exclusive parking spaces per one thousand (1,000) square feet of rentable space in the Premises.  The Maximum Parking Allocation shall be increased or decreased, as the case may be, to reflect that ratio of the rentable space in the Premises upon any additions of space to, or deletion of space from, the Premises.

 

The Basic Lease Information is incorporated into and made part of this Lease.  Each reference in this Lease to any Basic Lease Information shall mean the applicable information set forth in the Basic Lease Information, except that in the event of any conflict between an item in the Basic Lease Information and this Lease, the Basic Lease Information shall control.  Capitalized terms used in the Basic Lease Information and not defined therein shall have the meanings given those terms in this Lease.

 

ARTICLE 1.

 

PREMISES; COMMON AREAS

 

1.1 Subject to all of the terms and conditions hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises.  The property shown on Exhibit A to this Lease and all improvements thereon and appurtenances on that land thereto, including, but not limited to, the Buildings, other office buildings, access roadways, and all other related areas, shall be collectively hereinafter referred to as the "Project."  Tenant acknowledges and agrees that Landlord may elect to sell one or more of the buildings within the Project and that upon any such sale Tenant's pro-rata share of those Operating Expenses and Taxes (each as defined below) allocated to the areas of the Project other than buildings may be adjusted accordingly by Landlord.  The parties hereto hereby acknowledge that the purpose of Exhibit A and Exhibit B are to show the approximate location of the Premises in the Buildings and the general layout of the Project and such Exhibits are not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the Buildings or the Project, the precise area of the Premises, the Buildings or the Project or the specific location of the Buildings, "Common Areas," as that term is defined in Section 1.3, below, or the elements thereof or of the accessways to the Premises, or the Project.

 

1.2 For purposes of this Lease, (1) "rentable area" and "usable area" shall be calculated pursuant to the Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA Z65.1, 1996); (2) "rentable square feet" and "rentable footage" shall have the same meaning as the term "rentable area;" and (3) "usable square feet" and "usable square footage" shall have the same meaning as the term "usable area."  Notwithstanding anything to the contrary in this Lease, the recital of the rentable area herein above set forth is for descriptive purposes only.  Tenant shall have no right to terminate this Lease and neither Landlord nor Tenant shall receive any adjustment or rebate of any Base Rent or Additional Rent (as hereinafter defined) payable hereunder if said recital is incorrect.  Landlord and Tenant have inspected the Premises, are fully familiar with the scope and size thereof and Tenant agrees to pay and Landlord agrees to accept the Base Rent and Additional Rent set forth herein in consideration for the use and occupancy of said space, regardless of the actual number of square feet contained therein.  The rentable areas specified for the Premises reflect a remeasurement of the Premises by Landlord that is effective on the Effective Date.  Base Rent for the Premises for the period prior to the Effective Date is based upon the measurements of the Premises in effect prior to the Effective Date under the Existing Leases (as defined below).

 

1.3 Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 27 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas are collectively referred to herein as the "Common Areas").  The manner in which the Common Areas are maintained and operated shall be at the reasonable discretion of Landlord and the use thereof shall be subject to such reasonable nondiscriminatory rules, regulations and restrictions as Landlord may make from time to time; provided, however, that the Common Areas shall at all times be maintained in a first class manner.  Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas.  Subject to "Applicable Laws," as that term is defined in Section 5.1(h) of this Lease, except in the event of an emergency, Tenant shall have the right of access to the Premises, the Common Areas, and the parking facilities servicing the Buildings twenty-four (24) hours per day, seven (7) days per week during the "Term," as that term is defined in Section 2.1, below.

 

1.4 Tenant is the current tenant in the Premises under one or more existing leases (collectively, the "Existing Leases") as follows: (a) Lease dated July 5, 1999 between Westport Joint Venture, a California Joint Venture and predecessor in interest to Landlord and Digital Finish, Inc., a California corporation and predecessor in interest to Tenant; Commencement Letter dated September 8, 1999; Letter Agreement dated December 12, 1999; Amendment No. 1 dated January 11, 2000; Amendment No. 2 dated June 21, 2001; Amendment No. 3 dated July 6, 2004; Amendment No. 4 dated April 4, 2005 (collectively, the “Existing 2800 Bridge Lease”); and (b) Lease Agreement dated as of August 12, 1999, between Westport Joint Venture, a California Joint Venture and predecessor-in-interest to Landlord and MetricStream, Inc., a Delaware corporation (“Metricstream”) as amended by that certain Amendment No. 1 to Lease dated as of February 28, 2000 and further amended by that certain Amendment No. 2 to Lease dated as of October 18, 2002, as assigned to Tenant pursuant to a Temporary Sublease, Assignment and Assumption of Lease and Consent to Assignment dated as of May ___, 2008 between, Metricstream and Tenant (collectively, the “Existing 3000 Bridge Lease”).  Effective as of the Effective Date, the Existing Leases shall be amended to provide that their terms shall expire as of the Effective Date, whereupon neither Landlord nor Tenant shall have any further obligations thereunder.

 

1.5 Accordingly, upon expiration of the Existing Leases on the Effective Date, the following shall apply:

 

(a) Tenant's security deposit in the amount of $129,225.72 under the Existing 2800 Bridge Lease shall be returned to Tenant and the security deposit held by Landlord under the Existing 3000 Bridge Lease in the amount of $300,296 shall be returned to Metricstream.

 

(b) Landlord shall have no obligation to improve or modify the Premises pursuant to the terms of the Existing Leases.

 

(c) Tenant shall have no option to extend the term of the Existing Lease.

 

(d) This Lease shall constitute the entire agreement between Landlord and Tenant with respect to the Premises.

 

(e) Tenant will be deemed to have accepted full and complete possession of the Premises and will be the actual occupant in possession of the Premises.

 

(f) All of Landlord's and Tenant's obligations under the Existing Lease which have accrued prior to the date hereof shall be deemed to have been performed in full.

 

1.6 Tenant acknowledges that prior to the Effective Date, the Existing Leases require Tenant to maintain certain items that will be maintained by Landlord pursuant to this Lease.  Landlord and Tenant shall cooperate in the transition of the maintenance of those items, including, if so requested by Landlord, assignment of any existing maintenance and other agreements.  Notwithstanding anything to the contrary in this Lease, if Landlord does not elect to have assigned to it an existing maintenance contract and that contract has a minimum period before it may be terminated, then Tenant shall be responsible for continuing that maintenance agreement in effect through its termination date and Landlord shall assume the obligation to maintain the matter covered by that maintenance contract upon its termination.

 

ARTICLE 2.

 

TERM AND CONDITION OF PREMISES

 

2.1 The term of this Lease (the "Term") shall commence on the Effective Date and end on the Expiration Date, unless sooner terminated (the "Termination Date") as hereinafter provided.

 

2.2 Landlord has no obligation to construct improvements in the Premises.

 

2.3 Tenant acknowledges that Tenant will be in possession of the Premises prior to the Effective Date pursuant to the Existing Lease.  Tenant acknowledges that Landlord has no obligation and has made no promise to alter, remodel, or improve the Premises, or any part thereof.  Any improvements or personal property located in the Premises are delivered without any representation or warranty from Landlord, either express or implied, of any kind, including without limitation title, merchantability or suitability for a particular purpose.  Neither Landlord nor Landlord's agents have made any representations or promises with respect to the condition of the Buildings, the Premises, the land upon which the Buildings are constructed, or any other matter or thing affecting or related to the Buildings or the Premises, except as herein expressly set forth, and no rights, easements or licenses are acquired by Tenant by implication except as expressly set forth in this Lease.

 

ARTICLE 3.

 

USE, NUISANCE, OR HAZARD

 

3.1 The Premises shall be used and occupied by Tenant solely for general office purposes and all ancillary and related uses thereto and for no other purposes without the prior written consent of Landlord.

 

3.2 Tenant shall not use, occupy, or permit the use or occupancy of the Premises for any illegal purpose; permit any public or private nuisance; do or permit any act or thing which may disturb the quiet enjoyment of any other tenant of the Project; keep any substance or carry on or permit any operation which introduces offensive odors into other portions of the Project, use any apparatus which makes undue noise or sets up vibrations in or about the Project; permit anything to be done which would increase the premiums paid by Landlord for fire and extended coverage insurance on the Project or its contents or cause a cancellation of any insurance policy covering the Project or any part thereof or any of its contents; or permit anything to be done which is prohibited by or which is in violation of any law, statute, ordinance, or governmental rule, regulation or covenants, conditions and restrictions affecting the Project, including without limitation the CC&R's (as defined below) now or hereinafter in force.

 

3.3 The ownership, operation, maintenance and use of the Project shall be subject to certain conditions and restrictions contained in an instrument ("CC&R's") recorded or to be recorded against title to the Project.  Tenant agrees that regardless of when those CC&R's are so recorded, this Lease and all provisions hereof shall be subject and subordinate thereto.  Accordingly, as a consequence of that subordination, during any period in which the entire Project is not owned by Landlord, (a) the portion of Operating Expenses and Taxes (each as defined below) for the Common Areas shall be allocated among the owners of the Project as provided in the CC&R's, and (b) the CC&R's shall govern the maintenance and insuring of the portions of the Project not owned by Landlord.  Tenant shall, promptly upon request of Landlord, sign all documents reasonably required to carry out the foregoing into effect.

 

ARTICLE 4.

 

RENT

 

4.1 Tenant hereby agrees to pay Landlord the Base Rent subject to recalculation as provided in Section 1.2.  Each monthly installment (the "Monthly Rent") shall be payable by check or by money order on or before the first day of each calendar month.  In addition to the Base Rent, Tenant also agrees to pay Tenant's Share of Operating Expenses and Taxes (each as hereinafter defined), and any and all other sums of money as shall become due and payable by Tenant as hereinafter set forth, all of which shall constitute additional rent under this Lease (the "Additional Rent").  The Monthly Rent and the Additional Rent are sometimes hereinafter collectively called "Rent" and, except as expressly provided herein, shall be paid when due in lawful money of the United States without demand, deduction, abatement, or offset to the addresses for the rental payment set forth in the Basic Lease Information, or as Landlord may designate from time to time in writing.

 

4.2 In the event any Monthly or Additional Rent or other amount payable by Tenant hereunder is not paid within five (5) days after its due date, Tenant, upon notice and demand from Landlord, shall pay to Landlord a late charge (the "Late Charge"), as Additional Rent, in an amount of five percent (5%) of the amount of such late payment.  Failure to pay any Late Charge shall be deemed a Monetary Default (as hereinafter defined).  Provision for the Late Charge shall be in addition to all other rights and remedies available to Landlord hereunder, at law or in equity, and shall not be construed as liquidated damages or limiting Landlord's remedies in any manner.  Failure to charge or collect such Late Charge in connection with any one (1) or more such late payments shall not constitute a waiver of Landlord's right to charge and collect such Late Charges in connection with any other similar or like late payments.

 

4.3 If the Term commences on a date other than the first day of a calendar month or expires or terminates on a date other than the last day of a calendar month, the Rent for any such partial month shall be prorated to the actual number of days in such partial month.

 

4.4 All Rents and any other amount payable by Tenant to Landlord hereunder, if not paid when due, shall bear interest from the date due until paid at a rate equal to the prime commercial rate established from time to time by Bank of America, plus two percent (2%) per annum; but not in excess of the maximum legal rate permitted by law.  Failure to charge or collect such interest in connection with any one (1) or more delinquent payments shall not constitute a waiver of Landlord's right to charge and collect such interest in connection with any other or similar or like delinquent payments.

 

ARTICLE 5.

 

ADDITIONAL RENT

 

5.1 Definitions.

 

(a) "Operating Expenses", as said term is used herein, shall mean all expenses, costs, and disbursements of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, operation, management, security, repair, restoration, replacement, or maintenance of the Project, or any portion thereof.  Operating Expenses shall be computed in accordance with generally accepted real estate practices, consistently applied, and shall include, but not be limited to, the items as listed below:

 

(i) Wages, salaries, other compensation and any and all taxes, insurance and benefits of, the Building manager and of all other persons engaged in the operation, maintenance and security of the Project;

 

(ii) Payments under any equipment rental agreements or management agreements, including without limitation the cost of any actual or charged management fee and all expenses for the Project management office including rent, office supplies, and materials therefor; provided that any management agreement shall provide that the managing agent (be it a third party manager, Landlord or an affiliate of Landlord) shall operate the Buildings and the Project in a manner consistent with first class professional property management service.

 

(iii) Costs of all supplies, equipment, materials, and tools and 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 Project, or any portion thereof;

 

(iv) All costs incurred in connection with the operation, maintenance, and repair of the Project including without limitation, the following:  (A) the cost of operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Project; (B) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (C) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which are reasonably anticipated by Landlord to increase Operating Expenses, and the cost incurred in connection with a transportation system management program or similar program; (D) the cost of landscaping, decorative lighting, and relamping, the cost of maintaining fountains, sculptures, bridges; and (E) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute “Taxes” as that term is defined below.

 

(v) The cost of supplying all utilities, the cost of operating, maintaining, repairing, replacing, renovating and managing the utility systems, mechanical systems, sanitary, storm drainage systems, communication systems and escalator and elevator systems, and the cost of supplies, tools, and equipment and maintenance and service contracts in connection therewith.

 

(vi) The cost of all insurance carried by Landlord in connection with the Project, including without limitation commercial general liability insurance, physical damage insurance covering damage or other loss caused by fire, earthquake, flood or other water damage, explosion, vandalism and malicious mischief, theft or other casualty, rental interruption insurance and such insurance as may be required by any lessor under any present or future ground or underlying lease of the Building or Project or any holder of a mortgage, deed of trust or other encumbrance now or hereafter in force against the Building or Project or any portion thereof, and any deductibles payable thereunder;

 

(vii) Repairs made to capital assets or capital improvements made to or capital assets acquired for the Project, or any portion thereof, after the Effective Date that (1) are intended to reduce Operating Expenses or (2) upgrade security or (3) otherwise improve the operating efficiency of the Buildings or the Project, which capital costs, or an allocable portion thereof, shall be amortized over the useful life of such items in accordance with generally accepted accounting principles, consistently applied, together with interest on the unamortized balance at eight percent (8%) per annum;

 

(viii) fees, charges and other costs, including management fees (or amounts in lieu thereof), consulting fees, legal fees and accounting fees, of all contractors, engineers, consultants and other persons engaged by Landlord or otherwise incurred by or charged by Landlord in connection with the management, operation, maintenance and repair of the Buildings and the Project; and

 

(ix) payments, fees or charges under the CC&R's and any easement, license, operating agreement, declaration, restricted covenant, or instrument pertaining to the sharing of costs by the Project, or any portion thereof.

 

Notwithstanding the foregoing, expressly excluded from Operating Expenses are the following items:

 

(x) Advertising and leasing commissions;

 

(xi) Costs of any items (including, but not limited to, costs incurred by Landlord for the repair of damage to the Project) to the extent the cost of the repairs (1) is reimbursed or reimbursable by tenants or occupants of the Project (other than through the payment of Operating Expenses), by insurance, or by other sources or (2) would have been reimbursed if Landlord obtained the insurance required under this Lease and/or had used commercially reasonable efforts to collect such amounts from any such tenants or occupants of the Project, insurance carrier or otherwise.  In the case of repairs or replacements to the Project due to casualty which are not covered by insurance (but not as a result of Landlord's failure to obtain insurance as required under this Lease) or which fall within a deductible, if such repairs and replacements, according to generally accepted accounting principles and management practices, must be amortized, then such amortization shall be over the useful life of the applicable repair or replacement item, determined in accordance with generally accepted accounting principles and management practices; provided that the cumulative sum of any such annual amortization amounts plus the other costs of repairs or replacements due to casualty not covered by insurance or which fall within a deductible shall be excluded from Operating Expenses to the extent the sum of such annual amortization and other costs of repairs and replacements due to casualty exceeds an amount equal to $100,000.00 for each Building in any calendar year and provided further that if the amount of the deductible exceeds that annual limitation, Landlord may carry over the unrecovered portion of the deductible into subsequent years and recover them from Tenant subject to the annual limitation provided for in this Section 5.1(a)(xi).

 

(xii) Principal, interest, and other costs directly related to financing the Project or ground lease rental or depreciation;

 

(xiii) The cost of special services to tenants (including Tenant) for which a special charge is made;

 

(xiv) The costs of repair of casualty damage or for restoration following condemnation to the extent covered by insurance proceeds or condemnation awards;

 

(xv) The costs of any capital expenditures except as expressly permitted to be included in Operating Expenses as provided under clauses (vi), and (vii) above;

 

(xvi) The costs, including permit, license and inspection costs and supervision fees, incurred with respect to the installation of tenant improvements within the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space within the Project or promotional or other costs in order to market space to potential tenants;

 

(xvii) The legal fees and related expenses and legal costs incurred by Landlord (together with any damages awarded against Landlord) due to the bad faith violation by Landlord or any tenant of the terms and conditions of any lease of space in the Project;

 

(xviii) Costs incurred in connection with the investigation, cleanup, remediation, monitoring, management and/or administration and defense of claims related to Hazardous Materials in, on, under or about the Premises or the Project, except to the extent such costs are the responsibility of Tenant pursuant to Article 33, and except for the cost of removal of fluids discharged by motor vehicles of the types and quantities typically discharged by motor vehicles parked in or using parking areas.

 

(xix) The attorneys' fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants, lenders, purchasers or other occupants of the Project;

 

(xx) The expenses in connection with services or other benefits which are not available to Tenant;

 

(xxi) The overhead and profit paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in the Project to the extent the same exceeds the costs of such goods and/or services rendered by qualified, unaffiliated third parties on a competitive basis for Comparable Buildings in the Market Area (as defined below);

 

(xxii) The costs arising from Landlord's charitable or political contributions;

 

(xxiii) The costs (other than ordinary maintenance and insurance) for sculpture, paintings and other objects of art;

 

(xxiv) The interest and penalties resulting from Landlord's failure to pay any items of Operating Expense when due;

 

(xxv) The Landlord's general corporate overhead and general and administrative expenses, costs of entertainment, dining, automobiles or travel for Landlord's employees, and costs associated with the operation of the business of the partnership or entity which constitutes Landlord as the same are distinguished from the costs of the operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee, costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest in the Project, costs of any disputes between Landlord and its employees (if any) not engaged in the operation of the Project, disputes of Landlord with management, or outside fees paid in connection with disputes with other Project tenants or occupants (except to the extent such dispute is based on Landlord's good faith efforts to benefit Tenant or meet Landlord's obligations under this Lease);

 

(xxvi) The costs arising from the negligence or willful misconduct of Landlord or Landlord's employees, agents or contractors;

 

(xxvii) The management office rental to the extent such rental exceeds the fair market rental for such space;

 

(xxviii) The costs of correction of latent defects in the Project to the extent covered by warranties;

 

(xxix) The costs of Landlord's membership in professional organizations (such as, by way of example and without limitation, BOMA) in excess of $2,500.00 per year;

 

(xxx) Reserves for Landlord's repair, replacement or improvement of the Project or any portion thereof;

 

(xxxi) Fees and reimbursements payable to Landlord (including its parent organization, subsidiaries and/or affiliates) or by Landlord for management of the Project which exceed the amount which would normally be paid to a reputable company, in connection with the management of Comparable Buildings in the Market Area (as such terms are defined below), and which is not, directly or indirectly, affiliated with Landlord; and

 

(xxxii) Any costs or expenses of any kind or nature which are exclusively related to or for any other building forming part of the Project (other than the Buildings).

 

(b) "Taxes" shall mean all ad valorem taxes, personal property taxes, and all other taxes, assessments, embellishments, use and occupancy taxes, transit taxes, water, sewer and pure water charges not included in Section 5.1.(a)(v) above, excises, levies, license fees or taxes, and all other similar charges, levies, penalties, or taxes, if any, which are levied, assessed, or imposed, by any Federal, State, county, or municipal authority, whether by taxing districts or authorities presently in existence or by others subsequently created, upon, or due and payable in connection with, or a lien upon, all or any portion of the tax parcel on which the Buildings are located, or facilities used in connection therewith, and rentals or receipts therefrom and all taxes of whatsoever nature that are imposed in substitution for or in lieu of any of the taxes, assessments, or other charges included in its definition of Taxes, and any costs and expenses of contesting the validity of same.

 

(c) "Lease Year" shall mean the twelve (12) month period commencing January 1st and ending December 31st.

 

(d) "Tenant's Building Percentage" Landlord shall segregate Operating Expenses into two (2) separate and exclusive categories, one (1) such category, to be applicable only to Operating Expenses incurred for the Buildings and the other category applicable to Operating Expenses incurred for the Common Areas and/or the Project as a whole.  Tenant's Building Only Percentage shall be calculated by dividing the number of rentable square feet of the Premises by the total number of rentable square feet in the Building ("Tenant's Building Only Percentage"), and currently shall mean one hundred percent (100%), with respect to each Building.  If there is a change in the total Building Rentable Area as a result of an addition to a Building, partial destruction, modification or similar cause, which event causes a reduction or increase on a permanent basis, Landlord shall make adjustments in the computations as shall be necessary to provide for any such changes.  Tenant's Common Area Building Percentage shall be calculated by dividing the number of rentable square feet of the Premises by the total number of rentable square feet of all buildings in the Project ("Tenant's Common Area Building Percentage").  Consequently, any reference in this Lease to "Tenant's Building Percentage" shall mean and refer to both Tenant's Building Only Percentage and Tenant's Common Area Building Percentage of Operating Expenses.  Tenant's Building Percentage shall be determined separately for each individual Building in which a portion of the Premises may be located.

