OFFICE LEASE

Exhibit 10.11

501 SECOND STREET

OFFICE LEASE

BY AND BETWEEN

501 SECOND STREET ASSOCIATES, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

AS LANDLORD

AND

NBT TECHNOLOGY, INC.,

A DELAWARE CORPORATION

AS TENANT

PREMISES:

501 SECOND STREET, SUITE 410

SAN FRANCISCO, CALIFORNIA

OFFICE LEASE

SUMMARY OF LEASE TERMS

501 Second Street

San Francisco, California

 

 

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The provisions of the Lease identified above in brackets are those provisions where references to particular Lease Terms appear. Each such reference shall incorporate the applicable Lease

 

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Terms. In the event of any conflict between the Summary of Lease Terms and the Lease, the latter shall control.

 

 

 

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TABLE OF CONTENTS

 

 

 

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501 SECOND STREET

SAN FRANCISCO, CALIFORNIA

OFFICE LEASE

THIS LEASE is dated for reference purposes only as of January 23, 2003, between 501 SECOND STREET ASSOCIATES, LLC, a Delaware limited liability company (“Landlord”), and NBT TECHNOLOGY, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises described in Paragraph 1(j) below, for the term and subject to the terms, covenants, agreements and conditions hereinafter set forth.

1. DEFINITIONS. In addition to terms that are defined elsewhere in this Lease, unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified:

(a) The term “Applicable Laws” shall mean all laws, statutes, ordinances, orders, judgments, decrees, regulations, permits, and requirements of all courts and governmental authorities now or hereafter in effect and applicable to the Real Property, including, without limitation, Title III of the Americans With Disabilities Act of 1990 and all regulations and guidelines promulgated thereunder (the “ADA”).

(b) The term “Base Expense Year” shall mean the calendar year set forth in Paragraph G of the Summary of Lease Terms.

(c) The term “Base Tax Year” shall mean the calendar year set forth in Paragraph H of the Summary of Lease Terms.

(d) The term “Building” shall mean the office building located at 501 Second Street in San Francisco, California.

(e) The term “Building Standard Improvements” shall mean those improvements installed in the Premises as of the Commencement Date, including Landlord’s Work (as defined in Paragraph 2(d)).

(f) The term “Common Areas” shall mean all areas of the Building made available by Landlord from time to time for the general common use or benefit of the tenants of the Building, and their employees and invitees, or the public, including, without limitation, common entrances, lobbies, restrooms, elevators, stairways and access ways, loading docks, ramps, drives and platforms and any passageways and service ways thereto, and the common pipes, conduits, wires and appurtenant equipment serving the Premises. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Common Areas at any time, and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rental under this Lease, from time to time, close-off or restrict access to the Common Areas for purposes of permitting or facilitating any construction, alteration, repairs or improvements, provided that Tenant’s access to the Building, or any other express right of Tenant under this Lease, shall not be materially impaired.

 

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(g) The term “Land” shall mean the parcel(s) of land on which the Building is located.

(h) The term “Lease Year” means each consecutive twelve (12) month period during the Lease Term, commencing on the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Commencement Date through the final day of the calendar month during which the first anniversary of the Commencement Date occurs, and subsequent Lease Years shall be each succeeding twelve (12) month period during the Lease Term following the first Lease Year.

(i) (i) The term “Operating Expenses” shall mean the total costs and expenses incurred by Landlord in connection with the ownership, management, operation, maintenance and repair of the Real Property (as defined in Paragraph 1(k) hereof) and Common Areas (as defined in Paragraph 1(f) hereof), including, without limitation, the following costs: (1) salaries, wages, bonuses and other compensation (including hospitalization, medical, surgical, retirement plan, pension plan, union dues, parking privileges, life insurance, including group life insurance, welfare and other fringe benefits, and vacation, holidays and other paid absence benefits) relating to employees of Landlord or its agents engaged in the management, operation, repair, or maintenance of the Real Property and costs of training such employees; (2) payroll, social security, workers’ compensation, unemployment and similar taxes with respect to such employees of Landlord or its agents, and the cost of providing disability or other benefits imposed by law or otherwise, with respect to such employees; (3) uniforms (including the cleaning, replacement and pressing thereof) provided to such employees; (4) premiums and other charges incurred by Landlord with respect to any Casualty (as defined in Paragraph 19(a)), boiler and machinery, theft, rent interruption and liability insurance, and any other insurance (including earthquake insurance) as may be deemed necessary or advisable in the reasonable judgment of Landlord, or as may be required by the “Holder” of any “Superior Interest” (each as defined in Paragraph 15 hereof), all in such amounts as Landlord determines in good faith to be appropriate, and, after the Base Expense Year, costs of repairing an insured Casualty to the extent of the deductible amount under the applicable insurance policy; (5) water charges and sewer rents or fees; (6) license, permit and inspection fees and charges, the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with any governmentally mandated transportation system management program or similar program, including the costs of operating any shuttle bus or similar program; (7) sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Real Property and Building Systems (as defined in Paragraph 8(a) below) and equipment; (8) telephone, telegraph, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance, or repair of the Real Property; (9) management fees and expenses (including fees and expenses for accounting, financial management, data processing and information services) and costs of tenant service programs; (10) repairs to and physical maintenance of the Real Property, including Building Systems and appurtenances thereto, and repair and replacement of worn-out equipment, facilities and installations; (11) janitorial, window cleaning, security services, extermination, water treatment, rubbish removal, plumbing and other services, and inspection or service contracts for elevator, electrical, mechanical, sanitary, heating, ventilation and air conditioning, and other building equipment and systems; (12) supplies, tools, materials and equipment used in connection with the operation, maintenance or repair of the Real Property; (13) accounting, legal and other professional, consulting or service fees and expenses; (14) painting the exterior or the public or Common Areas and the cost of maintaining and repairing or replacing the sidewalks, landscaping and other Common Areas; (15) all costs

 

