**Exhibit10(c)(xv)**

 

**LEASE**

 

 

**BY AND BETWEEN**

 

 

**SHORELINEPARK, LLC,****a Delaware limited liability companyas Landlord**

 

 

**and**

 

 

**AMERICAN SCIENCE AND ENGINEERING,INC.,as Tenant**

 

 

**For Premises located at**

 

**1383 Shorebird Way,Mountain View, California**

 

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**TABLE OFCONTENTS**

 
| SUMMARY OF BASIC LEASE  TERMS                                     |
|-------------------------------------------------------------------|
|                                                              |
| ARTICLE 1 DEFINITIONS                                             |
|                                                              |
| ARTICLE  2 DEMISE, CONSTRUCTION, AND ACCEPTANCE                   |
|                                                              |
| ARTICLE  3 RENT                                                   |
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| ARTICLE 4 USE OF PREMISES                                         |
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| ARTICLE 5  TRADE FIXTURES AND ALTERATIONS                         |
|                                                              |
| ARTICLE 6 REPAIR AND  MAINTENANCE                                 |
|                                                              |
| ARTICLE 7 WASTE  DISPOSAL AND UTILITIES                           |
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| ARTICLE 8 COMMON  OPERATING EXPENSES                              |
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| ARTICLE 9 INSURANCE                                               |
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| ARTICLE 10 LIMITATION ON LANDLORD’S  LIABILITY AND INDEMNITY |
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| ARTICLE 11 DAMAGE TO PREMISES                                     |
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| ARTICLE 12 CONDEMNATION                                           |
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| ARTICLE 13 DEFAULT AND  REMEDIES                                  |
|                                                              |
| ARTICLE 14  ASSIGNMENT AND SUBLETTING                             |
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| ARTICLE 15 GENERAL  PROVISIONS                                    |

 

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LEASE

 

This Lease is dated as of the lease reference datespecified in Section A of the Summary of Basic Lease Terms and is madeby and between the party identified as Landlord in Section B of theSummary and the party identified as Tenant in Section C of the Summary.

 

SUMMARY OF BASIC LEASETERMS

 
| **SECTION  (LEASE REFERENCE)** |   | **TERMS**                                             |
|--------------------------------|--------|-------------------------------------------------------|
| A.  (Introduction)             |   | Lease Reference Date:                                 |   | June 24, 2003 |
|                           |   |                                                  |   |   |
| B.  (Introduction)             |   | Landlord:                                             |   | Shoreline Park, LLC  a Delaware limited liability company |
|                           |   |                                                  |   |   |
| C.  (Introduction)             |   | Tenant:                                               |   | American Science and  Engineering, Inc.  a Massachusetts corporation |
|                           |   |                                                  |   |   |
| D.  (§ 1.20)              |   | Premises:                                             |   | That area consisting of  approximately 24,733 square feet of gross leasable area the address of which  is 1383 Shorebird Way, Mountain View, California, and which is located within  the Building. |
|                           |   |                                                  |   |   |
| E.  (§1.21)               |   | Project:                                              |   | The land, Building and  improvements shown onExhibit A. |
|                           |   |                                                  |   |   |
| F.  (§ 1.7)               |   | Building:                                             |   | The building in which  the Premises are located having an address of 1383 Shorebird Way, Mountain  View, California, and containing approximately 24,733 square feet of gross  leasable area and shown on Exhibit A.   The gross leasable area of the Premises and Building referred to above  shall be deemed the actual gross leasable area in the Premises and Building. |
|                           |   |                                                  |   |   |
| G.  (§ 1.28)              |   | Tenant’s Share:                                  |   | 100% of the Building |
|                           |   |                                                  |   |   |
| H.  (§4.5)                |   | Tenant’s Allocated  Parking Stalls:              |   | 77 parking spaces  (based on the ratio of 3.14 parking spaces for each 1,000 square feet of  gross leasable space in the Premises). |
|                           |   |                                                  |   |   |
| I.  (§ 1.24)              |   | Scheduled Commencement  Date:  October 1,  2003. |
|                           |   |                                                  |   |   |
| J.  (§ 1.17)              |   | Initial Term:                                         |   | 84 calendar months  (plus the partial month following the Commencement Date if such date is not  the first day of a month). |
|                           |   |                                                  |   |   |
| K.  (§ 3.1)               |   | Base Monthly Rent:                                    |   | Months |   | Monthly Amount |
|                           |   |                                                  | 1 – 12 |   | $14,839.80 (i.e., $0.60  per sq. foot) |
|                           |   |                                                  |   | 13 – 24 |   | $22,259.70 (i.e., $0.90  per sq. foot) |
|                           |   |                                                  |   | 25 – 36 |   | $25,969.65 (i.e., $1.05  per sq. foot) |
|                           |   |                                                  |   | 37 – 48 |   | $28,442.95 (i.e., $1.15  per sq. foot) |
|                           |   |                                                  |   | 49 – 60 |   | $30,916.25 (i.e., $1.25  per sq. foot) |
|                           |   |                                                  |   | 61 – 72 |   | $33,389.55 (i.e., $1.35  per sq. foot) |
|                           |   |                                                  |   | 73 – 84 |   | $35,862.85 (i.e., $1.45  per sq. foot) |

 

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| L.  (§ 3.3)  |   | Prepaid Rent:                                                                                                                        |   | $28,079.99 representing  $14,839.80 for Base Monthly Rent and $13,240.19 for Tenant’s Share of Common  Operating Expenses.                                                           |
|-------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
| M.  (§ 3.5)  |   | Security Deposit:  $35,863.00                                                                                                   |
|              |   |                                                                                                                                 |
| N.  (§ 4.1)  |   | Permitted Use:  General office, research & development and light manufacturing.                                                  |
|              |   |                                                                                                                                 |
| O.  (§ 5.2)  |   | Permitted Tenant’s  Alterations limit:   $25,000.00                                                                        |
|              |   |                                                                                                                                 |
| P.  (§9.1)   |   | Tenant’s Liability  Insurance Minimum:   $3,000,000.00                                                                     |
|              |   |                                                                                                                                 |
| Q.  (§ 1.3)  |   | Landlord’s Address:                                                                                                             |   | Divco West Group, LLC  100 Park Center Plaza, Suite 425  San Jose, California 95113  Attn:  Property Manager                                                                         |
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
|              |   | With a copy to:                                                                                                                      |   | Divco West Group, LLC  150 Almaden Blvd., Suite 700  San Jose, CA 95113  Attn.: Asset Manager                                                                                             |
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
| R.  (§ 1.3)  |   | Tenant’s Address:                                                                                                               |   | American Science and  Engineering, Inc.  819 Middlesex Turnpike  Billerica, MA  01821  Attn.: General Counsel                                                                        |
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
|              |   | With a copy to:                                                                                                                      |   | Ropes & Gray  One International Place  Boston, MA 02110  Attn.: David B. Walek, Esquire                                                                                               |
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
| S.  (§15.13) |   | Retained Real Estate  Brokers:  Colliers  International representing Landlord and Wayne Mascia Associates representing  Tenant. |
|              |   |
| T.  (§ 1.16) |   | Lease:                                                                                                                               |   | This Lease includes the  summary of the Basic Lease  Terms, the Lease, and the following exhibits and addenda:                                                                            |
|              |   |                                                                                                                                 |   |                                                                                                                                                                                      |
|              |   |                                                                                                                                 |   | Exhibit A - Project  Site Plan and Outline of the Premises  Exhibit B - Work Letter for Tenant Improvements  Exhibit C - Acceptance Agreement  Exhibit D - Hazardous Material Certificate |
|                   |        |                                                                                                                                      |        |                                                                                                                                                                                           |  |

 

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The foregoing Summary is hereby incorporated into andmade a part of this Lease.  Eachreference in this Lease to any term of the Summary shall mean the respectiveinformation set forth above and shall be construed to incorporate all of theterms provided under the particular paragraph pertaining to suchinformation.  In the event of anyconflict between the Summary and the Lease, the Summary shall control.

 

ARTICLE 1 DEFINITIONS

 

1.1                                 General:  Any initially capitalized term that is givena special meaning by this Article 1, the Summary, or by any other provision ofthis Lease (including the exhibits attached hereto) shall have such meaningwhen used in this Lease or any addendum or amendment hereto unless otherwiseclearly indicated by the context.

 

1.2                                 AdditionalRent:  The term “**Additional Rent**” is defined in Section 3.2.

 

1.3                                 Addressfor Notices:  The term “**Address for Notices**” means the addressesset forth in Sections Q and R of the Summary, as they may be changedfrom time to time pursuant to Section 15.8 below.

 

1.4                                 Agents:  The term “**Agents**”means the following: (i) with respect to Landlord, the employees, contractorsand agents of Landlord; and (ii) with respect to Tenant, the employees,contractors and agents of Tenant and Tenant’s subtenants, but in any eventTenant’s Agents shall not include any of Landlord’s Agents.

 

1.5                                 AgreedInterest Rate:  The term “**Agreed Interest Rate**” means that interestrate determined as of the time it is to be applied that is equal to the lesserof (i) 5% in excess of the discount rate established by the Federal ReserveBank of San Francisco as it may be adjusted from time to time, or (ii) themaximum interest rate permitted by Law.

 

1.6                                 BaseMonthly Rent:  The term “**Base Monthly Rent**” means the fixed monthlyrent payable by Tenant pursuant to Section 3.1 which is specified in SectionK of the Summary.

 

1.7                                 Building:  The term “**Building**”means the building in which the Premises are located which Building isidentified in Section F of the Summary.

 

1.8                                 CommencementDate:  The term “**Commencement Date**” is the date the LeaseTerm commences, which term is defined in Section 2.2.

 

1.9                                 CommonArea:  The term “**Common Area**” means all areas and facilitieswithin the Project that are not designated by Landlord for the exclusive use ofTenant or any other lessee or other occupant of the Project, including theparking areas, access and perimeter roads, pedestrian sidewalks, landscapedareas, trash enclosures, recreation areas and the like.  The Common Area shall include all areas ofthe Project reasonably necessary for access to the Premises.

 

1.10                           CommonOperating Expenses:  The term “**Common Operating Expenses**” is defined in Section8.2.

 

1.11                           EffectiveDate:  The term “**Effective Date**” means the date the lastsignatory to this Lease whose execution is required to make it binding on theparties hereto shall have executed this Lease.

 

1.12                           Eventof Tenant’s Default:  The term “**Event of Tenant’s Default**” is defined inSection 13.1.

 

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1.13                           HazardousMaterials:  The terms “**Hazardous Materials**” and “**Hazardous Materials Laws**” are defined inSection 7.2F.

 

1.14                           Insuredand Uninsured Peril:  The terms “**Insured Peril**” and “**Uninsured Peril**” are defined in Section11.2E.

 

1.15                           Law:  The term “**Law**”means any judicial decision, statute, constitution, ordinance, resolution,regulation, rule, administrative order, or other requirement of any municipal,county, state, federal or other government agency or authority havingjurisdiction over the parties to this Lease or the Premises, or both, in effecteither at the Effective Date or any time during the Lease Term, including,without limitation, any Hazardous Material Law (as defined in Section 7.2F) andthe Americans with Disabilities Act, 42 U.S.C. §§ 12101 et.seq.and any rules, regulations, restrictions, guidelines, requirements orpublications promulgated or published pursuant thereto.

 

1.16                           Lease:  The term “**Lease**”means the Summary and all elements of this Lease identified in Section Tof the Summary, all of which are attached hereto and incorporated herein bythis reference.

 

1.17                           LeaseTerm:  The term “**Lease Term**” or “**Term**” means the Initial Term (which shall commence on theCommencement Date and continue for the period specified in Section J ofthe Summary) together with any duly exercised Extension Term as provided inSection 2.6.

 

1.18                           Lender:  The term “**Lender**”means any beneficiary, mortgagee, secured party, lessor, or other holder of anySecurity Instrument.

 

1.19                           PermittedUse:  The term “**Permitted Use**” means the use specified in SectionN of the Summary.

 

1.20                           Premises:  The term “**Premises**”means that building area described in Section D of the Summary that iswithin the Building.

 

1.21                           Project:  The term “**Project**”means that real property and the improvements thereon which are specified in SectionE of the Summary.  Landlord reservesthe right, in its sole and absolute discretion, to include such other buildingsin the Project, to sell, transfer, assign or otherwise dispose of any buildingor parcel in the Project and elect to remove such building and/or parcel fromthe Project.

 

1.22                           PrivateRestrictions:  The term “**Private Restrictions**” means all recordedcovenants, conditions and restrictions, private agreements, reciprocal easementagreements, and any other recorded instruments affecting the use of thePremises which (i) exist as of the Effective Date, copies of which have beendelivered to Tenant prior to the Effective Date, or (ii) are recorded after theEffective Date, but any recorded after the Effective Date will be subject tothe reasonable approval of Tenant to the extent such instruments will have amaterial effect on Tenant’s use and occupancy of the Premises under this Lease.

 

1.23                           RealProperty Taxes:  The term “**Real Property Taxes**” is defined in Section8.3.

 

1.24                           ScheduledCommencement Date:  The term “**Scheduled Commencement Date**” means the datespecified in Section I of the Summary.

 

1.25                           SecurityInstrument:  The term “**Security Instrument**” means any underlyinglease, mortgage or deed of trust which now or at any time during the Termaffects the Project, and any renewal, modification, consolidation, replacementor extension thereof.

 

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1.26                           Summary:  The term “**Summary**”means the Summary of Basic Lease Terms executed by Landlord and Tenant that ispart of this Lease.

 

1.27                           Tenant’sAlterations:  The term “**Tenant’s Alterations**” or “**Tenant’s Alteration**” or “**Tenant Alteration**” means all improvements,additions, alterations, and fixtures installed in the Premises by Tenant.

 

1.28                           Tenant’sShare: The term “**Tenant’s Share**”means the percentage obtained by dividing Tenant’s gross leasable area in thePremises (as set forth D of the Summary) by the gross leaseable area in theBuilding, which as of the Effective Date is the percentage identified in SectionG of the Summary.

 

1.29                           TradeFixtures:  The term “**Trade Fixtures**” means (i) Tenant’sinventory, furniture, signs, and business equipment, and (ii) anything affixedto the Premises by Tenant at its expense for purposes of trade, manufacture,ornament or domestic use (except replacement of similar work or materialoriginally installed by Landlord) which can be removed without material injuryto the Premises unless such thing has, by the manner in which it is affixed,become an integral part of the Premises.

 

ARTICLE 2 DEMISE,CONSTRUCTION, AND ACCEPTANCE

 

2.1                                 Demiseof Premises:  Landlord hereby leasesto Tenant, and Tenant leases from Landlord, for the Lease Term upon the termsand conditions of this Lease, the Premises together with (i) the non-exclusiveright to use the number of Tenant’s Allocated Parking Stalls within the CommonArea (subject to the limitations set forth in Section 4.5), and (ii) thenon-exclusive right to use the Common Area for ingress to and egress from thePremises.  Landlord reserves the use ofthe exterior walls, the roof and the area beneath and above the Premises,together with the right to maintain, use, and, in locations which will notmaterially interfere with Tenant’s use of the Premises, replace thecurrently-existing ducts, wires, conduits and pipes leading through thePremises.

 

2.2                                 CommencementDate:  The “**Commencement Date**” will be the earlier of(i) the date Landlord delivers possession of the Premises to Tenant in thecondition required hereunder after the “Tenant Improvements” have been“Substantially Completed” (as such terms are defined in Exhibit B attachedhereto), or (ii) the date Tenant occupies the Premises for the operation of itsbusiness.  The Lease term starts on theCommencement Date.  The ScheduledCommencement Date is only an estimate of the date the parties anticipate theTenant Improvements will be Substantially Completed.

 

2.3                                 Constructionof Improvements:  Prior to theCommencement Date, Landlord shall construct the Tenant Improvements inaccordance with the terms of Exhibit B.

 

2.4                                 Deliveryand Acceptance of Possession: Landlord shall deliver the Premises to Tenant in broom clean,weathertight condition, free of all persons and personal property (other thanthe Cubicles (hereinafter defined)), in compliance with all applicable Laws(including any work or improvements required for the Tenant Improvements (asprovided in Exhibit B), but excluding the installation of any Trade Fixtures byTenant) and with all building systems (including without limitation allplumbing, HVAC, sewage and electrical systems) and building facilities (includingwithout limitation wiring and conduits, gas lines (if any), water pipes, andplumbing and sewage facilities) in good working order, condition andrepair.  If Landlord is unable todeliver possession of the Premises to Tenant in such condition with the TenantImprovements Substantially Completed on or before the Scheduled CommencementDate for any reason whatsoever, then this Lease shall not be void or voidableexcept as provided in this Section 2.4, and Landlord shall not be liable toTenant for any loss or damage resulting therefrom.  To the extent any delay in Substantially Completing the TenantImprovements or in delivering possession to Tenant is due to any Tenant Delay(as defined in Exhibit B) or otherwise due to the acts or, where thereis a duty to act at law or under this Lease, the omissions of Tenant or itsemployees, agents

 

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or contractors (including without limitation the failure to timelydeliver plans, insurance certificates or other items as required by thisLease), then the Commencement Date shall be deemed to be the date theCommencement Date would have occurred but for any such delay by Tenant.Notwithstanding the foregoing, if Landlord does not deliver possession of thePremises to Tenant in the condition required hereunder within 90 days after theScheduled Commencement Date, then Tenant (if the delay was not due to a ForceMajeure Delay, Tenant Delay or otherwise due to the acts or, where there is aduty to act at law or under this Lease, the omissions of Tenant or itsemployees, agents or contractors as   ** **providedabove) shall have the right as its sole and exclusive remedy to terminate thisLease upon written notice to Landlord within ten 10 days after the earlier of(i) notice from Landlord that there will be a delay beyond said time period, or(ii) after the end of said time period. Provided the Premises are delivered ** **in the condition requiredhereunder, Tenant shall accept possession and enter into good faith occupancyof the entire Premises when delivery is offered by Landlord.

