HomeMy WebLinkAboutStaff Report 11543
City of Palo Alto (ID # 11543)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/22/2021
City of Palo Alto Page 1
Summary Title: Approval of a Lease Agreement for a Portion of 1900
Embarcadero Road
Title: Finance Committee Recommends the Approval of a Lease Agreement
With BioScience Properties for Regional Water Quality Control Plant
Workspace at 1900 Embarcadero Road in the Estimated Total Amount of
$1.73 Million for a Period of Five Years and Approval of a Fiscal Year 2022
Budget Amendment in the Wastewater Treatment Fund
From: City Manager
Lead Department: Public Works
Recommendation
Finance Committee and staff recommend that City Council:
1. Approve and authorize the City Manager or his designee to execute a Lease Agreement
(Attachment A) with BioScience Properties for Regional Water Quality Control Plant
work, storage, and parking space at 1900 Embarcadero Road in the approximate
amount of $1.73 million for a five-year lease term; and
2. Amend the Fiscal Year 2022 budget Appropriation for the Wastewater Treatment Fund,
by a 2/3 vote, by:
a. Increasing the rents and leases expenditure appropriation by $318,843 to align
with the estimated amount of the first year of expenses of the five -year lease
term; and
b. Decreasing the ending fund balance by $318,843.
Executive Summary
On June 15, 2021, the Finance Committee unanimously recommended Council approval of the
Lease Agreement. The City’s Regional Water Quality Control Plant (Plant) is entering a period of
concentrated Capital Improvement Projects over the next five years with a likely total cost of
over $250 million. Six major projects are in the design and construction phases. To facilitate
those projects and provide room for construction, staging, consultants, and contractors, some
City staff and equipment must be moved from their current location, while maintaining quick
and ready access to the Plant. Lease space is currently available immediately adjacent to the
Plant at 1900 Embarcadero Road. Staff proposes that the Wastewater Treatment Enterprise
City of Palo Alto Page 2
Fund lease approximately 5,500 square feet of space in that building for a term of five years at
an estimated total cost of $1.73 million. During that time, it is envisioned that different
personnel and equipment would be moved in and out of that space to facilitate different needs
during Capital Improvement Program (CIP) construction.
Background
The Plant treats wastewater from six communities including the City of Palo Alto. Palo Alto
contributes approximately one-third of the wastewater to the Plant and pays for approximately
one-third of the expenses. Much of the Plant is now 50 years old and must be refurbished or
rebuilt as discussed at the April 20, 2021 Finance Committee meeting (SR #12170). In addition,
new processes must be added to meet emerging environmental requirements for discharge to
the San Francisco Bay and to supply recycled water for irrigation and highly purified water for
other uses. These needs resulted in a 2012 Long Range Facilities Plan, which was accepted by
City Council. Subsequently, individual CIP projects were developed and six are now in the
design and construction process.
Discussion
In order to move the six CIP projects into the construction phase, space must be created at the
Plant for staging, materials storage, contractor and consultant workspace, parking, and the
construction itself. One immediate need is to move City employees and materials out of the
existing temporary trailers and use these for consultants and contractors. A second need is to
move City employees, equipment, and materials out of the Administration Building, which will
enable the repurposing of the building for pumping and electronic control of recycled and
purified water in the future, consistent with several CIP projects. This move also relocates
employees to more appropriate distances from motors, pumps, and electronics, which are in
the current facility. In addition, the move frees up a large open space for larger gatherings with
necessary distancing for meetings and job walks with contractors. The Plant currently does not
have a space that serves this function. While it had been hoped to accomplish these moves
much sooner, good alternatives did not exist.
Just recently, space for personnel, materials, equipment, and parking has becom e available at
1900 Embarcadero Road, immediately adjacent to the Plant. This location will act as a modest
extension of the Plant, in a way that no other available property would. Employees will be able
to walk and move materials, equipment, and samples around at the Plant much as they would
have from their current locations. The new location will allow staff to perform inspection,
investigation, repair, design, construction oversight, and outreach material preparation
functions. These functions cannot be efficiently performed at remote locations. The effort to
work at home in response to the pandemic confirmed that most Plant workers cannot
efficiently perform most of their tasks remotely. Some Plant workers can perform some tasks at
home but space will still be needed at the Plant to store, lay out work, and work with materials.
Understanding that the Plant space requirements would likely exceed the current footprint,
staff has had an ongoing dialogue for the past decade with the two owners of appropriat e
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buildings adjacent to the Plant. Until just recently, opportunities for leasing space of the right
size in one of those buildings was not available. Now, for the first time in more than 20 years,
the City has an opportunity to lease space adjacent to the Plant. Approximately 5,500 square
feet of space is available in 1900 Embarcadero Road, at the corner of Embarcadero Road and
Embarcadero Way. This is sufficient for approximately 25 employees (and their materials) most
in need of relocation to allow the CIP projects to move forward. Since it is not known when this
opportunity will present itself again, the Finance Committee unanimously recommended that
City Council approve and authorize the City Manager to execute the attached Lease Agreement
(Attachment A) with BioScience Properties.
One of the CIP projects in the group of six near-term CIP projects referred to above is the New
Laboratory and Environmental Services Building (WQ-14002) or “Laboratory Building”. This new
building would replace a number of f unctional areas around the Plant and the 50-year-old
facilities they are in. A preliminary design of this building resulted in a new cost estimate of
almost $60 million. This estimate is much higher than an earlier estimate included in the 2012
Long Range Facilities Plan. Therefore, creative alternatives are now being explored to reduce
the size of this building and reduce its cost. One potential alternative is to purchase the building
and thereby reduce the amount of space needed for a Laboratory Building. This possibility will
be analyzed in greater detail in the coming months. In the interim, leasing the 5,500 square feet
moves the Plant in this direction, with continuing to lease or to purchase the building becoming
options.
Key Terms of the Lease Agreement
COMMENCEMENT DATE: July 1, 2021
EXPIRATION DATE: June 30, 2026 (i.e., sixty (60) months after the Commencement
Date)
PREMISES TO BE LEASED: Suites 110, 201, 205 and 207
RENTABLE AREA OF PREMISES: 5,469 square feet
RENTABLE AREA OF BUILDING: 25,303 square feet
BASE RENT:
Months of Term
Base Rent per
Rentable Square
Foot
Monthly Base
Rent
1-12 $5.30 $28,985.70
13-24 $5.46 $29,855.27
25-36 $5.62 $30,750.93
37-48 $5.79 $31,673.46
49-60 $5.97 $32,623.66
Rent for the second (2nd), thirteenth (13th), twenty-fifth (25th)
and thirty-seventh (37th) months of the Term shall not be
charged.
CITY’S SHARE: 21.6% of Rentable space in the Building
BASE YEAR: Calendar year 2021
City of Palo Alto Page 4
PARKING SPACES: Sixteen (16) unreserved spaces
Rent Amount:
As noted above, the proposed lease includes four months of free rent spaced out over the term
of the lease. When the four free months are factored in, the $5.30 per rentable square foot
base monthly rate is equivalent to an approximately $4.95 starting rate, which is slightly higher
than the appraised value of $4.75 per square foot. This rental rate, as adjusted, is higher than
the rate the City currently pays for space at Elwell Court ($3.95), but does reflect a negotiated
reduction from the original asking price of $5.70 per square foot. The Elwell Court space,
located approximately one mile away from 1900 Embarcadero, is used by the Utilities
Department. Unike the current situation where the City is dealing with a new owner and
uncertain rental environment, the City has leased the Elwell Court facility since 1998, so enjoys
the benefit of a long-standing business relationship. The rental rate for 1900 Embarcadero is
higher due to its location, condition, parking, amenities, and appearance. The site ’s location is
beneficial for the City, because staff’s availability and proximity to the Plant are important for
efficient day to day operational needs in order to have easy access the various Plant facilities.
Rent Increases Over Time:
The type of lease the Owner uses for this building is known as “Full Service”, where a Base Rent
($5.30 per square foot per month, in this case) and a Base Year (2021, in this case) are
established. The Base Rent will increase 3 percent annually. The Landlord pays all the building’s
operating expenses in the Base (first) Year. The tenant then pays its proportionate share
(21.61%) of incremental increases in expenses, over the Base Year, in subsequent years.
Projected increases in expenses, if any, are calculated on an annua l basis and added to the
monthly rental as “Additional Expenses.” Additional Expenses include on-going operating costs,
such as utilities, insurance, property tax, and repair and maintenance. To the degree the
expenses are controllable – management and administrative costs, cleaning, security – any
increase is capped at 7%. This creates some uncertainty in the rental amount in the four
subsequent years of this lease as the owner is new so there is no historical data to review to
assess operational performance. The lease does contain a “non-appropriation” clause which
provides that if Council does not agree to fund the lease in any year it may be terminated
without a penalty. A remaining concern is that property taxes could increase if the building is
sold again. However, this is unlikely as the building just sold in the year before the City’s Base
Year, and the property taxes are therefore aligned with current market valuation.
Resource Impact
The total cost of the new lease is estimated to be $1.73 million over the five-year lease term,
including an annual increase in the Base Rent of 3 percent. Palo Alto treats the combined
wastewater from Palo Alto, Los Altos, Los Altos Hills, Mountain View, Stanford University, and
the East Palo Alto Sanitary District, and shares the costs of operating the Plant proportionally
with the other partners. Similar to other shared costs for the Plant, Palo Alto’s cost share of the
rent is approximately 35 percent and the other five agencies’ share is approximately 65 percent
(outlined in below table).
City of Palo Alto Page 5
The lease is a “Full Service” type lease in which expenses are paid by the Landlord except that
increases in expenses are paid by the City with a cap of 7 percent per year on controllable
expenses. This constitutes a 0 to 7+ percent range for years 2 through 5 (FY 2023 through FY
2026) of the lease term and is not built into the estimated cost projection below. No such
increases will apply to the first year (FY 2022) and any subsequent increase will be assessed in
the subsequent years of the lease term and addressed as needed through the annual budget
development process. Additionally, monthly fiber costs for the office suites are estimated at
$330 per month or approximately $3,960 annually. These costs are not included in the rent al
lease agreement, and will be funded separately through the Utility portion of the operating
Budget for the RWQCP.
Due to the timing of this agreement, these expenses were not included in the FY 2022 Proposed
Operating Budget for the Wastewater Treatment Fund and require a budget amendment in FY
2022 to appropriate funding for the first year of the five-year term estimated at a total cost of
$318,843. Funding for subsequent fiscal years of the five-year lease term is subject to the
annual appropriation of funds through the budget process.
Fiscal Year Total Cost CPA Cost Share
FY 2022 $318,843 $110,224
FY 2023 $328,408 $113,531
FY 2024 $338,260 $116,937
FY 2025 $348,408 $120,445
FY 2026 $391,484 $135,336
TOTAL $1,725,403 $596,472
Note: Estimated amounts include an annual 3 percent increase and one month of free
rent in years 1, 2, 3, and 4 of the five-year lease term.
Stakeholder Engagement
Leasing this space will not impact neighbors or Baylands visitors as no activities producing noise
or emissions will be transferred to the new location. Therefore, a formal outreach program was
not conducted. However, the immediate neighbors were notified, as were the Partners of the
Plant. The lease expense is approximently 1.0 percent of the Plant’s estimated annual operating
expenses and was not a concern to the Partners. On the contrary, should the lease be
extended, or the building purchased, it could result in construction of a considerably smaller
Laboratory Building than currently under consideration. This would likely save a large amount
of money for all of the Partners. This possibility will be analyzed in the coming months.
Environmental Review
Approval of the Lease Agreement is exempt from review under the California Environmental
Quality Act (“CEQA”) pursuant to CEQA Guideline Section 15301, Existing Facilities, involving
negligble expansion of existing or former use.
