OFFICE LEASE

Exhibit 10.31

OFFICE LEASE

by and between

CLARENDON HILLS INVESTORS, LLC,

a California limited liability company,

as Landlord

and

COTHERIX, INC.

a Delaware corporation

as Tenant

2000 Sierra Point Parkway

Brisbane, California 94005

OFFICE LEASE

THIS LEASE is entered into as of May 5, 2006 (the “Effective Date” ), by and between CLARENDON HILLS INVESTORS, LLC, a California limited liability company ( “Landlord” ), and COTHERIX, INC., a Delaware corporation ( “Tenant” ).

1. BASIC LEASE INFORMATION . The following is a summary of basic lease information. Each item in this Article 1 incorporates all of the terms set forth in this Lease pertaining to such item and to the extent there is any conflict between the provisions of this Article 1 and any other provisions of this Lease, the provisions of this Article 1 shall control. Any capitalized term not defined in this Lease shall have the meaning set forth in the Glossary that appears at the end of this Lease.

 

 

 

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2. PREMISES

2.1. Premises. Subject to the terms, covenants and conditions set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord those premises (the “Premises” ) shown on the building plan attached as Exhibit A . The approximate total Rentable Area of the Premises is specified in Article 1. The building in which the Premises shall be located is sometimes referred to herein as the “ Building ”. Notwithstanding anything to the contrary contained in this Lease, Landlord hereby reserves the exclusive right to the exterior side walls, rear walls and roof of the Building.

2.2. Common Area. Landlord hereby grants to Tenant and its employees, agents, contractors and invitees (collectively, “Tenant’s Agents” ) a non-exclusive license to use the public areas, sidewalks, driveways, parking areas and other public amenities (the “Common Area” ) associated with the Premises during the Term. Together, the Premises, the Building and the Common Area are sometimes referred to in this Lease as the “Property.” Tenant’s rights to the Common Area shall be subject to the Rules and Regulations described in Section 23.1 and to Landlord’s reserved rights described in Article 16.

2.3. Parking. Tenant shall have the right to use the number of parking spaces specified in Article 1. Tenant’s license shall not be assigned, sublet or otherwise transferred separately from the Premises. Tenant agrees that neither Tenant nor Tenant’s Agents shall use parking spaces in excess of the number of spaces allocated to Tenant or in areas designated for other uses. Landlord shall have the right, at Landlord’s sole discretion, to specifically designate the location of Tenant’s parking spaces within the parking areas of the Common Area, but shall use reasonable efforts to locate such spaces as close as possible to the Building. Tenant’s designated parking spaces (if any) may be relocated by Landlord from time to time upon written notice. Tenant shall not at any time park, or permit the parking of the trucks or vehicles of Tenant or Tenant’s Agents in any portion of the Common Area not designated by Landlord for such use. Tenant shall not park nor permit to be parked any inoperative vehicles or store any materials or equipment on any portion of the parking area or other areas of the Common Area. Tenant agrees to assume responsibility for compliance by Tenant’s employees and agents acting within the scope of their agency with the parking provisions contained in this Section. Tenant hereby authorizes Landlord at Tenant’s expense to attach violation stickers or notices to such vehicles not parked in compliance with this Section and to tow away any such vehicles. In addition, a specific section of the parking area may be set aside by Landlord for visitor parking for the Property.

2.4. Fitness Center. Tenant’s employees may use the existing fitness center facilities located in the Building ( “Fitness Center” ) on a non-exclusive basis at no charge during the Term, subject to the Rules and Regulations, so long as Landlord operates the Fitness Center as part of the Common Area..

2.5. Conference Center. Subject to Landlord’s reserved rights described in Article 16, Tenant may utilize the building conference center without charge on two (2) days per quarter and at other times subject to the Rules and Regulations for Landlord’s standard charge.

3. ACCEPTANCE

Except as provided in Section 9.1 and Exhibit E (the Work Letter), the Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date and Landlord shall have no obligation for construction work or improvements on or to the Premises,

 

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the Building or the Common Area. Prior to entering into this Lease, Tenant has made a thorough and independent examination of the Property and all matters related to Tenant’s decision to enter into this Lease. Tenant is thoroughly familiar with all aspects of the Property and is satisfied that it is in an acceptable condition and meets Tenant’s needs. Tenant does not rely on, and Landlord does not make, any express or implied representations or warranties as to any matters including, without limitation, (a) the physical condition of the Property, the Building Structure, or the Building Systems, (including, without limitation, indoor air quality), (b) the existence, quality, adequacy or availability of utilities serving the Property, (c) the use, habitability, merchantability, fitness or suitability of the Premises for Tenant’s intended use, (d) the likelihood of deriving business from Tenant’s location or the economic feasibility of Tenant’s business, (e) Hazardous Materials in the Premises, or on, in under or around the Property, (f) zoning, entitlements or any laws, ordinances or regulations which may apply to Tenant’s use of the Premises or business operations, or (g) any other matter. Tenant has satisfied itself as to such suitability and other pertinent matters by Tenant’s own inquiries and tests into all matters relevant in determining whether to enter into this Lease. Subject to Section 9.1 and Exhibit E (the Work Letter), Tenant accepts the Premises in their existing “as is” condition. Tenant shall, by entering into and occupying the Premises, be deemed to have accepted the Premises and to have acknowledged that the same are in good order, condition and repair. Upon the Delivery of the Premises, Tenant shall execute and deliver to Landlord the Acceptance Form attached here to Exhibit D.

4. TERM

4.1. Term. The Premises are leased for a term (the “Term” ) commencing on the Commencement Date and expiring on the Expiration Date. As of the Effective Date, the parties anticipate that the Premises will be delivered to Tenant for the construction of the Tenant Improvement Work described in Exhibit B on or before the Scheduled Date for Delivery of the Premises. The Term shall end on the Expiration Date, or such earlier date on which this Lease terminates pursuant to its terms. The date upon which this Lease actually terminates, whether by expiration of the Term or earlier termination pursuant to the terms of this Lease, is sometimes referred to in this Lease as the “Termination Date.” Upon delivery of possession, Landlord and Tenant shall execute an Agreement Regarding Commencement Date, Rent Commencement Date, Expiration Date, Base Rent and Rentable Area substantially in the form of Exhibit B . Such notice shall be executed promptly after all of the information set forth in the notice has been determined; provided that failure to do so shall not in any way affect either party’s rights or obligations under this Lease.