 

Tenant acknowledges that it has had an opportunity toconduct, and has conducted, such inspections of the Premises as it deemsnecessary to evaluate its condition. Except as otherwise specifically provided herein, and provided thatLandlord delivers the Premises to Tenant in the condition required hereunder,Tenant agrees to accept possession of the Premises in its then existingcondition, “AS IS”.  Within ten (10)business days after Tenant’s actual knowledge of any latent defect, Tenantshall send written to Landlord setting forth in reasonable detail the nature ofsuch latent defect.  Provided suchnotice is received by Landlord on or before the first (1st) anniversary of theCommencement Date, Landlord shall, without cost to Tenant, within a reasonableperiod of time after receipt of such notice, commence to correct such latentdefect, and shall diligently pursue the same to completion.  Subject to the foregoing, Tenant’s takingpossession of any part of the Premises shall be deemed to be an acceptance byTenant of any work or improvement done by Landlord in such part asSubstantially Complete and in accordance with the terms of this Lease exceptfor (a) defects of which Tenant has given Landlord written notice within thirty(30) days after Tenant takes possession, and (b) punch list items.  Within fifteen (15) days after Landlorddelivers possession of the Premises to Tenant in the condition requiredhereunder, Landlord shall prepare and Landlord and Tenant shall togetherexecute an acceptance agreement in the form attached as Exhibit C,appropriately completed.  The failure ofTenant to execute such agreement or the failure of Landlord to request suchagreement within such fifteen (15) day period shall not delay or extend theCommencement Date nor shall Tenant’s obligation to pay Base Monthly Rent andAdditional Rent be excused or delayed because of Tenant’s failure to executesuch acceptance agreement within such fifteen (15) day period.

 

2.5                                 EarlyOccupancy:  If Tenant enters orpermits its contractors to enter the Premises prior to the Commencement Datewith the written permission of Landlord (which permission shall not beunreasonably withheld, conditioned or delayed), it shall do so upon all of theterms of this Lease (including its obligations regarding indemnity andinsurance) except those regarding the obligation to pay rent (as defined inSection 3.3 below), which shall commence on the Commencement Date.

 

2.6                                 ExtensionTerm:  Tenant shall have one (1)option to extend the Initial Term of the Lease for a period of five (5) years(the period shall be referred to as the “**ExtensionTerm**”) by giving written notice of exercise of such option (“**Extension Option Notice**”) at least onehundred eighty (180) days, but not more than three hundred sixty-five (365)days, prior to the expiration of the Initial Term.  The Extension Term shall commence, if at all, immediatelyfollowing the expiration of the Initial Term of the Lease.  If Tenant is in default (after notice andthe expirations of the applicable cure period) under any term or provision ofthe Lease on the date of giving an Extension Option Notice, or if Tenant is indefault (after notice and the expiration of the applicable cure period) underany term or provision of the Lease on the date of the Extension Term is tocommence, the Extension Term at the option of Landlord shall not commence andthe Lease shall expire at the end of Initial Term.  The Extension Term shall be upon all of the terms and provisionsof the Lease, except that (a) the Base Monthly Rent  during such Extension Term shall be one hundred percent (100%) ofthe then Fair Market Rent, (b) any work, improvements, allowances (includingwithout limitation, Landlord’s Allowance as defined in Exhibit B) or concessionwill not apply, and (c) Tenant shall not have any option or right to extend theTerm beyond the Extension Term.  Theforegoing option to extend is personal to the original Tenant signing

 

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the Lease and a transferee under a Permitted Transfer (as defined inSection 14.1F), but not be assigned or transferred to or exercised by any otherassignee, sublessee or transferee under a Transfer.

 

A.                                   FairMarket Rent. The term “**Fair Market Rent**”for purposes of determining Base Monthly Rent during the Extension Term shallmean the base monthly rent generally applicable to similar leases in likebuildings for space of comparable size, age, quality of the Premises in theMountain View, Sunnyvale and Santa Clara, California area projected as of thefirst day of the Extension Term by giving due consideration for the quality ofthe Building and improvements therein (including the quality of the thenexisting improvements in the Premises, including the Tenant Improvements, butnot Tenant’s Trade Fixtures), for a term comparable to the Extension Term atthe time the commencement of the Extension Term is scheduled to commence,without any deduction for amortization or cost of tenant improvements or commissionswhether or not incurred by Landlord, and otherwise subject to the terms andconditions of this Lease that will be applicable during the Extension Term.

 

B.                                     Procedureto Determine Fair Market Rent. Within thirty (30) days of Extension Option Notice, Landlord shallnotify Tenant in writing of Landlord’s determination of the Fair Market Rent (“**Landlord’s FMR**”).  Within thirty (30) days after receipt of such written notice ofLandlord’s FMR, Tenant shall have the right either to: (i) elect to cancel theExtension Option Notice for the Extension Term, (ii) accept Landlord’s FMR or(iii) elect to have the Fair Market Rent determined in accordance with theappraisal procedure set forth below. The failure of Tenant to provide written notice of its election underthe preceding sentence shall be deemed an acceptance of Landlord’s FMR.  The election (or deemed election ) by Tenantunder this section shall be non-revocable and binding on the parties.

 

C.                                     Appraisers.  If Tenant has elected to have the FairMarket Rent determined by an appraisal, then within ten (10) days after receiptof Tenant’s written notice of such an election, each party, by giving writtennotice to the other party, shall appoint an appraiser to render a writtenopinion of the Fair Market Rent for the Extension Term.  Each appraiser must be a member of theAppraisal Institute of America (MAI) for at least five years and with at leastfive years experience in the appraisal of rental rates of office buildings inthe area in which the Building is located and otherwise unaffiliated witheither Landlord or Tenant.  The twoappraisers shall render their written opinion of the Fair Market Rent for theExtension Term to Landlord and Tenant within thirty (30) days after theappointment of the second appraiser.  Ifthe Fair Market Rent of each appraiser is within five percent (5%) of eachother, then the average of the two appraisals of Fair Market Rent shall be theBase Monthly Rent for the Extension Term. If one party does not appoint its appraiser as provided above, then theone appointed shall determine the Fair Market Rent.  The Fair Market Rent so determined under this section shall bebinding on Landlord and Tenant.

 

D.                                    ThirdAppraiser.  If the Fair Market Rentdetermined by the appraisers is more than five percent (5%) apart, then the twoappraisers shall pick a third appraiser within ten (10) days after the twoappraisers have rendered their opinions of Fair Market Rent as providedabove.  If the two appraisers are unableto agree on the third appraiser within said ten (10) day period, Landlord andTenant shall mutually agree on the third appraiser within ten (10) daysthereafter and if the parties fail to agree within said time period, then atthe request of either Landlord or Tenant, such third appraiser shall bepromptly appointed by the then Presiding Judge of the Superior Court of theState of California for the County where the Premises are located..  The third appraiser shall be a person whohas not previously acted in any capacity for either party and must meet thequalifications stated above.

 

E.                                      ImpartialAppraisal.  Within thirty (30) daysafter its appointment, the third appraiser shall render its written opinion ofthe Fair Market Rent for the applicable Extension Term (“**Third Opinion**”).  If the fair market rent set forth in the Third Opinion isequidistant from the fair market rent determination of Landlord’s and Tenant’sappraiser, then the fair market rent contained in the Third Opinion shall bethe Base Monthly Rent during the Extension Term.  If the fair market rent of the Third Opinion is not equidistantfrom the fair market rent made by Landlord’s and Tenant’s appraiser, then thetwo closest fair market determinations

 

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made by Landlord’s appraiser, Tenant’s appraiser and the Third Opinionshall be average and such average shall be the Base Monthly Rent during theapplicable Extension Term.  The fairmarket rent determined in accordance with the foregoing procedure shall bebinding on the parties

 

F.                                      AppraisalCosts.  Each party shall bear thecost of its own appraiser and one-half (1/2) the cost of the third appraiser.

 

G.                                     Acknowledgmentof Rent.  After the Fair Market Rentfor the Extension Term has been established in accordance with the foregoingprocedure, Landlord and Tenant shall promptly execute an amendment to the Leaseto reflect the Base Monthly Rent  forthe Extension Term.

 

ARTICLE 3 RENT

 

3.1                                 BaseMonthly Rent:  Commencing on theCommencement Date and continuing throughout the Lease Term, Tenant shall pay toLandlord the Base Monthly Rent set forth in Section K of the Summary.

 

3.2                                 AdditionalRent:  Commencing on theCommencement Date and continuing throughout the Lease Term, Tenant shall paythe following as additional rent (the “**AdditionalRent**”) as and when due: (i) any late charges or interest dueLandlord pursuant to Section 3.4; (ii) Tenant’s Share of Common OperatingExpenses as provided in Section 8.1; (iii) Landlord’s share of any Subrentreceived by Tenant upon certain assignments and sublettings as required bySection 14.1; (iv) any legal fees and costs due Landlord pursuant to Section15.9; and (v) any other charges due Landlord pursuant to this Lease.

 

3.3                                 Paymentof Rent:  Concurrently with theexecution of this Lease by both parties, Tenant shall pay to Landlord theamount set forth in Section L of the Summary as prepayment of rent forcredit against the first installment(s) of Base Monthly Rent and Tenant’s Shareof estimated Common Operating Expenses.   The term “**Rent**” or “**rent**” shall mean Base Monthly Rent,Additional Rent and other sums required to be paid by Tenant to Landlord underthis Lease.  All rent required to bepaid in monthly installments shall be paid in advance on the first day of eachcalendar month during the Lease Term. All rent shall be paid in lawful money of the United States, without anyabatement, deduction or offset whatsoever (except as specifically provided inSection 6.4, Section 11.4 and Section 12.3), and without any prior demand therefor.  Rent shall be paid to Landlord at itsaddress set forth in Section Q of the Summary, or at such other place asLandlord may designate by written notice to Tenant from time to time.  Tenant’s obligation to pay rent shall beprorated at the commencement and expiration of the Lease Term.

 

3.4                                 LateCharge, Interest and Quarterly Payments:

 

(a)                                  LateCharge.  Tenant acknowledges thatthe late payment by Tenant of any installment of rent, or any other sum ofmoney required to be paid by Tenant under this Lease, will cause Landlord toincur certain costs and expenses not contemplated under this Lease, the exactamount of such costs being extremely difficult and impractical to fix.  Such costs and expenses will include,without limitation, attorneys’ fees, administrative and collection costs, andprocessing and accounting expenses and other costs and expenses necessary andincidental thereto.  If any Base MonthlyRent or Additional Rent is not received by Landlord from Tenant when suchpayment is due, then Tenant shall, upon demand, pay to Landlord a late chargeequal to 5% of such delinquent rent as liquidated damages for Tenant’s failureto make timely payment; provided, however, that Landlord agrees that Tenantshall not have to pay such late charge if it makes its payment in full withinfive (5) days after receipt of written notice from Landlord, except that thisnotice and cure period shall only be applicable for the first two times eachcalendar year that Tenant fails to pay any Base Monthly Rent or any AdditionalRent when due.  If Landlord has provided two notices of a latepayment or default during a calendar year, Landlord shall not be obligated toprovide any notice thereafter for the remainder of such calendar year and suchlate charge shall be due if payment is not made when due without any graceperiod or notice..  In no eventshall this provision for a late charge be deemed to grant to Tenant a graceperiod or extension of time

 

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within which to pay any rent or, subject to Section 13 below, preventLandlord from exercising any right or remedy available to Landlord uponTenant’s failure to pay any rent due within the notice and cure periodsotherwise provided under this Lease, including any right to terminate thisLease pursuant to Section 13.2B.

 

(b)                                 Interest.  If any rent remains delinquent for a periodin excess of ten (10) days then, in addition to such late charge, Tenant shallpay to Landlord interest on any rent that is not paid when due at the AgreedInterest Rate following the date such amount became due until paid.

 

(c)                                  INTENTIONALLYOMITTED.

 

3.5                                 SecurityDeposit:  On the Effective Date,Tenant shall deposit with Landlord the amount set forth in Section M ofthe Summary as security for the performance by Tenant of its obligations underthis Lease, and not as prepayment of rent (the “**Security Deposit**”). Landlord may from time to time apply such portion of the SecurityDeposit as is reasonably necessary for the following purposes: (i) after theexpiration of applicable notice and cure periods set forth in Section 13 below(except in an emergency), to remedy any default by Tenant in the payment ofrent; (ii) after the expiration of applicable notice and cure periods set forthin Section 13 below, to repair damage to the Premises caused by Tenant; (iii)to the extent Tenant fails to do so, to put the Premises in broom cleancondition upon the expiration or earlier termination of the Lease; and (iv)after the expiration of applicable notice and cure periods set forth in Section13 below, to remedy any other default of Tenant to the extent permitted by Lawand, in this regard, Tenant hereby waives any restriction on the uses to whichthe Security Deposit may be put contained in California Civil Code Section1950.7, it being agreed that Landlord may, in addition, claim those sumsreasonably necessary to compensate Landlord for any other loss or damage,foreseeable or unforeseeable, caused by the act or, where there is a duty toact at law or under this Lease, the omission of Tenant or any officer,employee, agent or invitee of Tenant in violation of the terms of thisLease.  In the event the SecurityDeposit or any portion thereof is so used, Tenant agrees to pay to Landlordpromptly upon demand an amount in cash sufficient to restore the SecurityDeposit to the full original amount. Landlord shall not be deemed a trustee of the Security Deposit, may usethe Security Deposit in business, and shall not be required to segregate itfrom its general accounts.  Tenant shallnot be entitled to any interest on the Security Deposit.  If Landlord transfers the Premises duringthe Lease Term, Landlord shall pay the Security Deposit to any transferee ofLandlord’s interest in conformity with the provisions of California Civil CodeSection 1950.7 and/or any successor statute, in which event the transferringLandlord will be released from all liability for the return of the SecurityDeposit so paid over. The Security Deposit or the remaining proceeds therefrom,as applicable, shall be returned to Tenant within thirty (30) days after theend of the Term.

 

3.6                                 INTENTIONALLYOMITTED.

 

ARTICLE 4 USE OF PREMISES

 

4.1                                 Limitationon Use:  Tenant shall use thePremises solely for the Permitted Use specified in Section N of the Summary.  There shall not be any change in use withoutthe prior written consent of Landlord which will not be unreasonably withheld,conditioned or delayed.  Tenant shallnot do anything in or about the Premises which will (i) cause structural injuryto the Building, or (ii) cause damage to any part of the Building except to theextent reasonably necessary for the installation of Tenant’s Trade Fixtures andTenant’s Alterations, and then only in a manner which has been first approvedby Landlord in writing, which approval will not be unreasonably withheld,conditioned or delayed.  Tenant shallnot operate any equipment within the Premises which will (i) materially damagethe Building or the Common Area, (ii) overload existing electrical systems orother mechanical equipment servicing the Building, (iii) impair the efficientoperation of the sprinkler system or the heating, ventilating or airconditioning (“**HVAC**”) equipmentwithin or servicing the Building, or (iv) damage, overload or corrode thesanitary sewer system.  Tenant shall notattach, hang or suspend anything from the ceiling, roof, walls or columns ofthe Building or set any load on the floor in excess of the load limits forwhich such items are designed nor operate hard wheel forklifts within the Premises.  Any

 

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dust, fumes, or waste products generated by Tenant’s use of thePremises shall be contained and disposed so that they do not (i) create an unreasonable fire or healthhazard, (ii) damage the Premises, or (iii) result in the violation of anyLaw.  Except as otherwise set forthherein or as  approved by Landlord,which approval shall not be unreasonably withheld, conditioned or delayed,Tenant shall not change the exterior of the Building or install any equipmentor antennas on or make any penetrations of the exterior or roof of theBuilding.  Tenant shall not commit anywaste in or about the Premises, and Tenant shall keep the Premises in a neat,clean, attractive and orderly condition, free of any nuisances.  If Landlord designates a standard windowcovering for use throughout the Building, Tenant shall use this standard windowcovering to cover all windows in the Premises. Tenant shall not conduct on any portion of the Premises or the Projectany sale of any kind, including any public or private auction, fire sale,going-out-of-business sale, distress sale or other liquidation sale.

 

4.2                                 Compliancewith Regulations:  Tenant shall notuse the Premises in any manner which violates any Laws or Private Restrictionswhich affect the Premises.  Tenant shallabide by and promptly observe and comply with all Laws and Private Restrictionsapplicable to Tenant’s particular use and occupancy of the Premises or themanner in which it conducts its business therein or due to any TenantAlteration.  Tenant shall not use thePremises in any manner which will cause a cancellation of any insurance policycovering Tenant’s Alterations or any improvements installed by Landlord at itsexpense or which poses an unreasonable risk of damage or injury to thePremises.  Tenant shall not sell, orpermit to be kept, used, or sold in or about the Premises any article which maybe prohibited by the standard form of fire insurance policy.  Tenant shall comply with all reasonablerequirements of any insurance company, insurance underwriter, or Board of FireUnderwriters which are necessary to maintain the insurance coverage carried byeither Landlord or Tenant pursuant to this Lease.  Except to the extent required of Tenant under this Section 4.2 ofunder Section 5.3 hereof, Landlord shall, at its sole cost and expense (but,subject to Section 8.2D below, subject to reimbursement pursuant to Section 5.4and Section 8.1), comply with all Private Restrictions, Laws and any directionof any public office or officer acting in their lawful capacity relating to themaintenance of the structural parts of the Building as a combination office,research, development and light manufacturing building.  Landlord shall, at its sole cost and expense(but, subject to Section 8.2D below, subject to reimbursement pursuant toSection 5.4 and Section 8.1), comply with any Laws applicable to the CommonArea.

