TABLE OF CONTENTS

 

		Page
ARTICLE 1	PREMISES, BUILDING, PROJECT, AND COMMON AREAS	5
ARTICLE 2	LEASE TERM; OPTION TERM	7
ARTICLE 3	BASE RENT	12
ARTICLE 4	ADDITIONAL RENT	13
ARTICLE 5	USE OF PREMISES	24
ARTICLE 6	SERVICES AND UTILITIES	25
ARTICLE 7	REPAIRS	28
ARTICLE 8	ADDITIONS AND ALTERATIONS	29
ARTICLE 9	COVENANT AGAINST LIENS	31
ARTICLE 10	INSURANCE	32
ARTICLE 11	DAMAGE AND DESTRUCTION	36
ARTICLE 12	NONWAIVER	38
ARTICLE 13	CONDEMNATION	39
ARTICLE 14	ASSIGNMENT AND SUBLETTING	39
ARTICLE 15	SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES	44
ARTICLE 16	HOLDING OVER	45
ARTICLE 17	ESTOPPEL CERTIFICATES	45
ARTICLE 18	SUBORDINATION	46
ARTICLE 19	DEFAULTS; REMEDIES	46
ARTICLE 20	COVENANT OF QUIET ENJOYMENT	49
ARTICLE 21	LETTER OF CREDIT	50
ARTICLE 22	SUBSTITUTION OF OTHER PREMISES	52
ARTICLE 23	SIGNS	53

 

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ARTICLE 24	COMPLIANCE WITH LAW	55
ARTICLE 25	LATE CHARGES	56
ARTICLE 26	LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT	56
ARTICLE 27	ENTRY BY LANDLORD	57
ARTICLE 28	TENANT PARKING	58
ARTICLE 29	MISCELLANEOUS PROVISIONS	59

 

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INDEX

 

	Page(s)
13480 Lease	7
13480 Premises	7
13500 Lease	7
13500 Premises	7
Abatement Event	13
Accountant	25
Actual Cost	28
Additional Notice	13
Additional Rent	14
Advocate Arbitrators	10
Alterations	30
Applicable Laws	56
Approved Assignee	8
Approved Bank	51
Arbitration Agreement	11
Award	12
Bank Prime Loan	57
Base Building	31
Base Rent	13
Base Year	14
BOMA	6
Briefs	11
Brokers	65
BS/BS Exception	29
Building	1, 5
Building Common Areas,	6
Building Common Areas	6
Building Hours	26
Building Structure	29
Building Systems	29
Building Top Sign Specifications	55
Business Hours	26
Cap	19
CC&Rs	26
Common Areas	6
Communication Equipment	69
Comparable Area	2
Contract Rate Schedule	9
Contract Rent	9
Control,	45

 

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	Page(s)
Controllable Expenses	19
Cost Pools	22
Damage Termination Date	38
Damage Termination Notice	38
Direct Expenses	14
Eligibility Period	13
Environmental Laws	67
Estimate	23
Estimate Statement	23
Estimated Excess	23
Excess	22
Exercise Conditions	8
Exercise Notice	9
Expense Year	14
First Rebuttals	11
Force Majeure	62
Hazardous Material(s)	67
Holidays	26
HVAC	26
Identification Requirements	67
Increases	18
Interest Rate	57
Kilroy Sabre Springs	1, 5
Landlord	1
Landlord Parties	33
Landlord Repair Notice	37
Landlord Response Date	10
Landlord Response Notice	9
Landlord’s Initial Statements	12
Landlord’s Option Rent Calculation	10
Landlord’s Rebuttal Statement	12
L-C Amount	51
L-C Expiration Date	51
L-C Transfer Cap	52
Lease	1
Lease Commencement Date	7
Lease Expiration Date	7
Lease Term	7
Lease Year	7
Lines	66
Mail	63
Market Rate Schedule	8

 

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	Page(s)
Memorandum	61
Neutral Appraiser	10
Neutral Arbitrator	10
New Services	19
Nondisturbance Agreement	47
Notices	63
Objectionable Name	55
Operating Expenses	14
Option Rent	8
Option Term	8
Original Improvements	35
Original Tenant	8
Other Improvements	69
Outside Agreement Date	10
Permitted Chemicals	68
Permitted Transferee	45
Permitted Use	3
Premises	5
Project	5
Project Common Areas	6
Project Common Areas,	6
Proposition 13	20
Reminder Notice	9
Renovations	66
Rent.	14
Replacement Premises	53
Review Period	24
Right Holders	8
Second Rebuttals	11
Statement	22
Subject Space	41
Summary	1
Tax Expenses	19
TCCs	5
Tenant	1
Tenant Election Notice	10
Tenant Parties	33
Tenant’s Building-Top Signage	55
Tenant’s Initial Statements	12
Tenant’s Option Rent Calculation	9
Tenant’s Rebuttal Statement	12
Tenant’s Security System	29

 

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	Page(s)
Tenant’s Share	21
Transfer	44
Transfer Costs	43
Transfer Notice	41
Transfer Premium	43
Transferee	41
Transfers	41
Unusable Area	13
Utilities Costs	21
Work Letter Agreement	5

 

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*** Confidential portions of this document have been redacted and filed separately with the Commission.

 

4.

Base Rent ( Article 3 ):

 

Period during Lease Term*		Annualized Base Rent*			Monthly Installment of Base Rent			Monthly Rental Rate per Rentable Square Foot
May 7, 2009 — May 31, 2010*		$	656,712.00		$	54,726.00		$	3.000
June 1, 2010 — May 31, 2011		[***]			[***]			[***]
June 1, 2011 — May 31, 2012		[***]			[***]			[***]
June 1, 2012 — May 31, 2013		[***]			[***]			[***]
June 1, 2013 — May 31, 2014		[***]			[***]			[***]
June 1, 2014 — May 31, 2015		[***]			[***]			[***]
June 1, 2015 — May 31, 2016		[***]			[***]			[***]
June 1, 2016 — February 28, 2017		$	864,188.16		$	72,015.68		$	3.948

 

	*  Base Rent shall commence to accrue upon the Lease Commencement Date and shall first (1 st ) be escalated upon (i) the first (1 st ) day of the twelfth (12 th ) calendar month after the calendar month in which the Lease Commencement Date occurs if the Lease Commencement Date occurs on the first (1 st ) day of any calendar month, or (ii) the first (1 st ) day of the thirteenth (13 th ) calendar month after the calendar month in which the Lease Commencement Date occurs if the Lease Commencement Date occurs on other than the first (1 st ) day of any calendar month.
5.	Base Year ( Article 4 ):		Calendar year 2009.
6.	Tenant’s Share ( Article 4 ):		Twelve and ninety-five one-hundredths percent (12.95%) of the Building.
7.	Permitted Use ( Article 5 ):		Tenant shall use the Premises solely for general office use and uses incidental thereto, including, without limitation, support for online services (the “ Permitted Use ”); provided, however, that notwithstanding

 

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			anything to the contrary set forth hereinabove, and as more particularly set forth in the Lease, Tenant shall be responsible for operating and maintaining the Premises pursuant to, and in no event may Tenant’s Permitted Use violate, (A) Landlord’s “Rules and Regulations,” as that term is set forth in Section 5.2 of this Lease, (B) all “Applicable Laws,” as that term is set forth in Article 24 of this Lease, (C) all applicable zoning, building codes and the “CC&Rs,” as that term is set forth in Section 5.3 of this Lease, and (D) the character of the Project as a first-class office building Project.
8.	Letter of Credit ( Article 21 ):		$[***].
9.	Parking Passes ( Article 28 ):		A total of sixty-Three (63) parking passes, fifty-seven (57) of which shall be unreserved parking passes, and six (6) of which shall be for reserved parking spaces, as more particularly set forth in, and pursuant to the terms and conditions of, Article 28 .
10.	Address of Tenant ( Section 29.18 ):		Bridgepoint Education, Inc. 13500 Evening Creek Drive North, Suite 600 San Diego, California 92128 Facsimile No.: 858-408-2903 Attention: Kenny Lin [ Prior to, and following, Lease Commencement Date ]
			with copies to :
			Sheppard Mullin Richter & Hampton LLC 12275 El Camino Real, Ste 200 San Diego, California 92130-2006 Attention: Richard L. Kintz, Esq. Facsimile: 858-509-3691
11.	Address of Landlord ( Section 29.18 ):		See Section 29.18 of the Lease.

 

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12.	Broker(s) ( Section 29.24 ):
	Representing Tenant :   Grubb & Ellis/BRE Commercial 4350 La Jolla village Dr., Suite 500 San Diego, California 92122 Attention: Mr. Chris Hobson		Representing Landlord :   None
13.	Improvement Allowance ( Section 2 of Exhibit B ):		An amount equal to $[***] per usable square foot of the Premises ( i.e. , an amount anticipated to total [***] ($[***] based upon 15,864 usable square feet in the Premises).

 

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*** Confidential portions of this document have been redacted and filed separately with the Commission.

