TABLE OF CONTENTS

 

	Page
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS	6
ARTICLE 2 TERM	13
ARTICLE 3 BASE RENT	15
ARTICLE 4 ADDITIONAL RENT	15
ARTICLE 5 USE OF PREMISES	24
ARTICLE 6 SERVICES AND UTILITIES	25
ARTICLE 7 REPAIRS	28
ARTICLE 8 ADDITIONS AND ALTERATIONS	28
ARTICLE 9 COVENANT AGAINST LIENS	32
ARTICLE 10 INSURANCE	32
ARTICLE 11 DAMAGE AND DESTRUCTION	35
ARTICLE 12 NONWAIVER	37
ARTICLE 13 CONDEMNATION	37
ARTICLE 14 ASSIGNMENT AND SUBLETTING	38
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES	42
ARTICLE 16 HOLDING OVER	43
ARTICLE 17 ESTOPPEL CERTIFICATES	44
ARTICLE 18 SUBORDINATION	44
ARTICLE 19 DEFAULTS; REMEDIES	45
ARTICLE 20 COVENANT OF QUIET ENJOYMENT	48
ARTICLE 21 SECURITY DEPOSIT	48
ARTICLE 22 SUBSTITUTION OF OTHER PREMISES	50
ARTICLE 23 SIGNS	50
ARTICLE 24 COMPLIANCE WITH LAW	51
ARTICLE 25 LATE CHARGES	51
ARTICLE 26 LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT	52
ARTICLE 27 ENTRY BY LANDLORD	52
ARTICLE 28 TENANT PARKING	53
ARTICLE 29 MISCELLANEOUS PROVISIONS	54

EXHIBITS:

A		OUTLINE OF PREMISES
A-1		OUTLINE OF EXPANSION SPACE
A-2		OUTLINE OF MUST TAKE SPACES
A-3		OUTLINE OF ADDITIONAL EXPANSION SPACE
B		TENANT WORK LETTER
C		NOTICE OF LEASE TERM DATES
D		RULES AND REGULATIONS

 

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E		FORM OF TENANT’S ESTOPPEL CERTIFICATE
F		APPROVED FORM OF LETTER OF CREDIT
G		JANITORIAL STANDARDS
H		FORM OF SNDA

 

 

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INDEX

 

	Page(s)
Additional Expansion Space	11
Additional Rent	15
Alterations	29
Alternative Expansion Option	10
Alternative Expansion Space	10
Amended Expiration Date	12
Bank Prime Loan	52
Base Building	29
Base Building Elements	29
Base Rent	15
Base Year	16
Builder’s All Risk	31
Building	7
Building Hours	25
Clear Window	62
Common Areas	7
Conditional Termination Notice	37
Direct Expenses	16
Estimate	22
Estimate Statement	22
Estimated Excess	22
Excess	22
Existing Window	62
Expansion Option	9
Expansion Space	9
Expansion Space Extension Term	12
Expense Year	16
Extension Option	13
Extension Period	13
Face Amount	49
Force Majeure	57
Holidays	25
HVAC	25
Landlord	1
Landlord Parties	33
Landlord Repair Notice	36
Lease	1
Lease Commencement Date	13
Lease Expiration Date	13
Lines	61
Mail	57
Notices	57
Operating Expenses	16

 

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Outside Delivery Date	9
Permitted Transfer	42
Permitted Transferee	42
Premises	6
Proposition 13	19
Provider	62
Renovations	60
Rent	15
Scheduled Delivery Date	9
Security Deposit	48
Service Failure	27
Statement	22
Subject Space	39
Suite 2100 Commencement Date	12
Suite 2100 Expansion Option	11
Suite 2100 Expansion Space	11
Suite 2120 Expansion Option	12
Suite 2120 Expansion Space	11
Summary	1
Tax Expenses	19
Tenant	1
Tenant’s Security System	7
Tenant’s Share	22
Term	13
Transfer	41
Transfer Notice	39
Transfer Premium	40
Transferee	39
Transfers	38

 

 

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3. Term
(Article 2).
	3.1   Length of Term:		Ten (10) years, plus any partial month at the end of the Term to result in the Term ending on the last day of a calendar month.
	3.2   Lease Commencement Date:		The 22nd/23rd Floor Commencement Date.
	3.2.1   22nd/23rd Floor Commencement Date:		June 1, 2005.
	3.2.2   Suites 1825/1815 Commencement Date:		July 1, 2005.
	3.3   Lease Expiration Date:		The last day of the calendar month in which the tenth (10th) anniversary of the Suites 1825/1815 Commencement Date falls.
4. Base Rent
(Article 3):
	4.1   Amount Due:

 

Years Following Lease Commencement Date		Annual Base Rent			Monthly Installment of Base Rent			Annual Rental Rate per Rentable Square Foot
1 - 3*		$	1,089,380.25		$	90,781.69		$	30.75
4 - 7		$	1,160,234.25		$	96,686.19		$	32.75
8 - end of Term		$	1,231,088.25		$	102,590.69		$	34.75

 

 

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*  Notwithstanding any provision contained in this Lease to the contrary:
(a) During the initial 180 days following the 22nd/23rd Floor Commencement Date Tenant shall not be obligated to pay Base Rent for that portion of the Premises located on the Twenty-Second (22nd) and Twenty-Third (23rd) floors of the Building;
(b) During the initial 180 days following the Suites 1825/1815 Commencement Date Tenant shall not be obligated to pay Base Rent that portion of the Premises contained in Suites 1825 and 1815; and,
(c) Any increases in Base Rent under this Section 4.1 (i.,e. at the beginning of the 4th Year and the 8th Year) shall occur on the anniversary date of the Suites 1825/1815 Commencement Date.
4.2 Rent Payment Address:			ECI STEVENSON LLC Cushman & Wakefield as agent P.O. Box 45257 San Francisco, CA 94145-0257
5. Base Year			Calendar year 2005
(Article 4):
6. Tenant’s Share			Approximately 10.96%
(Article 4):
7. Permitted Use			General office use only, consistent with a first-class office
(Article 5):			building.

 

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8. Security Deposit			A letter of credit (“L/C”) in the amount of $275,000, subject
(Article 21):			to L/C Burnoff, all in accordance with the provisions of Article 21 of this Lease. Furthermore, if and when Tenant leases more than 35,427 rentable square feet of space in the Building, the Face Amount of the L/C shall increase proportionately in accordance with the provisions of Article 21 of this Lease.
9. Parking			Nine (9) unreserved valet parking passes, subject to
(Article 28):			the terms of Article 28 of this Lease.
			The foregoing parking privileges are based on Tenant leasing Suites 2200, 2300, 1825 and 1815 containing approximately 35,427 rentable square feet of space. If and when Tenant leases more than 35,427 rentable square feet of space in the Building, then for each five thousand (5,000) rentable square feet of space Tenant leases in excess of 35,427 rentable square feet of space Tenant shall be entitled to, and shall lease, one (1) additional unreserved valet parking pass, subject to the terms of Article 28 of this Lease.
10.   Address of Tenant			MD Beauty, Inc.
(Section 29.18):			425 Bush Street, 3 rd floor
			San Francisco, CA 94108 Attn: Chief Financial Officer with a copy to: Gardner Carton & Douglas, LLP 191 North Wacker Drive, Suite 3100 Chicago, IL 60606-1698 Attn: Barnett P. Ruttenberg, Esq. (Prior to Lease Commencement Date)

 

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	and		MD Beauty, Inc. 71 Stevenson Street, Suite 2300 San Francisco, CA 94105-2934 Attention: Chief Financial Officer with a copy to: Gardner Carton & Douglas, LLP 191 North Wacker Drive, Suite 3100 Chicago, IL 60606-1698 Attn: Barnett P. Ruttenberg, Esq. (After Lease Commencement Date)
11.   Address of Landlord			See Section 29.18 of the Lease.
(Section 29.18):
12.   Broker(s)			CB Richard Ellis Real Estate Services, Inc.
(Section 29.24):			101 California Street, 44th Floor San Francisco, California 94111 and The CAC Group 255 California Street, Suite 200 San Francisco, CA 94111
13.   Tenant Improvement Allowance (Section 2.1 of Exhibit B ):			$40 per rentable square foot

 

 

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ARTICLE 1

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1           Premises, Building, Project and Common Areas .

