Exhibit 10.2

Brookfield

Imprivata, Inc.

Monadnock Building

685 Market Street

 

 

 

 

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Table of Contents

 

1.

 

BASIC LEASE PROVISIONS

 

1

 

 

 

 

 

2.

 

PROJECT

 

2

 

 

 

 

 

3.

 

TERM

 

4

 

 

 

 

 

4.

 

RENT

 

5

 

 

 

 

 

5.

 

USE & OCCUPANCY

 

7

 

 

 

 

 

6.

 

SERVICES & UTILITIES

 

8

 

 

 

 

 

7.

 

REPAIRS

 

10

 

 

 

 

 

8.

 

ALTERATIONS

 

10

 

 

 

 

 

9.

 

INSURANCE

 

12

 

 

 

 

 

10.

 

DAMAGE OR DESTRUCTION

 

13

 

 

 

 

 

11.

 

INDEMNITY

 

14

 

 

 

 

 

12.

 

CONDEMNATION

 

14

 

 

 

 

 

13.

 

TENANT TRANSFERS

 

15

 

 

 

 

 

14.

 

LANDLORD TRANSFERS

 

16

 

 

 

 

 

15.

 

DEFAULT AND REMEDIES

 

17

 

 

 

 

 

16.

 

LETTER OF CREDIT; FINANCIAL STATEMENTS

 

19

 

 

 

 

 

17.

 

MISCELLANEOUS

 

20

 

 

 

 

 

18.

 

BROKERS

 

22

 

 

 

 

 

19.

 

TENANT’S SECURITY SYSTEM

 

22

 

List of Exhibits

EXHIBIT A – LOCATION OF PREMISES

EXHIBIT B – RULES & REGULATIONS

EXHIBIT C – NOTICE OF LEASE TERM

EXHIBIT D – WORK LETTER

 

i

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Index of Defined Terms

 

A

 

 

 

L

 

 

Additional Construction Allowance

 

D-4

 

Land

 

3

Additional Insured

 

13

 

Landlord

 

1

Additional Rent

 

5

 

Landlord Delay

 

D-2

Affiliates

 

15

 

Landlord’s Compliance Work

 

D-1

Alterations

 

11

 

Landlord’s Contractor

 

D-3

Amortization Rate

 

7

 

Landlord’s Representative

 

D-1

As-Built Drawings

 

D-3

 

Landlord’s Security System

 

24

B

 

 

 

Landlord’s Work

 

D-1

Bank

 

20

 

Late Charge

 

8

Base Building

 

3

 

LC Amount

 

1

Base Rent

 

1

 

LC Expiration Date

 

21

Base year

 

1

 

Lease

 

1

Bid Summary

 

D-3

 

Leasehold Improvements

 

3

Billing Address

 

2

 

Letter of Credit

 

20

Brokers

 

2

 

Liability Limit

 

2

Building

 

1

 

M

 

 

Building Standard

 

4

 

Mandated Expenses

.

6

Building Structure

 

3

 

Mechanical Systems

 

3

Business Hours

 

2

 

Month

 

4

C

 

 

 

N

 

 

Change Order

 

D-2

 

NLT

 

4

Claims

 

15

 

Notice Addresses

 

1

Commencement Date

 

4

 

P

 

 

Common Areas

 

3

 

Permitted Transferee

 

16

Comparison year

 

5

 

Premises

 

1

Construction Allowance

 

2

 

Project

 

3

Construction Drawings

 

D-2

 

Q

 

 

Construction Schedule

 

D-1

 

Quality Expenses

 

6

Cost-Saving Expenses

 

6

 

R

 

 

D

 

 

 

REIT

 

II

Dale

 

1

 

Relocation Notice

 

22

Default

 

19

 

Renovations

 

12

Default Rate

 

20

 

Rent

 

7

Design Problem

 

11

 

Repair Estimate

 

14

E

 

 

 

Replacement Premises

 

22

Encumbrance

 

18

 

Retention

 

D-3

Estimated Additional Rent

 

7

 

RSF

 

4

Expenses

 

5

 

S

 

 

Expiration Date

 

4

 

Scheduled Commencement Date

 

1

F

 

 

 

Scheduled Term

 

1

Force Majeure

 

20

 

Service Provider

 

11

Force Majeure Delay

 

D-2

 

Space Plans

 

D-2

H

 

 

 

Standard Services

 

9

Hazardous Materials

 

8

 

Substantially Complete

 

D-5

Holdover

 

4

 

Successor Landlord

 

18

Holidays

 

2

 

T

 

 

HVAC

 

9

 

Taking

 

16

I

 

 

 

Taxes

 

5

Interruption Estimate

 

14

 

Telecommunication Services

 

10

 

 

 

 

Tenant

 

1

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Tenant Delay 

 

D-1

 

Transferee

 

16

Tenant’s Architect

 

D-2

 

U

 

 

Tenant’s Personal Property

 

4

 

Untenantable

 

14

Tenant’s Personnel

 

D-3

 

Use

 

1

Tenant’s Representative.

 

D-1

 

USF

 

4

Tenant’s Security System

 

24

 

W

 

 

Tenants Share

 

1

 

Work Costs

 

D-4

Tenant’s Wiring

 

10

 

Y

 

 

Tenant’s Work

 

D-3

 

Year

 

4

Term

 

4

 

 

 

 

Transfer

 

16

 

 

 

 

 

 

 

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Lease

Landlord and Tenant enter into this Lease (“Lease”) as of the Date on the
following terms, covenants, conditions; and provisions:

1.

BASIC LEASE PROVISIONS

 

 

1.1

Basic Lease Definitions.

In this Lease, the following defined terms have the meanings indicated.

 

 

 

 

 

(a)

Date:

March 31, 2016

 

 

 

 

 

(b)

Landlord:

BOP 685 Market LLC, a Delaware limited liability company.

 

 

 

 

 

(c)

Tenant:

Imprivata, Inc., a Delaware corporation

 

 

 

 

 

(d)

Building:

685 Market Street, San Francisco, California, deemed to contain:

 

 

 

203,161 RSF

 

 

 

 

 

(e)

Premises:

Suite 500 (identified on Exhibit A), located in the Building and deemed to
contain:

 

 

 

5,029 RSF

 

 

 

 

 

(f)

Use:

General administrative non-governmental office use consistent with that of a
first-class office building.

 

 

 

 

 

(g)

Scheduled Term:

85 Months

 

 

 

 

 

(h)

Scheduled

June 1, 2016.

 

 

Commencement Date:

 

 

 

 

 

 

(i)

Base Rent:

The following amounts, payable in accordance with Article 4:

 

Period

Annual Rate

Annual Base Rent

Monthly Base Rent

Months 1 to 12

$75.00

$377,175.00

$31,431.25

Months 13 to 24

$77.25

$388,490.28

$32,374.19

Months 25 to 36

$79.57

$400,157.52

$33,346.46

Months 37 to 48

$81.96

$412,176.84

$34,348.07

Months 49 to 60

$84.42

$424,548.24

$35,379.02

Months 61 to 72

$86.95

$437,271.60

$36,439.30

Months 73 to·84

$89.56

$450,397.20

$37,533.10

Month 85

$92.25

$463,925.28

$38,660.44

 

Notwithstanding the foregoing, and provided that Tenant is not then in Default
of this Lease (with all applicable notices having been given and cure periods
having expired), Landlord will excuse Tenant from the payment of Base Rent,
only, otherwise payable during Month 1 of the initial Term.

 

 

(j)

Tenant’s Share:

2.48%

 

 

 

 

 

(k)

Base Year:

The calendar year 2016

 

 

 

 

 

(l)

LC Amount:

$270,623.08. Such LC Amount shall be periodically subject to reduction and
subject to conversion in accordance with Article 16 of this Lease.

 

 

 

 

 

 

(m)

Notice Address:

For each party, the following address(es):

 

1

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To Landlord

To Tenant

 

BOP 685 Market, LLC

Imprivata, Inc.

 

685 Market Street, Suite 520

10 Maguire Rd.

 

San Francisco, California 94105

Lexington, MA 02421

 

Attn: General Manager

Attn: Kelliann McCabe

 

 

 

 

with a copy to:

 

 

 

 

 

Brookfield Properties Management

 

 

601 S. Figueroa Street, Suite 2200

 

 

Los Angeles, California 90017

 

 

Attn: VP, Regional Counsel

 

 

 

(n)

Billing Address:

For each party, the following address:

 

 

For Landlord

For Tenant

 

Via U.S. Mail

Imprivata, Inc.

 

BOP 685 Market LLC

10 Maguire Rd.

 

PO Box 62905

Lexington, MA 02421

 

Baltimore, MD 21264-2905

Attn: Kelliann McCabe

 

 

Email: payables@imprivata.com

 

Via Overnight Courier

 

 

BOP 685 Market LLC

 

 

Box# 62905

 

 

1800 Washington Boulevard

 

 

Baltimore, MD 21230

 

 

 

 

 

Via Electronic Transfer

 

 

Bank:

Manufacturers & Traders

 

 

 

Trust Co.

 

 

Acct. Name:

BOP 685 Market LLC

 

 

Acct. No.:

9859352131

 

 

ABA No.:

022000046

 

 

Ref:

Invoice #

 

 

 

(o)

Brokers:

Brookfield Properties Management (CA) Inc. and Jones Lang LaSalle Brokerage Inc.
(for Landlord); and T3 Advisors (for Tenant).

 

 

 

 

 

(p)

Liability Limit

A minimum combined single limit of liability of at least $1,000,000 per
occurrence and a general aggregate limit of at least $2,000,000, and in
addition, excess liability insurance on a following form basis, with overall
limits of at least $5,000,000.

 

 

 

 

 

(q)

Construction Allowance:

$377,175.00 (i.e., $75.00 per RSF of the Premises) for the payment of Work Costs
in accordance with the Work Letter attached to this Lease as Exhibit D.

 

 

 

.

 

(r)

Business Hours:

From 7:00 a.m. to 6:00 p.m., Monday through Friday, except for the days observed
for: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, Christmas Day and, at Landlord’s discretion, other locally or nationally
recognized holidays that are observed by other buildings of comparable class in
the locale of the Building (“Holidays”).

 

2.

PROJECT

2.1 Project. The Land, Building, and Common Areas (as defined in §1 and below)
are collectively referred to as the “Project.” As of the Date, the Project is
commonly known as “The Monadnock Building.”

2.2 Land. “Land” means the real property on which the Building and Common Areas
are located, including casements and other rights that benefit or encumber the
real property. Landlord’s interest in the Land may be in fee or a leasehold. The
Land may be expanded or reduced after the Date.

2

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2.3 Base Building. “Base Building” means the Building Structure and Mechanical
Systems, collectively, defined as follows:

 

(a)

Building Structure. “Building Structure” means the structural components in the
Building, including foundations, floor and ceiling slabs, roofs, exterior walls,
exterior glass and mullions, columns, beams, shafts, and emergency stairwells.
The Building Structure excludes the Leasehold Improvements (and similar
improvements to other premises) and the Mechanical Systems.

 

(b)

Mechanical Systems. “Mechanical Systems” means the mechanical, electronic,
physical or informational systems generally serving the Building or Common
Areas, including the sprinkler, plumbing, heating, ventilating, air
conditioning, lighting, communications, security, drainage, sewage, waste
disposal, vertical transportation, and fire/life safety systems.

2.4 Common Areas. Tenant will have a non-exclusive right to use the Common Areas
subject to the terms of this Lease. “Common Areas” means those interior and
exterior common and public areas on the Land (and appurtenant easements) and in
the Building designated by Landlord for the non-exclusive use by Tenant in
common with Landlord, other tenants and occupants, and their employees, agents
and invitees.

2.5 Premises. Landlord leases to Tenant the Premises subject to the terms of
this Lease. Except as provided elsewhere in this Lease, by taking possession of
the Premises Tenant accepts the Premises in its “as is” condition and with all
faults, and the Premises is deemed in good order, condition, and repair. The
Premises includes the Leasehold Improvements and excludes certain areas,
facilities and systems, as follows:

 

(a)

Leasehold Improvements. “Leasehold Improvements” means all non-structural
improvements in the Premises or exclusively serving the Premises, and any
structural improvements to the Building made to accommodate Tenant’s particular
use of the Premises. The Leasehold Improvements may exist in the Premises as of
the Date, or be installed by Landlord or Tenant under this Lease at the cost of
either party. The Leasehold Improvements include: (1) interior walls and
partitions (including those surrounding structural columns entirely or partly
within the Premises); (2) the interior one-half of walls that separate the
Premises from adjacent areas designated for leasing; (3) the interior drywall on
exterior structural walls, and walls that separate the Premises from the Common
Areas; (4) stairways and stairwells connecting parts of the Premises on
different floors, except those required for emergency exiting; (5) the frames,
casements, doors, windows and openings installed in or on the improvements
described in the foregoing clauses (1) through (4), or that provide entry/exit
to/from the Premises; (6) all hardware, fixtures, cabinetry, railings, paneling,
woodwork and finishes in the Premises or that are installed in or on the
improvements described in the foregoing clauses (1) through (5); (7) if any part
of the Premises is on the ground floor, the ground floor exterior windows
(including mullions, frames and glass); (8) integrated ceiling systems
(including grid, panels and lighting); (9) carpeting and other floor finishes;
(10) kitchen, rest room, laboratory or other similar facilities that exclusively
serve the Premises (including plumbing fixtures, toilets, sinks and built-in
appliances); and (11) the sprinkler, plumbing, heating, ventilating, air
conditioning, electrical, metering, lighting, communications, security,
drainage, sewage, waste disposal, vertical transportation, fire/life safety, and
other mechanical, electronic, physical or informational systems that exclusively
serve the Premises, including the parts of each system that are connected to the
Mechanical Systems from the common point of distribution for each system to and
throughout the Premises. The Leasehold Improvements exclude Tenant’s Personal
Property (defined below).

 

(b)

Exclusions from the Premises. The Premises does not include: (1) any areas above
the finished ceiling or integrated ceiling systems, or below the finished floor
coverings that are not part of the Leasehold Improvements, (2) janitor’s
closets, (3) stairways and stairwells to be used for emergency exiting or as
Common Areas, (4) rooms for Mechanical Systems or connection of
telecommunication equipment, (5) vertical transportation shafts, (6) vertical or
horizontal shafts, risers, chases, flues or ducts, and (7) any casements or
rights to natural light, air or view.

2.6 Building Standard. “Building Standard” means the minimum or exclusive type,
brand, quality or quantity of materials Landlord designates for use in the
Building from time to time.

2.7 Tenant’s Personal Property. “Tenant’s Personal Property” means those trade
fixtures, furnishings, equipment, work product, inventory, stock-in-trade and
other personal property of Tenant that are not permanently affixed to the
Project in a way that they become a part of the Project and will not, if
removed, cause material damage to the Premises.

