Document:

Exhibit 10.12

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE (this “First Amendment”) is made as of June 1, 2010 (“Effective Date”), by and between ARE-901/951 GATEWAY BOULEVARD, LLC, a Delaware limited liability company (“Landlord”), and THERAVANCE, INC., a Delaware corporation (“Tenant”).

 

RECITALS

 

A.                                    Landlord and Tenant are now parties to that certain Amended and Restated Lease Agreement dated January 1, 2001 (the “Lease”).  Pursuant to the Lease, Tenant leases certain premises consisting of approximately 59,816 rentable square feet (“Premises”) in a three (3)-story building located at 951 Gateway Boulevard, South San Francisco, California.  The Premises are more particularly described in the Lease.  Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease.

 

B.                                    Pursuant to that certain Sublease dated February 9, 2009 (“Sublease”) now between Tenant and IPERIAN, INC., a Delaware corporation (as successor-in-interest to iZumi Bio, Inc.,) (“Subtenant”), Tenant subleases to Subtenant the entire second floor of the Building, consisting of approximately 19,988 rentable square feet (“Second Floor Premises”).

 

C.                                    Landlord and Tenant desire, subject to the terms and conditions set forth below, to amend the Lease to, among other things, (i) extend the Term of the Lease, (ii) provide for the surrender by Tenant of the entire first floor of the Building, consisting of approximately 19,914 rentable square feet (“First Floor Premises”) on May 31, 2011 (“FFP Surrender Date”), and (iii) provide for the surrender by Tenant of the Second Floor Premises on March 31, 2012 (“SFP Surrender Date”).

 

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                      Term.  The “Expiration Date” of the Term of the Lease is hereby extended from March 31, 2012, until May 31, 2020.  From and after the Effective Date, references in the Lease to “Term” shall mean the one hundred twenty (120) months commencing on June 1, 2010 and expiring on May 31, 2020.

 

2.                                      Premises.

 

a.                                      Following the FFP Surrender Date. Notwithstanding anything to the contrary contained in the Lease, commencing on June 1, 2011, the definition of “Premises” shall be amended to mean the Second Floor Premises and the Third Floor Premises.

 

As of June 1, 2011, the Site Plan attached to the Lease as Exhibit A2 describing the Premises shall be deleted and replaced with Exhibit A attached hereto.

 

b.                                      Following the SFP Surrender Date.  Commencing on April 1, 2012, the definition of “Premises” shall be amended to mean the Third Floor Premises.

 

As of April 1, 2012, Exhibit A attached hereto shall be amended to exclude the Second Floor Premises.

 

 

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3.                                      Premises Square Footage.

 

a.                                      Following the FFP Surrender Date.  Commencing on June 1, 2011, the definition of “Premises Square Footage” contained in the Basic Lease Information shall be deleted and replaced with the following:

 

“Premises Square Footage:                                           39,902 rentable square feet”

 

b.                                      Following the SFP Surrender Date.  Commencing on April 1, 2012, the definition of “Premises Square Footage” contained in the Basic Lease Information shall be deleted and replaced with the following:

 

“Premises Square Footage:                                           19,914 rentable square feet”

 

4.                                      Tenant’s Proportionate Share.

 

a.                                      Following the FFP Surrender Date.  Commencing on June 1, 2011, the definitions of “Tenant’s Proportionate Share of Project” and “Tenant’s Proportionate Share of Building” contained in the Basic Lease Information shall be deleted and replaced with the following:

 

“Tenant’s Proportionate Share of Project:          66.71%

 

Tenant’s Proportionate Share of Building:        66.71%”

 

b.                                      Following the SFP Surrender Date.  Commencing on April 1, 2012, the definitions of “Tenant’s Proportionate Share of Project” and “Tenant’s Proportionate Share of Building” contained in the Basic Lease Information shall be deleted and replaced with the following:

 

“Tenant’s Proportionate Share of Project:          33.29%

 

Tenant’s Proportionate Share of Building:        33.29%”

 

5.                                      Monthly Base Rent.

 

a.                                      First Floor Premises/Third Floor Premises.  Notwithstanding anything to the contrary contained in the Lease, commencing on the Effective Date of this First Amendment, Monthly Base Rent for the First Floor Premises and the entire third floor of the Building, consisting of approximately 19,914 rentable square foot feet (“Third Floor Premises”) shall be payable as follows through the FFP Surrender Date:

 

	
Time   Period
    	
 
    	
Monthly Base Rent
    
	
 
    	
 
    	
 
    
	
6/1/10   — 5/31/11
    	
 
    	
$103,552.80   per month
    

 

b.                                      Third Floor Premises.  Notwithstanding anything to the contrary contained in the Lease, commencing on June 1, 2011, Monthly Base Rent for the Third Floor Premises shall be payable pursuant to the following table:

 

	
Time   Period
    	
 
    	
Monthly Base Rent
    
	
 
    	
 
    	
 
    
	
6/1/11   — 3/31/12
    	
 
    	
$55,759.20   per month
    
	
4/1/12   — 3/31/13
    	
 
    	
$58,746.30   per month
    
	
4/1/13   — 3/31/14
    	
 
    	
$60,508.69   per month
    
	
4/1/14   — 3/31/15
    	
 
    	
$62,323.95   per month
    

 

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4/1/15   — 3/31/16
    	
 
    	
$64,193.69   per month
    
	
4/1/16   — 3/31/17
    	
 
    	
$66,119.50   per month
    
	
4/1/17   — 3/31/18
    	
 
    	
$68,103.08   per month
    
	
4/1/18   — 3/31/19
    	
 
    	
$70,146.17   per month
    
	
4/1/19   — 3/31/20
    	
 
    	
$72,250.56   per month
    
	
4/1/20 — 5/31/20
    	
 
    	
$74,418.08 per month
    

 

c.                                       Second Floor Premises.  Notwithstanding anything to the contrary contained in the Lease, commencing on the date of this First Amendment, Tenant shall pay to Landlord Monthly Base Rent for the Second Floor Premises through the SFP Surrender Date, as follows:

 

	
Time   Period
    	
 
    	
Monthly Base Rent
    
	
 
    	
 
    	
 
    
	
6/1/10   — 11/30/10
    	
 
    	
$51,968.80   per month
    
	
12/1/10   - 2/28/11
    	
 
    	
$41,175.28   per month
    
	
3/1/11   — 3/31/12
    	
 
    	
$42,410.54   per month
    

 

6.                                      Notice to Subtenant.  Concurrently with Tenant’s execution of this First Amendment, Tenant shall notify Subtenant in writing that the Lease with respect to the Second Floor Premises will terminate as of March 31, 2012, pursuant to this First Amendment, and that Subtenant shall have no right to extend the term of the Sublease beyond March 31, 2012.

 

7.                                      Additional Rent.  Notwithstanding anything to the contrary contained in the Lease, commencing on December 1, 2010, until the SFP Surrender Date, Tenant shall be required to pay for Expenses (as defined in Paragraph 4.2 of the Lease) with respect to the Second Floor Premises only in an amount equal to $1.50 per rentable square foot of the Second Floor Premises per month.  Notwithstanding the foregoing, Tenant shall continue to pay Expenses and Additional Rent for the First Floor Premises (through the FFP Surrender Date, as the same may be extended pursuant to Section 12(a) below) and the Third Floor Premises as provided for in the Lease.

 

8.                                      Additional Tenant Improvement Allowance.  Landlord and Tenant have amended the 901 Gateway Lease to, among other things, provide Tenant an “Additional TI Allowance” of up to $2,606,840.00.  Notwithstanding anything to the contrary contained in the 901 Gateway Lease, Tenant shall only have the right to use up to $782,052.00 of the Additional TI Allowance for the design and construction of fixed and permanent improvements within the Third Floor Premises desired by and performed by Tenant and which improvements shall be of a fixed and permanent nature (the “Additional Tenant Improvements”); provided, however, that Tenant shall comply with the terms of Section 3 of that certain First Amendment to Lease of even date herewith entered into by Landlord and Tenant with respect to the 901 Gateway Lease in connection with Tenant’s use of the Additional TI Allowance and the construction by Tenant of the Additional Tenant Improvements within the Third Floor Premises.

 

9.                                      Security Deposit.  Effective as of the Effective Date of this First Amendment, Paragraph 7 of the Lease is hereby deleted in its entirety and replaced with the following:

 

“7.                                Security Deposit.  Tenant acknowledges and agrees that Tenant has delivered to Landlord a Security Deposit (as defined in the 901 Gateway Lease) pursuant to the terms of the 901 Gateway Lease and that Landlord shall have the right to apply all or any portion of such Security Deposit in connection with any Default (as defined in Paragraph 24) under this Lease.

 

The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default.  Upon each occurrence of a Default  by Tenant under this Lease, Landlord may use all or any part of the Security Deposit to pay delinquent payments due

 

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under this Lease, future rent damages under California Civil Code Section 1951.2, and the cost of any damage, injury, expense or liability caused by such Default, without prejudice to any other remedy provided herein or provided by law.  Landlord’s right to use the Security Deposit under this Paragraph 7 includes the right to use the Security Deposit to pay future rent damages following the termination of this Lease pursuant to Paragraph 25.5 below.  Upon any use of all or any portion of the Security Deposit, Tenant shall pay Landlord within twenty (20) days after receipt of written demand the amount that will restore (by the delivery of a replacement or amended Letter of Credit) the Security Deposit to the amount set forth in the definition of “Letter of Credit” set forth in the Basic Lease Information of the 901 Gateway Lease.  Tenant hereby waives the provisions of any law, now or hereafter in force, including, without limitation, California Civil Code Section 1950.7, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the Default of Tenant  or any of Tenant’s Agents under this Lease.  Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings, subject to applicable bankruptcy law.  If Tenant shall fully perform every provision of this Lease to be performed by Tenant and Landlord is holding cash in the amount of a bifurcated Letter of Credit  (as described below) or cash proceeds therefrom, the Security Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to Tenant within ninety (90) days after the expiration or earlier termination of this Lease.  If Landlord is holding a bifurcated Letter of Credit upon the expiration or earlier termination of this Lease, Landlord shall comply with the LC Issuer’s requirements necessary to cancel the bifurcated Letter of Credit by the date that is ninety (90) days after the expiration or earlier termination of this Lease.

 

Notwithstanding anything contained in this Paragraph 7 to the contrary, if Landlord draws on the Letter of Credit for any reason, then Tenant shall have the right, upon ten (10) days’ prior written notice to Landlord, to obtain a refund from Landlord of any unapplied proceeds of the Letter of Credit which Landlord has drawn upon, any such refund being conditioned upon Tenant simultaneously delivering to Landlord a replacement Letter of Credit in the amount required by, and otherwise meeting the requirements contained in, this Paragraph 7 and Paragraph 7 of the 901 Gateway Lease.

 

Notwithstanding anything to the contrary contained herein or in the 901 Gateway Lease, if requested by Landlord at any time following the date of this Lease, Tenant shall cause the LC Issuing Bank (as defined in the 901 Gateway Lease) to bifurcate the Letter of Credit (as defined in the 901 Gateway Lease) into two separate letters of credit, one securing Tenant’s obligations under the 901 Gateway Lease and the other securing Tenant’s obligations under this Lease.  Such bifurcated letters of credit shall each be in an amount specified by Landlord, provided that the aggregate amount of such letters of credit shall equal the amount of the Letter of Credit immediately prior to such bifurcation.  Concurrently with the bifurcation of the Letter of Credit, Landlord and Tenant shall enter into a modification of the 901 Gateway Lease and a modification of this Lease, which modifications shall amend Paragraph 7 of the 901 Gateway Lease and this Paragraph 7 to provide for separate, stand-alone security deposit provisions in the 901 Gateway Lease and this Lease.

 

If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a) transfer any Security Deposit then held by Landlord to a person or entity assuming Landlord’s obligations under this Paragraph 7, or (b) return to Tenant any Security Deposit then held by Landlord and remaining after the deductions permitted herein.  Upon such transfer to such transferee or the return of the Security Deposit to Tenant, Landlord shall have no further obligation with respect to the Security Deposit, and Tenant’s right to the return of the Security

 

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Deposit shall apply solely against Landlord’s transferee.  Landlord’s obligation respecting the Security Deposit is that of a debtor, not a trustee, and no interest shall accrue thereon.”

 

10.                               Unreserved Parking Spaces.  Commencing on June 1, 2011, the definition of “Unreserved Parking Spaces” contained in the Basic Lease Information shall be deleted and replaced with the following:

 

“Unreserved Parking Spaces:                                Subject to the terms of Paragraph 50, Tenant shall have the right, in common with other tenants of the Project pro rata in accordance with the rentable area of the Premises and the rentable areas of the Project occupied by such other tenants, to park in the Project Parking Areas (as defined in Paragraph 50).”

 

11.                               Surrender Plan.  Effective as of the Effective Date of this First Amendment, Paragraph 32.9 of the Lease hereby is deleted in its entirety and replaced with the following:

 

“32.9                  Condition of Premises upon Expiration or Termination.  Upon the expiration of the Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlord (x) free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, the Premises by Tenant or Tenant’s Agents (“Tenant HazMat Operations”) in a manner consistent with prudent commercial practices and such that no Hazardous Materials resulting from Tenant HazMat Operations remain at the Premises in violation of Environmental Requirements and the continued presence of such Hazardous Materials are not in excess of industry standards for the occupancy and re-use of the Premises for research and scientific purposes by a subsequent tenant of the Premises, and (z) released of any license, clearance or other authorization of any kind issued by any governmental authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal or remediation of Hazardous Materials in, on or about the Premises (collectively referred to herein as “Hazardous Materials Clearances”).  At least 3 months prior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by any governmental authority) to be taken by Tenant in order to surrender the Premises (including any installations permitted by Landlord to remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and in a manner consistent with prudent commercial practices and such that no Hazardous Materials resulting from Tenant HazMat Operations remain at the Premises in violation of Environmental Requirements and the continued presence of Hazardous Materials are not in excess of industry standards for the occupancy and re-use of the Premises for research and scientific purposes by a subsequent tenant of the Premises (the “Surrender Plan”).  Such Surrender Plan shall be accompanied by a current listing of (i) all Hazardous Materials licenses and permits held by or on behalf of any of Tenant or Tenant’s Agents with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated, generated, released or disposed of or from the Premises by Tenant or Tenant’s Agents, and shall be subject to the review and approval of Landlord’s environmental consultant, which approval shall not be unreasonably withheld, conditioned or delayed.  In connection with the review and approval of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such additional non-proprietary information concerning Tenant HazMat Operations as Landlord reasonably shall request.  On or before such surrender, Tenant shall deliver to Landlord commercially reasonable evidence that the approved Surrender Plan has been satisfactorily completed and Landlord shall have the right, subject to reimbursement at Tenant’s expense as set forth below, to cause Landlord’s environmental consultant to inspect the Premises and perform such additional procedures as may be deemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of the Lease, free from any residual impact from Tenant HazMat Operations as required pursuant to this Paragraph 7.  Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred by Landlord for Landlord’s environmental consultant to review and approve the Surrender Plan and to visit the Premises and verify satisfactory completion of the same, which 

 

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cost shall not exceed $5,000.  Landlord shall have the unrestricted right to deliver such Surrender Plan (subject to any standard non-reliance letter, if any, prepared by Tenant and delivered by Tenant to Landlord concurrently with Tenant’s delivery of the Surrender Plan to Landlord, which non-reliance letter shall be applicable only to third parties other than Landlord) and any report by Landlord’s environmental consultant with respect to the surrender of the Premises to Landlord’s potential tenants, purchasers, lenders and other third parties with a need to know in connection with Landlord’s business; provided, however, that Landlord instructs such parties to treat the same as confidential.

 

If Tenant shall fail to prepare or submit a Surrender Plan reasonably approved by Landlord, or if Tenant shall fail to complete the approved Surrender Plan,  or if such Surrender Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or about the Premises, shall fail to adequately address any Hazardous Materials resulting from Tenant’s HazMat Operations remaining at the Premises in violation of Environmental Requirements or in a manner not consistent with prudent commercial practices or such that the continued presence of such Hazardous Materials are in excess of industry standards for the occupancy and re-use of the Premises for research and scientific purposes by a subsequent tenant of the Premises,  Landlord shall have the right to take such actions as Landlord reasonably may deem reasonable or appropriate to assure that the Premises and the Project are surrendered free from any such residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the first paragraph of this Paragraph 32.9.

 

All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of this Lease, including the obligations of Tenant under Paragraph 32 of this Lease, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to rent and obligations concerning the condition and repair of the Premises.”

 

12.                               Surrender of the Surrender Premises.

 

a.                                      First Floor Premises.  The Lease with respect to the First Floor Premises shall terminate as provided for in the Lease on the FFP Surrender Date.  Tenant shall voluntarily surrender the First Floor Premises on or before such date in the condition which Tenant is required to surrender the Premises as of the expiration of the Lease.  Tenant represents and warrants that since the Commencement Date of the Lease, the First Floor Premises has been used solely for offices purposes, warehousing and shipping and receiving (including the storage of Subtenant’s chemicals in the warehouse space and storage of chemical waste in the chemical waste room located in the First Floor Premises).  Notwithstanding anything to the contrary contained herein or in the Lease, so long as the First Floor Premises continues to be used solely for office purposes, warehousing and shipping and receiving through the FFP Surrender Date, Tenant shall not be required to provide Landlord a Surrender Plan with respect to the First Floor Premises in connection with Tenant’s surrender of the First Floor Premises.  From and after the FFP Surrender Date, Tenant shall have no further rights or obligations of any kind with respect to the First Floor Premises.  Notwithstanding the foregoing, those provisions of the Lease which, by their terms, survive the termination of the Lease shall survive the surrender of the First Floor Premises and termination of the Lease with respect to the First Floor Premises as provided for herein.  Nothing herein shall excuse Tenant from its obligations under the Lease with respect to the First Floor Premises prior to the FFP Surrender Date.  Notwithstanding anything to the contrary contained in the Lease, (i) Tenant shall not be required to remove any Tenant Improvements or Alterations from the First Floor Premises in connection with its surrender of the First Floor Premises and all Tenant Improvements and Alterations located in the First Floor Premises shall become the Property of Landlord on the Surrender Date, and (ii)  in addition to any such Tenant Improvements and Alterations, all casework, if any, located in the First Floor 

 

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Premises as of the date of this First Amendment shall also remain in the First Floor Premises and become the Property of Landlord on the Surrender Date.

 

Tenant has informed Landlord that Tenant will be relocating certain of its employees currently located in the First Floor Premises to a portion of Tenant’s premises located within the 901 Gateway Building (as defined below).  Tenant shall have the right to extend the term of the Lease with respect to the First Floor Premises for a period of ninety (90) days in order to complete the relocation of its employees.  Not later than 90 days after the mutual execution and delivery of this First Amendment by the parties, Tenant shall notify Landlord in writing (“FFP Notice”) whether Tenant elects to extend the term of the Lease with respect to the First Floor Premises for such ninety (90) day period.  If Tenant delivers the FFP Notice to Landlord within the time period provided in the immediately preceding sentence, the FFP Surrender Date shall be automatically extended for one (1) additional period of ninety (90) days (“FFP Extension Period”).  During the FFP Extension Period, Tenant shall have the right to continue to occupy the First Floor Premises pursuant to all of the terms and conditions of the Lease, as modified by this First Amendment; provided, however, that Tenant shall be required to pay Monthly Base Rent for the First Floor Premises in an amount equal to $55,759.20 per month for each month of the FFP Extension Period, along with all Additional Rent payable with respect to the First Floor Premises pursuant to the terms of the Lease.

 

b.                                      Second Floor Premises.  The Lease with respect to the Second Floor Premises shall terminate as provided for in the Lease on the SFP Surrender Date.  Tenant shall voluntarily surrender the Second Floor Premises on or before such date in the condition which Tenant is required to surrender the Premises as of the expiration of the Lease and in compliance with the surrender requirements set forth in the Lease (including this First Amendment).  From and after the SFP Surrender Date, Tenant shall have no further rights or obligations of any kind with respect to the Second Floor Premises.  Notwithstanding the foregoing, those provisions of the Lease which, by their terms, survive the termination of the Lease shall survive the surrender of the Second Floor Premises and termination of the Lease with respect to the Second Floor Premises as provided for herein.  Nothing herein shall excuse Tenant from its obligations under the Lease with respect to the Second Floor Premises prior to the SFP Surrender Date.  Notwithstanding anything to the contrary contained in the Lease, (i) Tenant shall not be required to remove any Tenant Improvements or Alterations from the Second Floor Premises in connection with its surrender of the Second Floor Premises and all Tenant Improvements and Alterations located in the Second Floor Premises shall become the Property of Landlord on the SFP Surrender Date, and (ii) in addition to any such Tenant Improvements and Alterations, all laboratory casework located in the Second Floor Premises as of the date of this First Amendment shall also remain in the Second Floor Premises and become the Property of Landlord on the SFP Surrender Date.

 

Notwithstanding anything to the contrary contained herein, Tenant acknowledges that Landlord may enter into a direct lease with Subtenant pursuant to which Subtenant would lease the Second Floor Premises directly from Landlord following the SFP Surrender Date (“Direct Lease”).  If Landlord and Subtenant enter into a Direct Lease prior to the SFP Surrender Date,  Tenant shall not be required to provide Landlord a Surrender Plan with respect to the Second Floor Premises in connection with Tenant’s surrender of the Second Floor Premises; provided, however, that Landlord shall have the right to conduct any inspections and testing of the Second Floor Premises determined reasonably necessary by Landlord to determine whether the condition of the Second Floor Premises is in compliance with the provisions of the Lease and whether any contamination has occurred in or from the Second Floor Premises.  Upon request from Tenant, Landlord shall provide Tenant with a copy of the results of such testing, subject to Landlord’s standard non-reliance letter.  Notwithstanding anything to the contrary contained herein, Tenant shall be required to pay the cost of such testing of the Second Floor Premises if there is a violation of Paragraph 32 of the Lease caused by Tenant or any of Tenant’s Agents or if contamination for which Tenant is responsible under Paragraph 32 of the Lease is identified,

 

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along with all costs incurred to clean up, remove or remediate any contamination identified by the investigations and testing conducted by Landlord hereunder.

 

c.                                       First Floor Warehouse/Shipping and Receiving.  Landlord acknowledges and agrees that from and after the FFP Surrender Date the warehouse and shipping and receiving areas located in the First Floor Premises will be Common Area to which Tenant, Subtenant and other tenants, licensees and occupants of the Building will have shared access for warehouse and shipping and receiving purposes.  In addition, in connection with the splitting of services pursuant to Section 13 below, Tenant may be required to locate the new CDA compressor, N2 and CO2 distribution systems and the House Vacuum in the warehouse space, which likely would result in the removal of some existing cages (collectively, the “Warehouse Relocation Work”).  Subject to the provisions of Section 13 below, Landlord consents to Tenant’s installation of the Warehouse Relocation Work in the First Floor warehouse, and Tenant’s continued use of the warehouse and shipping and receiving areas in the First Floor Premises in common with other tenants, licensees and occupants of the Building from and after the FFP Surrender Date for such purposes.

 

13.                               Splitting of Services.  Landlord and Tenant acknowledge that because Tenant currently leases the entire Building pursuant to the Lease and that certain adjacent building located at 901 Gateway Boulevard, South San Francisco, California (“901 Building”) pursuant to the 901 Gateway Lease, the services identified in this Section 13, along with any additional services which may be identified by both Landlord and Tenant, each in the exercise of its reasonable discretion (collectively, “Shared Services”), are currently shared between the Building and the 901 Building.  Because Tenant is surrendering the First Floor Premises and the Second Floor Premises pursuant to this First Amendment, Tenant has requested that the Shared Services be split pursuant to this Section 13 so that they may independently serve each of the Building and the 901 Building, respectively (“Splitting Work”).

 

a.                                      Landlord shall make available to Tenant an allowance of up to $250,000.00 (the “Splitting Allowance”) for the Splitting Work.  Except for the Splitting Allowance, Tenant shall be solely responsible for all of the costs of the Splitting Work.  Landlord and Tenant agree to work together in good faith to minimize the cost of the Splitting Work.  The Splitting Allowance shall only be available for use by Tenant for the payment of the cost of the Splitting Work until July 31, 2012, and any portion of the Splitting Allowance which has not been disbursed by Landlord for the Splitting Work on or before the expiration of such date shall be forfeited and shall not be available for use by Tenant.  Notwithstanding anything to the contrary contained herein, Landlord and Tenant shall agree upon the equitable allocation of the cost of the Splitting Work for any additional Shared Services identified by Landlord and Tenant after July 31, 2012, at the time such additional Shared Services are identified.

 

b.                                      Unless Landlord elects otherwise, Tenant shall perform the Splitting Work pursuant to plans approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.  The contractors for the Splitting Work shall be shall be selected by Tenant, subject to Landlord’s approval, which approval shall not be unreasonably withheld. conditioned or delayed.  Prior to the commencement of the Splitting Work, Tenant shall deliver to Landlord a copy of any contract with Tenant’s contractors and certificates of insurance from any contractor performing any part of the Splitting Work evidencing industry standard commercial general liability, automotive liability, “builder’s risk”, and workers’ compensation insurance.  Tenant shall cause the general contractor to provide a certificate of insurance naming Landlord, Alexandria Real Estate Equities, Inc., and Landlord’s lender (if any) as additional insureds for the general contractor’s liability coverages required above.  Landlord shall be entitled to receive the benefit of any warranties, if any, obtained by Tenant with respect to Splitting Work

 

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c.                                       Except as otherwise expressly provided in this Section 13(c), Tenant shall cause the Splitting Work to be completed on or before June 30, 2012.  Notwithstanding the foregoing, Tenant shall complete the Splitting Work with respect to the CO2, N2, CDA, DI and House Vacuum distribution of services (“Specified Services”) no later than April 30, 2012; provided, however, that Landlord may, by not less than one hundred twenty (120) days’ prior written notice to Tenant, cause Tenant to complete the Splitting Work with respect to the Specified Services prior to such date if Landlord intends to enter into a lease or other occupancy agreement with a third party (including, without limitation, Subtenant) with respect to any portion of the First Floor Premises and/or Second Floor Premises.

 

d.                                      Notwithstanding anything to the contrary contained herein, Tenant shall not be required to perform any Splitting Work with respect to the telephone, IT, building management and security systems serving the Building prior to March 31, 2011.  Prior to such date, Landlord and Tenant agree to work together in good faith to determine the manner and timing of splitting such systems at the lowest possible cost.

 

Tenant, at Tenant’s sole cost and expense, shall disconnect the existing public address systems serving the First Floor Premises and the Second Floor Premises on or before April 30, 2011.

 

14.                               Utilities.  On or before September 1, 2010, Tenant shall transfer all water, electricity, heat, light, power, sewer, refuse and trash collection contracts for the Building to Landlord.  With respect to Tenant’s obligation to transfer utilities to Landlord, Tenant and Landlord shall reasonably cooperate to ensure that each such utility will continue to be available to the Building without interruption.  Such cooperation shall include working with each party’s account representative to coordinate the termination of the utility service in Tenant’s name and the commencement of such service in Landlord’s name in a manner that permits utility service without disruption.  With respect to janitorial services for the Premises, during the Term, as extended, Tenant shall provide janitorial services to the Premises pursuant to its contract for janitorial services with the vendor performing such services for the 901 Building and Landlord shall have no obligation to provide janitorial services to the Premises.  Except for janitorial services provided by Landlord with respect to the Common Areas, which shall be passed through as an Expense, Landlord shall provide for its own janitorial service to that portion of the Building not occupied by Tenant, and may not charge Tenant for any portion of such service as an Expense or otherwise.

 

Notwithstanding anything to the contrary contained in the Lease, as of the date that all such utilities are established in Landlord’s name, Paragraph 5.1 of the Lease shall be deleted in its entirety and replaced with the following:

 

“5.1                         Tenants Obligation to Pay

 

Landlord shall provide, subject to the terms of this Paragraph 5.1, water, electricity, heat, light, power, sewer, and other utilities (including natural gas [but not process gas] and fire sprinklers to the extent the Project is plumbed for such services), refuse and trash collection and janitorial services (collectively, “Utilities”).  Landlord shall pay, as part of Expenses or subject to Tenant’s reimbursement obligation, for all Utilities used on the Premises, all maintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any governmental authority or Utility provider, and any taxes, penalties, surcharges or similar charges thereon.  Landlord may cause, at Tenant’s expense, any Utilities to be separately metered or charged directly to Tenant by the provider.  Notwithstanding the foregoing, Tenant’s cost for the installation of any separate meter shall not exceed that then-applicable cost of a “Demon Meter” or its reasonable equivalent.  Tenant shall pay directly to the Utility provider, prior to delinquency, any separately metered Utilities and services which may be furnished to Tenant or the Premises during the Term.  Tenant shall pay, as part of Expenses, its share of all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord.  Tenant acknowledges that the Premises, the Building and/or the Project may become subject to the 

 

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rationing of Utility services or restrictions on Utility use as required by a public utility company, governmental agency or other similar entity having jurisdiction thereof.  Tenant acknowledges and agrees that its tenancy and occupancy hereunder shall be subject to such rationing or restrictions as may be imposed upon Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant shall in no event be excused or relieved from any covenant or obligation to be kept or performed by Tenant by reason of any such rationing or restrictions.  Upon request from Landlord, Tenant agrees to cooperate in good faith with Landlord to develop the most efficient energy conservation program possible in order to comply with Laws, but in no event shall Landlord have the right to implement any energy conservation program (except to the extent mandated by Law) which unreasonably interferes, in Tenant’s reasonable good faith judgment, with Tenant’s operation of its business at the Premises.  Except to the extent that an energy conservation or program or measure is mandated by Law, Tenant shall have the right, in Tenant’s reasonable discretion, to approve in advance any energy conservation program or measure proposed by Landlord.”

