Back to top

STANDARD INDUSTRIAL LEASE

Industrial Lease Agreement

STANDARD INDUSTRIAL LEASE | Document Parties: ACCURAY INC | The Realty Associates Fund III, L.P., You are currently viewing:
This Industrial Lease Agreement involves

ACCURAY INC | The Realty Associates Fund III, L.P.,

. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here.
Title: STANDARD INDUSTRIAL LEASE
Date: 11/13/2006

50 of the Top 250 law firms use our Products every day


QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.2


STANDARD INDUSTRIAL LEASE
(Multiple Tenant—Tenant Pays its Percentage Share of Operating Expenses,
Real Property Taxes and Insurance Costs—NO Base Year)

1.     BASIC LEASE PROVISIONS.

 

1.1

 

DATE:

 

June 30, 2005

 

 

 

 

 

 

 

 

1.2

 

LANDLORD:

 

The Realty Associates Fund III, L.P.,
a Delaware limited partnership


 


1.3


 


TENANT:


 


Accuray Incorporated,
a California corporation


 


1.4


 


PREMISES ADDRESSES:


 


1306-1310 Orleans Drive, Sunnyvale, California


 


1.5


 


APPROXIMATE LEASABLE AREA OF PREMISES:
(in square feet)


 


50,000


 


1.6


 


USE:


 


Manufacturing, assembly, research and development and general office purposes


 


1.7


 


TERM:


 


Commencement Date through the date that is six (6) years after the Rent Commencement Date (the "Initial Term")


 


1.8


 


COMMENCEMENT DATE:


 


July 1, 2005


 


 


 


RENT COMMENCEMENT DATE:


 


The first to occur of (a) substantial completion of the Tenant Improvements (as defined in the Work Letter Agreement), (b) Lessee's occupancy of the Premises for the purpose of operating its business (as opposed to constructing the Tenant Improvements), or (c) January 1, 2006.


 


1.9


 


MONTHLY BASE RENT:


 


Prior to Rent Commencement Date:


$0;


 


 


 


 


 


Rent Commencement Date through


 

 

 

 

 

 

12 th  full calendar month:

$42,500.00;

 

 

 

 

 

13 th  month through 24 th  month:

$44,000.00;

 

 

 

 

 

25 th  month through 36 th  month:

$45,500.00;

 

 

 

 

 

37 th  month through 48 th  month:

$47,000.00;

 

 

 

 

 

49 th  month through 60 th  month:

$48,500.00;

 

 

 

 

 

 

          and

 

 

 

 

 

61 st  month through 72 nd  month

$50,000.00.


 


1.10


 


BASE RENT PAID UPON EXECUTION:


 


$42,500.00

 

 

 

 

 

 

 

 

1



 


 


 


APPLIED TO:
(insert month(s))


 


First full month of term of Lease


 


1.11


 


TENANT'S PERCENTAGE SHARE:


 


See section 6.4


 


1.12


 


SECURITY DEPOSIT:


 


$50,000.00


 


1.13


 


NUMBER OF PARKING SPACES:


 


151


 


1.14


 


REAL ESTATE BROKER:


 


 


 


 


 


                 LANDLORD:


 


CB Richard Ellis, Inc.


 


 


 


                 TENANT:


 


Wayne Mascia and Associates


 


1.15


 


EXHIBITS ATTACHED TO LEASE:


 


Exhibit A—"Premises;"
Exhibit B—Intentionally deleted;
Exhibit C—"Rules and Regulations;"
Exhibit D—"Form of HazMat Certificate";
Exhibit E—"Work Letter Agreement";
Exhibit F—"Addendum to Lease"


 


1.16


 


ADDRESSES FOR NOTICES:


 


 


 


 


 


                 LANDLORD:


 


The Realty Associates Fund III, L.P.
c/o TA Associates Realty
1301 Dove Street, Suite 860
Newport Beach, California 92660
Attn: Asset Manager/Orleans


 


 


 


                 WITH A COPY TO:


 


CB Richard Ellis, Inc.
225 West Santa Clara Street, Suite 1050
San Jose, California 95113
Attention: Property Manager/Orleans


 


 


 


                 TENANT:


 


Accuray Incorporated
1310 Chesapeake Terrace
Sunnyvale, California 94089
Attention: Chief Operating Officer

2.     Premises.

2.1

ACCEPTANCE.     Landlord leases to Tenant, and Tenant leases from Landlord, the Premises, to have and to hold for the term of this Lease, subject to the terms, covenants and conditions of this Lease. The Premises is depicted on Exhibit "A" attached hereto. The Premises depicted on Exhibit "A" is all or a part of a building (the " Building ") and may contain areas outside of the Building to the extent such areas are specifically identified on Exhibit "A" as being a part of the Premises. The number of square feet set forth in section 1.5 is an approximation, and the Base Rent shall not be changed if the actual number of square feet in the Premises is different than the number of square feet set forth in section 1.5.

2.2

CONDITION.    


(a)

Except as otherwise expressly provided in this Lease, Tenant accepts the Premises in its condition on the date Landlord delivers possession of the Premises to Tenant (the " Delivery Date "), subject to all applicable laws, ordinances, regulations, covenants, conditions, restrictions and easements, and except as may be otherwise expressly provided

2


in this Lease, Landlord shall not be obligated to make any repairs or alterations to the Premises.

(b)

Landlord represents and warrants to Tenant that on the Delivery Date the following parts of the Premises shall be in good working order: (a) plumbing systems, (b) electrical systems, (c) the roof, (d) all HVAC units, (e) mechanical systems and (f) lighting systems (collectively, the " Building Systems ").

(c)

Landlord warrants that on the Delivery Date the Building will comply with the requirements of the Americans With Disabilities Act and Title 24 of the California Code of Regulation (collectively, " ADA Requirements ") that are in effect as of the Delivery Date. In determining whether or not the Building complies with the ADA Requirements in effect on the Delivery Date, Landlord and Tenant shall assume that Tenant will occupy the Premises in its "as is" condition and without respect to any modification of the Premises to be made by Tenant (e.g., prior to the construction of the Tenant Improvements (as defined in the Work Letter Agreement) and prior to the construction of any Alterations (as defined below)).

(d)

In the event that it is determined that a warranty set forth in (b) or (c) above is untrue, Landlord shall not be in default under the Lease if after Landlord receives written notice of the representation or warranty that is untrue, Landlord promptly takes the actions, at Landlord's sole expense, necessary to put the applicable Building System in working order or to comply with the applicable ADA Requirement. The representations and warranties set forth in (b) and (c) above shall apply only to the condition of the Building Systems and compliance with the ADA Requirements as of the Delivery Date, and shall not apply to any point in time thereafter. Tenant shall notify Landlord in writing (the " Warranty Notice ") within ninety (90) days after the Rent Commencement Date with respect to all ADA Requirements and Building Systems except the roof, and within one hundred eighty (180) days after the Rent Commencement Date with respect to the roof, time being of the essence (a " Notice Date "), of each way, if any, that the foregoing representations and warranties ware untrue on the Delivery Date (an " Untrue Warranty "). A Warranty Notice shall state the specific way in which one or more Building System was not in working order on the Delivery Date or in which the Building did not comply with ADA Requirements on the Delivery Date. Subject to Landlord's obligations under section 11, Landlord shall have no responsibility to repair any Building System or to comply with any ADA Requirement unless Tenant notifies Landlord on or before the applicable Notice Date in a Warranty Notice of the Untrue Warranty, and if Tenant notifies Landlord that a Building System was not in working order or that the Building did not comply with an ADA Requirement after the applicable Notice Date, Landlord shall have no obligation pursuant to this section to repair the Building System that is not in working order or to comply with the ADA Requirement.

