Document:

Exhibit 10.6

 

FIRST AMENDMENT TO OFFICE LEASE

 

This FIRST AMENDMENT TO OFFICE LEASE (“First Amendment”) is made and entered into as of the 10th day of June, 2011, by and between KILROY REALTY, L.P., a Delaware limited partnership (“Landlord”), and SPLUNK INC., a Delaware corporation (“Tenant”).

 

R E C I T A L S:

 

A.                                   Brannan Propco, LLC, a Delaware limited liability company, as predecessor-in-interest to Landlord, and Tenant entered into that certain Office Lease dated as of March 6, 2008 (the “Lease”), whereby Landlord leases to Tenant and Tenant leases from Landlord those certain premises consisting of 34,167 rentable square feet of space commonly known as Suite 200 (the “Current Premises”) located on the second (2nd) floor of that certain office building located and addressed at 250 Brannan Street, San Francisco, California (the “Building”).

 

B.                                     Tenant desires to expand the Current Premises, as shown on Exhibit A attached hereto and made a part hereof, to include that certain space consisting of 23,362 rentable square feet of space commonly known as Suite 100 and located on the first (1st) floor and lower level of the Building (the “Expansion Premises”), as shown on Exhibit A-1 attached hereto and made a part hereof. Landlord and Tenant desire to enter into the Amendment to, among other things, provide for the inclusion of the Expansion Premises in the Premises covered by the Lease, and to make other modifications to the Lease.

 

A G R E E M E N T:

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                       Capitalized Terms. All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this First Amendment.

 

2.                                       Expansion of Current Premises. Upon the full execution and delivery of this First Amendment by Landlord and Tenant (the “Effective Date”) and delivery of the Expansion Premises by Landlord to Tenant for the purpose of commencing the Work (as defined in Exhibit B hereof) with respect to such Expansion Premises (the “Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant the Expansion Premises; provided, however, that Base Rent and other amounts payable under the Lease, as amended, will not commence to be payable until the “Expansion Term Commencement Date” (as defined below). Consequently, as of the Effective Date, (a) the “Premises” as defined in the Lease shall be increased to include both the Current Premises and the Expansion Premises, and (b) Exhibits A and A-1 attached hereto, which collectively describe the entire Premises, shall together replace Exhibit A currently attached to the Lease. Notwithstanding the foregoing, if the Delivery Date does not occur within thirty (30) days after the

 

 

Effective Date, Tenant may, upon delivery of written notice to Landlord at any time after the expiration of such thirty (30) day period (but in any event prior to the Delivery Date), terminate Tenant’s lease of the Expansion Premises, in which event Tenant’s lease of the Expansion Premises shall automatically terminate and be of no further force or effect, and this First Amendment shall be null and void and of no further force or effect. Landlord and Tenant hereby acknowledge and agree that the addition of the Expansion Premises to the Current Premises shall, effective as of the Effective Date, increase the stipulated size of the Premises to a total of 57,529 rentable square feet of space, consisting of 23,362 rentable square feet constituting the Expansion Premises and 34,167 rentable square feet of space constituting the Current Premises.

 

3.                                       Expansion Term. The term of Tenant’s lease of the Expansion Premises (the “Expansion Term”) shall commence on September 1, 2011 (the “Expansion Term Commencement Date”), as such date may be extended pursuant to Section 4.4 of the “Work Letter” attached hereto as Exhibit B. The Expansion Term shall also expire on October 31, 2013 (the “Expansion Term Expiration Date”), concurrently with expiration of Tenant’s lease of the Current Premises unless sooner terminated as provided in the Lease, as hereby amended. Notwithstanding any term or provision in the Lease to the contrary, effective as of the date of this First Amendment, any references in the Lease to the “Expiration Date” shall refer to the Expansion Term Expiration Date. Tenant and Landlord agree the Term of the Lease is currently scheduled to expire on October 31, 2013 in accordance with the terms of the Lease and Sections 1.4 and 3.1 thereof.

 

4.                                       Base Rent.

 

4.1                                 Base Rent for the Current Premises. Tenant shall continue to pay Base Rent for the Current Premises at the rate currently provided under Section 1.7 of the Lease for the period commencing on the Effective Date and ending on December 31, 2011. Provided this First Amendment has not been terminated in accordance with Section 2 above, commencing on January 1, 2012 and continuing until the Expansion Term Expiration Date, Tenant shall pay to Landlord monthly installments of Base Rent for the Current Premises as follows, and Section 1.7 of the Lease shall be deemed amended accordingly:

 

	
Period During Lease Term
    	
 
    	
Annual
   Base Rent
    	
 
    	
Monthly
   Installment
   of Base Rent
    	
 
    	
Annual
   Rental Rate
   per Rentable
   Square Foot
    	
 
    
	
Effective Date — December 31, 2011
    	
 
    	
$
    	
1,366,680.00
    	
 
    	
$
    	
113,890.00
    	
 
    	
$
    	
40.00
    	
 
    
	
January 1, 2012 — December 31, 2012
    	
 
    	
$
    	
1,435,014.00
    	
 
    	
$
    	
119,584.50
    	
 
    	
$
    	
42.00
    	
 
    
	
January 1, 2013 — October 31, 2013
    	
 
    	
$
    	
1,469,181.00
    	
 
    	
$
    	
122,431.75
    	
 
    	
$
    	
43.00
    	
 
    

 

4.2                                 Base Rent for the Expansion Premises. Commencing on the Expansion Term Commencement Date (subject to Section 4.3 of this First Amendment, below) and continuing 

 

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throughout the Expansion Term, Tenant shall pay to Landlord monthly installments of Base Rent for the Expansion Premises as follows:

 

	
Period During Expansion Term
    	
 
    	
Annual
   Base Rent
    	
 
    	
Monthly
   Installment
   of Base Rent
    	
 
    	
Annual
   Rental Rate
   per Rentable
   Square Foot
    	
 
    
	
September 1, 2011 — December 31, 2011*
    	
 
    	
$
    	
957,842.00
    	
 
    	
$
    	
79,820.17
    	
 
    	
$
    	
41.00
    	
 
    
	
January 1, 2012 — December 31, 2012
    	
 
    	
$
    	
981,204.00
    	
 
    	
$
    	
81,767.00
    	
 
    	
$
    	
42.00
    	
 
    
	
January 1, 2013 — October 31, 2013
    	
 
    	
$
    	
1,004,566.00
    	
 
    	
$
    	
83,713.83
    	
 
    	
$
    	
43.00
    	
 
    

 

*  Subject to an abatement of the Base Rent otherwise attributable to the Expansion Premises during the first two (2) months of the Expansion Term, pursuant to the terms and conditions of Section 4.3 of this First Amendment, below.

 

4.3                                 Expansion Premises Rent Abatement. Notwithstanding anything to the contrary contained in Section 4.2, above, provided that no Event of Default (as defined in Section 15.1 of the Lease) shall occur during the first two (2) months of the Expansion Term, then during the first two (2) months of the Expansion Term (the “Expansion Premises Rent Abatement Period”), Tenant shall not be obligated to pay any Base Rent otherwise attributable to the Expansion Premises during such Expansion Premises Rent Abatement Period. If an Event of Default shall occur during such Expansion Premises Rent Abatement Period, Tenant shall not be entitled to any abatement of Base Rent in connection with the Expansion Premises during any part of the Expansion Premises Rent Abatement Period occurring after such Event of Default occurs.

 

4.4                                 First Month’s Rent. Concurrently with Tenant’s execution and delivery of this First Amendment, Tenant shall pay to Landlord the Base Rent payable for the Expansion Premises for the first (1st) full month of the Expansion Term (i.e., Seventy-Nine Thousand Eight Hundred Twenty and 17/100 Dollars ($79,820.17)) (the “First Month’s Rent Payment”). Subject to Section 4.3 above, the First Month’s Rent Payment shall be applied to Base Rent due and owing for the third (3rd) month of the Expansion Term. If Tenant is not entitled to abatement for all or any portion of the Expansion Premises Rent Abatement Period, the First Month’s Rent Payment will be applied to Tenant’s obligations with respect to such Expansion Premises Rent Abatement Period.

 

5.                                       Property Tax and Operating Expense and Direct Reimbursement Payments Adjustment. Tenant shall continue to pay the Property Tax and Operating Expense and Direct Reimbursement Payments Adjustment in connection with the Current Premises in accordance with the terms of Article IV of the Lease. Additionally, except as specifically set forth in this Section 5, commencing on the Expansion Term Commencement Date, Tenant shall pay the Property Tax and Operating Expense and Direct Reimbursement Payments Adjustment in connection with the Expansion Premises in accordance with the terms of Article IV of the Lease, provided that for purposes of calculating the Property Tax and Operating Expense and Direct Reimbursement

 

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Payments Adjustment for the Expansion Premises during the Expansion Term, (a) Tenant’s Percentage Share is 26.46%, and (b) the Base Year shall be the calendar year 2011. Landlord shall clearly separate the calculation of Rent Adjustments attributable to each of the Current Premises and Expansion Premises in any estimates or statements delivered to Tenant pursuant to Section 4.3 of the Lease.

 

6.                                       Improvements. Notwithstanding Landlord’s ongoing repair and maintenance obligations under the Lease, Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Expansion Premises or of the Current Premises. Tenant shall accept the Expansion Premises and continue to accept the Current Premises in their presently existing “as-is” condition.

 

7.                                       Broker. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this First Amendment, and that they know of no real estate broker or agent who is entitled to a commission in connection with this First Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation claimed against the beneficiary of the indemnity alleged to arise from or on account of the indemnifying party’s dealings with any real estate broker or agent. The terms of this Section 7 shall survive the expiration or earlier termination of the Lease (as amended hereby).

 

8.                                       Parking. Section 1.16 of the Lease is hereby amended to provide that effective as of the Delivery Date and continuing throughout the Expansion Term, Tenant shall be entitled to rent a total of up to fifty-seven (57) unreserved parking passes (i.e., one (1) unreserved parking pass per 1,000 rentable square feet of the Premises) in the Building parking facility on the terms set forth in Section 27.26 of the Lease.

 

9.                                       Expansion Premises Signage. Landlord, at its sole cost and expense, will provide the initial Building standard identification signage at the entry to the Expansion Premises, and make any initially required changes to the Building standard main floor lobby directory signage to reflect Tenant’s lease of the Current Premises and the Expansion Premises. Except as expressly set forth herein, Tenant’s signage rights shall be in accordance with the provisions of Section 7.3 of the Lease.

 

10.                                 Right of First Offer.

 

10.1                           In General. Landlord hereby grants to the Tenant originally named in this First Amendment (the “Original Tenant”) or its Permitted Transferee (as that term is defined in Section 14.1(B) of the Lease) a one-time right of first offer (the “Right of First Offer”) with respect to any premises in the Building (a “First Offer Space”) which will become available for lease to 

 

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third parties following the expiration or earlier termination of the presently existing lease therefor, including any renewal or extension of any such lease pursuant to an express right that is presently set forth in such lease, but regardless of whether such renewal or extension rights are executed strictly in accordance with their terms, or pursuant to a lease amendment or a new lease. Landlord hereby represents to Tenant that as of the date of this First Amendment (a) no other tenants of the Building have a right to expand within the Building, and Tenant’s Right of First Offer shall be superior to any future expansion rights granted to other tenants of the Building, (b) the copy of the lease between Brannan Propco, LLC and Omniture, Inc. dated January 8, 2008 (the “Omniture Lease”), is a true and correct copy of such lease and any amendments thereto, (c) the Omniture Lease has not been amended except as indicated in the documents provided to Tenant, and (d) the Omniture Lease is presently scheduled to expire on September 30, 2013. Landlord will not make any amendment to the Omniture Lease that shall provide for an option to extend the term beyond September 30, 2013. Tenant’s Right of First Offer shall be on the terms and conditions set forth in this Section 10.

 

10.2                           Procedure for Offer and Acceptance. Subject to the terms of this Section 10, if during the Expansion Term, First Offer Space will become available for lease to third parties, then Landlord shall notify Tenant (a “First Offer Notice”) of (i) the location within the Building and the rentable square feet of the First Office Space, (ii) the date that Landlord reasonably anticipates the First Offer Space will be available for occupancy by Tenant, (iii) the lease term with respect to such First Offer Space (the “First Offer Space Lease Term”), (iv) the “Market Rent” (as determined pursuant to Exhibit C attached hereto), and (v) other fundamental economic terms and conditions upon which Landlord would be willing to lease such First Offer Space to Tenant. If Tenant wishes to exercise its Right of First Offer with respect to the First Offer Space described in the First Offer Notice, then within ten (10) business days of delivery of such First Offer Notice to Tenant (“Tenant’s Exercise Period”), Tenant shall deliver notice to Landlord of Tenant’s exercise of its Right of First Offer with respect to the entire space described in such First Offer Notice on the terms set forth in the First Offer Notice. If Tenant does not notify Landlord within Tenant’s Exercise Period of Tenant’s exercise of its Right of First Offer, then Landlord, in its sole and absolute discretion, shall have the right to lease the space described in the First Offer Notice to any third party on any terms Landlord desires. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its Right of First Offer, if at all, with respect to all of the First Offer Space offered by Landlord to Tenant, and Tenant may not elect to lease only a portion thereof.

 

10.3                           First Offer Space Rent. The Base Rent payable by Tenant with respect to the First Offer Space during the First Offer Space Lease Term shall be equal to the Market Rent (as determined pursuant to Exhibit C attached hereto).

 

10.4                           Construction In First Offer Space. Except as expressly otherwise provided in the First Offer Notice, Tenant shall take the First Offer Space in its “as is” condition, and the construction of improvements in the First Offer Space shall comply with the terms of Article IX of the Lease.

 

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10.5                           Amendment to Lease. If Tenant timely exercises Tenant’s right to lease the First Offer Space as set forth herein, Landlord and Tenant shall within thirty (30) days thereafter execute an amendment to the Lease for such First Offer Space upon the terms and conditions as set forth in the First Offer Notice and this Section 10. Tenant shall commence the payment of Base Rent for the First Offer Space, and the term of Tenant’s lease of the First Offer Space shall commence upon the date of delivery of the First Offer Space to Tenant (the “First Offer Space Commencement Date”) and shall terminate on the date set forth in the First Offer Notice.

 

10.6                           Termination of Right of First Offer. The Right of First Offer contained in this Section 10 shall be personal to Tenant or its Permitted Transferee, and may only be exercised by Tenant or its Permitted Transferee if Tenant and/or its Permitted Transferee occupies, or together they occupy, at least eighty percent (80%) of the rentable square feet of the Premises (i.e., the Current Premises and the Expansion Premises). The Right of First Offer granted herein shall terminate in its entirety upon the failure by Tenant to exercise its Right of First Offer with respect to such First Offer Space as offered by Landlord. Tenant shall not have the right to lease the First Offer Space, as provided in this Section 10, if, as of the date of the attempted exercise of any right of first offer by Tenant, or, at Landlord’s option, as of the scheduled date of delivery of the First Offer Space to Tenant, an Event of Default exists under the Lease, as amended. Notwithstanding any term or provision to the contrary set forth in this Section 10, the Right of First Offer granted herein shall terminate and be no further force or effect as of January 31, 2013. Upon the Delivery Date, this Section 10 shall supersede any right of first offer contained in the Lease, specifically including Section 3.2 thereof.

 

10.7                           Deletion of Prior Right of First Offer. The right of first offer set forth in Section 3.2 of the Lease is hereby deleted and without further force and effect.

 

11.                                 Landlord’s Right to Continue Lease Upon Tenant Event of Default. Section 15.3 of the Lease is hereby deleted and replaced with the following:

 

“Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any Event of Default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.”

 

12.                                 No Further Modification. Except as set forth in this First Amendment, all of the terms and provisions of the Lease shall apply with respect to the Expansion Premises and shall remain unmodified and in full force and effect.

 

[Signature page immediately follows.]

 

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IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first above written.

 

	
“LANDLORD”
    	
KILROY   REALTY, L.P.,
    
	
 
    	
a   Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Kilroy   Realty Corporation,
    
	
 
    	
 
    	
a   Maryland corporation,
    
	
 
    	
 
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jeffrey C. Hawken
    
	
 
    	
Name:
    	
Jeffrey   C. Hawken
    
	
 
    	
Its:
    	
Executive   Vice President & Senior Vice
    
	
 
    	
 
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   John T. Fucci
    
	
 
    	
Name:
    	
John   T. Fucci
    
	
 
    	
Its:
    	
Sr.   Vice President Asset Management
    
	
 
    	
 
    
	
 
    	
 
    
	
“TENANT”
    	
SPLUNK   INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Leonard R. Stein
    
	
 
    	
Name:
    	
Leonard   R. Stein
    
	
 
    	
Its:
    	
Senior   Vice President and General Counsel
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Godfrey Sullivan
    
	
 
    	
Name:
    	
/s/   Godfrey Sullivan
    
	
 
    	
Its:
    	
President &   CEO
    

 

7

 

EXHIBIT A

 

250 BRANNAN STREET

 

OUTLINE OF CURRENT PREMISES

 

 

A-1

 

EXHIBIT A-1

 

250 BRANNAN STREET

 

OUTLINE OF EXPANSION PREMISES

 

 

A-1-1

 

EXHIBIT B

 

250 BRANNAN STREET

 

WORK LETTER

 

This Work Letter shall set forth the terms and conditions relating to the construction of the tenant improvements in the Expansion Premises. All references in this Work Letter to Sections of “the Amendment” shall mean the relevant portions of Sections 1 through 12 of the First Amendment to which this Work Letter is attached as Exhibit B. All references in this Work Letter to Sections of “the Lease” shall mean the relevant portions of Articles I through XXVII of the Lease, as amended by the First Amendment. All references in this Work Letter to Sections of “this Work Letter” shall mean the relevant portions of Sections 1 through 5 of this Work Letter. “Work” shall refer to any work of improvement to be performed by Tenant contemplated in this Work Letter. Other capitalized terms used in this Work Letter and not defined herein shall have the meaning ascribed in the Lease, as amended.

 

SECTION 1

 

DELIVERY OF THE PREMISES AND BASE BUILDING

 

Upon the full execution and delivery of this Amendment by Landlord and Tenant, Landlord shall deliver the Expansion Premises and the “Base Building,” as that term is defined below, to Tenant, and Tenant shall accept the Expansion Premises and Base Building from Landlord in their presently existing, “as-is” condition (provided that the personal property of any prior tenant shall be removed from the Expansion Premises prior to the Effective Date). The “Base Building” shall include the structural portions of the Building, and the public restrooms, elevators, exit stairwells and the systems and equipment located in the internal core of the Building on the floor or floors on which the Expansion Premises is located. The “Base Building Plans” are the plans provided by Landlord to Tenant and its Architect and Engineers (as defined herein), covering the Base Building, with notations regarding any errors contained in such plans actually known to Landlord, which are delivered for the purposes of planning and design of the Improvements,

 

SECTION 2

 

IMPROVEMENTS

 

2.1           Improvement Allowance. Tenant shall be entitled to an improvement allowance in the amount of Six Hundred Forty-Two Thousand Four Hundred Fifty-Five and 00/100 Dollars ($642,455.00) (i.e., Twenty-Seven and 50/100 Dollars ($27.50) per rentable square foot of the Expansion Premises) (the “Improvement Allowance”) for (a) costs relating to the design and 

 

B-1

 

construction of the improvements affixed to the Premises, (b) electrical cabling and installation, network cabling and carpeting (collectively with subsection (a), the “Improvements”), (c) “soft costs” of the Improvements, and (d) subject to Section 2.2.1.5, below, furniture, fixtures and equipment to be acquired by Tenant for use in the Premises (“FF&E”). In no event shall Landlord be obligated to make disbursements pursuant to this Work Letter in the event that Tenant fails to pay any portion of the “Over-Allowance Amount,” as defined and required in Section 4.2.1 of this Work Letter, nor shall Landlord be obligated to pay a total amount which exceeds the Improvement Allowance. Notwithstanding the foregoing or any contrary provision of the Lease, as amended, the Improvements shall be deemed Landlord’s property under the terms of the Lease, as amended; provided, however, that the FF&E shall remain the property of Tenant, and shall be removed by Tenant from the Premises upon expiration of the Lease, as amended. Any unused portion of the Improvement Allowance remaining as of August 31, 2012, shall remain with Landlord and Tenant shall have no further right thereto.

 

 

2.2           Disbursement of the Improvement Allowance.

 

2.2.1        Improvement Allowance Items. Except as otherwise set forth in this Work Letter, the Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to the disbursement process described in this Work Letter, including, without limitation, Landlord’s receipt of invoices for all costs and fees described herein) only for the following items and costs (collectively the “Improvement Allowance Items”):

 

2.2.1.1     Payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Work Letter, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Work Letter, in an amount not to exceed Five Thousand Dollars ($5.000.00);

 

2.2.1.2     The payment of plan check, permit and license fees relating to construction of the Improvements;

 

2.2.1.3     The cost of construction of the Improvements, including, without limitation, Tenant’s testing and inspection costs, hoisting and trash removal costs at the rate customarily charged by Landlord for such additional services, and contractors’ fees and general conditions incurred by Tenant under the Contract (as defined below);

 

2.2.1.4     The cost of any changes in the Base Building when such changes are required by the Construction Drawings, such cost to include all direct architectural and/or engineering fees and expenses incurred by Tenant in connection therewith;

 

2.2.1.5     The costs of any FF&E acquired by Tenant, which costs shall, notwithstanding anything to the contrary contained in this Work Letter, not exceed an aggregate 

 

B-2

 

amount equal to Three and 00/100 Dollars ($3.00) per rentable square foot of the Expansion Premises;

 

2.2.1.6     The cost of any changes to the Construction Drawings or Improvements required by all applicable building codes (the “Code”);

 

2.2.1.7     The cost of the “Coordination Fee,” as that term is defined in Section 4.2.2.1 of this Work Letter; and

 

2.2.1.8     Sales and use taxes.

 

2.2.2        Disbursement of Improvement Allowance. During the construction of the Improvements, Landlord shall make monthly disbursements of the Improvement Allowance for Improvement Allowance Items and shall authorize the release of monies as follows.

 

2.2.2.1     Monthly Disbursements. On or before a day of each calendar month, as mutually agreed upon by Tenant and Landlord and designated to be the disbursement date (but no less than once per month), during the construction of the Improvements, Tenant shall deliver to Landlord: (i) a request for payment of the “Contractor,” as that term is defined in Section 4.1.1 of this Work Letter, approved by Tenant, in a form to be provided by Landlord and reasonably customary for such requests, showing the schedule, by trade, of percentage of completion of the Improvements in the Premises, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of “Tenant’s Agents,” as that term is defined in Section 4.1.2 of this Work Letter, for labor rendered and materials delivered to or FF&E purchased for the Premises; (iii) executed mechanic’s lien releases from all of Tenant’s Agents, which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requested by Landlord. Thereafter, Landlord shall, within thirty (30) days after the date of any such request, deliver a check to Tenant in payment of the lesser of (A) the amounts so requested by Tenant, as set forth in this Section 2.2.2.1, above, less a retention equal to ten percent (10%) of the total amount requested by Tenant for the relevant month (the aggregate amount of such retentions to be known as the “Final Retention”), and (B) the balance of any remaining available portion of the Improvement Allowance (not including the Final Retention), provided that (x) Landlord does not dispute any request for payment based on non-compliance of any work with the “Approved Working Drawings,” as that term is defined in Section 3.4 below, or due to any work that Landlord asserts is below the quality standard required under the Lease, as amended, or the Work Letter, or for any other reason permitted under this Work Letter, (y) Landlord shall, within the time period provided herein, pay any approved portion of the relevant request and only withhold payment for disputed items, and (z) Landlord shall deliver a writing to Tenant that states the amount of any disbursement request that is disapproved, and specifies the reason for any disapproval. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

 

B-3

 

2.2.2.2     Final Retention. Subject to the provisions of this Work Letter, a check for the Final Retention payable to Tenant shall be delivered by Landlord to Tenant following the completion of construction of the Premises, provided that (i) Tenant delivers to Landlord properly executed mechanic’s lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4), (ii) Landlord has reasonably determined that no work exists that is below the quality standard required under the Lease or Work Letter, or which materially adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building, or any other tenant’s use of such other tenant’s leased premises in the Building, and (iii) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Improvements in the Premises has been substantially completed.

 

2.2.2.3     Other Terms. Landlord shall only be obligated to make disbursements from the Improvement Allowance to the extent costs are incurred by Tenant for Improvement Allowance Items pursuant to Section 2.1 hereof.

 

2.3           Building Standards. Landlord has established specifications for certain Building standard components to be used in the construction of the Improvements in the Premises, which specifications are attached hereto as Schedule X (collectively, the “Building Standard Documents”). The quality of Improvements shall be equal to or of greater quality than the quality specified in the Building Standard Documents. Landlord may make reasonable changes to the Building Standard Documents from time to time, and shall promptly communicate such changes in writing to Tenant, and Tenant will comply with any changes if (a) such changes do not require a change to any Approved Working Drawings; (b) such changes do not increase the cost of the Improvements from the cost under the Building Standard Documents prior to the change, and does not require Tenant to incur any other additional costs, such as cancellation fees, change order fees or additional Landlord fees or costs; and (c) any such change does not result in a delay in completion of the Improvements. Removal requirements for the Improvements are addressed in Section 9.4 of the Lease; provided, however, that notwithstanding anything to the contrary contained in Section 9.4, in no event shall Tenant be required to remove any Improvements that are approved by Landlord as part of the Final Working Drawings (as defined below).

 

SECTION 3

 

CONSTRUCTION DRAWINGS

 

3.1           Selection of Architect/Construction Drawings.  Tenant shall retain an architect/space planner reasonably approved in advance by Landlord (the “Architect”) to prepare the “Construction Drawings,” as that term is defined in this Section 3.1. Tenant shall retain the engineering consultants reasonably approved in advance by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing and HVAC work in the 

 

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Premises, which work is not part of the Base Building. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall be subject to Landlord’s reasonable approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the Base Building Plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for Landlord’s sole purpose and shall not imply Landlord’s review of the same for the benefit of any other person, including, without limitation, Tenant, Architect, or Contractor, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant’s waiver and indemnity set forth in the Lease shall specifically apply to the Construction Drawings.

 

3.2           Final Space Plan. Tenant shall supply Landlord with one (1) hard copy signed by Tenant of its final space plan for the Premises before any architectural working drawings or engineering drawings have been commenced, and concurrently with Tenant’s delivery of such hard copy, Tenant shall send to Landlord via electronic mail one (1) .pdf electronic copy of such final space plan. The final space plan (the “Final Space Plan”) shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and fixtures to be contained therein. Landlord may request clarification or more specific drawings for special use items not included in the Final Space Plan to the extent the Final Space Plan does not, in Landlord’s judgment, fully describe such items in reasonable detail. Landlord shall advise Tenant within five (5) business days after Landlord’s receipt of the Final Space Plan for the Premises if the same is unsatisfactory or incomplete in any respect in Landlord’s reasonable judgment, provided Landlord will specify any objections in writing and in reasonable detail. If Tenant is so advised, Tenant shall promptly cause the Final Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require, and Landlord thereafter will have five (5) business days after each revised draft is delivered to Landlord to respond with any further reasonable objections, provided all objections will be specified in writing and in reasonable detail.