 

The Premises .   Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the “ Premises ”).  The outline of the Premises is set forth in Exhibit A attached hereto and each suite, floor or floors of the Premises has approximately the number of rentable square feet as set forth in Section 2.2 of the Summary.  The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance.  The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises in the “ Building ,” as that term is defined in Section 1.1.2, below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the “ Common Areas ,” as that term is defined in Section 1.1.3, below, or the elements thereof or of the accessways to the Premises or the “ Project ,” as that term is defined in Section 1.1.2, below.  Except as specifically set forth in this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the “ Tenant Work Letter ”), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises.  Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenant’s business, except as specifically set forth in this Lease and the Tenant Work Letter.  The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time in good and sanitary order, condition and repair, except for any “punch list” items to be completed by Landlord in connection with the improvements to be constructed by Landlord under the Tenant Work Letter.

1.1.1                Access to Premises and to Fire Stairwell.

1.1.1.1     After the Commencement Date Tenant (and such employees of Tenant to whom Landlord has previously given access keys or cards as Tenant from time-to-time requests pursuant to the provisions of this Lease) shall have access to the Premises 24 hours per day, 365 days per year, subject to (a) security controls, such as having keys and access cards to the Building and the Premises, (b) limitations and denial of access due to emergencies, and (c) limitations and denial of access due to reasons beyond the control of Landlord, such as actions by governmental authorities.

1.1.1.2     Subject to all applicable Laws, and Tenant’s reasonable cooperation with Landlord, so long as Tenant occupies the entire twenty-second (22nd) and twenty-third (23rd) floors of the Building [and the twenty-first (21st) floor when Tenant takes the entire floor], Tenant may, at Tenant’s own expense, use the existing fire stairwell to gain access to and between the twenty-second (22nd) and twenty-third (23rd) floors of the Building.  Subject

 

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to Landlord’s prior written approval, which approval shall not be unreasonably withheld, Tenant may install its own security system (“ Tenant’s Security System ” to access the twenty-second (22nd) and twenty-third (23rd) floors of the Building from the existing fire stairwell.  In no event shall Tenant’s Security System tie into the Building’s security system or other systems or equipment of the Building, unless required to do so by any applicable governmental authority.  Tenant shall provide Landlord with any information reasonably required regarding Tenant’s Security System to provide access from the existing stairwell to the Premises in the event of an emergency.  Notwithstanding any provision contained in this Lease to the contrary, at the expiration or early termination of this Lease, Landlord may require Tenant to remove Tenant’s Security System and repair all damage to the Building resulting from such removal, at Tenant’s sole cost and expense.

1.1.2                The Building and The Project .   The Premises are a part of the building set forth in Section 2.1 of the Summary (the “ Building ”).  The term “ Project ,” as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the land (which is improved with landscaping, subterranean parking facilities and other improvements) upon which the Building and the Common Areas are located, and (iii) at Landlord’s discretion, any additional real property, areas, land, buildings or other improvements added thereto outside of the Project.

1.1.3                Common Areas .   Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other portions of the Project as are used in the operation of the Project, as designated by Landlord, in its commercially reasonable discretion, are collectively referred to herein as the “ Common Areas ”).  The manner in which the Common Areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time.  Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas.

1.2           Verification of Rentable Square Feet of Premises and Building .  For purposes of this Lease, “rentable square feet” and of the Premises shall be deemed as set forth in Section 2.2 of the Summary and shall not be subject to remeasurement or modification.  An independent architect has measured the Building and Premises in accordance with BOMA standards of measurement.

1.3           Must Take Spaces.

1.3.1                Tenant agrees to add to the Premises two (2) suites containing approximately 3,707 rentable square feet of space in the aggregate, on the eighteenth (18th) floor of the Building (collectively, the “Must Take Spaces” and when referred to in general, rather than specifically, the “Must Take Space”).  Each Must Take Space is identified on Exhibit A-2 attached to this Lease.  The Must Take Spaces are (a) Suite 1810 containing approximately 858 rentable square feet of space (“Must Take Space 1810”); and (b) Suite 1830 containing approximately 2,849 square feet of space (“Must Take Space 1830”).  Each Must Take Space is not subject to any rights granted by Landlord (including Landlord’s predecessor-in-interest) to

 

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others with respect to the respective Must Take Space (including renewal and extension rights and rights of first offer, first negotiation, first refusal or other expansion rights).  Each Must Take Space may be available for Tenant to lease with different commencement dates for each Must Take Space.

1.3.2                Landlord agrees to use good faith efforts to deliver Must Take Space 1810 and Must Take Space 1830 on or before April 20, 2007.  Landlord agrees not to extend the term of the leases for either Must Take Space 1810 or Must Take Space 1830, and to use commercially reasonable efforts to cause the tenants occupying Must Take Space 1810 and Must Take Space 1830 to vacate the respective Must Take Spaces on or before April 20, 2007.  Landlord shall not be liable to Tenant or otherwise be in default under this Lease if Landlord is unable to deliver possession of Must Take Space 1810 or Must Take Space 1830, whether on April 20, 2007, or any time thereafter.  Landlord shall give Tenant written notice thirty (30) days prior to delivering Must Take Space 1810 or Must Take Space 1830.  If Landlord does not deliver either Must Take Space 1810 or Must Take Space 1830 to Tenant on or before June 1, 2007 because the existing tenant(s) occupying Must Take Space 1810 and/or Must Take Space 1830 hold over beyond April 30, 2005 and refuse to vacate such Must Take Space(s), then by written notice to Landlord before December 1, 2007, Tenant shall have the right to terminate Tenant’s obligation to lease the undelivered Must Take Space.

1.3.3                The Term of the Lease for each of the Must Take Spaces shall commence upon the date Landlord delivers possession of each of the respective Must Take Spaces to Tenant, and shall continue through the expiration or early termination of the Term.  Upon Landlord’s delivery of each of the Must Take Spaces to Tenant the respective Must Take Space shall be part of the Premises under the Lease (so that the term “Premises” in this Lease shall refer to the space in the Premises immediately before the delivery of the respective Must Take Space, plus the respective Must Take Space).

1.3.4                Tenant shall pay Base Rent for each Must Take Space at the same Annual Rental Rate per Rentable Square Foot contained in Section 4 of the Summary of Basic Lease Information as Tenant is then paying for the Premises originally leased under the terms of this Lease, as such rate changes during the Term.  Tenant shall commence paying Base Rent and Additional Rent for each Must Take Space (the “Must Take Rent Commencement”) sixty (60) days after Landlord delivers possession of the respective Must Take Space to Tenant; provided that for each Must Take Space a portion of the Base Rent for such specific Must Take Space will be waived for a period of time immediately following the Must Take Rent Commencement, in accordance with the following calculation:  The number of days for which Base Rent is waived for a specific Must Take Space shall be determined by multiplying one hundred eighty (180) by a fraction, the numerator of which is the number of days in the Term following the Must Take Rent Commencement for such specific Must Take Space, and the denominator of which is the number of days in the original Term for the Premises originally leased under this Lease (“Adjustment Factor”).

1.3.5                Landlord shall deliver, and Tenant shall take, each Must Take Space in its then existing “AS IS” condition.  Landlord shall construct Tenant Improvements in each Must Take Space in accordance with the provisions of this Lease.  For each Must Take Space Landlord delivers to Tenant Landlord shall provide a Tenant Improvement Allowance of $40 per

 

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rentable square foot in such Must Take Space multiplied by the relevant Adjustment Factor, in accordance with the provisions of this Lease.