 

4.3                                 OutsideAreas:  No materials, supplies,tanks or containers, equipment, finished products or semi-finished products,raw materials, inoperable vehicles or articles of any nature shall be storedupon or permitted to remain outside of the Premises except in fully fenced andscreened areas outside the Building which have been designed for such purposeand have been approved in writing by Landlord for such use by Tenant.

 

4.4                                 Signs:  Tenant shall have the right, at tits solecost and expense, to erect and maintain up to two (2) marquee signs on theexterior of the Building (the “**Exterior Signage**”), provided (i) theExterior Signage complies with all Laws and Private Restrictions (and Tenantshall have obtained any necessary permits prior to erecting the ExteriorSignage), (ii) the size, location, materials, design and lighting of theExterior Signage, and any requested changes thereto, shall be subject toLandlord’s prior written approval, which approval shall not be unreasonablywithheld, conditioned or delayed, and (iv) Tenant shall at all times maintainthe Exterior Signage in good condition and repair, and shall remove theExterior Signage and restore the affected area at the expiration or soonertermination of this Lease.  At no costor undertaking by Landlord, Landlord agrees to reasonably cooperate with Tenantin obtaining any necessary governmental approvals and permits in connectionwith the Exterior Signage.  Tenant shallhave the right, from time to time throughout the Lease Term, to replace theExterior Signage (if any) with signage which is equivalent to the signage beingreplaced, subject to all of the terms and conditions of this Section 4.4.  Tenant acknowledges and agrees that theforegoing signage rights are personal to Tenant and its affiliates, but may notbe exercised by or applicable to any transferee under a Transfer.  Tenant also acknowledges and agrees thatobtaining such Exterior Signage is not a condition precedent or subsequent tothe Lease nor a covenant by Landlord. The failure of Tenant to obtain all requisite

 

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approvals for the Exterior Signage shall not entitle Tenant to anyabatement in rent or other change in the terms of this Lease.  Tenant shall not place on any portion of theexterior of the Building any other sign, placard, lettering in or on windows,banner, displays or other advertising or communicative material which isvisible from the exterior of the Building without the prior written approval ofLandlord, which approval shall not be unreasonably withheld, conditioned ordelayed.  All such approved signs shallstrictly conform to all Laws, Private Restrictions, and Landlord’s reasonablesign criteria then in effect and shall be installed at the expense ofTenant.  Tenant shall maintain suchsigns in good condition and repair. Tenant shall have the right, at its sole cost and expense, withoutLandlord’s consent, to install sign(s), placard(s), banner(s), display(s)and/or other advertising or communicative material(s) within the interior ofthe Premises, provided such materials are not visible from the exterior of theBuilding.

 

4.5                                 Parking:  Tenant is allocated and shall have thenon-exclusive right to use not more than the number of Tenant’s AllocatedParking Stalls contained within the Project described in Section H ofthe Summary for its use and the use of Tenant’s Agents, the location of whichmay be designated from time to time by Landlord within reasonable proximity tothe Building.  Tenant shall not at anytime use more parking spaces than the number so allocated to Tenant or park itsvehicles or the vehicles of others in any portion of the Project not designatedby Landlord as a non-exclusive parking area. Tenant shall not have the exclusive right to use any specific parkingspace.  If Landlord grants to any othertenant the exclusive right to use any particular parking space(s), Tenant shallnot use such spaces.  Landlord reservesthe right, after having given Tenant at least one (1) business day’s priorwritten notice, to have any vehicles owned by Tenant or Tenant’s Agentsutilizing parking spaces in excess of the parking spaces allowed for Tenant’suse to be towed away at Tenant’s cost. All trucks and delivery vehicles shall be (i) parked at the rear of theBuilding, (ii) loaded and unloaded in a manner which does not interfere withthe businesses of other occupants of the Project, and (iii) permitted to remainon the Project only so long as is reasonably necessary to complete loading andunloading.  In the event Landlord electsor is required by any Law to limit or control parking in the Project, whetherby validation of parking tickets or any other method of assessment, Tenantagrees to participate in such validation or assessment program under suchreasonable rules and regulations as are from time to time established byLandlord.

 

4.6                                 Rulesand Regulations:  Landlord may fromtime to time promulgate reasonable and nondiscriminatory rules and regulationsapplicable to all occupants of the Project for the care and orderly managementof the Project and the safety of its tenants and invitees.  Such rules and regulations shall be bindingupon Tenant upon delivery of a copy thereof to Tenant, and Tenant agrees toabide by such rules and regulations.  Ifthere is a conflict between the rules and regulations and any of the provisionsof this Lease, the provisions of this Lease shall prevail.  Landlord shall not be responsible for theviolation by any other tenant of the Project of any such rules andregulations.  Upon written notice fromTenant, Landlord shall use commercially reasonable efforts to remedy any suchviolation if such violation unreasonably interferes with Tenant’s rightshereunder.

 

ARTICLE 5 TRADE FIXTURESAND ALTERATIONS

 

5.1                                 TradeFixtures:  Throughout the LeaseTerm, Tenant may provide and install, and shall maintain in good condition, anyTrade Fixtures required in the conduct of its business in the Premises, exceptto the extent (a) any Trade Fixture will use, generate, store or dispose of anyHazardous Material in which case it shall be subject to the requirements setforth in Section 7.2 below, or (b) any Trade Fixture will constitute a TenantAlteration, in which case it shall be subject to the requirements set forthbelow for the construction of a Tenant Alteration, including, withoutlimitation, the prior written consent of Landlord.  All Trade Fixtures shall remain Tenant’s property.

 

5.2                                 Tenant’sAlterations:  Construction by Tenantof a Tenant Alteration shall be governed by the following:

 

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A.                                   ConsentRequired.  Except as otherwise setforth herein, Tenant shall not construct any Tenant’s Alterations or otherwisealter the Premises without Landlord’s prior written approval, which will not beunreasonably withheld, conditioned or delayed unless such Tenant Alterationaffects areas outside of the Premises or the exterior of the Building or thestructural parts of the Building, in which case Landlord may withhold itsconsent in its sole and absolute discretion. Notwithstanding the foregoing, Landlord’s consent shall not be requiredfor any Alteration to the interior of the Premises that is cosmetic in naturesuch as painting or for any Tenant Alteration that complies with the followingrequirements (herein referred to as a “**MinorAlteration**”): (a) does not affect the roof or any area outside ofthe Premises or require work inside the walls or above the ceiling of thePremises; (b) does not affect the structural parts of the Building orelectrical, plumbing, HVAC or mechanical systems in the Building or servicingthe Premises, or the sprinkler or other life safety system; and (c) costs lessthan the Permitted Tenant Alterations Limit specified in Section O of theSummary in each instance and does not exceed two (2) times the Permitted TenantAlteration Limit in the aggregate for all of such Minor Alterations during eachcalendar year. Tenant shall provide Landlord with prior written notice of anyMinor Alteration that requires a building permit.  In the event Landlord’s approval for any Tenant’s Alterations isrequired, (i) Landlord shall respond to Tenant’s request within ten (10) daysafter receipt of the name of the proposed licensed contractor and plans andspecifications for such Alterations, and (ii) Tenant shall not construct theTenant Alteration until Landlord has approved in writing the plans andspecifications therefor, and (iii) such Tenant’s Alterations shall beconstructed substantially in compliance with such approved plans andspecifications by a licensed contractor reasonably approved by Landlord.  All Tenant’s Alterations constructed byTenant shall be constructed by  alicensed contractor in accordance with all Laws using new materials of goodquality.

 

B.                                     OtherRequirements.  Tenant shall notcommence construction of any Tenant’s Alterations until (i) all requiredgovernmental approvals and permits have been obtained, (ii) all requirementsregarding insurance imposed by this Lease have been satisfied, (iii) Tenant hasgiven Landlord at least five days’ prior written notice of its intention tocommence such construction (the “**Construction Notice**”), and (iv) ifreasonably requested by Landlord at the time of Landlord’s approval thereof, orin the case of Alterations not requiring Landlord’s consent, within five (5)days after receipt of the Construction Notice, Tenant has obtained contingentliability and broad form builders’ risk insurance in an amount reasonablysatisfactory to Landlord if there are any perils relating to the proposedconstruction not covered by insurance carried pursuant to Article 9.

 

C.                                     Restoration.  All Tenant’s Alterations shall remain theproperty of Tenant during the Lease Term but shall not be altered or removedfrom the Premises.  At the expiration orsooner termination of the Lease Term, all Tenant’s Alterations shall besurrendered to Landlord as part of the realty and shall then become Landlord’sproperty, and Landlord shall have no obligation to reimburse Tenant for all orany portion of the value or cost thereof; provided, however, that if Landlordrequires Tenant to remove any Tenant’s Alterations, Tenant shall so remove suchTenant’s Alterations prior to the expiration or sooner termination of the LeaseTerm.  Notwithstanding the foregoing,Tenant shall not be obligated to remove any Tenant’s Alterations with respectto which the following is true: (i) at the time Tenant requested Landlord’sapproval, or, in the case of Alterations not requiring Landlord’s approval, inthe Construction Notice Tenant requested of Landlord in writing that Landlordinform Tenant of whether or not Landlord would require Tenant to remove suchTenant Alteration at the expiration of the Lease Term; and (ii) at the timeLandlord granted its approval, or, in the case of Alterations not requiringLandlord’s approval, within five (5) days after receipt of the ConstructionNotice, Landlord did not inform Tenant that Landlord would require Tenant toremove such Alteration at the expiration of the Lease Term.  Tenant shall not be obligated to remove theinitial Tenant Improvements constructed in the Premises pursuant to ExhibitB to this Lease.

 

5.3                                 AlterationsRequired by Law:  Tenant shall makeany alteration, addition or change of any sort to the Premises that is requiredby any Law because of (i) Tenant’s particular use or change of use of thePremises; (ii) Tenant’s application for any permit or governmental approval; or(iii) Tenant’s construction or installation of any Tenant’s Alterations orTrade Fixtures.  Any other alteration,addition, or change required by

 

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Law which is not the responsibility of Tenant pursuant to the foregoingshall be made by  Landlord (subject toLandlord’s right to reimbursement from Tenant specified in Section 5.4).

 

5.4                                 Amortizationof Certain Capital Improvements: Tenant shall pay Additional Rent in the event Landlord reasonably electsor is required to make any of the following kinds of capital improvements tothe Project: (i) capital improvements required to be constructed in order tocomply with any Law (excluding any Hazardous Materials Law) not in effect orapplicable to the Project as of the Effective Date; (ii) modification ofexisting or construction of additional capital improvements or building serviceequipment for the purpose of reducing the consumption of utility services orCommon Operating Expenses of the Project; and (iii) replacement of capitalimprovements or building  serviceequipment existing as of the Effective Date when required because of normalwear and tear.  The amount of AdditionalRent Tenant is to pay with respect to each such capital improvement shall bedetermined as follows:

 

A.                                   AmortizationPeriod.  All costs paid by Landlordto construct such capital improvements (including financing costs) shall beamortized over the useful life of such capital improvement (as reasonablydetermined by Landlord in accordance with generally accepted accountingprinciples) with interest on the unamortized balance at the then prevailingmarket rate Landlord would pay if it borrowed funds to construct such capitalimprovements from an institutional lender, and Landlord shall inform Tenant ofthe monthly amortization payment required to so amortize such costs, and shallalso provide Tenant with the information upon which such determination is made.

 

B.                                     Payment.  Provided that Tenant shall not be obligatedto pay for any portion of any capital improvement made to any portion of theProject other than the Building and the Common Area, as Additional Rent, Tenantshall pay at the same time the Base Monthly Rent is due an amount equal toTenant’s Share of that portion of such monthly amortization payment fairlyallocable to the Building (as reasonably determined by Landlord in good faith)for each month after such capital improvements are completed until the first tooccur of (i) the expiration of the Lease Term (as it may be extended), or (ii)the end of the term over which such costs were amortized.

 

5.5                                 Mechanic’sLiens:  Tenant shall keep theProject free from any liens and shall pay when due all bills arising out of anywork performed, materials furnished, or obligations incurred by Tenant orTenant’s Agents relating to the Project. If any claim of lien is recorded as a result of any such work by Tenantor Tenant’s Agents, Tenant shall bond against or discharge the same within 20days after receipt of notice that the same has been recorded against theProject.  Should any lien be filedagainst the Project or any action be commenced affecting title to the Project,the party receiving notice of such lien or action shall immediately give theother party written notice thereof.

 

5.6                                 Taxeson Tenant’s Property:  Tenant shallpay before delinquency any and all taxes, assessments, license fees and publiccharges levied, assessed or imposed against Tenant or Tenant’s estate in thisLease or the property of Tenant situated within the Premises which become dueduring the Lease Term.  If any tax orother charge is assessed by any governmental agency because of the execution ofthis Lease, such tax shall be paid by Tenant. On demand by Landlord, Tenant shall furnish Landlord with satisfactoryevidence of these payments.

 

ARTICLE 6 REPAIR AND MAINTENANCE

 

6.1                                 Tenant’sObligation to Maintain:  Except asotherwise provided in Section 5.3, Section 6.2, Section 11.1, andSection 12.3, Tenant shall be responsible for the following during theLease Term:

 

A.                                   General.  Provided the Premises are delivered toTenant in the condition required hereunder, Tenant shall clean and maintain ingood order, condition, and repair and replace when necessary the Premises andevery part thereof, through regular inspections and servicing, including, butnot limited to: (i) all

 

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plumbing and sewage facilities (including all sinks, toilets, faucetsand drains), and all ducts, pipes, vents or other parts of the plumbing system;(ii) all fixtures, interior walls, floors, carpets and ceilings; (iii) allwindows, doors, entrances, plate glass, showcases and skylights (includingcleaning both interior and exterior surfaces); (iv) all electrical facilitiesand all equipment (including all lighting fixtures, lamps, bulbs, tubes, fans,vents, exhaust equipment and systems); and (v) any automatic fire extinguisherequipment in the Premises.

 

B.                                     Utilitiesand Glass.  Provided the Premisesare delivered to Tenant in the condition required hereunder, with respect toutility facilities serving the Premises (including electrical wiring andconduits, gas lines, water pipes, and plumbing and sewage fixtures and pipes),Tenant shall be responsible for the maintenance and repair of any suchfacilities which serve only the Premises, including all such facilities thatare within the walls or floor, or on the roof of the Premises, and any part ofsuch facility that is not within the Premises, but only up to the point wheresuch facilities join a main or other junction (e.g., sewer main or electricaltransformer) from which such utility services are distributed to other parts ofthe Project as well as to the Premises.

 

C.                                     Windows.  Tenant shall replace any damaged or brokenglass in the Premises (including all interior and exterior doors and windows)with glass of the same kind, size and quality. Subject to Section 6.2 below, Tenant shall repair any damage to thePremises (including exterior doors and windows) caused by vandalism or anyunauthorized entry. Tenant shall maintain continuously throughout the LeaseTerm a service contract for the washing of all windows (both interior andexterior surfaces) in the Premises with a contractor, which contract provides forthe periodic washing of all such windows at least once every 90 days during theLease Term.  Tenant shall notifyLandlord of the name and address of such contractor.

 

D.                                    Standards.  All repairs and replacements required ofTenant shall be promptly made with new materials of like kind and quality.  If the work affects the structural parts ofthe Building or if the estimated cost of any item of repair or replacement isin excess of the Permitted Tenant’s Alterations Limit, then Tenant shall firstobtain Landlord’s written approval of the scope of the work, plans therefor,materials to be used, and the contractor, which approval shall not beunreasonably withheld, conditioned or delayed.

 

6.2                                 Landlord’sObligation to Maintain:

 

A.                                   General.  Landlord shall repair, maintain and operatethe Common Area and repair and maintain the roof, exterior and structural partsof the building(s) located on the Project so that the same are kept in goodorder and repair.  In addition, Landlordshall repair any damage caused by the acts or, where there is a duty to actunder this Lease, the omissions of Landlord and/or Landlord’s Agents.  Landlord shall not be responsible forrepairs required by an accident, fire or other peril or for damage caused toany part of the Project by any act or, where there is a duty to act at law orunder this Lease, the omission of Tenant or Tenant’s Agents except as otherwiserequired by Article 11.  Landlord mayengage contractors of its choice to perform the obligations required of it bythis Article, and the necessity of any expenditure to perform such obligationsshall be at the sole discretion of Landlord.

 

B.                                     HVAC.  In addition, Landlord agrees to maintain,repair and replace when necessary the HVAC unit(s) which serve only thePremises, and shall keep the same in good working condition through periodicinspection and servicing.  The cost forsuch work will not be included in Common Operating Expenses, provided such workis not due to the negligence, willful misconduct or misuse by Tenant or any ofTenant’s Agents.  If such work isrequired due to the negligence, willful misconduct or misuse by Tenant or anyof its Agents, Tenant shall be responsible for payment of such costs asadditional rent within ten (10) days after written request by Landlord.  If Landlord replaces an HVAC unit, thenafter the time each such HVAC unit has been replaced, the cost to repair,maintain and service such replaced unit and related equipment will be includedin Common Operating Expenses.