2.8 Area. “RSF” means rentable square feet or rentable square foot, as the
context may require. “USF” means usable square feet or usable square foot, as
the context may require.

2.9 Access Inspection Status. Pursuant to Section 1938 of the California Civil
Code, Landlord hereby advises Tenant that the Premises, as delivered to Tenant,
the Building and Project have not undergone an inspection by a Certified Access
Specialist (“CASp”).

3

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3.

TERM  

3.1 Term. “Term” means the period that begins on the Commencement Date and ends
on the Expiration Date, subject to renewal, extension, or earlier termination as
may be further provided in this Lease. “Month” means a full calendar month of
the Term. “Year” means a full calendar year in which all or a part of the Term
occurs.

 

(a)

Commencement Date. “Commencement Date” means that date which is the earlier of:

 

(1)

The date that Tenant first conducts business in any part of the Premises; or

 

(2)

The date that Landlord tenders the Premises to Tenant with Landlord’s Work
substantially complete or that earlier date that Landlord would have tendered
possession of the Premises to Tenant with Landlord’s Work substantially complete
but for Tenant Delay (as defined in the Work Letter attached to this Lease as
Exhibit D).

 

(b)

Expiration Date. “Expiration Date” means the date that is the Scheduled Term
(plus that many additional days required for the Expiration Date to be the last
day of a Month) after the Commencement Date.

 

(c)

Early Occupancy. Except as set forth in the Work Letter, Tenant may not enter
the Premises for any purpose until Landlord tenders the Premises to Tenant. If
Tenant conducts business in any part of the Premises before the Scheduled
Commencement Date, Tenant will pay Base Rent for that period at the rate for the
first Month that Base Rent is due, without discount or excuse.

 

(d)

Late Occupancy. If Landlord fails to tender possession of the Premises to Tenant
by the Scheduled Commencement Date, Landlord will not be in default of this
Lease, but Tenant shall have no obligation to pay Rent until the Commencement
Date where such delay is not the result of a Tenant Delay.

 

(e)

Confirmation of Term. Landlord shall notify Tenant of the Commencement Date
using a Notice of Lease Term (“NLT”) in the form attached to this Lease as
Exhibit C. Unless Tenant reasonably objects, Tenant shall execute and deliver to
Landlord the NLT within 10 business days after its receipt, but Tenant’s failure
to do so will not reduce Tenant’s obligations or Landlord’s rights under this
Lease.

3.2 Holdover. If Tenant keeps possession of the Premises after the Expiration
Date (or earlier termination of this Lease) without Landlord’s prior written
consent (a “Holdover”), which may be withheld in its sole discretion, then in
addition to the remedies available elsewhere under this Lease or by law, Tenant
will be a tenant-at-sufferance and must comply with all of Tenant’s obligations
under this Lease (including the payment of Additional Rent), except that for
each Month of Holdover Tenant will pay 150% of the Base Rent payable for the
last Month of the Term (or that would have been payable but for abatement or
excuse), without prorating for any partial Month of Holdover, plus Additional
Rent for such period. Tenant shall indemnify and defend Landlord from and
against all claims and damages, both consequential and direct, that Landlord
suffers due to Tenant’s failure to return possession of the Premises to Landlord
at the end of the Term. Landlord’s deposit of Tenant’s Holdover payment will not
constitute Landlord’s consent to a Holdover, or create or renew any tenancy.

3.3 Condition on Expiration.

 

(a)

Return of the Premises. At the end of the Term, Tenant will return possession of
the Premises to Landlord vacant, free of Tenant’s Personal Property, in
broom-clean condition, and with all Leasehold Improvements in in the condition
delivered to Tenant (excepting ordinary wear and tear and casualty), except that
Landlord may require Tenant, by notice at least 10 days before the expiration of
the Term, to remove (and restore the Premises damaged by removal):

 

(1)

All Tenant’s Wiring; and

 

(2)

Any item of Leasehold Improvements or Alterations (other than Tenant’s Wiring)
if either:

 

(A)

When Landlord consented to the installation of the improvement, Landlord
reserved Landlord’s right to have Tenant remove the improvement at the end of
the Term; or

 

(B)

Tenant failed to obtain Landlord’s written consent under §8.1(a) for an item of
Alterations to become part of the Premises.

 

(b)

Correction by Landlord. If Tenant fails to return possession of the Premises to
Landlord in the condition required under (a), then Tenant shall reimburse
Landlord for the costs incurred by Landlord to put the Premises in the condition
required under (a), plus Landlord’s standard administration fee.

 

(c)

Abandoned Property. Tenant’s Personal Property left behind in the Premises after
the end of the Term will be considered abandoned and Landlord may move, store,
retain, or dispose of these items at Tenant’s cost, including Landlord’s
standard administration fee.

4

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4.

RENT  

4.1 Base Rent. Tenant shall prepay 1 Month’s installment of Base Rent (without
any abatement) by the Date (i.e., $31,431.25), to be applied against Base Rent
first due under this Lease. During the Term, Tenant shall pay all other Base
Rent in advance, in equal Monthly installments, on the 1st of each Month. Base
Rent for any partial Month will be prorated based on a 30-day month.

4.2 Additional Rent. Tenant’s obligation to pay Taxes and Expenses under this
§4.2 is referred to in this Lease as “Additional Rent.”

 

(a)

Taxes. For each full or partial Year after the Base Year in which the Term
occurs (each, a “Comparison Year”), Tenant shall pay as in the manner described
below the Tenant’s Share of the amount that Taxes for the Comparison Year exceed
Taxes for Ute Base Year. “Taxes” means the total costs incurred by Landlord for:
(1) real and personal property taxes and assessments (including ad valorem and
special assessments) levied on the Project and Landlord’s personal property used
in connection with the Project; (2) taxes on rents or other income derived from
the Building; (3) capital and place-of-business taxes; (4) taxes, assessments or
fees in lieu of the taxes described in the foregoing clauses (1) through (3);
and (5) the reasonable costs incurred to reduce the taxes described in the
foregoing clauses (1) through (4). Taxes excludes net income taxes, documentary
transfer taxes and taxes paid by Tenant under §4.3 (and any other tenant of the
Building with a similar lease obligation).

 

(b)

Expenses. For each Comparison Year, Tenant shall pay in the manner described
below the Tenant’s Share of the amount that Expenses for the Comparison Year
exceed Expenses for the Base Year. “Expenses” means the total costs incurred by
Landlord to operate, manage, administer, equip, secure, protect, repair,
replace, refurbish, clean, maintain, decorate and inspect the Project, including
a fee to manage the Project of 3% of the gross revenue of the Project. Expenses
that vary with occupancy will be calculated as if the Building is 100% occupied
and operating, with all utilities and services being provided to all tenants.

 

(1)

Expenses include:

 

(A)

Standard Services provided under §6.1;

 

(B)

Repairs and maintenance performed under §7.2;

 

(C)

Insurance maintained under §9.2 {including deductibles paid; provided, however,
any deductibles in excess of $100,000 shall be amortized over a term of 10 years
at an annual interest rate equal to the Amortization Rate (defined below), and
the amortized costs thereof, but not in excess of $1.00 per RSF of the Building
shall be included in Expenses in any Year);

 

(D)

Wages, salaries, and benefits of personnel of Landlord or its Affiliates to the
extent they render services to the Project (including, without limitation,
property accounting, technical services, and information technology services);

 

(E)

Costs of operating the Project management office (including reasonable rent);

 

(F)

Amortization installments of costs that are required to be capitalized and are
incurred:

 

(i)

To comply with insurance requirements or laws enacted after the Commencement
Date (“Mandated Expenses”);

 

(ii)

With the reasonable expectation of reducing Expenses or the rate of increase in
Expenses (“Cost-Saving Expenses”); or

 

(iii)

That are reasonably calculated to improve or maintain the safety or health of
Project occupants (“Quality Expenses”).

 

(2)

Expenses exclude:

 

(A)

Taxes;

 

(B)

Mortgage payments (principal and interest), and ground lease rent;

 

(C)

Commissions, advertising costs, attorney’s fees, and costs of improvements in
connection with leasing space in the Building;

 

(D)

Costs reimbursed by insurance proceeds;

 

(E)

Depreciation;

 

(F)

Except for the costs identified in §4.2(b)(1)(F), costs required to be
capitalized according to sound real estate accounting and management principles,
consistently applied;

5

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(G)

Collection costs and legal fees paid in disputes with tenants;  

 

(H)

Costs to maintain and operate the entity that is Landlord (as opposed to
operation and maintenance of the Project);

 

(I)

In the Base Year, only, installments of costs amortized under subsection (c)(1)
and (c)(2) of this §4.2, unless such costs are included in Expenses in Lease
Years subsequent to the Base Year,

 

(J)

The costs of utilities and services:

 

(i)

Set forth in subsections (4) and (9) of §6.l (a) that are provided to the
Premises and to other tenanted premises in the Building, regardless of whether
such Standard Services are subject to direct payment by Tenant or such other
tenants of the Building pursuant to §6.2 or any similar lease provision; and

 

(ii)

Otherwise reimbursed by Tenant pursuant to §6.3, or by other tenants of the
Building pursuant to any similar provision of their respective leases (and not
as part of Additional Rent, or any similar lease provision for the sharing of
Building costs);

 

(K)

Costs incurred by Landlord to comply with notices of violation of applicable
Jaws, including the Americans With Disabilities Act, as amended, when such
notices are for conditions existing prior to the Commencement Date that would
have been a violation of applicable laws existing as of the Commencement Date;
and

 

(L)

Penalties, fines, and associated legal expenses incurred by Landlord due to the
violation by Landlord or any other tenant of the Building (other than Tenant) of
applicable laws

 

(c)

Amortization and Accounting Principles.

 

(1)

Each item of Mandated Expenses and Quality Expenses will be fully amortized in
equal annual installments, with interest on the principal balance at
Amortization Rate, over the number of years that Landlord projects the item of
Expenses will be productive for its intended use, without replacement, but
properly repaired and maintained.

 

(2)

Each item of Cost-Saving Expenses will be fully amortized in equal annual
installments, with interest on the principal balance at the Amortization Rate,
over the number of years that Landlord reasonably estimates for the present
value of the projected savings in Expenses (discounted at the Amortization Rate)
to equal the cost.

 

(3)

Any item of Expenses of significant cost that is not required to be capitalized
but is unexpected or does not typically recur may, in Landlord’s discretion, be
amortized in equal annual installments, with interest on the principal balance
at the Amortization Rate, over a number of years determined by Landlord.

 

(4)

“Amortization Rate” means the greater of (A) prime rate of Citibank, N.A. (or a
comparable financial institution selected by Landlord) in effect as of the last
day of the year in which the costs were incurred, plus 3%, or (B) the actual
cost incurred by Landlord for financing.

 

(5)

Landlord may allocate Expenses and Taxes for the Project to various components
of the Project on an equitable basis, or as required by any reciprocal easement
agreement or common interest association agreement affecting the Project.

 

(6)

Subject to the specific provisions of this Article 4, Landlord will use sound
real estate accounting and management principles, consistently applied, to
determine Additional Rent.

 

(d)

Estimates. Landlord will reasonably estimate Additional Rent for each Comparison
Year (“Estimated Additional Rent”). During each Comparison Year, Tenant will pay
the Estimated Additional Rent in advance, in equal Monthly installments, on the
first day of each Month of the Comparison Year. Landlord may reasonably revise
the Estimated Additional Rent during a Comparison Year and the Monthly
installments of Estimated Additional Rent for the remainder of the Comparison
Year will be increased or decreased accordingly. Until Landlord provides Tenant
with the Estimated Additional Rent for a Comparison Year, Tenant will continue
to pay the Estimated Additional Rent for the prior Comparison Year.

6

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(e)

Settlement. As soon as practical after the end of each Comparison Year, Landlord
will give Tenant a statement of the actual Additional Rent for the Comparison
Year. Additional Rent for any partial Comparison Year will be prorated based on
a 365-day calendar year. The statement of Additional Rent is conclusive, binds
Tenant, and Tenant waives all rights to contest the statement, except for items
of Additional Rent to which Tenant objects by notice to Landlord given within
90 days after receipt of Landlord’s statement; however, Tenant’s objection will
not relieve Tenant from its obligation to pay Additional Rent pending resolution
of any objection. If the Additional Rent exceeds the Estimated Additional Rent
for the Comparison Year, then Tenant shall pay the underpayment to Landlord in a
lump sum as Rent within 30 days after receipt of Landlord’s statement of
Additional Rent. If the Estimated Additional Rent exceeds the Additional Rent
for the Comparison Year, then Landlord shall credit the overpayment against Rent
next due or refund such amount to Tenant concurrently with the delivery of such
statement if the Lease is to terminate with the same Year as the final
calculation of the Additional Rent for the Comparison Year. 

4.3 Tenant’s Taxes. Upon demand, Tenant will reimburse Landlord for taxes paid
by Landlord, other than net income taxes, on (a) Tenant’s Personal Property, (b)
Rent, (c) Tenant’s occupancy of the Premises, or (d) this Lease. If Tenant
cannot lawfully reimburse Landlord for these taxes, then the Base Rent will be
increased to yield to Landlord the same amount after these taxes were imposed as
Landlord would have received before these taxes were imposed.

4.4 Terms of Payment. “Rent” means all amounts payable by Tenant under this
Lease and the exhibits, including Base Rent and Additional Rent. If a time for
payment of an item of Rent is not specified in this Lease, then Tenant will pay
Rent within 30 days after receipt of Landlord’s statement or invoice. Unless
otherwise provided in this Lease, Tenant shall pay Rent without notice, demand,
deduction, abatement, or setoff, in lawful U.S. currency, at Landlord’s Billing
Address. Landlord will send invoices payable by Tenant to Tenant’s Billing
Address; however, neither Landlord’s failure to send an invoice nor Tenant’s
failure to receive an invoice for Base Rent (and installments of Estimated
Additional Rent) will relieve Tenant of its obligation to timely pay Base Rent
(and installments of Estimated Additional Rent). Any partial payment of Rent by
Tenant will be considered a payment on account. No endorsement or statement on
any Rent check or any letter accompanying Rent will be deemed an accord and
satisfaction, affect Landlord’s right to collect the full Rent due, or require
Landlord to apply any payment to any Rent other than Rent earliest due. No
payment by Tenant to Landlord will be deemed to extend the Term or render any
notice, pending suit or judgment ineffective. By notice to the other, each party
may change its Billing Address.