1.3.6                As Landlord delivers possession of each Must Take Space to Tenant, Tenant’s Share of the Annual Direct Expenses shall be adjusted in accordance with the provisions of Section 4.2.6 of this Lease, to reflect the increased Rentable Area of the Premises.  Tenant’s lease of each Must Take Space shall be on the same terms and conditions as affect the original Premises, from time-to-time, including the same annual Base Rent per Rentable Square foot as then applies to the original Premises (except that free Base Rent and Tenant Improvement Allowance for each Must Take Space shall be determined in accordance with Section 1.3.5 above).

1.3.7                After Landlord delivers any Must Take Space to Tenant, Landlord and Tenant shall execute a written confirmation of the addition of the respective Must Take Space to the Premises on the terms and conditions set forth in this Section 1.3.  The written confirmation shall confirm the actual delivery date of such Must Take Space, the amount of free rent and Tenant Improvement Allowance applicable to such Must Take Space, the Must Take Rent Commencement for such Must Take Space, the percentage that constitutes Tenant’s Share of Direct Annual Direct Expenses, and any other relevant provision applicable to such Must Take Space.

1.4           Expansion Option .

1.4.1                Provided that MD Beauty, Inc. has not assigned this Lease or sublet more than twenty-five percent (25%) or all of the Premises to an entity other than a Permitted Transferee (as defined in Section 14.8 below) (it being intended that all rights pursuant to this provision are and shall be personal to the original Tenant under this Lease and its Permitted Transferees and shall not be transferable or exercisable for the benefit of any Transferee other than a Permitted Transferee), and provided Tenant is not in default under this Lease beyond any applicable notice and cure periods on the date of exercise or at any time thereafter until the commencement of the Term with respect to any space so leased, Tenant shall have the following option (“ Expansion Option ”) by giving written notice to Landlord of the exercise of any such Expansion Option at any time prior to March 1, 2011 to lease the Expansion Space described below.  If Tenant fails to exercise the Expansion Option prior to March 1, 2011, then the Expansion Option shall become void, and of no further force and effect.  If Tenant effectively exercises the Expansion Option, then Landlord shall use commercially reasonable efforts to deliver possession of the Expansion Space to Tenant on or about the Scheduled Delivery Date.  The Expansion Space contains approximately 6,272 rentable square feet of space on the fifteenth (15th) floor of the Building (“ Expansion Space ”), as further set forth on Exhibit A-1 to this Office Lease.  The scheduled delivery date for the Expansion Space is February 1, 2012 (“ Scheduled Delivery Date ”).  If, despite Landlord’s good faith efforts, Landlord is unable to deliver the Expansion Space to Tenant on or before May 1, 2012 (“ Outside Delivery Date ”) in accordance with the provisions of this Article 1.4, then Tenant shall have no further rights with respect to the Expansion Space.

1.4.2                Tenant may meet with Landlord reasonably prior to March 1, 2011 to identify space (“ Alternative Expansion Space ”), as an alternative to the Expansion Space, and

 

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the availability, terms, including rental rate and time for delivery of the Alternative Expansion Space.  Within ten (10) business days following the date Landlord and Tenant agree upon the Alternative Expansion Space, and the terms upon which Tenant would lease the Alternative Expansion Space, and as an alternative  to exercising the Expansion Option for the Expansion Space, Tenant shall have the option (the “ Alternative Expansion Option ”) by giving written notice to Landlord within such ten (10) business day period to lease the Alternative Expansion Space instead of the Expansion Space.  Landlord shall deliver to Tenant the Alternative Expansion Space in accordance with the terms mutually agreed upon by Landlord and Tenant, subject to the other provisions of this Article 1.4.  If Tenant exercises the Alternative Expansion Option as provided above, then the Expansion Option for the Expansion Space identified above in Section 1.4.1 shall immediately terminate without any notice, and shall be of no further force and effect.  If Tenant does not exercise the Alternative Expansion Option within the ten (10) business day period specified above, then such Alternative Expansion Option shall terminate.  Upon any termination of the Alternative Expansion Option Tenant may still exercise the Expansion Option so long as it is exercised prior to March 1, 2011, provided, however, that Tenant shall not have the right to exercise both the Expansion Option and the Alternative Expansion Option.  The Alternative Expansion Space shall consist of contiguous vacant unleased space on one floor in the high-rise elevator bank area of the Building and shall contain between 3,000 and 8,000 rentable square feet of space and that Landlord shall deliver the Alternative Expansion Space to Tenant after April 30, 2008 and prior to May 1, 2011.  Upon delivery of any Alternative Expansion Space to Tenant, then Tenant shall lease such Alternative Expansion Space in accordance with the provisions of this Article 1.4.

1.4.3                The exercise by Tenant of the Expansion Option, or the Alternative Expansion Option, as the case may be, shall be irrevocable.  Upon exercise of the Expansion Option, or upon mutual agreement as to the Alternative Expansion Space, the Expansion Space or Alternative Expansion Space, as the case may be, shall be deemed to be leased under the terms and conditions of this Lease and shall constitute a portion of the Premises for all purposes of this Lease.  No further instrument shall be required to make such Lease of the Expansion Space or Alternative Expansion Space effective; provided that Landlord and Tenant shall, if requested by either party, execute and acknowledge an amendment to this Lease confirming the lease of such Expansion Space or Alternative Expansion Space.  The Expansion Option and the Alternative Expansion Option shall terminate if not exercised precisely in the manner provided herein.

1.4.4                The lease of the Expansion Space or Alternative Expansion Space, as the case may be, shall be on all the terms and conditions set forth in this Lease and all Exhibits thereto, except that:

(a)           The Expansion Space, or Alternative Expansion Space, as the case may be, shall be delivered to Tenant in an “as is” condition;

(b)           The term of the Lease with respect to the Expansion Space or Alternative Expansion Space shall commence sixty (60) days after delivery of the Expansion Space or Alternative Expansion Space to Tenant and shall expire on the Expiration Date for the original Premises; provided, however, that if Tenant is granted any option to extend the term of the Lease with respect to the original Premises, such option(s) shall also apply to any Expansion Space or

 

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its March 31, 2011 expiration date, or (b) at least twelve (12) months, but not more than fifteen (15) months, prior to August 31, 2011.

1.5.4                The exercise by Tenant of the Suite 2100 Expansion Option and the Suite 2120 Expansion Option, as the case may be, shall be irrevocable.  Upon exercise of the Suite 2100 Expansion Option or the Suite 2120 Expansion Option, as the case may be, the applicable Additional Expansion Space shall be deemed to be leased under the terms and conditions of this Lease and shall constitute a portion of the Premises for all purposes of this Lease.  No further instrument shall be required to make such lease of the applicable Additional Expansion Space effective; provided that Landlord and Tenant shall, if requested by either party, execute and deliver an amendment to this Lease confirming the lease of such Suite 2100 Expansion Space or Suite 2120 Expansion Space.  The Suite 2100 Expansion Option and the Suite 2120 Expansion Option shall terminate if not exercised precisely in the manner provided herein.

