LEASEHOLD IMPROVEMENTS AGREEMENT
by and between
Village Builders, L.P.,
a California limited partnership
("Landlord")
and
Fair, Isaac and Company, Inc.,
a Delaware corporation
("Tenant")
Dated as of November 26, 1997
EXHIBIT 10.34
LEASEHOLD IMPROVEMENTS AGREEMENT
THIS LEASEHOLD IMPROVEMENTS AGREEMENT (this "Leasehold Improvements
Agreement") is made and entered into as of November 26, 1997, by and between
Village Builders, L.P., a California limited partnership (herein called
"Landlord"), and Fair, Isaac and Company, Inc., a Delaware corporation (herein
called "Tenant").
RECITALS
A. Landlord is the holder of an option to acquire those certain parcels
of real property commonly known as 750 and 751 Lindaro Street, San Rafael,
California, more particularly described on Exhibit D hereto and described on the
tentative site plan attached hereto as Exhibit G (the "PG&E Property"). The
parties acknowledge that the legal description of the PG&E Property may be
revised in accordance with the provisions of the Option Agreement (as defined
below).
B. The City of San Rafael or its Redevelopment Agency (the "Agency") is
the owner of those certain parcels of real property described on Exhibit C
hereto (the "City Property"). The Agency has begun the process necessary to
dispose of the City Property, and it is Landlord's intention to obtain an option
to purchase the City Property from the Agency if possible.
C. Landlord and Tenant are entering into a "Lease Agreement (Phase I)"
of even date herewith (the "Lease"), whereby Landlord will lease to Tenant, and
Tenant will lease from Landlord, upon and subject to the terms, covenants,
provisions and conditions of the Lease, certain real property described in
Exhibit A hereto and certain improvements to be constructed on such real
property in accordance with this Leasehold Improvements Agreement.
D. Landlord and Tenant desire to enter into this Leasehold Improvements
Agreement for the purpose of establishing the procedures which they shall each
follow in the development and approval of plans and specifications for the base
building improvements and the tenant improvements which are to be demised to
Tenant pursuant to the Lease, in the making and processing of applications to
the Agency and the City of San Rafael for the approval of the proposed
construction of such base building improvements and the tenant improvements, and
for the actual construction of such base building improvements and the tenant
improvements.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant mutually agree
as follows:
1. DEFINITIONS.
Certain terms used in this Leasehold Improvements Agreement
and the Exhibits hereto shall have the meaning set forth below for each such
term. Certain other terms shall have the meaning set forth elsewhere in this
Leasehold Improvements Agreement and the Exhibits hereto. Unless otherwise
defined in this Leasehold Improvements Agreement or in the Exhibits hereto,
other terms shall have the meaning, if any, specifically ascribed to them in the
Lease.
1.1. "Agreed Spread for Take-Out Financing" shall mean five
hundred fifteen (515) basis points, unless Tenant exercises the First Option
under the Option Agreement, in which event "Agreed Spread for Take-Out
Financing" shall mean five hundred forty (540) basis points. The foregoing
notwithstanding, in the event that the Construction Financing or Take-Out
Financing or both selected by Landlord for the Project requires that prevailing
wages be paid or that
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union labor be used in connection with the construction of the Project, as
provided in Section 0, the "Agreed Spread for Take-Out Financing" shall be
reduced to five hundred five (505) basis points, unless Tenant exercises the
First Option under the Option Agreement, in which event "Agreed Spread for
Take-Out Financing" shall mean five hundred thirty (530) basis points. The
Agreed Spread for Take-Out Financing shall be subject to adjustment in
accordance with the provisions of Section 0.
1.2. "Agreed Take-Out Financing Closing Costs" shall mean the
sum of Five Hundred Sixty-Five Thousand Dollars ($565,000.00).
1.3. "Aggregate Development Cost" shall mean the aggregate of
all costs paid or to be paid, or reimbursed or to be reimbursed, by Landlord and
associated with the development of the Project or improvements upon or serving
the Phase II Land (but only to the extent that improvements upon or serving the
Phase II Land are constructed during or before the Construction Period),
including without limitation: (i) a sum equal to the Net Stipulated Value of the
PG&E Property; (ii) the actual cost to Landlord of arranging the acquisition of
the City Property; (iii) all actual costs of the design and construction of the
Site and Shell Improvements and of all improvements to the Phase II Land,
including without limitation parking areas, landscaping, walkways, driveways;
(iv) the Tenant Improvement Allowance; (v) all fees and charges of architects,
engineers, materials testing consultants and other design or construction
consultants; (vi) any costs of reproducing plans; (vii) any fees or costs of
providing security to the Project or to the site of any off-site construction
during the Construction Period; (viii) all fees and costs in soliciting,
evaluating and accepting bids for any aspect of the work which Landlord is to
cause to be performed pursuant to this Leasehold Improvements Agreement; (ix)
all reasonable fees and costs (including, without limitation, application fees,
commitment fees, appraisal fees, deposits, closing costs and loan fees) incurred
in connection with the Construction Financing for the Project or any loan which
would have provided Construction Financing, even if such loan was not closed due
to the expiration for any reason of the lender's commitment to make such loan
(provided, however, that if such expiration was solely caused by Landlord's
failure to perform obligations under the commitment which were in the complete
control of Landlord, then such fees and costs with respect to the expired
commitment shall not be included in Aggregate Development Cost); (x) all
reasonable fees and costs (including, without limitation, application fees,
commitment fees, appraisal fees and deposits) incurred in connection with
investigating or applying for and obtaining Take-Out Financing, but only with
respect to a particular loan which is not closed due to causes which are not
completely within the control of Landlord or if Tenant requests that Landlord
select the Designated Treasury Rate in accordance with Section 19.2.A and, as a
result, Landlord must subsequently obtain by another loan commitment pursuant to
Section 19.2 (in which event break-up fees and other fees, costs, charges of the
kinds and to the extent described in Section 1.3 of the Option Agreement
pertaining to Landlord's prior loan commitment shall also be a part of Aggregate
Development Cost) (except to the extent that such fees and costs are paid by
Tenant pursuant to Section 0); (xi) the Agreed Take-Out Financing Closing Costs;
(xii) all permit fees and all fees and charges for services rendered by
employees of the City of San Rafael or consultants hired directly by the City of
San Rafael in connection with the application for, or issuance of, the necessary
demolition, grading, building and similar permits required for the construction
of the Project; (xiii) all reasonable legal fees incurred in connection with the
Project, including, without limitation, legal fees incurred in connection with
the negotiation, documentation, enforcement or interpretation of any agreement,
except: (A) agreements between Landlord and Tenant, (B) agreements between
Landlord and PG&E, and (C) legal fees to obtain the Development Agreement (as
defined in the Option Agreement) and the entitlements described in section
8.2(j) of the Phase II Purchase Agreement, which legal fees are paid or incurred
on or before the date the Development Agreement and such entitlements are
obtained from all applicable governmental agencies (however, the foregoing
clause (C) shall not exclude from Aggregate Development Costs reasonable legal
fees actually paid by Landlord to arrange the acquisition of the City Property);
(xiv) fees and costs of
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audits or other reviews of financial records incurred in connection with any
review of Aggregate Development Cost which Tenant is permitted to conduct in
accordance with the provisions of this Leasehold Improvements Agreement or in
connection with the requirements of any lender of Construction Financing or
Take-Out Financing; (xv) premiums for, and other costs of, surety bonds or other
security required in connection with any aspect of the development of Phase I or
Phase II, to the extent that such security is provided by Landlord and not by
Tenant; (xvi) all costs reimbursed by Landlord to Tenant pursuant to Section 0;
(xvii) all fees and costs incurred in connection with Hazardous Materials or
environmental mitigation measures undertaken in connection with Project,
including, without limitation, the obligations of Landlord with respect to the
"Operations and Maintenance of Groundwater Remedial System", as such obligations
are set forth in paragraph "6e.(1)" of the PG&E Environmental Agreement; (xviii)
all Real Estate Taxes payable, based upon a daily proration, with respect to the
Construction Period (it being agreed that all real estate taxes payable with
respect to such period shall be excluded from Real Estate Taxes, as that term is
defined in Section 0); (xix) all interest on Construction Financing; provided,
however, that interest on the amount by which the principal loan balance exceeds
an amount equal to eighty-five percent (85%) of all Phase I Project Cost shall
be excluded from Phase I Project Cost (for the purpose of determining the
portion of interest to be so excluded, if the Construction Financing bears
interest at different rates on different tranches of the loan, the interest to
be so excluded shall be determined at the rate or rates applicable to the
borrowing of the tranches which exceed eighty-five percent (85%) of all Phase I
Project Cost, applying the rates on a tranche by tranche basis, commencing with
the rate applicable to the lowest tranche, provided further, however, that
commencing on each Rent Commencement Date (as defined in the Lease), the amount
of interest included in Aggregate Development Cost shall be reduced to an amount
equal to the total amount of such interest multiplied by a fraction, the
numerator of which is the Rentable Area of the portions of the Buildings with
respect to which Tenant is not then paying rent, and the denominator of which is
the Rentable Area of all of the Buildings; (xx) all deposits (including, without
limitation, deposits in connection with any utility service or Take-Out
Financing), provided that the amount of any such deposits returned to Landlord
shall be deducted from Aggregate Development Cost when received, but only to the
extent that such deposits were previously included in Aggregate Development
Cost; (xxi) reasonable fees and expense reimbursements, if any, paid to a
mortgage broker in connection with Construction Financing; (xxii) in the event,
and during any period, that the proceeds of Construction Financing are, in the
aggregate, less than eighty-five percent (85%) of all Phase I Project Cost then
incurred and paid, then there shall be included in Phase I Project Cost imputed
interest at the rate of fifteen percent (15%) per annum on the amount by which
eighty-five percent (85%) of all Phase I Project Cost so incurred and paid
exceeds the then advanced proceeds of the Construction Financing, provided
further, however, that commencing on each Rent Commencement Date (as defined in
the Lease), the amount of such imputed interest included in Aggregate
Development Cost shall be reduced to an amount equal to the total amount of such
imputed interest multiplied by a fraction, the numerator of which is the
Rentable Area of the portions of the Buildings with respect to which Tenant is
not then paying rent, and the denominator of which is the Rentable Area of all
of the Buildings; (xxiii) all fees, costs and expenses incurred by Landlord in
connection with the satisfaction of any condition or requirement imposed by the
City of San Rafael or any other governmental agency or public utility in
connection with any permit, approval or agreement (including the development
agreement) required for the development of the Project, including, without
limitation, any traffic or other impact fees, traffic mitigation fees, utility
hook-up or service fee and improvements to, or adjacent to, Mahon Creek; (xxiv)
all amounts expended in connection with site work and on and off-site
improvements required for the use or operation of the Project or required to be
constructed or paid for as a condition to any permit, approval or agreement
(including the development agreement) necessary to the construction or use of
the Base Building Improvements or Tenant Improvements; (xxv) all reasonable
legal fees and reasonable fees of other technical consultants incurred in
connection with the negotiation and documentation of (A) any agreement
pertaining to the design and construction of the Project or any portion thereof,
or (B) any agreement pertaining to the design, construction,
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performance or security for any improvement or payment imposed as a condition
upon any approval by the City of San Rafael of any permit or approval required
for the development of the Project, but only to the extent the such agreement
would typically and ordinarily be negotiated and documented after the
governmental approval of a tentative tract map; (xxvi) all premiums for
insurance in force following the Commencement of Construction, excluding any
premiums included in Expenses charged to Tenant pursuant to the Lease; (xxvii)
title insurance premiums, escrow fees and recording costs incurred during the
Construction Period or incurred in connection with the Construction Financing
(but not Take-Out Financing), except title insurance premiums, escrow fees and
recording costs in connection with the acquisition by Landlord of the PG&E
Property; (xxviii) all costs paid to contractors or materials suppliers in
connection with the correction of Punch List, Defect List or HVAC Defect List
items or other construction defects, but only if Landlord has used commercially
reasonable efforts to enforce its legal remedies against the contractors and
suppliers which performed the original work to which the Punch List, Defect List
or HVAC Defect List items related to the extent such efforts were required to be
made by Landlord prior to any closing under the Option Agreement; and, (xxix)
any other costs which are specifically stated to be Phase I Project Costs or
Phase II Current Costs elsewhere in this Leasehold Improvements Agreement.
_.Aggregate Development Cost shall not include: (i) the price
paid by Landlord for the acquisition of the PG&E Property; (ii) Landlord's
ordinary overhead; (iii) the cost of preparing an environmental impact report
for the Project, including, without limitation, the cost of preparing an initial
study and scoping the environmental impact report; (iv) fees and expenses of all
consultants retained by Landlord for the purpose of obtaining approval by the
City of San Rafael of any of the permits and approvals required for the
development of the Project (although fees and expenses of consultants whose work
pertains to the design or engineering of the Project or any part thereof or to
the obtaining of the necessary demolition, grading, building and similar permits
or to agreements or arrangements with utility providers, shall be included as a
part of Aggregate Development Cost, even if such work occurs in connection with
aspects of obtaining required permits and approvals from the City of San Rafael;
provided, however, that fees for appearances at meetings with officials of the
City of San Rafael pertaining to subjects other than the obtaining of the
necessary demolition, grading, building and similar permits or the obtaining of
agreements or arrangements with utility providers shall be excluded from
Aggregate Development Costs); (v) charges for the work or time of employees of
the City of San Rafael, to the extent pertaining to environmental review and
zoning matters (including, but not limited to, the preparation of an
environmental impact report and the negotiation of a development agreement),
other than as expressly permitted in Section 0; (vi) all expenses incurred by
Landlord in connection with any election campaigns pertaining to initiatives or
referenda pertaining to the Project; (vii) all legal fees and fees and expenses
for public relations incurred directly in connection with obtaining the approval
by the City of San Rafael of the necessary permits and approvals required for
the development of the Project other than necessary demolition, grading,
building and similar permits authorizing the commencement of
construction-related work (although fees and expenses of consultants whose work
pertains to the design or engineering of the Project or any part thereof shall
be included as a part of Aggregate Development Cost, even if such work occurs in
connection with aspects of obtaining required permits and approvals from the
City of San Rafael); (viii) all legal fees incurred in connection with the
negotiation or documentation of the development agreement with the City of San
Rafael, the acquisition of the PG&E Property, and agreements to the extent
pertaining to the environmental condition of the PG&E Property; (ix) all legal
fees incurred in connection with the resolution of disputes between Landlord and
Tenant under the Lease or this Leasehold Improvements Agreement; (x) all costs,
if any, incurred in connection with the relocation of the 115KV overhead
electrical utility line from the central portion of the Phase I Land to a
location further south, to the extent that the cost of such relocation is paid
by Landlord; (xi) costs incurred by Landlord in connection with the operation
and maintenance of the Phase I Land prior to the Commencement of Construction,
including Real Estate Taxes, insurance premiums, and
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other costs of ownership not related to obtaining the approval by the City of
San Rafael of any of the necessary permits and approvals required for the
development of the Project (although all fees and expenses of consultants whose
work pertains to the design or planning of the Project or any part thereof shall
be included as a part of Aggregate Development Cost, even if such work occurs in
connection with aspects of obtaining required permits and approvals from the
City of San Rafael); (xii) costs paid directly by Tenant in connection with any
Modifications; (xiii) costs paid directly by Tenant as a result of any Delays;
(xiv) any costs paid by Tenant directly to a vendor or service supplier and
without credit against Rent or against any other sum due from Tenant to
Landlord, even if such costs would otherwise have been a part of Phase I Project
Cost; (xv) salaries and other compensation paid to Martin Zemcik, Glenn
Isaacson, Conversion Management Associates, Inc. or any other person or entity
providing similar general development consulting services or third-party
development management services; and (xvi) any other costs which are
specifically stated to be excluded from Aggregate Development Cost elsewhere in
this Leasehold Improvements Agreement.
1.4. "Base Building Improvements" shall mean the improvements
described in Section 0.
1.5. "Budget" shall mean that budget attached to this
Leasehold Improvements Agreement as Exhibit H hereto, as hereafter modified from
time to time in accordance with this Leasehold Improvements Agreement, based
upon additional information or analyses received or generated by Landlord or
Tenant. Landlord and Tenant acknowledge and agree that Estimated Phase I Project
Cost, as set forth in such budget, represents a reasonable estimate of Phase I
Project Cost, based on the information available to each of them, and is to be
used for the convenience of the parties in arranging Take-Out Financing (as
provided in Section 0), but shall not be used or cited as a limitation for the
purpose of determining actual Aggregate Development Cost, as that term is
defined in Section 0.
1.6. "Commencement of Construction" shall mean the time at
which Landlord instructs its contractor to commence, pursuant to a grading or
building permit which has then been issued by the City of San Rafael, grading
necessary to permit the construction of the improvements which are to be a part
of Phase I.
1.7. "Common Area" shall mean all areas and facilities within
the Project located outside the Premises and intended for the use of tenants of
the Buildings, including the landscaped areas, service areas, parking areas,
recreation areas, trash enclosures, plazas, walkways, driveways, sidewalks,
access and perimeter roads, and the like; but excluding from the Common Area the
Containment Facilities (as those are defined in the Lease) and any area
contained within the boundaries of an exclusive easement granted to PG&E.
1.8. "Conceptual Plans for the Tenant Improvements" shall mean
and refer to the conceptual plans for the Tenant Improvements referred to in
Section 0.
1.9. "Construction Financing" shall mean any loan arranged by
Landlord the proceeds of which loan are primarily used or to be used for any or
all of the following purposes: (i) the acquisition of the PG&E Property; (ii)
the payment of any costs incurred or to be incurred in connection with the
design or construction of the Project or other improvements in connection
therewith; or, (iii) the reimbursement to Landlord of funds expended or
reimbursed by Landlord in connection with the acquisition of the PG&E Property
or the design, construction or development of the Project or other improvements
in connection therewith. In the event that Landlord does not elect to obtain a
loan secured by a Mortgage to provide funds for such purposes, but instead
obtains funds for those general purposes from a source of capital which charges
interest or other fees for the use of such funds during the Construction Period,
then the funds so obtained shall be deemed
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Construction Financing for the purposes of this Leasehold Improvements Agreement
during the period prior to the Last Rent Commencement Date (but only to the
extent that such funds do not exceed eighty-five percent (85%) of Phase I
Project Cost) and shall be deemed to bear interest at the lowest rate for which
a conventional construction loan to have been secured by a mortgage was offered
to Landlord in connection with the Project.
1.10. "Construction Period" shall mean the period commencing
with the Commencement of Construction and continuing to and including the Last
Rent Commencement Date.