4.2. Failure to Deliver Possession. If for any reason Landlord cannot deliver possession of the Premises to Tenant on or prior to the Scheduled Date for Delivery of the Premises, then the validity of this Lease and the obligations of Tenant under this Lease shall not be affected and Tenant shall have no claim against Landlord arising out of Landlord’s failure to deliver possession of the Premises on the Scheduled Date for Delivery of the Premises. In the event Landlord has not delivered the Premises to Tenant within sixty (60) days after the Scheduled Date for Delivery of the Premises (plus the number of days of Tenant Delay, as that term is defined in the Work Letter and any delays caused by Force Majeure), Tenant shall have the right to terminate this Lease by delivery to Landlord of a termination notice (the “Termination Notice” ) which shall be effective thirty (30) days after receipt by Landlord, unless within such 30-day period the Premises are delivered to Tenant. In the event Landlord has not delivered the Premises to Tenant within one hundred eighty (180) days after the Scheduled Date for Delivery of the Premises (plus the number of days of Tenant Delay, as that term is defined in the Work Letter, but without including

 

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any delays caused by force majeure, including but not limited to delays caused by weather, action of the elements, war, riot or civil insurrection, general building moritoria, labor disputes, inability to procure or a general shortage of labor or materials in the normal channels of trade, delay in transportation; delay in inspections; or any other cause beyond the reasonable control of Landlord), Tenant shall have the right to terminate this Lease by delivery to Landlord of a Termination Notice. The event Tenant elects to terminate this Lease, Tenant must deliver the Termination Notice to Landlord prior to the date the Premises are delivered to Tenant. Upon such termination, Landlord shall immediately return the Security Deposit, prepaid rent and any other amounts delivered by Tenant to Landlord hereunder and thereupon, this Lease shall terminate and neither party shall have any further obligation or liability to the other under this Lease.

4.3. Early Possession . Tenant shall have the right to take possession of the Premises up to 30 days before the Commencement Date for the sole purpose of performing improvements or installing furniture, voice and data cabling, equipment or other personal property, provided that such action does not interfere with any work being performed by the Landlord or the Landlord’s timely delivery of the Premises. In addition, Tenant shall have the right to take possession of the Premises up to 14 days before the Commencement Date for the sole purpose of performing improvements or installing furniture, voice and data cabling, equipment or other personal property. Any such early possession shall be subject to the terms and conditions of this Lease, provided that Tenant shall not be obligated to pay Rent (defined in Section 5.2).

4.4. Renewal Option. Tenant shall have two (2) successive options (the “Renewal Option” ) to extend the Term of the Lease for the entire Premises then being leased to Tenant for a period of three (3) years each (the “Renewal Term” ). Each Renewal Term shall commence on the day after the Expiration Date. Each Renewal Option shall be void if an uncured default by Tenant exists, either at the time of exercise of the Renewal Option or the time of commencement of the Renewal Term, with respect to which Tenant has received notice and has had the opportunity to cure pursuant to this Agreement. Each Renewal Option must be exercised, if at all, by written notice from Tenant to Landlord given not more than twelve (12) months and not less than nine (9) months prior to the expiration of the current Term. Each Renewal Term shall be upon the same terms and conditions as the original Term, except that (a) the Base Rent payable pursuant to Section 4.1 with respect to the Renewal Term shall be equal to the Prevailing Market Rent as of the commencement of the Renewal Term, as determined pursuant to Exhibit C ; (b) Tenant shall not be entitled to any tenant improvement allowance during the Renewal Term; and (c) from and after the exercise of the Renewal Option, (i) all references to “ Expiration Date ” shall be deemed to refer to the last day of each Renewal Term, and (ii) all references to “ Term ” shall be deemed to include the Renewal Term. The Renewal Option is personal to Tenant and shall be inapplicable and null and void if Tenant sublets or assigns its interest under this Lease, other than to a Permitted Transferee (defined below)

5. RENT

5.1. Base Rent. Commencing upon the Rent Commencement Date, and thereafter during the Term, Tenant shall pay to Landlord the monthly Base Rent specified in Article 1 on or before the first day of each month, in advance, at the address specified for Landlord in Article 1, or at such other place as Landlord designates in writing, without any prior notice or demand and without any deductions or setoff whatsoever (except as otherwise expressly provided in this Lease). Tenant shall pay the first month’s Base Rent in advance, upon execution of this Lease and such prepaid rent shall be applied to the first full month for

 

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which Base Rent is due hereunder. If the Rent Commencement Date occurs on a day other than the first day of a calendar month, or the Termination Date occurs on a day other than the last day of a calendar month, then the Base Rent for such fractional month will be prorated on the basis of the actual number of days in such month. The Rentable Area of the Premises shall be conclusively presumed to be as stated in Article 1, and shall not be subject to adjustment by either Landlord or Tenant during the Term.

5.2. Additional Rent. All sums due from Tenant to Landlord under the terms of this Lease (other than Base Rent) shall be additional rent ( “Additional Rent” ), including without limitation the charges for Tenant’s Pro Rata Share of Operating Expenses (described in Article 7). All Additional Rent that is payable to Landlord shall be paid at the time and place that Base Rent is paid, except if otherwise provided in this Lease. Landlord will have the same remedies for a default in the payment of any Additional Rent as for a default in the payment of Base Rent. Together, Base Rent and Additional Rent are sometimes referred to in this Lease as “Rent” .

5.3. Late Payment. Any unpaid Rent shall bear interest from the date due until paid at the lower of the “Reference Rate” announced by Bank of America (San Francisco) plus 5% or the maximum interest rate allowed by law (the “Interest Rate” ). In addition, Tenant recognizes that late payment of any Rent will result in administrative expense to Landlord, the extent of which expense is difficult and economically impracticable to determine. Therefore, Tenant agrees that if Tenant fails to pay any Rent within five (5) days after its due date, provided that Landlord notifies Tenant at the time such charge accrues that it elects to charge a late charge, an additional late charge of five percent (5%) of the sums so overdue shall become immediately due and payable. Tenant agrees that the late payment charge is a reasonable estimate of the additional administrative costs and detriment that will be incurred by Landlord as a result of such failure by Tenant. In the event of nonpayment of interest or late charges on overdue Rent, Landlord shall have, in addition to all other rights and remedies, the rights and remedies provided in this Lease and by law for nonpayment of Rent. Late charges and interest shall not accrue on Rent which is being disputed by Tenant; additionally, late charges and interest shall not be charged on the first late payment to occur in any lease year, provided that such payment is made within the thirty (30) days of the date due.