 

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6.3                                 Controlof Common Area:  Landlord shall atall times have exclusive control of the Common Area.  Provided there is no material interference with Tenant’s use andoccupancy of the Premises and Tenant’s rights under Section 4.5 above, Landlordshall have the right, upon at least five (5) business days’ prior writtennotice to Tenant (except in an emergency), without the same constituting anactual or constructive eviction and without entitling Tenant to any abatementof rent, to: (i) close any part of the Common Area to whatever extent requiredin the opinion of Landlord’s counsel to prevent a dedication thereof or theaccrual of any prescriptive rights therein; (ii) temporarily close the CommonArea to perform maintenance or for any other reason deemed sufficient byLandlord; (iii) change the shape, size, location and extent of the Common Area;(iv) eliminate from or add to the Project any land or improvement, includingmulti-deck parking structures; (v) make changes to the Common Area including,without limitation, changes in the location of driveways, entrances,passageways, doors and doorways, elevators, stairs, restrooms, exits, parkingspaces, parking areas, sidewalks or the direction of the flow of traffic andthe site of the Common Area; (vi) remove unauthorized persons from the Project;and/or (vii) change the name or address of the Building or Project.  Subject to Section 4.5 above, Tenant shallkeep the Common Area clear of all obstructions created or permitted by Tenant.  If in the opinion of Landlord unauthorizedpersons are using any of the Common Area by reason of the presence of Tenant inthe Building, Tenant, upon demand of Landlord, shall restrain such unauthorizeduse by appropriate proceedings.  Inexercising any such rights regarding the Common Area, (i) Landlord shall make areasonable effort to minimize any disruption to Tenant’s business, and (ii)Landlord shall not exercise its rights to control the Common Area in a mannerthat would materially interfere with Tenant’s use of the Premises without firstobtaining Tenant’s consent.  Landlordshall have no obligation to provide guard services or other security measuresfor the benefit of the Project.  Tenantassumes all responsibility for the protection of Tenant and Tenant’s Agentsfrom acts of third parties; provided, however, that nothing contained hereinshall prevent Landlord, at its sole option, from providing security measuresfor the Project.

 

6.4                                 Interruptionof Services:  If any service whichLandlord is required to provide hereunder is discontinued for three (3)consecutive business days and (i) such discontinuance is caused by thenegligence or willful misconduct of Landlord or any of its Agents, then Tenantshall be entitled to an abatement of Base Monthly Rent and Additional Rent inproportion to the extent to which the failure prevents Tenant from using thePremises for Tenant’s normal purposes, with such abatement to begin on thefourth (4th) business day after such occurrence and continuing until suchfailure has been cured; or (ii) as a result of such discontinuance of suchservice, Tenant is prevented from conducting all or any portion of its businessoperations in the Premises and was not due to the negligence, willfulmisconduct, act or omission of Tenant, and the cause of such discontinuance iscovered by any loss of rental or other similar insurance coverage that Landlordis then carrying with respect to the Building (it being understood thatLandlord has no obligation to maintain such coverage), then Tenant shall beentitled to an abatement of Base Monthly Rent and Additional Rent equal to theinsurance proceeds actually received by Landlord with respect to the Premisesfrom the insurance carrier providing such insurance coverage.  The provisions of this Section 6.4 shall notapply in the event of a discontinuation of such service caused by fire or othercasualty, which shall be governed by Section 11 below, or in the event of ataking, which shall be governed by Section 12 below.

 

ARTICLE 7 WASTE DISPOSALAND UTILITIES

 

7.1                                 WasteDisposal:  Tenant shall store itswaste either inside the Premises or within outside trash enclosures that arefully fenced and screened in compliance with all Private Restrictions, anddesigned for such purpose.  All  entrances to such outside trash enclosuresshall be kept closed, and waste shall be stored in such manner as not to bevisible from the exterior of such outside enclosures.  Tenant shall cause all of its waste to be regularly removed fromthe Premises at Tenant’s sole cost. Tenant shall keep all fire corridors and mechanical equipment rooms inthe Premises free and clear of all obstructions at all times.

 

7.2                                 HazardousMaterials:  Landlord and Tenantagree as follows with respect to the existence or use of Hazardous Materials onthe Project:

 

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A.                                   HazardousMaterials Disclosure Certificate. Prior to executing this Lease, Tenant has delivered to Landlord Tenant’sexecuted initial Hazardous Materials Disclosure Certificate, in the formattached hereto as Exhibit D (the “**InitialHazardous Materials Certificate**”). Tenant covenants, represents and warrants to Landlord that theinformation in the Initial Hazardous Materials Certificate is true and correctand accurately describes the use(s) of Hazardous Materials which will be madeand/or used on the Premises by Tenant. Tenant shall, commencing with the date which is one year from theCommencement Date and continuing every year thereafter, deliver to Landlord, anexecuted and updated Hazardous Materials Disclosure Certificate, substantiallyin the form attached hereto as Exhibit D (the “**Annual Hazardous Materials Certificate**”) describing Tenant’sproposed use of Hazardous Materials on the Premises for the upcoming year, andany other reasonably necessary documents as requested by Landlord.

 

B.                                     Hazardous Material Usage. Other than the Hazardous Materials referenced on the Initial HazardousMaterials Certificate, Tenant shall not be entitled to use, store,generate, transport or dispose of any Hazardous Materials (herein referred toas “**Hazardous Materials Usage**”)on, in, or about any portion of the Premises and the Project without, in eachinstance, obtaining Landlord’s prior written consent thereto, which consent shallnot be unreasonably withheld, conditioned or delayed.  If Landlord consents in writing to any such Hazardous MaterialUsage, then Tenant shall be permitted to use only those Hazardous Materialsthat are necessary for Tenant’s business, in Tenant’s reasonable judgment, andas expressly approved by Landlord in writing. Any such Hazardous Materials Usage may only be to the extent of thequantities of Hazardous Materials as specified in the then applicable HazardousMaterial Disclosure Certificate or as otherwise expressly approved byLandlord.  Any Hazardous Material Usageof Hazardous Materials by Tenant and Tenant’s Agents after the Effective Datein or about the Project shall strictly comply with all applicable laws,including all Hazardous Materials Laws now or hereinafter enacted.  Tenant agrees that any changes to the typeand/or quantities of Hazardous Materials specified in the most recent approvedHazardous Material Disclosure Certificate may be implemented only with theprior written consent of Landlord, which consent shall not be unreasonablywithheld, conditioned or delayed. Tenant shall not be entitled nor permitted to install any undergroundtanks at the Premises or Project for the storage of Hazardous Materials withoutthe express written consent of Landlord, which may be given or withheld inLandlord’s sole and absolute discretion.  Tenant shall not be entitled nor permitted to install any aboveground orbelow ground tanks at the Premises or Project for the storage of HazardousMaterials without the express written consent of Landlord, in its sole andabsolute discretion.

 

C.                                     Testsand Inspections.  Upon at least one(1) business day’s prior written notice (except in an emergency), and providedthat Landlord is accompanied by a representative of Tenant, Landlord shall havethe right at all times during the Term of this Lease to (i) inspect thePremises, (ii) conduct tests and investigations to determine whether Tenant isin compliance with the provisions of this Section 7.2 or to determine if HazardousMaterials are present in, on or about the Project, and (iii) request lists ofall Hazardous Materials used, stored or otherwise located by Tenant and/orTenant’s Agents on, under or about any portion of the Premises and/or theCommon Areas.  The cost of all suchinspections, tests and investigations shall be borne by Tenant to the extentthat Landlord reasonably determines that Tenant or any of Tenant’s Agents aredirectly or indirectly responsible in any manner for any contamination revealedby such inspections, tests and investigations. The aforementioned rights granted herein to Landlord and itsrepresentatives shall not create (a) a duty on Landlord’s part to inspect,test, investigate, monitor or otherwise observe the Premises or the activitiesof Tenant and Tenant’s Representatives with respect to Hazardous Materials,including without limitation, Tenant’s operation, use and any remediationrelated thereto, or (b) liability on the part of Landlord and itsrepresentatives for Tenant’s use, storage, disposal or remediation of HazardousMaterials, it being understood that Tenant shall be solely responsible for allliability in connection therewith. Landlord shall use commercially reasonable efforts to minimize anyunreasonable interference with Tenant’s business operations and use andoccupancy of the Premises in connection with the exercise any of the foregoingrights under this Section 7.2C.

 

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D.                                    Notice.  Tenant shall give to Landlord prompt verbaland follow-up written notice of any spills, releases, discharges, disposals,emissions, migrations, removals or transportation of Hazardous Materials on,under or about any portion of the Premises, Common Areas or Project by Tenantor any of Tenant’s Agents; provided that Tenant has actual, implied orconstructive knowledge of such event(s). Tenant, at its sole cost and expense, covenants and warrants to promptlyinvestigate, clean up, remove, restore and otherwise remediate (including,without limitation, preparation of any feasibility studies or reports and theperformance of any and all closures) any spill, release, discharge, disposal,emission, migration or transportation or other Hazardous Material Usage ofHazardous Materials to the extent arising from or related to the acts or, wherethere is a duty to act at law or under this Lease, the omissions of Tenant orTenant’s Agents such that the affected portions of the Project and any adjacentproperty are returned, to the extent possible, to the condition existing priorto the appearance of such Hazardous Materials and otherwise in compliance withLaws.  Any such investigation, clean up,removal, restoration and other remediation shall only be performed after Tenanthas obtained Landlord’s prior written consent, which consent shall not beunreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Tenant shall be entitled to respondimmediately to an emergency without first obtaining Landlord’s prior writtenconsent.  Tenant, at its sole cost andexpense, shall conduct and perform, or cause to be conducted and performed, allclosures as required by any Hazardous Materials Laws or any agencies or othergovernmental authorities having jurisdiction thereof to the extent suchclosures are due to the acts or, where there is a duty to act at law or underthis Lease, the omissions of Tenant or Tenant’s Agents.  If, after receipt of reasonable priorwritten notice, Tenant fails to so promptly investigate, clean up, remove,restore, provide closure or otherwise so remediate, Landlord may, but withoutobligation to do so, take any and all steps necessary to rectify the same andTenant shall promptly reimburse Landlord, upon demand, for all reasonable costsand expenses to Landlord of performing investigation, clean up, removal,restoration, closure and remediation work. All such work undertaken by Tenant, as required herein, shall beperformed in such a manner so as to enable Landlord to make full economic useof the Premises and the other portions of the Project in compliance withthen-existing Laws after the satisfactory completion of such work.

 

E.                                      Indemnity.  Subject to Section 9.3 below, Tenant shallindemnify, hold harmless, and, at Landlord’s option (with such attorneys asLandlord may reasonably approve in advance and in writing), defend Landlord andLandlord’s officers, directors, shareholders, partners, members, managers,employees, contractors, property managers, agents and mortgagees and other lienholders, from and against any and all “Losses” (hereinafter defined) arisingfrom or related to: (a) any violation or alleged violation by Tenant or any ofTenant’s Agents of any of the Laws, including, without limitation, theHazardous Materials Laws, to the extent required under Section 4.2, Section 5.3and/or this Article 7; (b) any breach of the provisions of this Section 7.2 orany subsection thereof by Tenant or any of Tenant’s Agents; or (c) anyHazardous Materials Usage on, about or from the Premises of any HazardousMaterial approved by Landlord under this Lease. The term “**Losses**” shall mean all claims, demands,expenses, actions, judgments, damages (whether consequential, direct orindirect, known or unknown, foreseen or unforeseen), penalties, fines,liabilities, losses of every kind and nature (including, without limitation,property damage, diminution in value of Landlord’s interest in the LeasedPremises or the Project, damages for the loss or restriction on use of anyspace or amenity within the Building or the Project, damages arising from anyadverse impact on marketing space in the Project, sums paid in settlement ofclaims and any costs and expenses associated with injury, illness or death toor of any person), suits, administrative proceedings, costs and fees,including, but not limited to, attorneys’ and consultants’ fees and expenses,and the costs of cleanup, remediation, removal and restoration, that are in anyway related to any matter covered by the foregoing indemnity.  Tenant’s indemnity under this Section 7.2Ewill not be applicable for any Losses due to a Release of any HazardousMaterial by any other party other than Tenant or its Agents.

 

Landlord agrees that it shall not release anyHazardous Materials in the Building or Common Area in violation of theapplicable Hazardous Materials Laws.  Ifany Hazardous Materials have been released in the Building or Common Area inviolation of the Hazardous Materials Laws, other than by Tenant or any of itsAgents, and such Hazardous Materials are required to be remediated under theapplicable Hazardous Materials Law by a governmental authority havingjurisdiction over the subject matter at the Building, then Landlord agrees toremediate such Hazardous Materials, at its sole cost and expense, to the extentrequired under the Hazardous Materials Laws and otherwise in a mannerdetermined by Landlord in its reasonable good faith

 

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discretion and in a manner that minimizes, to the extent reasonablypossible, interference with Tenant’s use of the Premises.

 

F.                                      HazardousMaterial.  As used herein, the term“**Hazardous Material**” means anyhazardous or toxic substance, material or waste which is or becomes regulatedby any local governmental authority, the State of California or the UnitedStates Government or under any Hazardous Material Law.  The term “Hazardous Material,” includes,without limitation, petroleum products, asbestos, PCB’s, and any material orsubstance which is (i) listed under Article 9 or defined as hazardous orextremely hazardous pursuant to Article 11 of Title 22 of the CaliforniaAdministrative Code, Division 4, Chapter 20, (ii) defined as a “hazardouswaste” pursuant to Section 1004 of the Federal Resource Conservation andRecovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6903), or (iii) defined as a“hazardous substance” pursuant to Section 101 of the ComprehensiveEnvironmental Response; Compensation and Liability Act, 42 U.S.C. 9601 et seq.(42 U.S.C. 9601).  As used herein, theterm “**Hazardous Material Law**”shall mean any statute, law, ordinance, or regulation of any governmental bodyor agency (including the U.S. Environmental Protection Agency, the CaliforniaRegional Water Quality Control Board, and the California Department of HealthServices) which regulates the use, storage, release or disposal of anyHazardous Material.

 

G.                                     Survival.  The obligations of Landlord and Tenant underthis Section 7.2 shall survive the expiration or earlier termination of theLease Term.  The rights and obligationsof Landlord and Tenant with respect to issues relating to Hazardous Materialsare exclusively established by this Section 7.2.  In the event of any inconsistency between any other part of thisLease and this Section 7.2, the terms of this Section 7.2 shall control.

 

7.3                                 Utilities:  Tenant shall promptly pay, as the samebecome due, all charges for water, gas, electricity, telephone, sewer service,waste pick-up and any other utilities, materials or services furnished directlyto or used by Tenant on or in the Premises during the Lease Term, including,without limitation, (i) meter, use and/or connection fees, hook-up fees, orstandby fee (excluding any connection fees or hook-up fees which relate tomaking the existing electrical, gas, and water service available to the Premisesas of the Commencement Date, which shall be paid by Landlord, if necessary),and (ii) penalties for discontinued or interrupted service, unless suchdiscontinuation or interruption results from the acts, or where there is a dutyto act at law or under this Lease, the omissions of Landlord or Landlord’sAgents, in which event Landlord shall pay such penalties.

 

7.4                                 Compliancewith Governmental Regulations: Landlord and Tenant shall comply with all rules, regulations andrequirements promulgated by national, state or local governmental agencies orutility suppliers concerning the use of utility services, including anyrationing, limitation or other control. Tenant shall not be entitled to terminate this Lease nor to anyabatement in rent by reason of such compliance.

 

ARTICLE 8 COMMONOPERATING EXPENSES

 

8.1                                 Tenant’sObligation to Reimburse:  AsAdditional Rent, Tenant shall pay Tenant’s Share (specified in Section Gof the Summary) of all Common Operating Expenses; provided, however, if theProject contains more than one building, then Tenant shall pay Tenant’s Shareof all Common Operating Expenses allocated to the Building in Landlord’sreasonable good faith judgment, including (a) all Common Operating Expensespaid with respect to the maintenance, repair, replacement and use of theBuilding, and (b) a proportionate share of all Common Operating Expenses whichrelate to the Project in general that are not fairly allocable to any onebuilding that is part of the Project. Tenant shall pay Tenant’s Share of Common Operating Expenses in advancein estimated monthly installments, in accordance with the following: (i) on orbefore the commencement of each of Landlord’s fiscal years during the Term,Landlord shall deliver to Tenant Landlord’s reasonable estimate of the CommonOperating Expenses it anticipates will be paid or incurred for the followingfiscal year; (ii) during such  fiscalyear, Tenant shall pay Tenant’s Share of the estimated Common OperatingExpenses in advance in monthly installments as estimated by Landlord at thesame time as the installments of 

 

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Base Monthly Rent are paid; and (iii) within 180 days after the end ofeach Landlord’s fiscal year, Landlord shall furnish to Tenant a statement inreasonable detail of the actual Common Operating Expenses paid or incurred byLandlord during the just ended Landlord’s fiscal year (the “**Annual Reconciliation Statement**”) andthereupon there shall be an adjustment between Landlord and Tenant, with paymentto Landlord or credit by Landlord against the next installment(s) of BaseMonthly Rent, as the case may require, within thirty (30) days after deliveryby Landlord to Tenant of said statement, so that Landlord shall receive theentire amount of Tenant’s Share of all Common Operating Expenses for suchLandlord’s fiscal year and no more.  Thefailure of Landlord to delivery such annual reconciliation statement withinsaid 180-day period under clause (iii) above shall not constitute a waiver orotherwise release a party from its obligation to make a payment or credit whensuch reconciliation is actually done.

 

Notwithstanding anything to the contrary in thisLease, the Project may consist of multiple buildings and certain CommonOperating Expenses may pertain to a particular building(s) and other CommonOperating Expenses may pertain to the Project as a whole.  Landlord reserves the right in itsreasonable good faith discretion to allocate any such costs applicable to anyparticular building within the Project to the building in question whosetenants shall be responsible for payment of their respective proportionateshares in the pertinent building and other such costs applicable to the Projectto each building in the Project (including the Building) with the tenants ineach such building being responsible for paying their respective proportionateshares in such building of such costs to the extent required under theapplicable leases. Landlord shall in good faith attempt to allocate such coststo the buildings (including the Building) in a reasonable, non-discriminatorymanner and such allocation shall be binding on Tenant.