4.5 Late Payment. If Landlord does not receive all or part of any item of Rent
when due, then Tenant shall pay Landlord 5% of the overdue Rent, plus interest
on the unpaid Rent at the Default Rate from the date due until paid
(collectively, a “Late Charge”) as Rent. Tenant agrees that the Late Charge is
not a penalty, and will compensate Landlord for costs not contemplated under
this Lease that are impracticable or extremely difficult to fix. Landlord’s
acceptance of a Late Charge does not waive any applicable Tenant’s Default.
Notwithstanding the foregoing, Landlord will waive a Late Charge otherwise due
from Tenant if:

 

(a)

Tenant notifies Landlord in writing of Tenant’s claim for waiver of the Late
Charge within 30 days after Tenant’s receipt of Landlord’s invoice for the Late
Charge;

 

(b)

Tenant has neither incurred a Late Charge nor received a waiver of a Late Charge
in the 12 consecutive Months before the due date of the late payment;

 

(c)

Tenant is not in Default; and

 

(d)

Tenant has paid Landlord the overdue amount.

5.

USE & OCCUPANCY

5.1 Use. Tenant shall use and occupy the Premises only for the Use. Landlord
does not represent or warrant that the Project is suitable for the conduct of
Tenant’s particular business.

5.2 Compliance with Laws and Directives.

 

(a)

Tenant’s Compliance. Subject to the remaining terms of this Lease, Tenant shall
comply at Tenant’s expense with all laws and reasonable directives of Landlord’s
insurers concerning:

 

(1)

The Leasehold Improvements and Alterations,

 

(2)

Tenant’s use or occupancy of the Premises,

 

(3)

Tenant’s employer/employee obligations,

 

(4)

A condition created by Tenant, its Affiliates or their contractors or invitees,

 

(5)

Tenant’s failure to comply with this Lease,

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(6)

The negligence of Tenant or its Affiliates or contractors, or  

 

(7)

Any chemical wastes, contaminants, pollutants or substances that are hazardous,
toxic, infectious, flammable or dangerous, or regulated by any local, state or
federal statute, rule, regulation or ordinance for the protection of health or
the environment (“Hazardous Materials”) that are introduced to the Project,
handled or disposed, by Tenant or its Affiliates, or any of their contractors;
provided, however, that this Section 5.2(a) shall not require Tenant to correct
construction defects in Landlord’s Work or effectuate capital improvements or
repairs (other than with respect to the Leasehold Improvements and/or Tenant’s
Alterations).

 

(b)

Landlord’s Compliance. The cost of Landlord’s compliance with laws or directives
of Landlord’s insurers concerning the Project, other than those that are
Tenant’s obligation under subsection (a), will be included in Expenses to the
extent allowed under §4.2.

5.3 Occupancy. Tenant shall not interfere with Building services or other
tenants’ rights to quietly enjoy their respective premises or the Common Areas.
Tenant shall not make or continue a nuisance, including any objectionable odor,
noise, fire hazard, vibration, or wireless or electromagnetic transmission.
Tenant will not maintain any Leasehold Improvements or use the Premises in a way
that increases the cost of insurance required under §9.2, or requires insurance
in addition to the coverage required under §9.2.

5.4 OFAC Certification. Tenant represents that: (a) Tenant is not now and has
never been listed or named as a Blocked Person, or (b) Tenant is not now and has
never been acting directly or indirectly for, or on behalf of, any Blocked
Person. “Blocked Person” means any person, group, entity or nation designated by
the United States Treasury Department as a terrorist or a “Specially Designated
National and Blocked Person,” or that is a banned or blocked person, entity,
nation under any law, order, rule or regulation that is enforced or administered
by the Office of Foreign Assets Control.

6.

SERVICES & UTILITIES

6.1 Standard Services.

 

(a)

Standard Services Defined. “Standard Services” means:

 

(1)

Condenser water for the operation of heating, ventilation and air-conditioning
(“HVAC”) equipment serving the Premises during Business Hours, to the extent
reasonably required to comfortably use and occupy the Premises.

 

(2)

HVAC during Business hours to the extent reasonably required to comfortably use
and occupy the interior Common Areas;

 

(3)

Tempered water from the public utility for use in Common Areas rest rooms, and
for use in customary kitchen facilities that may be in the Premises;

 

(4)

Subject to §6.2, janitorial services to the Premises and interior Common Areas 5
days a week, except Holidays, to the extent customarily provided in office
buildings in the San Francisco financial district and SOMA submarkets which are
comparable in quality, location and prestige to the Building;

 

(5)

Access to the Premises (by at least 1 passenger elevator if not on the ground
floor) 24 hours a day, 365 days per year;

 

(6)

Replacement of, and Labor to replace, fluorescent tubes and ballasts in Building
Standard light fixtures in the Premises and in the Common Areas;

 

(7)

Building access control services;

 

(8)

Electricity from Landlord’s selected provider(s) for Common Areas lighting; and

 

(9)

Subject to §6.2, electricity from Landlord’s selected provider(s) for the
provision of the following in and to the Premises:

 

(A)

Lighting,

 

(B)

Convenience outlets for the operation of customary office equipment, and

 

(C)

The operation of HVAC equipment;

provided, however, that the connected load for the uses under subsections (A)
and (B) will not exceed 6 watts per USF of the Premises.

 

(b)

Standard Services Provided. During the Term, Landlord will provide the Standard
Services to Tenant subject to Tenant’s obligations under §6.2. Except for those
costs directly paid by Tenant pursuant to §6.2, the cost of the Standard
Services

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will be included in Expenses. Landlord is not responsible for any inability to
provide Standard Services due to either: a concentration of personnel or
equipment in the Premises in excess of that customary for the general
administrative office use; or Tenant’s use of equipment in the Premises that is
not customary office equipment or has special cooling requirements.  

6.2 Direct Charge for Electricity and Janitorial Services. Tenant will pay as
Rent the costs incurred by Landlord to provide those Standard Services set forth
in subsections (4) and (9) of §6.1(a) subject to the following:

 

(a)

Tenant’s total consumption of electricity in the Premises, including lighting,
convenience outlets, and HVAC units, will be separately metered with Building
Standard meters to be installed and maintained at Tenant’s cost and expense (and
which will constitute part of the Leasehold Improvements and may be included as
a Work Cost pursuant to the Work Letter). Landlord may, but will not be required
to, install an energy management and billing system to read such meters and
determine the cost incurred by Landlord of Tenant’s electrical usage (which
system will be part of the Mechanical System) based upon any or all of the
following, as applicable: (i) the actual cost per kilowatt to which Landlord is
subject to charge by the utility providing service to the Building, as
determined by Landlord’s energy management and billing system.

 

(b)

The charge to Tenant for janitorial services provided to Tenant as a part of
Standard Services will be the product of (i) the USF of the Premises, and (ii)
the cost per USF of janitorial services provided to tenanted premises of the
Building as part of Standard Services (as opposed to costs incurred with respect
to the Common Areas, which will be included in Expenses).

6.3 Additional Services. Landlord will provide utilities and services in excess
of the Standard Services subject to the following:

 

(a)

HVAC. If Tenant requests condenser water for HVAC service to the Premises during
non-Business Hours, Tenant will pay as Rent Landlord’s scheduled rate for this
service.

 

(b)

Lighting. Landlord may elect to furnish non-Building Standard lamps, bulbs,
ballasts, and starters that are part of the Leasehold improvements for purchase
by Tenant at Landlord’s cost, plus Landlord’s standard administration fee.
Landlord will install such items at Landlord’s scheduled rate for this service.

 

(c)

Other Utilities and Services. Tenant will pay as Rent the actual cost of
utilities or services (other than those directly charged pursuant to §6.2, or
delineated in subsections (a) and (b) of this §6.1) either used by Tenant or
provided at Tenant’s request in excess of that provided as part of the Standard
Services, plus Landlord’s standard administration fee. Tenant’s excess
consumption may be estimated by Landlord unless either Landlord requires or
Tenant elects to install Building Standard meters to measure Tenant’s
consumption.

 

(d)

Additional Systems and Metering. Landlord may require Tenant, at Tenant’s
expense, to upgrade or modify existing Mechanical Systems serving the Premises
or the Leasehold Improvements to the extent necessary to meet Tenant’s excess
requirements, including installation of Building Standard meters in addition to
those meters required under §6.2(a) to measure the same.

6.4 Telecommunication Services. Tenant will contract directly with third party
providers and will be solely responsible for paying for all telephone, data
transmission, video and other telecommunication services (“Telecommunication
Services”) subject to the following:

 

(a)

Providers. Each Telecommunication Services provider that does not already
provide service to the Building shall be subject to Landlord’s approval, which
Landlord may withhold in Landlord’s sole discretion. Without liability to
Tenant, the license of any Telecommunication Services provider servicing the
Building may be terminated under the terms of the license, or not renewed upon
the expiration of the license.

 

(b)

Tenant’s Wiring. Landlord may, in its sole discretion, designate the location of
all wires, cables, fibers, equipment, and connections (“Tenant’s Wiring”) for
Tenant’s Telecommunication Services, restrict and control access to telephone
cabinets and rooms. Tenant may not use or access the Base Building, Common Areas
or roof for Tenant’s Wiring without Landlord’s prior written consent, which
Landlord may withhold in Landlord’s sole discretion. Tenant’s Wiring will be
subject to removal in accordance with §3.3.

 

(c)

No Beneficiaries. This §6.4 is solely for Tenant’s benefit, and no one else
shall be considered a beneficiary of these provisions.

6.5 Special Circumstances. Without breaching this Lease or creating any
liability on the part of Landlord, Landlord may interrupt, limit or discontinue
any utility or services Landlord provides under this Article 6 under any of the
following circumstances: (a) without notice, in an emergency; (b) with
reasonable notice, to comply with laws; (c) with reasonable notice, to conform
to

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voluntary government or industry guidelines; (d) with reasonable advance notice,
to repair and maintain the Project under §7.2 (including scheduled annual
Building-wide shutdowns; or (e) with reasonable notice, to modify, perform
Renovations or improve the Project under §8.2. If as a result of any
interruption, limitation or discontinuance of any utility or services under
clause (c), (d) or (e) of this §6.5, the Premises are Untenantable (as defined
in §10.1(a)) and Tenant does not actually use all or part of the Premises as a
result thereof, then Tenant’s Rent will be abated to the same extent as if
Untenantable due to damage or destruction, in the manner of and subject to the
provisions of §10.2.

6.6 REIT Compliance. If Landlord or any affiliate of Landlord has elected to
qualify as a real estate investment trust (“REIT”), any service required or
permitted to be performed by Landlord pursuant to this Lease, the charge or cost
of which may be treated as impermissible tenant service income under the laws
governing a REIT, may be performed by an independent contractor of Landlord,
Landlord’s property manager, or a taxable REIT subsidiary that is affiliated
with either Landlord or Landlord’s property manager (each, a “Service
Provider”). If Tenant is subject to a charge under this Lease for any such
service, then at Landlord’s direction Tenant will pay the charge for such
service either to Landlord for further payment to the Service Provider or
directly to the Service Provider and, in either case (a) Landlord will credit
such payment against any charge for such service made by Landlord to Tenant
under this Lease, and (b) Tenant’s payment of the Service Provider will not
relieve Landlord from any obligation under the Lease concerning the provisions
of such services.

7.

REPAIRS

7.1 Tenant’s Repairs. Except as provided in Articles 10 and 12 and subject to
Article 11, during the Term Tenant shall, at Tenant’s cost, repair, maintain and
replace, if necessary, the Leasehold Improvements and keep the Premises in the
condition delivered to Tenant, subject to ordinary wear and tear and casualty.
Tenant’s work under this §7.l must be (a) approved by Landlord before
commencement, (b) supervised by Landlord at Tenant’s cost, if Landlord so
reasonably requires, (c) performed in compliance with laws and Building rules
and regulations, and (d) performed lien free and in a first-class manner with
materials of at least Building Standard.

7.2 Landlord’s Repairs. Except as provided in Articles 10 and 12, during the
Term Landlord shall repair, maintain and replace, if necessary, all parts of the
Project that are not Tenant’s responsibility under §7.1, or any other tenant’s
responsibility under their respective lease, and otherwise keep the Project in
good order and condition according to the standards prevailing for comparable
office buildings in the area in which the Building is located. Except in an
emergency, Landlord will use commercially reasonable efforts to avoid disrupting
the Use of the Premises in performing Landlord’s duties under this §7.2;
however, Landlord will not be required to employ premium labor to perform any of
Landlord’s duties under this §7.2. Tenant may not repair or maintain the Project
on Landlord’s behalf or offset any Rent for any repair or maintenance of the
Project that is undertaken by Tenant.

8.

ALTERATIONS

8.1 Alterations by Tenant. “Alterations” means any modifications, additions, or
improvements to the Premises or Leasehold Improvements made by Tenant during the
Term, including modifications to the Base Building or Common Areas required by
law as a condition of performing the work. Alterations do not include work
performed under a Work Letter that is part of this Lease. Alterations are made
at Tenant’s sole cost and expense, subject to the following:

 

(a)

Consent Required. All Alterations that cost in excess of $20,000.00 or require a
building permit from the applicable governmental agency shall require Landlord’s
prior written consent; and if Landlord’s consent is not required pursuant to
foregoing, then Tenant must submit written notice to Landlord of any such
Alteration no less than 10 business days prior to the commencement of such
Alteration. If a Design Problem exists, Landlord may withhold its consent in
Landlord’s sole discretion; otherwise, Landlord will not unreasonably withhold,
condition or delay its consent. Unless Tenant at the time of installation
obtains Landlord’s prior written consent to remove the Alterations, then such
Alterations will become part of the Premises to be tendered to Landlord on
termination of the Lease. Landlord may require Tenant to remove Alterations and
restore the Premises under §3.3 upon termination of this Lease if the
Alterations are not customary Alterations for the Use and, if consent is
required, Landlord requires such removal as a condition of Landlord’s consent.

 

(b)

Design Problem Defined. “Design Problem” means a condition that results, or will
result, from work proposed, being performed or that has been completed that
either:

 

(1)

Does not comply with laws;

 

(2)

Does not meet or exceed the Building Standard;

 

(3)

Exceeds the capacity, adversely affects, is incompatible with, or impairs
Landlord’s ability to maintain, operate, alter, modify, or improve the Base
Building;

 

(4)

Affects the exterior appearance of the Building or Common Areas;

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(5)

Violates any agreement affecting the Project;  

 

(6)

Costs more to demolish than Building Standard improvements;

 

(7)

Violates any insurance regulations or standards for a fire-resistive office
building;

 

(8)

Locates any equipment, Tenant’s Wiring or Tenant’s Personal Property on the roof
of the Building, in Common Areas or in telecommunication or electrical closets,
except for connections of Tenant’s Wiring to service provided by
Telecommunications Services providers; or

 

(9)

Causes a “work of visual art” (as defined in the Visual Artists Rights Act of
1990) to be incorporated into or made a part of the Building.

