LEASE

Exhibit 10.33

LEASE

BETWEEN

POINT RICHMOND R&D ASSOCIATES II, LLC,

a California limited liability company (LANDLORD)

AND

TRANSCEPT PHARMACEUTICALS, INC.,

a Delaware corporation (TENANT)

POINT RICHMOND II

Point Richmond, California

TABLE OF CONTENTS

 

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LEASE

ARTICLE 1

BASIC LEASE PROVISIONS

1.1 BASIC LEASE PROVISIONS

In the event of any conflict between these Basic Lease Provisions and any other Lease provision, such other Lease provision shall control.

 

(1)

BUILDING AND ADDRESS:

POINT RICHMOND R&D ASSOCIATES II, LLC

501 Canal Boulevard

Point Richmond, California

 

(2)

LANDLORD AND ADDRESS:

POINT RICHMOND R&D ASSOCIATES II, LLC

1120 Nye Street, Suite 400

San Rafael, California 94901

Notices to Landlord shall be addressed:

POINT RICHMOND R&D ASSOCIATES II, LLC

c/o Wareham Development Corporation

1120 Nye Street, Suite 400

San Rafael, California 94901

With a copy to:

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, California 94111

Attention: David H. Kremer

 

(3)

TENANT AND CURRENT ADDRESS:

 

 

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Notices to Tenant shall be addressed:

Transcept Pharmaceuticals, Inc.

1003 West Cutting Boulevard

Richmond, California 94804

Attn: Glenn Oclassen, CEO

 

(4)

DATE OF LEASE: as of February 9, 2008

 

(5)

LEASE TERM: Approximately fifty-two (52) months, subject to the Extension Option set forth in Section 2.5 and the Acceleration Option set forth in Section 2.6

 

(6)

COMMENCEMENT DATE: The later of (i) February 15, 2009, and (ii) the date by which all of the following have occurred: (a) the Landlord Work (defined in the Workletter attached hereto as Exhibit B ) is Substantially Complete in accordance with this Lease and the Workletter; and (b) Landlord has delivered possession of the Premises to Tenant.

 

(7)

EXPIRATION DATE: May 31, 2013

 

(8)

MONTHLY BASE RENT:

 

*

“Month 1” will include any partial calendar month following the Commencement Date if the Commencement Date is other than the first (1st) day of a calendar month, and in the event Month 1 includes any partial calendar month, then on or before the Commencement Date, Tenant shall pay the prorated amount of Monthly Base Rent for such partial calendar month pursuant to Article 3 in addition to the Monthly Base Rent for the first full calendar month of the Term.

 

**	During Months 1 - 6, the Monthly Base Rent shall be determined by multiplying the monthly rate per square foot of rentable area by 6,000, notwithstanding the actual Rentable Area of the Premises.

 

***	During Months 7 - 12, the Monthly Base Rent shall be determined by multiplying the monthly rate per square foot of rentable area by 9,000, notwithstanding the actual Rentable Area of the Premises.

 

(9)

RENTABLE AREA OF THE PREMISES: 12,257 square feet

 

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(10)

SECURITY DEPOSIT: $17,934.00, subject to Article 5

 

(11)

PREMISES SUITE NUMBER: Suite E

 

(12)

TENANT’S USE OF PREMISES: General office

 

(13)

PARKING: Up to 37 unreserved parking spaces on surface lots, and five (5) visitor parking spaces reserved exclusively for Tenant near the main entrance to the Building as shown on Exhibit D

 

(14)

BROKERS:    Cushman & Wakefield

1111 Broadway, Suite 1600

Oakland, CA 94607

Cornish & Carey

5980 Horton Street, Suite 100

Emeryville, California 94608

1.2 ENUMERATION OF EXHIBITS, RIDER AND ADDENDUM

The Exhibits set forth below and attached to this Lease are incorporated in this Lease by this reference:

 

1.3 DEFINITIONS

For purposes hereof, the following terms shall have the following meanings:

AFFILIATE: Any corporation or other business entity that is owned or controlled by, owns or controls, or is under common ownership or control with Tenant or with Landlord.

BUILDING: The building located at the address specified in Section 1.1(1).

COMMENCEMENT DATE: The date specified in Section 1.1(6).

COMMON AREAS: All areas of the Project made available by Landlord from time to time for the general common use or benefit of the tenants of the Building, and their employees and invitees, or the public, as such areas currently exist and as they may be changed from time to time.

DECORATION: Tenant Alterations which do not require a building permit and which do not involve any of the structural elements of the Building, or any of the Building’s systems, including its electrical, mechanical, plumbing, security, heating, ventilating, air-conditioning, communication, and fire and life safety systems.

 

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DEFAULT RATE: Two (2) percentage points above the rate then most recently announced by Bank of America, N.A., at its San Francisco main office as its corporate or commercial base lending reference rate, from time to time announced, but in no event higher than the maximum rate permitted by Law.

ENVIRONMENTAL LAWS: All Laws governing the use, storage, disposal or generation of any Hazardous Material, including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and the Resource Conservation and Recovery Act of 1976, as amended.

EXPIRATION DATE: The date specified in Section 1.1(7).

FORCE MAJEURE: Any accident, casualty, act of God, war or civil commotion, strike or labor troubles, or any cause whatsoever beyond the reasonable control of Landlord or Tenant (excluding either such party’s financial inability), including water shortages, energy shortages or governmental preemption in connection with an act of God, a national emergency, or by reason of Law, or by reason of the conditions of supply and demand which have been or are affected by act of God, war or other emergency. Any prevention, delay, or stoppage due to any Force Majeure event shall excuse the performance of the party affected for a period of time equal to any such prevention, delay, or stoppage.

HAZARDOUS MATERIAL: Such substances, material and wastes which are or become regulated under any Environmental Law; or which are classified as hazardous or toxic under any Environmental Law; and explosives and firearms, radioactive material, asbestos, polychlorinated biphenyls, and petroleum products.

INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of the Property, the property manager and the leasing manager for the Property and their respective partners, members, directors, officers, agents and employees.

LAND: The parcel(s) of real estate on which the Building and Project are located.

LANDLORD WORK: The construction or installation of improvements to the Premises and the Project to be furnished by Landlord, as specifically described in the Workletter or exhibits attached hereto.

