Exhibit 10.30
LEASE
KILROY REALTY, L.P.,
a Delaware limited partnership
Landlord
APPLIED MICRO CIRCUITS CORPORATION,
a Delaware corporation
Tenant
TABLE OF CONTENTS
Page
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ARTICLE I - TERM OF LEASE................................................................................................. 1
1.1 Initial Term..................................................................................................... 1
1.2 Option to Extend................................................................................................. 2
ARTICLE II - CONSTRUCTION OF THE IMPROVEMENTS.............................................................................. 2
2.1 The Improvements................................................................................................. 2
2.2 Plans and Specifications......................................................................................... 3
2.3 Design Disputes.................................................................................................. 7
2.4 Substantial Completion of the Improvements....................................................................... 8
2.5 Delay in Substantial Completion.................................................................................. 9
2.6 Liquidated Damages for Delay in Substantial Completion........................................................... 10
2.7 Building Permit for the Improvements............................................................................. 11
2.8 Construction Warranties.......................................................................................... 11
2.9 Condition of Demised Premises; Limited Warranty.................................................................. 11
2.10 Tenant Improvement Allowance; Tenant Responsibility.............................................................. 12
2.11 Responsibility for Excess Shell Costs and Excess Tenant Improvement Costs........................................ 14
2.12 Contractor....................................................................................................... 15
2.13 Tenant's Entry Into the Building Prior to Substantial Completion................................................. 16
ARTICLE III - RENT......................................................................................................... 16
3.1 Base Rent........................................................................................................ 16
3.2 Base Rent During Option Term..................................................................................... 17
3.3 Additional Obligations; Additional Rent.......................................................................... 19
3.4 Delinquent Rental Payments....................................................................................... 20
ARTICLE IV - USE OF DEMISED PREMISES....................................................................................... 20
4.1 Permitted Use.................................................................................................... 20
4.2 Preservation of Demised Premises................................................................................. 21
4.3 Hazardous Substances............................................................................................. 21
4.4 Access Easement.................................................................................................. 24
ARTICLE V - PAYMENT OF TAXES, ASSESSMENTS, ETC............................................................................. 24
5.1 Payment of Impositions........................................................................................... 24
5.2 Tenant's Right to Contest Impositions............................................................................ 25
5.3 Levies and Other Taxes........................................................................................... 26
5.4 Evidence of Payment.............................................................................................. 27
5.5 Escrow for Taxes and Assessments................................................................................. 27
5.6 Landlord's Right to Contest Impositions.......................................................................... 27
ARTICLE VI - INSURANCE..................................................................................................... 27
6.1 Casualty Insurance............................................................................................... 27
6.2 Public Liability Insurance....................................................................................... 28
6.3 Other Insurance.................................................................................................. 28
6.4 Certain Insurance Provisions..................................................................................... 29
6.5 Waiver of Subrogation............................................................................................ 30
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6.6 Tenant's Indemnification of Landlord............................................................................. 30
6.7 Unearned Premiums................................................................................................ 30
6.8 Blanket Insurance Coverage....................................................................................... 30
6.9 Landlord's Liability Insurance Coverage.......................................................................... 30
ARTICLE VII - UTILITIES.................................................................................................... 31
7.1 Payment of Utilities............................................................................................. 31
7.2 Additional Charges............................................................................................... 31
7.3 Landlord's Responsibility for Utility Hook-Up Charges and Fees................................................... 31
ARTICLE VIII - REPAIRS AND MAINTENANCE OF DEMISED PREMISES................................................................ 31
8.1 Tenant's Responsibilities........................................................................................ 31
8.2 Landlord's Responsibilities...................................................................................... 32
8.3 Sharing of Expenses of Capital Items............................................................................. 32
8.4 Tenant's Waiver of Claims Against Landlord....................................................................... 33
8.5 Prohibition Against Waste........................................................................................ 33
ARTICLE IX - COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS.............................................................. 33
9.1 Compliance with Applicable Laws and Restrictions................................................................. 33
9.2 Tenant's Obligations............................................................................................. 34
9.3 Tenant's Right to Contest Laws and Ordinances.................................................................... 34
ARTICLE X - MECHANIC'S LIENS AND OTHER LIENS............................................................................... 35
10.1 Mechanic's Liens................................................................................................. 35
10.2 Landlord's Indemnification....................................................................................... 36
10.3 Removal of Liens................................................................................................. 36
10.4 Equipment and Trade Fixtures..................................................................................... 36
ARTICLE XI - LANDLORD'S PERFORMANCE OF TENANT'S OBLIGATIONS................................................................ 37
ARTICLE XII - DEFAULTS OF TENANT........................................................................................... 37
12.1 Events of Default................................................................................................ 37
12.2 Landlord's Remedies.............................................................................................. 38
12.3 Right to Collect Rent as Due..................................................................................... 39
12.4 New Lease Following Termination.................................................................................. 39
12.5 Cumulative Rights; No Waiver..................................................................................... 39
12.6 Surrender of Demised Premises.................................................................................... 40
12.7 Interest on Unpaid Amounts....................................................................................... 40
ARTICLE XIII - DESTRUCTION AND RESTORATION................................................................................. 40
13.1 Destruction and Restoration...................................................................................... 40
13.2 Application of Insurance Proceeds................................................................................ 41
13.3 Continuance of Tenant's Obligations.............................................................................. 42
13.4 Availability of Insurance Proceeds............................................................................... 42
13.5 Completion of Restoration........................................................................................ 42
13.6 Termination of Lease............................................................................................. 42
ARTICLE XIV - CONDEMNATION................................................................................................. 44
14.1 Condemnation of Entire Demised Premises.......................................................................... 44
14.2 Partial Condemnation/Termination of Lease........................................................................ 44
14.3 Partial Condemnation/Continuation of Lease....................................................................... 45
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14.4 Continuance of Obligations....................................................................................... 45
14.5 Adjustment of Rent............................................................................................... 45
ARTICLE XV - ASSIGNMENT, SUBLETTING, ETC.................................................................................... 45
15.1 Restriction on Transfer.......................................................................................... 45
15.2 Transfer to Affiliates; Sale or Merger........................................................................... 47
15.3 Restriction Against Further Assignment........................................................................... 47
15.4 Tenant's Failure to Comply....................................................................................... 47
ARTICLE XVI - SUBORDINATION, NONDISTURBANCE, NOTICE TO MORTGAGEE AND ATTORNMENT............................................. 48
16.1 Subordination by Tenant.......................................................................................... 48
16.2 Landlord's Default............................................................................................... 48
16.3 Attornment....................................................................................................... 48
ARTICLE XVII - SIGNS........................................................................................................ 49
ARTICLE XVIII - FINANCIAL STATEMENTS OF TENANT.............................................................................. 49
ARTICLE XIX - CHANGES AND ALTERATIONS....................................................................................... 49
ARTICLE XX - MISCELLANEOUS PROVISIONS....................................................................................... 52
20.1 Entry by Landlord................................................................................................ 52
20.2 Exhibition of Demised Premises................................................................................... 53
20.3 Indemnification by Tenant........................................................................................ 53
20.4 Notices.......................................................................................................... 53
20.5 Quiet Enjoyment.................................................................................................. 55
20.6 Landlord's Continuing Obligations................................................................................ 55
20.7 Estoppel......................................................................................................... 55
20.8 Delivery of Corporate Documents.................................................................................. 56
20.9 Memorandum of Lease.............................................................................................. 57
20.10 Severability..................................................................................................... 57
20.11 Successors and Assigns........................................................................................... 57
20.12 Captions......................................................................................................... 57
20.13 Relationship of Parties.......................................................................................... 57
20.14 Entire Agreement................................................................................................. 57
20.15 No Merger........................................................................................................ 57
20.16 Possession and Use............................................................................................... 57
20.17 Surrender of Demised Premises.................................................................................... 57
20.18 Holding Over..................................................................................................... 58
20.19 Survival......................................................................................................... 58
20.20 Broker's Commission.............................................................................................. 58
20.21 Applicable Law................................................................................................... 58
20.22 Counterparts..................................................................................................... 58
20.23 Attorney's Fees.................................................................................................. 59
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LEASE
THIS LEASE ("Lease") is made this 17/th/ day of February, 1999, by and
between KILROY REALTY, L.P., a Delaware limited partnership ("Landlord"), and
APPLIED MICRO CIRCUITS CORPORATION, a Delaware corporation ("Tenant").
WITNESSETH:
"Land" means that certain vacant lot located to the north of the building
currently occupied by Tenant at 6290 Sequence Drive located in San Diego,
California (the "Adjacent Building"), which is described in Exhibit "A" attached
hereto and made a part hereof.
"Building" means a building (known generally as the "Engineering Building")
which shall be comprised of approximately 58,000 rentable square feet of space
in two (2) stories with sixteen foot (16') minimum slab to slab clearance.
Rentable square footage shall be calculated according to BOMA standards for a
single tenant building, and any "drip line" area shall not exceed 200 rentable
square feet.
"Improvements" means the Building and all improvements, machinery,
equipment, fixtures and other property, real, personal or mixed (except Tenant's
trade fixtures, machinery and equipment) installed or constructed on the Land or
in the Building by Landlord (including, without limitation, the parking facility
and other site improvements and landscaping), together with all additions,
alterations and replacements thereof.
"Demised Premises" means the Land and the Improvements.
Landlord, for and in consideration of the rents, covenants and agreements
hereinafter reserved, mentioned and contained on the part of Tenant, its
successors and assigns, to be paid, kept, observed and performed under this
Lease, hereby leases, rents, lets and demises to Tenant, and upon and subject to
the conditions and limitations expressed in this Lease, Tenant takes and hires
from Landlord, the Demised Premises.
ARTICLE I
TERM OF LEASE
1.1 Initial Term. This Lease shall be effective and binding upon the
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parties hereto upon mutual execution hereof (the "Effective Date"). The term of
this Lease (the "Initial Term") shall commence upon the Commencement Date and
shall end one hundred twenty (120) months after the Commencement Date (as
defined below), subject to extension pursuant to Section 1.2, below. The
"Commencement Date" (as that term is used in this Lease) shall mean the date
upon which Substantial Completion (as defined in Section 2.3 below) of the
Improvements occurs. Substantial Completion of the Improvements and the
Commencement Date are currently anticipated to be not later than May 1, 2001
(the "Target Commencement Date"). In the event the Commencement Date is May 1,
2001, the Initial Term of this Lease would end on April 30, 2011. Tenant shall
have the right to advance the Target Commencement
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Date to a date earlier than May 1, 2001. Landlord has agreed to commence
construction of the Improvements at least one (1) year prior to the Target
Commencement Date. Accordingly, if Tenant desires to exercise its right to
advance the Target Commencement Date, Tenant shall deliver written notice of
such election ("Advance Notice") to Landlord no later than twelve (12) months
prior to the date which Tenant elects to have as the accelerated Target
Commencement Date. For example, if Tenant elects to advance the Target
Commencement Date to December 1, 2000, Tenant shall deliver the Advance Notice
to Landlord no later than December 1, 1999. If Tenant elects to advance the
Target Commencement Date, then all references herein to the Target Commencement
Date shall mean such date as advanced by Tenant pursuant to this Section 1.1. In
addition, if Tenant elects to advance the Target Commencement Date, Tenant shall
be entitled to a reduction in Base Rent as provided in Section 3.1 below.
1.2 Option to Extend. Tenant shall have three (3) options to extend (the
----------------
"Extension Options") the Initial Term for consecutive five (5) year periods (the
foregoing option terms shall be referred to hereinafter sometimes as the "Option
Terms"), by delivering a binding written notice of exercise to Landlord
("Extension Notice"), so that Landlord receives the Extension Notice with
respect to the first Option Term at least three hundred sixty (360) days prior
to the end of the Initial Term and with respect to the second Option Term, at
least three hundred sixty (360) days prior to the end of the first Option Term
and with respect to the third Option Term, at least three hundred sixty (360)
days prior to the end of the second Option Term. Tenant may exercise the
Extension Options only if this Lease is in full force and effect and there is no
uncured Event of Default, or any breach of Tenant's obligations under this Lease
which with the passage of time or the giving of notice, or both, would
constitute an Event of Default if not cured within any applicable cure period
(an "Incipient Default"), at the time of exercise of the right of renewal or at
the time of the commencement of the Option Term, but Landlord shall have the
right at its sole discretion to waive the non-default conditions herein;
provided, however, that if an Event of Default or Incipient Default exists at
the time Tenant exercises the Extension Option and Landlord does not elect to
waive, Landlord shall provide written notice to Tenant of the existence and
nature of such Event of Default or Incipient Default and Tenant shall be allowed
an amount of time to cure such Event of Default or Incipient Default as is
otherwise provided for curing defaults of that type under this Lease, and, if
timely cured, Tenant's exercise of the Extension Option shall be reinstated
effective as of the time of exercise. The Initial Term, together with any Option
Term, are referred to in this Lease as the "Term."
ARTICLE II
CONSTRUCTION OF THE IMPROVEMENTS
2.1 The Improvements. Landlord agrees to furnish all of the material,
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labor and equipment for the construction of the Improvements in a good and
workmanlike manner in conformance with the Plans and Specifications (as defined
in Section 2.2) and in compliance with all covenants, conditions and
restrictions to which the Land is subject and all then applicable building laws,
ordinances, orders, rules, regulations and requirements of all federal, state
and municipal governments with jurisdictional authority over the development of
the Land and the construction of the Improvements, including, but not limited
to, the Americans With
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Disabilities Act and Title 24 (the "Applicable Land Use Laws and Restrictions").
Landlord shall use its diligent, best efforts to achieve Substantial Completion
of the Improvements by the Target Commencement Date.
2.2 Plans and Specifications. The Plans and Specifications for the
------------------------
development of the Property and the construction of the Improvements shall be
developed on a "two-track" basis, with one "track" related to the creation of
Plans and Specifications for the Shell Improvements (as defined in Section
2.10(a) hereof) and a second "track" related to the creation of Plans and
Specifications for the Tenant Improvements (as defined in Section 2.10(b)
hereof. Pacific Cornerstone Architects shall be the architect and space planner
for the Improvements (the "Architect").
(a) Shell Improvements Plans and Specifications. The Plans and
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Specifications for the development of the Shell Improvements shall be developed
as follows:
(i) As used in this Lease, the term "Shell Improvements Plans
and Specifications" shall mean collectively the "Preliminary Plans and
Specifications," the "Shell Improvements Schematic Design Drawings," the "Shell
Improvements Design Development Drawings", the "Shell Improvements Construction
Drawings" (all as defined herein) which shall be prepared by Architect, and all
related plans, drawings, specifications and notes. The Shell Improvements Plans
and Specifications shall be prepared by Landlord in compliance with all
Applicable Land Use Laws and Regulations.
(ii) Landlord and Tenant shall agree on a set of preliminary
plans and specifications ("Preliminary Plans") for the Shell Improvements which
shall (a) describe and depict the Shell Improvements, (b) specify the components
of the Shell Improvements, and (c) preliminarily depict the Tenant Improvements.
On or before May 1, 2000, or as soon as reasonably possible following Landlord's
receipt of the Advance Notice, whichever is earlier, Landlord shall submit to
Tenant proposed Preliminary Plans. Within fifteen (15) business days after
Landlord delivers to Tenant the Preliminary Plans, Tenant shall deliver to
Landlord written notice of its approval or disapproval thereof. Tenant shall not
unreasonably withhold its approval of the Preliminary Plans or use the approval
process as a vehicle for expanding the scope of the Shell Improvements. If
Tenant disapproves any portion of the Preliminary Plans, then Tenant shall
specifically and in writing (a) approve those portions which are acceptable to
Tenant and (b) disapprove those portions which are not acceptable to Tenant,
specifying the reasons for such disapproval and describing in detail the change
Tenant requests for each item disapproved. In the event the Preliminary Plans
have not been fully approved by Tenant, and Landlord and Tenant are unable to
resolve the basis for Tenant's disapproval after good faith efforts to do so
over a period of fifteen (15) business days after delivery of Tenant's notice
disapproving the Preliminary Plans, Landlord and Tenant shall resolve such
differences through binding arbitration as more particularly provided in Section
2.3 below.
(iii) As soon as is reasonably possible following approval of the
Preliminary Plans, Landlord shall submit to Tenant reasonably detailed and
dimensioned 1/8 scale preliminary schematic design drawings ("Shell Improvements
Schematic Design Drawings") for the Shell Improvements elements of the Demised
Premises, which Shell Improvements
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Schematic Design Drawings shall be consistent with the Preliminary Plans. Within
fifteen (15) business days after Landlord delivers to Tenant the Shell
ImprovementsSchematic Design Drawings, Tenant shall deliver to Landlord written
notice of its approval or disapproval thereof. Tenant shall not unreasonably
withhold its approval of the Shell Improvements Schematic Design Drawings or use
the approval process as a vehicle for expanding the scope of the Shell
Improvements. If Tenant disapproves any portion of the Shell Improvements
Schematic Design Drawings, then Tenant shall specifically and in writing (a)
approve those portions which are acceptable to Tenant and (b) disapprove those
portions which are not acceptable to Tenant, specifying the reasons for such
disapproval and describing in detail the change Tenant requests for each item
disapproved. In the event the Shell Improvements Schematic Design Drawings have
not been fully approved by Tenant, and Tenant and Landlord are unable to resolve
the basis for Tenant's disapproval after good faith efforts to do so over a
period of fifteen (15) business days after delivery of Tenant's notice
disapproving the Schematic Shell Improvements Design Drawings, Landlord and
Tenant shall resolve such differences through binding arbitration as more
particularly provided in Section 2.3 below.
(iv) As soon as is reasonably possible following approval of the
Shell Improvements Schematic Design Drawings, Landlord shall submit to Tenant
reasonably detailed preliminary construction drawings for the Shell Improvements
elements of the Demised Premises ("Shell Improvements Design Development
Drawings"), which Shell Improvements Design Development Drawings shall be
consistent with the Shell Improvements Schematic Design Drawings. Within fifteen
(15) business days after Tenant receives the Shell Improvements Design
Development Drawings, Tenant shall deliver to Landlord written notice of
Tenant's approval or disapproval of the Shell Improvements Design Development
Drawings. Tenant shall not unreasonably withhold its approval of the Shell
Improvements Design Development Drawings or use the approval process as a
vehicle for expanding the scope of the Shell Improvements. If Tenant disapproves
any portion of the Shell Improvements Design Development Drawings, then Tenant
shall specifically and in writing (a) approve those portions which are
acceptable to Tenant and (b) disapprove those portions which are not acceptable
to Tenant, specifying the reasons for such disapproval and describing in detail
the change Tenant requests for each item disapproved. In the event the Shell
Improvements Design Development Drawings have not been fully approved by Tenant,
and Tenant and Landlord are unable to resolve the basis for Tenant's disapproval
after good faith efforts to do so over a period of fifteen (15) business days
after delivery of Tenant's notice disapproving the Shell Improvements Design
Development Drawings, Landlord and Tenant shall resolve such differences through
binding arbitration as more particularly provided in Section 2.3 below.
(v) As soon as is reasonably possible following approval of the
Shell Improvements Design Development Drawings, Landlord shall submit to Tenant
1/4 or 1/8 scale construction drawings for the Shell Improvements elements of
the Demised Premises ("Construction Drawings"), which Construction Drawings
shall be consistent with the previously approved Shell Improvements Design
Development Drawings. These Construction Drawings shall include all information
reasonably necessary to construct the Shell Improvements. Within fifteen (15)
business days after Tenant receives the Shell Improvements Construction
Drawings, Tenant shall deliver to Landlord written notice of Tenant's approval
or disapproval of the Shell Improvements Construction Drawings. Tenant shall not
unreasonably withhold its approval of
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the Shell Improvements Construction Drawings or use the approval process as a
vehicle for expanding the scope of the Shell Improvements. If Tenant disapproves
any portion of the Shell Improvements Construction Drawings, then Tenant shall
specifically and in writing (a) approve those portions which are acceptable to
Tenant and (b) disapprove those portions which are not acceptable to Tenant,
specifying the reasons for such disapproval and describing in detail the change
Tenant requests for each item disapproved. In the event the Shell Improvements
Construction Drawings have not been fully approved by Tenant, and Tenant and
Landlord are unable to resolve the basis for Tenant's disapproval after good
faith efforts to do so over a period of fifteen (15) business days after
delivery of Tenant's notice disapproving the Shell Improvements Construction
Drawings, Landlord and Tenant shall resolve such differences through binding
arbitration as more particularly provided in Section 2.3 below.
(vi) Upon approval of the Shell Improvements Construction
Drawings, the Shell Improvements Plans and Specifications shall be deemed
approved by Landlord and Tenant and shall, thereafter, be the Shell Improvements
element of the Plans and Specifications for the construction of the
Improvements.
(b) Tenant Improvements Plans and Specifications. The Plans and
--------------------------------------------
Specifications for the development of the Tenant Improvements shall be developed
as follows:
(i) As used in this Lease, the term "Tenant Improvements Plans
and Specifications" shall mean collectively the "Preliminary Plans", the "Tenant
Improvements Schematic Design Drawings," the "Tenant Improvements Design
Development Drawings", the "Tenant Improvements Construction Drawings" (all as
defined herein) which shall be prepared by Architect, and all related plans,
drawings, specifications and notes. The Tenant Improvements Plans and
Specifications shall be prepared by Landlord in compliance with all Applicable
Land Use Laws and Regulations.
(ii) As soon as is reasonably possible following approval of the
Preliminary Plans, or as soon as reasonably possible following Landlord's
receipt of the Advance Notice, Landlord shall submit to Tenant reasonably
detailed and dimensioned 1/8 scale preliminary schematic design drawings
("Tenant Improvements Schematic Design Drawings") for the Tenant Improvements
elements of the Demised Premises consistent with the Preliminary Plans. Within
fifteen (15) business days after Landlord delivers to Tenant the Tenant
Improvements Schematic Design Drawings, Tenant shall deliver to Landlord written
notice of its approval or disapproval thereof. Tenant shall not unreasonably
withhold its approval of the Tenant Improvements Schematic Design Drawings. If
Tenant disapproves any portion of the Tenant Improvements Schematic Design
Drawings, then Tenant shall specifically and in writing (a) approve those
portions which are acceptable to Tenant and (b) disapprove those portions which
are not acceptable to Tenant, specifying the reasons for such disapproval and
describing in detail the change Tenant requests for each item disapproved. In
the event the Tenant Improvements Schematic Design Drawings have not been fully
approved by Tenant, and Tenant and Landlord are unable to resolve the basis for
Tenant's disapproval after good faith efforts to do so over a period of fifteen
(15) business days after delivery of Tenant's notice disapproving the Tenant
Improvements Schematic Design Drawings, Landlord and Tenant shall
5
resolve such differences through binding arbitration as more particularly
provided in Section 2.3 below.