5.4. Security Deposit. Concurrently with the execution of this Lease, Tenant shall deliver to Landlord the Security Deposit described in Article 1. The Security Deposit shall be held by Landlord as security for the faithful performance of this Lease by Tenant of all of the terms, covenants and conditions of this Lease. If there is an Event of Default by Tenant with respect to any provisions of this Lease (including but not limited to the payment of Rent, then Landlord may, without waiving any of Landlord’s other rights or remedies under this Lease, apply the Security Deposit in whole or in part to remedy any failure by Tenant to pay any sums due under this Lease, to perform any other obligations of Tenant contained in this Lease, or to compensate Landlord for any loss or damages which Landlord may suffer as a result thereof, including without limitation any lost rent to which Landlord is entitled in the event the Lease terminates or is rejected as a result of any of the foregoing. Should Landlord so apply any portion of the Security Deposit, Tenant shall replenish the Security Deposit to the original amount within ten (10) business days after written demand by Landlord. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit.

 

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6. USE OF PREMISES AND CONDUCT OF BUSINESS

6.1. Permitted Use. Tenant may use and occupy the Premises during the Term solely for the uses specified and permitted in Article 1 and for no other purpose without the prior written consent of Landlord, such consent to be granted or withheld in Landlord’s reasonable discretion. Tenant’s use of the Property shall in all respects comply with all Applicable Laws (as defined in Section 11.1).

6.2. Prohibited Uses. Tenant shall not use the Premises or allow the Premises to be used for any illegal purpose, or so as to create waste, or constitute a private or public nuisance. Tenant shall not place any loads upon the floors, walls, or ceiling which endanger the structure, or place any Hazardous Material in the drainage system of the Premises, or overload existing electrical or other mechanical systems. Tenant shall not use any machinery or equipment which causes any substantial noise or vibration. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or outside of the Premises except in trash containers placed inside exterior enclosures designated by Landlord for that purpose or inside of the Premises. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain outside the Premises or on any portion of the Common Area unless otherwise approved by Landlord in its sole discretion. No loudspeaker or other device, system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent of Landlord. No explosives or firearms shall be brought into the Premises.

7. BUILDING SERVICES; OPERATING EXPENSES

7.1. Building Services.

(a) Landlord agrees to furnish Tenant with the following services: (1) Water service for use in the lavatories on each floor on which the Premises are located and for use within the Premises in any plumbed areas; (2) Heat and air conditioning in season during Normal Business Hours, at such temperatures and in such amounts as are standard for comparable buildings or as required by governmental authority. Tenant, upon such advance notice as is reasonably required by Landlord, shall have the right to receive HVAC service during hours other than Normal Business Hours. Tenant shall pay Landlord the standard charge for the additional service as reasonably determined by Landlord from time to time (which amount as of the Effective Date is $50.00 per hour per full or partial floor); (3) Maintenance and repair of the Property as described in Section 8.1; (4) Janitor service on Business Days. If Tenant’s use, floor covering or other improvements require special services in excess of the standard service for the Building, Tenant shall pay the additional cost attributable to the special services, but such charge shall in no event include any profit increment or markup for Landlord; (5) Elevator service; (6) Electricity to the Premises for general office use; and (7) such other services as Landlord reasonably determines are necessary or appropriate for the Property.

(b) Tenant shall have access to the Premises via card key access 24 hours per day, 7 days per week. Landlord shall work with Tenant to provide access to the Building by Tenant’s invitees as early as 6:00 a.m. on reasonable advance notice.

(c) Landlord’s failure to furnish, or any interruption or termination of, services due to the application of Laws, the failure of any equipment, the performance of repairs, improvements or alterations, or the occurrence of any event or cause beyond the reasonable control of Landlord shall not render Landlord liable to Tenant, constitute a constructive eviction of Tenant, give rise to an abatement of Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement, subject only to the provisions of Section 17.1.

 

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7.2. Operating Expenses. “Operating Expenses” means the total costs and expenses paid or incurred by Landlord in connection with the ownership, management, operation, maintenance, repair and replacement of the Property, including, without limitation, all costs of:

(a) taxes, assessments and charges levied upon or with respect to the Property or any personal property of Landlord used in the operation of the Property, or on Landlord’s interest in the Property or its personal property therein ( “Real Estate Taxes” ). Real Estate Taxes shall include, without limitation, all general real property taxes and general and special assessments, charges, fees, or assessments for transit, housing, police, fire, or other governmental services or purported benefits to the Property or the occupants thereof, service payments in lieu of taxes that are now or hereafter levied or assessed against Landlord by the United States of America, the State of California or any political subdivision thereof, or any other political or public entity, and shall also include any other tax, assessment or fee, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes, whether or not now customary or in the contemplation of the parties as of the Effective Date. Real Estate Taxes shall also include reasonable legal fees, costs, and disbursements incurred in connection with proceedings to contest, determine, or reduce Real Estate Taxes. Real Estate Taxes shall not include franchise, transfer, succession, gift, inheritance, gross receipts or capital stock taxes or income taxes measured by the net income of Landlord unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for, or as an addition to, in whole or in part, any other tax that would otherwise constitute a Real Estate Tax.

(b) repair, maintenance, replacement and supply of air conditioning, electricity, steam, water, heating, ventilating, mechanical, escalator and elevator systems, sanitary and storm drainage systems and all other utilities and mechanical systems (the “Building Systems” ); provided, however, the cost of any capital repair or improvements shall only be included in Operating Expenses to the extent provided in Section 7.2(n) below;

(c) landscaping and gardening of the Common Area;

(d) lighting, repaving, repairing, maintaining and restriping of parking areas and sidewalks; provided, however, the cost of any capital improvements shall only be included in Operating Expenses to the extent provided in Section 7.2(n) below;

(e) lighting, repairs and maintenance to the Common Area;

(f) repair, maintenance and replacement of any security systems and fire protection systems installed in the Premises; provided, however, the cost of any capital improvements shall only be included in Operating Expenses to the extent provided in Section 7.2(n) below;

(g) general maintenance, janitorial services, trash removal, cleaning and service contracts and the cost of all supplies, tools and equipment required in connection therewith;

 