1.5.5                The lease of the Additional Expansion Space shall be on all the terms and conditions set forth in this Lease and all Exhibits thereto, except that:

(a)           The Additional Expansion Space shall be delivered to Tenant in an “as is” condition;

(b)           The Term of the Lease with respect to the applicable Additional Expansion Space shall commence sixty (60) days after delivery of the Suite 2100 Expansion Space (“ Suite 2100 Commencement Date ”) or the Suite 2120 Expansion Space to Tenant, as the case may be, and shall expire on the Expiration Date for the original Premises (unless the Term is extended under the immediately following provisions); provided, however:

                (i)  if at the Suite 2100 Commencement Date the then remaining Term of the Lease is less than five (5) years, the Term of the Lease shall be extended to expire five (5) years following the Suite 2100 Commencement Date (“ Amended Expiration Date ”).  That portion of the Term between the Expiration Date contained in Section 3.3 of the above Summary of Basic Lease Information and the Amended Expiration Date is herein called the “ Expansion Space Extension Term” (; and,

                (ii)  if Tenant is granted any option to extend the term of the Lease with respect to the original Premises, such option(s) shall also apply to the Additional Expansion Space leased by Tenant at the commencement of the Extension Period, and the options to extend may only be exercised with respect to the entire Premises, including the Additional Expansion Space; and,

(c)           The Base Rent for the applicable Additional Expansion Space, shall be the Fair Market Base Rental and shall be determined in accordance with the provisions of Article 2.2.  If the Term of the Lease is extended to expire at an Amended Expiration Date, then during the Expansion Space Extension Term the Base Rent payable by Tenant for the entire Premises then leased by Tenant (including all Premises leased by Tenant prior to or following the Suite 2100 Commencement Date) shall be the Fair Market Base Rental determined as of the Suite

 

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2100 Commencement Date for the entire Premises, and shall be determined in accordance with the provisions of Article 2.2.

ARTICLE 2

TERM

2.1           Initial Term.   The terms and provisions of this Lease shall be effective as of the date of this Lease.  The term of this Lease (the “ Term ”) shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the “ Lease Commencement Date ”), and shall terminate on the date set forth in Section 3.3 of the Summary (the “ Lease Expiration Date ”) unless this Lease is sooner terminated as hereinafter provided.  At any time during the Term, Landlord or Tenant may deliver to the other party a notice in the form as set forth in Exhibit C, attached hereto, as a confirmation only of the information set forth therein, which the recipient shall execute and return within ten (10) business days of receipt thereof.

 

                2.2           Extension Option.

 

                                2.2.1        Provided that MD Beauty, Inc. has not assigned this Lease or sublet more than twenty-five percent (25%) or all of the Premises to an entity other than a Permitted Transferee (it being intended that all rights pursuant to this provision are and shall be personal to the original Tenant under this Lease and its Permitted Transferees and shall not be transferable or exercisable for the benefit of any Transferee other than a Permitted Transferee), and provided Tenant is not in default under this Lease beyond any applicable notice and cure period at the time of exercise or at any time thereafter until the beginning of any such extension of the Term, Tenant shall have the option (the “ Extension Option ”) to extend the Term for one (1) additional consecutive period of five (5) years (“ Extension Period ”), by giving written notice to Landlord of the exercise of any such Extension Option at least twelve (12) months, but not more than fifteen (15) months, prior to the expiration of the initial Term.  The exercise of the Extension Option by Tenant shall be irrevocable and shall cover the entire Premises leased by Tenant pursuant to this Lease.  Upon such exercise, the term of the Lease shall automatically be extended for the Extension Period without the execution of any further instrument by the parties; provided that Landlord and Tenant shall, if requested by either party, execute and acknowledge an instrument confirming the exercise of the Extension Option.  The Extension Option shall terminate if not exercised precisely in the manner provided herein.  Any extension of the Term shall be upon all the terms and conditions set forth in this Lease and all Exhibits thereto, except that:  (i) Tenant shall have no further option to extend the Term of the Lease; (ii) Landlord shall not be obligated to contribute funds toward the cost of any remodeling, renovation, alteration or improvement work in the Premises; and (iii) Base Rent for any such Extension Period shall be the then Fair Market Base Rental (as defined below) for the Premises for the space and term involved, which shall be determined as set forth below.

 

                                2.2.2        “ Fair Market Base Rental ” shall mean the “fair market” Base Rent at the time or times in question for the applicable space, based on the prevailing rentals then being charged to tenants in the Building and tenants in other office buildings in the general vicinity of the

 

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Building of comparable size, location, quality and age as the Building for leases with terms approximately equal to the Extension Period (or, if applicable, the initial term for the Expansion Space, Alternative Expansion Space, or Expansion Space Extension Term), taking into account the creditworthiness and financial strength of the tenant, the financial guaranties provided by the tenant (if any), and the desirability, location in the building, size and quality of the space, tenant finish allowance and/or tenant improvements, included services, operating expenses and tax and expense stops or other escalation clauses, for the space in the Building for which Fair Market Base Rental is being determined and for comparable space in the buildings which are being used for comparison.  Fair Market Base Rental shall also reflect the then prevailing rental structure for comparable office buildings in the general vicinity of the Property, so that if, for example, at the time Fair Market Base Rental is being determined the prevailing rental structure for comparable space and for comparable lease terms includes periodic rental adjustments or escalations, Fair Market Base Rental shall reflect such rental structure.

 

                                2.2.3        Landlord and Tenant shall endeavor to agree upon the Fair Market Base Rental.  If they are unable to so agree within thirty (30) days after receipt by Landlord of Tenant’s notice of exercise of the Extension Option (or, if applicable, the exercise of the Expansion Option, the Alternative Expansion Option or the Suite 2100 Expansion Option), Landlord and Tenant shall mutually select a licensed real estate broker who is active in the leasing of office space in the general vicinity of the Property.  Landlord shall submit Landlord’s determination of Fair Market Base Rental and Tenant shall submit Tenant’s determination of Fair Market Base Rental to such broker, at such time or times and in such manner as Landlord and Tenant shall agree (or as directed by the broker if Landlord and Tenant do not promptly agree).  The broker shall select either Landlord’s or Tenant’s determination as the Fair Market Base Rental, and such determination shall be binding on Landlord and Tenant.  If Tenant’s determination is selected as the Fair Market Base Rental, then Landlord shall bear all of the broker’s cost and fees.  If Landlord’s determination is selected as the Fair Market Base Rental, then Tenant shall bear all of the broker’s cost and fees.

 

                                2.2.4        In the event the Fair Market Base Rental for any Extension Period has not been determined at such time as Tenant is obligated to pay Base Rent for such Extension Period, Tenant shall pay as Base Rent pending such determination, the Base Rent in effect for the Premises immediately prior to the Extension Period; provided, that upon the determination of the applicable Fair Market Base Rental, any shortage of Base Rent paid, together with interest at the rate specified in the Lease, shall be paid to Landlord by Tenant.

 

                                2.2.5        In no event shall (a) the Base Rent during the Extension Period be less than the Base Rent in effect immediately prior to such Extension Period, (b) the Base Rent per rentable square foot for the Expansion Space, the Alternative Expansion Space, or the Additional Expansion Space be less than the Base Rent per rentable square foot payable for the original Premises immediately prior to the date the Term commences for the Expansion Space, the Alternative Expansion Space or the Additional Expansion Space, as the case may be, or (c) the Base Rent per rentable square foot during the Expansion Space Extension Term be less than the Base Rent per rentable square foot in effect immediately prior to such Expansion Space Extension Term.

 

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                                2.2.6        The term of this Lease, whether consisting of the initial Term alone or the initial Term as extended by the Extension Period (if the Extension Option is exercised), or the Expansion Space Extension Term (if the Term is extended by the Expansion Space Extension Term) is referred to in this Lease as the “Term.”

ARTICLE 3

BASE RENT

Tenant shall pay, without prior notice or demand, to Landlord or Landlord’s agent at the address set forth in Section 4.2 of the Summary, or, at Landlord’s option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (“ Base Rent ”) as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Term, without any setoff or deduction whatsoever.  The Base Rent for the first full month of the Term which occurs after the expiration of any free rent period shall be paid at the time of Tenant’s execution of this Lease.  If any “Rent,” as that term is defined in Section 4.1 below, payment date (including the Lease Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any fractional month shall accrue on a daily basis for the period from the date such payment is due to the end of such calendar month or to the end of the Term at a rate per day which is equal to 1/365 of the applicable annual Rent.  All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis.