(iii) As soon as is reasonably possible following approval of the
Tenant Improvements Schematic Design Drawings, Landlord shall submit to Tenant
reasonably detailed preliminary construction drawings for the Tenant
Improvements elements of the Demised Premises ("Tenant Improvements Design
Development Drawings"), which Tenant Improvements Design Development Drawings
shall be consistent with the Tenant Improvements Schematic Design Drawings.
Within fifteen (15) business days after Tenant receives the Tenant Improvements
Design Development Drawings, Tenant shall deliver to Landlord written notice of
Tenant's approval or disapproval of the Tenant Improvements Design Development
Drawings. Tenant shall not unreasonably withhold its approval of the Tenant
Improvements Design Development Drawings. If Tenant disapproves any portion of
the Tenant Improvements Design Development Drawings, then Tenant shall
specifically and in writing (a) approve those portions which are acceptable to
Tenant and (b) disapprove those portions which are not acceptable to Tenant,
specifying the reasons for such disapproval and describing in detail the change
Tenant requests for each item disapproved. In the event the Tenant Improvements
Design Development Drawings have not been fully approved by Tenant, and Tenant
and Landlord are unable to resolve the basis for Tenant's disapproval after good
faith efforts to do so over a period of fifteen (15) business days after
delivery of Tenant's notice disapproving the Tenant Improvements Design
Development Drawings, Landlord and Tenant shall resolve such differences through
binding arbitration as more particularly provided in Section 2.3 below.
(iv) As soon as is reasonably possible following approval of the
Tenant Improvements Design Development Drawings, Landlord shall submit to Tenant
1/4 or 1/8 scale construction drawings for the Tenant Improvements elements of
the Demised Premises ("Construction Drawings"), which Construction Drawings
shall be consistent with the Tenant Improvements Design Development Drawings.
These Construction Drawings shall include all information reasonably necessary
to construct the Tenant Improvements. Within fifteen (15) business days after
Tenant receives the Tenant Improvements Construction Drawings, Tenant shall
deliver to Landlord written notice of Tenant's approval or disapproval of the
Tenant Improvements Construction Drawings. Tenant shall not unreasonably
withhold its approval of the Tenant Improvements Construction Drawings. If
Tenant disapproves any portion of the Tenant Improvements Construction Drawings,
then Tenant shall specifically and in writing (a) approve those portions which
are acceptable to Tenant and (b) disapprove those portions which are not
acceptable to Tenant, specifying the reasons for such disapproval and describing
in detail the change Tenant requests for each item disapproved. In the event the
Tenant Improvements Construction Drawings have not been fully approved by
Tenant, and Tenant and Landlord are unable to resolve the basis for Tenant's
disapproval after good faith efforts to do so over a period of fifteen (15)
business days after delivery of Tenant's notice disapproving the Tenant
Improvements Construction Drawings, Landlord and Tenant shall resolve such
differences through binding arbitration as more particularly provided in Section
2.3 below.
(v) Upon approval of the Tenant Improvements Construction
Drawings, the Tenant Improvements Plans and Specifications shall be deemed
approved by
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Landlord and Tenant and shall, thereafter, be the Tenant Improvements element of
the Plans and Specifications for the construction of the Improvements.
(vi) During the process of preparing and reviewing the Tenant
Improvements Schematic Design Drawings, Tenant Improvements Design Development
Drawings and Tenant Improvements Construction Drawings, Landlord shall
reasonably cooperate with Tenant, and Landlord shall cause its contractor and
design professionals to reasonably cooperate with Tenant, in Tenant's efforts to
control the cost of the Tenant Improvements through "value engineering." Nothing
in this subsection (vii) nor related to the "value engineering" of the Tenant
Improvements shall extend the dates by which Tenant must review the plans and
specifications delivered to it under this Section 2.2 or otherwise delay the
completion of the Tenant Improvements Plans and Specifications.
(c) Final Plans and Specifications. The final Shell Improvements
------------------------------
Plans and Specifications and the final Tenant Improvements Plans and
Specifications are sometimes collectively referred to in this Lease as the
"Plans and Specifications" and shall be the final plans and specifications for
the development of the Improvements. Tenant shall not assume any liability for
defects in the design of the Shell Improvements or the Tenant Improvements as a
result of Tenant's involvement in the process described in this Section 2.2 and
shall not diminish Landlord's responsibilities under this Lease for any such
defects.
2.3 Design Disputes. In the event Landlord and Tenant are unable to
---------------
resolve Tenant's disapproval of a phase of the development of the Plans and
Specifications under Section 2.2 above (a "Design Dispute"), they shall resolve
those differences through the binding arbitration of a neutral third-party in
accordance with the procedure set forth in this Section 2.3: Landlord and Tenant
shall immediately meet to make a good faith attempt to mutually appoint a single
party who shall be a licensed architect ("Arbitrating Architect"), with not less
than ten (10) years experience in commercial and industrial architecture and who
is not employed or otherwise previously affiliated with either party, to
arbitrate their differences and resolve the Design Dispute. If Landlord and
Tenant are unable to agree upon a single Arbitrating Architect, then each shall,
within two (2) business days after the meeting, select an architect that meets
the foregoing qualifications. The two (2) architects so appointed shall, within
two (2) business days after their appointment, appoint a third architect meeting
the foregoing qualifications who shall serve as the Arbitrating Architect. If
the two (2) architects so selected cannot agree on the selection of the
Arbitrating Architect within the time above specified, then either party, on
behalf of both parties, may request the appointment of the Arbitrating Architect
to the Presiding Judge of the San Diego County Superior Court. The procedures
for arbitrating and resolving the Design Dispute shall be established by the
Arbitrating Architect, provided, however, that the parties agree to the use of
the rules of the American Arbitration Association regarding resolution of
commercial disputes. The determination of the Arbitrating Architect shall be
limited solely to the issue of the Design Dispute and shall be made within ten
(10) business days of its submission by the parties for arbitration. The
decision of the Arbitrating Architect shall be binding on both parties. The
costs of the arbitration, including, without limitation, attorneys' fees and
costs, witness fees, expert witness fees, and costs of the arbitration
proceeding shall be awarded as determined to be reasonable by the Arbitrating
Architect. In the event of any judicial enforcement or confirmation proceeding
relating to an arbitration award, the prevailing party
7
shall be entitled to recover from the other party all related costs, including
attorneys' fees and costs.
2.4 Substantial Completion of the Improvements.
------------------------------------------
(a) "Substantial Completion" of the Improvements shall be deemed to
have occurred on the earlier to occur of when (i) (A) the Improvements have been
completed in conformance with the Plans and Specifications, subject to the
completion of "punch-list" items (the "Punchlist") identified by Landlord and
Tenant as described in Section 2.3(c) below ("punch-list items" being defined to
mean minor items needing correction or repair which do not or will not
materially interfere with Tenant's use and enjoyment of the Building), (B) the
parking facilities to which Tenant is entitled under this Lease have been
completed other than as identified on the Punchlist, (C) all systems of the
Building are in good working order, and (D) Tenant can physically and legally
occupy the Demised Premises (e.g., a permanent Certificate of Occupancy or
temporary certificate of occupancy which is subsequently converted into or
replaced without any lapse by a permanent certificate of occupancy ("Certificate
of Occupancy") has been issued for the Demised Premises by the City of San Diego
("City")), or (ii) the Improvements would have been so completed and Tenant
legally entitled to occupy the Demised Premises but for any Tenant-Caused Delays
in Landlord (A) achieving Substantial Completion or (B) or obtaining the
Certificate of Occupancy. Landlord shall deliver to Tenant a copy of any
Certificate of Occupancy issued by City for the Demised Premises promptly upon
receipt. Landlord will use its best efforts to (i) keep Tenant informed on a
monthly basis following execution of this Lease of the anticipated Commencement
Date, and (ii) provide Tenant with no less than thirty (30) days advance notice
of the actual Commencement Date. Landlord shall deliver to Tenant a certificate
from the Architect (as defined below) certifying Substantial Completion of the
Improvements on or before the Commencement Date.
(b) "Tenant-Caused Delay" shall be defined as (i) the failure of
Tenant, its officers, directors, partners, agents, employees, or contractors to
(A) perform some act or pay some amount within the time provided in this Lease,
or (B) approve or reasonably disapprove any draft of the Plans and
Specifications within the time period specified in Section 2.2 above, (ii) any
change to the Plans and Specifications requested by Tenant, including both
during preparation of the Plans and Specifications and during construction of
the Demised Premises, including as a result of Tenant's efforts to control
Tenant Improvements Cost through "value engineering" (as provided in Section
2.2(b)(vii) hereof) (a "Tenant Change Order"), or (iii) any other act or
omission by Tenant, its officers, directors, partners, agents, employees, or
contractors to the extent it causes a delay in Substantial Completion or in the
issuance of the Certificate of Occupancy (including, without a limitation, a
delay caused by a delay in finalization of the Plans and Specifications);
provided, however, that Landlord shall have given written notice to Tenant of
the number of days of Tenant-Caused Delay due to such requested Tenant Change
Order. Tenant may revoke a Tenant Change Order if it notifies Landlord of such
revocation within two (2) business days following receipt of Landlord's written
notice. Landlord shall notify Tenant in writing of the occurrence of any Tenant-
Caused Delay within two (2) business days after learning of the same. If
Landlord fails to timely notify Tenant of an event which would otherwise be a
Tenant-Caused Delay, the Tenant-Caused Delay shall not commence until such
notice is delivered.
8
(c) On or immediately before the Commencement Date, Landlord and
Tenant shall conduct a walk-through inspection of the Demised Premises and shall
jointly prepare the Punchlist which shall be a list of items which have not been
completed in substantial conformance with the Plans and Specifications that need
to be corrected. Landlord shall cause such items to be corrected within thirty
(30) days thereafter, provided, however, if by the nature of such punch-list
item, more than thirty (30) days is required to effect such correction, Landlord
shall not be in default hereunder if such correction is commenced within such
thirty (30) day period and is diligently pursued to completion. Approximately
thirty (30) days following the Commencement Date, Landlord and Tenant shall
again conduct a walk-through inspection to determine if any remaining punch-list
items require correction, and Landlord shall cause all such corrective work to
be undertaken and completed promptly thereafter. If, thereafter, Landlord fails
to diligently pursue completion of the Punchlist items with due diligence, and
such failure continues for five (5) days after notice from Tenant, Tenant may
complete such items and offset the reasonable cost thereof against Base Rent and
Additional Rent.
(d) Tenant shall not be liable to Landlord for the payment of Base
Rent, Additional Rent (as hereinafter defined) or any other amount to be paid by
Tenant under this Lease (except as specifically provided elsewhere in this
Lease) until the Commencement Date. The failure of Tenant to take possession of
or to occupy the Demised Premises on or after the Commencement Date shall not
serve to relieve Tenant of its obligations or delay Tenant's obligation to pay
Rent, Additional Rent, or any other amount to be paid by Tenant to Landlord
under this Lease.
(e) If the Commencement Date has not occurred by the Target
Commencement Date, as such Target Commencement Date may be extended pursuant to
Section 2.5, below) Landlord shall not be liable for any damages caused thereby,
except as provided in Section 2.5, below, and this Lease shall remain in full
force, except as provided in Section 2.5 below.
2.5 Delay in Substantial Completion. Landlord shall diligently proceed, in
-------------------------------
accordance with the Project Schedule, with the construction of the Improvements
and complete the same and deliver possession thereof to Tenant on the Target
Commencement Date, provided, however, to the extent (i) a Tenant-Caused Delay,
or (ii) a Force Majeure (as defined below), results in a delay in Substantial
Completion of the Improvements, the Target Commencement Date shall be extended
for the amount of time the Substantial Completion of the Improvements is delayed
thereby. "Force Majeure" shall be defined as any factor or condition which is
outside the control of either Tenant or Landlord and for which neither could
have reasonably been anticipated or expected to plan, including, without
limitation, (i) unusually inclement weather, or inclement weather which occurs
at unusual times, (ii) other acts of God, (iii) labor disputes, (iv) casualties,
(v) embargo, (vi) governmental restrictions, (vii) shortages of fuel, labor, or
building materials, (viii) civil unrest, (ix) action or non-action of public
utilities, or of local, state or federal governments which delay the Substantial
Completion of the Demised Premises, and (x) action or non-action of local, state
or federal governments which prevent, prohibit or stop construction of the
Demised Premises. Notwithstanding the foregoing, (A) those events described in
subsections (iii), (v), (vi), (vii), (ix) and (x) of the preceding sentence will
constitute
9
Force Majeure events only if they are generally applicable to the construction
industry in San Diego, and (B) no Force Majeure event, or any combination
thereof, will result in a delay in the Target Commencement Date for more than
thirty (30) days, other than those described in subsections (ii), (viii) and (x)
of the preceding sentence. Landlord shall give written notice to Tenant of the
estimated number of days of delay due to Force Majeure within two (2) business
days after Landlord learns of such delay. If Landlord fails to timely notify
Tenant of an event which would otherwise be a delay due to Force Majeure, the
Force Majeure delay shall not commence until such notice is delivered.
2.6 Liquidated Damages for Delay in Substantial Completion. If the
------------------------------------------------------
Commencement Date has not occurred (or been deemed to have occurred) by the
Target Commencement Date, as it may be adjusted as described in Sections 1.1 or
2.4, above, then Landlord shall pay Tenant liquidated damages of Two Thousand
Five Hundred Dollars ($2,500.00) per day for each day the Commencement Date is
delayed beyond the Target Commencement Date (as adjusted pursuant to Section
2.4, above) for up to six (6) months after the Target Commencement Date (as
adjusted pursuant to Section 2.4, above). Such liquidated damages shall be paid
within thirty (30) days after the end of each month of delay beyond the Target
Commencement Date. In addition to Tenant's rights to such liquidated damages,
Tenant shall have the right to terminate this Lease if the delay in the
Commencement Date beyond the Target Commencement Date (as adjusted pursuant to
Section 2.4, above) exceeds six (6) months in length. If Tenant elects not to
terminate this Lease at that time, (i) Landlord's liability for such delay shall
be limited to the liquidated damages already paid or accrued, (ii) Landlord
shall not be liable for any additional liquidated damages, and (iii) Landlord
shall have no liability for damages related to the additional delay unless such
delay is caused by Landlord's intentional misconduct. If Tenant elects not to
terminate this Lease at the end of such six (6) month period, Landlord shall
endeavor to achieve Substantial Completion of the Demised Premises with due
diligence, provided Tenant may terminate the Lease at any time thereafter, which
termination shall be effective ninety (90) days following delivery by Tenant to
Landlord of a written notice of such termination, unless Substantial Completion
and the Commencement Date occurs within such ninety (90) day period, in which
case the termination notice shall be deemed withdrawn and of no further force or
effect. If the Commencement Date has not occurred (or been deemed to have
occurred) by one (1) year after the Target Commencement Date (as that date may
be adjusted pursuant to Section 2.4, above), either Tenant or Landlord provided
that Landlord may only so terminate this Lease if the delay is not within
Landlord's reasonable control), upon written notice to the other, may terminate
the Lease. If Landlord fails to timely pay Tenant the liquidated damages, Tenant
may, in addition to its other rights and remedies, offset the amount thereof
against any rent or other amount due hereunder to Landlord.
LANDLORD AND TENANT AGREE THAT TENANT'S ACTUAL DAMAGES IN THE
EVENT OF A DELAY IN THE COMMENCEMENT DATE BEYOND THE TARGET
COMMENCEMENT DATE (AS ADJUSTED PURSUANT TO SECTION 2.4, ABOVE),
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE AND
THAT THE AMOUNTS DESIGNATED ABOVE AS LIQUIDATED DAMAGES PAYABLE
BY LANDLORD TO TENANT IN SUCH EVENTS ARE EACH REASONABLE AMOUNTS
TO BE SET AS
10
DAMAGES FOR SUCH EVENTS UNDER THE CIRCUMSTANCES EXISTING AT THE
TIME THIS LEASE HAS BEEN ENTERED INTO. IN CONSIDERATION OF THE
PAYMENT OF LIQUIDATED DAMAGES, TENANT SHALL BE DEEMED TO HAVE
WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN EQUITY
DUE TO SUCH DELAY INCLUDING ANY RIGHTS TO SPECIFIC PERFORMANCE
TENANT MAY OTHERWISE HAVE.
Tenant: /s/ [SIGNATURE ILLEGIBLE] Landlord: [SIGNATURE ILLEGIBLE]
--------------------------- ----------------------
2.7 Building Permit for the Improvements. Landlord shall be responsible
------------------------------------
(at its sole cost and expense) for obtaining from any relevant and
jurisdictional governmental authority necessary (generally an "Authority"), all
governmental approvals including a building permit for the construction of the
Improvements ("Building Permit"). If a change to the Plans and Specifications or
Approved Working Drawings is required by the Authority, such change shall be
made to the Plans and Specifications or Approved Working Drawings by Landlord.
Tenant shall not unreasonably withhold its consent to any such change.
2.8 Construction Warranties. Landlord shall obtain the manufacturer's
-----------------------
warranties for the elements or systems which are part of the Demised Premises
and which are customarily given by such manufacturers without additional cost to
Landlord and warranties and guaranties from the contractors and subcontractors
with respect to the Improvements and which are customarily given by such
contractors and subcontractors without additional cost to Landlord. Landlord
shall assign to Tenant (or, should Tenant not be legally capable of doing so
itself, at Tenant's expense, prosecute on Tenant's behalf), on a non-exclusive
basis, all statutory and contractual warranties and guaranties to which Landlord
is entitled in connection with the Demised Premises, express or implied,
including, without limitation the warranties arising under any construction
contract between Landlord and Landlord's contractors and/or subcontractors
involved in the construction of the Demised Premises. Other than the assignment
to Tenant of such warranties, or as otherwise specifically provided in this
Lease, Landlord shall have no obligation or responsibility to Tenant, or its
successors, with respect to any condition of the Improvements. Landlord, at no
cost or expense to Landlord, shall cooperate with Tenant in the enforcement by
Tenant, at Tenant's sole cost and expense, of any such warranties or guaranties.
2.9 Condition of Demised Premises: Limited Warranty. Except as
-----------------------------------------------
specifically provided in this Section 2.9, Landlord makes no warranties or
representations with regard to the Demised Premises, or any portion thereof, and
Tenant shall accept the Demised Premises in the condition in which they are
delivered on the Commencement Date, provided that (i) the Demised Premises shall
be constructed in (A) conformance with the Plans and Specifications and Approved
Working Drawings, and (B) conformance with all Applicable Land Use Laws and
Restrictions then in effect and (ii) for the Term of this Lease, the
Improvements shall be free of latent defects in design and construction of the
Demised Premises, including, without limitation, the drainage of surface water
runoff from adjacent properties, and Landlord shall be responsible, at
Landlord's sole cost and expense, for the prompt and diligent repair of any such
latent defects which manifest themselves during the Term.
11
2.10 Tenant Improvement Allowance: Tenant Responsibility.
---------------------------------------------------
(a) Landlord shall be responsible for constructing, entirely at its
expense, subject to the provisions of Section 3.3 of this Lease, the Shell
Improvements (as that term is defined below). The Shell Improvements shall
consist of (and the term "Shell Improvements" shall be used in this Lease to
mean) those components of the Demised Premises which are identified as elements
of the basic Building shell or specifically as "Shell Improvements," land, land
preparation and landscaping or as otherwise mutually identified by Landlord and
Tenant, in writing, concurrent with or subsequent to the execution of this
Lease, including all utilities (including fiber optic cabling) stubbed to the
Building. The Base Rent specified in this Lease includes Landlord's obligation
to complete and deliver to Tenant the Shell Improvements in accordance with this
Lease. The cost of constructing the Shell Improvements are referred to in this
Lease as the "Shell Improvements Cost" Shell Improvements Cost shall include a
developer fee of $3.00 per rentable square foot, payable to Landlord, or an
affiliate (with no direct obligation to Tenant to pay such fee). The Shell
Improvements shall result in the construction by Landlord of a two (2) story
research and development and office concrete tilt-up building on a "cold shell"
basis. In addition, the Shell Improvements shall include, at Landlord's expense,
including:
(i) Water and sewer services to the Building and power of
3,000 amps of 277/480, 3 phases;
(ii) One (1) grade level loading door,
(iii) Column spacing of forty-eight (48) feet;
(iv) Exterior glazing wrapping around both floors of the
Building consistent with the Adjacent Building (i.e.,
the AMCC building at 6290 Sequence Drive);
(v) Approximately 4.0 parking spaces per 1,000 rentable
square feet of Building area to be paved and lighted
based upon the site plan which is attached to this
Lease as part of Exhibit "B;"
(vi) A distributed fire sprinkler system (excluding dropping
of heads);
(vii) Two percent (2%) roof skylight coverage;
(viii) A four (4)-ply roof;
(ix) All exterior landscaping and hardscaping consistent
with the Adjacent Building (i.e., the AMCC building at
6290 Sequence Drive) ;
(x) Second floor structure completed to code with any
stairways for fire exiting, main stairway structure and
a 3,000 pound elevator that complies with the Americans
With Disabilities Act;
(xi) One (1) trash enclosure with four (4) dumpsters;
(xii) Natural gas service (two (2)-inch diameter, low-
pressure) to the Building; and
12
(xiii) All other items commonly included as part of a "cold
shell."
The specifications defined in this Section 2.10(a) shall take precedence over
the attached exhibits. The Building will be designed substantially in accordance
with the attached architectural Exhibit "B," which shall incorporate all of the
above items.
(b) Landlord shall be responsible for constructing, subject to the
provisions of this Section 2.10 and 2.11, the Tenant Improvements (as that term
is defined below). The Tenant Improvements shall consist of (and the term
"Tenant Improvements" shall be used in this Lease to mean) those portions of the
Demised Premises which are not Shell Improvements, are identified in the final
Plans and Specifications as part of the Tenant Improvements, or as otherwise
mutually identified by Landlord and Tenant, in writing, concurrent with or
subsequent to the execution of this Lease.