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(h) all premiums and costs for insurance carried by Landlord on the Premises, the Common Area and the Property, or in connection with the use or occupancy thereof (including all amounts paid as a result of loss sustained that would be covered by such policies but for deductibles, but excluding in any event any deductibles on policies of earthquake insurance), including, but not limited to, the premiums and costs of fire and extended coverage, vandalism and malicious mischief, public liability and property damage, worker’s compensation insurance, rental income insurance and any other insurance commonly carried by prudent owners of comparable buildings; provided, however, that the Landlord may, but shall not be obligated to carry earthquake insurance, if such insurance is available at a commercially reasonable rates;

(i) wages, salaries, payroll taxes and other labor costs and employee benefits for all persons engaged in the operation, management, maintenance and security of the Property;

(j) management fees at commercially reasonable rates (whether or not Landlord employs a third party managing agent);

(k) fees, charges and other costs of all independent contractors engaged by Landlord to provide services benefiting the Property;

(l) license, permit and inspection fees;

(m) the cost of supplies, tools, machines, materials and equipment used in operation and maintenance of the Common Area;

(n) any capital improvements to the Property; provided that the cost of any such capital improvements shall be amortized over the useful life of the improvement in question (determined in accordance with GAAP, consistently applied), together with interest on the unamortized balance at the Interest Rate;

(o) [intentionally omitted];

(p) audit and bookkeeping fees, legal fees and expenses incurred in connection with the operation or management of the Property;

(q) [intentionally omitted];

(r) legal and accounting services benefiting the Property.

Notwithstanding anything in the definition of Operating Expenses to the contrary, Operating Expenses shall not include the following:

(i) cost of repairs or replacements occasioned by fire, windstorm or other casualty, the costs of which are covered by insurance required to be maintained by Landlord hereunder or reimbursed by governmental authorities in eminent domain;

(ii) brokerage commissions, origination fees, points, mortgage recording taxes, title charges and other costs or fees incurred in connection with any financing or refinancing or transfer of the Building; interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Property;

 

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(iii) legal fees, leasing commissions, finders’ fees, cash allowances, buy-out amounts, advertising expenses, promotional expenses, and other costs of a similar nature incurred in the leasing of space at the Property; legal fees for the negotiation or enforcement of leases (including without limitation the surrender, termination or modification of any lease of space in the Building) or with financing transactions; legal fees and costs in connection with the maintenance of Landlord’s entity or its internal organization;

(iv) ground rent or any other payments paid under any present or future ground or overriding or underlying lease and/or grant affecting the Property and/or the Premises (other than payments which, independent of such lease, would constitute an Operating Expense hereunder); and

(v) costs incurred due to a violation of the provisions of this Lease by Landlord;

(vi) costs arising from the presence of any Hazardous Materials, including investigation, cleanup or monitoring costs, or the violation of Environmental Laws not caused by Tenant or its agents;

(vii) the cost of redecorating or special cleaning or similar services to individual tenant spaces, not provided on a regular basis to other tenants of the Building;

(viii) wages or salaries paid to executive personnel of Landlord not providing full-time service at the Building;

(ix) Any costs incurred in the ownership of the Building or the maintenance of the Landlord’s entity status, as opposed to the operation and maintenance of the Building, including Landlord’s income taxes, excess profit taxes, franchise taxes or similar taxes on Landlord’s business; preparation of income tax returns; corporation, partnership or other business form organizational expenses; franchise taxes; filing fees;

(x) expenses in connection with services or other benefits of a type which are not Building standard but which are provided to any other tenant or occupant;

(xi) any items to the extent such items are required to be reimbursed to Landlord by Tenant (other than through Tenant’s additional rent), or by other tenants or occupants of the Building or by third parties;

(xii) depreciation or amortization charges (except as specifically included in Section 7.2(n) above);

(xiii) the cost of constructing tenant improvements or installations for any tenant in the Building, including any relocation costs and any costs properly allocable to employees or contractors engaged in the construction of such improvements or installations;

 

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(xiv) advertising and promotional expenses or brochures with respect to the Building or the Property;

(xv) overhead and profit increment paid to subsidiaries or affiliates of Landlord for services on or to the Property, to the extent that the costs of such services exceed market-based costs for such services rendered by unaffiliated persons or entities of similar skill, competence and experience;

(xvi) penalties, fines, legal expenses, or late payment interest incurred by Landlord due to violation by Landlord, or Landlord’s agents, contractors or employees, of either the payment terms and conditions of any lease or service contract covering space in the Building or Landlord’s obligations as owner of the Building (such as late payment penalties and interest on real estate taxes, late payment of utility bills);

(xvii) any compensation paid to clerks, attendants or other persons in any commercial concession operated by Landlord in the Building from which Landlord receives any form of income whatsoever, whether or not Landlord actually makes a profit from such concession;

(xviii) costs incurred in connection with correcting latent defects or remediating Hazardous Materials Contamination in the Building, or in repairing or replacing Building equipment, where such repair or replacement results from original defects in design, manufacture or installation rather than from ordinary wear and tear or use; or

(xix) costs of making the improvements currently planned for the building lobby, parking lot, second floor and common areas.

7.3. Occupancy Assumption . If the Building is not at least 95% occupied during any calendar year or if Landlord is not supplying services to at least 95% of the total Rentable Area of the Building at any time during a calendar year, Operating Expenses shall, at Landlord’s option, be determined as if the Building had been 95% occupied and Landlord had been supplying services to 95% of the Rentable Area of the Building during that calendar year. If Tenant pays for its Pro Rata Share of Operating Expenses based on increases over a “Base Year” and Operating Expenses for a calendar year are determined as provided in the prior sentence, Operating Expenses for the Base Year shall also be determined as if the Building had been 95% occupied and Landlord had been supplying services to 95% of the Rentable Area of the Building The extrapolation of Operating Expenses under this Section shall be performed by appropriately adjusting the cost of those components of Operating Expenses that are impacted by changes in the occupancy of the Building.