Attachments:
City of Palo Alto Page 6
• Attachment A: Lease Agreement for A Portion of 1900 Embarcadero Road
LEASE AGREEMENT
BETWEEN
1900 EMBARCADERO PROPERTY OWNER, LP,
A DELAWARE LIMITED PARTNERSHIP
LANDLORD
AND
CITY OF PALO ALTO,
A CALIFORNIA CHARTERED MUNICIPAL CORPORATION
TENANT
1900 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA
Attachment A
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TABLE OF CONTENTS
Basic Lease Information ............................................................................................................................. iii
1. Definitions ............................................................................................................................................ 1
2. Premises ............................................................................................................................................... 1
3. Term ..................................................................................................................................................... 1
4. Rent; Additional Charges ..................................................................................................................... 1
5. Expenses and Taxes ............................................................................................................................. 2
6. Condition of Premises .......................................................................................................................... 5
7. Common Areas ..................................................................................................................................... 6
8. Use........................................................................................................................................................ 6
9. Alterations and Tenant’s Property ........................................................................................................ 7
10. Repairs and Other Work .................................................................................................................. 8
11. Liens................................................................................................................................................. 8
12. Subordination ................................................................................................................................... 9
13. Inability to Perform .......................................................................................................................... 9
14. Destruction ....................................................................................................................................... 9
15. Insurance ........................................................................................................................................ 11
16. Eminent Domain ............................................................................................................................ 11
17. Assignment and Subletting ............................................................................................................ 12
18. Utilities and Services ..................................................................................................................... 13
19. Default ........................................................................................................................................... 15
20. Indemnity; Waiver; Interest on Overdue Obligations .................................................................... 16
21. Landlord’s Access to Premises ...................................................................................................... 17
22. Notices ........................................................................................................................................... 17
23. No Waiver ...................................................................................................................................... 18
24. Tenant’s Estoppel Certificates ....................................................................................................... 18
25. Rules and Regulations.................................................................................................................... 18
26. Tenant’s Taxes ............................................................................................................................... 18
27. Corporate Authority ....................................................................................................................... 18
28. Miscellaneous ................................................................................................................................ 18
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Exhibits:
A Diagram/Description of Premises
B Rules and Regulations
Addendum I: Option to Extend Term
Schedule I: Tenant’s Insurance Requirements
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BASIC LEASE INFORMATION
BUILDING: 1900 Embarcadero Road
Palo Alto, California 94303
LANDLORD’S ADDRESS: 1900 Embarcadero Property Owner, LP
c/o BioScience Properties, Inc.
514 Via De La Valle, Suite 300A
Solana Beach, CA 92075
Attn: Steve Bollert
Email: steve@bioscienceprop.com
Telephone: (858) 263-0770
With a copy to:
1900 Embarcadero Property Owner, LP
c/o BioScience Properties, Inc.
1900 Embarcadero Road, Suite 201
Palo Alto, CA 94303
Attn: Tina Long
Email: tina@bioscienceprop.com
Telephone: (650) 867-5981
TENANT’S ADDRESS: City of Palo Alto
P.O. Box 10250
Palo Alto, CA 94303
Attn: Real Property Manager
Email: real.property@cityofpaloalto.org
Telephone: (650) 329-2264
With a copy to:
City of Palo Alto
P.O. Box 10250
Palo Alto, CA 94303
Attn: Public Works – Watershed Protection
Email: cleanbay@cityofpaloalto.org
Telephone: (650) 329-2598
COMMENCEMENT DATE: July 1, 2021.
EXPIRATION DATE: June 30, 2026 (i.e., sixty (60) months after the Commencement Date).
PREMISES: Suites 110, 201, 205 and 207 in the Building
RENTABLE AREA OF PREMISES: Suite 110: 1,011 rentable square feet
Suite 201: 1,600 rentable square feet
Suites 205 & 207: 2,858 rentable square feet
Total: 5,469 rentable square feet
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RENTABLE AREA OF BUILDING: 25,303 rentable square feet
DIAGRAM OF PREMISES: See Exhibit A
BASE RENT:
Months of Term
Base Rent per
Rentable Square
Foot
Monthly Base Rent
1-12 $5.30 $28,985.70
13-24 $5.46 $29,855.27
25-36 $5.62 $30,750.93
37-48 $5.79 $31,673.46
49-60 $5.97 $32,623.66
*Notwithstanding the foregoing, provided that Tenant is not in default
under this Lease beyond any applicable notice and cure period, the Base
Rent for the second (2nd), and thirteenth (13th), twenty-fifth (25th) and
thirty-seventh (37th) months of the Term shall be abated.
SECURITY DEPOSIT: $32,623.66
TENANT’S SHARE: 21.61%
BASE YEAR: Calendar year 2021
PERMITTED USE: General office, administration, incidental storage, and other ancillary
uses as approved by the City of Palo Alto and otherwise in compliance
with all applicable laws, ordinances, rules and regulation.
PARKING SPACES: Sixteen (16) unreserved spaces (i.e., 3 per 1,000 rentable square feet of
the Premises)
PARKING FEE: $0 per unreserved space
INSURANCE AMOUNT: $1,000,000 per occurrence, $2,000,000 aggregate
BROKERS: None
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LEASE AGREEMENT
THIS LEASE, dated as of ______________, 2021, is between 1900 EMBARCADERO PROPERTY
OWNER, LP, a Delaware limited partnership (“Landlord”), and CITY OF PALO ALTO, a California
chartered municipal corporation (“Tenant”). Landlord and Tenant hereby covenant and agree as follows:
1. DEFINITIONS
1.1. Basic Lease Information
The Basic Lease Information is hereby incorporated into and made a part of this Lease.
2. PREMISES
2.1. Premises Defined
Landlord leases to Tenant and Tenant hires from Landlord on the terms and conditions contained in
this Lease the Premises specified in the Basic Lease Information. Tenant accepts the Rentable Area as
specified in the Basic Lease Information as the Rentable Area of the Premises and such area shall not be
subject to recalculation. Landlord warrants to Tenant that the Premises and Building have been measured
substantially in accordance with industry standards. The terms “common area” and “common areas” shall
mean spaces, facilities, and installations such as toilets, janitor, telephone, electrical, and mechanical rooms
and closets, trash facilities, stairs, public lobbies, corridors and other circulation areas, wherever located in
the Building. The Building, the real property upon which the Building stands, common areas, drives,
walkways and other amenities appurtenant to or servicing the Building, are herein sometimes collectively
called the “Real Property” or the “Project.”
3. TERM
3.1. Term Commencement
The “Term” shall commence on the Commencement Date and shall terminate on the Expiration Date,
each as described in the Basic Lease Information. Any occupancy or possession of the Premises by Tenant
with Landlord’s permission prior to the date specified for the commencement of the Term shall be upon
and subject to all terms, covenants and conditions of this Lease, including the payment of rent. Landlord
will make all commercially reasonable efforts to deliver the Premises to Tenant in the condition required
by this Lease on the Commencement Date. If, for any reason whatsoever, Landlord cannot deliver
possession of the Premises to Tenant on or prior to the Commencement Date as set forth in the Basic Lease
Information, then (A) the validity of this Lease shall not be affected except that the Term shall begin at such
time that the Premises are delivered to Tenant; and (B) Tenant shall have no claim against Landlord on
account of such late delivery, provided, however, that Tenant shall owe no rent until at such time that the
Premises is delivered to Tenant and provided further, however, that if Landlord fails to deliver the Premises
to Tenant within six (6) months following the Commencement Date as set forth in the Basic Lease
Information, then Tenant shall have the right, in its sole discretion, to terminate this Lease. Following the
Commencement Date, Landlord will deliver to Tenant a notice identifying the Commencement Date, a
copy of which notice shall be executed by Tenant and returned to Landlord.
4. RENT; ADDITIONAL CHARGES
4.1. Annual Rental
Tenant shall pay to Landlord during the Term at the address set forth in the Basic Lease Information,
without demand, offset or deduction, Base Rent as set forth in the Basic Lease Information. Base Rent shall
be payable on or before the first day of each month, in advance, provided that the first month’s rent shall
be payable no later than ten (10) days following the execution of this Lease by Tenant. If the
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Commencement Date or the Expiration Date should occur on a day other than the first or last day of a
calendar month, respectively, then the Base Rent for such period shall be prorated.
4.2. Additional Charges
Tenant shall pay to Landlord as and when due all charges, expense and tax reimbursements (including,
without limitation, Tenant’s Share of Excess Expenses and Excess Taxes), fees, expenses, and all other
amounts as provided in this Lease (“Additional Charges”). Unless otherwise specifically provided for
herein, all Additional Charges shall be due 30 days following Tenant’s receipt of Landlord’s invoice for
the Additional Charges. Base Rent and Additional Charges shall constitute the “Rent” payable by Tenant
for the Premises.
4.3. Late Charges
If Tenant fails to pay any Rent within five (5) business days after the date Landlord gives Tenant
notice, such unpaid amounts will be subject to a late payment charge equal to five percent (5%) of the
unpaid amounts in each instance. This late payment charge has been agreed upon by Landlord and Tenant,
after negotiation, as liquidated damages and a reasonable estimate of the additional administrative costs and
detriment that will be incurred by Landlord as a result of any such failure by Tenant, the actual damages
and costs thereof being extremely difficult if not impossible to determine.
4.4. Security Deposit
Concurrently with Tenant’s execution of this Lease, Tenant has deposited with Landlord the Security
Deposit described in the Basic Lease Information. The Security Deposit shall be held by Landlord as
security for Tenant’s performance of the terms of this Lease. Landlord may (but shall not be required to)
use all or any part of the Security Deposit to remedy any default of Tenant under the Lease or to compensate
Landlord for any loss or damage which Landlord may incur as a result of Tenant’s default. If any portion
of the Security Deposit is so used, Tenant shall redeposit said amount with Landlord within ten (10) days
of Landlord’s demand therefor. Tenant shall not be entitled to interest on the Security Deposit and Landlord
shall not be required to keep the Security Deposit separate from its general funds.
5. EXPENSES AND TAXES
5.1. Definitions
For purposes of this Article 5, the following terms shall have the following meanings:
(a) “Real Estate Taxes” shall mean any and all real property taxes and any and all general,
supplemental and special assessments and reassessments, transit charges, fees or assessments, housing fund
assessments, security charges, maintenance fees, payments in lieu of taxes, fees or charges, and any other
tax, fee, assessment, charge or excise levied or assessed (whether at the date of this Lease or thereafter)
(i) on the Real Property, any portion thereof or Landlord’s interest therein, or Landlord’s personal property
used in the operation of the Real Property, (ii) on the use or occupancy of the Real Property or any portion
thereof, including, without limitation, any tax or levy made against Rent or gross receipts from the Real
Property, (iii) on the sale or other transfer of the Real Property or any portion thereof, or any improvements
thereto or recapitalization thereof, (iv) in connection with the business of renting space in the Real Property,
or in connection with entering into this Lease or any other lease with respect to the Real Property, or (v) for
housing, police, fire, or other governmental services provided by any governmental or public entity and
collected by a lien upon the Real Property. Real Estate Taxes shall also include any other tax, fee, or charge
that may be levied or assessed as a substitute for any other Real Estate Taxes. Real Estate Taxes shall not
include those amounts payable by Tenant pursuant to Section 26, or similar amounts payable directly by
other tenants of the Building. Real Estate Taxes shall also include reasonable legal fees, costs and
disbursements incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes,
to the extent the reduction in Real Estate Taxes exceeds such costs . Tenant may in its sole discretion
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challenge the assessed value of the Project with the applicable authority, and Landlord wi ll take such
commercially reasonable action, at no cost to Landlord, to cooperate with Tenant in any such challenge.
(b) “Expenses” shall mean all reasonable actual costs and expenses paid and/or incurred by
Landlord in connection with the management, operation, maintenance and repair of the Real Property,
including, without limitation, (i) the cost of heating, ventilation, air conditioning, steam, electricity, gas,
water, sewer service, mechanical, elevator and other systems and all other utilities, and the cost of supplies
and equipment and maintenance and service contracts in connection therewith, (ii) the cost of repairs,
replacements, general maintenance and cleaning, including, without limitation, the cost of janitorial and
other service agreements and trash removal, (iii) the cost of insurance Landlord reasonably deems
appropriate to carry, or is required to carry by any mortgagee under any mortgage against the Real Property
or any portion thereof or interest therein with respect to the Real Property (including, without limitation,
earthquake and flood insurance) or any of Landlord’s or a property manager’s personal property used in the
operation of the Real Property, (iv) wages, salaries, payroll taxes and other labor costs and employee
benefits of all on-site employees, and the allocable share of all off-site employees to the extent engaged in
the operation, management, maintenance and repair of the Real Property, (v) reasonable fees, charges and
other costs, including, without limitation, property management fees, consulting fees, attorneys’ fees and
accounting fees of all independent contractors engaged by Landlord, or that are charged by Landlord if
Landlord performs equivalent services in connection with the Real Property, (vi) the cost of supplying,
replacing and cleaning employee uniforms, (vii) fifty percent (50%) of the fair market rental value of the
property manager’s offices in the Building, (viii) the cost of any capital improvements or alterations made
to the Real Property after the date of this Lease that are intended as a labor-saving measure or to effect other
economies in the operation or maintenance of the Real Property or that are required under any governmental
law or regulation that was not applicable to the Real Property at the date of this Lease (in either case
amortized over such reasonable period as Landlord shall determine), together with interest on the
unamortized balance(s) at the a rate equal to Landlord’s borrowing costs as reasonably determined by
Landlord, (ix) all costs and fees for licenses, inspections or permits that Landlord may be required to obtain,
(x) exterior and interior landscaping, (xi) depreciation on personal property used by Landlord exclusively
on the Real Property, (xii) legal fees, costs and disbursements incurred in connection with proceedings to
contest, determine, or reduce Expenses, to the extent the reduction exceeds the costs (xiii) reasonable
reserves for any periodic items or improvements that would constitute an Expense when paid (provided that
payment of an Expense out of such reserves shall be excluded in calculating Expenses for the applicable
period), and (xiv) any other reasonable expenses and costs, whether foreseeable or unforeseeable, incurred
in managing, operating, maintaining and repairing the Real Property.