(c) Landlord shall provide an allowance to be applied by Landlord
towards paying the costs of designing and constructing the Tenant Improvements
(the "Tenant Improvements Cost"), in the amount of Twenty-Five Dollars ($25.00)
per rentable square foot of the Demised Premises, which is currently anticipated
to total One Million Four Hundred Fifty Thousand Dollars ($1,450,000.00) (the
"Allowance"). In the event the final square footage of the Building is more or
less than 58,000 square feet, the Allowance shall be adjusted to an amount which
reflects the increase or decrease in square footage. The Allowance shall be used
to pay the direct construction cost (excluding any overhead or profit to
Landlord or any affiliate) of the Tenant Improvements which are paid to the
Contractor (as defined below) or others performing such construction work,
Tenant Improvement permits and space planning fees and reimbursables. The
Allowance shall not be applied to the following items, the cost of which shall
be Landlord's responsibility: (i) the cost of the Land and financing or carry
costs associated with the Land; (ii) financing fees, imputed interest, costs of
carry and taxes/insurance during construction; (iii) brokerage commissions or
developer fees; or (iv) architectural or engineering fees and reimbursables for
the Shell Improvements. The Allowance shall not be applied to the following
items, the cost of which shall be Tenant's responsibility: (i) building signage,
(ii) security systems, (iii) specialized cabling; or (iv) Tenant's moving
expenses.
(d) In the event that the Allowance is insufficient in amount to pay
the Tenant Improvements Costs, Tenant shall pay such excess as Tenant's Share
pursuant to the procedure set forth in Section 2.11 below.
(e) Upon execution of this Lease and again, upon submittal of the
Tenant Improvements Schematic Design Drawings, the Tenant Improvements Design
Development Drawings, and the Tenant Improvements Construction Drawings,
Landlord shall also provide Tenant with an estimate of the Tenant Improvements
Cost. No later than ninety (90) days prior to the commencement of construction
of the Improvements, Landlord shall prepare and deliver to Tenant a Tenant
Improvements Budget Estimate ("Tenant Improvements Budget Estimate"), which
Landlord and Tenant shall then mutually finalize prior to the commencement of
construction. Within fifteen (15) days prior to the commencement of construction
of the Improvements, and no less than monthly thereafter during the course of
construction of the Improvements, Landlord shall deliver to Tenant a revised
Tenant Improvements Budget
13
Estimate, whether reflecting an increase or a decrease in the Tenant Improvement
Costs, together with an explanation in reasonable detail of the cause of such
cost change and an accounting of actual costs to date ("Periodic Cost Report").
Additionally, prior to any Tenant Change Order being effective, Landlord will
provide Tenant with an estimate of the cost of said Tenant Change Order and
obtain Tenant's prior approval thereof, which Tenant shall grant or withhold
within two (2) business days following receipt of such estimated Tenant Change
Order cost. In addition, Landlord shall deliver a Periodic Cost Report to Tenant
no later than five (5) business days after Landlord learns of a material change
affecting the Tenant Improvements Budget Estimate. Similarly, Landlord shall
provide Tenant with an estimate of the cost of any Tenant-Caused Delay claimed
by Landlord as soon as reasonably possible after Landlord learns of the Tenant-
Caused Delay.
2.11 Responsibility for Excess Shell Costs and Excess Tenant Improvement
-------------------------------------------------------------------
Costs.
- -----
(a) The Base Rent has been determined based on the assumption
that the final Plans and Specifications will not be altered as a result of
Tenant Change Orders, and that no costs will be incurred in connection with the
construction of the Demised Premises resulting from Tenant-Caused Delays.
(b) Tenant shall be directly responsible, as additional rent, for
any increases in the cost to Landlord of the construction of the Shell
Improvements (including financing costs), (A) subject to Section 2.10(e) above,
resulting directly from Tenant Change Orders and which have not been offset by
savings resulting directly from Tenant Change Orders, or (B) subject to Section
2.10(e) above, resulting directly from Tenant-Caused Delays ("Excess Shell
Costs"). Each Periodic Cost Report and the Final Cost Report (as defined below),
shall include notification of any Excess Shell Costs and shall include
reasonably detailed documentation supporting the determination of such Excess
Shell Cost. Tenant shall pay the Excess Shell Costs to Landlord (i) upon
commencement of construction, if Landlord has notified Tenant of Excess Shell
Costs prior thereto, (ii) if later, within ten (10) business days after
notification to Tenant by Landlord of any Excess Shell Costs in a Periodic Cost
Notice, (iii) within ten (10) business days after the Final Cost Report, if such
report includes Excess Shell Costs which have not been previously paid to
Landlord, or (iv) as otherwise required by Landlord's construction lender, but
in no event prior to the construction of the Shell Improvements.
(c) Tenant shall be responsible, as additional rent, for any
Tenant Improvements Costs to the extent they exceed the Allowance ("Excess
Tenant Improvements Costs"). Tenant shall pay the Excess Tenant Improvements
Costs to Landlord upon the earlier to occur of (i) funding of Landlord's
construction loan or commencement of construction, whichever is later, if the
then applicable Tenant Improvements Budget Estimate reflects that the Allowance
will be insufficient to fully fund the Tenant Improvements Costs anticipated to
be incurred as of that date, (ii) within ten (10) business days after
notification to Tenant by Landlord that it has determined, in a periodic review
of the Tenant Improvements Costs during construction of the Tenant Improvements,
pursuant to Subsection 2.10(e), above, that the Allowance will be insufficient
to cover all the Tenant Improvements Costs anticipated to be incurred, or (iii)
within ten (10) business days after Landlord has notified Tenant that it has
made a final determination, pursuant to subsection (g), below, that the
Allowance is insufficient to
14
cover all the Tenant Improvements Costs which have been incurred, or (iv) as
otherwise required by Landlord's construction lender, but in no event prior to
commencement of construction of the Tenant Improvements.
(d) Landlord shall deposit the funds paid to it by Tenant under
subsections (b) or (c) of this Section 2.11 in its construction loan control
account with the construction Lender (as that term is defined in Section 3.4
hereof) and those funds shall be applied to the cost of construction of the
Shell Improvements and Tenant Improvements as provided under Landlord's
construction loan.
(e) Within ninety (90) days following Substantial Completion of
the Improvements, Landlord shall calculate, and report to Tenant, in writing,
(i) the final Shell Improvements Cost and the final Tenant Improvements Cost,
and (ii) the amount of any Excess Shell Costs or Excess Tenant Improvements
Costs (the "Final Cost Report"). In the event that there is an amount which has
not been paid by Tenant at the time of such final determination (i.e. Excess
Shell Improvements Costs or Excess Tenant Improvements Costs) then Tenant shall
pay such additional amount to Landlord within ten (10) business days following
such final determination.
(f) If the Final Cost Report, shows that the amounts previously
paid by Tenant under subsections (b) and (c) of this Section 2.11 exceeded the
final amount of Excess Shell Improvements Costs or Excess Tenant Improvements
Costs, as the case may be (i.e. Tenant has paid to Landlord more than was
ultimately needed), then such overpayment shall be refunded to Tenant within ten
(10) business days following delivery to Tenant of such Final Cost Report. In
any event, whether additional amounts are owed or a refund is due, within ten
(10) business days following the delivery to Tenant of the Final Cost Report,
Landlord shall pay to Tenant any amount equal to the product of (i) amount paid
to Landlord by Tenant under subsections (b)(i) and (c)(i) of this Section 2.11,
(ii) multiplied by five percent (.05), (iii) divided by two (2).
(g) All of the Periodic Cost Reports and the Final Cost Report
shall include reasonably detailed supporting explanations and documentation.
Landlord shall maintain accurate and complete books and records of all Shell
Improvement Costs and Tenant Improvement Costs. Tenant shall have the right to
inspect, audit and copy such books and records at Landlord's office in San
Diego, California.
2.12 Contractor. Reno Contracting, Inc., a California corporation
----------
("Reno") shall act as the general contractor ("Contractor"), for the
construction of the Shell Improvements and the Tenant Improvements.
Notwithstanding the foregoing, in the event that Reno's quality of construction
and professional reputation in the community has, in the reasonable opinion of
Landlord and Tenant, materially deteriorated between the date of this Lease and
the time the construction contract is to be entered into, a different general
contractor shall be selected for the construction of the Shell Improvements and
Tenant's Improvements which general contractor shall be subject to the
reasonable approval of both Landlord and Tenant. Contractor's contract shall be
on a "cost-plus" basis, with Contractor entitled to (i) reimbursement for direct
insurance expenses and direct "G&A" or "General Conditions" expenses, as
provided in the Estimated Budget and (ii) a profit of no more than five percent
(5%). Landlord shall cause the Contractor
15
to bid each component of the Improvements to at least three (3) qualified
subcontractors and, unless Landlord and Tenant agree otherwise, shall select the
lowest qualified bidder. Tenant shall have the right to approve the list of
subcontractors to be solicited for bids and to designate subcontractors to
participate in the bidding process. Tenant shall also have the right to select
subcontractors to perform components of the Improvements if Tenant agrees to pay
any Excess Shell Costs or Excess Tenant Improvements Costs attributable to such
election, provided such subcontractor is reasonably acceptable to Landlord and
Contractor. In no event shall the profit and overhead percentages for the Tenant
Improvements exceed the percentages paid by Landlord to Contractor for the Shell
Improvements.
2.13 Tenant's Entry Into the Building Prior to Substantial Completion.
----------------------------------------------------------------
Provided that Tenant and its agents, employees and contractors do not materially
interfere with the Contractor's work on the Demised Premises (any such
interference constituting a basis for a Tenant-Caused Delay), Landlord shall
allow and shall require the Contractor to allow, Tenant and Tenant's agents,
employees and contractors access to the Building prior to Substantial Completion
of the Improvements so that Tenant may install its furniture, trade fixtures,
data and telecommunications wiring and equipment, photocopy equipment and other
business equipment in the Building. Prior to Tenant's entry into the Building as
permitted by the terms of this Section 2.13, Tenant shall arrange a schedule
with Landlord and the Contractor in order to coordinate the timing of Tenant's
entry with the actions of the Contractor. Prior to any such entry, Tenant or its
agents and contractors (as applicable) shall provide evidence of insurance
reasonably satisfactory to Landlord. Tenant acknowledges that Section 20.3 below
shall apply with respect to any and all claims which may arise as a result of
the entry by Tenant, its agents, employees and contractors on the Demised
Premises in accordance with this Section 2.13. Tenant's responsibilities under
Section 7.1 of this Lease shall commence upon such early occupancy as opposed to
the Commencement Date.
ARTICLE III
RENT
3.1 Base Rent. In consideration of the lease of the Demised Premises
---------
evidenced by this Lease, Tenant covenants to pay Landlord, without previous
demand therefor and without any right of set-off or deduction whatsoever except
as expressly provided in this Lease, at the office of Landlord at:
Kilroy Realty, L.P.
Kilroy Realty Corporation
2250 East Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Chief Financial Officer
or at such other place as Landlord may from time to time designate in writing, a
rental for the Initial Term of this Lease as hereinafter set forth, payable
monthly, in advance, in equal installments as hereinafter set forth, with the
first payment due on the Commencement Date, and
16
continuing on the first day of each month thereafter for the succeeding months
during the balance of the Term ("Base Rent"):
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
Months 1-24 $1,050,960 $ 87,580
Months 25-48 $1,114,020 $ 92,835
Months 49-72 $1,180,860 $ 98,405
Months 73-96 $1,251,708 $104,309
Months 97-120 $1,326,816 $110,568
The Base Rent scheduled above is based on the assumption that the final rentable
square footage of the Building is 58,000. In the event the rentable square
footage of the Building upon Substantial Completion is more or less than 58,000,
then the initial Base Rent shall be increased or decreased, as appropriate, to
an amount equal to the product of(i) $1.51 per rentable square foot per month,
and (ii) the final rentable square footage of the Building. Such adjusted
initial Base Rent shall be increased every twenty-four (24) months by a factor
of six percent (6%).
In the event the Commencement Date occurs on other than the first (1st) day of a
month, the amount of the first and last monthly payment of Base Rent shall be
apportioned to account for the fact that the last month of the Initial Term
shall be less than a full calendar month.
In the event that the Commencement Date occurs before the Target Commencement
Date, the initial Base Rent shall be decreased by an amount equal to the produce
of(i) $.01, (ii) the number of rentable square feet in the Demised Premises, and
(iii) the number of thirty (30) day periods the Commencement Date occurs prior
to May 1,2001; provided, however, that in no event shall the initial Base Rent
for the Demised Premises be less than Seventy Five Thousand Four Hundred Dollars
($75,400.00) per month. Such adjusted initial Base Rent shall be increased every
twenty-four (24) months by a factor of six percent (6%)
3.2 Base Rent During Option Term. The Base Rent during the Option Term
----------------------------
("Option Term Base Rent") shall be an amount equal to the greater of (i) the
then fair market rental value of the Demised Premises ("Fair Market Rental
Value"), as stated on a monthly basis and determined pursuant to this Section
3.2, or (ii) the Base Rent during the last month of the Initial Term, multiplied
by 1.06. The initial Option Term Base Rent during each Option Term shall
thereafter be increased in accordance with market rate increases, if any. Upon
receipt by Landlord of Tenant's Extension Notice under Section 1.2, above,
Landlord and Tenant shall meet in an effort to negotiate, in good faith, the
Option Term Base Rent which shall become effective as of the first day of the
Option Term ("Option Term Commencement Date"). If Landlord and Tenant have not
agreed upon the Option Term Base Rent (which Option Term Base Rent shall, for
purposes of this Section 3.2 , include market rate increases) within thirty (30)
days after the delivery of Tenant's Extension Notice, the Option Term Base Rent
shall be determined as follows:
(a) Landlord and Tenant shall attempt to agree in good faith upon a
single appraiser not later than thirty-five (35) days after delivery of Tenant's
Extension Notice. If
17
Landlord and Tenant are unable to agree upon a single appraiser within such time
period, then Landlord and Tenant shall each appoint one appraiser not later than
five (5) days after the deadline for selecting a single appraiser. Landlord and
Tenant shall each give written notice to the other as to the name of the
appraiser it has selected, as soon as the selection is made. Within ten (10)
days thereafter, the two appointed appraisers shall appoint a third appraiser.
All appraisers shall be independent from, and disinterested in, both Landlord
and Tenant.
(b) The only task which the appraiser(s) shall perform shall be
forming and reporting to Landlord and Tenant an opinion of the Fair Market
Rental Value of the Demised Premises for use in determining the Option Term Base
Rent.
(c) If either Landlord or Tenant fails to appoint its appraiser
within the prescribed time period, the single appraiser appointed shall
determine the Fair Market Rental Value of the Demised Premises. If both parties
fail to appoint appraisers within the prescribed time periods, then the first
appraiser thereafter selected by a party shall determine the Fair Market Rental
Value of the Demised Premises.
(d) Each party shall bear the cost of its own appraiser and the
parties shall share equally the cost of any single or third appraiser, if
applicable. All appraisers so designated herein shall have at least five (5)
years' experience in the appraisal of commercial properties similar to the
Demised Premises in San Diego County, California and shall be members of
professional organizations such as MAI or its equivalent.
(e) For the purpose of such appraisal and this subsection (d), the
term "Fair Market Rental Value" shall mean the price that a ready and willing
single tenant would pay, as of the Option Term Commencement Date, as annual rent
to a ready and willing landlord of a property comparable to the Demised Premises
on the terms of this Lease, if such property were exposed for lease on the open
market for a reasonable period of time. A "comparable property" shall mean a
research and development and office facility located in the Sorrento Mesa area
of the City of San Diego, California (the "Market Area"), with improvements
similar in age and character to the Demised Premises, which has been improved
with the tenant improvements comparable to those constructed in the Demised
Premises; provided, however, that the appraisal shall disregard the value of
Tenant's and any other improvements paid for by Tenant (including Tenant
Improvements but only to the extent such Tenant Improvements were paid for by
Tenant as Excess Tenant Improvement Costs). The appraiser shall give appropriate
consideration to all relevant factors, including, without limitation, (i) the
fact that this Lease is a "triple net" lease, (ii) rental concessions and tenant
improvement allowances generally being offered by landlords of comparable
properties, (iii) the age of the Improvements, (iv) the condition of the Demised
Premises on the assumption that Tenant has complied with its obligations to
maintain and repair the Demised Premises, (v) rental market conditions then in
existence, (vi) whether Landlord will or will not be required to pay a real
estate brokerage commission in connection with Tenant's exercise of the
Extension Option, and (vii) the fact that the Tenant will be accepting the
Demised Premises in an "As-Is" condition.
(f) If a single appraiser is chosen, then such appraiser shall
determine the Fair Market Rental Value of the
18
Demised Premises shall be the arithmetic average of the two (2) appraisals which
are closest in amount, and the third appraisal shall be disregarded.
(g) Landlord and Tenant shall instruct the appraiser(s), in writing,
to complete their written determination of the Fair Market Rental Value not
later than thirty (30) days after their selection. If the Fair Market Rental
Value has not been determined by such date, then the Fair Market Rental Value
shall be determined thereafter, and if it has not been determined by the Option
Term Commencement Date, then Tenant shall continue to pay Landlord monthly
installments of Annual Rent in the amount applicable to the Demised Premises
immediately prior to the Option Term Commencement Date until the Fair Market
Rental Value is determined. In no event shall the Rent be less than the Rent in
the last year of the Lease Term increased by six percent (6%), and adjusted
based on market rate increases thereafter. When the Fair Market Rental Value of
the Demised Premises is determined, Landlord shall deliver notice thereof to
Tenant, and Tenant shall pay to Landlord, within ten (10) days after receipt of
such notice, the difference between the monthly installments of Base Rent
actually paid by Tenant to Landlord subsequent to the Option Term Commencement
Date and the new monthly installments of Base Rent which are determined to have
been actually owing during such period in accordance with this Section 3.2.
(h) On or before the date which is fifteen (15) months prior to the
expiration of the Initial Term or the first Option Term, as the case may be,
Tenant may deliver to Landlord a notice that it intends to exercise an Extension
Option provided in Section 1.2 hereof (a "Pre-Exercise Notice"). If a Pre-
Exercise Notice is timely delivered by Tenant, the provisions of this Section
3.2 regarding the determination of the Option Term Base Rent shall be
implemented as if Tenant had delivered the Extension Notice pursuant to Section
1.2. If the Option Term Base Rent has not been determined in accordance with
this Section 3.2 on or before the date which is three hundred sixty (360) days
prior to the end of the Initial Term or the first Option Term, as the case may
be, then when it is thereafter determined, Tenant shall have the option, to be
exercised within two (2) business days after notice of such determination is
given to Tenant, of (i) delivering to Landlord a written notice rescinding
Tenant's Pre-Exercise Notice (i.e. electing not to extend the Lease), in which
case the Initial Term or the first Option Term, as the case may be, shall be
extended to the date which is three hundred sixty (360) days after the date such
rescission notice is delivered, or (ii) delivering its Extension Notice, in
which case such Extension Notice shall be deemed timely delivered in accordance
with Section 1.2. If the Option Term Base Rent has been determined in accordance
with this Section 3.2 prior to the date which is three hundred sixty (360) days
prior to the end of the Initial Term or the first Option Term, as the case may
be, then provisions of this subsection (h) shall not apply. If the provisions of
this subsection (h) apply, and Tenant fails to deliver either a rescission
notice or the Extension Notice, Tenant shall be deemed to have rescinded the
Pre-Exercise Notice and not to have timely delivered the Extension Notice.
3.3 Additional Obligations: Additional Rent. The Base Rent shall be
---------------------------------------
absolutely "net" to Landlord so that this Lease shall yield to Landlord the Base
Rent specified in Section 3.1 and that all Impositions, insurance premiums,
utility charges, maintenance, repair and replacement expenses, all expenses
relating to compliance with all present or future applicable governmental laws,
rules and regulations, and all other costs, fees, charges, expenses,
reimbursements and
19
obligations of every kind and nature whatsoever relating to the Demised Premises
which may arise or become due during the term or by reason of events occurring
during the term of this Lease (all such items being sometimes referred to as
"Additional Obligations") shall be paid or discharged by Tenant, except to the
extent they are expressly the responsibility of Landlord under this Lease. To
the extent the following are the obligations of Tenant under this Lease, Tenant
hereby agrees to indemnify, defend and save Landlord harmless from and against
such Impositions, insurance premiums, utility charges, maintenance, repair and
replacement expenses, all expenses relating to compliance with all present and
future governmental laws, rules and regulations becoming effective during the
Term, and all other costs, fees, charges, expenses, reimbursements and
obligations referred to above. Any amounts referred to in this Lease as
additional rent (including, without limitation, the Additional Obligations) are
referred to collectively as "Additional Rent."
3.4 Delinquent Rental Payments. All payments of Base Rent and Additional
--------------------------
Rent shall be payable without previous demand therefor and without any right of
set-off or deduction whatsoever (except as expressly provided in this Lease),
and in case of nonpayment of any item of Additional Rent by Tenant when the same
is due, Landlord shall have, in addition to all its other rights and remedies,
all of the rights and remedies available to Landlord under the provisions of
this Lease or by law in the case of nonpayment of Base Rent. The performance and
observance by Tenant of all the terms, covenants, conditions and agreements to
be performed or observed by Tenant hereunder shall be performed and observed by
Tenant at Tenant's sole cost and expense. Any installment of Base Rent or
Additional Rent or any other charges payable by Tenant under the provisions
hereof which shall not be paid within five (5) days after they are due shall,
(i) be subject to a late charge of five percent (5%) of the amount due and not
timely paid, and (ii) bear interest from the date when such payment was due at
the lesser of(A) the default rate of interest under Landlord's most senior debt
obligation encumbering the Demised Premises, or (B) an annual rate of eighteen
percent (18%) per annum, but in no event in excess of the maximum lawful rate
permitted to be charged by Landlord against Tenant. Said rate of interest is
sometimes hereinafter referred to as the "Maximum Rate of Interest."
Notwithstanding the foregoing provisions of this Section 3.4, if any mortgagee
under any mortgage, beneficiary under any deed of trust, or ground lessor under
any ground lease, which encumbers the Land (a "Lender"), imposes fees, charges,
penalties or interest on Landlord for late payments under such instrument which
fees, charges, penalties or interest are less in amount than those described in
this Section 3.4, Landlord will not impose any late payment charge or interest
which is greater than the amounts charged by such Lender.
ARTICLE IV
USE OF DEMISED PREMISES
4.1 Permitted Use. Tenant intends to use the Demised Premises primarily
-------------
as a research and development and office facility and related lawful purposes,
and they shall be used for no other purpose without first securing the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall not use or occupy the same, or knowingly permit them to be used or
occupied, contrary to any statute, rule, order, ordinance, requirement or
regulation applicable thereto, or in any manner which would violate any
certificate of occupancy
20
affecting the same, or which would make void or voidable any insurance then in
force with respect thereto (provided Tenant has received a copy of the policy)
or which would make it impossible to obtain fire or other insurance thereon
required to be furnished hereunder by Tenant, or which would cause structural
injury to the improvements, or which would constitute a public or private
nuisance or waste, and Tenant agrees that it will promptly, upon discovery of
any such use, take all necessary steps to compel the discontinuance of such use.