 

15.                               Emergency Generator. Although Landlord is the owner of emergency generator and related automatic transfer switches serving the Building and the 901 Building  (collectively, the “Emergency Generator”), prior to the date of this First Amendment, Tenant, as the sole tenant of the Building and the 901 Building, has been operating and maintaining the Emergency Generator. Tenant shall, on the date that is 1 day after the mutual execution and delivery of this First Amendment by the parties (“EG Transfer Date”), (x) deliver the Emergency Generator  to Landlord in good working order with a full tank of diesel (y) assign to, transfer and deliver to Landlord all governmental permits and licenses (to the extent such permits and licenses are assignable), if any, warranties (to the extent assignable), operating and maintenance manuals, records and other documents concerning the Emergency Generator, and (y) terminate any service, maintenance or other contracts maintained by Tenant with respect to the Emergency Generator.  Tenant has not been obligated to maintain a wastewater permit in connection with the Emergency Generator.  With respect to any permit required for the Emergency Generator, Landlord acknowledges and agrees that Tenant has been in the process of obtaining a generator permit in connection with a Tenant permitting process underway with the Bay Area Air Quality Management District (“BAAQMD”) for the 901 Building, that Tenant will remove the generator from its permit application with BAAQMD, and that Landlord will need to obtain a generator permit from BAAQMD in its own name.  To the best of Tenant’s knowledge, Tenant does not have any other permits in connection with the Emergency Generator.  To the extent Tenant has current contracts with any vendors for the Emergency Generator, Tenant and Landlord shall reasonably cooperate to assign or terminate such contracts in the manner set forth in Section 14 above regarding utilities.

 

To the extent it is not possible for Tenant to remove the request for a generator permit from its BAAQMD application or to assign or terminate any service maintenance or other contracts within 1 day after the mutual execution and delivery of this First Amendment, Tenant shall not be in default hereunder if Tenant promptly commences efforts to do so and diligently performs until such actions have been completed within a reasonable period after such date.

 

Landlord shall, within 5 days of the EG Transfer Date, as part of Expenses, conduct such testing of the Emergency Generator required, in Landlord’s sole and absolute discretion, to determine whether the Emergency Generator is, in fact, in good working order.  If such testing discloses that the Emergency Generator is not in good working order, Landlord shall have the right, at Tenant’s sole cost and expense, to perform any maintenance and/or repairs required to put the Emergency Generator in good working order.

 

Following the EG Transfer Date, Landlord’s sole obligation for either providing emergency generators or providing emergency back-up power to Tenant shall be: (i) to provide emergency generators with not less than the current capacity of the Emergency Generator and Tenant shall be entitled to Tenant’s share of the capacity thereof available for use by all tenants

 

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of the Building and the 901 Building, collectively, in accordance with the rentable area of the Premises and the 901 Building  and the collective rentable areas of the Building and the 901 Building occupied by such other tenants, (ii) to contract with a third party to maintain the emergency generators (“Emergency Generator Servicer”) as per the manufacturer’s standard maintenance guidelines, and (iii) to obtain and maintain licenses for the emergency generators as required by applicable law.  Landlord shall have no obligation to provide Tenant with operational emergency generators or back-up power or to supervise, oversee or confirm that the Emergency Generator Servicer or any other third party maintaining the emergency generators is maintaining the generators as per the manufacturer’s standard guidelines or otherwise.  Landlord shall provide to Tenant copies of any reports received by Landlord from the Emergency Generator Servicer regarding its maintenance and repairs of the emergency generators; provided, however, that in no event shall Landlord’s failure to deliver such reports constitute a default by Landlord under the Lease.  During any period of replacement, repair or maintenance of the emergency generators when the emergency generators are not operational, including any delays thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no obligation to provide Tenant with an alternative back-up generator or generators or alternative sources of back-up power.  Tenant expressly acknowledges and agrees that Landlord does not guaranty that such emergency generators will be operational at all times or that emergency power will be available to the Premises when needed.  Landlord shall provide Tenant with not less than five (5) business days’ notice of the scheduled disruption in the operation of the emergency generators. In the case of an emergency, Landlord shall provide Tenant with notice of any emergency disruption as soon as reasonably possible after Landlord becomes aware of the need for such emergency disruption.

 

16.                               Maintenance.  Tenant shall continue to maintain the Building pursuant to Paragraph 13.1 of the Lease following the FFP Surrender Date until such date that Landlord notifies Tenant in writing that Landlord shall assume the maintenance of the Building (“Assumption Date”); provided, however, that in no event shall the Assumption Date occur after July 31, 2011.  Nothing contained herein shall release Tenant from its obligations arising prior to the Assumption Date.  Commencing on the Assumption Date, Paragraph 13 of the Lease shall be deleted in its entirely and replaced with the following:

 

“13.  MAINTENANCE AND REPAIRS OF PREMISES

 

13.1  Landlord Repairs.  Landlord, as an Expense, shall repair, replace when necessary (as reasonably determined by Landlord) and maintain in good repair the exterior of the Building (including exterior doors), parking, landscaping, exterior lighting, roof membrane, roof covering and all other Common Areas of the Project, including HVAC, plumbing, fire sprinklers, elevators, fire safety equipment, sewer and septic systems, the Emergency Generator and all other building systems serving the Premises and other portions of the Project (“Building Systems”), uninsured losses and damages caused by Tenant, or by any of Tenant’s Agents excluded.  Landlord, at Landlord’s sole cost without right of reimbursement from Tenant, shall repair, replace when necessary (as reasonably determined by Landlord) and maintain the structural portions of the roof (specifically excluding the roof membrane and the roof covering, the repair and/or replacement of which shall be treated as an Expense), the foundation, footings, floor slab and load-bearing walls and exterior walls of the Building (excluding any glass and any routine maintenance, including, without limitation, any painting, sealing, patching and waterproofing of such walls, repair, the maintenance of which shall be treated as an Expense), uninsured losses and damages caused by Tenant or Tenant’s Agents excluded.  Any losses and damages caused by Tenant or any Tenant Agent shall be repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole cost and expense.  Landlord reserves the right to stop Building Systems services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements, which are, in the reasonable judgment of Landlord, desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed.  Landlord shall have no responsibility or liability for failure to supply Building Systems services during any such

 

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period of interruption; provided, however, that Landlord shall, except in case of emergency, give Tenant not less than five (5) business days’ advance notice of any planned stoppage of Building Systems services for routine and planned maintenance, repairs, alterations or improvements.  Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this section, after which Landlord shall make a commercially reasonable effort to effect such repair within five (5) business days, or, where the repair cannot reasonably be completed within five (5) business days, as soon as reasonably possible thereafter.  Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after the time periods set forth herein.  Tenant waives its rights under any state or local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the parties’ respective rights with respect to such matters shall be solely as set forth herein. Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Paragraph 21.

 

Notwithstanding anything to the contrary contained in the Lease, commencing on the Assumption Date, to the extent that Landlord performs or is required to perform any capital repairs, replacements or improvements for the Project, whether to comply with Law, with any obligation imposed on Landlord pursuant to this Lease or at Landlord’s election, Tenant shall be responsible as part of Expenses for its Proportionate Share of the cost of such capital repairs, replacements and improvements amortized over the useful life (as reasonably determined by Landlord taking into account relevant real estate accounting principles, consistently applied, including, without limitation, the hours of operation of the Building and its use for laboratory/office purposes) of such capital items.  Tenant shall pay Tenant’s Proportionate Share of such amortized costs for each month after such capital repairs, replacements or improvements are completed until the first to occur of the expiration of the Term (as it may be extended) or the end of the period over which such costs are amortized.

 

13.2                        Tenant’s Repairs.  Subject to Paragraph 13.1 hereof, Tenant, at its expense, shall repair and maintain in good condition all portions of the Premises, including, without limitation, entries, doors (excluding exterior doors providing access to the Building, maintenance, repair and replacement of which is the obligation of Landlord as an Expense), ceilings, interior windows, interior walls, and the interior side of demising walls.  Should Tenant fail to make any such repair or replacement or fail to maintain the Premises, Landlord shall give Tenant notice of such failure.  If Tenant fails to commence cure of such failure within ten (10) days of Landlord’s notice, and thereafter diligently prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant within thirty (30) days after receipt of written demand therefor (together with reasonable documentation); provided, however, that if such failure by Tenant creates or could create an emergency, Landlord may immediately commence cure of such failure and shall thereafter be entitled to recover the actual and reasonable costs of such cure from Tenant.  Subject to Paragraphs 21 and 22 of the Lease, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results from damage caused by Tenant or any Tenant Party and any repair that benefits only the Premises.”

 

17.                               Signs.  Tenant shall be entitled to its Proportionate Share of any available external Building signage, if any, which signage shall be at Tenant’s cost and expense.  Notwithstanding the foregoing, Tenant acknowledges and agrees that Tenant’s signage on the Building including, without limitation, the size, color and type, shall be subject to Landlord’s prior written approval and shall be consistent with Landlord’s signage program at the Project and applicable legal requirements.  Tenant shall be responsible, at Tenant’s sole cost and expense, for the maintenance of Tenant’s signage, for the removal of Tenant’s signs at the expiration or earlier termination of this Lease and for the repair all damage resulting from such removal.

 

18.                               Option to Renew.  Tenant shall have two (2) options (each a “Renewal Option”) to extend the term of this Lease with respect to the entire Premises for successive periods of five (5) years each (each a “Renewal Term”) pursuant to the provisions of Paragraph 49 of the Lease.  For 

 

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avoidance of doubt, the parties hereby acknowledge and agree that if the Monthly Base Rent during any Renewal Term is calculated pursuant to Paragraph 49.4(ii) of the Lease, Monthly Base Rent shall be increased on each annual anniversary of the commencement of such Renewal Term by a percentage as determined by Landlord and agreed to by Tenant at the time the Fair Market Rent is determined.

 

19.                               Right of First Offer.  Notwithstanding anything to the contrary contained herein or in the Lease, Paragraph 51 of the Lease is hereby deleted in its entirety and of no further force or effect and Tenant shall have no further right of first offer or other right to purchase the Building.

 

20.                               Right to Expand.

 

a.                                      Right of First Refusal.  From and after the FFP Surrender Date with respect to the First Floor Premises, and from and after the SFP Surrender Date with respect to the Second Floor Premises through the expiration or earlier termination of the Term, each time that Landlord intends to accept a written proposal (the “Pending Deal”) to lease the First Floor Space or, if applicable, the Second Floor Space to a third party (“ROFR Space”), Landlord shall deliver to Tenant written notice (the “Pending Deal Notice”) of the existence and the terms of such Pending Deal; provided, however, that the terms of this Section 20(a) shall not apply to any current or future transaction pursuant to which Landlord intends to lease all or any of the Second Floor Space and/or the First Floor Premises directly to Subtenant.  Tenant shall be entitled to exercise its right under this Section 20(a) only with respect to the entire ROFR Space. Within ten (10) business days after Tenant’s receipt of the Pending Deal Notice, Tenant shall deliver to Landlord written notice (the “Space Acceptance Notice”) if Tenant elects to lease the ROFR Space.  Tenant’s right to receive the Pending Deal Notice and election to lease or not lease the ROFR Space pursuant to this Section 20(a) is hereinafter referred to as the “Right of First Refusal.” If Tenant elects to lease the ROFR Space by delivering the Space Acceptance Notice within the required ten (10) business day period, Tenant shall be deemed to agree to lease the ROFR Space on the terms and conditions set forth in the Pending Deal Notice and any other terms agreeable to Landlord and Tenant, in the respective sole discretion of each party.

 

If (i) Tenant fails to deliver a Space Acceptance Notice to Landlord within the required ten (10) business day period, or (ii) no lease amendment or lease agreement for the ROFR Space, acceptable to Landlord and Tenant in their respective reasonable discretion, has been executed and delivered by the parties within thirty (30) days after Landlord delivers a draft of the same to Tenant despite the good faith efforts of both parties, Tenant shall be deemed to have elected not to exercise Tenant’s right to lease the ROFR Space pursuant to the Pending Deal Notice in question in which case Tenant shall be deemed to have forever waived its right to lease the ROFR Space pursuant to the Pending Deal Notice in question, this Section 20(a) shall terminate and be of no further force or effect with respect to the Pending Deal Notice in question, and Landlord shall have the right to lease the ROFR Space to the party that was the subject of the Pending Deal Notice on substantially the same business terms and conditions set forth in the Pending Deal Notice.  Notwithstanding the foregoing, if Landlord negotiates with the proposed tenant economic lease terms materially more favorable (but in no event shall the economic lease terms be considered materially more favorable unless the difference in net effective base rent is 10% or greater), as reasonably determined by Landlord, than those offered to Tenant but rejected as part of the Pending Deal Notice, Landlord shall be required to submit the more favorable economic terms to Tenant for its review.  Tenant shall have five (5) business days after receipt of the more favorable economic terms to accept or reject the revised terms.  If Tenant rejects the more favorable terms, Landlord shall be free to enter into a lease with the proposed tenant on such terms.  Tenant’s rejection of any particular Pending Deal Notice shall not relieve Landlord of its obligation to again offer any Right of First Refusal Space to Tenant at any time that Landlord intends, other than with respect to Subtenant with respect to whom the terms of this Section 20 shall not apply, to again agree to a written proposal from another party to lease such space in such period.

 

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b.                                      Amended Lease.  If: (i) Tenant fails to timely deliver a Space Acceptance Notice, or (ii) after the expiration of a period of thirty (30) days from Tenant’s delivery of a Space Acceptance Notice pursuant to Section 20(a), no lease amendment or lease agreement for the ROFR Space, acceptable to Landlord and Tenant, in the respective sole discretion of each, has been executed, Tenant shall be deemed to have waived its right to lease the ROFR Space at issue.

 

c.                                       Exceptions.  Notwithstanding the above, the Right of First Refusal shall not be in effect and may not be exercised by Tenant:

 

(i)                                     during any period of time that Tenant is in Default under any provision of the Lease; or

 

(ii)                                  if Tenant has been in Default under any provision of the Lease three (3) or more times, whether or not the Defaults are cured, during the twelve (12) month period prior to the date on which Tenant seeks to exercise the Right of First Refusal.

 

d.                                      Termination.  The Right of First Refusal shall terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Right of First Refusal, if, after such exercise, but prior to the commencement date of the lease of such ROFR Space, (i) Tenant fails to timely cure any default by Tenant under the Lease; or (ii) Tenant has Defaulted three (3) or more times during the period from the date of the exercise of the Right of First Refusal to the date of the commencement of the lease of the ROFR Space, whether or not such Defaults are cured.

 

e.                                       Rights Personal.  The Right of First Refusal is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease, except that they may be assigned in connection with any Permitted Transfer of this Lease.

 

f.                                        No Extensions.  The period of time within which the Right of First Refusal may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Right of First Refusal.

 

21.                               Additional Modifications to Lease.  From and after the Effective Date of this First Amendment, the Lease shall be modified as follows:

 

a.                                      Modification to Basic Lease Information.  The Tenant’s Contact Person shall be “General Counsel” rather than “Marty Glick”.

 

b.                                      Modification to Paragraph 2.3(a), “Changes to Common Area”.  The following shall be added at the end of Paragraph 2.3(a):  “Notwithstanding the foregoing, Landlord’s exercise of the foregoing rights shall not materially interfere with Tenant’s access to or use of the Premises to the extent that Tenant’s business operations are materially interrupted thereby.”

 

c.                                       Modification to Paragraph 2.3(b), “Changes to Common Area”.  The second sentence of Paragraph 2.3(b) hereby is deleted and revised to state in its entirety as follows:  “During periods of construction only, Landlord shall have the right to provide parking to Tenant on properties reasonably proximate to the Project (the “Adjacent Properties”) or through the use of valets or parking attendants on the Parking Areas or the Adjacent Properties, provided that Tenant shall at all times have parking for the number of automobiles contemplated under the Lease.”

 

d.                                      Modification to Paragraph 4.2, “Additional Rent”. There shall be added to Paragraph 4.2 a new Paragraph 4.2.11, “Exclusions from Expenses”, which reads as follows:

 

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“4.2.11        Exclusions from Expenses.  Notwithstanding anything to the contrary contained in this Paragraph 4.2, and in addition to the exclusions set forth in the preceding paragraph, there shall be excluded from Expenses and Additional Rent the following: (i) leasing commissions, advertising expenses, promotional expenses, attorneys’ fees, disbursements, and other costs and expenses incurred in procuring prospective tenants, negotiating and executing leases, and constructing improvements required to prepare for a new tenant’s occupancy for the Building or the Project, if any; (ii) finance and debt service fees, principal and/or interest on debt or amortization payments on any mortgages executed by Landlord covering Landlord’s property, any other indebtedness of Landlord, and rental under any ground lease or leases for the Building or the Project; (iii) any depreciation allowance or expense, amortization (except for expenditures permitted under this Lease) or expense reserve; (iv) the costs of Landlord’s third party property manager or, if there is no third party property manager, administration fees in excess of the amount of 3.0% of Base Rent); (v) except for management fees, Landlord’s general overhead and any overhead or profit increment to any subsidiary or affiliate of Landlord for services on or to the Project to the extent that the cost of such service exceeds competitive costs for such services rendered by persons or entities of similar skill, competence and experience other than a subsidiary or affiliate of Landlord; (vi) any costs or expenses representing any amount paid for services and materials to a (personal or business) related person, firm, or entity to the extent such amount exceeds the amount that would have been paid for such service or materials at the then existing market rates in the absence of such relationship; (vii) compensation paid to any employee of Landlord above the grade of Property Manager/Building Superintendent, including officers and executives of Landlord (provided that Landlord may pass through as Expenses compensation paid to employees at or below the grade of Property Manager/Building Superintendant or affiliates of Landlord providing services to the Project); (viii) costs of electrical energy furnished and metered directly to tenants of the Project or for which Landlord is entitled to be reimbursed by tenants as additional rental over and above tenant’s Monthly Base Rent or pass-through of Expenses; (ix) the cost of any work or service furnished to any tenant or occupant of the Project to a materially greater extent or in a materially more favorable manner than that furnished generally to the tenants and other occupants of the Project, or the costs of work or service furnished exclusively for the benefit of any tenant or occupant of the Project or at such tenant’s cost; (x) the costs and expenses incurred in resolving disputes with other tenants, other occupants, or prospective tenants or occupants of the Project, collecting rents or otherwise enforcing leases of the tenants of the Project; (xi) any costs incurred to remove, study, test, remediate or otherwise related to the presence of Hazardous Materials in the Building, which Hazardous Materials (A) Tenant proves originated from any separately demised tenant space within the Building other than the Premises or (B) Tenant proves were not brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, the Building by Tenant or Tenant’s Agents; (xii) the costs of any work or service performed for any facility other than a facility located within the Project; (xiii) the costs of repairs, alterations, and general maintenance necessitated by the gross negligence or willful misconduct of Landlord or its agents, employees, or contractors or repairs; (xiv) interest or penalties due to the late payment by Landlord of taxes, utility bills or other such costs (except to the extent caused by Tenant’s action or inaction); (xv) any of the following tax or assessment expenses: (a) estate, inheritance, transfer, gift, federal, state or franchise taxes of Landlord, or (b) penalties and interest, other than those attributable to Tenant’s failure to comply timely with its obligations pursuant to this Lease; and (xvi) bad debt expenses and charitable contributions and donations.  Landlord agrees that (a) Landlord will not collect or be entitled to collect more than one hundred percent (100%) of the Expenses actually paid by Landlord in connection with the operation of the Project in any calendar year, and (b) Landlord shall make no profit from Landlord’s collection of Expenses.”

 

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e.                                       Modifications to Paragraph 15, “Tenant’s Insurance”.  The third sentence of Paragraph 15.2 hereby is revised in its entirety to state:  “No such policy shall contain a deductible greater than Twenty-Five Thousand Dollars ($25,000.00).  Paragraph 15.5 hereby is deleted and revised to state in its entirety as follows:  “All insurance required to be carried by Tenant hereunder shall be maintained with insurance companies authorized to do business in the State of California for the issuance of the applicable type of insurance coverage and rated A-VII or better in Best’s Key Rating Guide.  Tenant shall deliver to Landlord certificates of insurance and true and complete copies of any and all endorsements required herein for all insurance required to be maintained by Tenant hereunder at the execution of this Lease by Tenant.  Tenant shall, at least thirty (30) days prior to expiration of each policy, furnish Landlord and the other parties named as additional insureds with certificates of renewal thereof.  Tenant shall (i) provide Landlord with 30 days advance written notice of cancellation of each policy, and (ii) require Tenant’s insurer to endeavor to provide 30 days advance written notice of cancellation of each policy.”

 

f.                                        Modification to Paragraph 23.2, “Assignment and Subletting — Requirements of Request for Consent”.  Paragraph 23.2 shall be amended to provide that if Tenant requests consent to a proposed assignment or subletting (except in connection with a Permitted Transfer), whether or not the term of the proposed transfer is for the balance of the Term, Landlord shall have the right to recapture that portion of the Premises that is the subject of the proposed assignment or subletting and terminate the Lease with respect thereto; provided, however, that subsection (3) of Paragraph 23.2 shall be of no further force or effect and Landlord shall not have the right to sublease or take an assignment, as the case may be, of the interest in the Lease that is at issue.

 

g.                                       Modification to Paragraph 24, “Tenant’s Default”.  The following is hereby added at the end of Paragraph 24.(a):  “provided, however, that if Tenant vacates the Premises at any time during the last nine (9) months of the Term but continues to perform all of its obligations hereunder, including, without limitation, maintaining all insurance policies required by this Lease and complying with all of the requirements of Paragraph 32.9, Tenant shall not be deemed to be in default under this Paragraph 24.(a);”.

 

h.                                      Modification to Paragraph 32.2, “Tenant’s Obligation to Update Disclosure Certificates”.  The first sentence of Paragraph 32.2 hereby is deleted and revised to state in its entirety as follows:  “Within ten (10) business days after receipt of Landlord’s written request, Tenant shall complete, execute and deliver to Landlord an updated Disclosure Certificate (each, an “Updated Disclosure Certificate”) describing Tenant’s then current and proposed future uses of Hazardous Materials on or about the Premises, which Update Disclosure Certificates shall be in the same format as that which is set forth in Exhibit D or in such other form as is reasonably acceptable to Landlord”.

 

i.                                          Modification to Paragraph 34, “Waiver”.  The last two sentences of Paragraph 34 hereby are deleted and revised to state in their entirety as follows:  “No delay or omission in the exercise of any right or remedy of Landlord or Tenant in regard to any default by the other shall impair such right or remedy or be construed as a waiver.  Any waiver by Landlord or Tenant of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provisions of this Lease.”

 

j.                                         Modification to Paragraph 40, “Financial Statements”.  Paragraph 40 hereby is deleted and revised to state in its entirety as follows:  “Within ten (10) days after Landlord’s request, Tenant shall deliver to Landlord the then current, or if Tenant is a publicly traded company, the most recent publicly available financial statements of Tenant prepared, compiled or reviewed by a certified public accountant, including a balance sheet and 

 

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profit and loss statement for the most recent prior year, all prepared in accordance with GAAP.”.

 

k.                                      New Paragraphs.  The following new paragraphs are hereby added to the Lease:

 

“53.                         Commercially Reasonable.  Where Landlord or Tenant are required to use “best efforts” in the performance of any obligation under this Lease, “best efforts” shall mean “commercially reasonable good faith efforts.”

 

“54.                         Force Majeure.  Whenever a period of time is herein prescribed for action (other than the payment of money) to be taken by Landlord or Tenant, such party shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, terrorist activity, governmental laws, regulations or restrictions”.

 

22.                               Brokers.  Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection with this First Amendment and that no Broker brought about this transaction, other than BT Cassidy/Turley.  Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker, other than the broker, if any named in this Section 22, claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this First Amendment.

 

23.                               OFAC.  To Tenant’s knowledge, without any duty of inquiry, as of the date of Tenant’s execution of this First Amendment, Tenant is currently (a) in compliance with and shall at all times during the Term of the Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of the Lease be listed on, the Specially Designated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

 

24.                               Miscellaneous.

 

a.                                      This First Amendment is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions.  This First Amendment may be amended only by an agreement in writing, signed by the parties hereto.

 

b.                                      This First Amendment is binding upon and shall inure to the benefit of the parties hereto, their respective agents, employees, representatives, officers, directors, divisions, subsidiaries, affiliates, assigns, heirs, successors in interest and shareholders.

 

c.                                       Tenant acknowledges that it has read the provisions of this First Amendment, understands them, and is bound by them. Time is of the essence in this First Amendment.

 

d.                                      This First Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.  The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this First Amendment attached thereto.

 

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e.                                       Except as amended and/or modified by this First Amendment, the Lease is hereby ratified and confirmed and all other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this First Amendment.  In the event of any conflict between the provisions of this First Amendment and the provisions of the Lease, the provisions of this First Amendment shall prevail.  Whether or not specifically amended by this First Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this First Amendment.

 

[Signatures are on the next page.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first above written.

 

	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
THERAVANCE, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
/s/   Rick E Winningham
    
	
 
    	
 
    
	
 
    	
By:   Rick E Winningham
    
	
 
    	
Its:   Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
ARE-901/951 GATEWAY BOULEVARD, LLC,
    
	
 
    	
a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
ALEXANDRIA   REAL ESTATE EQUITIES, L.P.,
    
	
 
    	
 
    	
a   Delaware limited partnership,
    
	
 
    	
 
    	
managing   member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
ARE-QRS   CORP.,
    
	
 
    	
 
    	
 
    	
a   Maryland corporation,
    
	
 
    	
 
    	
 
    	
general   partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
/s/   Eric S. Johnson
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   Eric S. Johnson
    
	
 
    	
 
    	
 
    	
Its:   Vice President, Real Estate Legal Affairs
    

 

19

 

EXHIBIT A

 

The Premises

 

(Attached)Exhibit 10.13

 

LEASE AGREEMENT

 

BY AND BETWEEN

 

HMS GATEWAY OFFICE L.P.,
  A Delaware Limited Partnership

 

AS LANDLORD,

 

AND

 

ADVANCED MEDICINE, INC.,
  a Delaware corporation

 

AS TENANT

 

DATED JANUARY 1, 2001

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
Basic Lease Information
    	
viii
    
	
 
    	
 
    
	
1.
    	
Demise
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Premises
    	
1
    
	
 
    	
 
    	
 
    
	
 
    	
2.1.
    	
Definition   of Premises, 951 Gateway Premises, Building, Project, Parking Areas, Common   Areas
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.2.
    	
Changes   to Common Area
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Term
    	
2
    
	
 
    	
 
    	
 
    
	
4.
    	
Rent
    	
2
    
	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Monthly   Base Rent
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.2.
    	
Additional   Rent
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.3.
    	
Adjustment   to Additional Rent
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.4.
    	
Payment   of Additional Rent
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
4.4.1.
    	
Expense   Statement
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
4.4.2.
    	
Calculation   of Additional Rent
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
4.4.3.
    	
Tenant’s   Proportionate Share(s)
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
4.4.4.
    	
Tenant’s   Audit Rights
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.5.
    	
General   Payment Terms
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Utility   Expenses
    	
6
    
	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Tenant’s   Obligation to Pay
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.2.
    	
Limitation   of Landlord’s Liability for Interruption of Utilities
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Late   Charge
    	
7
    
	
 
    	
 
    	
 
    
	
7.
    	
Letter   of Credit
    	
8
    
	
 
    	
 
    	
 
    
	
8.
    	
Possession
    	
10
    
	
 
    	
 
    	
 
    
	
9.
    	
Use   Of Premises
    	
11
    
	
 
    	
 
    	
 
    
	
 
    	
9.1.
    	
Permitted   Use
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.2.
    	
Compliance   with Governmental Regulations and Private Restrictions
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.3.
    	
Compliance   with Americans with Disabilities Act
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Acceptance   Of Premises
    	
13
    
	
 
    	
 
    	
 
    
	
11.
    	
Surrender
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.1.
    	
Surrender   at Expiration or Termination
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.2.
    	
Removal   Obligations and Abandonment of Tenant’s Property
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.3.
    	
Indemnification
    	
14
    

 

ii

 

	
12.
    	
Alterations   And Additions
    	
14
    
	
 
    	
 
    	
 
    
	
 
    	
12.1.
    	
Landlord’s   Consent Required
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.2.
    	
Alterations   Permitted Without Landlord’s Consent; Removal Requirements
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.3.
    	
Alterations   at Tenant’s Expense
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.4.
    	
Requirements   of Request for Approval:
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.5.
    	