LAWS OR LAW: All laws, ordinances, rules, regulations, other requirements, orders, rulings or decisions adopted or made by any governmental body, agency, department or judicial authority having jurisdiction over the Property, the Premises or Tenant’s activities at the Premises and any covenants, conditions or restrictions of record which affect the Property.

LEASE: This instrument and all exhibits and riders attached hereto, as may be amended from time to time.

MONTHLY BASE RENT: The monthly base rent specified in Section 1.1(8).

MORTGAGEE: Any holder of a mortgage, deed of trust or other security instrument encumbering the Property.

 

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NATIONAL HOLIDAYS: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and other holidays recognized by Landlord and the janitorial and other unions servicing the Building in accordance with their contracts.

OPERATING EXPENSES: All costs, expenses and disbursements of every kind and nature, which Landlord shall pay in connection with the ownership, management, operation, maintenance, replacement and repair of the Building and the Project (including, without limitation, property management fees, costs and expenses, and the amortized portion of any capital expenditure or improvement, together with interest thereon, and the costs of changing utility service providers). In no event shall the annual property management fees for the Building exceed an amount equal to four and one-half percent (4.5%) of gross receipts. Operating Expenses shall not include:

 

(i)

costs of alterations of the premises of tenants of the Project, except where such costs are necessitated by the acts or omissions of Tenant or its employees, servants, agents, contractors, customers, or invitees,

 

(ii)

costs of capital improvements to the Project (except for amortized portion calculated on a straight-line basis calculated over the useful life of the capital expenditure or improvement as reasonably determined by Landlord of capital improvements installed for the purpose of reducing or controlling Operating Expenses or complying with applicable Laws, but only to the extent that the actual annual cost savings realized do not redound primarily to the benefit of any particular Building tenant),

 

(iii)

depreciation charges or expenses reserves,

 

(iv)

interest and principal payments on loans (except for loans for capital improvements which Landlord is allowed to include in Operating Expenses as provided above),

 

(v)

ground rental payments,

 

(vi)

real estate brokerage and leasing commissions,

 

(vii)

advertising and marketing expenses,

 

(viii)

costs of Landlord reimbursed by insurance proceeds,

 

(ix)

expenses incurred in negotiating leases of tenants in the Project, enforcing lease obligations of tenants in the Project, or providing additional services to particular tenants in the Project,

 

(x)

Landlord’s general corporate overhead,

 

(xi)

costs occasioned by the wrongful act, wrongful omission or violation of any Law by Landlord or its agents, employees or contractors,

 

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(xii)

costs to correct any construction defect in the Premises or the Building or to comply with any Law applicable to the Premises or the Project as of the Commencement Date,

 

(xiii)

costs relating to the presence of any Hazardous Material at or in the Building or Project prior to the Commencement Date (except to the extent caused by the release of the Hazardous Material by Tenant or Tenant’s agents, employees, contractors or invitees), and provided that with respect to the presence of any Hazardous Material at or in the Building or Project on or after the Commencement Date, except to the extent caused by the release of the Hazardous Material by Tenant or Tenant’s agents, employees, contractors or invitees, Tenant’s Share of such costs shall not exceed $10,000 in any given calendar year; and

 

(xiv)

compensation for any officer of Landlord or for any management employee not stationed at the Project on a full-time basis or any compensation retained by Landlord or its Affiliates for the management or administration of the Project in excess of the property management fees applicable to the Project.

Notwithstanding anything contained herein to the contrary, in the event any facilities, services, or utilities used in connection with the Building are provided from another building in the Project or another building owned or operated by Landlord or a Landlord Affiliate, or vice versa, the costs incurred by Landlord in connection therewith shall be allocated to Operating Expenses by Landlord on a reasonably equitable basis.

PREMISES: The space located in the Building at the Suite Number listed in Section 1.1(11) and depicted on Exhibit A attached hereto.

PROJECT or PROPERTY: The Project consists of the Building, the building located at 503 Canal Boulevard, associated surface parking as designated by Landlord from time to time, landscaping and improvements, together with the Land, any associated interests in real property, and the personal property, fixtures, machinery, equipment, systems and apparatus owned by Landlord located in and used in conjunction with any of the foregoing. The Project may also be referred to as the Property.

REAL PROPERTY: The Property excluding any personal property.

RENT: Collectively, Monthly Base Rent, Rent Adjustments and Rent Adjustment Deposits, and all other charges, payments, late fees or other amounts required to be paid by Tenant to Landlord under this Lease.

RENT ADJUSTMENT: Any amounts owed by Tenant for payment of Operating Expenses or Taxes. The Rent Adjustments shall be determined and paid as provided in Article Four.

RENT ADJUSTMENT DEPOSIT: An amount equal to Landlord’s estimate of the Rent Adjustment attributable to each month of the applicable calendar year (or portion thereof). On or before the beginning of each calendar year during the Term or with Landlord’s Statement

 

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(defined in Article Four), Landlord may estimate and notify Tenant in writing of its estimate of the amount of Operating Expenses and Taxes payable by Tenant for such year or applicable portion. Prior to the first determination by Landlord of the amount of Operating Expenses and Taxes for the first calendar year of the Term, Landlord may estimate such amounts in the foregoing calculation. The last estimate by Landlord shall remain in effect as the applicable Rent Adjustment Deposit unless and until Landlord notifies Tenant in writing of a change, which notice may be given by Landlord from time to time during any calendar year of the Term.

RENTABLE AREA OF THE PREMISES: The amount of square footage set forth in Section 1.1(9).

RENTABLE AREA OF THE PROJECT: The amount of square footage which represents the sum of the rentable area of all space intended for occupancy in the Project, as determined by Landlord from time to time; and Landlord shall notify Tenant of any adjustments in such rentable area and any corresponding change in Tenant’s Share.

SECURITY DEPOSIT: The funds specified in Section 1.1(10), deposited by Tenant with Landlord as security for Tenant’s performance of its obligations under this Lease.

SUBSTANTIALLY COMPLETE or SUBSTANTIAL COMPLETION: The completion of the Landlord Work or any work required under this Lease, as the case may be, in accordance with applicable Laws and any plans and specifications for such work (i.e., the Workletter) approved by the other party, except for minor insubstantial details of construction, decoration or mechanical adjustments which remain to be done.