4.2 Preservation of Demised Premises. Tenant shall not use, or permit the
--------------------------------
Demised Premises, or any portion thereof, to be used by Tenant, any third party
or the public in such manner as might reasonably tend to impair Landlord's title
to the Demised Premises, or any portion thereof, or in such manner as might
reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or third persons, or of implied dedication of
the Demised Premises, or any portion thereof. Nothing contained in this Lease,
and no action or inaction by Landlord, shall be deemed or construed to mean that
Landlord has granted to Tenant any right, power or permission to do any act or
make any agreement that may create, or give rise to or be the foundation for any
right, title, interest, lien, charge or other encumbrance upon the estate of
Landlord in the Demised Premises other than as expressly set forth in this
Lease.
4.3 Hazardous Substances.
--------------------
(a) Subject to Section 4.3(f), Tenant shall at all times and in all
respects comply with all federal, state and local laws, ordinances and
regulations ("Hazardous Materials Laws") relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, flammable explosives, asbestos,
urea formaldehyde, polychlorinated biphenyls, radioactive materials or waste, or
other hazardous, toxic, contaminated or polluting materials, substances or
wastes, including without limitation any "hazardous substances," "hazardous
wastes," "hazardous materials" or toxic substances" under any such laws,
ordinances or regulations (collectively, "Hazardous Materials") at the Demised
Premises.
(b) Subject to Section 4.3(f), Tenant shall at its own expense procure
(other than a certificate of occupancy), maintain in effect and comply with all
conditions of any and all permits, licenses and other governmental and
regulatory approvals required for Tenant's use of the Demised Premises,
including, without limitation, discharge of (appropriately treated) materials or
waste into or through any sanitary sewer system serving the Demised Premises.
Tenant shall in all respects handle, treat, deal with and manage any and all
Hazardous Materials in, on, under or about the Demised Premises in complete
conformity with all applicable Hazardous Materials Laws and prudent industry
practices regarding the management of such Hazardous Materials. Subject to
Section 4.3(f), all reporting obligations imposed by Hazardous Materials Laws
are solely the responsibility of Tenant. Upon expiration or earlier termination
of this Lease and subject to Section 4.3(f), Tenant shall cause all Hazardous
Waste Materials (as defined in 22 CCR 66261.3) to be removed from the Demised
Premises and transported for use, storage or disposal in accordance with and in
complete compliance with all applicable Hazardous Materials Laws. Tenant shall
not take any remedial action in response to the presence of any Hazardous
Materials in, on, about or under the Demised Premises or in any Improvements
21
situated on the Land other than in the normal course of Tenant's business
operations as now contemplated in accordance with all Hazardous Materials Laws
or as necessitated by emergency considerations in accordance with all applicable
Hazardous Materials Laws, nor enter into any settlement agreement, consent
decree or other compromise in respect to any claims relating to any Hazardous
Materials in any way connected with the Demised Premises or the Improvements on
the Land without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, at the expiration of the term of this Lease,
Tenant shall remove all tanks or fixtures which were placed on the Demised
Premises during the term of this Lease and which contain, have contained or are
contaminated with Hazardous Waste Materials.
(c) Tenant shall immediately notify Landlord in writing of (i) any
enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Landlord or the Demised
Premises relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any non-routine reports made to any environmental agency arising out of or
in connection with any Hazardous Materials in, on or about the Demised Premises
or with respect to any Hazardous Materials removed from the Demised Premises,
including any complaints, notices, warnings, reports or asserted violations in
connection therewith. Tenant shall also provide to Landlord, as promptly as
possible, and in any event within five (5) business days after Tenant first
receives or sends the same, copies of all claims, reports, complaints, notices,
warnings or asserted violations from any governmental agency of any Hazardous
Materials Laws relating in any way to the Demised Premises or Tenant's use
thereof. Upon written request of Landlord (to enable Landlord to defend itself
from any claim or charge related to any Hazardous Materials Laws), Tenant shall
promptly deliver to Landlord notices of hazardous waste manifests reflecting the
legal and proper disposal of all such Hazardous Materials removed from the
Demised Premises. Subject to Section 4.3(f), all such manifests shall list the
Tenant or its agent as a responsible party and in no way shall attribute
responsibility for any such Hazardous Materials to Landlord.
(d) Subject to Section 4.3(f), Tenant shall indemnify, defend (with
counsel reasonably acceptable to Landlord), protect and hold Landlord and each
of Landlord's officers, directors, partners, shareholders, affiliates,
employees, agents, attorneys, successors and assigns free and harmless from and
against any and all claims, liabilities, damages, costs, penalties, forfeitures,
losses or expenses (including attorneys' fees) for death or injury to any person
or damage to any property whatsoever (including water tables and atmosphere) to
the extent arising or resulting in whole or in part, directly or indirectly,
from the presence or discharge of Hazardous Materials in, on, under, upon or
from the Demised Premises or the Improvements located thereon or from the
transportation or disposal of Hazardous Materials to or from the Demised
Premises to the extent brought onto the Demised Premises by Tenant whether
knowingly or unknowingly, the standard herein being one of strict liability. For
purposes of the indemnity provided herein, any act or omission of Tenant or its
agents, employees, contractors or subcontractors (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant. Subject to Section 4.3(f), Tenant's obligations hereunder shall
22
include, without limitation, and whether foreseeable or unforeseeable, all costs
of any required or necessary repairs, clean-up or detoxification or
decontamination of the Demised Premises or the Improvements, and the presence
and implementation of any closure, remedial action or other required plans in
connection therewith, and shall survive the expiration of or early termination
of the term of this Lease. For purposes of the indemnity provided herein, any
acts or omissions of Tenant or its employees, agents, customers, sublessees,
assignees, contractors or subcontractors (whether or not they are negligent,
intentional, willful or unlawful) shall be strictly attributable to Tenant.
(e) Landlord may, at its expense, commission an environmental audit of
the Demised Premises at any time after prior written notice thereof to Tenant;
provided that such environmental audit does not unreasonably interfere with
Tenant's use of the Demised Premises, or any portion thereof, and provided
further that Landlord indemnifies, defends and holds harmless Tenant and its
officers, agents, employees and customers from and against any loss, liabilities
or damages to Tenant's machinery, equipment, fixtures and personal property, and
all liability, loss or damage arising from an injury to the property of Tenant,
or its officers, agents, employees or customers, and any death or personal
injury to any person or persons to the extent arising out of such environmental
audit except for liability, loss or damage caused by Tenant's gross negligence
or willful misconduct. However, should Tenant breach any of its obligations set
forth in this Section 4.3 in a manner that may expose Landlord to liability, and
Landlord provides written notice to Tenant of the reasonable basis upon which it
believes it has been exposed to liability, then Landlord shall have the right to
require Tenant to undertake and submit to Landlord an environmental audit from
an environmental company reasonably acceptable to Landlord, which audit shall
evidence Tenant's compliance with this Section 4.3.
(f) Landlord represents and warrants that as of the date of this Lease
there are, and as of the Commencement Date there will be, no Hazardous Materials
located on the Demised Premises, other than an as required for the normal
operation of the Demised Premises and in accordance with all Hazardous Materials
Laws. Landlord shall indemnify, defend (with counsel reasonably acceptable to
Tenant), protect and hold Tenant and each of Tenant's officers, directors,
partners, shareholders, affiliates, employees, agents, attorneys, successors and
assigns free and harmless from and against any and all claims, liabilities,
damages, costs, penalties, forfeitures, losses or expenses (including attorneys'
fees) for death or injury to any person or damage to any property whatsoever
(including water tables and atmosphere) arising or resulting in whole or in
part, directly or indirectly, from the presence of Hazardous Materials in, on,
under, upon or from the Demised Premises or the Improvements located thereon
prior to the Commencement Date, or from the transportation or disposal of
Hazardous Materials to or from the Demised Premises to the extent caused by
Landlord whether knowingly or unknowingly, the standard being one of strict
liability.
For purposes of the indemnity provided herein, any act or omission of
Landlord or its agents, employees, contractors or subcontractors (whether or not
they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Landlord. Subject to Section 4.3(f), Landlord's obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary repairs, clean-up or
detoxification or decontamination of the Demised Premises or the Improvements,
and the
23
presence and implementation of any closure, remedial action or other required
plans in connection therewith, and shall survive the expiration of or early
termination of the term of this Lease.
(g) The obligations of Landlord and Tenant under this Section 4.3
shall survive the expiration or earlier termination of this Lease.
4.4 Access Easement.
---------------
Landlord as owner of the building adjacent to the north, and
identified in Exhibit "B" as the "Existing Comstream Building," shall grant
Tenant access for ingress and egress between the Building and the "Existing
Comstream Building." If Landlord sells either property, Landlord will grant or
reserve an easement evidencing Tenant's ingress and egress rights.
ARTICLE V
PAYMENT OF TAXES, ASSESSMENTS, ETC.
5.1 Payment of Impositions.
----------------------
(a) Except as provided to the contrary in this Section 5.1 below,
Tenant covenants and agrees to pay during the Term of this Lease, as Additional
Rent, and before any fine, penalty, interest or cost may be added thereto for
the nonpayment thereof, all real estate taxes, regular or special assessments,
water rates and charges, sewer rates and charges, including any sum or sums
payable for present or future sewer or water capacity, (except as set forth in
Section 2.6 above) charges for public utilities, street lighting, excise levies,
licenses, permits, inspection fees, other governmental charges and all other
charges or burdens of whatsoever kind and nature (including costs, fees and
expenses of complying with any restrictive covenants to which the Land is
subject as of the date of this Lease or similar agreements to which the Demised
Premises are subject, incurred in the use, occupancy, ownership, operation,
leasing or possession of the Demised Premises), without particularizing by any
known name or by whatever name hereafter called, and whether any of the
foregoing be general or special, ordinary or extraordinary, foreseen or
unforeseen (all of which are sometimes herein referred to as "Impositions"),
which at any time during the Term may have been or may be assessed or levied on
the Demised Premises or any portion thereof or any appurtenance thereto, rents
or income therefrom, and such easements or rights as may now or hereafter be
appurtenant or appertain to the use of the Demised Premises. Tenant shall pay
the current portions of all special (or similar) assessments which during the
Term of this Lease shall be laid, assessed, levied or imposed upon or become
payable or become a lien upon the Demised Premises or any portion thereof;
provided, however, that if by law any special assessment is payable (without
default) or, at the option of the owner, may be paid (without default) in
installments (whether or not interest shall accrue on the unpaid balance of such
special assessment), Tenant may (and shall only be obligated to) pay the same,
in installments as the same respectively become payable and before any fine,
penalty, interest or cost may be added thereto for the nonpayment of any such
installment and the interest thereon. Notwithstanding the generality of the
foregoing, Tenant
24
shall not be responsible (and Landlord shall pay prior to delinquency) for
Impositions charged by any association which includes the Land to the extent the
amount of the Impositions therefrom exceeds the amount which Tenant would have
incurred had Tenant performed the work and provided the services performed or
provided by the association.
(b) Notwithstanding the foregoing provisions of Section 5.1(a), Tenant
shall not be responsible for (and Landlord shall pay prior to delinquency) any
increase in ad valorem property taxes or other taxes which might result from the
sale or other transfer (deemed a change of ownership for California tax
purposes) of the Demised Premises during the Term of the Lease to the extent
such increase results from the fact that the assessed value of the Demised
Premises exceeds the total cost (including the direct and indirect costs
(including the costs of permits, fees and professional services) of the Land,
Shell Improvements and Tenant Improvements) of the Demised Premises. Payment of
any taxes, assessments or similar charges which are directly related to the
acquisition of the Land or the construction of the Improvements or Demised
Premises will be Landlord's financial responsibility.
(c) Landlord shall pay all installments of special assessments
(including interest accrued on the unpaid balance) which are payable for periods
prior to the Commencement Date and after the termination date of the Term of
this Lease. Landlord will deliver to Tenant the tax bills at least thirty (30)
days prior to any delinquency date. Tenant shall pay all real estate taxes,
whether heretofore or hereafter levied or assessed upon the Demised Premises or
any portion thereof, which are due and payable for periods during the Term of
this Lease. Landlord shall pay all real estate taxes which are payable for
periods prior to the Commencement Date and after the termination date of the
Term of this Lease. Provisions herein to the contrary notwithstanding, Landlord
shall pay that portion of the real estate taxes and installments of special
assessments due and payable in respect to the Demised Premises during the year
in which the Initial Term commences and the year in which the Term ends which
the number of days in said year not within the Term of this Lease bears to 365,
and Tenant shall pay the balance of said current real estate taxes and current
installments of special assessments during said years.
5.2 Tenant's Right to Contest Impositions. Tenant shall have the right at
-------------------------------------
its own expense to contest the amount or validity, in whole or in part, of any
Imposition by appropriate proceedings diligently conducted in good faith;
provided, however, if the payment of such Imposition is necessary to properly
appeal such Imposition, Tenant shall pay such imposition before delinquency;
and, provided further, if there is then an uncured Event of Default hereunder,
Tenant shall have first deposited with Landlord cash or a certificate of deposit
payable to Landlord issued by a national bank or federal savings and loan
association in the amount of the Imposition so contested and unpaid, together
with all interest and penalties which may accrue in Landlord's reasonable
judgment in connection therewith, and all charges that may or might be assessed
against or become a charge on the Demised Premises or any portion thereof during
the pendency of such proceedings. If there is then in an uncured Event of
Default hereunder and if during the continuance of such proceedings, Landlord
shall, from time to time, reasonably deem the amount deposited, as aforesaid,
insufficient, Tenant shall, upon demand of Landlord, make additional deposits of
such additional sums of money or such additional certificates of deposit as
Landlord may reasonably request. If Tenant is required to make such additional
deposits
25
hereunder and Tenant fails to make same, the amount theretofore deposited may be
applied by Landlord to the payment, removal and discharge of such Imposition,
and the interest, fines and penalties in connection therewith, and any costs,
fees (including attorneys' fees) and other liability (including costs incurred
by Landlord) accruing in any such proceedings. Upon the termination of any such
proceedings, Tenant shall pay the amount of such Imposition or part thereof, if
any, as finally determined in such proceedings, the payment of which may have
been deferred during the prosecution of such proceedings, together with any
costs, fees, including attorneys' fees, interest, penalties, fines and other
liability in connection therewith, and upon such payment, if Landlord had
previously received any amounts or certificates as a deposit, Landlord shall
return all amounts or certificates deposited with it with respect to the contest
of such Imposition, as aforesaid, or, at the written direction of Tenant,
Landlord shall make such payment out of the funds on deposit with Landlord and
the balance, if any, shall be returned to Tenant. Tenant shall be entitled to
the refund of any Imposition, penalty, fine and interest thereon received by
Landlord which has been paid by Tenant or which has been paid by Landlord but
for which Landlord has been previously reimbursed in full by Tenant. Landlord
shall not be required to join in any proceedings referred to in this Section 5.2
unless the provisions of any law, rule or regulation at the time in effect shall
require that such proceedings be brought by or in the name of Landlord, in which
event Landlord shall join in such proceedings or permit the same to be brought
in Landlord's name upon compliance with such conditions as Landlord may
reasonably require. Landlord shall not ultimately be subject to any liability
for the payment of any fees, including attorneys' fees, costs and expenses in
connection with such proceedings. Tenant agrees to pay all such fees (including
reasonable attorneys' fees), costs and expenses or, on demand, to make
reimbursement to Landlord for such payment for fees reasonably incurred by
Landlord in connection with such proceedings as provided above. During the time
when any such certificate of deposit is on deposit with Landlord, and prior to
the time when the same is returned to Tenant or applied against the payment,
removal or discharge of Impositions, as above provided, Tenant shall be entitled
to receive all interest paid thereon. Cash deposits shall not bear interest.
5.3 Levies and Other Taxes. If, at any time during the Term of this Lease,
----------------------
any method of taxation shall be such that there shall be levied, assessed or
imposed on Landlord, or on the Base Rent or Additional Rent, or on the Demised
Premises, or any portion thereof, a capital levy, gross receipts tax,
transaction privilege tax or other tax on the rents received therefrom or a
franchise tax, or an assessment, levy or charge measured by or based in whole or
in part upon such rents, Tenant covenants to pay and discharge the same, it
being the intention of the parties hereto that the rent to be paid hereunder,
shall be paid to Landlord absolutely net, without deduction or charge of any
nature whatsoever, foreseeable or unforeseeable, ordinary or extraordinary, or
of any nature, kind or description, except as in this Lease otherwise expressly
provided. Nothing in this Lease contained shall require Tenant to pay any
municipal, state or federal net income, franchise, or excess profits taxes
assessed against Landlord, or any municipal, state or federal capital levy,
estate, succession, inheritance or transfer taxes of Landlord, or corporation
franchise taxes imposed upon any corporate owner of the fee of the Demised
Premises nor shall anything in this Lease require Tenant to pay any income tax
of Landlord or any tax in the nature of income and/or franchise tax or in lieu
of income tax.
26
5.4 Evidence of Payment. Tenant covenants to furnish Landlord, within
-------------------
thirty (30) days after Landlord requests the same, official receipts of the
appropriate taxing authority, or other appropriate proof reasonably satisfactory
to Landlord, evidencing the payment of the same. The certificate, advice or bill
of the appropriate official designated by law to make or issue the same or to
receive payment of any Imposition or other tax, assessment, levy or charge may
be relied upon by Landlord as sufficient evidence that such Imposition or other
tax, assessment, levy or charge is due and unpaid at the time of the making or
issuance of such certificate, advice or bill.
5.5 Escrow for Taxes and Assessments. At Landlord's written demand after
--------------------------------
any Event of Default (as hereinafter defined) and for as long as such Event of
Default is uncured, Tenant shall pay to Landlord the known or estimated yearly
real estate taxes and assessments payable with respect to the Demised Premises
in monthly payments equal to one-twelfth (1/12) of the known or estimated yearly
real estate taxes and assessments next payable with respect to the Demised
Premises. From time to time, Landlord may re-estimate the amount of real estate
taxes and assessments, and in such event Landlord shall notify Tenant, in
writing, of such re-estimate and fix future monthly installments for the
remaining period prior to the next tax and assessment due date in an amount
sufficient to pay the re-estimated amount over the balance of such period after
giving credit for payments made by Tenant on the previous estimate. If the total
monthly payments made by Tenant pursuant to this Section 5.5 shall exceed the
amount of payments necessary for said taxes and assessments, such excess shall
be credited on subsequent monthly payments of the same nature; but if the total
of such monthly payments so made under this paragraph shall be insufficient to
pay such taxes and assessments when due, then Tenant shall pay to Landlord such
amount as may be necessary to make up the deficiency. Payment by Tenant of real
estate taxes and assessments under this Section 5.5 shall be considered as
performance of such obligation under the provisions of Section 5.1 hereof.
5.6 Landlord's Right to Contest Impositions. In addition to the right of
---------------------------------------
Tenant under Section 5.2 to contest the amount or validity of Impositions,
Landlord shall also have the right, but not the obligation, to contest the
amount or validity, in whole or in part, of any Impositions not contested by
Tenant, by appropriate proceedings conducted in the name of Landlord or in the
name of Landlord and Tenant. If Landlord elects to contest the amount or
validity, in whole or in part, of any Impositions, such contests by Landlord
shall be at Landlord's expense; provided, however, that if the amounts payable
by Tenant for Impositions are reduced (or if a proposed increase in such amounts
is avoided or reduced) by reason of Landlord's contest of Impositions, Tenant
shall reimburse Landlord for the costs reasonably incurred by Landlord in
contesting such Impositions, but such reimbursements shall not be in excess of
the amount saved by Tenant.
ARTICLE VI
INSURANCE
6.1 Casualty Insurance. Tenant, at its sole cost and expense, shall obtain
------------------
and continuously maintain in full force and effect during the Term of this
Lease, commencing with the Commencement Date (subject to the provisions of
Section 2.12), policies of insurance covering the Building constructed,
installed or located on the Demised Premises naming the
27
Landlord as an additional insured, against (a) loss or damage by fire; (b) loss
or damage from such other risks or hazards now or hereafter embraced by an
"Extended Coverage Endorsement," including, but not limited to, windstorm, hail,
explosion, vandalism, riot and civil commotion, damage from vehicles, smoke
damage, water damage and debris removal; (c) loss for flood if the Demised
Premises are in a designated flood or flood insurance area and if such coverage
is required by Landlord's lender, (d) loss or damage caused by earthquake (but
only if required by a Lender) subject to standard deductibles (provided,
however, that (i) Tenant shall not be required to maintain earthquake insurance
if it is not reasonably obtainable and (ii) Tenant's financial responsibility
for the premium associated with earthquake insurance shall not exceed $50,000.00
per year during the Initial Term or any Option Term); and (e) loss or damage
from such other risks or hazards of a similar or dissimilar nature which are now
or may hereafter be customarily insured against with respect to improvements
similar in construction, design, general location, use and occupancy to the
Improvements. If the premium associated with earthquake insurance exceeds
$50,000.00 per year, Landlord shall have the option to either pay the excess
premium over and above such $50,000.00 amount or delete the requirement that
Tenant obtain earthquake coverage. At all times, such insurance coverage shall
be in an amount equal to one hundred percent (100%) of the then "Full
Replacement Cost" of the Improvements. "Full Replacement Cost" shall be
interpreted to mean the cost of replacing the Improvements, without deduction
for depreciation or wear and tear, including costs attributable to improvements
or upgrades in the Improvements required by changes in laws and regulations
governing zoning, public access and accommodation, workplace conditions, public
health or safety or similar matter, and it shall include to the extent
reasonably obtainable a reasonable sum for architectural, engineering, legal,
administrative and supervisory fees connected with the restoration or
replacement of the Improvements in the event of damage thereto or destruction
thereof. If a sprinkler system shall be located in the Improvements, sprinkler
leakage insurance shall be procured and continuously maintained by Tenant at
Tenant's sole cost and expense. Any deductible, self-insured retention or
similar limitation on coverage shall be submitted to Landlord for its prior
written approval, which shall be granted or withheld in Landlord's reasonable
discretion.