 

(e) "Tenant's Tax Percentage" shall mean the percentage determined by dividing the Rentable Area of the Premises by the total Rentable Area of all buildings on the same tax parcel on which a Building is located.  Tenant's Tax Percentage shall be determined separately for each Building in which a portion of the Premises may be located.

 

(f) "Market Area" shall mean Redwood City, California (the "City") and the cities of San Mateo and Foster City, California.

 

(g) "Comparable Buildings" shall mean comparable two-storey Class "A" office/R&D use buildings in the Market Area.

 

(h) "Applicable Laws" shall mean any and all applicable laws, statutes, codes, ordinances, orders, rules, regulations, conditions of approval and requirements of all federal, state, county, municipal and governmental authorities and all administrative or judicial orders or decrees and all permits, licenses, approvals and other entitlements issued by governmental entities, and rules of common law, relating to or affecting the Project, the Premises or the Buildings or the use or operation thereof, whether now existing or hereafter enacted, including, without limitation, the Americans with Disabilities Act of 1990, 42 USC 12111 et seq. (the "ADA") as the same may be amended from time to time, all Environmental Laws (as hereinafter defined), and any CC&R's, or any corporation, committee or association formed in connection therewith, or any supplement thereto recorded in any official or public records with respect to the Project or any portion thereof.

 

5.2 Tenant shall pay to Landlord, as Additional Rent, Tenant's Share (as hereinafter defined) of the Operating Expenses.  "Tenant's Share" shall be determined by multiplying Operating Expenses for any Lease Year or pro rata portion thereof, by Tenant's Building Percentage.  Landlord shall, in advance of each Lease Year, estimate what Tenant's Share will be for such Lease Year based, in part, on Landlord's operating budget for such Lease Year, and Tenant shall pay Tenant's Share as so estimated each month (the "Monthly Escalation Payments").  The Monthly Escalation Payments shall be due and payable at the same time and in the same manner as the Monthly Rent.  Amounts due from Tenant under this Article 5 shall be determined separately for each Building in which a portion of the Premises may be located.

 

5.3 Landlord shall, within one hundred fifty (150) days after the end of each Lease Year, or as soon thereafter as reasonably possible, provide Tenant with a written statement of the actual Operating Expenses incurred during such Lease Year for the Project and such statement shall set forth Tenant's Share of such Operating Expenses.  Tenant shall pay Landlord, as Additional Rent, the difference between Tenant's Share of Operating Expenses and the amount of Monthly Escalation Payments made by Tenant attributable to said Lease Year, such payment to be made within thirty (30) days of the date of Tenant's receipt of said statement (except as provided in Section 5.4 below); similarly, Tenant shall receive a credit if Tenant's Share is less than the amount of Monthly Escalation Payments collected by Landlord during said Lease Year, such credit to be applied to future Rent to become due hereunder.  If utilities or any other components of Operating Expenses increase materially during any Lease Year, Landlord may revise Monthly Escalation Payments due during such Lease Year by giving Tenant written notice to that effect; and thereafter, Tenant shall pay, in each of the remaining months of such Lease Year, a sum equal to the amount of the revised difference in Operating Expenses multiplied by Tenant's Building Percentage divided by the number of months remaining in such Lease Year.

 

5.4 If, within ninety (90) days following Tenant's receipt of the Operating Expense statement or Taxes statement, neither party hereto delivers to the other party a notice referring in reasonable detail to one (1) or more errors in such statement, it shall be deemed conclusively that the information set forth in such statement(s) is correct (absent manifest error).  Tenant shall, however, be entitled to conduct or require an audit to be conducted, provided that (a) not more than one (1) such audit may be conducted during any Lease Year of the Term, or portion thereof, covered by Landlord's written statement (each, an "Audit Period"), (b) the records for each Audit Period may be audited only once, (c) such audit is commenced within ninety (90) days following Tenant's receipt of the applicable statement, and (d) such audit is completed and a copy of a final report is delivered to Landlord within two hundred ten (210) days following Tenant's receipt of the applicable statement.  If Landlord responds to any such audit with an explanation of any issues raised in the audit, such issues shall be deemed resolved unless Tenant responds to Landlord and objects within thirty (30) days after receipt of Landlord's response to the audit.  In no event shall payment of Rent ever be contingent upon the performance of such audit.  For purposes of any audit, Tenant or Tenant's duly authorized representative, at Tenant's sole cost and expense (except as otherwise provided below), shall have the right, upon fifteen (15) days' written notice to Landlord, to inspect Landlord's books and records pertaining to Operating Expenses and Taxes at the offices of Landlord or Landlord's managing agent during ordinary business hours, provided that such audit must be conducted so as not to unreasonably interfere with Landlord's business operations and must be reasonable as to scope and time.  If actual Operating Expenses or Taxes are finally determined (by agreement of the parties, arbitration or a court of competent jurisdiction) to have been overstated or understated by Landlord for any Audit Period, then the parties shall within thirty (30) days thereafter make such adjustment payment or refund as is applicable, and if actual Operating Expenses or Taxes are finally determined (by agreement of the parties, arbitration or a court of competent jurisdiction) to have been overstated by Landlord for any Audit Period by in excess of five percent (5%), then Landlord shall pay the reasonable cost of Tenant's audit.

 

5.5 [Intentionally Omitted].

 

5.6 Tenant shall pay to Landlord, as Additional Rent, "Tenant's Tax Share" (as hereinafter defined) of the Taxes.  "Tenant's Tax Share" shall be determined by multiplying Taxes for any Lease Year or pro rata portion thereof, by Tenant's Tax Percentage.  Landlord shall, in advance of each Lease Year, estimate what Tenant's Tax Share will be for such Lease Year and Tenant shall pay Tenant's Tax Share as so estimated each month (the "Monthly Tax Payments").  The Monthly Tax Payments shall be due and payable at the same time and in the same manner as the Monthly Rent.

 

5.7 Landlord shall, within one hundred twenty (120) days after the end of each Lease Year, or as soon thereafter as reasonably possible, provide Tenant with a written statement of the actual Taxes incurred during such Lease Year for the tax parcel on which the Building is located and such statement shall set forth Tenant's Tax Share of such Taxes.  Tenant shall pay Landlord, as Additional Rent, the difference between Tenant's Tax Share of any increases in Taxes and the amount of Monthly Tax Payments made by Tenant attributable to said Lease Year, such payment to be made within thirty (30) days of the date of Tenant's receipt of said statement; similarly, Tenant shall receive a credit if Tenant's Tax Share is less than the amount of Monthly Tax Payments collected by Landlord during said Lease Year, such credit to be applied to Rent to become due hereunder.  If Taxes increase by a material amount during any Lease Year, Landlord may revise Monthly Tax Payments due during such Lease Year by giving Tenant written notice to that effect; and, thereafter, Tenant shall pay, in each of the remaining months of such Lease Year, a sum equal to the amount of revised difference in Taxes multiplied by Tenant's Tax Percentage divided by the number of months remaining in such Lease Year.

 

5.8 If the Taxes for any Lease Year are changed as a result of protest, appeal or other action taken by a taxing authority, the Taxes as so changed shall be deemed the Taxes for such Lease Year.  Any reasonable expenses incurred by Landlord in attempting to protest, reduce or minimize Taxes shall be included in Taxes in the Lease Year in which those expenses are paid.  Landlord shall have the exclusive right to conduct such contests, protests and appeals of the Taxes as Landlord shall determine is appropriate in Landlord's sole discretion.

 

5.9 Landlord's and Tenant's obligations with respect to Additional Rent and the payment or refund of Tenant's Share of Operating Expenses and Tenant's Tax Share of Taxes shall survive the Expiration Date or Termination Date of this Lease.

 

ARTICLE 6.

 

SERVICES TO BE PROVIDED BY LANDLORD

 

6.1 Subject to Articles 5 and 10 herein, Landlord agrees to furnish or cause to be furnished to the Premises the utilities and services described in the Standards for Utilities and Services, attached hereto as Exhibit G, subject to the conditions and in accordance with the standards set forth herein.

 

6.2 Landlord shall not be liable for any loss or damage arising or alleged to arise in connection with the failure, stoppage, or interruption of any such services; nor shall the same be construed as an eviction of Tenant, work an abatement of Rent, entitle Tenant to any reduction in Rent, or relieve Tenant from the operation of any covenant or condition herein contained; it being further agreed that Landlord reserves the right to discontinue temporarily such services or any of them at such times as may be necessary by reason of repair or capital improvements performed within the Project, accident, unavailability of employees, repairs, alterations or improvements, or whenever by reason of strikes, lockouts, riots, acts of God, or any other happening or occurrence beyond the reasonable control of Landlord.  In the event of any such failure, stoppage or interruption of services, Landlord shall use reasonable diligence to have the same restored.  Neither diminution nor shutting off of light or air or both, nor any other effect on the Project by any structure erected or condition now or hereafter existing on lands adjacent to the Project, shall affect this Lease, abate Rent, or otherwise impose any liability on Landlord.

 

6.3 Landlord shall have the right to reduce heating, cooling, or lighting within the Premises and in the public area in the Building as required by any mandatory fuel or energy-saving program.

 

6.4 Tenant shall separately arrange with the applicable local public authorities or utilities, as the case may be, for the furnishing of and payment of all telephone and facsimile services as may be required by Tenant in the use of the Premises.  Tenant shall directly pay for such telephone and facsimile services as may be required by Tenant in the use of the Premises.  Tenant shall directly pay for such telephone and facsimile services, including the establishment and connection thereof, at the rates charged for such services by said authority or utility; and the failure of Tenant to obtain or to continue to receive such services for any reason whatsoever shall not relieve Tenant of any of its obligations under this Lease.

 

6.5 Tenant shall have the right to directly control the thermostats within the Premises that control the Building HVAC system.

 

6.6 Notwithstanding anything to the contrary in Section 6.2 or elsewhere in this Lease, if (a) Landlord fails to provide Tenant with the services described in Section 6.1, or Landlord enters the Premises and such entry interferes with Tenant's reasonable use of the Premises (b) such failure or Landlord's entry is not due to any one or more Force Majeure Events or to an event covered by Article 19, (c) Tenant has given Landlord reasonably prompt written notice of such failure or that such entry by Landlord is unreasonably interfering with Tenant's use of the Premises and (d) as a result of such failure all or any part of the Premises are rendered untenantable for more than five (5) consecutive business days, then Tenant shall be entitled to an abatement of Rent proportional to the extent to which the Premises are thereby rendered unusable by Tenant, commencing with the later of (i) the sixth business day during which such untenantability continues or (ii) the sixth business day after Landlord receives such notice from Tenant, until the Premises (or part thereof affected) are again tenantable.  The foregoing rental abatement shall be Tenant's exclusive remedy therefor.  Notwithstanding the foregoing, the provisions of Article 19 below and not the provisions of this subsection shall govern in the event of casualty damage to the Premises and the provisions of Article 20 below and not the provisions of this subsection shall govern in the event of condemnation of all or a part of the Premises.

 

ARTICLE 7.

 

REPAIRS AND MAINTENANCE BY LANDLORD

 

7.1 Landlord shall provide for the cleaning, repair, maintenance and replacement of the Common Areas in first class order, condition and repair as part of Operating Expenses (to the extent permitted by Section 5.1).  Unless otherwise expressly stipulated herein, Landlord shall not be required to make any improvements or repairs of any kind or character to the Premises during the Term, Landlord shall also be responsible for the repair, maintenance and replacement to the following:  the exterior and structural walls, corridors, windows, roof (structure and membrane), foundation of the Premises, the integrated Building utility and mechanical systems and other Base Building (as defined below) elements of the Premises; the Common Areas, including any structural elements and equipment of the Project, landscaping and paving; underground utilities, water mains, drainage facilities and the like serving the Premises and the Project.  As used in this Lease, the "Base Building" shall include the structural portions of the Buildings, and the public restrooms, elevators, exit stairwells and the systems and equipment (including HVAC equipment other than the Supplemental HVAC Equipment (as defined below), if any) located in the internal core of the Buildings.

 

7.2 Subject to Tenant's reasonable security requirements, Landlord or Landlord's officers, agents, and representatives (subject to any security regulations imposed by any governmental authority) shall have the right to enter all parts of the Premises at all reasonable hours upon reasonable prior notice to Tenant (other than in an emergency) to inspect, clean, make repairs to the Project or the Premises which are necessary or required by this Lease, to cure any defaults of Tenant hereunder that Landlord elects to cure pursuant to Section 22.5, below, to show the Premises to prospective tenants (during the final nine (9) months of the Term or at any time after the occurrence of an Event of Default that remains uncured), mortgagees or purchasers of the Building, or to provide any service which it is obligated or elects to furnish to Tenant; and Tenant shall not be entitled to any abatement or reduction of Rent by reason thereof.  Landlord shall have the right to enter the Premises at any time and by any means in the case of an emergency.  Notwithstanding the foregoing, when entering the Premises, Landlord shall use commercially reasonable efforts not to adversely affect Tenant's use and enjoyment of the Premises.

 

7.3 Except as otherwise expressly provided in this Lease, Tenant hereby waives all rights it would otherwise have under California Civil Code Sections 1932(1) and 1942(a) or any successor statutes to deduct repair costs from Rent and/or terminate this Lease as the result of any failure by Landlord to maintain or repair.

 

ARTICLE 8.

 

REPAIRS AND CARE OF PROJECT BY TENANT

 

8.1 If the Building, the Project, or any portion thereof, which Landlord is required to maintain or repair pursuant to Section 7.1, are damaged or are destroyed through the negligence or misuse of Tenant, its servants, agents, employees, or anyone permitted by Tenant to be in the Building, then the reasonable cost of the necessary repairs, replacements, or alterations shall be borne by Tenant who shall pay the same to Landlord as Additional Rent within thirty (30) days after demand, subject to Section 13.4 below.  Landlord shall have the right, but not the obligation, to make any repairs necessitated by such damage.

 

8.2 Subject to Section 13.4 below, Tenant agrees, at its sole cost and expense, to repair or replace any damage or injury done to the Project, or any part thereof, caused by Tenant, Tenant's agents, employees, licensees, or invitees which Landlord elects not to repair.  Tenant shall not injure the Project or the Premises and shall maintain all elements of the Premises not required to be maintained by Landlord pursuant to Section 7.1 above, in good order, condition and in good repair.  Such maintenance and repair obligations specifically include Tenant's supplemental HVAC equipment currently in place on the roof of the 2800 Bridge Building and the 3000 Bridge Building (the "Supplemental HVAC Equipment").  If Tenant fails to keep such elements of the Premises in such good order, condition, and repair, Landlord, upon prior notice to Tenant and reasonable opportunity to cure, may restore the Premises to such good order and condition and make such repairs without liability to Tenant for any loss or damage that may accrue to Tenant's property or business by reason thereof, and within thirty (30) days after completion thereof, Tenant shall pay to Landlord, as Additional Rent, upon demand, the cost of restoring the Premises to such good order and condition and of the making of such repairs, plus an additional charge of ten percent (10%) thereof.  Upon the Expiration Date or the Termination Date, Tenant shall surrender and deliver up the Premises to Landlord in the same condition in which it existed at the Effective Date, excepting only ordinary wear and tear and damage arising from any cause not required to be repaired by Tenant or Landlord.

 

8.3 Tenant shall provide its own janitorial and cleaning services to the Premises at Tenant's sole cost and expense.  Landlord is not obligated to provide any janitorial or cleaning services to the Premises.

 

8.4 Tenant shall be solely responsible for the maintenance, repair, replacement of Tenant's equipment and personal property.

 

ARTICLE 9.

 

TENANT'S EQUIPMENT AND INSTALLATIONS

 

9.1 If heat-generating machines or equipment, including telephone equipment, (other than the machines and equipment existing in the Premises as of the Effective Date, similar machines and equipment density in the Must-Take Space, and comparable replacements of those existing machines and equipment) cause the temperature in the Premises, or any part thereof, to exceed the temperatures the Building's air conditioning system would be able to maintain in such Premises were it not for such heat-generating equipment, then Landlord shall have no obligation to modify the Building's air conditioning system or to respond to complaints from Tenant with respect to the temperature in the Premises and Tenant shall be solely responsible for any consequences to persons in the Premises or Tenant's Property resulting from those increased temperatures.

 

9.2 Tenant shall not, without the specific written consent of Landlord (which consent shall not be unreasonably withheld, conditioned, or delayed), install or maintain any apparatus or device within the Premises which shall increase the usage of electrical power or water for the Premises to an amount greater than that for which the Premises were designed.

 

ARTICLE 10.

 

FORCE MAJEURE

 

10.1 It is understood and agreed that with respect to any service or other obligation to be furnished or obligations to be performed by either party, in no event shall either party be liable for failure to furnish or perform the same when prevented from doing so by strike, lockout, breakdown, accident, supply, or inability by the exercise of reasonable diligence to obtain supplies, parts, or employees necessary to furnish such service or meet such obligation; or because of war or other emergency; or for any cause beyond the reasonable control with the party obligated for such performance; or for any cause due to any act or omission of the other party or its agents, employees, licensees, invitees, or any persons claiming by, through, or under the other party; or because of the failure of any public utility to furnish services; or because of order or regulation of any federal, state, county or municipal authority (collectively, "Force Majeure Events").  Nothing in this Section 10.1 shall limit or otherwise modify or waive Tenant's obligation to pay Base Rent and Additional Rent as and when due pursuant to the terms of this Lease.

 

ARTICLE 11.

 

CONSTRUCTION, MECHANICS' AND MATERIALMAN'S LIENS

 

11.1 Tenant shall not suffer or permit any construction, mechanics' or materialmans' lien to be filed against the Premises or any portion of the Project by reason of work, labor services, or materials supplied or claimed to have been supplied to Tenant.  Nothing herein contained shall be deemed or construed in any way as constituting the consent or request of Landlord, expressed or implied, by inference or otherwise, for any contractor, subcontractor, laborer, or materialman to perform any labor or to furnish any materials or to make any specific improvement, alteration, or repair of or to the Premises or any portion of the Project.

 

11.2 If any such construction, mechanics' or materialmans' lien shall at any time be filed against the Premises or any portion of the Project as the result of any act or omission of Tenant, Tenant covenants that it shall, within twenty (20) days after Tenant has notice of the claim for lien, procure the discharge thereof by payment or by giving security or in such other manner as is or may be required or permitted by law or which shall otherwise satisfy Landlord.  If Tenant fails to take such action, Landlord, in addition to any other right or remedy it may have, may take such action as may be reasonably necessary to protect its interests.  Any amounts paid by Landlord in connection with such action, all other expenses of Landlord incurred in connection therewith, including reasonable attorneys' fees, court costs, and other necessary disbursements shall be repaid by Tenant to Landlord within thirty (30) days after demand.

 

ARTICLE 12.

 

[INTENTIONALLY OMITTED]

 

ARTICLE 13.

 

INSURANCE

 

13.1 Landlord shall maintain, as a part of Operating Expenses, special causes of loss form insurance on the Project in an amount equal to the full replacement cost of the Project, liability insurance and rental insurance, subject to such deductibles as Landlord may determine.  Landlord shall not be obligated to insure, and shall not assume any liability of risk of loss for, any of Tenant's furniture, equipment, machinery, goods, supplies, improvements or alterations upon the Premises.  Such insurance shall be maintained with an insurance company selected, and in amounts desired, by Landlord or Landlord's mortgagee, and payment for losses thereunder shall be made solely to Landlord subject to the rights of the holder of any mortgage or deed of trust which may now or hereafter encumber the Project.  Additionally Landlord may maintain such additional insurance, including, without limitation, earthquake insurance and flood insurance, as Landlord may in its sole discretion elect.  The cost of all such additional insurance shall also be part of the Operating Expenses.  Any or all of Landlord's insurance may be provided by blanket coverage maintained by Landlord or any affiliate of Landlord under its insurance program for its portfolio of properties, and in such event Operating Expenses shall include the portion of the reasonable cost of blanket insurance that is allocated to the Project.

 

13.2 Tenant, at its own expense, shall maintain with insurers authorized to do business in the State of California and which are rated A- and have a financial size category of at least VIII in the most recent Best's Key Rating Guide, or any successor thereto (or if there is none, an organization having a national reputation), (a) commercial general liability insurance, including Broad Form Property Damage and Contractual Liability with the following minimum limits:  General Aggregate $3,000,000.00; Products/Completed Operations Aggregate $2,000,000.00; Each Occurrence $2,000,000.00; Personal and Advertising Injury $1,000,000.00; Medical Payments $5,000.00 per person, (b) Umbrella/Excess Liability on a following form basis with the following minimum limits:  General Aggregate $5,000,000.00; Each Occurrence $5,000,000.00; (c) Workers' Compensation with statutory limits; (d) Employer's Liability insurance with the following limits:  Bodily injury by disease per person $1,000,000.00; Bodily injury by accident policy limit $1,000,000.00; Bodily injury by disease policy limit $1,000,000.00; (e) property insurance on special causes of loss insurance form covering any and all personal property of Tenant including but not limited to alterations, improvements (inclusive of the tenant improvements which exist in the Premises as of the Effective Date), betterments, furniture, fixtures and equipment in an amount not less than their full replacement cost, with a deductible not to exceed $100,000.00; and (f) business auto liability insurance having a combined single limit of not less than One Million Dollars ($1,000,000.00) per occurrence and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired or non-owned automobiles.  At all times during the Term, such insurance shall be maintained, and Tenant shall cause a current and valid certificate of such policies to be deposited with Landlord.  If Tenant fails to have a current and valid certificate of such policies on deposit with Landlord at all times during the Term and such failure is not cured within ten (10) business days following Tenant's receipt of notice thereof from Landlord, Landlord shall have the right, but not the obligation, to obtain such an insurance policy, and Tenant shall be obligated to pay Landlord the amount of the premiums applicable to such insurance within thirty (30) days after Tenant's receipt of Landlord's request for payment thereof.  Said policy of liability insurance shall name Landlord and Landlord's managing agent as additional insureds and Tenant as the insured.  Tenant will give thirty (30) days' (ten (10) days with respect to a cancellation for nonpayment of premium) written notice to Landlord of any cancellation of the liability insurance policy.