1.11. "Criteria for Take-Out Financing" shall mean all of the
following terms (any of which may be waived by Landlord in the exercise of its
sole discretion): (i) the Take-Out Financing would provide actual proceeds (net
of fees, closing expenses and points) in an aggregate amount equal to not less
than seventy-five percent (75%) of the then current Estimated Phase I Project
Cost; (ii) the Take-Out Financing would require payment of not more than one
hundred (100) basis points as a loan fee at the closing of the loan; (iii) the
Take-Out Financing would require payment of a deposit of not more than two
hundred (200) basis points prior to the closing of the loan; (iv) the Take-Out
Financing would be for a term, including possible extensions, of at least
fifteen (15) years; (v) the Take-Out Financing would be amortized over a period
of not more than thirty (30) years; (vi) no tranche of the loan would require
any balloon payment; (vii) each tranche would be at a fixed rate of interest
over its term; (viii) the Take-Out Financing would impose no potential liability
on Landlord and its constituent partners, nor require any guarantees; (ix) the
lender would consent to the parking for Phase I being located upon the Parking
Easement Area or such other area within Phase II as to which the parking
easement could be moved from the Parking Easement Area pursuant to the Parking
Easement Agreement; (x) the Take-Out Financing would not require any security
other than a Mortgage encumbering the Project, a related assignment of rents
from the Project and a security interest in the right of Tenant to park on a
portion of the Phase II Land; (xi) the Take-Out Financing would be from a lender
whose reputation and financial position provide reasonable assurance that the
lender will perform all of its obligations under the loan in a timely manner;
(xii) if the lender intends to sell the loan or if the loan is subject to any
condition requiring a third party credit review or rating, such lender shall
have stated in writing that its chief underwriter has consulted with the
prospective purchaser of the loan or the third party credit reviewer or rating
agency regarding the Hazardous Materials present on the Phase I Land and
regarding the credit of Tenant; (xiii) the Take-Out Financing would be from a
lender other than Tenant or any entity related to Tenant or any affiliate,
subsidiary, parent entity or successor by merger to Tenant; (xiv) the Take-Out
Financing would accept Tenant as a potential borrower under the loan; (xv) would
be consistent with the arrangements concerning subordination, non-disturbance
and recognition set forth in the Lease, this Leasehold Improvements Agreement or
the Option Agreement; and, (xvi) the Take-Out Financing would coordinate with
the Construction Financing to be selected by Landlord, including, without
limitation, the execution of any buy-sell agreement or tri-party agreement
required by the lender of the Construction Financing. Landlord, in the exercise
of its sole discretion, may, by written notice to Tenant, waive one or more such
criteria or agree that a particular criterion can be modified in a manner which
is adverse to Landlord without being waived in its entirety. Landlord shall,
however, consult reasonably with Tenant as to, but shall not be required to
accept, the modification of such criteria if no loan is found which meets all of
the criteria, except those which Landlord is prepared to waive.
1.12. "Defect List" shall mean a written list to be given by
Tenant to Landlord in accordance with the provisions of Section 0.
1.13. "Delays" shall mean certain delays in the construction
of the Site and Shell Improvements or the Tenant Improvements or both, as
described in Section 0.
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1.14. "Designated Treasury Rate" shall mean the yield rate
determined in accordance with the provisions of Section 0.
1.15. "Development Constant" shall mean the sum of: (i) the
Designated Treasury Rate; plus, (ii) the Agreed Spread for Take-Out Financing.
1.16. "Descriptive Base Specifications" shall mean the
descriptive specifications attached to this Leasehold Improvements Agreement as
Exhibit E, as referred to in Section 0.
1.17. "Draft Working Drawings for the Tenant Improvements"
shall mean and refer to those certain draft working drawings for the Tenant
Improvements referred to in Section 0.
1.18. "Estimated Phase I Project Cost" shall mean the estimate
of Phase I Project Cost set forth in the Budget.
1.19. "Event of Default" shall mean an Event of Landlord
Default or an Event of Tenant Default, without inherent specificity as to which
of them.
1.20. "Event of Landlord Default" shall mean those
circumstances so described in Section 0.
1.21. "Event of Tenant Default" shall mean those circumstances
so described in Section 0.
1.22. "Final Working Drawings for the Tenant Improvements"
shall mean and refer to those certain final working drawings for the Tenant
Improvements referred to in Section 0.
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1.23. "Floor" shall mean any one of the interior floors of the
Buildings.
1.24. "Floor Substantial Completion Notice" shall mean and
refer to a notice from Landlord to Tenant that the Tenant Improvements for a
particular Floor within a Building are Substantially Complete, as provided in
Section 0.
1.25. "Force Majeure Events" shall mean acts of God or the
elements, acts of the government, labor disturbances of any character, and other
similar conditions, beyond the reasonable control of the party whose
performance, obligation or liability is excused or delayed by such event.
1.26. "Gross Building Area" shall be determined in accordance
with the "Standard Method for Measuring Floor Area in Office Buildings",
approved as of June 7, 1996 by the American National Standards Institute, Inc.
(ANSI/BOMA Z65.1-1996).
1.27. "Hazardous Materials" shall mean and refer to any
substance or material now or hereafter defined or regulated by any Environmental
Law as "hazardous substance," "hazardous waste," hazardous material," "extremely
hazardous waste," "designated waste," "restricted hazardous waste," "toxic
substance," or similar term. As used herein, the term "Hazardous Materials" also
means and includes any substance or material: (1) which is explosive, corrosive,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
regulated by any appropriate governmental authority as a hazardous material; or
(2) which is or contains oil, gasoline, diesel fuel or other petroleum
hydrocarbons; or (3) which is or contains polychlorinated biphenyls, asbestos,
urea formaldehyde foam insulation, radioactive materials; or (4) which is radon
gas. The term "Hazardous Substances" may include without limitation raw
materials, building components, wastes, and the products of any manufacturing or
other activities on the Project.
1.28. "HVAC Defect List" shall mean a written list to be given
by Tenant to Landlord in accordance with the provisions of Section 0.
1.29. "Laws" shall mean all present and future laws, statutes,
ordinances, resolutions, regulations, codes, proclamations, orders or decrees of
any municipal, county, state or federal government or other governmental or
regulatory authority or special district with jurisdiction over the Project, or
any portion thereof, whether currently in effect or adopted in the future and
whether or not in the contemplation of the parties hereto.
1.30. "Modifications" shall mean and refer to certain changes
to the Final Working Drawings for the Tenant Improvements which Tenant may make
in accordance with Section 0.
1.31. "Mortgage" shall mean any mortgage, deed of trust or
similar security instrument now or hereafter encumbering Phase I or any part
thereof (whether alone or together with other properties).
1.32. "Necessary Approvals" shall mean and refer to those
certain governmental permits and approvals necessary to permit the construction
of the Site and Shell Improvements and the Tenant Improvements, as referred to
in Section 0.
1.33. "Necessary Changes" shall mean and refer to changes to
the plans and specifications for the Site and Shell Improvements and the Tenant
Improvements made for the purposes referred to in Section 0.
1.34. "Net Stipulated Value of the PG&E Property" shall mean
the sum of
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Nine Million Three Hundred Fifty Thousand Dollars ($9,350,000.00).
1.35. "Option Agreement" shall mean that certain "Option
Agreement" between Landlord and Tenant of even date herewith.
1.36. "Parking Easement" shall mean that certain easement for
vehicular parking to be granted in the Parking Easement Agreement.
1.37. "Parking Easement Agreement" shall mean that certain
"Parking Easement Agreement" to be executed by Landlord and Tenant, as referred
to in the Phase II Purchase Agreement.
1.38. "Parking Easement Area" shall mean that portion of the
Phase II Land located within the easement granted pursuant to the Parking
Easement Agreement.
1.39. "PG&E" shall mean and refer to Pacific Gas & Electric
Company.
1.40. "PG&E Environmental Agreement" shall mean that certain
"Amended and Restated Environmental Agreement" to be executed by Landlord and
PG&E.
1.41. "PG&E Property" shall mean that certain real property
owned by Pacific Gas & Electric Company as of the date of this Leasehold
Improvements Agreement and more particularly described in Exhibit D. The parties
acknowledge that the legal description of the PG&E Property may be revised in
accordance with the Option Agreement.
1.42. "Phase I" shall mean the Phase I Land, the Buildings and
the other improvements to be constructed by Landlord on the Phase I Land in
accordance with the provisions of the Lease and this Leasehold Improvements
Agreement, together with the landscaping and paving improvements within the
Parking Easement Area necessary to provide parking on the Phase II Land for the
use of Phase I. A tentative site plan for Phase I is attached hereto as Exhibit
G.
1.43. "Phase I Buildings" shall mean the Buildings to be
constructed by Landlord on the Phase I Land pursuant to this Leasehold
Improvements Agreement. Subject to obtaining required permits and approvals from
the City of San Rafael and other governmental agencies having jurisdiction over
the Project, it is the intention of Landlord and Tenant that there be two (2)
office Buildings located on the Phase I Land, together containing approximately
one hundred forty-nine thousand six hundred eighty-six (149,686) square feet of
Rentable Area, with one such Building (known as "Building A") containing
approximately eighty-one thousand six hundred seventy-one (81,671) square feet
of Rentable Area and the other (known as "Building B") containing approximately
sixty-eight thousand fifteen (68,015) square feet of Rentable Area.
1.44. "Phase I Land" shall mean those certain parcels of real
property described in Exhibit A. The parties acknowledge that the legal
description of the Phase I Land may be revised in accordance with the Option
Agreement.
1.45. "Phase I Project Cost" shall mean the aggregate of: (i)
the difference between the Aggregate Development Cost and the Phase II Current
Costs paid by Tenant pursuant to Section 0; and (ii) a basic development
management fee in the amount of Thirty-Two Thousand Five Hundred Dollars
($32,500.00) per month, commencing as of the month of January 1998 and
continuing for a period of twenty-three (23) additional months thereafter. Any
other provision of this Agreement notwithstanding, in no event shall any amount
actually paid by Tenant (whether as a part of Phase II Current Costs or
otherwise) be deemed a part of Phase I Project Cost, unless Landlord has
actually reimbursed such amount to Tenant.
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1.46. "Phase II" shall mean the Phase II Land and the other
improvements to be constructed by Landlord on the Phase II Land in accordance
with the provisions of this Leasehold Improvements Agreement (including the
landscaping and paving improvements within the Parking Easement Area). A
tentative site plan for Phase II is attached hereto as Exhibit G.
1.47. "Phase II Current Costs" shall mean the aggregate of the
following costs, all of which are a portion of the Aggregate Development Cost:
(i) the purchase price for the Phase II Land paid by Tenant to Landlord pursuant
to the Phase II Purchase Agreement; (ii) the actual cost to Landlord of
arranging the acquisition of the City Property; (iii) all actual costs and
expenses of the design and construction of all improvements in the Parking
Easement Area; (iv) the cost of all fill materials placed on the Phase II Land
by Landlord; (v) the cost of all utilities installed for the present or future
benefit of the Phase II Land or any improvements constructed thereon or which
may be constructed thereon in the future; (vi) all fees and charges of
architects, engineers, materials testing consultants and other design or
construction consultants, to the extent that such fees and charges relate to the
design of buildings and other improvements to the Phase II Land; (vii) any other
component of Aggregate Development Cost, to the extent that such component
relates to the improvements to be installed on the Phase II Land, whether at or
about the same time as the Site and Shell Improvements or at a later time,
allocating any costs which pertain both to Phase I and to Phase II in accordance
with the schedule of allocations set forth in Exhibit H; (viii) the aggregate
cost of the design and construction of the common area entrance and plaza areas
to the extent located on Phase II; (ix) all permit fees and all fees and charges
for services rendered by employees of the City of San Rafael or consultants
hired directly by the City of San Rafael in connection with the application for,
or issuance of, the Necessary Approvals required for the construction of the
improvements to be located upon the Phase II Land; (x) all costs reimbursed by
Landlord to Tenant pursuant to Section 0, to the extent that such costs pertain
to improvements to be located upon, or to serve, the Phase II Land; (xi) all
fees and costs incurred in connection with environmental mitigation measures
undertaken in connection with the Phase II Land; (xii) all deposits (including,
without limitation, deposits in connection with any utility service, but
excluding deposits in connection with any Take-Out Financing), to the extent
that such deposits pertain to Phase II, provided that the amount of any such
deposits returned to Landlord shall be deducted from Aggregate Development Cost
and Phase II Current Costs when received, but only to the extent that such
deposits were previously included in Aggregate Development Cost and Phase II
Current Costs; (xiii) all fees, costs and expenses incurred by Landlord in
connection with the satisfaction of any condition or requirement imposed by the
City of San Rafael or any other governmental agency or public utility in
connection with any permit, approval or agreement (including the development
agreement) required for the development of the Project, including, without
limitation, any traffic impact, traffic mitigation fees, utility hook-up or
service fee and improvements to, or adjacent to, Mahon Creek, all to the extent
that such condition or requirement was imposed in respect of improvements to be
constructed upon the Phase II Land, whether at or about the same time as the
Site and Shell Improvements or at a later time; (xiv) all amounts expended in
connection with site work and on and off-site improvements required for the use
or operation of improvements to be constructed upon the Phase II Land, whether
at or about the same time as the Site and Shell Improvements or at a later time,
or required to be constructed or paid for as a condition to any permit or
approval necessary to the construction or use of such improvements; (xv)
premiums for, and other costs of, surety bonds or other security required in
connection with any aspect of the development of Phase II or off-site
improvements (allocating the cost of such bonds between Phase I and Phase II in
accordance with the schedule for such allocations set forth in Exhibit H, to the
extent that such security is provided by Landlord and not by Tenant; (xvi) all
reasonable legal fees and reasonable fees of other technical consultants
incurred in connection with the negotiation and documentation of any agreement
pertaining to the design and construction of the improvements to be constructed
upon the Phase II Land or any portion thereof, whether at or about the same time
as the Site and Shell Improvements or at a later time, or any agreement
pertaining to the design,
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construction or security for any improvement or payment imposed as a condition
upon any approval by the City of San Rafael or any utility provider of any
permit or agreement to provide utility services required for the development of
such improvements (it being agreed that where such fees are incurred in
connection with an agreement which pertains to both Phase I and Phase II, then
there shall be an equitable allocation of such fees among the Phases based on
Rentable Area of the Buildings approved for construction on each of them, with
the share allocated to Phase II constituting a part of Phase II Current Costs);
(xvii) all premiums for insurance in force following the Commencement of
Construction, excluding any premiums included in Expenses charged to Tenant
pursuant to the Lease; and, (xviii) any other costs which are specifically
stated to be Phase II Current Costs elsewhere in this Leasehold Improvements
Agreement. To the extent that any component of Aggregate Development Cost
pertains both to the Project and to the Phase II Land or improvements to be
constructed upon the Phase II Land, whether at or about the same time as the
Site and Shell Improvements or at a later time, the amount of such component
shall be allocated between Phase I Project Cost and Phase II Current Costs in
accordance with the provisions of Exhibit H.
1.48. "Phase II Land" shall mean those certain parcels of real
property described in Exhibit B. The parties acknowledge that the legal
description of the Phase II Land may be revised in accordance with the Option
Agreement.
1.49. "Phase II Purchase Agreement" shall mean that certain
"Purchase Agreement" between Village Builders, L.P., and Fair, Isaac and
Company, Inc. of even date herewith.
1.50. "Premises" shall mean the Buildings to be constructed by
Landlord on the Phase I Land as a part of the Project pursuant to this Leasehold
Improvements Agreement.
1.51. "Project" shall mean the Phase I Land and the Buildings
and all other improvements to be constructed thereon pursuant to this Leasehold
Improvements Agreement or which are hereafter constructed thereon by Landlord or
Tenant in accordance with the provisions of the Lease or this Leasehold
Improvements Agreement.
1.52. "Project Substantial Completion Notice" shall mean and
refer to a notice from Landlord to Tenant that the Project is Substantially
Complete, as provided in Section 0.
1.53. "Punch List" shall mean a written list to be given by
Tenant to Landlord in accordance with the provisions of Section 0.
1.54. "Real Estate Taxes" shall have the meaning given that
term in Section 5.10(A)(i) of the Lease.
1.55. "Rentable Area" shall be determined in accordance with
the "Standard Method for Measuring Floor Area in Office Buildings", approved as
of June 7, 1996 by the American National Standards Institute, Inc. (ANSI/BOMA
Z65.1-1996).
1.56. "Review Notice" shall mean a notice pertaining to the
Phase I Project Cost which may be given by Tenant to Landlord in accordance with
Section 0.
1.57. "Site Improvements" shall mean and refer to those
improvements to be constructed on the Phase I Land and the Phase II Land, as
described in Section 0.
1.58. "Site and Shell Improvements" shall mean and refer to
the Site Improvements and the Base Building Improvements, taken together.
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1.59. "Substantial Completion" shall mean, with respect to the
entire portion of the Premises located on a particular Floor within one of the
Buildings, (and such portion of the Premises shall be deemed "Substantially
Complete") when (i) installation of the Tenant Improvements by Landlord on such
Floor has been substantially completed in accordance with the plans for such
Tenant Improvements, as certified by Tenant's architect (provided that Tenant
shall use all commercially reasonable efforts to cause Tenant's architect to
cooperate promptly with Landlord in inspecting the work and issuing such a
certificate immediately upon the occurrence of such substantial completion of
the Tenant Improvements, (ii) Tenant has direct access from the street to the
lobby of such Building, (iii) sewer, electricity, water, gas (if required) and
standard telephone services are available to such Building, (iv) at least three
(3) parking spaces are available for the use of Tenant for each one thousand
(1,000) square feet of Gross Building Area located upon such Floor, (v) the
lobby of the Building in which the Floor is located is Substantially Complete,
(vi) any items identified by Tenant in accordance with Section 0 as critical to
the use of such Floor are substantially completed, and (vii) appropriate
governmental authorities have issued a temporary certificate of occupancy with
respect to such Floor or have given an equivalent approval for occupancy of such
Floor. "Substantial Completion" shall mean, with respect to the main lobby of a
Building, (and such lobby shall be deemed "Substantially Complete") when (i)
installation of the Tenant Improvements by Landlord in such lobby has occurred,
(ii) Tenant has direct access from the street to such lobby, (iii) lighting is
available to such lobby, (iv) at least one of the elevators from such lobby to
the Floors above are in working order, and (v) appropriate governmental
authorities have made their final inspections of such lobby as evidenced by
signed final inspection reports on file with said authorities. In all events,
Substantial Completion shall be deemed to have occurred notwithstanding a
requirement to complete "Punch List" or similar corrective work, provided that
the lack of completion of such Punch List work would not prevent Tenant from
using the Premises for the Permitted Use without material interference.
1.60. "Substantial Completion Notice" shall mean and refer to
a notice from Landlord to Tenant that the Site and Shell Improvements and Tenant
Improvements for Phase I are complete, as provided in Section 0.
1.61. "Take-Out Financing" shall mean any financing arranged
by Landlord, the proceeds of which are primarily used or to be used for either
or both of the following purposes: (i) the repayment of any Construction
Financing; or, (ii) the reimbursement to Landlord of funds expended or
reimbursed by Landlord in connection with the acquisition of the PG&E Property
or the City Property or the design, construction or development of the Project
or improvements on the Phase II Land. In the event that Landlord does not elect
to obtain a loan secured by a Mortgage to provide funds for such purposes, but
instead obtains funds for those general purposes from a source of capital which
charges interest or other fees for the use of such funds, then the funds so
obtained shall be deemed Take-Out Financing for the purposes of this Leasehold
Improvements Agreement.
1.62. "Tenant Caused Delays" shall mean certain delays in the
construction of the Site and Shell Improvements or the Tenant Improvements or
both caused by Tenant, as described in Section 0.
1.63. "Tenant Improvements" shall mean and refer to those
certain building interior improvements required by Tenant for its occupancy of
the Phase I Buildings and to be constructed on the Phase I Land, as described in
Section 0, but shall in all events exclude the Base Building Improvements.
1.64. "Tenant Improvement Allowance" shall mean a sum equal to
Twenty-Eight Dollars ($28.00) per square foot of Net Rentable Area in the
Premises.
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1.65. "Tentative Site Plan" shall mean and refer to that
certain tentative site plan for the development of Phase I and Phase II attached
hereto as Exhibit G and referred to in Section 0.
1.66. "Work" shall mean the construction of the Site and Shell
Improvements and the Tenant Improvements by Landlord in accordance with this
Leasehold Improvements Agreement.
1.67. "Working Drawings for the Site and Shell Improvements"
shall mean and refer to those certain final working drawings for the Site and
Shell Improvements referred to in Section 0.
2. GENERAL DESCRIPTION OF THE IMPROVEMENTS TO BE DESIGNED AND
CONSTRUCTED BY LANDLORD.