(c) “Base Year” shall be as provided on the Basic Lease Information.
(d) “Comparison Year” shall mean each calendar year after the Base Year.
(e) “Tenant’s Share” of Taxes and Expenses shall be as provided on the Basic Lease Information.
If the rentable area of the Premises or the Building is changed for any reason, Tenant’s Share shall be
recalculated to equal an amount determined by dividing the rentable area of the Premises after such
occurrence by the rentable area of the entire Building after such occurrence.
(f) “Excess Taxes” with respect to a given Comparison Year shall mean the excess of Real Estate
Taxes for that Comparison Year over Real Estate Taxes for the Base Year.
(g) “Excess Expenses” with respect to a given Comparison Year shall mean the excess of Expenses
for that Comparison Year over Expenses for the Base Year.
5.2. Special Allocations
Real Estate Taxes and Expenses which are, in Landlord’s reasonable discretion, properly chargeable
solely to a single tenant or to a group of tenants shall be so allocated. Any amount so allocated to Tenant
shall, notwithstanding any other provision of this Lease, be paid by Tenant as Additional Charges.
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5.3. Real Estate Taxes and Expense Gross-Up
Real Estate Taxes and Expenses for any period (including, without limitation, the Base Year) in which
the Building is not at least ninety-five percent (95%) occupied shall be adjusted according to Landlord’s
reasonable estimate to reflect the Real Estate Taxes and Expenses which would be payable if the Building
were ninety-five percent (95%) occupied.
5.4. Payment of Tenant’s Share of Excess Taxes and Expenses
Commencing on the first anniversary of the Commencement Date, Tenant shall pay to Landlord, in
advance, as Additional Charges one twelfth (1/12th) of Tenant’s Share of Excess Taxes and Excess
Expenses for each Comparison Year in an amount estimated by Landlord and billed by Landlord to Tenant.
As soon as reasonably possible after the expiration of the Base Year and each Comparison Year, Landlord
shall furnish Tenant with a statement (“Landlord’s Statement”) setting forth the actual amount of Real
Estate Taxes and Expenses for such Base Year or Comparison Year, as applicable, and Tenant’s Share of
Excess Taxes and Expenses for such Comparison Year, which Landlord’s Statement shall include
reasonably detailed calculations of such amounts. Tenant may request, within thirty (30) days of receipt of
Landlord’s Statement, such additional documentation as is reasonably necessary to review Landlord’s
Statement; provided however, that any such request will not affect the timing of any payments required
under this Lease and provided further that Landlord shall be obligated to provide only such documentation
which is within Landlord’s possession. Upon Tenant’s request, Landlord shall provide such additional
documentation within twenty (20) days following the request. If the actual amount of Tenant’s Share of
Excess Taxes and Expenses due for such Comparison Year is greater than the estimated amount of Tenant’s
Share of Excess Taxes and Expenses paid by Tenant for such Comparison Year, the difference shall be paid
by Tenant (whether or not this Lease has terminated) within thirty (30) days after delivery of Landlord’s
Statement or paid with the next installment of Base Rent. If the actual amount of Tenant’s Share of Excess
Taxes and Expenses due for such Comparison Year is less than the estimated amount of Tenant’s Share of
Excess Taxes and Expenses paid by Tenant for such Comparison Year, the difference shall be paid by
Landlord (whether or not this Lease has terminated) along with delivery of Landlord’s Statement , or
credited against the next installments of Excess Taxes or Excess Expenses due from Tenant hereunder;
provided, however, that in no event shall Excess Taxes or Excess Expenses for a given Comparison Year
be less than zero. Tenant’s Share of Excess Taxes and Excess Expenses for any Comparison Year that is
less than a full year shall be prorated equitably by Landlord.
5.5. Controllable Expenses
Notwithstanding any provision of this Lease to the contrary, for the sole purpose of calculating
Tenant’s Share of Excess Expenses, the Controllable Expenses (as defined below) for each calen dar year
after the Base Year shall not increase by more than seven percent (7%) over the maximum permitted
Controllable Expenses for the immediately preceding calendar year (i.e., on a cumulative, compounding
basis and regardless of the actual Controllable Expenses incurred for such preceding year); provided,
however, that if the actual Controllable Expenses for any calendar year are greater than the maximum
amount permitted to be charged to Tenant hereunder, then the difference shall be added to the actual
Controllable Expenses for succeeding years of the Term until exhausted. The term “Controllable
Expenses” mean those actual Expenses for which increases are reasonably within the control of Landlord,
and shall specifically exclude, without limitation, Utility Expenses (as defined below), Insurance Expenses
(as defined below), Real Estate Taxes, assessments, the cost of any Project amenities, collectively bargained
union wages, costs to comply with governmental laws enacted or first applicable after the Commencement
Date, trash removal and any services provided by monopolies or where there is otherwise only one (1)
provider available to Landlord. For purposes of this Lease, the following definitions shall apply: (i) “Utility
Expenses” shall mean the actual cost of supplying all utilities to the Project and the Building (other than
utilities for which tenants of the Building are separately metered), including utilities for the heating,
ventilation and air conditioning system for the Building and the Common Areas; and (ii) “Insurance
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Expenses” shall mean the actual cost of insurance required or allowed to be carried by Landlord under this
Lease. There shall be no limitation on the amount of increase from year to year on Expenses which are not
Controllable Expenses.
5.6. Objections to Statements
Provided that Tenant is not then in default under this Lease beyond any applicable notice and cure
period, Tenant shall have sixty (60) days following receipt of Landlord’s Statement, or receipt of additional
information requested pursuant to Section 5.4, whichever is later, to raise any objection to the calculations
contained therein, and to request adjustments to the data and/or calculations. If Landlord grants Tenant’s
request, the Expenses shall be adjusted accordingly. If Landlord disputes Tenant’s request, the Parties agree
to seek to resolve the dispute through good faith negotiations. If good faith negotiations fail to resolve the
dispute, the Parties agree to mutually select a certified public account (CPA) with not less than 10 years’
experience auditing financial statements related to commercial properties in the San Francisco Bay Area ,
to review the records and determine whether Tenant’s request for adjustment is justified. The CPA shall
not be paid on a contingency fee basis. The Parties agree to accept the CPA’s determination as final. If the
CPA confirms Tenant’s request, Tenant’s share of the expenses shall be adjusted retroactively to the start
date for such expenses. All costs incurred in connection therewith, including, without limitation, all fees
charged by the CPA, shall be the sole responsibility of Tenant, unless the CPA determines that Landlord
overstated the Expenses and Taxes by more than five percent (5%), in which event Landlord shall be
responsible for the costs of the CPA.
Failure of Tenant to object within the sixty (60) day period shall be deemed a waiver of any such
objection, absent manifest error. Tenant shall continue to make all payments required hereunder pending
resolution of any objection or request for adjustment. No delay by Landlord in providing any Landlord’s
Statement shall be deemed a default by Landlord or a waiver of Landlord’s right to require payment of
Tenant’s obligations for actual or estimated Excess Taxes or Excess Expenses.
6. CONDITION OF PREMISES
The Premises shall be delivered to Tenant as-is, in good, clean and tenantable condition, with all
Building Systems working, and in compliance with all applicable laws in effect as of the Commencement
Date. Except as expressly set forth herein, Landlord shall have no obligation to perform any work,
improvements or alterations to the Premises. Tenant shall be responsible, at its sole cost and expense, for
the performance of all work necessary or desirable for Tenant’s occupancy of the Premises (“Tenant’s
Work”). All such work shall be subject to the requirements of Section 10.2 below. Landlord makes no
representation or warranty as to the nature, quality or suitability for Tenant’s business of the Building or
the Premises, and Tenant shall have no rights against Landlord by reason of any claimed deficiencies
therein. For the period of ninety (90) consecutive days after the Commencement Date, Landlord shall, at its
sole cost and expense, be responsible for any repairs that are required to be made to the Premises, unless
Tenant was responsible for the cause of such repair, in which case Tenant shall pay the cost. Landlord and
Tenant acknowledge and agree that as of the Commencement Date, the floor of the Premises on the second
floor of the Building has a moderate slope (which has a corresponding impact on the ceiling of the Premises
on the first floor of the Building), but such slope does not currently impair the tenantability of the Premises
for the uses permitted under this Lease. If, at any time during the Term of this Lease, Tenant reasonably
determines that such slope materially impairs the tenantability of the Premises for the uses permitted under
this Lease, Tenant may deliver a written request to Landlord to remedy such slope (including the ceiling of
the first floor Premises) in a manner that will make the Premises tenantable for the uses permitted under
this Lease (“Slope Repair Request”). Within forty-five (45) days after receipt of the Slope Repair Request,
Landlord shall deliver a written notice to Tenant (“Slope Repair Response”) indicating whether or not
Landlord elects, in its sole discretion, to repair the slope (including the ceiling of the first floor Premises)
as set forth in the Slope Repair Request. If Landlord elects not to repair the slope (including the ceiling of
the first floor Premises) as set forth in the Slope Repair Request, Tenant shall have the right to terminate
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this Lease by providing written notice to Landlord no later than ten (10) business days following delivery
of Landlord’s Slope Repair Response, which termination shall be effective no earlier than ninety (90) days
after the date of Landlord’s Slope Repair Response. If, during such ninety (90) day period, Landlord elects
to repair the slope as set forth in the Slope Repair Request, Landlord shall deliver prior written notice
thereof to Tenant, after which Tenant may elect to either proceed with termination as aforesaid or retract
such termination by delivering written notice of such retraction to Landlord no later than ten (10) business
days following delivery of Landlord’s notice. In any event, if at any time Landlord elects to repair the slope,
Landlord shall, at its sole cost and expense, be responsible for the repair work, and the cost and expense for
such shall not be considered an Expense, for purposes of Section 5(b), above, and shall not be passed
through in any form to Tenant.
7. COMMON AREAS
7.1. Right to Use Common Areas
Tenant and Tenant’s agents, representatives, employees and visitors, shall have the right to use during
the Term the common areas of the Real Property in common with other persons approved by Landlord,
subject to Landlord’s rules and regulations and the provisions of this Lease, including all security
requirements imposed from time to time by Landlord at or for the Real Property.
7.2. Alteration by Landlord
Landlord shall at all times maintain and operate the common areas in good repair and condition and
in a manner consistent with comparable buildings in the vicinity of the Project. Landlord hereby reserves
the right, at any time and from time to time, without the consent of or liability of any kind whatsoever to
Tenant, Tenant’s agents, representatives, employees or visitors, to make reasonable alterations or additions
to the Real Property, to reasonably change, add to, eliminate or reduce the extent, size, location, shape,
number or configuration of any aspect of the Real Property, including any entrances or passageways, doors
and doorways, corridors, stairs, building equipment, or any Building Systems or facilities; to close to the
general public all or any portion of the Real Property, to the extent and for the period necessary to avoid
any dedication to the public, to effect any repairs or further construction, or in case of any other
circumstances rendering such action advisable in Landlord’s reasonable opinion; to change any common
areas to rental space and any rental space to common areas; to utilize portions of the common areas for
entertainment, displays, product shows, the leasing of temporary or permanent kiosks or other such uses as,
in Landlord’s reasonable judgment, may attract the public; and to change the name, address, number or
other designation by which the Real Property is commonly known. In undertaking any activity provided
for in this Section 7.2, Landlord shall not unreasonably restrict Tenant’s access to and use and enjoyment
of the Premises and any other portion of the Real Property; Landlord shall use commercially reasonable
efforts to limit any interference with the use of the Premises by Tenant in connection therewith, but shall
incur no liability for any such interference that may occur, and Tenant shall have no right to abate rent in
connection therewith.
8. USE
8.1. Permitted Use
The Premises shall be used for the Permitted Use specified in the Basic Lease Information only, and
for no other purpose, without the prior written consent of Landlord, which shall not be unreasonably
withheld, conditioned, or delayed, subject to the terms and conditions of this Lease.
8.2. No Nuisance
Tenant shall not allow, suffer or permit the Premises or any use thereof to constitute a nuisance, to
violate any insurance policy restrictions, or to unreasonably interfere with the safety, comfort or enjoyment
of the Building by Landlord or any other occupants of the Building or their customers, invitees or any others
lawfully in, upon or about the Real Property.