 

ARTICLE 1

 

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

 

1.1            Premises, Building, Project and Common Areas .

 

1.1.1        The Premises .  Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the “ Premises ”).  The outline of the Premises is set forth in Exhibit A attached hereto and each floor or floors of the Premises shall have approximately the number of rentable square feet as set forth in Section 2.2 of the Summary.  The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions (the “ TCCs ”) herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such TCCs by it to be kept and performed and that this Lease is made upon the condition of such performance.  The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises in the “ Building ,” as that term is defined in Section 1.1.2 , below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the “ Common Areas ,” as that term is defined in Section 1.1.3 , below, or the elements thereof or of the accessways to the Premises or the “ Project ,” as that term is defined in Section 1.1.2 , below.  Except as specifically set forth in this Lease and in the Work Letter Agreement attached hereto as Exhibit B (the “ Work Letter Agreement ”), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises.  Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenant’s business, except as specifically set forth in this Lease and the Work Letter Agreement.  The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time in good and sanitary order, condition and repair, subject only to (i) punchlist items provided to Landlord in writing within thirty (30) days following Landlord’s delivery of the Premises to Tenant, (ii) latent defects to the extent identified and, thereafter, promptly communicated to Landlord, (iii) Landlord’s ongoing obligations set forth in Sections 1.1.3 and 29.33 , and Articles 7 and  24 of this Lease, and (iv) the terms of the Work Letter Agreement.

 

1.1.2        The Building and The Project .  The Premises are a part of the building set forth in Section 2.1 of the Summary (the “ Building ”).  The Building is part of an office project known as “ Kilroy Sabre Springs .”  The term “ Project ,” as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Building and the Common Areas are located, and (iii) the other office buildings commonly known as 13480 and 13500 Evening Creek Drive North (respectively, the “ 13480 Building ” and “ 13500 Building ”), which are located adjacent to the Building and the land upon which such adjacent office building is located, and (iv) the adjacent land (commonly known as Phase II) and any buildings or other improvements subsequently added thereon.

 

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1.1.3        Common Areas .  Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the “ Common Areas ”).  The Common Areas shall consist of the “ Project Common Areas ” and the “ Building Common Areas .”  The term “ Project Common Areas ,” as used in this Lease, shall mean the portion of the Project reasonably designated as such by Landlord.  The term “ Building Common Areas ,” as used in this Lease, shall mean the portions of the Common Areas located within the Building reasonably designated as such by Landlord.  The Common Areas shall be maintained and operated in a manner consistent with the “Comparable Buildings” as that term is set forth in Section 4 of Exhibit G , attached to this Lease.  Notwithstanding anything set forth herein to the contrary, the use of the Common Areas shall be subject to the express provisions of this Lease and such rules, regulations and restrictions as Landlord may make from time to time, provided that such rules, regulations and restrictions do not (a) unreasonably interfere with the rights granted to Tenant under this Lease and the Permitted Use granted under Section 5.1 , below or (b) materially increase the cost of Tenant’s occupancy of the Premises through a material increase in Additional Rent.  Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas; provided that no such changes shall be permitted which materially reduce Tenant’s rights or access hereunder, or otherwise materially interferes with Tenant’s ability to use the Premises for the Permitted Use.  Except when and where Tenant’s right of access is specifically excluded in this Lease, Tenant shall have the right of access to the Premises, the Building, and the Project parking facility twenty-four (24) hours per day, seven (7) days per week during the “Lease Term,” as that term is defined in Section 2.1 , below.

 

1.2           Verification of Rentable Square Feet of Premises and Building .  For purposes of this Lease, “rentable square feet” and “usable square feet” shall be calculated pursuant to Standard Method of Measuring Floor Area in Office Building, ANSI Z65.1 - 1996, and its accompanying guidelines (collectively, “ BOMA ”).  Within thirty (30) days after the Lease Commencement Date, Landlord’s space planner/architect shall measure the rentable and usable square feet of the Premises, and thereafter such determined rentable square footages of the Premises shall be presented to Tenant in writing.  Tenant’s space planner/architect may review Landlord’s space planner/architect’s determination of the number of rentable square feet and usable square feet of the Premises and Tenant may, within fifteen (15) business days after Tenant’s receipt of Landlord’s space planner/architect’s written determination, object to such determination by written notice to Landlord.  Tenant’s failure to deliver written notice of such objection within said fifteen (15) business day period shall be deemed to constitute Tenant’s acceptance of Landlord’s space planner/architect’s determination.  If Tenant objects to such determination, Landlord’s space planner/architect and Tenant’s space planner/architect shall promptly meet and attempt to agree upon the rentable and usable square footage of the Premises.  If Landlord’s space planner/architect and Tenant’s space planner/architect cannot agree on the rentable and useable square footage of the Premises within thirty (30) days after Tenant’s objection thereto, Landlord and Tenant shall mutually select an independent third party space measurement professional to field measure the Premises pursuant to BOMA.  Such third party

 

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independent measurement professional’s determination shall be conclusive and binding on Landlord and Tenant.  [***] pay [***] of the fees and expenses of the independent third party space measurement professional.  If the Lease Term commences prior to such final determination, [***] determination shall be utilized until a final determination is made, whereupon an appropriate adjustment, if necessary, shall be made retroactively, and Landlord shall make appropriate payment (if applicable) to Tenant.  In the event that pursuant to the procedure described in this Section 1.2 above, it is determined that the square footage amounts shall be different from those set forth in this Lease, all amounts, percentages and figures appearing or referred to in this Lease based upon such incorrect amount (including, without limitation, the amount of the “ Rent ” and any “ Security Deposit ,” as those terms are defined in Section 4.1 and Article 21 of this Lease, respectively, and the amount of the “Improvement Allowance,” as that term is defined in Section 2.1 of the Work Letter Agreement) shall be modified in accordance with such determination.  If such determination is made, it will be confirmed in writing by Landlord to Tenant.

 

1.3           13480 Premises; 13480 Lease .  Landlord and Tenant are parties to that certain Office Lease dated as of January 31, 2008 (the “ 13480 Lease ”), whereby Tenant leases from Landlord, and Landlord leases to Tenant those certain premises consisting of the entirety of the 13480 Building (the “ 13480 Premises ”).  The terms of the 13480 Lease shall govern Tenant’s lease of the 13480 Premises in all respects and the terms of this Lease shall not be applicable with respect to the 13480 Lease, except to the extent expressly set forth to the contrary herein and therein.

 

1.4           13500 Premises; 13500 Lease .  Landlord and Tenant are parties to that certain Office Lease dated as of January 31, 2008 (the “ 13500 Lease ”), whereby Tenant leases from Landlord, and Landlord leases to Tenant those certain premises consisting of the entirety of the 13500 Building (the “ 13500 Premises ”).  The terms of the 13500 Lease shall govern Tenant’s lease of the 13500 Premises in all respects and the terms of this Lease shall not be applicable with respect to the 13500 Lease, except to the extent expressly set forth to the contrary herein and therein.

 

ARTICLE 2

 

LEASE TERM; OPTION TERM

 

2.1           Initial Lease Term .  The TCCs and provisions of this Lease shall be effective as of the date of this Lease.  The term of this Lease (the “ Lease Term ”) shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the “ Lease Commencement Date ”), and shall terminate on the date set forth in Section 3.3 of the Summary (the “ Lease Expiration Date ”) unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “ Lease Year ” shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, the first Lease Year shall commence on the Lease Commencement Date and end on (i) the last day of the eleventh (11th) calendar month after the calendar month in which the Lease Commencement Date occurs if the Lease Commencement Date occurs on the first (1st) day of any calendar month, or (ii) the last day of the twelfth (12th) calendar month after the calendar month in which the Lease Commencement Date occurs if the Lease Commencement Date occurs on other than

 

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the first (1st) day of any calendar month, and, in either case, the second (2nd) and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date.  At any time during the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C , attached hereto, as a confirmation only of the information set forth therein, which Tenant shall, after confirming the accuracy thereof, execute and return to Landlord within five (5) business days of receipt thereof.

 

2.2           Option Term .

 

2.2.1        Option Right .  Landlord hereby grants the Tenant originally named herein (the “ Original Tenant ”), its “Permitted Transferees,” as that term is set forth in Section 14.8 of this Lease, and any approved assignee of all of Original Tenant’s interest in this Lease, the 13480 Lease and the 13500 Lease (defined in Section 1.4 ) pursuant to the TCCs of Article 14 (an “ Approved Assignee ”) (collectively, the “ Right Holders ”), one (1) option to extend the Lease Term for the entire Premises, by a period of five (5) years (the “ Option Term ”).  Such option shall be exercisable only by Notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Notice, (i) Tenant is not then in monetary or material non-monetary default under this Lease (beyond any applicable notice and cure periods), (ii) Tenant has not been in monetary or material non-monetary default under this Lease (beyond any applicable notice and cure periods) more than once during the prior [***]month period, (iii) Landlord reasonably determines that Tenant is a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with Tenant’s lease of the Premises during the Option Term, and (iv) this Lease then remains in full force and effect and Original Tenant, its Permitted Transferees and/or its Approved Assignees are then in occupancy of no less than [***] of the rentable square footage of the Premises (the foregoing items (i) through (iv) collectively constituting the “ Exercise Conditions ”).  Upon the proper exercise of such option to extend, and provided that, as of the end of the Lease Term, there is no then existing violation of the Exercise Conditions, the Lease Term, as it applies to the entire Premises, shall be extended for a period of five (5) years.  The rights contained in this Section 2.2 shall only be exercised by the Right Holders (but not any other assignee, sublessee or other transferee of Tenant’s interest in this Lease).