ARTICLE 4

ADDITIONAL RENT

4.1           General Terms .   In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay “ Tenant’s Share ” of the annual “ Direct Expenses ,” as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease, respectively, which are in excess of the amount of Direct Expenses applicable to the “Base Year,” as that term is defined in Section 4.2.1, below; provided, however, that in no event shall any decrease in Direct Expenses for any Expense Year below Direct Expenses for the Base Year entitle Tenant to any decrease in Base Rent or any credit against sums due under this Lease.  Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the “ Additional Rent ”, and the Base Rent and the Additional Rent are herein collectively referred to as “ Rent .”  All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent.  All sums payable to Landlord on demand under the terms of this Lease shall be payable within thirty (30) days after notice from Landlord of the amounts due.  Without limitation on other obligations of Tenant which survive the expiration of the Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Term.

4.2           Definitions of Key Terms Relating to Additional Rent .   As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

 

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4.2.1                “ Base Year ” shall mean the period set forth in Section 5 of the Summary.

4.2.2                “ Direct Expenses ” shall mean “Operating Expenses” and “Tax Expenses.”

4.2.3                “ Expense Year ” shall mean each calendar year after the Base Year in which any portion of the Term falls, through and including the calendar year in which the Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant’s Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.

4.2.4                “ Operating Expenses ” shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during the Base Year or any Expense Year because of or in connection with the management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof.  Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following without duplication:  (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) costs incurred in connection with the parking areas servicing the Project; (vi) fees and other costs, including management fees, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under any equipment rental agreements and the fair rental value of any management office space; (viii) wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons engaged in the operation, maintenance and security of the Project, who are at or below the level of building manager, all such wages, salaries and other compensation to be appropriately allocated for persons who also perform duties unrelated to the Project; (ix) [intentionally deleted]; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Project not covered in clause (i) above in this Section 4.2.4; (xi) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof; (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, or reduce current or future Operating Expenses, (B) that are required to comply with present or anticipated conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition, or

 

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(D) that are required under any governmental law or regulation; provided, however, that any capital expenditure shall be amortized with interest over its useful life as Landlord shall reasonably determine; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute “Tax Expenses” as that term is defined in Section 4.2.5, below; and (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Project.  Operating Expenses shall be net of rebates, credits, recoveries under the insurance maintained by Landlord on the Building and similar items of which Landlord receives a monetary benefit.

Notwithstanding any provision contained in this Lease to the contrary, Operating Expenses shall not include the following:

1.                                             the cost of alterations, capital improvements (unless required by any new law, or which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, or reduce current or future Operating Expenses, in which event such capital improvement shall be amortized over its useful life, with interest at Landlord’s cost of funds), equipment replacements, and other items which under generally accepted accounting principles are properly classified as capital expenditures;

2.                                             painting or decorating other than in common or public areas of the building;

3.                                             any tenant work performed or alteration of space leased to Tenant or other tenants or occupants of the building, whether such work or alteration is performed for the initial occupancy by such tenant or occupant or thereafter;

4.                                             any cash or other consideration paid by Landlord on account of, with respect to or in lieu of the tenant work or alterations described in Clause 3 above;

5.                                             ground rent;

6.                                             depreciation or amortization, except as provided in exclusion number 1 above;

7.                                             repairs necessitated by the negligence of Landlord or required to cure violations of laws in effect on the lease execution date and any other expenses incurred in connection with upgrading the building or Project to comply with insurance requirements, codes, statues or other laws including without limitation ADA;

8.                                             costs of enforcement of leases;

9.                                             interest on indebtedness or any costs of financing or refinancing the building, building equipment, or building improvements, replacements, or repairs.

10.                                       management fees in excess of three percent (3%) of rental collections;

11.                                       corporate overhead and compensation paid to officers or executives of the

 

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                                                     Landlord;

12.                                       leasing commissions and advertising and promotional expenses;

13.                                       legal fees;

14.                                       the cost of repairs in excess of any commercially reasonable deductible incurred by reason of fire or other casualty or condemnation to the extent that either (a) Landlord is compensated therefore through proceeds of insurance or condemnation awards; (b) Landlord failed to obtain insurance against such fire or casualty, if insurance was available at a commercially reasonable rate, against a risk of such nature at the time of same; or (c) Landlord is not fully compensated therefore due to the coinsurance provisions of its insurance policies on account of Landlord’s failure to obtain a sufficient amount of coverage against such risk;

15.                                       purchase of works of art, provided that Landlord may include the costs of maintenance of, and insurance on, any works of art (whether existing on the Commencement Date or purchased subsequent thereto);

16.                                       overtime HVAC costs or electricity costs if charged separately to other building tenants;

17.                                       the cost of performing additional services or installation to or for tenants to the extent that such service exceeds that available to Tenant without charge hereunder;

18.                                       “takeover expenses” (i.e., expenses incurred by Landlord with respect to space located in another building of any kind or nature in connection with the leasing of space in the Building);

19.                                       any amounts payable by Landlord by way of indemnity or for damages or which constitute a fine, interest, or penalty, including interest (except as part of amortization of capital improvements as provided in number 1 above) or penalties for any late payments of operating costs;

20.                                       any improvement installed or work performed or any other cost or expens e incurred by Landlord for any tenant space in order to comply with the requirements for the obtaining or renewal of a certificate of occupancy for the building or any space therein;

21.                                       any cost representing an amount paid for services or materials to a related person, firm, or entity to the extent such amount exceeds the amount that would be paid for such services or materials at the then existing market rates to an unrelated person, firm, or corporation;

22.                                       the operating costs incurred by Landlord relative to retail stores, deli’s, or restaurants;

23.                                       the cost of overtime or other expense to Landlord in curing its defaults in excess of costs absent such default,

 

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24.                                       reserves of any kind.

If in either the Base Year or any Expense Year, Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant.  If the Project is not at least ninety-five percent (95%) occupied during all or a portion of the Base Year or any Expense Year, Landlord shall make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been ninety-five percent (95%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year.  Operating Expenses for the Base Year shall not include market-wide cost increases due to extraordinary non-recurring circumstances, including, but not limited to, “Force Majeure,” as that term is defined in Section 29.16 below, boycotts, strikes, conservation surcharges, embargoes or shortages, or amortized costs relating to capital improvements.

4.2.5                Taxes .

4.2.5.1     “ Tax Expenses ” shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during the Base Year or any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof.

4.2.5.2     Tax Expenses shall include, without limitation:  (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“ Proposition 13 ”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Project’s contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the

 

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Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises.  Any special assessments shall be amortized over the maximum period of time permitted by law and Tenant shall pay Tenant’s Share of any special assessments (together with interest thereon at the rate charged Landlord by the assessing entity) as a component of Tenant’s Share of Taxes through the lesser of (i) the full amortized period of the special assessment, or (ii) the end of the Term.  If any special assessment is not payable in installments and less than ten (10) years remains in the Term, any special assessment shall be apportioned between Landlord and Tenant as if such special assessment were payable over ten (10) years, with Tenant responsible to pay only that portion then deemed due within the remaining Term as a component of Tenant’s Share of Taxes.  For any partial calendar year at the beginning or the end of the Term, Taxes shall be prorated on the basis of a 365-day year by computing Tenant’s Share of Taxes for the entire year and then prorating such amount for the number of days during such year included in the Term.

4.2.5.3     Any costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid.  Except as set forth in Section 4.2.5.4, below, refunds of Tax Expenses shall be credited against Tax Expenses and refunded to Tenant based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year.  If Tax Expenses for any period during the Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord within thirty (30) days after Landlord invoices Tenant therefore, Tenant’s Share of any such increased Tax Expenses included by Landlord as Tax Expenses pursuant to the terms of this Lease.  Notwithstanding anything to the contrary contained in this Section 4.2.5, there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, transfer taxes and fees, federal and state net income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 4.5 of this Lease.