 

13.3 Landlord may require Tenant to adjust no more frequently than once every three years the amount of coverage required in Section 13.2 hereof to such amount as in Landlord's reasonable opinion, adequately protects Landlord's interest; provided the same does not exceed the amount of coverage customarily required of comparable tenants in Comparable Buildings in the Market Area.

 

13.4 Notwithstanding anything in this Lease to the contrary, Landlord and Tenant each hereby waives any and all rights of recovery, claim, action, or cause of action against the other, its agents, employees, licensees, or invitees for any loss or damage to or at the Premises or the Project or any personal property of such party therein or thereon by reason of fire, the elements, or any other cause which would be insured against under the terms of (i) fire and extended coverage insurance or (ii) the liability insurance referred to in Section 13.2, to the extent of such insurance, regardless of cause or origin, including omission of the other party hereto, its agents, employees, licensees, or invitees.  Landlord and Tenant covenant that no insurer shall hold any right of subrogation against either of such parties with respect thereto.  This waiver shall be ineffective against any insurer of Landlord or Tenant to the extent that such waiver is prohibited by the laws and insurance regulations of the State of California.  The parties hereto agree that any and all such insurance policies required to be carried by either shall be endorsed with a subrogation clause, substantially as follows:  "This insurance shall not be invalidated should the insured waive, in writing prior to a loss, any and all right of recovery against any party for loss occurring to the property described therein, " and shall provide that such party's insurer waives any right of recovery against the other party in connection with any such loss or damage.

 

13.5 In the event Tenant's occupancy or conduct of business in or on the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by Landlord with respect to the Buildings, Tenant shall pay any such increase in premiums as Rent within thirty (30) days after bills for such additional premiums shall be rendered by Landlord.  In determining whether increased premiums are a result of Tenant's use or occupancy of the Premises, a schedule issued by the organization computing the insurance rate on the Building showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up such rate.  Tenant shall promptly comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Premises.

 

ARTICLE 14.

 

QUIET ENJOYMENT

 

14.1 Provided Tenant is not in default under this Lease after the expiration of any period for cure in the performance of all its obligations under this Lease, including, but not limited to, the payment of Rent and all other sums due hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance by Landlord or any party claiming through Landlord, subject to the provisions and conditions set forth in this Lease.

 

ARTICLE 15.

 

ALTERATIONS

 

15.1 Tenant agrees that, except as expressly permitted in this Article 15, it shall not make or allow to be made any alterations, physical additions, or improvements in or to the Premises without first obtaining the written consent of Landlord in each instance.  As used herein, the term "Minor Alteration" refers to an alteration that (a) does not affect the outside appearance of the Building and is not visible from the Common Areas, (b) is non-structural and does not impair the strength or structural integrity of the Building, and (c) does not adversely affect the mechanical, electrical, HVAC or other systems of the Building.  Landlord agrees not to unreasonably withhold its consent to any Minor Alteration.  Landlord's consent to any other alteration may be conditioned, given, or withheld in Landlord's sole discretion.  Notwithstanding the foregoing, Landlord consents to any Minor Alterations, so long as (i) the aggregate cost of such work is less than $100,000.00 in any twelve-month period, (ii) such work constitutes a Minor Alteration (iii) no building permit is required in connection therewith or Tenant obtains a building permit if one is required, (iv) such work conforms to the then existing Building standards; and (v) Tenant provides Landlord with written notice of the scope of the proposed work and the time that the proposed work is to be commenced and provides Landlord with copies of any plans and specifications and building permits obtained in connection with the proposed Minor Alteration.  At the time of any request for Landlord's consent, Tenant shall submit to Landlord plans and specifications of the proposed alterations, additions, or improvements; and Landlord shall have a period of not less than twenty (20) days therefrom in which to review and approve or disapprove said plans; provided that if Landlord determines in good faith that Landlord requires a third party to assist in reviewing such plans and specifications, Landlord shall instead have a period of not less than thirty (30) days in which to review and approve or disapprove said plans.  Tenant shall pay to Landlord within thirty (30) days of invoice, the reasonable out-of-pocket cost and expense of Landlord in (A) reviewing said plans and specifications, and (B) inspecting the alterations, additions, or improvements to determine whether the same are being performed in accordance with the approved plans and specifications and all laws and requirements of public authorities, including, without limitation, the fees of any architect or engineer employed by Landlord for such purpose.  In any instance where Landlord grants such consent, and Tenant uses its own contractors, laborers, materialmen, and others to furnish labor or materials for Tenant's construction (collectively, "Tenant's Contractors"), Landlord's consent shall be deemed conditioned upon each of Tenant's Contractors (1) working in harmony and not interfering with any laborer utilized by Landlord, Landlord's contractors, laborers, or materialmen; and (2) furnishing Landlord with evidence of acceptable liability insurance, worker's compensation coverage and if required by Landlord, completion bonding, and if at any time such entry by one or more persons furnishing labor or materials for Tenant's work shall cause such disharmony or interference, the consent granted by Landlord to Tenant may be withdrawn immediately upon written notice from Landlord to Tenant.  Landlord agrees not to require completion bonding for any other alterations so long as the initially named Tenant is the Tenant under this Lease.  Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of alterations, additions, or improvements and for final approval thereof upon completion, and shall cause any alterations, additions, or improvements to be performed in compliance therewith and with all applicable laws and requirements of public authorities and with all applicable requirements of insurance bodies.  All alterations, additions, or improvements shall be diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to be better than the original installations of the Building.  Upon the completion of work and upon request by Landlord, Tenant shall provide Landlord copies of all waivers or releases of lien from each of Tenant's Contractors.  No alterations, modifications, or additions to the Project or the Premises shall be removed by Tenant either during the Term or upon the Expiration Date or the Termination Date without the express written approval of Landlord unless the alterations, modifications or additions removed are replaced with items of comparable value and utility for general office purposes or were installed by Tenant at Tenant's cost after completion of the Tenant Work and the Tenant MTS Work (as those terms are defined in Article 56).  Tenant shall not be entitled to any reimbursement or compensation resulting from its payment of the cost of constructing all or any portion of said improvements or modifications thereto unless otherwise expressly agreed by Landlord in writing.

 

15.2 Landlord's approval of Tenant's plans for work shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules, and regulations of governmental agencies or authorities, including, but not limited to, the Americans with Disabilities Act.

 

15.3 At least five (5) days prior to the commencement of any work permitted to be done by persons requested by Tenant on the Premises, Tenant shall notify Landlord of the proposed work and the names and addresses of Tenant's Contractors.  During any such work on the Premises, Landlord, or its representatives, shall have the right to go upon and inspect the Premises at all reasonable times subject to the other provisions of this Lease, and shall have the right to post and keep posted thereon notices of nonresponsibility or to take any further action which Landlord may deem to be proper for the protection of Landlord's interest in the Premises.

 

ARTICLE 16.

 

FURNITURE, FIXTURES, AND PERSONAL PROPERTY

 

16.1 Tenant, at its sole cost and expense, may remove its trade fixtures, office supplies and moveable office furniture and equipment not attached to the Project or Premises provided:

 

(a) Such removal is made prior to the Expiration Date or the Termination Date; and

 

(b) Tenant promptly repairs all damage caused by such removal.

 

16.2 If Tenant does not remove its trade fixtures, office supplies, and moveable furniture and equipment as herein above provided prior to the Expiration Date or the Termination Date (unless prior arrangements have been made with Landlord and Landlord has agreed in writing to permit Tenant to leave such items in the Premises for an agreed period), then, in addition to its other remedies, at law or in equity, Landlord shall have the right to have such items removed and stored at Tenant's sole cost and expense and all damage to the Project or the Premises resulting from said removal shall be repaired at the cost of Tenant; Landlord may elect that such items automatically become the property of Landlord upon the Expiration Date or the Termination Date, and Tenant shall not have any further rights with respect thereto or reimbursement therefor subject to the provisions of applicable law.  All other property in the Premises, any alterations, or additions to the Premises (including wall-to-wall carpeting, paneling, wall covering, specially constructed or built-in cabinetry or bookcases), and any other article attached or affixed to the floor, wall, or ceiling of the Premises shall become the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof at the Expiration or Termination Date regardless of who paid therefor; and Tenant hereby waives all rights to any payment or compensation therefor.  If, however, Landlord so requests, in writing, Tenant shall remove, prior to the Expiration Date or the Termination Date, any and all alterations, additions, fixtures, equipment, and property placed or installed in the Premises (other than those improvements Landlord has agreed not to require to be removed as provided in the balance of this Section 6.2) and shall repair any damage caused by such removal.  Prior to commencing any alteration, Tenant may request that Landlord notify Tenant whether or not the proposed alteration will be required by Landlord to be removed at the end of the Term.  In no event shall Tenant be required to remove any alterations, additions, fixtures or equipment installed in the Premises as of the Effective Date.

 

16.3 Except as may be otherwise provided in this Lease, all the furnishings, fixtures, equipment, effects, and property of every kind, nature, and description of Tenant and of all persons claiming by, through, or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises or elsewhere in the Project shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or be borne by Landlord unless due to the gross negligence or willful misconduct of Landlord or its employees, agents or contractors.

 

ARTICLE 17.

 

PERSONAL PROPERTY AND OTHER TAXES

 

17.1 During the Term hereof, Tenant shall pay, prior to delinquency, all business and other taxes, charges, notes, duties, and assessments levied, and rates or fees imposed, charged, or assessed against or in respect of Tenant's occupancy of the Premises or in respect of the personal property, trade fixtures, furnishings, equipment, and all other personal and other property of Tenant contained in the Project (including without limitation taxes and assessments attributable to the cost or value of any leasehold improvements made in or to the Premises by or for Tenant after the Effective Date (to the extent that the assessed value of those leasehold improvements exceeds the assessed value of standard office improvements in other space in the Project regardless of whether title to those improvements is vested in Tenant or Landlord)), and shall hold Landlord harmless from and against all payment of such taxes, charges, notes, duties, assessments, rates, and fees, and against all loss, costs, charges, notes, duties, assessments, rates, and fees, and any and all such taxes.  Tenant shall cause said fixtures, furnishings, equipment, and other personal property to be assessed and billed separately from the real and personal property of Landlord.  In the event any or all of Tenant's fixtures, furnishings, equipment, and other personal property shall be assessed and taxed with Landlord's real property, Tenant shall pay to Landlord Tenant's share of such taxes within thirty (30) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property.

 

17.2 The demised property herein may be subject to a special assessment levied by the City of Redwood as part of an Improvement District.  As a part of said special assessment proceedings (if any), additional bonds were or may be sold and assessments were or may be levied to provide for construction contingencies and reserve funds.  Interest shall be earned on such funds created for contingencies and on reserve funds which will be credited for the benefit of said assessment district.  To the extent surpluses are created in said district through unused contingency funds, interest earnings or reserve funds, such surpluses shall be deemed the property of Landlord.  Notwithstanding that such surpluses may be credited on assessments otherwise due against the Premises, Tenant shall pay to Landlord, as Additional Rent if, and at the time of any such credit of surpluses, an amount equal to all such surpluses so credited.  For example:  if (i) the property is subject to an annual assessment of $1,000.00, and (ii) a surplus of $200.00 is credited towards the current year’s assessment which reduces the assessment amount shown on the property tax bill from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord, pay to Landlord said $200.00 credit as Additional Rent.

 

ARTICLE 18.

 

ASSIGNMENT AND SUBLETTING

 

18.1 Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or conditioned (except that Landlord shall in no event be obligated to consent to an encumbrance of this Lease or any transfer by operation of law):  (a) assign, convey, mortgage or otherwise transfer this Lease or any interest hereunder, or sublease the Premises, or any part thereof, whether voluntarily or by operation of law; or (b) permit the use of the Premises or any part thereof by any person other than Tenant and its employees.  Any such transfer, sublease or use described in the preceding sentence (a "Transfer") occurring without the prior written consent of Landlord shall, at Landlord's option, be void and of no effect.  Landlord's consent to any Transfer shall not constitute a waiver of Landlord's right to withhold its consent to any future Transfer.  Landlord may require as a condition to its consent to any assignment of this Lease that the assignee execute an instrument in which such assignee assumes the remaining obligations of Tenant hereunder; provided that the acceptance of any assignment of this Lease by the applicable assignee shall automatically constitute the assumption by such assignee of all of the remaining obligations of Tenant that accrue following such assignment.  The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof shall not work a merger and shall, at the option of Landlord, terminate all or any existing sublease or may, at the option of Landlord, operate as an assignment to Landlord of Tenant's interest in any or all such subleases.

 

18.2 For purposes of this Lease, the term "Transfer" shall also include (i) if a Tenant is a partnership or limited liability company, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, members or managers thereof, or transfer of twenty-five percent (25%) or more of partnership or membership interests therein within a twelve (12) month period, or the dissolution of the partnership or the limited liability company without immediate reconstitution thereof, and (ii) if Tenant is a corporation whose stock is not publicly held and not traded through an exchange or over the counter or any other form of entity, (A) the dissolution, merger, consolidation or other reorganization of Tenant, the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares or other interests of or in Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) month period, or (B) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12) month period.  Notwithstanding the foregoing, transfers of the stock of the initially named Tenant shall not constitute a Transfer under this Lease.

 

18.3 If Tenant desires the consent of Landlord to a Transfer, Tenant shall submit to Landlord, at least fifteen (15) business days prior to the proposed effective date of the Transfer, a written notice (the "Transfer Notice") which includes (a) the name of the proposed sublessee or assignee, (b) the nature of the proposed sublessee's or assignee's business, (c) the terms and provisions of the proposed sublease or assignment, and (d) current financial statements and information on the proposed sublessee or assignee.  Upon receipt of the Transfer Notice, Landlord may request additional reasonable information concerning the Transfer or the proposed sublessee or assignee (the "Additional Information").  Landlord shall not unreasonably withhold its consent to any assignment or sublease (excluding an encumbrance or transfer by operation of law), which consent or lack thereof shall be provided within fifteen (15) business days of receipt of Tenant's Transfer Notice; provided, however, Tenant hereby agrees that it shall be a reasonable basis for Landlord to withhold its consent if Landlord has not received the Additional Information requested by Landlord.  Without limiting any other reasonable basis for Landlord to withhold its consent to the proposed Transfer, Landlord and Tenant agree that for purposes of this Lease and any Applicable Law, Landlord shall not be deemed to have unreasonably withheld its consent if, in the good faith judgment of Landlord:  (i) the transferee is of a character or engaged in a business which is not in keeping with the standards or criteria used by Landlord in leasing the Project, or the general character or quality of the Project; (ii) the financial condition of the transferee is such that it may not be able to perform its obligations in connection with this Lease (or otherwise does not satisfy Landlord’s standards for financial standing with respect to tenants under direct leases of comparable economic scope); (iii) the transferee, or any person or entity which directly or indirectly controls, is controlled by, or is under common control with, the transferee, is a tenant of or negotiating for space in the Project occupies space in the Project or has negotiated with Landlord within the preceding ninety (90) days (or is currently negotiating with Landlord) to lease space in the Project and for which Landlord has comparable space, (iv) the transferee has the power of eminent domain, is a governmental agency or an agency or subdivision of a foreign government; (v) an Event of Default by Tenant has occurred and is uncured at the time Tenant delivers the Transfer Notice to Landlord; (vi) in the good faith judgment of Landlord, such a Transfer would violate any term, condition, covenant, or agreement of Landlord involving the Project or any other tenant's lease within it or would give an occupant of the Project a right to cancel or modify its lease; (vii) [intentionally omitted]; (viii) in Landlord’s reasonable judgment, the use of the Premises by the proposed transferee would not be comparable to the types of office use by other tenants in the Project, would result in more than a reasonable density of occupants per square foot of the Premises, would materially increase the burden on elevators or other Building systems or equipment over the burden thereon prior to the proposed Transfer, would require increased services by Landlord or would require any alterations to the Project to comply with Applicable Laws, unless Tenant agrees to pay the cost of those required alterations; (ix) the transferee intends to use the space for purposes which are not permitted under this Lease; (x) the terms of the proposed Transfer would allow the transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant (or will allow the transferee to occupy space leased by Tenant pursuant to any such right); (xi) the proposed Transfer would result in more than three subleases per each full floor of the Premises being in effect at any one time during the Term; (xii) any ground lessor or mortgagee whose consent to such Transfer is required fails to consent thereto.  Tenant hereby waives any right to terminate the Lease as a remedy for Landlord wrongfully withholding its consent to any Transfer.

 

18.4 Landlord and Tenant agree that, in the event of any approved assignment or subletting, the rights of any such assignee or sublessee of Tenant herein shall be subject to all of the terms, conditions, and provisions of this Lease, including, without limitation, restriction on use, assignment, and subletting and the covenant to pay Rent.  In the event any Monetary Default by Tenant has occurred hereunder and is continuing past any applicable notice and cure period, Landlord may collect the rent owing by the assignee or sublessee directly from such assignee or sublessee and apply the amount so collected to the Rent herein reserved.  No such consent to or recognition of any such assignment or subletting shall constitute a release of Tenant of Tenant's performance hereunder from further performance by Tenant or covenants undertaken to be performed by Tenant herein.  Tenant shall remain liable and responsible for all Rent and other obligations herein imposed upon Tenant (except to the extent collected from any assignee or transferee).  Consent by Landlord to a particular assignment, sublease, or other transaction shall not be deemed a consent to any other or subsequent transaction.  In any case where Landlord's consent is required hereunder to any Transfer, whether or not Landlord consents to such Transfer, Tenant shall pay any reasonable attorneys' fees incurred by Landlord in connection with such Transfer, including, without limitation, fees incurred in reviewing documents relating to, or evidencing, said assignment, sublease, or other transaction; provided that those costs shall not exceed $1,500 with respect to any single Transfer so long as Tenant and the proposed transferee execute Landlord's standard form of consent document without negotiation requiring more than two hours of Landlord's attorney's time.  All documents utilized by Tenant to evidence any subletting or assignment for which Landlord's consent has been requested and is required hereunder, shall be subject to prior approval (not to be unreasonably withheld, conditioned or delayed) by Landlord or its attorney.

 

18.5 Tenant shall be bound and obligated to pay Landlord a portion of any sums or economic consideration payable to Tenant by any sublessee, assignee, licensee, or other transferee, within thirty (30) days following receipt thereof by Tenant from such sublessee, assignee, licensee, or other transferee, as the case might be, as follows:

 

(a) In the case of an assignment, fifty percent (50%) of any sums or other economic consideration received by Tenant as a result of such assignment shall be paid to Landlord after first deducting Tenant's costs, including the unamortized cost of reasonable leasehold improvements paid for by Tenant in connection with such assignment, any new sublease tenant improvement allowance and cost of any market standard real estate commissions and reasonable legal fees incurred by Tenant in connection with such assignment.

 

(b) In the case of a subletting, fifty percent (50%) of any sums or economic consideration received by Tenant as a result of such subletting shall be paid to Landlord after first deducting (i) the Rent due hereunder prorated to reflect only Rent allocable to the sublet portion of the Premises, and (ii) Tenant's costs, including the reasonable cost of tenant improvements made to the sublet portion of the Premises by Tenant for the specific benefit of the sublessee, any new sublease tenant improvement allowance, and the cost of any market standard real estate commissions and reasonable legal fees incurred by Tenant in connection with such subletting, which shall be amortized over the term of the sublease.

 

(c) Tenant shall provide Landlord with a detailed statement setting forth any sums or economic consideration Tenant either has or will derive from such Transfer, the deductions permitted under (a) and (b) of this Section 18.5, and the calculation of the amounts due Landlord under this Section 18.5.

 

18.6 If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. or any successor or substitute therefor (the "Bankruptcy Code"), fifty percent (50%) of such monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord, and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code.  Any such monies or other consideration not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord.  Any person or entity to whom this Lease is so assigned shall be deemed, without further act or deed, to have assumed all of the remaining obligations arising under this Lease as of the date of such assignment.  Any such assignee shall, upon demand therefor, execute and deliver to Landlord an instrument confirming such assumption.

 

18.7 [Intentionally Omitted].