2.3

COMMON AREAS.     Landlord hereby grants to Tenant for the benefit of Tenant and its employees, suppliers, shippers, customers and invitees during the term of this Lease, the nonexclusive right to use, in common with others entitled to such use (including Landlord), the Common Areas (as hereinafter defined) as they exist from time to time, subject to all rights reserved by Landlord hereunder and under the terms of all rules and regulations promulgated by Landlord from time to time with respect thereto. Landlord reserves the right from time to time to (a) make changes in the Common Areas, including, without limitation, changes in location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways; (b) close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remain available; (c) construct additional buildings,

3


parking areas, loading dock facilities and other improvements within the Common Areas; and (d) do and perform such other acts and make such other changes in, to or with respect to the Common Areas as Landlord may deem appropriate; provided , however , any such permanent changes or alterations that substantially and adversely affect parking, loading or unloading or substantially and adversely interfere with Tenant's use of the Premises or the Common Areas (as defined below) shall require Tenant's prior written consent, which consent shall not be unreasonably withheld or delayed. As used herein, the term " Common Areas " means all areas and facilities outside the Premises and within the exterior boundary lines of the land owned by Landlord that are provided and designated by Landlord as such from time to time for general nonexclusive use of Tenant and others, including, if designated by Landlord as Common Areas, parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways and landscaped areas. The Premises, the Building, the Common Areas, the land upon which the same are located, along with all other buildings and improvements thereon, are herein collectively referred to as the " Project ." Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas, including, without limitation, the storage of trucks or other vehicles. Any such storage shall be permitted only by the prior written consent of Landlord, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord.

3.     TERM.

3.1

TERM AND COMMENCEMENT.     The term and Commencement Date of this Lease are as specified in sections 1.7 and 1.8.

3.2

TENDER OF POSSESSION.     Possession of the Premises shall be deemed tendered to Tenant when Landlord has offered Tenant possession of the Premises.

4.     USE.

4.1

PERMITTED USE.     The Premises shall be used only for the purpose described in section 1.6 and for no other purpose. Landlord makes no representation or warranty that Tenant's use is permitted by applicable zoning laws or other laws and regulations. In no event shall any portion of the Premises be used for retail sales. Tenant shall not initiate, submit an application for, or otherwise request, any land use approvals or entitlements with respect to the Premises or any other portion of the Project, including, without limitation, any variance, conditional use permit or rezoning, without first obtaining Landlord's prior written consent, which may be given or withheld in Landlord's sole discretion. Tenant shall not (a) permit any animals or pets to be brought to or kept in the Premises, (b) install any antenna, dish or other device on the roof of the Building or outside of the Premises, (c) make any penetrations into the roof of the Building, (d) place loads upon floors, walls or ceilings in excess of the load such items were designed to carry, (e) place or store, nor permit any other person or entity to place or store, any property, equipment, material, supplies or other items outside of the Building in which the Premises is located or (f) change the exterior of the Premises or the Building in which the Premises is located. Tenant acknowledges that Landlord has made no representation or warranty as to the suitability of the Premises for the conduct of Tenant's business, and Tenant waives any implied warranty that the Premises are suitable for Tenant's intended purposes.

4.2

COMPLIANCE WITH LAWS.     Tenant shall, at Tenant's sole expense, promptly comply with all applicable laws, ordinances, rules, regulations, orders, certificates of occupancy, conditional use or other permits, variances, covenants, conditions, restrictions, easements, the reasonable

4


recommendations of Landlord's engineers or other consultants, and requirements of any fire insurance underwriters, rating bureaus or government agencies, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from that now existing, during the term or any part of the term hereof, relating in any manner to the Premises or the occupation and use by Tenant of the Premises (" Legal Requirements "). Tenant shall, at Tenant's sole expense, comply with all requirements of the Americans With Disabilities Act that relate to the Premises, and all federal, state and local laws and regulations governing occupational safely and health. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the Premises, or take any other action that would constitute a nuisance or would disturb, unreasonably interfere with or endanger Landlord or any other tenants of the Project. Tenant shall obtain, at its sole expense, any permit or other governmental authorization required to operate its business from the Premises. Landlord shall not be liable for the failure of any other tenant or person to abide by the requirements of this section or to otherwise comply with applicable laws and regulations, and Tenant shall not be excused from the performance of its obligations under this Lease due to such a failure. Notwithstanding the foregoing, in no event shall Tenant be required to make changes required by Legal Requirements to the structural components of the Premises (" Landlord Changes "), unless such changes are required due to Tenant's negligence or misuse of the Premises, Tenant's alteration of the Premises or Tenant's particular use of the Premises. If the changes are required due to Tenant's negligence or misuse of the Premises, Tenant's alteration of the Premises or Tenant's particular use of the Premises, Landlord shall make such changes and Tenant shall reimburse Landlord for the reasonable cost thereof. With respect to other Landlord Changes, Landlord shall cause same to be completed, and subject to the other limitations contained in this Lease, the cost thereof may be included in Operating Expenses.

4.3

LANDLORD REPRESENTATION.     As of the date set forth in section 1.1, Landlord represents and warrants to Tenant that to Landlord's actual knowledge it does not know of any material violations of laws or regulations applicable to the Premises that would materially and adversely affect Tenant's use of the Premises. Landlord's representation shall not apply to alterations or improvements to be made by Tenant to the Premises or the use for which Tenant will occupy the Premises. For purposes of this section, Landlord's actual knowledge shall mean the actual knowledge of Scott Amling without duty of investigation. Tenant acknowledges that the improvements comprising the Premises may have been constructed prior to the enactment of some existing laws and regulations and may have been constructed without building permits and the fact that such improvements do not now comply with some existing laws and regulations shall not constitute the breach of this warranty or obligate Landlord to modify such improvements.

5.

BASE RENT.     Tenant shall pay Base Rent in the amount set forth on the first page of this Lease. The first month's Base Rent, the Security Deposit, and the first monthly installment of estimated Operating Expenses (as hereafter defined) shall be due and payable on the date this Lease is executed by Tenant, and Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month succeeding the Rent Commencement Date. Payments of Base Rent for any fractional calendar month shall be prorated. All payments required to be made by Tenant to Landlord hereunder shall be payable at such address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant shall have no right at any time to abate, reduce, or set off any rent due hereunder except where expressly provided in this Lease.

5


6.     OPERATING EXPENSE PAYMENTS

6.1

OPERATING EXPENSES.     Tenant shall pay Tenant's Percentage Share (as defined below) of the Operating Expenses for the Project. For the purposes of this Lease, and subject to the exclusions described in section 6.2, the term " Operating Expenses " shall mean all expenses and disbursements of every kind (subject to the limitations set forth below) which Landlord incurs, pays or becomes obligated to pay in connection with the ownership, operation, and maintenance of the Project (including the associated Common Areas), including, but not limited to, the following:


(a)

wages and salaries (including management fees) of all employees, agents, consultants and other individuals or entities engaged in the operation, repair, replacement, maintenance, and security of the Project, including taxes, insurance and benefits relating thereto;

(b)

all supplies and materials used in the operation, maintenance, repair, replacement, and security of the Project;

(c)

annual cost of all Capital improvements (as defined below) made to the Project which although capital in nature can reasonably be expected to reduce the normal operating costs of the Project, as well as all Capital improvements made in order to comply with any law now or hereafter promulgated by any governmental authority, as amortized over the useful economic life of such improvements as determined by Landlord in its reasonable discretion (without regard to the period over which such improvements may be depreciated or amortized for federal income tax purposes). Capital improvements shall not include any expenditure incurred by Landlord to maintain the structural elements of the roof of the Building (excluding the roof membrane), the structural soundness of the foundation of the Building, the structural elements of the exterior walls of the Building and the structural elements of existing interior load-bearing walls of the Building (excluding any load-bearing walls constructed by Tenant, which Tenant shall maintain and repair at Tenant's sole expense), and the cost of such items shall be paid by Landlord, at Landlord's sole cost and expense;

(d)

cost of all utilities paid by Landlord;

(e)

cost of any insurance or insurance-related expense applicable to the Project and Landlord's personal property used in connection therewith, including, but not limited to, the insurance costs described in section 10.2;

(f)

cost of repairs, replacements and general maintenance of the Project (including all truck court areas, paving and parking areas, Common Area lighting facilities, fences, gates, water lines, sewer lines, rail spur areas and any other item Landlord is obligated to repair or maintain), other than costs necessary to assure the structural soundness of the roof, foundation and exterior walls of the Project which are payable solely by Landlord under section 11;

(g)

cost of service or maintenance contracts with independent contractors for the operation, maintenance, repair, replacement or security of the Project (including, without limitation, alarm service, exterior painting, trash collection, snow, ice, debris and waste removal and landscape maintenance);

(h)

the cost of all accounting fees, management fees, legal fees and consulting fees attributable to the operation, ownership, management, maintenance or repair of the Project;

6


(i)

payments made by Landlord under any easement, license, operating agreement, declaration, restrictive covenant or other agreement relating to the sharing of costs among property owners;

(j)

the cost of all business licenses, permits or similar fees relating to the operation, ownership, repair or maintenance of the Project; and

(k)

the cost of any other item the cost of which is stated in this Lease to be an Operating Expense.