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8.3. Compliance with Laws
Tenant, at Tenant’s expense, shall comply with, and cause all of Tenant’s agents, employees,
contractors, representatives, and visitors to comply with, all applicable laws, ordinances, rul es and
regulations of governmental authorities applicable to the Premises or the use or occupancy thereof,
including, without limitation, the federal Americans With Disabilities Act, as amended; provided that
Tenant shall not be obligated pursuant to this Section 8.3 to make or pay for any alterations to the electrical,
mechanical, heating, ventilation or air conditioning, life safety or plumbing systems of the Building
(collectively the “Building Systems”), any structural elements of the Building, or any common area, unless
such alterations are required as a result of Tenant’s actions or Tenant’s default under this Lease or result
from particular alterations or improvements to the Premises made by or for Tenant.
8.4. Hazardous Materials
Tenant shall not cause or suffer or permit any Hazardous Material, as defined below, to be brought
upon, kept, used, discharged, deposited or released in, on, or about the Premises or the Real Property by
Tenant, or any of Tenant’s agents, employees, representatives, contractors or visitors, provided that Tenant
may keep on the Premises such Hazardous Materials as are customarily used by typical office tenants and
are maintained in full compliance with all applicable laws. Landlord represents and warrants that to
Landlord’s actual knowledge there are no Hazardous Materials at the Project in violation of any local, state,
or federal environmental laws or regulations. Each party shall indemnify, defend and hold the other party
harmless from and against any and all claims, damages, costs, liabilities and expenses (including, without
limitation, diminution in value or use of the Real Property, attorneys’ fees, consultant fees and expert fees)
which arise during or after the Term as a result of any breach by the indemnifying party of this Section 8.4
or any contamination on or affecting the Real Property which is caused by such breach or for which Tenant
or Landlord is otherwise legally responsible under this Lease or applicable law. This indemnification
obligation shall survive any termination of this Lease and shall include, without limitation, costs incurred
in connection with any investigation of site conditions and any clean-up, remedial, removal or restoration
work on or affecting the Real Property. “Hazardous Material” means any hazardous, toxic or dangerous
substance, material or waste which is or becomes regulated by or under any local, state or federal
governmental authority or environmental law, including without limitation (i) all chlorinated solvents,
(ii) petroleum products or by-products, (iii) asbestos, and (iv) polychlorinated biphenyls.
9. ALTERATIONS AND TENANT’S PROPERTY
9.1. Alterations
Tenant shall not before or during the Term make or suffer to be made any alterations, additions or
improvements in or to the Premises (herein collectively called “Alterations”) without first obtaining
Landlord’s written consent therefor based on reasonable plans and specifications submitted by Tenant.
Landlord’s consent may be withheld in Landlord’s sole and absolute discretion if any Alterations could in
Landlord’s reasonable judgment negatively affect the structure of the Building or the Building Systems, or
require additional code compliance or similar work not included in the Alterations; otherwise, Landlord’s
consent shall not be unreasonably withheld, conditioned, or delayed. Notwithstanding anything herein to
the contrary, Tenant shall be permitted to make nonstructural alterations to the Premises following ten (10)
days’ written notice to Landlord, but without Landlord’s prior consent, to the extent that such alterations
do not adversely affect the systems and equipment of the Building, exterior appearance of the Building, or
structural aspects of the Building, and provided that such alterations cost less than $20,000 in each instance
and are made in compliance with all of Landlord’s rules and regulations for the Project applicable to
alterations.
9.2. Removal of Property
All Alterations shall become the property of Landlord, and shall be surrendered to Landlord, upon the
expiration or earlier termination of this Lease; except for movable equipment, trade fixtures, personal
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property and furniture owned by Tenant (“Tenant Owned Property”). At Landlord’s sole election made
at the time that Landlord approves any Alterations, such Alterations shall be removed from the Premises at
Tenant’s sole cost and expense at the expiration or sooner termination of this Lease, and the Premises shall
be restored, at Tenant’s sole cost and expense, to their condition before the making of such Alterations,
ordinary wear and tear excepted, and such obligations shall survive the expiration or any earlier termination
of this Lease.
10. REPAIRS AND OTHER WORK
10.1. Tenant’s Obligations
Tenant shall at all times during the Term maintain the Premises in good, clean and sanitary condition,
ordinary wear and tear excepted, and, at Tenant’s cost and expense, make all repairs and replacements as
and when necessary to preserve the Premises in good working order and such condition; provided that
Tenant shall not be obligated to repair or maintain the Building Systems or the str uctural elements of the
Building unless such repair or maintenance is necessitated by any act of Tenant, its agents, representatives,
employees, contractors or visitors. Notwithstanding the foregoing, Tenant shall not be responsible for the
repair of any latent defect in the original construction of the Building or installation of any Landlord
installed improvements regardless of time of discovery, and Landlord shall repair the same at its sole cost
within a reasonable time, but in no event later than thirty (30) days after discovery of the defect. Landlord
shall not be liable for, and there shall be no abatement of Rent with respect to, any injury to or interference
with Tenant’s business arising from any repairs, maintenance, alteration or improvement in or to any portion
of the Real Property, or in or to any fixtures, appurtenances or equipment therein , except to the extent
arising from Landlord’s gross negligence or willful misconduct . Tenant hereby waives the provisions of
Sections 1941 and 1942 of the California Civil Code and any similar law now or hereafter in effect, as such
laws relate to the condition of the Premises or Tenant’s right to effect repairs in the Premises and deduct
the cost thereof from the Rent.
10.2. Conditions Applicable to Repairs and Other Work
All repairs, replacements, and reconstruction (including without limitation all Alterations) made by or
on behalf of Tenant shall be made and performed (a) at Tenant’s cost and expense and at such time and in
such manner as Landlord may reasonably require, (b) by contractors or mechanics reasonably approved by
Landlord, (c) so as to be at least equal in quality of materials and workmanship to the original work or
installation, (d) in accordance with such reasonable requirements as Landlord may impose with respect to
insurance and bonds to be obtained by Tenant, (e) in accordance with all applicable laws and regulations
of governmental authorities having jurisdiction over the Premises and all Rules and Regulations for the
Real Property adopted by Landlord from time to time, (f) so as not to interfere with the use and enjoyment
of the Building by Landlord, other tenants of the Building or any other persons, and (g) in compliance with
such other requirements as Landlord may reasonably impose (including without limitation a requirement
that Tenant furnish Landlord with as-built drawings upon completion of the work).
11. LIENS
Tenant shall keep the Premises and the Real Property free from any liens arising from any acts or
omissions of Tenant, or Tenant’s agents, employees, representatives, contractors or visitors. Tenant shall,
within thirty (30) days following notice of the imposition of any such lien, cause the same to be released of
record by payment or posting of a bond fully satisfactory to Landlord in form and substance, and if Tenant
fails to do so Landlord shall have, in addition to all other remedies provided herein and by law, the right
(but not the obligation) to cause the lien to be released by such means as Landlord shall deem proper,
including without limitation payment of the claim giving rise to such lien. All such sums paid by Landlord
and all expenses incurred by it in connection therewith shall be Additional Charges payable by Tenant.
Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or
required by law, or that Landlord shall deem proper for the protection of Landlord, the Premises, the Real
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Property and any other party having an interest therein, from mechanics’, materialmen’s and other liens. In
addition to all other requirements contained in this Lease, Tenant shall give to Landlord at least five (5)
business days’ prior written notice of commencement of any construction by or for Tenant on the Premises.
12. SUBORDINATION
This Lease and Tenant’s rights and interests thereunder shall be subject and subordinate at all times
to (a) all existing and future ground leases or underlying leases affecting any portion of the Real Property,
and (b) the lien of any existing or future mortgage, deed of trust, or other security instrument in any amount
for which any portion of the Real Property or any interest therein is specified as security. Notwithstanding
the foregoing, Landlord or the holder of any such ground or underlying lease or such lien shall have the
right to cause the same to be subordinated to this Lease, and in such event Tenant shall, at the option of the
party who succeeds to the interest of Landlord under this Lease upon any termination of any such ground
or underlying lease or upon any foreclosure or assignment in lieu of foreclosure relating to such lien, attorn
to and become the tenant of such successor in interest to Landlord, provided that such successor in interest
shall recognize and agree to be bound by the terms of this Lease so long as Tenant is not in default. The
foregoing provisions shall be self operative and no further instrument shall be required to effect the
provisions of this Section; provided that Tenant’s right to possession of the Premises shall not be disturbed
so long as Tenant is not in default under this Lease beyond any applicable notice and cure period, and
Tenant covenants and agrees to execute and deliver, within ten (10) business days after demand by Landlord
and in the reasonable form requested by Landlord, any additional documents evidencing the foregoing,
provided such documents contain appropriate non-disturbance provisions assuring Tenant’s quiet
enjoyment of the Premises.
13. INABILITY TO PERFORM
If by reason of force majeure, including, without limitation, acts of God, governmental restrictions,
pandemics (including, without limitation, COVID-19), strikes, labor disturbances, shortages of materials
or supplies, or any other cause or event beyond Landlord’s reasonable control, whether similar or dissimilar
to the foregoing (“Force Majeure”), Landlord is unable to perform or is delayed in performing any of
Landlord’s obligations under this Lease, no such inability or delay shall (a) constitute an actual or
constructive eviction, in whole or in part, (b) entitle Tenant to any abatement or reduction of Rent,
(c) relieve Tenant from any of its obligations under this Lease, or (d) impose any liability upon Landlord
or its agents or contractors by reason of inconvenience or annoyance to Tenant or by reason of injury to or
interruption of Tenant’s business, or otherwise. If this Lease specifies a time period for performance of an
obligation of Landlord, that time period shall be extended by the period of any delay in Landlord’s
performance caused by any of the events of Force Majeure described above. The provisions of this Lease
shall supersede California Civil Code Section 1932(1) as it relates to the condition of the Premises or
Tenant’s occupancy thereof, and Tenant hereby waives any right to terminate this Lease under Section
1932(1) or under any similar laws, statutes or ordinances now or hereafter in effect.
14. DESTRUCTION
14.1. Repair
Subject to the provisions of Sections 14.3 and 14.4 below, if any portion of the Real Property is
damaged by any casualty (the “Damaged Property”), then to the extent that the Premises or common areas
is made unusable for the normal operation of Tenant’s business on the Premises and the Damaged Property
can, in Landlord’s reasonable opinion, be repaired within one hundred eighty (180) days after the date of
damage, Landlord shall proceed immediately to make such repairs in accordance with Section 14.4 below.
Landlord’s opinion regarding time to repair shall be delivered to Tenant within thirty (30) days after the
date of the damage. Rent for the portion(s) of the Premises affected by such repair shall be abated during
the period of repair to the extent that Tenant is unable to use such portion(s) of the Premises for the normal
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operation of Tenant’s business, which shall include repairs to the common areas which prevent Tenant from
using the Premises for the normal operating of Tenant’s business.
14.2. Tenant’s Right to Terminate
If such damage causes all or any material portion of the Premises to be unusable by Tenant for the
normal operation of Tenant’s business on the Premises and in Landlord’s reasonable opinion damage to the
Premises cannot be repaired within three hundred sixty (360) days from the date of the damage, Tenant
may terminate this Lease by delivery of written notice to Landlord within thirty (30) days after the date on
which Landlord’s opinion regarding time and repair is delivered to Tenant. Landlord’s opinion regarding
repairability shall be delivered to Tenant within sixty (60) days after the date of the damage. Upon
termination, Rent shall be apportioned as of the date of the damage.
14.3. Landlord’s Right to Terminate
In the event (i) the Building is totally or substantially destroyed, or (ii) the cost of repair of the Real
Property following the damage or destruction equals or exceeds ten percent (10%) of the replacement cost
of the Building and such cost is not fully covered by insurance proceeds actually paid or payable to Landlord
(and not claimed by Landlord’s mortgagee); or (iii) the Term will expire within one (1) year from the date
of any material damage to or destruction of the Premises and Tenant fails to extend the term in accordance
with any right expressly granted in this Lease within thirty (30) days after the date of damage; or (iv) the
Damaged Property cannot, in Landlord’s reasonable opinion, be repaired within one hundred eighty (180)
days after the date of damage or be feasibly restored to substantially the same condition as immediately
prior to the damage, then Landlord may elect to terminate this Lease (A) by delivery of written notice to
Tenant within thirty (30) days after the date of damage or destruction (in the case of a termination pursuant
to clauses (i), (ii) or (iv) above, or (B) by delivery of written notice to Tenant within forty -five (45) days
after the date of the damage or destruction (in the case of a termination pursuant to clause (iii) above).