 

2.2.2        Option Rent .  The Rent payable by Tenant during the Option Term (the “ Option Rent ”) shall be equal to [***] of the “Market Rent,” as that term is defined in, and determined pursuant to, Exhibit G attached hereto, during the Option Term; provided, however, that the Market Rent for each Lease Year during the Option Term shall be equal to the amount set forth on a “Market Rate Schedule,” as that term is defined below, and under no circumstances shall the Market Rent for any Lease Year occurring during the Option Term, as set forth on the Market Rate Schedule, be less than the corresponding “Contract Rent,” as that term is defined below, as such Contract Rent is set forth on the “Contract Rate Schedule,” as that term is defined below.  The “ Market Rate Schedule ” shall be derived from the Market Rent for the Option Term as determined pursuant to Exhibit G , attached hereto, as follows:  (i) the Market Rent for the first Lease Year of the Option Term shall be equal to the sum of [***], and (ii) the Market Rent for each subsequent Lease Year shall be equal to [***] of the prior Lease Year’s Market Rent.  The “ Contract Rate Schedule ” shall be derived from the Base Rent applicable to the Premises for the Lease Year immediately preceding the Option Term, as follows:  (x) the

 

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“ Contract Rent ” for the first Lease Year of the Option Term shall equal the sum of (A) the Base Rent in effect under this Lease for the Lease Year immediately preceding the commencement of the Option Term, (B) an amount equal to the “Excess” (as defined in Section 4.4 ) which is due under Article 4 of this Lease for the Base Year immediately preceding the commencement of the Option Term, and (C) an amount equal to the monthly amortization reimbursement payment for the “Renewal Allowance” (as defined in Section 3 of Exhibit G to this Lease) to be paid by Landlord in connection with Tenant’s lease of the Premises for the Option Term, with such Renewal Allowance being amortized at a reasonable rate of return to Landlord based on the rates of return then being received by the landlords of the Comparable Buildings in connection with tenant improvement allowances then be granted by such landlords, and (y) the Contract Rent for each subsequent Lease Year shall be equal to [***] of the prior Lease Year’s Contract Rent.  The calculation of the Market Rent shall be derived from a review of, and comparison to, the “Net Equivalent Lease Rates” of the “Comparable Transactions,” as provided for in Exhibit G .  Notwithstanding anything set forth in this Lease to the contrary, the Base Year for the Option Term with respect to the Renewal Premises shall be the calendar year in which the Option Term commences.

 

2.2.3        Exercise of Option .  The option contained in this Section 2.2 shall be exercised by Tenant, if at all, only in the manner set forth in this Section 2.2.3 .  Tenant shall deliver notice (the “ Exercise Notice ”) to Landlord not more than eighteen (18) months nor less than twelve (12) months prior to the expiration of the initial Lease Term, stating that Tenant is irrevocably exercising its extension option; provided, however, in the event Tenant fails to deliver the Exercise Notice by the date which is twelve (12) months prior to the expiration of the initial Lease Term, then Landlord shall deliver Tenant written notice of such failure (the “ Reminder Notice ”), in which event, notwithstanding the failure identified in such Reminder Notice, Tenant shall be deemed to have timely delivered the Exercise Notice as long as the same is delivered to Landlord within five (5) business days following Tenant’s receipt of the Reminder Notice.  If Tenant timely delivers an Exercise Notice to Landlord, then, on or before the date which is nine (9) months prior to the expiration of the initial Lease Term, Tenant shall deliver to Landlord Tenant’s calculation of the Market Rent (the “ Tenant’s Option Rent Calculation ”).  Landlord shall deliver notice (the “ Landlord Response Notice ”) to Tenant on or before the date that is eight (8) months prior to the end of the Lease Term (the “ Landlord Response Date ”), stating that (A) Landlord is accepting Tenant’s Option Rent Calculation as the Market Rent, or (B) rejecting Tenant’s Option Rent Calculation and setting forth Landlord’s calculation of the Market Rent (the “ Landlord’s Option Rent Calculation ”).  Within ten (10) business days of its receipt of the Landlord Response Notice, Tenant shall deliver written notice to Landlord (the “ Tenant Election Notice ”), which shall set forth Tenant’s election to either (i) accept the Market Rent contained in the Landlord’s Option Rent Calculation or (ii) reject the Market Rent contained in the Landlord’s Option Rent Calculation, in which event the parties shall follow the procedure, and the Market Rent shall be determined as set forth in Section 2.2.4 .  Tenant’s failure to timely deliver the Tenant Election Notice shall be conclusively deemed to constitute Tenant’s election to proceed pursuant to alternative (ii) from the immediately preceding sentence.

 

2.2.4        Determination of Market Rent .  In the event Tenant objects or is deemed to have objected to the Market Rent, Landlord and Tenant shall attempt to agree upon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reach agreement within sixty (60) days following Tenant’s objection or deemed objection to the

 

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Landlord’s Option Rent Calculation (the “ Outside Agreement Date ”), then each party shall make a separate, final and binding determination of the Market Rent, and within five (5) days following the Outside Agreement Date, such determinations shall be submitted to the other party and to the arbitrators pursuant to the TCCs of this Section 2.2.4 .

 

2.2.4.1     Landlord and Tenant shall each appoint one (1) arbitrator who shall by profession be a commercial real estate lease broker or commercial real estate lease appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing (or appraisal, as the case may be) of Comparable Buildings.  The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Market Rent, is the closest to the actual Market Rent as determined by the arbitrators, taking into account the requirements of Section 2.2.2 of this Lease.  Each arbitrator shall be appointed within fifteen (15) days after the applicable Outside Agreement Date.  Landlord and Tenant may consult with their selected arbitrators prior to appointment and may select an arbitrator who is favorable to their respective positions.  The arbitrators so selected by Landlord and Tenant shall be deemed the “ Advocate Arbitrators ”.

 

2.2.4.2     The two (2) Advocate Arbitrators so appointed shall be specifically required pursuant to an engagement letter within ten (10) days of the date of the appointment of the last appointed Advocate Arbitrator agree upon and appoint a third (3 rd ) arbitrator (“ Neutral Arbitrator ”) who shall be a commercial real estate lease attorney who shall have been active over the five (5) year period ending on the date of such appointment in the leasing of Comparable Buildings, except that neither the Landlord or Tenant or either party’s Advocate Arbitrator may, directly or indirectly, consult with the Neutral Arbitrator prior to or subsequent to his or her appearance; provided, however, the Neutral Arbitrator shall retain an appraiser (the “ Neutral Appraiser ”) to assist such Neutral Arbitrator (which Neutral Appraiser shall be selected by the Advocates Arbitrators).  The Neutral Appraiser shall be retained for the sole purpose of advising and assisting the Neutral Arbitrator, and such Neutral Appraiser shall not have an independent vote as the whether Landlord’s or Tenant’s submitted Market Rent is closest to the Market Rent.  In no event shall either the Neutral Arbitrator or the Neutral Appraiser have represented (or have been engaged to represent) Landlord or Tenant during the five (5) year period preceding the Outside Agreement Date or have any business or ownership affiliation with either of the Advocate Arbitrators during such five (5) year period (as opposed to having had professional interaction with the same).  The Neutral Arbitrator shall be retained via an engagement letter jointly prepared by Landlord’s counsel and Tenant’s counsel.

 

2.2.4.3     The parties shall, in connection with the determination of the Market Rent, enter into an arbitration agreement (the “ Arbitration Agreement ”) which shall set forth the following:  (i) each party’s final and binding Market Rent determination, (ii) an agreement to be signed by the Neutral Arbitrator, the form of which agreement shall be attached as an Exhibit to the Arbitration Agreement, whereby the Neutral Arbitrator shall agree to undertake the arbitration and render a decision in accordance with the terms of this Lease, as modified by the Arbitration Agreement, (iii) instructions to be followed by the Neutral Arbitrator when conducting such arbitration, which instructions shall be mutually and reasonably prepared by Landlord and Tenant and which instructions shall be consistent with the terms and conditions of this Lease, (iv) that Landlord and Tenant shall each have the right to have its Advocate Arbitrator submit to the Neutral Arbitrator (with a copy to the other parties), on or before a date

 

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the presiding judge of the Superior Court of San Diego County to appoint such Advocate Arbitrator subject to the criteria in Section 2.2.4.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such Advocate Arbitrator.

 

2.2.4.5     If the two Advocate Arbitrators fail to agree upon and appoint the Neutral Arbitrator, then either party may petition the presiding judge of the Superior Court of San Diego County to appoint the Neutral Arbitrator, subject to criteria in Section 2.2.4.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such arbitrator.

 

2.2.4.6     The costs of the Neutral Arbitrator and Neutral Appraiser shall be [***].  The costs of the Advocate Arbitrator representing the Tenant shall be borne by the Tenant.  The Costs of the Advocate Arbitrator representing the Landlord shall be borne by the Landlord.  The costs of petitioning any judge under Section 2.2.4.4 shall be [***].  The costs of petitioning any judge under Section 2.2.4.5 shall be [***].

 

ARTICLE 3

 

BASE RENT

 

3.1           Base Rent .  Tenant shall pay, without prior notice or demand, to Landlord or Landlord’s agent at the management office of the Project, or, at Landlord’s option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (“ Base Rent ”) as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or deduction whatsoever.  The Base Rent for the first full month of the Lease Term which occurs after the expiration of any free rent period shall be paid at the time of Tenant’s execution of this Lease.  If any Rent payment date (including the Lease Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any such fractional month shall accrue on a daily basis during such fractional month and shall total an amount equal to the product of (i) a fraction, the numerator of which is the number of days in such fractional month and the denominator of which is the actual number of days occurring in such calendar month, and (ii) the then-applicable Monthly Installment of Base Rent.  All other payments or adjustments required to be made under the TCCs of this Lease that require proration on a time basis shall be prorated on the same basis.