For purposes of this Lease, a " Capital Improvement " shall be an improvement to the Project that Landlord is obligated or permitted to make pursuant to this Lease, the cost of which is not fully deductible in the year incurred in accordance with generally accepted accounting principles; provided , however , that, at Landlord's option, the following items shall be treated as expenses and not Capital Improvements: (i) the cost of painting all or part of the Project, (ii) the cost of resurfacing and restriping roadways and parking areas and (iii) the cost of any items Tenant is obligated to pay for pursuant to section 12.1 that Landlord elects, in its sole discretion, to include in Operating Expenses. Real Property Taxes (as defined below) shall be reimbursed to Landlord as provided below and shall not be treated as an Operating Expense. References to facilities, services, utilities or other items in this section shall not impose an obligation on Landlord to have said facilities or to provide said services unless such facilities and services already exist at the Project.

6.2

OPERATING EXPENSE EXCLUSIONS.     Notwithstanding anything to the contrary contained herein, for purposes of this Lease, the term "Operating Expenses" shall not include the following: (i) costs (including permit license and inspection fees) incurred for tenant improvement for other tenants within the Project; (ii) legal and auditing fees (other than those fees reasonably incurred in connection with the maintenance and operation of all or any portion of the Project), leasing commissions, advertising expenses and similar costs incurred in connection with the leasing of the Project; (iii) depreciation of the Building or any other improvements situated within the Project; (iv) any items for which Landlord is actually reimbursed by insurance or by direct reimbursement by any other tenant of the Project; (v) costs of repairs or other work necessitated by fire, windstorm or other casualty (excluding any deductible) and/or costs of repairs or other work necessitated by the exercise of the right of eminent domain to the extent insurance proceeds or a condemnation award, as applicable, is actually received by Landlord for such purposes; provided , such costs of repairs or other work shall be paid by the parties in accordance with the provisions of sections 11 and 12, below; (vi) other than any interest charges for Capital Improvements referred to in section 6.1(c) hereinabove, any interest or payments on any financing for the Building or the Project and interest and penalties incurred as a result of Landlord's late payment of any invoice; (vii) costs associated with the investigation and/or remediation of Hazardous Materials (hereafter defined) present in, on or about any portion of the Project, unless such costs and expenses are the responsibility of Tenant as provided in section 27 hereof, in which event such costs and expenses shall be paid solely by Tenant in accordance with the provisions of section 27 hereof; (viii) overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in the Project to the extent the same exceeds the costs of such by unaffiliated third parties on a competitive basis; (ix) any payments under a ground lease or master lease; and (x) except as provided in section 6.1(c) and (j) above, the cost of Capital Improvements.

6.3

PAYMENT.     Tenant's Percentage Share of Operating Expenses shall be payable by Tenant within thirty (30) days after a reasonably detailed statement of actual expenses is presented to Tenant by Landlord. At Landlord's option, however, Landlord may, from time to time, estimate what Tenant's Percentage Share of Operating Expenses will be, and the same shall be

7


payable by Tenant monthly during each calendar year of the Lease term, on the same day as the Base Rent is due hereunder. In the event that Tenant pays Landlord's estimate of Tenant's Percentage Share of Operating Expenses, Landlord shall use its best efforts to deliver to Tenant within one hundred eighty (180) days after the expiration of each calendar year a reasonably detailed statement (the " Statement ") showing Tenant's Percentage Share of the actual Operating Expenses incurred during such year. If Landlord has not delivered a Statement to Tenant within one hundred fifty (150) days after the expiration of the preceding calendar year, Tenant shall have the right to give Landlord written notice of such failure (a " Tenant Notice "), and Landlord's failure to provide the Statement to Tenant within thirty (30) days after Landlord receives the Tenant Notice shall be a breach by Landlord of its obligations under this Lease. To be effective, the Tenant Notice must specifically state that Landlord's failure to provide the Statement to Tenant within thirty (30) days after Landlord's receipt of the Notice will constitute a breach of the Lease by Landlord and the Tenant Notice must refer specifically to this section of the Lease. Landlord's failure to deliver the Statement to Tenant within said period shall not constitute Landlord's waiver of its right to collect said amounts or otherwise prejudice Landlord's rights hereunder. If Tenant's payments under this section during said calendar year exceed Tenant's Percentage Share as indicated on the Statement, Tenant shall be entitled to credit the amount of such overpayment against Base Rent and Tenant's Percentage Share of Operating Expenses next falling due. If Tenant's payments under this section during said calendar year were less than Tenant's Percentage Share as indicated on the Statement, Tenant shall pay to Landlord the amount of the deficiency within thirty (30) days after delivery by Landlord to Tenant of the Statement. Landlord and Tenant shall forthwith adjust between them by cash payment any balance determined to exist with respect to that portion of the last calendar year for which Tenant is responsible for Operating Expenses, notwithstanding that the Lease term may have terminated before the end of such calendar year; and this provision shall survive the expiration or earlier termination of the Lease.

6.4

TENANT'S PERCENTAGE SHARE.     "Tenant's Percentage Share" as used in this Lease shall mean the percentage of the cost of Opening Expenses and Real Property Taxes (as defined below) for which Tenant is obligated to reimburse Landlord pursuant to the Lease. Notwithstanding anything to the contrary contained in section 1.11, Landlord shall have the right lo determine Tenant's Percentage Share of the cost of Operating Expenses and Real Property Taxes using any one or more of the following three methods, and Tenant hereby agrees that any one of the following three methods of allocation is reasonable: (a) by multiplying the cost of all Operating Expenses or Real Properties by a fraction, the numerator of which is the number of square feet of leasable space in the Premises and the denominator of which is the number of square feet of leasable space in all buildings in the Project; or (b) (i) with respect to an Operating Expense or Real Property Taxes attributable solely to the Building, requiring Tenant to pay that portion of the cost of the Operating Expense or Real Property Taxes that is obtained by multiplying such cost by a fraction, the numerator of which is the number of square feet of leasable space in the Premises and the denominator of which is the number of square feet of leasable space in the entire Building and (ii) with respect to an Operating Expense or Real Property Taxes attributable to the Common Areas of the Project, but no any particular building in the Project, requiring Tenant to pay that portion of the cost of the Operating Expense or Real Property Taxes that is obtained by multiplying such cost by a fraction, the numerator of which is the number of square feet of leasable space in the Premises and the denominator of which is the number of square feet of leasable space in all buildings in the Project or (c) by allocating an Operating Expense or Real Property Taxes in any other reasonable manner, as determined by Landlord. Landlord shall apply the various

8


Tenant Percentage Shares to Operating Expenses and Real Property Taxes in a commercially reasonable and good faith manner.

6.5

AUDITS.     If Tenant disputes the amount set forth in the Statement, Tenant shall have the right, at Tenant's sole expense, not later the sixty (60) days following receipt of such Statement, to review Landlord's books and records with respect to the calendar year which is the subject of the Statement. In addition, if Tenant disputes the amount set forth in the Statement, Tenant shall have the right, at Tenant's sole expense, not later than ninety (90) days following receipt of such Statement, to cause Landlord's books and records with respect to the calendar year which is the subject of the Statement to be audited by a certified public accountant mutually acceptable to Landlord and Tenant. The audit shall take place at the offices of Landlord where its books and records are located at a mutually convenient time during Landlord's regular business hours. If the audit is performed by a mutually acceptable certified public accountant, Tenant's Percentage Share of Operating Expenses shall be appropriately adjusted based upon the results of such audit, and the results of such audit shall be final and binding upon Landlord and Tenant. Tenant shall have no right to conduct an audit or to give Landlord notice that it desires to conduct an audit at any time Tenant is in default under the Lease. The accountant conducting the audit shall be compensated on an hourly basis and shall not be compensated based upon a percentage of overcharges it discovers. No subtenant shall have any right to conduct an audit, and no assignee shall conduct an audit for any period during which such assignee was not in possession of the Premises. Tenant's right to undertake an audit with respect to any calendar year shall expire ninety (90) days after Tenant's receipt of the Statement for such calendar year, and such Statement shall be final and binding upon Tenant and shall, as between the parties, be conclusively deemed correct, at the end of such ninety (90) day period, unless prior thereto Tenant shall have given Landlord written notice of its intention to audit Operating Expenses for the calendar year which is the subject of the Statement. If Tenant gives Landlord notice of its intention to audit Operating Expenses, it must commence such audit within sixty (60) days after such notice is delivered to Landlord, and the audit must be completed within one hundred twenty (120) days after such notice is delivered to Landlord. If Tenant does not commence and complete the audit within such periods, the Statement which Tenant elected to audit shall be deemed final and binding upon Tenant and shall, as between the parties, be conclusively deemed correct. Tenant agrees that the results of any Operating Expense audit shall be kept strictly confidential by Tenant and shall not be disclosed to any other person or entity. If as a result of an audit, it is determined that Landlord has overstated the Operating Expenses owed by Tenant on a Statement by more than ten percent (10%) of the actual Operating Expenses owed by Tenant, Landlord shall reimburse Tenant for the reasonable out-of-pocket costs Tenant paid to unrelated third parties for the performance of the audit; provided , however , Landlord shall not be obligated to reimburse Tenant for more than One Thousand Five Hundred Dollars($1,500) of expenses with respect to any one audit.