 

8.2                                 CommonOperating Expenses Defined:  Theterm “**Common Operating Expenses**”shall mean the total reasonable amounts paid or payable, whether by Landlord orothers on behalf of Landlord, in connection with the ownership, maintenance,repair, and operations of the Building, the Common Areas and the Project,including without limitation, the following:

 

A.                                   Allreasonable costs and expenses paid or incurred by Landlord in doing thefollowing (including payments to independent contractors providing servicesrelated to the performance of the following): (i) maintaining, cleaning,repairing, resurfacing and replacing the roof (including repair of leaks) andthe exterior surfaces (including painting) of all buildings located on theProject; (ii) maintenance of the liability, fire, property damage, earthquakeand other insurance covering the Project carried by Landlord pursuant toSection 9.2 (including the prepayment of premiums for coverage of up to oneyear); (iii) maintaining, repairing, operating and replacing when necessaryHVAC equipment, utility facilities and other building service equipment; (iv)providing utilities to the Common Area (including lighting, trash removal andwater for landscaping irrigation); (v) complying with all applicable Laws ineffect on or after the Commencement Date and Private Restrictions; (vi)operating, maintaining, repairing, cleaning, painting, re-striping and resurfacingthe Common Area; (vii) replacement or installation of lighting fixtures,directional or other signs and signals, irrigation systems, trees, shrubs,ground cover and other plant materials, and all landscaping in the Common Area;and (viii) providing security (provided, however, that Landlord shall not beobligated to provide security and if it does, Landlord may discontinue suchservice at any time and in any event Landlord shall not be responsible for anyact or omission of any security personnel); and (ix) capital improvements asprovided in Section 5.4 hereof;

 

B.                                     Thefollowing costs: (i) Real Property Taxes as defined in Section 8.3; (ii) up to$10,000 of the amount of any commercially reasonable “deductible” paid byLandlord with respect to damage caused by any Insured Peril; (iii) thereasonable cost to repair damage caused by an Uninsured Peril up to a maximumamount in any 12 month period equal to $10,000; and (iv) that portion of allreasonable compensation (including benefits and premiums for workers’compensation and other insurance) paid to or on behalf of employees of Landlordbelow the level of senior property manager or regional property manager butonly to the extent they are involved in the performance of the work describedby Section 8.2A that is fairly allocable to the Project;

 

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C.                                     Commerciallyreasonable fees for management services rendered by either Landlord or a thirdparty manager engaged by Landlord (which may be a party affiliated withLandlord), except that the total amount charged for management services andincluded in Tenant’s Share of Common Operating Expenses shall not exceed themonthly rate of 3% of the monthly Rent.

 

D.                                    Alladditional reasonable costs and expenses incurred by Landlord with respect tothe operation, protection, maintenance, repair and replacement of the Projectwhich would be considered a current expense (and not a capital expenditure)pursuant to generally accepted accounting principles.

 

E.                                      CommonOperating Expenses shall not include any of the following: (i) payments(including without limitation interest, principal, points and fees) on anyloans or ground leases affecting the Project; (ii) depreciation of anybuildings or any major systems or building service equipment within theProject; (iii) advertising and other fees and costs (including withoutlimitation legal and architectural fees, leasing commissions and tenantimprovement allowances) incurred in procuring tenants; (iv) the cost of work donefor tenant improvements and redecoration work in leasable space or servicesfurnished for the exclusive use of other tenants of the Project; (v) any costincurred in complying with Hazardous Materials Laws, which subject is governedexclusively by Section 7.2; (vi) costs to the extent paid directly byindividual tenants to suppliers, including tenant electricity, telephone andother utility costs; (vii) costs relating to creating or maintaining Landlord’sexistence as a corporation, partnership or other entity; (viii) the cost of anyitems to the extent for which Landlord is reimbursed by (or is entitled toreimbursement by) insurance, condemnation awards, refund, rebate or otherwise,and any expenses for repairs or maintenance to the extent covered by warranties,guaranties and service contracts, provided that any charges for obtaining ormaintaining such warranties or guarantees or enforcing warranty or guaranteeclaims shall be included in Common Operating Expenses, and Landlord agrees touse its good faith discretion in determining whether to pursue such enforcementor collection efforts; (ix) costs incurred in connection with any disputesbetween Landlord and its employees, between Landlord and property management,or between Landlord and other tenants or occupants; (x) costs, expenses andcharges incurred in connection with the sale of any portion of the Project;(xi) costs of repairs or maintenance required by reason of the negligence orwillful misconduct of Landlord, or of the active negligence of other occupantsof the Project, or of the officers, directors, employees, contractors, oragents of any of them; (xii) costs incurred as a consequence of any default orbreach by Landlord hereunder; and (xiii) payments to affiliates of Landlord forgoods or services provided to Landlord to the extent such payments exceed thecustomary charges for such goods or services for comparable buildings in thevicinity of the Project.

 

8.3                                 RealProperty Taxes Defined:  The term “**Real Property Taxes**” shall mean all taxes,assessments, levies, and other charges of any kind or nature whatsoever,general and special, foreseen and unforeseen (including all installments ofprincipal and interest required to pay any existing or future general orspecial assessments for public improvements, services or benefits, and anyincreases resulting from reassessments resulting from a change in ownership,new construction, or any other cause, all of which shall be paid over thelongest period allowed by Law), now or hereafter imposed by any governmental orquasi-governmental authority or special district having the direct or indirectpower to tax or levy assessments, which are levied or assessed against, or withrespect to the value, occupancy or use of all or any portion of the Project (asnow constructed or as may at any time hereafter be constructed, altered, orotherwise changed) or Landlord’s interest therein, the fixtures, equipment andother property of Landlord, real or personal, that are an integral part of andlocated on the Project, the gross receipts, income, or rentals from theProject, or the use of parking areas, public utilities, or energy within theProject.  If at any time during theLease Term the method of taxation or assessment of the Project prevailing as ofthe Effective Date shall be altered so that in lieu of or in addition to anyReal Property Tax described above there shall be levied, assessed or imposed(whether by reason of a change in the method of taxation or assessment,creation of a new tax or charge, or any other cause) an alternate or additionaltax or charge (i) on the value, use or occupancy of the Project or Landlord’sinterest therein, or (ii) on or measured by the gross receipts, income orrentals from the Project, on Landlord’s business of leasing the Project, orcomputed in any manner with respect to the operation of the Project, then anysuch tax or charge,

 

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however designated, shall be included within the meaning of the termReal Property Taxes for purposes of this Lease.  If any Real Property Tax is based upon property or rentsunrelated to the Project, then only that part of such Real Property Tax that isfairly allocable to the Project shall be included within the meaning of theterm Real Property Taxes. Notwithstanding the foregoing, the term Real Property Taxes shall notinclude (a) income, estate, excise, capital levy, state, payroll, stamp,profit, inheritance, transfer taxes to record a conveyancing document, gift orfranchise taxes, however designated, except to the extent to which after theCommencement Date Landlord demonstrates that such tax is first being imposed inlieu of or in substitution for one or more “Real Property Taxes” as abovedefined; or (b) any increase in Real Property Taxes due to an increase in theassessed value of the Project resulting from the construction of an improvementmade to the Project after the Commencement Date that will not be for thebenefit of the Building (such as the construction of a parking garage in theProject where Tenant will not have any right to use such parking garage), or(c) any interest or penalties resulting from the late payment of “Real PropertyTaxes” by Landlord.

 

8.4                                 Adjustments.  Notwithstanding the foregoing provisions,Tenant’s Share as to certain expenses included in Common Operating Expenses maybe calculated differently to yield a higher percentage share for Tenant as tothose expenses if Landlord permits other tenants or occupants in the Project toincur such expenses directly rather than have Landlord incur the expense incommon for the Project.  In such case,Tenant’s Share of the applicable expense shall be calculated as having as itsdenominator the sum of the gross leasable areas of all premises in the Projectless the gross leasable areas of tenants who have incurred such expensedirectly.  Nothing herein shall implythat Landlord will permit Tenant or any other tenant of the Project to incurCommon Area Costs.  Any such permissionshall be in the sole discretion of Landlord.

 

8.5                                 Inspection.  Tenant shall have the right at its ownexpense to inspect the books and records of Landlord pertaining to CommonOperating Expenses once in any calendar year by any employee of Tenant or by acertified public accountant reasonably approved by Tenant and Landlord(provided such certified public accountant charges for its service on an hourlybasis and not based on a percentage of any recovery or similar incentivemethod) at reasonable times, and upon reasonable written notice to Landlord as hereinafterprovided.  Within ninety (90) days afterreceipt of Landlord’s annual reconciliation, Tenant shall have the right, afterat least thirty (30) days prior written notice to Landlord, to inspect at theoffices of Landlord or its property manager, the books and records of Landlordpertaining solely to the Common Operating Expenses for the immediatelypreceding calendar year covered in such annual reconciliation statement.  All expenses of the inspection shall beborne by Tenant and must be completed within thirty (30) days aftercommencement of the inspection.  IfTenant’s inspection reveals a discrepancy in the comparative annualreconciliation statement, Tenant shall deliver a copy of the inspection reportand supporting calculations to Landlord within thirty (30) days aftercompletion of the inspection.  If Tenantand Landlord are unable to resolve the discrepancy within thirty (30) daysafter Landlord’s receipt of the inspection report, either party may upon writtennotice to the other have the matter decided by an inspection by an independentcertified public accounting firm approved by Tenant and Landlord (the “**CPA Firm**”), which approval shall not beunreasonably withheld or delayed.  Ifthe inspection by the CPA Firm shows that the actual amount of Common OperatingExpenses payable by Tenant is greater than the amount previously paid by Tenantfor such accounting period, Tenant shall pay Landlord the difference withinthirty (30) days after such determination. If the inspection by the CPA Firm shows that the actual amount is lessthan the amount paid by Tenant, then the difference shall be refunded to Tenantwithin thirty (30) days after such determination.  Tenant shall pay for the cost of the inspection by the CPA Firm,unless such inspection shows that Landlord overstated Common Operating Expensesby more than five percent (5%), in which case Landlord shall pay for the costof the inspection by the CPA Firm.

 

ARTICLE 9 INSURANCE

 

9.1                                 Tenant’sInsurance:  Tenant shall maintaininsurance complying with all of the following:

 

A.                                   Types.  Tenant shall procure, pay for and keep infull force and effect the following:

 

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(1)  Commercialgeneral liability insurance, including property damage, against liability forpersonal injury, bodily injury, death and damage to property occurring in orabout, or resulting from an occurrence in or about, the Premises with combinedsingle limit coverage of not less than the amount of Tenant’s LiabilityInsurance Minimum specified in Section P of the Summary, which insuranceshall contain a “contractual liability” endorsement insuring Tenant’sperformance of Tenant’s obligation to indemnify Landlord contained in Section10.3;

 

(2)  Fire andproperty damage insurance in so-called “all risk” form insuring Tenant’s TradeFixtures and Tenant’s Alterations for the full actual replacement cost thereof;

 

(3)  Businessinterruption insurance with limits of liability representing at leastapproximately six months of income, business auto liability covering owned,non-owned and hired vehicles with a limit of not less than $1,000,000 peraccident, insurance protecting against liability under workers’ compensationlaws with limits at least as required by statute, insurance for all plate glassin the Premises, and such other insurance that is reasonably required byLandlord or any Lender and customarily carried by tenants of similar propertyin similar businesses.

 

B.                                     Requirements.  Where applicable and required by Landlord,each policy of insurance required to be carried by Tenant pursuant to thisSection 9.1: (i) shall name Landlord and such other parties in interest asLandlord reasonably designates as additional insureds; (ii) shall be primaryinsurance which provides that the insurer shall be liable for the full amountof the loss up to and including the total amount of liability set forth in thedeclarations without the right of contribution from any other insurancecoverage of Landlord; (iii) shall be in a form reasonably satisfactory toLandlord; (iv) shall be carried with companies reasonably acceptable toLandlord; (v) shall provide that such policy shall not be subject tocancellation, lapse or change except after at least 30 days prior writtennotice to Landlord so long as such provision of 30 days notice is reasonablyobtainable, but in any event not less than 10 days prior written notice; (vi)shall not have a “deductible” in excess of such amount that is reasonablyapproved by Landlord, except that the original party signing this Lease asTenant, and its affiliates, may elect to have deductible that is customarilycarried by Tenant at other comparably leased properties in comparable areas;(vii) shall contain a cross liability endorsement; and (viii) shall contain a“severability” clause.  If Tenant has infull force and effect a blanket policy of liability insurance with the samecoverage for the Premises as described above, as well as other coverage ofother premises and properties of Tenant, or in which Tenant has some interest,such blanket insurance shall satisfy the requirements of this Section 9.1.

 

C.                                     Evidence.  A certificate of the insurer, certifyingthat such policy has been issued, providing the coverage required by thisSection 9.1, and containing the provisions specified herein, shall be deliveredto Landlord prior to the time Tenant or any of its Agents enters the Premisesand upon renewal of such policies, but not less than 5 days prior to theexpiration of the term of such coverage. Landlord may, at any time, and from time to time, inspect and/or copyany and all insurance policies required to be procured by Tenant pursuant tothis Section 9.1 if a claim is filed against Landlord and the carrier has notaccepted coverage for Landlord.  If anyLender or insurance advisor reasonably determines at any time that the amountof coverage required for any policy of insurance Tenant is to obtain pursuantto this Section 9.1 is not adequate, then Tenant shall, no more often thanevery five (5) years during the Term, increase such coverage for such insuranceto such amount as such Lender or insurance advisor reasonably deems adequate,not to exceed the level of coverage for such insurance commonly carried bycomparable businesses similarly situated.

 

9.2                                 Landlord’sInsurance:  Landlord shall have thefollowing obligations and options regarding insurance:

 

A.                                   PropertyDamage.  Landlord shall maintain apolicy or policies of fire and property damage insurance in so-called “allrisk” form insuring Landlord (and such others as Landlord may designate)

 

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against loss of rents for a period of not less than 12 months and fromphysical damage to the Project with coverage of not less than the fullreplacement cost thereof.  Landlord mayso insure the Project separately, or may insure the Project with other propertyowned by Landlord which Landlord elects to insure together under the samepolicy or policies. Landlord shall have the right, but not the obligation, toobtain insurance for such additional perils as Landlord deems appropriate inits reasonable good faith judgment, including, without limitation, coverage fordamage by earthquake and/or flood.  Asof the date hereof, Landlord has earthquake and environmental insurance, butLandlord does not make any commitment to continue such insurance in thefuture.  All such coverage shall contain“deductibles” which Landlord deems appropriate, which in the case of earthquakeand flood insurance, may be up to 10% of the replacement value of the propertyinsured or such higher amount as is then commercially reasonable.  Landlord shall not be required to cause suchinsurance to cover any Trade Fixtures or Tenant’s Alterations of Tenant.

 

B.                                     Other.  Landlord shall maintain a policy or policiesof commercial general liability insurance insuring Landlord (and such others asare designated by Landlord) against liability for personal injury, bodilyinjury, death and damage to property occurring or resulting from an occurrencein, on or about the Project, with combined single limit coverage in such amountas Landlord from time to time determines is reasonably necessary for itsprotection, but not less than the amount of liability insurance required ofTenant under this Lease.

 

C.                                     Tenant’sObligation to Reimburse:  To theextent Landlord’s insurance rates for the Building are increased at any timeduring the Lease Term as a result of the nature of Tenant’s use of thePremises, Tenant shall reimburse Landlord for the full amount of such increaseimmediately upon receipt of a bill from Landlord therefor.

 

9.3                                 Releaseand Waiver of Subrogation:  Landlord and Tenant each hereby waives onbehalf of itself and its property insurers (none of which shall ever beassigned any such claim or be entitled thereto due to subrogation or otherwise)any and all rights of recovery, claim, action, or cause of action against theother and its officers, partners, shareholders, or employees (collectively, the“**RelatedParties**”) for any loss or damage (other than rights of recovery,claims, actions, and causes of action relating to damage to the roof of theBuilding caused by Tenant) that may occur to or within the Premises or theBuilding or any improvements thereto, or any personal property of such partytherein which is insured against under any property insurance policy actuallybeing maintained by the waiving party from time to time, even if not requiredhereunder, or which would be insured against under the terms of any insurancepolicy required to be carried or maintained by the waiving party hereunder,whether or not such insurance coverage is actually being maintained, including,in every instance, such loss or damage that may be caused by the negligence ofthe other party hereto and/or its Related Parties.  Landlord and Tenant each agrees to cause appropriate clauses tobe included in its property insurance policies necessary to implement theforegoing provisions to the extent necessary.

 

ARTICLE 10 LIMITATION ONLANDLORD’S LIABILITY AND INDEMNITY

 

10.1                           Limitationon Landlord’s Liability:  Landlordshall not be liable to Tenant, nor shall Tenant be entitled to terminate thisLease or to any abatement of rent (except as expressly provided otherwiseherein), for any injury to Tenant or Tenant’s Agents, damage to the property ofTenant or Tenant’s Agents, or loss to Tenant’s business resulting from any: (i)failure, interruption or installation of any HVAC or other utility system orservice; (ii) failure to furnish or delay in furnishing any utilities orservices when such failure or delay is caused by fire or other peril, theelements, labor disturbances of any character, or any other accidents or otherconditions beyond the reasonable control of Landlord; (iii) limitation,curtailment, rationing or restriction on the use of water or electricity, gasor any other form of energy or any services or utility serving the Project;(iv) vandalism or forcible entry by unauthorized persons or the criminal act ofany person; or (v) penetration of water into or onto any portion of the Premisesor the Building through roof leaks or otherwise.  Notwithstanding the foregoing but subject to Section 9.3,Landlord shall be liable for any such injury, damage or loss for events underclauses (i), (iii) and (v) above which is proximately caused by the acts or,where there is a duty to act by

 

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Landlord to Tenant at law or under this Lease, the omissions ofLandlord and Landlord’s Agents, or the negligence or willful misconduct ofLandlord or its Agents.