2.1. General Description of Site Improvements. Landlord and
Tenant intend that the Phase I Buildings shall contain approximately one hundred
sixty thousand (160,000) square feet of Gross Building Area, and that the
Project will include not less than three (3) parking spaces for each one
thousand (1,000) square feet of Gross Building Area. Landlord shall provide all
required on-site improvements for the Project and all base hardscape and
landscape features on the Phase I Land, including grading, paving for parking
areas and drive aisles, sidewalks and street improvements, utilities stubbed in
or to the shell of each Building, landscaping, monuments for Tenant's signage,
directional signage, exterior lighting in the Common Area and other site
improvements which may be required by the City of San Rafael or which may be
reasonably necessary to the use and enjoyment of the Buildings for ordinary
office purposes. Landlord shall also provide such off-site improvements outside
the boundaries of the PG&E Property as may be required by the City of San Rafael
or which may be reasonably necessary to the use and enjoyment of the Buildings
for ordinary office purposes. Landlord shall also construct, contemporaneously
with the Project and as a part of Phase II Current Costs: (i) all common
entrance areas, plazas, parking, associated parking access walkways and
landscaping within the parking areas, all to the extent such improvements are to
be located upon the Phase II Land for the purpose of providing parking or access
for the Project; (ii) all additional landscaping required by the City of San
Rafael to be installed on Phase II or reasonably requested by Tenant; (iii) to
the extent that utilities for the planned Phase II buildings would most
conveniently and cost effectively be provided by lines, wires or pipes passing
through Phase I, then such lines, wires and pipes, from the point of connection
to a Phase I Building nearest to the Phase II Land (or to the point of
connection to the lines, wires and pipes of the utility provider, if no
connections to a Phase I Building lie along the lateral lines, wires and pipes
serving Phase II) to points which are within ten (10) feet of the projected
locations of each the Phase II buildings; (iv) the pads and rough grading for
the Phase II buildings, to the extent not located within the Parking Easement
Area to serve Phase I; and, (v) conduits for inter-building telecommunications
among the Phase II buildings in their planned locations, stubbed to within ten
(10) feet of each such location. The foregoing improvements are referred to in
this Leasehold Improvements Agreement as the "Site Improvements". The Site
Improvements shall be constructed by Landlord in accordance with the "Working
Drawings for the Site and Shell Improvements", as referred to in Section 0 below
and as developed in accordance with this Leasehold Improvements Agreement.
2.2. General Description of Base Building Improvements.
Landlord shall also construct each of the Phase I Building shells (collectively,
the "Base Building Improvements"), which shall include the following:
A. The structural elements and weathertight exterior
walls (including
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glazing), exterior doors and roof of the Phase I
Buildings;
B. The main ground floor lobby area of each Phase I
Building;
C. Smooth concrete floors, based on reasonable,
good-quality commercial construction standards
(ready for carpet or resilient tile);
D. Ceilings in toilet rooms and in other rooms located
within the cores of the Buildings (not in other
areas), but only to the extent that ceilings in such
other rooms are required by applicable codes;
E. The core area on each Floor, including elevators,
toilet rooms, electrical closets (one (1) in the
smaller Building and two (2) in the larger),
telecommunications closets, mechanical rooms,
janitorial closets, exit stairs, hold open door
assemblies at lobby perimeter doors, mechanical
shafts, HVAC (as defined and required by Section 0),
electrical power systems (as required by Section 0)
life safety systems (as required by Section 0) and
sprinkler systems (as required by Section 0);
F. Dry wall, paint ready (finish-taped and sanded, but
not painted) around surfaces of walls in core areas,
on interior portions of exterior walls below ceiling
level (and fire-taped drywall on interior portions
of exterior walls above ceiling level to the extent
required by applicable Laws), and around interior
columns;
G. An operating primary system to provide heating,
ventilating and air conditioning service ("HVAC") to
the toilet rooms and electrical closets of each
Floor and to the edge of each Phase I Building core
at each Floor, not including main loops and branch
distribution, on-Floor controls, mixing boxes and
fire dampers, except to the extent that fire dampers
are required in core areas by applicable Laws for an
undivided occupancy;
H. Primary electrical distribution system to each Phase
I Building core, including one (1) 480 volt panel on
each Floor, step down transformers, one (1) 120 volt
convenience panel on each Floor and one (1) lighting
panel on each Floor;
I. Exits to the extent required by code;
J. Metal window assembly details necessary to achieve
closure to interior drywall (or, where required, to
the acoustic ceiling) at the window head, sill and
jamb;
K. One standard telecommunications point of presence
location (with standard telephone line connections)
at each Building, and,
L. Life safety systems as required by code for a
building in shell condition, including sprinklers
with heads necessary to meet current requirements
for space in such shell condition.
The Base Building Improvements shall be constructed by Landlord in accordance
with the Working
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Drawings for the Site and Shell Improvements, as developed in accordance with
this Leasehold Improvements Agreement. Notwithstanding the foregoing, any items
specifically identified or designated in this Leasehold Improvements Agreement
or in the Exhibits hereto as Tenant Improvements shall not be included in or be
a part of the Site and Shell Improvements.
2.3. General Description of Tenant Improvements. In addition
to the Site and Shell Improvements, for each Phase I Building Landlord shall
furnish all building interior improvements required by Tenant for its occupancy
of the Phase I Buildings and security fencing and enclosures (collectively, the
"Tenant Improvements"). The Tenant Improvements shall exclude all telephone,
telecommunications and security equipment and cabling, uninterrupted power
supplies and fire suppression systems for electronic equipment (although
Landlord shall construct all ordinary building-wide sprinkler systems as a part
of the Tenant Improvements), unless Landlord and Tenant hereafter agree in
writing that such work or some part of it will be a part of the Tenant
Improvements. The Tenant Improvements shall be constructed by Landlord in
accordance with the "Final Working Drawings for the Tenant Improvements", as
referred to in Section 0 below and as developed in accordance with this
Leasehold Improvements Agreement.
2.4. Design of Site and Shell Improvements. Except as
otherwise provided in Sections 0, 0 and 0, Landlord shall design the Site and
Shell Improvements in accordance with: (i) the Descriptive Base Specifications
attached hereto as Exhibit E; (ii) the basic conceptual design drawings (the
"Preliminary Drawings") listed on Exhibit F attached hereto; and, (iii) the
tentative site plan (the "Tentative Site Plan") attached hereto as Exhibit G.
3. PREPARATION AND APPROVAL OF APPLICATIONS TO THE CITY OF SAN
RAFAEL.
3.1. Applications. Certain permits and approvals from the City
of San Rafael and other governmental agencies having jurisdiction over the
Project or the Phase I Land or Phase II Land will be required to permit the
development and construction of the Project and the work to be paid for as a
Phase II Current Cost (the "Necessary Approvals"). Landlord, in cooperation with
Tenant, has prepared and submitted to the City of San Rafael an application for
certain of the Necessary Approvals, including without limitation, applications
for: (i) development plan approval; (ii) vesting tentative map approval; (iii)
approval of a development agreement; and (iv) such environmental and design
review approvals as may be required.
3.2. Changes in Plans and Specifications. Landlord and Tenant
acknowledge that changes in the design, configuration, materials and building
systems (collectively, "Necessary Changes") may: (i) be necessary to obtain one
or more of the governmental approvals required to permit the construction and
occupancy of the Phase I Buildings or any part of Phase II; (ii) be necessary as
a result of conditions imposed upon one or more such approvals or, in the
judgment of Landlord, may be necessary to expedite the obtaining of any one or
more such Necessary Approvals; (iii) be required to comply with any site
constraints imposed by PG&E; or, (iv) be deemed necessary by Landlord to
decrease the Estimated Phase I Project Cost if and to the extent that it is
greater than One Hundred Eighty-Three Dollars ($183.00) per square foot of Gross
Building Area. In the event that a Necessary Change involves the reconfiguration
of a Phase I Building or a change to the ornamentation or other decorative or
design characteristics of the Building, Landlord shall, to the extent
commercially reasonable in the circumstances: (i) make such Necessary Change in
a manner which, in the reasonable opinion of Landlord, does not materially
interfere with Tenant's intended uses of the Premises, except to the extent that
such changes are necessary to comply with any governmentally imposed restriction
or requirement; (ii) make such Necessary Change in a manner which would not
cause the Gross Building Area in the Phase I Buildings to be less than
approximately one hundred forty thousand (140,000) square feet;
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and, (iii) consult reasonably with Tenant before agreeing or deciding to make
such changes, although the decision of Landlord as to such changes shall be
final and binding on the parties. Landlord shall deliver to Tenant written
notice of each Necessary Change, which notice shall describe the Necessary
Change in reasonable detail and shall state the objectives of such proposed
change. In the event that Tenant desires to have another change made to
accomplish the objectives of the Necessary Change proposed by Landlord, Tenant
shall describe such alternative change in writing to Landlord within ten (10)
days of the receipt by Tenant of a written notice from Landlord of a proposed
Necessary Change, which alternative change shall be sufficient to obtain the
objectives of the Necessary Change proposed by Landlord. In the event that
Tenant proposes an alternative change which accomplishes the objectives of the
Necessary Change proposed by Landlord, but Landlord does not wish to accept such
alternative change in lieu of the Necessary Change proposed by Landlord,
Landlord or Tenant may cause such matter to be submitted to arbitration pursuant
to the provisions of Section 0. In the event that any of the Phase I Buildings
are reconfigured, the description of the Premises for the purposes of this
Leasehold Improvements Agreement shall be modified in a reasonable manner by
written notice from Landlord to Tenant to reflect the reconfiguration of the
Phase I Building(s). In the event that Landlord determines that a Necessary
Change is to be made, Landlord may amend the applications to the City of San
Rafael to reflect appropriately such Necessary Change.
3.3. Consistency with Descriptive Base Specifications. The
provisions of Section 0 to the contrary notwithstanding, in no event shall any
Necessary Change cause the Base Building Improvements to be inconsistent with
the Descriptive Base Specifications, except to the extent:_. (i) such Necessary
Change is required as a result of any governmentally mandated requirement
applicable to the Project; (ii) such Necessary Change is required as a result of
any requirement imposed by a lender or prospective lender of Construction
Financing or Take-Out Financing; or, (iii) Landlord reasonably determines that
equipment or materials necessary to conform to the Descriptive Base
Specifications cannot be obtained within the time periods necessary to permit
Landlord to perform in a timely manner its obligations pursuant to this
Leasehold Improvements Agreement or the Lease. In any such event, Landlord shall
use commercially reasonable efforts in the circumstances to substitute equipment
or materials capable of substantially equivalent performance to any building
equipment or materials specified in the Descriptive Base Specifications.
3.4. Fees and Expenses Incurred in Connection with the
Applications. Subject to the provisions of Section 0, Landlord shall pay all
fees and costs incurred in connection with the preparation, filing, amendment,
processing and approval of the applications referred to in Section 0 (except
that Tenant shall bear any cost incurred by it in connection with its review of
the applications and the cost of any attorney or consultant who makes an
appearance on behalf of Tenant at any governmental hearings or meetings where
such consultant or attorney is there at the request of Tenant and not at the
request of Landlord), including the cost of any environmental impact report or
other documents or studies required to satisfy the requirements of the City of
San Rafael. Subject to the provisions of Section 0, Landlord shall also pay the
entire cost of satisfying any conditions imposed by the City of San Rafael on
the approval of such applications, all of which cost shall be a part of both
Aggregate Development Cost and either Phase I Project Cost or Phase II Current
Costs, as appropriate.
3.5. Letter Agreements Pertaining to Certain Fees and Expenses
Incurred in Connection with the Applications. Landlord and Tenant have entered
into three letter agreements, one executed by both of them on August 28, 1996, a
second executed by Landlord on April 18, 1997 and by Tenant on May 16, 1997, and
a third executed by Tenant on September 17, 1997, all three of which pertain to
the payment of certain expenses incurred or to be incurred in connection with
the design and planning for the Project and other improvements on the Phase II
Land. Notwithstanding the provisions of such September 17, 1997 letter regarding
limitation upon
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amount and termination of the obligations thereunder, it is the intention of
Landlord and Tenant that Tenant shall continue to pay all such expenses as
described in such letter agreement through January 12, 1998, and thereafter all
such letter agreements shall be superseded by this Leasehold Improvements
Agreement, but only to the extent that such letter agreements pertain to costs
incurred after January 12, 1998. In the event that Tenant elects to have
Landlord reimburse Tenant, in accordance with the provisions of the letter
agreements, for certain of the costs incurred and paid by Tenant pursuant to the
letter agreements, such costs shall be reimbursed by Landlord to Tenant within
thirty (30) days of the Commencement of Construction, without interest, and such
costs shall be Phase I Project Cost to the full extent so reimbursed by Landlord
to Tenant.
4. COOPERATION IN PLANNING PROCESS. Tenant and Landlord shall cooperate
reasonably with one another in a good faith effort to obtain all permits,
approvals and entitlements necessary to develop the Project pursuant to the
applications previously filed with the City of San Rafael.
5. PREPARATION OF PLANS AND SPECIFICATIONS FOR OFF-SITE IMPROVEMENTS.
As promptly as is reasonable in the circumstances following both the issuance by
the City of San Rafael of all permits and approvals necessary for the
construction of the Project (excluding building and grading permits) and the
time at which the extent of all off-site improvements which are required by the
City of San Rafael in connection with the Site Improvements can be ascertained,
Landlord shall cause plans and specifications to be prepared for such
improvements. Such plans and specifications shall not be subject to the approval
of Tenant, but shall be submitted to Tenant for its information.
6. PREPARATION OF WORKING DRAWINGS FOR THE SITE AND SHELL IMPROVEMENTS.
6.1. Initial Preparation. Promptly following the issuance by
the City of San Rafael of all permits and approvals necessary for the
construction of the Site and Shell Improvements (excluding building and grading
permits), or at such earlier time as Landlord may elect in its sole discretion,
Landlord shall, at its expense, cause its architects and engineers to commence
preparation of working drawings for the Site and Shell Improvements (the
"Working Drawings for the Site and Shell Improvements"), which shall be
consistent with the Descriptive Base Specifications and generally consistent
with the Preliminary Drawings and Tentative Site Plan, except for Necessary
Changes. Landlord and Tenant acknowledge that Landlord may, in its reasonable
discretion, incorporate features in the Base Building Improvements to make the
Building more readily adaptable for multi-tenant use. The foregoing
notwithstanding, the Working Drawings for the Site and Shell Improvements may
deviate from the Preliminary Drawings and Tentative Site Plan (but not
Descriptive Base Specifications) if required as a result of: (i) engineering or
environmental considerations necessary to the structural integrity of a Building
or other improvements which first become apparent in the course of the
preparation of the Working Drawings for the Site and Shell Improvements; or,
(ii) if reasonably deemed necessary by Landlord to decrease the Estimated Phase
I Project Cost if and to the extent that it is greater than One Hundred
Eighty-Three Dollars ($183.00) per square foot of Gross Building Area.
6.2. Submission to Tenant for Review. Landlord shall submit
the Working Drawings for the Site and Shell Improvements to Tenant for its
review, and may make such submissions in increments the review of which does not
require other portions of the Working Drawings for the Site and Shell
Improvements which Landlord has not then submitted to Tenant. Tenant shall
notify Landlord within ten (10) days from the receipt by Tenant of any such
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submission whether or not Tenant agrees that the portion of the Working Drawings
for the Site and Shell Improvements included in such submission is consistent
with the Descriptive Base Specifications. In the event that Tenant fails to
respond to such submission within such period of ten (10) days, Landlord may
give to Tenant a second notice stating such failure and further stating that if
Tenant does not respond within five (5) days of the receipt by Tenant of such
second notice from Landlord, Tenant will be deemed to have agreed that the
portion of the Working Drawings for the Site and Shell Improvements in such
submission is consistent with the Descriptive Base Specifications. In the event
that Tenant fails to respond to such submission within such period of five (5)
days of the receipt by Tenant of such second notice from Landlord, Tenant shall
for all purposes be deemed to have agreed that the portion of such the Working
Drawings for the Site and Shell Improvements included in such submission is
consistent with the Descriptive Base Specifications. In the event of a dispute
between Landlord and Tenant with regard to the question of whether or not the
Working Drawings for the Site and Shell Improvements are consistent with the
Descriptive Base Specifications or as to any variances required to decrease the
Estimated Phase I Project Cost if and to the extent that it is greater than One
Hundred Eighty-Three Dollars ($183.00) per square foot of Gross Building Area,
either Landlord or Tenant may require by written notice to the other that such
dispute be resolved by arbitration conducted in accordance with the provisions
of Section 0.
6.3. Tenant's Review Responsibilities. Landlord agrees and
understands that the review of the Working Drawings for the Site and Shell
Improvements by Tenant is solely to protect the interests of Tenant, and Tenant
shall not be the guarantor of, nor in any way or to any extent responsible for,
the correctness or accuracy of any such Working Drawings for the Site and Shell
Improvements or of the compliance of such Working Drawings for the Site and
Shell Improvements with applicable Laws. Approval by Tenant of the Working
Drawings for the Site and Shell Improvements prepared by Landlord shall not
imply approval by Tenant as to compliance of such Working Drawings for the Site
and Shell Improvements with applicable Laws.
6.4. Submission to the City of San Rafael. Upon the completion
of the Working Drawings for the Site and Shell Improvements (or such part or
parts thereof as the City of San Rafael may be willing to accept as sufficient
to constitute an application for a building permit), Landlord shall submit such
working drawings to the City of San Rafael together with all other documents and
fees necessary to constitute an application for a building permit. If only a
portion of the Working Drawings for the Site and Shell Improvements were
submitted to the City of San Rafael at the time of the application for a
building permit, Landlord shall cause its architects and its engineers promptly
to complete any additional necessary parts of the Working Drawings for the Site
and Shell Improvements and shall submit them to the City of San Rafael and to
Tenant.
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7. TENANT'S ARCHITECT AND ENGINEERS.
7.1. Submission of List of Consultants. Within sixty (60) days
of the date of this Leasehold Improvements Agreement, Tenant shall submit to
Landlord for its approval, which shall not be unreasonably withheld or delayed,
a list of architects, engineers and other consultants to be used in connection
with the design of the Tenant Improvements. Landlord shall respond to such
request for approval from Tenant within fifteen (15) days of the receipt of such
list by Landlord. In the event that Landlord fails to respond to such request
within such period of fifteen (15) days, Tenant may give to Landlord a second
notice stating such failure and further stating that if Landlord does not
respond within five (5) days of the receipt by Tenant of such second notice from
Landlord, Tenant will be deemed to have approved the list of architects,
engineers and other consultants submitted by Tenant. In the event that Landlord
fails to respond to such request within such period of five (5) days of the
receipt by Landlord of such second notice from Tenant, Landlord shall for all
purposes be deemed to have approved the list architects, engineers and other
consultants submitted by Tenant. Tenant shall select architects, engineers and
other consultants for the design of the Tenant Improvements from among those
approved by Landlord in response to such request from Tenant.
7.2. Cost of Preparation. The cost of preparing all plans and
specifications for the Tenant Improvements (including without limitation the
Conceptual Plans for the Tenant Improvements referred to in Section 0 and the
Draft Working Drawings for the Tenant Improvements referred to in Section 0 and
the Final Working Drawings for the Tenant Improvements referred to in Section
0), and the cost of preparing any change thereto shall be paid by Tenant.
8. SUBMITTAL OF CONCEPTUAL PLANS FOR THE TENANT IMPROVEMENTS.
8.1. Preliminary Submission. Tenant has previously submitted
to Landlord, and Landlord acknowledges receipt of, a preliminary conceptual plan
for the Tenant Improvements which indicates all of Tenant's requirements for
meeting rooms, kitchen facilities, office locations, corridor locations, general
arrangement of uses on particular Floors and any other special requirements
which would reasonably be expected to affect any aspect of the Site and Shell
Improvements.