6.6

AMORTIZATION OF CERTAIN IMPROVEMENTS.     Pursuant to sections 6.1 and 12 of this Lease, Landlord has the right to require Tenant to pay for certain costs related to the replacement of the roof membrane and HVAC units at the Building and the resurfacing of the asphalt and concrete driveways and parking areas of the Project (collectively, the " Major Items "). Notwithstanding anything to the contrary contained in sections 6.1 and 12, if Landlord replaces a Major Item, and in accordance with GAAP, the entire cost of the replacement is not deductible as an expense in the year incurred, Landlord shall amortize the cost of the replacement of the Major Item over its useful life, as reasonably determined by Landlord, and Tenant shall only be obligated to reimburse Landlord each year for its Percentage Share of such amortized cost. Landlord shall have no obligation to amortize repairs or maintenance items (as opposed to replacement costs) relating to the Major Items, and all repair and

9


maintenance items shall be payable by Tenant to Landlord as Operating Expense in the year incurred.

7.

SECURITY DEPOSIT.     Tenant shall deliver to Landlord at the time it executes this Lease the security deposit set forth in section 1.12 as security for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant fails to pay Base Rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Landlord may use all or any portion of said deposit for the payment of any Base Rent or other charge due hereunder, to pay any other sum to which Landlord may become obligated by reason of Tenant default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said deposit, Tenant shall within ten (10) days after written demand therefor deposit cash with Landlord in an amount sufficient to restore said deposit to its full amount. Landlord shall not be required to keep said security deposit separate from its general accounts. If Tenant performs all of Tenant's obligations hereunder, said deposit, or so much thereof as has not heretofore been applied by Landlord, shall be returned, without payment of interest or other amount for its use, to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's interest hereunder) at the expiration of the term hereof, and after Tenant has vacated the Premises. No trust relationship is created herein between Landlord and Tenant with respect to said security deposit. Tenant acknowledges that the security deposit is not an advance payment of any kind or a measure of Landlord's damages in the event of Tenant's default. Tenant hereby waives the provisions of any law which is inconsistent with this section.

8.     UTILITIES.

8.1

PAYMENT.     Tenant shall pay for all water, gas, electricity, telephone, sewer, sprinkler services, refuse and trash collection and other utilities and services used on the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto. Tenant shall contract directly with the applicable public utility for such service. Tenant shall pay its share of all charges for jointly-metered utilities based upon consumption, as reasonably determined by Landlord. Tenant agrees to limit use of water and sewer for normal restroom use, and nothing herein contained shall impose upon Landlord any duty to provide sewer or water usage for other than normal restroom usage.

8.2

INTERRUPTIONS.     Subject to Tenant's rights under section 8.5 below, Tenant agrees that Landlord shall not be liable to Tenant for its failure to furnish water, gas, electricity, telephone, sewer, refuse and trash collection or any other utility services or building services when such failure is occasioned, in whole or in part by repairs, replacements or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, telephone service or other utility at the Project, by any accident, casualty or event arising from any cause whatsoever, by act, negligence or default of Tenant or any other person or entity, or by any other cause, and such failures shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from the obligation of paying rent or performing any of its obligations under this Lease; provided , however , the foregoing shall not release Landlord from liability arising out of the negligence or willful misconduct of Landlord and Landlord's agents. Furthermore, subject to Tenant's rights under section 8.5 below, Landlord shall not be liable under any circumstances for loss of property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any such services or utilities. Landlord may comply with voluntary controls or guidelines promulgated by any governmental entity relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions without creating any liability of Landlord to Tenant under this Lease.

10


8.3

RAILROAD SPURS.     If the Premises is served by railroad spur, Tenant shall execute any agreement required by the railroad company serving the railroad spur, and such agreement shall be satisfactory to Landlord, in Landlord's sole discretion. Tenant shall pay the cost of maintaining the railroad spur, at Tenant's sole cost and expanse.

8.4

ALTERNATIVE UTILITY PROVIDERS.     If permitted by applicable laws, Landlord shall have the right at any time and from time to time during the term of this Lease to either contract for service from a different company or companies (each such company referred to as an " Alternate Service Provider ") other than the company or companies presently providing electrical service for the Project (the " Electric Service Provider ") or continue to contract for service from the Electric Service Provider, at Landlord's sole discretion. Tenant agrees to cooperate with Landlord, the Electric Service Provider, and an Alternate Service Provider at all times and, as reasonably necessary, shall allow Landlord, the Electric Service Provider, and any Alternate Service Provider reasonable access to the Building's electric lines, feeders, risers, wiring and any other machinery within the Premises.

8.5

ABATEMENT OF RENT.     In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof for two (2) consecutive business days (the " Eligibility Period ") as a result of any damage or destruction to the Premises or any repair, maintenance or alteration performed by Landlord to the Premises after the Commencement Date and required by the Lease, which substantially interferes with Tenant's use of the Premises, or any failure to provide services or access to the Premises due to Landlord's negligence or default, then Tenant's 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. However, in the event that Tenant is prevented from conducting, and does not conduct, its business in any portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Premises shall be abated; provided , however , if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the 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 such business operations commence.

9.     REAL AND PERSONAL PROPERTY TAXES.

9.1

PAYMENT OF TAXES.     Tenant shall pay to Landlord during the term of this Lease, in addition to Base Rent and Tenant's Percentage Share of Operating Expenses, Tenant's Percentage Share of all Real Property Taxes. Tenant's Percentage Share of Real Property Taxes shall be payable by Tenant at the same time, in the same manner and under the same terms and conditions as Tenant pays Tenant's Percentage Share of Operating Expenses.

9.2

DEFINITION OF REAL PROPERTY TAX.     As used herein, the term " Real Property Taxes " shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, improvement bond or bonds imposed on the Project or any portion thereof by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord in the Project or in any portion thereof. Real Property Taxes shall not include income, inheritance

11


and gift taxes. In the future a general or special assessment of real property taxes may be levied and assessed against the Project, and in this event Landlord may have the right to either elect to pay the new assessment in full or to pay the new assessment in installments over time. If Landlord elects to pay the new assessment in full, each year the Real Property Taxes shall include the amount of the assessment that would have come due each year if Landlord had elected to pay the assessment in installments.

9.3

PERSONAL PROPERTY TAXES.     Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Premises or related to Tenant's use of the Premises. If any of Tenant's personal property shall be assessed with Landlord's real or personal property, Tenant shall pay to Landlord the taxes attributable to Tenant within ten (10) days after receipt of a written statement from Landlord setting forth the taxes applicable to Tenant's property.

9.4

REASSESSMENTS.     From time to time Landlord may challenge the assessed value of the Project as determined by applicable taxing authorities and/or Landlord may attempt to cause the Real Property Taxes to be reduced on other grounds. If Landlord is successful in causing the Real Property Taxes to be reduced or in obtaining a refund, rebate, credit or similar benefit (hereinafter collectively referred to as a "reduction"), Landlord shall to the extent practicable, credit the reduction(s) to Real Property Taxes for the calendar year to which a reduction applies and recalculate the Real Property Taxes owed by Tenant for years in which the reduction applies based on the reduced Real Property Taxes. All costs incurred by Landlord in obtaining the Real Property Tax reductions shall be considered an Operating Expense, and Landlord shall determine, in its sole discretion, to which years any reductions will be applied. In addition, all accounting and related costs incurred by Landlord in making the adjustments shall be an Operating Expense. Landlord shall have the right to compensate a person or entity it employs to obtain a reduction in Real Property Taxes by giving such person or entity a percentage of any reduction or credit obtained, and in this event the reduction or credit obtained by Landlord shall be deemed to be the reduction or credit given by the taxing authority less the compensation paid to such person or entity.