14.4. Extent of Repair Obligations
If this Lease is not terminated pursuant to Section 14.2 or 14.3 above, Landlord shall repair the
Building and all improvements (except those constructed or installed by Tenant, if any). All such repairs
shall be performed in a good and workmanlike manner and shall restore the items repaired to substantially
the same usefulness, design and construction as existed immediately before the damage. All work by Tenant
shall be performed in accordance with the requirements of Section 10.2. In the event of any termination of
this Lease, the proceeds from any insurance carried by Landlord and paid by reason of damage to or
destruction of the Real Property or any portion thereof shall belong to and be paid to Landlord.
14.5. Waiver of Subrogation
As long as their respective insurance policies so permit, Landlord and Tenant hereby mutually waive
their respective rights of recovery against each other for any loss insured by fire, extended coverage and
other property insurance policies existing for the benefit of the respective parties. Each party shall obtain
any special policy endorsements, if required to evidence compliance with such waiver.
14.6. Non-Application of Certain Statutes
The provisions of this Lease constitute an express agreement between Landlord and Tenant with
respect to any and all damage to, or destruction of, all or any part of the Premises, or any other portion of
the Real Property. Any statute or regulation of the State of California or any other governmental authority
or body, including without limitation California Civil Code Sections 1932(2), 1933(4), 1941 and 1942,
relating to any rights or obligations of a landlord and tenant upon damage or destruction of the leased
premises shall have no application to this Lease or any damage or destruction to all or any part of the
Premises or any other portion of the Building, and Tenant hereby waives the provisions of any such statute
or regulation.
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15. INSURANCE
Tenant shall during the Term, or during any occupancy or use of the Premises by Tenant prior to the
commencement of the Term, provide insurance coverage conforming in all respects to the requirements of
Schedule I (Insurance) attached hereto. Tenant shall not do anything, or suffer or permit anything to be
done, in, on or about the Premises that shall invalidate or be in conflict with the provisions of any fire or
other insurance policies covering the Building or any property located therein. Tenant, at Tenant’s cost and
expense, shall comply with, and shall cause all occupants of the Premises to comply with, all applicable
customary rules, orders, regulations or requirements of any board of fire underwriters or other similar body.
Landlord shall provide property damage insurance during the Term covering the Building. The
amounts and terms and conditions of coverage shall be determined by Landlord and shall be as required or
approved by Landlord’s mortgagee, if any, and otherwise shall be consistent with property damage policies
carried for comparable properties in the immediate vicinity of the Building.
16. EMINENT DOMAIN
16.1. Effect of Taking
If the entirety of the Premises is condemned or taken (or any transfer is made in lieu thereof), other
than a temporary taking, before or during the Term for public or quasi -public use (each of which events
shall be referred to as a “taking”), this Lease shall automatically terminate as of the earlier of the date (the
“effective date of taking”) (i) of the vesting of title in the condemning authority, or (ii) the date the
condemning authority is authorized to take possession of the Premises. If only a part of the Premises is so
taken, this Lease shall automatically terminate as to the portion of the Premises so taken as of the effective
date of taking. If any portion of the Real Property is taken so as to render the Building incapable of
economically feasible operation as reasonably determined by Landlord, this Lease may be terminated by
Landlord, as of the effective date of taking, by written notice to Tenant given at any time prior to the
effective date of taking. If a portion of the Premises is taken so as to render the Premises or the remaining
portion thereof unusable by Tenant for the normal operation of Tenant’s business on the Premises, this
Lease may be terminated by Tenant as of the date of the effective date of such taking, by written notice to
Landlord given at any time prior to the effective date of taking. If this Lease is not terminated as a result of
a taking, Landlord shall restore the Building to an architecturally whole unit; provided, however, that
Landlord shall not be obligated to expend on such restoration more than the amount of the condemnation
award actually received by Landlord (and not claimed by Landlord’s mortgagee), nor do more work than
that described in Section 14.4, unless Tenant pays to Landlord in advance (and without any credit against
Rent or any other obligation of Tenant under this Lease) the difference between the cost of such restoration
and the amount of the condemnation award so actually received by Landlord.
16.2. Award
Landlord shall be entitled to the entire award for any taking, including, without limitation, any award
made for the value of the leasehold estate created by this Lease. No award for any partial or entire taking
shall be apportioned, and Tenant hereby assigns to Landlord any award that may be made in any taki ng;
provided, however, that nothing contained herein shall be deemed to give Landlord any interest in any
separate award made to Tenant for its relocation expenses, the taking of personal property and fixtures
belonging to Tenant, the unamortized value of improvements made or paid for by Tenant, or the interruption
of or damage to Tenant’s business.
16.3. Abatement of Rent
In the event of a partial taking that does not result in a termination of this Lease as to the entire
Premises, the Rent shall abate in proportion to the portion of the Premises so taken or rendered unusable by
Tenant for the normal operation of Tenant’s business on the Premises. The provisions of this Lease
specifically supercede California Code of Civil Procedure Sections 1265.120 and 1265.130 or any similar
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statute or regulation now or hereafter in effect relating to abatement of rent or termination of a lease in the
event of a taking or condemnation of the Premises, and Tenant hereby waives the provisions of any such
statute or regulation.
16.4. Temporary Taking
If all or any portion of the Building or the Premises is taken for a limited period of time before or
during the Term, this Lease shall remain in full force and effect; provided, however, that the Rent shall
abate during such limited period in proportion to the portion of the Premises that is rendered not usable by
Tenant by reason of such taking. Landlord shall be entitled to receive the entire award made in connection
with any such temporary taking.
17. ASSIGNMENT AND SUBLETTING
17.1. Consent Required
Neither Tenant nor any sublessee or assignee of Tenant shall, directly or indirectly, voluntarily or by
operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the
Premises or Tenant’s leasehold estate hereunder (each such act is herein referred to as an “Assignment”),
or sublet the Premises or any portion thereof or permit the Premises to be occupied by anyone other than
Tenant (each such act is herein referred to as a “Sublease”), without Landlord’s prior written consent in
each instance, which consent shall not be unreasonably withheld, conditioned, or delayed. Any Assignment
or Sublease that is not in compliance with this Article 17 shall be void. The acceptance of Rent by Landlord
from a proposed assignee, sublessee or occupant of the Premises shall not constitute consent to any
Assignment or Sublease by Landlord. In the event Landlord approves any Assignment or Sublease, fifty
percent (50%) of the excess, after amortization of the reasonable cost of leasing commissions and tenant
improvement costs actually incurred by Tenant in connection with such Sublease or Assignment, of the
total amount of rent and other consideration paid under or in consideration for any such Sublease or
Assignment over the Rent payable hereunder, shall be payable to Landlord as Additional Charges. As an
alternative to approving any Sublease or Assignment, Landlord shall have the right to elect, within the
response period provided in Section 17.2 below, to terminate this Lease as to the portion of the Premises
which is the subject of such proposed Assignment or Sublease (the “recaptured space”), in which event this
Lease shall terminate as to the recaptured space only and the Rent shall be abated as to such recaptured
space.
17.2. Notice
Any request by Tenant for Landlord’s consent to a specific Assignment or Sublease shall include
(a) the name of the proposed assignee, sublessee or occupant, (b) the nature of the proposed assignee’s
sublessee’s or occupant’s business to be carried on in the Premises, (c) a copy of the proposed Assignment
or Sublease, and (d) such financial and other information as Landlord may reasonably request concerning
the proposed assignee, sublessee or occupant or its business. Landlord shall have a response period of
fifteen (15) business days after receipt of all information reasonably necessary to evaluate the proposed
Assignment or Sublease in which to respond in writing to Tenant’s request, eith er approving the proposed
Assignment or Sublease or stating the reasons for any disapproval, or alternatively notifying Tenant of
Landlord’s election to recapture the affected space, as applicable. Tenant shall pay to Landlord the
reasonable costs of processing each request for approval of an Assignment or Sublease plus the reasonable
amount of all direct and indirect expenses incurred by Landlord arising from any assignee, occupant or
sublessee taking occupancy.
17.3. No Release
No consent by Landlord to any Assignment or Sublease by Tenant, and no specification in this Lease
of a right of Tenant to make any Assignment or Sublease, shall relieve Tenant of any obligation to be
performed by Tenant under this Lease. The consent by Landlord to any Assignment or Sublease shall not
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relieve Tenant or any successor of Tenant from the obligation to obtain Landlord’s express written consent
to any other Assignment or Sublease.
17.4. Entity Transfers
Any sale, assignment or other transfer, including without limitation by consolidation, merger or
reorganization, of twenty-five percent (25%) or more (whether in a single transaction or series of transfers)
of the equity ownership or beneficial interests in Tenant, if Tenant is a corporation, trust or limited liability
company, or of any general partnership interest in Tenant if Tenant is a general or limited partnership, shall
be an Assignment for purposes of this Lease. If Tenant is a corporation, the provisions of this Section 17.4
shall not apply at any time when the stock of Tenant is traded on a national exchange.
17.5. Assumption of Obligations
Each assignee or other transferee of Tenant’s interest hereunder, other than Landlord, shall assume all
obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant for
the payment of Rent, and for the performance of all the terms, covenants, conditions and agreements herein
contained on Tenant’s part to be performed for the Term. Each sublessee of all or any portion of the
Premises shall, as a condition to such sublease, agree in writing for the benefit of and pursuant to a written
instrument satisfactory to Landlord (a) to comply with all provisions of this Lease applicable to the
subleased premises (other than the amount of Rent payable under this Lease in the case of any sublease of
less than all of the Premises), and (b) that, at Landlord’s option, such sublease (and all further subleases of
any portion of the Premises) shall terminate upon any termination of this Lease, regardless of whether or
not such termination is voluntary, or such sublessee shall attorn to Landlord on and subject to all provisions
of the sublease.
17.6. No Signs
Tenant shall not, without Landlord’s consent, place or allow to be placed in, on or about the Building
any sign or other notice indicating Tenant’s desire to assign this Lease or sublet the Premises. Landlord’s
consent shall not be unreasonably withheld, conditioned, or delayed.
18. UTILITIES AND SERVICES
18.1. Landlord to Furnish
Landlord shall furnish during the Term, subject to reimbursement pursuant to Article 5 above,
(a) heating, ventilation and air conditioning (to the extent available in the Building) to the Premises during
the hours of 6:00 a.m. until 6:00 p.m. Monday through Friday (excluding holidays), (b) automatic elevator
service to the floor or floors where the Premises are located at all times, (c) electric power (110 volt) for
task lights, appliances and a reasonable number of computers (Tenant’s power requirements shall be
consistent with other tenants in the Building and shall not exceed the capacity of the Building taking into
account the uses by other tenants), (d) hot and cold water, if any, at those points of supply shown on the
approved plans for the Premises, and (e) janitorial service five nights per week (except labor holidays).
18.2. Excess Usage
Whenever heat generating machines or equipment or lighting are used in the Premises by Tenant
which materially affect the temperature otherwise maintained by the air conditioning system, Landlord shall
have the right to install supplementary air conditioning facilities in the Premises or otherwise modify the
ventilating and air conditioning system serving the Premises, and the reasonable cost of such facilities and
modifications shall be paid by Tenant as Additional Charges. Tenant shall also pay as Additional Charges
the cost, as determined by Landlord from time to time and applied consistently to other similar tenants of
the Building, of providing all heating or cooling energy to the Premises during hours other than those
specified in clause (a) of Section 18.1 above. Landlord shall furnish such after-hours heating or cooling
energy only upon at least twenty-four (24) hours’ advance notice from Tenant. If Tenant installs lighting or
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other equipment which results in an average electrical load per floor in the Premises in excess of the amount
specified in Section 18.1(c) above, Tenant shall pay for the reasonable cost of such excess power and the
cost of installing any additional risers or other facilities that may be necessary to furnish such excess power
to the Premises; provided, however, that Tenant shall have no right to install lighting or other equipment
which results in an average electrical load per floor in excess of the amount specified in Section 18.1(c)
above without Landlord’s prior written consent, not to be unreasonably withheld, conditioned, or delayed.