 

3.2           Abatement of Rent .  In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, as a result of (i) repairs, maintenance or alterations performed by Landlord, or which Landlord failed to perform, before or after the Lease Commencement Date and required by this Lease, which substantially interferes with Tenant’s use of or ingress to or egress from the Building, Project (including the Common Areas), or the Premises (including the Project parking areas to the extent reasonable replacement spaces are not provided); or (ii) the failure by Landlord to provide necessary services, utilities, parking spaces (unless replacement parking spaces and reasonable accommodations associated therewith are

 

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provided by Landlord), or ingress to and egress from the Building, Project (including the Common Areas), or Premises as required pursuant to the TCCs of this Lease; or (iii) the presence of “Hazardous Materials” (as that term is defined in Section 29.33.1 , below) not brought on the Premises by “Tenant Parties,” as that term is set forth in Section 10.1 of this Lease, to the extent such presence substantially interferes with Tenant’s use of or ingress to or egress from the Building, Project (including the Common Areas), or Premises (including the Project parking areas to the extent reasonable replacement spaces are not provided) (any such set of circumstances as set forth in items (i) through (iii), above, to be known as an “ Abatement Event ”), then Tenant shall give Landlord notice of such Abatement Event, and if such Abatement Event continues for five (5) or more consecutive business days after Landlord’s receipt of any such notice (the “ Eligibility Period ”), then Tenant may deliver an additional notice to Landlord (the “ Additional Notice ”), specifying such Abatement Event and Tenant’s intention to abate the payment of Rent under this Lease.  If Landlord does not cure such Abatement Event within three (3) business days of receipt of such Additional Notice, then as Tenant’s sole remedy vis-à-vis such Abatement Event, the Base Rent and Tenant’s Share of Direct Expenses shall be abated or reduced, as the case may be, after expiration of the Eligibility Period, for such time that Tenant continues to be so prevented from using, and does not use, the Premises, or a portion thereof, in the proportion of the rentable area of the portion of the Premises that Tenant is prevented from using and does not use (“ Unusable Area ”).  To the extent an Abatement Event is caused by an event covered by Articles 11 or 13 of this Lease, then the terms of such Article 11 or 13 , as the case may be, shall govern Tenant’s right to abate rent and the terms of this Section 3.2 shall not be applicable thereto.

 

ARTICLE 4

 

ADDITIONAL RENT

 

4.1           General Terms .  In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay “ Tenant’s Share ” of the annual “ Direct Expenses ,” as those terms are defined in Sections 4.2.6  and  4.2.2 , respectively, of this Lease which are in excess of the amount of Direct Expenses applicable to the “Base Year,” as that term is defined in Section 4.2.1 , below; provided, however, that in no event shall any decrease in Direct Expenses for any Expense Year below Direct Expenses for the Base Year entitle Tenant to any decrease in Base Rent or any credit against sums due under this Lease.  Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the TCCs of this Lease, are hereinafter collectively referred to as the “ Additional Rent, ” and the Base Rent and the Additional Rent are herein collectively referred to as “ Rent .”  All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent; provided, however, the parties hereby acknowledge that the first monthly installment of Tenant’s Share of any “Estimated Excess,” as that term is set forth in, and pursuant to the terms and conditions of, Section 4.4.2 of this Lease, shall first be due and payable for the calendar month occurring immediately following the expiration of the Base Year.  Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term.

 

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

 

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

 

4.2.2        “ Direct Expenses ” shall mean “Operating Expenses,” “Tax Expenses” and “Utilities Costs.”

 

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

 

4.2.4        “ Operating Expenses ” shall be calculated in accordance with sound real estate accounting practices, consistently applied from year to year, and shall mean all expenses, costs and amounts of every kind and nature which, in accordance with sound real estate management practices, consistently applied from year to year, Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof.  Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following:  (i) the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) costs incurred in connection with the parking areas servicing the Project; (vi) fees and other costs, including management fees (which management fees shall equal [***]), consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under any equipment rental agreements and the fair rental value of any management office space; (viii) wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons (other than persons generally considered to be higher in rank than the position of “Asset Manager”) engaged in the operation, maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and replacement (but with respect to replacement, only to the extent necessitated by normal wear and tear during the Lease Term) of all systems and equipment and components thereof of the Building; (xi) the cost of janitorial, alarm, security and other services, non-capital replacement of wall and floor coverings, ceiling tiles and fixtures in common areas (but only to the extent necessitated by normal wear and tear during the Lease Term), maintenance and replacement of curbs and walkways, repair to roofs; (xii) amortization of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof (which amortization calculation shall include interest at the “Interest Rate,” as that term is set forth in Article 25 of this Lease); (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are reasonably intended to effect economies in the operation or maintenance of the

 

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Project, or any portion thereof, to the extent of cost savings reasonably anticipated by Landlord at the time of such expenditure to be incurred in connection therewith, (B) that are required to comply with present or anticipated conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition (but only to the extent necessitated by normal wear and tear during the Lease Term), or (D) that are required under any governmental law or regulation by a federal, state or local governmental agency, except for capital repairs, replacements or other improvements to remedy a condition existing prior to the Lease Commencement Date which an applicable governmental authority, if it had knowledge of such condition prior to the Lease Commencement Date, would have then required to be remedied pursuant to then-current governmental laws or regulations in their form existing as of the Lease Commencement Date and pursuant to the then-current interpretation of such governmental laws or regulations by the applicable governmental authority as of the Lease Commencement Date; provided, however, that any capital expenditure shall be amortized with interest at the Interest Rate over its useful life as Landlord shall reasonably determine in accordance with sound real estate management and accounting practices; and such amortized costs shall be included in Operating Expenses only for that portion of the useful life which falls within the Lease Term; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute “Tax Expenses” as that term is defined in Section 4.2.5 , below; and (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Building.  Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:

 

(a)           costs, including marketing costs, legal fees, space planners’ fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including permit, construction, license and inspection costs, improvement allowances, incurred with respect to the installation of premises improvements made for tenants or occupants occupying space in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating space for tenants or other occupants of the Project (excluding, however, such costs relating to any Common Areas or parking facilities);

 

(b)           except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest costs of capital repairs, replacements and alterations, and costs of capital improvements and equipment and costs to repair defects in the original construction of the Project to the extent such repair is covered by a warranty;

 

(c)           costs for which the Landlord is reimbursed, or would have been reimbursed if Landlord had used commercially reasonable efforts to collect such amounts, by any tenant or occupant of the Project or by insurance by its carrier or any tenant’s carrier or by anyone else, and electric power or other utility costs for which any tenant directly contracts with the local public service company;

 

(d)           any bad debt loss, rent loss, or reserves for bad debts or rent loss;

 

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(e)           costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project).  Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee or ground lessor (except as the actions of the Tenant may be in issue), costs and fees incurred in the selling, syndicating, financing, mortgaging or hypothecating any of the Landlord’s interest in the Project, and costs or fees incurred in connection with any disputes between Landlord and its employees or brokers, between Landlord and Project management, or between Landlord and other tenants or occupants, and Landlord’s general corporate overhead and general and administrative expenses;

 

(f)            the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-a-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Asset manager;

 

(g)           amount paid as ground rental for all or any portion of the Project by the Landlord and attorneys fees, transfer taxes, and any other transactional expenses associated with any ground lease of the Project;

 

(h)           overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties providing similar services in the “Comparable Area” (as that term is defined in Exhibit G to this Lease) on a competitive basis;

 

(i)            any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense;

 

(j)            rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project ;

 

(k)           all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

 

(l)            costs, other than those incurred in ordinary maintenance and repair, for sculpture, paintings, fountains or other objects of art;

 

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(m)          any costs expressly excluded from Operating Expenses elsewhere in this Lease;

 

(n)           rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings with adjustment where appropriate for the size of the applicable project;

 

(o)           costs to the extent arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services;

 

(p)           costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or a “Landlord Party,” as that term is defined in Section 10.1 of this Lease, or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; provided, however, Landlord hereby acknowledges that it has not received written notice of the existence of hazardous material in the Building or the Project;

 

(q)           costs, fees, dues, contributions or similar expenses for political or charitable organizations;

 

(r)            reserves for future improvements, repairs, additions, etc., in excess of such amounts in the Base Year; and

 

(s)           costs incurred in order to cause the Building or the Project to comply with any applicable governmental law or regulation in effect and being enforced as of the Lease Commencement Date, but only to the extent such law or regulation required compliance prior to the Lease Commencement Date.