Permits   Required; Insurance Required
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
12.5.1.
    	
Permits
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
12.5.2.
    	
Insurance
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.6.
    	
Title   to Improvements; Removal Rights; Financing
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.7.
    	
Computer,   Utility and Telecommunications Equipment
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.8.
    	
Notice   and Opportunity to Post Notice of Nonresponsibility
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
Maintenance   and Repairs of Premises
    	
16
    
	
 
    	
 
    	
 
    
	
 
    	
13.1.
    	
Maintenance   by Tenant
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.2.
    	
Maintenance   by Landlord
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.3.
    	
Landlord’s   Right to Perform Tenant’s Obligations
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.4.
    	
Tenant’s   Waiver of Rights
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Landlord’s   Insurance
    	
18
    
	
 
    	
 
    	
 
    
	
15.
    	
Tenant’s   Insurance
    	
18
    
	
 
    	
 
    	
 
    
	
 
    	
15.1.
    	
Commercial   General Liability Insurance
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.2.
    	
Property   Insurance
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.3.
    	
Worker’s   Compensation Insurance; Employer’s Liability Insurance
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.4.
    	
Business   Interruption Insurance
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.5.
    	
Insurance   Standards and Evidence of Coverage
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Indemnification
    	
19
    
	
 
    	
 
    	
 
    
	
 
    	
16.1.
    	
Of   Landlord
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.2.
    	
Of   Tenant
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.3.
    	
No   Impairment of Insurance
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Subrogation
    	
20
    
	
 
    	
 
    	
 
    
	
18.
    	
Signs
    	
20
    
	
 
    	
 
    	
 
    
	
19.
    	
Free   From Liens
    	
21
    
	
 
    	
 
    	
 
    
	
20.
    	
Entry   By Landlord
    	
21
    
	
 
    	
 
    	
 
    
	
21.
    	
Destruction   And Damage
    	
22
    
	
 
    	
 
    	
 
    
	
 
    	
21.1.
    	
Damage   Covered by Extended Coverage Insurance
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
21.1.1.
    	
Material   Damage; Insured Loss
    	
22
    

 

iii

 

	
 
    	
 
    	
21.1.2.
    	
Minor   Damage; Insured Loss
    	
22
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
21.1.3.
    	
Calculation   of Restoration Period
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.2.
    	
Uninsured   Loss
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.3.
    	
Casualty   During Last Twelve Months of Term
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.4.
    	
Tenant’s   Right to Terminate Lease
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.5.
    	
Rent   Abatement
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.6.
    	
Restoration   of Base Building Improvements and Tenant Improvements
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
21.7.
    	
Waiver
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
22.
    	
Condemnation
    	
24
    
	
 
    	
 
    	
 
    
	
23.
    	
Assignment   And Subletting
    	
25
    
	
 
    	
 
    	
 
    
	
 
    	
23.1.
    	
Landlord’s   Consent Required Except for Permitted Transfers
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.2.
    	
Requirements   of Request for Consent
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.3.
    	
Criteria   To Be Considered in Connection with Request for Consent
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.4.
    	
Permitted   Transfers
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.5.
    	
Excess   Rent
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.6.
    	
No   Release of Tenant
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.7.
    	
Payment   of Landlord’s Fees
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.8.
    	
No   Consent to Further Assignment
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
23.9.
    	
Constraints   Reasonable
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
24.
    	
Tenant’s   Default
    	
27
    
	
 
    	
 
    	
 
    
	
25.
    	
Landlord’s   Remedies
    	
29
    
	
 
    	
 
    	
 
    
	
 
    	
25.1.
    	
Termination
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.2.
    	
Continuation   of Lease
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.3.
    	
Re-entry
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.4.
    	
Reletting
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.5.
    	
Termination
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.6.
    	
Cumulative   Remedies
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
25.7.
    	
No   Surrender
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
26.
    	
Landlord’s   Right to Perform Tenant’s Obligations
    	
31
    
	
 
    	
 
    	
 
    
	
 
    	
26.1.
    	
Landlord’s   Right to Perform
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
26.2.
    	
In   Emergencies
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
26.3.
    	
Tenant’s   Obligation to Reimburse Landlord
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
27.
    	
Attorneys’   Fees
    	
32
    
	
 
    	
 
    	
 
    
	
 
    	
27.1.
    	
Prevailing   Party Entitled to Fees
    	
32
    

 

iv

 

	
 
    	
27.2.
    	
Costs   of Collection
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
28.
    	
Taxes
    	
32
    
	
 
    	
 
    	
 
    
	
29.
    	
Effect   Of Conveyance
    	
33
    
	
 
    	
 
    	
 
    
	
30.
    	
Tenant’s   Estoppel Certificate
    	
33
    
	
 
    	
 
    	
 
    
	
31.
    	
Subordination
    	
33
    
	
 
    	
 
    	
 
    
	
32.
    	
Environmental   Covenants
    	
34
    
	
 
    	
 
    	
 
    
	
 
    	
32.1.
    	
Disclosure   Certificate
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.2.
    	
Tenant’s   Obligation to Update Disclosure Certificate
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.3.
    	
Definition   of Hazardous Materials
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.4.
    	
Definition   of Environmental Laws
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.5.
    	
Tenant’s   Use of Hazardous Materials
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.6.
    	
Tenant’s   Remediation Obligations
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.7.
    	
Landlord’s   Inspections
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.8.
    	
Landlord’s   Right to Remediate
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.9.
    	
Condition   of Premises Upon Expiration or Termination
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.10.
    	
Tenant’s   Indemnification of Landlord
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.11.
    	
Landlord’s   Indemnification of Tenant
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.12.
    	
Limitation   of Tenant’s Liability
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
32.13.
    	
Survival
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
33.
    	
Notices
    	
37
    
	
 
    	
 
    	
 
    
	
34.
    	
Waiver
    	
37
    
	
 
    	
 
    	
 
    
	
35.
    	
Holding   Over
    	
37
    
	
 
    	
 
    	
 
    
	
36.
    	
Successors   And Assigns
    	
38
    
	
 
    	
 
    	
 
    
	
 
    	
36.1.
    	
Binding   on Successors, Etc.
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
36.2.
    	
Landlord’s   Right to Sell
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
37.
    	
Time
    	
38
    
	
 
    	
 
    	
 
    
	
38.
    	
Brokers
    	
38
    
	
 
    	
 
    	
 
    
	
39.
    	
Limitation   Of Liability
    	
38
    
	
 
    	
 
    	
 
    
	
40.
    	
Financial   Statements
    	
39
    
	
 
    	
 
    	
 
    
	
41.
    	
Rules   And Regulations
    	
39
    
	
 
    	
 
    	
 
    
	
42.
    	
Mortgagee   Protection
    	
39
    
	
 
    	
 
    	
 
    
	
 
    	
42.1.
    	
Modifications   for Lender
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
42.2.
    	
Rights   to Cure
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
43.
    	
Entire   Agreement
    	
40
    

 

v

 

	
44.
    	
Interest
    	
40
    
	
 
    	
 
    	
 
    
	
45.
    	
Interpretation
    	
40
    
	
 
    	
 
    	
 
    
	
46.
    	
Representations   And Warranties
    	
40
    
	
 
    	
 
    	
 
    
	
 
    	
46.1.
    	
Of   Tenant
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
46.2.
    	
Of   Landlord
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
47.
    	
Security
    	
41
    
	
 
    	
 
    	
 
    
	
 
    	
47.1.
    	
Landlord   Not Obligated to Provide Security
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
47.2.
    	
Tenant’s   Obligation to Comply with Security Measures
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
48.
    	
Jury   Trial Waiver
    	
41
    
	
 
    	
 
    	
 
    
	
49.
    	
Option   to Renew
    	
42
    
	
 
    	
 
    	
 
    
	
 
    	
49.1.
    	
Commencement   Dates
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
49.2.
    	
Renewal   Option is Personal; Non-Transferable
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
49.3.
    	
Tenant’s   Notice of Exercise
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
49.4.
    	
Monthly   Base Rent During Renewal Term
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
49.4.1
    	
Fair   Market Rent Definition
    	
43
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
49.4.2.
    	
Determination   of Fair Market Rent
    	
43
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
49.4.3.
    	
Arbitrator   Qualifications
    	
43
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
49.4.4.
    	
Fees   and Costs of Arbitrators
    	
43
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
49.4.5.
    	
Arbitration   Period Base Rent
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
50.
    	
Parking
    	
44
    
	
 
    	
 
    	
 
    
	
 
    	
50.1.
    	
Grant   of Parking License
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
50.2.
    	
No   Assignment of Parking License
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
50.3.
    	
Visitor   Parking
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
51.
    	
Right   of First Offer
    	
44
    
	
 
    	
 
    	
 
    
	
 
    	
51.1.
    	
Offer   Notice
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.2.
    	
Election   Notice
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.3.
    	
Purchase   and Sale Agreement
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.4.
    	
Failure   to Exercise or Sign Agreement
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.5.
    	
Net   Operating Income
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.6.
    	
Landlord’s   Sale to Affiliate; Survival of Option
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
51.7.
    	
Concurrent   Exercise of Rights of First Offer with respect to 901 Gateway Boulevard and   951 Gateway Boulevard
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
52.
    	
Memorandum   of Lease
    	
46
    
	
 
    	
 
    	
 
    
	
53.
    	
Tenant   Improvements and Tenant Improvement Allowance
    	
46
    

 

vi

 

	
Exhibit
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
A
    	
Site   Plan
    	
 
    
	
B
    	
Additional   Operational Guidelines
    	
 
    
	
C
    	
Rules   and Regulations
    	
 
    
	
D
    	
Hazardous   Materials Disclosure Certificate
    	
 
    
	
E
    	
Tenant’s   Property
    	
 
    
	
F
    	
Memorandum   of Lease
    	
 
    
	
G
    	
Tenant   Improvements
    	
 
    

 

vii

 

LEASE AGREEMENT

 

BASIC LEASE INFORMATION

 

	
Lease   Date:
    	
 
    	
January   1, 2001
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Landlord:
    	
 
    	
HMS   Gateway Office, L.P. a Delaware limited partnership
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Landlord’s   Address:
    	
 
    	
c/o   Hines Interests Limited Partnership

101   California Street, Suite 1000

San   Francisco, California 94111-5848

Attn:   Tom Kruggel
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
All notices sent to Landlord under this Lease shall be   sent to the above address, with copies to:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Hines

651   Gateway Boulevard, Suite 1140

South   San Francisco, California 94080

Attn:   Catherine Fogelman
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tenant:
    	
 
    	
Advanced   Medicine, Inc.,

a   Delaware corporation
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tenant’s   Contact Person:
    	
 
    	
Marty   Glick
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tenant’s   Address:
    	
 
    	
901   Gateway Boulevard

South   San Francisco, California 94080
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Premises   Square Footage:
    	
 
    	
One   hundred ten thousand four hundred twenty eight (110,428) square feet.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Premises   Address:
    	
 
    	
901   Gateway Boulevard

South   San Francisco, California
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Project:
    	
 
    	
Parcel   A as shown on the Final Parcel Map 99-095 dated March 2000, prepared by Kier &   Wright, together with all improvements constructed thereon.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Building   (if not the same as the Project):
    	
 
    	
901   Gateway Boulevard

South   San Francisco, California
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tenant’s   Proportionate Share of Project
    	
 
    	
100%
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tenant’s   Proportionate Share of
    	
 
    	
100%
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Length   of Term:
    	
 
    	
One   hundred thirty five (135) months
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Commencement   Date:
    	
 
    	
January   1, 2001
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Expiration   Date:
    	
 
    	
March   31, 2012
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly   Base Rent:
    	
 
    	
1.
    	
 
    	
Monthly   Base Rent for the period commencing January 1, 2001 and ending March 31, 2001   shall be $269,405.71;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
2.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2001 and ending March 31, 2002   shall be $275,534.46;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
3.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2002 and ending March 31, 2003   shall be $281,847.08;
    

 

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4.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2003 and ending March 31, 2004   shall be $288,349.07;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
5.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2004 and ending March 31, 2005   shall be $295,046.13;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
6.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2005 and ending March 31., 2006   shall be $301,944.09;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
7.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2006 and ending March 31, 2007   shall be $309,049.00;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
8.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2007 and ending March 31, 2008   shall be $316,367.05;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
9.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2008 and ending March 31, 2009   shall be $323,904.65;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
10.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2009 and ending March 31, 2010   shall be $331,668.37;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
11.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2010 through March 31, 2011   shall be $339,665.00;
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
12.
    	
 
    	
Monthly   Base Rent for the period commencing April 1, 2011 and ending March 31, 2012   shall be $347,901.53.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Letter   of Credit:
    	
 
    	
Three   Million Seven Hundred Fifty Thousand Dollars ($3,750,000), subject to   reduction in accordance with Paragraph 7(d) hereof.
    
	
 
    	
 
    	
 
    
	
Permitted   Use:
    	
 
    	
General   office and research and development activities associated with   biotechnology/pharmaceutical services. All uses must be in accordance with   all applicable Laws.
    
	
 
    	
 
    	
 
    
	
Unreserved   Parking Spaces:
    	
 
    	
Two   Hundred Ninety Three (293) non-exclusive and undesignated parking spaces.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Except   as otherwise provided in this Lease to the contrary, the foregoing parking   calculation shall remain fixed.
    
	
 
    	
 
    	
 
    
	
Tenant   Improvement Allowance:
    	
 
    	
Nine   Million Three Hundred Eighty-Six Thousand Three Hundred Eighty Dollars   ($9,386,380) of which Landlord has paid Seven Million Seven Hundred   Twenty-Nine Thousand Nine Hundred Sixty Dollars ($7,729,960) as of the date   of this Lease, leaving a remaining Tenant Improvement Allowance to be paid of   One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty Dollars   ($1,656,420), which shall be paid on the later to occur of (i) January 1,   2001, or (ii) five (5) business days following the mutual execution and   delivery of this Lease.
    

 

ix

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT is made and entered into by and between Landlord and Tenant on the Lease Date. The defined terms used in this Lease which are defined in the Basic Lease Information attached to this Lease Agreement (“Basic Lease Information”) shall have the meaning and definition given them in the Basic Lease Information. The Basic Lease Information, the exhibits, the addendum or addenda described in the Basic Lease Information, and this Lease Agreement are and shall be construed as a single instrument and are referred to herein as the “Lease”.

 

O P E R A T I V E  P R O V I S I O N S

 

1.     DEMISE

 

In consideration for the rents and all other charges and payments payable by Tenant, and for the agreements, terms and conditions to be performed by Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES HEREBY HIRE AND TAKE FROM LANDLORD, the Premises described below (the “Premises”), upon the agreements, terms and conditions of this Lease for the Term hereinafter stated.

 

2.     PREMISES

 

2.1    Definition of Premises, 951 Gateway Premises, Building, Project, Parking Areas, Common Areas

 

(a)   The “Premises” demised by this Lease consist of that certain three (3) story building (the “Building”) shown on the Site Plan attached hereto as Exhibit A, which Building is to be located in that certain real estate development (the “Project”) specified in the Basic Lease Information. Subject to the provisions of this Lease, Landlord shall have the right to revise the definition of “Project” from time to time as Landlord develops and improves the Project and surrounding real property now or hereafter owned by Landlord or its Affiliates (as hereinafter defined), or sells to third parties portions of the Project or such adjacent properties. If at any time during the Term, Tenant is leasing, in accordance with the terms and conditions of this Lease, less than the entire Building, the “Premises” shall be deemed to include only that portion of the Building then leased by Tenant pursuant to this Lease. Tenant shall have the non-exclusive right (in common with the other tenants, Landlord and any other person granted use by Landlord) to use the Common Areas (as hereinafter defined), except that, with respect to the Project’s parking areas (the “Parking Areas”), Tenant shall have only the rights set forth in Paragraph 50 below. No easement for light or air is incorporated in the Premises. For purposes of this Lease, the term “Common Areas” shall mean all areas and facilities (i) outside the Premises and/or outside other buildings occupied or intended to be occupied by tenants, and (ii) either within the exterior boundary line of the Project or within the exterior boundary lines of properties abutting the Project, which areas and facilities are from time to time provided and designated by Landlord for the nonexclusive use of Landlord, Tenant and other tenants of the Project or of the properties abutting the Project and their respective employees, guests and invitees, including, without limitation, the Parking Areas.

 

(b)   Concurrently herewith, Landlord and Tenant are entering into a Lease Agreement, dated as of even date herewith, covering certain premises (the “951 Gateway Lease”) to be hereafter developed by Landlord and to be known as 951 Gateway Boulevard, South San Francisco, California (the “951 Gateway Premises”).

 

2.2    Changes to Common Area

 

(a)   Landlord has the right, in its sole and absolute discretion, from time to time, to: (i) make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces (provided, however, Landlord shall not have the right, except as otherwise provided herein, to reduce the total number of parking spaces below the number allocated to Tenant in the Basic Lease Information), Parking Areas, ingress, egress, direction of

 

 

driveways, entrances, corridors and walkways; (ii) close temporarily any of the Common Areas for maintenance or construction purposes so long as reasonable access to the Premises remains available; (iii) add additional buildings and improvements to the Common Areas or remove existing buildings or improvements therefrom; (iv) use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project or any portion thereof so long as reasonable access to the Premises and the loading area serving the Premises remains available; and (v) do and perform any other acts or make any other changes in, to or with respect to the Common Areas and the Project as Landlord may, in its sole and absolute discretion, deem to be appropriate.

 

(b)   Notwithstanding the terms of Paragraph 2.2(a) above, Tenant understands and acknowledges that Landlord will during the Term be developing the Project and other lands owned by Landlord for other tenants or occupants, including, without limitation, for Tenant as the future occupant of the 951 Gateway Premises, and that from time to time, whether during periods of construction or otherwise, Landlord may be unable to provide the full number of parking spaces allocated to Tenant under this Lease in the Parking Areas. During such periods, Landlord shall have the right to provide parking to Tenant on properties reasonably proximate to the Project (the “Adjacent Properties”) or through the use of valets or parking attendants on the Parking Areas or the Adjacent Properties, provided only that Tenant shall at all times have parking for the number of automobiles contemplated under this Lease.

 

3.     TERM

 

The term of this Lease (the “Term”) shall commence on January 1, 2001 (the “Commencement Date”) and shall expire on March 31, 2012 (the “Expiration Date”).

 

4.     RENT

 

4.1    Monthly Base Rent.

 

Commencing on the Commencement Date, Tenant shall pay to Landlord, in advance on the first day of each month, without further notice or demand and without offset or deduction, the monthly installments of rent specified in the Basic Lease Information (the “Monthly Base Rent”). If the expiration or termination of the Term of this Lease is not the last day of a calendar month, a prorated installment of Rent based on a per diem calculation shall be paid for the fractional calendar month during which the Term expires or terminates.

 

4.2    Additional Rent

 

This Lease is intended to be a triple-net Lease with respect to Landlord; and subject to Paragraph 13.2 below, the Base Rent owing hereunder is (1) to be paid by Tenant absolutely net of all costs and expenses relating to Landlord’s ownership and operation of the Project and the Building, and (2) not to be reduced, offset or diminished, directly or indirectly, by any cost, charge or expense payable hereunder by Tenant or by others in connection with the Premises, the Building and/or the Project or any part thereof. The provisions of this Paragraph 4.2 for the payment of Tenant’s Proportionate Share(s) of Expenses (as hereinafter defined) are intended to pass on to Tenant its share of all such costs and expenses. In addition to the Base Rent, Tenant shall pay to Landlord, in accordance with this Paragraph 4, Tenant’s Proportionate Share(s) of all costs and expenses paid or incurred by Landlord in connection with the ownership, operation, maintenance, management and repair of the Premises, the Building and/or the Project or any part thereof (collectively, the “Expenses”), including, without limitation, all the following items (the “Additional Rent”):

 

1.    Taxes and Assessments.    All real estate taxes and assessments, which shall include any form of tax, assessment, fee, license fee, business license fee, levy, penalty (if a result of Tenant’s delinquency), or tax (other than net income, estate, succession, inheritance, transfer or franchise taxes), imposed by

 

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any authority having the direct or indirect power to tax, or by any city, county, state or federal government or any improvement or other district or division thereof, whether such tax is (i) determined by the area of the Premises, the Building and/or the Project or any part thereof, or the Rent and other sums payable hereunder by Tenant or by other tenants, including, but not limited to, any gross income or excise tax levied by any of the foregoing authorities with respect to receipt of Rent and/or other sums due under this Lease; (ii) upon any legal or equitable interest of Landlord in the Premises, the Building and/or the Project or any part thereof, (iii) upon this transaction or any document to which Tenant is a party creating or transferring any interest in the Premises, the Building and/or the Project; (iv) levied or assessed in lieu of, in substitution for, or in addition to, existing or additional taxes against the Premises, the Building and/or the Project, whether or not now customary or within the contemplation of the parties; or (v) surcharged against the parking area. Tenant and Landlord acknowledge that Proposition 13 was adopted by the voters of the State of California in the June, 1978 election and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such purposes as fire protection, street, sidewalk, road, utility construction and maintenance, refuse removal and for other governmental services which may formerly have been provided without charge to property owners or occupants. It is the intention of the parties that all new and increased assessments, taxes, fees, levies and charges due to any cause whatsoever are to be included within the definition of real property taxes for purposes of this Lease. “Taxes and assessments” shall also include legal and consultants’ fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce taxes, Landlord specifically reserving the right, but not the obligation, to contest by appropriate legal proceedings the amount or validity of any taxes. In the event Landlord elects not to contest the real property taxes and assessments levied against the Building with respect to any calendar year during the Term, and if Tenant demonstrates to Landlord’s reasonable satisfaction that such a contest would likely result in a reduction of such taxes and assessments, then Tenant shall have the right to retain a consultant to prosecute such contest, subject to Landlord’s reasonable approval of the identity of such consultant. Such contest shall be conducted at Tenant’s sole cost and expense, provided that if Tenant prevails in such contest, the reasonable fees and costs of Tenant’s consultants shall, to the extent of any actual savings resulting from such contest, be equitably shared by Tenant and other tenant(s) who receive the benefit of such savings. Tenant shall have the right to deduct from its payments of Additional Rent the shares of such fees and costs to be charged to other tenants, as reasonably determined by Landlord, and Landlord shall cause such amounts to be billed or charged to the other benefited tenant(s).

 

2.    Insurance.    All insurance premiums for the Building and/or the Project or, subject to clause (i) of the paragraph immediately following Paragraph 4.2(8) below, any part thereof, including premiums for “all risk” fire and extended coverage insurance, commercial general liability insurance, rent loss or abatement insurance, earthquake insurance, flood or surface water coverage, and other insurance as Landlord deems necessary in its sole discretion, and any deductibles paid under policies of any such insurance.

 

3.    Utilities.    The cost of all Utilities (as hereinafter defined) serving the Premises, the Building and the Common Areas that are not separately metered to Tenant, any assessments or charges for Utilities or similar purposes included within any tax bill for the Building or the Common Areas, including, without limitation, entitlement fees, allocation unit fees, and/or any similar fees or charges and any penalties (if a result of Tenant’s delinquency) related thereto, and any amounts, taxes, charges, surcharges, assessments or impositions levied, assessed or imposed upon the Building or the Common Areas, or any part thereof, or upon Tenant’s use and occupancy thereof, as a result of any rationing of Utility services or restriction on Utility use affecting the Building and/or the Common Areas, as contemplated in Paragraph 5 below (collectively, “Utility Expenses”).

 

4.    Common Area Expenses.    All costs to operate, maintain, repair, replace, supervise, insure and administer the Common Areas, including supplies, materials, labor and equipment used in or related to

 

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the operation and maintenance of the Common Areas, including parking areas (including, without limitation, all costs of resurfacing and restriping parking areas), signs and directories on the Building and/or the Project, landscaping (including maintenance contracts and fees payable to landscaping consultants), amenities, sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and security services, if any, provided by Landlord for the Common Areas.

 

5.    Parking Charges.    Any parking charges or other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes or regulations, or interpretations thereof, promulgated by any governmental authority or insurer in connection with the use or occupancy of the Building or the Project.

 

6.    Maintenance and Repair Costs.    Except for costs which are the responsibility of Landlord pursuant to Paragraph 13.2 below, all costs to maintain, repair, and replace the Premises, the Building and/or the Common Areas or any part thereof, including, without limitation, (i) all costs paid under maintenance, management and service agreements such as contracts for janitorial, security and refuse removal, (ii) all costs to maintain, repair and replace the roof coverings of the Building, (iii) all costs to maintain, repair and replace the heating, ventilating, air conditioning, plumbing, sewer, drainage, electrical, fire protection, life safety and security systems and other mechanical and electrical systems and equipment serving the Premises, the Building and/or the Common Areas or any part thereof (collectively, the “Systems”), all to the extent that Landlord or any of Landlord’s agents, advisors, employees, partners, shareholders, directors, invitees or independent contractors (collectively, “Landlord’s Agents”) perform such tasks.

 

7.    Life Safety Costs.    All costs to install, maintain, repair and replace all life safety systems, including, without limitation, all fire alarm systems, serving the Premises, the Building and/or the Common Areas or any part thereof (including all maintenance contracts and fees payable to life safety consultants) whether such systems are or shall be required by Landlord’s insurance carriers, Laws (as hereinafter defined) or otherwise, all to the extent that Landlord or Landlord’s Agents perform such tasks.

 

8.    Management and Administration.    All costs for management and administration of the Premises, the Building and/or the Project or any part thereof, including, without limitation, a property management fee equal to two percent (2%) of the annual Rent derived from the Building, accounting, auditing, billing, postage, legal and accounting costs and fees for licenses and permits related to the ownership and operation of the Project (but specifically excluding any salaries and benefits of employees of Landlord or the property manager of the Building).

 

9.    Gateway Operational Expenses.    All charges, assessments, costs or fees levied by any association or entity of which the Project or any part thereof is a member or to which the Project or any part thereof is subject (including, without limitation, the Gateway Property Owners’ Association), or levied under or imposed by any reciprocal easement agreement, joint operating agreement or other document, instrument or agreement to which the Project or any part thereof is subject.

 

Notwithstanding anything in this Paragraph 4.2 to the contrary, (i) Tenant shall not be responsible for the payment of any Expenses which relate to or benefit solely another building within the Project occupied or intended to be occupied by tenants or for which Landlord receives full reimbursement from other tenants, and (ii) with respect to all sums payable by Tenant as Additional Rent under this Paragraph 4.2 for the replacement of any item or the construction of any new item in connection with the physical operation of the Premises, the Building or the Project (i.e., HVAC, roof membrane or coverings and parking area) which is a capital item the replacement of which would be capitalized under generally accepted accounting principles consistently applied, Tenant shall be required to pay only the prorata share of the cost of the item falling due within the Term (including any Renewal Term) based upon the amortization of the same over the useful life of such item, as reasonably

 

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determined by Landlord. Such share shall be paid by Tenant on a monthly basis throughout the Term (rather than in a lump sum when incurred by Landlord).

 

4.3    Adjustment to Additional Rent

 

Notwithstanding any other provision herein to the contrary, if the Building is not fully occupied during any year of the Term, an adjustment shall be made in computing Additional Rent for such year so that Additional Rent shall be computed as though the Building had been fully occupied during such year; provided, however, that in no event shall Landlord collect in total, from Tenant and all other tenants of the Building, an amount greater than one hundred percent (100%) of the actual Expenses during any year of the Term.

 

4.4    Payment of Additional Rent.

 

4.4.1.    Expense Statement

 

Upon the Commencement Date, Landlord shall submit to Tenant an estimate of monthly Additional Rent for the period between the Commencement Date and the following December 31 and Tenant shall pay such estimated Additional Rent on a monthly basis, in advance, on the first day of each month. Tenant shall continue to make said monthly payments until notified by Landlord of a change therein. By April 1 of each calendar year, Landlord shall endeavor to provide to Tenant a statement (the “Expense Statement”) showing the actual Additional Rent due to Landlord for the prior calendar year, to be prorated during the first year from the Commencement Date. If the total of the monthly payments of Additional Rent that Tenant has made for the prior calendar year is less than the actual Additional Rent chargeable to Tenant for such prior calendar year, then Tenant shall pay the difference in a lump sum within ten (10) days after receipt of such statement from Landlord. Any overpayment by Tenant of Additional Rent for the prior calendar year shall be credited towards the Additional Rent next due.

 

4.4.2.    Calculation of Additional Rent

 

Landlord’s then-current annual operating and capital budgets for the Building and the Project shall be used for purposes of calculating Tenant’s monthly payment of estimated Additional Rent for the current year. Landlord shall make the final determination of Additional Rent for the year in which this Lease terminates as soon as possible after termination of such year. Even though the Term has expired and Tenant has vacated the Premises, Tenant shall remain liable for payment of any amount due to Landlord in excess of the estimated Additional Rent previously paid by Tenant, and, conversely, Landlord shall promptly return to Tenant any overpayment. Failure of Landlord to submit statements as called for herein shall not be deemed a waiver of Tenant’s obligation to pay Additional Rent as herein provided.