 

10.2                           Limitationon Recourse:  If either party is acorporation, limited liability company, trust, partnership, joint venture,unincorporated association or other form of business entity: (i) theobligations of such party shall not constitute personal obligations of theofficers, directors, trustees, partners, joint venturers, members, owners,stockholders, or other principals or representatives of such business entity;and (ii) the other party shall not have recourse to the assets of suchofficers, directors, trustees, partners, joint venturers, members, owners,stockholders, principals or representatives except to the extent of theirinterest in the Project.  Tenant shallhave recourse only to the interest of Landlord in the Project for thesatisfaction of the obligations of Landlord and shall not have recourse to anyother assets of Landlord for the satisfaction of such obligations.

 

10.3                           Indemnificationof Landlord:  Subject to Section 9.3above, Tenant shall hold harmless, indemnify and defend Landlord, and itsAgents from all liability, penalties, losses, damages, costs, expenses, causesof action, claims and/or judgments arising by reason of any death, bodilyinjury, personal injury or property damage resulting from (i) any cause orcauses whatsoever occurring in or resulting from an occurrence in the Premisesduring the Lease Term, except to the extent due to the negligence of Landlord,(ii) the negligence or willful misconduct of Tenant or its Agents, on or aboutthe Project the same may occur, or (iii) an Event of Tenant’s Default.  Subject to Section 9.3 above, Landlord shallhold harmless, indemnify and defend Tenant or Tenant’s Agents from allliability, penalties, losses, damages, costs, expenses, causes of action,claims and/or judgments arising by reason of any death, bodily injury, personalinjury or property damage resulting from negligence or willful misconduct ofLandlord or Landlord’s Agents or default (after notice and the expiration ofthe applicable cure period as provided in Section 13.6) by Landlord hereunderin connection with the repair and maintenance of the Common Area.  The provisions of this Section 10.3 shallsurvive the expiration or sooner termination of this Lease.

 

ARTICLE 11 DAMAGE TO PREMISES

 

11.1                           Landlord’sDuty to Restore:  If the Premisesare damaged by any peril after the Effective Date, Landlord shall restore thePremises unless the Lease is terminated by Landlord pursuant to Section 11.2 orby Tenant pursuant to Section 11.3.  Allinsurance proceeds available from the fire and property damage insurancecarried by Landlord pursuant to Section 9.2 shall be paid to and become theproperty of Landlord.  If this Lease isnot so terminated, then upon receipt of the insurance proceeds (if the loss iscovered by insurance) and the issuance of all necessary governmental permits,Landlord shall  commence and diligentlyprosecute to completion the restoration of the Premises, to the extent thenallowed by Law, to substantially the same condition in which the Premises wereimmediately prior to such damage. Landlord’s obligation to restore shall be limited to the Premises andinterior improvements constructed by Landlord as they existed as of theCommencement Date, excluding any Tenant’s Alterations, Trade Fixtures and/orpersonal property constructed or installed by Tenant in the Premises.  If this Lease is not terminated pursuant toSection 11.2 or 11.3 below, Tenant shall forthwith replace or fully repair allTenant’s Alterations and Trade Fixtures installed by Tenant and existing at thetime of such damage or destruction, and all insurance proceeds received byTenant from the insurance carried by it pursuant to Section 9.1A(2) shall beused for such purpose.

 

11.2                           Landlord’sRight to Terminate:  Landlord shallhave the right to terminate this Lease in the event any of the followingoccurs, which right may be exercised only by delivery to Tenant of a writtennotice of election to terminate within 30 days after the date of such damage:

 

A.                                   DamageFrom Insured Peril.  The Building isdamaged by an Insured Peril to such an extent that the estimated cost torestore, after deducting the applicable deductible (except if the damage is dueto an earthquake), exceeds 50% of the then actual replacement cost thereof;

 

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B.                                     DamageFrom Uninsured Peril.  The Buildingis damaged by an Uninsured Peril to such an extent that the estimated cost torestore exceeds 10% of the then actual replacement cost thereof; provided,however, that Landlord may not terminate this Lease pursuant to this Section11.2B if one or more tenants of the Project agree in writing to pay the amountby which the cost to restore the damage exceeds such amount and subsequentlydeposit such amount with Landlord within 30 days after Landlord has notifiedTenant of its election to terminate this Lease;

 

C.                                     DamageNear End of Term.  The Premises aredamaged by any peril within 12 months of the last day of the Lease Term to suchan extent that the estimated cost to restore equals or exceeds an amount equalto six times the Base Monthly Rent then due; provided, however, that Landlordmay not terminate this Lease pursuant to this Section 11.2C if Tenant, at thetime of such damage, has a then valid express written option to extend the LeaseTerm and Tenant, notwithstanding the provisions of Section 2.6 to the contrary,exercises such option to extend the Lease Term within 15 days following thedate of such damage; or

 

D.                                    Restrictionson Restoration.  The Building isdamaged by any peril and, because of the Laws then in force, (i) cannot berestored at reasonable cost (after the application of insurance proceeds) tosubstantially the same condition in which it was prior to such damage, or (ii)cannot be used for the same use being made thereof before such damage ifrestored as required by this Article.

 

E.                                      DefinedTerms.  As used herein, thefollowing terms shall have the following meanings: (i) the term “**Insured Peril**” shall mean a peril actuallyinsured against or required to be insured against for which the insuranceproceeds actually received by Landlord are sufficient (except for any“deductible” amount specified by such insurance and any and all costs andexpenses, including adjusters and attorney’s fees, of obtaining such insuranceproceeds) to restore the Project under then existing building codes to thecondition existing immediately prior to the damage; and (ii) the term “**Uninsured Peril**” shall mean any peril whichis not an Insured Peril. Notwithstanding the foregoing, if the “deductible” for earthquake orflood insurance exceeds 2% of the replacement cost of the improvements insured,such peril shall be deemed an “Uninsured Peril”.

 

11.3                           Tenant’sRight to Terminate:  If the Premisesare damaged by any peril and Landlord does not elect to terminate this Lease oris not entitled to terminate this Lease pursuant to Section 11.2, then as soonas reasonably practicable, Landlord shall furnish Tenant with the writtenopinion of Landlord’s architect or construction consultant as to when the restorationwork required of Landlord may be completed. Tenant shall have the right to terminate this Lease in the event any ofthe following occurs, which right may be exercised only by delivery to Landlordof a written notice of election to terminate within 30 days after Tenantreceives from Landlord the estimate of the time needed to complete suchrestoration.

 

A.                                   MajorDamage.  The Premises are damaged byany peril and, in the reasonable opinion of Landlord’s architect orconstruction consultant, the restoration of the Premises cannot besubstantially completed within 270 days after the date of such damage; or aftercommencement of such restoration where the parties have not otherwise electedto terminate as provided in this Article 11, if Landlord notifies Tenant thatthe restoration will be delayed (other than due to a delay caused by Tenant orits Agents) beyond said 270-day period and Tenant notifies Landlord in writingwithin 10 days after receipt of such notice of delay from Landlord of Tenant’selection to terminate; or

 

B.                                     DamageNear End of Term.  The Premises aredamaged by any peril within 12 months of the last day of the Lease Term and, inthe reasonable opinion of Landlord’s architect or construction consultant, therestoration of the Premises cannot be substantially completed within 90 daysafter the date of such damage or such damage renders unusable more than 30% ofthe Premises.

 

11.4                           Abatementof Rent:  In the event of damage tothe Premises, the Base Monthly Rent and the Additional Rent shall betemporarily abated during the period of restoration in proportion to the degreeto

 

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which Tenant’s use of the Premises is impaired by such damage.  Tenant shall not be entitled to anycompensation or damages from Landlord for loss of Tenant’s business or propertyor for any inconvenience or annoyance caused by such damage orrestoration.  Tenant hereby waives theprovisions of California Civil Code Sections 1932(2) and 1933(4) and theprovisions of any similar law hereinafter enacted.

 

ARTICLE 12 CONDEMNATION

 

12.1                           INTENTIONALLYOMITTED.

 

12.2                           Tenant’sTermination Right:  Tenant shallhave the right to terminate this Lease if, as a result of any taking by meansof the exercise of the power of eminent domain (including any voluntary sale ortransfer by Landlord to any condemnor under threat of condemnation), (i) 10% ormore of the Premises is so taken and that part of the Premises that remainscannot be restored within a reasonable period of time and thereby madereasonably suitable, in Tenant’s reasonable judgment, for the continuedoperation of the Tenant’s business, or (ii) there is a taking affecting theCommon Area and, as a result of such taking, Landlord cannot provide parkingspaces within reasonable walking distance of the Premises equal in number to atleast 100% of the number of spaces allocated to Tenant by Section 2.1, whetherby rearrangement of the remaining parking areas in the Common Area (includingconstruction of multi-deck parking structures or re-striping for compact carswhere permitted by Law) or by alternative parking facilities on otherland.  Tenant must exercise such rightwithin a reasonable period of time, to be effective on the date that possessionof that portion of the Premises or Common Area that is condemned is taken bythe condemnor.

 

12.3                           Restorationand Abatement of Rent:  If any partof the Premises or the Common Area is taken by condemnation and this Lease isnot terminated, then Landlord shall restore the remaining portion of thePremises and Common Area and interior improvements constructed by Landlord asthey existed as of the Commencement Date, excluding any Tenant’s Alterations,Trade Fixtures and/or personal property constructed or installed by Tenant.  Thereafter, except in the case of atemporary taking, as of the date possession is taken the rent (as defined inSection 3.3 above) shall be reduced in the same proportion that the floor areaof that part of the Premises so taken (less any addition thereto by reason ofany reconstruction) bears to the original floor area of the Premises.

 

12.4                           TemporaryTaking:  If any portion of thePremises is temporarily taken for ninety (90) days or less, this Lease shallremain in effect.  If any portion of thePremises is temporarily taken by condemnation for a period which exceeds ninety(90) days or which extends beyond the natural expiration of the Lease Term, andsuch taking materially and adversely affects Tenant’s ability to use thePremises for the Permitted Use in Tenant’s reasonable judgment, then Tenantshall have the right to terminate this Lease, effective on the date possessionis taken by the condemnor.

 

12.5                           Divisionof Condemnation Award:  Any awardmade as a result of any condemnation of the Premises or the Common Area shallbelong to and be paid to Landlord, and Tenant hereby assigns to Landlord all ofits right, title and interest in any such award; provided, however, that Tenantshall be entitled to receive any condemnation award that is made directly to Tenantfor the following: (i) for the taking of personal property or Trade Fixturesbelonging to Tenant, (ii) for the interruption of Tenant’s business and itsmoving costs, (iii) for loss of Tenant’s goodwill; and (iv) for any temporarytaking where this Lease is not terminated as a result of such taking.  The rights of Landlord and Tenant regardingany condemnation shall be determined as provided in this Article, and eachparty hereby waives the provisions of California Code of Civil ProcedureSection 1265.130 and the provisions of any similar law hereinafter enactedallowing either party to petition the Superior Court to terminate this Lease inthe event of a partial taking of the Premises.

 

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ARTICLE 13 DEFAULT AND REMEDIES

 

13.1                           Eventsof Tenant’s Default:  Tenant shallbe in default of its obligations under this Lease if any of the followingevents occurs (an “**Event of Tenant’s Default**”):

 

A.                                   Payment.  Tenant shall have failed to pay Base MonthlyRent or Additional Rent when due, and such failure is not cured within 5 daysafter delivery of written notice from Landlord specifying such failure to pay;or

 

B.                                     GeneralCovenant.  Tenant shall have failedto perform any term, covenant, or condition of this Lease other than thosereferred to in any other subsection of this Section 13.1, and Tenant shall havefailed to cure such breach within 30 days after written notice from Landlordspecifying the nature of such breach where such breach could reasonably be curedwithin said 30 day period, or if such breach could not be reasonably curedwithin said 30 day period, Tenant shall have failed to commence such curewithin said 30 day period and thereafter continue with due diligence toprosecute such cure to completion within such time period as is reasonablyneeded; or

 

C.                                     Transfer.  Tenant shall have sublet the Premises orassigned its interest in the Lease in violation of the provisions contained inArticle 14 and such sublease or assignment is not terminated or rescindedwithin ten (10) days after receipt of notice from Landlord; or

 

D.                                    INTENTIONALLYOMITTED; or

 

E.                                      Insolvency.  The occurrence of the following: (i) themaking by Tenant of any general arrangements or assignments for the benefit ofcreditors; (ii) Tenant becomes a “debtor” as defined in 11 USC §101 or anysuccessor statute thereto (unless, in the case of a petition filed againstTenant, the same is dismissed within 90 days); (iii) the appointment of atrustee or receiver to take possession of substantially all of Tenant’s assetslocated at the Premises or of Tenant’s interest in this Lease, where possessionis not restored to Tenant within 90 days; or (iv) the attachment, execution orother judicial seizure of substantially all of Tenant’s assets located at thePremises or of Tenant’s interest in this Lease, where such seizure is notdischarged within 90 days; provided, however, in the event that any provisionof this Section 13.1E is contrary to any applicable Law, such provision shallbe of no force or effect; or

 

F.                                      RequiredDocuments.  Tenant shall have failedto deliver documents required of it pursuant to Section 15.4 or Section 15.6within the time periods specified therein and such failure continues for ten(10) business days after notice of such failure.

 

13.2                           Landlord’sRemedies:  If an Event of Tenant’sDefault occurs, Landlord shall have the following remedies, in addition to allother rights and remedies provided by any Law or otherwise provided in thisLease, to which Landlord may resort cumulatively or in the alternative:

 

A.                                   Continue.  Landlord may keep this Lease in effect andenforce by an action at law or in equity all of its rights and remedies underthis Lease, including (i) the right to recover the rent and other sums as theybecome due by appropriate legal action, (ii) the right to make paymentsrequired of Tenant or perform Tenant’s obligations and be reimbursed by Tenantfor the reasonable cost thereof with interest at the Agreed Interest Rate fromthe date the sum is paid by Landlord until Landlord is reimbursed by Tenant,and (iii) the remedies of injunctive relief and specific performance to compelTenant to perform its obligations under this Lease.  Notwithstanding anything contained in this Lease, in the event ofa breach of an obligation by Tenant which results in a condition which poses animminent danger to safety of persons or damage to property, an unsightlycondition visible from the exterior of the Building, or a threat to insurancecoverage, then if Tenant does not commence to cure such breach within 3 daysafter delivery to it of written notice from Landlord identifying the breach,and diligently pursue the completion of such cure thereafter, Landlord may curethe breach of Tenant and be reimbursed by Tenant for the reasonable costthereof with interest at the Agreed Interest Rate from the date the sum is paidby Landlord until Landlord is reimbursed by Tenant. Should 

 

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Landlord not terminate this Lease by giving Tenant written notice,Landlord may enforce all its rights and remedies under this Lease, includingthe right to recover the rent as it becomes due under the Lease as provided inCalifornia Civil Code Section 1951.4.

 

B.                                     Enterand Relet.  Landlord may enter thePremises and release them to third parties for Tenant’s account for any period,whether shorter or longer than the remaining Lease Term.  Tenant shall be liable immediately toLandlord for all reasonable costs Landlord incurs in releasing the Premises,including brokers’ commissions, and expenses of altering and preparing thePremises required by the releasing. Tenant shall pay to Landlord the rent and other sums due under thisLease on the date the rent is due, less the rent and other sums Landlordreceived from any releasing.  No act byLandlord allowed by this Section 13.2B shall terminate this Lease unlessLandlord notifies Tenant in writing that Landlord elects to terminate thisLease.  Notwithstanding any releasingwithout termination, Landlord may later elect to terminate this Lease becauseof the default by Tenant.

 

C.                                     Terminate.  Landlord may terminate this Lease by givingTenant written notice of termination, in which event this Lease shall terminateon the date set forth for termination in such notice.  Any termination under this Section 13.2C shall not relieve Tenantfrom its obligation to pay sums then due Landlord or from any claim againstTenant for damages or rent previously accrued or then accruing.  In no event shall any one or more of thefollowing actions  by Landlord, in theabsence of a written election by Landlord to terminate this Lease, constitute atermination of this Lease: (i) appointment of a receiver or keeper in order toprotect Landlord’s interest hereunder; (ii) consent to any subletting of thePremises or assignment of this Lease by Tenant, whether pursuant to theprovisions hereof or otherwise; or (iii) any other action by Landlord orLandlord’s Agents intended to mitigate the adverse effects of any breach ofthis Lease by Tenant, including without limitation any action taken to maintainand preserve the Premises or any action taken to relet the Premises or anyportions thereof to the extent such actions do not affect a termination ofTenant’s right to possession of the Premises.

 

D.                                    NoDeemed Termination.  In the eventTenant breaches this Lease and abandons the Premises, this Lease shall notterminate unless Landlord gives Tenant written notice of its election to soterminate this Lease.  No act by or onbehalf of Landlord intended to mitigate the adverse effect of such breach,including those described by Section 13.C, shall constitute a termination ofTenant’s right to possession unless Landlord gives Tenant written notice oftermination.

 

E.                                      Damages.  Landlord shall use reasonable****effortsto mitigate any damages hereunder following any termination of this Lease orany termination of Tenant’s possession of the Premises.  In the event Landlord terminates this Lease,Landlord shall be entitled, at Landlord’s election, to damages in an amount asset forth in California Civil Code Section 1951.2 as in effect on the EffectiveDate.  For purposes of computing damagespursuant to California Civil Code Section 1951.2, (i) an interest rate equal tothe Agreed Interest Rate shall be used where permitted, and (ii) the term“rent” includes Base Monthly Rent and Additional Rent.  Such damages shall include:

 

(1)                                  Theworth at the time of award of the amount by which the unpaid rent for thebalance of the term after the time of award exceeds the amount of such rentalloss that Tenant proves could be reasonably avoided, computed by discountingsuch amount at the discount rate of the Federal Reserve Bank of San Franciscoat the time of award plus one percent (1%); and

 

(2)                                  Anyother amount reasonably necessary to compensate Landlord for all detrimentproximately caused by Tenant’s failure to perform Tenant’s obligations underthis Lease, or which in the ordinary course of things would be likely to resulttherefrom, including the following: (i) reasonable expenses for cleaning,repairing or restoring the Premises; (ii) reasonable expenses for altering,remodeling or otherwise improving the Premises for the purpose of reletting,including installation of leasehold improvements (whether such installation befunded by a reduction of rent, direct payment or allowance to a new tenant, or

 

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otherwise); (iii) reasonable broker’s fees, advertising costs and otherreasonable expenses of reletting the Premises; (iv) reasonable costs ofcarrying the Premises, such as taxes, insurance premiums, utilities andsecurity precautions; (v) reasonable expenses in retaking possession of thePremises; and (vi) reasonable attorneys’ fees and court costs incurred byLandlord in retaking possession of the Premises and in releasing the Premisesor otherwise incurred as a result of Tenant’s default.