18.3. Interruption of Services
Landlord reserve the rights to disconnect, discontinue or limit Tenant’s use of any Building Systems
or Building services when reasonably necessary as determined by Landlord; provided that Landlord shall
give Tenant advance notice of any such interruption of services when reasonably possible, and shall restore
such services as soon as practical and in a manner so as to cause as little interference with Tenant’s use of
the Premises as is practical; provided further that Landlord shall not be obligated to perform work during
other than normal business hours, except in emergency situations. In addition, Landlord reserves the right
to limit or restrict any services or utilities serving the Premises or the Building, in compliance with the
requirements or voluntary guidelines or requests of federal, state or local governmental agencies or utility
suppliers for the purpose of reducing energy or other resources consumption and to make all alterations to
the Real Property or any Building Systems reasonably necessary therefor. Any such actions by Landlord
under this Section 18.3, or any other interruption of services provided for herein (unless caused by
Landlord’s gross negligence or willful misconduct) shall not (a) constitute an actual or constructive
eviction, in whole or in part, (b) entitle Tenant to any abatement or diminution of Rent, (c) relieve Tenant
from any of its obligations under this Lease, or (d) impose any liability on Landlord or its agents or
contractors by reason of inconvenience or annoyance to Tenant or by reason of injury to or interruption of
Tenant’s business, or otherwise, Tenant hereby waives its right to terminate this Lease under California
Civil Code Section 1932(1) and Sections 1941 and 1942 or any other similar laws, statutes or ordinances
now or hereafter in effect. Tenant shall cooperate reasonably with any voluntary energy conservation
program initiated by Landlord in cooperation with the efforts of federal, state or local governmental
agencies or utility suppliers to reduce the consumption of energy or other resources. Notwithstanding the
foregoing, in the event that Tenant is prevented from using, and does not use, the Premises or any material
portion thereof for more than three (3) consecutive business days as a result of any of the following, to the
extent within Landlord’s reasonable control: (i) a failure to provide any utilities to the Premises which
Landlord is required to provide under this Lease, (ii) Landlord making or failing to make any repairs,
alterations, additions or improvements in or to any portion of the Premises or the Property which Landlord
is required to provide under this Lease, or (iii) lack of access to the Premises (each, an “Abatement
Event”), then Tenant shall give Landlord written notice of such Abatement Event, and if such Abatement
Event continues for an additional two (2) consecutive business days after Landlord’s receipt of any such
notice (“Eligibility Period”) and Landlord does not diligently commence and pursue to completion t he
remedy of such Abatement Event, then, except to the extent covered by business interruption or similar
insurance carried or required to be carried by Tenant hereunder, Base Rent shall be abated or reduced, as
the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so
prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the rentable
area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total
rentable area of the Premises. If, however, Tenant reoccupies any portion of the Premises during such
period, the Base Rent allocable to such reoccupied portion, based on the proportion that the rentable area
of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable
by Tenant from the date Tenant reoccupies such portion of the Premises. Such right to abate Base Rent
shall be Tenant’s sole and exclusive remedy at law or in equity for an Abatement Event. Except as expressly
provided in this Section 18.3, nothing contained herein shall be interpreted to mean that Tenant is excused
from paying rent due hereunder.
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18.4. Security Systems and Programs
Landlord shall have no obligation or liability to Tenant, or any of Tenant’s agents, employees,
representatives, contractors or visitors, to provide any safety or security devices on or for the Real Property
or for the manner or quality of any such devices or services that Landlord may elect to pro vide on or for
the Real Property. The risk that any safety or security device, service or program may not be effective, or
may malfunction or be circumvented, is assumed by Tenant with respect to the property, personnel, and
interests of Tenant, and any of Tenant’s agents, employees, representatives, contractors and visitors, and
Tenant shall obtain insurance coverage to the extent Tenant desires protection against criminal acts or other
losses. Tenant agrees to cooperate fully at Tenant’s expense with any reasonable safety or security program
developed by Landlord on or for the Real Property or required by law.
19. DEFAULT
19.1. Events of Default
The occurrence of any one or more of the following events shall constitute a default or breach of this
Lease by Tenant:
(a) Failure of Tenant to make any payment of Rent when and as the same becomes due; provided,
however, that Landlord will give Tenant notice and an opportunity to cure any failure to pay Rent within
five (5) business days of any such notice.
(b) Failure of Tenant to perform any obligation of Tenant under this Lease, other than as described
in Section 19.1(a), where such failure shall continue for ten (10) business days after notice of such failure
by Landlord to Tenant; provided that if more than ten (10) business days are reasonably required for cure
of such failure, Tenant shall not be deemed to be in default if Tenant commences such cure within such ten
(10) business day period and thereafter diligently prosecutes such cure to completion.
(c) The filing by or against Tenant of any action or proceeding under any federal or state insolvency,
reorganization, bankruptcy or other debtor relief statute now or hereafter existing (unless in the case of such
action taken against Tenant, the same is dismissed within sixty (60) days); or the appointment of a trustee
or receiver for Tenant or its business, or the attachment of Tenant’s leasehold estate in the Premises or
Tenant’s assets at the Premises, unless the same is dismissed within thirty (30) days after such appointment
or attachment.
19.2. Remedies
Upon the occurrence of a default by Tenant under this Lease that is not remedied by Tenant within
the applicable cure periods specified in Section 19.1, Landlord shall use commercially reasonable efforts
to mitigate damages and have the following rights and remedies in addition to and without limiting any and
all other rights and remedies provided in Section 4.4 or otherwise available to Landlord at law or in equity:
(a) The rights and remedies provided by California Civil Code Section 1951.2, including without
limitation the right to terminate Tenant’s right to possession of the Premises and to recover the amounts
specified in California Civil Code Subsections 1951.2(a)(1)-(4);
(b) The rights and remedies provided by California Civil Code Section 1951.4, including, without
limitation, the right to continue the Lease in effect after Tenant’s breach and abandonment and recover any
and all Rent as it becomes due. Acts of maintenance or preservation, efforts to relet the Premises or the
appointment of a receiver upon Landlord’s initiative to protect its interest under this Lease, shall not in and
of themselves constitute a termination of Tenant’s right to possession;
(c) The right and power to enter the Premises and remove all persons and property, to store such
property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such
property and apply the proceeds thereof pursuant to applicable California law;
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(d) The right to have a receiver appointed for Tenant, upon application by Landlord, to take
possession of the Premises and to apply any rental collected from the Premises; and
(e) The right to specific performance of any or all of Tenant’s obligations hereunder, and to damages
for delay in or failure of such performance.
(f) The right to remedy such default at Tenant’s expense, upon two (2) days prior notice to Tenant
except that prior notice shall not be required in the case of an imminent threat to life or safety of any person
or to the impairment of the Building or its efficient operation.
19.3. Remedies Cumulative
The exercise of any remedy provided by law or the provisions of this Lease shall not exclude any
other remedies. Tenant hereby waives any right of redemption or relief from forfeiture following
termination of, or exercise of any remedy by Landlord with respect to, this Lease.
19.4. Default by Landlord
If Landlord fails to perform or observe any of the terms, covenants or conditions contained in this
Lease on its part to be performed or observed within thirty (30) days after receipt of written notice
specifically describing such default from Tenant or, when more than thirty (30) days shall be required
because of the nature of the default, if Landlord shall fail to proceed diligently to cure such default after
receipt of written notice thereof from Tenant, said failure shall constitute a default by Landlord under this
Lease. Tenant shall give written notice to any beneficiary of a deed of trust or mortgage covering the
Premises whose address shall have been furnished to Tenant of any default on the part of Landlord under
this Lease, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, in no
event less than sixty (60) days, including time to obtain possession of the Premises by power of sale or a
judicial foreclosure if necessary to effect a cure.
20. INDEMNITY; WAIVER; INTEREST ON OVERDUE OBLIGATIONS
20.1. Indemnity and Waiver
Except to the extent caused by the negligence or willful misconduct of Landlord, Tenant shall
indemnify, defend through attorneys reasonably satisfactory to Landlord, and hold harmless Landlord, all
partners or members of any partnership or limited liability company constituting Landlord, and their
respective officers, directors, shareholders, employees, servants and agents, all mortgagees or beneficiaries
of Landlord’s interest in all or any portion of the Real Property, and the lessor or lessors under all ground
or underlying leases affecting any portion of the Real Property (sometimes collectively referred to herein
as “Landlord Related Entities”) from and against any and all claims, losses, costs, liabilities, damages
and expenses, including without limitation reasonable attorneys’ fees (collectively, “Claims and
Liabilities”), that are incurred in connection with or arise from (a) any default by Tenant in the observance
or performance of any of the terms, covenants, conditions or other obligations of this Lease, (b) the use or
occupancy or manner of use or occupancy of the Premises by Tenant or any person occupying the Premises,
(c) the condition of the Premises or any occurrence or happening on the Premises between the
Commencement Date or Tenant’s earlier entry onto the Premises and the time Landlord has accepted the
surrender of the Premises after the expiration or termination of the Term, including, without limitation,
COVID-19 or any other pandemics and any conditions arising from or related thereto, (d) any negligence
or willful act or omission of Tenant or any assignee or subtenant of the Premises or any of their respective
agents, employees, representatives, contractors or visitors while on the Real Property, or (e) Landlord’s
inability to obtain access to any portion of the Premises with respect to which Landlord has not been
furnished a key (if locked) or access has been otherwise restricted. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property (including, without limitation,
any damage to personal property or scientific research, including loss of records kept by Tenant within the
Premises (in each case, regardless of whether such damage is foreseeable)) or injury to Tenant or any other
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Tenant Parties in, upon or about the Premises or any other part of the Real Property from any cause
whatsoever (including, without limitation, COVID-19 or any other pandemics and any conditions arising
from or related thereto) and hereby waives all Claims and Liabilities (including consequential damages and
claims for injury to Tenant’s business or loss of income arising out of any loss of use of the Premises or
any other part of the Real Property or any equipment or facilities therein, or relating to any such damage or
destruction of personal property as described in this Section) in respect thereof against Landlord and each
Landlord Related Entity, except that which is solely caused by, or solely the result of the grossly negligent
acts or willful misconduct of Landlord. Landlord shall not be liable for any damages arising from any act,
omission or neglect of any other tenant in the Building or of any other third party. The terms of this Section
20.1 shall survive the expiration or earlier termination of this Lease.
20.2. Interest on Past Due Obligations
Any amount due from Tenant to Landlord under this Lease which is not paid within five (5) business
days from the date when due shall bear interest from the due date until paid at the lesser of the highest rate
then permitted by law or a rate per annum equal to four percent (4%) plus the highest rate identified as the
“prime rate” in the Wall Street Journal between the date such amount was due and the date such payment
was received. Payment of such interest shall not excuse or cure any default under this Lease.
21. LANDLORD’S ACCESS TO PREMISES
Landlord reserves for itself and its agents, employees and contractors the right to enter the Premises
at all reasonable times (upon reasonable telephonic notice, if possible) to inspect the Premises, to supply
any service to be provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers, mortgagees, beneficiaries or (during the last twelve (12) months of the Term) prospective
tenants, to post notices of nonresponsibility, to determine whether Tenant is complying with its obligations
under this Lease, and to alter, improve or repair the Premises or any other portion of the Building. Tenant
shall not place any locks on any interior doors in the Premises without the consent of Landlord , which
consent shall not be unreasonable withheld, conditioned, or delayed, and without providing Landlord with
copies of the keys for such locks. In the event of an emergency, Landlord shall have the right to enter the
Premises at any time without notice. Landlord shall have the right to use any and all means that Landlord
may reasonably deem necessary or proper to open doors in an emergency, in order to obtain entry to any
portion of the Premises; provided, however, that Landlord shall use commercially reasonable efforts to
minimize any interference with Tenant’s business at the Premises. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy
or quiet enjoyment of the Premises, any right to abatement of Rent, or any other loss occasioned by
Landlord’s exercise of any of its rights under this Article 21. Tenant waives all rights to consequential
damages (including, without limitation, damages for lost profits and lost opportunities) arising in
connection with Landlord’s exercise of its rights under this Section 21.
22. NOTICES
Any payment required to be made by Tenant to Landlord, and any bills, statements, notices, demands,
requests or other communications given or required to be given under this Lease, shall be effective only if
rendered or given in writing, sent by personal delivery or registered or certified mail, return receipt
requested, by overnight courier service, or by confirmed email transmission with a following copy by first
class mail, addressed (a) to Tenant at the address set forth in the Basic Lease Information, (b) to Landlord
at the address set forth in the Basic Lease Information, or (c) to such other address as either Landlord or
Tenant may designate as its new address in California for such purpose by notice given to the other in
accordance with the provisions of this Section 22. Any such bill, statement, notice, demand, request or other
communication shall be deemed to have been rendered or given on the date of receipt or refusal to accept
delivery.
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23. NO WAIVER
No provision of this Lease may be waived, and no breach thereof shall be waived, except by a written
instrument signed by the party against which the enforcement of the waiver is sought. No failure by
Landlord to insist upon the strict performance of any obligation of Tenant under this Lease, and no course
of conduct between Landlord and Tenant, shall constitute a waiver of any breach or a waiver or modification
of any term, covenant or condition of this Lease. No payment by Tenant of a lesser amount than the
aggregate of all Rent then due under this Lease shall be deemed to be other than on account of the first
items of such Rent then accruing or becoming due, unless Landlord elects otherwise.