 

4.4.3.    Tenant’s Proportionate Share(s)

 

With respect to Expenses which Landlord allocates to the Building, Tenant’s “Proportionate Share” shall be the percentage set forth in the Basic Lease Information as Tenant’s Proportionate Share of the Building, as adjusted by Landlord from time to time for a remeasurement of or changes in the physical size of the Premises or the Building. With respect to Expenses which Landlord allocates to the Project, Tenant’s “Proportionate Share” shall be the percentage set forth in the Basic Lease Information as Tenant’s Proportionate Share of the Project as adjusted by Landlord from time to time in connection with the construction of additional buildings within the Project or a remeasurement of or changes in the physical size of the Premises or the Project, whether such changes in size are due to an addition to or a sale or conveyance of a portion of the Project or otherwise. Notwithstanding the foregoing,

 

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Landlord may equitably adjust Tenant’s Proportionate Share(s) for all or part of any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Building and/or the Project or that varies with the occupancy of the Building and/or the Project; provided, however, that Tenant’s prorata allocation of any such Expense shall not be disproportionate to any other tenant’s prorata allocation of such Expense.

 

4.4.4.    Tenant’s Audit Rights

 

Provided Tenant is not in Default under the terms of this Lease, Tenant, at its sole cost and expense, shall have the right within sixty (60) days after the delivery of each Expense Statement to review and audit Landlord’s books and records regarding such Expense Statement for the sole purpose of determining the accuracy of such Expense Statement. Such review or audit shall be performed by a nationally recognized accounting firm that calculates its fees with respect to hours actually worked and that does not discount its time or rate (as opposed to a calculation based upon percentage of recoveries or other incentive arrangement), shall take place during normal business hours in the office of Landlord or Landlord’s property manager and shall be completed within three (3) business days after the commencement thereof. If Tenant does not so review or audit Landlord’s books and records, Landlord’s Expense Statement shall be final and binding upon Tenant. In the event that Tenant determines on the basis of its review of Landlord’s books and records that the amount of Expenses paid by Tenant pursuant to this Paragraph 4 for the period covered by such Expense Statement is less than or greater than the actual amount properly payable by Tenant under the terms of this Lease, Tenant shall promptly pay any deficiency to Landlord or, if Landlord concurs with the results of Tenant’s audit, Landlord shall promptly refund any excess payment to Tenant, as the case may be. Landlord shall pay for any reasonable audit expenses if such excess payment exceeds the aggregate Expenses in Landlord’s Expense Statement by seven percent (7%).

 

4.5    General Payment Terms

 

The Base Rent, Additional Rent and all other sums payable by Tenant to Landlord hereunder, including, without limitation, any Late Charges, as defined below, assessed pursuant to Paragraph 6 below, and any interest assessed pursuant to Paragraph 44 below, are referred to collectively as the “Rent.” All Rent shall be paid without deduction, offset or abatement (except as specifically provided in this Lease) in lawful money of the United States of America. Checks are to be made payable to HMS Gateway Office, L.P. and shall be mailed: c/o Hines Interests Limited Partnership, 101 California Street, Suite 1000, San Francisco, California 94111-5848, Attn: Tom Kruggel, or to such other person or place as Landlord may, from time to time, designate to Tenant in writing. The Rent for any fractional part of a calendar month at the commencement or termination of the Lease term shall be a prorated amount of the Rent for a full calendar month based upon the number of days in the month of the commencement or termination of the Lease term, as applicable.

 

5.     UTILITY EXPENSES

 

5.1    Tenant’s Obligation to Pay

 

Tenant shall pay the cost of all water, sewer use, sewer discharge fees, gas, heat, electricity, refuse pick-up, janitorial service (including, without limitation, exterior and interior window washing), telephone, cable T.V., telecommunications facilities and all materials and services or other utilities (collectively, “Utilities”) billed or metered separately to the Premises and/or Tenant, together with all taxes, assessments, charges and penalties added to or included within such cost. Tenant acknowledges that the Premises, the Building and/or the Project may become subject to the rationing of Utility services or restrictions on Utility use as required by a public utility company, governmental agency or other similar entity having jurisdiction thereof. Tenant acknowledges and agrees that its tenancy and

 

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occupancy hereunder shall be subject to such rationing or restrictions as may be imposed upon Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant shall in no event be excused or relieved from any covenant or obligation to be kept or performed by Tenant by reason of any such rationing or restrictions. Tenant agrees to comply with energy conservation programs implemented by Landlord by reason of rationing, restrictions or Laws.

 

5.2    Limitation of Landlord’s Liability for Interruption of Utilities

 

(a)   Landlord shall not be liable for any loss, injury or damage to property caused by or resulting from any variation, interruption, or failure of Utilities due to any cause whatsoever, or from failure to make any repairs or perform any maintenance. No temporary interruption or failure of such services incident to the making of repairs, alterations, improvements, or due to accident, strike, or conditions or other events shall be deemed an eviction of Tenant or relieve Tenant from any of its obligations hereunder; provided, however, that Landlord shall give Tenant not less than forty-eight (48) hours’ notice of any interruption of Utilities planned in advance by Landlord. Landlord shall also use reasonable efforts to notify Tenant of any planned interruption of Utilities by any Utility service provider, provided that Landlord obtains actual knowledge of such planned interruption. In no event shall Landlord be liable to Tenant for any damage to the Premises or for any loss, damage or injury to any property therein or thereon occasioned by bursting, rupture, leakage, failure or overflow of any plumbing or other pipes (including, without limitation, water, steam, and/or refrigerant lines), sprinklers, tanks, drains, drinking fountains or washstands, or other similar cause in, above, upon or about the Premises, the Building or the Project.

 

(b)   Notwithstanding the provisions of Paragraph 5.2(a) above, if any Utility Services to the Premises are interrupted or interfered with as the result of the negligence or willful misconduct of any contractors engaged by Landlord to perform services at the Project, then Landlord shall use commercially reasonable efforts to pursue any claims for compensation or reimbursement available to Landlord against such contractors to the extent of any losses suffered by Tenant and shall make any monies received available to Tenant after allowance for Landlord’s costs of collection. In addition to the foregoing, if any policy of insurance maintained by Landlord with respect to the Premises provides coverage for losses incurred due to the failure of Utilities, then Landlord shall make a claim under such policy to the extent of any losses suffered by Tenant, and shall make the proceeds received, if any, available to Tenant after allowance for Landlord’s costs of collection.

 

6.     LATE CHARGE

 

Notwithstanding any other provision of this Lease, Tenant hereby acknowledges that late payment to Landlord of Rent, or other amounts due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. If any Rent or other sums due from Tenant are not received by Landlord or by Landlord’s designated agent when due, and if Tenant does not cure such failure within five (5) days after the due date (the “Grace Period”), then Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount (the “Late Charge”), plus any costs and reasonable attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder; provided, however, that Tenant shall have the right to pay Rent during the Grace Period only five (5) times during the Term and, after Tenant has paid Rent during the Grace Period an aggregate of five (5) times, Tenant shall pay to Landlord a Late Charge on any Rent or other sums due hereunder that are not received by Landlord or Landlord’s designated agent when due. Notwithstanding the foregoing, if Tenant establishes and maintains throughout the Term a direct payment or debit arrangement with a bank or financial institution pursuant to which the Rent due hereunder is automatically paid to Landlord by electronic transfer on the first day of each month, and if Tenant provides Landlord with evidence of such arrangement, then Landlord shall. provide Tenant with notice of any late payment of Rent prior to

 

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the imposition of a Late Charge. Landlord and Tenant hereby agree that such Late Charge represent a fair and reasonable estimate of the cost that Landlord will incur by reason of Tenant’s late payment and shall not be construed as a penalty. Landlord’s acceptance of such Late Charge shall not constitute a waiver of Tenant’s default with respect to such overdue amount or estop Landlord from exercising any of the other rights and remedies granted under this Lease.

 

	
 
    	
Initials:
    	
Landlord
    	
 
    	
 
    	
Tenant
    	
 
    	
 
    

 

7.     LETTER OF CREDIT

 

(a)    Delivery of Letter of Credit.    Tenant has heretofore delivered to Landlord or, concurrently herewith, Tenant shall deliver to Landlord, at Tenant’s sole cost and expense, the Letter of Credit described below in the aggregate amount of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00) as security for the full and faithful performance of Tenant’s covenants and obligations under this Lease and the 951 Gateway Lease. Upon the date that is forty-five (45) days after the later of (i) the expiration of the Term or earlier termination of this Lease, and/or (ii) the expiration or earlier termination of the 951 Gateway Lease, the Letter of Credit (as reduced pursuant to this Paragraph 7) shall be returned to Tenant, reduced by any amounts that Landlord reasonably estimates to be required to remedy any Defaults on the part of Tenant hereunder and/or under the 951 Gateway Lease.

 

(b)    Increase in Face Amount of Letter of Credit.    Notwithstanding anything to the contrary contained in Paragraph 7(a) above or Paragraph 7 of the 951 Gateway Lease, if at any time after the date of this Lease Tenant’s Actual Cash Balance (as hereinafter defined) is less than Fifty Million Dollars ($50,000,000.00), then Tenant shall immediately deliver to Landlord an amendment to the Letter of Credit increasing the then-current face amount thereof by the sum of One Million Dollars ($1,000,000.00) (said One Million Dollar ($1,000,000.00) increase being herein referred to as the “Supplemental Credit”). Together with the execution of this Lease, Tenant shall deliver to Landlord bank and investment statements and other financial information acceptable to Landlord to substantiate Tenant’s Actual Cash Balance as of September 30, 2000. Commencing as of the quarter ending December 31, 2000 and continuing thereafter, Tenant shall, within forty-five (45) days after the end of each calendar quarter, and at such other times as Landlord may request, Tenant shall deliver to Landlord, bank and investment statements and other financial information acceptable to Landlord to substantiate Tenant’s then-current Actual Cash Balance. As used herein, Tenant’s “Actual Cash Balance” means, at any given time, the actual balance of Tenant’s “cash and cash equivalents,” and “cash and cash equivalents” means the aggregate amount of the following, to the extent owned by Tenant free and clear of all loans, repayment obligations, encumbrances and rights of others: (i) cash on hand; (ii) dollar demand deposits maintained in the United States with any commercial bank and dollar time deposits maintained in the United States with, or certificates of deposit having a maturity of five years or less issued by, any commercial bank or other financial institution acceptable to the Landlord; (iii) direct obligations of, or unconditionally guaranteed by, the United States and having a maturity of five years or less; and (iv) readily marketable commercial paper having a maturity of five years or less, issued by any corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and rated by Standard & Poor’s or Moody’s (or, if neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating organization in the United States) with the highest rating assigned by such organization.

 

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(c)    Landlord’s Right to Draw on Letter of Credit; Letter of Credit Proceeds.    Landlord may (but shall not be required to) draw upon the Letter of Credit from time to time, in a singular draw or by partial draws at Landlord’s election, as permitted by the Letter of Credit, and use the proceeds therefrom (the “Letter of Credit Proceeds”) or any portion thereof to (i) cure or remedy any Default of Tenant under this Lease and/or under the 951 Gateway Lease, including, without limitation, any failure of Tenant to remove the Bridge and to restore the facades of the Building and the 951 Gateway Premises upon the earlier of the expiration or sooner termination of this Lease or the 951 Gateway Lease, to the extent such removal and restoration are required under Section 11.2 of the 951 Gateway Lease, (ii) repair damage to the Premises and/or to the 951 Gateway Premises caused by Tenant, (iii) clean the Premises upon termination of this Lease and clean the 951 Gateway Premises upon termination of the 951 Gateway Lease, (iv) reimburse Landlord for the payment of any amount which Landlord may spend or be required to spend by reason of Tenant’s Default hereunder and/or under the 951 Gateway Lease, or (v) compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s Default hereunder and/or under the 951 Gateway Lease, including, without limitation, all costs incurred by Landlord in releasing the Premises and/or the 951 Gateway Premises, as appropriate, and any tenant improvement costs and leasing commissions associated therewith; it being understood that any use of the Letter of Credit Proceeds shall not constitute a bar or defense to any of Landlord’s remedies set forth in this Lease or the 951 Gateway Lease, as the case may be. In such event and upon written notice from Landlord to Tenant specifying the amount of the Letter of Credit Proceeds so utilized by Landlord, Tenant shall immediately deliver to Landlord an amendment to the Letter of Credit restoring the Letter of Credit to the full amount required under Paragraph 7(a) above (as increased pursuant to Paragraph 7(b) above), less any reductions theretofore permitted pursuant to Paragraph 7(c). Tenant’s failure to deliver such amendment to Landlord within ten (10) business days of Landlord’s notice shall constitute a Default hereunder and under the 951 Gateway Lease.

 

(d)    Reduction of Amount of Letter of Credit.    As used herein, “Letter of Credit” shall mean an unconditional, stand-by irrevocable letter of credit (hereinafter referred to as the “Letter of Credit”) issued by Mellon Bank or the San Francisco Bay Area office of another major national bank mutually satisfactory to Landlord and Tenant (collectively, the “LC Issuing Bank”), naming Landlord as beneficiary, in the amount specified above; provided, however, that the amount of the Letter of Credit shall be subject to reduction from time to time as provided below:

 

(1)   If Tenant achieves actual annual net sales revenues of Thirty Million Dollars ($30,000,000.00) or more during any calendar year during the Term, the then-current amount of the Letter of Credit (including the Supplemental Credit, if applicable) shall be reduced by twenty-five percent (25%) (in addition to any other reduction to which Tenant is entitled under subparagraphs (2) and (3) below); for purposes of this subparagraph (1), “net sales revenues” shall mean the gross revenues actually realized by Tenant from the operation of its core business (as opposed to nonrecurring income or revenues not generated by Tenant’s core business), less actual expenses incurred by Tenant during the applicable calendar year;

 

(2)   commencing on April 1, 2004, the then-current amount of the Letter of Credit (specifically excluding, however, the Supplemental Credit, if applicable) shall be reduced on April 1 of each year in substantially equal annual amounts such that the balance of the Letter of Credit shall be zero on the Expiration Date; and

 

(3)   commencing on the fourth (4th) anniversary of the date Tenant delivers the Supplemental Credit to Landlord (the “Supplemental Credit Delivery Date”), the Supplemental Credit shall be reduced on the fourth (4th) and each succeeding anniversary of the Supplemental Credit Delivery Date in substantially equal installments such that the balance of the Supplemental Credit shall be zero on the Expiration Date.

 

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The Letter of Credit shall be for no less than a one-year term and in any event shall be maintained in effect from the date hereof through the date that is forty-five (45) days after expiration of the Term or the earlier termination of this Lease.

 

(e)    Form of Letter of Credit.    The Letter of Credit shall provide: (i) that Landlord may make partial and multiple draws hereunder, up to the face amount thereof, (ii) that Landlord may draw upon the Letter of Credit up to the full amount thereof, and the LC Issuing Bank will pay to Landlord the amount of such draw upon receipt by the LC Issuing Bank of a draft signed by Landlord (which draft may be presented by Landlord to the LC Issuing Bank in person, by overnight mail or by telefacsimile), accompanied by a written statement from Landlord that Tenant is in Default under this Lease and/or the 951 Gateway Lease or that Landlord is otherwise entitled to draw upon the Letter of Credit, and (iii) that, in the event of Landlord’s assignment or other transfer of its interest in this Lease and/or the 951 Gateway Lease, the Letter of Credit shall be freely transferable by Landlord, without recourse, to the assignee or transferee of such interest and the LC Issuing Bank shall confirm the same to Landlord and such assignee or transferee.

 

(f)    Failure to Provide for Annual Renewal or Replacement of Letter of Credit.    In the event that the LC Issuing Bank shall fail to notify Landlord at least forty-five (45) days prior to expiration of the Letter of Credit that the Letter of Credit will be renewed for at least one (1) year beyond the then applicable expiration date, and deliver to Landlord a replacement Letter of Credit or a modification to the existing Letter of Credit effectuating such renewal at least forty-five (45) days prior to expiration of the Letter of Credit, and Tenant shall not have otherwise delivered to Landlord, at least forty-five (45) days prior to the relevant annual expiration date, a replacement Letter of Credit in the amount required hereunder and under the 951 Gateway Lease and otherwise meeting the requirements set forth above, then Landlord shall be entitled to draw on the Letter of Credit as provided above, and shall hold the proceeds of such draw in a segregated interest bearing cash collateral account in the name of Landlord and with a bank selected by Landlord, as security for the full and faithful performance of Tenant’s obligations hereunder and under the 951 Gateway Lease, until Tenant shall have provided a new Letter of Credit satisfying the requirements of this Paragraph 7 and Paragraph 7 of the 951 Gateway Lease, in which event Landlord shall promptly return the proceeds of such draw plus all accrued interest thereon, not otherwise used in accordance with the terms of this Lease and/or the 951 Gateway Lease, to Tenant.

 

(g)    Bifurcation of Letter of Credit.    Notwithstanding anything to the contrary contained herein or in the 951 Gateway Lease, if requested by Landlord at any time following the date of this Lease, Tenant shall cause the LC Issuing Bank to bifurcate the Letter of Credit into two separate letters of credit, one securing Tenant’s obligations under the 951 Gateway Lease and the other securing Tenant’s obligations under this Lease. Such bifurcated letters of credit shall each be in an amount specified by Landlord, provided that the aggregate amount of such letters of credit shall equal the amount of the Letter of Credit immediately prior to such bifurcation. Concurrently with the bifurcation of the Letter of Credit, Landlord and Tenant shall enter into a modification of the 951 Gateway Lease and a modification of this Lease, which modifications shall amend Paragraph 7 of the 951 Gateway Lease and this Paragraph 7 to provide for separate, stand-alone letter of credit provisions in the 951 Gateway Lease and this Lease.

 

8.     POSSESSION

 

By entry hereunder, Tenant accepts the Premises as suitable for Tenant’s intended use and as being in good and satisfactory condition, operating order and repair, AS IS and without representation or warranty by Landlord as to the condition, use or occupancy which may be made thereof, with the exception of any obligation Landlord may have with respect to Landlord’s covenants set forth within Section 9.2(a) below. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant.

 

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9.     USE OF PREMISES

 

9.1    Permitted Use

 

(a)   The use of the Premises by Tenant and Tenant’s agents, advisors, employees, partners, shareholders, directors, invitees and independent contractors (collectively, “Tenant’s Agents”) shall be solely for the Permitted Use specified in the Basic Lease Information and for no other use. Tenant shall not permit any objectionable or unpleasant smoke, dust, gas, noise or vibration to emanate from or near the Premises, and shall use its best efforts to prevent any objectionable odor from emanating from or near the Premises. Tenant shall strictly comply with the measures set forth on Exhibit B hereto and any additional measures reasonably required by Landlord from time to time to eliminate the emanation of objectionable odors. Tenant shall promptly provide Landlord with copies of all permits issued to Tenant by the Bay Area Air Quality Management District (the “Air Management District”) and any other governmental agency responsible for or having jurisdiction over matters related to air quality, together with copies of all correspondence between Tenant and the Air Management District or such other agencies. Tenant acknowledges that The Gateway, the real estate development in which the Project is located, is a first-class office and R&D campus and that “objectionable odors” is a subjective standard. Accordingly, Tenant agrees that if odors in the area of the Building lead to complaints from other tenants and occupants of The Gateway, and if Landlord reasonably determines, based upon observation and/or a review of Tenant’s records, that such odors emanated from the Premises, Tenant shall promptly use its best efforts to correct the situation at Tenant’s sole cost and expense. Such measures to be taken by Tenant shall include, without limitation, the hiring of special consultants and the making of capital improvements to the Premises. Tenant shall make its laboratory records available to Landlord for review in connection with any complaints by tenants or occupants of the Gateway and as otherwise reasonably requested by Landlord. Any failure of Tenant to comply with its obligations under this Paragraph 9.1 (a) shall constitute an immediate Default under this Lease.

 

(b)   The Premises shall not be used to create any nuisance or trespass, for any illegal purpose, for any purpose not permitted by Laws, for any purpose that would invalidate the insurance or increase the premiums for insurance on the Premises, the Building or the Project or for any purpose or in any manner that would unreasonably interfere with other tenants’ use or occupancy of the Project. Tenant agrees to pay to Landlord, as Additional Rent, any increases in premiums on policies resulting from Tenant’s Permitted Use or any other use or action by Tenant or Tenant’s Agents which increases Landlord’s premiums or requires additional coverage by Landlord to insure the Premises. Tenant agrees not to overload the floor(s) of the Building.

 

9.2    Compliance with Governmental Regulations and Private Restrictions

 

(a)   Subject to the terms and conditions of the Lease, Landlord covenants that the Base Building Improvements have been constructed in compliance with all applicable building code requirements in effect and actively being enforced by the City of South San Francisco on the date the building permits were issued to the Contractor therefor. Any claims by Tenant under this Paragraph 9.2 shall be made in writing not later than March 31, 2001. In the event Tenant fails to deliver a written claim to Landlord on or before such date, then Landlord shall be conclusively deemed to have satisfied its obligations under this paragraph. The covenants contained in this paragraph are subject to Paragraph 39 below of the Lease and are made specifically and exclusively for the benefit of the original Tenant and any assignee or sublessee under a Permitted Transfer pursuant to Paragraph 23.4 below.

 

(b)   Tenant and Tenant’s Agents shall, at Tenant’s expense, faithfully observe and comply with (1) all municipal, state and federal laws, statutes, codes, rules, regulations, ordinances, requirements, and orders (collectively, “Laws”), now in force or which may hereafter be in force pertaining to the Premises or Tenant’s use of the Premises, the Building or the Project, including, without limitation, any

 

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Laws requiring installation of fire sprinkler systems, seismic reinforcement and related alterations, whether substantial in cost or otherwise; provided, however, that except as provided in Paragraph 9.3 below, Tenant shall not be required to make or, except as provided in Paragraph 4 above, pay for, structural changes to the Premises or the Building not related to Tenant’s specific use of the Premises unless the requirement for such changes is imposed as a result of any improvements or additions made or proposed to be made at Tenant’s request; (2) all recorded covenants, conditions and restrictions affecting the Project (“Private Restrictions”) now in force or which may hereafter be in force, Landlord hereby specifically reserving the right to hereafter adopt such Private Restrictions and to impose the same on the Project or any portion thereof; provided that such Private Restrictions adopted after the date hereof shall not unreasonably impair Tenant’s use of the Premises for any Permitted Use; and (3) any and all rules and regulations set forth in Exhibit C and any other rules and regulations now or hereafter promulgated by Landlord (collectively, the “Rules and Regulations”). Without limiting the generality of the foregoing, Tenant hereby covenants and agrees for itself, its successors and assigns, and all persons claiming under or through it, that this Lease is made and accepted upon and subject to the condition that there shall be no discrimination against, or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises herein leased, nor shall Tenant, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the premises herein leased. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such Laws or Private Restrictions, shall be conclusive of that fact as between Landlord and Tenant.

 

9.3    Compliance with Americans with Disabilities Act

 

Landlord and Tenant hereby agree and acknowledge that the Premises, the Building and/or the Project may be subject to, among other Laws, the requirements of the Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to, Title III thereof, and all regulations and guidelines related thereto, together with any and all laws, rules, regulations, ordinances, codes and statutes now or hereafter enacted by local or state agencies having jurisdiction thereof, including all requirements of Title 24 of the State of California, as the same may be in effect on the date of this Lease and may be hereafter modified, amended or supplemented (collectively, the “ADA”). Any Tenant Improvements (as hereinafter defined) constructed in connection with Tenant’s leasing of the Premises or Alterations (as hereinafter defined) made during the Term shall be in compliance with the requirements of the ADA, and all costs incurred for purposes of compliance therewith shall be a part of and included in the costs of the Tenant Improvements or the Alterations, as applicable. Tenant shall be solely responsible for conducting its own independent investigation of this matter and for ensuring that the design of all Tenant Improvements and Alterations strictly complies with all requirements of the ADA. Subject to reimbursement pursuant to Paragraph 4 above, if any barrier removal work or other work is required to the Building, the Common Areas or the Project under the ADA; then such work shall be the responsibility of Landlord; provided, if such work is required under the ADA as a result of Tenant’s use of the Premises or any work or Alteration made to the Premises by or on behalf of Tenant, then such work shall be performed by Landlord at the sole cost and expense of Tenant; and, provided further, that if any such work is required under the ADA as a result of another tenant’s specific use of its premises or improvements made by another tenant to its premises, then the cost of such work shall be solely chargeable to such tenant and Tenant shall have no responsibility therefor. Except as otherwise expressly provided in this provision, Tenant shall be responsible at its sole cost and expense for fully and faithfully complying with all applicable requirements of the ADA, including, without limitation, not discriminating against any disabled persons in the operation of Tenant’s business in or about the Premises, and offering or otherwise providing

 

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auxiliary aids and services as, and when, required by the ADA. Within ten (10) days after receipt, Tenant shall advise Landlord in writing, and provide Landlord with copies of (as applicable), any notices alleging violation of the ADA relating to any portion of the Premises, the Building or the Project; any claims made or threatened orally or in writing regarding noncompliance with the ADA and relating to any portion of the Premises, the Building or the Project; or any governmental or regulatory actions or investigations instituted or threatened regarding noncompliance with the ADA and relating to any portion of the Premises, the Building or the Project. Tenant shall and hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold Landlord and Landlord’s Agents harmless and indemnify Landlord and Landlord’s Agents from and against all liabilities, damages, claims, losses, penalties, judgments, charges and expenses (including attorneys’ fees, costs of court and expenses necessary in the prosecution or defense of any litigation including the enforcement of this provision) arising from or in any way related to, directly or indirectly, Tenant’s or Tenant’s Agents’ violation or alleged violation of the ADA. Landlord shall and hereby agrees to protect, defend (with counsel acceptable to Tenant) and hold Tenant and Tenant’s Agents harmless and indemnify Tenant and Tenant’s Agents from and against all liabilities, damages, claims, losses, penalties, judgments, charges and expenses (including attorneys’ fees, costs of court and expenses necessary in the prosecution or defense of any litigation including the enforcement of this provision) arising from or in any way related to, directly or indirectly, Landlord’s failure to have the Base Building Improvements constructed in compliance with the ADA as currently administered by the City of South San Francisco.

 

10.   ACCEPTANCE OF PREMISES

 

By taking possession of the Premises hereunder Tenant accepts the Premises as suitable for Tenant’s intended use and as being in good and sanitary operating order, condition and repair, AS IS, and without representation or warranty by Landlord as to the condition, use or occupancy which may be made thereof, except for Landlord’s covenant set forth in Section 9.2(a) above. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant.

 

11.   SURRENDER

 

11.1    Surrender at Expiration or Termination

 

Tenant agrees that on the last day of the Term, or on the sooner termination of this Lease, Tenant shall surrender the Premises to Landlord (i) in good condition and repair (damage by acts of God, fire, and normal wear and tear excepted), but with all interior walls painted or cleaned so they appear painted and, where appropriate, patched, any carpets cleaned, all floors cleaned and waxed, and all plumbing fixtures in good condition and working order and, where appropriate, capped, and (ii) otherwise in accordance with Paragraph 32.9. Normal wear and tear shall not include any damage or deterioration that would have been prevented by proper maintenance by Tenant, or Tenant otherwise performing all of its obligations under this Lease.

 

11.2    Removal Obligations and Abandonment of Tenant’s Property

 

On or before the expiration or sooner termination of this Lease, Tenant shall, in accordance with this Paragraph 11, and at Tenant’s sole cost and expense, remove, and repair any damage caused by such removal, (A) all of Tenant’s Property (as hereinafter defined) and Tenant’s signage from the Premises, the Building and the Project, (B) all Tenant Improvements and Alterations required to be removed pursuant to Paragraph 12 below, and (C) remove the depressed slab and trench drains in Room 1205 and return to such slab to a typical standard slab height and finish. Any of Tenant’s Property not so removed by Tenant as required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and disposition of such property;

 

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provided, however, that Tenant shall remain liable to Landlord for all costs incurred in storing and disposing of such abandoned property of Tenant. All Tenant Improvements and Alterations except those which Tenant is required to remove pursuant to Paragraph 12 below hereto shall remain in the Premises as the property of Landlord.

 

11.3    Indemnification

 

If the Premises are not surrendered at the end of the Term or sooner termination of this Lease, and in accordance with the provisions of this Paragraph 11 and Paragraph 32.9 below, Tenant shall indemnify, defend and hold Landlord harmless from and against any and all loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any loss or liability resulting from any claim against Landlord made by any succeeding tenant or prospective tenant founded on or resulting from such delay and losses to Landlord due to lost opportunities to lease any portion of the Premises to any such succeeding tenant or prospective tenant, together with, in each case, reasonable attorneys’ fees and costs.

 

12.   ALTERATIONS AND ADDITIONS

 

12.1    Landlord’s Consent Required

 

Tenant shall not make, or permit to be made, any alteration, addition or improvement (hereinafter referred to individually as an “Alteration” and collectively as the “Alterations”) to the Premises or any part thereof without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Landlord shall have the right in its sole and absolute discretion to consent or to withhold its consent to any Alteration which affects the structural portions of the Premises, the Building or the Project or the Systems serving the Premises, the Building and/or the Project or any portion thereof.