TAXES: All federal, state and local governmental taxes, assessments and charges of every kind or nature, whether general, special, ordinary or extraordinary, which Landlord shall pay or become obligated to pay because of or in connection with the ownership, leasing, management, control or operation of the Property or any of its components (including any personal property used in connection therewith), which may also include any rental or similar taxes levied in lieu of or in addition to general real and/or personal property taxes. For purposes hereof, Taxes for any year shall be Taxes which are assessed for any period of such year, whether or not such Taxes are billed and payable in a subsequent calendar year. There shall be included in Taxes for any year the amount of all fees, costs and expenses (including reasonable attorneys’ fees) paid by Landlord during such year in seeking or obtaining any refund or reduction of Taxes. Taxes for any year shall be reduced by the net amount of any tax refund received by Landlord attributable to such year. If a special assessment payable in installments is levied against any part of the Property, Taxes for any year shall include only the installment of such assessment and any interest payable during such year as if such assessment were payable over the longest possible term. Taxes shall not include any franchise, capital stock, federal or state inheritance, general or net income, or gift or estate taxes, except that if a change occurs in the method of taxation resulting in whole or in part in the substitution of any such taxes, or any other assessment, for any Taxes as above defined, such substituted taxes or assessments shall be included in the Taxes. Taxes shall also exclude any tax or assessment imposed on land or improvements other than the Property.

TENANT ADDITIONS: Collectively, Landlord Work and Tenant Alterations.

 

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TENANT ALTERATIONS: Any alterations, improvements, additions, installations or construction in or to the Premises or any Building systems serving the Premises (excluding any Landlord Work); and any supplementary air-conditioning systems installed by Landlord or by Tenant at Landlord’s request pursuant to Section 6.1(b).

TENANT DELAY: Any event or occurrence that delays the completion of any improvement work required hereunder (including the Landlord Work) which is caused by the following, but only to the extent that Substantial Completion of such work is actually delayed solely as a result thereof:

 

(1)

special work, changes, alterations or additions requested or made by Tenant in the design or finish in any part of the Premises after Tenant’s initial approval;

 

(2)

Tenant’s delay in submitting plans, supplying information, approving plans, specifications or estimates, giving authorizations or otherwise beyond the times provided in this Lease;

 

(3)

failure to pay the costs for any work as Landlord undertakes to complete, to the extent Tenant is responsible for the costs of such work pursuant to this Lease;

 

(4)

the performance or completion by Tenant or any person engaged by Tenant of any work in or about the Premises; or

 

(5)

failure to perform or comply with any obligation or condition binding upon Tenant pursuant to this Lease.

TENANT WORK: None.

TENANT’S SHARE: The percentage that represents the ratio of the Rentable Area of the Premises to the Rentable Area of the Building / Project, as determined by Landlord from time to time. Tenant’s Share of the Building as of the Commencement Date is stipulated to be 15.01%. Tenant’s Share of the Project as of the Commencement Date is stipulated to be 9.6%.

TERM: The term of this Lease commencing on the Commencement Date and expiring on the Expiration Date.

TERMINATION DATE: The Expiration Date or such earlier date as this Lease terminates or Tenant’s right to possession of the Premises terminates.

WORKLETTER: The Agreement describing the Landlord Work set forth on Exhibit B attached hereto.

 

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ARTICLE 2

PREMISES, TERM, FAILURE TO GIVE POSSESSION, PARKING, EXTENSION OPTION,

ACCELERATION OPTION, AVAILABLE SPACE, AND EXPANSION

2.1 LEASE OF PREMISES

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises for the Term and upon the terms, covenants and conditions provided in this Lease. In the event Landlord delivers possession of the Premises to Tenant prior to the Commencement Date, Tenant shall be subject to all of the terms, covenants and conditions of this Lease (except with respect to the payment of Rent) as of the date of such possession.

2.2 TERM

 

(a)

The Commencement Date shall be the date specified in Section 1.1(6) of the Basic Lease Provisions, and the Expiration Date shall be the date specified in Section 1.1(7) of the Basic Lease Provisions.

 

(b)

Subject to the terms and conditions of this Lease including, without limitation, Article 9, and provided Landlord has received the Security Deposit, the first installment of Monthly Base Rent, and all evidence of insurance reasonably required by Landlord, Tenant shall be allowed access into the Premises from and after the full execution and delivery of this Lease, at Tenant’s sole risk, solely for the purpose of (i) installing furniture, equipment and telecommunications and data cabling in the Premises and (ii) storing documents and equipment in the Premises. Landlord may withdraw such permission to enter the Premises prior to the Commencement Date at any time that Landlord reasonably determines that such entry by Tenant is causing a dangerous situation for Landlord, Tenant or their respective contractors or employees. Such early entry shall be subject to all the terms and provisions of this Lease, except that Tenant shall have no obligation to pay Monthly Base Rent, Rent Adjustments, Rent Adjustment Deposits or other charges during such early access period unless Tenant commences business operations in the Premises during such early access period.

2.3 CONDITION OF PREMISES

Tenant shall notify Landlord in writing within sixty (60) days after the Substantial Completion of the Landlord Work of any defects in the Premises claimed by Tenant or in the materials or workmanship furnished by Landlord in completing the Landlord Work. Except for defects stated in such notice, Tenant shall be conclusively deemed to have accepted the Premises “AS IS” in the condition existing on the date Tenant first takes possession. Landlord shall proceed diligently to correct the defects stated in such notice unless Landlord disputes the existence of any such defects. In the event of any dispute as to the existence of any such defects, the decision of Landlord’s architect shall be final and binding on the parties. No agreement of Landlord to alter, remodel, decorate, clean or improve the Premises or the Real Property and no representation regarding the condition of the Premises or the Real Property has been made by or

 

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on behalf of Landlord to Tenant, except as may be specifically stated in this Lease or the Workletter. As of the Commencement Date, Landlord warrants and represents that, to Landlord’s actual knowledge (i) the Premises, Building and the Project will comply with all applicable Laws, (ii) the Premises will be in good and clean operating condition and repair, (iii) the electrical, mechanical, HVAC, plumbing, sewer, elevator and other systems serving the Premises and Building will be in good operating condition and repair, and (iv) the roof of the Building will be in good condition and water tight. Notwithstanding the foregoing, Landlord, upon the receipt of evidence reasonably satisfactory to Landlord, shall reimburse the costs and expenses (in an amount not to exceed $15,000) (the “Cabling Allowance”) incurred by Tenant to connect Tenant’s network serving the Premises with Tenant’s network serving the space that Tenant leases from Landlord’s Affiliate, located at 1003 West Cutting Boulevard, Richmond, California. Landlord hereby authorizes Tenant to perform all work reasonably required by Tenant (including, without limitation, during the early access period set forth in Section 2.2(b) above, subject to the terms and conditions therein) to connect Tenant’s networks and grants Tenant reasonable rights to access and use the existing conduit serving the Premises and the PRI Premises (as hereinafter defined) for such purpose.