7.4. Payment of Operating Expenses. Commencing on the first anniversary of the Rent Commencement Date, Tenant shall pay to Landlord, as Additional Rent, Tenant’s Pro Rata Share of the amount, if any, by which Operating Expenses for each calendar year during the Term exceed Operating Expenses for the Base Year ( “ Expense Excess ” ). In no event, however, shall Expense Excess include Operating Expenses of a materially different nature or calculated in a materially different fashion than Operating Expenses in the Base Year. Tenant shall pay one twelfth of Tenant’s Pro Rata Share of the Expense Excess in advance, on or before the first day of each month in an amount estimated by Landlord as stated in a written notice to Tenant. Landlord may by written notice to Tenant revise such estimates from time to time and Tenant shall thereafter make payments on the basis of such revised estimates (but not more frequently than once in any given lease year). With reasonable promptness after the

 

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expiration of each calendar year, but in any event within ninety (90) days after the end of each calendar year, Landlord will furnish Tenant with a statement ( “Landlord’s Expense Statement” ) setting forth in reasonable detail the actual Operating Expenses for the prior calendar year and the amount of Tenant’s Pro Rata Share of the Expense Excess. If Tenant’s Pro Rata Share of the actual Expense Excess for such year exceeds the estimated amounts paid by Tenant for such year, Tenant shall pay to Landlord (whether or not this Lease has terminated) the difference between the amount of estimated Tenant’s Pro Rata Share of Expense Excess paid by Tenant and the actual Tenant’s Pro Rata Share of Expense Excess within thirty (30) days after the receipt of Landlord’s Expense Statement. If the total amount paid by Tenant for any year exceeds the actual amount due from Tenant for that year, the excess shall be credited against the next installments of Rent due from Tenant to Landlord, or, if after the Termination Date, the excess shall first be credited against any unpaid Rent and any remaining excess shall be refunded to Tenant within thirty (30) days of determination.

Within ninety (90) days after receipt of Landlord’s Expense Statement, Tenant shall have the right to audit at Landlord’s local offices, at Tenant’s expense, Landlord’s accounts and records relating to Operating Costs. Such audit shall be conducted by a certified public accountant approved by Landlord, which approval shall not be unreasonably withheld. If Landlord has overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty (30) days after the audit is concluded, together with interest thereon at the Interest Rate, from the date such amount was paid until payment of the overcharge is made to Tenant. In addition, if Landlord’s Expense Statement exceeds the actual Operating Costs which should have been charged to Tenant by more than five percent (5%), the cost of the audit up to $10,000 shall be paid by Landlord.

7.5. Proration. If either the Rent Commencement Date or the Termination Date occurs on a date other than the first or last day, respectively, of a calendar year, Tenant’s Pro Rata Share of Expense Excess for the year in which the Rent Commencement Date or Termination Date occurs shall be prorated based on a 365-day year.

7.6. Utility Costs. Landlord shall arrange for the following utilities furnished to or used at the Premises: water, gas, electricity, sewer service and non-hazardous waste pick-up. The costs of such utilities shall be included in Operating Expenses. Tenant shall be responsible for arranging for telephone and other electronic communications services, at the Premises and shall pay the costs of such utilities directly. Landlord will work in good faith with Tenant to provide access to a cable or satellite TV feed to the Premises, subject to agreement of the parties with respect to allocation of costs of installation and ongoing monthly service costs.

7.7. Taxes on Tenant’s Property and Business. Tenant shall pay prior to delinquency all taxes levied or assessed by any local, state or federal authority upon the conduct of Tenant’s business in the Premises or upon Tenant’s Property (as defined in Section 9.6). If the assessed value of the Property is increased by the inclusion of a value placed upon Tenant’s Property, Tenant shall pay to Landlord, upon written demand, the taxes so levied against Landlord, or the portion of Landlord’s taxes resulting from said increase in assessment.

8. REPAIRS, MAINTENANCE AND SERVICES

8.1. Landlord’s Obligations. Except as specifically provided in this Lease, Landlord shall not be required to furnish any services, facilities or utilities to the Premises or to Tenant, and Tenant assumes full responsibility for obtaining and paying for all services, facilities

 

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and utilities to the Premises. Landlord will repair, replace and maintain the Building Systems, the Common Area, and the structural portions of the Premises and the Building, including, without limitation, the foundation, floor/ceiling slabs, roof, curtain wall, exterior glass and mullions, columns, beams, shafts (including elevator shafts), Common Area stairs, Building standard stairwells (but not stairs or stairwells installed by the Tenant) and elevators (collectively, the “Building Structure” ), and shall perform all such maintenance, work and activities diligently and expeditiously to completion, and in a manner consistent with Class A office buildings located in Brisbane, California. Landlord shall also provide the Premises with interior and exterior window washing services and janitorial service and shall provide the Common Areas with janitorial and landscaping services; provided, however, that Tenant shall have the right (but not the obligation) to assume responsibility for providing janitorial services at the Premises. All window washing and janitorial services, whether provided by Landlord or Tenant, must meet the standards commensurate with Class A office buildings located in Brisbane, California. Tenant shall notify Landlord in writing when it becomes aware of the need for any repair, replacement or maintenance which is Landlord’s responsibility under this Section of which it becomes aware. The costs of such repair, replacement and maintenance shall be included in Operating Expenses to the extent provided in Article 7; provided that, subject to Section 13.5, Tenant shall reimburse Landlord in full and within thirty (30) business days after written demand for the cost of any repair to the Property, Building Structure or Building Systems which is attributable to misuse by Tenant or Tenant’s Agents and is not covered by Landlord’s insurance. Any such reimbursement shall be Additional Rent. Tenant hereby waives and releases any right it may have under any law, statute or ordinance now or hereafter in effect to make any repairs which are Landlord’s obligation under this Section.

8.2. Tenant’s Obligations. Except as provided in Section 8.1, Tenant assumes full responsibility for the repair, replacement and maintenance of the Premises, including, without limitation, all mechanical and other systems and equipment installed in the Premises by Tenant in connection with its use and occupancy of the Premises as permitted by this Lease ( “Tenant Systems” ). Tenant shall take good care of the Premises and the Tenant Systems and keep the Premises (other than any areas which are the responsibility of Landlord) and the Tenant Systems in good working order and in a clean, safe and sanitary condition. All repairs and replacements by Tenant for which Tenant is responsible are collectively referred to as the “Tenant Obligations” and shall be made and performed: (a) at Tenant’s cost and expense, (b) so that same shall be at least equal in quality to the original work or installation, (c) in a manner and using equipment and materials that will not impair the operation of or damage the Building Systems, and (d) in accordance with Article 9 (if applicable), and all Applicable Laws. Tenant shall cooperate fully and in good faith with Landlord and Landlord’s property manager in the performance of all such repairs and replacements by Tenant, and shall perform all such work and activities diligently and expeditiously to completion, and in a manner consistent with Class A office buildings located in Brisbane, California. Tenant shall reimburse Landlord within ten (10) days after written demand as Additional Rent for any out-of-pocket expenses incurred by Landlord in connection with any repairs or replacements required to be made by Tenant which Landlord performs pursuant to this Section 8.2.