 

12.2    Alterations Permitted Without Landlord’s Consent; Removal Requirements

 

Notwithstanding the foregoing, but subject to the conditions set forth below, Tenant may, without Landlord’s consent, make Alterations within the Premises provided that (i) such Alterations do not affect the structural portions of the Premises, the Building or the Project or the Systems, and (ii) the cost, on an individual project basis, of any Alteration or related series of Alterations is less than $50,000, and all Alterations in the aggregate do not exceed $500,000 over the Term. The Alterations made by Tenant without the consent of Landlord in accordance with this Paragraph 12.2 shall be herein referred to as the “Permitted Alterations.”

 

12.3    Alterations at Tenant’s Expense

 

Any Alteration to the Premises shall be at Tenant’s sole cost and expense, in compliance with all applicable Laws and all requirements requested by Landlord, including, without limitation, the requirements of any insurer providing coverage for the Premises or the Project or any part thereof, and in accordance with plans and specifications approved in writing by Landlord (except for Permitted Alterations), which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, with respect to Alterations that may be made without Landlord’s prior consent as permitted above, Landlord agrees that Tenant shall not be required to submit plans and specifications for prior approval of the Landlord and that Landlord shall not require prior approval of the installing contractor; provided, however, if Tenant does not obtain the prior approval of plans and specifications for any Alteration, then subject to the terms of Paragraph 12.4(b) below, Landlord may, by notice to Tenant given not later than ninety (90) days prior to the Expiration Date (except in the event of a termination of this Lease prior to the scheduled Expiration Date, in which event no advance

 

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notice shall be required), require Tenant, at Tenant’s expense, to remove, and repair any damage caused by removal of, any and all such Alterations. If Tenant does not obtain Landlord’s prior consent as to the installing contractor, Tenant shall be responsible for maintaining harmonious labor relations with all contractors and service providers servicing the Premises, Building and/or Project. In addition, with respect to any Permitted Alterations made without Landlord’s prior consent as permitted above, Tenant agrees to meet with Landlord, at Landlord’s request, not more than once in every calendar year, to discuss any such Permitted Alterations that have been made to the Premises (each such meeting being herein referred to as an “Alterations Meeting”). Tenant shall provide to Landlord within forty five (45) days after written request as-built plans and specifications for any Alterations (including, without limitation, any Permitted Alterations) made by Tenant to the Premises. Notwithstanding anything in this Lease to the contrary, any approval by Landlord of any drawings, plans or specifications prepared on behalf of Tenant shall not in any way bind Landlord, create any responsibility or liability on the part of Landlord for the completeness of the same, their design sufficiency or compliance with applicable statutes, ordinances or regulations or constitute a representation or warranty by Landlord as to the adequacy or sufficiency of such drawings, plans or specifications, or the improvements to which they relate, but such approval shall merely evidence the consent of Landlord to such drawings, plans or specifications.

 

12.4    Requirements of Request for Approval

 

(a)   Any Alterations requiring the prior consent of Landlord shall contain a request that Landlord specify in writing to Tenant those Alterations that Tenant will be required to remove in accordance with Paragraph 11.1 upon expiration or sooner termination of this Lease. Upon receipt of such request, Landlord shall make such determination and respond to Tenant within twenty (20) business days of such request. Landlord’s failure to respond within such time shall be deemed to mean that Tenant shall not be required to remove such Alterations upon the expiration or sooner termination of this Lease.

 

(b)   In the event Tenant constructs or installs any Permitted Alterations without the consent of Landlord, then Tenant shall have the right at the next succeeding Alterations Meeting to request that Landlord specify in writing whether Tenant will be required to remove all or any portion of such Permitted Alterations upon expiration or sooner termination of this Lease. Upon receipt of such request, Landlord shall make such determination and respond to Tenant within twenty (20) business days of such request. Landlord’s failure to respond within such time shall conclusively be deemed to be an irrevocable waiver of Landlord’s right to demand their removal.

 

12.5    Permits Required; Insurance Required

 

12.5.1.    Permits

 

Before Alterations may begin, valid building permits or other permits or licenses required must be furnished to Landlord, and, once the Alterations begin, Tenant will diligently and continuously pursue their completion. Landlord may monitor construction of the Alterations, either through its own employees or through a construction manager retained by Landlord.

 

12.5.2.    Insurance

 

Tenant shall maintain during the course of any construction (including, without limitation, during the construction of any Alterations), at its sole cost and expense, builders’ risk insurance for the amount of the completed value of the Alterations on an all-risk non-reporting form covering all improvements under construction, including building materials, and other insurance in amounts and against such risks as Landlord shall reasonably require in connection with the Alterations, including, without limitation, naming Landlord and Landlord’s lender as loss payee under any such policy. In

 

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addition to and without limitation on the generality of the foregoing, Tenant shall ensure that its contractor(s) procure and maintain in full force and effect during the course of construction a “broad form” commercial general liability and property damage policy of insurance naming Landlord, Tenant and Landlord’s lenders as additional insureds. The minimum limit of coverage of the aforesaid policy shall be in the amount of not less than Three Million Dollars ($3,000,000.00) for injury or death of one person in any one accident or occurrence and in the amount of not less than Three Million Dollars ($3,000,000.00) for injury or death of more than one person in any one accident or occurrence, and shall contain a severability of interest clause or a cross liability endorsement. Such insurance shall further insure Landlord and Tenant against liability for property damage of at least One Million Dollars ($1,000,000.00).

 

12.6    Title to Improvements; Removal Rights; Financing

 

Except as otherwise expressly stated herein or agreed to in writing between the parties, the Tenant Improvements actually paid for by Tenant and all Alterations, including, but not limited to, heating, lighting, electrical, air conditioning, fixed partitioning, drapery, wall covering and paneling, built-in cabinet work and carpeting installations made by Tenant, together with all property that has become an integral part of the Premises or the Building, shall upon installation become the property of Tenant; provided, however, that title to all such Tenant Improvements, Alterations and property shall automatically transfer to Landlord upon the expiration of the Term or the sooner termination of this Lease without the payment of any consideration or the execution of any transfer documents. Notwithstanding the foregoing, Tenant shall retain title to and ownership of Tenant’s Property at all times. For purposes of this Paragraph 12.6 and Paragraph 49.4.1 below, Landlord shall be deemed to have paid for those Tenant Improvements funded out of the Initial Tenant Improvement Allowance (as hereinafter defined), and Tenant shall be deemed to have paid for the remaining Tenant Improvements. As used herein, “Initial Tenant Improvement Allowance” means the initial $45.00 per square foot of the Tenant Improvement Allowance provided by Landlord hereunder.

 

12.7    Computer, Utility and Telecommunications Equipment

 

No private telephone systems, utilities and/or other related computer, utility or telecommunications equipment or lines may be installed without Landlord’s prior written consent, which consent shall not be unreasonably withheld. If Landlord gives such consent, all equipment must be installed within the Premises and, unless Landlord, at the time of installation, notifies Tenant in writing that removal will be required, left in the Premises and surrendered to Landlord upon the expiration or sooner termination of this Lease.

 

12.8    Notice and Opportunity to Post Notice of Nonresponsibility

 

Tenant agrees not to proceed to make any Alterations, notwithstanding consent from Landlord to do so, without fifteen (15) days’ prior written notice to Landlord, in order that Landlord may post appropriate notices to avoid any liability to contractors or material suppliers for payment for Tenant’s improvements. Tenant will at all times permit such notices to be posted and to remain posted until the completion of work.

 

13.   MAINTENANCE AND REPAIRS OF PREMISES

 

13.1    Maintenance by Tenant

 

Subject to the provisions of Paragraph 13.2, 21 and 22 below, throughout the Term, Tenant shall, at its sole expense, (1) keep and maintain in good order and condition the Building and the Premises and repair the Building and the Premises and every part thereof, including interior and exterior glass,

 

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windows, window frames and casements, interior and exterior doors and door frames and door closers; interior and exterior lighting (including, without limitation, light bulbs and ballasts), the roof covering; the Systems serving the Premises and the Building; interior and exterior signage, interior demising walls and partitions, equipment, interior painting and interior walls and floors, and the roll-up doors, ramps and dock equipment, including, without limitation, dock bumpers, dock plates, dock seals, dock levelers and dock lights located in or on the Premises (excepting only those portions of the Building or the Project to be maintained by Landlord, as provided in Paragraph 13.2 below), (2) furnish all expendables, including light bulbs, paper goods and soaps, used in the Premises, and (3) keep and maintain in good order and condition and repair and replace all of Tenant’s security systems in or about or serving the Premises. Tenant shall not do nor shall Tenant allow Tenant’s Agents to do anything to cause any damage, deterioration or unsightliness to the Premises, the Building or the Project. Tenant shall perform its obligations under this Paragraph 13.1 in accordance with maintenance and repair standards adopted by Landlord from time to time for the Project. Tenant shall cause to be furnished to Landlord on not less than a quarterly basis maintenance reports on all Systems and the roof of the Building prepared by a qualified vendor or consultant, and Tenant shall promptly perform any maintenance tasks recommended by such reports or otherwise required by Landlord to cause the Premises and the Systems to comply with Landlord’s maintenance and repair standards.

 

13.2    Maintenance by Landlord

 

Subject to the provisions of Paragraphs 13.1, 21 and 22, and further subject to Tenant’s obligation under Paragraph 4 to reimburse Landlord, in the form of Additional Rent, for Tenant’s Proportionate Share(s) of the Project and the Building, as applicable, of the cost and expense of the following items, Landlord agrees to repair and maintain the Common Areas in good order and condition, including, without limitation, the Parking Areas, pavement, landscaping, sprinkler systems, sidewalks, driveways, curbs, and lighting systems in the Common Areas. Subject to the provisions of Paragraphs 13.1, 21 and 22, Landlord, at its own cost and expense, agrees to repair and maintain the following items: the structural portions of the roof (specifically excluding the roof coverings), the foundation, the footings, the floor slab, and the load bearing walls and exterior walls of the Building (excluding any glass and any routine maintenance, including, without limitation, any painting, sealing, patching and waterproofing of such walls).

 

13.3    Landlord’s Right to Perform Tenant’s Obligations

 

Notwithstanding anything in this Paragraph 13 to the contrary, Landlord shall have the right to either repair or to require Tenant to repair any damage to any portion of the Premises, the Building and/or the Project caused by or created due to any act, omission, negligence or willful misconduct of Tenant or Tenant’s Agents and to restore the Premises, the Building and/or the Project, as applicable, to the condition existing prior to the occurrence of such damage; provided, however, that in the event Landlord elects to perform such repair and restoration work, Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in connection therewith. Landlord’s obligation hereunder to repair and maintain is subject to the condition precedent that Landlord shall have received written notice of the need for such repairs and maintenance and a reasonable time to perform such repair and maintenance. Tenant shall promptly report in writing to Landlord any defective condition which Landlord is required to repair, and failure to so report such defects shall make Tenant responsible to Landlord for the costs and expenses of repairing any Preventable Damage occurring after the date Tenant obtains actual knowledge of such defective condition and any liability incurred by Landlord by reason of Tenant’s failure to notify Landlord of such defective condition in a timely manner as provided herein. As used herein, “Preventable Damage” means any damage or deterioration which could have been prevented had Landlord received timely notice of the defective condition. Nothing contained herein shall be deemed or construed to limit Tenant’s obligations under Paragraph 16 below.

 

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13.4    Tenant’s Waiver of Rights

 

Tenant hereby expressly waives all rights to make repairs at the expense of Landlord or to terminate this Lease, as provided for in California Civil Code Sections 1941 and 1942, and 1932(1), respectively, and any similar or successor statute or law in effect or any amendment thereof during the Term.

 

14.   LANDLORD’S INSURANCE

 

At all times during the Term of this Lease, Landlord shall purchase and keep in force “all risk” property insurance covering the Base Building Improvements, the Tenant Improvements and all Alterations made to the Premises by Tenant in accordance with the terms of Paragraph 12 above, in accordance with Landlord’s customary insurance program for comparable properties. Tenant shall provide Landlord with such information as may be requested by Landlord or its insurers concerning the value of the Tenant Improvements or any Alterations. Tenant acknowledges and agrees that Landlord shall have no obligation to maintain property insurance covering any alterations, additions or improvements made to the Premises other than Alterations made in strict accordance with Paragraph 12 (such other alterations, additions or improvements being herein referred to as “Unpermitted Alterations”), and Tenant hereby agrees to indemnify and hold harmless Landlord and Landlord’s Agents from and against any and all Losses (as hereinafter defined) resulting from or arising out of the making of any such Unpermitted Alterations. Tenant shall, at its sole cost and expense, comply with any and all reasonable requirements pertaining to the Premises, the Building and the Project of any insurer necessary for the maintenance of reasonable property damage and commercial general liability insurance, covering the Building and the Project. Landlord, at Tenant’s cost, may maintain “Loss of Rents” insurance, insuring that the Rent will be paid in a timely manner to Landlord for a period of at least twelve (12) months if the Building or any portion thereof are destroyed or rendered unusable or inaccessible by any cause insured against under this Lease.

 

15.   TENANT’S INSURANCE

 

15.1    Commercial General Liability Insurance

 

At all times during the Term of this Lease, Tenant shall, at Tenant’s expense, secure and keep in force a Commercial General Liability insurance policy covering the Premises, insuring Tenant, and naming Landlord and its lenders as additional insureds, against liability arising out of the ownership, use, occupancy or maintenance of the Premises. The minimum limit of coverage of such policy shall be in the amount of not less than Three Million Dollars ($3,000,000.00) for each occurrence combined single limit for bodily injury and property damage, shall include contractual liability coverage (which shall include coverage for Tenant’s indemnification obligations in this Lease, provided that the amount of such coverage shall not be construed to limit Tenant’s indemnification obligations hereunder), and shall contain severability of interests and cross liability coverage clauses and/or endorsements. Such insurance shall be endorsed to be primary and non-contributory to any insurance Landlord may carry. Landlord may from time to time require reasonable increases in any such limits if Landlord believes that additional coverage is necessary or desirable. The limit of any insurance shall not limit the liability of Tenant hereunder. No policy maintained by Tenant under this Paragraph 15.1 shall contain a deductible greater than Five Thousand Dollars ($5,000.00). Such policies of insurance shall be issued as primary policies and not contributing with or in excess of coverage that Landlord may carry.

 

15.2    Property Insurance

 

At all times during the Term of this Lease, Tenant shall, at Tenant’s expense, maintain in full force and effect special form property insurance on all of its personal property, possessions, furniture,

 

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furnishings, trade or business fixtures, equipment and such other items listed on Exhibit E (collectively, “Tenant’s Property”) located on the Premises. Such special form property insurance shall be on a full replacement cost basis and shall be written to cover all risks of direct loss or damage, including, but not be limited to, theft, water damage and sprinkler leakage. No such policy shall contain a deductible greater than Five Thousand Dollars ($5,000.00). During the Term of this Lease the proceeds from any such policy or policies of insurance shall be used for the repair or replacement of Tenant’s Property. Landlord shall have no interest in the insurance upon Tenant’s Property and will sign all documents reasonably necessary in connection with the settlement of any claim or loss by Tenant. Landlord will not carry insurance on Tenant’s Property.

 

15.3    Worker’s Compensation Insurance; Employer’s Liability Insurance

 

At all times during the Term of this Lease, Tenant shall, at Tenant’s expense, maintain in full force and effect worker’s compensation insurance with not less than the minimum limits required by Law, and employer’s liability insurance with a minimum limit of coverage of One Million Dollars ($1,000,000) per accident.

 

15.4    Business Interruption Insurance

 

Tenant shall, at all times during the Term of this Lease, maintain in full force and effect loss of income and extra expense insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings or extra expenses attributable to or resulting from all perils commonly insured under a special form policy of property insurance.

 

15.5    Insurance Standards and Evidence of Coverage

 

All insurance required to be carried by Tenant hereunder shall be maintained with insurance companies authorized to do business in the State of California for the issuance of the applicable type of insurance coverage and rated A:XIII or better in Best’s Key Rating Guide. Notwithstanding the foregoing, Landlord hereby approves General Star Indemnity as the carrier of the insurance required under Paragraph 15.1 above, provided that General Star Indemnity shall at all times during the Term maintain a Best’s Key Rating of not less than A++:VIII. Tenant shall deliver to Landlord certificates of insurance and true and complete copies of any and all endorsements required herein for all insurance required to be maintained by Tenant hereunder at the time of execution of this Lease by Tenant. Tenant shall, at least thirty (30) days prior to expiration of each policy, furnish Landlord and the other parties named as additional insureds with certificates of renewal or “binders” thereof. Each certificate shall expressly provide that such policies shall not be cancelable except after thirty (30) days’ prior written notice to Landlord and the other parties named as additional insureds as required in this Lease (except for cancellation for nonpayment of premium, in which event cancellation shall not take effect until at least ten (10) days’ notice has been given to Landlord and the parties named as additional insureds hereunder).

 

16.   INDEMNIFICATION

 

16.1    Of Landlord

 

Tenant shall indemnify and hold harmless Landlord and Landlord’s advisors, employees, partners, shareholders and directors against and from any and all claims, liabilities, judgments, costs, demands, causes of action and expenses (including, without limitation, reasonable attorneys’ fees) (collectively, “Losses”) arising from (1) the use of the Premises, the Building or the Project by Tenant or Tenant’s Agents, or from any activity done, permitted or suffered by Tenant or Tenant’s Agents in or about the Premises, the Building or the Project, and (2) any act, neglect, fault, willful misconduct or omission of

 

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Tenant or Tenant’s Agents, or from any breach or default in the terms of this Lease by Tenant or Tenant’s Agents, and (3) any action or proceeding brought on account of any matter in items (1) or (2); provided, however, that in no event shall Tenant be required to indemnify Landlord against any claims, demands or losses resulting from any failure of Landlord to observe any of the terms and conditions of this Lease, including, without limitation, the covenant set forth in Paragraph 9.2(a) above, in each case to the extent such failure or breach has persisted for an unreasonable period of time after written notice of such failure or breach. If any action or proceeding is brought against Landlord by reason of any such claim, upon notice from Landlord, Tenant shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. As a material part of the consideration to Landlord, Tenant hereby releases Landlord and Landlord’s Agents from responsibility for, waives its entire claim of recovery for and assumes all risk of (i) damage to property or injury to persons in or about the Premises, the Building or the Project from any cause whatsoever (except that which is caused by the gross negligence or willful misconduct of Landlord or Landlord’s Agents or by the failure of Landlord to observe any of the terms and conditions of this Lease, if such failure has persisted for an unreasonable period of time after written notice of such failure), or (ii) loss resulting from business interruption or loss of income at the Premises. The obligations of Tenant under this Paragraph 16.1 shall survive the expiration or earlier termination of this Lease.

 

16.2    Of Tenant

 

Landlord shall indemnify and hold harmless Tenant and Tenant’s employees, partners, shareholders and directors against and from any and all Losses relating to the Project and arising from (1) the gross negligence or willful misconduct of Landlord or Landlord’s Agents, (2) the failure of Landlord to observe any of the terms and conditions of this Lease, if such failure has persisted for an unreasonable period of time after written notice of such failure, and (3) any action or proceeding brought on account of any matter in items (1) or (2). If any action or proceeding is brought against Tenant by reason of any such claim, upon notice from Tenant, Landlord shall defend the same at Landlord’s expense by counsel reasonably satisfactory to Landlord. The obligations of Landlord under this Paragraph 16.2 shall survive any termination of this Lease.

 

16.3    No Impairment of Insurance

 

The foregoing indemnity shall not relieve any insurance carrier of its obligations under any policies required to be carried by either party pursuant to this Lease, to the extent that such policies cover the peril or occurrence that results in the claim that is subject to the foregoing indemnity.

 

17.   SUBROGATION

 

Landlord and Tenant hereby mutually waive any claim against the other and its Agents for any loss or damage to any of their property located on or about the Premises, the Building or the Project that is caused by or results from perils covered by the property insurance required to be carried by the respective parties in accordance with Paragraphs 14 and 15 of this Lease, whether or not due to the negligence of the other party or its Agents. Because the foregoing waivers will preclude the assignment of any claim by way of subrogation to an insurance company or any other person, each party now agrees to immediately give to its insurer written notice of the terms of these mutual waivers and shall have their insurance policies endorsed to prevent the invalidation of the insurance coverage because of these waivers. Nothing in this Paragraph 17 shall relieve a party of liability to the other for failure to carry insurance required by this Lease.

 

18.   SIGNS

 

Tenant shall not place or permit to be placed in, upon, or about the Premises, the Building or the Project any exterior lights, decorations, balloons, flags, pennants, banners, advertisements or notices, or

 

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erect or install any signs, windows or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises without obtaining Landlord’s prior written consent or without complying with Landlord’s signage program, as the same may be modified by Landlord from time to time, and with all applicable Laws, and will not conduct, or permit to be conducted, any sale by auction on the Premises or otherwise on the Project. Tenant shall remove any sign, advertisement or notice placed on the Premises, the Building or the Project by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises, the Building or the Project caused thereby, all at Tenant’s expense. If any signs are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs and repair any damage or injury to the Premises, the Building or the Project at Tenant’s sole cost and expense.

 

19.   FREE FROM LIENS

 

Tenant shall keep the Premises, the Building and the Project free from any liens arising out of any work performed, material furnished or obligations incurred by or for Tenant in accordance with the provisions of this Paragraph 19. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have in addition to all other remedies provided herein and by law the right but not the obligation to cause same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith (including, without limitation, reasonable attorneys’ fees) shall be payable to Landlord by Tenant upon demand. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law or that Landlord shall deem proper for the protection of Landlord, the Premises, the Building and the Project, from mechanics’ and materialmen’s liens. Tenant agrees not to proceed to perform any repairs or construction on the Premises without fifteen (15) days’ prior written notice to Landlord in order that Landlord may post appropriate notices to avoid any liability to contractors or material suppliers for payment for Tenant’s work.

 

20.   ENTRY BY LANDLORD

 

Tenant shall permit Landlord and Landlord’s Agents to enter into and upon the Premises at all reasonable times upon twenty-four (24) hours’ notice (except in the case of an emergency, in which event no advance notice shall be required) for the purpose of inspecting the same or showing the Premises to prospective purchasers, lenders or tenants or to alter, improve, maintain and repair the Premises or the Building as required or permitted of Landlord under the terms hereof, or for any other reasonable business purpose, without any rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises thereby occasioned; and Tenant shall permit Landlord to post notices of non-responsibility and ordinary “for sale” or “for lease” signs. Notwithstanding the foregoing, Landlord shall only enter the Premises for the purpose of showing the same to prospective tenants during the last ten (10) months of the Term. No such entry shall be construed to be a forcible or unlawful entry into, or a detailer of, the Premises, or an eviction of Tenant from the Premises. Tenant’s representatives shall have the right to accompany Landlord on any inspection of the Premises, provided that Tenant’s representatives are available at the time of such inspections. Landlord may temporarily close entrances, doors, corridors, elevators or other facilities without liability to Tenant by reason of such closure in the case of an emergency and when Landlord otherwise reasonably deems such closure necessary.

 

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21.   DESTRUCTION AND DAMAGE

 

21.1    Damage Covered by Extended Coverage Insurance

 

If the Premises are damaged by fire or other perils covered by extended coverage insurance, Landlord shall, at Landlord’s option:

 

21.1.1.    Material Damage; Insured Loss

 

In the event of material damage to the Premises (which shall mean damage or destruction of a nature such that all required permits cannot be reasonably obtained and/or the Premises cannot be substantially repaired and restored to the condition existing immediately prior to such damage or destruction within three hundred sixty-five (365) days after the date Landlord obtains actual knowledge of such destruction (the “Casualty Discovery Date”)), Landlord may elect either to commence promptly to repair and restore the Premises and prosecute the same diligently to completion, in which event this Lease shall remain in full force and effect; or not to repair or restore the Premises, in which event this Lease shall terminate. Landlord shall give Tenant written notice of its intention within sixty (60) days after the Casualty Discovery Date. If Landlord elects in writing not to restore the Premises, this Lease shall be deemed to have terminated as of the date of such destruction.

 

21.1.2.    Minor Damage; Insured Loss

 

In the event of minor damage to the Premises (which shall mean damage or destruction of a nature such that all required permits can be reasonably obtained and the Premises may be substantially repaired or restored to the condition existing immediately prior to such damage or destruction within three hundred sixty-five (365) days after the Casualty Discovery Date) for which Landlord will receive insurance proceeds sufficient to cover the cost to repair and restore such partial destruction, Landlord shall commence and proceed diligently with the work of repair and restoration, in which event this Lease shall continue in full force and effect. If the insurance proceeds (plus any amounts Tenant may elect or is obligated to contribute) are not sufficient to cover the cost of such repair and restoration, Landlord may elect either to so repair and restore, in which event this Lease shall continue in full force and effect, or not to repair or restore, in which event this Lease shall terminate. In either case, Landlord shall give written notice to Tenant of its intention within sixty (60) days after the Casualty Discovery Date. If Landlord elects, in writing, not to restore the Premises, this Lease shall be deemed to have terminated as of the date of such partial destruction.

 

21.1.3.    Calculation of Restoration Period.

 

Following the occurrence of any casualty event, Landlord shall obtain from a licensed general contractor selected by Landlord (the “Restoration Contractor”) an estimate of the time required to obtain all permits and to fully repair and restore the Premises. In the event the Restoration Contractor determines that the work of repair and restoration shall require more than three hundred sixty-five (365) days to complete, Tenant shall have the right to discuss such timing with the Restoration Contractor and, with the approval of Landlord, to discuss modifications to the scope of work in an effort to reduce the repair and restoration time to a period of less than three hundred sixty-five days; provided, however, that in the event of any disagreement between the parties as to the estimated length of the restoration period or the scope of work required, the determination of Landlord and the Restoration Contractor shall control.

 

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21.2    Uninsured Loss

 

If the Premises are damaged by any peril not covered by Landlord’s property insurance, and the cost to repair such damage exceeds any amount Tenant may agree to contribute, Landlord may elect either to commence promptly to repair and restore the Premises and prosecute the same diligently to completion, in which event this Lease shall remain in full force and effect; or not to repair or restore the Premises, in which event this Lease shall terminate. Landlord shall give Tenant written notice of its intention within sixty (60) days after the Casualty Discovery Date. If Landlord elects, in writing, not to restore the Premises, this Lease shall be deemed to have terminated as of the date on which Tenant surrenders possession of the Premises to Landlord.

 

21.3    Casualty During Last Twelve Months of Term

 

If fifty percent (50%) or more of the Building is damaged or destroyed during the last twelve (12) months of the Term (unless Tenant has remaining extension options and has previously validly exercised such options or validly exercises such options within ten (10) days after the Casualty Discovery Date), Landlord shall have the option to terminate this Lease, exercisable by notice to Tenant within sixty (60) days after the Casualty Discovery Date.

 

21.4    Tenant’s Right to Terminate Lease

 

If the Premises is damaged or destroyed to the extent that the Premises cannot be substantially repaired or restored by Landlord within three hundred sixty-five (365) days after the Casualty Discovery Date, Tenant may terminate this Lease immediately upon notice thereof to Landlord, which notice shall be given, if at all, not later than fifteen (15) days after Landlord notifies Tenant of Landlord’s estimate of the period of time required to repair such damage or destruction.

 

21.5    Rent Abatement

 

In the event of repair and restoration as herein provided, the monthly installments of Base Rent and Additional Rent shall be abated proportionately to the extent Tenant’s use of the Premises is impaired during the period of such repair or restoration, but only to the extent of rental abatement insurance proceeds actually received by Landlord. The number of parking spaces allocated to Tenant hereunder shall be reduced on a proportionate basis in the event any of the parking spaces in the Parking Areas are eliminated as a result of such damage or destruction affecting such Parking Areas. Except as expressly provided above with respect to abatement of Base Rent, Tenant shall have no claim against Landlord for, and hereby releases Landlord and Landlord’s Agents from responsibility for and waives its entire claim of recovery for any cost, loss or expense suffered or incurred by Tenant as a result of any damage to or destruction of the Premises, the Building or the Project or the repair or restoration thereof, including, without limitation, any cost, loss or expense resulting from any loss of use of the whole or any part of the Premises, the Building or the Project and/or any inconvenience or annoyance occasioned by such damage, repair or restoration.

 

21.6    Restoration of Base Building Improvements and Tenant Improvements

 

If Landlord is obligated to or elects to repair or restore as herein provided, Landlord shall repair or restore only the Base Building Improvements constructed pursuant to the terms of this Lease, substantially to their condition existing immediately prior to the occurrence of the damage or destruction; and Tenant shall promptly repair and restore, at Tenant’s expense, the Tenant Improvements and Tenant’s Alterations. Landlord shall make available to Tenant to pay Restoration Costs (as hereinafter defined) any insurance proceeds actually collected by Landlord allocable to the Tenant Improvements and Alterations. Such proceeds shall be disbursed by Landlord in accordance with customary construction-lending practices and disbursement procedures (including, without

 

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limitation, the creation of a retention). As used herein, “Restoration Costs” means costs actually incurred by Tenant in repairing and restoring the Tenant Improvements and any Alterations made by Tenant to the Premises.