2.4 PARKING

During the Term, Tenant may use the number of spaces specified in Section 1.1(13) for parking free of charge, without regard to parking rates charged or discounts provided to any other occupants of the Building or Project. The locations and type of parking shall be designated by Landlord or Landlord’s parking operator from time to time. Tenant acknowledges and agrees that the parking spaces serving the Project may include valet parking (at no additional cost to Tenant) and a mixture of spaces for compact vehicles as well as full-size passenger automobiles, and that Tenant shall not use parking spaces for vehicles larger than the striped size of the parking spaces. As of the date of this Lease, the parking spaces serving the Project do not include valet parking. All vehicles utilizing Tenant’s parking privileges shall prominently display identification stickers or other markers, and/or have passes or keycards for ingress and egress, as may be required and provided by Landlord or its parking operator from time to time. Tenant shall comply with any and all reasonable parking rules and regulations from time to time established by Landlord or Landlord’s parking operator, including a requirement that Tenant pay to Landlord or Landlord’s parking operator a charge for loss and replacement of passes, keycards, identification stickers or markers, and for any and all loss or other damage caused by persons or vehicles related to use of Tenant’s parking privileges. Tenant shall not allow any vehicles using Tenant’s parking privileges to be parked, loaded or unloaded except in accordance with this Section, including in the areas and in the manner designated by Landlord or its parking operator for such activities. If any vehicle is using the parking or loading areas contrary to any provision of this Section, Landlord or its parking operator shall have the right, in addition to all other rights and remedies of Landlord under this Lease, to remove or tow away the vehicle on not less than forty-eight (48) hours’ after posting a notice on such vehicle, and the cost thereof shall be paid to Landlord within ten (10) days after notice from Landlord to Tenant. Notwithstanding the foregoing, Landlord agrees to stripe, label and install pole signage for five (5) non-handicapped parking spaces near the main Building lobby immediately outside the Building’s front door as spaces shown on Exhibit D attached hereto (“Visitor Spaces”) exclusively for “Transcept Visitors”. Landlord shall use reasonable efforts to enforce Tenant’s exclusive use of the Visitor Spaces.

 

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2.5 EXTENSION OPTION

 

(a)

Landlord hereby grants Tenant an option to extend the Term (“Extension Option”) for one (1) additional period of five (5) years (“Option Term”), commencing immediately after the expiration of the Term. The Extension Option shall be upon the terms and conditions contained in this Lease, except that the initial Monthly Base Rent for the Premises during the Option Term shall be equal to 95% of the “fair market rent” for the Premises as of the commencement of the Option Term (i.e., the rate that a willing, comparable, new (i.e., non-renewal), non-equity tenant would pay, and that a willing landlord of comparable office space in Point Richmond, California would accept at arms’ length), determined in the manner set forth in subparagraph 2.5(b) below. Notwithstanding anything to the contrary contained herein, in no event shall the Monthly Base Rent payable (on a per square foot basis) by Tenant during the Option Term be less than the Monthly Base Rent payable (on a per square foot basis) by Tenant as of the last month of the initial Term. The fair market rent shall not take into account any Tenant Additions paid for by Tenant without reimbursement from Landlord. Tenant’s election to exercise the Extension Option (“Tenant’s Extension Notice”) must be given to Landlord in writing not less than nine (9) months prior to the scheduled Expiration Date. Notwithstanding anything to the contrary contained herein, the Extension Option exercised by Tenant shall, at Landlord’s option, be null and void and of no further force or effect if Tenant is in Default under this Lease as of the date of Tenant’s Extension Notice.

 

(b)

If Tenant properly exercises the Extension Option, the initial Monthly Base Rent during the Option Term shall be determined in the following manner. Landlord shall advise Tenant in writing of Landlord’s good faith, reasonable determination of the fair market rent (based on the definition of fair market rental set forth above) for the Premises as of the commencement of the Option Term (“Landlord’s Fair Market Proposal”) no less than ninety (90) days prior to the commencement of the Option Term, provided Landlord’s notification to Tenant of Landlord’s Fair Market Proposal shall specifically state that Tenant shall have fifteen (15) days after receipt of Landlord’s Fair Market Proposal within which to approve or disapprove Landlord’s Fair Market Proposal. If Tenant does not disapprove in writing Landlord’s Fair Market Proposal within fifteen (15) days after receipt of Landlord’s Fair Market Proposal, Landlord’s Fair Market Proposal shall be deemed disapproved. In the event Tenant disapproves in writing (or is deemed to have disapproved) Landlord’s Fair Market Proposal, Landlord and Tenant shall attempt in good faith to agree upon the fair market rent within twenty (20) days of Tenant’s notice of or deemed disapproval. If after such twenty (20) day period, Landlord and Tenant have not agreed in writing as to the fair market rent, the parties shall determine the fair market rent in accordance with the procedure set forth below.

 

(i)

Within five (5) days after the expiration of such twenty (20) day period, Tenant shall notify Landlord of the name and address of the broker appointed to represent Tenant (“Tenant’s Broker”). Tenant’s Broker shall

 

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be licensed in the State of California, engaged in the brokerage business in the San Francisco-East Bay commercial real estate market for at least the immediately preceding five (5) years, and familiar with the office market in the cities of Richmond, Berkeley and Emeryville, California. Within ten (10) days of the appointment of Tenant’s Broker’s, Tenant shall advise Landlord in writing of Tenant’s Broker’s good faith, reasonable determination of the fair market rent for the Premises as of the commencement of the Option Term (“Tenant’s Broker’s Fair Market Proposal”). Landlord shall have ten (10) days after receipt of Tenant’s Broker’s Fair Market Proposal within which to approve or disapprove Tenant’s Broker’s Fair Market Proposal. In the event Landlord disapproves in writing Tenant’s Broker’s Fair Market Proposal, Landlord and Tenant shall attempt in good faith to agree upon the fair market rent within ten (10) days of Landlord’s notice of disapproval. If after such ten (10) day period, Landlord and Tenant have not agreed in writing as to the fair market rent, the parties shall determine the fair market rent in accordance with the procedure set forth below.