 

3.3           Final Working Drawings. After the Final Space Plan has been approved by Landlord, Tenant shall supply the Engineers with a complete listing of standard and non-standard equipment and specifications, including, without limitation, B.T.U. calculations, electrical requirements and special electrical receptacle requirements for the Premises, to enable the Engineers and the Architect to complete the “Final Working Drawings” (as that term is defined below) in the manner as set forth below. Upon the approval of the Final Space Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers to complete the architectural and engineering drawings for the 

 

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Premises, and Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to complete the work and to obtain all applicable permits (collectively, the “Final Working Drawings”) and shall submit the same to Landlord for Landlord’s reasonable approval. Tenant shall supply Landlord with one (1) hard copy signed by Tenant of the Final Working Drawings, and concurrently with Tenant’s delivery of such hard copy, Tenant shall send to Landlord via electronic mail one (1) .pdf electronic copy of such Final Working Drawings. Landlord shall advise Tenant within ten (10) business days after Landlord’s receipt of the Final Working Drawings for the Premises if the same is unsatisfactory or incomplete in any respect in the reasonable judgment of Landlord, provided Landlord will specify any objections in writing and in reasonable detail. If Tenant is so advised, Tenant shall promptly cause the Final Working Drawings to be revised to correct any deficiencies or other matters Landlord may reasonably require. Landlord will thereafter have five (5) business days after each revised draft is delivered to Landlord to respond with any further reasonable objections, provided all objections will be specified in writing and in reasonable detail. If the Final Working Drawings or any amendment thereof or supplement thereto shall require alterations in the Base Building, and if Landlord in its sole and exclusive discretion agrees to any such alterations, and notifies Tenant of the need and cost for such alterations, then Tenant shall pay the cost of such required changes as part of the Work, provided the Improvement Allowance may be applied to the cost of such alterations.

 

3.4           Approved Working Drawings. Landlord shall approve the Final Working Drawings prior to the commencement of construction of the Premises by Tenant (as so approved, the “Approved Working Drawings”), Tenant may then submit the Approved Working Drawings to the appropriate municipal authorities for all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that obtaining the same shall be Tenant’s responsibility. Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any permit or certificate of occupancy as required to substantially complete the Improvements. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent may not be unreasonably withheld.

 

3.5           Electronic Approvals. Notwithstanding any provision to the contrary contained in the Lease, as amended, or this Work Letter, Landlord may, in Landlord’s sole and absolute discretion, transmit or otherwise deliver any of the approvals required under this Work Letter via electronic mail to Tenant’s representative identified in Section 5.1 of this Work Letter, or by any of the other means identified in Article XXIV of the Lease.

 

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SECTION 4

 

CONSTRUCTION OF THE IMPROVEMENTS

 

4.1           Tenant’s Selection of Contractors.

 

4.1.1        The Contractor. A general contractor shall be retained by Tenant to construct the Improvements. Such general contractor (“Contractor”) shall be selected by Tenant from a list of general contractors supplied by Landlord, and Tenant shall deliver to Landlord notice of its selection of the Contractor upon such selection.

 

4.1.2        Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers used by Tenant in connection with the Improvements (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed. If Landlord does not approve any of Tenant’s proposed subcontractors, laborers, materialmen or suppliers, Tenant shall submit other proposed subcontractors, laborers, materialmen or suppliers for Landlord’s written approval. If Landlord disapproves of any of Tenant’s Agents, Landlord will specify the reason for any disapproval in writing. The designation of any subcontractors, laborers, materialmen, suppliers, or the Contractor as Tenant’s Agents will not be deemed to imply the existence of an agency relationship between Tenant and any such Tenant’s Agent, which relationship shall be and remain that of contractor or subcontractor, in accordance with the relevant contract documents.

 

4.2           Construction of Improvements by Tenant’s Agents.

 

4.2.1        Construction Contract; Cost Budget. Tenant shall engage the Contractor under a fixed price contract reasonably acceptable to Tenant, Contractor and Landlord (the “Contract”). Landlord’s approval of any proposed contract shall not be unreasonably withheld or delayed, and if Landlord objects to any Contract submitted for approval by Landlord, Landlord shall specify the reason for any disapproval in writing, within five (5) business days after such contract is submitted for approval by Tenant. Prior to the commencement of the construction of the Improvements, Tenant shall provide Landlord with a reasonably detailed breakdown, by trade, of the final costs to be incurred or which have been incurred, as set forth more particularly in Sections 2.2.1.1 through 2.2.1.8, above, in connection with the design and construction of the Improvements to be performed by or at the direction of Tenant or the Contractor, which costs shall form a basis for the amount of the Contract (the “Final Costs”). Prior to the commencement of construction of the Improvements, Tenant shall supply Landlord with cash in an amount (the “Over-Allowance Amount”) equal to the difference between the amount of the Final Costs and the amount of the Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the commencement of construction of the Improvements). The Over-Allowance Amount shall be disbursed by Landlord on a pro-rata basis along with any of the then remaining portion of the Improvement Allowance, and such disbursement shall be pursuant to the 

 

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same procedure as the Improvement Allowance. In the event that, after the Final Costs have been delivered by Tenant to Landlord, the costs relating to the design and construction of the Improvements shall change, any additional costs necessary to such design and construction in excess of the Final Costs, shall be paid by Tenant to Landlord within one (1) business day after written demand by Landlord, as an addition to the Over-Allowance Amount or at Landlord’s option, Tenant shall make payments for such additional costs out of its own funds, but Tenant shall continue to provide Landlord with the documents described in Sections 2.2.2.1(i), (ii), (iii) and (iv), of this Work Letter, above, for Landlord’s approval, prior to Tenant paying such costs.

 

4.2.2        Tenant’s Agents.

 

4.2.2.1     Landlord’s General Conditions for Tenant’s Agents and Improvement Work. Tenant’s and Tenant’s Agent’s construction of the Improvements shall comply with the following: (i) the Improvements shall be constructed in substantial accordance with the Approved Working Drawings; (ii) Tenant’s Agents shall submit schedules of all work relating to the Improvements to Contractor and Contractor shall, within five (5) business days of receipt thereof, inform Tenant’s Agents of any changes which are necessary thereto, and Tenant shall use commercially reasonable efforts to cause Tenant’s Agents to adhere to any approved schedule; and (iii) Tenant shall abide by all rules made by Landlord’s Building manager with respect to the use of freight, loading dock and service elevators, storage of materials, coordination of work with the contractors of other tenants, and any other matter in connection with this Work Letter, including, without limitation, the construction of the Improvements. Tenant shall pay a logistical coordination fee (the “Coordination Fee”) to Landlord in an amount equal to three percent (3%) of the “hard costs” of the Improvements, which Coordination Fee shall be Landlord’s sole compensation for services relating to the coordination of the construction of the Improvements. The Coordination Fee shall be paid from the Improvement Allowance. Tenant shall not be charged for the use of freight elevators, security access to loading docks or for utilities or temporary HVAC in the Expansion Premises prior to the Expansion Term Commencement Date, if use of such facilities and/or services is required for the Improvements.

 

4.2.2.2     Indemnity. Tenant’s indemnity of Landlord as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant’s non-payment of any amount arising out of the Improvements and/or Tenant’s disapproval of all or any portion of any request for payment. Such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord’s performance of any ministerial acts reasonably necessary (i) to permit Tenant to complete the Improvements, and (ii) to enable Tenant to obtain any building permit or certificate of occupancy for the Premises, except to the extent such losses are caused by Landlord’s gross negligence or willful misconduct.

 

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4.2.2.3     Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Tenant and Landlord that the portion of the Improvements for which such Tenant’s Agent is responsible shall be free from any defects in workmanship and materials for such period and on such terms as may be customary for similar subcontractors or trades performing work in first class office buildings in the Comparable Area (as defined in Exhibit C). All such warranties or guarantees as to materials or workmanship of or with respect to the Improvements shall be contained in the Contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect any right of direct enforcement if required to enforce such warranty.

 

4.2.2.4     Insurance Requirements.

 

4.2.2.4.1      General Coverages. All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in the Lease.

 

4.2.2.4.2      Special Coverages. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Improvements, and such other insurance as Landlord may require, it being understood and agreed that the Improvements shall be insured by Tenant pursuant to the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord including, but not limited to, the requirement that all of Tenant’s Agents shall carry excess liability and Products and Completed Operation Coverage insurance, each in such amounts as may be reasonably approved by Landlord, in form and with companies as are required to be carried by Tenant as set forth in the Lease.

 

4.2.2.4.3      General Terms. Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the Improvements and before the Contractor’s equipment is moved onto the site. All such certificates must indicate that the relevant policy contains a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance for a period of one year following the issuance of any such certificate. In the event that the Improvements are damaged by any cause during the course of the construction thereof, Tenant shall promptly repair the same at Tenant’s sole cost and expense, provided that any resulting delay shall be a Force Majeure Delay if the damage results from any of the causes enumerated in Section 4.4.1 below. Tenant’s Agents shall maintain all of the foregoing insurance coverage in force until the Improvements are fully completed and accepted by Landlord, except for any Products and Completed Operation Coverage insurance required by Landlord, which is to be maintained for ten (10) years following completion of the work and acceptance by Landlord 

 

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and Tenant. All policies carried under this Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear, as well as Contractor and Tenant’s Agents. All insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects the owner (Landlord) and that any other insurance maintained by owner (Landlord) is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.2.2.2 of this Work Letter.

 

4.2.3        Governmental Compliance. The Improvements shall comply in all respects with the following: (i) Code and other state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material manufacturer’s specifications.

 

4.2.4        Inspection by Landlord. Landlord shall have the right to inspect the Improvements upon prior written notice of at least one (1) business day, provided however, that Landlord’s failure to inspect the Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the Improvements constitute Landlord’s approval of the same. Should Landlord disapprove any portion of the Improvements, Landlord shall notify Tenant in writing of the disapproved items and shall specify the reasons for such disapproval. Any defects or deviations in, and/or disapproval by Landlord of, the Improvements in accordance with the foregoing shall be rectified by Tenant at no expense to Landlord, provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Improvements and such defect, deviation or matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any other tenant’s use of such other tenant’s leased premises, Landlord may, after five (5) business days’ prior written notice of such matter to Tenant, take such action as Landlord deems reasonably necessary, at Tenant’s expense and without incurring any liability on Landlord’s part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Improvements until such time as the defect, deviation and/or matter is corrected to Landlord’s reasonable satisfaction. Tenant will pay any costs incurred by Landlord in compliance with the foregoing within ten (10) business days after it receives an invoice therefor.

 

4.2.5        Meetings. Commencing upon the execution of this First Amendment, Tenant shall hold at least hi-weekly meetings at a reasonable time, with the Architect and the Contractor regarding the progress of the preparation of Construction Drawings and the construction of the Improvements, which meetings shall be held at a location in the Building designated by Landlord,

 

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and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings, and, upon Landlord’s request, Tenant shall use commercially reasonable efforts to cause any of Tenant’s Agents reasonably required for any review to attend such meetings. If request is made by Landlord before any meeting commences, a person attending the meeting shall be designated to take minutes, and minutes shall be taken at such meeting, a copy of which minutes shall be promptly delivered to Landlord. One such meeting each month shall include the review of any current request for payment submitted by Tenant, but the foregoing will not be deemed to extend any period provided herein for payment of such request, so long as Tenant has acted in compliance with this section in scheduling any meetings.

 

4.3           Notice of Completion; Copy of Record Set of Plans. Within ten (10) days after completion of Substantial Completion of the Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the conclusion of construction, (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to certify to the best of their knowledge that the “record-set” of as-built drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (C) to deliver to Landlord two (2) sets of copies of such record set of drawings in CAD format within ninety (90) days following issuance of a certificate of occupancy for the Premises, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, fixtures and systems in the Premises to the extent not previously provided.

 

4.4           Delay of Expansion Term Commencement Date.

 

4.4.1        Delays in Expansion Term Commencement Date. The Expansion Term Commencement Date set forth in Section 3 of the Amendment shall be extended by the number of days of delay of the “Substantial Completion of the Improvements” (as defined in Section 4.4.3 below) in the Premises to the extent caused by a “Commencement Date Delay” (as defined below), but only to the extent such Commencement Date Delay causes the Substantial Completion of the Improvements in the Premises to occur after the Expansion Term Commencement Date. As used herein, the term “Commencement Date Delay” shall mean only a “Force Majeure Delay” or a “Landlord Caused Delay,” as those terms are defined below in this Section 4.4.1. As used herein, the term “Force Majeure Delay” shall mean only an actual delay resulting from fire, earthquake, strikes, explosion, flood, hurricane, the elements, acts of God or the public enemy, war, invasion, insurrection, rebellion, or riots. As used herein, the term “Landlord Caused Delay” shall mean actual delays to the extent resulting from the acts or omissions of Landlord including, but not limited to (i) failure of Landlord to timely approve or disapprove any Construction Drawings; (ii) material 

 

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interference by Landlord, its agents, employees or contractors (except as otherwise allowed under this Work Letter) with the Substantial Completion of the Improvements in the Premises, and which objectively precludes or delays the construction of tenant improvements in the Building by any person, which interference relates to access by Tenant, or Tenant’s Agents to the Building or any Building facilities (including loading docks and freight elevators) or service (including temporary power and parking areas as provided herein) during normal construction hours, or the use thereof during normal construction hours; (iii) delays due to the acts or failures to act of Landlord or its agents, employees or contractors with respect to payment of the Improvement Allowance (except as otherwise allowed under this Work Letter); and (iv) delays due to Landlord’s failure to deliver the Expansion Premises to Tenant on the Effective Date.

 

4.4.2        Determination of Commencement Date Delay. If Tenant contends that a Commencement Date Delay has occurred, Tenant shall notify Landlord in writing of the event which constitutes such Commencement Date Delay, within five (5) business days after the occurrence of the relevant Commencement Date Delay. If such action, inaction or circumstance described in such notice (the “Delay Notice”) is not cured by Landlord within two (2) business days of Landlord’s receipt of the Delay Notice and if such action, inaction or circumstance otherwise qualifies as a Commencement Date Delay, then a Commencement Date Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the date such delay ends.

 

4.4.3        Definition of Substantial Completion of the Improvements. “Substantial Completion of the Improvements” shall mean completion of construction of the Improvements in the Premises pursuant to the Approved Working Drawings, with the exception of any tenant workstations and punch list items, and approval of such work as required by the relevant local authorities, including, without limitation, issuance of a temporary certificate of occupancy subject only to customary conditions that permits legal, safe occupancy of the Premises, in accordance with applicable law.

 

SECTION 5

 

MISCELLANEOUS

 

5.1           Tenant’s Representative. Tenant has designated George Yoshinaga as its sole representative with respect to the matters set forth in this Work Letter (whose e-mail address for the purposes of this Work Letter is gyy@splunk.com), who shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter.

 

5.2           Landlord’s Representative. Landlord has designated Lauren Phillips as its sole representative with respect to the matters set forth in this Work Letter (whose e-mail address for the purposes of this Work Letter is 1phillips@kilroyrealty.com), who, until further notice to Tenant, 

 

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shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter.

 

5.3           Time of the Essence in This Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall be repeated until the document is approved by Landlord. If any period provided herein would fall on a weekend, legal holiday or other day that is not a business day, such period will be extended to the next business day following such weekend, legal holiday or non-business day.

 

5.4           Tenant’s Lease Default. Notwithstanding any provision to the contrary contained in the Lease, as amended, or this Work Letter, if any Event of Default occurs under the Lease, as amended, or under this Work Letter (including, without limitation, any failure by Tenant to fund any portion of the Over-Allowance Amount) occurs at any time on or before the Substantial Completion of the Improvements, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, as amended, Landlord shall have the right to withhold payment of all or any portion of the Improvement Allowance and/or Landlord may, without any liability whatsoever, cause the cessation of construction of the Improvements (in which case, Tenant shall be responsible for any delay in the Substantial Completion of the Improvements and any costs occasioned thereby), and (ii) all other obligations of Landlord under the terms of the Lease and this Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease, as amended.

 

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SCHEDULE X

 

BUILDING STANDARD DOCUMENTS

 

See Attached.

 

 

 

250 Brannan Street

San Francisco, CA

 

MINIMUM BUILDING STANDARD TENANT IMPROVEMENT SPECIFICATIONS

 

STANDARD PARTITIONS

 

DEMISING PARTITION

 

a.                                       3-5/8” x 20 gauge metal studs @ 16” on center.

b.                                      1 layer each side 5/8” thick type ‘x’ gypsum wallboard.

c.                                       Height from floor slab to underside of structure above.

d.                                      Rh batt sound insulation in partition cavity.

e.                                       Partition taped and sanded smooth to a minimum of Level 4 finish to receive paint.

f.                                         Fire caulk @ partition and metal deck and at any penetrations as required by City of San Francisco. (Fill deck flutes voids to achieve one (1) hour fire rating as required by code).

g.                                      Provide openings above ceiling with sound boots as required, for return air as required by mechanical engineering and applicable code.

 

INTERIOR PARTITION

 

a.                                       2-1/2” x 25 gauge metal studs @ 24” on center.

b.                                      1 layer each side 5/8” thick type ‘x’ gypsum wallboard.

c.                                       From floor slab to underside of ceiling grids as applicable.

d.                                     Wall Bracing: 2-1/2” x 25 gauge metal studs at 45 degree diagonal to structure above staggered @ 4’-0” on center or as required by code and at door openings.

e.                                       Partition taped and sanded smooth to a minimum of Level 4 finish.

f.                                         Metal corner bead at terminations of partitions and at the ceiling.

 

INTERIOR ONE-HOUR SEPARATION PARTITION

 

a.                                       3-5/8” x 20 gauge metal studs © 16” on center.

b.                                      1 layer each side 5/8” thick type ‘x’ gypsum wallboard.

c.                                       From floor slab to underside of structure above.

h.                                      R11 haft sound insulation in partition cavity.

e.                                       Partition taped and sanded smooth to a minimum of Level 4 finish to receive paint.

f.                                         Fire tape and fire caulk connections between partition, slab and deck as required.

g.                                      Provide Fire dampers as required for penetrations and return air.

 

INTERIOR LOW PARTITION

 

a.                                       2-1/2” x 25 gauge metal studs @ 16” on center.

b.                                      1 layer each side and top 5/8” thick type ‘x’ gypsum wallboard.

c.                                       Heights vary to maximum allowed by code.

d.                                      Metal corner beads at all exposed corners.

 

 

e.                                       Partition taped and sanded smooth to receive paint to a minimum of Level 4 finish.

f.                                         Pipe support at free end within partition cavity and every 4’ on center.

 

COLUMN FURRING

 

a.                                       2-1/2” x 25 gauge metal studs @ 24” on center.

b.                                      1 layer one side 5/8” thick type ‘x’ gypsum wallboard.

c.                                       Height from floor slab to 6” above ceiling grid or to deck above.

d.                                      Partition taped and sanded smooth to a minimum of Level 4 finish to receive paint.

 

FURRING AT PERIMETER

 

a.                                       Below glazing sill and above glazing head, 1 layer 5/8” thick type ‘x’ gypsum wallboard.

b.                                      Taped and sanded smooth to a minimum of Level 4 finish to receive paint.

c.                                       Gypsum wallboard to finish flush with face of mullion.

 

WALL TERMINATION AT MULLION

 

a.                                       Install partition-end to die into closest mullion, not directly to glazing.

b.                                      Dog-leg or similar design may be used.

c.                                       No false mullions.

d.                                      Partition walls require Neoprene or similar seal and caps at glazing mullions.

 

DOORS, FRAMES AND HARDWARE

 

SINGLE CORRIDOR DOOR AND HARDWARE

 

a.                                       Single leaf U.L. rated, 20-minute suite entry door. Label attached to hinge side of door, 1-3/4” x 3`-0” x 8’-2”, solid core wood, 7 ply red oak veneer, plain sliced, clear finish and premium grade.

b.                                      Door shall be pre-finished and pre-mortised for hardware.

c.                                       Door shall be pre-bored to accept optional electrified hardware.

d.                                      Frame: 3’-0” x 8’-2” RACO (or equal approved by management for manufacturer/supplier of ACI Frames) extruded aluminum frames, with White DURALQ paint anodized finish, 20-minute fire rated.

e.                                       Hardware:

 

·                  Lockset: Schlage L9000 Series with B LG Rose, finish 625 polished chrome.

·                  Lever and Trim: Schlage L9000-03 Series, finish 625 polished chrome,

·                  Cylinders: Schlage cylinder: North Tower keyway 1457, South Tower keyway 1458.

·                  Hinges: Stanley, FBB179, 4.5, finish 625 Polished Chrome.

·                  Closer: Norton 7500 series regular Arm non-hold open 689 Aluminum.

·                  Stop: Wall Mount Ives WS 406-26. Floor Mount Ives FS 436 26 (low) FS 438-26 (high)

·                  Smoke Seals: Smoke Seal to be provided by the door frame manufacturer.

 

Substitutions of equal hardware shall be subject to approved by landlord

 

DOUBLE CORRIDOR DOOR AND HARDWARE

 

a.                                       Double leaf U.L. rated 20-minute suite entry doors. Label attached to hinge side of doors, 1-3/4” x 6’-0” x 8’-2” solid core wood, 7 ply red oak veneer, plain sliced finish and premium grade.

b.                                      Matching veneer at vertical edges.

c.                                       Door shall be pre-finished and mortised for hardware.

d.                                      Door shall be pre-bored to accept optional electrified hardware.

 

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e.                                       Frame: 6`411” x 8’-2”, RACO (or equal approved by management for manufacturer/supplier of ACI Frames) extruded aluminum frames, with White DURALQ paint anodized finish, 20-minute fire rated.

f.                                         Hardware:

 

·                  Lockset: Schlage L9000 Series with B LG Rose, finish 625 polished chrome.

·                  Lever and Trim: Schlage L9000-03 Series, finish 625 polished chrome.

·                  Cylinders: Schlage cylinder: North Tower keyway 1457, South Tower keyway 1458.

·                  Hinges: Stanley, FBB179, 4.5, finish 625 Polished Chrome.

·                  Closer: Norton 7500 series regular Arm non-hold open 689 Aluminum.

·                  Stop: Wall Mount Ives WS 406-26. Floor Mount Ives FS 436 26 (low) FS 438-26 (high)

·                  Smoke Seals: Smoke Seal to be provided by the door frame manufacturer.

·                  Auto Flush Bolt: Glynn-Johnson FB31 Polished Chrome

·                  Coordinator: Ingersoll-Rand Aluminum Finish.

·                  Astragal: Pemko 355, Aluminum finish

 

Substitutions of equal hardware shall be subject to approved by landlord

 

SINGLE INTERIOR DOOR AND HARDWARE

 

a.                                       Single leaf 1-3/4” x 3’-0” x 8’-2”, solid core wood, 7 ply red oak veneer, plain sliced, clear finish and premium grade.

b.                                      Door shall be prefinished and mortised for hardware.

c.                                       Frame: 3-0” x 8’-2”, RACO (or equal approved by management for manufacturer/supplier of ACI Frames) extruded aluminum frames, with White DURALQ paint anodized finish, 20-minute fire rated.

d.                                      Hardware

 

·                  Lockset: Schlage L9000 Series with B LG Rose, finish 625 polished chrome.

·                  Lever and Trim: Schlage L9000-03 Series, finish 625 polished chrome.

·                  Cylinders: Schlage cylinder: North Tower keyway 1457, South Tower keyway 1458,

·                  Hinges: Stanley, FBB179, 4.5, finish 625 polished chrome.

·                  Closer: Norton 7500 series regular Arm non-hold open 689 Aluminum.

·                  Stop: Wall Mount Ives WS 406-26. Floor Mount Ives FS 436 26 (low) FS 438-26 (high)

·                  Smoke Seals: Smoke Seal to be provided by the door frame manufacturer.

 

Substitutions of equal hardware shall be subject to approved by landlord

 

DOUBLE INTERIOR DOOR AND HARDWARE

 

a.                                       Double leaf, 1-3/4” x 3`-0” x 8’-2”, solid core wood, 7 ply red oak veneer, plain sliced, clear finish and premium grade. 20-minute fire rated.

b.                                      Match face veneers of doors. Matching veneer at vertical edges.

c.                                       Door shall be prefinished and mortised for hardware.

d.                                      Frame:    6’-0” x 8’-2”, RACO (or equal approved by management for manufacturer/supplier of ACI Frames) extruded aluminum frames, with White DURALQ paint anodized finish, 20-minute fire rated.

e.                                       Hardware

 

·                  Lockset: Schlage L9000 Series with B LG Rose, finish 625 polished chrome.

·                  Lever and Trim: Schlage L9000-03 Series, finish 625 polished chrome.

·                  Cylinders: Schlage cylinder: North Tower keyway 1457, South Tower keyway 1458.

·                  Hinges: Stanley, FBB179, 4.5, finish 625 polished chrome.

·                  Closer: Norton 7500 series regular Arm non-hold open 689 Aluminum.

·                  Stop: Wall Mount Ives WS 406-26. Floor Mount Ives FS 436 26 (low) FS 438-26 (high)

·                  Smoke Seals: Smoke Seal to be provided by the door frame manufacturer.

 

3

 

·                  Auto Flush Bolt: Glynn-Johnson FB31 Polished Chrome

·                  Coordinator: Ingersoll-Rand Aluminum Finish.

·                  Astragal: ‘Pemko’ 355, Aluminum finish

 

Substitutions of equal hardware shall be subject to approved by landlord

 

OPTIONAL DOORS AS APPROVED BY LANDLORD

 

Optional Doors as Selected by the Tenant for the tenant’s interior space may be submitted and subject to Landlord’s Approval

 

ACOUSTICAL CEILING

 

·                  2’ x 2’ USG Fine Line 9/16” bolt slot system with 1/4” reveals.

·                  2’ x 2’ Armstrong, Dune 1775 white

·                  Installed Seismic, Compression Posts, and Splay wiring requires as per code.

·                  Access tiles as required for repair and maintenance of all mechanical equipment.  Coded pin colors by equipment type, T.B.S

 

ELECTRICAL SYSTEMS

 

The main base building electrical service consists of a 277/480 Volt 3 Phase, 4 Wire, 4000 amps, Main Switch board located within an electrical room for each tower. House panel meter, distribution, and sub panel function for core improvement only.

 

Distribution within the tenant suites shall be modified as a part of the Tenant Improvements and part of the tenant improvement allowance.

 

Tenant Improvement distribution shall include all necessary distribution boards, transformers and sub panels, engineered and designed for both lighting and convenience power as required by tenants demand in compliance with California Title 24.

 

Low Voltage (Telephone/Data Cabling) ;

 

·                  Teflon coated in plenum space

·                  Cabling to be bundled, sleeved and sealed at firewalls and Independently supported per code.

 

Tenant installed lighting and controls shall be installed in compliance with California Title 24.