24. TENANT’S ESTOPPEL CERTIFICATES
Tenant, at any time and from time to time, within ten (10) business days after written request, shall
execute, acknowledge and deliver to Landlord, addressed (at Landlord’s request) to any prospective
purchaser, ground or underlying lessor, or mortgagee or beneficiary of any part of the Real Property, an
estoppel certificate in form and substance reasonably designated by Landlord. Tenant’s failure to do so
within such ten (10) business day period shall be conclusive upon Tenant that all facts set forth in Landlord’s
proposed certificate are true and correct.
25. RULES AND REGULATIONS
Tenant shall at all times observe and comply with, and cause all occupants of the Premises to observe
and comply with, the rules and regulations attached to this Lease as Exhibit B, and with all reasonable
modifications thereof from time to time adopted by Landlord (the “Rules and Regulations”).
26. TENANT’S TAXES
In addition to all other sums to be paid by Tenant under this Lease, Tenant shall pay, before
delinquency, any and all taxes levied or assessed during the Term, whether or not now customary or within
the contemplation of the parties hereto, (a) upon, measured by or reasonably attributable to Tenant’s
improvements, equipment, furniture, fixtures and other personal property located in the Premises, including
without limitation Tenant’s Work and all Alterations, (b) upon or measured by any Rent payable under this
Lease, including without limitation any gross income tax or excise tax levied by any federal, state or local
governmental body with respect to the receipt of such rental by Landlord; (c) upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant
of the Premises or any portion thereof; or (d) upon this transaction or any document to which Tenant is a
party creating or transferring an interest or an estate in the Premises.
27. CORPORATE AUTHORITY
Each person executing this Lease on behalf of Tenant or any entity constituting Tenant at any
ownership tier hereby represents and warrants that such person is duly authorized and has full right, power
and authority to enter into this Lease and bind Tenant, without qualification.
28. MISCELLANEOUS
28.1. Non-Appropriation
This Lease is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto
Municipal Code. In the event the Palo Alto City Council does not appropriate funds for payment of Rent
due under this Lease in any year, this Lease shall terminate upon 90-days prior written notice thereof. This
section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision
of this Lease.
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28.2. Financial Statements
Upon Landlord’s written request from time to time (not more frequently than twice per year), Tenant
shall promptly furnish Landlord with certified financial statements reflecting Tenant’s then-current
financial condition, in such form and detail as Landlord may reasonably request; provided, however, that if
Tenant is a corporation, then so long as the stock of Tenant is traded on a national exchange, Tenant may
furnish its annual or most recent quarterly report instead of financial statements. If Tenant is a municipality,
Tenant may furnish a digital copy of its fiscal year end Comprehensive Annual Financial Report.
28.3. Successors and Assigns
Without limiting Section 17 and subject to Section 28.10, the terms, covenants and conditions in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their respective representatives,
successors and assigns.
28.4. Severability
If any provision of this Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the application of such provision to any
other persons or circumstances, shall not be affected thereby, and each provision of this Lease shall remain
in effect and shall be enforceable to the fullest extent permitted by law.
28.5. Applicable Law
This Lease shall be governed by and construed in accordance with the laws of the State of California,
without giving effect to any principles of conflicts of law. If suit shall be brought by either party to this
Lease, the parties agree that venue shall be exclusively vested in the state courts of the County of Santa
Clara, or if federal jurisdiction is appropriate, exclusively in the United States District Cou rt, Northern
District of California, San Jose, California.
28.6. Integration; Interpretation
The terms of this Lease (including, without limitation, the Exhibits and Schedules hereto) are intended
by the parties as a final expression of their agreement with respect to such terms as are included in this
Lease and may not be contradicted by evidence of any prior or contemporaneous agreement, arrangement,
understanding or negotiation (whether oral or written). The word “including” shall mean “including
without limitation,” the singular shall include the plural and vice-versa, and each gender shall include any
other gender. Time is of the essence of each and every provision of this Lease.
28.7. Quiet Enjoyment
Upon Tenant paying the Rent and performing all of Tenant’s obligations under this Lease, Tenant
may peacefully and quietly enjoy the Premises during the Term as against all persons or entities claiming
by or through Landlord; subject, however, to the provisions of this Lease, including Section 12.
28.8. Holding Over
If Tenant holds over after the expiration or earlier termination of the Term, the Term shall not be
extended thereby, and Tenant shall pay Base Rent equal to one hundred twenty-five percent (125%) of the
Base Rent payable during the final full lease year (exclusive of abatements, if any), together with an amount
reasonably estimated by Landlord for the monthly Additional Charges and other sums payable under this
Lease, and such holding over shall otherwise be on the terms and conditions herein specified so far as
applicable (but expressly excluding all renewal or extension rights).
28.9. Broker’s Commissions
Each party represents and warrants to the other that it has not entered into any agreement or incurred
or created any obligation which might require the other party to pay any broker’s commission, finder’s fee
or other commission or fee relating to the leasing of the Premises, except for the brokers specified in the
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Basic Lease Information, whose commissions or fees shall be payable by the party designated in a separate
agreement with such brokers, and each party shall indemnify, defend and hold harmless the other and the
other’s constituent partners and members, and their respective officers, directors, agents and employees,
from and against any and all claims and liabilities for any such commissions or fees made by anyone
claiming by or through the indemnifying party.
28.10. Recovery Against Landlord
Tenant shall look solely to Landlord’s interest in the Real Property for any recovery of any judgment
against Landlord related in to this Lease and/or the Project. Neither Landlord, nor any of its partners
(whether general or limited), members, or any other equity or beneficial owners, directors, officers and
shareholders at any ownership tier, shall be personally liable for any such judgment. In the event that any
Landlord transfers or conveys its interest in the Building, all liabilities and obligations on the part of such
Landlord under this Lease accruing after the effective date of such transfer or conveyance shall terminate
and all such liabilities and obligations, including responsibility for the application or return of any security
deposit, shall be binding upon the new owner.
28.11. Amendments
No amendments or modifications of this Lease or any agreements in connection therewith shall be
valid unless in writing duly executed by both Landlord and Tenant. No amendment to this Lease shall be
binding on any mortgagee or beneficiary of Landlord (or purchaser at any foreclosure sale) unless such
mortgagee or beneficiary shall have consented thereto in writing.
28.12. Attorneys’ Fees
If either party commences an action against the other party arising out of or in connection with this
Lease, or institutes any proceeding in a bankruptcy or similar court which has jurisdiction over the other
party or any or all of its property or assets, the prevailing party shall be entitled to recover from the losing
party reasonable attorneys’ fees and court costs, including fees incurred on appeal and any other post -
judgment proceeding.
28.13. Parking.
Throughout the Term, Landlord shall provide Tenant with number of parking spaces specified in the
Basic Lease Information in the Building's parking area, such spaces to be unassigned. Landlord's obligation
to make such parking spaces available to Tenant shall be subject to ordinances and regulations of the
applicable governmental authority concerning off street parking and loading facilities, either now existing
or hereafter enacted.
28.14. CASp Disclosure.
For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant that
the common areas and the Premises, as of the date of this Lease, have not been inspected by a Certified
Access Specialist (CASp), as that term is defined in California Civil Code Section 55.52. In accordance
with subsection (e) of Section 1938 of the California Civil Code, Tenant is further notified as follows:
A Certified Access Specialist (CASp) can inspect the subject premises and determine
whether the subject premises comply with all of the applicable construction-related
accessibility standards under state law. Although state law does not require a CASp
inspection of the subject premises, the commercial property owner or lessor may not
prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for
the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or
tenant. The parties shall mutually agree on the arrangements for the time and manner of
the CASp inspection, the payment of the fee for the CASp inspection, and the cost of
making any repairs necessary to correct violations of construction-related accessibility
standards within the premises.
21
28.15. Binding
This Lease shall be binding upon the parties hereto only upon full execution and delivery by both
Landlord and Tenant. In the event that Landlord executes this Lease prior to Tenant, Landlord’s counterpart
shall be deemed an offer only and shall expire on the date which is thirty (30) days thereafter unless accepted
and executed by Tenant prior to the expiration of such thirty (30) day period.
28.16. Exhibits and Schedules
Exhibits A and B, Addendum I, and Schedule I, are attached hereto and by this reference incorporated
herein.
[signatures on following page]
IN WITNESS WHEREOF, Landlord and Tenant have each caused their duly authorized representatives
to execute this Lease on their behalf as of the dates written below.
LANDLORD: 1900 EMBARCADERO PROPERTY OWNER, LP,
a Delaware limited partnership
By: HSRE-BPI II GP, LLC, a Delaware limited liability
company, its general partner
By: ,
Nam teve Bollert
Title: Authorized Signatory
Date: --' —c2CP c2
TENANT: THE CITY OF PALO ALTO,
a California municipal corporation
By:
Name:
Title: City Manager
Date:
By:
Name:
Title: City Attorney (Special Counsel)
Date:
22
A-1 r
EXHIBIT A
DIAGRAM/DESCRIPTION OF PREMISES
1,011 sf
Suite 110
1900 Embarcadero Road, Palo Alto
A-2 r
1,600 sf
Suite 201
1900 Embarcadero Road, Palo Alto
A-3 r
2,858 sf
Suites 205-207
1900 Embarcadero Road, Palo Alto
B-1
EXHIBIT B
RULES AND REGULATIONS
1. The sidewalks, halls, passages, exits, entrances, elevators, malls, and stairways of the Building
shall not be obstructed by Tenant or any of Tenant’s agents, employees, representatives, contractors or
visitors (“Tenant Parties”), or used by Tenant or any Tenant Party for any purpose other than for ingress
to or egress from the Premises. The halls, passages, exits, entrances, corridors and stairways are not for the
use of the general public, and Landlord shall in all cases retain the right to control and prevent access thereto
of all persons whose presence in the judgment of Landlord might be prejudicial to the safety, character,
reputation or interests of the Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal or dangerous activities. Tenant and Tenant Parties shall
not go upon the roof of the Building, except in areas that Landlord may designate from time to time.
2. No awning canopy or other projection of any kind over or around the windows or entrances of
the Premises shall be installed by Tenant, and only such window coverings as are Building standard shall
be used in the Premises.
3. The Premises shall not be used for lodging or sleeping, and no cooking shall be done or permitted
by Tenant on the Premises, except that the preparation of food in microwave ovens and machines for
vending coffee, tea, hot chocolate and similar small food or drink items for Tenant and its employees shall
be permitted.
4. Landlord will furnish Tenant with ten (10) keys per floor of the Premises, free of charge.
Landlord may make a reasonable charge equal to Landlord’s cost for any additional keys. No additional
locking devices shall be installed without the prior written consent of Landlord, which shall not be
unreasonably withheld, conditioned, or delayed. Landlord may make reasonable charges for the removal of
any additional lock or any bolt installed on any door of the Premises without the prior consent of Landlord.
Tenant shall in each case furnish Landlord with a key for any such lock. Tenant, upon the termination of
its tenancy, shall deliver to Landlord all keys to doors in the Building and the Premises.
5. Landlord shall have the right to prescribe the method of reinforcement or weight distribution (as
Landlord shall reasonably determine in its sole discretion) for all equipment, materials, supplies, furniture
or other property brought into the Building that will impose a load of more than fifty (50) pounds per square
foot. Landlord will not be responsible for loss of or damage to any such property from any cause (except to
the extent resulting from the gross negligence or willful misconduct of Landlord or its agents, employees
or contractors), and all damage done to the Building by moving or maintaining Tenant’s property shall be
repaired at the expense of Tenant.
6. Tenant shall not use or suffer to be used or kept in the Premises or the Building any kerosene,
gasoline or flammable or combustible fluids or materials except as customarily used in offices, or use any
method of heating or air conditioning other than that supplied by Landlord.
7. Tenant shall use reasonable efforts to ensure that all doors and windows of the Premises are
closed and securely locked and all water faucets, water apparatus and utilities are shut off at such time as
Tenant’s employees leave the Premises.
8. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed, no foreign substance of any kind whatsoever shall
be deposited therein, and any damage resulting to such facilities from misuse by Tenant or its employees
or invitees shall be paid for by Tenant.
B-2
9. Except as permitted in this Lease, Tenant shall not sell, or permit the sale from the Premises of,
or use or permit the use of any sidewalk or corridor adjacent to the Premises for the sale of, newspapers,
magazines, periodicals, theater tickets or any other goods, merchandise or service, nor shall Tenant carry
on, or permit or allow any employee or other person to carry on, business in or from the Premises for the
service or accommodation of occupants of any other portion of the Building, nor shall the Premises be used
for manufacturing or assembly of any kind, or for any business or activity other than that specifically
provided for in this Lease.
10. Tenant shall not install any radio or television antenna, microwave dish, telecommunications
apparatus, loudspeaker, or other device on the roof or exterior walls of the Building , without Landlord’s
prior consent, which shall not be unreasonably withheld or delayed.