8.2. First Submission. On or before January 1, 1998, Tenant
shall submit to Landlord conceptual plans for the Tenant Improvements in the
Phase I Buildings ("Conceptual Plans for the Tenant Improvements"), including
architectural, mechanical and electrical, telecommunications and security, and
reflected ceiling drawings. The Conceptual Plans for the Tenant Improvements
shall be consistent with the preliminary plan submitted by Tenant pursuant to
Section 0 and shall provide for corridors, lobbies, bathrooms, mechanical and
electrical systems, and fire exits which are designed to accommodate single or
multi-tenant configurations of each Floor in each Building (including, without
limitation, separate metering for utilities), in conformance with the Working
Drawings for the Site and Shell Improvements (to the extent that Landlord has
previously delivered the same to Tenant), and in a design reasonably acceptable
to Landlord. At the time that Tenant submits such plans to Landlord, Tenant may
identify particular elements of the Base Building Improvements or of the Tenant
Improvements or both which are critical to the use by Tenant of particular
Floors and which must therefore be Substantially Completed before Tenant can
accept as Substantially Complete those particular Floors, which Floors shall
also then be identified by Tenant.
8.3. Purpose of Conceptual Plans for the Tenant Improvements.
Such
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Conceptual Plans for the Tenant Improvements shall be for the general
information of Landlord, and to assist in the coordination of the design and
construction of the Tenant Improvements, but receipt of such Conceptual Plans
for the Tenant Improvements by Landlord shall not constitute an approval by
Landlord of the design or specifications shown thereon. Landlord shall, within
fifteen (15) days following receipt by Landlord of such plans from Tenant,
review, comment on and return the Conceptual Plans for the Tenant Improvements
to Tenant, marked "Approved", "Approved as Noted" or "Disapproved as Noted,
Revise and Resubmit." If the Conceptual Plans for the Tenant Improvements are
returned to Tenant marked "Disapproved as Noted, Revise and Resubmit," Tenant
shall cause such plans to be revised within twenty (20) days, taking into
account the reasons for Landlord's disapproval, and shall resubmit revised plans
to Landlord for review. The same procedure shall be repeated until Landlord
fully approves the Conceptual Plans for the Tenant Improvements. Landlord shall
only refuse to consent to such Conceptual Plans for the Tenant Improvements on
the grounds that they are inconsistent with the plans for the Base Building
Improvements or with the requirements of any applicable Laws.
9. PREPARATION OF WORKING DRAWINGS FOR THE TENANT IMPROVEMENTS. On or
before February 15, 1998, Landlord shall deliver to Tenant those portions of the
Working Drawings for the Site and Shell Improvements which are reasonably
required to permit Tenant to prepare working drawings for the Tenant
Improvements. Within ninety (90) days after Tenant's receipt thereof, Tenant
shall deliver to Landlord one (1) set of reproducible sepia and three (3) sets
of blue-lined prints of working drawings and specifications (hereinafter
referred to collectively as the "Draft Working Drawings for the Tenant
Improvements") for such Tenant Improvements prepared, at Tenant's sole cost and
expense, by an architect ("Tenant's Architect") licensed in the State of
California and selected by Tenant and approved by Landlord in accordance with
Section 0 above or otherwise specifically approved in writing by Landlord.
Landlord shall cooperate reasonably with Tenant in connection with the
preparation of the Working Drawings for the Tenant Improvements, provided that
the production of such drawings shall be the sole responsibility of Tenant and
further provided that such cooperation shall not limit the right of Landlord to
review and approve such Working Drawings, as herein provided. Landlord shall
only refuse to consent to such Working Drawings on the grounds that they are
inconsistent with the plans for the Base Building Improvements or with the
requirements of any applicable Laws. Within fifteen (15) business days of the
receipt by Landlord of the Draft Working Drawings for the Tenant Improvements
from Tenant, Landlord shall return to Tenant one (1) sepia set of the Draft
Working Drawings for the Tenant Improvements marked "Approved", "Approved as
Noted" or "Disapproved as Noted, Revise and Resubmit." If the Draft Working
Drawings for the Tenant Improvements are returned to Tenant marked "Disapproved
as Noted, Revise and Resubmit," Tenant shall cause such Draft Working Drawings
for the Tenant Improvements to be revised, taking into account the reasons for
Landlord's disapproval and shall resubmit revised plans to Landlord for review.
The same procedure shall be repeated until Landlord fully approves the Final
Working Drawings for the Tenant Improvements. It is understood that the Draft
Working Drawings for the Tenant Improvements and the Final Working Drawings for
the Tenant Improvements are to be consistent with, and a logical extension of,
the Conceptual Plans for the Tenant Improvements approved by Landlord in
accordance with Section 0 above. Tenant shall be solely responsible for the
completeness of the Draft Working Drawings for the Tenant Improvements and the
Final Working Drawings for the Tenant Improvements and for conformity of the
Final Working Drawings for the Tenant Improvements with the Working Drawings for
the Site and Shell Improvements provided by Landlord to Tenant. When the Final
Working Drawings for the Tenant Improvements are approved by Landlord and
Tenant: (i) they shall be acknowledged as such by Landlord and Tenant signing
each sheet of the Final Working Drawings for the Tenant Improvements; and, (ii)
no changes shall be made to the approved Final Working Drawings for the Tenant
Improvements without the prior written consent of Landlord, which consent may be
withheld if such changes would affect the schedule or cost of the construction
of the Site and Shell
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Improvements or Tenant Improvements.
10. LANDLORD'S REVIEW RESPONSIBILITIES. Tenant agrees and understands
that the review of the Conceptual Plans for the Tenant Improvements, the Draft
Working Drawings for the Tenant Improvements and the Final Working Drawings for
the Tenant Improvements by Landlord is solely to protect the interests of
Landlord in the Building and the Premises, and Landlord shall not be the
guarantor of, nor in any way or to any extent responsible for, the correctness
or accuracy of any such Draft Working Drawings for the Tenant Improvements or
Final Working Drawings for the Tenant Improvements or of the compliance of such
Draft Working Drawings for the Tenant Improvements or Final Working Drawings for
the Tenant Improvements with applicable Laws or of the conformance of such Draft
Working Drawings for the Tenant Improvements or Final Working Drawings for the
Tenant Improvements with the Working Drawings for the Site and Shell
Improvements provided by Landlord to Tenant. Approval by Landlord of the
Conceptual Plans for the Tenant Improvements, the Draft Working Drawings for the
Tenant Improvements or the Final Working Drawings for the Tenant Improvements
prepared by Tenant shall not: (i) imply approval by Landlord as to compliance of
such Draft Working Drawings for the Tenant Improvements or Final Working
Drawings for the Tenant Improvements with applicable Laws; (ii) imply the
compatibility of the Draft Working Drawings for the Tenant Improvements or Final
Working Drawings for the Tenant Improvements with the shell or the core or the
Working Drawings for the Site and Shell Improvements; or (iii) limit Landlord's
right to require changes in portions of the Final Working Drawings for the
Tenant Improvements which are incompatible with or which, in the reasonable
opinion of Landlord, adversely affect the Building structure or the electrical,
plumbing, life safety or mechanical systems of the Building or which affect the
availability to Landlord of third party warranties. In the event that, after the
approval by Landlord of the Final Working Drawings for the Tenant Improvements,
Landlord modifies the Working Drawings for the Site and Shell Improvements in a
manner which will require modification to the Final Working Drawings for the
Tenant Improvements, Landlord shall promptly so notify Tenant and Tenant shall
cause any such required modifications to the Final Working Drawings for the
Tenant Improvements to be promptly made; provided, however, to the extent that
the modifications to the Working Drawings for the Site and Shell Improvements
requested by Landlord are the result of the failure by Landlord's employees or
construction managers (but not Landlord's architect) to use customary care in
coordinating the work of the architect in the preparation of the Working
Drawings for the Site and Shell Improvements, then Landlord shall pay all costs
and expenses incurred by Tenant as a result thereof. Landlord shall use
commercially reasonable efforts to cause the agreement with the architect to
require that such architect use the prevailing standard of care in the
architectural profession in the preparation of the Working Drawings for the Site
and Shell Improvements, and Landlord shall use commercially reasonable efforts
to enforce such agreement.
11. COST OF TENANT IMPROVEMENTS. Upon the approval by Landlord of the
Final Working Drawings for the Tenant Improvements, Landlord shall obtain from
the contractor selected by Landlord for the construction of the Base Building
Improvements a fixed-price for the construction of the Tenant Improvements. In
the event that such bid exceeds a sum equal to the Tenant Improvement Allowance,
Landlord shall so notify Tenant, and Tenant shall deposit, in the manner herein
required, immediately available funds equal to the amount by which such bid
exceeds the Tenant Improvement Allowance, which deposit shall be held for
disbursement to Landlord to pay expenses of construction of the Tenant
Improvements after the expenditure of the Tenant Improvement Allowance. Such
deposit shall be made in the following manner: (i) if required by lender of the
Construction Financing, such deposit shall be made into an account with such
lender at least five (5) days prior to the Commencement of Construction, as to
which account Landlord shall require the lender to pay interest to Tenant at a
reasonable deposit rate; or, (ii) in all
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other events, such deposit shall be made to an escrow agent reasonably
satisfactory to both Landlord and Tenant on or before the later of the day which
is the tenth (10th) day following the receipt by Tenant of a written request
from Landlord for such deposit or the day which is the tenth (10th) day prior to
the commencement of construction of any of the Tenant Improvements, to be held
in an interest bearing account, with interest to be paid periodically to Tenant.
Expenses paid directly from such funds shall be excluded from Aggregate
Development Cost, to the extent of the amount so paid.
12. CONSTRUCTION OF SITE AND SHELL IMPROVEMENTS.
12.1. Construction and Substitutions. The Site and Shell
Improvements shall be constructed by Landlord in substantial compliance with the
Working Drawings for the Site and Shell Improvements, although Landlord reserves
the right to make substitutions of equipment or materials for equipment or
materials which are specified in the Working Drawings for the Site and Shell
Improvements, provided that all such substitutions shall be consistent with the
Descriptive Base Specifications. Any details or materials which are not
specified in the Working Drawings for the Site and Shell Improvements shall be
completed by Landlord in a manner consistent with the standards of similar
buildings in Marin County, California. In the event Landlord so elects, Landlord
may commence grading of the PG&E Property and other on- and off-site work prior
to the completion of the Working Drawings for the Site and Shell Improvements.
Landlord shall use commercially reasonable efforts to cause all contractors
performing any portion of the Site and Shell Improvements or the Tenant
Improvements to comply in all material respects with their respective contracts,
and Landlord shall use commercially reasonable efforts to enforce such
contracts; provided, however, that nothing herein shall be deemed to prevent
Landlord from using its reasonable judgment in settling disputes with such
contractors or in accepting or permitting variances from the Working Drawings
where such variances do not materially affect the performance or appearance of
the area of the Project where such variance occurs. Nothing herein is, however,
intended to impose upon Landlord any liability for deficiencies in the
performance of any contractor, subcontractor or supplier.
12.2. Changes to Working Drawings for the Site and Shell
Improvements. Landlord may make changes to the Working Drawings for the Site and
Shell Improvements, provided that each such change is approved by the City of
San Rafael and any lender or prospective lender of Construction Financing or
Take-Out Financing, if such approval is required. In the event that Landlord
plans a change to the Working Drawings for the Site and Shell Improvements,
Landlord shall so notify Tenant in writing, which writing shall describe in
detail the nature, extent and location of the changes which Landlord plans to
make. Tenant shall notify Landlord within five (5) days from the receipt by
Tenant of any such submission whether or not Tenant agrees that the change to
the Working Drawings for the Site and Shell Improvements would be consistent
with the Descriptive Base Specifications. In the event that Tenant fails to
respond to such submission within such period of five (5) days, Landlord may
give to Tenant a second notice stating such failure and further stating that if
Tenant does not respond within five (5) days of the receipt by Tenant of such
second notice from Landlord, Tenant will be deemed to have agreed that the
proposed change to the Working Drawings for the Site and Shell Improvements is
consistent with the Descriptive Base Specifications. In the event that Tenant
fails to respond to such submission within such period of five (5) days of the
receipt by Tenant of such second notice from Landlord, Tenant shall for all
purposes be deemed to have agreed that the proposed change to the Working
Drawings for the Site and Shell Improvements is consistent with the Descriptive
Base Specifications. In the event of a dispute between Landlord and Tenant with
regard to the question of whether or not a proposed change to the Working
Drawings for the Site and Shell Improvements would be consistent with the
Descriptive Base Specifications or as to any variances required to decrease the
Estimated Phase I Project Cost if and to the extent that it is greater than One
Hundred
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Eighty-Three Dollars ($183.00) per square foot of Gross Building Area, either
Landlord or Tenant may require by written notice to the other that such dispute
be resolved by arbitration conducted in accordance with the provisions of
Section 0.
13. INSPECTION BY TENANT. During the course of construction of the Site
and Shell Improvements and the Tenant Improvements, Tenant or Tenant's
representative shall, at Tenant's sole cost and expense, at all times have the
right to inspect the construction; provided that Tenant, in the exercise of such
right, shall not unreasonably interfere with or delay the prosecution of such
work (except to the extent such work is delayed by the necessity of remedying
defective or incorrect work discovered by Tenant). No exercise by Tenant of its
right to inspect the construction shall be deemed to affect the rights and
obligations of Landlord and Tenant with respect to the work or any defects
therein, nor shall such exercise be deemed an assumption by Tenant of any
responsibility for the quality of the work.
14. CHANGE ORDERS.
14.1. Right of Tenant to Request Modifications. Tenant may
make modifications ("Modifications") to the Final Working Drawings for the
Tenant Improvements and/or to request that Landlord make Modifications to the
Working Drawings for the Site and Shell Improvements, provided that each such
Modification is approved by the City of San Rafael and any lender or prospective
lender of Construction Financing or Take-Out Financing, if such approval is
required, and is made sufficiently prior to the construction of the part of work
to which the Modification would be made so that the Modification can be
accommodated without resulting in a Tenant Caused Delay. Modifications relating
to the Site and Shell Improvements or the Tenant Improvements or both shall only
be made with the consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Any request by Tenant for Modifications shall be made in
writing to Landlord, which writing shall describe in detail the nature, extent
and location of the Modifications that Tenant requests be made.
14.2. Preparation of Plans for Modifications. In the event
that Tenant requests a Modification to the Working Drawings for the Site and
Shell Improvements, Landlord shall cause its architect and other consultants to
prepare drafts of revisions to those portions of the Working Drawings for the
Site and Shell Improvements which Tenant has requested be the subject of a
Modification, and shall deliver to Tenant a copy of such draft, together with a
statement of Landlord's best estimates (made in good faith and in accordance
with reasonably competitive prices and reasonable design plans; provided,
however, that Tenant recognizes that estimates will have to be provided in a
relatively short period of time, that there is some inherent uncertainty in the
process of providing estimates, that estimates may be based on incomplete design
details due to time constraints and that only one contractor will be negotiated
with) of (i) the additional cost of construction of the Site and Shell
Improvements or the Tenant Improvements (which shall include without limitation
increased design costs, increased construction costs and increased financing
costs arising by reason of the resulting Tenant Caused Delays, if any, in the
construction schedule) which Tenant will be required to pay by reason of the
proposed Modification (the "Modification Cost"); and, (ii) the duration of any
Tenant Caused Delay (as that term is defined in Section 0 below) which will
arise by reason of such Modification. Landlord shall also deliver to Tenant a
copy of any bids upon which Landlord based its estimates. Tenant shall elect
either to require Landlord to proceed with the Modification or not to require
Landlord to so proceed by written notice to Landlord given within five (5)
business days of the receipt by Tenant of the draft of the modified portions of
the Working Drawings for the Site and Shell Improvements and Landlord's estimate
of resulting costs and Tenant Caused Delays. The failure by Tenant to make such
election in writing within such five (5) business day period shall conclusively
be deemed to be an election by Tenant not to proceed
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with the Modification. In the event that Tenant elects to proceed with the
Modification: (i) Tenant shall, at least five (5) business days before the date
upon which Landlord, in its reasonable judgment, must direct the contractor to
proceed with the Modification (of which date Landlord shall notify Tenant in
writing at least two (2) days before such date), deposit with Landlord or
Landlord's lender (as Landlord may direct) immediately available funds (or, if
the lender of the Construction Financing will so permit without additional
requirements upon Landlord, a letter of credit) equal to Landlord's estimate of
the Modification Cost; and, (ii) Landlord shall cause the Working Drawings for
the Site and Shell Improvements to be modified as set forth in the draft
portions thereof given to Tenant in response to its request and shall thereafter
construct the Site and Shell Improvements in accordance with such Modifications.
In the event that the actual Modification Cost differs from the amount estimated
by Landlord, Landlord shall so notify Tenant, and, within five (5) days of the
receipt by Tenant of such notice, Landlord shall refund to Tenant the amount (if
any) by which the actual Modification Cost was less than that estimated by
Landlord, or Tenant shall pay to Landlord the amount (if any) by which the
actual Modification Cost exceeded that estimated by Landlord. In the event that
Tenant elects not to proceed with the Modification, Tenant shall reimburse
Landlord upon demand for all reasonable architect's fees and other reasonable
costs incurred by Landlord as a result of the preparation of the draft of the
modified portions of the Working Drawings for the Site and Shell Improvements,
and, if any Tenant Caused Delay has resulted from the request, Tenant shall,
within five (5) business days of the receipt by Tenant of a written request from
Landlord accompanied by a reasonably detailed explanation of costs incurred or
to be incurred, reimburse Landlord for the cost of such Tenant Caused Delay.
Landlord shall, however, use all reasonable efforts to minimize the duration of
any Tenant Caused Delays resulting solely from the necessity of Landlord causing
drafts and estimates to be prepared in response to Tenant's request.
15. CONSTRUCTION RELATED MATTERS.
15.1. Target Date For Commencement. Landlord and Tenant agree
to use commercially reasonable efforts to obtain all Necessary Approvals, to
prepare and approve plans, specifications and working drawings, hire
contractors, and take such other steps as may be required so that Landlord is in
a position to commence construction of the Site and Shell Improvements by June
1, 1998. Landlord and Tenant both acknowledge and agree, however, that such date
is a target for commencement of construction and that such commencement is
subject to numerous factors beyond the control of either Landlord or Tenant. In
the event that Landlord is unable, despite the use of its commercially
reasonable efforts in the circumstances, to obtain all required governmental
approvals, to prepare and approve plans, specifications and working drawings,
hire contractors, and take such other steps as may be required so that Landlord
is in a position to commence construction of the Site and Shell Improvements by
June 15, 1998, Landlord may defer the Commencement of Construction to June 1,
1999 by written notice to Tenant.
15.2. Schedule Requirements in Construction Contracts.
Landlord shall require that the contract between Landlord and its general
contractor for the construction of the Site and Shell Improvements contain a
commercially reasonable schedule for the Substantial Completion of each of the
Floors within the Buildings, which schedule will be subject to the consent of
Tenant, which consent shall not be unreasonably withheld or delayed. Such
contract shall also provide for the contractor to pay a reasonable sum as
liquidated damages for each day that Substantial Completion is not achieved in
accordance with the approved schedule, although such contract may also provide
for the schedule to be extended without the payment of such damages for delays
which are caused by Force Majeure Events.
15.3. Notice of Substantial Completion. When Substantial
Completion of a particular Floor within a Building has occurred, Landlord shall
give Tenant written notice thereof (a "Floor Substantial Completion Notice").
The fact that the landscaping, exterior plazas, parking
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lots, driveways, walkways, or other Floors of the Project or another Phase I
Building have not been completed shall not prevent Landlord from delivering a
Floor Substantial Completion Notice to Tenant and delivering the Floor which is
Substantially Complete. Landlord and Tenant shall prepare a Punch List of items
pertaining to the Floor which is then Substantially Complete within ten (10)
business days after the receipt by Tenant of the Floor Substantial Completion
Notice, which Punch List shall specify the items of work on such Floor which
have not been completed. Landlord shall use all reasonable diligence to complete
the items on such Punch List within thirty (30) days thereafter.