 

LIGHT FIXTURES

 

·                  Recessed Avante direct/ indirect 2x4 (2) lamp Fluorescent

 

·                  T-8 lamps with Electronic Ballasts

·                  Lamps: F32T8/TL835/ALTO

·                  Color 741-3500K (cool white)

 

·                  Recessed Avante direct I indirect2x2 (2) lamp Fluorescent Fixture

 

·                  T-8 lamps with Electronic Ballasts

·                  Lamp F32/TL835/ALTO

·                  Color 741-3500K (cool white)

 

4

 

·                  Tenant may elect to use additional alternate Architectural Lighting subject to Landlords Approval of Plans and Specs.

 

LIGHT CONTROL

 

·                  All new lighting work shall be tied into and coordinated with the buildings lighting control panels.

·                  Subject to Landlord’s review and approval dimmable ballast may be Incorporated in the Tenant lighting systems.  Dimmable fixtures shall be coordinated with and tied into the building lighting controls as required.

 

ELECTRICAL WALL OUTLET

 

·                  Specification Grade, Leviton 20A, 120V, single pull switch.

·                  White.

·                  Mounted vertically.

·                  Outlet height at 15” above finish floor to centerline of outlet U.O.N. as required for ADA compliance.

 

TELEPHONE WALL OUTLET

 

·                  Mud ring cut into wall - mounted vertically.

·                  3/4” metal conduit stub above ceiling with 6” pigtail at top of wall.

·                  Cover plate and wiring by Tenant’s telephone vendor.

 

EXIT SIGN LIGHTS

 

·                  Lithonia LRP-1-GC-RA -LED recessed architectural edge lit exit sign or double face, two (2) circuit 277 volt.

·                  Housing trim with white finish.

 

FIRE/LIFE SAFETY

 

All Life/Safety components shall be furnished and installed by the Landlords proprietary Life/Safety contractor:

 

Sabah International

Matt Ramesy

925-734-5754

 

Fire Extinguisher:

 

·                  Larsen Extinguisher Cabinet Fully Recessed, Architectural Series Vertical Duo Door. Brushed Stainless Steel #304

·                  Extinguisher: ABC Type B.C. Size B 10Lb.

 

AUTOMATIC FIRE SPRINKLERS

 

Fire sprinkler design & installation in accordance with U.B.C., NFPA 13 (1999 ed.) standards and San Francisco fire & life safety published requirements.

 

Sprinklers: drops to be included in Tenant Improvement allowanceCentral GBEC-20’s with escutcheon.

 

5

 

HEATING, VENTILATION AND AIR CONDITIONING:

 

THE TENANT HVAC SYSTEM SHALL BE designed to meet California Title 24 Energy standards.

 

The tenant HVAC system shall be designed to comply with California Quality Standards Section 118.

 

All new tenant HVAC system shall meet or exceed California Energy Efficiency Standards Sections 111-113-115 and 120 through 129.

 

All new tenant automatic controls shall comply with California Energy Efficiency Standards Sections 112 and 122.

 

The Heating, Ventilating & Air Conditioning system consists of a central plant HVAC system that is pneumatically controlled with VAV mixing boxes and perimeter reheat coils.

 

All Zones shall be conditioned and heated by Water Source Heat Pumps as manufactured by Mammoth and relocated and/or installed as part of the tenant improvements.

 

Water Source Heat Pumps shall be sized as required to meet ASHREA standards and equipped with Vibration Isolators, Balancing Valves, Strainers, Flow Controls and Shut Off Valves.

 

TENANT AIR DISTRIBUTION:

 

The sheet metal ducts will all be designed and installed In accordance with ASHRAE and SMACNA recommendations.

 

Controls:

 

Thermostats: Johnson Controls

Interior Zones T-4002 and Exterior Zones T-4054

 

Hot water control valves: Johnson Controls V-3000-1 Diaphragm Activator.

 

VAV Boxes: Kruger Manufacturer ESV 3000 Series with perimeter Reheat Coil. Two rows of coils required

 

Heat Pumps: Mammoth ( water source ONLY).

 

Condenser Water Pumps: Bell and Gosset Manufacturer.Series 1550 Multi- Stage Centrifugal Pump.

 

Ductwork: Medium Pressure ductwork- No snap locks or adjustable elbows no conical taps at main ductwork.

 

Downstream to VAV Boxes: four (4’) feet of ductwork with 1” sound liner or base building standard fiberglass ductboard.

 

All Metal Supply and Return Ducts to be wrapped with 1 1/2” foil faced duct wrap.

 

Connection at Air Outlet to be made with flex wire no more than 5 Ft long

 

Registers: Titus 4-way directional

 

6

 

 

Exhaust Fans: Penn TDA with speed controllers

 

Independent Pre-Air Balance required for close out packages for construction

 

·                  To determine the exact main air quantities available for design

·                  To verify the operation of all VAV boxes

·                  To check and repair controllers, actuators and thermostats

 

Fire and smoke dampers shall be provided per code.

 

Diffusers will be any one of the following as selected by Landlords Architect:

 

·                  Architectural air-bar linear diffusers

·                  Light troffer diffuser

·                  Lay-in tile ceiling diffusers

 

PLUMBING

 

Core Plumbing provided shall include all fixtures, trim, piping and accessories as required for the Core Improvements.

 

T.I. Plumbing hot and cold water, waste lines accessible from core areas and shall meet minimum code requirements.

 

FINISHES

 

PAINT

 

·                  Three coats of eggshell finish by Benjamin Moore Eco-Spec or other approved low VOC.

·                  Wall Paneling and Other Wall Coverings as selected by tenant subject to Landlords approval.

 

FLOOR COVERING

 

·                  Carpet, Atlas cut pile “Vancouver”. Other Premium grade available but subject to landlord review.

·                  Carpets or carpet tile as selected by tenant subject to landlord approval.

·                  Direct glue down installation for all carpet.

·                  VCT Armstrong, standard excelon, 12”x 12” Vinyl Tile or approved equal, colors to be selected from a standard color chart. Clean after installation and seal with high quality floor finish according to manufacturers printed directions for commercial traffic.

 

·                  Premium Grade Wood Floors subject to landlords approval

·                  Premium Grade Tile Floors subject to Landlords approval

 

RUBBER BASE

 

·                  Rubber Base Roppe or equivalent 4” straight at carpet and coved at hard surface flooring.

·                  Wood Base subject to Landlords approval.

·                  Tile or Slate Base subject to Landlords approval.

 

7

 

PLASTIC LAMINATE

 

·                  Formica or WilsonArt.

·                  Other plastic laminates as selected by tenant subject to Landlords approval

 

WINDOW COVERINGS

 

Vertical Blinds: Perforated Ivory 3 1/2” by Louverdrape. Header to match mullion.

 

NOTES

 

Landlord can substitute like quality materials. Where more than one (1) type of material or structure is available, the selection will be at Landlord’s option, provided that such selection does not increase the cost of such material or fixture.

 

8

 

EXHIBIT C

 

250 BRANNAN STREET

 

MARKET RENT DETERMINATION FACTORS

 

When determining Market Rent, the following rules and instructions shall be followed.

 

1.             RELEVANT FACTORS. The “Comparable Transactions” shall be the “Net Equivalent Lease Rates” per rentable square foot, at which tenants, are, pursuant to transactions consummated within twelve (12) months prior to the commencement of the First Offer Space Lease Term, leasing non-sublease, non-encumbered space comparable in location and quality to the First Offer Space containing a square footage comparable to that of the First Offer Space for a term of five (5) years, in an arm’s-length transaction, which comparable space is located in the “Comparable Buildings,” provided, however, the concessions applicable to such Comparable Transactions having terms of five (5) years shall be appropriately prorated on a fractional basis to account for the shorter or longer term of Tenant’s lease of the First Offer Space for the First Offer Space Lease Term. The terms of the Comparable Transactions shall be calculated as a “Net Equivalent Lease Rate” pursuant to the terms of this Exhibit C, and shall take into consideration only the following terms and concessions: (i) the rental rate and escalations for the Comparable Transactions, (ii) the amount of parking rent per parking permit paid in the Comparable Transactions, if any, (iii) operating expense and tax protection granted in such Comparable Transactions such as a base year or expense stop (although for each such Comparable Transaction the base rent shall be adjusted to a triple net base rent using reasonable estimates of operating expenses and taxes as determined by Landlord for each such Comparable Transaction); (iv) rental abatement concessions, if any, being granted such tenants in connection with such comparable space, (v) any “First Offer Space Allowance,” as defined hereinbelow, to be provided to Tenant in connection with the First Offer Space Lease Term as compared to the improvements or allowances provided or to be provided in the Comparable Transactions, taking into account the contributory value of the existing improvements in the First Offer Space, such value to be based upon the age, design, quality of finishes, and layout of the existing improvements, and (vi) all other monetary concessions (including the value of any signage), if any, being granted such tenants in connection with such Comparable Transactions. Notwithstanding any contrary provision hereof, in determining the Market Rent, no consideration shall be given to any commission paid or not paid in connection with such Comparable Transaction. The Market Rent shall include adjustment of the stated size of the First Offer Space based upon the standards of measurement utilized in the Comparable Transactions; provided, however, the size of the First Offer Space shall, notwithstanding the foregoing, be at least equal to the greater of: (i) the square footages set forth in the First Offer Notice, and (ii) the square footage of the First Offer Space determined pursuant to the standards of space measurement used in the Comparable Transactions.

 

C-1

 

2.             TENANT SECURITY. The Market Rent shall additionally include a determination as to whether, and if so to what extent, Tenant must provide Landlord with financial security, such as an enhanced security deposit, a letter of credit or guaranty, for Tenant’s Base Rent obligations during the First Offer Space Lease Term. Such determination shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of comparable financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing fmancial condition of Tenant and such other tenants, and giving reasonable consideration to Tenant’s prior performance history during the Lease Term).

 

3.             FIRST OFFER SPACE ALLOWANCE. Notwithstanding anything to the contrary set forth in this Exhibit C, once the Market Rent for the First Offer Space Lease Term is determined as a Net Equivalent Lease Rate, if, in connection with such determination, it is deemed that Tenant is entitled to an improvement or comparable allowance for the improvement of the Premises, (the total dollar value of such allowance shall be referred to herein as the “First Offer Space Allowance”), Landlord shall pay the First Offer Space Allowance to Tenant pursuant to a commercially reasonable disbursement procedure determined by Landlord, and, as set forth in Section 5, below, of this Exhibit C, the rental rate component of the Market Rent shall be increased to be a rental rate which takes into consideration that Tenant will receive payment of such First Offer Space Allowance and, accordingly, such payment with interest shall be factored into the base rent component of the Market Rent.

 

4.             COMPARABLE BUILDINGS. For purposes of the Lease, the term “Comparable Buildings” shall mean other first-class institutionally-owned office buildings which are comparable to the Building in terms of age (based upon the date of completion of construction or major renovation as to the building containing the portion of the Premises in question), quality of construction, level of services and amenities (including, but not limited to, the type (e.g., surface, covered, subterranean) and amount of parking), size and appearance, and are located in the “Comparable Area,” which is the area bounded by Market Street, 314 Street, and the Embarcadero.

 

5.             METHODOLOGY FOR REVIEWING AND COMPARING THE COMPARABLE TRANSACTIONS. In order to analyze the Comparable Transactions based on the factors to be considered in calculating Market Rent, and given that the Comparable Transactions may vary in terms of length of term, rental rate, concessions, etc., the following steps shall be taken into consideration to “adjust” the objective data from each of the Comparable Transactions. By taking this approach, a “Net Equivalent Lease Rate” for each of the Comparable Transactions shall be determined using the following steps to adjust the Comparable Transactions, which will allow for an “apples to apples” comparison of the Comparable Transactions.

 

C-2

 

5.1          The contractual rent payments for each of the Comparable Transactions should be arrayed monthly or annually over the lease term. All Comparable Transactions should be adjusted to simulate a net rent structure, wherein the tenant is responsible for the payment of all property operating expenses in a manner consistent with the Lease. This results in the estimate of Net Equivalent Rent received by each landlord for each Comparable Transaction being expressed as a periodic net rent payment.

 

5.2          Any free rent or similar inducements received over time should be deducted in the time period in which they occur, resulting in the net cash flow arrayed over the lease term.

 

5.3          The resultant net cash flow from the lease should be then discounted (using an 8% annual discount rate) to the lease commencement date, resulting in a net present value estimate.

 

5.4          From the net present value, up front inducements (improvements allowances and other concessions) and leasing commissions should be deducted. These items should be deducted directly, on a “dollar for dollar” basis, without discounting since they are typically incurred at lease commencement, while rent (which is discounted) is a future receipt.

 

5.5          The net present value should then be amortized back over the lease term as a level monthly or annual net rent payment using the same annual discount rate of 8,0% used in the present value analysis. This calculation will result in a hypothetical level or even payment over the First Offer Space Lease Term, termed the “Net Equivalent Lease Rate” (or constant equivalent in general financial terms).

 

6.             USE OF NET EQUIVALENT LEASE RATES FOR COMPARABLE  TRANSACTIONS. The Net Equivalent Lease Rates for the Comparable Transactions shall then be used to reconcile, in a manner usual and customary for a real estate appraisal process, to a conclusion of Market Rent which shall be stated as a “NNN” lease rate applicable to each year of the First Offer Space Lease Term.

 

C-3Exhibit 10.7

 

CUPERTINO CITY CENTER

 

NET OFFICE LEASE

 

by and between

 

CUPERTINO CITY CENTER BUILDINGS,

 

a California limited partnership,

 

as Lessor

 

and

 

SPLUNK, INC.,

 

a Delaware corporation

 

as Lessee

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
SUMMARY OF LEASE PROVISIONS
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
PREMISES DEMISED
    	
2
    
	
 
    	
 
    	
 
    
	
3.
    	
TERM
    	
2
    
	
 
    	
 
    	
 
    
	
4.
    	
POSSESSION
    	
4
    
	
 
    	
 
    	
 
    
	
5.
    	
RENT
    	
5
    
	
 
    	
 
    	
 
    
	
6.
    	
SECURITY DEPOSIT
    	
5
    
	
 
    	
 
    	
 
    
	
7.
    	
PROJECT TAXES AND OPERATING EXPENSE ADJUSTMENTS
    	
6
    
	
 
    	
 
    	
 
    
	
8.
    	
USE
    	
11
    
	
 
    	
 
    	
 
    
	
9.
    	
COMPLIANCE WITH LAWS
    	
12
    
	
 
    	
 
    	
 
    
	
10.
    	
ALTERATIONS AND ADDITIONS
    	
13
    
	
 
    	
 
    	
 
    
	
11.
    	
REPAIRS
    	
14
    
	
 
    	
 
    	
 
    
	
12.
    	
LIENS
    	
15
    
	
 
    	
 
    	
 
    
	
13.
    	
ASSIGNMENT AND SUBLETTING
    	
16
    
	
 
    	
 
    	
 
    
	
14.
    	
HOLD HARMLESS
    	
18
    
	
 
    	
 
    	
 
    
	
15.
    	
SUBROGATION
    	
19
    
	
 
    	
 
    	
 
    
	
16.
    	
LESSEE’S INSURANCE
    	
19
    
	
 
    	
 
    	
 
    
	
17.
    	
SERVICES AND UTILITIES
    	
20
    
	
 
    	
 
    	
 
    
	
18.
    	
RULES AND REGULATIONS
    	
21
    
	
 
    	
 
    	
 
    
	
19.
    	
HOLDING OVER
    	
21
    
	
 
    	
 
    	
 
    
	
20.
    	
ENTRY BY LESSOR
    	
22
    
	
 
    	
 
    	
 
    
	
21.
    	
RECONSTRUCTION
    	
22
    
	
 
    	
 
    	
 
    
	
22.
    	
DEFAULT
    	
23
    
	
 
    	
 
    	
 
    
	
23.
    	
REMEDIES UPON DEFAULT
    	
24
    
	
 
    	
 
    	
 
    
	
24.
    	
EMINENT DOMAIN
    	
25
    
	
 
    	
 
    	
 
    
	
25.
    	
OFFSET STATEMENT; MODIFICATIONS FOR LENDER
    	
26
    
	
 
    	
 
    	
 
    
	
26.
    	
PARKING
    	
26
    
	
 
    	
 
    	
 
    
	
27.
    	
AUTHORITY
    	
27
    
	
 
    	
 
    	
 
    
	
28.
    	
SURRENDER OF PREMISES
    	
27
    
	
 
    	
 
    	
 
    
	
29.
    	
LESSOR DEFAULT AND MORTGAGEE PROTECTION
    	
27
    
	
 
    	
 
    	
 
    
	
30.
    	
RIGHTS RESERVED BY LESSOR
    	
28
    
	
 
    	
 
    	
 
    
	
31.
    	
EXHIBITS
    	
28
    
	
 
    	
 
    	
 
    
	
32.
    	
WAIVER
    	
28
    
	
 
    	
 
    	
 
    
	
33.
    	
NOTICES
    	
29
    
	
 
    	
 
    	
 
    
	
34.
    	
JOINT OBLIGATIONS
    	
29
    

 

i

 

	
35.
    	
MARGINAL HEADINGS
    	
29
    
	
 
    	
 
    	
 
    
	
36.
    	
TIME
    	
29
    
	
 
    	
 
    	
 
    
	
37.
    	
SUCCESSORS AND ASSIGNS
    	
29
    
	
 
    	
 
    	
 
    
	
38.
    	
RECORDATION
    	
29
    
	
 
    	
 
    	
 
    
	
39.
    	
QUIET POSSESSION
    	
29
    
	
 
    	
 
    	
 
    
	
40.
    	
LATE CHARGES; ADDITIONAL RENT AND INTEREST
    	
29
    
	
 
    	
 
    	
 
    
	
41.
    	
PRIOR AGREEMENTS
    	
30
    
	
 
    	
 
    	
 
    
	
42.
    	
INABILITY TO PERFORM
    	
30
    
	
 
    	
 
    	
 
    
	
43.
    	
ATTORNEYS’ FEES
    	
30
    
	
 
    	
 
    	
 
    
	
44.
    	
SALE OF PREMISES BY LESSOR
    	
30
    
	
 
    	
 
    	
 
    
	
45.
    	
SUBORDINATION/ATTORNMENT
    	
30
    
	
 
    	
 
    	
 
    
	
46.
    	
NAME
    	
31
    
	
 
    	
 
    	
 
    
	
47.
    	
SEVERABILITY
    	
31
    
	
 
    	
 
    	
 
    
	
48.
    	
CUMULATIVE REMEDIES
    	
31
    
	
 
    	
 
    	
 
    
	
49.
    	
CHOICE OF LAW
    	
31
    
	
 
    	
 
    	
 
    
	
50.
    	
SIGNS
    	
31
    
	
 
    	
 
    	
 
    
	
51.
    	
GENDER AND NUMBER
    	
31
    
	
 
    	
 
    	
 
    
	
52.
    	
CONSENTS
    	
31
    
	
 
    	
 
    	
 
    
	
53.
    	
BROKERS
    	
31
    
	
 
    	
 
    	
 
    
	
54.
    	
SUBSURFACE AND AIRSPACE
    	
32
    
	
 
    	
 
    	
 
    
	
55.
    	
COMMON AREA
    	
32
    
	
 
    	
 
    	
 
    
	
56.
    	
LABOR DISPUTES
    	
32
    
	
 
    	
 
    	
 
    
	
57.
    	
CONDITIONS
    	
32
    
	
 
    	
 
    	
 
    
	
58.
    	
LESSEE’S FINANCIAL STATEMENTS
    	
32
    
	
 
    	
 
    	
 
    
	
59.
    	
LESSOR NOT A TRUSTEE
    	
33
    
	
 
    	
 
    	
 
    
	
60.
    	
MERGER
    	
33
    
	
 
    	
 
    	
 
    
	
61.
    	
NO PARTNERSHIP OR JOINT VENTURE
    	
33
    
	
 
    	
 
    	
 
    
	
62.
    	
LESSOR’S RIGHT TO PERFORM LESSEE’S COVENANTS
    	
33
    
	
 
    	
 
    	
 
    
	
63.
    	
PLANS
    	
33
    
	
 
    	
 
    	
 
    
	
64.
    	
INTENTIONALLY DELETED
    	
33
    
	
 
    	
 
    	
 
    
	
65.
    	
WAIVER OF JURY
    	
33
    
	
 
    	
 
    	
 
    
	
66.
    	
JOINT PARTICIPATION
    	
33
    
	
 
    	
 
    	
 
    
	
67.
    	
COUNTERPARTS
    	
33
    

 

ii

 

CUPERTINO CITY CENTER

 

NET OFFICE LEASE

 

For and in consideration of rentals, covenants, and conditions hereinafter set forth, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the herein described Premises for the term, at the rental rate specified herein and subject to and upon all of the terms, covenants and agreements set forth in this lease (“Lease”):

 

1.                                       SUMMARY OF LEASE PROVISIONS.  a.  Lessee:  SPLUNK, INC., a Delaware corporation (“Lessee”).

 

b.                                      Lessor:  CUPERTINO CITY CENTER BUILDINGS, a California limited partnership (“Lessor”).

 

c.                                       Date of Lease (for reference purposes only):  January 14, 2011.

 

d.                                      Premises:  That certain office space commonly known as 20400 Stevens Creek Boulevard, Suite 750, Cupertino, California, and shown cross-hatched on the reduced floor plan attached hereto as Exhibit A consisting of approximately Eleven Thousand Three Hundred Sixty-Five (11,365 ) square feet of Rentable Area (the “Premises”).  (ARTICLE 2)

 

e.                                       Term:  Sixty-two (62) months.  (ARTICLE 3)

 

f.                                         Commencement Date:  March 1, 2011 (“Commencement Date”).  (ARTICLE 3)

 

g.                                      Lease Termination:  April 30, 2016 (“Expiration Date”), unless sooner terminated pursuant to the terms of this Lease.  (ARTICLE 3)

 

h.                                      Base Rent:  Monthly base rent (“Base Rent”) shall be in accordance with the following rent schedule:

 

	
Base Rent Per Month
    	
 
    	
 
    	
 
    
	
Months
    	
 
    	
Per SF of Rentable Area
    	
 
    	
Per Month
    	
 
    	
Base Rent
    	
 
    
	
1-2
    	
 
    	
Rent Abated
    	
 
    	
 
    	
 
    	
Rent Abated
    	
 
    
	
3-14
    	
 
    	
$
    	
2.20
    	
 
    	
 
    	
 
    	
$
    	
25,003.00
    	
 
    
	
15-26
    	
 
    	
$
    	
2.30
    	
 
    	
 
    	
 
    	
$
    	
26,139.50
    	
 
    
	
27-38
    	
 
    	
$
    	
2.40
    	
 
    	
 
    	
 
    	
$
    	
27,276.00
    	
 
    
	
39-50
    	
 
    	
$
    	
2.50
    	
 
    	
 
    	
 
    	
$
    	
28,412.50
    	
 
    
	
51-62
    	
 
    	
$
    	
2.60
    	
 
    	
 
    	
 
    	
$
    	
29,549.00
    	
 
    
	
(ARTICLE 5)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

i.                                          Security Deposit:  Forty-Two Thousand Fifty Dollars and 50/1002 ($42,050.50).  (ARTICLE 6)

 

j.                                          Lessee’s Percentage Share:  Three and 20/100 percent (3.20%).  (ARTICLE 7)

 

k.                                       Parking:  Non-Exclusive right to use no more than thirty-four (34) unreserved, uncovered spaces without charge during the Term, subject to the provisions of Article 26.  (ARTICLE 26)

 

l.                                          Addresses for Notices:

 

	
Lessor:
    	
 
    	
c/o   Prometheus Real Estate Group, Inc.
    
	
 
    	
 
    	
1900   South Norfolk Street, Suite 150
    
	
 
    	
 
    	
San   Mateo, CA 94403
    
	
 
    	
 
    	
Attn:   Executive Vice President
    
	
 
    	
 
    	
Telephone   No.:
    
	
 
    	
 
    	
Fax   No.:
    

 

1

 

	
 
    	
 
    	
with   a concurrent copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
c/o   Prometheus Real Estate Group, Inc.
    
	
 
    	
 
    	
1900   South Norfolk Street, Suite 150
    
	
 
    	
 
    	
San   Mateo, CA 94403
    
	
 
    	
 
    	
Attn:
    
	
 
    	
 
    	
Telephone   No.:
    
	
 
    	
 
    	
Fax   No.:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
and   wills a concurrent copy to the
    
	
 
    	
 
    	
Project   Management Office at:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
20400   Stevens Creek Boulevard, Suite 245
    
	
 
    	
 
    	
Cupertino,   California 95014
    
	
 
    	
 
    	
Attn:   Property Manager
    
	
 
    	
 
    	
Telephone   No.:
    
	
 
    	
 
    	
Fax   No.:
    
	
 
    	
 
    	
 
    
	
Lessee:
    	
 
    	
Splunk, Inc.
    
	
 
    	
 
    	
250   Brannan Street, 2nd Fl
    
	
 
    	
 
    	
San   Francisco, CA 94107
    
	
 
    	
 
    	
Attn:
    
	
 
    	
 
    	
Telephone   No.:
    
	
 
    	
 
    	
Fax   No.:
    

 

m.                                    Broker:  Cornish & Carey Commercial Newmark Knight Frank and Cresa Partners.  (ARTICLE 53)

 

n.                                      Summary Provisions in General.  Parenthetical references in this Article 1 to other articles in this Lease are for convenience of reference, and designate some of the other Lease articles where applicable provisions are set forth.  All of the terms and conditions of each such referenced article shall be construed to be incorporated within and made a part of each of the above referred to Summary of Lease Provisions.  If any conflict exists between any Summary of Lease Provisions as set forth above and the balance of the Lease, then the latter shall control.

 

2.                                       PREMISES DEMISED.  Lessor does hereby lease to Lessee and Lessee hereby leases from Lessor the Premises described in Article 1.d., subject, nevertheless, to all of the terms and conditions of this Lease.  Notwithstanding anything to the contrary contained in this Lease, the Premises shall be deemed for all purposes of this Lease to contain the amount of Rentable Area specified in Article 1.d. above, notwithstanding any deviation in actual Rentable Area of the Premises from such amount.  Calculation of the actual “Rentable Area” of the Building and Project shall be performed by Lessor’s architect in accordance with Building measurement standards, whirls calculation shall be conclusive and binding upon Lessor and Lessee.  The Premises is approximately as shown as cross-hatched on the floor plan(s) attached hereto as Exhibit A.  As used in this Lease, the term “Building” shall mean the building at the address listed in Article 1.d. above in which the Premises is located.  The Building is situated upon the parcel(s) of land shown on Exhibit B attached hereto (collectively, the “Parcel”).  The Building and the “Exterior Common Area” (as defined in Article 55 below) and all other improvements as now or hereafter located on the Parcel, Rally, are herein sometimes referred to collectively as the “Project.”

 

3.                                       TERM.  a.  Initial Term.  The term of this Lease shall be for the period designated in Article 1e., commencing on the Commencement Date and ending on the Expiration Date set forth in Article 1.g., unless sooner terminated pursuant to this Lease (“Initial Term”).  The expiration or sooner termination of the Lease is hereinafter referred to as “Lease Termination”.