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and expenses for electricity, chilled water, air conditioning, water for heating, gas, fuel, steam, heat, lights, sewer service, communications service, power and other energy related utilities required in connection with the operation, maintenance and repair of the Real Property; (16) all costs associated with the maintenance, repair, operation, removal or replacement of the “INC” (as defined in Paragraph 23(a)(iii) below) of the Building, including without limitation, costs for acquiring and installing INC and Building Riser spaces (as defined in Paragraph 23(a)(ii) below) to accommodate new INC and spare INC, any associated computerized system and software for maintaining records of INC connections, costs for actual work required to provide cable pair assignments and routine maintenance of the INC, cost of insurance premiums and taxes related to the INC, and the fees of any consulting engineers and other experts; (17) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord exclusively for use in the Building after the Base Expense Year required under any Applicable Laws (other than the cost of capital improvements or capital assets to correct noncompliance with any Applicable Laws if, as of the Commencement Date, Landlord has received notice of such noncompliance from any governmental entity), such cost or allocable portion to be amortized over the useful life thereof as reasonably determined by Landlord, together with interest on the unamortized balance at a rate per annum equal to the Reference Rate (as defined in Paragraph 3(c) hereof) charged at the time such capital improvements or capital assets are constructed or acquired or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such capital improvements-or capital assets, but in either case not more than the maximum rate permitted by law at the time such capital improvements or capital assets are constructed or acquired (the “Amortization Rate”); (18) the cost of any capital improvements made by Landlord to the Real Property, or capital assets acquired by Landlord after the Base Expense Year for the protection of the health and safety of the occupants of the Real Property, for the replacement of Building Systems or components thereof, or that are intended to reduce other Operating Expenses, such cost or allocable portion thereof to be amortized over the useful life thereof as reasonably determined by Landlord (except that Landlord may include as an Operating Expense in any calendar year a portion of the cost of such a capital improvement or capital asset not in excess of Landlord’s estimate of the amount of the reduction of other Operating Expenses in such year resulting from such capital improvement or capital asset), together with interest on the unamortized balance at the Amortization Rate; (19) the cost of furniture, window coverings, carpeting, decorations, landscaping and other customary and ordinary items of personal property provided by Landlord for use in the Common Areas or in the Building office (to the extent that such Building office is dedicated to the operation and management of the Complex); (20) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord exclusively for use in the Building after the Base Expense Year to the extent that the cost of any such improvement or asset is less than twenty thousand dollars ($20,000); (21) any such expenses and costs resulting from substitution of work, labor, material or services in lieu of any of the itemizations hereunder, or for any such additional work, labor, services or material resulting from compliance with any Applicable Laws affecting the Real Property or any part thereof (other than such expenses and costs to correct noncompliance with any Applicable Laws if, as of the Commencement Date, Landlord has received notice of such noncompliance from any governmental entity); (22) property management office rent or rental value; (23) payments under any easement, license, operating agreement, declaration, restrictive covenant or instrument in effect on the Commencement Date pertaining to the sharing of costs by the Building; and (24) the cost of operation, repair and maintenance of the parking facilities appurtenant to or servicing the Building (the “Parking Facilities”), including resurfacing, restriping and cleaning.

 

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(ii) To the extent costs and expenses described above relate to both the Real Property and other property or relate to the Common Areas, such costs and expenses shall, in determining the amount of Operating Expenses, be equitably allocated by Landlord in accordance with sound property management practices.

(iii) Operating Expenses shall not include the following: (1) depreciation on the Building; (2) debt service (except relating to capital expenditures expressly included in Operating Expenses pursuant to this Paragraph 1(i)); (3) interest (except as expressly provided in this Paragraph 1(i)); (4) Real Property Taxes; (5) attorneys’ fees and expenses incurred in connection with lease negotiations with prospective Building tenants or the enforcement of leases; (6) the cost of any improvements or equipment which would be properly classified as capital expenditures (except for any capital expenditures expressly included in Operating Expenses pursuant to this Paragraph 1(i)); (7) the cost of decorating, improving for tenant occupancy, painting or redecorating portions of the Building to be demised to tenants; (8) advertising and promotional expenditures to the extent the same are materially in excess of those charged as operating expenses by the owners of comparable buildings; (9) real estate brokers’ or other leasing commissions; (10) salaries and other compensation of executive officers of Landlord or the managing agent of the Building senior to the Building manager; (11) the cost of any non-standard service provided to any other tenant of the Building which is not also available to Tenant, or is available only upon Tenant’s payment of a separate charge; (12) the cost of repairs or other work occasioned by any Casualty, (provided that costs of repairing an insured Casualty to the extent of the deductible amount under the applicable insurance policy shall constitute an Operating Expense); (13) overhead and profit increment paid to subsidiaries or affiliates of Landlord for goods and/or services in or to the Building, to the extent that the cost of such goods and/or services materially exceeds the cost of comparable goods and/or services were they rendered by qualified unaffiliated parties on a competitive basis, taking into account the scope and quality of the goods and/or services in question; (14) specific costs incurred for the account of, separately billed to, and payable by specific tenants (other than through the payment of a proportionate share of Operating Expenses); provided however, that if any tenant in the Building contracts directly for services for which Tenant pays Landlord pursuant to Paragraph 4 below, the total costs of such services for the Building shall be “grossed up” to reflect what those costs would have been had such tenants not directly contracted for such services; (15) costs of electrical power for which any tenant directly contracts with the local public service company or for which any tenant is separately metered or submetered and pays Landlord directly; provided, however, that if any tenant in the Building contracts directly for electrical power service or is separately metered or submetered during any portion of the relevant period, the total electric power costs for the Building shall be “grossed up” to reflect what those costs would have been had such tenants not directly contracted for such service or been separately metered or submetered; (16) Landlord’s charitable or political contributions to the extent the same are materially in excess of those charged as operating expenses by owners of comparable buildings; (17) the cost of rental for items (except when needed in connection with normal repairs and maintenance or keeping permanent systems in operation while repairs are being made) which if purchased, rather than rented, would constitute a capital improvement which is specifically excluded from Operating Expenses in this Paragraph 1(i) (excluding, however, equipment not permanently affixed to the Building or the Land which is used in providing janitorial or similar services); (18) any capital expenditures other than as expressly permitted under Paragraph 1(i)(i) above; or (19) any costs expressly excluded from Operating Expenses elsewhere in this Lease. Further, in the event that Landlord elects to carry insurance on the Building subsequent to the Base Expense Year (and include the cost thereof within Operating Expenses), the Operating Expenses for the Base Expense Year shall be increased to reflect the additional Operating Expenses which Landlord reasonably estimates

 

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would have been incurred during the Base Expense Year had Landlord carried such insurance for the Building during the Base Expense Year. In addition, Operating Expenses for the Base Expense Year shall not include market-wide labor-rate increases due to extraordinary circumstances, such as boycotts and strikes, nor utility rate increases due to extraordinary circumstances, including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages.

(j) The term “Premises” shall mean the space in the Building designated by cross-hatching on the floor plan(s) attached hereto as Exhibit A (exclusive of the areas, if any, shown by shading) and situated on the floor(s) of the Building specified in Paragraph D of the Summary of Lease Terms, together with the appurtenant right to the use, in common with others, of the Common Areas. Landlord and Tenant agree that the Premises contain the number of square feet of rentable area specified in Paragraph E of the Summary of Lease Terms. All the outside walls and windows of the Premises and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of operation, maintenance, improvements and repairs, are reserved to Landlord, but Landlord’s use thereof shall not unreasonably interfere with Tenant’s use and enjoyment of the Premises.

(k) The term “Real Property” shall mean, collectively, the Land, the Building, and the utilities, facilities, drives, walkways, parking facilities and other amenities appurtenant to or servicing the Building.

(l) The term “Real Property Taxes” shall mean all taxes, assessments (whether general or special), excises, transit charges, housing fund assessments or other housing charges, levies or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind, which are assessed, levied, charged or imposed (i) on the Real Property or any part thereof, (ii) on Landlord with respect to the Real Property, (iii) on the act of entering into this Lease or any other lease of space in the Real Property, (iv) on the use or occupancy of the Real Property or any part thereof, (v) with respect to services or utilities consumed in the use, occupancy or operation of the Real Property, (vi) on or attributable to personal property used in connection with the Building, including the Common Areas, (vii) related to any transportation plan, fund or system affecting the Building, and (viii) relating to or on or measured by the rent payable under this Lease or in connection with the business of renting space in the Real Property, including, without limitation, any gross income tax, gross receipts tax or excise tax levied with respect to the receipt of such rent, by the United States of America, the State of California, the City and County of San Francisco, any political subdivision, public corporation, district or other political or public entity or public authority, and shall also include any other tax, fee or other excise, however described, which may be levied or assessed in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other Real Property Taxes. Real Property Taxes shall include reasonable attorneys’ fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Property Taxes.