 

18.8 Notwithstanding anything to the contrary contained in this Article 18, Tenant may assign this Lease or sublet the Premises without the need for Landlord's prior consent if such assignment or sublease is to any parent, subsidiary or affiliate business entity which the initially named Tenant controls, is controlled by or is under common control with (each, an "Affiliate") provided that: (i) at least thirty (30) days prior to such assignment or sublease, Tenant delivers to Landlord the financial statements or other financial and background information of the assignee or sublessee as required for other transfers; (ii) if the transfer is an assignment, the assignee assumes, in full, the obligations of Tenant under this Lease (or if a sublease, the sublessee of a portion of the Premises or term assumes, in full, the obligations of Tenant with respect to such portion); (iii) the financial audited net worth of the assignee or sublessee as of the time of the proposed transfer , is sufficient for such assignee or sublessee to fulfill its obligations pursuant to such assignment or sublease, as reasonably determined by Landlord in accordance with generally accepted accounting principles; (iv) Tenant remains fully liable under this Lease; and (v) unless Landlord consents to the same, the use of the Premises set forth herein remains unchanged.  As used in this section, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies through ownership of at least fifty-one (51%) of the securities or partnership or other ownership interests of the entity subject to control.

 

18.9 Notwithstanding anything to the contrary contained in this Article 18, Tenant may engage in Approved Reorganizations (as defined below), without the express consent of Landlord; provided that (a) at least ten (10) days prior to the effective date of the Approved Reorganization, Tenant shall furnish Landlord with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization, (b) no Event of Default exists under this Lease during the period commencing on the date of Tenant's request and ending on the effective date of the Approved Reorganization, and (c) there is no change in use of the Premises.  To the extent that legal requirements or confidentiality requirements do not permit Tenant to give Landlord prior notice of an Approved Reorganization, then Tenant may in lieu of the prior notice required under this Section give Landlord notice within ten (10) days after the effective date of the Approved Reorganization, together with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization.  As used herein, the term "Approved Reorganizations" means any merger, reorganization or consolidation of Tenant (whether or not Tenant is the surviving entity), or the sale of all or substantially all of the assets or stock of Tenant, in each case as a going concern, where Tenant's successor shall have a net worth following consummation of such transaction, as reasonably determined by Landlord in accordance with generally accepted accounting principles, that is sufficient to meet the remaining obligations of Tenant under this Lease.

 

18.10 The provisions of Section 18.5 shall not apply to any assignment or subletting permitted without Landlord's consent pursuant to Section 18.8 or 18.9.  The transferee under a Transfer permitted under Section 18.8 or 18.9 without Landlord's consent is referred to herein as a "Permitted Transferee" and a Transfer permitted without Landlord's consent therein, a "Permitted Transfer."

 

ARTICLE 19.

 

DAMAGE OR DESTRUCTION

 

19.1 Casualty.  If the Premises should be damaged or destroyed by fire or other casualty insurable under a standard policy of casualty insurance, Tenant shall give immediate written notice to Landlord. Within thirty (30) days after receipt from Tenant of such written notice, Landlord shall notify Tenant whether the necessary repairs can reasonably be made: (a) within ninety (90) days; (b) in more than ninety (90) days but in less than one hundred eighty (180) days; or (c) in more than one hundred eighty (180) days, in each case after the date of the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed.

 

19.1.1 Less Than 90 Days.  If the Premises should be damaged only to such extent that rebuilding or repairs can reasonably be completed within ninety (90) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed, this Lease shall not terminate and, provided that insurance proceeds are available to pay for the full repair of all damage (or would have been available had Landlord secured the insurance required under this Lease), Landlord shall repair the Premises or Building, except that Landlord shall not be required to rebuild, repair or replace Tenant's furniture, fixtures, furnishings, or equipment (collectively, "Tenant's Property") which may have been placed in, on or about the Premises by or for the benefit of Tenant.  If Tenant's use of the Premises is impaired by the damage or destruction, Base Rent and Additional Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) or proportionate to the amount of impairment from the date of damage to the Premises until repaired only to the extent rental abatement insurance proceeds are received by Landlord (or would have been received by Landlord if Landlord had carried rental abatement insurance with a coverage period of twelve months).

 

19.1.2 Greater Than 90 Days.  If the Premises should be damaged only to such extent that rebuilding or repairs can reasonably be completed in more than ninety (90) days but in less than one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed, then Landlord shall have the option of: (a) terminating the Lease effective upon the occurrence of such damage; or (b) electing to repair the Premises, provided insurance proceeds are available to pay for the full repair of all damage (or would have been available had Landlord secured the insurance required under this Lease), except that Landlord shall not be required to rebuild, repair or replace Tenant's Property.  If Tenant's use of the Premises is impaired by the damage or destruction, Base Rent and Additional Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) or proportionate to the amount of impairment from the date of damage to the Premises until repaired only to the extent rental abatement insurance proceeds are received by Landlord (or would have been received by Landlord if Landlord had carried rental abatement insurance with a coverage period of twelve months).  In the event that Landlord should fail to substantially complete such repairs within one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed (such period to be extended for delays caused by Tenant or because of any Force Majeure Events, as hereinafter defined; provided that any extension for Force Majeure Events shall not exceed 60 days in the aggregate), Tenant shall have the right, as Tenant's exclusive remedy, within ten (10) business days after the expiration of such one hundred eighty (180) day period, and provided that such repairs have not been substantially completed within such ten (10) business day period, to terminate this Lease by delivering written notice to Landlord as Tenant's exclusive remedy, whereupon the Lease and all further rights of Tenant and obligations of the parties hereunder, terminate on the date specified by Tenant in its notice to Landlord (which date shall not be more than sixty (60) days from the date of such notice).  In the event that after issuance permits for the necessary repair or reconstruction of the portion of the Premises which has been damaged or destroyed, Landlord fails to substantially complete such repairs within the 240 days after the issuance of those permits and Landlord has been delayed in that construction because of Force Majeure Events for a period in excess of 60 days, then Landlord may terminate this Lease by delivering written notice to Tenant.

 

19.1.3 Greater Than 180 Days.  If the Premises should be so damaged that rebuilding or repairs cannot be completed within one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises or Building which was damaged or destroyed, either Landlord or Tenant may terminate this Lease by giving written notice within ten (10) business days after notice from Landlord specifying such time period of repair, and this Lease shall terminate and the Rent shall be abated from the date of damage.  In the event that neither party elects to terminate this Lease, Landlord shall commence and prosecute to completion the repairs to the Premises or Building, provided insurance proceeds are available to pay for the repair of all damage (or would have been available had Landlord secured the insurance required under this Lease ) except that Landlord shall not be required to rebuild, repair or replace Tenant's Property.  If Tenant's use of the Premises is impaired by the damage or destruction, Base Rent and Additional Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises), or proportionate to the amount of impairment from the date of damage to the Premises until repaired only to the extent rental abatement insurance proceeds are received by Landlord (or would have been received by Landlord if Landlord had carried rental abatement insurance with a coverage period of twelve months).

 

19.1.4 Casualty During the Last Year of the Lease Term.  Notwithstanding any other provisions hereof, if the Premises shall be damaged within the last year of the Lease Term, and if the cost to repair or reconstruct the portion of the Premises which was damaged or destroyed shall exceed $250,000, then, irrespective of the time necessary to complete such repair or reconstruction, either party shall have the right, in its sole and absolute discretion, to terminate the Lease effective upon the occurrence of such damage.  The foregoing right shall be in addition to any other right and option of either party under this Article 19.

 

19.2 Uninsured Casualty.  Tenant shall be responsible for and shall pay to Landlord Tenant's Share of any deductible payable under the property insurance for the Building as part of Operating Expenses, subject to any limitations in Section 5.1(a).  In the event that the Premises or any portion of the Building is damaged to the extent Tenant's use and enjoyment of the Premises is materially impaired and such damage is not covered by insurance proceeds received by Landlord (or would have been available had Landlord secured the insurance required under this Lease), or in the event that the holder of any indebtedness secured by the Premises requires that the insurance proceeds be applied to such indebtedness and such amounts are actually applied, then Landlord shall have the right at Landlord's option, in Landlord's sole and absolute discretion, either (i) to repair such damage as soon as reasonably possible at Landlord's expense, or (ii) to give written notice to Tenant within thirty (30) days after the date of the occurrence of such damage of Landlord's intention to terminate this Lease as of the date of the occurrence of such damage. In the event Landlord elects to terminate this Lease, Tenant shall have the right within ten (10) days after receipt of such notice to give written notice to Landlord of Tenant's commitment to pay the cost of repair of such damage, in which event this Lease shall continue in full force and effect, and Landlord shall make such repairs as soon as reasonably possible subject to the following conditions: Tenant shall deposit into escrow Landlord's estimated cost of such repairs (based on fixed price construction contracts to be entered into by Landlord and agreeable to Tenant in its reasonable discretion) not later than five (5) business days prior to Landlord's commencement of the repair work. If the cost of such repairs exceeds the amount deposited, Tenant shall reimburse Landlord for such excess cost within thirty (30) days after receipt of an invoice from Landlord, indicating payment of such amounts.  Any amount deposited by Tenant in excess of the cost of such repairs shall be refunded within thirty (30) days of Landlord's final payment to Landlord's contractor.  If Tenant does not give such notice within the ten (10) day period, or fails to make such deposit as required, Landlord shall have the right, in Landlord's sole and absolute discretion, to immediately terminate this Lease to be effective as of the date of the occurrence of the damage.

 

19.3 Waiver.  The provisions of this Lease, including this Article 19, constitute an express agreement between Landlord and Tenant with respect to damage to, or destruction of, all or any portion of the Premises or the Project, and any statute or regulation of the State of California, 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 with respect to such rights or obligations), shall have no application to this Lease or to any damage or destruction to all or any portion of the Premises or the Project.

 

ARTICLE 20.

 

CONDEMNATION

 

20.1 Total Condemnation.  If all of the Premises is condemned by eminent domain, inversely condemned or sold under threat of condemnation for any public or quasi-public use or purpose ("Condemned"), this Lease shall terminate as of the earlier of the date the condemning authority takes title to or possession of the Premises, and Rent shall be adjusted to the date of termination.

 

20.2 Partial Condemnation.  If any portion of the Premises is condemned and such partial condemnation materially impairs Tenant's ability to use the Premises for Tenant's business, Landlord shall have the option in Landlord's sole and absolute discretion of either (i) relocating Tenant to comparable space within the Project or (ii) terminate this Lease as of the earlier of the date title vests in the condemning authority or as of the date an order of immediate possession is issued and Rent shall be adjusted to the date of termination.  If such partial condemnation does not materially impair Tenant's ability to use the Premises for the business of Tenant, Landlord shall promptly restore the Premises to the extent of any condemnation proceeds recovered by Landlord, excluding the portion thereof lost in such condemnation, and this Lease shall continue in full force and effect except that after the date of such title vesting or order of immediate possession Rent shall be adjusted equitably.

 

20.3 Award.  If the Premises are wholly or partially condemned, Landlord shall be entitled to the entire award paid for such condemnation, and Tenant waives any claim to any part of the award from Landlord or the condemning authority; provided, however, Tenant shall have the right to recover from the condemning authority such compensation as may be separately awarded to Tenant in connection with costs in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment to a new location.  No condemnation of any kind shall be construed to constitute an actual or constructive eviction of Tenant or a breach of any express or implied covenant of quiet enjoyment.  Tenant hereby waives the effect of Sections 1265.120 and 1265.130 of the California Code of Civil Procedure.

 

20.4 Temporary Condemnation. In the event of a temporary condemnation not extending beyond the Term, this Lease shall remain in effect, Tenant shall continue to pay Rent and Tenant shall receive any award made for such condemnation except damages to any of Landlord's property.  If a temporary condemnation is for a period which extends beyond the Term, this Lease shall terminate as of the date of initial occupancy by the condemning authority and any such award shall be distributed in accordance with the preceding section.  If a temporary condemnation remains in effect at the expiration or earlier termination of this Lease, Tenant shall pay Landlord the reasonable cost of performing any obligations required of Tenant with respect to the surrender of the Premises.

 

ARTICLE 21.

 

HOLD HARMLESS

 

21.1 Tenant agrees to defend, with counsel reasonably acceptable to Landlord, all actions against Landlord, any member, partner, trustee, stockholder, officer, director, employee, or beneficiary of Landlord (collectively, "Landlord Parties"), holders of mortgages secured by the Premises or the Project and any other party having an interest therein (collectively with Landlord Parties, the "Indemnified Parties") with respect to, and to pay, protect, indemnify, and save harmless, to the extent permitted by law, all Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands, or judgments of any nature to which any Indemnified Party is subject because of its estate or interest in the Premises or the Project arising from (a) injury to or death of any person, or damage to or loss of property on the Premises, the Project, on adjoining sidewalks, streets or ways, or, in any of the foregoing cases, connected with the use, condition, or occupancy of the Premises, the Project sidewalks streets, or ways by Tenant, except to the extent, if any, caused by the gross negligence or willful misconduct of the Indemnified Parties, including Landlord and Landlord's employees, contractors and agents, or any breach by Landlord of its obligations under this Lease, (b) any violation of this Lease by or attributable to Tenant, or (c) subject to Section 13.4, any act, fault, omission, or other misconduct of Tenant or its agents, contractors, licensees, sublessees, or invitees.  Tenant agrees to use and occupy the Premises and other facilities of the Project at its own risk, and hereby releases the Indemnified Parties from any and all claims for any damage or injury to the fullest extent permitted by law.

 

21.2 Tenant agrees that Landlord shall not be responsible or liable to Tenant, its agents, employees, or invitees for fatal or non-fatal bodily injury or property damage occasioned by the acts or omissions of any other tenant, or such other tenant's agents, employees, licensees, or invitees, of the Project.  Landlord shall not be liable to Tenant for losses due to theft, burglary, or damages done by persons on the Project.

 

21.3 Notwithstanding anything to the contrary in this Article 21 or elsewhere in the Lease, Tenant does not agree to hold Landlord and Landlord Parties harmless from, or to release or indemnify such parties for the gross negligence or willful misconduct of the Indemnified Parties, including Landlord and Landlord's employees, contractors and agents, or for any breach by Landlord of its obligations under this Lease.

 

ARTICLE 22.

 

DEFAULT BY TENANT

 

22.1 The term "Event of Default" refers to the occurrence of any one (1) or more of the following:

 

(a) Failure of Tenant to pay when due any sum required to be paid hereunder (the "Monetary Default") within five (5) days of receipt of written notice from Landlord; provided, however, that after the first failure to pay any sum required to be paid hereunder in any twelve (12) month period, in the event that Tenant fails a second time to pay when due any sum required to be paid hereunder during such twelve (12) month period, such failure shall be deemed to automatically constitute a Monetary Default without any obligation on Landlord to provide any additional written notice, and provided further that the Tenant acknowledges that any such written notice provided hereunder shall be in lieu of, and not in addition to, any notice to pay rent or quit pursuant to any applicable statutes;

 

(b) Failure of Tenant, after thirty (30) days written notice thereof, to perform any of Tenant's obligations, covenants, or agreements except a Monetary Default, provided that if the cure of any such failure is not reasonably susceptible of performance within such thirty (30) day period, then an Event of Default of Tenant shall not be deemed to have occurred so long as Tenant has promptly commenced and thereafter diligently prosecutes such cure to completion;

 

(c) Tenant admits in writing that it cannot meet its obligations as they become due; or is declared insolvent according to any law; or assignment of Tenant's property is made for the benefit of creditors; or a receiver or trustee is appointed for Tenant or its property; or the interest of Tenant under this Lease is levied on under execution or other legal process; or any petition is filed by or against Tenant to declare Tenant bankrupt or to delay, reduce, or modify Tenant's debts or obligations.  Any such levy, execution, legal process, or petition filed against Tenant shall not constitute a breach of this Lease provided Tenant shall vigorously contest the same by appropriate proceedings and shall remove or vacate the same within ninety (90) days from the date of its creation, service, or filing;

 

(d) The abandonment of the Premises by Tenant, which shall mean that Tenant has vacated the Premises for ten (10) consecutive days, while Tenant is in Monetary Default and such abandonment has impaired Landlord's insurance coverage for the Premises or the Building;

 

(e) The discovery by Landlord that any financial statement given by Tenant or any of its assignees or successors-in-interest was materially false; or

 

(f) Except in connection with a Permitted Transfer, if Tenant shall cease to exist as a corporation or partnership, or be otherwise dissolved or liquidated or become insolvent.

 

22.2 In the event of any Event of Default by Tenant, Landlord, at its option, may pursue one or more of the following remedies without notice or demand in addition to all other rights and remedies provided for at law or in equity:

 

(a) Landlord may continue this Lease in full force and effect, and this Lease shall continue in full force and effect as long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to collect Rent when due.

 

 

(b) Landlord may terminate Tenant's right to possession of the Premises at any time by giving written notice to that effect.  Acts of maintenance, efforts to relet the Premises or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession.  On termination, Landlord shall have the right to remove all personal property of Tenant and store it at Tenant's cost in accordance with applicable law, and to recover from Tenant as damages:  (i) the worth at the time of award of unpaid Rent and other sums due and payable which had been earned at the time of termination; plus (ii) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable which would have been payable after termination until the time of award exceeds the amount of the Rent 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 and other sums due and payable for the balance of the Term after the time of award exceeds the amount of the Rent loss that Tenant proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease, or which, in the ordinary course of things, would be likely to result therefrom, including, if appropriate, any costs or expenses incurred by Landlord:  (A) in retaking possession of the Premises, including reasonable attorneys' fees and costs therefor; (B) maintaining or preserving the Premises for reletting to a new tenant, including repairs to the Premises for the reletting; (C) leasing commissions; (D) any other costs necessary or appropriate to relet the Premises; and (E) such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by the laws of the State of California.

 

The "worth at the time of award" of the amounts referred to in Sections 22.2(b)(i) and 22.2(b)(ii) shall be calculated by allowing interest at the lesser of ten percent (10%) per annum or the maximum rate permitted by law, on the unpaid Rent and other sums due and payable from the termination date through the date of award.  The "worth at the time of award" of the amount referred to in Section 22.2(b)(iii) shall be calculated by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent (1%).  Tenant waives redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or under any other present or future law, if Tenant is evicted or Landlord takes possession of the Premises by reason of any Event of Default by Tenant.

 

22.3 [Intentionally Omitted].

 

22.4 To the extent allowed by applicable law, each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise, including, but not limited to, suits for injunctive relief and specific performance.  The exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity, or by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord for any or all other rights or remedies provided for in this Lease or now or hereafter existing at or in equity or by statute or otherwise.  All such rights and remedies shall be considered cumulative and non-exclusive.  If any notice and grace period required under subparagraphs 22.1(a) or (b) was not previously given, a notice to pay rent or quit, or to perform or quit, as the case may be, given to Tenant under any statute authorizing the forfeiture of leases for unlawful detainer shall also constitute the applicable notice for grace period purposes required by subparagraphs 22.1(a) or (b).  In such case, the applicable grace period under subparagraphs 22.1(a) or (b) and under the unlawful detainer statute shall run concurrently after the one such statutory notice, and the failure of Tenant to cure the default within the greater of the two (2) such grace periods shall constitute both an unlawful detainer and an Event of Default entitling Landlord to the remedies provided for in this Lease and/or by said statute.

 

22.5 If Tenant should fail to make any payment or cure any default hereunder within the time herein permitted and such failure constitutes an Event of Default (except in the case where if Landlord in good faith believes that action prior to the expiration of any cure period under Section 22.1 is necessary to prevent damage to persons or property, in which case Landlord may act without waiting for such cure period to expire), Landlord, without being under any obligation to do so and without thereby waiving such default, but upon advance notice to Tenant, may make such payment and/or remedy such default for the account of Tenant (and enter the Premises for such purpose), and thereupon, Tenant shall be obligated and hereby agrees to pay Landlord, within thirty (30) days of demand, all reasonable costs, expenses, and disbursements, plus ten percent (10%) overhead cost incurred by Landlord in connection therewith.

 

22.6 [Intentionally Omitted].

 

22.7 Nothing contained in this Article 22 shall limit or prejudice the right of Landlord to prove and obtain as damages in any bankruptcy, insolvency, receivership, reorganization, or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such a proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal, or less than the amounts recoverable, either as damages or Rent, referred to in any of the preceding provisions of this Article 22.

 

22.8 Landlord is entitled to accept, receive, in check or money order, and deposit any payment made by Tenant for any reason or purpose or in any amount whatsoever, and apply them at Landlord's option to any obligation of Tenant, and such amounts shall not constitute payment of any amount owed, except that to which Landlord has applied them.  No endorsement or statement on any check or letter of Tenant shall be deemed an accord and satisfaction or recognized for any purpose whatsoever.  The acceptance of any such check or payment shall be without prejudice to Landlord's rights to recover any and all amounts owed by Tenant hereunder and shall not be deemed to cure any other default nor prejudice Landlord's rights to pursue any other available remedy, Landlord's acceptance of partial payment of Rent does not constitute a waiver of any rights, including without limitation any right Landlord may have to recover possession of the Premises.

 

22.9 In the event that Tenant's right of possession of the Premises is terminated prior to the end of the initial term by reason of default, then immediately upon such termination, an amount shall be due and payable by Tenant to Landlord equal to the unamortized portion as of that date (which amortization shall be based on an interest rate of eleven percent (11%) per annum and the number of months of unexpired Lease term) of the value of any free Base Rent (i.e., the Base Rent stated in this Lease to be abated as an inducement to Tenant's entering into this Lease) enjoyed as of that date by Tenant (collectively, the "Inducements").  Notwithstanding the foregoing, Landlord shall not be entitled to recover such unamortized portions of the Inducements as provided in this Section 22.9 if, following an uncured default under this Lease by Tenant, Landlord elects to pursue its remedy against Tenant pursuant to California Civil Code Section 1951.4, or if Landlord recovers the discounted present value of all rent payable for the entire term of the Lease pursuant to California Civil Code Section 1951.2.  To the extent Landlord recovers the discounted present value of some, but not all, of the rent payable following the termination of this Lease resulting from Tenant's default, the number of months of such rent so recovered by Landlord shall be subtracted from the "number of months of unexpired lease term" in the formula set forth above.