 

21.7    Waiver

 

Tenant hereby waives the provisions of California Civil Code Section 1932(2) and Section 1933(4) which permit termination of a lease upon destruction of the leased premises, and the provisions of any similar law now or hereinafter in effect, and the provisions of this Paragraph 21 shall govern exclusively in case of such destruction.

 

22.   CONDEMNATION

 

(a)   If twenty-five percent (25%) or more of the Building or fifty percent (50%) or more of the Designated Parking Areas (as hereinafter defined) is taken for any public or quasi-public purpose by any lawful governmental power or authority, by exercise of the right of appropriation, inverse condemnation, condemnation or eminent domain, or sold to prevent such taking (each such event being referred to as a “Condemnation”), Landlord may, at its option, terminate this Lease as of the date title vests in the condemning party. If twenty-five percent (25%) or more of the Premises is taken and if the Premises remaining after such Condemnation and any repairs by Landlord would be untenantable for the conduct of Tenant’s business operations, Tenant shall have the right to terminate this Lease as of the date title vests in the condemning party. If either party elects to terminate this Lease as provided herein, such election shall be made by written notice to the other party given within thirty (30) days after the nature and extent of such Condemnation have been finally determined. If neither Landlord nor Tenant elects to terminate this Lease to the extent permitted above, Landlord shall promptly proceed to restore the Premises, to the extent of any Condemnation award received by Landlord, to substantially the same condition as existed prior to such Condemnation, allowing for the reasonable effects of such Condemnation, and a proportionate abatement shall be made to the Base Rent and Additional Rent corresponding to the time during which, and to the portion of the floor area of the Premises (adjusted for any increase thereto resulting from any reconstruction) of which, Tenant is deprived on account of such Condemnation and restoration, as reasonably determined by Landlord. Except as expressly provided in the immediately preceding sentence with respect to abatement of Rent, Tenant shall have no claim against Landlord for, and hereby releases Landlord and Landlord’s Agents from responsibility for and waives its entire claim of recovery for any cost, loss or expense suffered or incurred by Tenant as a result of any Condemnation or the repair or restoration of the Premises, the Building, the Project or the Parking Areas following such Condemnation, including, without limitation, any cost, loss or expense resulting from any loss of use of the whole or any part of the Premises, the Building, the Project or the parking areas and/or any inconvenience or annoyance occasioned by such Condemnation, repair or restoration. The provisions of California Code of Civil Procedure Section 1265.130, which allows either party to petition the Superior Court to terminate the Lease in the event of a partial taking of the Premises, the Building or the Project or the parking areas for the Building or the Project, and any other applicable law now or hereafter enacted, are hereby waived by Tenant.

 

(b)   Landlord shall be entitled to any and all compensation, damages, income, rent, awards, or any interest therein whatsoever which may be paid or made in connection with any Condemnation, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease or otherwise; provided, however, that Tenant shall be entitled to receive any award separately allocated by the condemning authority to Tenant for Tenant’s relocation expenses or the value of Tenant’s Property (specifically excluding fixtures, Alterations and other components of the Premises which under this Lease or by law are or at the expiration of the Term will become the property of Landlord), provided that such award does not reduce any award otherwise allocable or payable to Landlord.

 

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23.   ASSIGNMENT AND SUBLETTING

 

23.1    Landlord’s Consent Required Except for Permitted Transfers

 

Except as specifically provided for in Paragraph 23.3 below, Tenant shall not voluntarily or by operation of law, (1) mortgage, pledge, hypothecate or encumber this Lease or any interest herein, (2) assign or transfer this Lease or any interest herein, (3) sublease the Premises or any part thereof, or any right or privilege appurtenant thereto, or (4) allow any other person (the employees and invitees of Tenant excepted) to occupy or use the Premises, or any portion thereof, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed provided that Tenant is not then in Default under this Lease nor is any event then occurring which with the giving of notice or the passage of time, or both, would constitute a Default hereunder.

 

23.2    Requirements of Request for Consent.

 

When Tenant requests Landlord’s consent to such assignment or subletting, it shall notify Landlord in writing of the name and address of the proposed assignee or subtenant and the nature and character of the business of the proposed assignee or subtenant and shall provide current and prior financial statements for the proposed assignee or subtenant prepared in accordance with generally accepted accounting principles consistently applied (“GAAP”). Tenant shall also provide Landlord with a copy of the proposed sublease or assignment agreement, including all material terms and conditions thereof, and such additional information concerning the proposed assignee or subtenant as Landlord may request. Landlord shall have the option, to be exercised within fifteen (15) days of receipt of the foregoing in the case of a proposed assignment or subletting affecting not more than twenty five thousand (25,000) square feet of the Premises, and within thirty (30) days of receipt of the foregoing in the case of a proposed assignment or subletting affecting more than twenty five thousand (25,000) square feet (“Landlord’s Review Period”), to (1) consent to the proposed assignment or sublease, (2) refuse its consent to the proposed assignment or sublease, providing that such consent shall not be unreasonably withheld, conditioned or delayed so long as Tenant is not then in Default under this Lease or the Expansion Lease, if any, nor is any event then occurring which with the giving of notice or the passage of time, or both, would constitute a Default hereunder or under the Expansion Lease, or (3) sublease or take an assignment, as the case may be, from Tenant of the interest in this Lease and/or the Premises that Tenant proposes to assign or sublease, on the same terms and conditions as stated in the proposed sublet or assignment agreement. Notwithstanding the foregoing, in the event Tenant wishes to assign or sublet all of the Premises for all of the remainder of the Term (except in either event in connection with a Permitted Transfer), then in addition to the options specified in the aforesaid clauses (1), (2) and (3), Landlord shall have the additional right, to be exercised within the aforesaid thirty (30) day period, to terminate this Lease in its entirety. In the event Landlord elects to terminate this Lease or sublease or take an assignment from Tenant of the interest in this Lease and/or the Premises that Tenant proposes to assign or sublease as provided in the foregoing clauses of this Paragraph 23.2, then Landlord shall have the additional right to negotiate directly with Tenant’s proposed assignee or subtenant and to enter into a direct lease or occupancy agreement with such party on such terms as shall be acceptable to Landlord in its sole and absolute discretion, and Tenant hereby waives any claims against Landlord related thereto, including, without limitation, any claims for any compensation or profit related to such lease or occupancy agreement.

 

23.3    Criteria To Be Considered in Connection with Request for Consent

 

Without otherwise limiting the criteria upon which Landlord may withhold its consent to a proposed assignment or sublease, Landlord shall be entitled to consider all reasonable criteria including, but not limited to, the following: (1) whether or not the proposed subtenant or assignee is engaged in a business which, and the Premises will be used in a manner which, is in keeping with the

 

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then character and nature of all other tenancies in the Project, (2) whether the use to be made of the Premises by the proposed subtenant or assignee will conflict with any so-called “exclusive” use then in favor of any other tenant of the Building, the Project, or the Adjacent Properties, and whether such use would be prohibited by any other portion of this Lease, including, but not limited to, any rules and regulations then in effect, or under applicable Laws, and whether such use imposes an unreasonable load upon the Premises and the Building and Project services, (3) the business reputation of the proposed individuals who will be managing and operating the business operations of the assignee or subtenant, and the long-term financial and competitive business prospects of the proposed assignee or subtenant, and (4) the creditworthiness and financial stability of the proposed assignee or subtenant in light of the responsibilities involved. In any event, Landlord may withhold its consent to any assignment or sublease if the actual use proposed to be conducted in the Premises or portion thereof is not a Permitted Use provided for under Paragraph 9 above or a general office use.

 

23.4    Permitted Transfers

 

Notwithstanding the foregoing, Tenant may, without Landlord’s consent, but upon notice and delivery of evidence documenting such assignment or subletting, assign or sublet to an Affiliate (as defined below) of the original Tenant (such assignment or subletting being referred to as a “Permitted Transfer”). In addition, a sale or transfer of the capital stock of Tenant shall be deemed a Permitted Transfer if (1) such sale or transfer occurs in connection with any bona fide financing or capitalization for the benefit of Tenant or (2) occurring through a public trade. For purposes of this Lease, “Affiliate” shall mean, as to any Person, any person, firm or corporation (i) which shall be controlled by, under the control of, or under common control with such person, (ii) which results from a merger of, reorganization of, or consolidation with, or (iii) which acquires substantially all of the stock or assets with respect to the business that is conducted in the Premises. “Person” means any natural person, corporation, firm, association, government, governmental agency or any other entity, whether acting in any individual, fiduciary or other capacity. For purposes hereof, “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, firm or corporation, whether through the ownership of voting securities, by contract or otherwise.

 

23.5    Excess Rent

 

If Landlord approves an assignment or subletting as herein provided, Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of the Transfer Profits (as hereinafter defined), as evidenced by written records satisfactory to Landlord. As used herein, “Transfer Profits” means the difference, if any, between (1) the Base Rent plus Additional Rent allocable to that part of the Premises affected by such assignment or sublease pursuant to the provisions of this Lease, and (2) the rent and any additional rent payable by the assignee or sublessee to Tenant, less actual leasing commissions and reasonable attorneys’ fees, if any, incurred by Tenant in connection with such assignment or sublease, and actual tenant improvement costs paid by Tenant in improving the Premises for the applicable assignee or subtenant up to an aggregate of five dollars ($5.00) per square foot of space subject to the assignment or sublease transaction. The assignment or sublease agreement, as the case may be, after approval by Landlord, shall not be amended without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, shall contain an express assumption by the assignee or subtenant of Tenant’s obligations under this Lease and shall contain a provision directing the assignee or subtenant to pay the rent and other sums due thereunder directly to Landlord upon receiving written notice from Landlord that Tenant is in default under this Lease with respect to. the payment of Rent. In the event that, notwithstanding the giving of such notice, Tenant collects any rent or other sums from the assignee or subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord and shall immediately forward the same to Landlord. Landlord’s collection of such rent and other sums shall not constitute an acceptance by Landlord of attornment by such assignee or subtenant.

 

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A consent to one assignment, subletting, occupation or use shall not be deemed to be a consent to any other or subsequent assignment, subletting, occupation or use, and consent to any assignment or subletting shall in no way relieve Tenant of any liability under this Lease. Any assignment or subletting without Landlord’s consent shall be void, and shall, at the option of Landlord, constitute a Default under this Lease.

 

23.6    No Release of Tenant

 

Notwithstanding any assignment or subletting, including, without limitation, a Permitted Transfer, Tenant shall at all times remain fully responsible and liable for the payment of the Rent and for compliance with all of Tenant’s other obligations under this Lease (regardless of whether Landlord’s approval has been obtained for any such assignment or subletting).

 

23.7    Payment of Landlord’s Fees

 

Tenant shall pay Landlord’s reasonable fees (including, without limitation, the fees of Landlord’s counsel, not to exceed $1,000.00 per transaction), incurred in connection with Landlord’s review and processing of documents regarding any proposed assignment or sublease.

 

23.8    No Consent to Further Assignment

 

Notwithstanding anything in this Lease to the contrary, in the event Landlord consents to an assignment or subletting by Tenant in accordance with the terms of this Paragraph 23 (specifically excluding any Permitted Transfer), Tenant’s assignee or subtenant shall have no right to further assign this Lease or any interest therein or thereunder or to further sublease all or any portion of the Premises.

 

23.9    Constraints Reasonable

 

Tenant acknowledges and agrees that the restrictions, conditions and limitations imposed by this Paragraph 23 on Tenant’s ability to assign or transfer this Lease or any interest herein, to sublet the Premises or any part thereof, to transfer or assign any right or privilege appurtenant to the Premises, or to allow any other person to occupy or use the Premises or any portion thereof, are, for the purposes of California Civil Code Section 1951.4, as amended from time to time, and for all other purposes, reasonable at the time that the Lease was entered into, and shall be deemed to be reasonable at the time that Tenant seeks to assign or transfer this Lease or any interest herein, to sublet the Premises or any part thereof, to transfer or assign any right or privilege appurtenant to the Premises, or to allow any other person to occupy or use the Premises or any portion thereof.

 

24.   TENANT’S DEFAULT

 

The occurrence of any one of the following events shall constitute an event of default on the part of Tenant (“Default”):

 

(a)   The vacation of the Premises for a consecutive period of sixty (60) days or more, without (i) the intention of retaking possession or occupancy, and (ii) providing for the security of the Building, or the abandonment of the Premises by Tenant or any other vacation which would cause any insurance policy to be invalidated or otherwise lapse;

 

(b)   Failure to pay any installment of Rent or any other monies due and payable hereunder within five (5) days after the date the same are due;

 

(c)   A general assignment by Tenant for the benefit of creditors;

 

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(d)   The filing of a voluntary petition in bankruptcy by Tenant, the filing by Tenant of a voluntary petition for an arrangement, the filing by or against Tenant of a petition, voluntary or involuntary, for reorganization, or the filing of an involuntary petition by the creditors of Tenant, said involuntary petition remaining undischarged for a period of sixty (60) days;

 

(e)   Receivership, attachment, or other judicial seizure of substantially all of Tenant’s assets on the Premises, such attachment or other seizure remaining undismissed or undischarged for a period of sixty (60) days after the levy thereof;

 

(f)    Death or disability of Tenant, if Tenant is a natural person, or the failure by Tenant to maintain its legal existence, if Tenant is a corporation, partnership, limited liability company, trust or other legal entity;

 

(g)   Failure of Tenant to execute and deliver to Landlord any estoppel certificate, subordination agreement, or lease amendment in the time periods and manner required by Paragraphs 30 or 31 or 42;

 

(h)   An assignment or sublease, or attempted assignment or sublease, of this Lease or the Premises by Tenant contrary to the provisions of Paragraph 23, unless such assignment or sublease is expressly conditioned upon Tenant having received Landlord’s consent thereto;

 

(i)    Failure of Tenant to deposit the Letter of Credit with Landlord when required under Paragraph 7, and/or failure of Tenant to restore the Letter of Credit to the amount and within the time period provided in Paragraph 7;

 

(j)    Failure in the performance of any of Tenant’s covenants, agreements or obligations hereunder (except those failures specified as events of Default in any other subparagraphs of this Paragraph 24, which shall be governed by such other subparagraphs), which failure continues for thirty (30) days after written notice thereof from Landlord to Tenant, provided that, if Tenant has exercised reasonable diligence to cure such failure and such failure cannot be cured within such thirty (30) day period despite reasonable diligence, Tenant shall not be in default under this subparagraph so long as Tenant thereafter diligently and continuously prosecutes the cure to completion;

 

(k)   Chronic delinquency by Tenant in the payment of Rent, or any other periodic payments required to be paid by Tenant under this Lease. “Chronic delinquency” shall mean failure by Tenant to pay Rent, or any other periodic payments required to be paid by Tenant under this Lease, when due (i) for any three (3) months (consecutive or nonconsecutive) during any period of twelve (12) months or (ii) for any twelve (12) months (consecutive or nonconsecutive) during the Term. In the event of a Chronic Delinquency, in addition to Landlord’s other remedies for Default provided in this Lease, at Landlord’s option, Landlord shall have the right to require that Rent be paid by Tenant quarterly, in advance;

 

(l)    Chronic overuse by Tenant or Tenant’s Agents of the number of undesignated parking spaces set forth in the Basic Lease Information. “Chronic overuse” shall mean use by Tenant or Tenant’s Agents of a number of parking spaces greater than the number of parking spaces set forth in the Basic Lease Information more than three (3) times during any twelve (12) month period;

 

(m)  Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or be reduced or materially changed, except as permitted in this Lease, and shall not have been replaced with substitute insurance satisfying the requirements of this Lease within five (5) business days of Tenant’s receipt of notice of such termination, reduction or change;

 

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(n)   Any failure by Tenant to discharge any lien or encumbrance placed on the Project or any part thereof in violation of this Lease within ten (10) days after the date such lien or encumbrance is filed or recorded against the Project or any part thereof; and

 

(o)   Any Default (as defined in the 951 Gateway Lease) under the terms of the 951 Gateway Lease.

 

Tenant agrees that any notice given by Landlord pursuant to Paragraph 24(j) above shall satisfy the requirements for notice under California Code of Civil Procedure Section 1161, and Landlord shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding.

 

25.   LANDLORD’S REMEDIES

 

25.1    Termination

 

In the event of any Default by Tenant, then in addition to any other remedies available to Landlord at law or in equity and under this Lease, Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event that Landlord shall elect to so terminate this Lease then Landlord may recover from Tenant:

 

(1)   the worth at the time of award of any unpaid Rent and any other sums due and payable which have been earned at the time of such termination; plus

 

(2)   the worth at the time of award of the amount by which the unpaid Rent and any other sums due and payable which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus

 

(3)   the worth at the time of award of the amount by which the unpaid Rent and any other sums due and payable for the balance of the term of this Lease after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus

 

(4)   any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course would be likely to result therefrom, including, without limitation, (A) any costs or expenses incurred by Landlord (1) in retaking possession of the Premises; (2) in maintaining, repairing, preserving, restoring, replacing, cleaning, altering, remodeling or rehabilitating the Premises or any affected portions of the Building or the Project, including such actions undertaken in connection with the reletting or attempted reletting of the Premises to a new tenant or tenants; (3) for leasing commissions, advertising costs and other expenses of reletting the Premises; or (4) in carrying the Premises, including taxes, insurance premiums, utilities and security precautions; (B) any unearned brokerage commissions paid in connection with Tenant’s lease of the Premises; (C) reimbursement of any previously waived or abated Base Rent or Additional Rent or any free rent or reduced rental rate granted hereunder; and (D) any concession made or paid by Landlord to the benefit of Tenant in consideration of this Lease including, but not limited to, any moving allowances, contributions, payments or loans by Landlord for tenant improvements or build-out allowances (including, without limitation, any unamortized portion of the Tenant Improvement Allowance (such Tenant Improvement Allowance to be amortized over the Term in the manner reasonably determined by Landlord), if any), or assumptions by Landlord of any of Tenant’s previous lease obligations; plus

 

(5)   such reasonable attorneys’ fees incurred by Landlord as a result of a Default, and costs in the event suit is filed by Landlord to enforce such remedy; and plus

 

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(6)   at Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

 

As used in subparagraphs (1) and (2) above, the “worth at the time of award” is computed by allowing interest at an annual rate equal to twelve percent (12%) per annum or the maximum rate permitted by law, whichever is less. As used in subparagraph (3) above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent (1%). Tenant waives redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or under any other pertinent present or future Law, in the event Tenant is evicted or Landlord takes possession of the Premises by reason of any Default of Tenant hereunder.

 

25.2    Continuation of Lease

 

In the event of any Default by Tenant, then in addition to any other remedies available to Landlord at law or in equity and under this Lease, Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant’s Default and abandonment and recover Rent as it becomes due, provided Tenant has the right to sublet or assign, subject only to reasonable limitations). In addition, Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the Premises; provided, however, that the foregoing provision shall not be deemed to relieve Landlord of any duty under applicable law to mitigate Tenant’s damages in the event Landlord elects to seek damages for Tenant’s breach or default. For purposes of this Paragraph 25.2, the following acts by Landlord will not constitute the termination of Tenant’s right to possession of the Premises:

 

(1)   Acts of maintenance or preservation or efforts to relet the Premises, including, but not limited to, alterations, remodeling, redecorating, repairs, replacements and/or painting as Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof, or

 

(2)   The appointment of a receiver upon the initiative of Landlord to protect Landlord’s interest under this Lease or in the Premises.

 

25.3    Re-entry

 

In the event of any Default by Tenant, Landlord shall also have the right, with or without terminating this Lease, in compliance with applicable law, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant.

 

25.4    Reletting

 

In the event of the abandonment of the Premises by Tenant or in the event that Landlord shall elect to re-enter as provided in Paragraph 25.3 or shall take possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord does not elect to terminate this Lease as provided in Paragraph 25.1, Landlord may from time to time, without terminating this Lease, relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to the Premises in Landlord’s sole discretion. In the event that Landlord shall elect to so relet, then rentals received by Landlord from such reletting shall be applied in the following order: (1) to reasonable attorneys’ fees incurred by Landlord as a result of a Default and costs in the event suit is filed by Landlord to enforce such remedies; (2) to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; (3) to the payment of any costs of such reletting; (4) to the payment of the costs of any alterations and repairs to the Premises; (5) to the payment of Rent due and unpaid hereunder; and (6) the residue, if any, shall

 

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be held by Landlord and applied in payment of future Rent and other sums payable by Tenant hereunder as the same may become due and payable hereunder. Should that portion of such rentals received from such reletting during any month, which is applied to the payment of Rent hereunder, be less than the Rent payable during the month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting.

 

25.5    Termination

 

No re-entry or taking of possession of the Premises by Landlord pursuant to this Paragraph 25 shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of any Default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such Default.

 

25.6    Cumulative Remedies

 

The remedies herein provided are not exclusive and Landlord shall have any and all other remedies provided herein or by law or in equity.

 

25.7    No Surrender

 

No act or conduct of Landlord, whether consisting of the acceptance of the keys to the Premises, or otherwise, shall be deemed to be or constitute an acceptance of the surrender of the Premises by Tenant prior to the expiration of the Term, and such acceptance by Landlord of surrender by Tenant shall only flow from and must be evidenced by a written acknowledgment of acceptance of surrender signed by Landlord. The surrender of this Lease by Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects in writing that such merger take place, but shall operate as an assignment to Landlord of any and all existing subleases, or Landlord may, at its option, elect in writing to treat such surrender as a merger terminating Tenant’s estate under this Lease, and thereupon Landlord may terminate any or all such subleases by notifying the sublessee of its election so to do within five (5) days after such surrender.

 

26.   LANDLORD’S RIGHT TO PERFORM TENANT’S OBLIGATIONS

 

26.1    Landlord’s Right to Perform

 

Without limiting the rights and remedies of Landlord contained in Paragraph 25 above, if Tenant shall be in Default in the performance of any of the terms, provisions, covenants or conditions to be performed or complied with by Tenant pursuant to this Lease, then Landlord may at Landlord’s option, without any obligation to do so, and without further notice to Tenant perform any such term, provision, covenant, or condition, or make any such payment and Landlord by reason of so doing shall not be liable or responsible for any loss or damage thereby sustained by Tenant or anyone holding under or through Tenant or any of Tenant’s Agents, unless caused by Landlord’s gross negligence or willful misconduct.

 

26.2    In Emergencies

 

Without limiting the rights of Landlord under Paragraph 25 above, Landlord shall have the right at Landlord’s option, without any obligation to do so, to perform any of Tenant’s covenants or obligations under this Lease without notice to Tenant in the case of an emergency, as determined by Landlord in its good faith and absolute judgment, or if Landlord otherwise determines in its reasonable discretion

 

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that such performance is necessary or desirable for the preservation of the rights and interests or safety of other tenants of the Building or the Project.

 

26.3    Tenant’s Obligation to Reimburse Landlord

 

If Landlord performs any of Tenant’s obligations hereunder in accordance with this Paragraph 26, the full amount of the cost and expense incurred or the payment so made or the amount of the loss so sustained shall immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to Landlord upon demand, as Additional Rent, the full amount thereof with interest thereon from the date of payment by Landlord at the lower of (l) twelve percent (12%) per annum, or (2) the highest rate permitted by applicable law.

 

27.   ATTORNEYS’ FEES

 

27.1    Prevailing Party Entitled to Fees

 

If either party hereto fails to perform any of its obligations under this Lease or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Lease, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Lease shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Lease and to survive and not be merged into any such judgment.

 

27.2    Costs of Collection

 

Without limiting the generality of Paragraph 27.1 above, if Landlord utilizes the services of an attorney for the purpose of collecting any Rent due and unpaid by Tenant or in connection with any other breach of this Lease by Tenant, Tenant agrees to pay Landlord reasonable attorneys’ fees as determined by Landlord for such services, regardless of the fact that no legal action may be commenced or filed by Landlord.

 

28.   TAXES

 

Tenant shall be liable for and shall pay, prior to delinquency, all taxes levied against Tenant’s Property. If any Alteration or Tenant Improvement installed by Tenant pursuant to Paragraph 12 or any of Tenant’s Property is assessed and taxed with the Project or Building, Tenant shall pay such taxes to Landlord, in an amount reasonably determined by Landlord if such taxes are not separately stated in the applicable tax bill, within ten (10) days after delivery to Tenant of a statement therefor.

 

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29.   EFFECT OF CONVEYANCE

 

The term “Landlord” as used in this Lease means, from time to time, the then current owner of the Building or the Project containing the Premises, so that, in the event of any sale of the Building or the Project, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord arising hereunder from and after the date of such transfer, and it shall be deemed and construed, without further agreement between the parties and the purchaser at any such sale, that the purchaser of the Building or the Project has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder.

 

30.   TENANT’S ESTOPPEL CERTIFICATE

 

From time to time, upon written request of Landlord, Tenant shall execute, acknowledge and deliver to Landlord or its designee, a written certificate stating (a) the date this Lease was executed, the Commencement Date of the Term and the date the Term expires; (b) the date Tenant entered into occupancy of the Premises; (c) the amount of Rent and the date to which such Rent has been paid; (d) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way (or, if assigned, modified, supplemented or amended, specifying the date and terms of any agreement so affecting this Lease); (e) that this Lease represents the entire agreement between the parties with respect to Tenant’s right to use and occupy the Premises (or specifying such other agreements, if any); (f) that all obligations under this Lease to be performed by Landlord as of the date of such certificate have been satisfied (or specifying those as to which Tenant claims that Landlord has yet to perform); (g) that all required contributions by Landlord to Tenant on account of Tenant’s improvements have been received (or stating exceptions thereto); (h) that on such date there exist no defenses or offsets that Tenant has against the enforcement of this Lease by Landlord (or stating exceptions thereto); (i) that no Rent or other sum payable by Tenant hereunder has been paid more than one (1) month in advance (or stating exceptions thereto); (j) that a currently valid Letter of Credit has been deposited with Landlord, stating the original amount thereof and any increases or decreases thereto; and (k) any other matters evidencing the status of this Lease that may be required either by a lender making a loan to Landlord to be secured by a deed of trust covering the Building or the Project or by a purchaser of the Building or the Project. Any such certificate delivered pursuant to this Paragraph 30 may be relied upon by a prospective purchaser of Landlord’s interest or a mortgagee of Landlord’s interest or assignee of any mortgage upon Landlord’s interest in the Premises. If Tenant shall fail to provide such certificate within ten (10) days of receipt by Tenant of a written request by Landlord as herein provided, such failure shall, at Landlord’s election, constitute a Default under this Lease, and Tenant shall be deemed to have given such certificate as above provided without modification and shall be deemed to have admitted the accuracy of any information supplied by Landlord to a prospective purchaser or mortgagee.

 

31.   SUBORDINATION

 

Landlord shall have the right to cause this Lease to be and remain subject and subordinate to any and all mortgages, deeds of trust and ground leases, if any (“Encumbrances”) that are now or may hereafter be executed covering the Premises, or any renewals, modifications, consolidations, replacements or extensions thereof, for the full amount of all advances made or to be made thereunder and without regard to the time or character of such advances, together with interest thereon and subject to all the terms and provisions thereof; provided only, and as an express condition precedent to any such subordination of this Lease to an Encumbrance hereafter executed covering the Premises, that the holder of such Encumbrance (“Holder”) shall agree to recognize Tenant’s rights under this Lease upon the foreclosure or termination, as applicable, of such Encumbrance as long as Tenant shall pay the Rent and observe and perform all the provisions of this Lease to be observed and performed by Tenant. Within ten (10) days after Landlord’s written request, Tenant shall execute, acknowledge and

 

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deliver any and all reasonable documents required by Landlord or the Holder to effectuate such subordination, provided that, concurrently with the execution of such subordination documents, the Holder shall execute a nondisturbance agreement in favor of Tenant consistent with the terms of this Paragraph 31. If Tenant fails to do so, such failure shall constitute a Default by Tenant under this Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31, Tenant hereby attorns and agrees to attorn to any person or entity purchasing or otherwise acquiring the Premises at any sale or other proceeding or pursuant to the exercise of any other rights, powers or remedies under such Encumbrance.

 

32.   ENVIRONMENTAL COVENANTS

 

32.1    Disclosure Certificate

 

Prior to executing this Lease, Tenant has completed, executed and delivered to Landlord a Hazardous Materials Disclosure Certificate (“Initial Disclosure Certificate”), a fully completed copy of which is attached hereto as Exhibit D and incorporated herein by this reference. Tenant covenants, represents and warrants to Landlord that the information on the Initial Disclosure Certificate is, to the best of Tenant’s knowledge, true and correct and accurately describes the Hazardous Materials which will be treated, used or stored on or about the Premises by Tenant or Tenant’s Agents.

 

32.2    Tenant’s Obligation to Update Disclosure Certificate

 

Tenant shall, on a semi-annual basis, complete, execute and deliver to Landlord an updated Disclosure Certificate (each, an “Updated Disclosure Certificate”) describing Tenant’s then current and proposed future uses of Hazardous Materials on or about the Premises, which Updated Disclosure Certificates shall be in the same format as that which is set forth in Exhibit D or in such updated format as Landlord may require from time to time. Landlord shall have the right to approve or disapprove such new or additional Hazardous Materials in its sole and absolute discretion. Tenant shall make no use of Hazardous Materials on or about the Premises except as described in the Initial Disclosure Certificate or as otherwise approved by Landlord in writing in accordance with this Paragraph 32.2.