 

b.                                      Option to Extend.  Lessee shall have the option to extend the Initial Term of this Lease for one (1) period of thirty-six (36) months, commencing immediately following the expiration of the Initial Term (such period

 

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is referred to herein as the “Extended Term,” “Initial Term” and “Extended Term” are collectively referred to as “Term”), on all provisions contained in this Lease (except for Base Rent and such other terms and conditions as are specifically or by their operation limited to the Initial Term only and except that Lessee shall have no further right or option to extend the term upon the expiration of the Extended Term), by giving notice of exercise of the option (the “Option Notice”) to Lessor no more than twelve (12) months but no less than nine (9) months before the expiration of the Initial Term.

 

Lessor’s ability to plan for the orderly transaction of its rental business, to accommodate the needs of other existing and potential tenants, and to enjoy the benefits of increasing rentals at such times as Lessor is able to do so in its sole and absolute discretion, are fundamental elements of Lessor’s willingness to provide Lessee with the option to extend contained herein.  Accordingly, Lessee hereby acknowledges that strict compliance with the notification provisions contained herein, and Lessee’s strict compliance with the time period for such notification contained herein, are material elements of the bargained for exchange between Lessor and Lessee and are material elements of Lessee’s consideration paid to Lessor in exchange for the grant of the option.  Therefore, Lessee’s failure to adhere strictly and completely to the provisions and time frame contained in this provision shall render the option automatically null, void and of no further force or effect, without notice, acknowledgement, or any action of any nature or sort, required of Lessor.  Lessee acknowledges that no other act or notice, other than the express written notice set forth hereinabove, shall act to put Lessor on notice of Lessee’s intent to extend, and Lessee hereby waives any claims to the contrary, notwithstanding any other actions of Lessee during the Initial Term of this Lease or any statements, written or oral, of Lessee to Lessor to the contrary during the Initial Term of this Lease.  Notwithstanding the foregoing, if an Event of Default (as defined below) exists on the date of giving the Option Notice, the Option Notice shall be totally ineffective, or if an Event of Default exists on the date the Extended Term is to commence, in addition to any and all other remedies available to Lessor under this Lease, at Lessor’s election, the exercise of the option shall be deemed null and void, the Extended Term shall not commence, and this Lease shall expire at the end of the Initial Term.

 

The option to extend granted pursuant hereto is personal to original Lessee signatory to this Lease and cannot be assigned, transferred or conveyed to, or exercised for the benefit of, any other person or entity (voluntarily, involuntarily, by operation of law or otherwise) including, without limitation, to any assignee or subtenant permitted under Article 13, except in the event of a “Permitted Transfer” (as defined in Article 13).  All of Lessee’s rights under this Article 3.b. shall terminate upon the expiration of the Initial Term or sooner termination of this Lease.

 

The parties shall have thirty (30) days after Lessor receives the Option Notice in which to agree upon the adjustment of Base Rent as of the commencement of the Extended Term.  The Base Rent shall be adjusted as of the commencement of the Extended Term to be an amount equal to one hundred percent (100%) of the then current “Fair Market Rental Value” (defined below) of the Premises at the time of commencement of the Extended Term.  The term “Fair Market Rental Value” of the Premises as used in this Lease shall mean the then prevailing fair snorkel rent for the Premises as of the commencement of the applicable Extended Term.  In determining such rate, the parties will consider first class, “Class A” office space comparable in size and quality to the Premises, if any, located in the vicinity of the Project in the Walnut Creek office market, and located in the Building and other buildings comparable M size and quality to the Building in which the Premises is located, including, without limitation, and taking into consideration all other factors normally considered when determining fair market rental value (including, without limitation, the duration of the Extended Term and such rental increases as may be appropriate during such period).

 

Upon determination of the Fair Market Rental Value for the Premises, the parties shall immediately execute an amendment to this Lease stating the adjustment of the Base Rent as of the commencement of the Extended Term.  In the event Lessee has retained the services of a real estate broker to represent Lessee during the negotiations in connection with the Extended Term, it is expressly understood that Lessor shall have no obligation for the payment of all or any part of a real estate commission or other brokerage fee to Lessee’s real estate broker us connection with the Extended Term.  Lessee shall be solely responsible for payment of fees for services rendered to Lessee by such broker in connection with the Extended Term.

 

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If the parties are unable to agree, in their sole and absolute discretion, on the Fair Market Rental Value for the Premises within such thirty (30) day period, then the Fair Market Rental Value as of the commencement of the Extended Term shall be determined as follows:

 

(i)             Following the expiration of such thirty (30) day period, Lessor and Lessee shall meet and endeavor in good faith to agree upon a licensed commercial real estate agent with at least seven (7) years full-time experience as a real estate agent active in leasing of commercial office buildings in the area of the Premises to appraise and set the Fair Market Rental Value as of the commencement of the Extended Term.  If Lessor and Lessee fail to reach agreement upon such agent within fifteen (15) days following the expiration of such thirty (30) day period, then, within fifteen (15) days thereafter, each party, at its own cost and by giving notice to the other party, shall appoint a licensed commercial real estate agent wills at least seven (7) years full-time experience as a real estate agent active in leasing of commercial office buildings in the area of the Premises to appraise and set the Fair Market Rental Value as of the commencement of the Extended Term.  If a party does not appoint an agent within fifteen (15) days after the other party has given notice of the name of its agent, the single agent appointed shall be the sole agent and shall set the Fair Market Rental Value as of the commencement of the Extended Tem.  If there are two (2) agents appointed by the parties as stated above, the agents shall meet within ten (10) days after the second agent has been appointed and attempt to set Fair Market Rental Value as of the commencement of the Extended Term.  If the two (2) agents are unable to agree on such Fair Market Rental Value within fifteen (15) days after the second agent has been appointed, they shall, within fifteen (15) days after the last day the two (2) agents were to have set such Fair Market Rental Value, attempt to select a third agent who shall be a licensed commercial real estate agent meeting the qualifications stated above.  If the two (2) agents are unable to agree on the third agent within such fifteen (15) day period, either Lessor or Lessee may request the President of the local chapter of the Society of Industrial and Office Realtors (SIOR) or a then equivalent organization if SIOR is not then in existence to select third agent meeting the qualifications stated in this subsection.  Each of the parties shall bear one-half (1/2) of the cost of appointing the third agent and of paying the third agent’s fee.  No agent shall be employed by, or otherwise be engaged in business with or affiliated with, Lessor or Lessee, except as an independent contractor.

 

(ii)          Within fifteen (15) days after the selection of the third agent, a majority of the agents shall set the Fair Market Rental Value as of the commencement of the Extended Term.  If a majority of the agents are unable to set such Fair Market Rental Value within the stipulated period of time, each agent shall snake a separate determination of such Fair Market Rental Value and the three (3) appraisals shall be added together and the total shall be divided by three (3).  The resulting quotient shall be the Fair Market Rental Value for the Premises as of the commencement of the Extended Term.  If, however, the low appraisal and/or high appraisal is/are more than twenty percent (20%) lower and/or higher than the middle appraisal, such low appraisal and/or such high appraisal shall be disregarded.  If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be Fair Market Rental Value as of the commencement of the Extended Term.  If both the low appraisal and the high appraisal are disregarded as stated in this subsection, the middle appraisal shall be the Fair Market Rental Value as of the commencement of the Extended Term.

 

(iii)       Each agent shall hear, receive and consider such information as Lessor and Lessee earls care to present regarding the determination of Fair Market Rental Value as of the commencement of the Extended Tem and each agent shall have access to the information used by each other agent.  Upon determination of the Pair Market Rental Value as of the commencement of the Extended Term, the agents shall immediately notify the pasties hereto in writing of such determination by certified mail, return receipt requested.

 

4.                                       POSSESSION.  a.  Construction of Improvements/Delay in Possession.  Lessor and Lessee agree to the provisions set forth in the work letter attached hereto as Exhibit C (“Work Letter”), if any.  Lessor agrees to construct within the Premises, at Lessor’s sole cost and expense, the improvements described in the Work Letter (“Lessee Improvements”), upon and subject to the provisions thereof.  If Lessor, for any reason whatsoever, cannot deliver possession of the Premises to Lessee at the date specified in Article 1.f. above, this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom; except, however, that in such event the “Commencement Date” for all purposes of this Lease shall be adjusted to be the date when Lessor delivers possession or such earlier date upon which such delivery of possession would have occurred but for delay in delivery of possession of the Premises caused and/or contributed to by Lessee and/or Lessee’s agents, officers, employees, representatives, contractors, servants, invitees and/or guests (collectively “Lessee’s Agents”), and the

 

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“Expiration Date” for all purposes of this Lease shall be the date which is the period of the Term specified in Article 1.e. following such Commencement Date.  Lessor shall be deemed to have delivered possession to Lessee on the earlier of (i) the date that Lessor gives notice to Lessee that the Lessee Improvements are substantially completed and available for occupancy by Lessee, subject only to punch list items which do not prevent Lessee from using the Premises for its intended use, or (ii) the date on which the Lessee Improvements would have been substantially completed but for delays caused by Lessee or Lessee’s Agents, including without limitation, change orders requested by Lessee or required because of any errors or omissions in plans submitted by Lessee, or (iii) the date upon which Lessee actually occupies or commences operation from the Premises.  Lessor shall endeavor to give Lessee notice of the estimated date of the Commencement Date at least thirty (30) days prior to the then-estimated Commencement Date.

 

b.                                      Early Possession.  Provided that Lessee’s early occupancy shall not interfere with Lessor’s construction of the Lessee Improvements, Lessee shall be permitted to occupy the Premises commencing on January 15, 2011 for purposes of installing its equipment, furniture, fixtures and related cabling, which occupancy shall be subject to all the provisions of this Lease other than the payment of Base Rent.  Said early possession shall not advance the Expiration Date.

 

c.                                       Certificates and Licenses.  Prior to occupancy, Lessee shall provide to Lessor the certificate(s) of insurance required by Article 16 and a copy of all licenses and authorizations that may be required for the lawful operation of Lessee’s business upon the Premises, including any City business licenses as may be required.

 

5.                                       RENT.  Lessee agrees to pay to Lessor as rental for the Premises, without offset, deduction, prior notice or demand, the monthly Base Rent designated in Article 1.h., as the same may be adjusted from time to rinse pursuant to Article 7.a. below.  Base Rent shall be payable monthly in advance on or before the first day of each calendar month during the Term, except that Base Rent for the first full calendar month during the Term shall be paid upon the execution of this Lease, and if the Commencement Date is other than the first day of a calendar month, Base Rent for the initial partial calendar mends during the Term shall be prorated and paid upon the Commencement Date.  Base Rent for any period during the Term which is for less than one (1) month shall be prorated based upon a thirty (30) day month.  Base Rent and all other amounts owing to Lessor pursuant to this shall be paid to Lessor in lawful money of the United States of America which shall be legal tender at the time of payment, at the office of the Project, or to such other person or at such other place as Lessor may from time to time designate in writing.

 

6.                                       SECURITY DEPOSIT.  Upon Lessee’s execution of this Lease, Lessee shall deposit with Lessor the sum set forth in Article 1.i. as the security deposit (“Security Deposit”).  Lessee hereby grants to Lessor a security interest in the Security Deposit in accordance with applicable provisions of the California Commercial Code.  The Security Deposit shall be held by Lessor as security for the faithful performance by Lessee of all the terms, covenants and conditions of this Lease to be kept and performed by Lessee during the Term.  If Lessee defaults with respect to any provision of this Lease, including, but not limited to the provisions relating to the payment of Rentals or relating to the condition of the Premises at Lease Termination, Lessor may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any Rental or any other sum in default, or for the payment of any amount which Lessor may spend or become obligated to spend by reason of Lessee’s default, or to compensate Lessor for any other loss or damage which Lessor may suffer by reason of Lessee’s default.  If any portion of the Security Deposit is so used or applied, Lessee shall within five (5) business days after Lessee’s receipt of written demand therefor, deposit cash with Lessor in an amount sufficient to restore the Security Deposit to its original amount and Lessee’s failure to do so shall be a material breach of this Lease.  Lessor shall not be required to keep the Security Deposit separate from its general funds, and Lessee shall not be entitled to interest on the Security Deposit.  Lessor is not a trustee of the Security Deposit and may use it in ordinary business, transfer it or assign it, or use it in any combination of such ways.  The remaining portion of the Security Deposit shall be returned to Lessee (or, at Lessor’s option, to the last assignee of Lessee’s interest hereunder) within two (2) weeks after Lease Termination and vacation of the Premises by Lessee or its last assignee; provided, however if any portion of the Security Deposit is to be applied to repair damages to the Premises caused by Lessee or Lessee’s Agents or to clean the Premises, then the balance of the Security Deposit shall be returned to Lessee (or, at Lessor’s option to the last assignee of Lessee’s interests hereunder) no later than thirty (30) days from the date Lessor receives possession of the Premises.  Lessee waives any rights it may have under Section 1950.7 of the California Civil Code with respect to the Security Deposit.  Lessee shall not transfer or encumber tire Security Deposit nor shall Lessor be bound by Lessee’s attempt to do so.  If Lessor’s interest in this Lease is terminated, Lessor may transfer the Security Deposit

 

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to Lessor’s successor in interest, and upon such transfer, Lessor shall be released from any liability to Lessee with respect to the Security Deposit and Lessee shall look only to the transferee for any return of the Security Deposit to which Lessee may be entitled.

 

7.             PROJECT TAXES AND OPERATING EXPENSE ADJUSTMENTS. a.  Intentionally Deleted.

 

b.             Building Taxes and Building Operating Expenses.  Lessee shall pay to Lessor, as additional rent and without deduction or offset, Lessee’s percentage share set forth in Article 1.j. (“Lessee’s Percentage Share”) of the amount of annual “Building Taxes” and “Building Operating Expenses” (as such terms are defined below).  Building Taxes and Building Operating Expenses are collectively referred to herein as “Building Expenses.”  Lessee’s Percentage Share shall be determined by dividing the Rentable Area of the Premises by the total Rentable Area in the Building.  Lessee’s Percentage Share shall be subject to an equitable adjustment upon a condemnation, sale by Lessor of part of the Building, reconstruction after damage or destruction or expansion or reduction of the areas within the Building.  Lessee’s Percentage Share of Building Expenses shall be payable during the Terns in equal monthly installments on the first day of each month hr advance, without deduction, offset or prior demand.

 

At any time during the Term, Lessor may give Lessee notice of Lessor’s estimate of the Building Expenses for the current calendar year.  An amount equal to one twelfth (1/12) of Lessee’s Percentage Share of the estimated Building Expenses shall be payable monthly by Lessee as aforesaid, commencing on the first day of the calendar month following thirty (30) days written notice and continuing until receipt of any notice of adjustment from Lessor given pursuant to this paragraph.  Until notice of the estimated Building Expenses for a subsequent calendar year is delivered to Lessee, Lessee shall continue to pay its Percentage Share of Building Expenses on the basis of the prior year’s estimate.  Lessor may at any time during the Term adjust estimates of the Building Expenses to reflect current expenditures and following Lessor’s written notice to Lessee of such revised estimate, subsequent payments by Lessee shall be based upon such revised estimate.

 

If the Commencement Date is on a date other than the first day of a calendar year, the amount of the Building Expenses payable by Lessee in such calendar year shall be prorated based upon a fraction, the numerator of which is the number of days from the Commencement Date to the end of the calendar year in which the Commencement Date falls, and the denominator of which is three hundred sixty (360).

 

Within one hundred twenty (120) days after the end of each calendar year during the Term or as soon thereafter as practicable, Lessor will furnish to Lessee a statement (“Lessor’s Statement”) setting forth in reasonable detail the actual Building Expenses paid or incurred by Lessor during the preceding year, and thereupon within twenty (20) days an adjustment will be made by Lessee’s payment to Lessor or credit to Lessee by Lessor against the Building Expenses next becoming due from Lessee, as the case may require, to the end that Lessor shall receive the entire amount of Lessee’s Percentage Share of Building Expenses for such calendar year and no more.  If, based on Lessor’s Statement a payment from Lessee is required, Lessee shall not have the right to withhold or defer such payment pending a review of Lessor’s books and records pursuant to the following paragraph or the resolution of any dispute relating to Building Expenses.  If the Expiration Date is on a day other than the last day of a calendar year, the amount of Building Expenses payable by Lessee for the calendar year in which Lease Termination falls shall be prorated on the basis which the number of days from the commencement of such calendar year to and including such Expiration Date bears to three hundred sixty (360).  The termination of this Lease shall not affect the obligations of Lessor and Lessee pursuant to this Article 7.

 

Within sixty (60) days after Lessee receives a statement of actual Building Expenses paid or incurred for a calendar year, Lessee shall have the right, upon written demand and reasonable notice, to inspect Lessor’s books and records relating to such Building Expenses for the calendar year covered by Lessor’s Statement for the purpose of verifying the amount set forth in such statement.  Such inspection shall be made during Lessor’s normal business hours, at the place where such books and records are customarily maintained by Lessor.  In no event may any such inspection be performed by a person or entity being compensated on a contingency fee basis or based upon a share of any refund obtained by Lessee.  Information obtained by such inspection shall be kept in the strictest confidence by Lessee.  Unless Lessee asserts in writing a specific error within ninety (90) days following Lessee’s receipt of Lessor’s Statement, the amounts set forth in Lessor’s Statement shall be conclusively deemed correct and binding on Lessee.

 

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(i)    Operating Expenses.  As used in this Lease, “Building Operating Expenses” means all of the Building Service Expenses and an allocable portion of the Project Expenses as follows:

 

(A)          Building Service Expenses.  Building Operating Expenses shall include, without duplication, all costs of operation, maintenance, repair (which for purposes of this Lease shall be deemed to include, without limitation, replacement as and when deemed appropriate by Lessor) and management of the Building and Building Common Area (defined in Article 55), hereinafter collectively referred to as “Building Service Expenses”, as determined by Lessor’s standard accounting practices.  Building Service Expenses as used herein shall mean all sums expended in connection with all general maintenance, repairs, painting, cleaning, sweeping and janitorial services; maintenance and repair of signs, indoor plants, and atriums; trash removal; sewage; electricity, gas, water and any other utilities (including any temporary or permanent utility surcharge or other exaction whether now or hereafter imposed); maintenance and repair of any fire protection systems, elevator systems, lighting systems, storm drainage systems, heating, ventilation and air conditioning systems and other utility and/or mechanical systems; any governmental imposition or surcharge imposed upon Lessor with respect to die Building or assessed against the Building; all costs and expenses pertaining to a security alarm system or other security services or measures for the Building, if Lessor deems necessary in Lessor’s sole business judgment; materials; supplies; tools; depreciation on maintenance and operating machinery and equipment (if owned) and rental paid for such machinery and equipment (if rented); service agreements on equipment; maintenance, and repair of the roof (including repair of leaks and resurfacing) and the exterior surfaces of all improvements (including painting); maintenance and repair of structural parts (including repair of leaks and resurfacing) and the exterior surfaces of all improvements (including painting); maintenance and repair of structural parts (including foundation, floor slabs and load bearing walls); window cleaning; elevator or escalator services; materials handling; fees for licenses and permits relating to the Building; the cost of complying with rules, regulations and orders of governmental authorities; Building office rent or rental value; accounting and legal fees; the cost of contesting the validity or applicability of any governmental enactment which may affect Building Service Expense (unless it is determined that Lessor or the Building was in violation of such governmental enactment m of the Commencement Date); personnel to implement such services (including, without limitation, if Lessor deems necessary, the cost of security guards, maintenance personnel, engineers and valet attendants); public liability, environmental impairment, property damage and fire and extended coverage insurance on the Building (in such amounts and providing such coverage as determined in Lessor’s sole discretion and which may include, without limitation, liability, all risk property, lessor’s risk liability, war risk, vandalism, malicious mischief, boiler and machinery, rental income, earthquake, flood and worker’s compensation insurance); compensation and fringe benefits payable to all persons employed by Lessor in connection with the operation, maintenance, repair and management of the Building; and a management fee equal to four percent (4%) of gross receipts from the Building (including, without limitation, all rentals and parking receipts from Building tenants and/or visitors).  Lessor may cause any or all of said services to be provided by an independent contractor or contractors, or they may be rendered by Lessor.  It is the intent of the parties hereto that Building Service Expenses shall include every cost paid or incurred by Lessor in connection with the operation, maintenance, repair and management of the Building, and the specific examples of Building Service Expenses stated in this Article 7 are in no way intended to, and shall not, limit the costs comprising Building Service Expenses, nor shall such examples be deemed to obligate Lessor to incur such costs or to provide such services or to take such actions, except as may be expressly required of Lessor in other portions of this Lease, or except as Lessor, in its sole discretion, may elect.  The maintenance of the Building shall be at the sole discretion of Lessor and all costs incurred by Lessor in good faith shall be deemed conclusively binding on Lessee.  If less than one hundred percent (100%) of the Rentable Area of the Building is occupied during any calendar year, then in calculating Building Service Expenses for such year, the components of Building Service Expenses which vary based upon occupancy level shall be adjusted to equal Lessor’s reasonable estimate of the amount of such Building Service Expenses had one hundred percent (100%) of the total Rentable Area of the Building been occupied during such year.  In addition, if Lessor is not furnishing any particular work or service (the cost of which, if performed by Lessor, would be included in Building Service Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Lessor, Building Service Expenses shall be deemed to be increased by an amount equal to the additional Building Service Expenses which would reasonably have been incurred during such period by Lessor if it had at its own expense furnished such work or service to such tenant provided that it shall not be taken into account with respect to the tenant that paid it.

 

(B)           Project Expenses.  Building Operating Expenses shall include the Building’s equitable share of all direct casts of operation, maintenance, repair and management of the Project (as opposed to

 

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expenses relating solely to the Building or any other particular building within the Project) and/or the Exterior Common Area, determined by Lessor’s standard accounting practices (collectively, “Project Expenses”).  Such costs shall be allocated by Lessor between the Building containing the Premises and the other buildings located within the Project from time to time, in such manlier as Lessor reasonably determines in good faith provided that such allocated costs to all parties shall not exceed 100% thereof.  Project Expenses as used herein shall include, but not be limited to, all sums expended in connection with all general maintenance, repairs, resurfacing, painting, restriping, cleaning, sweeping, and janitorial services; maintenance and repair of sidewalks, curbs, signs and other Exterior Common Areas; maintenance and repair of sprinkler systems, planting, and landscaping; trash removal; sewage; electricity, gas, water and any other utilities (including any temporary or permanent utility surcharge or other exaction whether now or hereafter imposed); maintenance and repair of directional signs and other markers and bumpers; maintenance and repair of any fire protection systems, elevator systems, lighting systems, storm drainage systems and other utility systems; any governmental imposition or surcharge imposed upon Lessor or assessed against the Exterior Common Area or the Project; materials; supplies, tools; depreciation on maintenance and operating machinery and equipment (if owned) and rental paid for such machinery and equipment (if rented); service agreements on equipment; maintenance and repair of parking areas and parking structures, if any; maintenance and repair of structural parts (including foundation and floor slabs); elevator services, if applicable; material handling; fees for licenses and permits relating to the Exterior Common Area; the cost of complying with rules, regulation and orders of governmental authorities; accounting and legal fees; the cost of contesting the validity or applicability of any governmental enactment which may affect Project Expenses; personnel to implement such services (including, without limitation, if Lessor deems necessary, the cost of security guards, maintenance personnel, engineers and valet attendants); all annual assessments and special assessments levied or charged against the Project and/or Lessor pertaining to the Project by the Cupertino City Center Owner’s Association pursuant to the “CC&R’s” (as hereinafter defined); public liability, environmental impairments, property damage and fire and extended coverage insurance on Exterior Common Area (in such accounts and providing such coverage as determined in Lessor’s sole discretion and which may include, without limitation, liability, all risk property, lessor’s risk liability, war risk, vandalism, malicious mischief, sprinlder leakage, boiler and machinery, parking income, earthquake, flood and worker’s compensation insurance); compensation and fringe benefits payable to all persons employed by Lessor in connection with the operation, maintenance, repair and management of the Exterior Common Area; and a management fee equal to four percent (4%) of gross receipts from the Project (exclusive of amounts collected from tenants of any building within the Project under their respective leases).  Lessor may cause any or all of said services to be provided by an independent contractor or contractors, or they may be rendered by Lessor.  It is the intent of the parties hereto that Project Expenses shall include every cost paid or incurred by Lessor in connection with the operation, maintenance, repair and management of the Exterior Common Area, and the specific examples of Project Expenses stated in this Article 7 are in no way intended to, and shall not limit the costs comprising Project Expenses, nor shall such examples be deemed to obligate Lessor to incur such costs or to provide such services or to take such actions except as Lessor may be expressly required in other portions of this Lease, or except as Lessor, in its sole discretion, may elect.  The maintenance of the Exterior Common Areas shall be at the sole discretion of Lessor and all costs incurred by Lessor in good faith shall be deemed conclusively binding on Lessee.  If less than one hundred percent (100%) of the Rentable Area of the Project is occupied during any calendar year, then in calculating Project Expenses for such year, the components of Project Expenses which vary based upon occupancy level shall be adjusted to equal Lessor’s reasonable estimate of the amount of such Project Expenses had one hundred percent (100%) of the total Rentable Area of the Project been occupied during such year.  In addition, if Lessor is not furnishing any particular work or service (the cost of which, if performed by Lessor, would be included in Project Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Lessor, Project Expenses shall be deemed to be increased by an amount equal to the additional Project Expenses which would reasonably have been incurred during such period by Lessor if it had at its own expense furnished such work or service to such tenant.

 

(ii)   Project Taxes.  “Building Taxes” as used in this Lease, shall mean those items of “Project Taxes” (as hereinafter defined) which relate solely to the Building, plus an equitable share of Project Taxes which relate to the land underlying the Project, to the Exterior Common Areas and/or to the Project as a whole (as opposed to Project Taxes relating solely to the Building or any other particular building within the Project), which equitable share shall be allocated by Lessor between the Building and the other buildings located within the Project from time to time, in such manner as Lessor reasonably determines in good faith.  The term “Project Taxes” as used in this Lease shall collectively mean (to the extent any of the following are not paid by Lessee pursuant to Article 7.c. below) all:  real estate taxes and general or special assessments (including, but not limited to, assessments for

 

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public improvements or benefits); personal property taxes; taxes based on vehicles utilizing parking areas on the Parcel; taxes computed or based on rental income (including without limitation any municipal business tax but excluding federal, state and municipal net income taxes); Environmental Surcharges; excise taxes; gross receipts taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies, assessments and other charges in the nature of taxes or assessments (including, but not limited to, assessments for public improvements or benefit); and all other governmental, quasi-governmental or special district impositions of any kind and nature whatsoever, regardless of whether now customary or within the contemplation of the parties hereto and regardless of whether resulting from increased rate and/or valuation, or whether extraordinary or ordinary, general or special, unforeseen or foreseen, or similar or dissimilar to any of the foregoing which during the Lease Term are laid, levied, assessed or imposed upon Lessor and/or become a lien upon or chargeable against the Project or the Premises, Building, Common Area and/or Parcel under or by virtue of any present or future laws, statutes, ordinances, regulations, or other requirements of any governmental authority or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments whatsoever.  The term “Environmental Surcharges” shall include any and all expenses, taxes, charges or penalties imposed by the Federal Department of Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or any regulations promulgated thereunder, or imposed by any other local, state or federal governmental agency or entity now or hereafter vested with the power to impose taxes, assessments or other types of surcharges as a means of controlling or abating environmental pollution or the use of energy in regard to the use, operation or occupancy of the Project including the Premises, Building, Common Area and/or Parcel.  The teen “Project Taxes” shall include (to the extent the same are not paid by Lessee pursuant to Article 7.c. below), without limitation:  the cost to Lessor of contesting the amount or validity or applicability of any Project Taxes described above; and all taxes, assessments, levies, fees, impositions or charges levied, imposed, assessed, measured, or based in any manner whatsoever upon or with respect to the use, possession, occupancy, leasing, operation or management of the Project (including, without limitation, the Premises, Building, Common Area and/or Parcel) or in lieu of or equivalent to any Project Taxes set forth in this Article 7.b.(ii).