 

22.10 Tenant waives the right to terminate this Lease on Landlord's default under this Lease, except as specifically provided hereunder, and Tenant's sole remedy on Landlord's default is an action for damages or injunctive or declaratory relief.  Landlord's failure to perform any of its obligations under this Lease shall constitute a default by Landlord under this Lease if the failure continues for thirty (30) days after written notice of the failure from Tenant to Landlord.  If the required performance cannot be completed within thirty (30) days, Landlord's failure to perform shall constitute a default under the Lease unless Landlord undertakes to cure the failure within thirty (30) days and diligently and continuously attempts to complete this cure as soon as reasonably possible.  All obligations of each party hereunder shall be construed as covenants, not conditions.

 

ARTICLE 23.

 

[INTENTIONALLY OMITTED]

 

ARTICLE 24.

 

[INTENTIONALLY OMITTED]

 

ARTICLE 25.

 

ATTORNEYS' FEES

 

25.1 All costs and expenses, including reasonable attorneys' fees (whether or not legal proceedings are instituted), involved in collecting rents or other amounts due to either party under this Lease, enforcing the obligations of Tenant or Landlord under this Lease, or protecting the rights or interests of Landlord or Tenant under this Lease, incurred in instituting and prosecuting legal proceedings or, in the case of Landlord, recovering possession of the Premises after default by Tenant or in the case of either Landlord or Tenant upon expiration or sooner termination of this Lease, shall be due and payable by the other party within thirty (30) days of receipt of an invoice therefor (and, in the case of Tenant, as additional rent).

 

25.2 In addition, and notwithstanding the foregoing, if either party hereto shall file any action or bring any proceeding against the other party arising out of this Lease or for the declaration of any rights hereunder, the prevailing party in such action shall be entitled to recover from the other party all costs and expenses, including reasonable attorneys' fees incurred by the prevailing party, as determined by the trier of fact in such legal proceeding.  For purposes of this provision, the terms "attorneys' fees" or "attorneys' fees and costs," or "costs and expenses" shall mean the fees and expenses of legal counsel (including external counsel and in-house counsel) of the parties hereto, which include printing, photocopying, duplicating, mail, overnight mail, messenger, court filing fees, costs of discovery, and fees billed for law clerks, paralegals, investigators and other persons not admitted to the bar for performing services under the supervision and direction of an attorney.  For purposes of determining in-house counsel fees, the same shall be considered as those fees normally applicable to a partner in a law firm with like experience in such field.  In addition, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs incurred in enforcing any judgment arising from a suit or proceeding under this Lease, including without limitation post-judgment motions, contempt proceedings, garnishment, levy and debtor and third party examinations, discovery and bankruptcy litigation, without regard to schedule or rule of court purporting to restrict such award.  This post-judgment award of attorneys' fees and costs provision shall be severable from any other provision of this Lease and shall survive any judgment/award on such suit or arbitration and is not to be deemed merged into the judgment/award or terminated with the Lease.

 

ARTICLE 26.

 

NON-WAIVER

 

26.1 Neither acceptance of any payment nor, the failure to complain of any action, non-action, or default of either party shall constitute a waiver by a party of any of such party's rights hereunder.  Time is of the essence with respect to the performance of every obligation of each party under this Lease in which time of performance is a factor.  Waiver by either party of any right or remedy arising in connection with any default of the other party shall not constitute a waiver of such right or remedy or any other right or remedy arising in connection with either a subsequent default of the same obligation or any other default.  No right or remedy of either party hereunder or covenant, duty, or obligation of any party hereunder shall be deemed waived by the other party unless such waiver is in writing, signed by  the other party or the other party's duly authorized agent.

 

ARTICLE 27.

 

RULES AND REGULATIONS

 

27.1 Such reasonable rules and regulations applying to all lessees in the Project for the safety, care, and cleanliness of the Project and the preservation of good order thereon are hereby made a part hereof as Exhibit D, and Tenant agrees to comply with all such rules and regulations.  Landlord shall have the right at all times to change such rules and regulations or to amend them in any reasonable and non-discriminatory manner, all of which changes and amendments shall be sent by Landlord to Tenant in writing and shall be thereafter carried out and observed by Tenant.  In the event that Tenant notifies Landlord of any non-compliance with said rules and regulations by any other lessee in the Project which adversely affects Tenant's use and enjoyment of the Premises, Landlord shall use its reasonable efforts to cause such other tenant to comply with such rules and regulations; provided that Landlord shall have no obligation to commence or prosecute any action or proceeding against such other Tenant and Landlord shall not have any liability to Tenant for any failure of any other lessees of the Project to comply with such rules and regulations.  In the event of any conflict between the terms and provisions of this Lease and Rules and Regulations, the terms and provisions of this Lease shall pertain and control.

 

ARTICLE 28.

 

ASSIGNMENT BY LANDLORD

 

28.1 Landlord shall have the right to transfer or assign, in whole or in part, all its rights and obligations hereunder and in the Premises and the Project.  In such event, no liability or obligation shall accrue or be charged to Landlord with respect to the period from and after such transfer or assignment and assumption of Landlord's obligations by the transferee or assignee.

 

ARTICLE 29.

 

LIABILITY OF LANDLORD

 

29.1 It is expressly understood and agreed that the obligations of Landlord under this Lease shall be binding upon Landlord and its successors and assigns and any future owner of the Project only with respect to events occurring during its and their respective ownership of the Project.  In addition, Tenant agrees to look solely to Landlord's interest in the Project for recovery of any judgment against Landlord arising in connection with this Lease, it being agreed that neither Landlord nor any successor or assign of Landlord nor any future owner of the Project, nor any partner, shareholder, member, or officer of any of the foregoing shall ever be personally liable for any such judgment.  The limitations of liability contained in this Section 29.1 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns.  Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations under this Lease.  Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for any indirect or consequential damages or any injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring.  Notwithstanding any contrary provision herein, neither Tenant nor any member, partner, trustee, stockholder, officer, director, employee, beneficiary or affiliate of Tenant ("Tenant Parties") shall be liable under any circumstances for any indirect or consequential damages or any injury or damage to, or interference with, the Landlord's business or that of any of Landlord's Parties, including but not limited to, loss of profits, loss of rents or other revenues (other than as expressly provided in Section 22.2), loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring, except as specifically provided in Article 31.

 

ARTICLE 30.

 

SUBORDINATION AND ATTORNMENT

 

30.1 This Lease, at Landlord's option, shall be subordinate to any present or future mortgage, ground lease or declaration of covenants regarding maintenance and use of any areas contained in any portion of the Building, and to any and all advances made under any present or future mortgage and to all renewals, modifications, consolidations, replacements, and extensions of any or all of same.  Tenant agrees, with respect to any of the foregoing documents, that no documentation other than this Lease shall be required to evidence such subordination.  Notwithstanding the foregoing, as a condition to the subordination to any mortgage or ground lease, Landlord shall provide a Non-Disturbance Agreement from its lender or ground lessor in a commercially reasonable form.  If any holder of a mortgage shall elect for this Lease to be superior to the lien of its mortgage and shall give written notice thereof to Tenant, then this Lease shall automatically be deemed prior to such mortgage whether this Lease is dated earlier or later than the date of said mortgage or the date of recording thereof.  Tenant agrees to execute such commercially reasonable documents as may be further required to evidence such subordination or to make this Lease prior to the lien of any mortgage or deed of trust, as the case may be and failure to do so within five (5) business days after written demand shall be an Event of Default.  Tenant hereby attorns to all successor owners of the Building, whether or not such ownership is acquired as a result of a sale through foreclosure or otherwise.

 

30.2 Each party shall, at such time or times as the other party may request, upon not less than ten (10) days' prior written request by the requesting party, sign and deliver to the requesting party a certificate stating whether this Lease is in full force and effect; whether any amendments or modifications exist; whether any Monthly Rent has been prepaid and, if so, how much; whether to the knowledge of the certifying party there are any defaults hereunder; and in the circumstance where Landlord is the requesting party, such other information and agreements as may be reasonably requested, it being intended that any such statement delivered pursuant to this Article may be relied upon by the requesting party and by any prospective purchaser of all or any portion of the requesting party's interest herein, or a holder or prospective holder of any mortgage encumbering the Building.  Tenant's failure to deliver such statement within five (5) days after Landlord's second written request therefor shall constitute an Event of Default (as that term is defined elsewhere in this Lease) and shall conclusively be deemed to be an admission by Tenant of the matters set forth in the request for an estoppel certificate.

 

30.3 Upon Landlord's request made from time to time (but not more frequently than once a year, unless required in connection with a proposed sale or financing of the Project or the Building), Tenant shall deliver to Landlord Tenant's then most current financial statements, including a balance sheet and profit and loss statement for the most recent prior year (collectively, the "Statements"), which Statements shall accurately and completely reflect the financial condition of Tenant.  If audited financial statements are not then available, Tenant may instead provide unaudited financial statements certified by an officer of Tenant as accurately and completely reflecting the financial condition of Tenant.  The Statements shall be held in strict confidence by Landlord.  Landlord shall have the right to deliver the same to any proposed purchaser of the Building or the Project, and to any encumbrancer of all or any portion of the Building or the Project, but only upon receipt by Tenant of a mutually acceptable and reasonable confidentiality agreement.  Notwithstanding the foregoing, if (i) Tenant is required to file reports under the Securities Exchange Act of 1934, as amended, (ii) Tenant is current in its reporting obligations thereunder, and (iii) the reports required by such act are available to the public, including Landlord, then Tenant shall not be obligated to provide Landlord with financial statements pursuant to this Section 30.3.  Under no circumstances shall this Section 30.3 require Tenant to provide Landlord with any material nonpublic information.

 

ARTICLE 31.

 

HOLDING OVER

 

31.1 In the event Tenant, or any party claiming under Tenant, retains possession of the Premises after the Expiration Date or Termination Date, such possession shall be that of a holdover tenant and an unlawful detainer.  No tenancy or interest shall result from such possession, and such parties shall be subject to immediate eviction and removal.  Tenant or any such party shall pay Landlord, as Base Rent for the period of such holdover, an amount equal to one hundred fifty percent (150%) of the Base Rent otherwise provided for herein, during the time of holdover together with all other Additional Rent and other amounts payable pursuant to the terms of this Lease.  Tenant shall also be liable for any and all damages sustained by Landlord due to the loss of a prospective third-party tenant, or delay in delivering the Premises or a portion thereof to a prospective third-party tenant, or a delay in Landlord's ability to perform improvements for a prospective third-party tenant resulting from Tenant's holdover; provided that (a) the lease to the prospective third-party tenant has been fully executed, and (b) Landlord has given notice to Tenant of the date Landlord, pursuant to such lease, intends to deliver the Premises or any portion thereof to the prospective third-party tenant or commence improvements for that prospective third-party tenant at least thirty (30) days prior to such date.  Tenant shall vacate the Premises and deliver same to Landlord immediately upon Tenant's receipt of notice from Landlord to so vacate.  The Rent during such holdover period shall be payable to Landlord on demand.  No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend the Term of this Lease.

 

ARTICLE 32.

 

SIGNS

 

32.1 No sign, symbol, or identifying marks visible from the exterior of the Premises shall be put upon the Project, Building, entrances, parking areas, or elsewhere in the Common Areas by Tenant without the prior written approval of Landlord.  Should such approval ever be granted, all signs or lettering shall conform in all respects to the sign and/or lettering criteria established by Landlord.  Landlord has approved the existing signage in the Buildings.

 

32.2 As of the Effective Date, Tenant has monument signage identifying Tenant's name on the monument sign for the 2800 Bridge Building (the "2800 Bridge Monument Signage").  Any changes to the graphics, materials, color, design, lettering, size and specifications of Tenant's 2800 Bridge Monument Signage shall be subject to the reasonable approval of Landlord and all applicable governmental authorities and shall conform to Landlord's approved sign plan for the Project.  At the expiration or earlier termination of this Lease, Landlord shall, at Tenant's sole cost and expense, cause the 2800 Bridge Monument Signage to be removed and the area of the monument sign affected by the 2800 Bridge Monument Signage to be restored to the condition existing prior to the installation of Tenant's 2800 Bridge Monument Signage.  The right to 2800 Bridge Monument Signage is personal to the initially named Tenant in this Lease, to any Permitted Transferee and any assignee of the Lease consented to by Landlord pursuant to the terms of Article 18.  So long as Tenant leases all of the rentable area in the 2800 Bridge Building, the 2800 Bridge Monument Signage shall be the only tenant signage on the monument sign for the 2800 Bridge Building.

 

32.3 As of the Effective Date, Tenant has monument signage identifying Tenant's name on the monument sign for the 3000 Bridge Building (the "3000 Bridge Monument Signage").  Any changes to the graphics, materials, color, design, lettering, size and specifications of Tenant's 3000 Bridge Monument Signage shall be subject to the reasonable approval of Landlord and all applicable governmental authorities and shall conform to Landlord's approved sign plan for the Project.  At the expiration or earlier termination of this Lease, Landlord shall, at Tenant's sole cost and expense, cause the 3000 Bridge Monument Signage to be removed and the area of the monument sign affected by the 3000 Bridge Monument Signage to be restored to the condition existing prior to the installation of Tenant's 3000 Bridge Monument Signage.  The right to 3000 Bridge Monument Signage is personal to the initially named Tenant in this Lease, to any Permitted Transferee and any assignee of the Lease consented to by Landlord pursuant to the terms of Article 18.  So long as Tenant leases all of the rentable area in the 3000 Bridge Building, the 3000 Bridge Monument Signage shall be the only tenant signage on the monument sign for the 3000 Bridge Building.

 

ARTICLE 33.

 

HAZARDOUS SUBSTANCES

 

33.1 Except for Hazardous Material (as defined below) contained in products used by Tenant for ordinary cleaning and office purposes in quantities not violative of applicable Environmental Requirements, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises and/or the Project or transport, store, use, generate, manufacture, dispose, or release any Hazardous Material on or from the Premises and/or the Project without Landlord's prior written consent.  Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements (as defined below) and all requirements of this Lease.  Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant's transportation, storage, use, generation, manufacture, or release of Hazardous Materials on the Premises, and Tenant shall promptly deliver to Landlord a copy of any notice of violation relating to the Premises or the Project of any Environmental Requirement.

 

33.2 The term "Environmental Requirements" means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, permits, authorizations, orders, policies or other similar requirements of any governmental authority, agency or court regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following:  the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act and all state and local counterparts thereto; all applicable California requirements, including, but not limited to, Sections 25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316 and 25501 of the California Health and Safety Code and Title 22 of the California Code of Regulations, Division 4.5, Chapter 11, and any policies or rules promulgated thereunder as well as any County or City ordinances that may operate independent of, or in conjunction with, the State programs, and any common or civil law obligations including, without limitation, nuisance or trespass, and any other requirements of Article 3 of this Lease.  The term "Hazardous Materials" means and includes any substance, material, waste, pollutant, or contaminant  that is or could be regulated under any Environmental Requirement or that may adversely affect human health or the environment, including, without limitation, any solid or hazardous waste, hazardous substance, asbestos, petroleum (including crude oil or any fraction thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs), and radioactive material).  For purposes of Environmental Requirements, to the extent authorized by law, Tenant is and shall be deemed to be the responsible party, including without limitation, the "owner" and "operator" of Tenant's "facility" and the "owner" of all Hazardous Materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

 

33.3 Tenant, at its sole cost and expense, shall remove all Hazardous Materials stored, disposed of or otherwise released by Tenant, its assignees, subtenants, agents, employees, contractors or invitees onto or from the Premises, in a manner and to a level reasonably satisfactory to Landlord, but in no event to a level and in a manner less than that which complies with all Environmental Requirements and does not limit any future uses of the Premises or require the recording of any deed restriction or notice regarding the Premises.  Tenant shall perform such work at any time during the Term of the Lease upon written request by Landlord or, in the absence of a specific request by Landlord, before Tenant's right to possession of the Premises terminates or expires.  If Tenant fails to perform such work within the time period specified by Landlord or before Tenant's right to possession terminates or expires (whichever is earlier), Landlord may at its discretion, and without waiving any other remedy available under this Lease or at law or equity (including without limitation an action to compel Tenant to perform such work), perform such work at Tenant's cost.  Tenant shall pay all costs incurred by Landlord in performing such work within ten (10) days after Landlord's request therefor.  Tenant agrees not to enter into any agreement with any person, including without limitation any governmental authority, regarding the removal of Hazardous Materials that have been disposed of or otherwise released onto or from the Premises without the written approval of Landlord.

 

33.4 Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Project and loss of rental income from the Project), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys' fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the Premises or disturbed in breach of the requirements of this Article 33, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials  or any breach of the requirements under this Article 33 by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such noncompliance.  The obligations of Tenant under this Article 33 shall survive any termination of this Lease.

 

33.5 Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant's compliance with Environmental Requirements, its obligations under this Article 33, or the environmental condition of the Premises.  Access shall be granted to Landlord upon Landlord's prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant's operations.  Such inspections and tests shall be conducted at Landlord's expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests.  Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant.  Tenant shall promptly notify Landlord of any communication or report that Tenant makes to any governmental authority regarding any possible violation of Environmental Requirements or release or threat of release of any Hazardous Materials onto or from the Premises.  Tenant shall, within five (5) days of receipt thereof, provide Landlord with a copy of any documents or correspondence received from any governmental agency or other party relating to a possible violation of Environmental Requirements or claim or liability associated with the release or threat of release of any Hazardous Materials onto or from the Premises.

 

33.6 Landlord hereby informs Tenant, and Tenant hereby acknowledges, that the Premises and adjacent properties overlie a former solid waste landfill site commonly known as the Westport Landfill ("Former Landfill").  Landlord further informs Tenant, and Tenant hereby acknowledges, that (i) prior testing has detected the presence of low levels of certain volatile and semi-volatile organic compounds and other contaminants in the groundwater, in the leachate from the landfilled solid waste, and/or in certain surface waters of the Property, as more fully described in the California Regional Water Quality Control Board, San Francisco Bay Region's ("Regional Board") Order No. R2-2003-0074 (Updated Waste Discharge Requirements and Rescission of Order No. 94-181) (“Order”), (ii) methane gas is or may be generated by the landfilled solid waste (item "i" immediately preceding and this item "ii" are hereafter collectively referred to as the "Landfill Contamination"), and (iii) the Premises and the Former Landfill are subject to the Order.  The Order is attached hereto as Exhibit H.  As evidenced by their initials on said Exhibit H, Tenant acknowledges that Landlord has provided Tenant with copies of the Order, and Tenant acknowledges that Tenant and Tenant’s experts (if any) have had ample opportunity to review the Order and that Tenant has satisfied itself as to the environmental conditions of the Property and the suitability of such conditions for Tenant’s intended use of the Property. Additional environmental reports are available for Tenant’s review at Landlord’s offices.  To Landlord’s actual knowledge (without duty of inquiry), there is no other on-site originated Hazardous Materials contamination within the Project.  In the event the Regional Board determines that the majority of the Premises cannot be occupied for a period in excess of ten (10) business days due to the any Hazardous Materials conditions related to the Landfill Contamination, then, provided Tenant has not caused and/or contributed to the incident responsible for said occupancy restriction, Tenant may terminate this Lease provided Tenant gives Landlord written notice within thirty (30) days of Tenant’s receipt of notice that the Premises cannot be occupied for the purpose referenced in this Lease of its election to so terminate the Lease in the event Tenant cannot occupy the majority of the Premises at the conclusion of the ten (10) business day period.  In the event said notice is received by Landlord as required herein and the majority of the Premises cannot be occupied as referenced above, this Lease shall thereafter terminate on the date of termination referenced in said Tenant notice (which date shall not be less than thirty (30) days from the date the Premises are deemed un-occupiable).  Tenant agrees to cooperate and provide Landlord and the Regional Board or their authorized representatives, upon presentation of credentials, during normal business hours, entry upon the Premises to assess any and all aspects of the environmental condition of the Project and its use, including, but not limited to, conducting any environmental assessment or audit, taking samples of soil, groundwater or other water, air or building materials, the inspection of treatment equipment, monitoring equipment or monitoring methods, or sampling of any discharge governed by the Order.

 

33.7 Landlord at its sole cost shall be responsible for complying with the Order, except for any violations of the Order caused by Tenant or any Tenant Parties.  Tenant is not responsible for complying with any of the obligations contained in the Order that are imposed only on the Dischargers or their agents, successors or assigns; provided that Tenant shall not take any actions which cause a violation of the following prohibitions set forth in the Order:

 

"A.           PROHIBITIONS

 

1.

Wastes shall not be in contact with ponded water from any source whatsoever.

 

2.

The site is regulated as a closed facility.  Therefore, no further waste shall be deposited or stored at this site.

 

3.

Leachate from wastes and ponded water containing leachate or in contact with solid wastes shall not be discharged to waters of the State or of the United States.

 

4.

Neither the treatment nor the discharge of waste shall create a condition of pollution, contamination or nuisance, as defined by Section 13050 of the California Water Code (CWC).  (H & SC Section 5411, CWC Section 13263).

 

5.

The Discharger, or any future owner or operator of this site, shall not cause the following conditions to exist in waters of the State at any place outside the waste management facility.

 

a.           Surface Waters.