16. NOTICES OF COMPLETION AND DEFECTS.
16.1. Project Substantial Completion Notice and Acceptance.
Upon the Substantial Completion of all of the Site and Shell Improvements and
the Tenant Improvements, Landlord shall give Tenant written notice of such
completion (a "Project Substantial Completion Notice"), and Tenant shall be
deemed to have fully accepted the Work as satisfactorily completed in accordance
with all requirements of this Leasehold Improvements Agreement and shall further
be deemed to have waived any defects in any such Work, except to the extent
that:
A. Tenant shall furnish Landlord with a list (the
"Punch List") within ten (10) business days after the receipt by Tenant
of the Project Substantial Completion Notice, which Punch List shall
specify the items of work which have not been completed;
B. Tenant shall furnish Landlord with a list (the
"Defect List") within three (3) months after the date of the receipt by
Tenant of the Project Substantial Completion Notice, specifying any
defects in the construction of Work which were discovered prior to the
end of such three (3) month period (provided that Tenant shall also
notify Landlord of any such defect within a reasonable time after
discovering it); and,
C. Tenant shall furnish Landlord with a list (the
"HVAC Defect List") within twelve (12) months after the date of the
receipt by Tenant of the Project Substantial Completion Notice,
specifying any defects in the construction of those portions of the
HVAC system serving the Project which are a part of the Work and which
were discovered prior to the end of such twelve (12) month period
(provided that Tenant shall also notify Landlord of any such defect
within a reasonable time after discovering it).
16.2. Assignment of Warranty Rights by Landlord. Within five
(5) days of the delivery of the Project Substantial Completion Notice by
Landlord to Tenant, Landlord shall assign to Tenant, pursuant to an assignment
agreement in a form reasonably acceptable to Landlord and Tenant, all warranties
and guarantees from all manufacturers, equipment suppliers and contractors
related to the Project; provided, however, that such assignment agreement shall
also permit Landlord to retain the right to enforce any such warranties.
16.3. Corrections by Landlord. Landlord shall commence the
correction of each of the items on the Punch List, the Defect List, and the HVAC
Defect List within twenty (20) days of the receipt by Landlord of such Punch
List or earlier notice of such defect (unless a particular defect materially
interferes with the use by Tenant of any of the Buildings or other portion of
the Work, in which event Landlord shall commence the required correction as
promptly as is reasonably feasible in the circumstances and shall thereafter
diligently prosecute such correction to completion). The cost, if any, to
Landlord of such corrections shall be a part of Phase I Project Cost, or, if the
final Phase I Project Cost has been established under the Lease, then such cost
shall be an Expense under the Lease. Landlord shall, if reasonably possible in
the circumstances, complete any required correction within thirty (30) business
days of the receipt by Landlord of such list or earlier notice of such defect.
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17. DELAYS.
17.1. Tenant Caused Delays. To the extent that a delay shall
occur in the Substantial Completion of a Floor or of the Project as the direct
or indirect result of a delay with regard to one or more critical path aspects
of the Project fairly attributable to the acts or omissions of Tenant; then: (i)
any such delay shall extend the date for the completion by Landlord of that part
of the Work which is delayed by one (1) day for each day of such delay; and,
(ii) Tenant shall reimburse Landlord on demand for all additional costs incurred
by Landlord as a result of such delays (including, without limitation: (a)
increased design costs, (b) increased construction costs, (c) increased
development management costs, and (d) increased financing costs or fees in
connection with loan extensions or replacements required by reason of the
resulting delays, if any, in the construction schedule; provided, however, that
any amount so reimbursed by Tenant shall be excluded from Aggregate Development
Cost). In addition, any such delay in the Substantial Completion of construction
shall extend all dates for the Substantial Completion by Landlord of any work to
be performed by it on the Phase I Land, the Phase II Land or a particular
Building by one (1) day for each day of such delay in Substantial Completion;
and, the Rent Commencement Dates under the Lease shall each be deemed to have
occurred one (1) day sooner than the day upon which the conditions for the
occurrence of each such date are actually fulfilled for each day of such delay.
The following is a non-exclusive list of the kinds of acts or omissions which
could, depending on the applicable facts and circumstances, result in a delay in
the Substantial Completion of a Floor: (i) any delay of Tenant, beyond the
periods provided in this Leasehold Improvements Agreement for the response of
Tenant, in giving any consent or approval which is required pursuant to this
Leasehold Improvements Agreement; (ii) any request by Tenant that Landlord delay
any element, or the completion, of construction; (iii) any request by Tenant for
a Modification or any Modification undertaken at the request of Tenant or any
change to any of the Final Working Drawings for the Tenant Improvements after
such Final Working Drawings for the Tenant Improvements have been approved; (iv)
any event of default by Tenant under the Lease, the Option Agreement, the Phase
II Purchase Agreement or any Event of Tenant Default under this Leasehold
Improvements Agreement; (v) any interference by Tenant or its agents or
contractors with the prosecution by Landlord of the Work; (vi) any reasonably
necessary displacement of any construction from its place in Landlord's
construction schedule resulting from any of the causes for delay described above
and the fitting of such construction back into such schedule; or (vii) any delay
in obtaining any approval or permit from the City of San Rafael or any other
governmental entity or any utility company or district resulting from any other
delay referred to in this Section 0. Following a determination by Landlord that
a Tenant Caused Delay is reasonably likely to result from an event of the kind
referred to in this Section 0, Landlord shall give written notice of such event
to Tenant. Landlord shall use Landlord's reasonable efforts to minimize the
length of any such delay and to mitigate or eliminate the effects of such delay
in subsequent parts of the work, which reasonable efforts may include overtime
to the extent reasonably requested by Tenant to minimize the adverse economic
consequences to Tenant of such delay, but only if and to the extent Tenant
agrees to reimburse Landlord upon demand for any incremental increase in the
cost of performing the work as to which such overtime is used. The delays
described in this Section 0 are referred to in this Leasehold Improvements
Agreement as "Tenant Caused Delays". Tenant acknowledges that, because grading
of the site will only be permitted during certain months, relatively brief
delays may result in a lengthy postponement of the commencement of grading until
it can be undertaken during a month in which grading is permitted, and the
duration of any such delay in such grading shall be taken into account in
determining the duration of any Tenant Caused Delay.
17.2. Force Majeure Delays. To the extent that Landlord or
Tenant shall be delayed in or prevented from the performance of any act (other
than Tenant's obligation to make payments of rent, additional rent and other
charges required hereunder or under the Lease) solely by
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reason of restrictive governmental laws or regulations, governmental delays
beyond a reasonable and customary period for the issuance of any required permit
or approval, actions initiated by a third party resulting in a judicial order
which restrains or enjoins activity necessary to the completion of the Site and
Shell Improvements and/or the Tenant Improvements or which would prevent the
accrual of vested rights to complete the Project, industry-wide craft strikes,
unavailability of materials, riots, insurrections, epidemics, quarantine
restrictions, acts of God, an Event of Default on the part of the other party to
this Leasehold Improvements Agreement, war or damage to work in process by
reason of fire, flood, earthquake or other casualty, then performance of such
act shall be excused for the period of the delay and the period for the
performance of such act shall be extended for a period equivalent to the period
of such delay. Notwithstanding the foregoing, lack of funds shall not be deemed
to be a cause beyond the control of either party. Landlord shall use Landlord's
reasonable efforts to minimize the length of any such delay. The delays
(including, without limitation, Tenant Caused Delays) described in this Section
0 are referred to in this Leasehold Improvements Agreement as "Delays".
17.3. Statements of Landlord as to Delays. Within ten (10)
business days of a written request from Tenant, Landlord shall give to Tenant a
written statement setting forth a description of the cause for and duration (by
dates of commencement and cessation or, as to Delays which have not yet ended,
estimated date of cessation) of all Delays in the Work which Landlord contends
have occurred prior to the date of such statement or which are continuing to
occur as of the date of such statement. Such statement shall also specify
whether or not Landlord contends a particular Delay was a Tenant Caused Delay
and shall specify the extent (if any) to which Landlord contends that each
particular Delay has affected the Substantial Completion (or, for a Delay
occurring after Substantial Completion, affected the final completion) of a
particular Building through the date of such statement. Landlord shall be bound
by, and Tenant shall be entitled to rely on, such statements for all purposes
(except with respect to estimated dates of cessation in the case of Delays which
have not ended as of the date of such statement), although nothing in such
statements shall be deemed to bind Tenant with respect to the existence or
duration of any Delay claimed by Landlord or to bind Landlord with respect to
Delays caused by events of which Landlord is not aware as of the date of such
statement. Tenant shall not be entitled to request such a statement from
Landlord more than once in any period of thirty (30) consecutive days.
17.4. Minimization of Delays. Upon the receipt by Tenant of
any notice of Delay from Landlord, Tenant may elect to direct Landlord to use
such overtime as may reasonably be required in the judgment of Landlord to
minimize the duration of any Delay. Such request shall be deemed a request for a
Modification by Tenant, and the parties shall have the same rights and
responsibilities with respect to such a request as they would have with respect
to any other requested Modification.
18. PROJECT FINANCING
18.1. Right and Obligation to Arrange. Landlord shall have the
sole and exclusive right to arrange for Construction Financing and Take-Out
Financing for the Project, in accordance with the provisions of this Section 0.
Except as otherwise provided in Section 0, Landlord shall be obligated to
arrange for or provide all equity and loan proceeds required to pay the Phase I
Project Cost.
18.2. Retaining a Mortgage Broker to Arrange Financing.
Landlord shall, at such time as Landlord may select, retain a mortgage broker of
Landlord's choosing for the purpose of researching and negotiating Construction
Financing for the Project. Tenant shall not, either directly or indirectly,
solicit or respond to quotations from potential lenders with respect to
conventional real estate financing at any time prior to the exercise of the
"First Option" by Tenant
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pursuant to, and as defined in, the Option Agreement. Tenant may, however,
inquire directly from potential lenders only as to the availability to Tenant of
off-balance sheet financing.
18.3. Selection of Lender and Negotiation of Construction
Financing. Landlord shall choose, from among those who give quotations to
Landlord, one or more of the potential lenders with which to negotiate for the
Construction Financing which Landlord then desires to obtain, the costs of which
shall not exceed in the aggregate the amount which is then reasonable for
construction financing for a project of the type, size, location and other
characteristics of the Project.
18.4. Selection of Lender and Negotiation of Take-Out
Financing. Landlord shall select and arrange Take-Out Financing for the Project.
18.5. Inability to Obtain Commitment for Take-Out Financing.
In the event that Landlord elects by written notice to Tenant to obtain a
commitment for Take-Out Financing meeting the Criteria for Take-Out Financing
and thereafter uses commercially reasonable efforts to obtain a commitment from
the lender offering such Take-Out Financing, but thereafter reasonably believes
that it will not be able for any reason not within the control of Landlord to
obtain a binding commitment which satisfies the Criteria for Take-Out Financing
and which is otherwise acceptable to Landlord in the exercise of its reasonable
discretion, Landlord shall so notify Tenant. During the immediately following
fifteen (15) days, Landlord and Tenant shall meet and negotiate to agree on an
alternative basis for consummating the transaction which is acceptable to both
of them in the exercise of their respective sole discretion. If Landlord and
Tenant fail to so agree within such fifteen (15) day period, then Landlord may,
in its sole discretion, elect by written notice to Tenant to terminate the
Lease, this Leasehold Improvements Agreement, the Option Agreement and the Phase
II Purchase Agreement (but not less than all of them) by written notice to
Tenant. Such termination shall be effective upon and as of the sixth (6th)
business day following the date upon which Tenant receives such notice from
Landlord, unless Tenant exercises the First Option under the Option Agreement
prior to the effective date of such termination. In the event that Tenant so
exercises the First Option, then Tenant shall purchase the PG&E Property from
Landlord in its then condition, "as is, with all faults", except that Landlord
shall have the right set forth in Section 2.13 of the Option Agreement.
18.6. Other Funds. Landlord may, in its sole discretion,
choose to provide funds for the purposes of Take-Out Financing from sources or
loans which do not meet the Criteria for Take-Out Financing, which funds may be
greater in amount than those stated in the Criteria for Take-Out Financing.
18.7. Contribution of Tenant. In the event that Landlord
estimates that the Estimated Phase I Project Cost will exceed an amount equal to
One Hundred Eighty-Three Dollars ($183.00) per square foot of Gross Building
Area in the Buildings to be located in Phase I, Landlord may so notify Tenant in
writing and request that Tenant provide Construction Financing and Take-Out
Financing for the Project in an amount equal to the lesser of: (i) seventy-five
percent of the amount by which the Phase I Project Cost exceeds the amount equal
to One Hundred Eighty-Three Dollars ($183.00) per square foot of Gross Building
Area in the Buildings to be located in Phase I; or, (ii) Seven and 50/100ths
Dollars ($7.50) per square foot of Gross Building Area in the Buildings to be
located in Phase I. _.In the event that Landlord delivers such a notice to
Tenant: (i) Tenant shall provide such funds to Landlord as and when requested by
Landlord, but only after Landlord has invested in the Project an equity
contribution equal to fifteen percent (15%) of the Phase I Project Cost, as such
Phase I Project Cost is estimated in good faith by Landlord; (ii) Tenant shall
be entitled to receive monthly payments of interest only at the rate of fifteen
percent (15%) per annum, commencing as of the Last Rent Commencement Date and
continuing during the Term of the Lease; (iii) interest shall accrue from the
time that such funds are paid by Tenant to the
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day immediately preceding the Last Rent Commencement Date at the rate of fifteen
percent (15%) per annum, and the amount so accrued shall be added to the
principal; (iv) such loan shall be secured by a Deed of Trust encumbering the
Project in the standard form used by First American Title Company of Marin as of
the date of the making of such loan or, if such a deed of trust would not be
acceptable to any Mortgagee of a Mortgage securing Construction Financing or
Take-Out Financing, then by other security reasonably acceptable to Landlord and
Tenant and acceptable to such Mortgagee; and, (v) Tenant shall unconditionally
subordinate its interest under such Deed of Trust to the interests of the
mortgagee of any mortgage or the holder of any other deed of trust securing a
loan against the Project, provided that the aggregate amount of principal
indebtedness secured by all such mortgages and deeds of trust to which Tenant is
required to be subordinate at any time is equal to or less than the Phase I
Project Cost. Any funds so advanced by Tenant, together with any accrued and
unpaid interest thereon, shall be due and payable by Landlord to Tenant on the
fifth (5th) anniversary of the Last Rent Commencement Date.
18.8. Cooperation of Tenant in Construction Financing and
Take-Out Financing.
A. Because of the rights of Tenant to acquire the PG&E
Property pursuant to the Option Agreement, Tenant may be required by the lenders
of the Construction Financing or the Take-Out Financing or both to execute the
loan documents as a prospective borrower or successor borrower. Tenant shall
execute, within five (5) days of a written request from Landlord, any
commercially reasonable loan documents which the lender requires that Tenant
execute, provided that no such loan document shall require that Tenant have
personal liability for the repayment of any indebtedness on such loan, except in
an amount equal to the aggregate monetary obligations of Tenant under the Lease
during the then remaining Term and any Extended Terms as to which Tenant then
has an unexpired right to extend the Term of the Lease and except for customary
personal liability exceptions, such as those pertaining to Hazardous Materials,
misapplication of funds and misrepresentation. Without limiting any other
provision of such loan documents, such loan documents may condition the right of
Tenant to exercise its option pursuant to the Option Agreement on the
maintenance by Tenant of reasonable net worth or other financial standards,
provided that such standards are reasonably related to, and less than, the
financial condition of Tenant as of the date of this Leasehold Improvements
Agreement. Tenant shall also execute such instruments subordinating its rights
and interests pursuant to the Option Agreement to the rights and interests of
the lender pursuant to the loan documents, provided that such lender shall agree
in writing to recognize the rights of Tenant under the Option Agreement
following a foreclosure of the Mortgage, subject to such restrictions on the
liability and obligations of the lender as the lender may reasonably require in
the circumstances.
B. If required by a Mortgagee of Take-Out Financing,
Tenant shall agree to such commercially reasonable amendments to the provisions
of the Lease and this Leasehold Improvements Agreement as such Mortgagee may
require, provided that the amount of Basic Monthly Rent, Real Estate Taxes and
Expense for which Tenant is liable shall not be affected by reason of any such
amendment and the Permitted Use and the other rights and privileges of Tenant
under the Lease and this Leasehold Improvements Agreement are not materially
impaired or reduced.
18.9. Financial Covenants of Tenant. In the event of any
material diminution in the financial condition or creditworthiness of Tenant
occurring after the date of this Leasehold Improvements Agreement which could
reasonably be expected to result, or which has then resulted, in increased costs
of financing or other economic losses to Landlord which would not have been
incurred had no such diminution occurred, Landlord may notify Tenant in writing
that Landlord proposes to increase the Agreed Spread for Take-Out Financing by a
specified amount to take into account the amount of increase in rate caused by
such diminution or to require that Tenant pay to
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Landlord the increased costs of financing or other economic losses. Such written
notice to Tenant (a "Creditworthiness Adjustment Notice") from Landlord shall
state the grounds on which Landlord has concluded that increased costs of
financing or other economic losses will result or has resulted from such a
diminution. In the event that Tenant contends that no increased costs of
financing or other economic losses will result or has resulted from any such
diminution or that the amount of the increased costs of financing or other
economic losses described by Landlord is greater than that required to fairly
reflect the increased costs of financing or other economic losses caused by such
diminution, Tenant may give to Landlord a written notice (a "Contention Notice")
stating such contention within fifteen (15) days of the receipt by Tenant of
such a notice from Landlord, which notice shall state the grounds on which
Tenant has concluded that no increased costs of financing or other economic
losses will result or has resulted from such a diminution or that the amount of
the increased costs of financing or other economic losses described by Landlord
is greater than that which will occur or has occurred. Upon the receipt by
Landlord of such a notice from Tenant within such period, Landlord and Tenant
shall meet and confer for a period of ten (10) days regarding whether or not
increased costs of financing or other economic losses will or has resulted from
such a diminution and as to the amount of the adjustment to the Agreed Spread
for Take-Out Financing or other payments, if any, required to fairly reflect the
increased costs of financing or other economic losses. In the event that
Landlord and Tenant are unable to agree as to whether or not increased costs of
financing or other economic losses will or has resulted from such a diminution
and as to the amount of the adjustment or payments, if any, required to fairly
reflect such increase or losses, then either may require that the matter be
resolved by arbitration conducted in accordance with the provisions of Section
0. In the event that such arbitration results in an award determining that an
increase in the Agreed Spread for Take-Out Financing would be required in the
circumstances to fairly reflect the increase in rate caused by such diminution,
then the Agreed Spread for Take-Out Financing shall be increased in the manner
so determined in the arbitration award. In the event that such arbitration
results in an award determining that Tenant should pay to Landlord an amount to
compensate Landlord for increased costs of financing or other economic losses,
then Tenant shall make such payments to Landlord in the manner and at the time
described in the arbitration award. In the event that Tenant fails to give to
Landlord a Contention Notice within the time period for the giving of such
notice provided in this Section 0, Landlord may give to Tenant a second notice
stating such failure and further stating that if Tenant does not give such a
Contention Notice within five (5) days of the receipt by Tenant of such second
notice from Landlord, the adjustments or payments or both proposed by Landlord
will become final. In the event that Tenant fails to respond to such submission
within such period of five (5) days of the receipt by Tenant of such second
notice from Landlord, then the adjustments or payments or both proposed by
Landlord will become final and not subject to challenge by Tenant.
18.10. Prevailing Wages. Landlord and Tenant hereby
acknowledge that a lender of Construction Financing or Take-Out Financing or
both may require that prevailing wages be paid or that union labor be used in
connection with the construction of the Project, and Landlord and Tenant hereby
agree that Landlord and Tenant shall comply with any such requirements imposed
by such a lender.
18.11. Security Deposit. In the event that the terms of
Take-Out Financing require that Tenant deliver to Landlord a deposit or other
security for the performance by Tenant of its obligations under the Lease or
this Leasehold Improvements Agreement (or both), then Tenant shall so deliver
the required deposit or other security in the form and amount, which deposit or
other security shall be held, applied and disbursed by Landlord pursuant to the
provisions of Section 34 of the Lease.