 

[***]  If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant.  If the Project is not at least [***] percent ([***]%) occupied during all or a portion of the Base Year or any Expense

 

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Year, Landlord shall make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been [***] percent ([***]%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year.  Operating Expenses for the Base Year shall include market-wide cost increases (including utility rate increases) due to extraordinary circumstances, including, but not limited to, Force Majeure, boycotts, strikes, conservation surcharges, embargoes or shortages, or amortized costs relating to capital improvements (collectively, “ Increases ”); provided, however, that at such time as any such particularly Increases are no longer included in Operating Expenses, such Increase shall be excluded from the Base Year calculation of Operating Expenses.  In no event shall the components of Direct Expenses for any Expense Year related to Utility Costs or Project services or Project insurance costs be less than the corresponding components of Direct Expenses related to Utility Costs, Project Services and Project insurance costs in the Base Year.  Landlord shall not (i) make a profit by charging items to Operating Expenses that are otherwise also charged separately to others and (ii) subject to Landlord’s right to adjust the components of Operating Expenses described above in this paragraph, collect Operating Expenses from Tenant and all other tenants in the Project in an amount in excess of what Landlord incurs for the items included in Operating Expenses.   If Landlord, in any Expense Year following the Base Year, begins providing any new category of services (as opposed to an expansion in scope of a service or a change in a type of service) (the “ New Services ”), then for such period of time in which such New Services apply, Operating Expenses for the Base Year shall be increased by the amount that Landlord reasonably determines it would have incurred had Landlord provided such New Services during the same period of time during the Base Year as such New Services were provided during such subsequent Expense Year.  Notwithstanding the foregoing, no adjustment to the Operating Expenses for the Base Year shall occur to the extent such New Services (1) are attributable to Tenant’s use of the Premises (as opposed to office use generally), in which case Landlord may elect (Y) to include the cost of such New Services in Operating Expenses, or (Z) to invoice Tenant directly for such costs, depending upon the nature of the New Services and the extent to which the need for such New Services is directly attributable to Tenant’s use, as determined in Landlord’s reasonable discretion, (2) is being offered by landlords in the majority of Comparable Buildings, or (3) is required by “Applicable Laws,” as that Term is set forth in Article 24 .  If Landlord, in any Expense Year after the Base Year, discontinues any type or category of service then for such period of time in which such services are discontinued, Operating Expenses for the Base Year shall be decreased by the amount that Landlord reasonably determines it incurred for such type or category of service throughout the Base Year.  In no event shall Tenant be responsible to pay any “Controllable Expenses,” as defined below, to the extent such Controllable Expenses exceed the amount that such Controllable Expenses would have been had they increased, from the amount of Controllable Expenses incurred during the first twelve (12) months of the Lease Term ( i.e. , May 7, 2009 through May 31, 2010), at a compounded rate of [***] percent ([***]%) per Expense Year (the “ Cap ”).  As used herein “ Controllable Expenses ” shall mean any costs incurred by Landlord relating to services (not including utility services) provided to the Project, labor costs paid by Landlord, and maintenance contracts paid by Landlord; provided, however, Controllable Expenses shall not include Tax Expenses, costs relating to the HVAC systems of a Building, costs of insurance premiums, utility charges, or market-wide increases in labor costs due to extraordinary circumstances, including, without limitation, boycotts and strikes.

 

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4.2.5         Taxes .

 

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

 

4.2.5.2     Tax Expenses shall include, without limitation:  (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“ Proposition 13 ”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Project’s contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises [***].

 

4.2.5.3     Any costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid.  Except as set forth in Section 4.2.5.4 , below, refunds of Tax Expenses shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year.  If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord

 

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upon demand Tenant’s Share of any such increased Tax Expenses included by Landlord as Building Tax Expenses pursuant to the TCCs of this Lease.  Notwithstanding anything to the contrary contained in this Section 4.2.5 (except as set forth in Section 4.2.5.1 , above), there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 4.5 of this Lease.

 

4.2.5.4     Notwithstanding anything to the contrary set forth in this Lease, the amount of Tax Expenses for the Base Year and any Expense Year shall be calculated without taking into account any decreases in real estate taxes obtained in connection with Proposition 8, and, therefore, the Tax Expenses in the Base Year and/or an Expense Year may be greater than those actually incurred by Landlord, but shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i) any costs and expenses incurred by Landlord in securing any Proposition 8 reduction shall not be included in Direct Expenses for purposes of this Lease, and (ii) tax refunds under Proposition 8 shall not be deducted from Tax Expenses, but rather shall be the sole property of Landlord.  Landlord and Tenant acknowledge that this Section 4.2.5.4 is not intended to in any way affect (A) the inclusion in Tax Expenses of the statutory two percent (2.0%) annual increase in Tax Expenses (as such statutory increase may be modified by subsequent legislation), or (B) the inclusion or exclusion of Tax Expenses pursuant to the terms of Proposition 13, which shall be governed pursuant to the terms of Sections 4.2.5.1 through 4.2.5.3 , above.

 

4.2.5.5     [***]

 

4.2.6         “ Tenant’s Share ” shall mean the percentage set forth in Section 6 of the Summary.  Tenant’s Share was calculated by multiplying the number of rentable square feet of the Premises, as set forth in Section 2.2 of the Summary, by 100, and dividing the product by the total number of rentable square feet in the Building.

 

4.2.7         “ Utilities Costs ” shall mean all actual charges for utilities for the Building and the Project which Landlord shall pay during any Expense Year, including, but not limited to, the costs of water, sewer and electricity, and the costs of HVAC (including, unless paid by Tenant pursuant to Section 6.1.2 below, the cost of electricity to operate the HVAC air handlers) and other utilities (but excluding (i) the cost of electricity consumed in the Premises and the premises of other tenants of the Building and any other buildings in the Project (since Tenant is separately paying for the cost of electricity pursuant to Section 6.1.2 below) and (ii) those charges for which tenants directly reimburse Landlord or otherwise pay directly to the utility company) as well as related fees, assessments and surcharges.  Utilities Costs shall be calculated assuming the Buildings (and during the period of time when any other office buildings are fully constructed and ready for occupancy and are included by Landlord within the Project), are at least [***] percent ([***]%) occupied.  If, during all or any part of any Expense Year, Landlord shall not provide any utilities other than gas and electricity (the cost of which, if provided by Landlord, would be included in Utilities Costs) to a tenant (including Tenant) who has undertaken to provide the same instead of Landlord, Utilities Costs shall be deemed to be increased by an amount equal to the additional Utilities Costs which would reasonably have been

 

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incurred or accrued for the Base Year or such preceding Expense Year, as applicable, and which shall indicate the amount of the Excess.  Landlord shall use commercially reasonable efforts to deliver such Statement to Tenant on or before May 1 following the end of the Expense Year to which such Statement relates.  Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, if an Excess is present, Tenant shall pay, within thirty (30) days after receipt of the Statement, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Excess,” as that term is defined in Section 4.4.2 , below, and if Tenant paid more as Estimated Excess than the actual Excess, Tenant shall receive a credit in the amount of Tenant’s overpayment against Rent next due under this Lease.  The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 4 .  Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of Building Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall, within thirty (30) days after receipt of the Statement, pay to Landlord such amount, and if Tenant paid more as Estimated Excess than the actual Excess, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment.  The provisions of this Section 4.4.1 shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant’s Share of any Building Direct Expenses attributable to any Expense Year which are first billed to Tenant more than [***] after the end of such Expense Year (provided that any expense that was not originally included in the Statement applicable to the Expense Year in which such expense was incurred must be billed to Tenant within [***] of the date Landlord receives the invoice for such expense), provided that in any event Tenant shall be responsible for Tenant’s Share of Direct Expenses levied by any governmental authority or by any public utility companies which are attributable to any Expense Year.

 

4.4.2         Statement of Estimated Building Direct Expenses .   In addition, Landlord shall give Tenant a yearly expense estimate statement (the “ Estimate Statement ”) which shall set forth in general major categories Landlord’s reasonable estimate (the “ Estimate ”) of what the total amount of Building Direct Expenses for the then-current Expense Year shall be and the estimated excess (the “ Estimated Excess ”) as calculated by comparing the Building Direct Expenses for such Expense Year, which shall be based upon the Estimate, to the amount of Building Direct Expenses for the Base Year.  Landlord shall use commercially reasonable efforts to deliver such Estimate Statement to Tenant on or before May 1 following the end of the Expense Year to which such Estimate Statement relates.  The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Additional Rent under this Article 4 , nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Excess theretofore delivered to the extent necessary.  Thereafter, Tenant shall pay, within thirty (30) days after receipt of the Estimate Statement, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the second to last sentence of this Section 4.4.2 ).  Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement

 

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delivered by Landlord to Tenant.  Throughout the Lease Term Landlord shall maintain books and records with respect to Building Direct Expenses in accordance with generally accepted real estate accounting and management practices, consistently applied.

 

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

 

4.5.1         Tenant shall be liable for and shall pay ten (10) days before delinquency, taxes levied against Tenant’s equipment, furniture, fixtures and any other personal property located in or about the Premises.  If any such taxes on Tenant’s equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord’s property or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.

 

4.5.2         If the premises improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which premises improvements conforming to Landlord’s “building standard” in other space in the Building are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.5.1 , above; provided, however, Landlord’s “building standard” shall be reasonably established vis-à-vis the customary level of premises improvements for Comparable Buildings in the Comparable Area (as such terms are defined in Exhibit G to this Lease).