 

(ii)

If Landlord and Tenant are unable to agree upon the fair market rent within such ten (10) day period, Landlord and Tenant shall, within five (5) days thereafter, appoint a second broker meeting the qualifications set forth above with the added qualification that such second broker shall not have previously acted for either Landlord or Tenant. Within five (5) days following the appointment of the second broker, the second broker shall deliver his or her written determination of the fair market rent to Landlord and Tenant. If the second broker’s determination of fair market rent falls between Landlord’s Fair Market Proposal and Tenant’s Broker’s Fair Market Proposal, the second broker’s determination shall be deemed to be the fair market rent for purposes of determining the initial Monthly Base Rent for the Premises for the Option Term. If the second broker’s determination falls outside of Landlord’s Fair Market Proposal and Tenant’s Broker’s Fair Market Proposal, whichever of Landlord’s Fair Market Proposal and Tenant’s Broker’s Fair Market Proposal most closely reflects the fair market rent as determined by the second broker shall be deemed to be the fair market rent for purposes of determining the initial Monthly Base Rent for the Premises for the Option Term, and such determination shall be binding on both Landlord and Tenant. Tenant shall pay all costs, commissions and fees of Tenant’s Broker in connection with such determination of the fair market rent. The costs and fees of the second broker shall be paid one-half by Landlord and one-half by Tenant.

 

(c)

If the amount of the fair market rent has not been determined in accordance with this Section 2.5 as of the commencement of the Option Term, then Tenant shall continue to pay the Monthly Base Rent in effect during the last month of the initial Term, until the amount of the fair market rent is determined. When such determination is made, Tenant shall pay any deficiency to Landlord within twenty (20) days after such determination.

 

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(d)

The Monthly Base Rent payable hereunder during the Option Term shall be increased by three percent (3%) on each anniversary of the commencement date of the Option Term.

2.6 ACCELERATION OPTION

 

(a)

Tenant shall have the right, in Tenant’s sole discretion, to accelerate the Termination Date (“Acceleration Option”) of the Lease, with respect to the entire Premises only, to May 31, 2011 (the “Accelerated Termination Date”), if:

 

(i)

Tenant is not in Default under the Lease at the date Tenant provides Landlord with an Acceleration Notice (defined below); and

 

(ii)

Landlord receives notice of acceleration (“Acceleration Notice”) by no later than August 31, 2010.

 

(b)

If Tenant exercises its Acceleration Option, Tenant, within twenty (20) days of the delivery of Landlord’s statement of the Acceleration Fee, shall pay to Landlord an amount equal to the unamortized portion of any broker commissions, incurred or provided by Landlord in connection with this Lease (collectively, the “Acceleration Fee”). Within ninety (90) days of the Commencement Date, and the commencement date for any additional space leased by Tenant hereunder, as the case may be, Landlord shall provide Tenant with a statement setting forth the amount and calculation of the Acceleration Fee (including reasonable back up documentation). Tenant shall remain liable for all Monthly Base Rent, additional Rent and other sums due under this Lease up to and including the Accelerated Termination Date even though billings for such may occur subsequent to the Accelerated Termination Date. The “unamortized portion” of any broker commissions shall be determined on a straight-line basis over the initial Term.

 

(c)

If Tenant defaults in the payment of the Acceleration Fee, Landlord, at its option, may, by written notice to Tenant within fifteen (15) days after such default, (1) declare Tenant’s exercise of the Acceleration Option in that instance only to be null and void, and immediately so notify Tenant in writing, or (2) continue to honor Tenant’s exercise of its Acceleration Option, in which case, Tenant shall remain liable for the payment of the Acceleration Fee and all Monthly Base Rent, additional Rent and other sums due under the Lease up to and including the Accelerated Termination Date even though billings for such may occur subsequent to the Accelerated Termination Date. If Landlord fails to notify Tenant of such election within such fifteen (15)-day period, Landlord shall be deemed to have elected clause (2) above.

 

(d)

As of the date Tenant provides Landlord with an Acceleration Notice that is honored by Landlord, any unexercised rights or options of Tenant to extend the Term or expand the Premises shall immediately be deemed terminated and of no further force or effect.

 

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2.7 AVAILABLE SPACE

Prior to Landlord leasing space in the Project (“Available Space”) to a proposed third party tenant during the Term, Landlord shall first notify Tenant in writing of such Available Space and meet and confer with Tenant for not less than fifteen (15) days to discuss any interest Tenant may have in leasing the Available Space. Landlord shall have no obligation to (i) disclose to Tenant any term in connection with the proposed lease of the Available Premises, (ii) disclose to Tenant the proposed third party tenant, or (iii) lease the Available Space to Tenant following any discussion with Tenant. After providing notice to Tenant pursuant to this Section 2.7, Landlord may, in its sole and absolute discretion, elect to lease the Available Space to the third party tenant. Nothing in this Section 2.7 shall be deemed a right of first offer or a right of first refusal.

2.8 EXPANSION

 

(a)

Point Richmond R&D Associates, a California limited partnership (“PRA I”), as landlord, and Tenant, as tenant, are parties to that certain Lease dated as of February 22, 2006 (as amended, the “PRI Lease”), pursuant to which Tenant leases from PRA I, an affiliate of Landlord, the premises commonly known as Suites 110 and 130 (the “PRI Premises”) on the ground floor of the building located at 1003 West Cutting Boulevard, Richmond, California. Pursuant to the PRI Lease, Tenant holds an option to expand (the “PRI Expansion Option”) into space consisting of at least 5,000 rentable square feet of area more than the aggregate of the Rentable Area of the Premises and the rentable area of the PRI Premises (the “Aggregate Premises”).

 

(b)

If PRA I (or its Affiliate) and Tenant have not agreed upon suitable space for Tenant (in Tenant’s sole opinion) within six (6) months following Tenant’s exercise of the PRI Expansion Option, Tenant shall have the right to terminate this Lease by providing Landlord one hundred eighty (180) days prior notice specifying the unequivocal termination of this Lease, and provided further that Tenant provide such termination notice within thirty (30) days of the expiration of such six-month period.