8.3. Security. Tenant shall be solely responsible for the security of the Premises while in or about the Premises. Any security services provided to the Property by Landlord shall be at Landlord’s sole discretion and Landlord shall not be liable to Tenant or Tenant’s Agents for any failure to provide security services or any loss, injury or damage suffered as a result of a failure to provide security services.

8.4. [intentionally omitted]

 

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8.5. Special Services. If Tenant requests any services from Landlord other than those for which Landlord is obligated under this Lease, Tenant shall make its request in writing and Landlord may elect in its sole discretion whether to provide the requested services. If Landlord provides any special services to Tenant, Landlord shall charge Tenant for such services at the prevailing rate being charged for such services by other property owners and property managers of comparable buildings in the area of the Property, and Tenant shall pay the cost of such services as Additional Rent within thirty (30) business days after receipt of Landlord’s invoice.

9. TENANT IMPROVEMENT WORK; ALTERATIONS

9.1. Tenant Improvement Work. Landlord shall deliver the Premises to Tenant with the Tenant Improvement Work substantially completed consistent with the Work Letter attached, marked Exhibit E .

9.2. Landlord Consent. Tenant shall not make or permit any alterations to the Building Systems, and shall not make or permit any alterations, installations, additions or improvements, structural or otherwise (collectively, “Alterations” ) in or to the Premises or the Building without Landlord’s prior written consent, which Landlord shall not unreasonably withhold, condition or delay. Landlord shall respond to any request by Tenant to make any Alteration within ten (10) business days after receipt of such request for consent from Tenant. Notwithstanding the foregoing, Landlord’s consent shall not be required in the case Alterations that do not exceed a total price of Twenty-Five Thousand Dollars ($25,000) per project and do not affect the Building Systems or the structural integrity of the Building. All Alterations shall be done at Tenant’s sole cost and expense, including without limitation the cost and expense of obtaining all permits and approvals required for any Alterations. Tenant shall reimburse Landlord within thirty (30) days after written demand as Additional Rent for any out-of-pocket expenses incurred by Landlord in connection with Alterations elected to be made and/or any repairs or replacements required to be made by Tenant, including, without limitation, any reasonable fees charged by Landlord’s contractors and/or consultants to review plans and specifications prepared by Tenant.

9.3. Project Requirements. The provisions of this Section 9.3 shall apply to all Alterations, whether or not requiring Landlord’s approval (unless otherwise noted):

(a) Prior to entering into a contract for Alterations requiring Landlord’s approval, Tenant shall obtain Landlord’s written approval, which approval shall not be unreasonably withheld, conditioned or delayed, of the identity of each of the design architect and the general contractor.

(b) Before commencing the construction of any Alterations requiring Landlord’s approval, Tenant shall procure or cause to be procured the insurance coverage described below and provide Landlord with certificates of such insurance in form reasonably satisfactory to Landlord. All such insurance shall comply with the following requirements of this Section and of Section 13.2.

(i) During the course of construction, to the extent not covered by property insurance maintained by Tenant pursuant to Section 13.2, comprehensive “all risk” builder’s risk insurance, including vandalism and malicious mischief, excluding earthquake and flood, covering all improvements in place on the Premises, all materials and equipment stored at the site and furnished under contract, and all materials and equipment that

 

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are in the process of fabrication at the premises of any third party or that have been placed in transit to the Premises when such fabrication or transit is at the risk of, or when title to or an insurable interest in such materials or equipment has passed to, Tenant or its construction manager, contractors or subcontractors (excluding any contractors’, subcontractors’ and construction managers’ tools and equipment, and property owned by the employees of the construction manager, any contractor or any subcontractor), such insurance to be written on a completed value basis in an amount not less than the full estimated replacement value of Alterations.

(ii) Commercial general liability insurance covering Tenant, Landlord and each construction manager, contractor and subcontractor engaged in any work on the Premises, which insurance may be effected by endorsement, if obtainable, on the policy required to be carried pursuant to Section 13.2, including insurance for completed operations, elevators, owner’s, construction manager’s and contractor’s protective liability, products completed operations for one (1) year after the date of acceptance of the work by Tenant, broad form blanket contractual liability, broad form property damage and full form personal injury (including but not limited to bodily injury), covering the performance of all work at or from the Premises by Tenant, its construction manager, contractors and subcontractors, and in a liability amount not less than the amount at the time carried by prudent owners of comparable construction projects, but in any event not less than Two Million Dollars ($2,000,000) combined single limit, which policy shall include for the mutual benefit of Landlord and Tenant, bodily injury liability and property damage liability, and automobile insurance on any non-owned, hired or leased automotive equipment used in the construction of any work.

(iii) Workers’ Compensation Insurance approved by the State of California, in the amounts and coverages required under workers’ compensation, disability and similar employee benefit laws applicable to the Premises, and Employer’s Liability Insurance with limits not less than One Million Dollars ($1,000,000) or such higher amounts as may be required by law.

(c) All construction and other work in connection with any Alterations shall be done at Tenant’s sole cost and expense and in a first class manner. Tenant shall construct the Alterations in accordance with all Applicable Laws, and with plans and specifications that are in accordance with the provisions of this Article 9 and all other provisions of this Lease.

(d) Prior to the commencement of the any Alteration in excess of Ten Thousand Dollars ($10,000), Landlord shall have the right to post in a conspicuous location on the Premises and to record in the public records a notice of Landlord’s nonresponsibility. Tenant covenants and agrees to give Landlord at least ten (10) days prior written notice of the commencement of any such Alteration in order that Landlord shall have sufficient time to post such notice.

(e) Tenant shall take all necessary safety precautions during any construction.

(f) Tenant shall prepare and maintain for any construction requiring Landlord’s approval (i) on a current basis during construction, annotated plans and specifications showing clearly all changes, revisions and substitutions during construction, and (ii) upon completion of construction of any material Alterations, as-built drawings showing clearly all changes, revisions and substitutions during construction, including, without limitation, field

 

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changes and the final location of all mechanical equipment, utility lines, ducts, outlets, structural members, walls, partitions and other significant features. These as-built drawings and annotated plans and specifications shall be kept at the Premises and Tenant shall update them as often as necessary to keep them current. The as-built drawings and annotated plans and specifications shall be made available for copying and inspection by Landlord at all reasonable times. Within sixty (60) days after the Alterations have been substantially completed, Tenant shall, at its cost, make a copy of the as-built drawings and annotated plans and specifications and deliver the same to Landlord.