Real Property Taxes shall not include income, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other charge which would otherwise constitute a part of Real Property Taxes.

(m) The term “Rental” shall include the Basic Monthly Rental set forth in Paragraph J of the Summary of Lease Terms, all additional rent, and any other costs or charges payable by Tenant to Landlord hereunder.

 

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(n) [Intentionally omitted.]

(o) The term “Tenant’s Percentage Share” shall mean the percentage figure specified in Paragraph F of the Summary of Lease Terms (subject to Landlord’s right, from time to time, to adjust such percentage to reflect accurate measurements of the Premises or other portions of the Building and/or to reflect changes in Landlord’s standard common area load factor).

2. TERM.

(a) The term of this Lease (the “Lease Term”) shall commence and, unless ended sooner as herein provided, shall expire on the dates respectively specified in Paragraph I of the Summary of Lease Terms (respectively referred to hereinafter as the “Commencement Date” and the “Expiration Date”). Landlord and Tenant hereby agree to confirm the actual Commencement and Expiration Dates within ten (10) days following the commencement of the Lease Term by executing and delivering to each other counterparts of a Commencement Date Memorandum in the form of Exhibit D attached hereto, but the Lease Term shall commence on the Commencement Date and end on the Expiration Date whether or not such Memorandum is executed. This Lease shall be a binding contractual obligation effective upon execution and delivery hereof by Landlord and Tenant, notwithstanding the later commencement of the Lease Term.

(b) Landlord shall deliver possession of the Premises to Tenant on the Commencement Date; provided, however, that if Landlord does not deliver possession of all or any portion of the Premises to Tenant on the Commencement Date specified in Paragraph I of the Lease Summary, for any reason beyond Landlord’s reasonable control, this Lease shall not be void or voidable and Landlord shall not be deemed in default or otherwise liable to Tenant for any claims, damages, or liabilities in connection therewith or by reason thereof, but in such event the Commencement Date shall be the date Landlord actually delivers possession of the Premises to Tenant, and the Expiration Date shall be extended one (1) day for each day beyond February 14, 2003 that Landlord is delayed in delivering the Premises to Tenant, and Tenant shall accept such delivery of the Premises, which acceptance shall constitute agreement by Tenant that the Premises are in the condition required by this Lease.

(c) Notwithstanding the foregoing, if the Commencement Date does not occur by April 14, 2003 (the “Premises Delivery Deadline”), Tenant, as its sole remedy, shall have the right to cancel this Lease by giving written notice of such cancellation to Landlord at any time after the Premises Delivery Deadline and prior to the date Landlord delivers possession of the Premises to Tenant, in which case this Lease shall be cancelled effective thirty (30) days after Landlord’s receipt of Tenant’s cancellation notice, unless Landlord delivers possession of the Premises to Tenant within said thirty (30) day period. The Premises Delivery Deadline shall be extended by the number of days that Landlord is delayed in delivering possession of the Premises due to any act, neglect, failure or omission of Tenant or any Tenant Parties (as defined in Paragraph 9(b) below) or Force Majeure Delay (as defined below); provided, however, that if due to Force Majeure Delay (but not delay caused by Tenant or any Tenant Parties) Landlord does not deliver possession of the Premises to Tenant prior to May 14, 2003 (the “Outside Delivery Deadline”), Tenant, as its sole remedy, shall have the right to cancel this Lease by giving written notice of such cancellation to Landlord at any time after the Outside Delivery Deadline and prior to the date Landlord delivers possession of the Premises to Tenant. For purposes of this Lease, the term “Force Majeure Delay” shall mean any delay attributable to one or more of the following causes: strike, lockout or other labor disturbance,

 

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civil disturbance, fire, flood, lightning, earthquake, or other act of God or the public enemy, war, riot, sabotage, blockade, embargo, accident, interruption of utilities or services, inability to obtain necessary materials, supplies or labor, action or inaction on the part of any government or regulatory body, or any other similar cause which is beyond the reasonable control of Landlord. If Tenant cancels this Lease pursuant to this Paragraph 2(c), Landlord shall refund the amount equal to the Basic Monthly Rental and the Deposit (as defined in Paragraph 3(d)) paid pursuant to Paragraph 3(d), and neither party shall have any obligations to the other under this Lease, except for obligations arising before such cancellation and obligations that expressly survive the expiration or earlier termination of this Lease.

(d) Tenant agrees to accept possession of the Premises in their “as is” condition on the date of this Lease, without representation or warranty by Landlord, express or implied, and with no obligation of Landlord to repaint, remodel, repair, improve or alter the Premises, or to perform any construction, remodeling or other work of improvement upon the Premises, or contribute to the cost of any of the foregoing, except that prior to delivery of the Premises to Tenant, Landlord shall re-paint and re-carpet the Premises using Building standard materials in colors to be selected by Tenant and cause all systems and equipment installed within or serving the Premises to be fully functional and in good order, condition and repair (“Landlord’s Work”). Landlord agrees to diligently endeavor to complete Landlord’s Work (without the payment of overtime labor costs or other additional expense) prior to February 14, 2003. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises or the Building or with respect to the suitability of any of the foregoing for the conduct of Tenant’s business, except as expressly set forth in this Lease.

(e) Tenant agrees that in the event Tenant takes possession or enters into the Premises prior to the Commencement Date for any reason, including for the purpose of preparing the Premises for Tenant’s occupancy, such possession or entry shall be pursuant to all of the terms, covenants and conditions of this Lease, including, without limitation, Tenant’s indemnity obligations contained in Paragraph 13 below, but excluding the obligation to pay Basic Monthly Rental or Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes, as provided in Paragraph 4 below. Without limiting the foregoing, Tenant shall pay the cost of all utilities and other services provided to the Premises prior to the Commencement Date which are required by reason of Tenant’s early possession or entry.

3. RENTAL; SECURITY DEPOSIT.

(a) Except as otherwise provided in Paragraph 3(d) below, beginning on the Commencement Date, Tenant agrees to pay to Landlord as “Basic Monthly Rental” for the Premises the sums specified in Paragraph J of the Summary of Lease Terms.

(b) Basic Monthly Rental shall be paid to Landlord, in advance, on or before the first day of each and every successive calendar month during the Lease Term. In the event the Lease Term commences on a day other than the first day of a calendar month, or ends on a day other than the last day of a calendar month, then the Basic Monthly Rental for the first and/or last fractional months of the Lease Term shall be appropriately prorated. All such prorations shall be made on the basis of a 360-day year consisting of twelve 30-day months.