 

(c)

If Tenant properly exercises its PRI Expansion Right, and PRA I (or its Affiliate) and Tenant are able to agree on a space suitable for Tenant in accordance with the PRI Lease (the “Expansion Space”), as evidenced by the execution and delivery of the Expansion Amendment (as defined in the PRI Lease), Tenant shall have the right to terminate this Lease as of the commencement date of the term for the Expansion Space by delivering written notice to Landlord within thirty (30) days following the date of the Expansion Amendment (as defined in the PRI Lease). If Tenant fails to timely deliver such termination notice, Tenant shall be deemed to have elected to continue this Lease, and this Lease will remain in full force and effect.

 

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ARTICLE 3

RENT

Tenant agrees to pay to Landlord at the address specified in Section 1.1(2), or to such other persons, or at such other places designated by Landlord, without any prior demand therefor and without any deduction or offset whatsoever, Rent, including Monthly Base Rent and Rent Adjustments in accordance with Article Four, during the Term. Monthly Base Rent shall be paid monthly in advance on the first day of each month of the Term, except that the installment of Monthly Base Rent for the first full month of the Term shall be paid by Tenant to Landlord concurrently with Tenant’s execution of this Lease. Monthly Base Rent shall be prorated for partial months within the Term. Unpaid Rent shall bear interest at the Default Rate from the date due until paid. Tenant’s covenant to pay Rent shall be independent of every other covenant in this Lease.

ARTICLE 4

RENT ADJUSTMENTS AND PAYMENTS

4.1 RENT ADJUSTMENTS

Tenant shall pay to Landlord Rent Adjustments with respect to each calendar year (or partial calendar year) as follows:

 

(a)

The Rent Adjustment Deposit representing Tenant’s Share of Operating Expenses for the applicable calendar year (or partial calendar year), monthly during the Term with the payment of Monthly Base Rent; and

 

(b)

The Rent Adjustment Deposit representing Tenant’s Share of Taxes for the applicable calendar year (or partial calendar year), monthly during the Term with the payment of Monthly Base Rent; and

 

(c)

Any Rent Adjustments due in excess of the Rent Adjustment Deposits in accordance with Section 4.2. Rent Adjustments due from Tenant to Landlord for any calendar year (or partial calendar year) shall be Tenant’s Share of Operating Expenses for such year and Tenant’s Share of Taxes for such year.

 

(d)

Landlord shall reasonably allocate Operating Expenses and Taxes to the Building or Project as reasonably appropriate and Tenant’s Share of Operating Expenses and Taxes shall be applied with respect to the Building or Project, as reasonably appropriate.

4.2 STATEMENT OF LANDLORD

As soon as practicable after the expiration of each calendar year, Landlord will furnish to Tenant a statement (“Landlord’s Statement”) showing the following:

 

(a)

Actual Operating Expenses and Taxes for the calendar year;

 

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(b)

The amount of Rent Adjustments due Landlord for the last calendar year (or partial calendar year), less other amounts paid, if any; and

 

(c)

Any change in the Rent Adjustment Deposit due monthly in the current calendar year, including the amount or revised amount due for months preceding any such change pursuant to Landlord’s Statement.

Tenant shall pay to Landlord within thirty (30) days after receipt of such statement any amounts for Rent Adjustments then due in accordance with Landlord’s Statement. Any amounts due from Landlord to Tenant pursuant to this Section shall be credited to the Rent next coming due, or refunded to Tenant if the Term has already expired provided Tenant is not in Default hereunder and no further Rent is due. No interest or penalties shall accrue on any amounts that Landlord is obligated to credit or refund to Tenant by reason of this Section 4.2. Landlord’s failure to deliver Landlord’s Statement or to compute the amount of the Rent Adjustments shall not constitute a waiver by Landlord of its right to deliver such items nor constitute a waiver or release of Tenant’s obligations to pay such amounts. The Rent Adjustment Deposit shall be credited against Rent Adjustments due for the applicable calendar year. During the last complete calendar year or during any partial calendar year in which the Lease terminates, Landlord may include in the Rent Adjustment Deposit its reasonable estimate of Rent Adjustments which may not be finally determined until after the termination of this Lease. Tenant’s obligation to pay Rent Adjustments survives the expiration or termination of the Lease.

4.3 BOOKS AND RECORDS

Landlord shall maintain books and records showing Operating Expenses and Taxes in accordance with generally accepted accounting principles, consistently applied. Tenant or its representative(s) (which representative(s) shall be experienced in reviewing building operating expenses not be paid on a contingency basis) shall have the right, for a period of ninety (90) days following the date upon which Landlord’s Statement is delivered to Tenant, to examine Landlord’s books and records with respect to the items in the foregoing statement of Operating Expenses and Taxes during Landlord’s normal business hours, upon written notice, delivered at least three (3) business days in advance (a “Tenant Review”). If Tenant does not object in writing to Landlord’s Statement within ninety (90) days of Tenant’s receipt thereof, specifying the nature of the item in dispute and the reasons therefor, then Landlord’s Statement shall be considered final and accepted by Tenant. If Tenant does dispute any Landlord’s Statement (or supplemental Landlord’s Statement), Tenant shall deliver a copy of any such audit to Landlord at the time of notification of the dispute. If Tenant does not provide such notice of dispute and a copy of such audit to Landlord within such ninety day (90) day period, it shall be deemed to have waived such right to dispute Landlord’s Statement. Any amount due to the Landlord as shown on Landlord’s Statement, whether or not disputed by Tenant as provided herein shall be paid by Tenant when due as provided above, without prejudice to any such written exception. In no event shall Tenant be permitted to examine Landlord’s books and records or to dispute any statement of Operating Expenses unless Tenant has paid and continues to pay all Rent when due. Upon resolution of any dispute with respect to Operating Expenses and Taxes, Tenant, at its election, shall either pay Landlord any shortfall or Landlord shall credit Tenant with respect to any overages paid by Tenant. The records obtained by Tenant shall be treated as confidential and neither Tenant nor any of its representatives or agents shall disclose or discuss the information

 

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set forth in the audit to or with any other person or entity, except in connection with any dispute resolution or other legal proceeding and except such disclosures as may be necessary to Tenant’s attorneys, accountants, and other professional advisors, provided that the disclosing party ensures that such attorneys, accountants and prospective advisors maintain the confidentiality of such terms (“Confidentiality Requirement”).