 

F.                                      NonExclusive Remedies.  Nothing in thisSection 13.2 shall limit Landlord’s right to indemnification from Tenant asprovided in Section 7.2 and Section 10.3. Any notice given by Landlord in order to satisfy the requirements ofSection 13.1A or Section 13.1B above shall also satisfy the notice requirementsof California Code of Civil Procedure Section 1161 regarding unlawful detainerproceedings.

 

13.3                           Waiver:  One party’s consent to or approval of anyact by the other party requiring the first party’s consent or approval shallnot be deemed to waive or render unnecessary the first party’s consent to orapproval of any subsequent similar act by the other party.  The receipt by Landlord of any rent orpayment with or without knowledge of the breach of any other provision hereofshall not be deemed a waiver of any such breach unless such waiver is inwriting and signed by Landlord.  No delayor omission in the exercise of any right or remedy accruing to either partyupon any breach by the other party under this Lease shall impair such right orremedy or be construed as a waiver of any such breach theretofore or thereafteroccurring.  The waiver by either partyof any breach of any provision of this Lease shall not be deemed to be a waiverof any subsequent breach of the same or of any other provisions hereincontained.

 

13.4                           LimitationOn Exercise of Rights:  At any timethat an Event of Tenant’s Default has occurred and remains uncured, (i) itshall not be unreasonable for Landlord to deny or withhold any consent orapproval requested of it by Tenant which Landlord would otherwise be obligatedto give, and (ii) Tenant may not exercise any option to extend, right toterminate this Lease, or other right granted to it by this Lease which wouldotherwise be available to it.

 

13.5                           Waiverby Tenant of Certain Remedies: Tenant waives the provisions of Sections 1932(1), 1941 and 1942 of theCalifornia Civil Code and any similar or successor law regarding Tenant’s rightto terminate this Lease or to make repairs and deduct the expenses of suchrepairs from the rent due under this Lease. Tenant hereby waives any right of redemption or relief from forfeitureunder the laws of the State of California, or under any other present or futurelaw, including the provisions of Sections 1174 and 1179 of the California Codeof Civil Procedure.

 

13.6                           LandlordDefault.  Landlord shall not be in default of this Lease unless Landlord fails toperform obligations required of Landlord within thirty (30) days afterLandlord’s receipt of written notice from Tenant to Landlord specifying whereLandlord has failed to perform such obligation; provided, however, if the natureof Landlord’s obligation is such that more than thirty (30) days are requiredfor performance, Landlord shall not be in default if Landlord commencesperformance within such thirty (30) day period and thereafter diligentlypursues the same to completion.  IfLandlord defaults in the performance of any repair or maintenance obligationsrequired of Landlord under this Lease within a reasonable time after receipt ofwritten notice from Tenant (but in no event later than thirty (30) days afterreceipt of written notice by Tenant to Landlord specifying how Landlord hasfailed to perform such obligation, unless the nature of the repair ormaintenance is such that more than thirty (30) days are required forperformance and Landlord has commenced and is proceeding with due diligence tocomplete such work), then Tenant may perform such work and bill Landlord forthe reasonable cost thereof, which Landlord will pay within thirty (30) daysafter receipt of written notice from Tenant together with reasonable supportingdocumentation.

 

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ARTICLE 14 ASSIGNMENT ANDSUBLETTING

 

14.1                           TransferBy Tenant:  The following provisionsshall apply to any assignment, subletting or other transfer by Tenant or anysubtenant or assignee or other successor in interest of the original Tenant(collectively referred to in this Section 14.1 as “Tenant”):

 

A.                                   Transfer.  Except as otherwise set forth herein, Tenantshall not do any of the following (collectively referred to herein as a “**Transfer**”), whether voluntarily,involuntarily or by operation of law, without the prior written consent ofLandlord, which consent shall not be unreasonably withheld, conditioned ordelayed: (i) sublet all or any part of the Premises or allow it to be sublet,occupied or used by any person or entity other than Tenant; (ii) assign itsinterest in this Lease; (iii) mortgage or encumber the Lease (or otherwise usethe Lease as a security device) in any manner; or (iv) materially amend ormodify an assignment, sublease or other transfer that has been previouslyapproved by Landlord.  Tenant shallreimburse Landlord for up to $2,500 of all reasonable costs and attorneys’ feesincurred by Landlord in connection with the evaluation, processing, and/ordocumentation of any requested Transfer, whether or not Landlord’s consent isgranted.  Landlord’s reasonable costsshall include the cost of any review or investigation performed by Landlord orconsultant acting on Landlord’s behalf of (i) Hazardous Materials used, stored,released, or disposed of by the potential subtenant or assignee, and/or (ii)violations of Hazardous Materials Law by the Tenant or the proposed subtenantor assignee.  Any Transfer so approvedby Landlord shall not be effective until Tenant has delivered to Landlord anexecuted counterpart of the document evidencing the Transfer which (i) is in aform reasonably approved by Landlord, (ii) contains the same terms andconditions as stated in Tenant’s notice given to Landlord pursuant to Section14.1B, and (iii) in the case of an assignment of the Lease, contains theagreement of the proposed transferee to assume all obligations of Tenant underthis Lease arising after the effective date of such Transfer and to remainjointly and severally liable therefor with Tenant.  Any attempted Transfer without Landlord’s consent, to the extentrequired hereunder, shall be voidable at Landlord’s option.  Landlord’s consent to any one Transfer shallnot constitute a waiver of the provisions of this Section 14.1 as to anysubsequent Transfer or a consent to any subsequent Transfer.  No Transfer, even with the consent ofLandlord, shall relieve Tenant of its personal and primary obligation to paythe rent and to perform all of the other obligations to be performed by Tenanthereunder.  The acceptance of rent byLandlord from any person shall not be deemed to be a waiver by Landlord of anyprovision of this Lease nor to be a consent to any Transfer.

 

B.                                     Procedure.  At least 30 days before a proposed Transferis to become effective, ** **Tenant shall give Landlord writtennotice of the proposed terms of such Transfer and request Landlord’s approval,which notice shall include the following: (i) the name and legal composition ofthe proposed transferee; (ii) a current financial statement of the transferee,financial statements of the transferee covering the preceding three years ifthe same exist, and (if available) an audited financial statement of thetransferee for a period ending not more than one year prior to the proposed effectivedate of the Transfer, all of which statements are prepared in accordance withgenerally accepted accounting principles, except as noted therein; (iii) thenature of the proposed transferee’s business to be carried on in the Premises;(iv) all consideration to be given on account of the Transfer; (v) a currentfinancial statement of Tenant (either in writing or by reference to a URLaddress or other publicly available source; and (vi) an accurately filled outresponse to Landlord’s standard hazardous materials questionnaire by thetransferee.  Tenant shall provide toLandlord such other information as may be reasonably requested by Landlordwithin seven days after Landlord’s receipt of such notice from Tenant.  Landlord shall respond in writing to Tenant’srequest for Landlord’s consent to a Transfer within the later of (i) 20 days ofreceipt of such request together with the required accompanying documentation,or (ii) 7 days after Landlord’s receipt of all information which ** **Landlordreasonably requests within seven days after it receives Tenant’s first noticeregarding the Transfer in question.  IfLandlord fails to respond in writing within said period, then Tenant shallprovide a second written notice to Landlord requesting such consent and ifLandlord fails to respond within 10 days after receipt of such second notice,then Landlord will be deemed to have consented to such Transfer.  Tenant shall immediately notify Landlord ofany material modification to the proposed terms of such Transfer, which shallalso be subject Landlord’s consent in accordance with the same process forobtaining Landlord’s initial consent to such Transfer.

 

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C.                                     Recapture.  If Tenant seeks to make a Transfer after thefourth year following the Commencement Date, Landlord shall have the right toterminate this Lease or, in the case of a sublease of less than all of thePremises, terminate this Lease as to that part of the Premises proposed to beso sublet, either (i) on the condition that the proposed transferee immediatelyenter into a direct lease of the Premises with Landlord (or, in the case of apartial sublease, a lease for the portion proposed to be so sublet) on the sameterms and conditions contained in Tenant’s notice, or (ii) so that Landlord isthereafter free to lease the Premises (or, in the case of a partial sublease,the portion proposed to be so sublet) to whomever it pleases on whatever termsare acceptable to Landlord.  In theevent Landlord elects to so terminate this Lease, then (i) if such terminationis conditioned upon the execution of a lease between Landlord and the proposedtransferee, Tenant’s obligations under this Lease shall not be terminated untilsuch transferee executes a new lease with Landlord, enters into possession andcommences the payment of rent, and (ii) if Landlord elects simply to terminatethis Lease (or, in the case of a partial sublease, terminate this Lease as tothe portion to be so sublet), the Lease shall so terminate in its entirety (oras to the space to be so sublet) fifteen (15) days after Landlord has notifiedTenant in writing of such election. Upon such termination, Tenant shall be released from any furtherobligation under this Lease if it is terminated in its entirety, or shall bereleased from any further obligation under the Lease with respect to the spaceproposed to be sublet in the case of a proposed partial sublease.  In the case of a partial termination of theLease, the Base Monthly Rent and Tenant’s Share shall be reduced to an amountwhich bears the same relationship to the original amount thereof as the area ofthat part of the Premises which remains subject to the Lease bears to theoriginal area of the Premises.  Landlordand Tenant shall execute a cancellation and release with respect to the Leaseto effect such termination.

 

Notwithstanding the foregoing provisions of Section14.1C, Landlord’s right to recapture under this Section shall not be applicableto (i) any Permitted Transfer, or (b) any other Transfer involving the sale ortransfer of Tenant’s business at the Premises where the transferee willcontinue to conduct the same or substantially similar business as Tenant at thePremises.

 

D.                                    OtherRequirements.  If Landlord consentsto a Transfer proposed by Tenant, Tenant may enter into such Transfer, and ifTenant does so, the following shall apply:

 

(1)                                  Tenantshall not be released of its liability for the performance of all of itsobligations under the Lease.

 

(2)                                  IfTenant assigns its interest in this Lease, then Tenant shall pay to Landlord62.5% of all Subrent (as defined in Section 14.1D(5)) received by Tenant.  In the case of assignment, the amount ofSubrent owed to Landlord shall be paid to Landlord on the same basis, whetherperiodic or in lump sum, that such Subrent is paid to Tenant by the assignee.

 

(3)                                  IfTenant sublets any part of the Premises, then with respect to the space sosubleased, Tenant shall pay to Landlord 62.5% of the positive difference, ifany, between (i) all ** **Subrent paid by the subtenant toTenant, less (ii) the sum of all Base Monthly Rent and Additional Rentallocable to the space sublet.  Suchamount shall be paid to Landlord on the same basis, whether periodic or in lumpsum, that such Subrent is paid to Tenant by its subtenant.

 

(4)                                  Tenant’sobligations under this Section 14.1D shall survive any Transfer.  At the time Tenant makes any payment toLandlord required by this Section 14.1D, Tenant shall deliver an itemizedstatement of the method by which the amount to which Landlord is entitled wascalculated, certified by Tenant as true and correct.  Landlord shall have the right at reasonable intervals to inspectTenant’s books and records relating to the payments due hereunder.  Upon request therefor, Tenant shall deliverto Landlord copies of all bills, invoices or other documents upon which itscalculations are based.  Landlord maycondition its approval of any Transfer upon obtaining a certification from bothTenant and the proposed transferee of all Subrent and other amounts that are tobe paid to Tenant in connection with such Transfer.

 

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(5)                                  Asused in this Section 14.1D, the term “**Subrent**”shall mean any consideration of any kind received, or to be received, by Tenantas a result of the Transfer, to the extent such sums are related to Tenant’sinterest in this Lease or in the Premises, including payments from or on behalfof the transferee (in excess of the book value thereof) for Tenant’s assets,fixtures, leasehold improvements, inventory, accounts, goodwill, equipment,furniture, and general intangibles, after deducting (i) reasonable actualout-of-pocket legal and brokerage expenses incurred and paid by Tenant tounaffiliated third parties in connection therewith, and (ii) the depreciatedvalue (in accordance with generally accepted accounting principles) of the costof alterations and improvements affixed and made a part of the Premises whichwere required to be performed for such Transfer at Tenant’s expense, which, inthe event of a sublease, shall only be applicable to the alterations andimprovements in the sublet premises.

 

E.                                      DeemedTransfers.  If Tenant is acorporation, the following shall be deemed a voluntary assignment of Tenant’sinterest in this Lease: (i) any dissolution, merger, consolidation, or otherreorganization of or affecting Tenant, whether or not Tenant is the survivingcorporation; and (ii) if the capital stock of Tenant is not publicly traded,the sale or transfer to one person or entity (or to any group of relatedpersons or entities) stock possessing more than 50% of the total combinedvoting power of all classes of Tenant’s capital stock issued, outstanding andentitled to vote for the election of directors.  If Tenant is a partnership, limited liability company or otherentity any withdrawal or substitution (whether voluntary, involuntary or byoperation of law, and whether occurring at one time or over a period of time)of any partner, member or other party owning 50% or more (cumulatively) of anyinterest in the capital or profits of the partnership, limited liabilitycompany or other entity or the dissolution of the partnership, limitedliability company or other entity, shall be deemed a voluntary assignment ofTenant’s interest in this Lease.

 

F.                                      PermittedTransfers.  Notwithstanding anythingcontained in Section 14.1, Tenant may sublease all or part of the Premises orassign its interest in this Lease to any entity (a) which controls, iscontrolled by, or is under common control with Tenant by means of an ownershipinterest of more than 50%, and/or (b) into or with which Tenant is merged orwith which Tenant is consolidated or which acquires all or substantially all ofTenant’s stock or assets as a going concern, provided that the successor has atangible net worth equal to or greater than Tenant’s at the time of suchTransfer and has other financial indicators sufficient to met Tenant’sobligations under this Lease (all of the foregoing, a “**Permitted Transfer**”) without Landlord’sprior written consent but after providing at least 20 days prior writtennotice.  Landlord shall not be entitledto terminate the Lease pursuant to Section 14.1C or to receive any part of anySubrent resulting therefrom that would otherwise be due it pursuant to Section14.1D in connection with a Permitted Transfer.

 

G.                                     ReasonableStandards.  The consent of Landlordto a Transfer may not be unreasonably withheld, conditioned or delayed providedthat it is agreed to be reasonable for Landlord to consider any of the followingreasons, which list is not exclusive, in electing to deny consent:

 

(1)                                  Thecharacter and business or professional standing of the proposed transferee atthe time of the proposed Transfer is not at least equal to that of Tenant atthe time of execution of this Lease, or if the proposed transferee does nothave a tangible net worth and other financial indicators sufficient to meet Tenant’sobligations hereunder with respect to the portion of the Premises affected bysuch Transfer;

 

(2)                                  Aproposed transferee whose occupation of the Premises would cause a diminutionin the value of the Building or Project;

 

(3)                                  Aproposed transferee whose impact or affect on the common facilities or theutility, efficiency or effectiveness of any utility or telecommunication systemserving the Building or the Project or the other occupants of the Project wouldbe adverse, disadvantageous or require improvements or changes in any utilityor telecommunication capacity currently serving the Building or the Project;

 

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(4)                                  Aproposed transferee whose occupancy will require a variation in the terms ofthis Lease (including, without limitation, a variation in the use clause) orwhich otherwise adversely affects any interest of Landlord;

 

(5)                                  Theexistence of any material default under any provision of this Lease that is notcured at the time of the request for consent to a Transfer;

 

(6)                                  Aproposed transferee who is or is likely to be, or whose business is or islikely to be, subject to compliance with additional laws or other governmentalrequirements beyond those to which Tenant or Tenant’s business is subject;

 

(7)                                  Eitherthe proposed transferee, or any person or entity which directly or indirectly,controls, is controlled by, or is under common control with, the proposedtransferee or an affiliate of the proposed transferee is negotiating withLandlord to lease space in the Building or in the Project at such time;

 

(8)                                  theproposed Transferee is a governmental agency or unit, or an existing tenant inthe Project unless such existing tenant is seeking expansion space and Landlordcannot supply such space within the Project;

 

(9)                                  Landlordotherwise determines that the proposed Transfer would have the effect ofdecreasing the value of the Building or the Project, or increasing the expensesassociated with operating, maintaining and repairing the Building or theProject; or

 

(10)                            theproposed Transferee will use, store or handle Hazardous Materials (definedabove) in or about the Premises of a type, nature or quantity not then in useby Tenant.

 

H.                                    ReasonableRestriction. The restrictions on Transfer described in this Lease areacknowledged by Tenant to be reasonable for all purposes, including, withoutlimitation, the provisions of California Civil Code (the “**Code**”) Section 1951.4(b)(2). Tenantexpressly waives any rights which it might otherwise be deemed to possesspursuant to applicable law, including, without limitation, Section 1997.040 ofthe Code, to limit any remedy of Landlord pursuant to Section 1951.2 or 1951.4of the Code by means of proof that enforcement of a restriction on use of thePremises would be unreasonable.