(c) Rental shall be paid to Landlord without notice, demand, deduction or offset in lawful money of the United States in immediately available funds or by good check as described below at Landlord’s address for payments specified in Paragraph B of the Summary

 

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of Lease Terms, or to such other person or at such other place as Landlord from time to time may designate in writing (provided that, so long as a deed of trust in favor of PB Capital Corporation encumbers the Real Property, any change of the address for payment shall require the written consent of PB Capital Corporation). Payments made by check must be drawn either on a California financial institution or on a financial institution that is a member of the federal reserve system. All amounts of Rental, if not paid when due, shall bear interest from the due date until paid at an annual rate of interest (the “Interest Rate”) equal to the greater of (i) eighteen percent (18%) per year, or (ii) a rate equal to the sum of five (5) percentage points over the publicly announced reference rate (the “Reference Rate”) charged on such due date by the San Francisco Main Office of Bank of America NT & SA (or any successor bank thereto) (or if there is no such publicly announced rate, the rate quoted by such bank in pricing ninety (90) day commercial loans to substantial commercial borrowers); provided, however, Tenant’s total liability for interest payments under this Lease shall not exceed the limits, if any, imposed on such payments by the usury laws of the State of California. In addition, Tenant acknowledges that late payment by Tenant to Landlord of Rental will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and/or note secured by an encumbrance covering the Premises. Therefore, if any installment of Rental due from Tenant is not received within three (3) days of when due, Tenant shall pay to Landlord an additional sum of ten percent (10%) of the overdue Rental as a late charge; provided that, if Rental is not paid when due (3) times during the Lease Term, then thereafter Tenant shall not be entitled to such three (3) day grace period, and such late charge shall be assessed on any Rental not paid by 5:00 p.m. on the date due. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment of Rental by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord. Notwithstanding the provisions of this Paragraph 3(c) to the contrary, no late charge shall be assessed the first time during any Lease Year that Rental is not paid within five (5) days after the date on which it is due and payable, so long as Tenant shall pay any such delinquent amount within three (3) days after notice of such delinquency from Landlord.

(d) Upon signing this Lease, Tenant shall pay to Landlord (i) an amount equal to the Basic Monthly Rental for the first month of the Lease Term, which amount Landlord shall apply to the Basic Monthly Rental for such first month, and (ii) the amount of the security deposit specified in Paragraph L of the Summary of Lease Terms (the “Deposit”). The Deposit shall be held by Landlord as security for the faithful performance by Tenant of all of the provisions of this Lease to be performed or observed by Tenant. If Tenant fails to pay any Rental, or otherwise defaults with respect to any provision of this Lease, Landlord may (but shall not be obligated to), and without prejudice to any other remedy available to Landlord, use, apply or retain all or any portion of the Deposit for the payment of any Rental in default or for the payment of any other sum to which Landlord may become obligated by reason of Tenant’s default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby, including, without limitation, prospective damages and damages recoverable pursuant to California Civil Code Section 1951.2. Tenant waives the provisions of California Civil Code Section 1950.7, and all other provisions of law now in force or that become in force after the date of execution of this Lease, that provide that Landlord may claim from the Deposit only those sums reasonably necessary to remedy defaults in the payment of Rental, to repair damage caused by Tenant, or to clean the Premises. If Landlord uses or applies all or any portion of the Deposit as provided above, Tenant shall within ten (10) days after demand

 

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therefor deposit cash with Landlord in an amount sufficient to restore the Deposit to the full amount thereof, and Tenant’s failure to do so shall, at Landlord’s option, be an Event of Default (as defined in Paragraph 18(a)) under this Lease. Landlord shall not be required to keep the Deposit separate from its general accounts. If Tenant performs all of Tenant’s obligations hereunder, the Deposit, or so much thereof as has not theretofore been applied by Landlord, shall be returned, without payment of interest or other increment for its use, to Tenant (or, at Landlord’s option, to the last assignee, if any, of Tenant’s interest hereunder) at the expiration of the Lease Term and after Tenant has vacated the Premises; provided, however, that if this Lease is terminated by Landlord pursuant to Paragraph 18(b) below, or by Tenant in a bankruptcy proceeding pursuant to 11 U.S.C. §365, Landlord may retain the Deposit and apply the same against its damages recoverable pursuant to pursuant to California Civil Code Section 1951.2. Landlord’s return of the Deposit or any part thereof shall not be construed as an admission that Tenant has performed all of its obligations under this Lease. No trust relationship is created herein between Landlord and Tenant with respect to the Deposit.

4. TENANT’S SHARE OF OPERATING EXPENSES AND REAL PROPERTY TAXES.

(a) In addition to the Basic Monthly Rental payable during the Lease Term, Tenant shall pay to Landlord, as additional rent, Tenant’s Percentage Share of (i) the amount, if any, by which Operating Expenses allocable to any calendar year subsequent to the Base Expenses Year exceed the amount of Operating Expenses allocable to the Base Expense Year, and (ii) the amount, if any, by which Real Property Taxes allocable to any calendar year subsequent to the Base Tax Year exceed the amount of Real Property Taxes allocable to the Base Tax Year. Notwithstanding the foregoing, if the Building is less than 100% occupied in any year during the Lease Term, Operating Expenses and Real Property Taxes for such year shall be adjusted, for purposes of the foregoing calculation, to the amount which they would have been if the Building had been 100% occupied. If it shall not be lawful for Tenant to reimburse Landlord for any increase in Real Property Taxes as defined herein, the Basic Monthly Rental payable to Landlord prior to the imposition of such increases in Real Property Taxes shall be increased to net Landlord the same net Basic Monthly Rental after imposition of such increases in Real Property Taxes as would have been received by Landlord prior to the imposition of such increases in Real Property Taxes.

(b) During December of each calendar year or as soon thereafter as practicable, Landlord shall give Tenant notice of its estimate of the amounts payable pursuant to Paragraph 4(a) above for the succeeding calendar year. On or before the first day of each month during the succeeding calendar year, Tenant shall pay to Landlord, as additional rent, one twelfth (1/12) of such estimated amounts. If Landlord fails to deliver such notice to Tenant in December, Tenant shall continue to pay Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes on the basis of the prior year’s estimate until the first day of the next calendar month after such notice is given, provided that on such date Tenant shall pay to Landlord the amount of such estimated adjustment payable to Landlord for prior months during the year in question, less any portion thereof previously paid by Tenant. If at any time it appears to Landlord that the amounts payable under this Paragraph 4(b) for the current calendar year will vary from Landlord’s estimate, Landlord may, by giving written notice to Tenant, revise Landlord’s estimate for such year, and subsequent payments by Tenant for such year shall be based on estimate. Landlord’s failure or delay in providing Tenant with Landlord’s estimate of Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes or Landlord’s “annual statement” (as defined in subparagraph 4(c)(i) below) for any calendar year shall not constitute a default by Landlord hereunder, or a waiver by Landlord

 

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of Tenant’s obligation to pay Tenant’s Percentage Share of increases in Operating Expenses or Real Property Taxes for such calendar year or of Landlord’s right to send to Tenant such an estimate or annual statement, as the case may be.

(c) (i) Within one hundred twenty (120) days after the close of each calendar year or as soon after such one hundred twenty (120) day period as practicable, Landlord shall deliver to Tenant a statement of the amounts payable under Paragraph 4(a) above for such calendar year (an “annual statement”). Landlord shall not be permitted to revise an annual statement for any calendar year more than twelve (12) months after the end of such calendar year unless Landlord first receives supplemental tax bills or statements from third parties relating to Operating Expenses or Real Property Taxes allocable to such calendar year after the expiration of said twelve (12) month period. Subject to subparagraph 4(c)(ii), such annual statement or revised annual statement shall be final and binding upon Tenant. If on the basis of such annual statement or revised annual statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of the statement. If on the basis of such annual statement or revised annual statement Tenant has paid to Landlord an amount in excess of the amounts payable under Paragraph 4(a) above for the preceding calendar year and Tenant is not in default in the performance of any of its covenants under this Lease, then Landlord, at its option, shall either promptly refund such excess to Tenant or credit the amount thereof to the Basic Monthly Rental or additional rent next becoming due from Tenant until such credit has been exhausted.