6.2 Public Liability Insurance. From and after the Commencement Date,
--------------------------
Tenant, at its sole cost and expense, shall obtain and continuously maintain in
full force and effect comprehensive general liability insurance against any
loss, liability or damage on, about or relating to the Demised Premises, or any
portions thereof, with limits of not less than Ten Million Dollars
($10,000,000.00); provided, however, such coverage may be maintained by Tenant
pursuant to an "umbrella" policy covering the Demised Premises and Tenant's
other properties and operations. Any such insurance obtained and maintained by
Tenant shall name Landlord as an additional insured therein or shall include a
"loss payee" endorsement in favor of Landlord, and shall be obtained and
maintained from and with a reputable and financially sound insurance company
authorized to issue such insurance in the state in which the Demised Premises
are located. Such insurance shall to the extent reasonably obtainable
specifically insure (by contractual liability endorsement) Tenant's obligations
under Section 20.3 of this Lease.
6.3 Other Insurance.
---------------
(a) During the Term of this Lease, commencing with the Commencement
Date, Tenant, at its sole cost and expense, shall obtain and continuously
maintain in full force
28
and effect boiler and pressure vessel (including, but not limited to, pressure
pipes, steam pipes and condensation return pipes) insurance, provided the
Building contains a boiler or other pressure vessel or pressure pipes. Landlord
shall be named as an additional insured or loss payee in such policy or policies
of insurance.
(b) During the Term of this Lease commencing with the Commencement
Date, Tenant, at its sole cost and expense, shall obtain and continuously
maintain, in full force and effect, loss of use and business interruption
coverage for the payment for no less than one (1) year of (i) the Base Rent and
(ii) those Impositions which will continue to be payable even during a period
when the Demised Premises are not operational.
(c) During the Term of this Lease, Tenant, at its sole cost and
expense, shall obtain and continuously maintain in full force and effect such
other insurance in such amounts against other insurable hazards which at the
time are commonly insured against in the case of premises and/or buildings or
improvements similar in construction, design, general location, use and
occupancy to the Demised Premises if required by Landlord's construction or
permanent lenders; provided, however, that this Section 6.3(c) is not intended
to, and shall not, supersede the cap on Tenant's financial responsibility for
earthquake insurance premiums specified in Section 6.1(d)(ii), above.
6.4 Certain Insurance Provisions. All policies of insurance required by
----------------------------
Section 6.1 shall contain deductibles which are no higher than those which are
customarily maintained for casualty and liability insurance in connection with
facilities similar to the Demised Premises and provide that the proceeds thereof
shall be payable to Landlord and if Landlord so requests shall also be payable
to any contract purchaser of the Demised Premises and the holder of any
mortgages now or hereafter becoming a lien on the fee of the Demised Premises,
or any portion thereof, as the interest of such purchase or holder appears
pursuant to a standard named insured or mortgagee clause or as an additional
insured. Tenant shall not, on Tenant's own initiative or pursuant to request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required in Section 6.1 hereof,
unless Landlord is named therein as an additional insured with loss payable as
provided in Section 6.1. Tenant shall immediately notify Landlord whenever any
such separate insurance is taken out and shall deliver to Landlord original
certificates evidencing the same.
Each policy required under this Article VI shall have attached thereto (a)
an endorsement that such policy shall not be canceled and that the coverage
under such policy will not be materially changed without at least thirty (30)
days prior written notice to Landlord, and (b) to the extent reasonably
obtainable an endorsement to the effect that the insurance as to the interest of
Landlord shall not be invalidated by any act or neglect of Landlord or Tenant.
All policies of insurance shall be written with companies reasonably
satisfactory to Landlord and licensed in the state in which the Demised Premises
are located. Such certificates of insurance shall be in a form reasonably
acceptable to Landlord and shall be delivered to Landlord upon the Commencement
Date and, prior to expiration of such policy, new certificates of insurance
shall be delivered to Landlord not less than twenty (20) days prior to the
expiration of the then current policy term.
29
Insurance required hereunder shall be obtained from companies duly licensed
to transact business in the state of California, and maintaining during the
policy term a "General Policyholders Rating" of at least "A" and financial
category rating of "Class VII" in "Best's Insurance Guide."
6.5 Waiver of Subrogation. Landlord and Tenant hereby mutually waive any
---------------------
and all rights of recovery against one another for real or personal property
loss or damage occurring to the Demised Premises, or any part thereof, or any
personal property therein from perils insured against under the insurance
maintained hereunder for the benefit of the respective parties, and to the
extent the proceeds of such insurance are actually recovered, and each shall use
commercially reasonable efforts to assure that such insurance permits waiver of
liability and contains a waiver of subrogation.
6.6 Tenant's Indemnification of Landlord. Tenant may maintain insurance
------------------------------------
coverage upon all personal property of Tenant or the personal property of others
kept, stored or maintained on the Demised Premises against loss or damage by
fire, windstorm or other casualties or causes for such amount as Tenant may
desire. To the extent Tenant maintains such insurance, Tenant agrees that such
policies shall, to the extent obtainable, name Landlord as an "additional
insured" and contain a waiver of subrogation clause as to Landlord.
6.7 Unearned Premiums. Upon expiration or other termination of the Term of
-----------------
this Lease, the unearned premiums upon any insurance policies or certificates
thereof lodged with Landlord by Tenant shall, subject to the provisions of
Article XIII hereof, be payable to Tenant, provided that an Event of Default
does not then exist (or if an Event of Default does then exist, any excess over
the amount required to cure such default shall be so payable to Tenant).
6.8 Blanket Insurance Coverage. Nothing in this Article VI shall prevent
--------------------------
Tenant from taking out insurance of the kind and in the amount provided for
under the preceding paragraphs of this Article VI under a blanket insurance
policy or policies (and certificates thereof reasonably satisfactory to Landlord
shall be delivered to Landlord) which may cover other properties owned, leased
or operated by Tenant as well as the Demised Premises; provided, however, that
any such policy of blanket insurance of the kind provided for shall not contain
any clause which would result in the insured thereunder being required to carry
any insurance with respect to the property covered thereby in an amount not less
than any specific percentage of the Full Replacement Cost of such property in
order to prevent the insured therein named from becoming a co-insurer of any
loss with the insurer under such policy; and further provided, however, that
such policies of blanket insurance shall, as respects the Demised Premises,
contain the various provisions required of such an insurance policy by the
foregoing provisions of this Article VI.
6.9 Landlord's Liability Insurance Coverage. Landlord, at its sole cost and
---------------------------------------
expense, shall obtain and continuously maintain in full force and effect during
the Term of this Lease, commencing with the Commencement Date, comprehensive
general liability insurance in such amounts as it shall deem reasonably
appropriate.
30
ARTICLE VII
UTILITIES
7.1 Payment of Utilities. During the Term of this Lease, Tenant shall pay,
--------------------
when due, all charges of every nature, kind or description for utilities
furnished to the Demised Premises or chargeable against the Demised Premises,
including all charges for water, sewage, heat, gas, light, garbage, electricity,
telephone, steam, power, or other public or private utility services.
7.2 Additional Charges. In the event that any charge or fee is required
------------------
after the Commencement Date by the state in which the Demised Premises are
located, or by any agency, subdivision or instrumentality thereof, or by any
utility company furnishing services or utilities to the Demised Premises, as a
condition precedent to furnishing or continuing to furnish utilities or services
to the Demised Premises, such charge or fee shall be deemed to be a utility
charge payable by Tenant. The provisions of this Section 7.2 shall include, but
not be limited to, any charges or fees for future water or sewer capacity to
serve the Demised Premises, any charges for the underground installation of gas
or other utilities or services subsequent to the installation thereof, and other
charges relating to the extension of or change in the facilities necessary to
provide the Demised Premises with adequate utility services. In the event that
Landlord has paid any such charge or fee after the Commencement Date, Tenant
shall reimburse Landlord for such utility charge.
7.3 Landlord's Responsibility for Utility Hook-Up Charges and Fees.
--------------------------------------------------------------
Notwithstanding anything contained in this Article VII to the contrary, (a) as
of the Commencement Date, all utilities contemplated by the Improvements shall
be hooked-up and fully operational and functional to the Demised Premises and
all capacity, hookup and similar charges (except to the extent they constitute
Excess Shell Costs or Excess Tenant Improvement Costs) shall have been paid by
Landlord; and (b) if any utility or service charge or fee related to capital
improvements made during the Term of this Lease, whose tax depreciable life
extends beyond the termination date of this Lease, Tenant shall only pay the pro
rata portion of such charge or fee to the extent that such tax depreciable life
is within the Term of this Lease.
ARTICLE VIII
REPAIRS AND MAINTENANCE OF DEMISED PREMISES
8.1 Tenant's Responsibilities. Except to the extent specifically identified
-------------------------
as Landlord's responsibility in Section 8.2, below, Tenant shall, at its own
expense, keep the Demised Premises, and every part thereof, including, but not
by way of limitation, the grounds, landscaped areas, truck parking and loading
and dock areas, the roof surface and roof membrane (but only as to routine and
ongoing maintenance), drainage swales, gutters, downspouts, glass, interior and
exterior portions of the Building, and the plumbing, heating, air conditioning,
wiring, elevators and other mechanical systems therein, the facilities thereof
and all sidewalks, parking areas, driveways, passageways and alleys adjacent
thereto and other appurtenances thereunto belonging, in good order, appearance,
condition and repair (reasonable wear and tear excepted), free of obstructions,
dirt, and rubbish, and so as to comply fully and at all times with all present
31
and future applicable governmental laws, rules and regulations, consistent with
other comparable business and industrial parks in the Market Area. Tenant agrees
to make all replacements and repairs to the Demised Premises necessary to
maintain the Demised Premises in the condition described in the preceding
sentence. Tenant, at its own expense, shall also seal (paint) the exterior of
the Building periodically during the Term (including any Option Term) of this
Lease in accordance with the recommendations of the manufacturer of the material
used for the exterior of said Building. Tenant shall maintain regular service
contracts for all of the Demised Premises' (i) HVAC system, and (ii)
elevator(s), and shall, upon Landlord's request, provide Landlord copies of such
contracts or any other maintenance or service contracts maintained by Tenant
with respect to the Demised Premises. Any such contract shall be terminable by
Tenant (or its successors, including Landlord or a Lender) on not less than
thirty (30) days notice to the contractor or shall provide that it does not bind
a Lender. All repairs, replacements and renewals shall be at least equal in
quality and class to the original work. Because Tenant is undertaking the
responsibility for most aspects of the ongoing maintenance of the Demised
Premises, Tenant waives the provisions of California Civil Code Sections 1941
and 1942 with respect to Landlord's obligations for tenantability of the Demised
Premises and Tenant's right to make repairs and deduct the expenses of such
repairs from Rent. When used in this Article VIII, "repairs" shall include all
necessary replacements, renewals, alterations, additions and betterments.
8.2 Landlord's Responsibilities. Landlord shall, at its own expense,
---------------------------
repair any failure in the structural elements of the roof, all exterior and
load-bearing walls (except for painting of the exterior walls, which shall be
Tenant's responsibility), the Building foundation and for keeping all
underground utilities in good order, condition and repair. In addition, Landlord
shall be responsible, at Landlord's sole cost and expense, for the prompt and
diligent repair of any latent defects in design and construction of the Demised
Premises which manifest themselves during the Term, including, but not limited
to, latent defects in the design and/or construction of the drainage system
constructed on the Demised Premises as part of the Improvements. Landlord shall
not charge Tenant for any property management fees during the Term of the Lease.
8.3 Sharing of Expenses of Capital Items. Certain items of repair and
------------------------------------
maintenance which are Tenant's responsibility under Section 8.1, may, under
generally acceptable accounting principles consistently applied, be considered
to have a reasonable useful life which would extend beyond the end of the Term
(a "Capital Item"). Landlord and Tenant shall share the expenses associated with
such Capital Items, as follows:
(a) Tenant shall pay all expenses related to Capital Items.
(b) At any time Tenant intends to incur an expense related to a
Capital Item, Tenant shall notify Landlord, in writing, and Landlord shall
approve or disapprove such expenditure, which approval shall not be unreasonably
withheld or delayed. Landlord shall not be required to approve any expenditure
which is not required for the maintenance and operation of the Demised Premises.
32
(c) At that time, Landlord and Tenant shall also agree on the
"useful" life of the Capital Item and, shall determine a level per-year useful
life allocation (the "Useful Life Allocation") of financial responsibility for
that Capital Item. By way of example only, financial responsibility for a
Capital Item which requires the expenditure of $50,000.00 and which has a five-
year "useful" life would be assigned a $10,000.00 per year Useful Life
Allocation.
(d) The Useful Life Allocation shall be applied to the item of
expense related to the Capital Item, until the full amount of such expense has
been amortized, although Tenant shall have the responsibility for paying all
expenses related to Capital Items when incurred.
(e) If, at the end of the Term of Lease, including any Option Term,
there remains any unamortized Useful Life Allocation(s), Landlord shall, within
thirty (30) days after the end of the Term, refund to Tenant, such unamortized
Useful Life Allocations, in cash.
8.4 Tenant's Waiver of Claims Against Landlord. Except as provided in
------------------------------------------
Article II, Section 8.2 and Article XIII of this Lease, or as expressly provided
under any other provision hereof, Landlord shall not be required to furnish any
services or facilities or to make any repairs or alterations in, about or to the
Demised Premises or any improvements hereafter erected thereon. Subject to the
requirements of Article II, Section 8.2 and Article XIII of this Lease, or as
expressly provided under any other provision hereof, Tenant hereby assumes the
full and sole responsibility for the condition, operation, repair, replacement,
maintenance and management of the Demised Premises and all improvements
hereafter erected thereon, and Tenant hereby waives any rights created by any
law now or hereafter in force to make repairs to the Demised Premises or
improvements hereafter erected thereon at Landlord's expense.
8.5 Prohibition Against Waste. Tenant shall not do or suffer any waste,
-------------------------
damage, disfigurement or injury to the Demised Premises, or any improvements
hereafter erected thereon, or to the fixtures or equipment therein, or permit or
suffer any overloading of the floors or other use of the Improvements that would
place an undue stress on the same or any portion thereof beyond that for which
the same was designed.
ARTICLE IX
COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS
9.1 Compliance with Applicable Laws and Restrictions. Subject to
------------------------------------------------
Landlord's obligations under Article II, Section 8.2 and Article XIII of this
Lease, or as expressly provided under any other provision hereof, throughout the
Term of this Lease, and at Tenant's sole cost and expense (except as provided in
Sections 2.8 and 8.3 above), Tenant shall promptly comply or cause compliance
with or remove or cure any violation caused by Tenant of any and all present and
future laws, rules and regulations applicable to the Demised Premises
(including, without limitation, those reflected on the Preliminary Title Report
prepared by First American Title Company, dated October 28, 1998; provided,
however, Landlord hereby agrees that Tenant shall have no responsibility with
respect to the Memorandum of Contribution Agreement described in Exception No.
14 of said Preliminary Title Report), and the appropriate departments,
commissions, boards, associations and officers enforcing them, and the orders,
rules
33
and regulations of the Board of Fire Underwriters where the Demised Premises are
situated, or any other governmental body now or hereafter constituted exercising
lawful or valid authority over the Demised Premises, or any portion thereof, or
exercising authority with respect to the use or manner of use of the Demised
Premises, whether or not the compliance, curing or removal of any such violation
and the costs and expenses necessitated thereby shall have been foreseen or
unforeseen, ordinary or extraordinary, and whether or not the same shall be
presently within the contemplation of Landlord or Tenant or shall involve any
change of governmental policy or require structural or extraordinary repairs,
alterations or additions by Tenant and irrespective of the costs thereof. Tenant
shall also comply with, observe and perform all provisions and requirements of
all policies of insurance at any time in force with respect to the Demised
Premises and required to be obtained and maintained under the terms of Article
VI hereof, and Tenant shall comply with all development permits issued by
governmental authorities issued in connection with development of the Demised
Premises, copies of which shall be supplied to Tenant by Landlord promptly after
issuance. In addition to the matters of record to which the Demised Premises are
subject as of the date of this Lease, Tenant acknowledges that, prior to the
Commencement Date, the Demised Premises will become subject to a Reciprocal
Easement Agreement the purpose of which will be to establish certain access and
maintenance rights and obligations with regard to driveway, fire suppression and
storm drain facilities shared by the Demised Premises and the property which is
located adjacent to the Demised Premises, provided that Landlord shall obtain
Tenant's approval of such Reciprocal Easement Agreement prior to the Demised
Premises becoming subject thereto, and to any other modifications to the matters
of record to which the Demised Premises are subject and which would have an
affect on Tenant's use and enjoyment of the Demised Premises, which approval
shall not be unreasonably withheld.
9.2 Tenant's Obligations. Notwithstanding that it may be usual and
--------------------
customary for Landlord to assume responsibility and performance of any or all of
the obligations set forth in this Article IX, and notwithstanding any order,
rule or regulation directed to Landlord to perform, subject to the provisions of
Article II, Section 8.2 and Article XIII of this Lease, Tenant hereby assumes
such obligations because, by nature of this Lease, or as expressly provided
under any other provision hereof, the rents and income derived from this Lease
by Landlord are "net" rentals not to be diminished by any expense incident to
the ownership, occupancy, use, leasing or possession of the Demised Premises or
any portion thereof (except as expressly provided in this Lease).
9.3 Tenant's Right to Contest Laws and Ordinances. After prior written
---------------------------------------------
notice to Landlord, Tenant, at its sole cost and expense and without cost or
expense to Landlord, shall have the right to contest the validity or application
of any Applicable Laws or Restrictions in the name of Tenant or Landlord, or
both, by appropriate legal proceedings diligently conducted but only if
compliance with the terms of any such law or ordinance pending the prosecution
of any such proceeding, may legally be delayed without incurring of any lien,
charge or liability of any kind against the Demised Premises, or any portion
thereof, and without subjecting Landlord or Tenant to any liability, civil or
criminal, for failure so to comply therewith until the final determination of
such proceeding; provided, however, if any lien, charge or civil liability would
be incurred by reason of any such delay, Tenant nevertheless, on the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
may contest as aforesaid and delay as aforesaid, provided that such delay would
not subject Tenant or Landlord to criminal liability
34
and Tenant (a) furnishes Landlord security, reasonably satisfactory to Landlord,
against any loss or injury by reason of any such contest or delay, (b)
prosecutes the contest with due diligence and in good faith, and (c) agrees to
indemnify, defend and hold harmless Landlord and the Demised Premises from any
charge, liability or expense whatsoever. The security furnished to Landlord by
Tenant shall be in the form of a cash deposit or a Certificate of Deposit issued
by a national bank or federal savings and loan association payable to Landlord.
Said deposit shall be held, administered and distributed in accordance with the
provisions of Section 5.2 hereof relating to the contest of the amount or
validity of any Imposition.
If necessary or proper to permit Tenant so to contest the validity or
application of any such law or ordinance, Landlord shall, at Tenant's sole cost
and expense, including reasonable attorneys' fees incurred by Landlord, execute
and deliver any appropriate papers or other documents; provided, however, that
Landlord shall not be required to execute any document or consent to any
proceeding which would result in the imposition of any cost, charge, expense or
penalty on Landlord or the Demised Premises.
ARTICLE X
MECHANIC'S LIENS AND OTHER LIENS
10.1 Mechanic's Liens.
----------------
(a) Tenant shall keep the Demised Premises free from any liens
arising out of work performed, materials furnished and obligations incurred by
Tenant. Tenant covenants and agrees that any mechanic's lien filed against the
Demised Premises for work claimed to have been done for, or materials claimed to
have been furnished to, Tenant shall be discharged by Tenant, by bond or
otherwise, within thirty (30) days after the filing thereof, at the sole cost
and expense of Tenant. This provision does not apply to any claim or lien
arising out of the original construction of the Demised Premises by Landlord
pursuant to this Lease.
(b) Tenant shall have the right to contest with due diligence the
validity or amount of any lien or claimed lien created by Tenant if Tenant shall
give to Landlord such security as Landlord may reasonably require to insure
payment thereof and prevent any sale, foreclosure or forfeiture of the Demised
Premises or any portion thereof by reason of such nonpayment. On final
determination of the lien or claim for lien, Tenant shall immediately pay any
judgment rendered with all proper costs and charges and shall have the lien
released or judgment satisfied at Tenant's own expense, and if Tenant shall fail
to do so, Landlord may at its option, pay any such final judgment and clear the
Demised Premises therefrom. If Tenant shall fail to contest with due diligence
the validity or amount of any such lien or claimed lien created by Tenant, or to
give Landlord security as hereinabove provided, Landlord may, but shall not be
required to, contest the validity or amount of any such lien or claimed lien or
settle or compromise the same without inquiring into the validity of the claim
or the reasonableness of the amount thereof. Should any lien be filed against
the Demised Premises or should any action of any character affecting the title
thereto be commenced, Tenant shall give to Landlord written notice thereof as
soon as notice of such lien or action comes to the knowledge of Tenant.
35
(c) Should Tenant fail to discharge any such lien, Landlord may,
at Landlord's election, pay such claim or post a bond or otherwise provide
security to eliminate the lien as a claim against title, and the cost thereof
shall be immediately due from Tenant as Additional Rent. Tenant shall not suffer
or permit any mechanic's lien or other lien to be filed against the Demised
Premises, or any portion thereof, by reason of work, labor, skill, services,
equipment or materials supplied or claimed to have been supplied to the Demised
Premises at the request of Tenant, or anyone holding the Demised Premises, or
any portion thereof, through or under Tenant.
(d) All materialmen, contractors, artisans, mechanics, laborers
and any other person now or hereafter furnishing any labor, services, materials,
supplies or equipment to Tenant with respect to the Demised Premises, or any
portion thereof, are hereby charged with notice that they must look exclusively
to Tenant to obtain payment for the same. Notice is hereby given that Landlord
shall not be liable for any labor, services, materials, supplies, skill,
machinery, fixtures or equipment furnished or to be furnished to Tenant upon
credit, and that no mechanic's lien or other lien for any such labor, services,
materials, supplies, machinery, fixtures or equipment shall attach to or affect
the estate or interest of Landlord in and to the Demised Premises or any portion
thereof.
10.2 Landlord's Indemnification. The provisions of Section 10.1 above
--------------------------
shall not apply to any mechanic's lien or other lien for labor, services,
materials, supplies, machinery, fixtures or equipment furnished to the Demised
Premises in the performance of Landlord's obligations to construct the
Improvements required by the provisions of Article II hereof or in the
performance of Landlord's other obligations under this Lease, and Landlord does
hereby agree to indemnify and defend Tenant against and save Tenant and the
Demised Premises and any portion thereof harmless from all losses, costs,
damages, expenses, liabilities and obligations, including, without limitation,
reasonable attorneys' fees resulting from the assertion, filing, foreclosure or
other legal proceedings with respect to any such mechanic's lien or other lien.