 

If at any time during the Term, Project Taxes are under-assessed by the taxing authorities so that they are not computed on a fully-completed and occupied basis in accordance with the then applicable taxing authority of the governmental entities having jurisdiction, Lessor shall have the right, but not the obligation, to adjust Project Taxes to reflect the amount that Project Taxes would be if the Project were assessed on a fully-completed and occupied basis, as determined in Lessor’s reasonable discretion, and such adjusted amount shall be allocated to the Project in accordance with the terms of this Lease.

 

c.             Other Taxes.  Lessee shall pay the following:

 

(i)    Lessee shall pay (or reimburse Lessor as additional rent if Lessor is assessed), before delinquency, any and all taxes levied or assessed, and which become payable for or in connection with any period during the Term, upon all of the following (collectively, “Leasehold Improvements and Personal Property”):  Lessee’s Leasehold Improvements, the Lessee Improvements, equipment, furniture, furnishings, fixtures, merchandise, inventory, machinery, appliances and other personal property located in the Premises; except only that which has been paid for by Lessor and is the standard of the Building.  Lessee hereby acknowledges receipt of a copy of a schedule setting forth the improvements comprising the standard of the Building.  If any or all of the Leasehold Improvements and Personal Property are assessed and taxed with the Project, Lessee shall pay to Lessor such taxes within ten (10) days after delivery to Lessee by Lessor of a statement in writing setting forth the amount applicable to the Leasehold Improvements and Personal Property.  If the Leasehold Improvements and Personal Property are not separately assessed on the tax statement or bill, Lessor’s good faith reasonable determination of the amount of such taxes applicable to the Leasehold Improvements and Personal Property shall be a conclusive determination of Lessee’s obligation to pay such amount as so determined by Lessor.

 

(ii)   Lessee shall pay (or reimburse Lessor if Lessor is assessed, as additional rent), prior to delinquency or within ten (10) days after receipt of a statement thereof, any and all other taxes, levies, assessments, or surcharges payable by Lessor or Lessee and relating to this Lease, the Premises or Lessee’s activities in the Premises (other than Lessor’s net income, succession, transfer, gift, franchise, estate, or inheritance taxes), whether or not now customary or within the contemplation of the parties hereto, now in force or which may hereafter become effective, including but not limited to taxes:  (1) upon, allocable to, or measured by the area of the Premises or on the Rentals payable hereunder, including without limitation any gross income, gross receipts, excise, or other tax levied by the state, any political subdivision thereof, city or federal government with respect to the receipt of such

 

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Rentals; (2) upon or wills respect to the use, possession, occupancy, leasing, operation and management of the Premises or any portion thereof; (3) upon this transaction or any document to which Lessee is a party creating or transferring an interest or an estate in the Premises; or (4) imposed as a means of controlling or abating environmental pollution or the use of energy, including, without limitation, any parking taxes, levies or charges or vehicular regulations imposed by any governmental agency.  Lessee shall also pay, prior to delinquency, all privilege, sales, excise, use, business, occupation, or other taxes, assessments, license fees, or charges levied, assessed, or imposed upon Lessee’s business operations conducted at the Premises.  If any such taxes are payable by Lessor and it shall not be lawful for Lessee to reimburse Lessor for such taxes, then the Rentals payable hereunder shall be increased to net Lessor the net Rental after imposition of any such tax upon Lessor as would have been payable to Lessor prior to the imposition of any such tax.

 

(iii)  Any payments made by Lessee directly to the applicable taxing authority pursuant to this subsection 7.c. shall be made prior to the applicable delinquency date for such payment, and Lessee shall deliver evidence of such payment to Lessor within fifteen (15) days thereafter.

 

d.             Exclusions to Operating Expenses.  Notwithstanding anything to the contrary contained in this Lease, in no event shall Taxes and Operating Expenses include, and under no circumstances shall Lessee otherwise be required to pay directly or indirectly or indemnify Lessor or any other person for any of the following (the “Exclusions”):  (1) any costs relating to the replacement of the roof or relating to structural repairs or replacements to maintain the structural integrity of the Building (including, without limitation, the structural repairs to the structural elements of the exterior, walls, columns, roof, footings and floor slab of the Building), (2) costs, including permit, license and inspection costs, incurred with respect to the construction of leasehold improvements or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant leasable space within the Building, (3) costs in order to market space to potential tenants, leasing commissions, and attorneys’ fees, accounting fees or other professionals’ fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments or other costs in connection with lease, sublease and/or assignment negotiations with present or prospective tenants or other occupants of the Building, (4) costs incurred for restoration following condemnation to the extent reimbursed by condemnation award or for repair of damage to the Building to the extent reimbursed by insurance proceeds (provided that insurance deductibles and uninsured casualty damage shall be included in Operating Expenses but only to the extent that, with respect to any specific casualty, Lessee’s Percentage Share of any insurance deductible does not exceed $25,000), (5) ground lease rental on any underlying ground lease or interest, principal, points and/or fees on debts or amortization or depreciation charges on any mortgage or mortgages or any other debt instrument encumbering the Building or the Project, (6) to the extent any employee of Lessor spends only a portion of his or her time working with respect to the Project (as opposed to full time work with respect to the Project), a prorated amount of such employee’s wages, salaries and compensation based upon the portion of time spent by such employee with respect to the projects other than the Project, (7) costs resulting from the breach of this Lease by Lessor, or from the negligence or willful misconduct of Lessor or Lessor’s agents, employees or contractors, (8) costs incurred due to violation by Lessor or any other tenant in the Building of the terms and conditions of any lease for space within the Building, (9) the cost of any service provided to Lessee or other occupants of the Building or other cost includable in Operating Expenses pursuant hereto for which Lessor is actually reimbursed by insurance, third parties or otherwise (other than reimbursement by lessees as a part of their respective payments of Operating Expenses), (10) charitable or political contributions, (11) interest, penalties or other costs arising out of Lessor’s failure to make timely payment of its obligations, (12) costs to remediate Hazardous Materials (defused in Article 8 below) located upon, within or beneath the Project prior to the Commencement Date or which were brought onto the Project thereafter by Lessor, its agents, employees, or contractors, (13) costs (other than ordinary maintenance) for sculpture, paintings and other objects of art, (14) advertising or promotional expenses and costs of signs in or on the Project identifying the owner of the Project or the other lessees’ signs; (15) costs of services for which Lessee is obligated to separately reimburse Lessor pursuant to this Lease, (16) expense reserves and bad debt loss or reserves therefor; (17) costs incurred in connection with the original construction or subsequent reconfiguration of the Building or the Project; (18) costs of curing violations of applicable building codes or other laws or regulations (including without limitation ADA as defined below) or other legal requirements where such violations exist as of the Commencement Date or of correcting defects in the original design or original construction of the Building or the Project (including latent defects); (19) legal, accounting or other professional fees incurred in connection with the audit of any Lessor financial materials; (20) overhead and profit paid to subsidiaries or affiliates of the Lessor for management or other services for supplies or other materials to the extent the amounts incurred are in excess of those which would have

 

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been incurred if such supplies or services were obtained from unrelated third parties (but this provisions does not prevent the payment of a management fee to Lessor as provided above), (21) depreciation costs except as explicitly provided elsewhere in this Article 7, or (22) costs for the replacement or repair of capital items, where such cost exceeds $200,000 (as determined with respect to each such capital item and not on an aggregate basis for all such capital items), except to the extent amortized over the useful life of the capital item in question (along with interest on the unamortized amount).

 

8.             USE. a.  In no event shall Lessee use or permit the use of the Premises for any purpose other than general office use and other related legal uses incidental thereto.  Lessor and Lessee hereby acknowledge and agree that the foregoing use restriction is an absolute prohibition against a change in use of the Premises m contemplated under California Civil Code Section 1997.230.  Lessee shall not do or permit to be done in or about the Premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or other insurance upon the Building or the Project or any of its contents, or cause cancellation of any insurance policy covering the Building or the Project or any part thereof or any of its contents.  Lessee shall not, without prior consent of Lessor, bring into the Building or the Premises or use or incorporate in the Premises any apparatus, equipment or supplies that may cause substantial noise, odor, or vibration or overload the Premises or the Building or any of its utility or elevator systems or jeopardize the structural integrity of the Building or any part thereof.  Lessee and Lessee’s Agents shall not use, store, or dispose of any “Hazardous Materials” (defined below) on any portion of the Project.  Without limiting the generality of the foregoing, Lessee shall not (either with or without negligence) cause or permit the escape, disposal, release or discharge of any Hazardous Materials in, on or below the Premises or any other portion of the Project.  If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release or other use of Hazardous Materials at the Premises during the Term of this Lease, then the reasonable costs thereof shall be reimbursed by Lessee to Lessor upon demand as additional rent.  In addition, Lessee shall execute such affidavits, representations and certifications as may be reasonably required by Lessor from time to time concerning Lessee’s best knowledge and belief regarding the presence of Hazardous Materials at the Premises.  Lessee shall indemnify, defend with counsel acceptable to Lessor, and hold Lessor and Lessor’s employees, agents, partners, officers, directors and shareholders harmless from and against any and all claims, actions, suits, proceedings, orders, judgment, losses, costs, damages, liabilities, penalties, or expenses (including, without limitation, attorneys’ fees) arising in connection with the breach of the obligations described in any of the previous four sentences and the obligations of Lessee pursuant hereto and under the previous four sentences shall survive the Lease Termination.  As used in this paragraph, “Hazardous Materials” means any chemical, substance or material which has been determined or is hereafter determined by any federal, state, or local governmental authority to be capable of posing risk of injury to health or safety, including, without limitation, petroleum, asbestos, polychlorinated biphenyls, radioactive materials, radon gas, and/or biologically and/or chemically active materials.  Without limiting the generality of the foregoing, the definition of “Hazardous Materials” shall include those definitions found in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq., the Hazardous Materials Transportation Authorization Act, 49 U.S.C. §§ 5101 et seq., the National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq., the Clean Water Act, 33 U.S.C. §§ 1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq., the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq., Division 20 of the California Health and Safety Code commencing at Section 24000, Division 7 of the California Water Code commencing at Section 13000, each as amended from time to time, and all similar federal, state and local statutes and ordinances and all rules, regulations or policies promulgated thereunder.  Lessee shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or the Project or injure them or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Lessee cause, maintain or permit any nuisance in, on or about the Premises.  Lessee shall not commit or suffer to be committed any waste in or upon the Premises.

 

b.             Effect of Use Restriction.  Lessor and Lessee hereby acknowledge and agree that the use restriction set forth in subsection 8.a. above shall be deemed reasonable in all respects and under all circumstances.  Lessor and Lessee further acknowledge and agree that, notwithstanding any provision of this Lease to the contrary, (i) in the event Lessee requests Lessor’s consent to a proposed assignment of this Lease or subletting of the Premises, Lessor shall be deemed reasonable in withholding its consent to such assignment or subletting if the proposed assignee or subtenant desires to use the Premises for any purpose other than as expressly provided in subsection 8.a. above, and (ii) in the event of a default by Lessee under the Lease, the enforcement of the use

 

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restriction set forth in subsection 8.a. above shall be deemed reasonable for purposes of computing the rental loss that could be or could have been reasonably avoided by Lessor pursuant to California Civil Code Section 1951.2 and in connection with the exercise of Lessor’s remedies under California Civil Code Section 1951.4.

 

Notwithstanding the preceding to the contrary, if Lessor withholds its consent to an assignment of the Lease or subletting of the Premises based upon the desire of the proposed assignee or subtenant to use the Premises for any purpose other than as expressly provided in subsection 8.a. above, or if on Event of Default exists under this Lease, then, prior to commencing or pursuing any claim or defense against Lessor based upon the unreasonableness of the use restriction set forth in subsection 8.a. above, Lessee shall provide Lessor with written notice (by certified mail, postage prepaid and return receipt requested) setting forth Lessee’s objections to the enforcement of the use restriction in such instance, the basis upon which Lessee intends to demonstrate that the enforcement of such use restriction would be unreasonable in such instance, and the use(s) which Lessee believes Lessor should allow Lessee or its proposed assignee or subtenant, as the case may be, to make of the Premises.  Within thirty (30) days of Lessor’s receipt of Lessee’s written notice of objection, Lessor shall provide Lessee with written notice of Lessor’s election to either (A) enforce the use restriction set forth in subsection 8.a. above, or (B) permit a change in the use of the Premises, provided that such proposed use shall in no event (1) require the use, storage or disposal of Hazardous Materials on or about the Premises or the Project, (2) increase or affect any fire or other insurance covering the Building or the Project, (3) interfere with the rights of other tenants of the Building or Project, including, without limitation, any exclusive use rights of such tenants, (4) be in violation of applicable federal, state or local laws, rules, regulations, codes or ordinances, or (5) require Lessor to construct or install, or to provide any allowance for the construction or installation of, any tenant improvements in the Premises.  Notwithstanding the preceding to the contrary, in no event shall Lessor have any obligation to allow a change in the use of the Premises, it being expressly understood by the parties that the use restriction set forth in subsection 8.a. above is an absolute prohibition against a change in use of the Premises.  In the event Lessor fails to provide Lessee with written notice of its election to either enforce the use restriction or allow a change in use of the Premises within said thirty (30) day period, Lessor shall be deemed to have elected to enforce the use restriction.  In the event Lessor elects or is deemed to have elected to enforce the use restriction as provided hereinabove, Lessee shall have the right to pursue such valid claims or defenses against Lessor as may be permitted under California Civil Code section 1997.040 and which Lessee is able to prove.

 

9.             COMPLIANCE WITH LAWS.  Lessee shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with or violate any law, statute, ordinance, order or governmental rule or regulation or requirement of duly constituted public authorities or quasi-public authorities now in force or which may hereafter be enacted or promulgated.  Lessee shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances, orders and governmental or quasi-governmental rules, regulations or requirements now in force or which may hereafter be in force and with all recorded documents which relate to or affect the condition, use or occupancy of the Premises, including, without limitation, that certain Declaration of Covenants, Conditions and Restrictions and Grant of Easements for Cupertino City Center, recorded October 9, 1985, Series No. 8554457 of the Official Records of Santa Clara County, California, as amended by First Amendment to Declaration of Covenants, Conditions and Restrictions and Grant of Easements for Cupertino City Center recorded September 12, 1987, Series No. 9417820 of the Official Records of Santa Clara County, California (as amended, the “CC&R’s”), and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Lessee’s improvements, acts or use or occupancy of the Premises.  The judgment of any court of competent jurisdiction or the admission of Lessee in any action against Lessee, whether Lessor be a party thereto or not, that Lessee has violated any law, statute, ordinance, or governmental or quasi-governmental rule, regulation or requirement, shall be conclusive of that fact as between the Lessor and Lessee.  Lessee shall obtain, prior to taking possession of the Premises, all permits, licenses, or other authorizations for the lawful operation of its business at the Premises.  Lessee shall indemnify, defend with counsel acceptable to Lessor and hold Lessor and Lessor’s employees, agents, partners, officers, directors and shareholders harmless from and against any claim, action, suit, proceeding, order, judgment, liability, penalty or expense (including, without limitation, attorneys’ fees) arising out of the failure of Lessee to comply with any applicable law, statute, ordinance, order, rule, regulation, requirement or recorded document.  Lessee acknowledges that Lessee has independently investigated and is satisfied that the Premises are suitable for Lessee’s intended use and that the Building and Premises meet all governmental and quasi-governmental requirements for such intended use.  Notwithstanding anything to the contrary contained in this Lease, Lessee shall not be liable or responsible (legally, financially or otherwise) for any violations of or non-

 

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compliances with applicable laws (including environmental laws) relating to the Premises if such violations or non-compliances either (i) exist on the Commencement Date (except to the extent exacerbated by Lessee), or (ii) do not arise as a result of Lessee’s or Lessee’s Agents’ act, failure to act or particular use of the Premises.

 

Lessor and Lessee acknowledge that, in accordance with the provisions of the Americans with Disabilities Act of 1990 (the “ADA”), responsibility for compliance with the terms and conditions of Title III of the ADA may be allocated as between Lessor and Lessee.  In this regard and notwithstanding anything to the contrary contained in the Lease, Lessor and Lessee agree that the responsibility for compliance with the ADA (including, without limitation, the removal of architectural and communications barriers and the provision of auxiliary aids and services to the extent required) shall be allocated as follows:  (i) Lessee shall be responsible for compliance with the provisions of Tide I of the ADA, and of Title II and Title III of the ADA as Titles II and III relate to any construction, renovations, alterations and repairs made within the Premises if such construction, renovations, alterations and repairs are made by Lessee, at its expense without the assistance of Lessor; (ii) Lessor shall be responsible for compliance with the provisions of Title II and III of the ADA for all construction, renovations, alterations and repairs which Lessor is required, under this Lease, to make within the Premises, whether (pursuant to the relevant provisions of the Lease) at Lessor’s or Lessee’s expense; and (iii) Lessor shall be responsible for compliance with the provisions of Title Ill of the ADA for all exterior and interior areas of the Building not included within the Premises except to the extent such compliance is necessitated as a result of Lessee’s particular use of, or alterations to, the Premises.  Lessor agrees to indemnify, defend and hold Lessee harmless from and against any claims, damages, costs and liabilities arising out of Lessor’s failure, or alleged failure, as the case may be, to comply with the ADA, to the extent such compliance has been allocated to Lessor herein, which indemnification obligation shall survive the expiration or termination of this Lease if the Lease has not been terminated by reason of a default by Lessee.  Lessee agrees to indemnify, defend and hold Lessor harmless from and against any claims, damages, costs and liabilities arising out of Lessee’s failure, or alleged failure, as the case may be, to comply with the ADA to the extent such compliance has been allocated to Lessee herein, which indemnification obligation shall survive the expiration or termination of this Lease.  Lessor and Lessee each agrees that the allocation of responsibility for ADA compliance shall not require Lessor or Lessee to supervise, monitor or otherwise review the compliance activities of the other with respect to its assumed responsibilities for ADA compliance as set forth in this Article 9.  Lessor shall, in complying with the ADA (to the extent such compliance has been allocated to Lessor herein), be entitled to rely upon representations made to, or information given to Lessor by Lessee in regard to Lessee’s use of the Premises, Lessee’s employees, and other matters pertinent to compliance with the ADA.  The indemnity of Lessee set forth above shall apply as to any liability arising against Lessor by mason of any misrepresentations or misinformation given by Lessee to Lessor.  The allocation of responsibility for ADA compliance between Lessor and Lessee, and the obligations of Lessor and Lessee established by such allocations, shall supersede any other provisions of the Lease that may contradict or otherwise differ from the requirements of this Article 9.

 

10.           ALTERATIONS AND ADDITIONS. a.  Lessee’s Alterations.  Lessee shall not make or suffer to be made any alterations, additions, changes or improvements (collectively, “Alterations”) to or of the Premises, or any part thereof without Lessor’s prior written consent, which consent shall not, except as otherwise expressly provided in the Lease, be unreasonably withheld, provided, however, that Lessor’s consent shall not be required for any interior, non-structural Alteration that satisfies all of the following conditions:  (i) its cost does not exceed $15,000 per work of Alteration, (ii) it will not require the demolition of any material existing improvements, and (iii) it will not affect the structure of the building in which the Premises is located or the building’s mechanical or utility systems or the exterior appearance of the Building.  Lessor may impose, as a condition to the aforesaid consent, such requirements as Lessor may deem necessary in its sole discretion, including without limitation:  the manner in which the work is done; a right of approval of the contractor by whom the work is to be performed; the times during which such work is to be accomplished; the requirement that Lessee post a lien and completion bond (or its equivalent) in an amount equal to one and one-half times any and all estimated Alterations costs and otherwise in form satisfactory to Lessor to insure Lessor against any liability for mechanics’ and materialmen’s liens and to insure completion of the work; the requirement that Lessee reimburse Lessor, as additional rent, for Lessor’s reasonable costs incurred in reviewing any proposed Alterations, whether or not Lessor’s consent is granted; and the requirement that at Lease Termination, either (i) Lessee, at its expense, will remove any and all such Alterations installed by Lessee and shall, at its cost, promptly repair all damages to the Project caused by such removal, or (ii) the Alterations made by Lessee shall remain with the Premises, be a part of the realty, and belong to Lessor.  If Lessor consents to any Alterations to the Premises by Lessee, the same shall be made by Lessee at Lessee’s sole cost and expense in accordance with plans and specifications approved by Lessor.  Any such Alterations made by Lessee shall be performed in accordance with

 

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all applicable laws, ordinances and codes and in a first class workmanlike manner, and shall not weaken or impair the structural strength or lessen the value of the Building, shall not invalidate, diminish, or adversely affect any warranty applicable to the Building or any other improvements located within the Project, including any equipment therein, and shall be performed in a manner causing Lessor and Lessor’s agents and other tenants of the Building the least interference and inconvenience practicable under the circumstances.  In malting any such Alterations, Lessee shall, at Lessee’s sole cost and expense:

 

(i)             File for and secure any necessary permits or approvals from all governmental departments or authorities having jurisdiction, and any utility company having an interest therein,

 

(ii)            Notify Lessor in writing at least fifteen (15) days prior to the commencement of work on any Alteration, so that Lessor can post and record appropriate notices of non-responsibility, and

 

(iii)           Provide Lessor with copies of all drawings and specifications prior to commencement of construction of any Alterations, and provide Lessor with “as built” plans and specifications (on CAD diskette if available) following completion of such Alterations.

 

In no event shall Lessee make or suffer to be made any Alteration to the mechanical or utility systems of the Building, to the Common Area or the structural portions of the Building or any part thereof without Lessor’s prior written consent, which consent may be withheld in Lessor’s sole discretion.

 

b.             Removal.  Upon Lease Termination, Lessee shall, upon written demand by Lessor at Lessee’s sole cost and expense, forthwith and with all due diligence remove any Alterations made by Lessee, which is then designated by Lessor to be removed and Lessee shall, forthwith and with all due diligence at its sole cost and expense, repair any damage to the Project caused by such removal.  Lessee shall also, upon Lease Termination and provided that Lessee is not then in default hereunder, remove Lessee’s movable equipment, furnishings, trade fixtures and other personal property (excluding any Alterations made by Lessee not specifically designated by Lessor to be removed), provided that Lessee shall, forthwith and with all due diligence at its sole cost and expense, repair any damages to die Project caused by such removal.  Unless Lessor elects to have Lessee remove any such Alterations, all such Alterations except for movable furniture and trade fixtures of Lessee not affixed to the Premises, shall become the property of Lessor upon Lease Termination (without any payment therefor) and remain upon and be surrendered with the Premises.

 

c.             Alterations Required by Law.  Lessee shall pay to Lessor as additional rent, the cost of any structural or non-structural alteration, addition or change to the Building and/or at Lessor’s election, shall promptly make, at Lessee’s sole expense and in accordance with the provisions of subsection 10.a. above, any structural or non-structural alteration, addition or change to the Premises required to comply with laws, regulations, ordinances or orders of any public agencies, whether now existing or hereinafter promulgated, where such alterations, additions or changes are required by reason of Lessee’s or Lessee’s Agents’ acts; Lessee’s use or change of use la the Premises; alterations or improvements to the Premises made by or for Lessee; or Lessee’s application for any permit or governmental approval.

 

d.             Lessor’s Improvements.  All fixtures, improvements or equipment which are installed, constructed on or attached to die Premises, or any part of the Project by Lessor at its expense shall be a part of the realty and belong to Lessor.

 

11.           REPAIRS. a.  By Lessee.  By taking possession of the Premises, Lessee shall be deemed to have accepted the Premises as being in good and sanitary order, condition and repair and to have accepted the Premises in their condition existing as of the date of such possession, subject to all applicable laws, covenants, conditions, restrictions, easements, and other matters of public record and the Rules and Regulations from time to time promulgated by Lessor governing the use of any portion of the Project.  Lessee shall further be deemed to have accepted Lessee Improvements constructed by Lessor, if any, as being completed in accordance with the plans and specifications for such improvements, excluding only the punch list items referred to in Article 4.a. above.  Notwithstanding the foregoing, Lessor, at its sole cost and expense, shall promptly repair any defects set forth in any written notice delivered to Lessor within fifteen (15) days after Lessee takes possession of the Premises, to the extent that the Premises are not in the condition set forth in the first full sentence of this paragraph.  Lessee shall at

 

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Lessee’s sole cost and expense, keep every part of the Premises in good condition and repair, damage thereto from causes beyond the control of Lessee (and not caused by any act or omission of Lessee or Lessee’s Agents) and ordinary wear and tear excepted.  If Lessee fails to maintain the Premises as required by this Lease, Lessor may give Lessee notice to do such acts as are reasonably required to so maintain the Premises and if Lessee fails to commence such work immediately in an emergency or where immediate action is required to protect the Premises or any portion of the Project, or within ten (10) days after such notice is given under other circumstances, and diligently prosecute it to completion, then Lessor or Lessor’s agents, in addition to all of the rights and remedies available hereunder or by law and without waiving any alternative remedies, shall have the right to enter the Premises and to do such acts and expend such funds at the expense of Lessee as are reasonably required to perform such work.  Any amount so expended by Lessor shall be paid by Lessee to Lessor as additional rent, upon demand.  With respect to any work performed by Lessor pursuant to this Article 11.a., Lessor shall be liable to Lessee only for physical damage caused to Lessee’s personal property located within the Premises to the extent such damage is caused by Lessor’s active negligence or willful misconduct and is not covered by the insurance required to be maintained by Lessee pursuant to this Lease.  In no event shall Lessor have any liability to Lessee for any other damages, or for any inconvenience or interference with the use of the Premises by Lessee, or for any consequential damages, including lost profits, as a result of performing any such work.  Except as specifically provided in an addendum, if any, to this Lease, Lessor shall have no obligation whatsoever to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof and the parties hereto affirm that Lessor has made no representations or warranties, express or implied, to Lessee respecting the condition of the Premises or any part of the Project except as specifically set forth in this Lease.