19. DETERMINATION OF MONTHLY BASE RENT
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19.1. Initial Monthly Base Rent. The Initial Monthly Base Rent
shall be in an amount equal to the product of: _. (i) the total Phase I Project
Cost; multiplied by, (ii) the Development Constant.
19.2. Selection of Designated Treasury Rate.
A. The Designated Treasury Rate shall be determined on
a date selected by Landlord, which date must fall no later than fifteen (15)
days after the date on which the first of the following events occurs: (i)
Landlord enters into a binding agreement to sell, convey or otherwise transfer
in the aggregate fifty percent (50%) of the interests in the Project to any
person or entity other than Tenant (except a conveyance or transfer to any
person who is a constituent partner in Landlord or the holder of an equity
interest in a constituent partner in Landlord); (ii) Landlord receives a
commitment from a lender to provide the Take-Out Financing at a fixed rate of
interest (as opposed to a fixed spread over an index); (iii) Landlord receives a
commitment from any other person or entity to provide funds at a fixed rate of
interest in an amount greater than Eight Million Dollars ($8,000,000.00) for the
purposes of Take-Out Financing pursuant to Section 0. For the purposes of this
Section 19.2, the term "fixed" shall mean set at unvarying rate for a period of
at least one (1) year. Notwithstanding the foregoing provisions of this Section
0, Landlord shall select the Designated Treasury Rate not later than the earlier
to occur of the date upon which Landlord designates the Initial Monthly Base
Rent in accordance with Section 19.3(iii) or the date which is ninety (90) days
after Tenant delivers to Landlord a written request that Landlord select the
Designated Treasury Rate. If Tenant delivers such written request, then Landlord
may, at its option, purchase a forward commitment to fix the rate of interest
(as opposed to fixing a spread over an index) under the Take-Out Financing
covering the period commencing on the date Landlord selects the Designated
Treasury Rate in response to Tenant's request and ending on the date upon which
Landlord reasonably estimates it will be designating the Initial Monthly Base
Rent in accordance with Section 19.3(iii), and the cost of such forward
commitment shall be included in Phase I Project Cost. For the purposes of this
Section 19.2.A. only: (i) the cost of such forward commitment shall be paid to
the lender of the Take-Out Financing in points and not by increasing the spread
of the interest rate applicable thereunder; (ii) the cost of such forward
commitment shall not be subject to the limitations on the cost of Take-Out
Financing set forth in the other provisions of this Leasehold Improvements
Agreement; and, (iii) the cost of such forward commitment shall not be deemed to
be included in costs reimbursed as a part of Agreed Take-Out Financing Closing
Costs. The Designated Treasury Rate shall be an approximation of the rate which
would be quoted forward in the futures markets for the sale of United States
Treasury Bonds with maturities of fifteen (15) years, which rate shall be
determined by extrapolating between the quoted rates for United States Treasury
Bonds with maturities of ten (10) and thirty (30) years as of the date for which
a quote can be obtained that is closest to the date upon which Landlord
reasonably predicts that the Last Term Commencement Date will occur.
B. Landlord shall deliver to Tenant, within one (1)
business day after the occurrence of the applicable event described above,
written notice (a "Rate Designation Notice") of the date on which such event
occurred, and within two (2) business days after Landlord selects the Designated
Treasury Rate in accordance with this Section 0, Landlord shall deliver to
Tenant written notice of such selection date and the Designated Treasury Rate.
Failure by Landlord to deliver either or both of such notices shall not
constitute a waiver of the right of to set the Designated Treasury Rate,
although a failure by Landlord to select a date as of which the Designated
Treasury Rate is to be established on or before the last day of the period
during which such date could occur, as such period is provided in Section
19.2.A, shall result in the date as of which the Designated Treasury Rate is to
be established being the last day of such period.
C. In the event that Landlord has previously given a
Rate Designation Notice to Tenant, but Commencement of Construction has not
occurred on or before August 1,
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1998, Landlord may give to Tenant a second Rate Designation Notice at any time
thereafter and prior to the Last Rent Commencement Date, and the Designated
Treasury Rate shall be determined as of the date specified by Landlord in such
second Rate Designation Notice; provided, however, that if the failure to
achieve Commencement of Construction was solely due to causes within the
complete control of Landlord, then the Designated Treasury Rate shall be that
selected by reason of the prior Rate Designation Notice given by Landlord to
Tenant.
D. In accordance with Sections 2.14, 3.13 and 4.12 of
the Option Agreement, in the event that Landlord has previously given a Rate
Designation Notice to Tenant, but Tenant exercises one of the options granted in
the Option Agreement but thereafter defaults in its obligation to purchase the
PG&E Property in accordance with the terms of the Option Agreement, Landlord may
give to Tenant another Rate Designation Notice in accordance with the provisions
of Section 0, and the Designated Treasury Rate shall be determined as of the
date specified by Landlord in such other Rate Designation Notice.
19.3. Estimation and Redetermination of Initial Monthly Base
Rent.
(i) As of the date of this Leasehold
Improvements Agreement, and based on the information available to Landlord and
Tenant as of that date, Landlord and Tenant estimate that the Initial Monthly
Base Rent will be approximately Three Hundred Five Thousand Two Hundred Fifty
Dollars ($305,250.00) per month, based upon an estimate that total Phase I
Project Cost will be in the approximate amount of Thirty-Three Million Dollars
($33,000,000.00) and that the Development Constant will be approximately eleven
and one-tenth percent (11.1%).
(ii) In the event that the Designated Treasury
Rate has not been determined on or before the First Rent Commencement Date,
Landlord shall, on or before the First Rent Commencement Date, notify Tenant in
writing of Landlord's revised estimate of the Initial Monthly Base Rent,
specifying both Landlord's revised good faith estimate of total Phase I Project
Cost and of the Development Constant as of the date of such notice. Such revised
estimate shall constitute the Initial Monthly Base Rent until the Initial
Monthly Base Rent is finally determined in accordance with Section 0.
(iii) Within sixty (60) days following the Last
Rent Commencement Date, Landlord shall notify Tenant in writing of Landlord's
determination of the final Initial Monthly Base Rent, specifying both Landlord's
then current good faith estimate of total Phase I Project Cost and of the
Development Constant upon which Landlord's determination of final Initial
Monthly Base Rent shall be based. Such estimates of total Phase I Project Cost
and of the Development Constant shall be based on the most current information
then available to Landlord, and shall include an explanation of any changes from
the estimate (if any) given in accordance with Section 0.
(iv) Tenant acknowledges that the estimates to
be given by Landlord to Tenant in accordance with this Section 0 will
necessarily be based on incomplete information and will therefore be subject to
inherent uncertainties. Landlord shall make such estimates in good faith, based
on the information available to Landlord at the time the estimate is to be made.
Tenant hereby acknowledges that Landlord will not be bound by any estimate so
given, and that no previous estimate shall be taken into account in any
redetermination of Initial Monthly Base Rent required by this Section 0. No
failure by Landlord to give to Tenant a revised estimate of Initial Monthly Base
Rent, or to redetermine the Initial Monthly Base Rent within the time periods
herein required shall constitute a waiver by Landlord of the right to do so
thereafter. The foregoing notwithstanding, in the event that Landlord fails to
notify Tenant of a redetermination within the time period provided herein,
Tenant shall give to Landlord a notice stating such failure
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and warning Landlord that a failure to give such a notice could result in a
waiver of the right to do so. If Landlord does not give to Tenant a notice of a
redetermination of Initial Monthly Base Rent within thirty (30) days of the
receipt by Landlord of such notice from Tenant, Tenant may give to Landlord a
second notice stating such failure and further stating that if Landlord does not
give such a notice of redetermination within ten (10) business days of the
receipt by Landlord of such second notice from Tenant, Landlord will be deemed
to have waived the right to such a redetermination. In the event that Landlord
fails to respond to such notice within such period of ten (10) business days of
the receipt by Landlord of such second notice from Tenant, Landlord shall be
deemed to have waived the right to such a redetermination, unless such failure
was caused by a Force Majeure Event, in which event Landlord shall not be deemed
to have waived such a redetermination if Landlord gives a notice of
redetermination within one (1) year.
(v) Within five (5) business days from the
receipt by Tenant of a written request from Landlord, Tenant shall execute a
certificate in a form reasonably required by Landlord or a lender acknowledging
the amount of the Initial Monthly Base Rent as so estimated by Landlord, subject
to the effect of any redetermination of Initial Monthly Base Rent permitted
hereunder. It is the intention of Landlord and Tenant that any lender shall be
fully entitled to rely on the statements set forth in such certificate as true
and correct. The execution of such a certificate by Tenant shall not, however,
be a condition to the obligation of Tenant to pay Monthly Base Rent in the
amounts determined by Landlord nor excuse in any manner any failure by Tenant to
make payments of Monthly Base Rent as and when due.
(vi) During the period between the First Rent
Commencement Date and the determination of the final Initial Monthly Base Rent
in accordance with Section 0, Tenant shall pay Initial Monthly Base Rent at the
rate determined by the estimate of Landlord given in accordance with the
provisions of Sections 0 or, if applicable, 0. Upon the final determination of
the Initial Monthly Base Rent pursuant to Section 0, Landlord shall notify
Tenant in writing of any amount by which the Initial Monthly Base Rent then
previously paid by Tenant is more or less than that which would have been due at
the rate determined under Section 0. In the event that Tenant has paid more than
that which would have been due at the rate determined under Section 0, then
Landlord shall refund the amount of the overage to Tenant within twenty (20)
days of the receipt by Tenant of such notice from Landlord. In the event that
Tenant has paid less than that which would have been due at the rate determined
under Section 0, then Tenant shall pay to Landlord the amount of the
underpayment within twenty (20) days of the receipt by Tenant of such notice
from Landlord.
(vii) Throughout the process of the design,
bidding and construction of the Project, Landlord shall undertake reasonable
efforts to keep Tenant apprised of the status of all Aggregate Development Cost.
Tenant shall be entitled to receive copies of all bid documents, contracts and
subcontracts and all change orders agreed to by Landlord. Without limiting the
foregoing, Landlord agrees to deliver to Tenant: (A) a monthly report which
describes, in reasonable detail, the Aggregate Development Cost paid during the
preceding month and compares such Aggregate Development Cost to the
corresponding amounts set forth in the Budget and in any budget or other
document used by the lender of the Construction Financing in approving
disbursements of the proceeds of the Construction Financing; (B) a copy of the
summary of each request to disburse Construction Financing proceeds to pay hard
costs of the Project, together with copies of invoices submitted by the
architect and engineers for amounts due to such parties; (C) written notice as
promptly as possible after Landlord realizes that funds reserved in the Budget
for contingencies will need to be expended in the future, together with a
reasonably detailed, written explanation of the use thereof; and, (D) copies of
such supporting documentation to any of the foregoing as Tenant may request from
time to time.
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20. FIRST ADJUSTMENT TO REFLECT FINAL PHASE I PROJECT COST
2.01. Determination of Final Phase I Project Cost. Within
thirty (30) days of the date upon which Landlord has the information necessary
to determine the final Phase I Project Cost, but not later than one hundred
twenty (120) days following the Last Rent Commencement Date, Landlord shall
notify Tenant in writing of the final Phase I Project Cost. Such written notice
shall be accompanied by a detailed statement of final Phase I Project Cost.
20.2 Possible Review of Final Phase I Project Cost by Tenant.
Within twenty (20) days of the receipt by Tenant of the notice from Landlord
setting forth final Phase I Project Cost, Tenant may notify Landlord in writing
(a "Review Notice") that Tenant desires to review the records of Landlord
pertaining to the determination of Phase I Project Cost. If Tenant gives such a
notice to Landlord within such period, Landlord shall permit Tenant to review
all of the records of Landlord relevant to the determination of Phase I Project
Cost. Such review shall be performed at the offices of Landlord during regular
business hours, and Landlord shall permit Tenant to make copies, at its expense,
of such portions of such records as Tenant may elect. Tenant shall undertake and
complete such review within sixty (60) days of the receipt by Landlord of the
Review Notice. In the event that Tenant concludes that the determination by
Landlord of Phase I Project Cost is incorrect, it shall so notify Landlord
within seventy (70) days of the receipt by Landlord of the Review Notice from
Tenant, which notice from Tenant shall: (i) state with particularity the items
of Phase I Project Cost as to which Tenant believes that the determination of
Landlord was incorrect; and, (ii) state the election of Tenant to have the final
Phase I Project Cost determined by arbitration in accordance with Section 0.
20.3. Payment to Adjust Phase I Project Cost. The final Phase
I Project Cost stated by Landlord in its notice to Tenant given in accordance
with Section 0 shall be deemed to have been accepted and approved by Tenant
unless: (i) Landlord and Tenant agree in writing to a different Phase I Project
Cost within seventy (70) days of the receipt by Landlord of the Review Notice
from Tenant; or, Tenant gives to Landlord within such seventy (70) day period a
notice electing to have final Phase I Project Cost determined by arbitration in
accordance with Section 0. Within thirty (30) days of the date upon which the
final Phase I Project Cost is established (whether by Landlord's statement of
final Phase I Project Cost being deemed accepted and approved by Tenant in
accordance with this Section 0 or by a written agreement between Landlord and
Tenant establishing a different final Phase I Project Cost or by an arbitration
resulting from an election by Tenant made within seventy (70) days of the
receipt by Landlord of the Review Notice from Tenant): _.(i) if the final Phase
I Project Cost is less than the Phase I Project Cost used by Landlord in
determining the Initial Monthly Base Rent pursuant to Section 0, Landlord shall
pay to Tenant a sum equal to the difference between the Phase I Project Cost
used by Landlord in determining the Initial Monthly Base Rent pursuant to
Section 0 and the final Phase I Project Cost, together with, if the difference
is greater than two percent (2%) of Phase I Project Cost, an amount equal to ten
percent (10%) of the amount by which such difference exceeds two (2%) of Phase I
Project Cost; or, (ii) if the final Phase I Project Cost is greater than the
Phase I Project Cost used by Landlord in determining the Initial Monthly Base
Rent pursuant to Section 0, Tenant shall pay to Landlord a sum equal to the
difference between the final Phase I Project Cost and the Phase I Project Cost
used by Landlord in determining the Initial Monthly Base Rent pursuant to
Section 0. Any claim by Tenant pertaining to a payment due from Landlord to
Tenant pursuant to this Section 0 shall be subject and subordinate to the claims
and rights of any lender with respect to the Project, the Phase I Land and any
appurtenances thereto, including, without limitation, the right to receive
monthly installment payments of principal and interest. Upon the written request
of Landlord, Tenant shall execute such documents as the lender of the
Construction Financing or Take-Out Financing may reasonably require to further
evidence or implement such subordination.
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21. SECOND ADJUSTMENT TO REFLECT FINAL PHASE I PROJECT COST
21.1. Determination of Revised Final Phase I Project Cost. In
the event that any items of Phase I Project Cost could not have been reasonably
ascertained with precision within ninety (90) days of the Last Rent Commencement
Date, then within one (1) year of the Last Rent Commencement Date, Landlord may
notify Tenant in writing of a revised final Phase I Project Cost. Such written
notice shall be accompanied by a detailed statement of such revised final Phase
I Project Cost.
21.2. Possible Review of Revised Final Phase I Project Cost by
Tenant. Within twenty (20) days of the receipt by Tenant of the notice from
Landlord given in accordance with Section 0 and setting forth a revised final
Phase I Project Cost, Tenant may notify Landlord in writing (a "Difference
Review Notice") that Tenant desires to review the records of Landlord pertaining
to those items (the "Difference Items") which account for the difference between
the revised final Phase I Project Cost and the final Phase I Project Cost as
determined pursuant to the provisions of Section 0. If Tenant gives such a
notice to Landlord within such period, Landlord shall permit Tenant to review
all of the records of Landlord relevant to the determination of such Difference
Items. Such review shall be performed at the offices of Landlord during regular
business hours, and Landlord shall permit Tenant to make copies, at its expense,
of such portions of such records as Tenant may elect. Tenant shall undertake and
complete such review within sixty (60) days of the receipt by Landlord of the
Difference Review Notice. In the event that Tenant concludes that the
determination by Landlord of the Difference Items is incorrect, it shall so
notify Landlord within seventy (70) days of the receipt by Landlord of the
Difference Review Notice from Tenant, which notice from Tenant shall: (i) state
with particularity the Difference Items as to which Tenant believes that the
determination of Landlord was incorrect; and, (ii) state the election of Tenant
to have the revised final Phase I Project Cost determined by arbitration in
accordance with Section 0.
21.3. Payment to Adjust Phase I Project Cost. The revised
final Phase I Project Cost stated by Landlord in its notice to Tenant given in
accordance with Section 0 shall be deemed to have been accepted and approved by
Tenant unless: (i) Landlord and Tenant agree in writing to a different Phase I
Project Cost within seventy (70) days of the receipt by Landlord of the
Difference Review Notice from Tenant; or, (ii) Tenant gives to Landlord within
such seventy (70) day period a notice electing to have the revised final Phase I
Project Cost determined by arbitration in accordance with Section 0. Within
thirty (30) days of the date upon which the revised final Phase I Project Cost
is established (whether by Landlord's statement of revised final Phase I Project
Cost being deemed accepted and approved by Tenant in accordance with this
Section 0 or by a written agreement between Landlord and Tenant establishing a
different revised final Phase I Project Cost or by an arbitration resulting from
an election by Tenant made within seventy (70) days of the receipt by Landlord
of the Difference Review Notice from Tenant): _.(i) if the revised final Phase I
Project Cost is less than the final Phase I Project Cost determined in
accordance with Section 0, Landlord shall pay to Tenant a sum equal to the
difference between the final Phase I Project Cost determined in accordance with
Section 0 and the revised final Phase I Project Cost; or, (ii) if the revised
final Phase I Project Cost is greater than the Phase I Project Cost determined
in accordance with Section 0, Tenant shall pay to Landlord a sum equal to the
difference between the revised final Phase I Project Cost and the Phase I
Project Cost determined in accordance with Section 0. Any claim by Tenant
pertaining to a payment due from Landlord to Tenant pursuant to this Section 0
shall be subject and subordinate to the claims and rights of any lender with
respect to the Project, the Phase I Land and any appurtenances thereto,
including, without limitation, the right to receive monthly installment payments
of principal and interest. Upon the written request of Landlord, Tenant shall
execute such documents as the lender of the Construction Financing or Take-Out
Financing may reasonably require to further evidence or implement such
subordination.
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22. PAYMENT OF PHASE II CURRENT COSTS
22.1. Payment of Certain Phase II Current Costs at
Acquisition. As provided in the Phase II Purchase Agreement, Tenant shall pay to
Landlord at the closing of the escrow for the acquisition of the Phase II Land
by Tenant from Landlord the purchase price for the Phase II Land.