10.3 Removal of Liens. Except as otherwise provided for in this Article
----------------
X, Tenant shall not create, permit or suffer, and shall promptly discharge and
satisfy of record, any other lien, encumbrance, charge, security interest or
other right or interest which shall be or become a lien, encumbrance, charge or
security interest upon the Demised Premises, or any portion thereof, or the
income therefrom, or on the interest of Landlord or Tenant in the Demised
Premises, or any portion thereof, if such lien, encumbrance, charge, security
interest or other right or interest shall result from the actions of Tenant or
others acting on the behalf of or for Tenant (other than Landlord).
10.4 Equipment and Trade Fixtures. Landlord expressly waives and
----------------------------
disclaims any lien which it may have by statute or otherwise on the equipment
and trade fixtures which Tenant brings to the Demised Premises. In addition,
Landlord acknowledges that Tenant may, from time to time, offer all or portions
of such equipment and trade fixtures as collateral for obligations to lenders.
Landlord will promptly execute such reasonable documentation as Tenant may
request in order to evidence to any such lender Landlord's lack of any claim to
such equipment and trade fixtures.
36
ARTICLE XI
LANDLORD'S PERFORMANCE OF TENANT'S OBLIGATIONS
In the event Tenant fails to pay or discharge any Additional Obligation,
Landlord may, but shall not be obligated to, in addition to its remedies in an
Event of Default, provide a factually correct written notice of such failure,
and if Tenant still fails to cure such failure within ten (10) days after
Tenant's receipt of such notice, Landlord may pay or perform the same, and in
that event Tenant shall within ten (10) days after invoice reimburse Landlord
therefor (together with interest at the Maximum Rate of Interest from the date
Landlord made such payment), which amount shall be deemed Additional Rent;
provided, however, that Landlord shall be entitled to pay such amount without
prior notice to Tenant if Landlord reasonably believes that any further delay
would expose Landlord or the Demised Premises to (i) civil or criminal
penalties, (ii) a potential default under a mortgage, deed of trust or similar
obligation, or (iii) lack of insurance coverage as required hereunder, or is
otherwise an emergency. Nothing herein contained shall be deemed as a waiver or
release of Tenant from any obligation of Tenant contained in this Lease.
ARTICLE XII
DEFAULTS OF TENANT
12.1 Events of Default. Any one or more of the following events shall be
-----------------
an event of default by Tenant ("Event of Default") under this Lease:
(a) Tenant fails to pay any Base Rent or Additional Rent or any
other sum required by this Lease to be paid by Tenant, within five (5) business
days after the same is due and payable;
(b) Tenant fails to perform or comply with any other term hereof,
and such failure shall continue for more than thirty (30) days after notice
thereof from Landlord, and Tenant shall not within such period commence with due
diligence and thereafter dispatch the curing of such default, or, having so
commenced, shall thereafter fail or neglect to prosecute or complete with due
diligence and dispatch the curing of such default;
(c) Tenant makes a general assignment for the benefit of creditors
or admits in writing its inability to pay its debts as they become due or files
a petition in bankruptcy, or is adjudicated as bankrupt or insolvent, or files a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statutes,
law or regulation, or files an answer admitting or fails to reasonably contest
the material allegations of a petition filed against it in any such proceeding,
or seeks or consents to or acquiesces in the appointment of any trustee,
receiver or liquidator of Tenant or any material part of its properties
(provided, however, that this Section 12.1(c) shall apply only to the extent it
is enforceable under applicable law); or
37
(d) Within ninety (90) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding has not been dismissed, or
if, within ninety (90) days after the appointment without the consent or
acquiescence of Tenant of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment has not been vacated
(provided, however, that this Section 12.1(d) shall apply only to the extent it
is enforceable under applicable law); or
(e) Tenant permits the abandonment or nonoccupancy of the entire
Demised Premises (except for temporary vacancies or portions thereof, or to the
extent caused by damage, destruction or condemnation).
12.2 Landlord's Remedies. Upon the occurrence of an Event of Default,
-------------------
Landlord, at its option, without further notice or demand to Tenant, shall have,
in addition to all other rights and remedies provided in this Lease, at law or
in equity, the option to pursue any one or more of the following remedies, each
and all of which shall be cumulative and nonexclusive, without any notice or
demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Base Rent or Additional Rent, enter upon and take
possession of the Demised Premises and expel or remove Tenant and any other
person who may be occupying the Demised Premises or any part thereof, without
being liable for prosecution or any claim or damages therefor; and Landlord may
recover from Tenant the following:
(i) The worth at the time of award of any unpaid Base Rent
and Additional Rent which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent for the balance of the Lease Term after the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and
(v) Such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
38
The term "Rent" as used in this Section 12.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in subsections
(i) and (ii), above, the "worth at the time of award" shall be computed at the
Maximum Rate of Interest. As used in subsection (iii), above, the "worth at the
time of award" shall be computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%). Nothing herein shall be deemed to relieve Landlord of its
obligation to mitigate its damages following an Event of Default.
12.3 Right to Collect Rent as Due. Landlord shall have the remedy
----------------------------
described in California Civil Code Section 1951.4 (Landlord may continue lease
in effect after Tenant's breach and abandonment and recover rent as it becomes
due, if Tenant has the right to sublet or assign, subject only to reasonable
limitations). Accordingly, if Landlord does not elect to terminate this Lease on
account of any default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies under this Lease,
including the right to recover all Base Rent and Additional Rent as they become
due.
12.4 New Lease Following Termination. In the event Landlord elects to
-------------------------------
terminate this Lease and relet the Premises, it may execute any new lease in its
own name. Tenant hereunder shall have no right or authority whatsoever to
collect any Base Rent, Additional Rent or other sums from such tenant. The
proceeds of any such reletting shall be applied as follows:
(a) First, to the payment of any indebtedness other than Base Rent
or Additional Rent due hereunder from Tenant to Landlord, including but not
limited to storage charges or brokerage commissions owing from Tenant to
Landlord as the result of such reletting;
(b) Second, to the payment of the costs and expenses of reletting
the Premises, including alterations and repairs which Landlord deems reasonably
necessary and advisable, and reasonable attorneys' fees incurred by Landlord in
connection with the retaking of the Demised Premises and such reletting;
(c) Third, to the payment of Base Rent, Additional Rent and other
charges due and unpaid hereunder, and
(d) Fourth, to the payment of future Base Rent, Additional Charges
and other damages payable by Tenant under this Lease.
12.5 Cumulative Rights; No Waiver. All rights, options and remedies of
----------------------------
Landlord contained in this Lease shall be construed and held to be non-exclusive
and cumulative. Landlord shall have the right to pursue any or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any Event of Default of Tenant hereunder
shall be implied from the acceptance by Lender of any payments due hereunder
(except with respect to the amount so collected) or any omission by Landlord
party to take any action on account of such Event of Default if such Event of
Default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
39
12.6 Surrender of Demised Premises. Upon any expiration or termination of
-----------------------------
this Lease, Tenant shall quit and peaceably surrender the Demised Premises and
all portions thereof to Landlord, and Landlord may, upon or at any time after
any such expiration or termination and without further notice, enter upon and
reenter the Demised Premises and all portions thereof and possess and repossess
itself thereof by force, summary proceeding, ejectment or otherwise, and may
dispossess Tenant and remove Tenant and all other persons and property from the
Demised Premises and all portions thereof and may have, hold and enjoy the
Demised Premises and the right to receive all rental and other income of and
from the same.
12.7 Interest on Unpaid Amounts. If Tenant shall commit an Event of
--------------------------
Default, Landlord may cure the same, but shall not be required to do so, as
provided in, and subject to, Section 11.1 above, and in exercising any such
right, may employ counsel and pay necessary and incidental costs and expenses,
including reasonable attorneys' fees. All reasonable sums so paid by Landlord,
and all reasonable and necessary costs and expenses, including reasonable
attorneys' fees, in connection with the performance of any such act by Landlord,
together with interest thereon at the Maximum Rate of Interest from the date of
making such expenditure by Landlord, shall be deemed Additional Rent hereunder
and, except as is otherwise expressly provided herein, shall be payable to
Landlord within ten (10) days after written demand, and Tenant covenants to pay
any such sum or sums, with interest as aforesaid, and Landlord shall have, in
addition to any other right or remedy of Landlord, the same rights and remedies
in the event of nonpayment thereof by Tenant as in the case of default by Tenant
in the payment of monthly Base Rent. Landlord shall not be limited in the proof
of any damages which Landlord may claim against Tenant arising out of or by
reason of Tenant's failure to provide and keep in force insurance as aforesaid,
to the amount of the insurance premium or premiums not paid or not incurred by
Tenant, and which would have been payable upon such insurance, but Landlord
shall also be entitled to recover as damages for such breach the uninsured
amount of any loss (to the extent of any deficiency between the dollar limits of
insurance required by the provisions of this Lease and the dollar limits of the
insurance actually carried by Tenant) and reasonable costs and expenses,
including reasonable attorneys' fees, suffered or incurred by reason thereof
occurring during any period when Tenant shall have failed or neglected to
provide insurance as aforesaid.
ARTICLE XIII
DESTRUCTION AND RESTORATION
13.1 Destruction and Restoration. Tenant covenants and agrees that, in
---------------------------
case of damage to or destruction of the Improvements during the Term, whether by
fire or otherwise, Tenant shall make funds available to Landlord and Landlord
shall promptly restore, repair, replace and rebuild the same as nearly as
possible to the condition that the same were in immediately prior to such damage
or destruction with such changes or alterations as may be reasonably acceptable
to Landlord and Tenant or required by Applicable Land Use Laws and Restrictions
then in effect. Tenant shall immediately give Landlord written notice of such
damage or destruction upon Tenant's or any assignee's or subtenant's knowledge
of the occurrence thereof and specify in such notice, in reasonable detail, the
extent thereof. Such restorations, repairs, replacements, rebuilding, changes
and alterations, including the cost of
40
temporary repairs for the protection of the Demised Premises, or any portion
thereof, pending completion thereof are sometimes hereinafter referred to as the
"Restoration." Landlord shall be entitled to recover all "soft" costs incurred
in connection with Landlord's performance of the Restoration including a fee
competitive with others providing similar services. The Restoration shall be
carried on and completed in accordance with the provisions and conditions of
Section 13.2 hereof. If the amount of the insurance proceeds recovered from the
policy or policies maintained (or required to be maintained) by Tenant, as
described in Article VI of this Lease, is reasonably deemed insufficient by a
qualified contractor, reasonably acceptable to Tenant and Landlord (or
Landlord's lender, as the case may be) to complete the Restoration of such
Improvements (exclusive of Tenant's personal property and trade fixtures which
shall be restored, repaired or rebuilt, at Tenant's discretion, out of Tenant's
separate funds), except as provided in this Section 13.1 below, Tenant shall,
upon request of Landlord (or by Landlord's lender, as the case may be), deposit
with Landlord (or Landlord's lender, if required) a cash deposit equal to the
reasonable estimate of the amount necessary to complete the Restoration of such
Improvements less the amount of such insurance proceeds available.
Notwithstanding the foregoing, if Landlord is prohibited from effecting the
Restoration of the Demised Premises due to applicable governmental laws, rules
or regulations then in effect, Landlord shall not be required to effect such
Restoration. In such an event, any insurance proceeds shall be paid to, and may
be retained by, Landlord or Landlord's lender, as the case may be, and this
Lease, and all obligations of the parties hereunder (except those which
expressly survive the termination hereof) shall terminate.
13.2 Application of Insurance Proceeds. All moneys recovered from the
---------------------------------
insurance policy or policies maintained (or required to be maintained) by
Tenant, shall be paid directly to Landlord (or held by Landlord's lender, if
required) on account of such damage or destruction. Such amounts, less the
reasonable costs, if any, incurred by Landlord in recovering such funds, shall
be applied to the payment of the costs of the Restoration and shall be paid out
from time-to-time as the Restoration progresses upon the written request of
Tenant, accompanied by a certificate of the architect or a qualified
professional engineer in charge of the Restoration stating that as of the date
of such certificate (a) the sum requested is justly due to the contractors,
subcontractors, materialmen, laborers, engineers, architects, or persons, firms
or corporations furnishing or supplying work, labor, services or materials for
such Restoration, and when added to all sums previously paid out does not exceed
the value of the Restoration performed to the date of such certificate by all of
said parties; (b) except for the amount, if any, stated in such certificates to
be due for work, labor, services or materials, there is no outstanding
indebtedness known to the person signing such certificate, after due inquiry,
which is then due for work, labor, services or materials in connection with such
Restoration, which, if unpaid, might become the basis of a mechanic's lien or
similar lien with respect to the Restoration or a lien upon the Demised
Premises, or any portion thereof; and (c) the costs, as estimated by the person
signing such certificate, of the completion of the Restoration required to be
done subsequent to the date of such certificate in order to complete the
Restoration do not exceed the sum of the remaining insurance moneys, plus the
amount deposited by the parties (as applicable) after payment of the sum
requested in such certificate.
If the insurance moneys and such other sums, if any, deposited with
Landlord (or with Landlord's lender) pursuant to Section 13.1 hereof, shall be
insufficient to pay the entire costs of
the Restoration, Tenant agrees to pay any deficiency promptly upon demand. Upon
completion of the Restoration and payment in full thereof by Tenant, Landlord
shall, within a reasonable period of time, turn over to Tenant all insurance
moneys or other moneys then remaining upon the parties' joint, good-faith
determination that the Restoration has been paid for in full and the damaged or
destroyed Building and other Improvements repaired, restored or rebuilt as
nearly as possible to the condition they were in immediately prior to such
damage or destruction, or with such changes or alterations as may be made in
conformity with Section 13.1 and Article XIX hereof.
13.3 Continuance of Tenant's Obligations. Except as provided for in this
-----------------------------------
Section 13.3 and in Section 13.6, no destruction of or damage to the Demised
Premises, or any portion thereof, by fire, casualty or otherwise shall permit
Tenant to surrender this Lease or shall relieve Tenant from its liability to pay
to Landlord the Base Rent and Additional Rent payable under this Lease or from
any of its other obligations under this Lease, and Tenant waives any rights now
or hereafter conferred upon Tenant by present or future law or otherwise to quit
or surrender this Lease or the Demised Premises, or any portion thereof, to
Landlord or to any suspension, diminution, abatement or reduction of rent on
account of any such damage or destruction, including, without limitation, the
provisions of California Civil Code Sections 1932(2) and 1933(4).
13.4 Availability of Insurance Proceeds. To the extent that any
----------------------------------
insurance moneys which would otherwise be payable and used in the Restoration of
the damaged or destroyed Improvements are paid to any mortgagee of Landlord and
applied in payment of or reduction of the sum or sums secured by any such
mortgage or mortgages made by Landlord on the Demised Premises, Landlord shall
make available, for the purpose of Restoration of such Improvements, an amount
equal to the amount payable to its mortgagee out of such proceeds, and such sum
shall be applied in the manner provided in Section 13.2 hereof.
13.5 Completion of Restoration. The foregoing provisions of this Article
-------------------------
XIII apply only to damage or destruction of the Improvements by fire, casualty
or other cause occurring after the Commencement Date. Any such damage or
destruction occurring prior to such time shall be restored, repaired, replaced
and rebuilt by Landlord.
13.6 Termination of Lease.
--------------------
(a) For purposes of this Lease, the term "Threshold Amount" shall
mean an amount equal to the product of (i) One Million Dollars ($1,000,000.00)
multiplied by (ii) a fraction, the numerator of which is the number of months
from the date of damage or destruction until the expiration of the Term of this
Lease, and the denominator of which is eighteen (18); and the term "Threshold
Period" shall mean the product of (a) one hundred eighty (180) days multiplied
by a fraction, the numerator of which is the number of months from the date of
such damage or destruction until the date of expiration of the Term of this
Lease, and the denominator of which is eighteen (18).
(b) If, within eighteen (18) months prior to the expiration of the
Term of this Lease, the Improvements shall be destroyed or damaged to such an
extent that the Restoration
42
thereof is reasonably estimated to cost more than the Threshold Amount to
complete, Tenant and Landlord shall, as soon as reasonably possible following
such event of damage or destruction, compute the amount of the insurance
proceeds available from the insurance required to be maintained by Tenant under
this Lease and the amount, if any, over and above the net proceeds of such
insurance which will be necessary for such Restoration, as determined by a
qualified contractor, reasonably acceptable to Tenant and Landlord (or
Landlord's Lender, as the case may be), which latter amount is hereinafter
referred to as the "Excess Cost." Within five (5) business days following the
determination of the Excess Cost, Tenant shall notify Landlord, in writing,
whether Tenant is willing to pay to such Excess Cost to restore such damage or
destruction for occupancy by Tenant. If Tenant notifies Landlord that it is
willing to pay such Excess Cost, it shall do so in accordance with the
provisions of Sections 13.1, 13.2 and 13.3 hereof.
(c) If, within eighteen (18) months prior to the expiration of the
Term of this Lease, the Improvements shall be destroyed or damaged to such an
extent that, in the opinion of a reasonably qualified contractor selected by
Landlord and Tenant, the Restoration shall take longer than the Threshold Period
to complete, Tenant shall be entitled to notify Landlord, in writing, of such
fact, which notice shall be accompanied by a detailed statement of the nature
and extent of such damage or destruction and the estimated period of
Restoration.
(d) If (i) Tenant elects not to pay the Excess Cost, as described
under subsection (b), above, or (ii) if the period of Restoration as estimated
by the contractor selected by Landlord and Tenant exceeds the Threshold Period,
then Tenant shall have the option, within thirty (30) days after Tenant's notice
to Landlord, to surrender the Demised Premises to Landlord by a notice, in
writing, addressed to Landlord, specifying such election; provided, however, if
Landlord elects to pay such Excess Cost, which election shall be made within ten
(10) business days after Tenant notifies Landlord of its election not to pay the
Excess Cost, then Tenant shall not have the right to terminate this Lease
pursuant to subsection (i) of this subsection (d) and, provided Tenant has not
elected to terminate this Lease under subsection (ii) of this subsection (d),
Landlord shall pay such Excess Cost. If Tenant terminates this Lease in
accordance with this subsection (d), the applicable notice shall be accompanied
by (A) Tenant's payment of the balance of the Base Rent and Additional Rent due
for the remainder of the term of this Lease and other charges hereafter
specified in this Section 13.6, or, in the alternative, (B) reasonably
satisfactory evidence (e.g. a certificate from the insurer) that the loss of use
and business interruption insurance Tenant is required to maintain shall be paid
by the insurer directly to Landlord in an amount equal to the lesser of (x) if
more than one (1) year of the Term remains the Base Rent and Additional Rent
provided under this Lease for no less than one (1) year, or (y) the Base Rent
and Additional Rent provided under this Lease for the remainder of the Term.
(e) In such an event Landlord shall be entitled to the proceeds of all
insurance required to be maintained by Tenant under Section 6.1 above (other
than proceeds related to trade fixtures, furniture, equipment and other personal
property of Tenant) and Tenant shall execute all documents reasonably requested
by Landlord to allow such proceeds to be paid to Landlord or as Landlord may
otherwise direct (e.g., to Landlord's lender).
43
ARTICLE XIV
CONDEMNATION
14.1 Condemnation of Entire Demised Premises. If, during the Initial
---------------------------------------
Term of this Lease or any extension or renewal thereof, the entire Demised
Premises or the entire Building shall be taken as the result of the exercise of
the power of eminent domain (hereinafter referred to as the "Proceedings"), this
Lease and all right, title and interest of Tenant hereunder shall cease and come
to an end on the date of vesting of title pursuant to such Proceedings.
In any taking of the Demised Premises, or any portion thereof, whether or
not this Lease is terminated as in this Article provided, Tenant shall not be
entitled to any portion of the award for the taking of the Demised Premises or
damage to the Improvements, except as otherwise provided in Section 14.3 with
respect to the restoration of the Improvements, and Tenant hereby waives any
right it now has or may have under present or future law to receive any separate
award of damages for its interest in the Demised Premises or any portion
thereof, except that Tenant shall have, nevertheless, the limited right to prove
in the Proceedings and to receive any award which may be made for damages to or
condemnation of Tenant's movable trade fixtures and equipment, for goodwill and
for Tenant's relocation costs in connection therewith.
14.2 Partial Condemnation/Termination of Lease. If, during the Term of
-----------------------------------------
this Lease an amount less than the entire Demised Premises shall be taken in
such Proceedings with the result that it will materially and adversely interfere
with Tenant's enjoyment and intended use (as described in Section 4.1, hereof),
as reasonably determined by Tenant, Tenant may, at its option, terminate this
Lease as to the remainder of the Demised Premises. Tenant shall not have the
right to terminate this Lease pursuant to the preceding sentence unless (a) the
business of Tenant conducted in the portion of the Demised Premises taken cannot
reasonably be carried on with substantially the same utility and efficiency in
the remainder of the Demised Premises, and (b) Tenant (or Landlord for Tenant)
cannot construct or secure on the Demised Premises substantially similar space
to the space so taken and as a substantially integrated whole with the remaining
portion of the Demised Premises. Such termination as to the remainder of the
Demised Premises shall be effected by notice in writing given not more than
sixty (60) days after the date of vesting of title in such Proceedings, and
shall specify a date no more than sixty (60) days after the giving of such
notice as the date for such termination. Upon the date specified in such notice,
the Term of this Lease, and all right, title and interest of Tenant hereunder,
shall cease and come to an end. If this Lease is terminated as provided in this
Section 14.2, Landlord shall be entitled to and shall receive the total award
made in such Proceedings, Tenant hereby assigning any interest in such award,
damages, and compensation to Landlord, and Tenant hereby waiving any right
Tenant now has or may have under present or future law to receive any separate
award of damages for its interest in the Demised Premises or any portion thereof
or its interest in this Lease, except as otherwise provided in Section 14.1. The
right of Tenant to terminate this Lease as provided in this Section 14.2, shall
not cure or otherwise release Tenant from any then existing breach of Tenant's
performance of any of the terms, covenants or conditions of this Lease on its
part to be performed. In the event that Tenant elects not to terminate this
Lease as to the remainder of the Demised Premises, the rights and obligations of
Landlord and Tenant shall be governed by the provisions of Section 14.3 hereof.