 

1.

Floating, suspended, or deposited macroscopic particulate matter or foam;

 

2.

Bottom deposits or aquatic growth.

 

3.

Adversely alter temperature, turbidity, or apparent color beyond natural background levels.

 

4.

Visible, floating, suspended or deposited oil or other products of petroleum origin.

 

5.

Toxic or other deleterious substances to be present in concentrations or quantities which may cause deleterious effects on aquatic biota, wildlife or waterfowl, or which render any of these unfit for human consumption either at levels created in the receiving waters or as a result of biological concentrations.

 

b.           Groundwater

 

The groundwater shall not be degraded as a result of the waste maintained at the facility."

 

Tenant shall immediately report any violation of such prohibitions by Tenant or any Tenant Parties to the Landlord.

 

33.8 Tenant acknowledges receipt of a copy of that certain Phase I Environmental Site Assessment, Westport Office Park, Bridge Parkway and Island Drive Redwood City, California  94065, No. 001 09412 00, dated August 10, 2005, prepared by LFR Levine-Fricke (collectively, "Hazardous Substance Reports").  Landlord acknowledges to Tenant that:  (i) Landlord has not authorized any other studies for hazardous or toxic materials at the Premises, Project or Building other than the Hazardous Substance Reports; and (ii) Landlord does not know of any surveys for toxic or Hazardous Materials at the Premises or the Building other than the Hazardous Substance Reports.  Notwithstanding the preceding sentence, Tenant shall not rely on and Tenant hereby represents to Landlord that it has not relied on the Hazardous Substance Reports.

 

33.9 Landlord shall indemnify, defend, and hold harmless Tenant against any and all claims asserted by third parties (excluding any agents, employees, contractors, vendors, invitees, visitors, future subtenants and assignees of Tenant, and excluding any other parties related to Tenant), including all liabilities, judgments, damages, suits, orders, government directives, costs and expenses in connection with such claims, which arise from (i) the Landfill Contamination, or (ii) the Order, as may be amended ("Landlord's Environmental Indemnity"), provided, however that Landlord's Environmental Indemnity shall be subject to the following limitations and conditions:

 

(1) Landlord's Environmental Indemnity shall not apply to any economic or consequential damages suffered by Tenant, including but not limited to loss of business or profits.

 

(2) Landlord's Environmental Indemnity shall not apply, without limitation, to any releases caused by Tenant's Hazardous Materials Activities.

 

(3) Tenant acknowledges that Landlord must comply with the Order, as may be amended, and with directives of government authorities including the Regional Board, with respect to the Contamination and the Former Landfill.  Tenant further acknowledges that groundwater monitoring wells, methane recovery wells and equipment, and other environmental control devices are located on and about the Premises and may be modified or added to during the term of the Lease (collectively, "Environmental Equipment"), and that environmental investigation, monitoring, closure and post-closure activities (collectively, "Environmental Activities") will be performed on the Premises during the term of the Lease.  Tenant shall allow Landlord, and any other party named as a discharger under the Order, as may be amended, and their respective agents, consultants and contractors, and agents of governmental environmental authorities with jurisdiction ("Government Representatives") to enter the Premises to access the Environmental Equipment and to perform Environmental Activities during the term of the Lease, provided that Tenant's use and occupancy of the Premises shall not unreasonably be disturbed.

 

(4) Tenant and Landlord shall reasonably cooperate with each other regarding any Environmental Activities to be performed, and regarding any Environmental Equipment to be installed, maintained, or removed on the Premises during the term of the Lease.

 

(5) Tenant shall be responsible at its expense for repairing any Environmental Equipment damaged due to the negligence of Tenant or Tenant's agents, employees, contractors, vendors, invitees, visitors, future subtenants or assignees (such terms "invitees" and "visitors" as used in this Article 33 shall not include Landlord or any other party named as a discharger under the Order as may be amended, or any of their respective agents, consultants or contractors, or any Government Representatives).

 

ARTICLE 34.

 

COMPLIANCE WITH LAWS AND OTHER REGULATIONS

 

34.1 Tenant, as its sole cost and expense, shall promptly comply with all laws, statutes, ordinances, and governmental rules, regulations, or requirements now in force or which may hereafter become in force, of federal, state, county, and municipal authorities, including, but not limited to, the Americans with Disabilities Act, with the requirements of any board of fire underwriters or other similar body now or hereafter constituted, and with any occupancy certificate issued pursuant to any law by any public officer or officers, which impose, any duty upon Landlord or Tenant, insofar as any thereof relate to or affect the condition, use, alteration, or occupancy of the Premises.  Landlord's approval of Tenant's plans for any improvements shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules, and regulations of governmental agencies or authorities, including, but not limited to, the Americans with Disabilities Act.  Tenant shall not be obligated to make any capital improvements to the Premises in order to comply with Applicable Laws, except to the extent the capital improvement is required due to a Trigger Event (as defined below).  As used herein, the term "Trigger Event" means one or more of the following events or circumstances:

 

(a) Tenant's particular use of the Premises (other than normal office uses);

 

(b) The manner of conduct of Tenant's business or operation of its installations, equipment or other property outside those of normal office use;

 

(c) The performance of any improvements or alterations by Tenant or the installation by Tenant of any Tenant systems; or

 

(d) The breach of any of Tenant's obligations under this Lease.

 

34.2 Landlord and Tenant hereby represent and warrant that:  (i) such party is not, nor is it owned or controlled directly or indirectly by, any person, group, entity or nation named on any list issued by the Office of Foreign Assets Control of the United States Department of the Treasury ("OFAC") pursuant to Executive Order 13224 or any similar list or any law, order, rule or regulation or any Executive Order of the President of the United States as a terrorist, "Specially Designated National and Blocked Person" or other banned or blocked person (any such person, group, entity or nation being hereinafter referred to as a "Prohibited Person"); (ii) such party is not (nor is it owned or controlled, directly or indirectly, by any person, group, entity or nation which is) acting directly or indirectly for or on behalf of any Prohibited Person; and (iii) neither such party (nor any person, group, entity or nation which owns or controls such party, directly or indirectly) has conducted or will conduct business or has engaged or will engage in any transaction or dealing with any Prohibited Person, or the making or receiving of any contribution of funds, goods or services to or for the benefit of a Prohibited Person.  Landlord and Tenant each covenants and agrees (a) to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (b) to immediately notify the other in writing if any of the representations, warranties or covenants set forth in this Section 31.2 are no longer true or have been breached or if such party has a reasonable basis to believe that they may no longer be true or have been breached, (c) not to use funds from any Prohibited Person to make any payment due to the other party under the Lease and (d) at the request of a party, to provide such information as may be requested by the other party to determine a party's compliance with the terms hereof.  Any breach by Landlord or Tenant of the foregoing representations and warranties shall be deemed an event of default by Tenant under this Lease.  The representations and warranties contained in this subsection shall be continuing in nature and shall survive the expiration or earlier termination of this Lease.

 

ARTICLE 35.

 

SEVERABILITY

 

35.1 This Lease shall be construed in accordance with the laws of the State of California.  If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws effective during the Term, then it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby.  It is also the intention of both parties that in lieu of each clause or provision that is illegal, or unenforceable, there is added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and still be legal, valid, and enforceable.

 

ARTICLE 36.

 

NOTICES

 

36.1 Whenever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other, such notice or demand shall be given or served in writing and delivered personally, or forwarded by certified or registered mail, postage prepaid, or recognized overnight courier, addressed to Landlord's address and Tenant's address, as applicable, as specified in the Basic Lease Information.  Either party may change its address for notice from time to time by serving written notice of the new address as provided in this Article 36.

 

36.2 Notice hereunder shall become effective upon (a) delivery in case of personal delivery and (b) receipt or refusal in case of certified or registered mail or delivery by overnight courier.

 

ARTICLE 37.

 

OBLIGATIONS OF, SUCCESSORS, PLURALITY, GENDER

 

37.1 Landlord and Tenant agree that all the provisions hereof are to be construed as covenants and agreements as though the words imparting such covenants were used in each paragraph hereof, and that, except as restricted by the provisions hereof, shall bind and inure to the benefit of the parties hereto, their respective heirs, legal representatives, successors, and assigns.  If the rights of Tenant hereunder are owned by two or more parties, or two or more parties are designated herein as Tenant, then all such parties shall be jointly and severally liable for the obligations of Tenant hereunder.  Whenever the singular or plural number, masculine or feminine or neuter gender is used herein, it shall equally include the other.

 

ARTICLE 38.

 

ENTIRE AGREEMENT

 

38.1 This Lease and any attached addenda or exhibits constitute the entire agreement between Landlord and Tenant.  No prior or contemporaneous written or oral leases or representations shall be binding.  This Lease shall not be amended, changed, or extended except by written instrument signed by Landlord and Tenant.

 

38.2 THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED HEREBY THAT THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY LANDLORD AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.

 

ARTICLE 39.

 

CAPTIONS

 

39.1 Paragraph captions are for Landlord's and Tenant's convenience only, and neither limit nor amplify the provisions of this Lease.

 

ARTICLE 40.

 

CHANGES

 

40.1 Should any mortgagee require a modification of this Lease, which modification will not bring about any increased cost or expense to Tenant or in any other way materially and 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 whatever documents which are reasonably required therefor and are in form and substance reasonably acceptable to Tenant, and to deliver the same to Landlord within ten (10) business days following a request therefor.

 

ARTICLE 41.

 

AUTHORITY

 

41.1 All rights and remedies of Landlord under this Lease, or those which may be provided by law, may be exercised by Landlord in its own name individually, or in its name by its agent, and all legal proceedings for the enforcement of any such rights or remedies, including distress for Rent, unlawful detainer, and any other legal or equitable proceedings may be commenced and prosecuted to final judgment and be executed by Landlord in its own name individually or in its name by its agent.  Landlord and Tenant each represent to the other that each has full power and authority to execute this Lease and to make and perform the agreements herein contained, and Tenant expressly stipulates that any rights or remedies available to Landlord, either by the provisions of this Lease or otherwise, may be enforced by Landlord in its own name individually or in its name by its agent or principal.

 

ARTICLE 42.

 

BROKERAGE

 

42.1 Each party represents and warrants to the other that it has dealt only with Tenant's Broker and Landlord's Broker, in negotiation of this Lease.  Landlord shall make payment of the brokerage fee due the Landlord's Broker pursuant to and in accordance with a separate agreement between Landlord and Landlord's Broker.  Landlord's Broker shall pay a portion of its commission to Tenant's Broker pursuant to a separate agreement between Landlord's Broker and Tenant's Broker.  Except for amounts owing to Landlord's Broker and Tenant's Broker, each party hereby agrees to indemnify and hold the other party harmless of and from any and all damages, losses, costs, or expenses (including, without limitation, all attorneys' fees and disbursements) by reason of any claim of or liability to any other broker or other person claiming through the indemnifying party and arising out of or in connection with the negotiation, execution, and delivery of this Lease.  Nothing in this Lease obligates Landlord and/or Landlord's agent for payment of any brokerage fee or similar compensation to any person with whom Tenant has dealt or may in the future deal with respect to leasing of any additional or expansion space in the Building or renewals or extensions of this Lease.

 

ARTICLE 43.

 

EXHIBITS

 

43.1 Exhibits A through H are attached hereto and incorporated herein for all purposes and are hereby acknowledged by both parties to this Lease.

 

ARTICLE 44.

 

APPURTENANCES

 

44.1 The Premises include the right of ingress and egress thereto and therefrom; however, Landlord reserves the right to make changes and alterations to the Building, fixtures and equipment thereof, in the street entrances, doors, halls, corridors, lobbies, passages, elevators, escalators, stairways, toilets and other parts thereof which Landlord may deem necessary or desirable; provided that Tenant at all times has a means of access to the Premises (subject to a temporary interruption due to Force Majeure Events or necessary maintenance that cannot reasonably be performed without such interruption of access); provided further that Landlord shall not exercise any of the rights in the foregoing provisions of this Article 44 in any Building in which Tenant leases all of the rentable area, except to the extent required by Applicable Laws or in connection with the fire life safety system in the Building or as necessary for Landlord to perform its maintenance obligations under this Lease.  Neither this Lease nor any use by Tenant of the Building or any passage, door, tunnel, concourse, plaza or any other area connecting the garages or other buildings with the Project, shall give Tenant any right or easement of such use.  In exercising its rights under this Section 44.1, Landlord shall make commercially reasonable efforts to minimize the disruption to Tenant's business operations during standard business hours.

 

ARTICLE 45.

 

PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND JURY

 

45.1 Tenant, for itself and for all persons claiming through or under it, hereby expressly waives any and all rights which are, or in the future may be, conferred upon Tenant by any present or future law to redeem the Premises, or to any new trial in any action for ejection under any provisions of law, after reentry thereupon, or upon any part thereof, by Landlord, or after any warrant to dispossess or judgment in ejection.  If Landlord shall acquire possession of the Premises by summary proceedings, or in any other lawful manner without judicial proceedings, it shall be deemed a reentry within the meaning of that word as used in this Lease.  Tenant and Landlord both waive a trial by jury of any or all issues arising in any action or proceeding between the parties hereto or their successors, under or connected with this Lease, or any of its provisions.

 

ARTICLE 46.

 

RECORDING

 

46.1 Tenant shall not record this Lease but will, at the request of Landlord, execute a memorandum or notice thereof in recordable form satisfactory to both Landlord and Tenant specifying the date of commencement and expiration of the Term of this Lease and other information required by statute.  Either Landlord or Tenant may then record said memorandum or notice of lease at the cost of the recording party.

 

ARTICLE 47.

 

MORTGAGEE PROTECTION

 

47.1 Tenant agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon Landlord, provided that prior to such notice Tenant has been notified, in writing of the address of such mortgagees and/or trust deed holders.  Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default (including but not limited to commencement of foreclosure proceedings, if necessary to effect such cure) in which event this Lease shall not be terminated while such remedies are being so diligently pursued.

 

ARTICLE 48.

 

OTHER LANDLORD CONSTRUCTION

 

48.1 Tenant acknowledges that portions of the Project may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, odor, obstruction of access, etc. which are in excess of that present in a fully constructed project.  Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction.  If any excavation or construction is made adjacent to, upon or within the Building, or any part thereof, Tenant shall afford to any and all persons causing or authorized to cause such excavation or construction license to enter upon the Premises for the purpose of doing such work as such persons shall deem necessary to preserve the Building or any portion thereof from injury or damage and to support the same by proper foundations, braces and supports, without any claim for damages or indemnity or abatement of Rent (subject to the express provisions of this Lease), or of a constructive or actual eviction of Tenant.

 

48.2 It is specifically understood and agreed that Landlord has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, the Building, or any part thereof and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in the Tenant Work Letter.  However, Tenant hereby acknowledges that Landlord is currently renovating or may during the Lease Term renovate, improve, alter, or modify (collectively, the "Renovations") the Project, the Building and/or the Premises.  Tenant hereby agrees that such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent.  Landlord shall have no responsibility and shall not be liable to Tenant for any injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal property or improvements resulting from the Renovations, or for any inconvenience or annoyance occasioned by such Renovations.

 

ARTICLE 49.

 

PARKING

 

49.1 The use by Tenant, its employees and invitees, of the parking facilities of the Project shall be on the terms and conditions set forth in Exhibit E attached hereto and by this reference incorporated herein and shall be subject to such other agreement between Landlord and Tenant as may hereinafter be established and to such other rules and regulations as Landlord may establish.  Tenant, its employees and invitees shall use no more than the Maximum Parking Allocation.  If, in Landlord's reasonable business judgment, it becomes necessary, Landlord shall exercise due diligence to cause the creation of cross-parking easements and such other agreements as are necessary to permit Tenant, its employees and invitees to use parking spaces on properties and buildings which are separate legal parcels from the Project.  Tenant acknowledges that other tenants of the Project and the tenants of the other buildings, their employees and invitees, may be given the right to park at the Project.  Tenant's right to use the Maximum Parking Allocation during the Term and any extension terms, shall be without direct charge, other than Operating Expenses and Taxes otherwise payable under Article 5 of this Lease.

 

ARTICLE 50.

 

ELECTRICAL CAPACITY

 

Tenant covenants and agrees that at all times, its use of electric energy shall never exceed the capacity of the existing feeders to the Building or the risers of wiring installation.  Any riser or risers to supply Tenant's electrical requirements upon written request of Tenant shall be installed by Landlord at the sole cost and expense of Tenant, if, in Landlord's sole judgment, the same are necessary and will not cause or create a dangerous or hazardous condition or entail excess or unreasonable alterations, repairs or expense or interfere with or disrupt other tenants or occupants.  In addition to the installation of such riser or risers, Landlord will also, at the sole cost and expense of Tenant, install all other equipment proper and necessary in connection therewith subject to the aforesaid terms and conditions.

 

ARTICLE 51.

 

OPTIONS TO EXTEND LEASE

 

51.1 First Extension Option. Tenant shall have the option to extend this Lease (the "First Extension Option") for one additional term of three (3) years (the "First Extension Period"), upon the terms and conditions hereinafter set forth:

 

(a) If the First Extension Option is exercised, then the Base Rent per annum for such First Extension Period (the "First Option Rent") shall be the Fair Market Rental Value (as defined hereinafter) for the Premises (or if Tenant elects a Partial Renewal pursuant to Section 51.5, the Renewal Space) as of the commencement of the First Extension Option for such First Extension Period.

 

(b) The First Extension Option must be exercised by Tenant, if at all, only at the time and in the manner provided in this subsection 51.1(b).

 

(i) If Tenant wishes to exercise the First Extension Option, Tenant must, on or before the date occurring nine (9) months before the expiration of the initial Lease Term (but not before the date that is twelve (12) months before the expiration of the Initial Lease Term), exercise the First Extension Option by delivering written notice (the "First Exercise Notice") to Landlord.  If Tenant timely and properly exercises its First Extension Option, the Lease Term shall be extended for the First Extension Period upon all of the terms and conditions set forth in the Lease, as amended, except that the rent for the First Extension Period shall be as provided in subsection 51.1(a) and Tenant shall have no further options to extend the Lease Term except for the Second Extension Option.

 

(ii) If Tenant fails to deliver a timely First Exercise Notice, Tenant shall be considered to have elected not to exercise the First Extension Option.

 

(c) It is understood and agreed that the First Extension Option hereby granted is personal to Tenant and is not transferable except to Permitted Transferee in connection with an assignment of Tenant's entire interest in this Lease.  In the event of any assignment or subletting of the Premises or any part thereof (other than to a Permitted Transferee), the First Extension Option shall automatically terminate and shall thereafter be null and void.

 

(d) Tenant's exercise of the First Extension Option shall, if Landlord so elects in its absolute discretion, be ineffective in the event that Monetary Default by Tenant remains uncured at the time of delivery of the First Exercise Notice or at the commencement of the First Extension Period.

 

51.2 Second Extension Option.  Tenant shall have the option to extend this Lease (the "Second Extension Option") for one additional term of three (3) years (the "Second Extension Period"), upon the terms and conditions hereinafter set forth:

 

(a) If the Second Extension Option is exercised, then the Base Rent per annum for such Second Extension Period (the "Second Option Rent") shall be the Fair Market Rental Value for the Premises (or if Tenant elects a Partial Renewal pursuant to Section 51.5, the Renewal Space) as of the commencement of the Second Extension Option for such Second Extension Period.

 

(b) The Second Extension Option must be exercised by Tenant, if at all, only at the time and in the manner provided in this subsection 51.2(b).

 

(i) If Tenant wishes to exercise the Second Extension Option, Tenant must, on or before the date occurring nine (9) months before the expiration of the First Extension Period (but not before the date that is twelve (12) months before the expiration of the First Extension Period), exercise the Second Extension Option by delivering written notice (the "Second Exercise Notice") to Landlord.  If Tenant timely and properly exercises its Second Extension Option, the Lease Term shall be extended for the Second Extension Period upon all of the terms and conditions set forth in the Lease, as amended, except that the rent for the Second Extension Period shall be as provided in subsection 51.2(a) and Tenant shall have no further options to extend the Lease Term.

 

(ii) If Tenant fails to deliver a timely Second Interest Notice or Second Exercise Notice, Tenant shall be considered to have elected not to exercise the Second Extension Option.

 

(c) It is understood and agreed that the Second Extension Option hereby granted is personal to Tenant and is not transferable except to Permitted Transferee in connection with an assignment of Tenant's entire interest in this Lease.  In the event of any assignment or subletting of the Premises or any part thereof (other than to a Permitted Transferee), the Second Extension Option shall automatically terminate and shall thereafter be null and void.

 

(d) Tenant's exercise of the Second Extension Option shall, if Landlord so elects in its absolute discretion, be ineffective in the event that a Monetary Default by Tenant remains uncured at the time of delivery of the Second Exercise Notice or at the commencement of the Second Extension Period.

 

(e) The Second Extension Option shall terminate and shall thereafter be null and void in the event Tenant does not exercise the First Extension Option or for any reason Tenant's exercise of the First Extension Option is ineffective.

 

51.3 Fair Market Rental Value.  The provisions of this Section shall apply in any instance in which this Lease provides that the Fair Market Rental Value is to apply.

 

(a) "Fair Market Rental Value" means the annual amount per square foot that a willing tenant would pay and a willing landlord would accept in arm's length negotiations, for space in Comparable Buildings in the Market Area for comparable lease term, size, quality and location, taking into consideration any tenant inducements then given to new and renewal tenants.  Fair Market Rental Value shall be proposed by Landlord considering the most recent new direct leases (and market renewals and extensions, if applicable) in the Building and in Comparable Buildings in the Market Area.