 

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

 

4.6            Landlord’s Books and Records .  Upon Tenant’s written request given not more than [***] months after Tenant’s receipt of a Statement for a particular Expense Year, and provided that Tenant is not then in monetary default or material non-monetary default under this Lease beyond the applicable notice and cure period provided in this Lease, Landlord shall furnish Tenant with such reasonable supporting documentation in connection with said Building Direct Expenses as Tenant may reasonably request.  Landlord shall provide said information to Tenant within sixty (60) days after Tenant’s written request therefor.  Within [***] months after receipt of a Statement by Tenant (the “ Review Period ”), if Tenant disputes the amount of Additional Rent set forth in the Statement, an independent certified public accountant (which accountant (A) is a member of a nationally or regionally recognized accounting firm, and (B) is not working on a contingency fee basis), designated and paid for by Tenant, may, after

 

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reasonable notice to Landlord and at reasonable times, inspect Landlord’s records with respect to the Statement at Landlord’s corporate office (located in either San Diego County or Los Angeles County), provided that Tenant is not then in monetary default or material non-monetary default under this Lease (beyond any applicable notice and cure periods) and Tenant has paid all amounts required to be paid under the applicable Estimate Statement and Statement, as the case may be.  In connection with such inspection, Tenant and Tenant’s agents must agree in advance to follow Landlord’s reasonable rules and procedures regarding inspections of Landlord’s records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection.  Tenant’s failure to dispute the amount of Additional Rent set forth in any Statement within the Review Period shall be deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement.  If after such inspection, Tenant still disputes such Additional Rent, a determination as to the proper amount shall be made, at Tenant’s expense, by an independent certified public accountant (the “ Accountant ”) selected by Landlord and subject to Tenant’s reasonable approval; provided that if such determination by the Accountant proves that Direct Expenses were overstated by more than five percent (5%), then the cost of the Accountant and the cost of such determination shall be paid for by Landlord. Tenant hereby acknowledges that Tenant’s sole right to inspect Landlord’s books and records and to contest the amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.6 , and Tenant hereby waives any and all other rights pursuant to applicable law to inspect such books and records and/or to contest the amount of Direct Expenses payable by Tenant.

 

ARTICLE 5

 

USE OF PREMISES

 

5.1            Permitted Use .  Tenant shall use the Premises solely for the Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion; provided, however, that Landlord shall use its reasonable discretion in determining whether a particular use is within the parameters of the Permitted Use.

 

5.2            Prohibited Uses .  The uses prohibited under this Lease shall include, without limitation, use of the Premises or a portion thereof for (i) offices of any agency or bureau of the United States or any state or political subdivision thereof; (ii) offices or agencies of any foreign governmental or political subdivision thereof; (iii) offices of any health care professionals or service organization; (iv) schools or other training facilities which are not ancillary to corporate, executive or professional office use; (v) retail or restaurant uses; or (vi) communications firms such as radio and/or television stations.  Tenant shall not allow occupancy density of use of the Premises which is greater than the occupancy density that can be reasonably supported by the Building Systems (taking into consideration any supplemental systems installed by Tenant) or which would result in the use of more Project parking spaces than provided to Tenant under the terms of this Lease (taking into consideration any offsite parking programs enacted by Tenant).  Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the Rules and Regulations set forth in Exhibit D , attached hereto, or in violation of the laws of

 

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the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project) including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by applicable laws now or hereafter in effect; provided, however, Landlord shall not enforce, change or modify the Rules and Regulations in a discriminatory manner and Landlord agrees that the Rules and Regulations shall not be unreasonably modified or enforced in a manner which will unreasonably interfere with the normal and customary conduct of Tenant’s business.  Tenant shall not do or permit anything to be done in or about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or unreasonably annoy them or use or allow the Premises to be used for any unlawful or reasonably objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.

 

5.3            CC&Rs .  Tenant shall comply with all recorded covenants, conditions, and restrictions currently affecting the Project (including, but not limited to, the prohibition against using all or any portion of the Premises as a school).  Additionally, Tenant acknowledges that the Project may be subject to any future covenants, conditions, and restrictions (the “ CC&Rs ”) which Landlord, in Landlord’s discretion, deems reasonably necessary or desirable, and Tenant agrees that this Lease shall be subject and subordinate to such CC&Rs; provided, however, any such future CC&Rs shall not materially and adversely affect Tenant’s use or occupancy of the Premises for the Permitted Use nor any of Tenant’s rights hereunder.  Landlord hereby acknowledges that general office use does not violate the CC&R’s.  Landlord shall have the right to require Tenant to execute and acknowledge, within fifteen (15) business days of a request by Landlord, a “Recognition of Covenants, Conditions, and Restriction,” in a form substantially similar to that attached hereto as Exhibit F , agreeing to and acknowledging the CC&Rs.

 

ARTICLE 6

 

SERVICES AND UTILITIES

 

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

 

6.1.1         Subject to limitations imposed by all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning (“ HVAC ”) when necessary for normal comfort for normal office use in the Premises from 7:00 A.M. to 6:00 P.M. Monday through Friday, and on Saturdays from 9:00 A.M. to 1:00 P.M. (collectively, the “ Building Hours ”), except for the date of observation of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord’s discretion, other locally or nationally recognized holidays (collectively, the “ Holidays ”); provided, however, Landlord acknowledges that, pursuant to Tenant’s requirements, in no event shall Holidays include Martin Luther King Day, Columbus Day or Veterans Day.  The daily time periods identified hereinabove are sometimes referred to as the “ Business Hours .”

 

6.1.2         Landlord shall provide adequate electrical wiring and facilities and power for normal general office use as reasonably determined by Landlord.  Tenant shall pay directly to

 

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the utility company pursuant to the utility company’s separate meters, the cost of all electricity provided to and/or consumed in the Premises (including normal and excess consumption and including the cost of electricity to operate the HVAC air handlers if not charged to and paid by Tenant as part of Utilities Costs), which electricity shall be separately metered.  Tenant shall pay such cost (including the cost of such meters) within thirty (30) days after Tenant’s receipt of demand therefor.  Landlord shall designate the electricity utility provider from time to time.

 

6.1.3         As part of Operating Expenses, Landlord shall replace lamps, starters and ballasts for Building standard lighting fixtures within the Premises.  In addition, Tenant shall bear the cost of replacement of lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises.

 

6.1.4         Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes, and for the Building’s life safety systems.

 

6.1.5         Landlord shall provide janitorial services to the Premises five (5) days per week, except the date of observation of the Holidays, in and about the Premises and window washing services in a manner consistent with Comparable Buildings in the vicinity of the Project.

 

6.1.6         Landlord shall provide nonexclusive, non-attended automatic passenger elevator service during the Building Hours, shall have one elevator available at all other times, except on the Holidays.

 

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

 

6.2            Overstandard Tenant Use .  Tenant shall not, without Landlord’s prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which may substantially affect the temperature otherwise maintained by the air conditioning system unless Tenant installs adequate supplementary air conditioning units as part of the initial “Improvements” (as that term is defined in Section 2.1 of the Work Letter Agreement) to the Premises or as “Alterations” (as that term is defined in Section 8.1 of this Lease) authorized pursuant to the terms of this Lease.  If such consent is given, or if Tenant fails to install adequate supplementary air conditioning units, then Landlord shall have the right to install supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord.  If Tenant uses water, electricity, heat or air conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease (for example , HVAC in excess of that required for normal comfort for normal office use in the Premises and/or HVAC requested outside of Building Hours), Tenant shall pay to Landlord, upon billing, the cost of such excess consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption;

 

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and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, at the rates charged by the public utility company furnishing the same, including the cost of such additional metering devices.  Tenant’s use of electricity shall never exceed the capacity of the feeders to the Project or the risers or wiring installation, and subject to the terms of Section 29.32 , below, Tenant shall not install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises, without the prior written consent of Landlord; provided, however, the foregoing restriction shall not apply to general office use of personal computers on the desktops of Tenant’s employees.  If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior notice, if any, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use in order to supply such utilities, and Landlord shall supply such utilities to Tenant at the “Actual Cost” thereof (as that term is defined below) (which shall be treated as Additional Rent).  For the purpose of this Section 6.2 , “ Actual Cost ” shall mean the actual cost, including reasonable depreciation (attributable to such after-hours usage) and actual administrative charges (to the extent not duplicative of Operating Expenses), incurred by Landlord, as reasonably determined by Landlord but without charge for profit, provided that, notwithstanding the foregoing, any amount actually charged by any third party to Landlord ( i.e. , unaffiliated with Landlord) for the supply of HVAC to Tenant shall be deemed part of Landlord’s “Actual Cost.”

 

6.3            Interruption of Use .  Except as otherwise provided in Section 6.4 or elsewhere in this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord’s reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease, except as otherwise provided in Section 3.2 or elsewhere in this Lease.  Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6 .

 

6.4            Tenant Maintained Security .  Tenant hereby acknowledges that Landlord shall have no obligation to provide guard service or other security measures for the benefit of the Premises, the Building or the Project.  Any such security measures for the benefit of the Premises, the Building or the Project shall be provided by Tenant, at Tenant’s sole cost and expense.  Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed.  Tenant shall be entitled to install a separate security system for the Premises (“ Tenant’s Security System ”), either as an Alteration (pursuant to the TCCs of Article 8 ) or as a part of the initial Improvements

 

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being constructed pursuant to the TCCs of Exhibit B ; provided, however, that the plans and specifications for Tenant’s Security System shall be subject to Landlord’s reasonable approval, and the installation of Tenant’s Security System shall otherwise be subject to the terms and conditions of Article 8 of this Lease and/or the Work Letter Agreement, as applicable.  Tenant shall at all times provide Landlord with a contact person who can disarm the security system and who is familiar with the functions of Tenant’s Security System in the event of a malfunction.