(g) Upon completion of the construction of any Alterations in excess of Ten Thousand Dollars ($10,000) during the Term, Tenant shall file for recordation, or cause to be filed for recordation, a notice of completion and shall deliver to Landlord evidence satisfactory to Landlord of payment of all costs, expenses, liabilities and liens arising out of or in any way connected with such construction (except for liens that are contested in the manner provided herein).

9.4. Ownership of Improvements. Except as provided in Section 9.5 or as otherwise agreed to in writing by the parties at the time such item is installed, all Alterations and any other appurtenances, fixtures, improvements, equipment, additions and property permanently attached to or installed in the Premises at the commencement of or during the Term, shall at the end of the Term become Landlord’s property without compensation to Tenant, or be removed in accordance with this Section. Upon written request by Tenant, Landlord shall notify Tenant in writing at the time of Landlord’s approval of the Alterations whether or not the proposed Alterations will be required to be removed by Tenant at the end of the Term and Tenant shall have no obligation to remove any Alterations that Landlord has not designated in writing for removal. Tenant shall repair or pay the cost of repairing any damage to the Property caused by the removal of Alterations. If Tenant fails to perform its repair obligations, without limiting any other right or remedy, Landlord may on fifteen (15) business days prior written notice to Tenant perform such obligations at Tenant’s expense and Tenant shall reimburse Landlord within thirty (30) days after demand for all out-of-pocket costs and expenses incurred by Landlord in connection with such repair. Tenant’s obligations under this Section shall survive the termination of this Lease.

9.5. Tenant’s Personal Property. All furniture, trade fixtures, furnishings, equipment and articles of movable personal property installed in the Premises by or for the account of Tenant (except for ceiling and related fixtures, HVAC equipment and floor coverings, which shall become the property of Landlord at the end of the Term, and which can be removed without structural or other material damage to the Property (collectively, “Tenant’s Property” ) shall be and remain the property of Tenant and may be removed by it at any time during the Term. Tenant shall remove from the Premises all Tenant’s Property on or before the Termination Date, except such items as the parties have agreed pursuant to the provisions of this Lease or by separate agreement are to remain and to become the property of Landlord. Tenant shall repair or pay the cost of repairing any damage to the Property resulting from such removal, and the provisions of Section 9.4 above shall apply in the event Tenant fails to do so. Any items of Tenant’s Property which remain in the Premises after the Termination Date may, on five (5) business days prior written notice to Tenant, at the option of Landlord, be deemed abandoned and in such case may either be retained by Landlord as its property or be disposed of, without accountability, at Tenant’s expense in such manner as Landlord may see fit.

 

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10. LIENS

Tenant shall keep the Premises free from any liens arising out of any work performed, material furnished or obligations incurred by or for Tenant. If Tenant shall not, within thirty (30) days following notice of the imposition of any such lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided in this Lease and by law, the right but not the obligation to cause any such lien to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith (including, without limitation, reasonable counsel fees) shall be payable to Landlord by Tenant upon demand with interest from the date incurred at the Interest Rate. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law or that Landlord shall deem proper for the protection of Landlord, the Premises and the Property from mechanics’ and materialmen’s liens, as more specifically provided in Section 9.3(d).

11. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS

11.1. Applicable Laws. Tenant, at Tenant’s cost and expense, in regard to its use of the Premises and any Alterations Tenant makes to the Premises, shall comply with all applicable laws, statutes, codes, ordinances, orders, rules, regulations, conditions of approval, and requirements, of all federal, state, county, municipal and other governmental authorities and the departments, commissions, boards, bureaus, instrumentalities, and officers thereof, and all administrative or judicial orders or decrees and all permits, licenses, approvals and other entitlements issued by governmental entities, and rules of common law, relating to or affecting the Premises or the use, operation or occupancy of the Premises, whether now existing or hereafter enacted (collectively, “Applicable Laws” ). Notwithstanding anything to the contrary contained or implied in the foregoing, Landlord shall be solely responsible for compliance with Applicable Laws and shall make or cause to be made all such improvements and alterations to the Premises and the Common Areas (including, without limitation, removing barriers and providing alternative services) as shall be required to comply with all applicable building codes, laws and ordinances relating to public accommodations, including the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12111 et seq. (the “ADA” ), and the ADA Accessibility Guidelines promulgated by the Architectural and Transportation Barriers Compliance Board, the public accommodations title of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000a et. seq., the Architectural Barriers Act of 1968, 42 U.S.C. §§ 4151 et. seq., as amended, Title V of the Rehabilitation Act of 1973, 29 U.S.C. §§ 790 et. seq., the Minimum Guidelines and Requirements for Accessible Design, 36 C.F.R. Part 1190, the Uniform Federal Accessibility Standards, and Title 24 of the California Code of Regulations, as the same may be amended from time to time, or any similar or successor laws, ordinances and regulations, now or hereafter adopted. Any Alterations made or performed by Tenant or any person or entity claiming through or under Tenant pursuant to the provisions of this Section shall be made in conformity with and subject to the provisions of Article 9. Tenant, with respect to its use of the Premises and Alterations Tenant makes to the Premises shall be responsible for compliance with Applicable Laws from and after the Commencement Date.

11.2. Insurance Requirements. Tenant shall not do anything, or permit anything to be done, in or about the Premises that would: (a) invalidate any provisions of or cause any increase in the applicable rates for any fire or other insurance policies covering the Property or any property located therein (unless Tenant pays for such increased costs), or (b) result in a refusal by fire insurance companies of good standing to insure the Property or any

 

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such property in amounts reasonably satisfactory to Landlord (which amounts shall be comparable to the amounts required by comparable landlords of comparable buildings), or (c) subjects Landlord to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in the Premises. 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 that shall hereafter perform the function of such Association.

12. HAZARDOUS MATERIALS

12.1. Definitions. As used in this Lease, the following terms shall have the following meanings:

(a) “Environmental Activity” means any use, treatment, keeping, storage, holding, release, emission, discharge, manufacturing, generation, processing, abatement, removal, disposition, handling, transportation, deposit, leaking, spilling, injecting, dumping or disposing of any Hazardous Materials from, into, on or under the Premises, and shall include the exacerbation of any pre-existing contamination by Tenant or any of Tenant’s Agents.