(ii) Tenant shall have the right, during the ninety (90) day period following delivery of an annual statement, and during the thirty (30) day period following delivery of a revised annual statement, at Tenant’s sole cost, to review in Landlord’s offices Landlord’s records of Operating Expenses and Real Property Taxes for the subject calendar year; provided, however, that during the thirty (30) day period following delivery of a revised annual statement, Tenant shall have the right to review Landlord’s records only to the extent directly relevant to the modifications contained in the revised annual statement. Such review shall be carried out only by regular employees of Tenant or by a regional accounting firm and not by any other third party. No person conducting such an audit shall be compensated on a “contingency” or other incentive basis. Tenant shall keep any information gained from its inspection of Landlord’s books and records confidential and shall not disclose any such information to any other party, except as required by Applicable Laws or to enforce Tenant’s rights under this Lease or in connection with any Transfer (as defined in Paragraph 12(a)). If requested by Landlord, Tenant shall require its employees, agents or contractors inspecting Landlord’s books and records to sign a confidentiality agreement prior to making Landlord’s books and records available to them. If, as of the ninetieth (90th) day after delivery to Tenant of an annual statement or the thirtieth (30th) day after delivery to Tenant of a revised annual statement, as the case may be, Tenant shall not have delivered to Landlord an objection statement (as defined below), then such annual statement or revised annual statement shall be final and binding upon Landlord and Tenant, and Tenant shall have no further right to object to such statement. If within the ninety (90) day period or the thirty (30) day period, Tenant delivers to Landlord a written statement specifying objections to such annual statement or revised annual statement (an “objection statement”), then Tenant and Landlord shall meet to attempt to resolve such objection within thirty (30) days after delivery of the objection statement. Notwithstanding that any such dispute remains unresolved, Tenant shall be obligated to pay Landlord all amounts payable in accordance with this Paragraph 4 (including any disputed amount). If such dispute results in an agreement that Tenant is entitled to a refund, Landlord shall, at its option,

 

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either pay such refund or credit the amount thereof to the Basic Monthly Rental and additional rent next becoming due from Tenant.

(d) If this Lease terminates on a day other than the last day of a calendar year, the amounts payable by Tenant under Paragraph 4(a) above with respect to the calendar year in which such termination occurs shall be prorated on the basis which the number of days from the commencement of such calendar year, to and including such termination date, bears to 360. The termination of this Lease shall not affect the obligations of Landlord and Tenant pursuant to Paragraph 4(c) above to be performed after such termination.

(e) It is the intention of Landlord and Tenant that (i) the Basic Monthly Rental paid to Landlord throughout the Lease Term shall be absolutely net of all increases, respectively, in Real Property Taxes over Real Property Taxes for the Base Tax Year and of Operating Expenses over Operating Expenses for the Base Expense Year, (ii) Landlord shall make no profit from the collection of increases in the Operating Expenses over those in the Base Expense Year or Real Property Taxes over those in the Base Tax Year, and (iii) the foregoing provisions of this Paragraph 4 are intended to so provide.

5. OTHER TAXES PAYABLE BY TENANT. Tenant shall reimburse Landlord upon demand for any and all taxes, but not including Real Property Taxes, payable by Landlord (other than net income taxes) whether or not now customary or within the contemplation of the parties hereto:

(a) imposed upon, measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, other than Building Standard Improvements made by Landlord, regardless of whether title to such improvements shall be in Tenant or Landlord;

(b) imposed upon or measured by the Basic Monthly Rental payable hereunder, including, without limitation, any gross income tax or excise tax levied by the City and County of San Francisco, the State of California, the federal government or any other governmental body with respect to the receipt of such rental (provided, however, that any tax on Basic Monthly Rental or additional rent which is in effect during the Base Tax Year shall be included in Real Property Taxes);

(c) imposed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or

(d) imposed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

In the event that it shall not be lawful for Tenant to so reimburse Landlord, the Basic Monthly Rental payable to Landlord under this Lease shall be revised to net Landlord the same income after imposition of any such tax upon Landlord as would have been received by Landlord hereunder prior to the imposition of any such tax.

6. USE. Tenant agrees to use the Premises for general business office, administration and related business activities and agrees not to use nor permit the use of the Premises or any part thereof for any other purpose. Landlord represents and warrants to

 

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Tenant that, on the Commencement Date, the Building may be lawfully used for office purposes. Tenant agrees not to do or permit to be done in or about the Premises or the Building, nor to bring or keep or permit to be brought or kept in or about the Premises or the Building, anything which is prohibited by or will in any way conflict with any Applicable Laws now or hereafter in effect, or which would subject Landlord or Landlord’s agents to any liability, or which is prohibited by the standard form of fire insurance policy, or which will in any way increase the existing rate of (or otherwise may adversely affect) fire or any other insurance on the Building or any of its contents. If any act or omission of Tenant results in any such increase in premium rates, Tenant shall pay to Landlord, as additional rent, upon demand the amount of such increase. Tenant agrees not to do or permit to be done anything in, on or about the Premises or the Building which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose. Tenant agrees not to cause, maintain or permit any nuisance in, on or about the Premises or the Building, nor to use or permit to be used any loudspeaker or other device, system or apparatus which can be heard outside the Premises without the prior written consent of Landlord nor to permit any objectionable odors, bright lights or electrical or radio interference which may unreasonably annoy or interfere with the rights of other tenants of the Building or the public. Tenant agrees not to commit or suffer to be committed any waste in or upon the Premises. The provisions of this Paragraph 6 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

7. COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.

(a) Tenant agrees at its sole cost and expense to promptly comply with all Applicable Laws; with any occupancy certificate issued for the Premises; and with the provisions of all recorded documents affecting the Premises, insofar as any thereof relates to or affects the condition, use or occupancy of the Premises; provided, however, that subject to reimbursement as an Operating Expense if permitted pursuant to Paragraph 4, Tenant shall not be required to make or pay for alterations or improvements to the structural portions of the Premises or the Building Systems (as defined in Paragraph 8(a)), unless such alterations or improvements are necessitated by Tenant’s Alterations, acts or particular use of the Premises. In addition, Tenant shall be responsible, at its sole cost and expense, for (i) ADA compliance in the Premises, including in connection with any leasehold improvements or other work to be performed in the Premises under or in connection with this Lease (except Landlord’s Work), (ii) ADA compliance outside the Premises triggered by Tenant’s Alterations in the Premises, and (iii) ADA compliance outside the Premises necessitated by the Building being deemed to be a “public accommodation” instead of a “commercial facility” as a result of Tenant’s use of the Premises. With respect to any ADA compliance work required outside the Premises for which Tenant is responsible hereunder, Landlord shall have the right to perform such work, or require that Tenant perform such work with contractors, subcontractors, engineers and architects approved by Landlord; and if Landlord elects to perform such work outside the Premises, Tenant shall reimburse Landlord for the cost of such work within ten (10) days following receipt of invoices therefor. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action against Tenant (whether Landlord be a party thereto or not), that Tenant has violated any Applicable Laws or other such requirements or provisions shall be conclusive of that fact as between Landlord and Tenant. If Tenant’s use or operation of the Premises or any of Tenant’s equipment therein requires a governmental permit, license or other authorization or any notice to any governmental agency, Tenant shall promptly provide a copy thereof to Landlord.