 

b.             By Lessor.  The costs of repairs and maintenance which are the obligation of Lessor under this Lease or which Lessor elects to perform under this Lease except such repairs and maintenance which are the responsibility of Lessee hereunder, shall be an Operating Expense.  Lessor shall repair and maintain the structural portions of the Building, including the basic plumbing, air conditioning, heating and electrical systems installed or furnished by Lessor, unless such maintenance or repairs are caused in part or in whole by the act, neglect, fault or omission of any duty by Lessee or Lessee’s Agents, in which case Lessee shall pay to Lessor the reasonable cost of such maintenance or repairs as additional rent.  Lessor shall not be liable for any failure to make any such repairs or to perform any maintenance for which Lessor is responsible as provided above unless Lessor fails to commence such work for a period of more than thirty (30) days after written notice of the need of such repairs or maintenance is given to Lessor by Lessee and the failure is due solely to causes within Lessor’s reasonable control.  Except as provided in Article 21 of this Lease, there shall be no abatement of Rentals, and in any event there shaft be no liability of Lessor by reason of any injury to or interference with Lessee’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Project or in or to fixtures, appurtenances and equipment therein.  Lessee waives the benefits of any statute now or hereafter in effect (including, without limitation, the provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of the California Civil Code and any similar or dissimilar law, statute or ordinance now or hereafter in effect) which would otherwise afford Lessee the right to make repairs at Lessor’s expense (or to deduct the cost of such repairs from Rentals due hereunder) or to terminate this Lease because of Lessor’s failure to keep the Premises in good and sanitary order.

 

12.           LIENS.  Lessee shall keep the Premises and every portion of the Project free from any and all mechanics’, materialmen’s and other liens, and claims thereof, arising out of any work performed, materials furnished or obligations incurred by or for Lessee.  Lessee shall indemnify and defend with counsel acceptable to Lessor and hold Lessor harmless from and against any liens, demands, claims, actions, suits, proceedings, orders, losses, costs, damages, liabilities, penalties, expenses, judgments or encumbrances (including without limitation, attorneys’ fees) arising out of any work or services performed or materials furnished by or at the direction of Lessee or Lessee’s Agents or any contractor employed by Lessee with respect to the Premises.  Should any claims of lien relating to work performed, materials furnished or obligations incurred by Lessee be filed against, or any action be commenced affecting the Premises, any part of the Project, and/or Lessee’s interest therein, Lessee shall give Lessor notice of such lien or action within three (3) days after Lessee receives notice of the filing of the lien or the commencement of the action.  If Lessee does not, within twenty (20) days following the imposition of any such lien, cause such lien to be released of record by payment or posting of a proper bond, Lessor shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including by payment of the claim giving rise to such lien or by posting a proper bond, or by requiring Lessee to post for Lessor’s benefit a bond, surety, or cash amount equal to one and one-half (1-1/2) times the amount of lien and sufficient to release the Premises and Project from the lien.  All sums paid by Lessor pursuant

 

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to this Article 12 and all expenses incurred by it in connection therewith including attorneys’ fees and costs shall be payable to Lessor by Lessee as additional rent on demand.

 

13.           ASSIGNMENT AND SUBLETTING. a.  Prohibitions in General.  Lessee shall not (whether voluntarily, involuntarily, or by operation of law) assign this Lease or allow all or any part of the Premises to be sublet, without Lessor’s prior written consent in each instance, which consent shall not be unreasonably withheld, subject, nevertheless, to the provisions of this Article 13.  Notwithstanding anything to the contrary contained herein, Lessee shall have the right without Lessor’s prior consent and without being subject to Article 13.e. below, but upon not less than fifteen (15) days prior written notice to Lessor, to assign this Lease or sublet the Premises to any entity (i) controlling, controlled by or having fifty percent (50%) or more common control with Lessee, or (ii) resulting from a merger or consolidation with Lessee or acquiring substantially all of the assets and/or substantially all of the stock of Lessee; provided that any such entity shall assume the obligations and liabilities of Lessee under this Lease (or such of such obligations and liabilities as are to be performed by the sublessee under the terms of the applicable sublease in the event of a sublease), and no such assignment or sublease shall in any manner release Lessee from its primary liability under this Lease (except in the case of an assignment to the surviving entity in a merger or consolidation transaction permitted pursuant to the foregoing provisions of this sentence where the prior “Lessee” does not survive such merger or consolidation transaction).  For all purposes of this Lease, a “Permitted Transfer” shall mean an assignment or subletting by Lessee which is permitted without Lessor’s prior consent pursuant to clause (i) or (ii) above.  Except for an allowed assignment or subletting pursuant to the foregoing provisions of this paragraph, Lessee shall not (whether voluntarily, involuntarily, or by operation of law) (iii) allow all or any part of the Premises to be occupied or used by any person or entity other than Lessee, (iv) transfer any right appurtenant to this Lease or the Premises, (v) mortgage, hypothecate or encumber the Lease or Lessee’s interest in the Lease or Premises (or otherwise use the Lease as a security device) in any manner, or (vi) permit any person to assume or succeed to any interest whatsoever in this Lease, without Lessor’s prior written consent in each instance, which consent may be withheld in Lessor’s sole and absolute discretion.

 

Any assignment, sublease, hypothecation, encumbrance, or transfer (collectively “Transfer”) without Lessor’s consent shall constitute an Event of Default by Lessee and shall be voidable.  Lessor’s consent to any one Transfer shall not constitute a waiver of the provisions of this Article 13 as to any subsequent Transfer nor a consent to any subsequent Transfer.  The provisions of this subsection 13.a. expressly apply to all heirs, successors, sublessees, assigns and transferees of Lessee.  If Lessor consents to a proposed Transfer, such Transfer shall be valid and the transferee shall have the right to take possession of the Premises only if the Assumption Agreement described in subsection 13.c. below is executed and delivered to Lessor, Lessee has paid the costs and fees described in subsection 13.i. below, and an executed counterpart of the assignment, sublease or other document evidencing the Transfer is delivered to Lessor and such transfer document contains the same terms and conditions as stated in Lessee’s notice given to Lessor pursuant to subsection 13.d. below, except for any such modifications Lessor has consented to in writing.  The acceptance of Rentals by Lessor from any person or entity other than Lessee shall not be deemed to be a waiver by Lessor of any provision of this Lease or to be a consent to any Transfer.

 

b.             Collection of Rent.  Lessee irrevocably assigns to Lessor, as security for Lessee’s obligations under this Lease, all rent not otherwise payable to Lessor by reason of any Transfer of all or any part of the Premises or this Lease.  Lessor, as assignee of Lessee, or a receiver for Lessee appointed on Lessor’s application, may collect such rent and apply it toward Lessee’s obligations under this Lease; provided, however, that until the occurrence of any default by Lessee or except as provided by the provisions of subsection 13.f. below, Lessee shall have the right to collect such rent.

 

c.             Assumption Agreement.  As a condition to Lessor’s consent to any Transfer of Lessee’s interest in this Lease or the Premises, Lessee and Lessee’s assignee, sublessee, encumbrancer, hypothecate, or transferee (collectively “Transferee”), shall execute a written Assumption Agreement, in a form approved by Lessor, which Agreement shall include a provision that Lessee’s Transferee shall expressly assume all obligations of Lessee under this Lease, and shall be and remain jointly and severally liable wills Lessee for the performance of all conditions, covenants, and obligations under this Lease from the effective date of the Transfer of Lessee’s interest in this Lease (except that as to a subletting, such Assumption Agreement shall relate only to performance of Lessee’s non-rent payment obligations under this Lease relating to the portion of the Premises subleased).  In no event shall Lessor have any obligation to materially amend or modify this Lease in connection with any proposed Transfer, including, without limitation, amending or modifying the use restriction set forth in subsection 8.a. above.

 

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d.             Request for Transfer.  Lessee shall give Lessor at least thirty (30) days prior written notice of any desired Transfer and of the proposed terms of such Transfer, including but not limited to:  the name and legal composition of the proposed Transferee; an audited financial statement (or unaudited if proposed Tranferee does not have audited financials) of the proposed Transferee prepared in accordance with generally accepted accounting principles within one year prior to the proposed effective date of the Transfer; the nature of the proposed Transferee’s business to be carried on in the Premises; the payment to be made or other consideration to be given on account of the Transfer; and other such pertinent information as may be requested by Lessor, all in sufficient detail to enable Lessor to evaluate the proposed Transfer and the prospective Transferee.  Lessee’s notice shall not be deemed to have been served or given until such time as Lessee has provided Lessor with all information specified above and all additional information requested by Lessor pursuant to this subsection 13.d. Lessee shall immediately notify Lessor of any modification to the proposed terms of such Transfer.

 

e.             Excess Consideration.  In the event of any Transfer (other than a Permitted Transfer), Lessor shall receive as additional rent hereunder, fifty percent (50%) of Lessee’s “Excess Consideration” derived from such Transfer to the extent directly attributable to the Lease of the Premises.  As used herein, “Excess Consideration” shall mean all rent, additional rent, key money, bonus money and/or other consideration received by Lessee from a Transferee and/or paid by a Transferee on behalf of Lessee in connection with the Transfer in excess of the rent, additional rent and other sums payable by Lessee under this Lease (on a per square foot basis if less than all of the Premises is subject to such Transfer), excluding any consideration attributable to the sale or lease of Lessee’s furniture, fixtures, or equipment in the Premises, less the sum of Lessee’s actual out-of-pocket costs inclined for brokerage commissions, attorneys’ fees and any Alterations to the Premises or improvement allowances in connection with such Transfer, any lease takeover payment paid to or for the benefit of the Transferee, any actual costs of advertising the Premises (or applicable portion thereof) for sublease or assignment.  If part of the Excess Consideration shall be payable by the Transferee other than in cash, then Lessor’s share of such non-cash consideration shall be in such form as is reasonably satisfactory to Lessor.

 

f.              Standards for Consent.  Without otherwise limiting the criteria upon which Lessor may withhold its consent to any proposed Transfer, the parties hereby agree that it shall be deemed presumptively reasonable for Lessor to withhold its consent to a proposed Transfer if

 

(i)            The proposed Transferee’s net worth (according to generally accepted accounting principles) is less than the greater of (A) the net worth of Lessee immediately prior to the Transfer; or (B) the net worth of Lessee at the time this Lease is executed;

 

(ii)           The proposed Transferee’s use of the Premises is inconsistent with the permitted use of the Premises set forth in this Lease or the proposed Transferee is of a character or reputation which is not consistent with the quality of the Building or Project;

 

(iii)          As to a Transfer of less than all of the Premises, the space to be Transferred is not regular in shape with appropriate means of ingress and egress suitable for normal leasing purposes;

 

(iv)          The proposed Transferee is a governmental agency or instrumentality thereof or a person or entity (or an affiliate thereof) currently leasing or occupying space within the Project or with whom Lessor is then negotiating for the lease or occupancy of space within the Project;

 

(v)           An Event of Default exists under this Lease at the time Lessee requests consent to the proposed Transfer;

 

(vi)          The proposed Transfer will result in more than a reasonable and safe number of occupants per floor within the space proposed to be Transferred or will result in insufficient parking for the Building;

 

(vii)         The rent proposed to be payable by the proposed Transferee will be less (on a per square foot of Rentable Area basis) than the rent payable by Lessee under this Lease; or

 

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(viii)        The Project is then below the level of ninety-five percent (95%) occupancy of Rentable Area.

 

g.             Intentionally Deleted.

 

h.             Corporations and Partnerships.  If Lessee is a partnership, a withdrawal or substitution (whether voluntary, involuntary, or by operation of law and whether occurring at one time or over a period of time) of any partner(s) owning twenty-five percent (25%) or more of the partnership, any assignment(s) of twenty-five percent (25%) or more (cumulatively) of any interest in the capital or profits of the partnership, or the dissolution of the partnership shall be deemed a Transfer of this Lease.  If Lessee is a corporation, limited liability company or other entity, any dissolution, merger, consolidation or other reorganization of Lessee, any sale or transfer (or cumulative sales or transfers) of the capital stock of or equity interests in Lessee in excess of fifty percent (50%) (disregarding original issuances of stock to financing parties (e.g., venture capitalists and strategic investors), provided that Lessee shall provide fifteen (15) days prior written notice to Lessor of any such issuance) or any sale (or cumulative sales) of more than fifty percent (50%) of the value of the assets of Lessee shall be deemed a Transfer of this Lease.  This subsection 13.h. shall not apply to corporations the capital stock of which is publicly traded.

 

i.              Attorneys’ Fees and Costs.  Lessee shall pay, as additional rent, Lessor’s actual costs and attorneys’ fees incurred for reviewing, investigating, processing and/or documenting any requested Transfer, whether or not Lessor’s consent is granted.

 

j.              Miscellaneous.  Regardless of Lessor’s consent, no Transfer shall release Lessee of Lessee’s obligations under this Lease or alter the primary liability of Lessee to pay the Rentals and to perform all other obligations to be performed by Lessee hereunder.  The acceptance of Rentals by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision hereof.  Upon default by any assignee of Lessee or any successor of Lessee in the performance of any of the terms hereof, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said assignee or successor.  Lessor may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with any assignee of Lessee, without notifying Lessee, or any successor of Lessee, and without obtaining its or their consent thereto and such action shall not relieve Lessee of liability under this Lease.

 

k.             Reasonable Provisions.  Lessee acknowledges that, but for Lessee’s identity, financial condition and ability to perform the obligations of Lessee under the Lease, Lessor would not have entered into this Lease nor demised the Premises in the manner set forth in this Lease, and that in entering into this Lease, Lessor has relied specifically on Lessee’s identity, financial condition, responsibility and capability of performing the obligations of Lessee under the Lease.  Lessee acknowledges that Lessor’s rights under this Article 13, including the right to terminate this Lease or withhold consent to certain Transfers in Lessor’s sole and absolute discretion, are reasonable, agreed upon and bargained for rights of Lessor and that the Rentals set forth in the Lease have taken into consideration such rights.  Lessee expressly agrees that the provisions of this Article 13 are not unreasonable standards or conditions for purposes of Section 1951.4(b)(2) of the California Civil Code, as amended from time to time, under the Federal Bankruptcy Code or for any other purpose.

 

14.           HOLD HARMLESS.  Lessee shall indemnify, defend with counsel acceptable to Lessor, and hold Lessor and Lessor’s employees, agents, partners, officers, directors and shareholders harmless from and against any and all claims, damages, losses, liabilities, penalties, judgments, and costs and expenses (including, without limitation, attorneys’ fees) and any suit, action or proceeding brought pursuant thereto (collectively, “Claims”), including, without limitation, Claims for property damage, or personal injury including death, and arising out of (i) Lessee’s use of the Premises or any part thereof, (ii) any activity, work or other thing done, permitted in or about the Premises, or any part thereof, by Lessee or Lessee’s Agents, (iii) any breach or default in the performance of any obligation on Lessee’s part to be performed under the terms of this Lease, (including, without limitation, a failure to maintain insurance as provided in Article 16), or (iv) any negligence of the Lessee or Lessee’s Agents ha connection with its use of the Premises and/or the Project.

 

The indemnity herein shall extend to the costs and expenses incurred by Lessor for administrative expenses, consultant fees, expert costs, investigation expenses and costs incurred in settling indemnified claims, whether such costs occurred before or after any litigation is commenced.  The obligations of Lessee pursuant to this

 

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Article 14 and elsewhere in this Lease with respect to indemnification of Lessor shall survive the Lease Termination and shall continue in effect until any and all claims, actions or causes of action with respect to any of the matters indemnified against are fully and finally barred by the applicable statute of limitations.  In no event shall any of insurance provisions set forth in Article 16 of this Lease be construed as any limitation on the scope of indemnification set forth herein.

 

Lessee as a material part of the consideration to Lessor hereby assumes all risk of damage or loss to property or injury or death to person in, upon or about all portions of the Project from any cause except as hereinafter stated.  Lessor or its agents shall not be liable for any damage or loss to property entrusted to employees of any part of the Project nor for loss or damage to any property by theft or otherwise, nor for any injury or death or damage or loss to persons or property resulting from any accident, casualty or condition occurring in or about any portion of the Project, or to any equipment, appliances or fixtures therein, or from any other cause whatsoever.  Lessee’s assumption of risk and die exculpation of Lessor pursuant hereto is unqualified with the single exception that it shall not apply to the portion of any claim, damage or loss that arises out of Lessor’s negligence or willful misconduct and which is not covered by the insurance required to be maintained by Lessee pursuant to this Lease, but it shall apply without limitation to all other claims, damages or losses.  Lessor or its agents shall not be liable for interference with the light or other incorporeal hereditaments, nor shall Lessor be liable for any latent defect in the Premises or in the Building.  Notwithstanding any other provision of this Lease, in no event shall Lessor have arty liability for loss of business (including, without limitation, lost profits) by Lessee.  Lessee shall give prompt written notice to Lessor in case of fire or accidents in the Premises or in the Building or of defects therein or in the fixtures or equipment

 

If, by reason of any act or omission of Lessee or Lessee’s Agents, Lessor is made a party defendant to any litigation concerning this Lease or any part of the Project or otherwise, Lessee shall indemnify, defend with counsel acceptable to Lessor, and hold Lessor harmless from any liability and damages incurred by (or threatened against) Lessor as a party defendant, including without limitation all damages, costs and expenses, including attorneys’ fees.

 

15.           SUBROGATION.  Lessor releases Lessee and Lessee’s officers, directors, agents, employees, partners and shareholders from any and all claims or demands for damages, loss, expense or injury arising out of any perils to the extent covered by insurance carried by Lessor, whether due to the negligence of Lessee or Lessee’s officers, directors, agents, employees, partners and shareholders and regardless of cost or origin, to the extent such waiver is permitted by Lessor’s insurers and does not prejudice the insurance required to be carried by Lessor under this Lease.  Lessee releases Lessor and Lessor’s officers, directors, agents, employees, partners and shareholders from any and all claims or demands for damages, loss, expense or injury arising out of any perils which are insured against under any insurance carried by Lessee, whether due to the negligence of Lessor or its officers, directors, agents, employees, partners and shareholders and regardless of cost or origin, to the extent such waiver is permitted by Lessee’s insurers and does not prejudice the insurance required to be carried by Lessee under this Lease.

 

16.           LESSEE’S INSURANCE. a.  Lessee shall, at Lessee’s expense, obtain and keep in force during the Term a policy of commercial general liability insurance, including the broad form endorsement, insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy, maintenance, repair or improvement of the Premises and all areas appurtenant thereto.  Such insurance shall provide single limit liability coverage of not less than Five Million Dollars ($5,000,000.00) per occurrence for bodily injury or death and property damage.  Such insurance shall name Lessor and, at Lessor’s request, Lessor’s mortgagee, each as an additional insured, and shall provide that Lessor and any such mortgagee, although an additional insured, may recover for any loss suffered by Lessor or Lessor’s agents by reason of Lessee’s or Lessee’s Agent’s negligence.  All such insurance shall be primary and non-contributing with respect to any insurance maintained by Lessor and shall specifically insure Lessee’s performance of the indemnity and hold harmless agreements contained in Article 14 above although Lessee’s obligations pursuant to Article 14 shall not be limited to the amount of any insurance required of or carried by Lessee under this Article 16 and Lessee is responsible for ensuring that the amount of liability insurance carried by Lessee is sufficient for Lessee’s purposes.  Lessee may carry said insurance under a blanket policy provided that such policy conforms with the requirements specified in this Article and the coverage afforded Lessor is not diminished thereby.

 

b.             Lessee acknowledges and agrees that insurance coverage carried by Lessor will not cover Lessee’s property within the Premises or widths the Building.  Lessee shall, at Lessee’s expense, obtain and keep in force

 

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during the Terns a policy of “All Risk” property insurance; boiler and machinery (if applicable); sprinkler damage; vandalism; malicious mischief; and demolition, increased cost of construction and contingent liability from changes in building laws on all leasehold improvements installed in the Premises by Lessee at its expense (if any), and on all equipment, trade fixtures, inventory, fixtures and personal property located on or in the Premises, including improvements or fixtures hereinafter constructed or installed on the Premises.  Such insurance shall be ha an amount equal to the full replacement cost of the aggregate of the foregoing and shall provide coverage comparable to the coverage in the Standard ISO All Risk form, when such form is supplemented wills the coverage required above.

 

c.             If Lessee fails to procure and maintain any insurance required to be procured and maintained by Lessee pursuant to this Lease, Lessor may, but shall not be required to, procure and maintain all or any portion of the same, at the expense of Lessee.  Lessor’s election pursuant to this subsection 16.c. to procure and maintain all or any portion of the insurance which Lessee fails to procure and maintain is acknowledged by Lessee to be for Lessor’s sole benefit.  Lessee acknowledges that any insurance procured and maintained by Lessor pursuant to this subsection 16.c. may not be sufficient to adequately protect Lessee.  Any personal property insurance procured and maintained by Lessor for Lessee’s equipment, trade fixtures, inventory, fixtures and personal property located on or in the Premises, including improvements or fixtures hereinafter constructed or installed on the Premises, may not sufficiently cover the replacement cost thereof Any insurance procured and maintained by Lessor pursuant to this subsection 16.c. may provide for less coverage than is required to be maintained by Lessee pursuant to this Lease.  Lessee acknowledges and agrees that Lessee is and shall remain solely responsible for procuring insurance sufficient for Lessee’s purposes, notwithstanding the fact that Lessor has procured or maintained any insurance pursuant to this subsection 16.c.  Any insurance required to be maintained by Lessee hereunder shall be in companies with a security rating of A or better, and a financial size category rating of X or better, in the then most recently published “Best’s Insurance Guide”.  Prior to occupancy of the Premises (and thereafter annually with respect to renewals, not later than thirty (30) days prior to expiration of then existing policies), Lessee shall deliver to Lessor copies of the policies of insurance required to be kept by Lessee hereunder, or certificates evidencing the existence and amount of such insurance, with evidence satisfactory to Lessor of payment of premiums.  No policy shall be cancelable or subject to reduction of coverage except after thirty (30) days prior written notice to Lessor.

 

d.             Not more frequently than once every year, Lessee shall increase the amounts of insurance as follows:  (i) as recommended by Lessor’s insurance broker provided that the amount of insurance recommended by such broker shall not exceed the amount customarily required of tenants in comparable projects located within Cupertino, California, or (ii) as required by Lessor’s lender.  Any limits set forth in this Lease on the amount or type of coverage required by Lessee’s insurance shall not limit the liability of Lessee under this Lease.

 

17.           SERVICES AND UTILITIES.  Provided that Lessee is not in default hereunder, Lessor agrees to furnish to the Premises during reasonable hours of generally recognized business days, to be determined by Lessor in its reasonable discretion, and subject to tine rules and regulations of the Building of which the Premises are a part, electricity for normal lighting, water, heat, air-conditioning and elevator service which are required in Lessor’s good faith judgment for the comfortable use and occupation of the Premises; provided, however, that electricity, water and elevator service shall be furnished 24 hours a day, 7 days a week.  During recognized business days for the Building, and subject to the reasonable rules and regulations of the Building and Project, Lessor shall furnish to the Premises and the Commons Areas, janitorial service, window washing, fluorescent tube replacement and toilet supplies; provided, however, Lessor shall not be required to provide janitorial services for any portion of the Premises to the extent required as a result of the preparation or consumption of food or beverages (provided that nothing in this paragraph shall be construed as a consent by Lessor to the preparation or consumption of such food or beverages unless otherwise expressly provided elsewhere in this Lease).  Lessor shall also maintain and keep lighted during such hours the common stairs, common entries and toilet rooms in the Building.  Lessor shall not be liable for, and Lessee shall not be entitled to, any reduction of Rentals by reason of Lessor’s failure to furnish any of the foregoing when such failure is caused by casualty, Act of God, accident, breakage, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character, or by any other cause, similar or dissimilar, beyond the reasonable control of Lessor.  Lessor shall not be liable under any circumstances for injury to or death of or loss or damage to persons or property or damage to Lessee’s business, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing.  Wherever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Lessor reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Lessee to Lessor upon demand by

 

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Lessor as additional rent.  The costs of all utilities and services furnished by Lessor to Lessee pursuant to this Article 17 which are not specified as being reimbursed or paid directly by Lessee shall be included as items of Building Operating Expenses.

 

Lessee will not, without the prior written consent of Lessor, use or permit the use of any apparatus or device in or upon the Premises (including, but without limitation thereto, machines using in excess of 120 volts), which will in any way increase the amount of gas, electricity or water usually furnished or supplied for the use of the Premises as general office space (which, as to electricity consumption, the parties hereby agree to mean not more than three (3) watts per square foot of usable area on a demand load basis); nor will Lessee connect or permit connection of any apparatus or device for the purpose of using gas, electric current or water with electric current, gas or water supply lines, except for electricity through existing electrical outlets in the Premises.  If Lessee requires water or electric current in excess of that usually furnished or supplied for the use of the Premises as general office space, Lessee shall first procure the written consent of Lessor (which consent may be granted or withheld in Lessor’s sole and absolute discretion), to the use thereof and Lessor may cause a water or gas meter or electric current meter to be installed in the Premises so as to measure the amount of water, gas and electric current consumed for any such use.  The cost of any such meters and of installation, maintenance and repair thereof shall be paid for by the Lessee and Lessee agrees to pay to Lessor, as additional rent, promptly upon demand therefor by Lessor for all such water, gas and electric current consumed as shown by said meters, at the rates charged for such services by the local public utility furnishing the same, plus any additional expense incurred in keeping account of the water, gas and electric current so consumed.  If a separate meter is not installed, such excess cost for such water, gas and electric current will be conclusively established by an estimate made by a utility company or electrical engineer selected by Lessor.

 

If requested by Lessee in writing at least one (1) business day in advance (or such shorter time in advance as is reasonably practicable given Building mechanical systems), heating, ventilation and air conditioning (“HVAC”) service shall be provided to the Premises other than during Building Hours (for a minimum period of three (3) consecutive hours at a time, except for after-hours HVAC service immediately following Building Hours, at which time the minimum period shall be one (1) hour), provided that Lessee shall pay to Lessor for each such hour of HVAC service during non-Building Hours, the then prevailing charge by Lessor for such service (which shall equal Lessor’s determination in Lessor’s reasonable business judgment of the actual cost of providing such non-Building Hours HVAC service, including, without limitation, a reasonable administrative charge).  Lessor’s current hourly cost for such additional HVAC usage is sixty-two dollars ($62.00) per zone.  Amounts payable by Lessee hereunder shall be paid as additional rent within thirty (30) days following Lessee’s receipt of Lessor’s billing therefor.

 

18.           RULES AND REGULATIONS.  Lessee shall faithfully observe and comply with the rules and regulations that Lessor shall from time to time promulgate for the Building and the Project.  Lessor reserves the right from time to time to make all reasonable modifications to said rules and regulations.  The additions and modifications to these rules and regulations shall be binding upon Lessee upon delivery of a copy of them to Lessee.  Lessor shall not be responsible to Lessee for the non-performance of any said rules by any other tenants or occupants.  The current “Rules and Regulations” are attached hereto as Exhibit D.

 

19.           HOLDING OVER.  If Lessee remains in possession of the Premises or any part thereof after Lease Termination, with the express written consent of Lessor, such occupancy shall be a tenancy from month to month at a Base Rent in the amount of one hundred fifty percent (150%) of the Base Rent in effect immediately preceding such Lease Termination, plus all other rental charges payable hereunder, and upon all the terms hereof applicable to a month to month tenancy.  In such case, either party may thereafter terminate this Lease at any time upon giving not less than thirty (30) days written notice to the other party.  For any possession of the Premises after the Lease Termination without Lessor’s consent, Lessee shall be liable for all detriment proximately caused by Lessee’s possession, including without limitation, attorneys’ fees, costs and expenses, claims of any succeeding tenant founded on Lessee’s failure to vacate and for payment to Lessor of Base Rent in an amount equal to the greater of (a) two hundred percent (200%) of the Base Rent in effect immediately preceding such Lease Termination, or (b) the fair market rental value for the Base Rent for the Premises, together with such other Rentals provided in this Lease to the date Lessee actually vacates the Premises, and such other remedies as are provided by law, in equity or under this Lease, including without limitation punitive damages recoverable under California Code of Civil Procedure Section 1174.