44
14.3 Partial Condemnation/Continuation of Lease. If this Lease is not
------------------------------------------
terminated as provided in Section 14.2 hereof; then this Lease shall, upon
vesting of title in the Proceedings, terminate as to the parts so taken, and
Tenant shall have no claim or interest in the award, damages, consequential
damages and compensation, or any part thereof except as otherwise provided in
Section 14.1, Tenant hereby waiving any right Tenant now has or may have under
present or future law to receive any separate award of damages for its interest
in the Demised Premises or any portion thereof or its interest in this Lease,
except as otherwise provided in Section 14.1 and except that Tenant shall have
the right to apply to Landlord for reimbursement as hereinafter provided from
such funds as specified in this Section 14.3. The net amount of the award (after
deduction of all costs and expenses, including attorneys' fees) shall be held by
Landlord (or Landlord's lender) and applied as hereinafter provided. Landlord,
in such case, covenants and agrees, at Landlord's sole cost and expense promptly
to restore that portion of the Improvements on the Demised Premises not so taken
to a complete architectural and mechanical unit for the use and occupancy of
Tenant as provided in this Lease. In the event that the net amount of the award
(after deduction of all costs and expenses, including attorneys' fees) that may
be received by Landlord in any such Proceedings for physical damage to the
Improvements as a result of such taking, and held by Landlord (or Landlord's
lender) for restoration of the Demised Premises, is insufficient to pay all
costs of such restoration work, Landlord shall pay the difference. Tenant shall
not be liable for any additional sum.
14.4 Continuance of Obligations. In the event of any termination of this
--------------------------
Lease or any part thereof as a result of any such Proceedings, Tenant shall pay
to Landlord all Base Rent, all Additional Rent and other charges payable
hereunder with respect to that portion of the Demised Premises so taken in such
Proceedings with respect to which this Lease shall have terminated justly
apportioned to the date of such termination. From and after the date of vesting
of possession in such Proceedings, Tenant shall continue to pay the Base Rent,
Additional Rent and other charges payable hereunder as in this Lease provided to
be paid by Tenant, subject to an abatement of a just and proportionate part of
the Base Rent according to the extent and nature of such taking as provided for
in Sections 14.3 and 14.5 hereof in respect to the Demised Premises remaining
after such taking.
14.5 Adjustment of Rent. In the event of a partial taking of the Demised
------------------
Premises under Sections 14.2 or 14.3 hereof in which case this Lease is not
terminated, the Base Rent for the period from and after the date of vesting of
title in such Proceedings, until the termination of this Lease, shall be reduced
to a sum equal to the product of the Base Rent provided for herein multiplied by
a fraction, the numerator of which is the value of the Demised Premises after
such taking and after the same shall have been restored to a complete
architectural unit, and the denominator of which is the value of the Demised
Premises prior to such taking.
ARTICLE XV
ASSIGNMENT, SUBLETTING, ETC.
15.1 Restriction on Transfer. Tenant shall not sublet the Demised
-----------------------
Premises or any portion thereof, nor assign, mortgage, pledge, transfer or
otherwise encumber or dispose of this
45
Lease or any interest therein, or in any manner assign, mortgage, pledge,
transfer or otherwise encumber or dispose of its interest or estate in the
Demised Premises or any portion thereof without obtaining Landlord's prior
written consent in each and every instance. For purposes of this Article XV, an
assignment shall not be deemed to include any sale or similar transfer of any
stock in Tenant so long as Tenant's stock is publicly traded.. Landlord's
consent to an assignment or subletting under this Section 15.1 shall not be
unreasonably withheld or delayed, provided the following conditions are complied
with:
(a) Any assignment of this Lease shall transfer to the assignee all of
Tenant's right, title and interest in this Lease and all of Tenant's estate or
interest in the Demised Premises.
(b) At the time of any assignment or subletting and at the time Tenant
requests Landlord's written consent thereto, this Lease must be in full force
and effect without any uncured Event of Default or Incipient Default thereunder
on the part of Tenant.
(c) Any such assignee shall assume, by written, recordable instrument,
in form and content satisfactory to Landlord, the due performance of all of
Tenant's obligations under this Lease from and after the time of the effective
date of the assignment, and such assumption agreement shall state that the same
is made by the assignee for the express benefit of Landlord as a third party
beneficiary thereof. A copy of the assignment and assumption agreement, both in
form and content satisfactory to Landlord, fully executed and acknowledged by
assignee, together with a certified copy of a properly executed corporate
resolution (if the assignee be a corporation) authorizing the execution and
delivery of such assumption agreement, shall be sent to Landlord ten (10) days
after the effective date of such assignment.
(d) In the case of a subletting, a copy of any sublease fully executed
and acknowledged by Tenant and the sublessee shall be mailed to Landlord ten
(10) days after to the effective date of such subletting, which sublease shall
be in form and content acceptable to Landlord.
(e) Each sublease permitted under this Section 15.1 shall contain
provisions to the effect that (i) such sublease is only for actual use and
occupancy by the sublessee; (ii) such sublease is subject and subordinate to all
of the terms, covenants and conditions of this Lease and to all of the rights of
Landlord thereunder, and (iii) in the event this Lease shall terminate before
the expiration of such sublease, the sublessee thereunder will, at Landlord's
option, attorn to Landlord and waive any rights the sublessee may have to
terminate the sublease or to surrender possession thereunder as a result of the
termination of this Lease.
(f) Any and all compensation paid to Tenant, in whatever form, in
consideration of such assignment or subletting, including any differential
between Base Rent and rent paid to Tenant by such assignee or subtenant, or any
assignment fee or any other amount which can be attributed to the assignment or
subletting, shall be paid directly by such assignee or subtenant to Landlord;
provided, however, that Tenant shall Tenant be entitled to deduct from such
compensation the amount of any (i) leasing commissions it has incurred in
connection with such assignment or subletting, (ii) the direct cost of
improvements constructed and paid for by Tenant in connection with such
assignment or subletting, provided such improvements have been
46
made in accordance with the terms of this Lease (including, without limitation,
requirements for Landlord's approval and that they be completed on a lien-free
basis), and (iii) the actual cost of similar concessions actually made by Tenant
in connection with such assignment or subletting.
(g) Tenant agrees to pay on behalf of Landlord any and all
reasonable costs of Landlord, including reasonable attorneys' fees paid or
payable to outside counsel, occasioned by such assignment or subletting, but not
to exceed One Thousand Dollars ($1,000.00).
15.2 Transfer to Affiliates; Sale or Merger. Notwithstanding the
--------------------------------------
foregoing provisions of Section 15.1, Tenant shall be permitted to assign or
sublet the Demised Premises or Tenant's rights under this Lease, without
Landlord's prior consent, to (i) an entity in which Tenant, directly or
indirectly, owns or beneficially controls more than fifty percent (50%) of the
outstanding voting interests, (ii) an entity which directly or indirectly owns
or beneficially controls more than fifty percent (50%) of the outstanding voting
interests of Tenant, (iii) an entity, the outstanding voting interests of which
are directly or indirectly owned by the same persons or entities which own or
beneficially control the outstanding voting interests of Tenant (each, a "Sister
Entity"), (iv) an entity in which a Sister Entity owns or beneficially controls
more than fifty percent (50%) of the outstanding voting interests, or (v) an
entity deemed to have been assigned the Lease through a sale of Tenant's stock
or assets or through merger with Tenant, provided, that in any such case Tenant
shall be required to give Landlord written notice of that assignment or
subletting within thirty (30) days thereafter, including written evidence of the
identity of the assignee or sublessee (actual or deemed) and its affiliation
with Tenant. Tenant shall not be entitled to share in any profits Tenant might
obtain as a result of an authorized assignment or sublet of the Demised Premises
and Tenant shall arrange for any such profits which might otherwise be paid to
Tenant by such assignee or sublessee to be paid directly to Landlord.
15.3 Restriction Against Further Assignment. Notwithstanding anything
---------------------------------------
contained in this Lease to the contrary and notwithstanding any consent by
Landlord to any sublease of the Demised Premises or any portion thereof or to
any assignment of this Lease or of Tenant's interest or estate in the Demised
Premises, except as provided in Section 15.2 above, no sublessee shall assign
its sublease nor further sublease the Demised Premises or any portion thereof,
and no assignee shall further assign its interest in this Lease or its interest
or estate in the Demised Premises or any portion thereof; nor sublease the
Demised Premises or any portion thereof; without Landlord's prior written
consent in each and every instance, which consent shall not be unreasonably
withheld or unduly delayed. No such assignment or subleasing shall relieve
Tenant from any of Tenant's obligations contained in this Lease.
15.4 Tenant's Failure to Comply. Tenant's failure to comply with all of
--------------------------
the foregoing provisions and conditions of this Article XV shall, at Landlord's
option, render any purported assignment or subletting null and void and of no
force and effect.
47
ARTICLE XVI
SUBORDINATION, NONDISTURBANCE,
NOTICE TO MORTGAGEE AND ATTORNMENT
16.1 Subordination by Tenant. This Lease and all rights of Tenant
-----------------------
therein and all interest or estate of Tenant in the Demised Premises or any
portion thereof shall be subject and subordinate to the lien of any mortgage,
deed of trust, security instrument or other document of like nature
(collectively, "Mortgage"), which at any time after the date of this Lease may
be placed upon the Demised Premises or any portion thereof, and to each and
every advance made under any such Mortgage. Tenant agrees at any time hereafter,
to execute and deliver to Landlord any instruments, releases or other documents
that may be reasonably required for the purpose of subjecting and subordinating
this Lease to the lien of any such Mortgage. It is agreed, nevertheless, that so
long as an Event of Default does not exist, that such subordination agreement or
other instrument, release or document shall not interfere with, hinder or molest
Tenant's right to quiet enjoyment under this Lease, shall not modify the terms
of this Lease, nor the right of Tenant to continue to occupy the Demised
Premises and all portions thereof, and to conduct its business thereon in
accordance with the covenants, conditions, provisions, terms and agreements of
this Lease. The lien of any such Mortgage shall not cover Tenant's trade
fixtures or other personal property located in or on the Demised Premises.
Landlord shall deliver to Tenant a commercially reasonably nondisturbance
agreement executed by all lenders having a lien on the Demised Premises on the
Commencement Date as a condition precedent in Tenant's favor, and from each
future lender as a condition to Tenant's subordination or attornment hereunder.
16.2 Landlord's Default. In the event of any act or omission of Landlord
------------------
constituting a default by Landlord, other than Landlord's failure to have the
Improvements substantially completed on a timely basis as provided in Article II
and to make the same fully available to Tenant as therein provided, Tenant shall
not exercise any remedy until Tenant has given Landlord and any mortgagee whose
name and address have been previously provided to Tenant prior written notice of
such act or omission and until a 30-day period of time to allow Landlord or the
mortgagee to remedy such act or omission shall have elapsed following the giving
of such notice; provided, however, if such act or omission cannot with due
diligence and in good faith be remedied within such 30-day period, Landlord
and/or mortgagee shall be allowed such further period of time as may be
reasonably necessary provided that it shall have commenced remedying the same
with due diligence and in good faith within said 30-day period. In the event any
act or omission of Landlord which constitutes a Landlord's default hereunder
results in an immediate threat of bodily harm to Tenant's employees, agents or
invitees or damage to Tenant's property, or exposes Tenant to criminal
liability, Tenant may proceed to cure the default without prior notice to
Landlord or its mortgagee; provided, however, in that event Tenant shall give
written notice to Landlord and its mortgagee as soon as possible after
commencement of such cure. Nothing herein contained shall be construed or
interpreted as requiring any mortgagee to remedy such act or omission.
16.3 Attornment. Subject to Section 16.1 above, if any mortgagee shall
----------
succeed to the rights of Landlord under this Lease or to ownership of the
Demised Premises, whether through
48
possession or foreclosure or the delivery of a deed to the Demised Premises,
then, upon the written request of such mortgagee so succeeding to Landlord's
rights hereunder, Tenant shall attorn to and recognize such mortgagee as
Tenant's landlord under this Lease, and shall promptly execute and deliver any
instrument that such mortgagee may reasonably request to evidence such
attornment (whether before or after making of the mortgage). In the event of any
other transfer of Landlord's interest hereunder, upon the written request of the
transferee and Landlord, Tenant shall attorn to and recognize such transferee as
Tenant's landlord under this Lease and shall promptly execute and deliver any
instrument that such transferee and Landlord may reasonably request to evidence
such attornment.
ARTICLE XVII
SIGNS
Tenant shall be allowed prominent Building and monument signage during the
Term of this Lease, provided that such sign or signs (a) do not cause any
structural damage or other material damage to the Building; (b) comply with and
do not violate applicable governmental laws, ordinances, rules or regulations;
(c) comply with and do not violate any existing restrictions affecting the
Demised Premises and which are of a matter of record as of the date of this
Lease; (d) are compatible with the architecture of the Building and the
landscaped area adjacent thereto, and (e) the design, size and location of such
signs have been mutually approved by Landlord and Tenant, which approval shall
not be unreasonably withheld or delayed. The cost of such signs shall not be
funded from the Tenant Improvement Allowance and shall be entirely Tenant's
separate expense, except as provided in Section 2.10(c).
ARTICLE XVIII
FINANCIAL STATEMENTS OF TENANT
From time to time, at Landlord's request, Tenant shall provide Landlord
with Tenant's most recent financial statements in form and content reasonably
satisfactory to Landlord and Landlord's lenders (which, if Tenant is an entity
which files periodic financial disclosures to securities regulatory authorities,
shall be those which are periodically filed with those authorities). Landlord
may provide copies of those financial statements to current and prospective
lenders, investors and buyers, identified in writing to Tenant, for examination
and review. Landlord shall keep all such financial statements strictly
confidential and may provide copies of such financial statements to such other
parties only upon receiving in return a covenant from each recipient that such
recipient shall keep the financial statements confidential except with the prior
written consent of Tenant.
ARTICLE XIX
CHANGES AND ALTERATIONS
Tenant shall have the right at any time, and from time to time during the
Term of this Lease, to make such changes and alterations, structural or
otherwise, to the Building,
49
improvements and fixtures hereafter erected on the Demised Premises as Tenant
shall deem necessary or desirable in connection with the requirements of its
business, which changes and alterations (other than changes or alterations of
Tenant's movable trade fixtures and equipment) shall be made in all cases
subject to the following conditions, which Tenant covenants to observe and
perform:
(a) Permits. No change or alteration shall be undertaken until Tenant shall
-------
have procured and paid for, so far as the same may be required from time to
time, all municipal, state and federal permits and authorizations of the various
governmental bodies and departments having jurisdiction thereof; and Landlord
agrees to join in the application for such permits or authorizations whenever
such action is necessary, all at Tenant's sole cost and expense, provided such
applications do not cause Landlord to become liable for any cost, fees or
expenses.
(b) Compliance with Plans and Specifications. Before commencement of any
----------------------------------------
change, alteration, restoration or construction (hereinafter sometimes referred
to as "Work") involving in the aggregate an estimated cost of more than Fifty
Thousand Dollars ($50,000.00) or which, in Landlord's reasonable judgment, would
materially alter the mechanical, structural or electrical components of the
Demised Premises, Tenant shall (i) furnish Landlord with detailed plans and
specifications of the proposed change or alteration; (ii) obtain Landlord's
prior written consent, which consent shall not be unreasonably withheld; (iii)
obtain Landlord's prior written approval of a licensed architect or licensed
professional engineer selected and paid for by Tenant who shall approve any such
work (hereinafter referred to as "Alterations Architect or Engineer"); (iv)
obtain Landlord's prior written approval (which shall not be unreasonably
withheld or delayed) of detailed plans and specifications prepared and approved
in writing by said Alterations Architect or Engineer and of each amendment and
change thereto, and (v) for any Work involving in the aggregate an estimated
cost of more than One Hundred Thousand Dollars ($100,000.00), furnish to
Landlord a surety company performance bond issued by a surety company licensed
to do business in the state in which the Demised Premises are located and
reasonably acceptable to Landlord in an amount equal to the estimated cost of
such work guaranteeing the completion thereof within a reasonable time
thereafter (1) free and clear of all mechanic's liens or other liens,
encumbrances, security interests and charges, and (2) in accordance with the
plans and specifications approved by Landlord. Tenant shall retain Contractor as
the general contractor for the build-out of any portion of the Demised Premises
which are left in "shell" condition as of the Commencement Date, provided
Contractor's contract is on substantially the same terms as described in Section
2.12 of this Lease.
(c) Value Maintained. Any change or alteration shall, when completed, be of
----------------
such character so as not to reduce the value of the Demised Premises or the
Building to which such change or alteration is made below its value or utility
to Landlord immediately before such change or alteration, nor shall such change
or alteration reduce the area or cubic content of the Building to use without
Landlord's express written consent.
(d) Compliance with Laws. All Work done in connection with any change or
--------------------
alteration shall be done promptly and in a good and workmanlike manner and in
compliance with all building and zoning laws of the place in which the Demised
Premises are situated, and in compliance with all laws, ordinances, orders,
rules, regulations and requirements of all federal,
50
state and municipal governments and appropriate departments, commissions, boards
and officers thereof; and in accordance with the orders, rules and regulations
of the Board of Fire Underwriters where the Demised Premises are located or any
other body exercising similar functions. The cost of any such change or
alteration shall be paid in cash so that the Demised Premises and all portions
thereof shall at all times be free of liens for labor and materials supplied to
the Demised Premises or any portion thereof. The Work or any change or
alteration shall be prosecuted with reasonable dispatch, delays due to strikes,
lockouts, acts of God, inability to obtain labor or materials, governmental
restrictions or similar causes beyond the control of Tenant excepted. Tenant or
Tenant's contractor or subcontractor shall obtain and maintain at its sole cost
and expense during the performance of the Work workers' compensation insurance
covering all persons employed in connection with the Work and with respect to
which death or injury claims could be asserted against Landlord or Tenant or
against the Demised Premises or any interest therein, together with
comprehensive general liability insurance for the mutual benefit of Landlord and
Tenant with limits of not less than One Million Dollars ($1,000,000.00) in the
event of injury to one person, Three Million Dollars ($3,000,000.00) in respect
to any one accident or occurrence, and Five Hundred Thousand Dollars
($500,000.00) for property damage, and the fire insurance with "extended
coverage" endorsement required by Section 6.1 hereof shall be supplemented with
"builder's risk" insurance on a completed value form or other comparable
coverage on the Work if the cost of such work will be in excess of Fifty
Thousand Dollars ($50,000.00). All such insurance shall be in a company or
companies authorized to do business in the state in which the Demised Premises
are located and reasonably satisfactory to Landlord, and all such policies of
insurance or certificates of insurance shall be delivered to Landlord endorsed
"Premium Paid" by the company or agency issuing the same, or with other evidence
of payment of the premium satisfactory to Landlord.
(e) Property of Landlord. All improvements and alterations (other than
--------------------
Tenant's movable trade fixtures, furniture and equipment) made or installed by
Tenant shall, immediately upon completion or installation thereof, become the
property of Landlord without payment therefor by Landlord, and shall be
surrendered to Landlord on the expiration of the Term of this Lease unless and
to the extent Tenant is required or permitted to remove the same upon
termination or expiration of the Term as provided in subsection (g), below, in
which event they shall become the property of Tenant, provided that Tenant shall
be required to restore the Demised Premises in accordance with Section 19(g),
below.
(f) Location of Improvements. No change, alteration, restoration or new
------------------------
construction shall be in, or connect the Improvements with, any property,
building or other improvement located outside the boundaries of the parcel of
land described in Exhibit "A" attached hereto, nor shall the same obstruct or
-----------
interfere with any existing easement.
(g) Removal of Improvements. As a condition to granting approval for any
-----------------------
changes or alterations, Landlord may require Tenant, by written notice to Tenant
given at or prior to the time of granting such approval, to remove any
improvements, additions or installations installed by Tenant in the Demised
Premises at Tenant's sole cost and expense at the end of the term of this Lease
and repair and restore any damage caused by the installation and removal of such
improvements, additions, or installations; provided, however, the only
improvements, additions or installations which Tenant shall remove shall be
those specified in such notice. All
51
improvements, additions or installations installed by Tenant which did not
require Landlord's prior approval shall be removed by Tenant as provided for in
this Section 19(g), unless such improvements, additions or installations do not
adversely affect Landlord's ability to re-lease the Demised Premises. Prior to
making any improvements, additions or alterations that do not require Landlord's
approval, Tenant may request Landlord to specify whether Landlord considers such
improvements, additions or installations to be of the type that would adversely
affect Landlord's ability to re-lease the Demised Premises if not removed by
Tenant Notwithstanding anything to the contrary contained herein, Tenant shall
have the right to remove any improvements, additions or alterations installed by
Tenant and at its expense (specifically not including any of the original Tenant
Improvements) upon expiration or earlier termination of the Term so long as
Tenant repairs any damage caused by such removal at its sole cost and expense
and returns the applicable portion of the Demised Premises to its original
condition prior to the installation of such improvement, addition or alteration.
(h) Reasonable Consent. All consents required of Landlord under this
------------------
Article XIX shall not be unreasonably withheld by Landlord.
(i) Notice to Landlord. Regardless of whether Landlord's consent is
------------------
required to any change or alteration to the Demised Premises made or to be made
by Tenant, such changes or alterations shall not be commenced until two (2)
business days notice after Landlord has received notice from Tenant stating the
date such changes or alterations are to commence so that Landlord can post and
record an appropriate notice of nonresponsibility.
ARTICLE XX
MISCELLANEOUS PROVISIONS
20.1 Entry by Landlord. Tenant agrees to permit Landlord and authorized
-----------------
representatives of Landlord to enter upon the Demised Premises at all reasonable
times during ordinary business hours upon at least two (2) business day's
advance notice to Tenant for the purpose of inspecting the same and making any
repairs required to be made thereto by Landlord under the terms of this Lease,
or as required to be made thereto by Tenant under the terms of this Lease
provided that Landlord shall have first given written notice to Tenant to make
such repairs and Tenant shall have failed to make such repairs within thirty
(30) days after notice; provided, however, Tenant shall be allowed such further
period of time as may be provided in Section 12.1(b); and, provided further,
that Landlord shall be allowed to enter upon the Demised Premises during an
emergency. Nothing herein contained shall imply any duty upon the part of
Landlord to do any such work which, under any provision of this Lease, Tenant
may be required to perform, and the performance thereof by Landlord shall not
constitute a waiver of Tenant's default in failing to perform the same. Landlord
may, during the progress of any work, keep and store upon the Demised Premises
all necessary materials, tools and equipment in areas designated by Tenant.