 

(c)

Performance of Alterations. Alterations shall be performed by Tenant in a good
and workman-like manner according to plans and specifications approved by
Landlord, if applicable. All Alterations shall comply with law and insurance
requirements. Landlord’s designated contractors must perform Alterations
affecting the Base Building or Mechanical Systems; and, all other work will be
performed by qualified contractors that meet Landlord’s insurance requirements
and are otherwise approved by Landlord. Promptly after completing Alterations,
if applicable, Tenant will deliver to Landlord “as-built” CADD plans, proof of
payment, a copy of the recorded notice of completion, and all unconditional lien
releases.

 

(d)

Bonding. If requested by Landlord, before commencing Alterations requiring
consent Tenant shall at Tenant’s cost obtain bonds, or deposit with Landlord
other security acceptable to Landlord for the payment and completion of the
Alterations. These bonds or other security shall be in form and amount
acceptable to Landlord.

 

(e)

Alterations Fee. Tenant shall pay Landlord as Rent 3% of the total construction
costs of the Alterations that are not cosmetic Alterations to cover review of
Tenant’s plans and construction coordination by Landlord’s employees. In
addition, Tenant shall reimburse Landlord for the actual cost that Landlord
reasonably incurs to have engineers, architects, or other professional
consultants review Tenant’s plans and work in progress, or inspect the completed
Alterations.

8.2 Renovations. Landlord may modify, renovate, or improve the Project,
including the granting of rights to other tenants to modify, renovate, or
improve their respective premises and Common Areas serving their premises
(“Renovations”) as Landlord deems appropriate; provided, that Renovations may
not materially adversely impair Tenant’s access to the Premises from the Common
Areas on a permanent basis and Landlord shall use commercially reasonable
efforts to avoid disrupting Tenant’s Use of the Premises during Business Hours.
Renovations may include demolishing or removing improvements, erecting
scaffolding or other necessary structures, screening, limiting access to
portions of the Project (or all of the Project, if required for safety reasons),
and performing work that creates noise, dust, or debris. Provided that Landlord
uses commercially reasonable efforts not to interfere with the conduct of
business in the Premises for the Use during Business Hours, the performance of
Renovations will not constitute a constructive eviction. Except as expressly
provided elsewhere in this Lease, Renovations will not entitle Tenant to any
abatement of Rent or damages for interference with Tenant’s business or the loss
of use of any or all of the Premises. Landlord shall use commercially reasonable
efforts to do the work permitted pursuant to this Section in a manner that will
minimize, to the extent commercially practicable, the disruption of Tenant’s
business in the Premises.

8.3 Liens and Disputes. With respect to Alterations undertaken by Tenant, Tenant
will keep title to the Land and Building free of any liens concerning the
Leasehold Improvements (other than with respect to Landlord’s Work pursuant to
the Work Letter), Alterations, or Tenant’s Personal Property, and will promptly
take whatever action is required to have any of these liens released and removed
of record (including, as necessary, posting a bond or other deposit). To the
extent legally permitted, each contract and subcontract for Alterations will
provide that no lien attaches to or may be claimed against the Project. Tenant
will indemnify Landlord for costs that Landlord reasonably incurs because of
Tenant’s violation of this §8.3.

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9.

INSURANCE  

9.1 Tenant’s Insurance.

 

(a)

Tenant’s Coverage. Before taking possession of the Premises for any purpose
(including construction of Tenant Improvements, if any) and during the Term,
Tenant will provide and keep in force the following coverage:

 

(1)

Commercial general liability insurance insuring Tenant’s use and occupancy of
the Premises and use of the Common Areas, and covering personal and bodily
injury, death, and damage to others’ property of not less than the Liability
Limit. Each of these policies shall include cross liability and severability of
interests clauses, and be written on an occurrence, and not claims-made, basis.
Each of these policies shall name Landlord, the Building property manager, each
secured lender, and any other party reasonably designated by Landlord as an
additional insured (“Additional Insured”).

 

(2)

All risk property insurance (including standard extended coverage endorsement
perils, leakage from fire protective devices, and other water damage) covering
the full replacement cost of the Leasehold improvements and Tenant’s Personal
Property. Each of these policies shall name Landlord and each Additional Insured
an additional insured to the extent of their interest in the Leasehold
Improvements. Each of these policies shall include a provision or endorsement in
which the insurer waives its right of subrogation against Landlord and each
Additional Insured.

 

(3)

Insurance covering the perils described in (2) for Tenant’s loss of income or
insurable gross profits with a limit not less than Tenant’s annual Rent. Each of
these policies shall include a provision or endorsement in which the insurer
waives its right of subrogation against Landlord and each Additional Insured.

 

(4)

If any boiler or machinery is operated in the Premises, boiler and machinery
insurance.

 

(5)

Insurance required by law, including workers’ compensation insurance.

 

(6)

Employers liability insurance with limits not less than $1 million.

 

(7)

Commercial automobile liability insurance covering all owned, hired, and
non-owned vehicles with a combined single limit of not less than $1 million for
each accident or person.

 

(8)

Insurance covering the Leasehold Improvements and Tenant’s Personal Property
against loss or damage due to earthquake or difference in condition; provided,
however, that Tenant may elect to self-insure this coverage. If Tenant does not
elect to self-insure this coverage, then each of these policies shall name
Landlord and each Additional Insured an additional insured to the extent of
their interest in the Leasehold Improvements.

 

(b)

Insurers and Terms. Each policy required under (a) shall be written with
insurance companies that are licensed to do business in the state in which the
Building is located and have a rating of not less than A and a Financial Size
Class of at least VIII by A.M. Best Company. The proceeds of policies providing
coverage under subsection (a)(2) of this §9.1 will be payable to Landlord,
Tenant and each Encumbrance holder as their interests may appear. Tenant will
cooperate with Landlord in collecting any insurance proceeds that may be due in
the event of loss, and Tenant will execute and deliver to Landlord proofs of
loss and any other instruments that Landlord may require to recover such
insurance proceeds.

 

(c)

Proof of Insurance. At least 10 days prior to the Commencement Date, and
throughout the Term, Tenant will provide Landlord with certificates of insurance
establishing that the coverage required under subsection (a) is in effect.
Tenant will provide replacement certificates before any policy expires that the
expiring policy has been renewed or replaced.

9.2 Landlord’s Insurance.

 

(a)

Landlord’s Coverage. During the Term, Landlord will provide and keep in force
the following coverage:

 

(1)

Commercial general liability insurance.

 

(2)

All risk insurance (including standard extended coverage endorsement perils,
leakage from fire protective devices, and other water damage) covering the
Project improvements (excepting the Leasehold Improvements to be insured by
Tenant). Each of these policies shall include a provision or endorsement in
which the insurer waives its right of subrogation against Tenant.

 

(3)

Insurance covering the perils described in (2) for Landlord’s loss of rental
income or insurable gross profits. Each of these policies shall include a
provision or endorsement in which the insurer waives its right of subrogation
against Tenant.

 

(4)

Boiler and machinery insurance.

 

(5)

Other insurance that Landlord elects to maintain.

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(b)

Terms. Each of the policies required under (a) will have those limits,
deductibles, retentions and other terms that Landlord prudently determines.  

10.

DAMAGE OR DESTRUCTION

10.1 Damage and Repair. If all or any part of the Project is damaged by fire or
other casualty, then the parties will proceed as follows:

 

(a)

Landlord’s Estimates. Landlord will assess the damage to the Project (but not
the Leasehold Improvements) and notify Tenant of Landlord’s reasonable estimate
of the time required to substantially complete repairs and restoration of the
Project (“Repair Estimate”) within 30 days after the date of the casualty.
Landlord will also estimate the time that all or a portion of the Premises will
be Untenantable (“Interruption Estimate”) within 30 days after the date of the
casualty. “Untenantable” means that the Premises are not reasonably accessible
or are unfit for the Use. Within 30 days after the later of the casualty,
issuance of the Repair Estimate, issuance of the Interruption Estimate, or
receipt of any denial of coverage or reservation of rights from Landlord’s
insurer, each party may terminate the Lease by written notice to the other on
the following conditions:

 

(1)

Landlord may elect to terminate this Lease if either:

 

(A)

The Repair Estimate exceeds 180 days, or

 

(B)

The damage or destruction occurs in the last 12 Months of the Term and the
Repair Estimate exceeds 20% of the remaining Term; or

 

(C)

The repair and restoration is not fully covered by insurance maintained or
required to be maintained by Landlord (subject only to those deductibles or
retentions Landlord elected to maintain) or Landlord’s insurer denies coverage.

 

(2)

Tenant may elect to terminate this Lease if either (i) the Interruption Estimate
exceeds 180 days, or (ii) the damage or destruction occurs in the last 12 Months
of the Term and the Interruption Estimate exceeds 20% of the remaining Term.

 

(b)

Repairs. If neither party terminates the Lease under (a), then the Lease shall
remain in full force and effect and the parties will proceed as follows:

 

(1)

Landlord will repair and restore the Project (but not Leasehold Improvements) to
the condition existing prior to such damage, except for modifications required
by law. Landlord will perform such work reasonably promptly, subject to delay
for loss adjustment, delay caused by Tenant and Force Majeure.

 

(2)

Tenant will repair and restore the Leasehold Improvements reasonably promptly to
the condition existing prior to such damage, but not less than then current
Building Standards, except for modifications required by law.

 

(3)

Tenant may not terminate this Lease if the actual time to perform the repairs
and restoration exceeds the Repair Estimate, or the actual interruption exceeds
the Interruption Estimate. Notwithstanding the foregoing, if(A) either the
actual time to perform the repairs and restoration to the Base Building and
Leasehold Improvements exceeds the Repair Estimate by more than 60 days, or the
actual interruption exceeds the Interruption Estimate by more than 60 days (each
such period to be extended by any delay caused by Tenant), and (B) the total
time which the Premises will be Untenantable will exceed 180 days, then Tenant
may terminate this Lease upon 30 days’ prior written notice to Landlord;
provided, however, that if the repairs and restoration are completed within said
30 day period, then this Lease will not be so terminated and will continue in
full force and effect.

10.2 Rent Abatement. If as a result of the damage or destruction under §10.1 all
or any part of the Premises becomes Untenantable and Tenant does not actually
use the Untenantable part of the Premises, then Tenant’s Base Rent and
Additional Rent for the Untenantable part of the Premises that Tenant does not
actually use will be abated until the Untenantable part of the Premises becomes
tenantable; however, Tenant will not be entitled to abatement of Base Rent and
Additional Rent after that date (a) Landlord repairs and restores the Project to
the extent necessary for Tenant to reasonably access and use the Premises for
the Use, and (b) repair and restoration of the Leasehold Improvements would have
been substantially complete if Tenant had performed its obligations under §10.1
(b )(2) diligently and in coordination with Landlord’s work. Tenant’s sole
remedies against Landlord for damage or destruction of any part of the Project
is abatement of Base Rent and Additional Rent under this §10.2 and/or
termination of the Lease as provided in §10.1, and Landlord will not be liable
to Tenant for any other amount, including damages to Tenant’s Personal Property,
consequential damages, actual or constructive eviction, or abatement of any
other item of Rent.

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11.

INDEMNITY  

11.1 Claims. “Claims” means any and all liabilities, losses, claims, demands,
damages or expenses that are suffered or incurred by a party, including
attorneys’ fees reasonably incurred by that party in the defense or enforcement
of the rights of that party.

11.2 Landlord’s Waivers and Tenant’s Indemnity.

 

(a)

Landlord’s Waivers. Landlord waives any Claims against Tenant and its Affiliates
for perils insured or required to be insured by Landlord under subsections (2)
and (3) of §9.2(a), except to the extent caused by the willful misconduct of
Tenant or its Affiliates but in no case will Tenant be liable for any special or
consequential damages (including interruption of business, loss of income, or
loss of opportunity).

 

(b)

Tenant’s Indemnity. Unless waived by Landlord under (a), Tenant will indemnify
and defend Landlord and its Affiliates and hold each of them harmless from and
against Claims arising from:

 

(1)

Any accident or occurrence in the Premises, except to the extent caused by
Landlord’s or its Affiliates’ or contractors’ negligent or willful misconduct;

 

(2)

Tenant’s or its Affiliates’ or its contractors’ negligence or willful
misconduct; or

 

(3)

Any claim for commission or other compensation by any person other than the
Brokers for services rendered to Tenant in procuring this Lease.

11.3 Tenant’s Waivers and Landlord’s Indemnity,

 

(a)

Tenant’s Waivers. Tenant waives any Claims against Landlord and its Affiliates
for:

 

(1)

Any peril insured or required to be insured by Tenant under subsections (2), (3)
and (8) of §9.1(a), except to the extent caused by the willful misconduct of
Landlord or its Affiliates, but in no case will Landlord be liable for any
special or consequential damages (including interruption of business, loss of
income, or loss of opportunity); or

 

(2)

Damage caused by any public utility, public work, other tenants or occupants of
the Project, or persons other than Landlord or its Affiliates or contractors; or

 

(b)

Landlord’s Indemnity. Unless waived by Tenant under (a), Landlord will indemnify
and defend Tenant and its Affiliates and hold each of them harmless from and
against Claims arising from:

 

(1)

Landlord’s or its Affiliates’ or contractors’ negligence or willful misconduct;
or

 

(2)

Any claim for commission or other compensation by any person other than the
Brokers for services rendered to Landlord in procuring this Lease.

11.4 Affiliates Defined. “Affiliates” means with respect to a party (a) that
party’s partners, co-members and joint venturers, (b) each corporation or other
entity that is a parent or subsidiary of that party, (c) each corporation or
other entity that is controlled by or under common control of a parent of such
party, and (d) the directors, officers, employees and agents of that party and
each person or entity described in subsections (a) through (c) of this §11.4.

11.5 Survival of Waivers and Indemnities. Landlord’s and Tenant’s waivers and
indemnities under §11.2 and §11.3 will survive the expiration or early
termination of this Lease.

12.

CONDEMNATION

12.1 Taking. “Taking” means acquiring of all or part of the Project for any
public or quasi-public use by exercise of a right of eminent domain or under any
other law, or any sale in lieu thereof. If a Taking occurs:

 

(a)

Total Taking. If because of a Taking substantially all of the Premises is
untenantable for substantially all of the remaining Term, then the Lease
terminates on the date of the Taking.

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(b)

Partial Taking. If a Taking does not cause the Lease to be terminated under (a),
then Landlord will restore (and alter, as necessary) the Premises to be
tenantable, unless the Lease is terminated by either Landlord or Tenant under
the following circumstances:  

 

(1)

Landlord may terminate the Lease upon 60 days prior written notice to Tenant if
Landlord reasonably determines that it is uneconomical to restore or alter the
Premises to be tenantable.

 

(2)

Tenant may terminate the Lease upon 60 days prior written notice to Landlord if
the Taking causes more than 20% of the Premises to be Untenantable for the
remainder of the Term and Tenant cannot reasonably operate Tenant business for
the Use in the remaining Premises.