4.4 TENANT OR LEASE SPECIFIC TAXES

In addition to Monthly Base Rent, Rent Adjustments, Rent Adjustment Deposits and other charges to be paid by Tenant, Tenant shall pay to Landlord, upon demand, any and all taxes payable by Landlord (other than federal or state inheritance, general income, gift or estate taxes) whether or not now customary or within the contemplation of the parties hereto: (a) upon, allocable to, or measured by the Rent payable hereunder, including any gross receipts tax or excise tax levied by any governmental or taxing body with respect to the receipt of such Rent; or (b) 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 (c) upon the measured value of Tenant’s personal property located in the Premises or in any storeroom or any other place in the Premises or the Property, or the areas used in connection with the operation of the Property, it being the intention of Landlord and Tenant that, to the extent possible, such personal property taxes shall be billed to and paid directly by Tenant; or (d) resulting from Tenant Alterations to the Premises, whether title thereto is in Landlord or Tenant; or (e) upon this transaction. Taxes paid by Tenant pursuant to this Section 4.5 shall not be included in any computation of Taxes payable pursuant to Sections 4.1 and 4.2.

ARTICLE 5

SECURITY DEPOSIT

Concurrently with the execution of this Lease, Tenant shall pay to Landlord the Security Deposit. The Security Deposit may be applied by Landlord to cure, in whole or part, any default of Tenant under this Lease (after applicable notice and cure periods), and upon notice by Landlord of such application, Tenant shall replenish the Security Deposit in full by paying to Landlord within ten (10) days of demand the amount so applied. Landlord’s application of the Security Deposit shall not constitute a waiver of Tenant’s default to the extent that the Security Deposit does not fully compensate Landlord for all losses, damages, costs and expenses incurred by Landlord in connection with such default and shall not prejudice any other rights or remedies available to Landlord under this Lease or by Law. Landlord shall not pay any interest on the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its general accounts. The Security Deposit shall not be deemed an advance payment of Rent or a measure of damages for any default by Tenant under this Lease, nor shall it be a bar or defense of any action that Landlord may at any time commence against Tenant. In the absence of evidence satisfactory to Landlord of an assignment of the right to receive the Security Deposit or the remaining balance thereof, Landlord may return the Security Deposit to the original Tenant, regardless of one or more assignments of this Lease. Upon the transfer of Landlord’s interest under this Lease, Landlord’s obligation to Tenant with respect to the Security Deposit shall terminate upon transfer to the transferee of the Security Deposit, or any balance thereof. If Tenant shall fully and faithfully comply with all the terms, provisions, covenants, and conditions

 

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of this Lease, the Security Deposit, or any balance thereof, shall be returned to Tenant within thirty (30) days after Landlord recovers possession of the Premises. Tenant hereby waives any and all rights of Tenant under the provisions of Section 1950.7 of the California Civil Code or other Law regarding security deposits.

In lieu of the cash Security Deposit described above, Tenant shall have the right to deliver the Security Deposit in the form an unconditional, irrevocable, standby letter of credit (the “Letter of Credit”) in the amounts described above, issued to Landlord, as beneficiary, by a bank reasonably approved by Landlord, in which case the Letter of Credit shall serve as the Security Deposit under this Lease. Tenant shall maintain the Letter of Credit for the entire Term, provided that Tenant may at any time substitute a cash Security Deposit for the Letter of Credit, and upon such substitution, Landlord shall return the Letter of Credit to Tenant. The Letter of Credit shall provide that it will be automatically renewed until sixty (60) days after the Expiration Date unless the issuer provides Landlord with written notice of non-renewal at least sixty (60) days prior to the expiration thereof. If, not later than thirty (30) days prior to expiration of the Letter of Credit, Tenant fails to furnish Landlord with a replacement Letter of Credit, Landlord shall have the right to draw the full amount of the Letter of Credit, in which event Landlord shall hold the proceeds of the Letter of Credit as a cash Security Deposit under this Lease. Except as set forth in the preceding sentence, Landlord shall only draw upon the Letter of Credit while a Default by Tenant exists and only to the extent required to cure such Default. If Landlord draws upon the Letter of Credit solely due to Tenant’s failure to renew the Letter of Credit at least thirty (30) days before its expiration, then (i) such failure to renew shall not constitute a default hereunder, and (ii) Tenant shall at any time thereafter be entitled to provide Landlord with a replacement Letter of Credit that satisfies the requirements of this paragraph, at which time Landlord shall return the cash proceeds of the original Letter of Credit drawn by Landlord.

ARTICLE 6

SERVICES

6.1 LANDLORD’S GENERAL SERVICES

 

(a)

So long as the Lease is in full force and effect, Landlord shall furnish the following, the cost of which shall be included in Operating Expenses or paid directly by Tenant to the utility or service provider:

 

(i)

heat, ventilation and air-conditioning (“HVAC”) in the Premises and the Common Areas;

 

(ii)

tempered and cold water for use in lavatories in common with other tenants from the regular supply of the Building;

 

(iii)

customary utilities, landscaping and cleaning services in the Common Areas; and

 

(iv)

washing of the outside windows in the Premises weather permitting at intervals determined by Landlord.

 

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(b)

If Tenant uses heat generating machines or equipment in the Premises to an extent which adversely affects the temperature otherwise maintained by the air-cooling system or whenever the occupancy or electrical load adversely affects the temperature otherwise maintained by the air-cooling system, Landlord reserves the right to install or to require Tenant to install supplementary air-conditioning units in the Premises. Tenant shall bear all costs and expenses related to the installation, maintenance and operation of such units. Notwithstanding the foregoing or anything to the contrary in this Lease, Landlord acknowledges that Tenant may require additional HVAC for the server room in the Premises. Landlord shall cooperate reasonably with Tenant to provide such HVAC service with the existing facilities located at the Building.

 

(c)

Landlord shall provide HVAC as reasonably required for Tenant’s permitted use for the comfortable occupancy and operation of the Premises during normal business hours (i.e., 8:00 a.m. to 8:00 p.m. Monday through Friday). Landlord shall also furnish such water for use in the employee break room at the Premises. Landlord shall furnish trash pick-up and recycling services consistent with general office use at the Premises. Landlord shall provide Tenant with access to the Premises twenty-four hours per day, seven days per week.