11. Tenant and Tenant Parties shall not use in the Premises, or in the common areas of the Building,
any handtrucks except those equipped with rubber tires and side guards or such other material-handling
equipment as Landlord may approve, and Tenant shall use reasonable efforts to cause its invitees to comply
with the provisions of this Paragraph. No other vehicles of any kind shall be brought by Tenant or any
Tenant Party into the Building or kept in or about the Premises.
12. Tenant shall store all its trash and garbage within the Premises until removal. All trash placed in
any portion of the Real Property for pick-up shall be placed in locations and containers approved by
Landlord.
13. All loading, unloading and delivery of merchandise, supplies, materials, garbage and refuse shall
be made only through such entryways and elevators and at such times as Landlord shall designate. While
loading and unloading, Tenant and any Tenant Party shall not obstruct or permit the obstruction of the
entryways to the Building or any tenant’s space therein.
14. Canvassing, soliciting, peddling or distribution of handbills or any other written material in the
Building is prohibited, and Tenant shall cooperate to prevent such acts.
15. Tenant shall not permit the use or the operation of any video or mechanical games or pay
telephones on the Premises.
16. Landlord may direct the use of all reasonable and qualified pest extermination and scavenger
contractors to eliminate pests caused or introduced into the Premises by Tenant or any Tenant Party at such
intervals as Landlord may reasonably require, upon notice to Tenant, at Tenant’s sole cost and expense.
17. Tenant shall immediately, upon request from Landlord (which request need not be in writing),
reduce its lighting or other non-critical electrical usage in the Premises for temporary periods designated
by Landlord (but not more than one-third (1/3) of the total lighting or non-critical electrical usage in the
Premises for more than two (2) hours in any twenty-four (24) hour period), when required in Landlord’s
reasonable judgment to prevent overloads of the mechanical or electrical systems of the Building.
18. Landlord reserves the right to select and change the name and address of the Building as it may
deem appropriate from time to time, and Tenant shall not refer to the Building by any name other than:
(i) the name as designated by Landlord from time to time, or (ii) the postal address used for the Building.
Tenant shall not use the name of the Building in any respect other than as an address of its business
operations in the Building without the prior written consent of Landlord, which shall not be unreasonably
withheld, conditioned, or delayed..
19. Any requests made by Tenant of Landlord shall be made by telephone or in person by Tenant’s
designated representative at the office of the Building. Employees of Landlord shall not perform any work
or do anything outside of their regular duties unless under special instructions from Landlord.
20. Landlord may waive any one or more of these Rules and Regulations for the benefit of any
particular tenant or tenants, and no such waiver by Landlord shall be construed as a waiver of these Rules
B-3
and Regulations in favor of any other tenant or tenants or prevent Landlord from thereafter enforcing any
Rule or Regulation against any or all tenants of the Building.
21. These Rules and Regulations are in addition to, and shall not be construed in any way to modify,
alter or amend, in whole or part, any terms, covenants, agreements and conditions of the Lease or any other
lease of premises in the Building which expressly contradict these Rules and Regulations.
22. Landlord reserves the right to make such other and reasonable rules and regulations as in its
reasonable judgment may from time to time be needed for the safety, care and cleanliness of the Building,
and for the preservation of good order therein.
23. Tenant shall not obtain for use in the Premises ice, drinking water, food, beverage, towel or other
similar services, except at reasonable hours and under reasonable regulations fixed by Landlord.
24. Tenant shall be entitled to its proportionate share (based on rentable area) of listings in the
Building lobby directory. All signage, lettering or other writing or decoration on or visible from the exterior
of the Premises shall require Landlord’s reasonable prior written approval.
(1)
ADDENDUM I
OPTION TO EXTEND TERM
(a) Landlord hereby grants to Tenant the option (“Extension Option”) to extend the Term of this
Lease for an additional term (the “Option Term”) of five (5) years upon and subject to the terms and
conditions set forth in this Addendum. The Extension Option shall be exercised, if at all, by written notice
given to Landlord no more than one (1) year and no less than nine (9) months prior to the Expiration Date
of the Term. If Tenant exercises the Extension Option, each of the terms, covenants and conditions of this
Lease shall apply during the Option Term except the expiration date of the Option Term will be the date
five (5) years after the originally set forth herein as the Expiration Date of the Term , provided that (i) the
Rent to be paid during the Option Term shall be ninety-five percent (95%) of the Prevailing Market Rental,
as hereinafter defined, for the Premises for the Option Term, (ii) the Expiration Date for this Lease shall
become the expiration date for the Option Term; and (iii) there shall be no additional option terms. Anything
contained herein to the contrary notwithstanding, if Tenant is in monetary or material non-monetary default
under any of the terms, covenants or conditions of this Lease either at the time Tenant exercises the
Extension Option or at any time thereafter prior to the commencement date of the Option Term, Landlord
shall have, in addition to all of Landlord’s other rights and remedies provided in this Lease, the right to
terminate the Extension Option upon notice to Tenant. As used herein, the term “Prevailing Market
Rental” for the Premises shall mean the annual basic rental, payments for Expenses and Taxes as defined
in this Lease, and all other monetary payments that Landlord could obtain for the Option Term from a third
party desiring to lease the Premises for the Option Term taking into account the age and condition of the
Building and the Premises, the services provided under the terms of this Lease, the annual basic rental,
payments for Expenses and Taxes and all other monetary payments then being obtained for new leases of
space comparable to the Premises in the vicinity of the Building, provided however, no allowance for the
construction of tenant improvements, the payment of leasing commissions or moving expenses, or any other
tenant inducement shall be taken into account in determining Prevailing Market Rental.
(b) If Tenant exercises the Extension Option, Landlord shall send to Tenant a notice setting forth
the Prevailing Market Rental for the Premises for the Option Term, on or before the date that is one hundred
fifty (150) days prior to the Expiration Date of the Term. If Tenant disputes Landlord’s determination of
the Prevailing Market Rental for the Option Term, Tenant shall, within thirty (30) days after the date of
Landlord’s notice setting forth the Prevailing Market Rental for the Option Term, send to Landlord a notice
stating that Tenant disagrees with Landlord’s determination of Prevailing Market Rental for the Option
Term and elects to resolve the disagreement as provided below in subparagraph (c). If Tenant does not send
to Landlord a notice as provided in the previous sentence, Landlord’s determination of the Prevailing
Market Rental shall be conclusive and shall be the basis for determining the annual basic rental, payments
for Expenses and Taxes and all other monetary payments to be paid by Tenant hereunder during the Option
Term. If Tenant elects to resolve the disagreement as provided in subparagraph (c) and such procedures
shall not have been concluded prior to the commencement date of the Option Term, Tenant shall pay annual
basic rental, payments for Expenses and Taxes and all other monetary payments to Landlord hereunder
adjusted to reflect the Prevailing Market Rental as stated by Landlord in its original notice to Tenant of
Landlord’s determination thereof. If the amount of Prevailing Market Rental as finally determined pursuant
to subparagraph (c) is greater than Landlord’s determination, Tenant shall pay to Landlord the difference
between the amount paid by Tenant and the Prevailing Market Rental as so determined pursuant to
subparagraph (c) within thirty (30) days after the determination. If the Prevailing Market Rental as finally
determined pursuant to subparagraph (c) is less than Landlord’s determination, the difference between the
amount paid by Tenant and the Prevailing Market Rental as so determined pursuant to subparagraph (c)
shall be credited against the next installments of annual basic rental, payments for Expenses and Taxes and
all other monetary payments due from Tenant to Landlord hereunder.
(2)
(c) Any disagreement regarding the Prevailing Market Rental as defined in this Section shall be
resolved as follows:
(i) Within thirty (30) days after Tenant’s written response to Landlord’s notice to Tenant of
the Prevailing Market Rental, Landlord and Tenant shall meet no less than two (2) times, at a mutually
agreeable time and place, to attempt to resolve any such disagreement.
(ii) If within the thirty (30) day period referred to in clause (i) above, Landlord and Tenant
cannot reach Agreement as to the Prevailing Market Rental, they shall each select one appraiser to
determine the Prevailing Market Rental. Each appraiser shall arrive at a determination of the Prevailing
Market Rental, as defined in this Addendum, and submit its conclusions to Landlord and Tenant within
thirty (30) days after the expiration of the thirty (30) day consultation period described in clause (i) above.
(iii) If only one appraisal is submitted within the requisite time period, it shall be deemed to be
the Prevailing Market Rental. If both appraisals are submitted within such time period, and if the two
appraisals so submitted differ by less than ten percent (10%) of the higher of the two, the average of the
two shall be the Prevailing Market Rental. If the two appraisals differ by more than ten perc ent (10%) of
the higher of the two, then the two appraisers shall immediately select a third appraiser who shall within
thirty (30) days after his or her selection make a determination of the Prevailing Market Rental and submit
such determination to Landlord and Tenant. This third appraisal will then be averaged with the closer of
the two previous appraisals and the result shall be the Prevailing Market Rental.
(iv) All appraisers specified pursuant to this subparagraph (c) shall be members of the
American Institute of Real Estate Appraisers with not less than ten (10) years’ experience appraising
commercial properties in the San Francisco area. Each party shall pay the cost of the appraiser selected by
such party and one-half of the cost of the third appraiser plus one-half of any other reasonable third party
costs (excluding legal fees and disbursements) incurred in resolving the dispute pursuant to this Section.
If the commencement date of the Option Term is other than on the first day of a calendar month, then
the installment of Base Rent and Additional Charges for Expenses and Taxes payable on the first day of
any month during which an increase in the Rent, as provided for hereinabove, is to occur shall be prorated
based on the number of days in such month prior to the effective date of the increase and the number of
days in such month on or after the effective date of the increase.
(d) The Extension Option is intended to be personal to Tenant. Notwithstanding anything to the
contrary contained herein, if Tenant agrees to assign its interest in this Lease or to sublet all or any part of
the Premises prior to the commencement of the Extension Option, then unless otherwise expressly
consented to by Landlord in writing, the Extension Option shall immediately become null and void and of
no further force or effect.
(1)
SCHEDULE I
TENANT’S INSURANCE REQUIREMENTS
During the Term of this Lease, and during any period prior to the commencement of the Term in which
Tenant shall enter onto, occupy or use the Premises, Tenant shall provide at Tenant’s cost and expense the
following insurance coverage:
1. Property Damage Insurance. Tenant shall provide insurance coverage for all risks of physical
loss or damage insuring the full replacement value of Tenant’s Work, Alterations, Tenant’s trade fixtures,
furnishings, equipment, plate glass, signs and all other items of personal property of Tenant.
2. Liability Insurance. Tenant shall provide broad form commercial general liability insurance, and
automobile liability insurance, each with a minimum combined single limit of liability of at least the amount
set forth in the Basic Lease Information, and statutory worker’s compensation insurance with an employer’s
liability limit in the amount set forth in the Basic Lease Information covering all of Tenant’s employees.
Such broad form commercial general liability insurance shall include products and completed operations
liability insurance, fire legal liability insurance, contractual liability insurance applicable to all of Tenant’s
indemnity obligations under this Lease (provided that the amount of such insurance shall not be a limitation
on Tenant’s indemnity obligations), and such other coverage as Landlord may reasonably require from time
to time. At Landlord’s request, but not more frequently than every two (2) years, Tenant shall increase such
insurance coverage to a level that is reasonably required by Landlord.
3. Form of Policies. All insurance policies required to be carried by Tenant under this Lease shall
(i) be written by companies rated A 8 or better in “Best’s Insurance Guide” and authorized to do business
in California, (ii) name Landlord and any other parties designated by Landlord as additional insureds,
(iii) as to liability coverages, be written on an “occurrence” basis, (iv) provide that Landlord shall receive
thirty (30) days’ notice from the insurer before any cancellation or change in coverage, and (v) contain a
provision that no act or omission of Tenant shall affect or limit the obligation of the insurer to pay the
amount of any loss sustained. Each such policy shall contain a provision that such policy and the coverage
evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord
and that any coverage carried by Landlord shall be excess insurance. Any deductible amounts under any
insurance policies required hereunder shall be subject to Landlord’s prior written approval (which shall not
be unreasonably withheld), and in any event Tenant shall be liable for payment of any deductible in the
event of any loss or casualty. Tenant shall deliver reasonably satisfactory evidence of such insurance to
Landlord on or before the Commencement Date, and thereafter at least thirty (30) days before the expiration
dates of expiring policies; and in the event Tenant shall fail to procure such insurance or to deliver
reasonably satisfactory evidence thereof within five (5) business days after written notice from Landlord of
such failure, Landlord may, at its option and in addition to Landlord’s other remedies in the event of a
default by Tenant hereunder, procure such insurance for the account of Tenant, and the cost thereof shall
be paid to Landlord as Additional Charges. The limits of the insurance required under this Lease shall not
limit any obligation or liability of Tenant under this Lease.
1227906/56198049v.8