 

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(b) Tenant agrees to cooperate with Landlord and participate in traffic management programs to which the Building is subject. Without limiting the generality of the foregoing, Tenant agrees to encourage and support van and car pooling and bicycle use by, and staggered and flexible working hours for, its office workers and employees to the extent reasonably permitted by the requirements of Tenant’s business. Neither this Paragraph nor any other provision of this Lease is intended to or shall create any rights or benefits in any other person, firm, company, governmental entity or the public.

(c) Tenant shall not bring or keep, or permit to be brought or kept, in the Premises or in or on the Real Property any “hazardous substance” (as hereinafter defined). Tenant shall not manufacture, generate, treat, handle, store or dispose of any hazardous substance in the Premises or in or on the Real Property, or use the Premises for any such purpose, or emit, release or discharge any hazardous substance into any air, soil, surface water or groundwater comprising the Premises or the Real Property, or permit any person using or occupying the Premises to do any of the foregoing; provided, however, that Tenant may store and use within the Premises, in accordance with “environmental laws” (as hereinafter defined) hazardous substances typically associated with general office use (such as copier toner and cleaning supplies). Tenant shall comply, and shall cause all persons using or occupying the Premises to comply, with all environmental laws applicable to the Premises, the use or occupancy of the Premises or any operation or activity therein. As used in this Lease, “hazardous substance” shall mean any substance or material that is described as a toxic, hazardous, corrosive, ignitable, flammable or reactive substance, waste or material or a pollutant or contaminant, or words of similar import, in any of the environmental laws, and includes asbestos, petroleum, petroleum products, polychlorinated biphenyls, radon gas, radioactive matter, and chemicals which may cause cancer or reproductive toxicity. As used in this Lease, “environmental laws” shall mean all Applicable Laws now or hereafter in force, as amended from time to time, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater.

(d) Tenant shall immediately furnish Landlord with any (i) notices received from any insurance company or governmental agency or inspection bureau regarding any unsafe or unlawful conditions within the Premises, and (ii) notices or other communications sent by or on behalf of Tenant to any person relating to environmental laws or hazardous substances.

(e) The provisions of this Paragraph 7 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

8. ALTERATIONS; LIENS.

(a) Tenant agrees not to make or suffer to be made any alteration, addition or improvement to or of the Premises (hereinafter referred to as “Alterations”), or any part thereof, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed; provided, however, Tenant acknowledges that, by way of example and without limitation, it shall be reasonable for Landlord to withhold its consent to Alterations that may adversely affect the structural portions of the Building or the life-safety, electrical, plumbing, heating, ventilation, air-conditioning, fire-protection, telecommunications or other building systems (collectively, the “Building Systems”), or Alterations which require work to be performed in portions of the Real Property outside the Premises in order to comply with Applicable Laws. In addition, as a condition of its consent to Alterations hereunder, Landlord may impose any

 

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reasonable requirements that Landlord considers desirable, including a requirement that Tenant provide Landlord with a surety bond, a letter of credit, or other financial assurance that the cost of the Alterations will be paid when due. Alterations made by Tenant, including without limitation any partitions (movable or otherwise) or carpeting, shall become a part of the Building and belong to Landlord; provided, however, that equipment, trade fixtures and movable furniture shall remain the property of Tenant. If Landlord consents to the making of any Alterations, the same shall be designed and constructed or installed by Tenant at Tenant’s expense (including expenses incurred in complying with Applicable Laws). All Alterations shall be performed only by contractors or mechanics approved by Landlord, which approval shall not be unreasonably withheld; provided, however, that (i) Landlord may, in its sole discretion, specify engineers, general contractors, subcontractors, and architects to perform work affecting the Building Systems; and (ii) if Landlord consents to any Alterations that require work to be performed outside the Premises, Landlord may elect to perform such work at Tenant’s expense. All Alterations shall be made in accordance with complete and detailed architectural, mechanical and engineering plans and specifications approved in writing by Landlord and shall be designed and diligently constructed in a good and workmanlike manner and in compliance with all Applicable Laws. The design and construction of any Alterations shall be performed in accordance with Landlord’s applicable rules, regulations and requirements, which Landlord shall enforce in a nondiscriminatory manner. Tenant shall cause any Alterations to be made in such a manner and at such times so that any such work shall not disrupt or interfere with the use or occupancy of other tenants or occupants of the Building. Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of Tenant’s plans and specifications, Tenant’s contractors or subcontractors, design of any work, construction of any work by Tenant, or delay in completion of any work by Tenant.

(b) Subsequent to obtaining Landlord’s consent and prior to commencement of the Alterations, Tenant shall deliver to Landlord (i) any building or other permit required by Applicable Laws in connection with the Alterations; (ii) a copy of the executed construction contract(s); and (iii) written acknowledgments from all materialmen, contractors, artisans, mechanics, laborers and any other persons furnishing any labor, services, materials, supplies or equipment to Tenant with respect to the Premises that they will look exclusively to Tenant for payment of any sums in connection therewith and that Landlord shall have no liability for such costs. In addition, Tenant shall require its general contractor to carry and maintain the following insurance at no expense to Landlord, and Tenant shall furnish Landlord with satisfactory evidence thereof prior to the commencement of construction: (A) Commercial General Liability Insurance with limits of not less than $2,000,000 combined single limit for bodily injury and property damage, including personal injury and death, and Contractor’s Protective Liability, and Products and Completed Operations Coverage in an amount not less than $500,000 per incident, $1,000,000 in the aggregate;(B) Comprehensive automobile liability insurance with a policy limit of not less than $1,000,000 each accident for bodily injury and property damage, providing coverage at least as broad as the Insurance Services Office (ISO) Business Auto Coverage form covering Automobile Liability, code 1 “any auto”, and insuring against all loss in connection with the ownership, maintenance and operation of automotive equipment that is owned, hired or non-owned; (C) Worker’s Compensation with statutory limits and Employer’s Liability Insurance with limits of not less than $100,000 per accident, $500,000 aggregate disease coverage and $100,000 disease coverage per employee; and (D) “Builder’s All Risk” insurance in an amount approved by Landlord covering the Alterations, including such extended coverage endorsements as may be reasonably required by Landlord, it being understood and agreed that the Alterations shall be insured by Tenant pursuant to Paragraph 14 of this Lease immediately upon completion thereof. All such insurance policies (except Workers’ Compensation insurance) shall be endorsed to add Landlord, the Holder of any Superior Interest

 

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and Landlord’s designated agents as additional insureds with respect to liability arising out of work performed by or for Tenant’s general contractor, to specify that such insurance is primary and that any insurance or self-insurance maintained by Landlord shall not contribute with it, and to provide that coverage shall not be reduced, terminated, cancelled or materially modified except after thirty (30) days prior written notice has been given to Landlord. Landlord may inspect the original policies of such insurance coverage or require complete certified copies at any time. Tenant’s general contractor shall furnish Landlord the same evidence of insurance for its subcontractors as required of Tenant’s general contractor.