 

(c)

If the Lease is not terminated under (a) or (b), the Rent payable by Tenant will
be reduced for the term of the Taking based upon the RSF Premises rendered
Untenantable by the Taking and that Tenant does not actually use.

12.2 Awards. Landlord is entitled to the entire award for any claim for a taking
of any interest in this Lease or the Project, without deduction or offset for
Tenant’s estate or interest; however, Tenant may make a claim for relocation
expenses and damages to Tenant’s Personal Property and business to the extent
that Tenant’s claim does not reduce Landlord’s award.

13.

TENANT TRANSFERS

13.1 Terms Defined.

 

(a)

Transfer Defined. “Transfer” means any:

 

(1)

Sublease of all or part of the Premises, or assignment, mortgage, hypothecation
or other conveyance of an interest in this Lease;

 

(2)

Use of the Premises by anyone other than Tenant with Tenant’s consent;

 

(3)

Transfer of 51 % or more of Tenant’s assets, shares (excepting shares
transferred in the normal course of public trading), membership interests,
partnership interests or other ownership interests; or

 

(4)

Transfer of control of Tenant, subject to §13.3.(a) herein below.

 

(b)

Transferee Defined. “Transferee” means a party to whom a Transfer is proposed to
be made or actually made in accordance with the provisions of this Lease.

13.2 Prohibited Transfers. Tenant may not enter into a Transfer or other
agreement to use or occupy the Premises that provides for rent or other
compensation based in whole or in part on the net income or profits from the
business operated in the Premises. Tenant may not enter into a Transfer if the
proposed Transferee is directly or indirectly related to the Landlord under
§856, et seq. of the Internal Revenue Code of 1986 (as amended). Any such
Transfers shall be considered null, void and of no force or effect.

13.3 Consent Not Required. Tenant may effect a Transfer to a Permitted
Transferee (defined below) without Landlord’s prior consent and without
application of §13.5, below, but with notice to Landlord given not later than
the Permitted Transferee’s occupancy. “Permitted Transferee” means any person or
entity that:

 

(a)

Either (1) controls, is controlled by, or is under common control with Tenant
(for purposes hereof, “control” shall mean ownership of not less than 50% of all
of the voting stock or legal and equitable interest in the entity in question),
(2) results from the merger or consolidation of Tenant, or (3) acquires all or
substantially all of the stock and/or assets of Tenant as a going concern;

 

(b)

Has a tangible net worth immediately following the Transfer not less than
Tenant’s tangible net worth preceding the Transfer;

 

(e)

Will not, by occupying the Premises, cause Landlord to breach any other lease or
other agreement affecting the Project; and

 

(d)

Is not named or listed as a Blocked Person.

13.4 Consent Required. Each proposed Transfer, other than any Transfer
prohibited under § 13.2 or permitted under § 13.3, requires Landlord’s prior
consent, in which case the parties will proceed as follows:

 

(a)

Tenant’s Notice. Tenant shall notify Landlord at least 30 days prior to the
proposed Transfer of the name and address of the proposed Transferee and the
proposed use of the Premises, and include in the notice the Transfer documents
and copies of the proposed Transferee’s balance sheet and income statement for
the most recent complete fiscal year.

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(b)

Landlord’s Rights. Within 30 days after receipt of Tenant’s complete notice,
Landlord may either:  

 

(1)

If the proposed Transfer is either an assignment of this Lease a sublease of all
of the Premises or any part of the Premises that will be separately demised and
have its own entrance from the Common Areas and for substantially all of the
remaining Term of the Lease, terminate this Lease as of the proposed Transfer
date; provided, however, that there shall be no termination if Tenant rescinds
its request within 5 days after receipt of Landlord’s election to terminate; or

 

(2)

Consent or deny consent to the proposed Transfer, provided that consent will not
be unreasonably withheld if:

 

(A)

The proposed Transferee, in Landlord’s reasonable opinion, has the financial
capacity to meet its obligations under the proposed Transfer;

 

(B)

The proposed use is consistent with the Use and will not cause Landlord to be in
breach of any lease or other agreement affecting the Project;

 

(C)

The proposed Transferee is typical of tenants that directly lease premises in
first-class office buildings;

 

(D)

The proposed Transferee is not an existing tenant or an Affiliate of an existing
tenant, or a party with which Landlord is actively negotiating to lease space in
the Building (or has, in the last 6 months, been actively negotiating to lease),
unless Landlord does not have space in the Building to accommodate such tenant,
Affiliate or party;

 

(E)

The proposed Transferee is not an agency of any government, a medical facility,
or an entity with sovereign immunity;

 

(F)

Tenant is not in Default under this Lease;

 

(G)

The proposed Transferee is not named or listed as a Blocked Person; and

 

(c)

Compelling Consent. If Landlord does not consent to a Transfer, Tenant’s sole
remedy against Landlord will be an action for specific performance or
declaratory relief, and Tenant may not terminate this Lease or seek monetary
damages.

13.5 Payments to Landlord. Tenant will pay Landlord 50% of Transfer receipts
that exceed Tenant’s Rent (on a per square foot basis); after Tenant is
reimbursed for Tenant’s reasonable and customary out-of-pocket costs incurred in
the Transfer, including attorneys’ fees, cost of improvements (or construction
allowances) provided to the Transferee, Alterations, and broker commissions.
Tenant shall pay Landlord a $500 review fee for each proposed Transfer requiring
Landlord’s consent, excepting those in which Landlord exercises its rights under
subsection (1) of §13.4(b).

13.6 Effect of Transfers. No Transfer releases Tenant or any guarantor of this
Lease from any Lease obligation. Landlord’s acceptance of a payment from any
person or entity other than Tenant that occupies the Premises does not waive
Tenant’s obligations under this Article 13. If Tenant is in Default of this
Lease, then Landlord may (a) proceed against Tenant without exhausting any
remedies against any Transferee, and (b) by written notice to a Transferee,
require such Transferee to pay directly to Landlord all consideration payable by
Transferee to Tenant under the Transfer (which Landlord will apply against
Tenant’s obligations under this Lease). Termination of this Lease for any reason
will not result in a merger of the Lease and any sublease, each of which will be
deemed terminated concurrently with this Lease unless Landlord elects by notice
to a subtenant to assume their sublease, in which case the subtenant shall
attorn to Landlord under the executory terms of the sublease.

14.

LANDLORD TRANSFERS

14.1 Landlord’s Transfer. Landlord’s right to transfer any interest in the
Project or this Lease is not limited by this Lease. Upon any such transfer,
Tenant will attorn to Landlord’s transferee and Landlord will be released from
liability under this Lease, except for any Lease obligations accruing before the
transfer that are not assumed by the transferee.

14.2 Subordination. This Lease is, and will at all times be, subject and
subordinate to each ground lease, mortgage, deed to secure debt or deed of trust
now or later encumbering the Building, including each renewal, modification,
supplement, amendment, consolidation or replacement thereof (each, an
“Encumbrance”). At Landlord’s request, Tenant will, without charge, promptly
execute, acknowledge, and deliver to Landlord (or, at Landlord’s request, the
Encumbrance holder) any instrument reasonably necessary to evidence this
subordination Notwithstanding the foregoing, each Encumbrance holder may
unilaterally elect to subordinate its Encumbrance to this Lease.

14.3 Attornment. Tenant will automatically attorn to any transferee of
Landlord’s interest in the Project that succeeds Landlord by reason of a
termination, foreclosure, or enforcement proceeding of an Encumbrance, or by
delivery of a deed in lieu of any

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foreclosure or proceeding (a “Successor Landlord”). In this event, the Lease
will continue in full force and effect as a direct lease between the Successor
Landlord and Tenant on all of the terms of this Lease, except that the Successor
Landlord shall not be:

 

(a)

Liable for any obligation of Landlord under this Lease, or be subject to any
counterclaim, defense or offset accruing before Successor Landlord succeeds to
Landlord’s interest;

 

(b)

Bound by any modification or amendment of this Lease made without Successor
Landlord’s consent,

 

(c)

Bound by any prepayment of more than one month’s Rent;

 

(d)

Obligated to return any security deposit or Letter of Credit (as applicable) not
paid over to Successor Landlord, or

 

(e)

Obligated to perform any improvements to the Premises (or provide an allowance
therefor).

Upon Successor Landlord’s request, Tenant will, without charge, promptly (i)
execute, acknowledge, and deliver to Successor Landlord any instrument
reasonably necessary required to evidence such attornment, and/or (ii) enter
into a new lease with Successor Landlord on the same terms and conditions of
this Lease that are applicable to the remainder of the Term.

14.4 Estoppel Certificate. Within 10 days after receipt of Landlord’s written
request, Tenant (and each guarantor of the Lease and transferee of an interest
in the Lease, including subtenants) will execute, acknowledge and deliver to
Landlord a certificate upon which Landlord and each existing or prospective
Encumbrance holder may rely confirming the following (or whether any exceptions
exist to the following):

 

(a)

The Commencement Date and Expiration Date;

 

(b)

The documents that constitute the Lease, and that the Lease is unmodified and in
full force and effect;

 

(c)

The date through which Base Rent, Additional Rent, and other Rent has been paid;

 

(d)

That, to Tenant’s actual knowledge neither Landlord nor Tenant is in Default;

 

(e)

That, to Tenant’s actual knowledge, Landlord has satisfied all Lease obligations
to improve the Premises (or provide Tenant an allowance therefor) and Tenant has
accepted the Premises;

 

(f)

That, unless the Premises have been sublet, Tenant solely occupies the Premises;
and

 

(g)

Such other matters concerning this Lease or Tenant’s occupancy that Landlord may
reasonably require.

15.

DEFAULT AND REMEDIES

15.1 Tenant’s Default and Remedies.

 

(a)

Tenant will be in “Default” of this Lease if Tenant either:

 

(1)

Fails to pay Rent when due, and the failure continues for 7 days after Landlord
notifies Tenant of this failure under §17.2 (Tenant waiving any other notice
that may be required by law);

 

(2)

Fails to perform a non-monetary Lease obligation of Tenant and the failure
continues for 30 days after Landlord notifies Tenant of this failure, but:

 

(A)

In an emergency Landlord may require Tenant to perform this obligation in a
reasonable time of less than 30 days, or

 

(B)

If it will reasonably take more than 30 days to perform this obligation, then
Tenant will have a reasonable time to perform this obligation, but only if
Tenant commences performing this obligation within 30 days after Landlord
notifies Tenant of this failure;

 

(3)

Consummates a Transfer that violates Article 13;

 

(4)

Fails, within 15 days after it occurs, to discharge any attachment or levy on
Tenant’s interest in this Lease;

 

(5)

Fails, within 60 days after it occurs, to have vacated or dismissed any
appointment of a receiver or trustee of Tenant’s assets (or any Lease
guarantor’s assets), or any voluntary or involuntary bankruptcy or assignment
for the benefit of Tenant’s creditors (or any Lease guarantor’s creditors); or

 

(6)

Is listed or named as a Blocked Person, or acts directly or indirectly for or on
behalf of any Blocked Person in connection with this Lease.

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(b)

If Tenant is in Default, Landlord may, without prejudice to the exercise of any
other remedy, exercise any remedy available under law, including those described
below:  

 

(1)

Landlord has the remedy described in California Civil Code §1951.4. Landlord may
continue this Lease in effect after Tenant’s breach and abandonment (until
Landlord terminates Tenant’s right to possess the Premises under (2), below) and
recover Rent as it becomes due. If Landlord elects this remedy, any Transfer
Tenant proposes will be subject only to reasonable limitations.

 

(2)

Landlord has the remedy described in California Civil Code §1951.2. If Tenant
breaches the Lease and abandons the Premises before the end of the Term, or
Tenant’s right to possession is terminated by Landlord as a result of a Default,
then Landlord may recover from Tenant all of the following:

 

(A)

The worth at the time of award (computed by allowing interest at the rate in
(3), below, on amounts due prior to award, and discounting amounts due after
award at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus 1%) of:

 

(i)

The unpaid Rent earned as of termination

 

(ii)

The amount that the unpaid Rent earned after termination to the date of award
exceeds the rental loss that Tenant proves could have been reasonably avoided;
and

 

(iii)

The amount that the unpaid Rent for the balance of the Term after the date of
award exceeds the rental loss that Tenant proves could have been reasonably
avoided; and

 

(B)

Any other amount necessary to compensate Landlord for damage caused by Tenant’s
failure to observe this Lease (or Which, in the ordinary course of things would
be likely to result therefrom, including costs of obtaining mitigating rental
income, such as excused rent, brokerage commissions, improvements, lease
takeovers, cash payments, advertising, and moving costs).

 

(3)

For any amounts owed under (1) or (2), recover interest at the greater of the
interest rate permitted under law or l0% (“Default Rate”) from the date each
amount is due until paid by Tenant.

15.2 Landlord’s Default and Remedies.

 

(a)

Landlord will be in “Default” of this Lease if Landlord fails to perform any
Lease obligation of Landlord and this failure continues for 20 days after Tenant
notifies Landlord of such failure, or such longer period of time as is
reasonable if more than 20 days is reasonably required to perform this
obligation if performance commences within this 20-day period and is diligently
prosecuted to completion.

 

(b)

If Landlord is in Default, then Tenant may exercise any remedy available under
law that is not waived or limited under this Lease, subject to the following:

 

(1)

Tenant may not terminate this Lease due to any Landlord Default until Tenant
notifies each Encumbrance holder identified by Landlord to Tenant and each
Encumbrance holder is provided a reasonable opportunity to gain legal possession
of the Project and, after gaining possession, cure the Default.

 

(2)

Landlord’s liability under this Lease is limited to Landlord’s interest in the
Building.

 

(3)

No liability under this Lease is assumed by Landlord’s Affiliates.

15.4 Enforcement Costs. If Landlord or Tenant brings any action against the
other to enforce or interpret any provision of this Lease (including any claim
in a bankruptcy or an assignment for the benefit of creditors), the prevailing
party will be entitled to recover from the other reasonable costs and attorneys’
fees incurred in such action.

15.5 Jury Trial. Landlord and Tenant each waive trial by jury in any action,
proceeding, or counterclaim brought by either party against the other concerning
any matter related to this Lease.

15.6 Force Majeure. “Force Majeure” means any cause or event beyond both
Landlord’s and Tenant’s reasonable control, including any act of God, government
act or restriction, labor disturbance, general shortage of materials or
supplies, riot, insurrection, or act of war or terrorism. Force Majeure excuses
a party from performing any non-monetary Lease obligation for a commercially
reasonable time.

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16.