 

32.3    Definition of Hazardous Materials

 

As used in this Lease, the term “Hazardous Materials” shall mean and include any substance that is or contains (1) any “hazardous substance” as now or hereafter defined in § 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”) (42 U.S.C. § 9601 et seq.) or any regulations promulgated under CERCLA; (2) any “hazardous waste” as now or hereafter defined in the Resource Conservation and Recovery Act, as amended (“RCRA”) (42 U.S.C. § 6901 et seq.) or any regulations promulgated under RCRA; (3) any substance now or hereafter regulated by the Toxic Substances Control Act, as amended (“TSCA”) (15 U.S.C. § 2601 et seq.) or any regulations promulgated under TSCA; (4) petroleum, petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (5) asbestos and asbestos-containing material, in any form, whether friable or non-friable; (6) polychlorinated biphenyls; (7) lead and lead-containing materials; or (8) any additional substance, material or waste (A) the presence of which on or about the Premises (i) requires reporting, investigation or remediation under any Environmental Laws (as hereinafter defined), (ii) causes or threatens to cause a nuisance on the Premises or any adjacent area or property or poses or threatens to pose a hazard to the health or safety of persons on the Premises or any adjacent area or property, or (iii) which, if it emanated or migrated from the Premises, could constitute a trespass, or (B) which is now or is hereafter classified or considered to be hazardous or toxic under any Environmental Laws. Landlord hereby notifies Tenant in accordance with California Health & Safety Code Section 25359.7 that in 1981-82, the Project was

 

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the subject of a state-supervised cleanup of hazardous waste disposed of on the site by prior occupants. As part of the cleanup approved by the applicable agencies, some soils containing heavy metals were left in place, covered by clean fill. These soils are managed in accordance with the requirements of the applicable agencies and a Declaration of Covenants, Conditions and Restrictions imposed by Homart Development Co.

 

32.4    Definition of Environmental Laws

 

As used in this Lease, the term “Environmental Laws” shall mean and include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or hereinafter in effect relating to (A) pollution, (B) the protection or regulation of human health, natural resources or the environment, (C) the treatment, storage or disposal of Hazardous Materials, or (D) the emission, discharge, release or threatened release of Hazardous Materials into the environment.

 

32.5    Tenant’s Use of Hazardous Materials

 

Tenant agrees that during its use and occupancy of the Premises it will (1) not (A) introduce any Hazardous Materials on or about the Premises except in a manner and quantity necessary for the ordinary performance of Tenant’s business or (B) release, discharge or dispose of any Hazardous Materials on, in, at, under, or emanating from, the Premises, the Building or the Project; (2) comply with all Environmental Laws relating to Tenant’s use of Hazardous Materials in, on or about the Premises and not engage in or permit Tenant’s Agents to engage in any activity in, on or about the Premises in violation of any Environmental Laws; and (3) immediately notify Landlord of (A) any inquiry, test, investigation or enforcement proceeding by any governmental agency or authority against Tenant, Landlord or the Premises, Building or Project relating to any Hazardous Materials or under any Environmental Laws or (B) the occurrence of any event or existence of any condition that would cause a breach of any of the covenants set forth in this Paragraph 32.

 

32.6    Tenant’s Remediation Obligations

 

If Tenant’s use of Hazardous Materials on or about the Premises results in a release, discharge or disposal of Hazardous Materials on, in, at, under, or emanating from, the Premises, the Building or the Project, Tenant agrees to investigate, clean up, remove or remediate such Hazardous Materials in full compliance with (1) the requirements of (A) all Environmental Laws and (B) any governmental agency or authority responsible for the enforcement of any Environmental Laws; and (2) any additional requirements of Landlord that are reasonably necessary to protect the value of the Premises, the Building or the Project.

 

32.7    Landlord’s Inspections

 

Upon twenty-four (24) hours’ notice to Tenant (except in the case of an emergency, in which event no advance notice shall be required), Landlord may inspect the Premises and surrounding areas for the purpose of determining whether there exists on or about the Premises any Hazardous Material or other condition or activity that is in violation of the requirements of this Lease or of any Environmental Laws. Such inspections may include, but are not limited to, entering upon the property adjacent to or surrounding the Premises with drill rigs or other machinery for the purpose of obtaining laboratory samples. Landlord shall not be limited in the number of such inspections during the Term of this Lease. In the event (1) such inspections reveal the presence of any such Hazardous Material or other condition or activity caused by Tenant or its Agents in violation of the requirements of this Lease or of any Environmental Laws, or (2) Tenant or its Agents contribute or knowingly consent to the importation of any Hazardous Materials in, on, under, through or about the Premises, the Building or the Project or, through their actions, exacerbate the condition of or the conditions caused by any

 

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Hazardous Materials in, on, under, through or about the Premises, the Building or the Project, Tenant shall reimburse Landlord for the cost of such inspections within ten (10) days of receipt of a written statement therefor. Tenant will supply to Landlord such historical and operational information regarding the Premises and surrounding areas as may be reasonably requested to facilitate any such inspection and will make available for meetings appropriate personnel having knowledge of such matters. In the event Tenant vacates the Premises prior to the Expiration Date, Tenant shall give Landlord at least sixty (60) days’ prior notice of its intention to vacate the Premises so that Landlord will have an opportunity to perform such an inspection prior to such vacation. The right granted to Landlord herein to perform inspections shall not create a duty on Landlord’s part to inspect the Premises, or liability on the part of Landlord for Tenant’s use, storage, treatment or disposal of Hazardous Materials, it being understood that Tenant shall be solely responsible for all liability in connection therewith.

 

32.8    Landlord’s Right to Remediate

 

Landlord shall have the right, but not the obligation, prior or subsequent to a Default, without in any way limiting Landlord’s other rights and remedies under this Lease, to enter upon the Premises, or to take such other actions as it deems necessary or advisable, to investigate, clean up, remove or remediate any Hazardous Materials or contamination by Hazardous Materials present on, in, at, under, or emanating from, the Premises, the Building or the Project in violation of Tenant’s obligations under this Lease or under any Environmental Laws. Notwithstanding any other provision of this Lease, Landlord shall also have the right, at its election, in its own name or as Tenant’s agent, to negotiate, defend, approve and appeal, at Tenant’s expense, any action taken or order issued by any governmental agency or authority with regard to any such Hazardous Materials or contamination by Hazardous Materials. All reasonable costs and expenses paid or incurred by Landlord in the exercise of the rights set forth in this Paragraph 32 shall be payable by Tenant upon demand.

 

32.9    Condition of Premises Upon Expiration or Termination

 

Tenant shall surrender the Premises to Landlord upon the expiration or earlier termination of this Lease free of debris, waste or Hazardous Materials placed on, about or near the Premises by Tenant or Tenant’s Agents, and in a condition which complies with (i) all Environmental Laws, and (ii) any additional requirements of Landlord that are reasonably necessary to protect the value of the Premises, the Building or the Project, including, without limitation, the obtaining of any closure permits or other governmental permits or approvals related to Tenant’s use of Hazardous Materials in or about the Premises. Tenant’s obligations and liabilities pursuant to the provisions of this Paragraph 32 shall survive the expiration or earlier termination of this Lease.

 

32.10    Tenant’s Indemnification of Landlord

 

Tenant agrees to indemnify and hold harmless Landlord from and against any and all claims, losses (including, without limitation, loss in value of the Premises, the Building or the Project and any losses to Landlord due to lost opportunities to lease any portions of the Premises to succeeding tenants due to the failure of Tenant to surrender the Premises upon the expiration or sooner termination of this Lease in accordance with the provisions of Paragraph 32.9 above), liabilities and expenses (including attorneys’ fees) sustained by Landlord attributable to (1) any Hazardous Materials placed on or about the Premises, the Building or the Project by Tenant or Tenant’s Agents, or (2) Tenant’s breach of any provision of this Paragraph 32.

 

32.11    Landlord’s Indemnification of Tenant

 

Landlord agrees to indemnify and hold harmless Tenant from and against any and all claims, losses, liabilities and expenses (including attorneys’ fees, but specifically excluding lost profits and

 

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consequential damages) actually sustained by Tenant attributable to any Hazardous Materials placed on or about the Premises, the Building or the Project by Landlord or Landlord’s Agents, except to the extent the condition thereof has been exacerbated by Tenant or Tenant’s Agents.

 

32.12    Limitation of Tenant’s Liability

 

Notwithstanding anything in this Lease to the contrary, Tenant shall not be responsible for the clean up or remediation of, and shall not be required to indemnify Landlord against any costs or liabilities attributable to, contamination by Hazardous Materials during the Term caused by third parties or Hazardous Materials place on or about the Premises (i) prior to the Commencement Date by third parties not related to Tenant or Tenant’s Agents, or (ii) by Landlord at any time, except in any of the foregoing cases to the extent that Tenant or Tenant’s Agents have contributed to or exacerbated the presence of such Hazardous Materials.

 

32.13    Survival

 

The provisions of this Paragraph 32 shall survive the expiration or earlier termination of this Lease.

 

33.   NOTICES

 

All notices and demands which are required or may be permitted to be given to either party by the other hereunder shall be in writing and shall be sent by United States mail, postage prepaid, certified, or by personal delivery or overnight courier, addressed to the addressee at Tenant’s Address or Landlord’s Address as specified in the Basic Lease Information, or to such other place as either party may from time to time designate in a notice to the other party given as provided herein. Copies of all notices and demands given to Landlord shall additionally be sent to Landlord’s property manager at the address specified in the Basic Lease Information or at such other address as Landlord may specify in writing from time to time. Notice shall be deemed given upon actual receipt (or attempted delivery if delivery is refused), if personally delivered, or one (1) business day following deposit with a reputable overnight courier that provides a receipt, or on the third (3rd) day following deposit in the United States mail in the manner described above.

 

34.   WAIVER

 

The waiver of any breach of any term, covenant or condition of this Lease shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of Rent by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent. No delay or omission in the exercise of any right or remedy of Landlord in regard to any Default by Tenant shall impair such a right or remedy or be construed as a waiver. Any waiver by Landlord of any Default must be in writing and shall not be a waiver of any other Default concerning the same or any other provisions of this Lease.

 

35.   HOLDING OVER

 

Any holding over after the expiration of the Term, without the express written consent of Landlord, shall constitute a Default and, without limiting Landlord’s remedies provided in this Lease, such holding over shall be construed to be a tenancy at sufferance, at a rental rate equal to the greater of one hundred fifty percent (150%) of (i) the fair market rental value for the Premises as determined by Landlord or (ii) the Base Rent last due in this Lease, plus Additional Rent, and shall otherwise be on the terms and conditions herein specified, so far as applicable; provided, however, in no event shall

 

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any renewal or extension option or other similar right or option contained in this Lease be deemed applicable to any such tenancy at sufferance. If the Premises are not surrendered at the end of the Term or sooner termination of this Lease, and in accordance with the provisions of Paragraphs 11 and 32.9, Tenant shall indemnify, defend and hold Landlord harmless from and against any and all loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any loss or liability resulting from any claim against Landlord made by any succeeding tenant or prospective tenant caused by such delay and losses to Landlord due to lost opportunities to lease any portion of the Premises to any such succeeding tenant or prospective tenant, together with, in each case, actual attorneys’ fees and costs.

 

36.   SUCCESSORS AND ASSIGNS

 

36.1    Binding on Successors, Etc.

 

The terms, covenants and conditions of this Lease shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of all of the parties hereto. If Tenant shall consist of more than one entity or person, the obligations of Tenant under this Lease shall be joint and several.

 

36.2    Landlord’s Right to Sell

 

Notwithstanding anything in this Lease to the contrary, Landlord shall have the right to sell, transfer or otherwise convey, either separately or jointly, its interest in the Building and/or the Project, and all of Landlord’s related rights and obligations hereunder, to any Person.

 

37.   TIME

 

Time is of the essence of this Lease and each and every term, condition and provision herein.

 

38.   BROKERS

 

Landlord and Tenant each represents and warrants to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than BT Commercial (“Broker”) in relation to Tenant’s lease of the Premises and/or the negotiating or making of this Lease, and each party agrees to indemnify and hold harmless the other from any claim or claims, and costs and expenses, including attorneys’ fees, incurred by the indemnified party in conjunction with any such claim or claims of any other broker or brokers to a commission in connection with this Lease as a result of the actions of the indemnifying party. Landlord has paid BT Commercial a brokerage commissions in the amount of Five Hundred Fifty-Two Thousand One Hundred Forty ($552,140.00) in relation to Tenant’s lease of the Premises. Nothing contained herein shall restrict Landlord from paying any fees owed by Landlord in connection with Tenant’s lease of the Premises and/or the execution of this Lease to any constituent partner of Landlord (or any Affiliate of any such partner) and to any consultants providing services to Landlord in connection with the Project.

 

39.   LIMITATION OF LIABILITY

 

Tenant agrees that, in the event of any default or breach by Landlord with respect to any of the terms of this Lease to be observed and performed by Landlord or with respect to the enforcement of an indemnity obligation of Landlord under this Lease (1) Tenant shall look solely to the then-current landlord’s interest in the Building for the satisfaction of such indemnity obligation of Landlord or for satisfaction of Tenant’s remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord; (2) no other property or assets of Landlord, its partners, shareholders, officers, directors, employees, investment advisors, or any successor in interest of any of

 

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them (collectively, the “Landlord Parties”) shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies; (3) no personal liability shall at any time be asserted or enforceable against the Landlord Parties; and (4) no judgment will be taken against the Landlord Parties (except for a judgment against Landlord which is enforceable only to the extent of Landlord’s interest in the Building). The provisions of this Paragraph shall apply only to the Landlord and the parties herein described, and shall not be for the benefit of any insurer nor any other third party.

 

40.   FINANCIAL STATEMENTS

 

Within ten (10) days after Landlord’s request, Tenant shall deliver to Landlord the then current, or if Tenant is a publicly traded company, the publicly available financial statements of Tenant (including interim periods following the end of the last fiscal year for which annual statements are available), prepared, compiled or reviewed by a certified public accountant, including a balance sheet and profit and loss statement for the most recent prior year, all prepared in accordance with GAAP.

 

41.   RULES AND REGULATIONS

 

Tenant agrees to comply with such reasonable rules and regulations as Landlord may adopt from time to time for the orderly and proper operation of the Building and the Project. Such rules may include but shall not be limited to the following: (a) restriction of employee parking to a limited, designated area or areas in reasonable proximity to the Building; and (b) regulation of the removal, storage and disposal of Tenant’s refuse and other rubbish at the sole cost and expense of Tenant. The then current rules and regulations shall be binding upon Tenant upon delivery of a copy of them to Tenant. Landlord shall not be responsible to Tenant for the failure of any other person to observe and abide by any of said rules and regulations; provided, however, Landlord shall enforce such rules and regulation in a non-discriminatory manner. Landlord’s current rules and regulations are attached to this Lease as Exhibit C.

 

42.   MORTGAGEE PROTECTION

 

42.1    Modifications for Lender

 

If, in connection with obtaining financing for the Project or any portion thereof, Landlord’s lender shall request reasonable modifications to this Lease as a condition to such financing, Tenant shall not unreasonably withhold, delay or defer its consent to such modifications, provided such modifications do not materially adversely affect Tenant’s rights or increase Tenant’s obligations under this Lease.

 

42.2    Rights to Cure

 

Tenant agrees to give to any trust deed or mortgage holder (“Holder”), by registered mail, at the same time as it is given to Landlord, a copy of any notice of default given to Landlord, provided that prior to such notice Tenant has been notified, in writing, (by way of notice of assignment of rents and leases, or otherwise) of the address of such Holder. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Holder shall have an additional twenty (20) days after expiration of such period, or after receipt of such notice from Tenant (if such notice to the Holder is required by this Paragraph 42.2), whichever shall last occur within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary if within such twenty (20) days, any Holder has commenced and is diligently pursuing the remedies necessary to cure such default (including, but not limited to, commencement of foreclosure proceedings, if necessary to effect such cure), in which event there shall be no default under this Lease.

 

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43.   ENTIRE AGREEMENT

 

This Lease, including the Exhibits and any Addenda attached hereto, which are hereby incorporated herein by this reference, contains the entire agreement of the parties hereto, and no representations, inducements, promises or agreements, oral or otherwise, between the parties, not embodied herein or therein, shall be of any force and effect.

 

44.   INTEREST

 

Any installment of Rent and any other sum due from Tenant under this Lease which is not received by Landlord when due shall bear interest from the date such payment was originally due under this Lease until paid at an annual rate equal to the maximum rate of interest permitted by law. Payment of such interest shall not excuse or cure any Default by Tenant. In addition, Tenant shall pay all costs and reasonable attorneys’ fees incurred by Landlord in collection of such amounts.

 

45.   INTERPRETATION

 

This Lease shall be construed and interpreted in accordance with the laws of the State of California. The parties acknowledge and agree that no rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation of this Lease, including the Exhibits and any Addenda attached hereto. All captions in this Lease are for reference only and shall not be used in the interpretation of this Lease. Whenever required by the context of this Lease, the singular shall include the plural, the masculine shall include the feminine, and vice versa. If any provision of this Lease shall be determined to be illegal or unenforceable, such determination shall not affect any other provision of this Lease and all such other provisions shall remain in full force and effect. Unless otherwise specifically stated herein to the contrary, Landlord’s consent may be given or withheld in Landlord’s sole and absolute discretion.

 

46.   REPRESENTATIONS AND WARRANTIES

 

46.1    Of Tenant

 

Tenant hereby makes the following representations and warranties, each of which is material and being relied upon by Landlord, is true in all respects as of the date of this Lease, and shall survive the expiration or termination of the Lease.

 

(1)   If Tenant is an entity, Tenant is duly organized, validly existing and in good standing under the laws of the state of its organization and the persons executing this Lease on behalf of Tenant have the full right and authority to execute this Lease on behalf of Tenant and to bind Tenant without the consent or approval of any other person or entity. Tenant has full power, capacity, authority and legal right to execute and deliver this Lease and to perform all of its obligations hereunder. This Lease is a legal, valid and binding obligation of Tenant, enforceable in accordance with its terms.

 

(2)   Tenant has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets, (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

 

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46.2    Of Landlord

 

Landlord hereby makes the following representations and warranties, each of which is material and being relied upon by Tenant, is true in all respects as of the date of this Lease, and shall survive the expiration or termination of the Lease.

 

(1)   If Landlord is an entity, Landlord is duly organized, validly existing and in good standing under the laws of the state of its organization and the persons executing this Lease on behalf of Landlord have the full right and authority to execute this Lease on behalf of Landlord and to bind Landlord without the consent or approval of any other person or entity. Landlord has full power, capacity, authority and legal right to execute and deliver this Lease and to perform all of its obligations hereunder. This Lease is a legal, valid and binding obligation of Landlord, enforceable in accordance with its terms.

 

(2)   Landlord has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets, (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

 

47.   SECURITY

 

47.1    Landlord Not Obligated to Provide Security

 

Tenant acknowledges and agrees that, while Landlord may engage security personnel to patrol the Building or the Project, Landlord is not required to provide any security services with respect to the Premises, the Building or the Project and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises, the Building or the Project.

 

47.2    Tenant’s Obligation to Comply with Security Measures

 

Tenant hereby agrees to the exercise by Landlord and Landlord’s Agents, within their sole discretion, of such security measures as, but not limited to, the evacuation of the Premises, the Building or the Project for cause, suspected cause or for drill purposes, the denial of any access to the Premises, the Building or the Project and other similarly related actions that it deems necessary to prevent any threat of property damage or bodily injury. The exercise of such security measures by Landlord and Landlord’s Agents, and the resulting interruption of service and cessation of Tenant’s business, if any, shall not be deemed an eviction or disturbance of Tenant’s use and possession of the Premises, or any part thereof, or render Landlord or Landlord’s Agents liable to Tenant for any resulting damages, or relieve Tenant from Tenant’s obligations under this Lease.

 

48.   JURY TRIAL WAIVER

 

Landlord and Tenant each hereby waive any right to trial by jury with respect to any action or proceeding (i) brought by Landlord, Tenant or any other party, relating to (A) this Lease and/or any understandings or prior dealings between the parties hereto, or (B) the Premises, the Building or the Project or any part thereof, or (ii) to which Landlord is a party. The parties each hereby agree that this Lease constitutes a written consent to waiver of trial by jury pursuant to the provisions of California Code of Civil Procedure Section 631.

 

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49.   OPTION TO RENEW

 

Tenant shall have two (2) options (each a “Renewal Option”) to extend the Term of this Lease with respect to the entire Premises (including, without limitation, the “951 Gateway Premises”), for successive periods of five (5) years each (each a “Renewal Term”). Each Renewal Option shall be effective only if (i) Tenant is not in Default under this Lease and no event has occurred which with the giving of notice or the passage of time, or both, would constitute a Default hereunder, either at the time of exercise of the Renewal Option or the time of commencement of the Renewal Term, and (ii) concurrently with the exercise of each such Renewal Option hereunder, Tenant validly exercises the corresponding renewal option contained in Paragraph 49 of the 951 Gateway Lease.

 

49.1    Commencement Dates

 

If Tenant exercises the first Renewal Option in accordance herewith, the first Renewal Term shall commence on the day following the last day of the initial Term and end on the day preceding the fifth anniversary thereof. If Tenant exercises the second Renewal Option, the second Renewal Term shall commence on the day following the last day of the first Renewal Term and end on the day preceding the fifth anniversary thereof. The second Renewal Option may not be exercised unless Tenant has previously exercised the first Renewal Option hereunder and under the 951 Gateway Lease. Each Renewal Term, if properly exercised, shall be upon the same terms and conditions as the Lease except for Monthly Base Rent (which shall be determined as provided in the following provisions of this Paragraph).

 

49.2    Renewal Option is Personal; Non-Transferable

 

The Renewal Option shall be personal to Tenant, any transferee under a Permitted Transfer, and any assignee to whom Tenant assigns its entire right, title and interest under, or any sublessee to whom Tenant subleases the entire Premises for the entire remaining Term of, this Lease, and shall not be assignable or otherwise transferable in whole or in part, voluntarily or by operation of law, to any other permitted assignee, subtenant or other third parties and there shall be no further Renewal Option beyond the expiration of the second Renewal Term.

 

49.3    Tenant’s Notice of Exercise

 

In order to exercise a Renewal Option, Tenant shall give written notice to Landlord of Tenant’s exercise of such election (“Tenant’s Notice”) at least ten (10) months prior to expiration of the then current Term and if such notice is not so given, the Renewal Option shall lapse; the Tenant hereby expressly acknowledges and agrees that time is of the essence for purposes of notice of exercise of a Renewal Option and that Tenant’s failure to do so by said date will relieve Landlord of any obligation under this Paragraph. If Tenant gives such notice within the time prescribed, Landlord and Tenant shall be deemed to have entered into an extension of this Lease for a five (5) year extended term on the terms and conditions set forth herein.

 

49.4    Monthly Base Rent During Renewal Term

 

The Monthly Base Rent payable during any Renewal Term shall be an amount equal to the greater of (i) the Monthly Base Rent payable for the last month of the then expiring Term (provided that such Monthly Base Rent shall be increased during each year of the Renewal Term to an amount equal to one hundred three percent (103%) of the Monthly Base Rent payable during the immediately preceding term), or (ii) ninety-five percent (95%) of the Fair Market Rent (as hereinafter defined) for the Premises during such Renewal Term.

 

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49.4.1.    Fair Market Rent Definition

 

“Fair Market Rent” shall mean the rate being charged for comparable office/R&D/laboratory space in comparable locations in the South San Francisco/Brisbane market area, taking into consideration: tenant credit, tenant improvements or allowances provided or to be provided and leasing commissions, but specifically excluding any specialized laboratory improvements, Tenant’s Property or other Tenant Improvements actually paid for by Tenant (as determined in accordance with Paragraph 12.6 above).

 

49.4.2.    Determination of Fair Market Rent

 

Landlord and Tenant shall meet and attempt in good faith to mutually determine the Fair Market Rent for any Renewal Term. If the parties have not reached agreement on the Fair Market Rent by the date that is thirty (30) days after Landlord’s receipt of Tenant’s Notice, each party shall appoint an arbitrator and shall give to the other party notice of the identity of the arbitrator no later than the date that is forty (40) days after Landlord’s receipt of Tenant’s Notice. If either party fails to appoint an arbitrator by the date that is forty (40) days after Landlord’s receipt of Tenant’s Notice, the sole arbitrator appointed, if any, shall determine the Fair Market Rent. If two arbitrators are appointed, they shall immediately meet and attempt to agree upon such Fair Market Rent. If the arbitrators cannot reach agreement on the Fair Market Rent by the date that is sixty (60) days after Landlord’s receipt of Tenant’s Notice, each arbitrator shall submit a determination of Fair Market Rent to Landlord and Tenant. If the determinations of Fair Market Rent made by these two arbitrators vary by ten percent (10%) or less, the Fair Market Rent shall be the average of the two determinations. If the determinations vary by more than ten percent (10%), the two arbitrators shall within ten (10) days after submission of their determinations appoint a third arbitrator. If the two arbitrators shall be unable to agree on the selection of a third arbitrator within the 10-day period, then either Tenant or Landlord may request such appointment by petitioning the presiding judge of the Superior Court in and for the County of San Mateo. Such third arbitrator shall, within thirty (30) days after appointment, make a determination of the Fair Market Rent and submit such determination to Landlord and Tenant. The Fair Market Rent shall be the determination of Fair Market Rent submitted by the original two arbitrators that is closer to the Fair Market Rent determination of the third arbitrator. If the third arbitrator’s determination is exactly between the Fair Market Rent determination of the original two arbitrators, then the Fair Market Rent shall be the average of the original two determinations. The determination of Fair Market Rent pursuant to this Paragraph 49 shall be final and binding on Landlord and Tenant.

 

49.4.3.    Arbitrator Qualifications

 

For purposes of this Paragraph, “arbitrator” shall mean a licensed commercial real estate broker or leasing agent with not less than five (5) years of fulltime commercial brokerage experience in San Mateo County.

 

49.4.4.    Fees and Costs of Arbitrators

 

Each party shall bear the fees and costs of its arbitrator in connection with the determination of Fair Market Rent and one-half of the fees and costs of the third arbitrator, if any.

 

49.4.5.    Arbitration Period Base Rent

 

If the determination of Fair Market Rent has not been made by the expiration of the then expiring Term, Tenant shall (i) continue to pay Monthly Base Rent at the Monthly Base Rent for the last month of the Term (the “Arbitration Period Base Rent”) as well as any Additional Rent due under the Lease and (ii) pay to Landlord, or receive as a refund from Landlord, as applicable, on the first day of the

 

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month after the determination of Fair Market Rent is made, an amount, if any, equal to the difference between the Arbitration Period Base Rent that was paid to Landlord and the Monthly Base Rent for the Renewal Term that should have been paid to Landlord as the Monthly Base Rent for the Renewal Term as determined hereunder.

 

50.   PARKING

 

50.1    Grant of Parking License

 

Provided that Tenant shall comply with and abide by Landlord’s parking rules and regulations from time to time in effect, Tenant shall have a license to use for the parking of passenger automobiles the number of non-exclusive and undesignated parking spaces in the Common Areas set forth in the Basic Lease Information. Notwithstanding the foregoing, Landlord shall not be required to enforce Tenant’s right to use any such parking spaces (but Landlord shall use commercially reasonable efforts to resolve any problems related to parking); and, provided further, that the number of parking spaces allocated to Tenant hereunder shall be reduced on a proportionate basis in the event any of the parking spaces in the Designated Parking Areas are taken or otherwise eliminated as a result of any Condemnation or casualty event affecting such Designated Parking Areas. Notwithstanding the foregoing provisions of this Paragraph 50.1, Landlord shall have the right to relocate Tenant’s parking from time to time to other areas within the Project and to provide parking spaces to Tenant in surface parking lots, parking structures or other areas now or hereafter designated by Landlord as the “Project’s Parking Areas.” All unreserved spaces will be on a first-come, first-served basis in common with other tenants of and visitors to the Project in parking spaces provided by Landlord from time to time in the Project’s Parking Areas. Tenant’s license to use the parking spaces provided for herein shall be subject to such terms, conditions, rules and regulations as Landlord or the operator of the Parking Area may impose from time to time.

 

50.2    No Assignment of Parking License

 

The license granted hereunder is for self-service parking only and does not include additional rights or services except to the extent that Landlord elects in its sole and absolute discretion to provide any such services.

 

50.3    Visitor Parking

 

Tenant recognizes and agrees that visitors, clients and/or customers (collectively the “Visitors”) to the Project and the Premises must park automobiles or other vehicles only in areas designated by Landlord from time to time as being for the use of such Visitors and Tenant hereby agrees to ask its Visitors to park only in the areas designated by Landlord from time to time for the use of Tenant’s Visitors.