(b) “Environmental Laws” mean all Applicable Laws, now or hereafter in effect, relating to environmental conditions, industrial hygiene or Hazardous Materials on, under or about the Property, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., the Clean Air Act, 42 U.S.C. Section 7401, et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 through 2629, the Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j, and any similar state and local laws and ordinances and the regulations now or hereafter adopted and published and/or promulgated pursuant thereto.

(c) “Hazardous Material” means any chemical, substance, medical or other waste, living organism or combination thereof which is or may be hazardous to the environment or human or animal health or safety due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potentially harmful properties or effects. Hazardous Materials shall include, without limitation, petroleum hydrocarbons, including MTBE, crude oil or any fraction thereof, asbestos, radon, polychlorinated biphenyls (PCBs), methane, lead, urea, formaldehyde foam insulation, microbial matter (including mold) and all substances which now or in the future may be defined as “hazardous substances,” “hazardous wastes,” “extremely hazardous wastes,” “hazardous materials,” “toxic substances,” “infectious wastes,” “biohazardous wastes,” “medical wastes,” “radioactive wastes” or which are otherwise listed, defined or regulated in any manner pursuant to any Environmental Laws.

(d) “Tenant’s Hazardous Materials” means any Hazardous Materials resulting from the Environmental Activity by Tenant or any of Tenant’s Agents on the Premises.

12.2. Environmental. Landlord hereby informs Tenant that detectable amounts of Hazardous Materials may have come to be located on, beneath and/or in the vicinity of the Premises. Landlord makes no representation or warranty with regard to the environmental condition of the Property.

 

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12.3. Use of Hazardous Materials. Tenant shall not cause or permit any Hazardous Materials to be used, stored, discharged, released or disposed of in the Premises or cause any Hazardous Materials to be used, stored, discharged, released or disposed of in, from, under or about, the Property, or any other land or improvements in the vicinity of the Property, excepting only the types and minor quantities of Hazardous Materials which are normally used in connection with general office uses and then only in strict accordance with all Applicable Laws, including all Environmental Laws. As of the Commencement Date, Tenant shall provide Landlord a complete list of all Hazardous Materials (including MSDS sheets for all such Hazardous Materials) used or stored by Tenant or any of Tenant’s Agents or subtenants at the Premises, excluding standard janitorial and office products. Throughout the Term, Tenant shall continue to update this list so that it remains current. Without limiting the foregoing, Tenant shall, at its own expense, procure, maintain in effect and comply with all conditions of any and all permits, licenses, and other governmental and regulatory approvals required for Tenant’s use of Hazardous Materials at the Premises, including, without limitation, discharge of appropriately treated materials or wastes into or through any sanitary sewer serving the Premises. Tenant shall in all respects handle, treat, deal with and manage any and all Tenant’s Hazardous Materials in total conformity with all Environmental Laws and prudent industry practices regarding management of such Hazardous Materials.

12.4. Remediation of Hazardous Materials. Tenant shall, upon demand of Landlord, and at Tenant’s sole cost and expense, promptly take all actions to remediate the Property from the effects of any Tenant’s Hazardous Materials. Such actions shall include, but not be limited to, the investigation of the environmental condition of the Property, the preparation of any feasibility studies, reports or remedial plans, and the performance of any cleanup, remediation, containment, operation, maintenance, monitoring or restoration work, whether on or off of the Property. Tenant shall take all actions necessary to remediate the Property from the effects of such Tenant’s Hazardous Materials to a condition required by any applicable governmental authority. All work shall be performed by one or more contractors selected by Tenant and reasonably approved in advance and in writing by Landlord. Tenant shall proceed continuously and diligently with such investigatory and remedial actions, provided that in all cases such actions shall be in accordance with all Applicable Laws. Any such actions shall be performed in a good, safe and workmanlike manner. Tenant shall pay all costs in connection with such investigatory and remedial activities, including but not limited to all power and utility costs, and any and all taxes or fees that may be applicable to such activities. Tenant shall promptly provide to Landlord copies of testing results and reports that are generated in connection with the above activities and any that are submitted to any governmental entity. Promptly upon completion of such investigation and remediation, Tenant shall permanently seal or cap all monitoring wells and test holes in accordance with sound engineering practice and in compliance with Applicable Laws, remove all associated equipment, and restore the Property to the maximum extent possible, which shall include, without limitation, the repair of any surface damage, including paving, caused by such investigation or remediation.

12.5. Environmental Indemnity. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord and Landlord’s trustees, directors, officers, agents and employees and their respective successors and assigns (collectively, “Landlord’s Agents” ), free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including reasonable attorneys’ and consultants’ fees and oversight and response costs) to the extent arising from (a) Environmental

 

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Activity by Tenant or Tenant’s Agents; or (b) failure of Tenant or Tenant’s Agents to comply with any Environmental Law with respect to Tenant’s Environmental Activity; or (c) Tenant’s failure to remove Tenant’s Hazardous Materials as required in Section 12.4. Matters referred to in subparts (a), (b) and (c) in the previous sentence are referred to herein collectively as “ Environmental Indemnity Matters .” Tenant’s obligations hereunder shall include, but not be limited to, the burden and expense of defending all claims, suits and administrative proceedings (with counsel reasonably approved by Landlord), even if such claims, suits or proceedings are groundless, false or fraudulent; conducting all negotiations of any description; and promptly paying and discharging when due any and all judgments, penalties, fines or other sums due against or from Landlord or the Premises. As a condition to Tenant’s obligations under this Section, Tenant shall receive timely notice of any Environmental Indemnity Matter. Prior to retaining counsel to defend such claims, suits or proceedings, Tenant shall obtain Landlord’s written approval of the identity of such counsel, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant acknowledges that Landlord, as the owner of the Property, shall have the right at its election and at Tenant’s expense, to negotiate, defend, approve and appeal any action taken or order issued with regard to Tenant’s Hazardous Materials by any applicable governmental authority; provided, however, that Tenant shall have the right to participate in any such negotiations and to approve any settlements, in the exercise of its reasonable discretion. In the event Tenant’s failure to surrender the Premises at the expiration or earlier termination of this Lease free of Tenant’s Hazardous Materials prevents Landlord from reletting the Premises, or reduces the fair market and/or rental value of the Premises or any portion thereof, Tenant’s indemnity obligations shall include all losses to Landlord arising therefrom. Notwithstanding the foregoing, Tenant shall in no event be responsible for consequential damages.

12.6. No Lien . Tenant shall not suffer any li