LETTER OF CREDIT; FINANCIAL STATEMENTS  

16.1 Delivery of Letter of Credit. Tenant shall deliver to Landlord, as
protection for all losses and damages to which Landlord is entitled under
applicable law that result from any breach or default by Tenant under this
Lease, an irrevocable and unconditional negotiable standby letter of credit (the
“Letter of Credit”) naming Landlord as beneficiary, substantially in the form
attached hereto as Exhibit E, and otherwise meeting the following requirements:

 

(a)

Tenant shall provide the Letter of Credit to Landlord on or before the date that
is 3 business days after full execution and delivery of this Lease to both
Landlord and Tenant. Notwithstanding anything to the contrary contained in this
Lease, prior to Tenant’s delivery of the Letter of Credit, Landlord shall have
no obligation to commence Landlord’s Work, and the failure of Tenant to provide
the Letter of Credit to Landlord when required under this subsection (a) shall
be a Tenant Delay.

 

(b)

The Letter of Credit shall be issued by a solvent, nationally recognized bank
(the “Bank”) with a long term debt rating by Standard & Poors of not less than
A, and shall initially be in the LC Amount specified in §1.1 (I), and shall be
subject to reduction as follows:

 

(1)

Effective on the first day of Month 25 of the Term, the LC Amount will be
reduced to $231,962.64;

 

(2)

Effective on the first day of Month 37 of the Term, the LC Amount will be
reduced to $193,302.20;

 

(3)

Effective on the first day of Month 49 of the Term, the LC Amount will be
reduced to $154,641.76;

 

(4)

Effective on the first day of Month 61 of the Term, the LC Amount will be
reduced to $115,981.32.

 

(5)

Effective on the first day of Month 73 of the Term, the LC Amount will be
reduced to $77,320.88.

 

(6)

Effective on the first day of Month 85 of the Term, the LC Amount will be
reduced to $38,660.44.

 

(c)

The Letter of Credit shall be maintained in effect, whether through renewal or
extension, for the period from the date of Tenant’s execution of this Lease to a
date 60 days after the Expiration Date of this Lease (the “LC Expiration Date”).
If the Letter of Credit held by Landlord expires prior to the LC Expiration
Date, then Tenant shall deliver a new Letter of Credit or certificate of renewal
or extension to Landlord at least 60 days prior to the expiration of the Letter
of Credit then held by Landlord, without any action whatsoever on the part of
Landlord.

 

(d)

The Letter of Credit shall provide that Landlord, and each of its successors and
assigns, may at any time and without Tenant’s consent, transfer one or more
times all of its interest in and to the Letter of Credit to a successor to
Landlord’s interest in this Lease. Landlord will give Tenant notice of any such
assignment of the Letter of Credit. In the event of a transfer of Landlord’s
interest in the Building by Landlord, or any of its successors and assigns, such
party shall transfer the Letter of Credit to the transferee of such interest and
thereupon the transferring party shall, without Tenant’s consent, be released by
Tenant from all subsequent liability with respect to the Letter of Credit. In
connection with any such transfer of the Letter of Credit by Landlord, or any of
its successors and assigns, Tenant shall (i) without charge to Landlord execute
and submit to the Bank such applications, documents and instruments as may be
necessary to effectuate such transfer, and (ii) pay the Bank’s transfer and
processing fees in connection each such transfer.

 

(e)

The Letter of Credit shall be presentable at sight at a location within a major
city in the continental United States, permit partial draws, and permit multiple
presentations and draws. The Letter of Credit may not contain any provision or
condition (i) that requires the Landlord to make any representations to the Bank
as to the basis for draw set forth in §16.2, (ii) under which the Bank may
determine whether any condition for draw set forth in §16.2, below, has
occurred, or (iii) permits the Bank to dishonor any draw because of the
existence of any dispute between Landlord and Tenant.

 

(f)

Subject to the foregoing requirements, the Letter of Credit shall be subject to
the Uniform Customs and Practices for Documentary Credits (2007-Rev),
International Chamber of Commerce Publication #500, or the International Standby
Practices-ISP 98, International Chamber of Commerce Publication #590.

16.2 Drawing Upon the Letter of Credit. Landlord may (by and through its
managing agent) draw down an amount up to the face amount of the Letter of
Credit if any of the following occurs:

 

(a)

Tenant is in Default of any monetary obligation under this Lease; or

 

(b)

A receiver or trustee of Tenant’s assets is appointed, or any voluntary or
involuntary bankruptcy is filed by or against Tenant, or Tenant makes any
assignment for the benefit of Tenant’s creditor; or

 

(c)

The Bank has notified Landlord that the Letter of Credit will not be renewed or
extended through the LC Expiration Date and an acceptable replacement Letter of
Credit is not provided by Tenant to Landlord at least 60 days prior to the
expiration of the Letter of Credit then held by Landlord.

19

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For purposes of Landlord’s right to draw upon the Letter of Credit, the
occurrences described in subsections (b) and (c), above, shall, notwithstanding
anything to the contrary contained in this Lease, not require any prior notice
of default or opportunity to cure.

16.3 Restoration of Amount. If, as a result of any draw by Landlord upon the
Letter of Credit, the amount of the Letter of Credit is less than the LC Amount,
then Tenant shall within 10 business days after receipt of written notice from
Landlord provide Landlord with additional Letter of Credit in an amount equal to
the deficiency. Tenant’s failure to comply with its obligations under this §
16.3 shall, notwithstanding anything to the contrary contained in this Lease,
constitute an incurable default by Tenant under this Lease (without the need for
any additional notice and/or cure period).

16.4 General Provisions.

 

(a)

Tenant may not assign or encumber the Letter of Credit or any part thereof, and
neither Landlord nor its successors or assigns will be bound by any such
assignment, encumbrance.

 

(b)

Landlord shall not be required to segregate the proceeds of the Letter of Credit
from Landlord’s other assets.

 

(c)

Landlord is entering into this Lease in material reliance upon the ability of
Landlord to draw upon the Letter of Credit on the terms and conditions described
in this Article 16, upon the occurrence of any Default on the part of Tenant
under this Lease.

 

(d)

The use, application or retention of the Letter of Credit, or any portion
thereof, by Landlord shall not prevent Landlord from exercising any other right
or remedy provided by this Lease or by any applicable law, or limit any recovery
under law to which Landlord may be entitled. Landlord is not required to first
proceed against the Letter of Credit.

 

(e)

Tenant shall not interfere in any way with the Bank’s obligation to pay to
Landlord any proceeds of the Letter of Credit, either prior to or following a
“draw” by Landlord of any portion of the Letter of Credit, regardless of whether
any dispute exists between Tenant and Landlord as to Landlord’s right to draw
upon the Letter of Credit. No condition or term of this Lease shall be deemed to
render the Letter of Credit conditional to justify the Bank’s failing to honor a
drawing upon such Letter of Credit in a timely manner. Notwithstanding the
foregoing, nothing herein shall be deemed to prevent Tenant from seeking order
for injunctive relief against Landlord (but not the Bank) prohibiting Landlord
from presenting the Letter of Credit to the Bank.

 

(f)

The Letter of Credit constitutes a separate and independent contract between
Landlord and the Bank, and Tenant is not a third party beneficiary of such
contract. Tenant has no property interest whatsoever in the Letter of Credit or
the proceeds thereof. If Tenant becomes a debtor under any chapter of the
Bankruptcy Code, neither Tenant (or its bankruptcy estate) nor any trustee
thereof shall have any right to restrict or limit Landlord’s claim and/or rights
to the Letter of Credit and/or the proceeds thereof by application of Section
502(b)(6) of the U. S. Bankruptcy Code or otherwise.

 

(g)

Neither Landlord nor Tenant intends, and in no event or circumstance shall the
Letter of Credit or any renewal thereof or any proceeds thereof constitute a
“security deposit” within the meaning of California Civil Code § 1950.7, or
otherwise be subject to the terms of such section or any other law, rule or
regulations applicable to security deposits in the commercial context, and each
party waives any and all rights, duties and obligations that the other party may
now or, in the future, relating to or arising from the application of any such
laws.

16.5 Financial Statements. Unless Tenant is a public company traded on a major
stock exchange in the United States, Landlord may from time to time (but nor
more often than once each Year) require Tenant to furnish Landlord with an
certified financial statement covering the preceding Year and a certified
financial statement covering each completed quarter of the current Year for
which a statement is reasonably available, and Landlord shall keep such
financial statements strictly confidential. All financial statements furnished
Landlord will be prepared according to generally accepted accounting principles,
consistently applied.

17.

MISCELLANEOUS

17.1 Rules and Regulations. Tenant will comply with the Rules and Regulations
attached as Exhibit B. Landlord may reasonably modify or add to the Rules and
Regulations upon notice to Tenant. If the Rules and Regulations conflict with
this Lease, the Lease shall govern.

20

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17.2 Notice. Notice to Landlord must be given to Landlord’s Notice Addresses.
Notice to Tenant must be given to Tenant’s Notice Addresses. By notice to the
other, either party may change its Notice Address. Each notice must be in
writing and will be validly given if either: (a) the notice is personally
delivered and receipt is acknowledged in writing; (b) the notice is delivered by
a nationally recognized overnight courier service (e.g., FedEx) and receipt is
acknowledged in writing. If the party to receive notice fails or refuses to
accept delivery or acknowledge receipt of the notice in writing, then notice may
be validly given by mailing the notice first-class, certified or registered
mail, postage prepaid, and the notice will be deemed received by such party 2
business days after the notice’s deposit in the U.S. Mail.

17.3 Relocation. Landlord may relocate Tenant to other premises in the Building
(“Replacement Premises”) upon not less than 60-days’ notice (the “Relocation
Notice”), provided that the Replacement Premises (i) is the same size or bigger
than the Premises as of the date of Relocation Notice, (ii) will have the same
finishes, number of offices, conference rooms and amenities as the Premises as
of the date of the Relocation Notice, and (iii) has all or a portion thereof
that faces Market Street. The Base Rent and the Additional Rent for the
Replacement Premises shall be the same amount of the monthly Base Rent and
Additional Rent paid for the Premises pursuant to this lease, including any
scheduled increases, regardless if the Relocation Premises is larger than the
Premises. If Landlord elects to relocate Tenant under this § 17.3, then Landlord
will, at Landlord’s cost, construct Leasehold improvements in the Replacement
Premises of comparable quality to those existing in the Premises, move Tenant’s
personal property from the Premises to the Replacement Premises over a
single-weekend, relocate Tenant’s existing telephone, computer systems and other
IT and cabling systems, and replace up to $500 of any in-stock stationery
identifying the Premises. Landlord may not relocate Tenant to other premises in
the Building during the last 12 months of the Term.

17.4 Building Name and Image. Tenant shall not use the Building’s name for any
purpose other than Tenant’s address. Landlord may change the name of the
Building without any obligation or liability to Tenant. Tenant may not use any
image of the Building without Landlord’s prior written consent, which may be
withheld in Landlord’s sole discretion.

17.5 Entire Agreement. This Lease is deemed integrated and contains all of each
party’s representations, waivers, and obligations. The parties may only modify
or amend this Lease in a writing that is fully executed by, and delivered to
each party.

17.6 Successors. Unless provided to the contrary elsewhere in this Lease, this
Lease binds and inures to the benefit of each party’s heirs, successors, and
permissible assignees.

17.7 No Waiver. A party’s waiver of a breach of this Lease will not be
considered a waiver of any other breach. No custom or practice that develops
between the parties will prevent either party from requiring strict performance
of the terms of this Lease. No Lease provision or act of a party creates any
relationship between the parties other than that of landlord and tenant.

17.8 Independent Covenants. The covenants of this Lease are independent. A
court’s declaration that any part of this Lease is invalid, void or illegal will
not impair or invalidate the remaining parts of this Lease, which will remain in
full force and effect.

17.9 Captions. The use of captions, headings, boldface, italics, or underlining
is for convenience only, and will not affect the interpretation of this Lease.

17.10 Authority. Individuals signing this Lease on behalf of either party
represent and warrant that they are authorized to bind that party.

17.11 Applicable Law. The laws of California govern this Lease. In any action
brought under this Lease, Tenant submits to the jurisdiction of the courts of
the State of California, and to venue in the County of San Francisco.

17.12 Confidentiality. Tenant will not record this Lease or a memorandum of this
Lease without Landlord’s written consent. Tenant will keep the terms of this
Lease confidential and, unless required by law, may not disclose the terms of
this Lease to anyone other than Tenant’s Affiliates, its agents and advisors and
prospective lenders, investors, purchasers, assignees and sublessees to the
extent necessary to Tenant’s business.

17.13 Reasonableness. Tenant’s sole remedy for any claim against Landlord that
Landlord has unreasonably withheld or unreasonably delayed any consent or
approval shall be an action for injunctive or declaratory relief.

17.14 Time. Time of the essence as to all provisions in this Lease in which time
is a factor.

21

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17.15 Quiet Enjoyment. So long as Tenant is not in Default and subject to the
terms of this Lease, Tenant may peacefully and quietly enjoy the Premises for
the Term under the terms of this Lease. Landlord will not be liable for any
interference with Tenant’s peaceful and quiet enjoyment of the Premises and use
of the Common Areas that is caused by anyone other than Landlord or its
Affiliates.

17.16 Landlord’s Entry. Landlord may enter the Premises at all reasonable hours
to perform its obligations under this Lease. During the last 12 months of the
Term, upon 12 hours’ prior notice and provided that an employee of Tenant
accompanies Landlord and such prospective tenants, Landlord may enter the
Premises with reasonable prior notice to Tenant to show the Premises to
prospective tenants. Tenant will endeavor to makes its employees available to
accompany Landlord and such prospective tenants during such showings.

17.17 Exhibits. The Exhibits attached to this Lease are part of this Lease. If
any exhibit is inconsistent with the body of this Lease, then the provisions of
the body of this Lease will govern.

18.

BROKERS

18.1 Agency. Pursuant to California Civil Code §2079.17, with respect to the
transaction set forth in this Lease, Landlord and Tenant confirm the following:

 

(a)

T3 Advisors is the agent of the Buyer (i.e., Tenant) exclusively.

 

(b)

Brookfield Properties Management (CA) Inc. and Jones Lang LaSalle are,
collectively, the agent of the Seller (i.e., the Landlord) exclusively.

18.2 Brokers. Landlord and Tenant each represent to the other that no broker
other than Brokers represented Tenant or Landlord, respectively, or is entitled
to a commission for services provided to Tenant or Landlord with respect to the
transaction set forth in this Lease. Landlord will pay the Brokers’ commissions
in accordance with separate agreements between Landlord and each of the Brokers

19.