 

ARTICLE 7

 

REPAIRS

 

Landlord shall maintain in first-class condition and operating order and keep in good repair and condition the structural portions of the Building, including the foundation, floor/ceiling slabs, roof structure (as opposed to roof membrane), curtain wall, exterior glass and mullions, columns, beams, shafts (including elevator shafts), stairs, parking areas, landscaping, exterior Project signage, stairwells, elevator cab, men’s and women’s washrooms, Building mechanical, electrical and telephone closets, and all common and public areas (collectively, “ Building Structure ”) and the Base Building mechanical, electrical, life safety, plumbing, sprinkler systems and HVAC systems which were not constructed by Tenant Parties (collectively, the “ Building Systems ”) and the Project Common Areas.  Notwithstanding anything in this Lease to the contrary, Tenant shall be required to repair the Building Structure and/or the Building Systems to the extent caused due to Tenant’s use of the Premises for other than normal and customary business office operations, unless and to the extent such damage is covered by insurance carries or required to be carried by Landlord pursuant to Article 10 and to which the waiver of subrogation is applicable (such obligation to the extent applicable to Tenant as qualified and conditioned will hereinafter be defined as the “ BS/BS Exception ”).   Tenant shall, at Tenant’s own expense, keep the Premises, including all improvements, fixtures and furnishings therein, and the floor or floors of the Building on which the Premises are located, in good order, repair and condition at all times during the Lease Term, but such obligation shall not extend to the Building Structure and the Building Systems except pursuant to the BS/BS Exception.  In addition, Tenant shall, at Tenant’s own expense, but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances, but such obligation shall not extend to the Building Structure and the Building Systems except pursuant to the BS/BS Exception, and/or (iii) for damage caused by ordinary wear and tear or beyond the reasonable control of Tenant;  provided however, that, at Landlord’s option, or if Tenant fails to make such repairs, Landlord may, after written notice to Tenant and Tenant’s failure to repair within five (5) days thereafter, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building and/or the Project, and to be reasonably consistent with similar percentages paid for such services by tenant in the Comparable Buildings) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses paid to third parties arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same.  Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may

 

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be required to do by governmental or quasi-governmental authority or court order or decree; provided, however, except for (i) emergencies, (ii) repairs, alterations, improvements or additions required by governmental or quasi-governmental authorities or court order or decree, or (iii) repairs which are the obligation of Tenant hereunder, any such entry into the Premises by Landlord shall be performed in a manner so as not to materially interfere with Tenant’s use of, or access to, the Premises; provided that, with respect to items (ii) and (iii) above, Landlord shall use commercially reasonable efforts to not materially interfere with Tenant’s use of, or access to, the Premises.  Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.

 

ARTICLE 8

 

ADDITIONS AND ALTERATIONS

 

8.1            Landlord’s Consent to Alterations .   Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the “ Alterations ”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than ten (10) business days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration which adversely affects the structural portions or the systems or equipment of the Building or is visible from the exterior of the Building..    The construction of the initial Improvements to the Premises shall be governed by the terms of the Work Letter Agreement and not the terms of this Article 8 .

 

8.2            Manner of Construction .   Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant utilize for such purposes only contractors reasonably approved by Landlord, and the requirement that upon Landlord’s timely request (as more particularly set forth in Section 8.5 , below), Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Lease Term and return the affected portion of the Premises to a building standard improved condition as determined by Landlord.  Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the City of San Diego, all in conformance with Landlord’s construction rules and regulations; provided, however, that prior to commencing to construct any Alteration, Tenant shall meet with Landlord to discuss Landlord’s design parameters and code compliance issues.  In the event Tenant performs any Alterations in the Premises which require or give rise to governmentally required changes to the “Base Building,” as that term is defined below, then Landlord shall, at Tenant’s expense, make such changes to the Base Building.  The “ Base Building ” shall include the structural portions of the Building, and the public restrooms, elevators, fire stairwells and the systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located.  In performing the work of any such Alterations, Tenant shall have the work performed in such manner so as not to obstruct access to the Project or any portion thereof, by any other

 

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tenant of the Project, and so as not to obstruct the business of Landlord or other tenants in the  Project.  Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord’s reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas.  In addition to Tenant’s obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of San Diego in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Project construction manager a reproducible copy and an electronic copy of the “as built” drawings of the Alterations, to the extent such Alterations are of a type for which as-built plans are generally prepared, as well as all permits, approvals and other documents issued by any governmental agency in connection with the Alterations.

 

8.3            Payment for Improvements .   If payment is made directly to contractors, Tenant shall (i) comply with Landlord’s requirements for final lien releases and waivers in connection with Tenant’s payment for work to contractors, and (ii) sign Landlord’s standard contractor’s rules and regulations.  If Tenant orders any work directly from Landlord, Tenant shall pay to Landlord an amount equal to five percent of the cost of such work to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord’s involvement with such work.  If Tenant does not order any work directly from Landlord, Tenant shall reimburse Landlord for Landlord’s  reasonable, actual, out-of-pocket costs and expenses actually incurred in connection with Landlord’s review of such work.

 

8.4            Construction Insurance .   In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries “Builder’s All Risk” insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.  In addition, Landlord may, if the cost of any Alteration is reasonably expected to exceed [***], in its reasonable discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee.  For purposes of determining the cost of an Alteration, work done in phases or stages shall be considered part of the same Alteration, and any Alteration shall be deemed to include all trades and materials involved in accomplishing a particular result.

 

8.5            Landlord’s Property .  Landlord and Tenant hereby acknowledge and agree that (i) all Alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become part of the Premises and the property of Landlord, and (ii) the Improvements to be constructed in the Premises pursuant to the TCCs of the Work Letter Agreement shall, upon completion of the same, be and become a part of the Premises and the property of Landlord; provided, however, Tenant may remove any Alterations, improvements (excluding the Improvements), fixtures and/or equipment which Tenant can substantiate to Landlord have not been paid for by any Improvement Allowance funds, provided that Tenant repairs any and all damage to the Premises or the Building caused in whole or in part by such

 

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in the Premises and shall in all respects be subordinate to Landlord’s title to the Project, Building and Premises.

 

ARTICLE 10

 

INSURANCE

 

10.1          Indemnification and Waiver .  To the extent not prohibited by law and except as otherwise expressly provided herein, Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause whatsoever and agrees that Landlord, its partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, “ Landlord Parties ”) shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant.  Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys’ fees) incurred in connection with or arising from any cause in, on or about the Premises, any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, invitees, guests or licensees of Tenant or any such person, in, on or about the Project or any breach of the TCCs of this Lease, either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply to the negligence or willful misconduct of Landlord or any Landlord Party.  Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant’s occupancy of the Premises, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as appraisers’, accountants’ and attorneys’ fees.  Landlord shall indemnify, defend, protect, and hold harmless Tenant, its partners, and their respective officers, agents, servants, employees, and independent contractors (collectively, “ Tenant Parties ”) from any and all loss, cost, damage, expense and liability (including without limitation reasonable attorneys’ fees) arising from the gross negligence or willful misconduct of Landlord in, on or about the Project (excluding the Premises), except to the extent caused by the negligence or willful misconduct of the Tenant Parties.  Notwithstanding anything to the contrary set forth in this Lease, either party’s agreement to indemnify the other party pursuant to this Section 10.1 is not intended and shall not relieve any insurance carrier of its obligations under policies required to be carried by such party pursuant to the provisions of this Lease.  In addition, either party’s agreement to indemnify the other party as set forth in this Section 10.1 shall be ineffective to the extent the matters for which such party agreed to indemnify the other party are covered by insurance required to be carried by the non-indemnifying party pursuant to this Lease.  The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such expiration or termination.  Notwithstanding anything to the contrary contained in this Lease, nothing in this Lease shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease or incurred by Landlord in connection with any repair, physical construction or improvement work performed by or on behalf of Tenant in the Project, but Tenant shall not be responsible for any

 

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direct or consequential damages resulting from Landlord’s or contractor’s acts in connection with the completion by Landlord of the improvements in the Premises pursuant to the Work Letter Agreement or Landlord’s ownership or removal of any Alterations that are not required to be removed by Tenant pursuant to Article 8 , above.

 

10.2          Landlord’s Fire, Casualty and Liability Insurance .

 

10.2.1       Landlord shall maintain Commercial/Comprehensive General Liability Insurance with respect to the Building during the Lease Term covering claims for bodily injury, personal injury and property damage in the Common Areas and with respect to Landlord’s activities in the Premises.

 

10.2.2       Landlord shall insure the Building and Landlord’s remaining interest in the Improvements and Alterations with a policy of Physical Damage Insurance including building ordinance coverage, written on a standard Causes of Loss — Special Form basis (against loss or damage due to fire and other casualties covered within the classification of fire and extended coverage, vandalism, and malicious mischief, sprinkler leakage, water damage and special extended coverage), covering the full replacement cost of the Base Building, Premises and other improvements (including coverages for enforcement of Applicable Laws requiring the upgrading, demolition, reconstruction and/or replacement of any portion of the Building as a result of a covered loss) without deduction for depreciation.

 

10.2.3       Landlord shall maintain Boiler and Machinery/Equipment Breakdown Insurance covering the Building against risks commonly insured against by a Boiler & Machinery/Equipment Breakdown policy and such policy shall cover the full replacement costs, without deduction for depreciation.

 

10.2.4       The foregoing coverages shall contain commercially reasonably deductible amounts from such companies, and on such other terms and conditions, as Landlord may from time to time reasonably determine.

 

10.2.5       Additionally, at the option of Landlord, such insurance coverage may include the risk of (i) earthquake, (ii) flood damage and additional hazards, (iii) a rental loss endorsement for a period of up to two (2) years, (iv) one or more loss payee endorsements in favor of holders of any mortgages or deeds of trust encumbering the interest of Landlord in the Building, or any portion thereof.