10.   INSURANCE.

10.1

INSURANCE—TENANT.    


(a)

Tenant shall obtain and keep in force during the term of this Lease a commercial general liability policy of insurance with coverages acceptable to Landlord, in Landlord's reasonable discretion, which, by way of example and not limitation, protects Tenant and Landlord (as an additional insured) against claims for bodily injury, personal injury and property damage based upon, involving or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single-limit coverage in an amount not less than $2,000,000 per occurrence with an "Additional Insured-Managers and Landlords of Premises Endorsement" and contain the "Amendment of the Pollution Exclusion" for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Tenant's indemnity obligations under this Lease.

(b)

Tenant shall obtain and keep in force during the term of this Lease "all-risk" extended coverage property insurance. Said insurance shall be written on a one hundred percent (100%) replacement cost basis on Tenant's personal property, all tenant improvements installed at the Premises by Landlord or Tenant, Tenant's trade fixtures and other

12


property. By way of example, and not limitation, such policies shall provide protection against any peril included within the classification "fire and extended coverage," against vandalism and malicious mischief, theft, sprinkler leakage, earthquake damage and flood damage.

(c)

Tenant shall, at all times during the term hereof, maintain in effect workers' compensation insurance as required by applicable law and business interruption and extra expense insurance satisfactory to Landlord.

10.2

INSURANCE—LANDLORD.    


(a)

Landlord shall obtain and keep in force a policy of general liability insurance with coverage against such risks and in such amounts as Landlord deems advisable insuring Landlord against liability arising out of the ownership, operation and management of the Project.

(b)

Landlord shall also obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Project in the amount of not less than eighty percent (80%) of the full replacement cost thereof, as determined by Landlord from time to time. The terms and conditions of said policies and the perils and risks covered thereby shall be determined by Landlord, from time to time, in Landlord's sole discretion; provided that such policy shall, at a minimum, provide protection against any peril included within the classification "fire and extended coverage," vandalism and malicious mischief, theft and sprinkler leakage. In addition, at Landlord's option, Landlord shall obtain and keep in force, during the term of this Lease, a policy of rental interruption insurance, with loss payable to Landlord, which insurance shall, at Landlord's option, also cover all Operating Expenses and Real Property Taxes. Tenant will not be named as an additional insured in any insurance policies carried by Landlord and shall have no right to any proceeds therefrom. The policies purchased by Landlord shall contain such deductibles as Landlord may determine. Tenant shall pay at Tenant's sole expense any increase in the property insurance premiums for the Project over what was payable immediately prior to the increase to the extent the increase is specified by Landlord's insurance carrier as being caused by the nature of Tenant's occupancy or any act or omission of Tenant.

10.3

INSURANCE POLICIES.     Tenant shall deliver to Landlord certificates of the insurance policies required under section 10.1 within fifteen (15) days prior to the Commencement Date of this Lease, and Landlord shall have the right to approve the terms and conditions of said certificates. Tenant's insurance policies shall not be cancelable or subject to reduction of coverage or other modification except after thirty (30) days' prior written notice to Landlord. Tenant shall, at least thirty (30) days prior to the expiration of such policies, furnish Landlord with certificates of renewals thereof. Tenant's insurance policies shall be issued by insurance companies authorized to do business in the state in which the Project is located, and said companies shall maintain during the policy term a "General Policyholder's Rating" of at least A and a financial rating of at least "Class X" (or such other rating as may be required by any lender having a lien on the Project) as set forth in the most recent edition of "Best Insurance Reports." All insurance obtained by Tenant shall be primary to and not contributory with any similar insurance carried by Landlord, whose insurance shall be considered excess insurance only. Landlord and, at Landlord's option, the holder of any mortgage or deed of trust encumbering the Project and any person or entity managing the Project on behalf of Landlord, shall be named as an additional insured on all insurance policies Tenant is obligated to obtain by section 10.1 above. Tenant's insurance policies shall not include deductibles in excess of Five Thousand Dollars ($5,000); provided , however , if deductibles in this amount are

13


not available at commercially reasonable rates and it becomes customary to permit tenants of similar industrial buildings to maintain a higher deductible, Landlord shall permit Tenant to maintain the higher customary deductible not to exceed One Hundred Thousand Dollars ($25,000).

10.4

WAIVER OF SUBROGATION.     Landlord waives any and all rights of recovery against Tenant and Tenant's employees and agents for or arising out of damage to, or destruction of, the Project to the extent that Landlord's insurance policies then in force insure against such damage or destruction (or to the extent of what would have been covered had Landlord maintained the insurance required to be carried under this Lease) and permit such waiver. Tenant waives any and all rights of recovery against Landlord and Landlord's employees and agents for or arising out of damage to, or destruction of, the Project to the extent that Tenant's insurance policies then in force insure against such damage or destruction (or to the extent of what would have been covered had Tenant maintained the insurance required to be carried under this Lease) and permit such waiver. Tenant shall cause the insurance policies it obtains in accordance with section 10.1 relating to property damage to provide that the insurance company waives all right of recovery by subrogation against Landlord in connection with any liability or damage covered by Tenant's insurance policies.

10.5

COVERAGE.     Landlord makes no representation to Tenant that the limits or forms of coverage specified above or approved by Landlord are adequate to insure Tenant's property or Tenant's obligations under this Lease, and the limits of any insurance carried by Tenant shall not limit Tenant's obligations or liability under any indemnity provision included in this Lease or under any other provision of this Lease.

11.   LANDLORD'S REPAIRS.

11.1

OBLIGATIONS OF LANDLORD.     Landlord shall maintain, at Landlord's expense, only the structural elements of the roof of the Building (excluding the roof membrane), the structural soundness of the foundation of the Building and the structural elements of the exterior walls of the Building. Tenant shall reimburse Landlord for the cost of any maintenance, repair or replacement of the foregoing necessitated by Tenant's misuse, negligence, alterations to the Premises or any breach of its obligations under this Lease. By way of example, and not limitation, the term "exterior walls" as used in this section shall not include windows, glass or plate glass, doors or overhead doors, special store fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall immediately give Landlord written notice of any repair required by Landlord pursuant to this section, after which Landlord shall have a reasonable time in which to complete the repair. Nothing contained in this section shall be construed to obligate Landlord to seal or otherwise maintain the surface of any foundation, floor or slab. Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises in good order, condition and repair.

11.2

FAILURE OF LANDLORD TO MAKE REPAIR.     Notwithstanding anything to the contrary contained in the Lease, if Tenant provides written notice to Landlord that an event or circumstance has occurred which requires Landlord to complete a repair at the Premises, and Landlord fails to begin taking the actions necessary to complete such repair within thirty (30) days after the receipt of such notice and to thereafter diligently proceed to complete such repair, then, Tenant shall have the right to give to Landlord a second written notice (the " Second Notice "). The Second Notice shall (a) describe the repair Landlord is obligated to complete and (b) state that Landlord's failure to begin taking the actions necessary to complete such repair within ten (10) days after Landlord's receipt of the Second Notice shall entitle Tenant to make the repair pursuant to this Section of the Lease. If Landlord does not

14


begin taking the actions necessary to complete such repair within ten (10) days after the receipt of the Second Notice, subject to the terms and conditions set forth below, Tenant may proceed to make the repair, and if such repair was required under the terms of the Lease to be made by Landlord, then Tenant shall be entitled to reimbursement by Landlord of Tenant's reasonable costs and expenses in making such repair. If Landlord was obligated to perform such repair, Landlord shall reimburse Tenant for the reasonable cost of the repair within thirty (30) days after receiving reasonable evidence of the repair made, its cost and mechanics' lien releases from all contractors making the repair. If Tenant makes a repair, and such repair will affect the Building's life/safety system, HVAC system, elevator system, electrical system, plumbing system, or the structural integrity of the Building, Tenant shall utilize the services of the contractors used by Landlord to provide such services or, if Tenant is unable to determine which contractors Landlord uses to provide such services after diligent inquiry, a qualified, experienced and solvent contractor that regularly performs similar work in similar buildings in the area in which the Building is located. Nothing contained herein shall be deemed to give Tenant the right to take any action or to make any repair in any Common Area or the right to modify the structure, layout or design of the Building. In addition, Tenant shall not have the right to make any repair pursuant to this section, unless such repair is necessary to remedy a problem which substantially and adversely affects Tenant's use of the Premises. All repairs made by Tenant shall be made in accordance with all applicable laws, and Landlord shall not be responsible for any defective work performed by Tenant or contractors hired by Tenant. Tenant shall pay all costs incurred with respect to any actions or repairs made by Tenant and shall pay all claims for labor and materials furnished to Tenant as and when due.