TENANT’S SECURITY SYSTEM

19.1 Right to Install. Subject to Landlord’s approval (whic11 may account for
Landlord’s policies and protocols), Tenant may install, maintain and repair, at
its sale expense, a security system within the Premises (“Tenant’s Security
System”). Tenant’s Security System and any components thereof shall be Tenant’s
personal property and removed from the Premises at the expiration of the Term.
Tenant acknowledges that Landlord does n01 represent or warrant the suitability
of Tenan1’sSecurity System for Tenant’s use thereof and Landlord will not be
responsible for monitoring, responding to security breaches, repairing, or
damage associated with Tenant’s Security System. Tenant’s Security System shall
be separate and apart from any security sys1em installed by Landlord for the
Building (“Landlord’s Security System”) and Tenant’s Security System will not
interfere in any manner with Landlord’s Security System. Tenant will insure that
Landlord will have access to the Premises in accordance with this. Lease to
perform its obligations under the Lease notwithstanding such Tenant’s Security
System.

Landlord And Tenant Execute This Lease AS Follows:

 

Imprivata, Inc.

 

BOP 685 Market LLC

 

 

 

 

 

 

 

By:

 

/s/ John F. Milton

 

By:

 

/s/ John R. Barganski

Print:

 

John F. Milton

 

Print:

 

John R. Barganski

Title:

 

VP and General Counsel

 

Title:

 

Senior Vice President, Leasing

 

 

 

 

 

 

 

By:

 

 

 

By:

 

/s/ Mark C. Phillips

Print:

 

 

 

Print:

 

Mark C. Phillips

Title:

 

 

 

Title:

 

Senior Vice President, Regional Counsel

 

 

 

22

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EXHIBIT A – LOCATION OF PREMISES

685 Market Street • San Francisco, California

Suite 500

 

[gtlrzb0e2raz000001.jpg]

 

 

 

A-1

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EXHIBIT B -RULES & REGULATIONS

685 Market Street • San Francisco, California

Suite 500

1. Rules Applied. These Rules and Regulations apply equally to Tenant’s
Affiliates, Transferees and others permitted by Tenant to access, use, or occupy
the Premises.

2. Right to Exclude. Landlord may require that Tenant, its Affiliates, and
guests comply with each reasonable security measure that Landlord may establish
as a condition entry to the Premises, Building, or Project. These measures may
include submitting to a search by persons or devices employed by Landlord,
presenting an identification card or pass issued by the government, Landlord, or
both, being announced to Tenant and accepted as a visitor by Tenant, and signing
a register on entry and exit. Any person who cannot comply with these
requirements may be excluded from the Project. If Landlord requires a Building
pass issued by Landlord as a condition of entry to the Premises, Building, or
Project, Landlord will furnish a Building pass to all persons reasonably
designated by Tenant in writing. Landlord may exclude or expel from the Project
any person who, in Landlord’s reasonable opinion, is intoxicated or under the
influence of alcohol or drugs.

3. Obstructions. Tenant will not cause the Common Areas, or sidewalks or
driveways outside the Building to be obstructed. Landlord may, at Tenant’s
expense, remove any such obstruction without prior notice to Tenant.

4. Trash. Tenant may not litter. Tenant will reasonably participate in
Landlord’s recycling program. Tenant will place trash in proper receptacles in
the Premises provided by Tenant at Tenant’s cost, or in Building receptacles
designated by Landlord for removal by Landlord; however, Tenant, at Tenant’s
cost, will be responsible for removing trash that results from large move-ins or
deliveries.

5. Public Safety. Tenant will not throw anything out of doors, windows, or
skylights, down passageways or over walls. Tenant will not use any fire exits or
stairways in the Building except in case of emergency. Firearms, weapons,
explosives, flammable materials and other hazardous liquids and materials may
not be brought into or stored in the Premises, Building, or Project without the
prior written consent of Landlord, which Landlord may withhold or condition in
Landlord’s sole discretion, except reasonable quantities of customary office and
cleaning supplies. Tenant must comply with all life safety programs established
by Landlord or required by law and use commercially reasonable efforts to cause
each of Tenant’s employees, invitees and guests to likewise comply, including
participation in drills. Tenant will provide Landlord with the names and
telephone numbers of representatives of Tenant that may be contacted in an
emergency, and of all changes in personnel that may access the Premises.

6. Keys, Access Cards, and Locks. Landlord may from time to time install and
change locks on entrances to the Project, Building, Common Areas, or Premises,
and will provide Tenant a number of keys to meet Tenant’s reasonable
requirements. Additional keys will be furnished by Landlord at Tenant’s cost. At
the end of the Term, Tenant will promptly return to Landlord all keys for the
Building and Premises issued by Landlord to Tenant. Unless Tenant obtains
Landlord’s prior written consent, Tenant will not add any locks or change
existing locks on any door to the Premises, or in or about the Premises. If with
Landlord’s consent, Tenant installs any lock incompatible with the Building
master locking system, Tenant will: relieve Landlord of each Lease obligation
that requires access to each affected area; indemnify Landlord against any Claim
resulting from forced entry to each affected area in an emergency; and, at the
end of the Term, remove each incompatible lock and replace it with a Building
Standard lock at Tenant’s expense.

7. Aesthetics. Unless Tenant obtains Landlord’s prior written consent (which may
be withheld in Landlord’s sole discretion), Tenant may not:

 

(a)

Attach any awnings, signs, displays, or projections to either the outside walls
or windows of the Building, or to any part of the Premises visible from outside
the Premises;

 

(b)

Hang any non-Building Standard curtains, blinds, shades, or screens in any
window or door of the Premises;

 

(c)

Coat or sunscreen the interior or exterior of any windows; or

 

(d)

Place any objects on windowsills.

8. Directories and Signs. Tenant may list 1 trade name and suite number in each
Building-wide directory in the Building’s main lobby. Tenant will keep all
listings accurate and current. Tenant may install 1 Building Standard tenant
identification sign containing Tenant’s trade name and suite number at the
entrance to each separately demised suite leased by Tenant. Tenant will
reimburse Landlord for the cost of all future signage and above Building
Standard sign age (subject to Landlord’s approval) requested by Tenant and
installed by Landlord, plus Landlord’s standard administration fee. Except as
provided in this paragraph or elsewhere in the Lease, Tenant may not install any
signs outside the Premises.

B-1

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9. HVAC Operation. Tenant will not obstruct the HVAC convectors or diffusers, or
adjust or interfere with the HVAC system. Tenant will assist the HVAC system in
maintaining comfort in the Premises by drawing shades, blinds and other window
coverings in the Premises as may be reasonably required. Tenant may not use any
method of heating or cooling the Premises other than that supplied by Landlord.

10. Plumbing. Tenant will use plumbing fixtures only for the purpose for which
they are constructed. Tenant will reimburse Landlord for any damage caused by
Tenant’s misuse of plumbing fixtures. Tenant will promptly advise Landlord of
any damage, defects or breakage of plumbing, electrical fixtures or HVAC
equipment of which Tenant has knowledge. Tenant may not dispose of liquids,
materials or substances (including coffee grounds) that may damage plumbing in
any rest rooms, kitchen sinks, water closets, or other plumbing fixtures serving
the Premises or Building, and shall be responsible for the cost of repairs
caused by any misuse or neglect of such fixtures.

11. Equipment Location. Landlord may specify the location of any of Tenant’s
Business machines, mechanical equipment, or other property that are unusually
heavy, may damage the Building, or may cause vibration, noise, or annoyance to
other tenants. Tenant will reimburse Landlord for any professional engineering
certification or assistance reasonably required to determine the location of
these items.

12. Bicycles. Tenant may not bring bicycles, scooters, or other means of
personal conveyance (other than medically prescribed devices for use by the
physically impaired) into the Building or Premises, and such devices must be
parked in areas designated by Landlord.

13. Animals. Tenant may not keep in or bring into the Building or Premises any
fish, birds, or animals, except assistance animals that are permitted and
identified in accordance with law.

14. Carpet Protection. To protect carpeting in the Premises, Tenant will, at its
own expense, install and maintain pads to protect the carpet under al1 chairs
having castors other than carpet castors.

15. Elevators. Any use of the passenger elevators for purposes other than normal
passenger use (such as moving to or from the Building or delivering freight),
whether during or after Business Hours, must be scheduled through the office of
the Property Manager. Tenant will reimburse Landlord for any extra costs
incurred by Landlord in connection with any such non-passenger use of the
elevators.

16. Moving and Deliveries. Moving of Tenant’s Personal Property and deliveries
of materials and supplies to the Premises must be made during the times and
through the entrances, elevators, and corridors reasonably designated by
Landlord. Moving and deliveries may not be made through any of the main
entrances to the Building without Landlord’s prior permission. Any hand truck or
other conveyance used in the Common Areas must be equipped with rubber tires and
rubber side guards to prevent damage to the Building and its property. Tenant
will promptly reimburse Landlord for the cost of repairing any damage to the
Building or its property caused by any person making deliveries to the Premises.

17. Solicitation. Canvassing, soliciting and peddling in the Building are
prohibited and Tenant will cooperate in preventing the same. Tenant may not post
any notices, or distribute any advertisements or handbills outside the Premises.

18. Food and Vending Machines. Only persons approved from time to time by
Landlord may prepare, solicit orders for, sell, serve, or distribute food in or
around the Project. Except as may be specified in the Lease or on construction
drawings for the Premises approved by Landlord, and except for microwave
cooking, Tenant will not use the Premises for preparing or dispensing food, or
soliciting of orders for sale, serving or distribution of food without the prior
written approval of Landlord. Tenant may not place any vending machine or
dispensing machine in the Premises without Landlord’s prior written consent.

19. Pest Control. At Tenant’s sole cost and expense, Tenant must keep the
Premises free of insects, rodents, vermin and other pests and to keep insects,
rodents, vermin, and other pests from infesting the Premises, other premises,
and Common Areas. Tenant will use a pest control service that is approved by
Landlord to perform work in the Building and, if Landlord requests coordinate
Tenant’s pest control efforts with Landlord. Tenant will comply with all
requirements of law to post warnings in the Premises concerning the use of
insecticides and other chemicals for pest control, and post in the Premises or
distribute to occupants of the Premises any warnings provided by Landlord to
Tenant concerning Landlord’s pest control efforts. If Tenant fails or refuses to
comply with this paragraph, then Landlord may provide pest control services to
the Premises at Tenant’s cost and expense, plus Landlord’s standard
administration fee; however, Landlord’s performance of pest control on Tenant’s
behalf does not release Tenant from any obligation under this paragraph.

B-2

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20. Work Orders and Service Requests. Only authorized representatives of Tenant
may request services or work on behalf of Tenant. Tenant may not request that
Building employees perform any work outside of their duties assigned by
Landlord.

21. Smoking. Neither Tenant nor its Affiliates shall smoke or permit smoking in
any part of the Project in which Landlord, in Landlord’s sole discretion,
prohibits smoking. Landlord may designate the entire Project a no-smoking area,
excepting areas in which Landlord, in Landlord’s sole discretion, permits
smoking.

[Remainder of Page Intentionally Left Blank]

 

 

 

B-3

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EXHIBIT C -NOTICE OF LEASE TERM

685 Market Street • San Francisco, California

Suite 500

This NOTICE OF LEASE TERM (this “NLT”) dated                 is made by and
between                                ("Tenant”) and BOP 685 Market LLC, a
Delaware limited liability company (“Landlord”), with respect to that certain
Lease dated                                (the “Lease”), concerning premises
located at 685 Market Street, San Francisco, California (the “Building”). Except
for those terms defined in this NLT, capitalized terms have the meanings
attributed to them in the Lease.

Pursuant to the Lease, Tenant has agreed to lease from Landlord Suite         
(the “Subject Premises”) in the Building. In accordance with the Lease, Landlord
and Tenant certify and confirm the following with respect to the Subject
Premises:

 

(a)

The Commencement Date is                     .

 

(b)

The Expiration Date is                     .

Landlord and Tenant execute this NLT as follows:

 

[gtlrzb0e2raz000002.jpg]

 

 

 

C-1

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EXHIBIT D - WORK LETTER

685 Market Street • San Francisco, California

Suite 500

This Work Letter is part of the Lease. All capitalized terms not defined in this
Work Letter have the same meaning provided in the Lease.

1.

CONSTRUCTION REPRESENTATIVES

1.1 Landlord’s Director of Construction or Senior Project Manager of Landlord’s
Construction Department (“Landlord’s Representative”) will represent Landlord in
connection with Landlord’s duties under this Work Letter.

1.2 Tenant will designate an individual (“Tenant’s Representative”) to represent
Tenant in connection with Tenant’s duties under this Work Letter.

1.3 Landlord’s Representative and Tenant’s Representative will communicate with
each other concerning matters covered by this Work Letter. Either party may
change its representative by giving written notice to the other.

2.

AS-IS CONDITION

2.1 Except for Landlord’s obligation to furnish the Construction Allowance and
Perform Landlord’s Work in accordance with this Work Letter, Tenant accepts the
Premises and Leasehold Improvements in their as-is condition and Landlord will
have no obligation to improve the Premises, Common Areas or Building, or provide
Tenant with any allowance to do so.

2.2 Notwithstanding anything to the contrary contained in §2.1, Landlord shall,
at Landlord’s cost and expense (and not as a Work Cost), perform such
improvements to the Common Areas on the floors on which the Premises are located
as may be required by governing entities as a condition of approval of Tenant’s
Work and/or Tenant’s occupancy of the Premises (“Landlord’s Compliance Work”);
provided, however, that if such Landlord’s Compliance Work is required as a
result of any item of Tenant’s Work is that is not a customary improvement for
office use, then Tenant shall reimburse Landlord for the cost of such Landlord’s
Compliance Work as a Work Cost.

3.

LANDLORD’S WORK

3.1 All work shown on the finalized and fully-approved Construction Drawings (as
may be amended by approved Change Orders), or otherwise required as a condition
of obtaining permits, approvals and certificates from governing authorities
necessary for construction of the work and Tenant’s use and occupancy of the
Premises (“Landlord’s Work”), will be performed and constructed by Landlord in
accordance with the provisions of this Work Letter and the Lease, as amended by
the Amendment.

3.2 Landlord’s Work will be performed, constructed, installed, inspected and
supervised in a good and workmanlike manner, in compliance with all laws enacted
as of the Commencement Date and otherwise in accordance with the provisions of
this Work Letter. Landlord’s Work will conform to the Construction Drawings (as
may be amended by approved Change Orders).

4.

CONSTRUCTION SCHEDULE AND DELAY

4.1 Landlord and Tenant will complete the tasks on the following schedule (the
“Construction Schedule”) for which they are responsible, by the dates or within
the periods set forth:

 

Task

 

Party Responsible

 

Date Due

Submit Tenant-Approved Construction Drawings and Specify Building Standard
Finishes to Landlord

 

Tenant

 

28 calendar days after the Date

 

4.2 “Tenant Delay” means any delay in the Substantial Completion of Landlord’s
Work caused by Tenant’s act or failure to act, including, without limitation:
the failure to complete any item of Tenant’s Work upon which Landlord’s Work is
dependent in accordance with the approved Construction Schedule; Change Orders
required by Tenant; specification of a material, finish or installation that is
unavailable or has a lead time exceeding that of comparable products; and
failure to cooperate with government authorities having jurisdiction over
Landlord’s Work.