22.2. Payment of Certain Phase II Current Costs Prior to
Construction Financing. On or before the earlier of the date required by lender
of the Construction Financing or the date which is five (5) business days before
the date on which Landlord, in its reasonable judgment, must direct the
contractor to proceed with the applicable portion of the work on the Phase II
Land (of which date Landlord shall notify Tenant in writing at least two (2)
business days before such date), Tenant shall pay to Landlord an amount equal to
Landlord's reasonable estimate of any of the following Phase II Current Costs
which have then been incurred (but not necessarily paid) by Landlord: (i) the
actual cost to Landlord of arranging the acquisition of the City Property; (ii)
all fees and charges of architects, engineers, materials testing consultants and
other design or construction consultants, to the extent that such fees and
charges relate to the design of buildings and other improvements to the Phase II
Land; (iii) all permit fees and all fees and charges for services rendered by
employees of the City of San Rafael or consultants hired directly by the City of
San Rafael in connection with the application for, or issuance of, the Necessary
Approvals required for the construction of the improvements to be located upon
the Phase II Land; (iv) all costs reimbursed by Landlord to Tenant pursuant to
Section 0, to the extent that such costs pertain to improvements to be located
upon, or to serve, the Phase II Land; (v) all deposits (including, without
limitation, deposits in connection with any utility service, but excluding
deposits in connection with any Take-Out Financing), to the extent that such
deposits pertain to Phase II, provided that the amount of any such deposits
returned to Landlord shall be deducted from Aggregate Development Cost and Phase
II Current Costs when received (and returned to Tenant, to the extent then
previously paid by Tenant to Landlord), but only to the extent that such
deposits were previously included in Aggregate Development Cost and Phase II
Current Costs; (vi) premiums for, and other costs of, surety bonds or other
security required in connection with any aspect of the development of Phase II
or off-site improvements (allocating the cost of such bonds between Phase I and
Phase II in accordance with the schedule for such allocations set forth in
Exhibit H, to the extent that such security is provided by Landlord and not by
Tenant; and, (vii) all reasonable legal fees and reasonable fees of other
technical consultants incurred in connection with the negotiation and
documentation of any agreement pertaining to the design and construction of the
improvements to be constructed upon the Phase II Land or any portion thereof,
whether at or about the same time as the Site and Shell Improvements or at a
later time, or any agreement pertaining to the design, construction or security
for of any improvement or payment imposed as a condition upon any approval by
the City of San Rafael of any permit or approval required for the development of
such improvements.
22.3. Payment of Remainder of Phase II Current Costs at
Construction Financing. On or before the later of the day immediately preceding
the funding of the Construction Financing or fifteen (15) days from a written
request by Landlord, Tenant shall deposit with the lender of the Construction
Financing an amount equal to Landlord's reasonable estimate of all Phase II
Current Costs which have not then been paid by Tenant to Landlord pursuant to
Sections 0 or 0. At the request of Tenant, Landlord shall request that the
lender enter into an agreement with Tenant requiring that the deposit be applied
only in payment of Phase II Current Costs, which agreement shall be in a form
reasonably satisfactory to such lender. In the event that such lender will not
enter into such an agreement, then Tenant may, as the alternative to depositing
such funds with such lender, elect to pay such funds to Landlord, and Landlord
shall enter into the required agreement with Tenant. Tenant shall not
unreasonably withhold or delay the
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execution of such an agreement. Such lender may disburse such funds to pay Phase
II Current Costs or to reimburse Landlord for any Phase II Current Costs
incurred and paid by Landlord. In the event that the amount so paid and
deposited by Tenant is less than Phase II Current Costs, Landlord may request
that Tenant make an additional deposit in an amount equal to Landlord's
reasonable estimate of the additional funds required to pay or reimburse all
Phase II Current Costs then unpaid (whether or not then yet incurred), and
Tenant shall make such deposit within ten (10) days of the receipt by Tenant of
such a request from Landlord. In the event that the amount so deposited by
Tenant is more than Phase II Current Costs, after all such Phase II Current
Costs have been paid or reimbursed, the excess amount so deposited shall be
returned to Tenant by the party then holding the excess funds. No component of
Phase II Current Costs so deposited or otherwise paid or reimbursed by Tenant
shall be included within Phase I Project Cost, to the full extent so paid or
reimbursed.
23. PAYMENT FOR DESIGN AND CONSTRUCTION OF PARKING LOT. On or before
the later of May 1, 1998 or fifteen (15) days from a written request by
Landlord, Tenant shall deposit with the lender of the Construction Financing an
amount equal to Landlord's reasonable estimate of all costs of the design and
construction of all the parking lot which is to be located upon the Phase II
Land. The obligation of Tenant to make the deposit to a lender required by this
Section 0 may be conditioned, at the request of Tenant, upon the execution by
Tenant and such lender of an agreement requiring that the deposit be applied
only in payment of the cost of the design and construction of all the parking
lot which is to be located upon the Phase II Land, which agreement shall be in a
form reasonably satisfactory to such lender. Tenant shall not unreasonably
withhold or delay the execution of such an agreement. Such lender may disburse
such funds to pay such costs or to reimburse Landlord for any such costs
incurred and paid by Landlord. In the event that the amount so deposited by
Tenant is less than the aggregate of such costs of design and construction,
Landlord may request that Tenant make an additional deposit in an amount equal
to Landlord's reasonable estimate of the additional funds required to pay or
reimburse all such costs then unpaid (whether or not then yet incurred). In the
event that the amount so deposited by Tenant is more than the aggregate of such
costs, after all such costs have been paid or reimbursed, the excess amount so
deposited shall be returned to Tenant by the party then holding the excess
funds. No component of such costs so deposited or otherwise paid or reimbursed
by Tenant shall be included within Phase I Project Cost or in Phase II Current
Costs, to the full extent so paid or reimbursed.
24. ARBITRATION OF DISPUTES
EXCEPT FOR DISPUTES WHICH ARE TO BE DETERMINED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 0, ANY DISPUTE ARISING UNDER THIS LEASEHOLD IMPROVEMENTS
AGREEMENT SHALL BE DETERMINED BY ARBITRATION UPON THE REQUEST OF EITHER PARTY.
THE PARTY REQUESTING ARBITRATION SHALL DO SO BY GIVING NOTICE TO THAT EFFECT TO
THE OTHER PARTY, SPECIFYING IN SAID NOTICE IN REASONABLE DETAIL THE NATURE OF
THE DISPUTE. WITHIN THE FIVE (5) DAY PERIOD AFTER SUCH NOTICE IS GIVEN, THE
PARTIES SHALL MEET AND CONFER AS OFTEN AS IS REASONABLY POSSIBLE TO ATTEMPT IN
GOOD FAITH TO AGREE ON A SINGLE ARBITRATOR TO RESOLVE THE DISPUTE. IF THE
PARTIES FAIL TO SO AGREE WITHIN THAT FIVE (5) DAY PERIOD, THE MATTER SHALL BE
REFERRED TO THE AMERICAN ARBITRATION ASSOCIATION, WHICH SHALL SELECT A SINGLE
ARBITRATOR TO RESOLVE SUCH DISPUTE. WITHIN FIVE (5) DAYS AFTER THE ARBITRATOR IS
SELECTED, THE ARBITRATOR SHALL NOTIFY EACH OF THE PARTIES OF THE LOCATION AND
TIME OF A HEARING OF THEIR RESPECTIVE POSITIONS WITH RESPECT TO THE DISPUTE,
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WHICH SHALL BE HELD NOT LATER THAN FIFTEEN (15) DAYS AFTER THE NOTICE FROM THE
PARTY INITIATING THE ARBITRATION. THE ARBITRATOR SHALL RENDER HIS OR HER
DECISION WITHIN SEVEN (7) DAYS OF CONCLUSION OF THE HEARING. THE DECISION OF THE
ARBITRATOR SHALL BE BINDING AND CONCLUSIVE UPON THE PARTIES. IF AN ARBITRATOR
SHALL FAIL OR REFUSE TO ACT WITHIN THE TIME PERIODS PROVIDED HEREIN, THEN A
SUBSTITUTE ARBITRATOR SHALL BE APPOINTED UPON THE APPLICATION OF EITHER PARTY BY
THE PRESIDING JUDGE OF THE SUPERIOR COURT IN AND FOR THE COUNTY OF MARIN, ACTING
IN HIS OR HER PERSONAL, RATHER THAN JUDICIAL, CAPACITY. THE AWARD IN SUCH
ARBITRATION MAY BE ENFORCED, ON THE APPLICATION OF EITHER PARTY THERETO, BY THE
ORDER OR JUDGMENT OF A COURT OF COMPETENT JURISDICTION. THE FEES AND EXPENSES OF
THE ARBITRATOR SHALL BE BORNE BY THE PARTIES EQUALLY, BUT EACH PARTY SHALL BEAR
THE EXPENSE OF ITS OWN ATTORNEYS AND EXPERTS AND THE ADDITIONAL EXPENSES OF
PRESENTING ITS OWN PROOF.
NOTICE: BY INITIALLING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN
THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
LANDLORD
Village Builders, L.P.,
a California limited partnership
By: VPI, Inc., a California corporation,
Its General Partner
By:
------------------------------------
Its:
------------------------------------
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TENANT
Fair, Isaac and Company, Inc.,
a Delaware corporation
By:
--------------------------------------------
Its:
--------------------------------------------
25. ALTERNATIVE PROCEDURE FOR ARBITRATION OF CERTAIN DISPUTES.
ANY DISPUTE ARISING UNDER A PROVISION OF THIS LEASEHOLD IMPROVEMENTS
AGREEMENT WHICH SPECIFICALLY STATES THAT SUCH DISPUTES SHALL BE DETERMINED BY
ARBITRATION IN ACCORDANCE WITH THIS SECTION 0 SHALL BE DETERMINED BY THE
FOLLOWING PROCEDURES. THE PARTY REQUESTING ARBITRATION SHALL DO SO BY GIVING
NOTICE TO THAT EFFECT TO THE OTHER PARTY, SPECIFYING IN SAID NOTICE IN
REASONABLE DETAIL THE NATURE OF THE DISPUTE. WITHIN THE TWO (2) DAY PERIOD AFTER
SUCH NOTICE IS GIVEN, THE PARTIES SHALL MEET AND CONFER AS OFTEN AS IS
REASONABLY POSSIBLE TO ATTEMPT IN GOOD FAITH TO AGREE ON A SINGLE ARBITRATOR TO
RESOLVE THE DISPUTE. IF THE PARTIES FAIL TO SO AGREE WITHIN THAT TWO (2) DAY
PERIOD, THEN BY 5:00 P.M. ON SUCH SECOND DAY, EACH PARTY SHALL LIST THE NAMES OF
TWO (2) ARBITRATORS ON A PIECE OF PAPER AND SHALL PROVIDE A COPY THEREOF TO THE
OTHER PARTY. IF THE NAME OF AN ARBITRATOR APPEARS ON BOTH PIECES OF PAPER, SUCH
PERSON SHALL ARBITRATE THE DISPUTE. OTHERWISE, THE NAMES OF THE FOUR (4)
ARBITRATORS SHALL BE SUBMITTED ON THE FOLLOWING MORNING TO THE AMERICAN
ARBITRATION ASSOCIATION SOLELY FOR THE PURPOSE OF SELECTING WHICH OF THOSE FOUR
(4) INDIVIDUALS SHALL ARBITRATE THE DISPUTE. THE AMERICAN ARBITRATION
ASSOCIATION SHALL BE REQUESTED TO SELECT SUCH AN ARBITRATOR WITHIN TWO (2) DAYS.
WITHIN FIVE (5) DAYS OF THE SELECTION OF THE ARBITRATOR, THE ARBITRATOR SHALL
NOTIFY EACH OF THE PARTIES OF THE LOCATION AND TIME OF A HEARING OF THEIR
RESPECTIVE POSITIONS WITH RESPECT TO THE DISPUTE, WHICH SHALL BE HELD NOT LATER
THAN TEN (10) DAYS AFTER THE NOTICE FROM THE PARTY INITIATING THE ARBITRATION.
THE ARBITRATOR SHALL RENDER HIS OR HER DECISION WITHIN TWO (2) BUSINESS DAYS OF
CONCLUSION OF THE HEARING. THE DECISION OF THE ARBITRATOR SHALL BE BINDING AND
CONCLUSIVE UPON THE PARTIES. IF AN ARBITRATOR SHALL FAIL OR REFUSE TO ACT WITHIN
THE TIME PERIODS PROVIDED HEREIN, THEN A SUBSTITUTE ARBITRATOR SHALL BE
APPOINTED UPON THE APPLICATION OF EITHER PARTY BY THE PRESIDING JUDGE OF THE
SUPERIOR COURT IN AND FOR THE COUNTY OF MARIN, ACTING IN HIS OR HER PERSONAL,
RATHER THAN JUDICIAL, CAPACITY. THE AWARD IN SUCH ARBITRATION MAY BE ENFORCED,
ON THE APPLICATION OF EITHER PARTY THERETO, BY THE ORDER OR JUDGMENT OF A COURT
OF COMPETENT JURISDICTION. THE FEES AND EXPENSES OF THE ARBITRATOR SHALL BE
BORNE BY THE PARTIES EQUALLY, BUT EACH PARTY SHALL BEAR THE EXPENSE OF ITS OWN
ATTORNEYS AND EXPERTS AND THE ADDITIONAL EXPENSES OF PRESENTING ITS OWN PROOF.
NOTICE: BY INITIALLING IN THE SPACE BELOW, YOU ARE AGREEING
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TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS
PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT
POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
INITIALLING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED
IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
LANDLORD
Village Builders, L.P.,
a California limited partnership
By: VPI, Inc., a California corporation,
Its General Partner
By:
-------------------------------------------
Its:
-------------------------------------------
TENANT
Fair, Isaac and Company, Inc.,
a Delaware corporation
By:
--------------------------------------------
Its:
--------------------------------------------
26. NOTICES. Except as otherwise expressly provided in this Leasehold
Improvements Agreement, any bills, statements, notices, demands, requests or
other communications given or required to be given under this Leasehold
Improvements Agreement shall be effective only if rendered or given in writing,
sent by certified mail (return receipt requested), reputable overnight carrier,
or delivered personally, (i) to Tenant at Tenant's address set forth in the
Basic Lease Information of the Lease, or (ii) to Landlord at Landlord's address
set forth in the Basic Lease Information of the Lease; or (iii) to such other
address as either Landlord or Tenant may designate as its new address for such
purpose by notice given to the other in accordance with the provisions of this
Section 0. Any bill, statement, notice, demand, request or other communication
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shall be deemed to have been rendered or given on the date the return receipt
indicates delivery of or refusal of delivery if sent by certified mail, the day
upon which recipient accepts and signs for delivery from a reputable overnight
carrier or on the date a reputable overnight carrier indicates refusal of
delivery, upon the date personal delivery is made, or three (3) days after
mailed by first class U.S. mail. Any bill, statement, notice, demand, request or
other communication under this Leasehold Improvements Agreement may be given on
behalf of a party by the attorney for such party.
27. EFFECT OF EXERCISE OF OPTION. The other provisions of this
Leasehold Improvements Agreement notwithstanding, in the event that Tenant
exercises the "First Option" (as that term is defined in the Option Agreement)
in accordance with the provisions of the Option Agreement, Landlord shall assign
to Tenant the agreements required to be so assigned by the Option Agreement, and
Landlord may thereafter cease to perform any obligation of Landlord pursuant to
this Leasehold Improvements Agreement with respect to the design and
construction of any improvements on the Phase I Land or the Phase II Land other
than any obligations of Landlord with respect to obtaining Necessary Approvals.
28. ASSIGNMENT.
28.1. By Tenant. The rights of Tenant hereunder shall not be
assigned by Tenant except in connection with an assignment of the leasehold
interest of Tenant under the Lease, but only if such assignment is permitted
under the Lease or is made with the consent of Landlord, and any other purported
assignment by Tenant shall be null and void and of no force or effect.
28.2. By Landlord. This Leasehold Improvements Agreement and
the rights of Landlord (but not the obligations of Landlord) hereunder shall be
assignable as collateral by Landlord without Tenant's consent or approval to any
lender of Construction Financing or Take-Out Financing, to constituent partner
in Landlord (or constituent partner of a constituent partner in Landlord), to an
entity in which Jim Helfrich or Scott Kepner hold equity interests (or to a
constituent partner of such entity), but any such assignment shall only be made
in connection with an assignment of the right of Landlord under the Lease.
29. CONFLICTS AND CONFORMITY WITH OTHER DOCUMENTS. To the extent which
this Leasehold Improvements Agreement fails to provide the rights and
obligations of Landlord and Tenant relative to any matter, the rights and
obligations of each of them relative to such matter shall be governed by the
Lease to the extent such matters are addressed in the Lease.
30. DESIGNATION OF AGENTS.
30.1. Designation of Agent by Landlord. Landlord hereby
appoints as its respective agents in connection with the matters referred to in
this Leasehold Improvements Agreement Scott Kepner and Jim Helfrich, with each
such agent being fully authorized to act for and bind Landlord without the
necessity of confirmation or ratification by any other such agent or by any
other person or entity. Such appointment shall be for the express benefit of
Tenant.
30.2. Designation of Agent by Tenant. Tenant hereby appoints
as its respective agents in connection with the matters referred to in this
Leasehold Improvements Agreement Stephen Gale and Michael Gordon, with each such
agent being fully authorized to act for and bind Tenant without the necessity of
confirmation or ratification by any other such agent or
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by any other person or entity. Such appointment shall be for the express benefit
of Landlord.
31. EVENTS OF DEFAULT.
31.1. Events of Landlord Default. An "Event of Landlord
Default" shall be deemed to have occurred when: (i) Landlord has failed to
perform any of its obligations or has breached any of its duties under this
Leasehold Improvements Agreement; (ii) Tenant has given written notice of such
failure or breach to Landlord; and, (iii) Landlord has not cured such failure or
breach, with respect to any failure to pay or deposit money, within five (5)
business days of the receipt by Landlord of such notice from Tenant or, with
respect to any failure to perform any obligation or breach of any duty, other
than an obligation to pay or deposit money, within thirty (30) days from the
receipt by Landlord of such notice from Tenant or, if Landlord has diligently
commenced and endeavored to cure such failure or breach but such failure or
breach cannot by its nature be cured within such period of thirty (30) days
despite the diligent efforts of Landlord, then within such additional period as
may reasonably be required for the completion of such cure through the diligent
efforts of Landlord; provided, however, that such additional period shall not
exceed ninety (90) days beyond such thirty (30) day period. The foregoing
notwithstanding, in the event that Tenant is prevented or delayed by operation
of law or by injunction from giving to Landlord notice that Landlord has failed
to perform any of its obligations or has breached any of its duties, then no
such notice shall be required, and an "Event of Landlord Default" shall be
deemed to have occurred when the applicable time period referred to in clause
(iii) above has elapsed from the first occurrence of such failure of performance
or breach of duty (rather than from the receipt by Landlord of a notice from
Tenant).
31.2. Events of Tenant Default. An "Event of Tenant Default"
shall be deemed to have occurred when: (i) Tenant has failed to perform any of
its obligations or breached any of its duties under this Leasehold Improvements
Agreement; (ii) Landlord has given written notice of such failure or breach to
Tenant; and, (iii) Tenant has not cured such failure or breach, with respect to
any failure to pay or deposit money, within five (5) business days of the
receipt by Tenant of such notice from Landlord or, with respect to any failure
to perform any obligation or breach of any duty, other than an obligation to pay
or deposit money, within thirty (30) days from the receipt by Tenant of such
notice from Landlord or, if Tenant has diligently commenced and endeavored to
cure such failure or breach but such failure cannot by its nature be cured
within such period of thirty (30) days despite the diligent efforts of Tenant,
then within such additional period as may reasonably be required for the
completion of such cure through the diligent efforts of Tenant; provided,
however, that such additional period shall not exceed ninety (90) days beyond
such thirty (30) day period. The foregoing notwithstanding, in the event that
Landlord is prevented or delayed by operation of law or by injunction from
giving to Tenant notice that Tenant has failed to perform any of its obligations
or has breached any of its duties, then no such notice shall be required, and an
"Event of Tenant Default" shall be deemed to have occurred when the applicable
time period referred to in clause (iii) above has elapsed from the first
occurrence of such failure of performance or breach of duty (rather than from
the receipt by Tenant of a notice from Landlord).
32. WAIVER. If either Landlord or Tenant waives the performance of any
term, covenant or condition contained in this Leasehold Improvements Agreement,
such waiver shall not be deemed to be a waiver of any subsequent breach of the
same or any other term, covenant or condition contained herein. Furthermore, the
acceptance of Monthly Base Rent or Additional Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Leasehold Improvements Agreement or of any Tenant Caused
Delay, regardless of Landlord's knowledge of such preceding breach at the time
Landlord accepted such Monthly Base Rent or Additional Rent. Failure by Landlord
or Tenant to enforce any of the terms,
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covenants or conditions of this Leasehold Improvements Agreement for any length
of time shall not be deemed to waive or to decrease the right of Landlord or
Tenant to insist thereafter upon strict performance by Tenant. Waiver by
Landlord or Tenant of any term, covenant or condition contained in this
Leasehold Improvements Agreement may only be made by a written document signed
by the party to be charged with such waiver.