12.   TENANT'S REPAIRS.

12.1

OBLIGATIONS OF TENANT.     Subject to section 12.2 below. Tenant shall, at its sole cost and expense, keep and maintain all parts of the Premises (except those listed as Landlord's responsibility in section 11 above) in good and sanitary condition, promptly making all necessary repairs and replacements, including but not limited to, windows, glass and plate glass, doors, skylights, roof membranes, any special store front or office entry, walls and finish work, floors and floor coverings, heating and air conditioning systems, dock boards, bumpers, plates, seals, levelers and lights, plumbing work and fixtures (including periodic backflow testing), electrical systems, lighting facilities and bulbs, sprinkler systems, alarm systems, fire detection systems, termite and pest extermination, sidewalks, landscaped areas, fencing, tenant signage and regular removal of trash and debris. Tenant shall notify Landlord in writing prior to making any repair or performing any maintenance pursuant to this section, and Landlord shall have the right to designate the contractor Tenant shall use to make any repair or to perform any maintenance on the roof, heating, ventilation and air conditioning systems (" HVAC "), plumbing systems, electrical systems, sprinkler systems, fire alarm systems or fire detection systems located at the Premises. Notwithstanding the foregoing, Tenant shall have the right to perform routine repairs and maintenance in the Premises without notifying Landlord provided that the routine repair or maintenance item (i) will not affect any other tenant of the Project or the exterior of the Building, (ii) is not a Landlord Maintenance Item (as defined below) and (iii) will not cost more than Two Thousand Dollars ($2,000.00). Tenant shall not paint or otherwise change the exterior appearance of the Premises without Landlord's prior written consent, which may be given or withheld in Landlord's sole discretion. The cost of maintenance and repair of any common party wall (any wall, divider, partition or any other structure separating the Premises from any adjacent premises occupied by other tenants) shall be shared equally by Tenant and the tenant occupying the adjacent premises; provided , however , if Tenant damages a party wall the entire cost of the repair shall be paid by Tenant, at Tenant's sole expense. Tenant shall not damage any party wall or disturb

15


the integrity and support provided by any party wall. If Tenant fails to keep the Premises in good condition and repair, Landlord may, but shall not be obligated to, make any necessary repairs. If Landlord makes such repairs, Landlord may bill Tenant for the cost of the repairs as additional rent, and said additional rent shall be payable by Tenant within ten (10) days after demand by Landlord.

12.2

PERFORMANCE OF WORK BY LANDLORD.     Notwithstanding Tenant's obligation to keep the roof membranes, HVAC units, sprinkler systems, fire alarm systems, fire detection systems and exterior walls of the Premises in good condition and repair, Landlord shall employ contractors to perform all repairs, maintenance and replacements of the roof membranes, HVAC units, sprinkler systems, fire alarm systems, fire detection systems and exterior walls of the Premises. The items described in the previous sentence that Landlord will cause to be repaired, maintained and replaced are hereinafter referred to as the "Landlord Maintenance Items." Tenant shall reimburse Landlord as additional rent for all costs Landlord incurs in performing the Landlord Maintenance Items within ten (10) days after written demand by Landlord. Landlord shall determine in its sole discretion the scope and timing of the performance of such Landlord Maintenance Items, and Tenant shall not perform such Landlord Maintenance Items. Landlord's maintenance of the exterior walls of the Premises shall include the right, but not the obligation, of Landlord to paint from time to time all or some of the exterior walls, canopies, doors, windows, gutters, handrails and other exterior parts of the Premises with colors selected by Landlord, and Tenant shall reimburse Landlord as provided above for all costs incurred by Landlord in painting such items. If the Premises contains landscaped areas (" Landscaped Areas "), Landlord shall maintain the Landscaped Areas, and Tenant shall reimburse Landlord for all costs incurred by Landlord in maintaining the Landscaped Areas within ten (10) days after written demand by Landlord; provided , however , Landlord shall have the right to estimate the monthly cost of maintaining the Landscaped Areas, and Tenant shall pay such amount to Landlord as additional rent each month at the same time Tenant pays Base Rent. Tenant shall Immediately give Landlord written notice of any repair or maintenance required by Landlord pursuant to this section, after which Landlord shall have a reasonable time in which to complete such repair or maintenance. Landlord shall have the right, but not the obligation, to include the cost of Landlord Maintenance Items and the cost of the maintenance of Landscaped Areas in Operating Expenses, and Tenant shall then pay Tenant's Percentage Share of such costs as determined by Landlord. Landlord shall have the right at any time, and from time to time, to elect upon written notice to Tenant to have Tenant perform some or all of the Landlord Maintenance Items and/or the maintenance of the Landscaped Areas, in which event Tenant shall employ contractors designated by Landlord to perform such work and shall pay for all such work at Tenant's sole cost and expense, all in accordance with the requirements of section 12.1.

12.3

MAINTENANCE CONTRACTS.     Landlord shall enter into regularly scheduled preventative maintenance/service contacts for some or all of the following: the HVAC units servicing the Premises, the sprinkler, fire alarm and fire detection systems servicing the Premises, backflow testing for the plumbing servicing the Premises and for the roof membrane of the Premises (the " Maintenance Contracts "). The Maintenance Contracts shall include maintenance services satisfactory to Landlord, in Landlord's sole discretion. Tenant shall reimburse Landlord for the cost of the Maintenance Contracts within ten (10) days after written demand by Landlord; provided , however , Landlord shall have the right to estimate the monthly cost of the Maintenance Contracts, and Tenant shall pay such amount to Landlord as additional rent each month at the same time Tenant pays Base Rent. Landlord shall have the right, but not the obligation, to include the cost of Maintenance Contracts in Operating Expenses, and Tenant shall then pay Tenant's Percentage Share of such costs as determined by Landlord. Landlord

16


shall have the right at any time, and from time to time, to elect upon written notice to Tenant to have Tenant purchase some or all of the Maintenance Contracts, in which event Tenant shall purchase such contracts from persons designated or approved by Landlord and shall pay for such Maintenance Contracts at Tenant's sole cost and expense. Landlord shall obtain Maintenance Contracts at commercially reasonable costs.

13.   ALTERATIONS AND SURRENDER.

13.1

CONSENT OF LANDLORD.    


(a)

GENERALLY .    Tenant shall have the right, subject to Landlord's reasonable requirements relating to construction at the Project, upon ten (10) days prior written notice to Landlord, to make alterations (" Permitted Alterations ") to the inside of the Premises that do not (i) involve the expenditure of more then $50,000.00; (iii) affect the exterior appearance of the Building or the roof, (iii) affect the Building's electrical, plumbing, HVAC, life, fire safety or similar Building systems or the structural elements of the Building, or (iv) materially adversely affect any other tenant of the Project. Except with respect to Permitted Alterations, Tenant shall not, without Landlord's prior written consent, which may be given or withheld in Landlord's reasonable discretion, make any alterations, improvements, additions, utility installations or repairs (hereinafter collectively referred to as " Non-Permitted Alterations ") in, on or about the Premises or the Project. References in this Lease to "Alterations" shall mean both Permitted Alterations and Non-Permitted Alterations, but not the initial Tenant improvements (as defined in the Work Letter Agreement). Subject to section (b) below, at the expiration of the term, Landlord may require the removal of any Alterations installed by Tenant and the restoration of the Premises and the Project to their prior condition, at Tenant's expense if, at the time of Landlord's consent, Landlord did not agree in writing that Tenant would not be obligated to remove the Alterations. If, as a result of any Alteration made by Tenant, Landlord is obligated to comply with the Americans With Disabilities Act or any other law or regulation, and such compliance requires Landlord to make any improvement or Alteration to any portion of the Project, as a condition to Landlord's consent, Landlord shall have the right to require Tenant to pay to Landlord, prior to the construction of any Alteration by Tenant, the entire cost of any improvement or alteration Landlord is obligated to complete by such law or regulation. Should Landlord permit Tenant to make its own Alterations, Tenant shall use only such architect and contractor as has been reasonably approved by Landlord, and if the cost of the Alteration will exceed $50,0000 Landlord may require Tenant to provide to Landlord, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alterations, to insure Landlord against any liability for mechanic's and materialmen's liens and to insure completion of the work. Should Tenant make any Alterations without the prior approval of Landlord, or use a contractor not expressly approved by Landlord, Landlord may, at any time during the term of this Lease, require that Tenant remove all or part of the Alterations and return the Premises to the condition it was in prior to the making of the Alternations. In the event Tenant makes any Alterations, Tenant agrees to obtain or cause its contractor to obtain, prior to the commencement of any work, "builders all risk" insurance in an amount approved by Landlord, workers compensation insurance and any other insurance requested by Landlord; in Landlord's reasonable discretion.