(c) Landlord shall have the right (but not an obligation) to inspect the construction work during the progress thereof, and to require corrections of faulty construction or any material deviation from the plans for such Alterations as approved by Landlord; provided, however, that no such inspection shall be deemed to create any liability on the part of Landlord, or constitute a representation by Landlord or any person hired to perform such inspection that the work so inspected conforms with such plans or complies with any Applicable Laws, and no such inspection shall give rise to a waiver of, or estoppel with respect to, Landlord’s continuing right at any time or from time to time to require the correction of any faulty work or any material deviation from such plans. Promptly following completion of any Alterations, Tenant shall (i) furnish to Landlord “as-built” plans therefor, (ii) cause a timely notice of completion to be recorded in the Office of the Recorder of the City and County of San Francisco in accordance with Civil Code Section 3093 or any successor statute, and (iii) deliver to Landlord evidence of full payment and unconditional final waivers of all liens for labor, services, or materials. All trash which may accumulate in connection with Tenant’s construction activities shall be removed by Tenant at its own expense from the Premises and the Building.

(d) Tenant shall pay to Landlord a fee in the amount of ten percent (10%) of the cost of the Alterations for its review of plans and its management and supervision of the progress of the work. All sums due to Tenant’s contractors, if paid by Landlord due to Tenant’s failure to pay such sums when due, shall bear interest payable to Landlord at the Interest Rate until fully paid. By written notice to Tenant either before, or within thirty (30) days following, the Expiration Date or any earlier termination of this Lease, Landlord may require Tenant, at Tenant’s sole expense, to remove any Alterations, to restore the Premises to their configuration and condition before the Alterations were made, and to repair any damage to the Premises caused by such removal; provided, however, that Tenant shall not be required to remove any Alterations unless, at the time Landlord gives its consent thereto, Landlord notifies Tenant that Landlord will require the removal of such Alterations. Tenant shall use a general contractor reasonably approved by Landlord for such removal and repair.

(e) Tenant agrees to keep the Premises and the Real Property free from any liens arising out of any work performed, materials furnished or obligations incurred by Tenant. Tenant shall promptly and fully pay and discharge all claims on which any such lien could be based. In the event that Tenant does not, within ten (10) days following the recording of notice of any such lien, cause the same to be released of record, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant, as additional rent, on demand, together with interest at the Interest Rate from the date such expenses are incurred by Landlord to the date of the payment thereof by Tenant to Landlord. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper for the protection of Landlord, the Premises, the Building, or

 

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the Real Property, from mechanic’s and materialmen’s and like liens. Tenant shall give Landlord at least twenty (20) days’ prior written notice of the date of commencement of any construction on the Premises in order to permit the posting of such notices.

9. MAINTENANCE AND REPAIR.

(a) By taking possession of the Premises, Tenant accepts the Premises as being in the condition in which Landlord is obligated to deliver the Premises, subject, however, to the completion of Landlord’s Work. Tenant, at its expense, shall at all times keep the Premises and every part thereof and all equipment, fixtures and improvements therein in good and sanitary order, condition and repair, damage thereto by fire, the perils of the extended coverage endorsement, earthquake and other Casualty excepted, and Tenant waives all rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law or ordinance now or hereafter in effect. Upon the expiration or sooner termination of this Lease, Tenant shall surrender the Premises and, unless designated by Landlord to be removed in accordance with Paragraph 8 above, Tenant’s Alterations to Landlord in the same condition as when received or first constructed, ordinary wear and tear (except such as Tenant is obligated to repair to keep the Premises in good condition and repair) and damage thereto by fire, the perils of the extended coverage endorsement, earthquake and other Casualty excepted. It is agreed that Landlord has no obligation, and has made no promises, to alter, add to, remodel, improve, repair, decorate or paint the Premises, or any part thereof and that no representations respecting the condition of the Premises, the Building or the Real Property have been made by Landlord to Tenant except as may be specifically set forth herein. Except as expressly provided in this Lease, no representation or warranty, express or implied, is made with respect to (i) the condition of the Premises or the Building, (ii) the fitness of the Premises for Tenant’s intended use, (iii) the degree of sound transfer within the Building, (iv) the absence of electrical or radio interference in the Premises or the Building, (v) the condition, capacity or performance of electrical or communications systems or facilities, or (vi) the absence of objectionable odors, bright lights or other conditions which may affect Tenant’s use and enjoyment of the Premises or the Building.

(b) Except as otherwise provided in Paragraph 19, Landlord agrees to make all necessary repairs to the structure and the exterior of the Building, the Common Areas and the Building Systems, and to maintain the same in reasonably good order and condition, subject to inclusion of the costs thereof in Operating Expenses, and subject to the following sentence. Subject to the provisions of Paragraph 14(e) below, any damage arising from the acts of Tenant, or any person or entity claiming through or under Tenant, including any Transferee, or any of their respective members, partners, employees, contractors, agents, customers, visitors, licensees or other persons in or about the Building by reason of Tenant’s occupancy of the Premises (individually, a “Tenant Party” and collectively, “Tenant Parties”) shall be repaired by Landlord at Tenant’s sole expense, and Tenant shall pay Landlord on demand the cost of any such repair.

10. SERVICES.

(a) Provided there exists no Event of Default by Tenant, Landlord, subject to the terms of this Paragraph 10 and the Building Rules and Regulations attached hereto as Exhibit B and subject to Applicable Laws and the regulations and rules of public utilities, shall furnish to the Premises the following services (the cost of which shall be included in Operating Expenses): (i) water, electrical power and elevator service to the Premises at all times; (ii) heating and air conditioning suitable for the comfortable use and occupation of the Premises

 

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(assuming normal office use thereof) during the period (“Business Hours”) from 8:00 a.m. to 6:00 p.m. on weekdays (excluding holidays), or during such other period as may be prescribed by any applicable policies or regulations of any utility or governmental agency, and, subject to Tenant’s timely request and payment therefor, heating or air conditioning at times other than Business Hours; and (iii) basic janitorial service (limited to emptying and removal of general office refuse, light vacuuming as needed and window washing as determined by Landlord) on weekdays (excluding union holidays). Tenant agrees that at all times it will cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe (which regulations and requirements Landlord shall enforce in a nondiscriminatory manner) for the proper functioning and protection of the Building heating, ventilating and air conditioning systems. Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of Rental by reason of Landlord’s failure to furnish any of the foregoing or any other utilities or services when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances or disputes of any character, by the limitation, curtailment, rationing or restrictions on use of electricity, gas or any form of energy, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord. No such failure and no interruption of utilities or services from any cause whatsoever shall 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, except that if Landlord willfully causes the failure to furnish the foregoing utilities or services and there exists no Event of Default by Tenant, then Tenant, to the extent allowed by Applicable Law, shall have the right to make a claim for constructive eviction (provided, however, that in no event shall Landlord be liable for consequential damages, including business interruption, loss of profits, or loss of business by Tenant). Except as otherwise provided in this Paragraph 10(a), Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other Applicable Laws permitting the termination of this Lease due to such failure or interruption. Neither Landlord nor any other Indemnitee (as defined in Paragraph 13 below) shall be liable under any circumstances for injury to or death of any person or damage to or destruction of property, however occurring, through or in connection with or incidental to the furnishing of or the failure to furnish any of the foregoing utilities or services or any other utilities or services, except only, with respect to any Indemnitee, to the extent such injury, death or damage is caused by the gross negligence or willful misconduct of such Indemnitee and not covered by the insurance required to be carried by Tenant hereunder or except to the extent such limitation on liability is prohibited by law. The provisions of this Paragraph 10(a) shall not be interpreted or construed as an attempt by Landlord to be relieved of liability arising out of a non-delegable duty on the part of Landlord. Further, the provisions of this Paragraph 10(a) shall survive the expiration or earlier termination of this Lease until all claims within the scope of this Paragraph 10(a) are fully, finally and absolutely barred by the applicable statutes of limitations.