33. ATTORNEYS' FEES. If Tenant or Landlord brings any arbitration or
action for any relief against the other, declaratory or otherwise, arising out
of this Leasehold Improvements Agreement, the losing party shall pay to the
prevailing party a reasonable sum for attorneys' fees, which shall be deemed to
have accrued on the commencement of such action and shall be paid whether or not
the arbitration or action is prosecuted to judgment.
34. TERMINATION.
34.1. Rights of Landlord to Terminate. In addition to any
other rights to terminate this Leasehold Improvements Agreement set forth
herein, but subject to the provisions of Section 0.D, Landlord shall have the
following rights:
A. In the event that Landlord is unable to obtain
Construction Financing or Take-Out Financing (on the terms described in this
Leasehold Improvements Agreement and otherwise on terms which, if less favorable
to Landlord, shall be satisfactory to Landlord in the exercise of its sole
discretion) in sufficient time to permit the Commencement of Construction for
the Project on or before June 1, 1998, after Landlord has followed the
procedures set forth in this Leasehold Improvements Agreement to obtain such
financing, Landlord may terminate the Lease, this Leasehold Improvements
Agreement, the Option Agreement and the Phase II Purchase Agreement (but not
less than all of them) by written notice to Tenant on or after June 2, 1998. In
addition, if Landlord is unable to obtain binding commitments for Construction
Financing or Take-Out Financing (on the terms described in the Leasehold
Improvements Agreement and otherwise on terms which, if less favorable to
Landlord, shall be satisfactory to Landlord in the exercise of its sole
discretion) on or before April 15, 1998, after Landlord has followed the
procedures set forth in the Leasehold Improvements Agreement to obtain such
commitments, Landlord may terminate the Lease, this Leasehold Improvements
Agreement, the Option Agreement and the Phase II Purchase Agreement (but not
less than all of them) by written notice to Tenant on or after April 16, 1998.
B. In the event that the City of San Rafael imposes a
condition upon the issuance of any permit or approval necessary for the
development of the Project (including, without limitation, a development
agreement for the Project and the Phase II Land) which Landlord concludes, in
the exercise of its reasonable judgment, would materially impair the value or
usability of the Project or which would cause Phase I Project Cost to exceed
Estimated Phase I Project Cost or which would impose upon Landlord costs which
are not Phase I Project Costs and which are materially in excess of the costs
projected by Landlord for those purposes, or in the event that Landlord
reasonably believes that the City of San Rafael is likely to impose one or more
such conditions in the future, Landlord may terminate the Lease, this Leasehold
Improvements Agreement, the Option Agreement and the Phase II Purchase Agreement
(but not less than all of them) by written notice to Tenant. Landlord may also
terminate the Lease, this Leasehold Improvements Agreement, the Option Agreement
and the Phase II Purchase Agreement (but not less than all of them) by written
notice to Tenant if Landlord reasonably concludes that no solution to the
relocation of the existing 115KV powerline will be approved by the City of San
Rafael which is acceptable to Tenant and, in the sole judgment of Landlord,
economically feasible in the circumstances.
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C. In the event that the City of San Rafael for any
reason fails or refuses to grant on or before May 1, 1998 all permits and
approvals necessary to permit the development of the Project and the Phase II
Land with not less than three hundred fifty thousand (350,000) square feet of
Gross Building Area and otherwise in accordance with the terms of the Lease and
this Leasehold Improvements Agreement (including, without limitation, a
development agreement for the Project and the Phase II Land), Landlord may
terminate the Lease, this Leasehold Improvements Agreement, the Option Agreement
and the Phase II Purchase Agreement (but not less than all of them) by written
notice to Tenant on or after May 2, 1998.
D. Notwithstanding the foregoing provisions of this
Section 0 to the contrary, if Tenant exercises the First Option under the Option
Agreement prior to Landlord's exercise of any right under this Section 0, then
the following provisions shall apply: (i) with respect to Landlord's rights
under Sections 0.A and 0.B, Landlord's rights under such Sections shall be
suspended until the earlier to occur of: (a) the date on which Tenant acquires
the PG&E Property pursuant to the First Option (in which event Landlord's rights
under such Sections shall automatically terminate); or (b) the date on which
Tenant fails, for any reason, to acquire the PG&E Property pursuant to the First
Option (in which event, with respect to Section 0.A only, the dates set forth in
Section 0.A shall be deemed to be the same dates in 1999); and (ii) with respect
to Landlord's right under Section 0.C, if on or before May 1, 1998 both Tenant
has not acquired the PG&E Property pursuant to the First Option and the permits
and approvals described in Section 0.C have not been granted by the City of San
Rafael, then Landlord may elect to deliver to Tenant written notice advising
Tenant that it must either acquire title to the PG&E Property in its "as is"
condition on or before a date specified by Landlord in its notice (which date
shall not be less than fifteen (15) days after the date of Landlord's notice) or
permitting Landlord to terminate the Lease, this Leasehold Improvements
Agreement, the Option Agreement and the Phase II Purchase Agreement (but not
less than all of them) effective as of the date which is five (5) days after the
date of Landlord's notice. With respect to clause (ii) above only, if Tenant
fails to deliver to Landlord, within that five (5) day period, written notice
agreeing to so acquire title to the PG&E Property, then the Lease, this
Leasehold Improvements Agreement, the Option Agreement and the Phase II Purchase
Agreement (but not less than all of them) shall so terminate.
34.2. Termination of Multiple Agreements. In those instances
where either Landlord or Tenant or both of them are given the right to terminate
more than one agreement between them by reason of the occurrence of a particular
event or circumstance, it is the intention of Landlord and Tenant that any
termination resulting from the exercise of such right shall be of all of the
agreements as to which the right is so given and all rights arising thereunder,
but not less than all of them, except that termination of the Option Agreement
shall not ipso facto terminate the Lease under this Section 0. If the Lease,
this Leasehold Improvements Agreement, the Option Agreement and the Phase II
Purchase Agreement are terminated for any reason, that termination shall be
without prejudice to any rights either party may have against the other with
respect to sums which became due under the Lease, this Leasehold Improvements
Agreement, the Option Agreement or the Phase II Purchase Agreement prior to such
termination. The provisions of this Section 0 shall apply to all the
aforementioned documents notwithstanding any provision to the contrary in them.
34.3. Effect of Termination of the Lease. In the event that
the Lease is terminated for any reason, then this Leasehold Improvements
Agreement shall also be deemed to have simultaneously been terminated, without
further act of the parties. In the event of the termination of the Lease by
reason of a default by Tenant thereunder, then this Leasehold Improvements
Agreement shall conclusively be deemed also to have been terminated due to a
default by Tenant.
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35. PAYMENTS BY LANDLORD. Provisions of this Leasehold Improvements
Agreement which require that Landlord pay an expense or provide a service or
thing at its expense are not intended to affect, or to exclude such expenses
from, the definition of "Aggregate Development Cost" set forth in the Lease
(upon which Monthly Base Rent is to be based, as therein provided) or to imply
that Landlord is not entitled to obtain reimbursement for such expenses to the
extent provided herein or in the Lease.
36. INTEREST ON DEPOSITS OR PAYMENTS BY LANDLORD. In instances where
Tenant is required to pay a deposit or other sum to Landlord pursuant to this
Leasehold Improvements Agreement, if Landlord does not intend to promptly make
the expenditure to which the payment related and is permitted by the lender of
the Construction Financing to invest the funds so paid by Tenant at interest,
Landlord shall so invest the funds at rates then applicable to insured accounts,
and shall pay to Tenant the interest earned thereon when such interest is
received by Landlord. In instances where Tenant is required to pay a deposit or
other sum to the lender of the Construction Financing pursuant to this Leasehold
Improvements Agreement, Landlord shall use reasonable efforts to cause such
lender to deposit such sum in an interest-bearing account with all interest
earned thereon to be paid to Tenant when received.
37. MISCELLANEOUS MATTERS. Time is of the essence of this Leasehold
Improvements Agreement and all of its provisions. This Leasehold Improvements
Agreement shall in all respects be governed by the laws of the State of
California. This Leasehold Improvements Agreement, together with its exhibits,
contains all the agreements of the parties hereto pertaining to the subject
matter of this Leasehold Improvements Agreement, and supersedes any previous
negotiations regarding that subject matter. There have been no representations
made by Landlord or understandings made between the parties other than those set
forth in this Leasehold Improvements Agreement and its exhibits. This Leasehold
Improvements Agreement may be executed in counterparts, each of which shall be
deemed an original. This Leasehold Improvements Agreement may not be modified
except by a written instrument by the parties hereto. The Section headings
herein are for convenience of reference and shall in no way define, increase,
limit or describe the scope or intent of any provision of this Leasehold
Improvements Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Leasehold
Improvements Agreement as of the day and year first above written.
LANDLORD
Village Builders, L.P.,
a California limited partnership
By: VPI, Inc., a California corporation,
Its General Partner
By:
-------------------------------------------
Its:
-------------------------------------------
TENANT
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Fair, Isaac and Company, Inc.,
a Delaware corporation
By:
--------------------------------------------
Its:
--------------------------------------------
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TABLE OF CONTENTS
Page
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1. DEFINITIONS..............................................................................................1
1.1. "Agreed Spread for Take-Out Financing"..........................................................2
1.2. "Agreed Take-Out Financing Closing Costs".......................................................2
1.3. "Aggregate Development Cost"....................................................................2
1.4. "Base Building Improvements"....................................................................6
1.5. "Budget"........................................................................................6
1.6. "Commencement of Construction"..................................................................6
1.7. "Common Area"...................................................................................6
1.8. "Conceptual Plans for the Tenant Improvements"..................................................6
1.9. "Construction Financing"........................................................................6
1.10. "Construction Period"...........................................................................7
1.11. "Criteria for Take-Out Financing"...............................................................7
1.12. "Defect List"...................................................................................8
1.13. "Delays"........................................................................................8
1.14. "Designated Treasury Rate"......................................................................8
1.15. "Development Constant"..........................................................................8
1.16. "Descriptive Base Specifications"...............................................................8
1.17. "Draft Working Drawings for the Tenant Improvements"............................................8
1.18. "Estimated Phase I Project Cost"................................................................8
1.19. "Event of Default"..............................................................................8
1.20. "Event of Landlord Default".....................................................................8
1.21. "Event of Tenant Default".......................................................................8
1.22. "Final Working Drawings for the Tenant Improvements"............................................8
1.23. "Floor".........................................................................................9
1.24. "Floor Substantial Completion Notice"...........................................................9
1.25. "Force Majeure Events"..........................................................................9
1.26. "Gross Building Area"...........................................................................9
1.27. "Hazardous Materials"...........................................................................9
1.28. "HVAC Defect List"..............................................................................9
1.29. "Laws"..........................................................................................9
1.30. "Modifications".................................................................................9
1.31. "Mortgage"......................................................................................9
1.32. "Necessary Approvals"......................................................................... 10
1.33. "Necessary Changes"........................................................................... 10
1.34. "Net Stipulated Value of the PG&E Property"................................................... 10
1.35. "Option Agreement"............................................................................ 10
1.36. "Parking Easement"............................................................................ 10
1.37. "Parking Easement Agreement".................................................................. 10
1.38. "Parking Easement Area"....................................................................... 10
1.39. "PG&E" ....................................................................................... 10
1.40. "PG&E Environmental Agreement" ............................................................... 10
1.41. "PG&E Property"............................................................................... 10
1.42. "Phase I"..................................................................................... 10
1.43. "Phase I Buildings"........................................................................... 10
1.44. "Phase I Land"................................................................................ 11
1.45. "Phase I Project Cost"........................................................................ 11
1.46. "Phase II".................................................................................... 11
1.47. "Phase II Current Costs"...................................................................... 11
1.48. "Phase II Land"............................................................................... 13
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1.49. "Phase II Purchase Agreement" ................................................................ 13
1.50. "Premises".................................................................................... 13
1.51. "Project"..................................................................................... 13
1.52. "Project Substantial Completion Notice"....................................................... 13
1.53. "Punch List".................................................................................. 13
1.54. "Real Estate Taxes"........................................................................... 13
1.55. "Rentable Area"............................................................................... 13
1.56. "Review Notice"............................................................................... 13
1.57. "Site Improvements"........................................................................... 13
1.58. "Site and Shell Improvements"................................................................. 13
1.59. "Substantial Completion"...................................................................... 13
1.60. "Substantial Completion Notice"............................................................... 14
1.61. "Take-Out Financing".......................................................................... 14
1.62. "Tenant Caused Delays"........................................................................ 14
1.63. "Tenant Improvements"......................................................................... 14
1.64. "Tenant Improvement Allowance"................................................................ 15
1.65. "Tentative Site Plan"......................................................................... 15
1.66. "Work"........................................................................................ 15
1.67. "Working Drawings for the Site and Shell Improvements"........................................ 15
2. GENERAL DESCRIPTION OF THE IMPROVEMENTS TO BE DESIGNED AND CONSTRUCTED BY LANDLORD..................... 15
2.1. General Description of Site Improvements...................................................... 15
2.2. General Description of Base Building Improvements............................................. 16
2.3. General Description of Tenant Improvements.................................................... 17
2.4. Design of Site and Shell Improvements......................................................... 17
3. PREPARATION AND APPROVAL OF APPLICATIONS TO THE CITY OF SAN RAFAEL..................................... 18
3.1. Applications.................................................................................. 18
3.2. Changes in Plans and Specifications........................................................... 18
3.3. Consistency with Descriptive Base Specifications.............................................. 19
3.4. Fees and Expenses Incurred in Connection with the Applications................................ 19
3.5. Letter Agreements Pertaining to Certain Fees and Expenses Incurred in Connection with
the Applications.............................................................................. 19
4. COOPERATION IN PLANNING PROCESS........................................................................ 20
5. PREPARATION OF PLANS AND SPECIFICATIONS FOR OFF-SITE IMPROVEMENTS...................................... 20
6. PREPARATION OF WORKING DRAWINGS FOR THE SITE AND SHELL IMPROVEMENTS.................................... 20
6.1. Initial Preparation........................................................................... 20
6.2. Submission to Tenant for Review............................................................... 21
6.3. Tenant's Review Responsibilities.............................................................. 21
6.4. Submission to the City of San Rafael.......................................................... 21
7. TENANT'S ARCHITECT AND ENGINEERS....................................................................... 22
7.1. Submission of List of Consultants............................................................. 22
7.2. Cost of Preparation........................................................................... 22
8. SUBMITTAL OF CONCEPTUAL PLANS FOR THE TENANT IMPROVEMENTS.............................................. 22
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8.1. Preliminary Submission........................................................................ 22
8.2. First Submission.............................................................................. 22
8.3. Purpose of Conceptual Plans for the Tenant Improvements....................................... 23
9. PREPARATION OF WORKING DRAWINGS FOR THE TENANT IMPROVEMENTS............................................ 23
10. LANDLORD'S REVIEW RESPONSIBILITIES..................................................................... 24
11. COST OF TENANT IMPROVEMENTS............................................................................ 25
12. CONSTRUCTION OF SITE AND SHELL IMPROVEMENTS............................................................ 25
12.1. Construction and Substitutions................................................................ 25
12.2. Changes to Working Drawings for the Site and Shell Improvements............................... 26
13. INSPECTION BY TENANT................................................................................... 26
14. CHANGE ORDERS.......................................................................................... 27
14.1. Right of Tenant to Request Modifications...................................................... 27
14.2. Preparation of Plans for Modifications........................................................ 27
15. CONSTRUCTION RELATED MATTERS........................................................................... 28
15.1. Target Date For Commencement.................................................................. 28
15.2. Schedule Requirements in Construction Contracts............................................... 28
15.3. Notice of Substantial Completion.............................................................. 29
16. NOTICES OF COMPLETION AND DEFECTS...................................................................... 29
16.1. Project Substantial Completion Notice and Acceptance.......................................... 29
16.2. Assignment of Warranty Rights by Landlord..................................................... 30
16.3. Corrections by Landlord....................................................................... 30
17. DELAYS................................................................................................. 30
17.1. Tenant Caused Delays.......................................................................... 30
17.2. Force Majeure Delays.......................................................................... 31
17.3. Statements of Landlord as to Delays........................................................... 31
17.4. Minimization of Delays........................................................................ 32
18. PROJECT FINANCING...................................................................................... 32
18.1. Right and Obligation to Arrange............................................................... 32
18.2. Retaining a Mortgage Broker to Arrange Financing.............................................. 32
18.3. Selection of Lender and Negotiation of Construction Financing................................. 32
18.4. Selection of Lender and Negotiation of Take-Out Financing..................................... 33
18.5. Inability to Obtain Commitment................................................................ 33
18.6. Other Funds................................................................................... 33
18.7. Contribution of Tenant........................................................................ 33
18.8. Cooperation of Tenant in Construction Financing and Take-Out Financing........................ 34
18.9. Financial Covenants of Tenant................................................................. 35
18.10. Prevailing Wages.............................................................................. 36
18.11. Security Deposit.............................................................................. 36
19. DETERMINATION OF MONTHLY BASE RENT..................................................................... 36
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20. FIRST ADJUSTMENT TO REFLECT FINAL PHASE I PROJECT COST................................................. 40
20.1. Determination of Final Phase I Project Cost................................................... 40
20.2. Possible Review of Final Phase I Project Cost................................................. 40
20.3. Payment to Adjust Phase I Project Cost........................................................ 40
21. SECOND ADJUSTMENT TO REFLECT FINAL PHASE I PROJECT COST................................................ 41
21.1. Determination of Revised Final Phase I Project Cost........................................... 41
21.2. Possible Review of Revised Final Phase I Project Cost......................................... 41
21.3. Payment to Adjust Phase I Project Cost........................................................ 41
22. PAYMENT OF PHASE II CURRENT COSTS...................................................................... 42
22.1. Payment of Certain Phase II Current Costs at Acquisition...................................... 42
22.2. Payment of Certain Phase II Current Costs Prior to Construction Financing..................... 42
22.3. Payment of Remainder of Phase II Current Costs at Construction Financing...................... 43
23. PAYMENT FOR DESIGN AND CONSTRUCTION OF PARKING LOT..................................................... 44
24. ARBITRATION OF DISPUTES................................................................................ 44
25. ALTERNATIVE PROCEDURE FOR ARBITRATION OF CERTAIN DISPUTES.............................................. 46
26. NOTICES................................................................................................ 48
27. EFFECT OF EXERCISE OF OPTION........................................................................... 48
28. ASSIGNMENT............................................................................................. 48
28.1. By Tenant..................................................................................... 48
28.2. By Landlord................................................................................... 49
29. CONFLICTS AND CONFORMITY WITH OTHER DOCUMENTS.......................................................... 49
30. DESIGNATION OF AGENTS.................................................................................. 49
30.1. Designation of Agent by Landlord.............................................................. 49
30.2. Designation of Agent by Tenant................................................................ 49
31. EVENTS OF DEFAULT...................................................................................... 49
31.1. Events of Landlord Default.................................................................... 49
31.2. Events of Tenant Default...................................................................... 50
32. WAIVER................................................................................................. 50
33. ATTORNEYS' FEES........................................................................................ 51
34. TERMINATION............................................................................................ 51
34.2. Termination of Multiple Agreements............................................................ 52
34.3. Effect of Termination of the Lease............................................................ 53
35. PAYMENTS BY LANDLORD................................................................................... 53
36. INTEREST ON DEPOSITS OR PAYMENTS BY LANDLORD........................................................... 53
37. MISCELLANEOUS MATTERS.................................................................................. 53