Landlord shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Tenant by reason of making such
repairs or the performance of any such work in or about the Demised Premises or
on account of bringing material, supplies and equipment into, upon or through
the Demised Premises during the course thereof, and the obligations of Tenant
under this Lease shall not be thereby affected in any
52
manner whatsoever, except that Landlord shall use its best efforts to not
unreasonably interfere with Tenant's use of the Demised Premises, or any portion
thereof; by reason of Landlord's making such repairs or the performance of any
such work in or about the Demised Premises or on account of bringing materials,
supplies and equipment into, upon or through the Demised Premises during the
course thereof. Tenant may accompany Landlord on any inspection or entry by
Landlord.
20.2 Exhibition of Demised Premises. Landlord is hereby given the right
------------------------------
during usual business hours upon at least two (2) business days' advance notice
to Tenant at any time during the Term of this Lease to enter upon the Demised
Premises and to exhibit the same for the purpose of mortgaging or selling the
same. During the final year of the Term, Landlord shall be entitled (i) to
display on the Demised Premises in such manner as to not unreasonably interfere
with Tenant's business, signs reasonably approved as to design and location by
Tenant indicating that the Demised Premises are for rent and/or sale and
suitably identifying Landlord or its agent, and (ii) upon at least two (2)
business days' advance notice to Tenant, to exhibit the Demised Premises to
prospective tenants.
20.3 Indemnifications by Tenant. To the fullest extent allowed by law,
--------------------------
Tenant shall at all times indemnify, defend and hold Landlord harmless against
and from any and all claims by or on behalf of any person or persons, firm or
firms, corporation or corporations, arising from the conduct or management, or
from any work or things whatsoever done in or about the Demised Premises during
the Term of this Lease, other than as a result of the negligence or willful
misconduct of Landlord or its officers, agents, employees, contractors or
subcontractors, or as a result of Landlord's breach of its obligations under
this Lease, and Tenant shall further indemnify, defend and hold Landlord
harmless against and from any and all claims arising during the Term of this
Lease from any condition of the Improvements (other than defects in construction
of the initial Improvements or other items Landlord is required to repair or
maintain), or of any passageways or space therein, other than as a result of the
negligence or willful misconduct of Landlord or its officers, employees, agents,
contractors or subcontractors or as a result of Landlord's breach of its
obligations under this Lease, or arising from any act or gross negligence of
Tenant, its agents, servants, employees or licenses, or arising from any
accident, injury or damage whatsoever caused to any person, firm or corporation
occurring during the Term of this Lease in or about the Demised Premises, other
than as a result of the negligence or willful misconduct of Landlord or its
officers, employees, agents, contractors or subcontractors, or as a result of
Landlord's breach of its obligations under this Lease, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about any such
claim or action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, covenants to defend such action or proceeding by counsel
reasonably satisfactory to Landlord subject to the requirements of Tenant's
insurer. Tenant's obligations under this Section 20.3 shall be insured by
contractual liability endorsement on Tenant's policies of insurance required
under the provisions of Section 6.2 hereof to the extent reasonably obtainable.
20.4 Notices. All notices, demands and requests which may be or are
-------
required to be given, demanded or requested by either party to the other shall
be in writing, and shall be sent by United States registered or certified mail,
postage prepaid, by an independent overnight courier
53
service marked for next business day delivery, or by telephonic facsimile
transmission with automatic written time and date confirmation of delivery
transmitted between the hours of 9:00 a.m. and 5:00 p.m. (time zone of
recipient, but only if confirmed within two (2) business days by receipt of a
mailed or personally delivered copy), and addressed as follows:
To Landlord:
Kilroy Realty, L.P.
2250 East Imperial Highway, Suite 1200
El Segundo, California 92045
Attention: Nadine Kirk
Facsimile: (310) 322-8790
with copy to:
Kilroy Realty, L.P.
2250 East Imperial Highway, Suite 1200
El Segundo, California 92045
Attention: Jeff Hawken
Facsimile: (310) 322-5981
with an additional copy to:
Kilroy Realty, L.P.
4365 Executive Drive, Suite 850
San Diego, California 92121
Attention: Steve Scott
Facsimile: (619) 550-1935
To Tenant:
Applied Micro Circuits Corporation
6920 Sequence Drive
San Diego, California 92121-2793
Attention: Mr. Joel 0. Holliday
Facsimile: (619) 535-6800
With a copy to:
David B. Marino
The Irving Hughes Group, Inc.
501 West Broadway, Suite 2020
San Diego, California 92101
Facsimile: (619) 238-1025
54
or at such other place as a party hereto may from time to time designate by
written notice thereof to the other. Notices, demands and requests which shall
be served upon Landlord by Tenant, or upon Tenant by Landlord, in the manner
aforesaid, shall be deemed received three (3) days after delivery to United
States mail, one (1) business day after delivery to an overnight courier
service, or at the time such notice, demand or request shall be transmitted by
facsimile (if confirmed as written above).
20.5 Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon
---------------
paying the Base Rent and Additional Rent and upon observing and keeping the
covenants, agreements and conditions of this Lease on its part to be kept,
observed and performed, shall lawfully and quietly hold, occupy and enjoy the
Demised Premises (subject to the provisions of this Lease) during the Term of
this Lease without hindrance or molestation by Landlord or by any person or
persons claiming under Landlord.
20.6 Landlord's Continuing Obligations. The term "Landlord," as used in
---------------------------------
this Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the fee of the Demised Premises, and in the event of any
transfer or transfers or conveyance, the then grantor shall be automatically
freed and relieved from and after the date of such transfer or conveyance of all
liability as respects the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed, provided
that any funds in the hands of such landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be turned over to the
grantee, and any amount then due and payable to Tenant by Landlord or the then
grantor under any provision of this Lease, shall be paid to Tenant, and further
provided that the new Landlord expressly assumes in writing for the benefit of
Tenant all obligations of Landlord under this Lease. The covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the aforesaid, be binding on Landlord's successors and assigns during and in
respect of their respective successive periods of ownership. Nothing herein
contained shall be construed as relieving Landlord of its obligations under
Article II of this Lease or releasing Landlord from any obligation to complete
the cure of any breach by Landlord during the period of its ownership of the
Demised Premises. However, Tenant agrees to look solely to Landlord's interest
in the Land, the Building and the Improvements for the recovery of any judgment
from Landlord, it being agreed that, if Landlord is a partnership, Landlord's
partners, whether general or limited, or if Landlord is a corporation, its
directors, officers and shareholders, shall never be personally liable for any
such judgments or damages. Notwithstanding the foregoing, Landlord and its
general partner shall be fully and personally liable for claims by Tenant
relating to Landlord's obligations under Sections 2.1 (The Improvements), 2.6
(Liquidated Damages for Delay in Substantial Completion) and 2.9 (Condition of
Demised Premises; Limited Warranty).
20.7 Estoppel. Tenant shall, without charge at any time and from time to
--------
time, within ten (10) business days after written request by Landlord, certify
by written instrument, duly executed, acknowledged and delivered to any
mortgagee, assignee of a mortgagee, proposed mortgagee, purchaser or proposed
purchaser, or any other person dealing with Landlord or the Demised Premises:
55
(a) That this Lease (and all guaranties, if any) is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect, as modified and stating the modifications);
(b) The dates to which the Base Rent or Additional Rent have been
paid in advance.
(c) Whether or not there are then existing any breaches or defaults
by such party or the other party known by such party under any of the covenants,
conditions, provisions, terms or agreements of this Lease, and specifying such
breach or default, if any, or any set-offs or defenses against the enforcement
of any covenant, condition, provision, term or agreement of this Lease (or of
any guaranties) upon the part of Landlord or Tenant (or any guarantor), as the
case may be, to be performed or complied with (and, if so, specifying the same
and the steps being taken to remedy the same); and
(d) Such other statements or certificates as Landlord or any
mortgagee may reasonably request.
It is the intention of the parties hereto that any statement delivered
pursuant to this Section 20.7 may be relied upon by any of such parties dealing
with Landlord or the Demised Premises. Failure by Tenant to timely respond to
such request shall be deemed Tenant's certification of the accuracy of such
matters.
20.8 Delivery of Corporate Documents. In the event that Tenant is a
-------------------------------
corporation or similar business entity (e.g., limited partnership, limited
liability company or limited liability partnership), Tenant shall, without
charge to Landlord, at any time and from time to time within ten (10) business
days after written request by Landlord, deliver to Landlord, in connection with
any proposed sale or mortgage of the Demised Premises, the following instruments
and documents:
(a) Certificate of Good Standing in the state of incorporation of
Tenant and in the state in which the Demised Premises are located issued by the
appropriate state authority and bearing a current date;
(b) A copy of Tenant's articles of incorporation and by-laws (or
partnership or operating agreement, as the case may be) and any amendments or
modifications thereof certified by the secretary or assistant secretary (or
managing partner or member, as the case may be) of Tenant;
(c) A written and certified confirmation from the secretary or
assistant secretary (or managing partner or member, as the case may be) that (i)
this Lease has been duly authorized by all necessary corporate action and is a
valid and binding agreement enforceable in accordance with its terms; and (ii)
Tenant is a duly organized and validly existing corporation under the laws of
its state of incorporation, is duly authorized to carry on its business, and is
in good standing under the laws of the state in which the Demised Premises are
located, if different from the state of incorporation.
56
20.9 Memorandum of Lease. Concurrently with their execution and delivery
-------------------
of this Lease, the parties shall execute, acknowledge and deliver to each other,
a Memorandum of Lease in the form attached hereto as "Exhibit C" and made a part
---------
hereof. Such Memorandum of Lease may be recorded by either party' at their sole
cost and expense.
20.10 Severability. If any covenant, condition, provision, term or
------------
agreement of this Lease shall, to any extent, be held invalid or unenforceable,
the remaining covenants, conditions, provisions, terms and agreements of this
Lease shall not be affected thereby, but each covenant, condition, provisions,
term or agreement of this Lease shall be valid and in force to the fullest
extent permitted by law.
20.11 Successors and Assigns. The covenants and agreements herein contained
----------------------
shall bind and inure to the benefit of Landlord, its successors and assigns, and
Tenant and its permitted successors and assigns.
20.12 Captions. The caption of each article of this Lease is for
--------
convenience and reference only, and in no way defines, limits or describes the
scope or intent of such article or of this Lease.
20.13 Relationship of Parties. This Lease does not create the relationship
-----------------------
of principal and agent, partnership, joint venture, or any association or
relationship between Landlord and Tenant, the sole relationship between Landlord
and Tenant being that of landlord and tenant.
20.14 Entire Agreement. All preliminary and contemporaneous negotiations
----------------
are merged into and incorporated in this Lease. This Lease, together with the
exhibits attached hereto, contains the entire agreement between the parties and
shall not be modified or amended in any manner except by any instrument in
writing executed by the parties hereto.
20.15 No Merger. There shall be no merger of this Lease or of the leasehold
---------
estate created by this Lease with any other estate or interest in the Demised
Premises by reason of the fact that the same person, firm, corporation or other
entity may acquire, hold or own, directly or indirectly, (a) this Lease or the
leasehold interest created by this Lease or any interest therein, and (b) any
such other estate or interest in the Demised Premises, or any portion thereof.
No such merger shall occur unless and until all persons, firms, corporations or
other entities having an interest (including a security interest) in (1) this
Lease or the leasehold estate created thereby, and (2) any such other estate or
interest in the Demised Premises, or any portion thereof; shall join in a
written instrument expressly affecting such merger and shall duly record the
same.
20.16 Possession and Use. Tenant acknowledges that the Demised Premises are
------------------
the property of Landlord and that Tenant has only the right to possession and
use thereof upon the covenants, conditions, provisions, terms and agreements set
forth in this Lease.
20.17 Surrender of Demised Premises. Subject to the other provisions of
-----------------------------
this Lease, at the expiration of the Term of this Lease, Tenant shall surrender
the Demised Premises in the same condition as they were in upon delivery of
possession thereto at the Commencement Date,
57
reasonable wear and tear, casualty and condemnation excepted, and shall
surrender all keys to the Demised Premises to Landlord at the place then fixed
for the payment of Base Rent, and shall inform Landlord of all combinations on
locks, safes and vaults, if any. Tenant shall at such time remove all of its
property therefrom and all alterations and improvements placed thereon by Tenant
if so requested by Landlord, or otherwise allowed, subject to Sections 19(e) and
(g). Tenant shall repair any damage to the Demised Premises caused by such
removal, and any and all such property not so removed shall, at Landlord's
option, become the exclusive property of Landlord or be disposed of by Landlord,
at Tenant's cost and expense, without further notice to or demand upon Tenant,
subject to applicable law and Sections 19(e) and (g).
All property of Tenant not removed on or before the last day of the Term of
this Lease shall be deemed abandoned in accordance with, and subject to,
applicable law.
20.18 Holding Over. In the event Tenant remains in possession of the
------------
Demised Premises after expiration of this Lease and without the execution of a
new lease, it shall be deemed to be occupying the Demised Premises as a tenant
from month-to-month, subject to all the provisions, conditions and obligations
of this Lease insofar as the same can be applicable to a month-to-month tenancy,
except that the Base Rent shall be escalated to one hundred and twenty-five
percent (125%) of the then current Base Rent for the Demised Premises for the
first three (3) months of such tenancy and one hundred fifty percent (150%) of
such amount thereafter, and from and after such three (3) month period, Tenant
shall indemnify, defend and hold Landlord harmless against loss or liability
resulting from the delay by Tenant in so surrendering the Demised Premises,
including without limitation any claim made by any succeeding occupant founded
on such delay. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease.
20.19 Survival. All obligations of either party (together with interest or
--------
money obligations at the Maximum Rate of Interest) accruing prior to expiration
of the Term of this Lease shall survive the expiration or other termination of
this Lease.
20.20 Broker's Commission. Tenant and Landlord represent that they have
-------------------
dealt only with The Irving Hughes Group, Inc., as broker in connection with this
Lease. Landlord shall be responsible for paying the commissions owing to such
brokers under a separate written agreement between Landlord and such broker.
Tenant and Landlord will indemnify, defend and hold the other harmless from and
against any loss, cost or expense, including, but not limited to, reasonable
attorneys' fees and court costs, resulting from any claim for a fee or
commission by any other broker or finder resulting from their own actions.
20.21 Applicable Law. This Lease shall be governed and interpreted in
--------------
accordance with the laws of the State of California.
20.22 Counterparts. This Lease may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute a single instrument.
58
20.23 Attorney's Fees. In the event of any litigation, arbitration,
---------------
mediation or any other action taken by either party to this Lease to enforce any
provision of this Lease, enforce any remedy available upon default under this
Lease, or seek a declaration of the rights of a party under this Lease, the
prevailing party shall be entitled to recover in such action such attorneys'
fees and costs as may be reasonably incurred, including, without limitation, the
costs of reasonable investigation, preparation and professional or expert
consultation, travel expenses, costs on appeal, court reporter fees and
expenses, incurred by reason of such litigation, arbitration or other action.
All other attorneys' fees and cost relating to this Agreement and the
transactions described herein shall be borne by the party incurring the same.
IN WITNESS WHEREOF, each of the parties hereto have caused this Lease to be
duly executed as of the day and year first above-written.
LANDLORD:
KILROY REALTY, L.P.,
a Delaware limited partnership
By: Kilroy Realty Corporation,
a Maryland corporation
Its General Partner
By: [SIGNATURE ILLEGIBLE] By:______________________
----------------------------
Name:__________________________ Name:____________________
Its:______________________ Its: _______________
TENANT:
APPLIED MICRO CIRCUITS CORPORATION,
a Delaware corporation
By: /s/ Joel O. Holiday
----------------------------
Joel O. Holliday
Its: Vice President, Finance and Administration
By: /s/ David M. Rickey
----------------------------
David M. Rickey
Its: President & CEO
59
EXHIBIT "A"
LEGAL DESCRIPTION OF LAND
LEGAL DESCRIPTION
BEING A PORTION OF PARCELS 3 AND 4 OF PARCEL MAP NO. 17755, ON FILE IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN THE CITY, OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA. MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
EGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 3; THENCE ALONG THE WESTERLY
LINE OF SAID PARCEL 3
1. NORTH 04 degrees 43'00" EAST 40.06 FEET; THENCE
2. NORTH 00 degrees 19'33" WEST 199.65 FEET; THENCE LEAVING SAID WESTERLY
LINE
3. NORTH 89 degrees 57'12" EAST 57.50 FEET; THENCE
4. NORTH 00 degrees 19'33" WEST 99.68 FEET: THENCE
5. NORTH 86 degrees 40'27" WEST 31.29 FEET; THENCE
6. NORTH 00 degrees 00'00" EAST 23.80 FEET; THENCE
7. SOUTH 85 degrees 37'38" EAST 274.92 FEET TO A POINT ON THE WESTERLY LINE
OF SEQUENCE DRIVE AS DEDICATED
PER MAP NO. 12685, ON FILE IN
THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY,
IN THE CITY OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA. POINT ALSO LIES ON
THE ARC OF A 1573.00 FOOT
RADIUS CURVE, CONCAVE EASTERLY,
A RADIAL TO TO SAID POINT BEARS
NORTH 87 DEGREES 02' 12" WEST:
THENCE ALONG THE ARC OF SAID
CURVE AND SAID WESTERLY LINE
8. SOUTHERLY 318.25 FEET THROUGH A CENTRAL ANGLE OF 11
DEGREES 35'31"; THENCE LEAVING
SAID WESTERLY LINE IN A NON-
TANGENT DIRECTION
9. SOUTH 86 degrees 32'09" WEST 380.84 FEET TO THE POINT OF BEGINNING.
CONTAINS 2.69 AC. MORE OR LESS.
/s/ Mark J. Rowson Jan 25, 1999
----------------------------------------------
MARK J. ROWSON, R.C.E. 30836 DATE
[SEAL] (Registration expires 3-31-2000)
EXHIBIT A
---------
EXHIBIT "B"
SITE PLAN
[TO BE ATTACHED]
EXHIBIT B
---------
EXHIBIT "C"
MEMORANDUM OF LEASE
RECORDING REQUESTED BY: )
AND WHEN RECORDED RETURN TO: )
)
Applied Micro Circuits Corporation )
c/o Luce, Forward, Hamilton & Scripps, LLP)
600 West Broadway, Suite 2600 )
San Diego, California 92101 )
Attn: David Hymer, Esq. )
- -------------------------------------------
(Space Above For Recorder's Use Only)
MEMORANDUM OF LEASE
1. This Memorandum of Lease is made as of the ______ day of __________,
1999, by and between KILROY REALTY, L.P., a Delaware limited partnership
("Landlord"), and APPLIED MICRO CIRCUITS CORPORATION, a Delaware corporation
("Tenant"). By this Memorandum, for good and adequate consideration, Landlord
does hereby lease to Tenant and Tenant does hereby rent from Landlord that
certain real property depicted on Schedule "A" attached hereto as the Demised
-----------
Premises, which real property is situated in the City of San Diego, County of
San Diego, State of California.
2. The terms, conditions, covenants and agreements governing the leasing
of the Demised Premises from Landlord to Tenant are set forth at length in that
certain Lease (the "Lease") between Landlord and Tenant dated as of the same
date as this Memorandum. All of the terms, conditions, covenants and agreements
in the Lease are incorporated into this Memorandum with the same force and
effect as if they were fully recited in this document
3. The term of the Lease shall commence upon the substantial completion of
certain improvements to be constructed by Landlord at the Demised Premises, and
shall terminate ten (10) years thereafter, unless sooner terminated or extended
as provided in the Lease. Tenant has two (3) consecutive options to extend the
term of the Lease for a period of five (5) years each.
4. In the event of inconsistency between the terms of this Memorandum or
the Lease, the terms of the Lease shall control.
EXHIBIT C
---------
1
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as
of the date first above written.
LANDLORD:
KILROY REALTY, L.P.,
a Delaware limited partnership
By: Kilroy Realty Corporation,
a Maryland corporation
Its General Partner
By:_____________________________
Name:___________________________
Its:_______________________
TENANT:
APPLIED MICRO CIRCUITS CORPORATION,
a Delaware corporation
By: ____________________________
Joel O. Holliday
Its: Vice President, Finance and Administration
STATE OF )
)ss.
COUNTY OF )
On _____________________,before me, ______________________, a Notary Public in
and for said state, personally appeared ___________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument, the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public in and for said State
EXHIBIT C
---------
2
STATE OF )
) ss.
COUNTY OF )
On ____________________, before me, ____________________, a Notary Public in
and for said state, personally appeared _________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument, the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public in and for said State
EXHIBIT C
---------
3
SCHEDULE "A"
DESCRIPTION OF DEMISED PREMISES
LEGAL DESCRIPTION
BEING A PORTION OF PARCELS 3 AND 4 OF PARCEL MAP NO. 17755, ON FILE IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN THE CITY, OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA. MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 3; THENCE ALONG THE WESTERLY
LINE OF SAID PARCEL 3
1. NORTH 04 degrees 43'00" EAST 40.06 FEET; THENCE
2. NORTH 00 degrees 19'33" WEST 199.65 FEET; THENCE LEAVING SAID WESTERLY
LINE
3. NORTH 89 degrees 57'12" EAST 57.50 FEET; THENCE
4. NORTH 00 degrees 19'33" WEST 99.68 FEET: THENCE
5. NORTH 86 degrees 40'27" WEST 31.29 FEET; THENCE
6. NORTH 00 degrees 00'00" EAST 23.80 FEET; THENCE
7. SOUTH 85 degrees 37'35" EAST 274.92 FEET TO A POINT ON THE WESTERLY LINE
OF SEQUENCE DRIVE AS DEDICATED
PER MAP NO. 12685, ON FILE IN
THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, IN
THE CITY OF SAN DIEGO, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA.
POINT ALSO LIES ON THE ARC OF A
1573.00 FOOT RADIUS CURVE,
CONCAVE EASTERLY, A RADIAL TO TO
SAID POINT BEARS NORTH 87
DEGREES 02'12" WEST: THENCE
ALONG THE ARC OF SAID CURVE AND
SAID WESTERLY LINE
8. SOUTHERLY 318.25 FEET THROUGH A CENTRAL ANGLE OF 11
DEGREES 35'31"; THENCE LEAVING
SAID WESTERLY LINE IN A NON-
TANGENT DIRECTION
9. SOUTH 86 degrees 32'09" WEST 380.84 FEET TO THE POINT OF BEGINNING.
CONTAINS 2.69 AC. MORE OR LESS.
/s/ Mark J. Rowson Jan 25, 1999
----------------------------------------------
MARK J. ROWSON, R.C.E. 30836 DATE
[SEAL] (Registration expires 3-31-2000)
SCHEDULE A
----------