E-1

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4.3 “Landlord Delay” means any delay in the Substantial Completion of Landlord’s
Work caused by Landlord’s act or failure to act, including, without limitation:
Change Orders required by Landlord; requirement of a material, finish or
installation that is unavailable or has a lead time exceeding that of comparable
products (provided, however, that in no event will Landlord be required to
approve any material finish or installation that does not meet or exceed
Building Standard); failure to cooperate with government authorities having
jurisdiction over Landlord’s Work; and failure to timely pay Landlord’s
Contractor.

4.4 “Force Majeure Delay” is defined as any delay in the substantial completion
of Landlord’s Work caused by Force Majeure, including: an act of God or the
elements of nature; fire or other casualty; war, riot, insurrection, or public
disturbance; a black-out or other interruption of utility service from the
provider to the Building; a strike or other labor disturbance (except to the
extent caused by an illegal act of Landlord); changes in government codes or
regulations (or the interpretation of same); the unavailability of government
permits or approvals within the time customarily available; or a general
shortage of materials or supplies. Force Majeure Delay does not include the
inability of either Landlord or Tenant to meet their monetary obligations either
under this Lease or Work Letter.

4.5 Each party claiming delay on the part of the other party, or Force Majeure
Delay, shall give the other party written notice of such delay, including with
reasonable specificity the nature of the delay, within 3 business days after
such delay is alleged by such party to have occurred.

5.

PLANS & PERMITS

5.1 Tenant will engage an architect licensed to do business in California that
is experienced in the design and construction of leasehold improvements in
first-class office buildings in the Los Angeles area (“Tenant’s Architect”).
Tenant’s Architect will prepare plans showing the architectural design of the
Premises, including partition layout, location of receptacles, location of major
trade fixtures, reflective ceiling plans (the “Space Plans”). The Landlord and
Tenant approved Space Plans by Brereton Architects dated March 16, 2016 are
attached hereto as Schedule 1.

5.2 Tenant’s Architect will prepare or cause to be prepared complete
architectural plans, drawings and specifications, and engineered mechanical,
structural and electrical working drawings in a form and in such detail as is
reasonably necessary to accurately construct Landlord’s Work in accordance with
all applicable codes; including, without limitation, layout, finish and
decorative work (including carpeting and other floor coverings), any proposed
improvement affecting the base Building structural, mechanical, electrical,
intra-Building telephone network cabling, plumbing, fire/life safety, heating,
ventilation and air conditioning systems, exhaust systems, and any item will
require installation of conduit, plumbing or other improvements within Common
Areas or other premises (the “Construction Drawings”). Tenant’s Architect will
work with Tenant and will submit the Tenant-approved Construction Drawings to
Landlord for its review and approval in accordance with the Construction
Schedule. Landlord will review the Construction Drawings and issue its written
approval or disapproval of the Construction Drawings within 10 business days of
receipt. If Landlord disapproves of any part of the Construction Drawings, then
Tenant’s Architect will revise the Construction Drawings and resubmit them to
each party for further review. Each party will review the revised Construction
Drawings and issue its written approval or disapproval of the Construction
Drawings within 5 business days of receipt. Review, revision and resubmission of
the Construction Drawings will continue in this manner until the Construction
Drawings arc fully approved by Landlord and Tenant. Landlord will not disapprove
the Construction Drawings so long as the Construction Drawings are consistent
with the Space Plans and do not present a Design Problem.

5.3 Except as otherwise set forth in the approved Construction Drawings (and not
further modified by any Change Orders), the finishes, quantities and qualities
to be furnished and constructed by Landlord as part of Landlord’s Work shall not
exceed Building Standard as defined in that certain Tenant and Building Manual
for the Building in effect as of the Date (the “Construction Manual”), a copy of
which Landlord has furnished to Tenant and Tenant acknowledges receipt.

5.4 If Tenant wants to change the approved Construction Drawings, then Tenant
must notify Landlord of the proposed change with reasonable particularity and
will cause Tenant’s Architect to modify the Construction Drawings as required (a
“Change Order”). Upon receipt of the Change Order, Landlord will within 5
business days of receipt issue its written approval or disapproval of the Change
Order, and if approved provide Tenant with an estimate of any Tenant Delay that
may reasonably occur as a result of the proposed Change Order and advise Tenant
of the increased Work Costs that may be incurred. Upon receipt of Tenant’s
written approval of the approved Change Order and receipt of any increased Work
Costs (to the extent such increased costs exceed the amount deposited with
Landlord pursuant to §8.2 of this Work Letter), Landlord will proceed with
Landlord’s Work, as so modified by the Change Order.

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5.5 Tenant will not knowingly include in the Construction Drawings or any Change
Order any requirement that will result in a Design Problem (as defined in §8.1
of the Lease). Landlord’s approval of the Construction Drawings, or any Change
Order shall not be deemed a waiver of any Design Problem incorporated therein. A
Design Problem may only he waived by Landlord in a writing that specifically
identifies the Design Problem and its waiver by Landlord.

5.6 Landlord will secure such permits and approvals as may be required from any
governmental authority having jurisdiction over Landlord’s Work. If any
government authority requires alterations, modifications, or supplements to the
Construction Drawings, Tenant hereby agrees to promptly make such alterations,
modifications, or supplements necessary to obtain any required permits.

5.7 Upon completion of Landlord’s Work, Tenant’s Architect will furnish Landlord
and Tenant with complete Construction Drawings modified to show all improvements
as actually constructed, in an industry standard electronic format otherwise
compatible with Landlord’s CAD system, with industry standard layering (the
“As-Built Drawings”).

6.

GENERAL CONTRACTOR

6.1 Landlord shall not be required to solicit bids from contractors or
subcontractors other than those pre-approved by Landlord to perform work in the
Building. Landlord may require that each general contractor solicit bids from
unionized subcontractors for certain trades. Landlord shall provide Tenant with
a summary of the bids received along with copies of all related paperwork.

6.2 Subject to Landlord’s approval, which shall not be unreasonably withheld,
conditioned or delayed, from those approved contractors that have submitted
bids, Tenant and Landlord will mutually select a general contractor to perform
Landlord’s Work (“Landlord’s Contractor”) within 5 business days of receipt of
Landlord’s summary of the received bids (the “Bid Summary”). Such Bid Summaries
will include a contingency amount reasonably determined by Landlord. Landlord
will then enter into a written guaranteed maximum price contract providing for
payment on a progress payment basis, a commercially reasonable retention, and
having such other terms and conditions that are commercially reasonable and do
not violate the terms of the Lease or this Work Letter, although Landlord shall
not be required to either impose a performance penalty upon, or provide a
performance incentive to Landlord’s Contractor in connection with the timely
performance of Landlord’s Work. The contract with Landlord’s Contractor will
provide for a retention of not less than 10% of the contract price (the
“Retention”).

7.

TENANT’S ACCESS

7.1 In the 30 day period prior to Substantial Completion of Landlord’s Work,
Landlord will provide Tenant and its subcontractors and vendors (collectively,
“Tenant’s Personnel”) with reasonable access to the Premises and Common Areas
necessary to install Tenant’s furnishing, fixtures, equipment and systems as may
be reasonably necessary for Tenant to occupy the Premises for the conduct of
business (“Tenant’s Work”), subject to the following:

 

(a)

Tenant’s Work and Landlord’s Work will be coordinated.

 

(b)

Tenant’s Personnel must comply with all reasonable rules and regulations that
Landlord establishes for the performance of work in the Building. Tenant
acknowledges receipt of Landlord’s Construction Manual for the Building.
Tenant’s Personnel will follow Landlord’s reasonable directions. Tenant’s
Personnel shall have, during the hours specified in the Construction Manual and
subject to the terms set forth in the Construction Manual, access during normal
business hours to the Premises and reasonable use in common with Landlord and
other tenants to the loading docks and freight elevators.

 

(c)

If Tenant’s Work unreasonably interferes with Landlord’s Work, Building
operations or causes labor unrest at the Building, then Landlord may order
Tenant’s Personnel to immediately cease Tenant’s Work and vacate the Premises,
Common Areas and Building of personnel, equipment, materials and supplies to the
extent reasonably required to eliminate this interference. Landlord’s actions
under this (c) shall not constitute a Landlord Delay.

 

(d)

Tenant’s Work will comply with all applicable laws, regulations, permits and
other government approvals applicable to entry and work in the Premises.

 

(e)

Before being provided access to the Premises, Tenant’s Personnel must furnish
Landlord with:

 

(1)

Certificates or other proof reasonably required by Landlord to establish that
Tenant’s Personnel is in compliance with the following insurance requirements:

 

(A)

Tenant’s Personnel shall maintain the coverage types and limits required in the
Construction Manual with respect to the particular trade and/or work being
performed.

 

(B)

Prior to commencing work, Tenant’s Personnel and each subcontractor shall submit
to Landlord certificates of insurance showing the required insurance has been
obtained. If the coverage expires prior to completion of the work, then Tenant’s
Personnel and each subcontractor shall submit replacement certificates of
insurance to

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Landlord prior to the expiration of such coverage. All certificates shall
provide that there will be no cancellation, material modification, or reduction
of coverage without reasonable written notice to Landlord. 

 

(2)

A copy of all required building permits for Tenant’s Work;

 

(3)

A complete list of Tenant’s Personnel;

 

(4)

A copy of the contractor’s license for Tenant’s Personnel; and

 

(5)

A copy of the work schedule for Tenant’s Personnel.

8.

WORK COSTS

8.1 “Work Costs” means the total of the following:

 

(a)

All design and engineering fees incurred in connection with the preparation and
review of the Space Plans, Construction Drawings, Change Orders, and As-Built
Drawings by Tenant’s Architect;

 

(b)

All reasonable out-of-pocket fees incurred by Landlord in having third party
engineers or other consultants review, test or inspect the Space Plans,
Construction Drawings, Change Orders, or Landlord’s Work;

 

(c)

Governmental agency plan check, permit, and other fees applicable to Landlord’s
Work;

 

(d)

The cost of any improvements, modifications, additions or alterations to the
Base Building or Common Areas that are required by any government agency or
authority having jurisdiction over Landlord’s Work as a condition of performing
any item of Landlord’s Work that is required by Tenant and does not constitute
normal and customary office improvements;

 

(e)

Sales and use taxes applicable to Landlord’s Work;

 

(f)

Material and labor costs incurred in performing Landlord’s Work;

 

(g)

General conditions and contractor’s fees; and

 

(h)

A supervision fee payable to Landlord in the amount of 3% of the Work Costs
defined in subsections (d) through (g), above.

8.2 Work Costs will be paid as follows:

 

(a)

If the contracted Work Costs exceed the Construction Allowance, then Tenant will
within 5 business days after receipt of Landlord’s invoice for the same

 

(1)

Deposit with Landlord such excess amount, or

 

(2)

Deliver written notice to Landlord that Tenant elects to receive an “Additional
Construction Allowance” of such overage amount from Landlord that will be fully
amortized over the Term and repaid by Tenant to Landlord in advance in equal
monthly installments (without any such installment being subject to excuse or
abatement for any cause whatsoever), with the interest on the unpaid principal
balance at the rate of 8% per annum, and computed using beginning of period
accounting. The Additional Construction Allowance plus the Construction
Allowance shall not exceed the Work Costs.

If Tenant elects the Additional Construction Allowance, the dollar amount of
Tenant’s monthly payments. Tenant may not convert any of the Additional
Construction Allowance amount to Rent payments. Landlord may require additional
deposits as a result of increases in Work Costs.

 

(b)

Out of the Construction Allowance and amounts deposited by Tenant, Landlord will
pay all Work Costs on a progress payment basis for Landlord’s Work, withholding
the applicable Retention from each progress payment.

 

(c)

Landlord will pay the Retention upon final completion of Landlord’s Work,
evidenced by Landlord’s receipt of all of the following:

 

(1)

The permit card with all final inspector sign-offs completed and, if required by
law, a certificate of occupancy for the Premises;

 

(2)

A copy of the recorded Notice of Completion of Landlord’s Work (and Tenant’s
Work, if applicable);

 

(3)

The As-Built Drawings;

 

(4)

An air balance report evidencing that the HVAC system has been balanced and
calibrated to industry and Building Standards;

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(5)

Completion of all punchlist items; and 

 

(6)

Unconditional lien releases from all contractors and subcontractors for all
amounts due in connection with Landlord’s Work and Tenant’s Work (if
applicable).

 

(d)

If Tenant has deposited any amount with Landlord in accordance with subsection
(a), above, and after payment of all Work Costs and disbursement of the entire
Construction Allowance (including the Retention) any portion of such deposit
remains, then Landlord will repay such unused portion to Tenant within 10
business days of such determination.

 

(e)

If after payment of the Work Costs and application of Construction Allowance
against Base Rent to the extent provided in this §8.2, there remains unused
Construction Allowance after December 31, 2016, then such Construction Allowance
will be deemed forfeited and no longer available to Tenant.

 

(f)

Tenant shall be solely responsible for all after-hours security, after-hours
HVAC, after-hours freight elevator use, and cabling for the Premises. Tenant
shall be solely responsible, and not as a Work Cost, for all furniture, fixtures
and equipment in the Premises.

9.

SUBSTANTIAL COMPLETION; PUNCHLIST ITEMS

9.1 “Substantially Complete” (as such term is modified for the context) means
the Landlord’s Work is sufficiently complete so that the Premises can be
occupied and used for the Use, subject only to punchlist items that do not
render the Premises unsuitable for the conduct of business for the Use, and all
certificates of occupancy or other permit(s) issued by appropriate governmental
entities necessary for such use and occupancy have been issued.

9.2 Within 30 days after the later of completion of Landlord’s Work or Tenant’s
occupancy of the Premises, Tenant shall give Landlord written notice of any
claimed deficiencies in Landlord’s Work. Landlord shall promptly cause
corrective work to begin and will diligently prosecute the same to completion.
Notwithstanding the foregoing, Landlord shall not be responsible for correcting
any damage to Landlord’s Work caused by Tenant or its employees, contractors or
agents. Except for latent defects in the materials and workmanship of Landlord’s
Work and any defects under warranty by Landlord’s Contractor, if Tenant fails to
give Landlord notice of any deficiency as provided herein, then Tenant shall be
deemed to have accepted Landlord’s Work inclusive of such deficiency and waived
any right to corrective work with respect to the same; provided, however, that
Landlord’s Contractor shall provide a customary construction warranty with a
term of at least one year from Substantial Completion and such warranty shall be
assignable and shall be assigned by Landlord to Tenant.

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SCHEDULE 1 - SPACE PLANS

 

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