 

51.   RIGHT OF FIRST OFFER

 

51.1    Offer Notice

 

If subsequent to the full execution of this Lease, Landlord desires to sell the Building, Landlord shall notify Tenant in writing of such intent to sell (the “Offer Notice”); provided, however, Landlord shall not be required to provide Tenant with the Offer Notice with respect to the Building if Landlord has previously terminated this Lease or recaptured the Premises. This Right of First Offer shall be personal to Tenant and any transferee under a Permitted Transfer and shall not be assignable or otherwise transferable in whole or in part, voluntarily or by operation of law, to any other permitted assignee, subtenant or other third parties. Tenant’s right to receive the Offer Notice shall further be

 

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effective only if Tenant is not in Default under this Lease and no event has occurred which with the giving of notice or the passage of time, or both, would constitute a Default hereunder. Subject to Paragraph 51.4 below, Tenant’s right to receive an Offer Notice in accordance with this Paragraph 51.1 shall be a one-time right.

 

51.2    Election Notice

 

In the event Tenant desires to purchase the Building, Tenant shall notify Landlord in writing of its election to purchase the Building (the “Election Notice”) within ten (10) days following Tenant’s receipt of the Offer Notice. If Tenant delivers an Election Notice to Landlord, Tenant shall acquire the Building on an “as-is” basis and without any representations or warranties from Landlord.

 

51.3    Purchase and Sale Agreement

 

In the event Tenant timely delivers the Election Notice to Landlord, the parties shall thereafter execute a purchase and sale agreement prepared by Seller’s counsel (the “Purchase and Sale Agreement”) with the purchase price of the Building equal to the quotient of the Net Operating Income (as defined below) of the Building divided by nine hundredths (.09%) and with a closing to be held on or before the date that is forty-five (45) days after delivery of the Offer Notice.

 

51.4    Failure to Exercise or Sign Agreement

 

If Tenant fails to deliver an Election Notice within the 10-day time period, or if for any reason whatsoever Tenant has not executed the Purchase and Sale Agreement within ten (10) days after its receipt thereof from Landlord, Tenant’s right to purchase the Building hereunder shall automatically terminate and be of no further force and effect with respect to Landlord or any other Person (as hereinafter defined) and Landlord shall thereafter have the right to sell the Building at any time to any Person on terms acceptable to Landlord in its sole and absolute discretion. Notwithstanding the foregoing, if Landlord fails to enter into a letter of intent or purchase and sale agreement for the sale of the Building to any such Person within two hundred seventy (270) days after the date Tenant’s right to purchase the Building lapses pursuant to this Paragraph 51.4, then Tenant’s rights under this Paragraph 51 shall be reinstated and Landlord shall once again furnish Tenant with an Offer Notice prior to selling the Building to a Person other than a Landlord Affiliate. Tenant hereby expressly acknowledges and agrees that time is of the essence for purposes of the Election Notice and the ten (10) day period to execute the Purchase and Sale Agreement and that Tenant’s failure to deliver such Election Notice or the executed Purchase and Sale Agreement as specified herein will relieve Landlord of any obligation under this Paragraph.

 

51.5    Net Operating Income

 

As used herein, “Net Operating Income” shall mean the Monthly Base Rent due under the Lease with respect to the Building being purchased for the twelve (12) full calendar months following the Offer Notice. As used in this Paragraph 51.5, Monthly Base Rent shall mean the scheduled Monthly Base Rent set forth in the Basic Lease Information.

 

51.6    Landlord’s Sale to Affiliate; Survival of Option

 

Notwithstanding anything in this Paragraph to the contrary, this Paragraph shall be inapplicable to, and neither Landlord nor any person or entity providing financing to Landlord in connection with the Building (“Lender”) shall have any obligation to provide an Offer Notice to Tenant in connection with (i) any sale, conveyance or other transfer or proposed sale, conveyance or other transfer of the Building to any Person who controls, is controlled by or is under common control with, Landlord or Lender or any Person in which Hines Interest Limited Partnership or Morgan Stanley Real Estate

 

45

 

Investment Fund maintains an interest (collectively, a “Landlord Affiliate”), or (ii) any foreclosure sale or deed-in-lieu of foreclosure or the exercise of any similar remedy (collectively, a “Foreclosure”) by any Lender. As used herein “Person” shall mean any natural person, corporation, firm, association or other entity, whether acting in an individual, fiduciary or other capacity. Tenant’s rights under this Paragraph 51.6 shall survive Landlord’s transfer pursuant to clause (i) of this Paragraph 51.6 but shall not survive any Foreclosure.

 

51.7    Concurrent Exercise of Rights of First Offer with respect to 901 Gateway Boulevard and 951 Gateway Boulevard

 

Notwithstanding anything to the contrary contained in this Paragraph 51, if Landlord concurrently delivers to Tenant an Offer Notice under this Lease and an Offer Notice under Paragraph 51 of the 951 Gateway Lease, then Tenant shall have the right to exercise the Right of First Offer contained in this Paragraph 51 only if it concurrently and validly exercises the Right of First Offer granted to Tenant under Paragraph 51 of the 951 Gateway Lease. Any attempt by Tenant to deliver an Election Notice under Paragraph 51.2 above without the concurrent delivery of an Election Notice under Paragraph 51.2 of the 951 Gateway Lease (assuming that Landlord has delivered to Tenant Offer Notices under both this Lease and the 951 Gateway Lease) shall be null and void and of no force or effect.

 

52.   MEMORANDUM OF LEASE

 

Promptly after full execution of this Lease, Landlord and Tenant shall execute and cause to be recorded a Memorandum of Lease in the form attached hereto as Exhibit F.

 

53.   TENANT IMPROVEMENTS AND TENANT IMPROVEMENT ALLOWANCE

 

In connection with Tenant’s lease of the Premises, Tenant has constructed the improvements described in Exhibit G attached hereto (the “Tenant Improvements”). In connection with this Lease, Landlord has agreed to supply Tenant with an improvement allowance (“Tenant Improvement Allowance”) in an amount equal to Nine Million Three Hundred Eighty-Six Thousand Three Hundred Eighty Dollars ($9,386,380). Landlord and Tenant hereby acknowledge that prior to the date hereof, Landlord has paid Tenant Seven Million Seven Hundred Twenty-Nine Thousand Nine Hundred Sixty ($7,729,960), representing a portion of the Tenant Improvement Allowance owed hereunder, leaving a remaining Tenant Improvement Allowance to be paid to Tenant in the amount of One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty Dollars ($1,656,420). On the later date to occur of (i) January 1, 2001, or (ii) the date which is five (5) business days following the mutual execution and delivery of this Lease, Landlord shall pay to Tenant the amount of One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty Dollars ($1,656,420) representing the remaining outstanding balance of the Tenant Improvement Allowance owed hereunder.

 

46

 

Landlord and Tenant have executed and delivered this Lease effective as of the Lease Date specified in the Basic Lease Information.

 

	
 
    	
LANDLORD:
    	
HMS   GATEWAY OFFICE, L.P.,
    
	
 
    	
 
    	
a   Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Hines   Gateway Office, L.P.,
    
	
 
    	
 
    	
 
    	
Administrative   Partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
Hines   Interests Limited Partnership,
    
	
 
    	
 
    	
 
    	
 
    	
General   Partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
By:
    	
Hines   Holdings, Inc.,
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
General   Partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
By:
    	
/s/  JAMES   C. BUIE, JR. 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Name:
    	
James   C. Buie, Jr. 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Its:
    	
Executive   Vice President 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
TENANT:
    	
ADVANCED   MEDICINE, INC. 
    
	
 
    	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/  A.   GREG STURMER 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
A.   Greg Sturmer 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
Vice   President, Finance 
    
								

 

47

 

EXHIBIT A

 

SITE PLAN

 

[TO COME]

 

A-1

 

EXHIBIT B

 

ADDITIONAL OPERATIONAL GUIDELINES

 

As a component of the Tenant Improvements and any Alterations made by Tenant to the Premises, Tenant shall install fume hoods, as well as a rooftop venting and exhaust system designed to increase the velocity of exhaust such that any odors shall be discharged high into the atmosphere in order to minimize the risk of odors detectable at ground level. In addition, Tenant shall install and utilize such additional venting, exhaust and quenching systems, including, without limitation, base quenching, distillation units, acid quenching, and mechanical exhaust/filtration systems, as appropriate to reduce the risk of emanation of such odors.

 

B-1

 

EXHIBIT C

 

RULES AND REGULATIONS

 

This exhibit, entitled “Rules and Regulations,” is and shall constitute Exhibit E to the Lease Agreement, dated as of the Lease Date, by and between Landlord and Tenant for the Premises. The terms and conditions of this Exhibit E are hereby incorporated into and are made a part of the Lease. Capitalized terms used, but not otherwise defined, in this Exhibit E have the meanings ascribed to such terms in the Lease.

 

1.               Tenant shall not use any method of heating or air conditioning other than that approved by Landlord in writing without the prior written consent of Landlord, which consent shall not to be unreasonably withheld, conditioned or delayed.

 

2.               All window coverings installed by Tenant and visible from the outside of the Building require the prior written approval of Landlord.

 

3.               Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance or any flammable or combustible materials on or around the Project or the Adjacent Properties, except to the extent that Tenant is permitted to use the same in the Premises under the terms of Paragraph 32 of the Lease.

 

4.               Tenant shall not alter any lock or install any new locks or bolts on any door at the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed.

 

5.               Tenant shall not make any duplicate keys without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed.

 

6.               Tenant shall park motor vehicles in parking areas designated by Landlord, including areas for loading and unloading. During those periods of loading and unloading, Tenant shall not unreasonably interfere with traffic flow around the Building or the Project and loading and unloading areas of other tenants.

 

7.               Tenant shall not disturb, solicit or canvas any tenant or other occupant of the Building or Project and shall cooperate to prevent same.

 

8.               No person shall go on the roof without Landlord’s permission.

 

9.               Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building, to such a degree as to be objectionable to Landlord or other tenants, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration isolators or in noise-dampening housing or other devices sufficient to eliminate noise or vibration.

 

10.        All goods, including material used to store goods, delivered to the Premises of Tenant shall be immediately moved into the Premises and shall not be left in parking or receiving areas overnight. During the period of construction of the Tenant Improvements and any Alterations, all construction materials shall be stored in a manner and a location mutually acceptable to Landlord and Tenant.

 

11.        Tenant is responsible for the storage and removal of all trash and refuse. All such trash and refuse shall be contained in suitable receptacles stored behind screened enclosures at locations approved by Landlord.

 

12.        Tenant shall not store or permit the storage or placement of goods or merchandise in or around the Common Areas surrounding the Premises. No displays or sales or merchandise shall be allowed in the Parking Areas or other Common Areas.

 

C-1

 

13.        Tenant shall not permit any animals, including, but not limited to, any household pets, to be brought or kept in or about the Premises, the Building, the Project or any of the Common Areas which would violate applicable Laws or constitute a nuisance to the Premises, the Building or the Project. Tenant shall prior to the Commencement Date and thereafter from time to time upon the request of Landlord provide to Landlord a written plan for the handling and disposal of all animals used by Tenant in the conduct of its business, which plan shall be subject to the written approval of Landlord.

 

	
INITIALS:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TENANT:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LANDLORD:
    	
 
    	
 
    

 

C-2

 

EXHIBIT D

 

HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE

 

Your cooperation in this matter is appreciated. Initially, the information provided by you in this Hazardous Materials Disclosure Certificate is necessary for the Landlord to evaluate your proposed uses of the premises (the “Premises”) and to determine whether to enter into a lease agreement with you as tenant. If a lease agreement is signed by you and the Landlord (the “Lease Agreement”), on an annual basis in accordance with the provisions of Paragraph 32 of the Lease Agreement, you are to provide an update to the information initially provided by you in this certificate. Any questions regarding this certificate should be directed to, and when completed, the certificate should be delivered to:

 

	
Landlord:
    	
HMS   Gateway Office L.P. c/o Hines
    
	
 
    	
c/o   Hines
    
	
 
    	
650   Gateway Boulevard, Suite 1140
    
	
 
    	
South   San Francisco, California 94080
    
	
 
    	
Phone:   (650) 794-1111
    

 

Name of (Prospective) Tenant: Advance Medicine, Inc.

 

	
Mailing Address:
    	
 
    
	
 
    
	
 
    
	
Contact Person, Title and Telephone Number(s):
    	
 
    
	
 
    
	
Contact Person for Hazardous Waste Materials   Management and Manifests and Telephone Number(s):
    
	
 
    
	
 
    
	
 
    
	
Address of (Prospective) Premises:
    	
 
    
	
 
    	
 
    
	
Length of (Prospective) initial Term:
    	
 
    
	
 
    	
 
    
				

 

D-1

 

1.                                      GENERAL INFORMATION:

 

Describe the proposed operations to take place in, on, or about the Premises, including, without limitation, principal products processed, manufactured or assembled, and services and activities to be provided or otherwise conducted. Existing tenants should describe any proposed changes to on-going operations.

 

 

 

2.                                      USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS

 

2.1                               Will any Hazardous Materials (as hereinafter defined) be used, generated, treated, stored or disposed of in, on or about the Premises? Existing tenants should describe any Hazardous Materials which continue to be used, generated, treated, stored or disposed of in, on or about the Premises.

 

	
Wastes
    	
Yes   o
    	
No   o
    
	
 
    	
 
    	
 
    
	
Chemical   Products
    	
Yes   o
    	
No   o
    
	
 
    	
 
    	
 
    
	
Other
    	
Yes   o
    	
No   o
    

 

If Yes is marked, please explain:

 

 

 

2.2                                         If Yes is marked in Exhibit 2.1, attach a list of any Hazardous Materials to be used, generated, treated, stored or disposed of in, on or about the Premises, including the applicable hazard class and an estimate of the quantities of such Hazardous Materials to be present on or about the Premises at any given time; estimated annual throughput; the proposed location(s) and method of storage (excluding nominal amounts of ordinary household cleaners and janitorial supplies which are not regulated by any Environmental Laws, as hereinafter defined); and the proposed location(s) and method(s) of treatment or disposal for each Hazardous Material, including the estimated frequency, and the proposed contractors or subcontractors. Existing tenants should attach a list setting forth the information requested above and such list should include actual data from on-going operations and the identification of any variations in such information from the prior year’s certificate.

 

3.                                      STORAGE TANKS AND SUMPS

 

3.1                                         Is any above or below ground storage or treatment of gasoline, diesel, petroleum, or other Hazardous Materials in tanks or sumps proposed in, on or about the Premises? Existing tenants should describe any such actual or proposed activities.

 

Yes o             No o

 

If yes, please explain:

 

 

 

4.                                      WASTE MANAGEMENT

 

4.1                               Has your company been issued an EPA Hazardous Waste Generator I.D. Number? Existing tenants should describe any additional identification numbers issued since the previous certificate.

 

D-2

 

Yes o             No o

 

4.2                               Has your company filed a biennial or quarterly reports as a hazardous waste generator? Existing tenants should describe any new reports filed.

 

Yes o             No o

 

If yes, attach a copy of the most recent report filed.

 

5.                                      WASTEWATER TREATMENT AND DISCHARGE

 

5.1                               Will your company discharge wastewater or other wastes to:

 

	
o storm drain?
    	
o sewer?
    
	
 
    	
 
    
	
o surface   water?
    	
o no wastewater   or other wastes discharged.
    

 

Existing tenants should indicate any actual discharges. If so, describe the nature of any proposed or actual discharge(s).

 

 

 

5.2                               Will any such wastewater or waste be treated before discharge?

 

Yes o             No o

 

If yes, describe the type of treatment proposed to be conducted. Existing tenants should describe the actual treatment conducted.

 

 

 

6.                                      AIR DISCHARGES

 

6.1                               Do you plan for any air filtration systems or stacks to be used in your company’s operations in, on or about the Premises that will discharge into the air; and will such air emissions be monitored? Existing tenants should indicate whether or not there are any such air filtration systems or stacks in use in, on or about the Premises which discharge into the air and whether such air emissions are being monitored.

 

Yes o             No o

 

If yes, please describe:

 

 

 

6.2                                         Do you propose to operate any of the following types of equipment, or any other equipment requiring an air emissions permit? Existing tenants should specify any such equipment being operated in, on or about the Premises.

 

	
o Spray   booth(s)
    	
o   Incinerator(s)
    
	
 
    	
 
    
	
o Dip tank(s)
    	
o Other   (Please describe)
    
	
 
    	
 
    
	
o Drying   oven(s)
    	
o No Equipment   Requiring Air Permits
    

 

D-3

 

If yes, please describe:

 

 

6.3                                         Please describe (and submit copies of with this Hazardous Materials Disclosure Certificate) any reports you have filed in the past [thirty-six] months with any governmental or quasi-governmental agencies or authorities related to air discharges or clean air requirements and any such reports which have been issued during such period by any such agencies or authorities with respect to you or your business operations.

 

7.                                      HAZARDOUS MATERIALS DISCLOSURES

 

7.1                                         Has your company prepared or will it be required to prepare a Hazardous Materials management plan (“Management Plan”) or Hazardous Materials Business Plan and Inventory (“Business Plan”) pursuant to Fire Department or other governmental or regulatory agencies’ requirements? Existing tenants should indicate whether or not a Management Plan is required and has been prepared.

 

Yes o             No o

 

If yes, attach a copy of the Management Plan or Business Plan. Existing tenants should attach a copy of any required updates to the Management Plan or Business Plan.

 

7.2                               Are any of the Hazardous Materials, and in particular chemicals, proposed to be used in your operations in, on or about the Premises listed or regulated under Proposition 65? Existing tenants should indicate whether or not there are any new Hazardous Materials being so used which are listed or regulated under Proposition 65.

 

Yes o             No o

 

If yes, please explain:

 

8.                                      ENFORCEMENT ACTIONS AND COMPLAINTS

 

8.1                               With respect to Hazardous Materials or Environmental Laws, has your company ever been subject to any agency enforcement actions, administrative orders, or consent decrees or has your company received requests for information, notice or demand letters, or any other inquiries regarding its operations? Existing tenants should indicate whether or not any such actions, orders or decrees have been, or are in the process of being, undertaken or if any such requests have been received.

 

Yes o             No o

 

If yes, describe the actions, orders or decrees and any continuing compliance obligations imposed as a result of these actions, orders or decrees and also describe any requests, notices or demands, and attach a copy of all such documents. Existing tenants should describe and attach a copy of any new actions, orders, decrees, requests, notices or demands not already delivered to Landlord pursuant to the provisions of Paragraph 32 of the Lease Agreement.

 

 

 

 

8.2                               Have there ever been, or are there now pending, any lawsuits against your company regarding any environmental or health and safety concerns?

 

Yes o             No o

 

D-4

 

If yes, describe any such lawsuits and attach copies of the complaint(s), cross-complaint(s), pleadings and other documents related thereto as requested by Landlord. Existing tenants should describe and attach a copy of any new complaint(s), cross-complaint(s), pleadings and other related documents not already delivered to Landlord pursuant to the provisions of Paragraph 32 of the Lease Agreement.

 

8.3                               Have there been any problems or complaints from adjacent tenants, owners or other neighbors at your company’s current facility with regard to environmental or health and safety concerns? Existing tenants should indicate whether or not there have been any such problems or complaints from adjacent tenants, owners or other neighbors at, about or near the Premises and the current status of any such problems or complaints.

 

Yes o             No o

 

If yes, please describe. Existing tenants should describe any such problems or complaints not already disclosed to Landlord under the provisions of the signed Lease Agreement and the current status of any such problems or complaints.

 

 

 

 

9.                                      PERMITS AND LICENSES

 

9.1                               Attach copies of all permits and licenses issued to your company with respect to its proposed operations in, on or about the Premises, including, without limitation, any Hazardous Materials permits, wastewater discharge permits, air emissions permits, and use permits or approvals. Existing tenants should attach copies of any new permits and licenses as well as any renewals of permits or licenses previously issued.

 

As used herein, “Hazardous Materials” shall mean and include any substance that is or contains (a) any “hazardous substance” as now or hereafter defined in § 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”) (42 U.S.C. § 9601 et seq.) or any regulations promulgated under CERCLA; (b) any “hazardous waste” as now or hereafter defined in the Resource Conservation and Recovery Act, as amended (“RCRA”) (42 U.S.C. § 6901 et seq.) or any regulations promulgated under RCRA; (c) any substance now or hereafter regulated by the Toxic Substances Control Act, as amended (“TSCA”) (15 U.S.C. § 2601 et seq.) or any regulations promulgated under TSCA; (d) petroleum, petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (e) asbestos and asbestos-containing material, in any form, whether friable or non-friable; (f) polychlorinated biphenyls; (g) lead and lead-containing materials; or (h) any additional substance, material or waste (A) the presence of which on or about the Premises (i) requires reporting, investigation or remediation under any Environmental Laws (as hereinafter defined), (ii) causes or threatens to cause a nuisance on the Premises or any adjacent property or poses or threatens to pose a hazard to the health or safety of persons on the Premises or any adjacent property, or (iii) which, if it emanated or migrated from the Premises, could constitute a trespass, or (B) which is now or is hereafter classified or considered to be hazardous or toxic under any Environmental Laws; and “Environmental Laws” shall mean and include (a) CERCLA, RCRA and TSCA; and (b) any other federal, state or local laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or hereinafter in effect relating to (i) pollution, (ii) the protection or regulation of human health, natural resources or the environment, (iii) the treatment, storage or disposal of Hazardous Materials, or (iv) the emission, discharge, release or threatened release of Hazardous Materials into the environment.

 

The undersigned hereby acknowledges and agrees that this Hazardous Materials Disclosure Certificate is being delivered to Landlord in connection with the evaluation of a Lease Agreement and, if such Lease Agreement is executed, will be attached thereto as an exhibit. The undersigned further

 

D-5

 

acknowledges and agrees that if such Lease Agreement is executed, this Hazardous Materials Disclosure Certificate will be updated from time to time in accordance with Paragraph 32 of the Lease Agreement. The undersigned further acknowledges and agrees that the Landlord and its partners, lenders and representatives may, and will, rely upon the statements, representations, warranties, and certifications made herein and the truthfulness thereof in entering into the Lease Agreement and the continuance thereof throughout the term, and any renewals thereof, of the Lease Agreement. I [print name]                        , acting with full authority to bind the (proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent and warrant that the information contained in this certificate is true and correct.

 

	
(PROSPECTIVE)   TENANT:
    	
 
    
	
 
    	
 
    
	
ADVANCED   MEDICINE, INC.,

a   Delaware corporation
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

	
INITIALS:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TENANT:
    	
/s/  A.   GREG STURMER 
    	
 
    
	
 
    	
 
    	
 
    
	
LANDLORD:
    	
/s/  JAMES   C. BUIE, JR. 
    	
 
    

 

D-6

 

EXHIBIT E

 

TENANT’S PROPERTY

 

Laboratory related furniture and equipment including:

 

benches and tables
 casework
 biosafety, laminar flow, and fume hoods
 cages/fencing
 DI water system
 vacuum pumps
 compressed air
 nitrogen manifold

 

Office related furniture and equipment including:

 

open office partitions
 telephone and network equipment
 reception desk
 lobby furniture
 lobby display cases
 appliances
 interior signage

 

E-1

 

EXHIBIT F

 

	
RECORDING   REQUESTED BY AND WHEN RECORDED RETURN TO:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Attention:
    	
 
    	
 
    
			

 

 

MEMORANDUM OF LEASE

 

THIS MEMORANDUM OF LEASE is executed as of February 17, 1999, by and between HMS GATEWAY OFFICE, L.P., a Delaware limited partnership (“Landlord”), and ADVANCED MEDICINE, INC., a Delaware corporation (“Tenant”). Landlord has previously leased to Tenant a portion of that certain real property described on Exhibit A attached hereto and incorporated herein by reference, consisting of the building commonly known as 901 Gateway Boulevard located in South San Francisco, California, commencing on                        ,             and terminating on                        ,             on the terms and conditions set forth in that certain Lease between Landlord and Tenant dated as of February    , 1999 (the “Off Record Lease”). Landlord has also granted to Tenant (i) options to renew the term of the Lease for two (2) additional periods of five (5) years each, and (ii) a right to expand the premises being leased by Tenant, all terms and conditions of the Off Record Lease.

 

F-1

 

IN WITNESS WHEREOF, the undersigned have executed this Memorandum of Lease so that third parties might have notice of the lease by Landlord and Tenant herein.

 

	
 
    	
Landlord:
    	
HMS   GATEWAY OFFICE, L.P.,
   a Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Hines   Gateway Office, L.P.,
   Administrative Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Hines   Interests Limited Partnership,
   General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Hines   Holdings, Inc.,
   General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Tenant:
    	
ADVANCED   MEDICINE, INC.,
   a Delaware corporation
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
INITIALS:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
TENANT:
    	
/s/   A. GREG STURMER
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
LANDLORD:
    	
/s/   JAMES C. BUIE, JR.
    	
 
    	
 
    	
 
    
							

 

F-2

 

EXHIBIT G

 

TENANT IMPROVEMENTS

 

The tenant improvements depicted on the plan set dated August 10, 1999, titled “Advanced Medicine, Inc. Tenant Improvement Package.”

 

G-1

 

Exhibit H

 

TENANT ESTOPPEL CERTIFICATE
  901 GATEWAY BOULEVARD

 

	
From:
    	
Theravance, Inc.   (Formerly Advanced Medicine, Inc.)
    
	
 
    	
901   Gateway Boulevard
    
	
 
    	
South   San Francisco, California 94080
    
	
 
    	
(“Tenant”)
    
	
 
    	
 
    
	
To:
    	
ARE-901/951   Gateway Boulevard LLC
    
	
 
    	
c/o   Alexandria Real Estate Equities, Inc.
    
	
 
    	
135   N. Los Robles Ave., Suite 250
    
	
 
    	
Pasadena,   California 91101
    
	
 
    	
(“Purchaser”)
    
	
 
    	
 
    
	
 
    	
HMS   Gateway Office, L.P.
    
	
 
    	
Hines   Gateway
    
	
 
    	
651   Gateway Boulevard, Suite 1140
    
	
 
    	
South   San Francisco, California 94080
    
	
 
    	
(“Landlord”)
    

 

Lease: Lease Agreement dated January 1, 2001 between HMS Gateway Office,. L.P., a Delaware limited partnership, and Advanced Medicine, Inc., a Delaware corporation, covering the Premises (as defined below), as modified, altered or amended (as further described in Paragraph 1 below) (the “Lease”).

 

Premises:    110,428 rentable square feet (as set forth in the Lease) (the “Premises”), located in the building known as 901 Gateway having an address of 901 Gateway Boulevard, South San Francisco, California 94080.

 

Tenant hereby certifies to Landlord and Purchaser as follows:

 

1.    Attached hereto as Annex 1 is a true, correct, and complete copy of the Lease, including amendments, modifications, supplements, guarantees, and restatements thereof. Tenant is the current Tenant under the Lease. The Lease is in full force and effect and is the complete and only lease, agreement or understanding between Landlord and Tenant affecting the Premises and any rights to parking. The Lease has not been modified, altered or amended, except by the documents listed on Annex I attached hereto. Pursuant to the Lease, Tenant has the right to use 293 non-exclusive and undesignated parking spaces located within the project of which the Premises are part (the “Project”). Tenant acknowledges that Landlord may fulfill its obligations regarding parking under the Lease through the exercise of Landlord’s rights under that certain Declaration of Reciprocal Easements made by HMS Gateway Office, L.P. and recorded on June 26, 2000 as Document No. 2000-077496.

 

2.    The term of the Lease has commenced and expires on March 31, 2012 subject to the following options to extend: Two (2) options of five (5) years each. Tenant has accepted and is presently occupying the Premises.

 

 

10.    As of the date of this Certificate, Tenant has not sublet any portion of the Premises or assigned any rights under the Lease. The address for notices to be sent to Tenant is as set forth in the Lease.

 

11.    Tenant understands that this Certificate is required in connection with Purchaser’s acquisition of the Property, and Tenant agrees that Purchaser and its assigns (including any parties providing financing for the Property) will, and will be entitled to, rely on the truth of this Certificate.

 

12.    The party executing this document on behalf of Tenant represents that he/she has been authorized to do so on behalf of Tenant.

 

EXECUTED on this    day of April, 2002.

 

	
 
    	
“TENANT”
    	
 
    	
 
    
	
 
    	
By:
    	
/s/  A.   GREG STURMER 
    

 

2

 

Exhibit 10.9

 

LEASE AGREEMENT BY AND BETWEEN HMS GATEWAY OFFICE L.P., A Delaware Limited Partnership AS LANDLORD, AND ADVANCED MEDICINE, INC., a Delaware corporation AS TENANT DATED JANUARY 1, 2001
 TABLE OF CONTENTS
 LEASE AGREEMENT BASIC LEASE INFORMATION
 LEASE AGREEMENT
 O P E R A T I V E P R O V I S I O N S
 EXHIBIT A SITE PLAN
 EXHIBIT B ADDITIONAL OPERATIONAL GUIDELINES
 EXHIBIT C RULES AND REGULATIONS
 EXHIBIT D HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
 EXHIBIT E TENANT’S PROPERTY
 EXHIBIT F
 MEMORANDUM OF LEASE
 EXHIBIT G TENANT IMPROVEMENTS
 Exhibit H TENANT ESTOPPEL CERTIFICATE 901 GATEWAY BOULEVARD

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