 

14.2                           TransferBy Landlord:  Landlord and itssuccessors in interest shall have the right to transfer their interest in thisLease and the Project at any time and to any person or entity.  In the event of any such transfer, theLandlord originally named herein (and, in the case of any subsequent transfer,the transferor) from the date of such transfer, shall be automaticallyrelieved, without any further act by any person or entity, of all liability forthe performance of the obligations of the Landlord hereunder which may accrueafter the date of such transfer only to the extent assumed in writing by suchtransferee.  After the date of any suchtransfer, the term “Landlord” as used herein shall mean the transferee of suchinterest in the Premises.

 

ARTICLE 15 GENERAL PROVISIONS

 

15.1                           Landlord’sRight to Enter:  Landlord and itsagents may enter the Premises at any reasonable time after giving at least two(2) business days’ prior written notice to Tenant (and immediately in the caseof emergency) for the purpose of: (i) inspecting the same; (ii) posting noticesof non-responsibility; (iii) supplying any service to be provided by Landlordto Tenant; (iv) showing the Premises to prospective purchasers, mortgagees or,during the last six (6) months of the Term, prospective tenants; (v) makingnecessary alterations, additions or repairs; (vi) performing Tenant’s obligationsupon an Event of Tenant’s Default; (vii) placing upon the Premises ordinary“for sale” signs or, during the last six (6) months of the Term, “for lease”signs; and (viii) responding to an emergency. Landlord shall have the right to use any and all means Landlord may deem

 

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reasonably necessary and proper to enter the Premises in anemergency.  Any entry into the Premisesobtained by Landlord in accordance with this Section 15.1 shall not be aforcible or unlawful entry into, or a detainer of, the Premises, or aneviction, actual or constructive, of Tenant from the Premises. Landlord shalluse commercially reasonable efforts to minimize any unreasonable interferencewith Tenant’s business operations and use and occupancy of the Premises inconnection with the exercise any of the foregoing rights under this Section15.1.

 

15.2                           Surrenderof the Premises:  Upon theexpiration or sooner termination of this Lease, Tenant shall vacate andsurrender the Premises to Landlord in the same condition as existed at theCommencement Date, together with any Tenant Alterations which Landlord did notspecify for removal pursuant to Section 5.2C hereof, except for (i) reasonablewear and tear, (ii) damage caused by any peril or condemnation, and (iii)contamination by Hazardous Materials for which Tenant is not responsiblepursuant to Section 7.2A or Section 7.2B. In this regard, normal wear and tear shall be construed to mean wear andtear caused to the Premises by the natural aging process which occurs in spiteof prudent application of commercially reasonable standards for maintenance,repair and janitorial practices, and does not include items of neglected ordeferred maintenance which are the responsibility of Tenant hereunder.  In any event, Tenant shall cause thefollowing to be done prior to the expiration or the sooner termination of thisLease: (i) all broken, marred, stained or nonconforming acoustical ceilingtiles shall be replaced; (ii) the plumbing and electrical systems and lightingshall be placed in good order and repair (including replacement of any burnedout, discolored or broken light bulbs, ballasts, or lenses).  If Landlord so requests, Tenant shall, priorto the expiration or sooner termination of this Lease, (i) remove any Tenant’sAlterations which Tenant is required to remove pursuant to Section 5.2 andrepair all damage caused by such removal, and (ii) return the Premises or anypart thereof to its original configuration existing as of the time the Premiseswere delivered to Tenant except for Alterations made by Tenant and notspecified by Landlord for removal pursuant to Section 5.2C hereof.  If the Premises are not so surrendered atthe termination of this Lease, Tenant shall be liable to Landlord for allreasonable costs incurred by Landlord in returning the Premises to the requiredcondition, plus interest on all such costs incurred at the Agreed InterestRate.  Tenant shall indemnify Landlordagainst loss or liability resulting from delay by Tenant in so surrendering thePremises, including, without limitation, any claims made by any succeedingtenant or losses to Landlord due to lost opportunities to lease to succeedingtenants and losses and damages suffered by Landlord due to lost opportunitiesto lease any portion of the Premises to any such succeeding tenant orprospective tenant, together with, in each case, actual attorneys’ fees andcosts.

 

15.3                           HoldingOver:  This Lease shall terminatewithout further notice at the expiration of the Lease Term.  Any holding over by Tenant after expirationof the Lease Term shall not constitute a renewal or extension of the Lease orgive Tenant any rights in or to the Premises except as expressly provided inthis Lease.  Any holding over after suchexpiration with the written consent of Landlord shall be construed to be atenancy from month to month on the same terms and conditions herein specifiedinsofar as applicable except that Base Monthly Rent shall be increased to anamount equal to 150% of the greater of (a) the Base Monthly Rent payable duringthe last full calendar month of the Lease Term, or (b) the then prevailing fairmarket rent.

 

15.4                           Subordination:  The following provisions shall govern therelationship of this Lease to any Security Instrument:

 

A.                                   ExistingSecurity Instruments.  The Lease issubject and subordinate to all Security Instruments existing as of theEffective Date.  However, if any Lenderso requires, this Lease shall become prior and superior to any such SecurityInstrument.

 

B.                                     NewSecurity Instruments.  At Landlord’selection, this Lease shall become subject and subordinate to any SecurityInstrument created after the Effective Date. Notwithstanding such subordination, Tenant’s right to quiet possessionof the Premises shall not be disturbed so long as Tenant is not in default andperforms all of its obligations under this Lease beyond the expiration of allapplicable notice and grace periods, unless this Lease is otherwise terminatedpursuant to its terms.

 

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C.                                     Documents.  Tenant shall upon request execute anydocument or instrument in commercially reasonable form which may be required byany Lender to make this Lease either prior or subordinate to a SecurityInstrument, which may include such other matters as the Lender customarily andreasonably requires in connection with such agreements, including provisionsthat the Lender not be liable for (i) the return of any security deposit unlessthe Lender receives it from Landlord, and (ii) any defaults on the part ofLandlord occurring prior to the time the Lender takes possession of the Projectin connection with the enforcement of its Security Instrument.  Tenant’s failure to execute any suchdocument or instrument within 15 business days after written demand thereforshall constitute an Event of Tenant’s Default.

 

15.5                           MortgageeProtection and Attornment:  In theevent of any default on the part of the Landlord, Tenant will use reasonableefforts to give notice by registered mail to any Lender whose name has beenprovided to Tenant and shall offer such Lender a reasonable opportunity to curethe default, including time to obtain possession of the Premises by power ofsale or judicial foreclosure or other appropriate legal proceedings, if suchshould prove necessary to effect a cure. Tenant shall attorn to any purchaser of the Premises at any foreclosuresale or private sale conducted pursuant to any Security Instrument encumberingthe Premises, or to any grantee or transferee designated in any deed given inlieu of foreclosure.

 

15.6                           EstoppelCertificates and Financial Statements: At all times during the Lease Term, each party agrees, following anyrequest by the other party, promptly to execute and deliver to the requestingparty within 15 business days following delivery of such request an estoppelcertificate: (i) certifying that this Lease is unmodified and in full force andeffect or, if modified, stating the nature of such modification and certifyingthat this Lease, as so modified, is in full force and effect, (ii) stating thedate to which the rent and other charges are paid in advance, if any, (iii)acknowledging that there are not, to the certifying party’s knowledge, anyuncured defaults on the part of any party hereunder or, if there are uncureddefaults, specifying the nature of such defaults, and (iv) certifying suchother information about the Lease as may be reasonably required by therequesting party.  A failure to deliveran estoppel certificate within 15 business days after delivery of a requesttherefor shall be a conclusive admission that, as of the date of the requestfor such statement: (i) this Lease is unmodified except as may be representedby the requesting party in said request and is in full force and effect, (ii)there are no uncured defaults in the requesting party’s performance, and (iii)no rent has been paid more than 30 days in advance.  At any time during the Lease Term Tenant shall, upon 15 days’prior written notice from Landlord, provide (in writing or by reference to aURL address or other publicly available source) Tenant’s most recent financialstatement and financial statements covering the 24 month period prior to thedate of such most recent financial statement to any existing Lender or to anypotential Lender or buyer of the Premises. Such statements shall be prepared in accordance with generally acceptedaccounting principles and, if such is the normal practice of Tenant, shall beaudited by an independent certified public accountant.

 

15.7                           Consent:  Whenever Landlord’s approval or consent isrequired by this Lease, such approval or consent shall not be unreasonablywithheld, conditioned or delayed, unless a different standard has beenexpressly provided in this Lease for the particular matter requiring Landlord’sconsent or approval.

 

15.8                           Notices:  Any notice required or desired to be givenregarding this Lease shall be in writing and shall be given by personaldelivery or nationally recognized overnight courier service, in either eventwith evidence of delivery or refusal thereof, addressed to the party to beserved at its Address for Notices specified in Section Q or Section Rof the Summary (as applicable.  A noticeshall be deemed to have been given uponthe date of receipt or refusal thereof.  Either party may change its address by giving notice of the samein accordance with this Section 15.8.

 

15.9                           Attorneys’Fees:  In the event either Landlordor Tenant shall bring any action or legal proceeding for an alleged breach ofany provision of this Lease, to recover rent, to terminate this Lease orotherwise to enforce, protect or establish any term or covenant of this Lease,the prevailing party shall be

 

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entitled to recover as a part of such action or proceeding, or in aseparate action brought for that purpose, reasonable attorneys’ fees, courtcosts, and experts’ fees as may be fixed by the court.  The “prevailing party” shall be the partywhich by law is entitled to recover its costs of suit, whether or not theaction proceeds to final judgment.

 

15.10                     Corporate Authority:  Each individual executing this Lease onbehalf of each party represents and warrants that he/she is duly authorized toexecute and deliver this Lease on behalf of such party and that this Lease isbinding upon such party in accordance with its terms.  Each of the persons executing this Lease on behalf of each partydoes hereby covenant and warrant that the party for whom it is executing thisLease is duly authorized and existing, that it is qualified to do business inCalifornia, and has full right and authority to enter into this Lease.

 

15.11                     Miscellaneous:  Should any provision of this Lease prove tobe invalid or illegal, such invalidity or illegality shall in no way affect,impair or invalidate any other provision hereof, and such remaining provisionsshall remain in full force and effect. Time is of the essence with respect to the performance of everyprovision of this Lease in which time of performance is a factor.  The captions used in this Lease are forconvenience only and shall not be considered in the construction orinterpretation of any provision hereof. Any executed copy of this Lease shall be deemed an original for allpurposes.  This Lease shall, subject tothe provisions regarding assignment, apply to and bind the respective heirs,successors, executors, administrators and assigns of Landlord and Tenant.  “**Party**”shall mean Landlord or Tenant, as the context implies.  If Tenant consists of more than one personor entity, then all members of Tenant shall be jointly and severally liablehereunder.  This Lease shall beconstrued and enforced in accordance with the laws of the State of California.  The language in all parts of this Leaseshall in all cases be construed as a whole according to its fair meaning, andnot strictly for or against either Landlord or Tenant.  When the context of this Lease requires, theneuter gender includes the masculine, the feminine, a partnership orcorporation or joint venture, and the singular includes the plural.  The terms “shall”, “will” and “agree” aremandatory.  The term “may” ispermissive.  When a party is required todo something by this Lease, it shall do so at its sole cost and expense withoutright of reimbursement from the other party unless a provision of this Leaseexpressly requires reimbursement. Landlord and Tenant agree that (i) the gross leasable area of thePremises includes any atriums, depressed loading docks, covered entrances oregresses, and covered loading areas, (ii) each has had an opportunity todetermine to its satisfaction the actual area of the Project and the Premises,(iii) all measurements of area contained in this Lease are conclusively agreedto be correct and binding upon the parties, even if a subsequent measurement ofany one of these areas determines that it is more or less than the amount ofarea reflected in this Lease, and (iv) any such subsequent determination thatthe area is more or less than shown in this Lease shall not result in a changein any of the computations of rent, improvement allowances, or other mattersdescribed in this Lease where area is a factor.  Where a party hereto is obligated not to perform any act, suchparty is also obligated to restrain any others within its control fromperforming said act, including the Agents of such party.  Landlord shall not become or be deemed apartner or a joint venturer with Tenant by reason of the provisions of thisLease.

 

15.12                     Termination by Exercise ofRight:  If this Lease is terminatedpursuant to its terms by the proper exercise of a right to terminatespecifically granted to Landlord or Tenant by this Lease, then this Leaseshall, unless otherwise set forth herein, terminate 30 days after the date theright to terminate is properly exercised (unless another date is specified inthat part of the Lease creating the right, in which event the date so specifiedfor termination shall prevail), the rent and all other charges due hereundershall be prorated as of the date of termination, and neither Landlord norTenant shall have any further rights or obligations under this Lease except forthose that have accrued prior to the date of termination or those obligationswhich this Lease specifically provides are to survive termination.  This Section 15.12 does not apply to atermination of this Lease by Landlord as a result of an Event of Tenant’sDefault.

 

15.13                     Brokerage Commissions:  Each party hereto (i) represents andwarrants to the other that it has not had any dealings with any real estatebrokers, leasing agents or salesmen, or incurred any obligations for the

 

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payment of real estate brokerage commissions or finder’s fees whichwould be earned or due and payable by reason of the execution of this Lease,other than to the Retained Real Estate Brokers described in Section S ofthe Summary, and (ii) agrees to indemnify, defend, and hold harmless the otherparty from any claim for any such commission or fees which result from theactions of the indemnifying party. Landlord shall be responsible for the payment of any commission owed tothe Retained Real Estate Brokers pursuant to a separate agreement betweenLandlord and Colliers International, the Retained Real Estate Broker representingLandlord. .

 

15.14                     Force Majeure:  Any prevention, delay or stoppage due tostrikes, lock-outs, inclement weather, labor disputes, inability to obtainlabor, materials, fuels or reasonable substitutes therefor, governmentalrestrictions, regulations, controls, action or inaction, civil commotion, fireor other acts of God, and other causes beyond the reasonable control of eitherparty (except financial inability) shall excuse the performance by such party,for a period equal to the period of any said prevention, delay or stoppage, ofany obligation hereunder. The provisions of this Section will not be applicablein connection with any obligation to pay Base Monthly Rent, Additional Rent orany other sum.  A party claiming a forcemajeure delay under this Section shall notify the other party of the delaypromptly following the event that is causing the delay.

 

15.15                     Entire Agreement:  This Lease constitutes the entire agreementbetween the parties, and there are no binding agreements or representationsbetween the parties except as expressed herein.  Tenant acknowledges that neither Landlord nor Landlord’s Agentshas made any legally binding representation or warranty as to any matter exceptthose expressly set forth herein, including any warranty as to (i) whether thePremises may be used for Tenant’s intended use under existing Law, (ii) thesuitability of the Premises or the Project for the conduct of Tenant’sbusiness, or (iii) the condition of any improvements.  There are no oral agreements between Landlord and Tenantaffecting this Lease, and this Lease supersedes and cancels any and allprevious negotiations, arrangements, brochures, agreements and understandings,if any, between Landlord and Tenant or displayed by Landlord to Tenant withrespect to the subject matter of this Lease. This instrument shall not be legally binding until it is executed byboth Landlord and Tenant.  No subsequentchange or addition to this Lease shall be binding unless in writing and signedby Landlord and Tenant.

 

15.16                     Quiet Enjoyment:  Notwithstanding anything herein to thecontrary, Landlord covenants that so long as Tenant keeps and performs each andevery covenant, agreement, term, provision and condition herein contained onthe part and on behalf of Tenant to be kept and performed, Tenant shallpeaceably and quietly hold, occupy and enjoy the Premises during the Termhereof, subject to the terms and provisions of this Lease.

 

15.17                     Waiver of Landlord’s Lien.  Landlord hereby waives any right it may nowor hereafter have under the laws of the State of California to any lien orother security interest in any of Tenant’s Trade Fixtures or other equipment ofTenant on the Premises, and hereby releases Tenant and Tenant’s Trade Fixturesand such equipment from any such lien or security interest.  To the extent this waiver is not sufficient,after request by Tenant, Landlord agrees to execute a waiver and consent form whereby Landlord subordinates anyright to equipment installed by Tenant in the Premises which constitutes collateralunder a loan agreement to which Tenant is a party, provided that suchsubordination and consent form (a) requires that prior written notice be givento Landlord before entry to the Premises by such lender, (b) does not permitany auction for the sale or other disposition of such equipment at or about thePremises, (c) requires such lender to indemnify, defend and hold harmlessLandlord for any damage to property or injury to any person caused by suchlender or its representatives or agents, (d) does not permit such lender tooccupy the Premises beyond the expiration or earlier termination of this Leaseor require Landlord to provide notice of any default by Tenant under thisLease, and (e) is otherwise in a form reasonably approved by Landlord.

 

[SIGNATURES ON FOLLOWINGPAGE]

 

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IN WITNESS WHEREOF, Landlord and Tenant have executedthis Lease with the intent to be legally bound thereby, to be effective as ofthe Effective Date.

 
| **LANDLORD:**                                              |                                  | **TENANT:**                                                           |
|------------------------------------------------------------|---------------------------------------|-----------------------------------------------------------------------|
|                                                       |                                  |                                                                  |
| SHORELINE PARK, LLC,  a Delaware limited liability company |                                  | AMERICAN SCIENCE AND  ENGINEERING, INC.,  a Massachusetts corporation |
|                                                       |                                  |                                                                  |
|                                                       |                                  |                                                                  |
| By:                                                        | Divco West Group, LLC,                |                                                                  | By: |   |   |
|                                                       | a Delaware limited  liability company |                                                                  | Name: |   |   |
|                                                       | Its Agent                             |                                                                  | Title: |   |   |
|                                                       |                                  |                                                                  |   |   |   |
|                                                       | By:                                   |                                                                  |   |   | Dated: |   |   |
|                                                       | Name:                                 |                                                                  |   |   |   |
|                                                       | Its:                                  |                                                                  |   |   |   |
|                                                       |                                  |                                                                  |   |   |   |
|                                                       | Dated:                                |                                                                  |   |   |   |

 

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