(b) Landlord makes no representation to Tenant regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for, or because of, any of Tenant’s equipment which uses other than the fractional horsepower normally required for office equipment, and Landlord shall have no liability for loss or damage suffered by Tenant or others in connection therewith. If the temperature otherwise maintained in any portion of the Premises by the heating, air conditioning or ventilation system is affected as a result of (i) any lights, machines or equipment (including without limitation electronic data processing machines) used by Tenant in the Premises, (ii) the occupancy of the Premises by more than one person per two hundred (200) square feet of rentable area therein, (iii) an electrical load for lighting or power in excess of the limits per square foot of rentable area of the Premises specified in Paragraph 10(c) below, or (iv) any rearrangement of partitioning or other improvements, Landlord shall have the right to install

 

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supplementary air conditioning units or other equipment Landlord deems appropriate in the Premises, and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord, as additional rent, upon demand by Landlord.

(c) Tenant agrees it will not, without the written consent of Landlord, use any equipment, apparatus or device in the Premises (including, without limitation, electronic data processing machines, computers or machines using current in excess of 110 volts) which will, individually or in the aggregate, in any way cause the amount of electricity, water or heating, ventilation or air conditioning supplied to the Premises to exceed the amount usually furnished or supplied to premises being used as general business office space, or connect with electric current (except through existing electrical outlets in the Premises) or with water pipes any equipment, apparatus or device for the purposes of using electric current or water. Landlord and Tenant agree that, for purposes of this Paragraph 10, the amount of electricity normally furnished to premises being used as general business office space is .70 kilowatt hours per rentable square foot per month (excluding electric power used in supplying heating, ventilating and air conditioning). If Tenant shall require water or electric current in excess of that usually furnished or supplied to premises being used as general office space, Tenant shall first obtain the written consent of Landlord (which consent shall not be unreasonably withheld), and Landlord may cause an electric current or water meter to be installed in the Premises in order to measure the amount of electric current or water consumed for any such excess use. The cost of any such meter and of the installation, maintenance and repair thereof; all charges for such excess water and electric current consumed (as shown by such meters and at the rates then charged by the furnishing public utility); and any additional expense incurred by Landlord in keeping account of electric current or water so consumed shall be paid by Tenant, and Tenant agrees to pay Landlord therefor, as additional rent, promptly upon demand by Landlord.

(d) Tenant shall give reasonable notice in making any request for utilities required outside of Business Hours. Tenant agrees to pay, as additional rent, promptly on demand any and all costs incurred by Landlord in good faith in connection with providing any additional utilities and services Landlord may provide.

(e) In the event any governmental authority having jurisdiction over the Real Property or the Building promulgates or revises any law, ordinance or regulation or building, fire or other code or imposes mandatory controls or guidelines on Landlord or the Real Property or the Building relating to the use or conservation of energy or utilities or the reduction of automobile or other emissions (collectively “Controls”) or in the event Landlord is required or elects to make alterations to the Real Property or the Building in order to comply with such mandatory or voluntary Controls, Landlord shall comply with such Controls or make such alterations to the Real Property or the Building related thereto. Such compliance and the making of such alterations shall not 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.

 

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(f) If solely as a result of Landlord’s gross negligence or willful misconduct, Landlord fails to provide an Essential Service (as hereinafter defined) which Landlord is required to provide to the Premises pursuant to the terms of this Paragraph 10 (an “Abatement Condition”), and such failure prevents Tenant from occupying all or a material portion of the Premises (the “Abatement Space”), then Basic Rental and Tenant’s Percentage Share of Operating Expenses and Real Property Taxes payable hereunder shall abate, provided the following additional conditions are satisfied in each instance:

(i) With respect to the Abatement Condition in question, Tenant shall give notice to Landlord of the occurrence thereof, which notice shall designate the cause or suspected cause of the Abatement Condition, if known to Tenant, and the portion of the Premises which is not usable by Tenant, and the Abatement Condition in question shall continue after Tenant has given such notice for a period of not less than seven (7) consecutive days; and

(ii) Tenant, solely because of the occurrence of the Abatement Condition, shall actually vacate the Abatement Space for not less than seven (7) consecutive days after giving its notice to Landlord of the Abatement Condition.

If, with respect to any Abatement Condition, the conditions contained in subparagraphs (f)(i) and (f)(ii) are fulfilled, then Basic Rental and Tenant’s Percentage Share of Operating Expenses and Real Property Taxes shall abate in the proportion that the rentable square foot area of the Abatement Space actually vacated bears to the rentable square foot area of the Premises, for a period equal to the lesser of (A) the period during which Tenant has actually vacated the Abatement Space, or (B) the period of time between Tenant’s having vacated the Abatement Space and the date Tenant receives notice from Landlord that the Abatement Condition has been cured, provided that such time periods shall not commence to run until the day after Tenant gives Landlord notice of the Abatement Condition as required above. For purposes of this Paragraph 10(f), vacation of the Abatement Space shall not require Tenant to remove furniture, fixtures or equipment. Tenant shall be deemed to have vacated the Abatement Space if, due to the Abatement Condition, the Abatement Space is not occupiable by Tenant, and Tenant does not in fact conduct any business in or use the Abatement Space. Tenant agrees that furnishing Landlord with notice of the Abatement Condition shall be an election of remedies, and Tenant shall be deemed to have waived any other rights against Landlord at law or in equity, including, but not limited to, an action for money damages in connection with the Abatement Condition in question. Nothing contained herein shall limit Tenant’s right to an abatement of Rental or termination of this Lease in the case of a Casualty as provided in Paragraph 19 hereof. For purposes hereof, an “Essential Service” shall mean the standard services to be provided by the heating, ventilation and air conditioning systems, life safety systems, mechanical systems, plumbing and waste disposal systems and electrical systems to the extent Landlord is required to provide such services to the Premises pursuant to the terms of this Paragraph 10.

(g) Tenant acknowledges that Landlord may, at Landlord’s sole option, to the extent permitted by Applicable Laws, elect to change, from time to time, the company or companies which provide services (including electrical service, gas service, water, telephone and technical services) to the Building, the Premises and/or its occupants; provided, however, that no such change shall materially adversely affect the quality or reliability of any of the services Landlord is to provide under this Lease. Further, Tenant acknow