(b)

INITIAL TENANT IMPROVEMENTS AND RADIATION CELLS .    Except as provided below, Landlord hereby approves and agrees to permit Tenant to leave the Tenant improvements (as defined in the Work Letter Agreement) in the Premises at the end of

17


the term of the Lease. Landlord shall not be entitled to reimbursed by Tenant or from the Tenant improvement Allowance for any costs incurred by Landlord in monitoring the construction of the Tenant improvements or in reviewing and/or approving any plans and specifications for the Tenant Improvements. Tenant intends to install four concrete radiation cells in the Premises as part of the initial Tenant improvements, as more particularly described on the Space Plan attached to the Work Letter Agreement (the " Initial Radiation Cells "). The Space Plan attached to the Work Letter Agreement also describes the location of two additional concrete radiation cells that Tenant may wish to install after the initial Tenant improvements are completed (the " Additional Radiation Cells "). Subject to the terms and conditions of this section 13, Landlord hereby consents to the construction of the Additional Radiation Cells by Tenant at any time during the term of the Lease. The Additional Radiation Cells shall be placed in the locations described on the Space Plan and shall be constructed using materials and designs that are similar to the Initial Radiation Cells. Tenant shall have no obligation to remove the Initial Radiation Cells or to restore the Premises to the condition it was in prior to the installation of the Initial Radiation Cells unless Tenant defaults in the performance of its obligations under this Lease during the Initial Term and this Lease is terminated as a result of such default, in which case Tenant shall be obligated to remove the Initial Radiation Cells from the Premises. If Tenant installs the Additional Radiation Cells during the Initial Term and Tenant does not exercise the Extension Option, prior to the expiration of the Initial Term, Tenant shall remove the Additional Radiation Cells and restore the Premises to the condition it was in prior to the Installation of the Additional Radiation Cells. If Tenant exercises the Extension Option and performs all of its obligations under this Lease during the term of the Extension Option, if Tenant has installed the Additional Radiation Cells, Tenant shall have no obligation to remove the Additional Radiation Cells from the Premises. If Tenant defaults in the performance of its obligations under this Lease during the Extended Term and this Lease is terminated as a result of such default, Tenant shall be obligated to remove the Additional Radiation Cells and to restore the Premises to the condition it was in prior to the installation of the Additional Radiation Cells.

13.2

PERMITS.     Any Alterations in or about the Premises that Tenant shall desire to make shall be presented to Landlord in written form, and if a building permit will be required, with plans and specifications which are sufficiently detailed to obtain a building permit. If Landlord consents to an Alteration, the consent shall be deemed conditioned upon Tenant acquiring a building permit from the applicable governmental agencies, furnishing a copy thereof to Landlord prior to the commencement of the work, and compliance by Tenant with all conditions of said permit in a prompt and expeditious manner. Tenant shall provide landlord with as-built plans and specifications for any Alterations made to the Premises.

13.3

MECHANICS LIENS.     Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or the Project, or any interest therein. If Tenant shall, in good faith, contest the validity of any such lien, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to not less than one and one-half times the amount of such contested lien claim indemnifying Landlord against liability arising out of such lien or claim. Such bond shall be sufficient in form and amount to free the Project from the effect of such lien. In addition, Landlord may require Tenant to pay Landlord's reasonable attorneys' fees and costs in participating in such action.

18


13.4

NOTICE.     Tenant shall give Landlord not less than ten (10) days' advance written notice prior to the commencement of any work in the Premises by Tenant, and Landlord shall have the right to post notices of non-responsibility in or on the Premises or the Project.

13.5

SURRENDER.     Subject to Landlord's right to require removal or to elect ownership as hereinafter provided, all Alterations made by Tenant to the Premises shall be the property of Tenant, but shall be considered to be a part of the Premises. Unless Landlord gives Tenant written notice of its election not to become the owner of the Alterations at the end of the term of this Lease, the Alterations shall become the property of Landlord at the end of the term of this Lease. Landlord may require, on notice to Tenant, that some or all Alterations be removed prior to the end of the term of this Lease and that any damages caused by such removal be repaired at Tenant's sole expense. On the last day of the term hereof, or on any sooner termination, Tenant shall surrender the Premises (including, but not limited to, all doors, windows, floors and floor coverings, skylights, heating and air conditioning systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures, electrical systems, lighting facilities, sprinkler systems, fire detection systems and nonstructural elements of the exterior walls, foundation and roof (collectively the " Elements of the Premises ")) to Landlord in the same condition as received, ordinary wear and tear and casualty damage excepted, clean and free of debris and Tenant's personal property, trade fixtures and equipment. Tenant's personal property shall include all computer wiring and cabling installed by Tenant. Provided, however, if Landlord has not elected to have Tenant remove the Alterations, Tenant shall leave the Alterations at the Premises in good condition and repair, ordinary wear and tear excepted. Tenant shall repair any damage to the Premises occasioned by the installation or removal of Tenant's trade fixtures, furnishings and equipment. Damage to or deterioration of any Element of the Premises or any other item Tenant is required to repair or maintain at the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices. If the Premises are not surrendered at the expiration of the term or earlier termination of this Lease in accordance with the provisions of this section, at Landlord's option, Tenant shall continue to be responsible for the payment of Base Rent and all other amounts due under this Lease until the Premises are so surrendered in accordance with said provisions. Tenant shall indemnify, defend and hold Landlord harmless from and against any and all damages, expenses, costs, losses or liabilities arising from any delay by Tenant in so surrendering the Premises including, without limitation, any damages, expenses, costs, losses or liabilities arising from any claim against Landlord made by any succeeding tenant or prospective tenant founded on or resulting from such delay and losses and damages suffered by Landlord due to lost opportunities to lease any portion of the Premises to any such succeeding tenant or prospective tenant, together with, in each case, actual attorneys' fees and costs.

13.6

FAILURE OF TENANT TO REMOVE PROPERTY.     If this Lease is terminated due to the expiration of its term or otherwise, and Tenant fails to remove its property, in addition to any other remedies available to Landlord under this Lease, and subject to any other right or remedy Landlord may have under applicable law, Landlord may remove any property of Tenant from the Premises and store the same elsewhere at the expense and risk of Tenant.

14.   DAMAGE AND DESTRUCTION.

14.1

EFFECT OF DAMAGE OR DESTRUCTION.     If all or part of the Project is damaged by fire, earthquake, flood, explosion, the elements, riot, the release or existence of Hazardous Materials (as defined below) or by any other cause whatsoever (hereinafter collectively referred to as "damages"), but the damages are not material (as defined in section 14.2 below), Landlord shall repair the damages to the Project as soon as is reasonably possible, and