 

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20.           ENTRY BY LESSOR.  Lessor reserves and shall at any and all reasonable times with reasonable advance notice (except in the event of an emergency, in which event no advance notice shall be required) to Lessee have the right to enter the Premises, inspect the same, supply janitorial service and any other service to be provided by Lessor to Lessee hereunder, to submit said Premises to prospective purchasers, mortgagees, lenders or tenants, to post notices of non-responsibility, and to alter, improve or repair the Premises and any portion of the Building that Lessor may deem necessary or desirable, without any abatement of Rentals, and may for such purposes erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that the entrance to the Premises shall not be unreasonably blocked thereby, and further provided that the business of the Lessee shall not be interfered with unreasonably.  In no event shall Lessor have any liability to Lessee for, and Lessee hereby waives any claim for, damages or for any injury or inconvenience to or interference with Lessee’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other damage or loss occasioned thereby.  For each of the aforesaid purposes, Lessor shall at all times have and retain a lacy with which to unlock all of the doors in, upon and about the Premises, excluding Lessee’s vaults, safes and files, and Lessor shall have the right to use any and all means which Lessor may deem proper to open said doors in an emergency in order to obtain entry to the Premises, without liability to Lessee except for any failure to exercise due care for Lessee’s property under the circumstances of each entry.  Any entry to the Premises obtained by Lessor by any of said means or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Lessee from the Premises or any portion thereof.  If Lessee has removed substantially all of Lessee’s property from the Premises, Lessor may, without abatement of Rentals, enter the Premises for alteration, renovation or decoration during the last thirty (30) days of the Term.  With respect to any entry by Lessor into the Premises, Lessor shall be liable to Lessee solely for physical damage caused to Lessee’s personal property located within the Premises to the extent such damage is caused by Lessor’s active negligence or willful misconduct and which is not covered by the insurance required to be maintained by Lessee pursuant to this Lease, and only with respect to an entry in an non-emergency situation.

 

21.           RECONSTRUCTION.  If the Premises are damaged and rendered substantially untenantable, or if the Building is damaged (regardless of damage to the Premises) or destroyed, Lessor may, within ninety (90) days after the casualty, notify Lessee of Lessor’s election not to repair, in which event this Lease shall terminate at the expiration of the ninetieth (90th) day.  If Lessor elects to repair the damage or destruction, this Lease shall remain in effect and the then current Base Rent and Lessee’s Percentage Share of Building Expenses shall be proportionately reduced during the period of repair.  The reduction shall be based upon the extent to which the snaking of repairs interferes with Lessee’s business conducted in the Premises, as reasonably determined by Lessor.  All other Rentals due hereunder shall continue unaffected, and Lessee shall have no claim against Lessor for compensation for inconvenience or loss of business during any period of repair or reconstruction.  Lessee shall continue the operation of its business on the Premises during any period of reconstruction or repair to the extent reasonably practicable from the standpoint of prudent business management.  Upon Lessor’s election to repair, Lessor shall diligently repair the damage to the extent of insurance proceeds available to Lessor.  Lessor shall not be required to repair or replace, whether injured or damaged by fire or other cause, any items required to be insured by Lessee under this Lease including Lessee’s fixtures, equipment, merchandise, personal property, inventory, panels, decoration, furniture, railings, floor covering, partitions or airy other improvements, alterations, additions, or property made or installed by Lessee to the Premises, and Lessee shall be obligated to promptly rebuild or restore the same to the same condition as they were in immediately before the casualty.  Lessee hereby waives all claims for lass or damage to the foregoing.  Lessee waives any rights to terminate this Lease if the Premises are damaged or destroyed, including without limitation any rights pursuant to the provisions of Subdivision 2 of Section 1932 and Subdivision 4 of Section 1933 of the Civil Code of California, as amended from time to time, and the provisions of any similar law hereinafter enacted.  If the Lease is terminated by Lessor pursuant to this Article 21, the unused balance of the Security Deposit and any Rentals unearned as of the effective date of termination shall be refunded to Lessee.  Lessee shall pay to Lessor any Rentals or other charges due Lessor under the Lease, prorated as of the effective date of termination.  Notwithstanding anything to the contrary in the foregoing, if the damage is due to the fault or neglect of Lessee, or Lessee’s Agents, there shall be no abatement of Base Rent or any other Rentals.

 

Notwithstanding the foregoing, if less than thirty-three percent (33%) of the Rentable Area of the Building is damaged from an insured casualty and the insurance proceeds actually available to Lessor for reconstruction (net of costs to recover such proceeds and after all claimants thereto including lienholders have been satisfied or waive their respective claims) (“Net Insurance Proceeds”) are sufficient to completely restore the Building, Lessor agrees to make such reparations and continue this Lease in effect. If, upon damage of less than thirty-three percent (33%) of

 

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the Rentable Area of the Building there are not sufficient insurance proceeds actually available to allow Lessor to completely restore the Building, Lessor shall not be obligated to repair the Building and the provisions of the first paragraph of this Article shall control.

 

Lessee shall not be entitled to any compensation or damages from Lessor for loss of the use of the whole or any part of the Premises, or for any damage to Lessee’s business, or any inconvenience or annoyance occasioned by such damage, or by any repair, reconstruction or restoration by Lessor, or by any failure of Lessor to make any repairs, reconstruction or restoration under this Article or any other provision of this Lease.

 

22.           DEFAULT.  The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee (“Event of Default”):

 

a.             Lessee’s failure to pay when due Base Rent or any other Rentals or other sums payable hereunder;

 

b.             Lessee’s failure to occupy and use tire Premises for thirty (30) consecutive days, which failure shall deem an abandonment of the Premises by Lessee.

 

c.             Commencement, and continuation for at least thirty (30) days, of any case, action, or proceeding by, against, or concerning Lessee, or any guarantor of Lessee’s obligations under this Lease (“Guarantor”), under any federal or state bankruptcy, insolvency, or other debtor’s relief law, including without Emulation, (i) a case under Title 11 of the United States Code concerning Lessee, or a Guarantor, whether under Chapter 7, 11, or 13 of such Title or under airy other Chapter, or (ii) a case, action, or proceeding seeking Lessee’s or a Guarantor’s financial reorganization or an arrangement with any of Lessee’s or a Guarantor’s creditors;

 

d.             Voluntary or involuntary appointment of a receiver, trustee, keeper, or other person who takes possession for more than thirty (30) days of substantially all of Lessee’s or a Guarantor’s assets, or of any asset used in Lessee’s business on the Premises, regardless of whether such appointment s as a result of insolvency or any other cause;

 

e.             Execution of an assignment for the benefit of creditors of substantially all assets of Lessee or a Guarantor available by law for the satisfaction of judgment creditors;

 

f.              Commencement of proceedings for winding up or dissolving (whether voluntary or involuntary) the entity of Lessee or a Guarantor, if Lessee or such Guarantor is a corporation, partnership, limited liability company or other entity;

 

g.             Levy of a writ of attachment or execution on Lessee’s interest under this Lease, if such writ continues for a period of ten (10) days;

 

h.             Any Transfer or attempted Transfer of this Lease by Lessee contrary to the provisions of Article 13 above; or

 

i.              With respect to any report that Lessee is required to submit hereunder, the submission by Lessee of any false report;

 

j.              The use or occupancy of the Premises for any use or purpose not specifically allowed by the terms of this Lease; or

 

k.             Breach by Lessee of any term, covenant, condition, warranty, or provision contained in this Lease or of any other obligation owing or due to Lessor other than as described in subsections 22.a., b., c., d., e., f., g., h., i. or j. of this Article 22, where such failure shall continue for the period specified in this Lease or if no such period is specified, for a period of thirty (30) days after written notice thereof by Lessor to Lessee; provided, however, that if the nature of Lessee’s default is such that more than thirty (30) days are reasonably required for its cure, Lessee shall not be deemed to be in default if Lessee commences such cure within said thirty (30) day period and thereafter

 

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diligently prosecutes such cure to completion, and if Lessee provides Lessor with such security as Lessor may require to fully compensate Lessor for any loss or liability to which Lessor might be exposed.

 

23.           REMEDIES UPON DEFAULT.  Upon any default or breach by Lessee, at any time thereafter, with or without notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have hereunder or otherwise at law or in equity by reason of such default or breach Lessor may do the following:

 

a.             Termination of Lease.  Lessor may terminate this Lease or Lessee’s right to possession of the Premises by notice to Lessee or any other lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor.  In such event Lessor shall be entitled to recover from Lessee:

 

(i)    The worth at the time of award of the unpaid Rentals which had been earned at the time of termination;

 

(ii)   The worth at the time of award of the amount by which the unpaid Rentals which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided;

 

(iii)  The worth at the time of award (computed by discounting at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent) of the amount by which the unpaid Rentals for the balance of the Term after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; and

 

(iv)  Any other amounts necessary to compensate Lessor for detriment proximately caused by the default by Lessee or which in the ordinary course of events would likely result, including without limitation the reasonable costs and expenses incurred by Lessor for:

 

(A)          Retaking possession of the Premises;

 

(B)           Cleaning and making repairs and alterations (including installation of leasehold improvements, whether or not the same shall be funded by a reduction of rent, direct payment or otherwise) necessary to return the Premises to good condition and preparing the Premises for reletting;

 

(C)           Removing, transporting, and storing any of Lessee’s property left at the Premises (although Lessor shall have no obligation to remove, transport, or store any of the property);

 

(D)          Retelling the Premises, including without limitation, brokerage commissions, advertising costs, and attorneys’ fees;

 

(E)           Attorneys’ fees, expert witless fees and court costs;

 

(F)           Any unamortized real estate brokerage commissions paid in connection with this Lease; and

 

(G)           Costs of carrying the Premises, such as repairs, maintenance, taxes and insurance premiums, utilities and security precautions, if any.

 

The “worth at the time of award” of the amounts referred to in Articles 23.a.(i) and 23.a.(ii) is computed by allowing interest at an amoral rate equal to the greater of:  ten percent (10%); or five percent (5%) plus the rate established by the Federal Reserve Bank of San Francisco, as of the 25th day of the month immediately preceding the default by Lessee, on advances to member banks under Section 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to time amended (the “Stipulated Rate”).  The computation of the amount of rental loss that could be or could have been reasonably avoided by Lessor pursuant to California Civil Code section 1951.2

 

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shall take into account the use restrictions set forth in Article 8.a. above except to the extent that Lessee proves that under all circumstances the enforcement of the use restriction would be unreasonable.

 

b.             Continuation of Lease.  Lessor may continue this Lease in full force and effect, and the Lease shall continue in effect as long as Lessor does not terminate Lessee’s right to possession, and Lessor shall have the right to enforce all rights and remedies under this Lease including the right to collect all Rentals when due.  During the period Lessee is in default, Lessor can enter the Premises and relet them, or any part of them, to third parties for Lessee’s account.  Lessee shall be liable immediately to Lessor for all costs Lessor incurs in retelling the Premises, including without limitation, those items outlined in subsections a.(i) through a.(iv) of this Article 23, and other like costs.  Reletting can be for a period shorter or longer than the remaining Term.  Lessee shall pay to Lessor all Rentals due under this Lease on the date the Rentals are due, less the rent Lessor receives from any reletting.  The use restriction provided in Article 8.a. above shall apply to Lessor’s remedies under California Civil Code section 1951.4 except to the extent that Lessee proves that under all circumstances enforcement of the use restriction would be unreasonable.

 

c.             Other Remedies.  Lessor may pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the State in which the Premises are located.

 

d.             General.  The following shall apply to Lessor’s remedies:

 

(i)    No entry upon or taking of possession of the Premises or any part thereof by Lessor, nor any letting or subletting thereof by Lessor for Lessee, nor any appointment of a receiver, nor any other act of Lessor, whether acceptance of keys to the Processes or otherwise, shall constitute or be construed as an election by Lessor to terminate this Lease or Lessee’s right to possession of the Premises unless a written notice of such election be given to Lessee by Lessor.

 

(ii)   If Lessor elects to terminate this Lease or Lessee’s right to possession hereunder, Lessee shall surrender and vacate the Premises in broom-clean condition, and Lessor may re-enter and take possession of the Premises and may eject all parties in possession or eject some and not others or eject none.  Any personal property of or under the control of Lessee remaining on the Premises at the time of such re-entry may be considered and treated by Lessor as abandoned.

 

24.           EMINENT DOMAIN.  If more than twenty-five percent (25%) of the area of the Premises is taken or appropriated for any public or quasi-public use under the power of eminent domain, or conveyed in lieu thereof, either party hereto shall have the right, at its option, to terminate this Lease by written notice to the other party given within ten (10) days of the date of such taking, appropriation or conveyance, and Lessor shall be entitled to any and all income, rent, award, or any interest therein whatsoever which may be paid or made (the “Award”) in connection with such public or quasi-public use or purpose, and Lessee shall have no claim against Lessor for (and hereby assigns to Lessor any claim which Lessee may have for) the value of any unexpired Term of this Lease.  If any part of the Building or the Project other than the Premises may be so taken, appropriated or conveyed, Lessor shall have the right at its option to terminate this Lease, and in any such event Lessor shall be entitled to the entire Award whether or not this Lease is terminated.  If this Lease is terminated as provided above:  (i) the termination shall be effective as of the date upon which title la the Premises, the Building, the Project, or a portion thereof, passes to and vests in the condemnor or the effective date of any order for possession if issued prior to the date title vests in the condemnor; (ii) Lessor shall refund to Lessee any prepaid but unearned Rentals and the unused balance of the Security Deposit; and (iii) Lessee shall pay to Lessor any Rentals or other charges due Lessor under the Lease, prorated as of the date of taking.

 

If less than twenty-five percent (25%) of the Premises is so taken, appropriated or conveyed, or more than twenty-five percent (25%) thereof is so taken, appropriated or conveyed and neither party elects to terminate as herein provided, (i) Lessor shall be entitled to the entirety of the Award, and Lessee shall be entitled to make a claim for any separate award attributable to any taking of Lessee’s trade fixtures so long as any such award to Lessee does not reduce the amount of the Award available to Lessor; and (ii) the Rental thereafter to be paid hereunder for the Premises shall be reduced in the some ratio that the percentage of the area of the Premises so taken, appropriated or conveyed bears to the total area of the Premises immediately prior to the taking, appropriation or conveyance.  In addition, if any Rentable Area in the Building containing the Premises is so taken, appropriated or conveyed and this

 

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Lease is not terminated by Lessor, Lessee’s Percentage Share of Building Expenses shall be adjusted pursuant to Article 7.

 

Notwithstanding this Article 24 above, upon a temporary taking of all or any portion of the Premises, the Lease shall remain in effect and Lessee shall continue to pay and be liable for all Rentals under this Lease.  Upon such temporary taking, Lessee shall be entitled to any Award for the temporary use of the portion of the Premises taken which is attributable to the period prior to the date of Lease Termination, and Lessor shall be entitled to any pardon of the Award for such use attributable to the period after Lease Termination.  As used in this paragraph, a temporary taking shall mean a salting for a period of one year or less and does not include a taking which is to last for an indefinite period and/or which will terminate only upon the happening of a specified event unless it can be determined at the time of the taking when such event will occur.

 

25.           OFFSET STATEMENT; MODIFICATIONS FOR LENDER.  Lessee shall at any time and from time to time within ten (10) days following request from Lessor execute, acknowledge and deliver to Lessor a statement in writing, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect), (ii) acknowledging that there are not, to Lessee’s knowledge, any uncured defaults on the part of the Lessor hereunder, or specifying such defaults if any are claimed, (iii) rectifying the date Lessee entered into occupancy of the Premises and that Lessee is open and conducting business at the Premises, (iv) certifying the date to which Rentals and other charges are paid in advance, if any, (v) evidencing the status of this Lease as may be required either by a lender making a loan affecting or a purchaser of the Premises, or part of the Project from Lessor, (vi) certifying that all improvements to be constructed on the Premises by Lessor are substantially completed (if applicable), except for any punch list items which do not prevent Lessee from using the Premises for its intended use, and (vii) certifying such other matters relating to this Lease and/or the Premises as may be reasonably requested by Lessor or a lender making a loan to Lessor or a purchaser of the Premises, or any part of the Project from Lessor.  Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Project, or any interest therein.  Lessee shall, within ten (10) days following request of Lessor, deliver such other documents including Lessee’s financial statements as are reasonably requested in connection with the sale of, or loan to be secured by, any portion of the Project, or any interest therein.

 

If in connection wills obtaining financing for all or any portion of the Project, any lender shall request modifications of this Lease as a condition to Lessor obtaining such financing, Lessee will not unreasonably withhold, delay or condition its consent thereto, provided that such modifications do not increase the financial obligations of Lessee hereunder or materially and adversely affect the leasehold interest hereby created or Lessee’ s rights hereunder.

 

26.           PARKING.  Lessee shall have the right to use the number of non-exclusive parking spaces located within the Project as designated in Article 1.k. without charge during the Term; except, however, notwithstanding anything to the contrary contained in this Lease, if a charge, fee, tax or other imposition is assessed against Lessor or the Project by applicable governmental authorities based upon use of parking spaces at the Project or is required by applicable governmental authorities to be assessed by Lessor upon users of parking spaces at the Project, then Lessee shall pay its equitable share of such charge, fee, tax or other imposition to Lessor monthly in advance as additional rent.  Use of all parking spaces shall be subject to rules and regulations established by Lessor which may be altered at any time and from time to rinse during the Terns.  The location of all parking spaces may be designated from time to time by Lessor.  Neither Lessee nor Lessee’s Agents shall at any time use more parking spaces than the number so allocated to Lessee or park or permit the parking of their vehicles in any portion of the Parcel not designated by Lessor as a non-exclusive parking area.  Lessee and Lessee’s Agents shall not have the exclusive right to use any specific parking space, except as expressly stated in this Article 26.

 

Notwithstanding the number of parking spaces designated for Lessee’s non-exclusive use, in the event by reason of any rule, regulation, order, law, statute or ordinance of any governmental or quasi-governmental authority relating to or affecting parking on the Parcel, or any cause beyond Lessor’s reasonable control, Lessor is required to reduce the number of parking spaces on the Parcel, Lessor shall have the right to proportionately reduce the number of Lessee’s parking spaces and the non-exclusive parking spaces of other tenants of the Building.  Lessor reserves the right in its absolute discretion:  to determine whether parking facilities are becoming overcrowded and in such event to re-allocate parking spaces among Lessee and other tenants of the Project; to have any vehicles owned by

 

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Lessee or Lessee’s Agents which are parked in violation of the provisions of this Article 26 or Lessor’s rules and regulations relating to parking, towed away at Lessee’s cost, after having given Lessee reasonable notice.  In the event Lessor elects or is required by any law to limit or control parking on the Parcel, by validation of parking tickets or any other method, Lessee agrees to participate in such validation or other program under such reasonable rules and regulations as are from time to time established by Lessor.  Lessor shall have the right to close all or any portion of the parking areas at reasonable times for any purpose, including, without limitation, the prevention of a dedication thereof, or the accrual of rights in any person or the public therein.  Employees of Lessee shall be required to park in areas designated for employee parking, if any.  The parking areas shall not be used by Lessee or Lessee’s Agents for any purpose other than the parking of motor vehicles and the ingress and egress of pedestrians and motor vehicles.

 

27.           AUTHORITY.  If Lessee is a corporation, partnership, limited liability company or other entity, each individual executing this Lease on behalf of said entity represents and warrants on behalf of such entity that he is duly authorized to execute and deliver this Lease on behalf of said entity in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the by-laws of said corporation or on behalf of said partnership in accordance with the partnership agreement of such partnership or otherwise on behalf of said entity in accordance with the organizational documents governing such entity, and that this Lease is binding upon said entity in accordance with its terms.  If Lessee is a corporation or other entity, Lessee shall, upon execution of this Lease, deliver to Lessor a certified copy of a resolution of the Board of Directors of said corporation or other evidence of organizational approval authorizing or ratifying the execution of this Lease.  If Lessee fails to deliver such resolution or other evidence to Lessor upon execution of this Lease, Lessor shall not be deemed to have waived its right to require delivery of such resolution or other evidence, and at any time during the Term Lessor may request Lessee to deliver the same, and Lessee agrees it shall thereafter promptly deliver such resolution or other evidence to Lessor.  If Lessee is a corporation or other entity, Lessee hereby represents, warrants, and covenants that (i) Lessee is a valid and existing corporation or other entity; (ii) Lessee is qualified to do business in California; (iii) all fees and all franchise and corporate taxes of Lessee are paid to date, and will be paid when due; (iv) all required forms and reports will be filed when due; and (v) the signers of this Lease are properly authorized to execute this Lease on behalf of Lessee and to bind Lessee hereto.

 

28.           SURRENDER OF PREMISES.

 

a.             Condition of Premises.  Lessee shall, upon Lease Termination, surrender the Premises in the condition required pursuant to subsection 10.b. above, and otherwise in broom clean, trash free, and in good condition, reasonable wear and tear, and insured casualties to the extent of Net Insurance Proceeds recovered by Lessor, alone excepted.  By written notice to Lessee, Lessor may elect to cause Lessee to remove from the Premises or cause to be removed, at Lessee’s expense, any logos, signs, notices, advertisements or displays placed on the Premises by Lessee.  If the Premises is not so surrendered as required by this Article 28, Lessee shall indemnify, defend and bold harmless Lessor from and against any loss or liability resulting from Lessee’s failure to comply with the provisions of this Article 28, including, without limitation, any claims made by any succeeding tenant or losses to Lessor due to lost opportunities to lease to succeeding tenants, and the obligations of Lessee pursuant hereto shall survive the Lease Termination.

 

b.             Removal of Personal Property.  Lessee shall remove all its personal property from the Premises upon Lease Termination, and shall immediately repair all damage to the Premises, Building and Common Area caused by such removal.  Any personal property remaining on the Premises after Lease expiration or sooner termination may be packed, transported, and stored at a public warehouse at Lessee’s expense.  If after Lease Termination and, within ten (10) days after written demand by Lessor, Lessee fails to remove Lessee’s personal property or, if removed by Lessor, fails to pay the removal expenses, the personal property may be deemed abandoned property by Lessor and may be disposed of as Lessor deems appropriate.  Lessee shall repair any damage to the Premises caused by or in connection with the removal of any personal property, including without limitation, the floor and patch and paint the walls, when required by Lessor, to Lessor’s reasonable satisfaction, all at Lessee’s sole cost and expense.  The provisions of this Article 28 shall survive Lease Termination.

 

29.           LESSOR DEFAULT AND MORTGAGEE PROTECTION.  Lessor shall not be in default under this Lease unless Lessee shall have given Lessor written notice of the breach, and, within thirty (30) days after notice, Lessor has not cured the breach or, if the breach is such that it cannot reasonably be cured under the circumstances

 

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within thirty (30) days, has not commenced diligently to prosecute the cure to completion.  The liability of Lessor pursuant to this Lease shall be limited to Lessor’s interest in the Building and any money judgment obtained by Lessee based upon.  Lessor’s breach of this Lease or otherwise relating to this Lease or the Premises, shall be satisfied only out of the proceeds of the sale or disposition of Lessor’s interest in the Building (whether by Lessor or by execution of judgment).  Lessee agrees that the obligations of Lessor under this Lease do not constitute personal obligations of the individual partners, whether general or limited, members, directors, officers or shareholders of Lessor, and Lessee shall not seek recourse against the individual partners, members, directors, officers or shareholders of Lessor or any of their personal assets for satisfaction of any liability with respect to this Lease.  Upon any default by Lessor under this Lease, Lessee shall give notice by registered mail to any beneficiary or mortgagee of a deed of trust or mortgage encumbering the Premises, and/or any portion of the Project, whose address shall have been famished to it, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises, and/or Project, or any portion thereof, by power of sale or judicial foreclosure, if such should prove necessary to effect a cure.

 

30.           RIGHTS RESERVED BY LESSOR.  Lessor reserves the right from time to time, without abatement of Rentals and without limiting Lessor’s other rights under this Lease:  (i) to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Project above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located in the Premises or located elsewhere outside the Premises, and to expand any building within the Project; (ii) to designate other land outside the current boundaries of the Project be a part of the Project, in which event the Parcel shall be deemed to include such additional land, and the Common Areas shall be deemed to include Common Areas upon such additional land; (iii) to add additional buildings and/or other improvements (including, without limitation, additional parking structures or extension of existing parlcing structures) to the Project, which may be located on land added to the Project pursuant to clause (ii) above; (iv) to make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parlcing areas, loading and unloading areas, ingress, egress, direction of traffic, landscape areas and walkways; (v) to close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (vi) to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Building or the Project, or any portion thereof; (vii) to grant the right to the use of the Exterior Common Area to the occupants of other improvements located on the Parcel; (viii) to designate the name, address, or other designation of the Building and/or Project, without notice or liability to Lessee; (ix) to close entrances, doors, corridors, elevators, escalators or other Building facilities or temporarily abate their operation; (x) to change or revise the business hours of the Building; and (xi) to do and performs such other acts and make such other changes in, to or with respect to the Common Areas, the Building or any other portion of the Project as Lessor deems to be appropriate in the exercise of its reasonable business judgment, provided that Lessor shall use reasonable efforts to avoid substantial interference with the conduct of Lessee’s normal business.

 

31.           EXHIBITS.  Exhibits and riders, if any, signed by the Lessor and the Lessee and endorsed on or affixed to this Lease are a part hereof.

 

32.           WAIVER.  No covenant, term or condition in this Lease or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed.  Any waiver of the breach of any covenant, term or condition herein shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, term or condition.  Acceptance by Lessor of any performance by Lessee after the time the same shall have become due shall not constitute a waiver by Lessor of the breach or default of any covenant, term or condition unless otherwise expressly agreed to by Lessor in writing.  The acceptance by Lessor of any sum less than that which is required to be paid by Lessee shall be deemed to have been received only on account of the obligation for which it is paid (or for which it is allocated by Lessor, in Lessor’s absolute discretion, if Lessee does not designate the obligation as to which the payment should be credited), and shall not be deemed an accord and satisfaction notwithstanding any provisions to the contrary written on any check or contained in a letter of transmittal.  Lessor’s efforts to mitigate damages caused by any default by Lessee shall not constitute a waiver of Lessor’s right to recover damages for any default by Lessee.  No custom or practice which may arise between the parties hereto in the administration of the terms hereof shall be construed as a waiver or diminution of Lessor’s right to demand performance by Lessee in strict accordance wills the terms of this Lease.