6.2 GAS AND ELECTRICAL SERVICES

 

(a)

The Premises are separately metered for gas and electricity, and Tenant shall contract directly with the utility company for the use of gas and electricity at the Premises. Electricity used by Tenant in the Premises shall be paid for by Tenant directly to the utility company. Gas used by Tenant in the Premises shall be paid for by Tenant directly to the utility company. Notwithstanding any provision of the Lease to the contrary, without, in each instance, the prior written approval of Landlord, in Landlord’s reasonable business judgment, Tenant shall not: (i) make any alterations or additions to the utility equipment or systems; or (ii) install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises other than personal computers, laptop computers and ancillary equipment consistent with Tenant’s permitted use. Tenant’s use of electric current shall at no time exceed the capacity of the wiring, feeders and risers providing electric current to the Premises or the Building. The consent of Landlord to the installation of electric equipment shall not relieve Tenant from the obligation to limit usage of electricity to no more than such capacity.

6.3 ADDITIONAL SERVICES

At Tenant’s request, Landlord shall furnish additional quantities of any of the services specified in Section 6.1, if Landlord can reasonably do so, on the terms set forth herein. Landlord and Tenant acknowledge Tenant shall provide its request for weekend HVAC service during normal business hours. Landlord shall use reasonable efforts to accommodate any requests by Tenant outside of normal business hours. For services requested by Tenant and furnished by Landlord, Tenant shall pay to Landlord as a charge therefor Landlord’s prevailing rates charged from time to time for such services and utilities. If Tenant shall fail to make any

 

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such payment (beyond applicable notice and cure periods), Landlord may, upon notice to Tenant and in addition to Landlord’s other remedies under this Lease, discontinue any of such additional services for which Tenant has not paid.

6.4 TELEPHONE SERVICES

All telephone, and communication connections which Tenant may desire shall be subject to Landlord’s prior written approval, in Landlord’s reasonable discretion, and the location of all wires and the work in connection therewith shall be performed by contractors approved by Landlord and shall be subject to the direction of Landlord, except that such approval is not required as to Tenant’s telephone equipment (including cabling) within the Premises and from the Premises in a route designated by Landlord to any telephone cabinet or panel provided (as existing or as installed as part of Landlord Work, if any) on Tenant’s floor for Tenant’s connection to the telephone cable serving the Building so long as Tenant’s equipment does not require connections different than or additional to those to the telephone cabinet or panel provided. Except to the extent of such cabling within the Premises or from the Premises to such telephone cabinet or panel, Landlord reserves the right to designate and control the entity or entities providing telephone or other communication cable installation, removal, repair and maintenance in the Building and to restrict and control access to telephone cabinets or panels. In the event Landlord designates a particular vendor or vendors to provide such cable installation, removal, repair and maintenance for the Building, Tenant agrees to abide by and participate in such program. Tenant shall be responsible for and shall pay all costs incurred in connection with the installation of telephone cables and communication wiring in the Premises, including any hook-up, access and maintenance fees related to the installation of such wires and cables in the Premises and the commencement of service therein, and the maintenance thereafter of such wire and cables; and there shall be included in Operating Expenses for the Building all reasonable installation, removal, hook-up or maintenance costs incurred by Landlord in connection with telephone cables and communication wiring serving the Building which are not allocable to any individual users of such service but are allocable to the Building generally. If Tenant fails to maintain all telephone cables and communication wiring in the Premises and such failure affects or interferes with the operation or maintenance of any other telephone cables or communication wiring serving the Building, Landlord or any vendor hired by Landlord may enter into and upon the Premises forthwith and perform such repairs, restorations or alterations as Landlord deems necessary in order to eliminate any such interference (and Landlord may recover from Tenant all of Landlord’s costs in connection therewith). If required by Landlord, no later than the Termination Date Tenant shall remove all telephone cables and communication wiring installed by Tenant for and during Tenant’s occupancy. Tenant agrees that neither Landlord nor any of its agents, or employees, contractors, or invitees shall be liable to Tenant, or any of Tenant’s employees, agents, customers or invitees or anyone claiming through, by or under Tenant, for any damages, injuries, losses, expenses, claims or causes of action because of any interruption, diminution, delay or discontinuance at any time for any reason in the furnishing of any telephone or other communication service to the Premises and the Building.

6.5 DELAYS IN FURNISHING SERVICES

Tenant agrees that Landlord shall not be in breach of this Lease nor be liable to Tenant for damages or otherwise, for any failure to furnish, or a delay in furnishing, or a change in the

 

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quantity or character of any service when such failure, delay or change is occasioned, in whole or in part, by repairs, improvements or mechanical breakdowns by the act or default of Tenant or other parties or by an event of Force Majeure. No such failure, delay or change (“Service Failure”) shall be deemed to be an eviction or disturbance of Tenant’s use and possession of the Premises, or relieve Tenant from paying Rent or from performing any other obligations of Tenant under this Lease, without any deduction or offset. Failure to any extent to make available, or any slowdown, stoppage, or interruption of, the specified utility services resulting from any cause, including changes in service provider or Landlord’s compliance with any voluntary or similar governmental or business guidelines now or hereafter published or any requirements now or hereafter established by any governmental agency, board, or bureau having jurisdiction over the operation of the Property shall not render Landlord liable in any respect for damages to either persons, property, or business, nor be construed as an eviction of Tenant or work an abatement of Rent, nor relieve Tenant of Tenant’s obligations for fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord break down or for any cause cease to function properly, Landlord shall use reasonable diligence to repair same promptly, but Tenant shall have no claim for abatement of Rent or damages on account of any interruption of service occasioned thereby or resulting therefrom. Notwithstanding the foregoing, if the Premises, or a material portion of the Premises, are made untenantable for a period in excess of three (3) consecutive business days as a result of a Service Failure that is reasonably within the control of Landlord to correct, then Tenant, as its sole remedy, shall be entitled to receive an abatement of Rent payable hereunder during the period beginning on the fourth (4 ^th ) consecutive business day of the Service Failure and ending on the day the service has been restored. If the entire Premises have not been rendered untenantable by the Service Failure, the amount of abatement shall be equitably prorated. Notwithstanding the foregoing, if a Service Failure is reasonably within the control of Landlord and (a) continues for thirty (30) business days after the Service Failure and (b) is not being diligently remedied by Landlord, then Tenant, as its sole remedy, shall have the right to elect to terminate this Lease within 10 days after the expiration of said thirty (30) business day period without penalty, by delivering written notice to Landlord of its e