 

(b) In determining the rental rate of comparable space, the parties shall include all escalations and take into consideration any and all concessions, including following concessions:

 

(i) Rental abatement concessions, if any, being granted to tenants in connection with the comparable space;

 

(ii) Tenant improvements or allowances provided or to be provided for the comparable space, taking into account the value of the existing improvements in the Premises, based on the age, quality, and layout of the improvements.

 

(c) If in determining the Fair Market Rental Value the parties determine that the economic terms of leases of comparable space include a tenant improvement allowance, Landlord may, at Landlord's sole option, elect to do the following:

 

(i) Grant some or all of the value of the tenant improvement allowance as an allowance for the refurbishment of the Premises; and

 

(ii) Reduce the Base Rent component of the Fair Market Rental Value to be an effective rental rate that takes into consideration the total dollar value of that portion of the tenant improvement allowance that Landlord has elected not to grant to Tenant, including an appropriate interest factor (in which case that portion of the tenant improvement allowance evidenced in the effective rental rate shall not be granted to Tenant).

 

51.4 Resolving Disagreement Over Fair Market Rental Value.  The  determination of Fair Market Rental Value shall be as provided this Section 51.4.

 

(a) Negotiated Agreement.  Landlord and Tenant shall diligently attempt in good faith to agree on the Fair Market Rental Value on or before the date that is four (4) months prior to the commencement of the applicable Extension Period (the "Outside Agreement Date").

 

(b) Parties' Separate Determinations.  If Landlord and Tenant fail to reach agreement on or before the Outside Agreement Date, Landlord and Tenant shall each make a separate determination of the Fair Market Rental Value and notify the other party of this determination within five (5) days after the Outside Agreement Date.

 

(i) Two Determinations.  If each party makes a timely determination of the Fair Market Rental Value, those determinations shall be submitted to arbitration in accordance with subsection (c).

 

(ii) One Determination.  If Landlord or Tenant fails to make a determination of the Fair Market Rental Value within the five-day period, that failure shall be conclusively considered to be that party's approval of the Fair Market Rental Value submitted within the five-day period by the other party.

 

(c) Arbitration.  If both parties make timely individual determinations of the Fair Market Rental Value under subsection (b), the Fair Market Rental Value shall be determined by arbitration under this subsection (c).

 

(i) Scope of Arbitration.  The determination of the arbitrators shall be limited to the sole issue of whether Landlord's or Tenant's submitted Fair Market Rental Value is the closest to the actual Fair Market Rental Value as determined by the arbitrators, taking into account the requirements of Section 51.3.

 

(ii) Qualifications of Arbitrator(s).  The arbitrators must be licensed real estate brokers who have been active in the leasing of commercial multi-story properties in the Market Area over the five-year period ending on the date of their appointment as arbitrator(s).

 

(iii) Parties' Appointment of Arbitrators.  Within fifteen (15) days after the Outside Agreement Date, Landlord and Tenant shall each appoint one arbitrator and notify the other party of the arbitrator's name and business address.

 

(iv) Appointment of Third Arbitrator.  If each party timely appoints an arbitrator, the two (2) arbitrators shall, within ten (10) days after the appointment of the second arbitrator, agree on and appoint a third arbitrator (who shall be qualified under the same criteria set forth above for qualification of the initial two (2) arbitrators) and provide notice to Landlord and Tenant of the arbitrator's name and business address.

 

(v) Arbitrators' Decision.  Within thirty (30) days after the appointment of the third arbitrator, the three (3) arbitrators shall decide whether the parties will use Landlord's or Tenant's submitted Fair Market Rental Value and shall notify Landlord and Tenant of their decision.  The decision of the majority the three (3) arbitrators shall be binding on Landlord and Tenant.

 

(vi) If Only One Arbitrator is Appointed.  If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the Outside Agreement Date, the arbitrator timely appointed by one of them shall reach a decision and notify Landlord and Tenant of that decision within thirty (30) days after the arbitrator's appointment.  The arbitrator's decision shall be binding on Landlord and Tenant.

 

(vii) If Only Two Arbitrators Are Appointed.  If each party appoints an arbitrator in a timely manner, but the two (2) arbitrators fail to agree on and appoint a third arbitrator within the required period, the arbitrators shall be dismissed without delay and the issue of Fair Market Rental Value shall be submitted to binding arbitration under the real estate arbitration rules of JAMS, subject to the provisions of this section.

 

(viii) If No Arbitrator Is Appointed.  If Landlord and Tenant each fail to appoint an arbitrator in a timely manner, the matter to be decided shall be submitted without delay to binding arbitration under the real estate arbitration rules of JAMS subject the provisions of this Section 51.4(c).

 

(ix) Cost of Arbitration.  The cost of the arbitration shall be paid by the losing party.

 

51.5 Partial Renewal; Non-Renewed Space.  In connection with Tenant's exercise of its renewal options, Tenant shall have the right to reduce the size of the Premises and exercise the option only as to such reduced portion of the Premises (the "Partial Renewal"), in accordance with the terms of this Section 51.5.  In the event Tenant desires to exercise its Partial Renewal right, the First Option Exercise Notice or the Second Option Exercise Notice (as the case may be), shall describe the area of the Option Space for which Tenant elects to renew the then-current Lease Term (the "Renewal Space") and the area of the Premises for which Tenant elects not to renew the then-current Term (the "Non-Renewed Space").  The following conditions shall apply to Tenant's exercise of the Partial Renewal right.  The Renewal Space shall be determined by Tenant, subject to the satisfaction of the following conditions: (i) Tenant must elect to renew the Lease with respect to, at a minimum, one (1) full floor of a Building, (ii) Tenant may not break up any full floor leased by Tenant, and (iii) if Tenant leases space on a multi-tenant floor in a Building, the Renewal Space must include or exclude all space leased by Tenant on such floor.  If Tenant elects to exercise the Partial Renewal right, then Landlord and Tenant shall be relieved of their respective obligations under this Lease with respect to the Non-Renewed Space as of the first (1st) day of the applicable Extension Period, except for those obligations set forth in this Lease which specifically survive the expiration or earlier termination of this Lease, including, without limitation, the payment by Tenant of all amounts owed by Tenant under this Lease, up to the first (1st) day of the applicable Extension Period, with respect to the Non-Renewed Space.  In the event that Tenant fails to vacate, and surrender and deliver to Landlord exclusive possession of the Non-Renewed Space, free of all subleases, prior to the first (1st) day of the applicable Option Term in the condition required by this Lease, and such failure continues for ten  (10) business days after receipt of notice from Landlord, then the provisions of Article 31 of this Lease shall apply to the Non-Renewed Space which is not so delivered; provided that holdover in the Non-Renewed Space shall not void Tenant's exercise of its option.  In the event Tenant fails to specify in the First Option Exercise Notice or the Second Option Exercise Notice that Tenant is interested in exercising its renewal rights herein granted with respect to less than the entire Premises, then Tenant shall thereafter not have the right to renew the Lease Term for less than all of the Premises.

 

ARTICLE 52.

 

TELECOMMUNICATIONS LINES AND EQUIPMENT

 

52.1 Location of Tenant's Equipment and Landlord Consent:

 

52.1.1 Tenant may install, maintain, replace, remove and use communications or computer wires, cables and related devices (collectively, the "Lines") at the Building in or serving the Premises only with Landlord's prior written consent, which consent may not be unreasonably withheld.  Tenant shall locate all electronic telecommunications equipment within the Premises and shall coordinate the location of all Lines with Landlord.  Any request for consent shall contain such information as Landlord may request.  Landlord hereby approves all Lines installed in the Premises as of the Effective Date.

 

52.1.2 Landlord's approval of, or requirements concerning, the Lines or any equipment related thereto, the plans, specifications or designs related thereto, the contractor or subcontractor, or the work performed hereunder, shall not be deemed a warranty as to the adequacy or appropriateness thereof, and Landlord hereby disclaims any responsibility or liability for the same.

 

52.1.3 If Landlord consents to Tenant's proposal, Tenant shall pay all of Tenant's and Landlord's actual and reasonable third party costs in connection therewith (including without limitation all costs related to new Lines) and shall use, maintain and operate the Lines and related equipment in accordance with and subject to all laws governing the Lines and equipment and at Tenant's sole risk and expense.  Tenant shall comply with all of the requirements of this Lease concerning alterations in connection with installing the Lines.  As soon as the work is completed, Tenant shall submit as-built drawings to Landlord.

 

52.1.4 Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any laws or present a dangerous or potentially dangerous condition (whether such Lines were installed by Tenant or any other party), within thirty (30) days after written notice.

 

52.2 Reallocation of Line Space.  Landlord may (but shall not have the obligation to) (a) install Lines at the Building; and (b) monitor and control the installation, maintenance, replacement and removal of any Lines now or hereafter installed at the Buildings by Landlord, Tenant or any other party.

 

52.3 Line Problems.  Except to the extent arising from the gross negligence or willful misconduct of Landlord or Landlord's contractors, agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant's use of any Lines will be free from the following (collectively called "Line Problems"):  (a) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, or replacement, use or removal of Lines by or for other tenants or occupants in the Building, by any failure of the environmental conditions or the power supply for the Building to conform to any requirement of the Lines or any associated equipment, or any other problems associated with any Lines by any other cause; (b) any failure of any Lines to satisfy Tenant's requirements; or (c) any eavesdropping or wiretapping by unauthorized parties.  Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.

 

52.4 Electromagnetic Fields.  If Tenant at any time uses any equipment that may create an electromagnetic field and/or radio frequency exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, Landlord reserves the right to require Tenant to appropriately insulate that equipment and the Lines therefor (including without limitation riser cables), and take such other remedial action at Tenant's sole cost and expense as Lender may require in its sole discretion to prevent such excessive electromagnetic fields, radio frequency or radiation.

 

52.5 Removal of Electrical and Telecommunications Wires.

 

52.5.1 Within thirty (30) days after the expiration or sooner termination of the Lease, Landlord may elect by written notice to Tenant to:

 

(a) Retain any or all Lines installed by Tenant in the risers of the Building;

 

(b) Remove any or all such Lines and restore the Premises and risers to their condition existing prior to the installation of the Lines ("Wire Restoration Work").  Landlord shall perform such Wire Restoration Work at Tenant's sole cost and expense; or

 

(c) Require Tenant to perform the Wire Restoration Work at Tenant's sole cost and expense.

 

52.5.2 In the event Landlord elects to retain the Lines, Tenant covenants that Tenant shall have good right to surrender such Lines, free of all liens and encumbrances, and that all Lines shall be left in their then existing condition, reasonable wear and tear excepted, properly labeled at each end and in each telecommunications/electrical closet and junction box, and in safe condition.

 

ARTICLE 53.

 

TENANT'S ROOFTOP RIGHTS

 

53.1 Right to Install and Maintain Rooftop Equipment.  During the Lease Term and subject to the terms of this Article 53, Tenant may install on the roof of either or both Buildings telecommunications antennae, microwave dishes or other communication equipment, as necessary for the operation of Tenant's business within the Premises, including any cabling or wiring necessary to connect this rooftop equipment to the Premises (collectively, the "Rooftop Equipment").  If Tenant wishes to install any additional Rooftop Equipment, Tenant shall first notify Landlord in writing, which notice shall fully describe the Rooftop Equipment, including, without limitation, its purpose, weight, size and desired location on the roof of the Building and its intended method of connection to the Premises.  All of Tenant's Rooftop Equipment must be located within a total aggregate area not to exceed 100 square feet, at locations reasonably approved by Landlord prior to any installation.  Landlord hereby consents to the continued use of the Rooftop Equipment existing on the Premises on the date of this Lease consisting of two (2) antennae and/or satellite dishes and any replacements thereof having comparable or lesser size and weight (the "Initial Rooftop Equipment").  Landlord also reserves the right to restrict the number and size of dishes, antennae and other Rooftop Equipment in addition to the Initial Rooftop Equipment installed on the roof of the Building in its reasonable discretion.

 

53.2 Additional Charges for Rooftop Equipment.  Tenant will be solely responsible, at Tenant's sole expense, for the installation, maintenance, repair and removal of the Rooftop Equipment, and Tenant shall at all times maintain the Rooftop Equipment in good condition and repair.  Landlord agrees that the named Tenant hereunder shall not pay any rental charge for Tenant's use of the rooftop pursuant to the terms of this Article 53 for the Initial Rooftop Equipment, provided, however, if any successor to the named Tenant wishes to utilize rooftop space or if Tenant seeks to use rooftop space for Rooftop Equipment in addition to the Initial Rooftop Equipment, Landlord reserves the right to impose a charge for such use, which shall be consistent with market rates.

 

53.3 Conditions of Installation.  The installation of the Rooftop Equipment shall constitute an alteration and shall be performed in accordance with and subject to the provisions of Article 15 of this Lease.  Tenant shall comply with all applicable laws, rules and regulations relating to the installation, maintenance and operation of Rooftop Equipment at the Building (including, without limitation, all construction rules and regulations) and will pay all costs and expenses relating to such Rooftop Equipment, including the cost of obtaining and maintaining any necessary permits or approvals for the installation, operation and maintenance thereof in compliance with applicable laws, rules and regulations.  The installation, operation and maintenance of the Rooftop Equipment at the Building shall not adversely affect the structure or operating systems of the Building or the business operations of any other tenant or occupant at the Building.  For purposes of determining Landlord's and Tenant's respective rights and obligations with respect to the use of the roof, the portion of the roof affected by the Rooftop Equipment shall be deemed to be a portion of the Premises (provided that such portion shall not be measured for purposes of determining the area of the Premises); consequently, all of the provisions of this Lease respecting Tenant's obligations hereunder shall apply to the installation, use and maintenance of the Rooftop Equipment, including without limitation provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance.  Tenant may install cabling and wiring through the Building interior conduits, risers, and pathways of the Building in accordance with Article 52 in order to connect Rooftop Equipment with the Premises.

 

53.4 Non-Exclusive Right.  Tenant's right to install and maintain Rooftop Equipment is non-exclusive and is subject to termination or revocation as set forth herein, including pursuant to Section 22.2(b) of this Lease.  Subject to the terms set forth below in this Section 53.4, Landlord at its election may require the relocation, reconfiguration or removal of the Rooftop Equipment, if in Landlord's reasonable judgment the Rooftop Equipment is interfering with the use of the rooftop for the helipad or other Building operations or the business operations of other tenants or occupants of the Building, causing damage to the Building or if Tenant otherwise fails to comply with the terms of this Article 53.  If relocation or reconfiguration becomes necessary due to interference difficulties, Landlord and Tenant will reasonably cooperate in good faith to agree upon an alternative location or configuration that will permit the operation of the Rooftop Equipment for Tenant's business at the Premises without interfering with other operations at the Building or communications uses of other tenants or occupants.  If removal is required due to any breach or default by Tenant under the terms of this Article 53, Tenant shall remove the Rooftop Equipment upon thirty (30) days' written notice from Landlord.  Any relocation, removal or reconfiguration of the Rooftop Equipment as provided above shall be at Tenant's sole cost and expense.  In addition to the other rights of relocation and removal as set forth herein, Landlord reserves the right to require relocation of Tenant's Rooftop Equipment at any time at its election at Landlord's cost (but not more frequently than once per year) so long as Tenant is able to continue operating its Rooftop Equipment in substantially the same manner as it was operated prior to its relocation.  In connection with any relocation of Tenant's Rooftop Equipment at the request of or required by Landlord (other than in the case of a default by Tenant hereunder), Landlord shall provide Tenant with at least thirty (30) days' prior written notice of the required relocation and will conduct the relocation in a commercially reasonable manner and in such a way that will, to the extent reasonably possible, prevent interference with the normal operation of Tenant's Rooftop Equipment.  In connection with any relocation, Landlord further agrees to work with Tenant in good faith to relocate Tenant's Rooftop Equipment to a location that will permit its normal operation for Tenant's business operations.  Landlord acknowledges that relocation of Tenant's Rooftop Equipment may be disruptive to Tenant's business and, without limiting its rights to require such removal, confirms that it will not exercise its rights hereunder in a bad faith manner or for the purpose of harassing or causing a hardship to Tenant.

 

53.5 Costs and Expenses.  If Tenant fails to comply with the terms of this Article 53 within thirty (30) days following written notice by Landlord (or such longer period as may be reasonably required to comply so long as Tenant is diligently attempting to comply), Landlord may take such action as may be necessary to comply with these requirements.  In such event, Tenant agrees to reimburse Landlord for all costs incurred by Landlord to effect any such maintenance, removal or other compliance subject to the terms of this Article 53, including interest on all such amounts incurred at the Agreed Rate, accruing from the date which is ten (10) days after the date of Landlord's demand until the date paid in full by Tenant, with all such amounts being Additional Rent under this Lease.

 

53.6 Indemnification; Removal.  Tenant agrees to indemnify Landlord, its partners, agents, officers, directors, employees and representatives from and against any and all liability, expense, loss or damage of any kind or nature from any suits, claims or demands, including reasonable attorneys' fees, arising out of Tenant's installation, operation, maintenance, repair, relocation or removal of the Rooftop Equipment, except to the extent any such liability, expense, loss or damage results from the gross negligence or intentional misconduct of Landlord or its agents, partners, officers, directors, employees, contractors or representatives.  At the expiration or earlier termination of the Lease, Tenant may and, upon request by Landlord, shall remove all of the Rooftop Equipment, including any wiring or cabling relating thereto, at Tenant's sole cost and expense and will repair at Tenant's cost any damage resulting from such removal.  If Landlord does not require such removal, any Rooftop Equipment remaining at the Building after the expiration or earlier termination of this Lease which is not removed by Tenant shall be deemed abandoned and shall become the property of Landlord.

 

53.7 Roof Access; Rules and Regulations.  Subject to compliance with the construction rules for the Building and Landlord's reasonable and nondiscriminatory rules and regulations regarding access to the roof and, upon receipt of Landlord's prior written consent to such activity (which shall not be unreasonably withheld, conditioned or delayed), Tenant and its representatives shall have access to and the right to go upon the roof of the Building, on a seven (7) day per week, twenty-four (24) hour basis, to exercise its rights and perform its obligations under this Article 53.  Tenant acknowledges that, except in the case of an emergency or when a Building engineer is not made available to Tenant in sufficient time to allow Tenant to avoid or minimize interruption of use of the Rooftop Equipment, advance notice is required and a Building engineer must accompany all persons gaining access to the rooftop.  Tenant may install Rooftop Equipment at the Building only in connection with its business operations at the Premises, and may not lease or license any rights or equipment to third parties or allow the use of any rooftop equipment by any party other than Tenant.  Tenant acknowledges that Landlord has made no representation or warranty as to Tenant's ability to operate Rooftop Equipment at the Building and Tenant acknowledges that helicopters, other equipment installations and other structures and activities at or around the Building may result in interference with Tenant's Rooftop Equipment.  Except as set forth in this Article 53, Landlord shall have no obligation to prevent, minimize or in any way limit or control any existing or future interference with Tenant's Rooftop Equipment.

 

ARTICLE 54.

 

ERISA

 

54.1 To satisfy compliance with the Employee Retirement Income Security Act of 1974, as amended, Tenant represents and warrants to Landlord and The Prudential Insurance Company of America, a New Jersey corporation ("Prudential"), that:

 

(a) Tenant is not an "employee benefit plan" (as that term is defined in Section 3(3) of ERISA); and

 

(b) Tenant is not acquiring the Property as a plan asset subject to ERISA but for Tenant's own investment account; and

 

(c) Tenant is not an "affiliate" of Prudential as defined in Section IV(b) or PTE 90-1;

 

(d) Tenant is not a "party in interest" (as that term is defined in Section 3(14) of ERISA) to the Virginia Retirement System; and

 

(e) Tenant agrees to keep the identity of the Virginia Retirement System confidential, except to the extent that Tenant may be required to disclose such information as a result of (i) legal process, or (ii) compliance with ERISA or other Laws governing Tenant's operations.

 

ARTICLE 55.

 

TENANT'S RIGHT OF FIRST OFFER

 

55.1 Landlord shall provide Tenant with written notice (the "Availability Notice") from time to time when Landlord determines that any Offer Space (as defined below) will become Available (as defined below).  Tenant shall have an ongoing right of first offer to lease any such Offer Space, as set forth in this Article 50 (the "ROFO").  Landlord shall provide the Offer Notice to Tenant on the later of the date that is fifteen (15) days after the date on which Landlord determines that the particular Offer Space (the "Specific Offer Space") will become Available but in any event not prior to the date that is one hundred eighty (180) days before the Specific Offer Space will be Available.  As used herein, "Available" means that the space (i) is not part of the Premises, (ii) is not then subject to a lease, and (iii) is not then subject to any rights of any existing tenant in the Project to renew their lease or expand their premises as set forth in their lease on or prior to December 8, 2009.  As used herein, "Offer Space" means space and any of the buildings in the Project commonly known as 2200 Bridge Parkway, 2400 Bridge Parkway, 2600 Bridge Parkway and 3200 Bridge Parkway.  The Availability Notice shall:

 

(a) Describe the particular Specific Offer Space (including rentable area, usable area and location);

 

(b) Include an attached floor plan identifying such space;

 

(c) State the date (the "Specific Offer Space Delivery Date") the space will be available for delivery to Tenant; and

 

(d) State Landlord's determination of the Fair Market Rental Value of the space.