 

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33.           NOTICES.  All notices, consents and demands which may or are to be required or permitted to be given by either party to the other hereunder shall be in writing.  All notices, consents and demands by Lessor to Lessee shall be personally delivered, sent by overnight courier providing receipt of delivery (such as Federal Express), or sent by United States Certified Mail, postage prepaid return receipt requested, addressed to Lessee as designated in Article 1.l., or to such other place as Lessee may from time to time designate in a notice to Lessor pursuant to this Article 33.  All notices and demands by Lessee to Lessor shall be personally delivered, sent by overnight courier providing receipt of delivery (such as Federal Express) or sent by United States Certified Mail, postage prepaid return receipt requested (provided that a copy of any such notice or demand so sent by United States Certified Mail shall be concurrently sent by Lessee to Lessor by facsimile transmission), addressed to Lessor as designated in Article 1.l., or to such other person or place as Lessor may from time to time designate in a notice to Lessee pursuant to this Article 33.  Notices sent by overnight courier shall be drained delivered upon the next business day following deposit with such overnight courier for next business day delivery.  Mailed notices shall be deemed delivered two (2) business days after deposit in the United States mail as required by this Article 33.

 

34.           JOINT OBLIGATIONS.  If Lessee consists of more than one person or entity, the obligations of each Lessee under this Lease shall be joint and several.

 

35.           MARGINAL HEADINGS.  The captions of paragraphs and articles of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.

 

36.           TIME.  Time is of the essence of this Lease and each and all of its provisions in which performance is a factor except as to the delivery of possession of the Premises to Lessee.

 

37.           SUCCESSORS AND ASSIGNS.  The covenants and conditions herein contained, subject to the provisions of Article 13, apply to and bind the heirs, successors, executors, administrators, legal representatives and assigns of the parties hereto.

 

38.           RECORDATION.  Upon request by Lessor, Lessee shall execute and acknowledge a short form of this Lease in form for recording which may be recorded at Lessor’s election.  Lessee shall not record this Lease or a short form or memorandum hereof without the prior written consent of Lessor.

 

39.           QUIET POSSESSION.  Upon Lessee paying the Rentals reserved hereunder and observing and performing all of the covenants, conditions and provisions on Lessee’s part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire Term, subject to all the provisions of this Lease and subject to any ground or underlying leases, mortgages or deeds of trust now or hereafter affecting the Premises or the Building and the rights reserved by Lessor hereunder.

 

40.           LATE CHARGES; ADDITIONAL RENT AND INTEREST.

 

a.             Late Charges.  Lessee acknowledges that late payment by Lessee to Lessor of Rentals or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which are impracticable or extremely difficult to ascertain.  Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by the terms of any mortgage or trust deed covering the Premises or any part of the Project.  Accordingly, if any installment of Rentals or any other sum due from Lessee is not received by Lessor or Lessor’s designee within three (3) business days after the due date, then Lessee shall pay to Lessor, in each case, a late charge equal to eight percent (8%) of such overdue amount.  The parties agree that such late charge represents a fair and reasonable estimate of the cost that Lessor will incur by reason of late payment by Lessee.  Acceptance of any late charges by Lessor shall in no event constitute a waiver of Lessee’s default with respect to such overdue amount, nor prevent Lessor from exercising any of its other rights and remedies under this Lease.

 

b.             Rentals, Additional Rent and Interest.  All taxes, charges, costs, expenses, and other amounts which Lessee is required to pay hereunder, including without limitation Lessee’s Percentage Share of Building Expenses, and all interest and charges (including late charges) that may accrue thereon upon Lessee’s failure to pay the same and all damages, costs and expenses which Lessor may incur by reason of any default by Lessee shall be

 

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deemed to be additional rent hereunder.  Upon nonpayment by Lessee of any additional rent, Lessor shall have all the rights and remedies with respect thereto as Lessor has for the nonpayment of Base Rent.  The term “Rentals” as used in this Lease is Base Rent and all additional rent.  Any payment due from Lessee to Lessor (including but not limited to Base Rent and all additional rent) which is not paid within three (3) business days of when due shall bear interest from the date when due until paid, at an annual rate equal to the maximum rate that Lessor is allowed to contract for by law.  Payment of such interest shall not excuse or cure any default by Lessee.  In addition, Lessee shall pay all costs and attorneys’ fees incurred by Lessor in collection of such amounts.  All Rentals and other moneys due under this Lease shall survive the Lease Termination.  Interest on Rentals past due as provided herein shall be in addition to the late charges levied pursuant to 40.a. above.  All Rentals shall be paid to Lessor, in lawful money of tire United States of America which shall be legal tender at the time of payment, at the address of Lessor a provided herein, or to such other person or at such other place as Lessor may from time to time designate in writing.  If at any tune during the Term Lessee pays any Rentals by check which is returned for insufficient funds, Lessor shall have the right, in addition to any other rights or remedies Lessor may have hereunder, to require that Rentals thereafter be paid in cash or by cashier’s or certified check.

 

41.           PRIOR AGREEMENTS.  This Lease contains all of the agreements of the parties hereto with respect to the Premises, this Lease or any matter covered or mentioned in this Lease, and no prior agreements or understanding pertaining to any such matters shall be effective for any purpose.  No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest.  This Lease shall not be effective or binding on Lessor until fully executed by Lessor.

 

42.           INABILITY TO PERFORM.  This Lease and the obligations of the Lessee hereunder shall not be affected or impaired because the Lessor is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles, Acts of God, or airy other cause, similar or dissimilar, beyond the reasonable control of the Lessor.

 

43.           ATTORNEYS’ FEES.  If either party to this agreement shall bring an action to interpret or enforce this agreement or for airy relief against the other, including, but not limited to, declaratory relief or a proceeding in arbitration, the losing party shall pay to the prevailing party a reasonable sum for attorney’s fees, expert witness fees and other costs incurred in such action or proceeding.  Additionally, the prevailing party shall be entitled to all additional attorney’s fees and costs incurred in enforcing and collecting any such judgment or award.  Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney’s fees and costs incurred in enforcing such award or judgment

 

44.           SALE OF PREMISES BY LESSOR.  Upon a sale or conveyance by the Lessor herein named (and in case of any subsequent transfers or conveyances, the then grantor) of Lessor’s interest in the Building, other than a transfer for security purposes only, the Lessor herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be relieved, from and after the date of such transfer, of all obligations and liabilities accruing thereafter on the part of Lessor, provided that any funds in the hands of Lessor or the then grantor at the time of transfer and in which Lessee has an interest, less any deductions permitted by law or this Lease, shall be delivered to Lessor’s successor.  Following such sale or conveyance by Lessor or the then grantor, Lessee agrees to look solely to the responsibility of the successor-in-interest of Lessor in and to this Lease.  This Lease shall not be affected by any such sale or conveyance and Lessee agrees to attorn to the purchaser or assignee.

 

45.           SUBORDINATION/ATTORNMENT.  This Lease shall automatically be subject and subordinate to all ground or underlying leases which now exist or may hereafter be executed affecting any portion of the Project and to the lien of any mortgages or deeds of trust (including all advances thereunder, renewals, replacements, modifications, supplements, consolidations, and extensions thereof) in any amount or amounts whatsoever now or hereafter placed on or against any portion of the Project, or on or against Lessor’s interest or estate therein, or on or against any ground or underlying lease, without the necessity of the execution and delivery of any farther instruments on the part of Lessee to effectuate such subordination.  Lessee covenants and agrees to execute and deliver upon demand and without charge therefor, such further instruments evidencing the subordination of this Lease to such ground or underlying leases and/or to the lien of any such mortgages or deeds of trusts as may be required by Lessor or a lender making a loan affecting the Project; provided that such mortgagee or beneficiary under such mortgage or deed of trust or lessor under such ground or underlying lease agrees in writing that so long as Lessee is not in default under this Lease, this Lease shall not be terminated in the event of any foreclosure or

 

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termination of any ground or underlying lease.  Failure of Lessee to execute such instruments evidencing subordination of this Lease shall constitute a default by Lessee under this Lease.  If any mortgagee, beneficiary or lessor elects to have this Lease prior to the lien of its mortgage, deed of trust or lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust or lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust, or lease or the date of the recording thereof.

 

If any proceedings are brought to terminate any ground or underlying leases or for foreclosure, or upon the exercise of the power of sale, under any mortgage or deed of hurt covering any portion of the Project, Lessee shall attorn to the lessor or purchaser upon any such termination, foreclosure or sale and recognize such lessor or purchaser as the Lessor under this Lease.  So long as Lessee is not in default hereunder and norm as required above, this Lease shall remain in full force and effect for the full term hereof after any such termination, foreclosure or sale.

 

46.           NAME.  Lessee shall not use any name, picture or representation of the Building or Project for any purpose other than as an address of the business to be conducted by the Lessee in the Premises.

 

47.           SEVERABILITY.  Any provision of this Lease which proves to be invalid, void or illegal shall in no way affect, impair or invalidate airy other provision of this Lease and all such other provisions shall remain in full force and effect; however, if Lessee’s obligation to pay the Rentals is determined to be invalid or unenforceable, this Lease shall terminate at the option of Lessor.

 

48.           CUMULATIVE REMEDIES.  Except has otherwise expressly provided in this Lease, no remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

 

49.           CHOICE OF LAW.  This Lease shall be governed by the laws of the State of California.

 

50.           SIGNS.  Lessee shall not inscribe, paint, affix or place any sign, awning, canopy, advertising matter, decoration or lettering upon any portion of the Premises, including, without limitation, any exterior door, window or wall, without Lessor’s prior written consent.  Subject in all events to the requirements of the City of Cupertino and other applicable governmental requirements and any other restrictions of record or to which the Project is subject, (a) Lessee shall be entitled to Building standard identification of Lessee upon the common Building lobby directory board sign to be installed by Lessor at Lessor’s cost; (b) Lessor shall, at Lessor’s cost, install Building standard signage identifying Lessee at the Premises entry.  The exact location, size, materials, coloring and lettering of all Lessee signage shall be subject to Lessor’s prior written approval.

 

51.           GENDER AND NUMBER.  Wherever the context so requires, each gender shall include any other gender, and the singular number shall include the plural and vice-versa.

 

52.           CONSENTS.  Whenever the consent of Lessor is required herein, the giving or withholding of such consent in any one or any number of instances shall not limit or waive the need for such consent in any other or future instances.  Any consent given by Lessor shall not be binding upon Lessor unless in writing and signed by Lessor or Lessor’s agents.  Notwithstanding any other provision of this Lease, where Lessee is required to obtain the consent of Lessor to do any act, or to refrain from the performance of any act, Lessee agrees that if Lessee is in default with respect to any term, condition, covenant or provision of this Lease, then Lessor shall be deemed to have acted reasonably in withholding its consent if said consent is, in fact, withheld.

 

53.           BROKERS.  Lessee warrants that it has had no dealing with any real estate broker or agents in connection with the negotiation of this Lease excepting only the broker or agent designated in Article 1.m., and that it knows of no other real estate broker or agent who is entitled to or can claim a commission in connection with this Lease.  Lessee agrees to indemnify, defend and hold Lessor harmless from and against any and all claims demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) with respect to any alleged leasing commission or equivalent compensation alleged to be owing on account of Lessee’s dealings with any real estate broker or agent.

 

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54.           SUBSURFACE AND AIRSPACE.  This Lease confers on Lessee no rights either with respect to the subsurface of the Parcel or with regard to airspace above the top of the Building or above any paved or landscaped areas on the Parcel or Common Area and Lessor expressly reserves the right to use such subsurface and airspace areas, including without limitation the right to perform construction work thereon and in regard thereto.  Any diminution or shutting off of light, air or view by any structure which may be erected by Lessor on those portions of the Parcel, Common Area and/or Building reserved by Lessor shall in no way affect this Lease or impose any liability on Lessor.  Lessor shall have the exclusive right to use all or any portion of the roof, side and rear walls of the Premises and Building for any purpose.  Lessee shall have no right whatsoever to the exterior of the exterior walls or the roof of the Premises or any portion of the Project outside the Premises except as provided in Article 55 of this Lease.

 

55.           COMMON AREA.  For purposes of the Lease, “Common Area” shall collectively mean the following:

 

a.             Exterior Common Area.  That portion of the Parcel other than the land comprising the property, and all facilities and improvements on such portion for the non-exclusive use of Lessee in common with other authorized users, including, but not limited to, vehicle parking areas, driveways, sidewalks, landscaped areas, and the facilities and improvements necessary for the operation thereof (the “Exterior Common Area”); and

 

b.             Building Common Area.  That portion of the Building in which the Premises are located, and all of the facilities therein, set aside by Lessor for the non-exclusive use of Lessee in common with other authorized users, including, but not limited to, entrances, lobbies, halls, atriums, corridors, toilets and lavatories, passenger elevators and service areas (the “Building Common Area”).

 

Subject to the limitations and restrictions contained in this Lease, and the Rules and Regulations, Lessor grants to Lessee and Lessee’s Agents the nonexclusive right to use the Common Area in common with Lessor, Lessor’s agent, other occupants of the Building and Project, other authorized users and their agents, subject to the provisions of this Lease.  The right to use the Common Area shall terminate upon Lease Termination.

 

56.           LABOR DISPUTES.  If Lessee becomes involved in or is the object of a labor dispute which subjects the Premises or any part of the Project to any picketing, work stoppage, or other concerted activity which in the reasonable opinion of Lessor is in any manner detrimental to the operation of any part of the Project, or its tenants, Lessor shall have the right to require Lessee, at Lessee’s own expense and within a reasonable period of time specified by Lessor, to use Lessee’s best efforts to either resolve such labor dispute or terminate or control any such picketing, work stoppage or other concerted activity to the extent necessary to eliminate any interference with the operation of the Projector its tenants.  To the extent such labor dispute interferes with the performance of Lessor’s duties hereunder, Lessor shall be excused from the performance of such duties and Lessee hereby waives any and all claims against Lessor for damages or losses in regard to such duties.  If Lessee fails to use its best efforts to so resolve such dispute or terminate or control such picketing, work stoppage or other concerted activity within the period of time specified by Lessor, Lessor shall have the right to terminate this Lease.  Nothing contained in this Article 56 shall be construed as placing Lessor in an employer-employee relationship with any of Lessee’s employees or with any other employees who may be involved in such labor dispute.  Lessee shall indemnify, defend and hold harmless Lessor from and against any and all liability (including, without limitation, attorneys’ fees and expenses) arising from any labor dispute in which Lessee is involved and which affects any part of the Project

 

57.           CONDITIONS.  All agreements by Lessee contained in this Lease, whether expressed as covenants or conditions, shall be construed to be both covenants and conditions, conferring upon Lessor, upon breach thereof, the right to terminate this Lease.

 

58.           LESSEE’S FINANCIAL STATEMENTS.  Lessee hereby warrants that all financial statements delivered by Lessee to Lessor prior to the execution of this Lease by Lessee, or that shall be delivered in accordance wide the terms hereof, are or shall be at the time delivered true, correct, and complete, and prepared in accordance with generally accepted accounting principles.  Lessee acknowledges and agrees that Lessor is relying on such financial statements in accepting this Lease, and that a breach of Lessee’s warranty as to such financial statements shall constitute a default by Lessee.

 

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59.           LESSOR NOT A TRUSTEE.  Lessor shall not be deemed to be a trustee of any funds paid to Lessor by Lessee (or held by Lessor for Lessee) pursuant to this Lease.  Lessor shall not be required to keep any such funds separate from Lessor’s general funds or segregated from any funds paid to Lessor by (or held by Lessor for) other tenants of the Building.  Any fiends held by Lessor pursuant to this Lease shall not bear interest.

 

60.           MERGER.  The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of the Lessor, terminate all or any existing subleases or subtenancies, or may, at the option of Lessor, operate as an assignment to it of any or all such subleases or subtenancies.

 

61.           NO PARTNERSHIP OR JOINT VENTURE.  Nothing in this Lease shall be construed as creating a partnership or joint venture between Lessor, Lessee, or any other party, or cause Lessor to be responsible for the debts or obligations of Lessee or any other party.

 

62.           LESSOR’S RIGHT TO PERFORM LESSEE’S COVENANTS.  Except as otherwise expressly provided herein, if Lessee fails at any time to make any payment or perform any other act on its part to be made or performed under this Lease, then upon ten (10) days written notice to Lessee (provided that no such notice shall be required in the event of an emergency), Lessor may, but shall not be obligated to, and without waiving or releasing Lessee from any obligation under this Lease, make such payment or perform such other act to the extent that Lessor may deem desirable, and in connection therewith, pay expenses and employ counsel.  All sums so paid by Lessor and all penalties, interest and costs in connection therewith shall be due and payable by Lessee to Lessor as additional rent upon demand.

 

63.           PLANS.  Lessee acknowledges that any plan of the Project which may have been displayed or furnished to Lessee or which may be a part of Exhibit A or Exhibit B is tentative; Lessor may from time to tune change the shape, size, location, number, and extent of the improvements shown on any such plan and eliminate or add any improvements to the Project, in Lessor’s sole discretion.

 

64.           INTENTIONALLY DELETED.

 

65.           WAIVER OF JURY.  LESSOR AND LESSEE HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY ON ANY CAUSE OF ACTION, CLAIM, COUNTER-CLAIM OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER LESSOR AGAINST LESSEE OR LESSEE AGAINST LESSOR ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE.

 

66.           JOINT PARTICIPATION.  Lessor and Lessee hereby acknowledge that both parties have been represented by counsel in connection with this Lease and that both parties have participated in the negotiation and drafting of all of the terms and provisions hereof.  By reason of this joint participation, no term or provision of this Lease will be construed against either party as the “drafter” thereof, which terms and provisions shall include, without limitation, Article 14 hereof.

 

67.           COUNTERPARTS.  This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, but any number of which, taken together, shall be deemed to constitute one and the same instrument.

 

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR APPROVAL.  NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LESSOR BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS RELATING THERETO.

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Lease as of the data first written above.

 

	
LESSOR:
    	
 
    	
LESSEE:
    
	
 
    	
 
    	
 
    	
 
    
	
CUPERTINO CITY CENTER BUILDINGS,
    	
 
    	
SPLUNK, INC.,
    
	
a California limited partnership
    	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
PROM   XX, INC.,
    	
 
    	
By:
    	
/s/   Godfrey Sullivan
    
	
 
    	
a   California corporation, its general partner
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Print   Name:
    	
Godfrey   Sullivan
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
PROMETHEUS   REAL ESTATE
    	
 
    	
Its:
    	
CEO
    
	
 
    	
GROUP, INC.,   a California corporation,
    	
 
    	
 
    	
 
    
	
 
    	
agent   for owner
    	
 
    	
Date:
    	
January 12,   2011
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Jackie Safier
    	
 
    	
By:
    	
/s/   Raman Kapur
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Print   Name:
    	
Jackie   Safier
    	
 
    	
Print   Name:
    	
Raman   Kapur
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
President
    	
 
    	
Its:
    	
VP,   Finance
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    	
January 13,   2011
    	
 
    	
Date:
    	
January 12,   2011
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Blaine R. Emmons
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Print   Name:
    	
Blaine   R. Emmons
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
Vice   President
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    	
January 14,   2011
    	
 
    	
 
    

 

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EXHIBIT “A”

 

FLOOR PLAN OF THE PREMISES

 

 

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EXHIBIT “B”

 

DEPICTION OF THE PROJECT

 

 

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EXHIBIT “C”

 

WORK LETTER

 

Lessor shall cause, at Lessor’s sole cost and expense, the construction of certain improvements within the Premises as itemized below (the “Lessee Improvements”).  The Lessee Improvements shall be constructed by Lessor or Lessor’s designated contractor using Building standard materials and in compliance with all applicable building codes.  The Lessee Improvements consist of the following listed items:

 

1.               Remove the first six (6) offices along the window line to create a more open office environment;

 

2.               Remove the demising wall separating the kitchen from the open office area;

 

3.               Recarpet affected areas after demolition;

 

4.               Repair, if necessary, the supplemental HVAC tonnage in the server rooms (Lessor shall repair and replace such units for Lessee’s use throughout the Term);

 

5.               Increase, if necessary, electrical supply in break room to no less than five (5) 20 amp dedicated circuits; and

 

6.               Touch up paint as necessary.

 

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EXHIBIT “D”

 

RULES AND REGULATIONS

 

1.             No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building without prior written consent of Lessor.  Lessor shall have the right to remove any such sign, placard, picture, advertisement, name or notice without notice to and at the expense of Lessee.  All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Lessee by a person approved of by Lessor.  Lessee shall not place anything or allow anything to be places near the glass of any exterior window, door, partition or wall which may appear unsightly from outside the Premises.  Lessee shall not, without prior written consent of Lessor cover or otherwise sunscreen any window.

 

2.             The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Lessee or used by Lessee for any purpose other than for ingress or egress from its Premises.

 

3.             Lessor will furnish Lessee, free of charge, with two keys to each door lock in the Premises.  Lessor may make a reasonable charge for any additional keys.  Lessee shall return all keys issued for the Premises.  Lessee shall pay to Lessor the costs of re-keying Use Premises if all keys are not returned.  Without Lessor’s prior approval and otherwise complying with the provisions of this Lease governing the making of Alterations, Lessee shall not alter any lock or install any new or additional locks or any bolts on any doors or windows of the Premises.

 

4.             The Common Area toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Lessee who, or whose agents, officers, employees, contractors, servants, invitees or guests shall have caused it.

 

5.             Lessee shall not overload the floor of the Premises or in any way deface the Premises or any part thereof.  Lessor shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building and also the time and manner of moving the same in and out of the Building.  Safes and other heavy objects shall, if considered necessary by Lessor, stand on supports of such thickness as is necessary to properly distribute the weight.  Lessor will not be responsible for loss of or damage to any such safe or property from any cause and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Lessee.

 

6.             No furniture, freight or equipment of any kind shall be brought into the Building without prior notice to Lessor and all moving of the same into or out of the Building shall be done at such time and in such manner as Lessor shall designate.  Unless otherwise agreed to in writing by Lessor, any such movement of furniture, freight, or equipment shall be made during non-business hours for the Building.

 

7.             Lessee shall have the right to use the loading facilities provided at the Building, if any, in common with the other tenants.  All Lessee deliveries of bulk items shall be through the Building loading facilities, if any.  Freight elevator(s) will be available for use by all tenants in the Building, subject to such reasonable scheduling as Lessor, in its discretion, deems appropriate.  Lessor shall have the right at its sole discretion to prohibit Lessee’s delivery through the main lobbies.

 

8.             Lessee shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a mariner offensive or objectionable to Lessor or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be in or kept in or about the Premises or Building (other than “seeing-eye” dogs or other animals providing assistance to disabled persons).

 

9.             The Premises will not be used for lodging, storage of merchandise, washing clothes, or manufacturing of any kind, nor shall the Premises be used for any improper, immoral or objectionable purpose.  No

 

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cooking will be done or permitted on the Premises without Lessor’s consent, except the use by Lessee of Underwriters Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, and the use of a microwave oven for employees use will be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.

 

10.           Lessee shall not use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or any method of healing or air conditioning other than supplied by Lessor.

 

11.           Lessor shall approve in writing the method of attachment of any objects affixed to walls, ceilings or doors.  Lessor will direct electricians as to where and how telephone and telegraph wires are to be introduced.  No boring or cutting for the wires will be allowed without the consent of Lessor.  The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Lessor.  Lessee shall not install any wiring above the ceiling tiles that does not comply with the fire codes.  Any such wiring shall be removed immediately at the expense of Lessee.  Lessee will not affix any floor covering la the floor of the Premises in any manner except as approved by Lessor.

 

12.           All cleaning and janitorial services for the Building and the Premises will be provided exclusively through Lessor, and except with the written consent of Lessor, no person or persons other than those approved by Lessor will be employed by Lessee or permitted to miter the Building for the purpose of cleaning the same.

 

13.           Lessee will store all its trash and garbage within its Premises or in other facilities provided by Lessor.  Lessee will not place in any trash box or receptacle any material which cannot be disposed of in Use ordinary and customary manner of trash and garbage disposal.  All garbage and refuse disposal is to be made in accordance wills directions issued from time to time by Lessor.

 

14.           On Saturdays, Sundays and legal holidays, and on other days between the hours of 6:00 p.m. and 7:00 a.m. the following day, access to the Building, or to the halls, corridors, elevators or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the Building in charge and has a pass or is properly identified.  Lessor shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person.  In case of invasion, mob, not, public excitement or other commotion, Lessor reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the tenants and protection of the Building and of property in the Building.

 

15.           Lessee will not waste electricity, water or air conditioning and agrees to cooperate fully with Lessor to assure the most effective operation of the Building’s heating and air conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Lessee has actual notice, and will refrain from attempting to adjust controls.  Lessee will keep corridor doors closed, and shall keep all window coverings pulled down.

 

16.           Lessor reserves the right to exclude or expel from the Building any person who, in the judgment of Lessor, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

 

17.           No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the written consent of Lessor.

 

18.           Lessor shall have the right, exercisable without notice and without liability to Lessee to change the name and street address of the Building or the Project

 

19.           Lessee shall not disturb, solicit or canvass any occupant of the Building or Project and shall cooperate to prevent the same.

 

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20.           Lessor shall have the right to control and operate the public portions of the Buildings and the public facilities, and heating and air conditioning, as well as facilities furnished for the common use of the tenants, in such manner as it deems best for the benefit of the tenants generally.

 

21.           All entrance doors in the Premises shall be left locked when the Premises are not in use and all doors opening to public corridors shall be kept closed except for normal ingress or egress from the Premises.

 

22.           Without the written consent of Lessor, Lessee shall not use the name of the Building or Project in connection with or in promoting or advertising the business of Lessee except at Lessee’s address.

 

23.           Lessee shall place pads under all desk chairs, or have carpet coasters to protect carpeting.

 

24.           The current “Building Hours” are between 7:00 a.m. to 6:00 p.m. on weekdays, Monday through Friday, except generally recognized Building holidays.

 

25.           Lessee will not install any radio or television antenna, loudspeaker, satellite dishes or other devices on the roof(s) or exterior walls of the Building or the Project.  Lessee will not interfere with radio or television broadcasting or reception from or in the Project or elsewhere.  If Lessee desires telegraphic, telephonic, burglar alarm, satellite dishes, antennae or similar services, it will first obtain Lessor’s approval, and comply with, Lessor’s reasonable rules and requirements applicable to such services, which may include (without limitation) separate licensing by, and fees paid to, Lessor.

 

26.           Lessee agrees to comply with all safety, fire protection and evacuation procedures and regulations established by Lessor or any governmental agency.

 

27.           Lessee assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.

 

28.           Lessor may prohibit smoking in the Building and/or any other portion of the Project and may require Lessee and any of its employees, agents, clients, customers, invitees and guests who desire to smoke, to smoke within designated smoking areas within the Project, if any such smoking areas are provided.

 

29.           Lessee’s requirements will be attended to by Lessor only upon appropriate application to Lessor’s management office for the Project by an authorized individual of Lessee.  Employees of Lessor will not perform any work or do anything outside of their regular duties unless under special instructions from Lessor, and no employee of Lessor will admit any person (Lessee or otherwise) to any office without specific instructions from Lessor.

 

30.           In the event of any conflict between these Rules and Regulations and the Lease of which they are a part, the other provisions of the Lease shall prevail.  Lessor may waive any one or more of these Rules and Regulations for the benefit of Lessee or any other tenant, but no such waiver by Lessor will be construed as a waiver of such Rules and Regulations in favor of Lessee or any other tenant, nor prevent Lessor from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Project.

 

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