 

10.2.6       Notwithstanding the foregoing provisions of this Section 10.2 , the coverage amounts, and corresponding deductibles of insurance carried by Landlord in connection with the Building shall be comparable to the coverage and amounts of insurance which are carried by reasonably prudent landlords of Comparable Buildings, and Worker’s Compensation and Employer’s Liability coverage as required by applicable law.

 

10.3          Tenant’s Compliance With Landlord’s Fire and Casualty Insurance .  Tenant shall, at Tenant’s expense, comply with Landlord’s insurance company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of

 

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the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

 

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

 

10.4.1       Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant’s operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements) including a Broad Form endorsement covering the insuring provisions of this Lease.  Landlord shall be named as an additional insured as their interests may appear using form CG2011 or a comparable form approved by Landlord.  Tenant shall provide an endorsement or policy excerpt showing that Tenant’s coverage is primary and any insurance carried by Landlord shall be excess and non-contributing.  Such insurance shall (i) name Landlord, and any other party the Landlord so specifies that has a material financial interest in the Project as an additional insured, including Landlord’s managing agent, if any, and (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant’s obligations under Section 10.1 of this Lease.  Liability limits shall not be less than:

 

 

Bodily Injury and Property Damage Liability		$5,000,000 each occurrence or any combination of primary and excess/umbrella liability insurance
Personal Injury and Auto Liability		$5,000,000 each occurrence or any combination of primary and excess/umbrella liability insurance

 

10.4.2       Property Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, (ii) the Improvements and any other improvements which exist in the Premises as of the Lease Commencement Date (excluding the Base Building) (the “ Original Improvements ”), and (iii) all other improvements, alterations and additions to the Premises.  Such insurance shall be written on a Special Form basis, for the full replacement cost value (subject to reasonable deductible amounts), without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage, including, but not limited to, sprinkler leakage, bursting or stoppage of pipes, and explosion.

 

10.4.3       Business Interruption, loss of income and extra expense insurance in such amounts as will reimburse Tenant for actual direct or indirect loss of earnings for up to one (1) year attributable to the risks outlined in Section 10.4.2 above.

 

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10.4.4       Worker’s Compensation and Employer’s Liability or other similar insurance pursuant to all applicable state and local statutes and regulations and Employer’s Liability with minimum limits not less than $1,000,000 per employee.

 

10.4.5       Commercial Automobile Liability Insurance covering all Owned (if any), Hired, or Non-owned vehicles with limits not less than $1,000,000 combined single limit for bodily injury and property damage.

 

10.5          Form of Policies .  The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease.  Such insurance shall (i) be issued by an insurance company having a rating of not less than A-X in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California,  (ii) be in form and content reasonably acceptable to Landlord; and (iii) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee of Landlord, the identity of whom has been provided to Tenant in writing.  Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the expiration dates thereof.  In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate, Landlord may, at its option, after written notice to Tenant and Tenant’s failure to obtain such insurance within five (5) business days thereafter, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within thirty (30) days after delivery to Tenant of bills therefor.

 

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

 

10.7          Additional Insurance Obligations .   Tenant shall carry and maintain during the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10 and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant’s operations therein, as may be reasonably requested by Landlord.  Notwithstanding the foregoing, Landlord’s request shall only be considered reasonable if such increased coverage amounts and/or such new types of insurance are consistent with the requirements of a majority of Comparable Buildings, and Landlord shall not so increase the coverage amounts or require additional types of insurance during the first five (5) years of the Lease Term and thereafter no more often than one time in any five (5) year period.

 

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ARTICLE 11

 

DAMAGE AND DESTRUCTION

 

11.1          Repair of Damage to Premises by Landlord .   Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty.  If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control, and subject to all other terms of this Article 11 , restore the Base Building and such Common Areas.  Such restoration shall be to substantially the same condition of the Base Building and the Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building or Project or any other modifications to the Common Areas deemed desirable by Landlord, which are consistent with the character of the Project and which are reasonably approved by Tenant, provided that access to the Premises and any common restrooms serving the Premises shall not be materially impaired.  Upon the occurrence of any damage to the Premises, upon notice (the “ Landlord Repair Notice ”) to Tenant from Landlord, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s insurance required under Section 10.3 of this Lease, and Landlord shall repair any injury or damage to the Improvements, Original Improvements, and any Alterations installed in the Premises and shall return such Improvements and any Alterations to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord prior to Landlord’s commencement of repair of the damage.  In the event that Landlord does not deliver the Landlord Repair Notice within sixty (60) days following the date the casualty becomes known to Landlord, Tenant shall, at its sole cost and expense, repair any injury or damage to the Improvements and Alterations installed in the Premises and shall return such Improvements and Original Improvements to their original condition.  Whether or not Landlord delivers a Landlord Repair Notice, prior to the commencement of construction, Tenant shall submit to Landlord, for Landlord’s review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work subject to Tenant’s reasonable approval.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or Common Areas necessary to Tenant’s occupancy, and the Premises are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy, the Rent shall be abated in proportion to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy for the purposes permitted under this Lease bears to the total rentable square feet of the Premises.  In the event that Landlord shall not deliver the Landlord Repair Notice, Tenant’s right to rent abatement pursuant to the preceding sentence shall terminate as of the date which is reasonably determined by Landlord to be the date Tenant should have completed repairs to the Premises assuming Tenant used reasonable due diligence in connection therewith.

 

11.2          Landlord’s Option to Repair .   Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises, Building and/or Project,

 

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and instead terminate this Lease, by notifying Tenant in writing of such termination within ninety (90) days after the date of discovery of the damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) in Landlord’s reasonable judgment, repairs cannot reasonably be completed within two hundred seventy (270) days after the date of discovery of the damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) the damage is not fully covered by Landlord’s insurance policies; (iv) Landlord decides to rebuild the Building or Common Areas so that they will be substantially different structurally or architecturally; or (v) the damage occurs during the last twelve (12) months of the Lease Term.  Notwithstanding the foregoing, if Landlord elects to terminate this Lease pursuant to item (i), above, then Tenant may, [***]  If Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within two hundred seventy (270) days after being commenced, Tenant may elect not later than ninety (90) days after the date of Tenant’s receipt of Landlord’s reasonable estimate, in writing, of the time required to effectuate such repairs, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant.  Furthermore, if neither Landlord nor Tenant has terminated this Lease, and the repairs are not actually completed within such 270-day period, Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such period until such time as the repairs are complete, by notice to Landlord (the “ Damage Termination Notice ”), effective as of a date set forth in the Damage Termination Notice (the “ Damage Termination Date ”), which Damage Termination Date shall not be less than ten (10) business days following the end of each such month.  Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord’s receipt of the Damage Termination Notice, a certificate of Landlord’s contractor responsible for the repair of the damage certifying that it is such contractor’s good faith judgment that the repairs shall be substantially completed within thirty (30) days after the Damage Termination Date.  If repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if the repairs shall not be substantially completed within such thirty-day period, then this Lease shall terminate upon the expiration of such thirty-day period.  At any time, from time to time, after the date occurring sixty (60) days after the date of the damage, Tenant may request that Landlord inform Tenant of Landlord’s reasonable opinion of the date of completion of the repairs and Landlord shall respond to such request within five (5) business days.  Notwithstanding the provisions of this Section 11.2 , Tenant shall have the right to terminate this Lease under this Section 11.2 to the extent each of the following conditions is satisfied: (a) the damage to the Project by fire or other casualty was not caused by the gross negligence or intentional act of Tenant or its partners or subpartners and their respective officers, agents, servants, employees, and independent

 

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contractors; (b) Tenant is not then in monetary default or material non-monetary default under this Lease; (c) as a result of the damage, Tenant cannot reasonably conduct business from the Premises; and, (d) as a result of the damage to the Project, Tenant does not occupy or use the Premises at all.  In the event this Lease is terminated in accordance with the terms of this Section 11.2 , Tenant shall pay to Landlord (or to any party designated by Landlord) a portion of the insurance proceeds payable to Tenant under Tenant’s insurance required under items (ii) and (iii) of Section 10.3.2 of this Lease, which portion shall be equal to [***].

 

11.3          Waiver of Statutory Provisions .  The provisions of this Lease, including this Article 11 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or the Project, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or the Project.

 

ARTICLE 12

 

NONWAIVER

 

No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing signed thereby.  The waiver by either party hereto of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other term, covenant or condition herein contained.  The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent.  No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord’s right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the full amount due.  No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder, or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

 

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ARTICLE 13

 

CONDEMNATION

 

If the whole or any part of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease effective as of the date possession is required to be surrendered to the authority.  If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Premises is substantially impaired, in each case for a period in excess of one hundred eighty (180) days, Tenant shall have the option to terminate this Lease effective as of the date possession is required to be surrendered to the authority.  Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant.  All Rent shall be apportioned as of the date of such termination.  If any part of the Premises shall be taken, and this Lease shall  not be so terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure.  Notwithstanding anything to the contrary contained in this Article 13 , in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises.  Landlord shall be entitled to receive the entire award made in connection with any such temporary taking.

 

ARTICLE 14

 

ASSIGNMENT AND SUBLETTING

 

14.1          Transfers .  Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as “ Transfers ” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “ Transferee ”).  If Tenant desires Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the “ Transfer Notice ”) shall include (i) the proposed

 

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effective date of the Transfer, which shall not be less than fifteen (15) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “ Subject Space ”), (iii) all of the terms of the proposed Transfer and the consideration therefor, including calculation of the “ Transfer Premium ”, as that term is defined in Section 14.3 below, in connection with such Transfer, the name and address of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, provided that Landlord sha