19


this Lease shall remain in full force and effect. If all or part of the Project is destroyed or materially damaged (as defined in section 14.2 below), Landlord shall have the right, in its sole and complete discretion, to repair or to rebuild the Project or to terminate this Lease. Landlord shall within one hundred twenty (120) days after the discovery of such material damage or destruction notify Tenant in writing of Landlord's intention to repair or to rebuild or to terminate this Lease. Tenant shall in no event be entitled to compensation or damages on account of annoyance or inconvenience in making any repairs, or on account of construction, or on account of Landlord's election to terminate this Lease. Notwithstanding the foregoing, if Landlord shall elect to rebuild or repair the Project after material damage or destruction, but in good faith determines that the Premises cannot be substantially repaired within three hundred sixty (360) days after the date of the discovery of the material damage or destruction, without payment of overtime or other premiums, and the damage to the Project will render the entire Premises unusable during said three hundred sixty (360) day period, Landlord shall notify Tenant thereof in writing at the time of Landlord's election to rebuild or repair, and Tenant shall thereafter have a period of fifteen (15) days within which Tenant may elect to terminate this Lease, upon thirty (30) days' advance written notice to Landlord. Tenant's termination right described in the preceding sentence shall not apply if the damage was caused by the negligent or intentional acts of Tenant or its employees, agents, contractors or invitees. Failure of Tenant to exercise said election within said fifteen (15) day period shall constitute Tenant's agreement to accept delivery of the Premises under this Lease whenever tendered by Landlord, provided Landlord thereafter pursues reconstruction or restoration diligently to completion, subject to delays caused by Force Majeure Events. Tenant shall also have the right to terminate this Lease in the event that, notwithstanding Landlord's good faith estimate that the Premises can be substantially repaired within three hundred sixty (360) days after the date of damage or destruction, the Premises are not in fact substantially repaired within such three hundred sixty (360) day period (as extended by Force Majeure Events). Tenant shall provide Landlord with written notice of its election to terminate this Lease because the repairs are not completed in three hundred sixty (360) days within ten (10) days after the three hundred sixty (360) day. Failure of Tenant to exercise said election within said ten (10) day period shall constitute Tenant's agreement to accept delivery of the Premises under this Lease whenever tendered by Landlord, provided Landlord thereafter pursues reconstruction or restoration diligently to completion, subject to delays caused by Force Majeure Events. If Landlord is unable to repair the damage to the Premises or the Project during such three hundred sixty (360) day period due to Force Majeure Events, the three hundred sixty (360) day period shall be extended by the period of delay caused by the Force Majeure Events. A "Force Majeure Event" shall mean fire, earthquake, weather delays or other acts of God, strikes, boycotts, war, riot, insurrection, embargoes, shortages of equipment, labor or materials, delays in issuance of governmental permits or approvals not caused by Landlord or its agents or contractors, or any other cause beyond the reasonable control of Landlord. Subject to section 14.3 below, if Landlord or Tenant terminates this Lease in accordance with this section 14.1, Tenant shall continue to pay all Base Rent, Operating Expenses and other amounts due hereunder which arise prior to the date of termination. Tenant shall also have the right to terminate this Lease if damage occurs to the Premises during the last twelve (12) months of the Lease term, such damage renders a substantial portion of the Premises unusable, and such damage cannot be substantially repaired within sixty (60) days. Tenant's termination right described in the previous sentence shall be exercised by providing Landlord with written notice within fifteen (15) days after the occurrence of the damage.

14.2

DEFINITION OF MATERIAL DAMAGE.     Damage to the Project shall be deemed material if, in Landlord's reasonable judgment, the uninsured cost of repairing the damage will exceed

20


One Hundred Thousand Dollars (100,000). If insurance proceeds are available to Landlord in an amount which is sufficient to pay the entire cost of repairing all of the damage to the Project, the damage shall be deemed material if the cost of repairing the damage exceeds Five Hundred Thousand Dollars ($500,000). Damage to the Project shall also be deemed material if (a) the Project cannot be rebuilt or repaired to substantially the same condition it was in prior to the damage due to laws or regulations in effect at the time the repairs will be made, (b) the holder of any mortgage or deed of trust encumbering the Project requires that insurance proceeds available to repair the damage in excess of One Hundred Thousand Dollars ($100,000) be applied to the repayment of the indebtedness secured by the mortgage or the deed of trust, or (c) the damage occurs during the last twelve (12) months of the Lease term.

14.3

ABATEMENT OF RENT.     If Landlord elects to repair damage to the Project and all or part of the Premises will be unusable or inaccessible to Tenant in the ordinary conduct of its business until the damage is repaired, Tenant's Base Rent and Tenant's Percentage Share of Operating Expenses shall be abated until the repairs are completed in proportion to the amount of the Premises which is unusable or inaccessible to Tenant in the ordinary conduct of its business. Notwithstanding the foregoing, there shall be no abatement of Base Rent or Tenant's Percentage Share of Operating Expenses by reason of any portion of the Premises being unusable or inaccessible for a period equal to five (5) consecutive business days or less.

14.4

TENANT'S ACTS.     If such damage or destruction occurs as a result of the negligence or the intentional acts of Tenant or Tenant's employees, agents, contractors or invitees, and the proceeds of insurance which are actually received by Landlord are not sufficient to pay for the repair of all of the damage, Tenant shall pay, at Tenant's sole cost and expense, to Landlord upon demand, the difference between the cost of repairing the damage and the insurance proceeds received by Landlord.

14.5

TENANT'S PROPERTY.     Landlord shall not be liable to Tenant or its employees, agents, contractors, invitees or customers for loss or damage to merchandise, tenant improvements, fixtures, automobiles, furniture, equipment, computers, files or other property (hereinafter collectively " Tenant's property ") located at the Project. Tenant shall repair or replace all of Tenant's property at Tenant's sole cost and expense. Tenant acknowledges that it is Tenant's sole responsibility to obtain adequate insurance coverage to compensate Tenant for damage to Tenant's property.

14.6

WAIVER.     Landlord and Tenant hereby waive the provisions of any present or future statutes which relate to the termination of leases when leased property is damaged or destroyed and agree that such event shall be governed by the terms of this Lease.

15.

CONDEMNATION.     If any portion of the Premises or the Project are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called " condemnation "), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs; provided that if so much of the Premises or Project are taken by such condemnation as would substantially and adversely affect the operation and profitability of Tenant's business conducted from the Premises, and said taking lasts for ninety (90) days or more, Tenant shall have the option, to be exercised only in writing within thirty (30) days after Landlord shall have given Tenant written notice of such taking (or in the absence of such notice, within thirty (30) days after the condemning authority shall have taken possession), to terminate this Lease as of the date the condemning authority takes such possession. If a taking lasts for less than ninety (90) days, Tenant's rent shall be abated during said period but Tenant shall not have the right to terminate this Lease. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of

21


the Premises remaining, except that the Base Rent and Operating Expenses shall be reduced in the proportion that the usable floor area of the Premises taken bears to the total usable floor area of the Premises. Common Areas taken shall be excluded from the Common Areas usable by Tenant and no reduction of rent shall occur with respect thereto or by reason thereof. Landlord shall have the option in its sole discretion to terminate this Lease as of the taking of possession by the condemning authority, by giving written notice to Tenant of such election within thirty (30) days after receipt of notice of a taking by condemnation of any part of the Premises or the Project. Any award for the taking of or any part of the Premises or the Project under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such award shall be made as compensation for diminution in value of the leasehold, for good will, for the taking of the fee, as severance damages, or as damages for tenant improvements; provided , however , that Tenant shall be entitled to any separate award for loss of or damage to Tenant's removable personal property and for moving expenses. In the event that this Lease is not terminated by reason of such condemnation, and subject to the requirements of any lender that has made a loan to Landlord encumbering the Project, Landlord shall to the extent of severance damages received by Landlord in connection with such condemnation, repair any damage to the Project caused by such condemnation except to the extent that Tenant has been reimbursed therefor by the condemning authority. This section, not general principles of law or California Code of Civil Procedure sections 1230.010 et seq., shall govern the rights and obligations of Landlord and Tenant with respect to the condemnation of all or any portion of the Project.

22


16.   ASSIGNMENT AND SUBLETTING.

16.1

Landlord's Consent Required.     Except as provided in section 16.8, Tenant shall not voluntarily or by operation of law assign, transfer, hypothecate, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises (hereinafter collectively a " Transfer "), without Landlord's prior written consent, which shall not be unreasonably withheld. Landlord shall respond to Tenant's written request for consent hereunder within thirty (30) days after Landlord's receipt of the written request from Tenant. Any attempted Transfer without such consent shall be void and shall constitute a default and breach of this Lease. Tenant's written request for Landlord's consent shall include, and Landlord's thirty (30) day response period referred to above shall not commence, unless and until Landlord has received from Tenant, all of the following information, if readily available (and if not readily available, then information sufficient for reasonable financial review): (a) financial statements for the proposed assignee or subtenant for the past three (3) years prepared in accordance with generally accepted accounting principles, (b) federal tax returns for the proposed assignee or subtenant for the past three (3) years, (c) a reasonably detailed description of the business the assignee or subtenant intends to operate at the Premises, (d) the proposed effective date of the assignment or sublease, (e) a copy of the proposed sublease or assignment agreement, (f) a reasonably detailed description of any Alterations the proposed assignee or subtenant desires to make to the Premises, and (g) a Hazardous Material


SITE SEARCH

AGREEMENTS / CONTRACTS

Document Title:

Entire Document: (optional)

Governing Law:(optional)
 

CLAUSES

Search Contract Clauses >>

Browse Contract Clause Library>>

Close this window