4.2.5.4     Notwithstanding anything to the contrary set forth in this Lease, the amount of Tax Expenses for the Base Year and any Expense Year shall be calculated without taking into account any decreases in real estate taxes obtained in connection with Proposition 8, and, therefore, the Tax Expenses in the Base Year and/or an Expense Year may be greater than those actually incurred by Landlord, but shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i) any costs and expenses incurred by Landlord in securing any Proposition 8 reduction shall not be included in Direct Expenses for purposes of this Lease, and (ii) tax refunds under Proposition 8 shall not be deducted from Tax Expenses, but rather shall be the sole property of Landlord.  Landlord and Tenant acknowledge that this Section 4.2.5.4 is not intended to in any way affect (A) the inclusion in Tax Expenses of the statutory two percent

 

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changed by Tenant’s leasing of additional space hereunder or for any other reason, Tenant’s Share shall be adjusted accordingly.

4.3           Cost Pools .   Landlord shall have the right, from time to time, to equitably allocate some or all of the Direct Expenses for the Project among different portions or occupants of the Project (the “ Cost Pools ”), in Landlord’s reasonable discretion applied in a consistent way between Expense Years and consistent with similar office buildings in the financial district of San Francisco.  Such Cost Pools may include, but shall not be limited to, the office space tenants of the Project, and the retail space tenants of the Project.  The Direct Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner.

4.4           Calculation and Payment of Additional Rent .   If for any Expense Year ending or commencing within the Term, Tenant’s Share of Direct Expenses for such Expense Year exceeds Tenant’s Share of Direct Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.4.1, below, and as Additional Rent, an amount equal to the excess (the “ Excess ”).

4.4.1                Statement of Actual Direct Expenses and Payment by Tenant .   Landlord shall endeavor to give to Tenant following the end of each Expense Year, a statement (the “ Statement ”) in reasonable detail which shall state the Direct Expenses incurred or accrued for such preceding Expense Year and the Direct Expenses for the Base Year, and which shall indicate the amount of the Excess.  Upon receipt of the Statement for each Expense Year commencing or ending during the Term, if an Excess is present, Tenant shall pay, within thirty (30) days following receipt of the Statement, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Excess,” as that term is defined in Section 4.4.2, below, and any over payment shall be credited to Rent or refunded within thirty (30) days if the Lease has not terminated or expired.  The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 4.  Even though the Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of Direct Expenses for the Expense Year in which this Lease terminates, if an Excess if present, Tenant shall immediately pay to Landlord such amount.  The provisions of this Section 4.4.1 shall survive the expiration or earlier termination of the Term.

4.4.2                Statement of Estimated Direct Expenses .  In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the “ Estimate Statement ”) which shall set forth Landlord’s reasonable estimate (the “ Estimate ”) of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated excess (the “ Estimated Excess ”) as calculated by comparing the Direct Expenses for such Expense Year, which shall be based upon the Estimate, to the amount of Direct Expenses for the Base Year.  The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4, nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Excess theretofore delivered to the extent necessary, but not more than one (1) time for any Expense Year.  Thereafter, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to

 

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the next to last sentence of this Section 4.4.2).  Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant.  I f any Taxes paid by Landlord and previously included in Direct Expenses are refunded, Landlord shall promptly pay Tenant an amount equal to the amount of such refund (less the reasonable expenses incurred by Landlord in obtaining such refund) multiplied by Tenant’s Share in effect for the period to which such refund relates.

4.4.3                Tenant’s Audit Rights .               Tenant, at its expense, shall have the right upon fifteen (15) days prior written notice to Landlord ( “Tenant’s Audit Notice”) to be given only within ninety (90) days after Tenant receives the annual Statement of Direct Expenses to audit Landlord’s books and records relating to such Statement for such immediately preceding Expense Year, subject to the following terms and conditions:  (a) No audit shall be conducted at any time that an Event of Default exists of any of the terms of this Lease; (b) any audit shall be conducted only by certified public accountants practicing for an independent accounting firm, employed by Tenant on an hourly or fixed fee basis, and not on a contingency fee basis; and (c) Tenant shall not audit Landlord’s books and records more than one (1) time for any Expense Year.  Tenant acknowledges that Tenant’s right to inspect Landlord’s books and records with respect to Direct Expenses for the preceding Expense Year is for the exclusive purpose of determining whether Landlord has complied with the terms of the Lease with respect to Direct Expenses.  Tenant shall have ninety (90) days after Tenant’s Audit Notice to complete Tenant’s inspection of Landlord’s books and records concerning Direct Expenses at Landlord’s accounting office.  During its inspection Tenant agrees to request, in writing, all pertinent documents relating to the inspection.  Landlord will provide such documents to Tenant within ten (10) days from Landlord’s receipt of the request and Tenant shall not remove such records from Landlord’s accounting office, but Tenant shall have the right to make copies of the relevant documents at Tenant’s expense.  Tenant shall deliver to Landlord a copy of the results of such audit within fifteen (15) days of its receipt by Tenant.  The nature and content of any audit are strictly confidential.  Tenant, on behalf of its accountant, employees and agents shall not disclose the information obtained from the audit to any other person or entity, including, without limitation, any other tenant in the Building, or any agent, employee, officer, shareholder, partner, accountant or attorney of such tenant in the Building.  Except for a Permitted Transferee, no assignee shall conduct an audit for any period during which such assignee was not in possession of the Premises.  If Tenant’s audit shows that Direct Expenses are overstated by more than five percent (5%), then Landlord agrees to pay the reasonable costs of such audit, not to exceed Two Thousand and 00/100 Dollars ($2,000.00) per audit.

4.5           Taxes and Other Charges for Which Tenant Is Directly Responsible .

4.5.1                Tenant shall be liable for and shall pay before delinquency, taxes levied against Tenant’s equipment, furniture, fixtures and any other personal property located in or about the Premises.  If any such taxes on Tenant’s equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord’s property or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon such equipment,

 

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furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.

4.5.2                If the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord’s “building standard” in other space in the Project are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.5.1, above.

4.5.3                Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project, including the Project parking facility; or (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

4.6           Notwithstanding anything contained herein to the contrary, Landlord may adjust Operating Expenses and submit a corrected Statement with respect to Operating Expenses no more than two (2) years after the end of an Expense Year; provided, however, such two (2) year limitation shall not apply to Taxes.

ARTICLE 5

USE OF PREMISES

5.1           Permitted Use .   Tenant shall use the Premises solely for the Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion.

5.2           Prohibited Uses .   The uses prohibited under this Lease shall include, without limitation, use of the Premises or a portion thereof for (i) offices of any agency or bureau of the United States or any state or political subdivision thereof; (ii) offices or agencies of any foreign governmental or political subdivision thereof; (iii) offices of any health care professionals or service organization; (iv) schools or other training facilities which are not ancillary to corporate, executive or professional office use; (v) retail or restaurant uses; or (vi) communications firms such as radio and/or television stations.  Tenant shall not allow occupancy density of use of the Premises which is greater than the average density of the other tenants of the Building.  Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the

 

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Rules and Regulations set forth in Exhibit D , attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project) including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by applicable laws now or hereafter in effect.  Tenant shall not do or permit anything to be done in or about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Project, or injure or annoy them or use or allow the Premises to be used for any improper, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.

ARTICLE 6

SERVICES AND UTILITIES

6.1           Standard Tenant Services .   Landlord shall provide the following services on all days (unless otherwise stated below) during the Term.

6.1.1                Subject to limitations imposed by all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide adequate heating and air conditioning (“ HVAC ”) to maintain the temperature in the Premises between sixty-eight degrees (68º) Fahrenheit and seventy-five degrees (75º) Fahrenheit  from 6:30 A.M. to 6:00 P.M. Monday through Friday (except on Holidays) (collectively, the “ Building Hours ”).  “ Holidays ” include the date of observation of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord’s discretion, other locally or nationally recognized holidays consistent with similar class office buildings located in the San Francisco financial district.