 

55.2 If Tenant wishes to exercise the ROFO with respect to the Specific Offer Space, then within ten (10) days of delivery of the Availability Notice to Tenant, Tenant shall deliver irrevocable notice to Landlord (the "First Offer Exercise Notice") of Tenant's intention to exercise the ROFO with respect to all of the Specific Offer Space.  If Tenant, concurrently with Tenant's exercise of the first offer right, notifies Landlord that it does not accept Landlord's determination of Fair Market Rental Value set forth in the Availability Notice, the Fair Market Rental Value of the Specific First Offer Space shall be determined in accordance with the procedures set forth in Sections 51.3 and 51.4.  Otherwise, the Fair Market Rental Value shall be as set forth in the Availability Notice.  Tenant must elect to exercise its ROFO, if at all, only with respect to all the space offered by Landlord to Tenant at any particular time, and Tenant may not elect to lease a portion of that space.  Notwithstanding anything to the contrary in this Article 55, or in Sections 51.3 or 51.4, in no case shall the Tenant Improvement Allowance determined as part of as part of the Fair Market Rental Value exceed on a square foot basis the unamortized value of the Tenant Improvement Allowance set forth in Article 56, below, with amortization determined using an interest rate of eight per cent (8%) per annum.

 

55.3 In the event Tenant fails to give a First Offer Exercise Notice in response to an Availability Notice with respect to Specific Offer Space, Tenant shall have no further rights to receive an Availability Notice with respect to such Specific Offer Space for a period of six (6) months after the latest Availability Notice for such Specific Offer Space and Landlord shall be free to enter into a lease of the Specific Offer Space with anyone on any terms at any time during that six (6) month period; provided, however, that if the net present value of the economic terms of Landlord’s proposed lease to such third party are more than ten percent (10%) more favorable to the third party (determined using an eight percent (8%) discount rate) than the net present value of the economic terms proposed by Landlord in the Availability Notice (determined using an eight percent (8%) discount rate), then before entering into such third party lease Landlord shall notify Tenant of such materially more favorable economic terms and Tenant shall have the right to lease the Specific Offer Space upon such materially more favorable economic terms by delivering written notice thereof to Landlord within ten (10) business days after Tenant’s receipt of Landlord’s notice.

 

55.4 If Tenant timely and validly gives the First Offer Exercise Notice, then beginning on the Specific Offer Space Delivery Date and continuing for the balance of the Term (including any extensions):

 

(a) The Specific Offer Space shall be part of the Premises under this Lease (so that the term "Premises" in this Lease shall refer to the space in the Premises immediately before the Specific Offer Delivery Date plus the Specific Offer Space);

 

(b) Tenant's Building Percentage shall be adjusted to reflect the increased rentable area of the Premises.

 

(c) Tenant's lease of the Specific Offer Space shall be on the same terms and conditions as affect the Original Premises from time to time, except as otherwise provided in this section.  Rent and all other economic terms applicable to the Specific First Offer Space shall be equal to the Fair Market Rental Value of that space.  Tenant's obligation to pay Rent with respect to the Specific Offer Space shall begin on the Specific Offer Space Delivery Date.  The Specific Offer Space shall be leased to Tenant in its "as-is" condition and Landlord shall not be required to construct improvements in, or contribute any tenant improvement allowance for, the Specific Offer Space, except as otherwise provided in this Article 55.  Tenant's construction of any improvements in the Specific Offer Space shall comply with the terms of this Lease concerning alterations.

 

(d) If requested by Landlord, Landlord and Tenant shall confirm in writing the addition of the Specific Offer Space to the Premises on the terms and conditions set forth in this section, but Tenant's failure to execute or deliver such written confirmation shall not affect the enforceability of the First Offer Exercise Notice.

 

55.5 Tenant's rights and Landlord's obligations under this Article 55 are expressly subject to and conditioned upon there not existing a Monetary Default by Tenant under this Lease, either at the time of delivery of the First Offer Exercise Notice or at the time any Specific Offer Space is to be added to the Premises.

 

55.6 It is understood and agreed that Tenants' rights in this Article 55 are personal to Tenant and not transferable except to Permitted Transferee in connection with an assignment of Tenant's entire interest in this Lease.  In the event of any assignment or subletting of the Premises or any part thereof (other than to Permitted Transferee), Tenants' rights under this Article 55 shall automatically terminate, and shall thereafter be null and void.

 

ARTICLE 56.

 

CERTAIN ALLOWANCES

 

56.1 So long as no Event of Default shall be existing under the Lease as of the date Tenant requests reimbursement of the Allowance (as defined below), Landlord agrees to reimburse Tenant up to, and not to exceed the sum of $1,692,630.00 (the "Allowance") (based on a $22.50 prsf of the Premises, but not including the Must-Take Space) for costs incurred in connection with Tenant improvements, cabling, equipment, relocation costs, space planning and design, construction fees, phasing costs, furniture, signage, project managers and consultation fees (the "Allowance Items").  Landlord shall pay the Allowance to Tenant upon delivery to Landlord of "Tenant's Allowance Notice" (as defined below) according to the terms and conditions of this Section 56.1.  Not more frequently than once in any calendar month, Tenant may submit to Landlord a written notice indicating that Tenant has paid the cost of Allowance Items, which notice shall be accompanied by all of the following (collectively, "Tenant's Allowance Notice"):  (i) copies of paid invoices for the Allowance Items, (ii) certification that the Allowance Items have been delivered to and installed in the Premises, and (iii) with respect to Tenant improvements and other labor and materials as to which mechanic's lien rights are available under California law (the "Tenant Work"), (1) final unconditional lien releases in compliance with California law from Tenant's general contractor and all subcontractors and material suppliers, showing that full payment has been received for the construction of the Tenant Work, and (2) copies of all building permits (if any) required by the City in connection with the construction and installation of the Tenant Work signed by the appropriate building inspector, indicating that the Tenant Work have been finally approved.

 

56.2 So long as no Event of Default shall be existing under the Lease as of the date Tenant requests reimbursement of the MTS Allowance (as defined below).  Landlord agrees to reimburse Tenant up to, and not to exceed the sum of $407,168.00 (the "MTS Allowance") (based on a $16.00 prsf of the Must-Take Space) for costs incurred in connection with Tenant improvements, including cabling, equipment, relocation costs, space planning and design, construction fees, phasing costs, furniture, signage, project managers and consultation fees (the " MTS Allowance Items").  Landlord shall pay the MTS Allowance to Tenant upon delivery to Landlord of "Tenant's MTS Allowance Notice" (as defined below) according to the terms and conditions of this Section 56.2.  Not more frequently than once in any calendar month, Tenant may submit to Landlord a written notice indicating that Tenant has paid the cost of Allowance Items, which notice shall be accompanied by all of the following (collectively, "Tenant's MTS Allowance Notice"):  (i) copies of paid invoices for the MTS Allowance Items, (ii) certification that the MTS Allowance Items have been delivered to and installed in the Must-Take Space, and (iii) with respect to Tenant improvements and other labor and materials as to which mechanic's lien rights are available under California law (the "Tenant MTS Work"), (1) final unconditional lien releases in compliance with California law from Tenant's general contractor and all subcontractors and material suppliers, showing that full payment has been received for the construction of the Tenant MTS Work, and (2) copies of all building permits (if any) required by the City in connection with the construction and installation of the Tenant MTS Work signed by the appropriate building inspector, indicating that the Tenant MTS Work have been finally approved.

 

56.3 So long as all Tenant Work and Tenant MTS Work commenced by Tenant shall have been completed and all costs for Allowance Items and MTS Allowance Items have been paid in full and Landlord has received all of the lien releases required in Sections 56.1 and 56.2, Tenant may by notice to Landlord at any time elect to convert an amount equal to the lesser of (a) the remaining Allowance and MTS Allowance and (b) 20% of the original Allowance and MTS Allowance to a credit against Base Rent next coming due under this Lease.  In no event shall the amount funded for the Allowance and MTS Allowance and the amount of the rent credit in the aggregate exceed the total amount of the original Allowance and MTS Allowance.

 

56.4 In connection with performing the Tenant Work and the Tenant MTS Work and the acquisition and installation of the other Allowance Items and MTS Allowance Items, Tenant shall have the right to control, manage and direct the Tenant improvement design and construction process in accordance with Article 15.  Landlord shall not charge Tenant any fee or other charges for supervision and/or overhead associated with the construction of the Tenant Work and the Tenant MTS Work or the acquisition or installation of any other Allowance Items and MTS Allowance Items.  Except as otherwise provided in this Article 56, all Tenant Work and the Tenant MTS Work and installation of Allowance Items and MTS Allowance Items shall be performed in accordance with Article 15 of this Lease.

 

56.5 In addition to the foregoing, Landlord shall pay Tenant or Tenant's architect the sum of $10,000 for test fits required by Tenant in connection with this Lease within thirty (30) days after receipt from Tenant of reasonable evidence of the costs incurred for those test fits.

 

IN WITNESS WHEREOF, Landlord and Tenant, acting herein through duly authorized individuals, have caused these presents to be executed as of the date first above written.

 

TENANT:

 

SHUTTERFLY, INC., a Delaware corporation

 

By: /s/Mark J. Rubash               

 

       Mark J. Rubash, SVP & Chief Financial Officer  

          [Printed Name and Title]

 

By: /s/ Jeff Housenbold          

 

      Jeff Housenbold, Chief Executive Officer

          [Printed Name and Title]

 

 

Tenant's NAICS Code:                                                      

 

 

LANDLORD:

 

WESTPORT OFFICE PARK, LLC,

 

a California limited liability company

 

By:           THE PRUDENTIAL INSURANCE

 

COMPANY OF AMERICA, a New Jersey

 

corporation, its member

 

By: /s/Jeffrey D. Mills         

 

 

      Jeffrey D. Mills, Vice President_____

         [Printed Name and Title]

 

 

 

 

 

 

(See Attached)

 

 

 

 

[INTENTIONALLY OMITTED]

 

 

RULES AND REGULATIONS

 

In the event of any conflict between the terms and provisions of the Lease and these Rules and Regulations, the terms and provisions of the Lease shall pertain and control.  Tenant shall faithfully observe and comply with the following Rules and Regulations:

 

1.           Except in connection with Tenant's work (if any) under Exhibit C, Tenant shall not alter any locks or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord's prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant and Tenant shall promptly deliver any new keys to Landlord.

 

2.           All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises. Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.

 

3.           Tenant, its employees and agents must be sure that the entry doors to the Premises are securely closed and locked when leaving the Premises if it is after the normal hours of business of the Project.  Access to the Project may be refused unless the person seeking access has proper identification or has a previously received authorization for access to the Project. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Project of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Project during the continuance thereof by any means it deems appropriate for the safety and protection of life and property.

 

4.           Landlord reserves the right, in the event of an emergency in Landlord's reasonable discretion, to close or limit access to the Project and/or the Premises, from time to time, due to damage to the Project and/or the Premises, to ensure the safety of persons or property or due to government order or directive, and Tenant agrees to immediately comply with any such reasonable decision by Landlord. If Landlord closes or limits access to the Project and/or the Premises for the reasons described above, Landlord's actions shall not constitute a breach of the Lease.

 

5.           Tenant shall not disturb, solicit, or canvass any occupant of the Project and shall cooperate with Landlord and its agents to prevent the same. Tenant, its employees and agents shall not loiter in or on the entrances, corridors, sidewalks, lobbies, halls, stairways, elevators, or any Common Areas for the purposes of smoking tobacco products or for any other purpose, nor in any way obstruct such areas, and shall use them only as a means of ingress and egress for the Premises.  Smoking shall not be permitted in the Common Areas.

 

6.           The toilet rooms, urinals and wash bowls shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenants who, or whose employees or agents, shall have caused it.

 

7.           Tenant shall not permit its vendors or other persons visiting the Premises to solicit other tenants of the Project.

 

8.           Tenant shall not use or keep in or on the Premises or the Project any kerosene, gasoline or other inflammable or combustible fluid or material, except as otherwise permitted in the Lease. Tenant shall not bring into or keep within the Premises or the Project any animals, birds or vehicles (other than passenger vehicles, forklifts or bicycles and service animals).

 

9.           Tenant shall not use, keep or permit to be used or kept, any noxious gas or substance in or on the Premises or permit or allow offensive or objectionable noise, odors, or vibrations to disturb other tenants in the Project, or to otherwise unreasonably interfere with the use of the Project by other tenants.

 

10.           No cooking shall be done or permitted on the Premises nor shall the Premises be used for the storage of merchandise, for loading or for any illegal purposes.  Notwithstanding the foregoing, Underwriters' Laboratory approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and visitors of Tenant, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations; and provided further that such cooking does not result in odors escaping from the Premises in any Building in which Tenant does not lease all of the leasable area.

 

11.           Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.

 

12.           No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash in the vicinity of the Project without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate.

 

13.           Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

 

14.           Tenant acknowledges that the local fire department has previously required Landlord to participate in a fire and emergency preparedness program or may require Landlord and/or Tenant to participate in such a program in the future. Tenant agrees to take all actions reasonably necessary to comply with the requirements of such a program including, but not limited to, designating certain employees as "fire wardens" and requiring them to attend any necessary classes and meetings and to perform any required functions.

 

15.           Tenant and its employees shall comply with all federal, state and local recycling and/or resource conservation laws and shall take all actions reasonably requested by Landlord in order to comply with such laws.

 

Landlord reserves the right at any time to reasonably change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable and nondiscriminatory Rules and Regulations as in Landlord's judgment may from time to time be necessary for the management, safety, care and cleanliness of the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Landlord, however, shall apply such Rules and Regulations in a nondiscriminatory manner. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them.

 

 

 

 

 

In the event of any conflict between the terms and provisions of the Lease and these Parking Rules, the terms and provisions of the Lease shall pertain and control.

 

1.           Parking areas shall be used only for parking by vehicles no longer than full size, passenger automobiles, pickup trucks and sport utility vehicles. Tenant and its employees shall park automobiles within the lines of the parking spaces.

 

2.           Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking.

 

3.           Parking stickers and parking cards, if any, shall be the property of Landlord and shall be returned to Landlord by the holder thereof upon termination of the holder's parking privileges.  Landlord shall not be obligated to return the deposit unless and until the parking card or other device is returned to Landlord. Tenant will pay such replacement charges as is reasonably established by Landlord for the loss of such devices. Loss or theft of parking identification stickers or devices from automobiles must be reported to the parking operator immediately. Any parking identification stickers reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution.

 

4.           Unless otherwise instructed, every person using the parking area is required to park and, lock his own vehicle. Landlord will not be responsible for any damage to vehicles, injury to persons or loss of property, all of which risks are assumed by the party using the parking area.

 

5.           The maintenance, washing, waxing or cleaning of vehicles in the parking structure or Common Areas is prohibited.

 

6.           Tenant shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws, and agreements. Parking area managers or attendants, if any, are not authorized to make or allow any exceptions to these Parking Rules and Regulations. Landlord reserves the right to terminate parking rights for any person or entity that willfully refuses to comply with these rules and regulations.

 

7.           Every driver is required to park his or her own car. Tenant agrees that all responsibility for damage to cars or the theft of or from cars is assumed by the driver, and further agrees that Tenant will hold Landlord harmless for any such damages or theft.

 

8.           No vehicles shall be parked in the parking areas overnight. The parking area shall only be used for daily parking and no vehicle or other property shall be stored in a parking space.

 

9.           Any vehicle parked by Tenant, its employees, contractors or visitors in a reserved parking space or in any area of the parking area that is not designated for the parking of such a vehicle may, at Landlord's option, and without notice or demand, be towed away by any towing company selected by Landlord, and the cost of such towing shall be paid for by Tenant and/or the driver of said vehicle.

 

Landlord reserves the right at any time to reasonably change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable and nondiscriminatory Rules and Regulations as in Landlord's judgment may from time to time be necessary for the management, safety, care and cleanliness of the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Landlord, however, shall apply such Rules and Regulations in a nondiscriminatory manner. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them.

 

 

 

 

With respect to that certain lease ("Lease") dated ______________, 200__ between WESTPORT OFFICE PARK, LLC, a California limited liability company ("Landlord"), and _____________________ ("Tenant"), whereby Landlord leased to Tenant and Tenant leased from Landlord approximately _________ rentable square feet of that certain office building located at , California ("Premises"), Tenant hereby acknowledges and certifies to Landlord as follows:

 

(1)           Landlord delivered possession of the Premises to Tenant substantially complete on _______________________________;

 

(2)           The Lease commenced on _______________________ ("Commencement Date") and Tenant's obligation to pay Rent commenced on ________________________ ("Rent Commencement Date");

 

(3)           The Premises contain ___________ rentable square feet of space; and

 

(4)           Tenant has accepted and is currently in possession of the Premises and the Premises are acceptable for Tenant's use.

 

(5)           Tenant's Building Percentage is ______________________________

 

(6)           Base Rent Per Month is ________________

 

IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this day of_______________

 

"Tenant"

 

By:                                                                

 

Its:                                                      

 

 

 

By:                                                                

 

Its:                                                      

 

 

 

 

 

(a)           Ventilate the Premises and furnish air conditioning or heating on such days and hours, when it may be required for the comfortable occupancy of the Premises.  The air conditioning system achieves maximum cooling when the window coverings are closed. Landlord shall not be responsible for room temperatures if Tenant does not keep all window coverings in the Premises closed whenever the system is in operation.  Tenant agrees to cooperate fully at all times with Landlord, and to abide by all regulations and requirements which Landlord may prescribe for the proper function and protection of said air conditioning system.

 

(b)           During any periods in which Tenant does not lease all of the space in a Building, Tenant agrees not to connect any apparatus, device, conduit or pipe to the Building chilled and hot water air conditioning supply lines.  Tenant further agrees that neither Tenant nor its servants, employees, agents, visitors, licensees or contractors shall at any time enter mechanical installations or facilities of the Building in which Tenant does not lease all of the space or adjust, tamper with, touch or otherwise in any manner affect said installations or facilities.  The cost of maintenance and service calls to adjust and regulate the air conditioning system may be charged to Tenant if the need for maintenance work results from either Tenant’s adjustment of room thermostats or Tenant’s failure to comply with its obligations under this section, including keeping window coverings closed as needed.  Such work shall be charged at hourly rates equal to then current journeymen’s wages for air conditioning mechanics.

 

(c)           During any periods in which Tenant does not lease all of the space in a Building and is not paying for all of the utilities provided to such Building, Landlord reserves the right to charge Tenant for the cost to Landlord of providing heating and air-conditioning to space in that Building at times other than Normal Business Hours. As used in the Lease, the term " Normal Business Hours" means Monday through Friday, except holidays, from 8:00 a.m. to 6:00 p.m.

 

(d)           Landlord shall furnish electric current sufficient for normal office use.

 

(e)           The provisions of this paragraph (e) shall apply during any periods in which Tenant does not lease all of the space in a Building with respect to electrical service provided to that Building and is not paying for all of the electrical service provided to such Building.  Tenant agrees, should its electrical installation or electrical consumption be in excess of current required for normal business use or extend beyond Normal Business Hours, to reimburse Landlord monthly for the measured consumption at the average cost per kilowatt hour charged to the Building during the period.  If a separate meter is not installed, such excess cost will be established by an estimate agreed upon by Landlord and Tenant, and if the parties fail to agree, as established by an independent licensed engineer.  Said estimates to be reviewed and adjusted quarterly.  Tenant agrees not to use any apparatus or device in, or upon, or about the Premises which may in any way increase the amount of such services usually furnished or supplied to said Premises, and Tenant further agrees not to connect any apparatus or device with wires, conduits or pipes, or other means by which such services are supplied, for the purpose of using additional or unusual amounts of such services without written consent of Landlord.  Should Tenant use the same to excess, the refusal on the part of Tenant to pay upon demand of Landlord the amount established by Landlord for such excess charge shall constitute a breach of the obligation to pay Rent under this Lease and shall entitle Landlord to the rights therein granted for such breach.

 

(f)           The provisions of this paragraph (f) shall apply during any periods in which Tenant does not lease all of the space in a Building with respect to water service provided to that Building and Tenant is not paying for all of the water service provided to that space. Water will be available in public areas for drinking and lavatory purposes only, but if Tenant requires, uses or consumes water for any purposes in addition to ordinary drinking and lavatory purposes of which fact Tenant constitutes Landlord to be the sole judge, Landlord may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant may be required to pay Landlord for the cost of the meter and the cost of the installation thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense, in default of which Landlord may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to pay for water consumed, as shown on said meter, as and when bills are rendered, and on default in making such payment, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred, or payments made by Landlord for any of the reasons or purposes hereinabove stated shall be deemed to be additional rent payable by Tenant and collectible by Landlord as such.

 

(g)           Subject to Section 6.6 of the Lease, Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and electric systems, when necessary, by reason of accident or emergency or for repairs, alterations or improvements, in the judgment of Landlord desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed, and shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilating, air conditioning or electric service, when prevented from so doing by strike or accident or by any cause beyond Landlord's reasonable control, or by laws, rules, orders, ordinances, directions, regulations or requirements of any federal, state, county or municipal authority or failure of gas, oil or other suitable fuel supply or inability by exercise of reasonable diligence to obtain gas, oil or other suitable fuel.  Subject to Section 6.6 of the Lease, it is expressly understood and agreed that any covenants on Landlord's part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of a strike or labor trouble or any other cause whatsoever beyond Landlord's control.

 

 

 

 

(See Attached.)