6.1.2                Landlord shall provide adequate electrical wiring and facilities in the Building core for connection to Tenant’s power distribution, wiring, lighting fixtures and incidental use equipment adequate to service a connected electrical load of the incidental use equipment and lighting fixtures averaging three (3) watts per usable square foot of the Premises during the Building Hours, and the electricity so furnished for incidental use equipment and lighting fixtures will be at a nominal one hundred twenty (120) volts and no electrical circuit for the supply of such incidental use equipment will require a current capacity exceeding twenty (20) amperes.  Tenant will design Tenant’s electrical system serving any equipment producing nonlinear electrical loads to accommodate such nonlinear electrical loads, including, but not limited to, oversizing neutral conductors, derating transformers and/or providing power-line filters.  Engineering plans provided by Tenant shall include a calculation of Tenant’s fully connected electrical design load with and without demand factors and shall indicate the number of watts of unmetered and submetered loads.  Tenant shall be responsible for replacement of lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises.

6.1.3                Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes in the Common Areas.

 

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6.1.4                Landlord shall provide janitorial services to the Premises in accordance with the standards set forth on Exhibit G, except the date of observation of the Holidays, in and about the Premises and window washing services in a manner consistent with other comparable buildings in the vicinity of the Building.

6.1.5                Landlord shall provide nonexclusive, non-attended automatic passenger elevator service during the Building Hours, and shall have at least one elevator available at all other times.

6.1.6                Landlord shall provide nonexclusive freight elevator service subject to scheduling by Landlord and charges for such service as determined by Landlord from time-to-time.

Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems.

6.2           Overstandard Tenant Use .   Tenant shall not, without Landlord’s prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water required to be furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease.  If such consent is given, Landlord shall have the right to install supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord.  If Tenant uses water, electricity, heat or air conditioning in excess of that required to be furnished by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay to Landlord, upon billing, the cost of such excess consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, at the rates charged by the public utility company furnishing the same, including the cost of such additional metering devices.  Tenant’s use of electricity shall never exceed the capacity of the feeders to the Project or the risers or wiring installation, and subject to the terms of Section 29.32, below, Tenant shall not install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises, without the prior written consent of Landlord.  If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior notice, if any, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use in order to supply such utilities, and Landlord shall supply such utilities to Tenant at such hourly cost to Tenant (which shall be treated as Additional Rent) as Landlord shall from time to time establish.  Subject to change by Landlord upon reasonable notice to Tenant, as of the date of this Lease the hourly cost established by Landlord for use of fans only is $150 per hour, and for full heating, ventilating and air conditioning is $250 per hour, with a minimum of four (4) hours per request.

 

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6.3           Interruption of Use .   Except as provided in Section 6.4 below, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease.  Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, 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 of the services or utilities as set forth in this Article 6.  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, provided that the Premises are not thereby rendered untenantable.

6.4           Interruption of Services .  In the event of an interruption in, or failure or inability to provide electricity, water, or air conditioning (a “ Service Failure ), such Service Failure shall not, regardless of its duration, constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant or, except as provided herein, entitle Tenant to an abatement of rent or to terminate this Lease.

 

                                (a)           If any Service Failure not caused by Tenant or its Representatives prevents Tenant from reasonably using a material portion of the Premises and Tenant in fact ceases to use such portion of the Premises, Tenant shall be entitled to an abatement of Base Rent and Additional Rent with respect to the portion of the Premises that Tenant is prevented from using by reason of such Service Failure in the following circumstances:  (i) if Landlord fails to correct the Service Failure within two (2) business days following Landlord’s receipt of a notice from Tenant of the occurrence of the Service Failure, and such failure has persisted and continuously prevented Tenant from using a material portion of the Premises during that period, the abatement of rent shall commence on the day of the Service Failure and continue until Tenant is no longer so prevented from using such portion of the Premises.

 

                                (b)           If a Service Failure is caused by Tenant or its Representatives, Landlord shall nonetheless remedy the Service Failure, at the expense of Tenant, pursuant to Landlord’s maintenance and repair obligations under this Lease, but Tenant shall not be entitled to an abatement of rent or to terminate this Lease as a result of any such Service Failure.

 

                                (c)           Notwithstanding Tenant’s entitlement to rent abatement under the preceding provisions, Tenant shall continue to pay Tenant’s then current rent until such time as Landlord and Tenant agree on the amount of the rent abatement.  If Landlord and Tenant are unable to agree on the amount of such abatement within ten (10) Business Days of the date they commence negotiations

 

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 regarding the abatement, then either party may submit the matter to binding arbitration pursuant to Sections 1280 et seq . of the California Code of Civil Procedure.

 

                                (d)           Where the cause of a Service Failure is within the control of a public utility or other public or quasi-public entity outside Landlord’s control, notification to such utility or entity of the Service Failure and request to remedy the failure shall constitute “reasonable efforts” by Landlord to remedy the Service Failure.

                                (f)            Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other applicable existing or future law, ordinance or governmental regulation permitting the termination of this Lease due to such interruption, failure or inability.

ARTICLE 7

REPAIRS

Tenant shall, at Tenant’s own expense, pursuant to the terms of this Lease, including without limitation Article 8 hereof, keep the Premises, including all improvements, fixtures and furnishings therein, and the floor coverings of the Building on which the Premises are located, in good order, repair and condition at all times during the Term.  In addition, Tenant shall, at Tenant’s own expense, but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, pursuant to the terms of this Lease, including without limitation Article 8 hereof, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances, except for damage caused by ordinary wear and tear or beyond the reasonable control of Tenant;  provided however, that, at Landlord’s option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord its actual out-of-pocket cost thereof, including a percentage of the cost thereof, not to exceed ten percent (10%) (to be uniformly established for the Project) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same.  Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree.  Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.

ARTICLE 8

ADDITIONS AND ALTERATIONS

8.1           Landlord’s Consent to Alterations .   Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the “ Alterations ”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be

 

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requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration which adversely affects the structural portions or the systems or equipment of the Building or is visible from the exterior of the Building.  Notwithstanding any other provision contained herein, Tenant shall not be required to obtain Landlord’s prior consent for minor, non-structural Alterations that (a) do not affect either the electrical system outside of the Premises or any of the other Building systems, (b) are not visible from the exterior of the Premises, and (c) cost less than Fifty Thousand Dollars ($50,000), so long as Tenant gives Landlord notice of the proposed Alterations at least ten (10) days prior to commencing the Alterations and complies with all of the following provisions of this Article 8 (except that Tenant shall not be required to obtain Landlord’s approval of any plans or specifications therefor) .  The construction of the initial improvements to the Premises shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8.

8.2           Manner of Construction .

8.2.1                Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about the Premises, such reasonable, non-discriminatory requirements as Landlord in its sole discretion may deem desirable, including, but not limited to, the requirement that Tenant utilizes for such purposes only contractors, subcontractors, materials, mechanics and materialmen selected by Tenant and approved by Landlord, the requirement that upon Landlord’s request, Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Term, and the requirement that all Alterations conform in terms of quality and style to the Building’s standards established by Landlord.  Notwithstanding the foregoing, Landlord shall have the right to designate contractors and subcontractors for Alterations affecting either the structure of the Building, the electrical system outside the Premises, or other Building systems.  At the time Landlord consents to any Alterations, Landlord shall indicate which of Tenant’s Alterations Tenant must remove at Tenant’s sole cost and expense at the end of the Term.  Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the City of San Francisco, all in conformance with Landlord’s construction rules and regulations.

8.2.2                The “ Base Building ” shall include the structural portions of the Building, and the public restrooms and the systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located.  The term “ Base Building Elements ” shall mean the (a) structural portions of the Building, (b) exterior of the Building (including the curtain wall and curtain wall elements), (c) public restrooms, (d) exit staircases, (e) fire-rated exit corridors, (f) the elevators and other shafts and portions of the Building core, and (g) mechanical systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located.  If governmentally required changes to the Base Building Elements are triggered by the initial Tenant Improvements described in Exhibit B and such changes cause work on the Base Building Elements in any way, then Landlord shall make such changes to the Base Building Elements at Tenant’s expense.  Notwithstanding the foregoing, Landlord shall be responsible, at Landlord’s expense, for (x) any work required for the restrooms and common areas located on the eighteenth (18th), twenty-first (21st), twenty-

 

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second (22nd) and twenty-third (23rd) floors of the Building in their presently existing condition (prior to any Tenant Improvements) to comply with all applicable Laws, including the then applicable building codes for the City of San Francisco, in effect as of the date that construction commences on the initial Tenant Improvements on the eighteenth (18th), twenty-first (21st), twenty-second (22nd) and twenty-third (23rd) floors of the Building, and (y) correcting any building code deficiencies for tenant improvements existing in the Premises prior to commencing construction of Tenant Improvements, if such tenant improvements are retained in place without material change by Tenant.  If governmentally required changes to the Base Building Elements are triggered by (i) Tenant’s use of the Premises other than for ordinary office purposes, or (ii) construction of any Alterations by Tenant, then Landlord shall make such changes to the Base Building Elements at Tenant’s expense; provided, however, prior to commencing such changes to the Base Building Elements Landlord shall notify Tenant of such changes together with the estimated cost therefore.  Tenant shall then have the opportunity to change its use or Alterations to avoid or minimize Tenant’s obligation for costs of changes to the Base Building Elements.  Landlord, at Landlord’s sole cost and expense, shall make all other repairs, replacements, alterations, or improvements required to comply with applicable Laws to the extent such Laws relate to the Base Building and are not the responsibility of Tenant as aforesaid.

8.2.3                In performing the work of any Alterations, Tenant shall have the work performed in such manner so as not to obstruct access to the Project or any portion thereof, by any other tenant of the Project, and so as not to obstruct the business of Landlord or other tenants in the  Project.  Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord’s reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas.  In addition to Tenant’s obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of San Francisco in accordance with Section 3093 of the Civil Code of the State of California or any successor statute.

8.3           Payment for Improvements .   If payment is made directly to contractors, Tenant shall comply with Landlord’s requirements for final lien releases and waivers in connection with Tenant’s payment for work to contractors.  Whether or not Tenant orders any work directly from Landlord, Tenant shall pay to Landlord a percentage of the cost of such work sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord’s involvement with such work, provided that such percentage payable to Landlord shall not exceed three percent (3%) of the cost of such work.

8.4           Construction Insurance .   In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries “ Builder’s All Risk ” insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.  As a condition of Landlord’s approving Alterations costing more than One Hundred Fifty Thousand Dollars ($150,000) Landlord may request Tenant to demonstrate to Landlord’s reasonable satisfaction that Tenant has the financial

 

 

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life safety fixtures, and (c) a reflected ceiling plan showing the location of heating, ventilating and air conditioning registers, lighting and life safety systems.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of the work performed, materials furnished or obligations incurred by or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, without limitation, reasonable attorneys’ fees and costs) arising out of same or in connection therewith.  Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any such work on the Premises (or such additional time as may be necessary under applicable laws) to afford Landlord the opportunity of posting and recording appropriate notices of non-responsibility.  Tenant shall remove any such lien or encumbrance by bond, by endorsement to the title insurance policies of Landlord and any lender having a lien on the Building (if any such endorsement protects Landlord and Landlord’s lender to the same extent as does a bond) or otherwise, at Tenant’s expense, within fifteen (15) business days after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof.  The amount so paid shall be deemed Additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease.  Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord’s title to the Project or Premises to any liens or encumbrances whether claimed by operation of law or express or implied contract.  Any claim to a lien or encumbrance upon the Project or Premises arising in connection with any such work or respecting the Premises not performed by or at the request of Landlord shall be null and void, or at Landlord’s option shall attach only against Tenant’s interest in the Premises and shall in all respects be subordinate to Landlord’s title to the Project, Building and Premises.

ARTICLE 10

INSURANCE

10.1         Assumption of Risk, Indemnification and Waiver .

10.1.1              Damage to Tenant and Tenant’s Property .  Tenant hereby assumes all risk of damage to property in, upon or about the Premises from any cause whatsoever and agrees that Landlord, its partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, “ Landlord Parties ”) shall not be liable for, and are hereby released from any responsibility for, any damage to property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant.

10.1.2              Landlord’s Indemnification of Tenant .  Landlord shall indemnify, protect, defend and hold Tenant harmless from and against any and all loss, damage, claims, actions, cost, expense and liability (including without limitation court costs and reasonable attorneys’ fees) incurred in defending against the same asserted by any third party against Tenant

 

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for loss, injury or damage, to the extent such loss, injury or damage is caused by the willful misconduct or negligent acts or omissions of Landlord or its authorized representatives.

10.1.3              Tenant’s Indemnification of Landlord .  Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from and against any and all loss, damage, claims, actions, cost, expense and liability (including without limitation court costs and reasonable attorneys’ fees) incurred in connection with or arising from any cause in, on or about the Premises, any violation of any of the requirements, ordinances, statutes, regulations or other laws, including, without limitation, any environmental laws, any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, invitees, guests or licensees of Tenant or any such person, in, on or about the Project, either prior to, during, or after the expiration of the Term.  Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant’s occupancy of the Premises, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as appraisers’, accountants’ and attorneys’ fees.  Further, Tenant’s agreement to indemnify Landlord pursuant to this Section 10.1 is not intended and shall not relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease, to the extent such policies cover the matters subject to Tenant’s indemnification obligations; nor shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease.  The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such expiration or termination.

10.2         Tenant’s Compliance With Landlord’s Fire and Casualty Insurance .   Tenant shall, at Tenant’s expense, comply with all insurance company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.  Tenant shall not be responsible to pay for any increase in such premiums arising out of the Permitted Use.

10.3         Tenant’s Insurance .   Tenant shall maintain the following coverages in the following amounts.

10.3.1              Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant’s operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements) including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than:

 

Bodily Injury and Property Damage Liability		$3,000,000 each occurrence $3,000,000 annual aggregate
Personal Injury Liability		$3,000,000 each occurrence $3,000,000 annual aggregate 0% Insured’s participation

 

 

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10.3.2              Physical Damage Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, and (ii) all other improvements, alterations and additions to the Premises after the Commencement Date.  Such insurance shall be written on an “all risks” of physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing business interruption coverage for a period of one year.

10.3.3              Worker’s Compensation and Employer’s Liability or other similar insurance pursuant to all applicable state and local statutes and regulations.

10.4         Form of Policies .   The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease.  Such insurance shall (i) name Landlord, Landlord’s lender, and any other party the Landlord so specifies, as an additional insured, including Landlord’s managing agent, if any; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-:VIII in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said insurance shall not be canceled or coverage diminished unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee of Landlord.  Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the expiration dates thereof.  In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate, Landlord may, at its option, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within thirty (30) days after delivery to Tenant of bills therefor.  Any insurance required pursuant to this Lease may be provided by means of a so-called “blanket” policy, so long as the Building or Premises are specifically covered (by rider, endorsement or otherwise), the limits of the policy are applicable on a “per location” basis to the Building or Premises, and the policy otherwise complies with the provisions of this Lease.

10.5         Landlord’s Insurance .  During the Term, to the extent such coverages are available at a commercially reasonable cost, Landlord shall maintain in effect insurance on the Building with responsible insurers, on an “all risk” or “special form” basis, insuring the Building and the Tenant Improvements in an amount equal to at 100% of the replacement cost thereof

 

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(except for a commercially reasonable deductible), excluding land, foundations, footings and underground installations.  Landlord may, but shall not be obligated to, carry insurance against additional perils and/or in greater amounts.

10.6         Subrogation .   Landlord and Tenant intend that their respective property loss risks shall be borne by reasonable insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder, or which is actually carried if broader in coverage.  The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right to the insured to recover thereunder.  The parties agree that their respective insurance policies are now, or shall be, endorsed such that the waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor.

10.7         Additional Insurance Obligations .   Tenant shall carry and maintain during the entire Term, at Tenant’s sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant