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SHORT FORM OFFICE LEASE

Office Lease Agreement

SHORT FORM OFFICE LEASE | Document Parties: BERNARDO REGENCY, LLC | LIFEVANTAGE CORPORATION You are currently viewing:
This Office Lease Agreement involves

BERNARDO REGENCY, LLC | LIFEVANTAGE CORPORATION

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Title: SHORT FORM OFFICE LEASE
Date: 9/23/2008
Industry: Major Drugs     Sector: Healthcare

SHORT FORM OFFICE LEASE, Parties: bernardo regency  llc , lifevantage corporation
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Exhibit 10.19

SHORT FORM OFFICE LEASE

BY AND BETWEEN

BERNARDO REGENCY, LLC,
a Delaware limited liability company,
AS LANDLORD

AND

LIFEVANTAGE CORPORATION
a Colorado corporation,
AS TENANT

FOR THAT PROPERTY LOCATED AT

11545 W. B ernardo C ourt, S an D iego, C alifornia

i


 

T able of C ontents

 

 

 

 

 

 

 

1.

 

BASIC LEASE PROVISIONS

 

 

1

 

 

 

 

 

 

 

 

2.

 

PROJECT

 

 

2

 

 

 

 

 

 

 

 

3.

 

TERM

 

 

4

 

 

 

 

 

 

 

 

4.

 

RENT

 

 

5

 

 

 

 

 

 

 

 

5.

 

USE & OCCUPANCY

 

 

8

 

 

 

 

 

 

 

 

6.

 

SERVICES & UTILITIES

 

 

9

 

 

 

 

 

 

 

 

7.

 

REPAIRS

 

 

11

 

 

 

 

 

 

 

 

8.

 

ALTERATIONS

 

 

11

 

 

 

 

 

 

 

 

9.

 

INSURANCE

 

 

12

 

 

 

 

 

 

 

 

10.

 

DAMAGE OR DESTRUCTION

 

 

13

 

 

 

 

 

 

 

 

11.

 

INDEMNITY

 

 

14

 

 

 

 

 

 

 

 

12.

 

CONDEMNATION

 

 

15

 

 

 

 

 

 

 

 

13.

 

TENANT TRANSFERS

 

 

16

 

 

 

 

 

 

 

 

14.

 

LANDLORD TRANSFERS

 

 

17

 

 

 

 

 

 

 

 

15.

 

DEFAULT AND REMEDIES

 

 

18

 

 

 

 

 

 

 

 

16.

 

SECURITY

 

 

19

 

 

 

 

 

 

 

 

17.

 

MISCELLANEOUS

 

 

20

 

 

 

 

 

 

 

 

18.

 

OPTION TO EXTEND

 

 

20

 

 

 

 

 

 

 

 

E xhibits :

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT A — RULES & REGULATIONS

 

 

A-1

 

 

 

 

 

 

 

 

EXHIBIT B — PARKING

 

 

B-1

 

 

 

 

 

 

 

 

EXHIBIT C —NOTICE OF LEASE TERM

 

 

C-1

 

 

 

 

 

 

 

 

EXHIBIT D — WORK LETTER

 

 

D-1

 

 

 

 

 

 

 

 

EXHIBIT E — TENANT ESTOPPEL CERTIFICATE

 

 

ED-1

 

ii


 

I ndex of D efined T erms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional Insured

 

 

12

 

Mechanical Systems

 

 

2

 

Additional Rent

 

 

5

 

Month

 

 

4

 

Affiliates

 

 

15

 

NLT

 

 

4

 

Alterations

 

 

11

 

Notice Addresses

 

 

1

 

Amortization Rate

 

 

6

 

Option Rent

 

 

21

 

Approved Working Drawings

 

Exhibit    

D

 

Option/Rent/Notice

 

 

21

 

Architect

 

Exhibit    

D

 

Option Rent

 

 

21

 

Base Building

 

 

2

 

Options

 

 

21

 

Base Rent

 

 

5

 

Original Tenant

 

 

21

 

Billing Address

 

 

2

 

Outside Agreement Date

 

 

22

 

Brokers

 

 

2

 

Over-Allowance Amount

 

Exhibit

D

 

Building

 

 

1

 

Parking Allotment

 

 

2

 

Building Standard

 

 

3

 

Parking Facilities

 

 

C-1

 

Building Structure

 

 

2

 

Patron

 

 

C-1

 

Business Hours

 

 

2

 

Permitted Transferee

 

 

16

 

Claims

 

 

14

 

Plans

 

Exhibit

D

 

Commencement Date

 

 

4

 

Premises

 

 

1

 

Common Areas

 

 

2

 

Project

 

 

2

 

Construction Allowance

 

 

2

 

Quality Expenses

 

 

6

 

Contractor

 

Exhibit    

D

 

Rent Exhibit D

 

 

8

 

Cost-Saving Expenses

 

 

6

 

Repair Estimate

 

 

13

 

Date

 

 

1

 

Replacement Premises

 

 

20

 

Default

 

 

18

 

RSF

 

 

3

 

Default Rate

 

 

19

 

Scheduled Commencement Date

 

 

1

 

Design Problem

 

 

11

 

Scheduled Term

 

 

1

 

Encumbrance

 

 

17

 

Security Deposit

 

 

1

 

Estimated Additional Rent

 

 

7

 

Standard Services

 

 

9

 

Expenses

 

 

5

 

Substantial Completion

 

Exhibit

D

 

Expiration Date

 

 

4

 

Successor Landlord

 

 

17

 

Force Majeure

 

 

19

 

Taking

 

 

15

 

Hazardous Materials

 

 

9

 

Taxes

 

 

5

 

Holdover

 

 

4

 

Telecommunication Services

 

 

10

 

Holidays

 

 

2

 

Tenant

 

 

1

 

HVAC

 

 

9

 

Tenant Delays

 

Exhibit

D

 

Interest Notice

 

 

21

 

Tenant’s Personal Property

 

 

3

 

Interruption Estimate

 

 

13

 

Tenant’s Share

 

 

1

 

Land

 

 

2

 

Tenant’s Wiring

 

 

10

 

Landlord

 

 

1

 

Tenant’s Acceptance

 

 

21

 

Late Charge

 

 

8

 

Term

 

 

4

 

Lease

 

 

1

 

Transfer

 

 

16

 

Leasehold Improvements

 

 

3

 

Untenantable

 

 

13

 

Liability Limit

 

 

2

 

Use

 

 

1

 

Mandated Expenses

 

 

6

 

Vehicles

 

 

C-1

 

Market Rent

 

 

21

 

Working Drawings

 

Exhibit

D

 

 

 

 

 

 

Year

 

 

4

 

iii


 

Lease

          Landlord and Tenant enter into this Lease (“Lease”) as of the Date on the following terms, covenants, conditions and provisions:

1.

 

BASIC LEASE PROVISIONS

 

 

 

 

 

 

 

 

 

1.1

 

Basic Lease Definitions.

 

In this Lease, the following defined terms have the meanings indicated.

 

 

 

 

 

 

 

 

 

(a)

 

Date:

 

May 5, 2008.

 

 

 

 

 

 

 

 

 

(b)

 

Landlord:

 

BERNARDO REGENCY, LLC, a Delaware limited liability company.

 

 

 

 

 

 

 

 

 

(c)

 

Tenant:

 

LIFEVANTAGE CORPORATION, a Colorado corporation.

 

 

 

 

 

 

 

 

 

(d)

 

Building:

 

11545 W. Bernardo Court, San Diego, California, deemed to contain 48,055 RSF

 

 

 

 

 

 

 

 

 

(e)

 

Premises:

 

Suites 301 and 302 deemed to contain 3,204 RSF (2,818 USF).

 

 

 

 

 

 

 

 

 

(f)

 

Use:

 

General administrative non-governmental office use consistent with that of a first-class office building.

 

 

 

 

 

 

 

 

 

(g)

 

Scheduled Term:

 

Five (5) years and Three (3) months.

 

 

 

 

 

 

 

 

 

(h)

 

Scheduled Commencement Date:

 

July 1, 2008.

 

 

 

 

 

 

 

 

 

(i)

 

Base Rent:

 

The following amounts, payable in accordance with Article 4:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

Monthly Rate

 

Annual Base Rent

 

Monthly Base Rent

Year 1

 

$

2.45

 

 

$

94,197.60

 

 

$

7,849.80

*

Year 2

 

$

2.54

 

 

$

97,494.52

 

 

$

8,124.54

 

Year 3

 

$

2.63

 

 

$

100,906.79

 

 

$

8,408.90

 

Year 4

 

$

2.72

 

 

$

104,438.54

 

 

$

8,703.21

 

Year 5

 

$

2.81

 

 

$

108,093.87

 

 

$

9,007.82

 

 

 

 

 

*

 

subject to abatement as set forth in Section 4.1, below.

 

 

 

 

 

 

 

 

 

 

(j)

 

Base Year;

 

The calendar year 2008.

 

 

 

 

 

 

 

 

 

 

 

Tenant’s Share:

 

6.67%

 

 

 

 

 

 

 

 

 

(k)

 

Security Deposit:

 

$7,849.80

 

 

 

 

 

 

 

 

 

(l)

 

Notice Address:

 

For each party, the following addresses:

 

 

 

 

To Landlord

 

To Tenant

Bernardo Regency, LLC

 

Before the Commencement Date:

c/o CABI Developers

 

Life Vantage Corporation

9911 W. Pico Boulevard, Suite 1200

 

6400 S. Fiddler’s Green Circle, Suite 1970

Los Angeles, California 90035

 

Greenwood Village, CO 80111

Attn: V.P./Legal

 

Attn: David Brown

 

 

(858) 442-4924

 

 

 

 

 

After the Commencement Date:

 

 

Life Vantage Corporation

 

 

Attn: 11545 W. Bernardo Court, Suite 301

 

 

San Diego, California 92127

1


 

 

 

 

 

 

 

 

 

 

(m)

 

Billing Address:

 

For each party, the following address:

 

 

 

 

For Landlord

 

For Tenant

Bernardo Regency, LLC

 

LifeVantage Corporation

c/o CABI Developers

 

Attn: 11545 W. Bernardo Court, Suite 301

9911 W. Pico Boulevard, Suite 1200

 

San Diego, California 92127

Los Angeles, California 90035

 

 

Attn: V.P./Legal

 

 

 

 

 

 

 

 

 

 

 

 

(n)

 

Brokers:

 

CB Richard Ellis, Inc. (for Landlord); and Corporate Real Estate Consultants (for Tenant). Brokers will be paid by Landlord in accordance with a separate agreement with Landlord.

 

 

 

 

 

 

 

 

 

(o)

 

Parking Allotment:

 

Twelve (12) unreserved parking passes, for the use and access to the Building’s Parking Facility subject to the terms set forth in Exhibit C to this Lease.

 

 

 

 

 

 

 

 

 

(p)

 

Liability Limit:

 

$3 million for any one accident or occurrence.

 

 

 

 

 

 

 

 

 

(q)

 

Construction Allowance:

 

None; Landlord shall construct the Improvements on a “turn key” basis in accordance with the Work Letter attached to this Lease as Exhibit E.

 

 

 

 

 

 

 

 

 

(r)

 

Business Hours:

 

From 8:00 a.m. to 6:00 p.m., Monday through Friday, and from 9:00 a.m. to 1:00 p.m. on Saturdays, except for the days observed for: excepting New Year’s Day, Martin Luther King Day, President’s Day, Memorial Day, Independence Day, Labor Day, Veteran’s Day, Thanksgiving and the day after Thanksgiving and Christmas, and in Landlord’s reasonable discretion, any other holidays recognized by landlords of comparable projects to the Building (“Holidays”).

 

2.

 

PROJECT

           2.1 Project. The Land, Building, Common Areas and Premises (as defined in §1 and below) are collectively referred to as the “Project.” As of the Date, the Project is named “Bernardo Regency.”

           2.2 Land. “Land” means the real property on which the Building and Common Areas are located, including easements and other rights that benefit or encumber the real property. Landlord’s interest in the Land may be in fee or a leasehold. The Land may be expanded or reduced after the Date.

           2.3 Base Building. “Base Building” means the Building Structure and Mechanical Systems, collectively, defined as follows:

 

(a)

 

Building Structure. “Building Structure” means the structural components in the Building, including foundations, floor and ceiling slabs, roofs, exterior walls, exterior glass and mullions, columns, beams, shafts, and emergency stairwells. The Building Structure excludes the Leasehold Improvements (and similar improvements to other premises) and the Mechanical Systems.

 

 

 

 

 

(b)

 

Mechanical Systems . “Mechanical Systems” means the mechanical, electronic, physical or informational systems generally serving the Building or Common Areas, including the sprinkler, plumbing, heating, ventilating, air conditioning, lighting, communications, security, drainage, sewage, waste disposal, vertical transportation, and fire/life safety systems.

           2.4 Common Areas. Tenant will have a non-exclusive right to use the Common Areas subject to the terms of this Lease. “Common Areas” means those interior and exterior common and public areas on the Land (and appurtenant easements) and in the Building designated by Landlord for the non-exclusive use by Tenant in common with Landlord, other tenants and occupants, and their employees, agents and invitees. The Common Areas includes parking facilities serving the Building that are owned or leased by Landlord.

           2.5 Premises. Landlord leases to Tenant the Premises subject to the terms of this Lease. If Landlord does not deliver possession of the Premises to Tenant on or before the estimated Commencement Date (as set forth above), Landlord

2


 

shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Lease nor the obligations of Tenant hereunder, provided that Tenant shall have no obligation to commence paying Rent payments until the Commencement Date. Notwithstanding the foregoing, if Landlord fails to deliver the Premises within one hundred eighty (180) days after the Scheduled Commencement Date (accounting for Tenant Delays, if any and subject to extension for Force Majeure), Tenant may elect to either (1) terminate this Lease and receive any amounts prepaid by Tenant hereunder; or (ii) continue this Lease until the Premises are so delivered. Landlord and Tenant hereby agree that the Premises shall be measured in accordance with BOMA ANSI Z65.1-1996 standards, as modified for the Project pursuant to Landlord’s standard rentable measurements for the Project, and in the event that Landlord’s architect/space planner determines that the amounts thereof 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 Base Rent and Tenant’s Share shall be modified in accordance with such determination. If such determination is made, it will be confirmed in writing by Landlord to Tenant. Except as provided elsewhere in this Lease, by taking possession of the Premises, Tenant accepts the Premises in its “as is” condition and with all faults, and the Premises is deemed in good order, condition, and repair. The Premises includes the Leasehold Improvements and excludes certain areas, facilities and systems, as follows:

 

(a)

 

Leasehold Improvements . “Leasehold Improvements” means all non-structural improvements in the Premises or exclusively serving the Premises, and any structural improvements to the Building made to accommodate Tenant’s particular use of the Premises. The Leasehold Improvements may exist in the Premises as of the Date, or be installed by Landlord or Tenant under this Lease at the cost of either party. The Leasehold Improvements include: (1) interior walls and partitions (including those surrounding structural columns entirely or partly within the Premises); (2) the interior one-half of walls that separate the Premises from adjacent areas designated for leasing; (3) the interior drywall on exterior structural walls, and walls that separate the Premises from the Common Areas; (4) stairways and stairwells connecting parts of the Premises on different floors, except those required for emergency exiting; (5) the frames, casements, doors, windows and openings installed in or on the improvements described in the foregoing clauses (1) through (4), or that provide entry/exit to/from the Premises; (6) all hardware, fixtures, cabinetry, railings, paneling, woodwork and finishes in the Premises or that are installed in or on the improvements described in the foregoing clauses (1) through (5); (7) if any part of the Premises is on the ground floor, the ground floor exterior windows (including mullions, frames and glass); (8) integrated ceiling systems (including grid, panels and lighting); (9) carpeting and other floor finishes; (10) kitchen, rest room, laboratory or other similar facilities that exclusively serve the Premises (including plumbing fixtures, toilets, sinks and built-in appliances); and (11) the sprinkler, plumbing, heating, ventilating, air conditioning, electrical, metering, lighting, communications, security, drainage, sewage, waste disposal, vertical transportation, fire/life safety, and other mechanical, electronic, physical or informational systems that exclusively serve the Premises, including the parts of each system that are connected to the Mechanical Systems from the common point of distribution for each system to and throughout the Premises (such items in this subsection (11) shall be referred to the “Systems”).

 

(b)

 

Exclusions from the Premises . The Premises does not include: (1) any areas above the finished ceiling or integrated ceiling systems, or below the finished floor coverings that are not part of the Leasehold Improvements, (2) janitor’s closets, (3) stairways and stairwells to be used for emergency exiting or as Common Areas, (4) rooms for Mechanical Systems or connection of telecommunication equipment, (5) vertical transportation shafts, (6) vertical or horizontal shafts, risers, chases, flues or ducts, and (7) any easements or rights to natural light, air or view.

      2.6 Building Standard. “Building Standard” means the minimum or exclusive type, brand, quality or quantity of materials Landlord designates for use in the Building from time to time.

      2.7 Tenant’s Personal Property. “Tenant’s Personal Property” means those trade fixtures, furnishings, equipment, work product, inventory, stock-in-trade and other personal property of Tenant that are not permanently affixed to the Project in a way that they become a part of the Project and will not, if removed, impair the value of the Leasehold Improvements that Tenant is required to deliver to Landlord at the end of the Term under §3.3.

      2.8 Rentable Area. “RSF” means rentable square feet or rentable square foot, as the case may be, as the same may be reasonably modified by Landlord in accordance with BOMA ANSI Z65.1-1996 standards.

3


 

3. TERM

      3.1 Term. “Term” means the period that begins on the Commencement Date and ends on the Expiration Date, subject to renewal, extension or earlier termination as may be further provided in this Lease. “Month” means a full calendar month of the Term. “Year” means a full calendar year in which all or a part of the Term occurs.

 

(a)

 

Commencement Date. The “Commencement Date” means the date that is the earlier of:

 

(1)

 

The day that Tenant first conducts business in the Premises; or

 

 

 

 

 

(2)

 

The later of:

 

 

(A)

 

The Scheduled Commencement Date, or

 

 

 

 

 

(B)

 

The day that Landlord tenders the Premises to Tenant with Landlord’s Work substantially complete or that date that Landlord would have tendered possession of the Premises but for delay caused by Tenant.

 

(b)

 

Expiration Date. “Expiration Date” means the date that is the Scheduled Term (plus that many additional days required for the Expiration Date to be the last day of a Month) after the later of:

 

 

(1)

 

The Scheduled Commencement Date, or

 

 

 

 

 

(2)

 

The Commencement Date.

 

(c)

 

Early Occupancy. Tenant may not enter the Premises for any purpose until Landlord tenders the Premises to Tenant. If Tenant conducts business in any part of the Premises before the Scheduled Commencement Date, Tenant will pay Base Rent for that period at the rate for the first Month that Base Rent is due, without discount or excuse. Notwithstanding anything to the contrary provided herein, and provided that Tenant and its agents do not interfere with Landlord’s Contractor’s work in the Building and the Premises, Landlord shall allow Tenant access to the Premises ten (10) days prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment or fixtures (including Tenant’s data and telephone equipment) in the Premises. Prior to Tenant’s entry into the Premises as permitted by the terms of this Section, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant’s entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by Tenant’s actions pursuant to this Section.

 

 

(d)

 

Late Occupancy. If Landlord fails to tender possession of the Premises to Tenant by the Scheduled Commencement Date due to delay caused by Tenant or Force Majeure, Landlord will not be in default of this Lease.

 

(e)

 

Confirmation of Term. If applicable, Landlord shall notify Tenant of the Commencement Date using a Notice of Lease Term (“NLT”) in the form attached to this Lease as Exhibit D. Tenant shall execute and deliver to Landlord the NLT within 10 business days after its receipt, but Tenant’s failure to do so will not reduce Tenant’s obligations or Landlord’s rights under this Lease.

      3.2 Holdover. If Tenant keeps possession of the Premises after the Expiration Date (or earlier termination of this Lease) without Landlord’s prior written consent (a “Holdover”), which may be withheld in its sole discretion, then in addition to the remedies available elsewhere under this Lease or by law, Tenant will be a tenant-at-sufferance and must comply with all of Tenant’s obligations under this Lease (including the payment of Additional Rent), except that for each Month of Holdover Tenant will pay 150% of the Base Rent payable for the last Month of the Term (or that would have been payable but for abatement or excuse), without prorating for any partial Month of Holdover, plus Additional Rent for such period. Tenant shall indemnify and defend Landlord from and against all claims and damages, both consequential and direct, that Landlord suffers due to Tenant’s failure to return possession of the Premises to Landlord at the end of the Term. Landlord’s deposit of Tenant’s Holdover payment will not constitute Landlord’s consent to a Holdover, or create or renew any tenancy.

      3.3 Condition on Expiration.

 

(a)

 

Return of the Premises. At the end of the Term, Tenant will return possession of the Premises to Landlord vacant, free of Tenant’s Personal Property, in broom-clean condition, and with all Leasehold Improvements in good working order and repair (excepting ordinary wear and tear), except that Landlord may require

4


 

 

 

 

Tenant, by notice at least 10 days before the expiration of the Term, to remove (and restore the Premises damaged by removal):

 

(1)

 

All Tenant’s Wiring; and

 

 

 

 

 

(2)

 

Any item of Leasehold Improvements (not part of the original Leasehold Improvements made by Landlord as outlined in the Work Letter or the Systems) or Alterations (other than Tenant’s Wiring) if either:

 

 

(A)

 

When Landlord consented to the installation of the improvement, Landlord reserved Landlord’s right to have Tenant remove the improvement at the end of the Term; or

 

 

 

 

 

(B)

 

Tenant failed to obtain Landlord’s written consent under § 8.1 (a) for an item of Alterations to become part of the Premises.

 

(b)

 

Correction by Landlord . If Tenant fails to return possession of the Premises to Landlord in the condition required under (a), then Tenant shall reimburse Landlord for the costs incurred by Landlord to put the Premises in the condition required under (a), plus Landlord’s standard administration fee.

 

 

 

 

 

(c)

 

Abandoned Property . Tenant’s Personal Property left behind in the Premises after the end of the Term will be considered abandoned and Landlord may move, store, retain or dispose of these items at Tenant’s cost, including Landlord’s standard administration fee.

 

4.

 

RENT

      4.1 Base Rent. Tenant shall prepay one Month’s installment of Base Rent by the Date, to be applied against Base Rent first due under this Lease. During the Term, Tenant shall pay all other Base Rent in advance, in equal Monthly installments, on the 1 st of each Month. Base Rent for any partial Month will be prorated based on a 30-day month. Notwithstanding anything to the contrary contained in the Lease, and provided that Tenant faithfully performs all of the terms and conditions of the Lease, Landlord hereby agrees to abate Tenant’s obligation to pay Monthly Base Rent for the second (2 nd ), third (3 rd ) and fourth (4 th ) full months of the Term. During such abatement period, Tenant shall still be responsible for the payment of all of its other monetary obligations under the Lease.

      4.2 Additional Rent. Tenant’s obligation to pay Taxes and Expenses under this §4.2 is referred to in this Lease as “Direct Costs.”

 

(a)

 

Taxes . For each full or partial Year Tenant shall pay as in the manner described below the Tenant’s Share of the Taxes for such Year in excess of the Taxes for the Base Year. “Taxes” means the total costs incurred by Landlord for: (1) real and personal property taxes and assessments (including ad valorem and special assessments) levied on the Project and Landlord’s personal property used in connection with the Project; (2) taxes on rents or other income derived from the Building; (3) capital and place-of-business taxes; (4) taxes, assessments or fees in lieu of the taxes described in the foregoing clauses (1) through (3); and (5) the reasonable costs incurred to reduce the taxes described in the foregoing clauses (1) through (4). Taxes excludes net income taxes and taxes paid under §4.3.

 

 

 

 

 

(b)

 

Expenses . For each full or partial Year, Tenant shall pay in the manner described below the Tenant’s Share of the Expenses for such Year in excess of the Expenses for the Base Year. “Expenses” means the total costs incurred by Landlord to operate, manage, administer, equip, secure, protect, repair, replace, refurbish, clean, maintain, decorate and inspect the Project, including a fee to manage the Project not to exceed 5% of the gross revenue of the Project. Expenses that vary with occupancy will be calculated as if the Building is 95% occupied and operating and all such services are provided to all tenants.

 

(1)

 

Expenses include:

 

 

(A)

 

Standard Services provided under §6.1 (excluding electrical service pursuant to Section 6.3);

 

 

 

 

 

(B)

 

Repairs and maintenance performed under §7.2;

 

 

 

 

 

(C)

 

Insurance maintained under §9.2 (including deductibles paid);

 

 

 

 

 

(D)

 

Wages, salaries and benefits of personnel to the extent they render services to the Project;

5


 

 

(E)

 

Costs of operating the Project management office (including reasonable rent);

 

 

 

 

 

(F)

 

Amortization installments of costs required to be capitalized and incurred:

 

(i)

 

To comply with insurance requirements or laws (“Mandated Expenses”);

 

 

 

 

 

(ii)

 

That are reasonably calculated to reduce other Expenses or the rate of increase in other Expenses (“Cost-Saving Expenses”); or

 

 

 

 

 

(iii)

 

That are reasonably calculated to improve or maintain the safety, health or access of Project occupants, and otherwise maintain the quality, appearance, or integrity of the Project (“Quality Expenses”).

 

 

(2)

 

Expenses exclude:

 

(A)

 

Taxes;

 

 

 

 

 

(B)

 

Mortgage payments (principal and interest), and ground lease rent;

 

 

 

 

 

(C)

 

Commissions, advertising costs, attorney’s fees and costs of improvements in connection with leasing space in the Building;

 

 

 

 

 

(D)

 

Costs reimbursed by insurance proceeds or tenants of the Building (other than as Direct Costs);

 

 

 

 

 

(E)

 

Depreciation;

 

 

 

 

 

(F)

 

Except for the costs identified in §4.2(b)(1)(F), costs required to be capitalized according to sound real estate accounting and management principles, consistently applied;

 

 

 

 

 

(G)

 

Collection costs and legal fees paid in disputes with tenants; and

 

 

 

 

 

(H)

 

Costs to maintain and operate the entity that is Landlord (as opposed to operation and maintenance of the Project).

 

 

 

 

 

(I)

 

Costs incurred by Landlord due to the violation by Landlord of the terms and conditions of any lease of space in the Project or any law, code, regulation, ordinance or the like;

 

 

 

 

 

(J)

 

Landlord’s general corporate overhead and general and administrative expenses; and

 

 

 

 

 

(K)

 

Costs incurred to (i) comply with laws relating to the removal of any Hazardous Material, unless caused by Tenant or any Tenant Parties, and (ii) to remove, remedy, contain, or treat any Hazardous Material, which Hazardous Material is brought onto the Project after the date hereof by Landlord or any other tenant of the Project or any other person.

 

 

(c)

 

Amortization and Accounting Principles.

 

(1)

 

Each item of Mandated Expenses and Quality Expenses will be fully amortized in equal annual installments, with interest on the principal balance at Amortization Rate, over the number of years, not to exceed 10, that Landlord projects the item of Expenses will be productive for its intended use, without replacement, but properly repaired and maintained.

 

 

 

 

 

(2)

 

Each item of Cost-Saving Expenses will be fully amortized in equal annual installments, with interest on the principal balance at the Amortization Rate, over the number of years that Landlord reasonably estimates for the present value of the projected savings in Expenses (discounted at the Amortization Rate ) to equal the cost.

 

 

 

 

 

(3)

 

Any item of Expenses of significant cost that is not required to be capitalized but is unexpected or does not typically recur may, in Landlord’s discretion, be amortized in equal annual installments, with interest on the principal balance at the Amortization Rate, over a number of years determined by Landlord.

 

 

 

 

 

(4)

 

“Amortization Rate” means the prime rate of Citibank, N.A. (or a comparable financial institution selected by Landlord), plus 3%.

6


 

 

(5)

 

Landlord may allocate Direct Costs for the Project to various components of the Project on an equitable basis.

 

 

 

 

 

(6)

 

Subject to the specific provisions of this Article 4, Landlord will use sound real estate accounting and management principles, consistently applied, to determine Direct Costs.

 

(d)

 

Estimates . Landlord will provide to Tenant a reasonably detailed itemization of estimated Direct Costs for each Year. During the Term, if for any Year, Tenant’s Share exceeds Tenant Share for the Base Year, Tenant will pay an amount equal to the excess (“Excess”), in equal Monthly installments, on the first day of each Month. If Landlord has not provided Tenant with Landlord’s estimate of Direct Costs for a Year, then Tenant will pay the estimated Excess until the estimate is revised by Landlord. Landlord may reasonably revise its estimate of Direct Costs for a Year and after receipt of the revised estimate, Tenant will pay the monthly installments of Excess based on the revised estimate for the remainder of the Year or until the estimate is later revised by Landlord. The aggregate estimates of Direct Costs paid by Tenant in a Year is the “Estimated Direct Costs.”

 

 

 

 

 

(e)

 

Settlement . As soon as practicable after the end of each Year, Landlord will give Tenant a statement of the actual Direct Costs for the Year, and which shall indicate the amount, if any, of the Excess. Direct Costs for any partial Year will be prorated based on a 365-day calendar year. The statement of Direct Costs is conclusive, binds Tenant, and Tenant waives all rights to contest the statement, except for items of Direct Costs to which Tenant objects by notice to Landlord given within 90 days after receipt of Landlord’s statement; however, Tenant’s objection will not relieve Tenant from its obligation to pay Direct Costs pending resolution of any objection. If the Direct Costs exceed the Estimated Direct Costs for the Year, then Tenant shall pay any underpayment in Excess to Landlord in a lump sum as Rent within 30 days after receipt of Landlord’s statement of Direct Costs. If the Estimated Direct Costs exceeds the Direct Costs for the Year, then Landlord shall credit any overpayment in Excess against Rent next due. However, if the Term ends during a Year, then Landlord may, in Landlord’s sole discretion, elect either of the following: (1) to forego the settlement of Excess Direct Costs for the Year that is otherwise required and accept the payments of estimated Excess for the final Year in satisfaction of Tenant’s obligations to pay Excess for the final Year, or (2) to have Landlord’s and Tenant’s obligations under this §4.2(e) survive the end of the Term.

 

 

 

 

 

(f)

 

Audit . Tenant shall have the right to review and/or audit Landlord’s books and records regarding Tenant’s Share of Operating Costs at Landlord’s offices during normal business hours on ten (10) business days’ prior notice (“Review Notice”) for a period of ninety (90) days following Tenant’s receipt of the Annual Statement (the “Review Period”). Within a reasonable time after receipt of Tenant’s review/audit notice, Landlord shall make all pertinent records available for inspection that are reasonably necessary for Tenant to conduct its review. If any records are maintained at a location other than the office of the Project, Tenant may either inspect the records at such other location or pay for the reasonable cost of copying and shipping the records. Any audit shall be conducted by a reputable firm of certified public accountants (“Tenant’s CPA”) which, along with Tenant, agrees to be bound by a confidentiality agreement, on a noncontingent fee basis. Tenant shall have no right to contest, review or audit such statement if a Default has occurred and is continuing, or if Tenant fails to give such written notice during the Review Period. Within ninety (90) days after the records are made available to Tenant, Tenant shall have the right to give Landlord written notice (an “Objection Notice”) stating in reasonable detail any objection to the books and records that Tenant has reviewed. If Tenant fails to give Landlord an Objection Notice within the 90-day period or fails to provide Landlord with a Review Notice within the 90-day period described above, Tenant shall be deemed to have approved Landlord’s statement of Operating Costs for such year and shall be barred from raising any claims regarding the Operating Costs for that year. Landlord may elect to contest the conclusion of Tenant’s auditor in the Objection Notice by giving a written contest notice (the “Contest Notice”) to Tenant within sixty (60) days after receipt of the Objection Notice, such Contest Notice containing the name of a firm of certified public accountants appointed by Landlord (“Landlord’s CPA”). Landlord’s CPA and Tenant’s CPA shall meet and confer within forty-five (45) days after the Contest Notice is given in an attempt to agree on any disputed items. If Landlord’s CPA and Tenant’s CPA are unable to agree on all disputed items within forty-five (45) days after the Contest Notice, then each of Landlord’s CPA and Tenant’s CPA shall propose and deliver to each other in writing an amount to be paid by Tenant to Landlord or Landlord to Tenant relating to the Operating Costs being audited. Tenant’s CPA and Landlord’s CPA shall agree on a third CPA experienced in real estate accounting unaffiliated with

7


 

 

 

 

Landlord, Tenant and their respective CPA’s and who has not worked for Landlord, Tenant or their respective CPA’s in the last ten (10) years. Such third CPA (the “Deciding CPA”) shall meet for one day or less with Landlord’s CPA and Tenant’s CAP within fifteen (15) business days after the appointment of such Deciding CPA, and at the end of such meeting the Deciding CPA shall choose in writing either Tenant’s CPA’s proposal or Landlord’s CPA’s proposal, and such decision shall be final, binding and nonappealable. If Landlord and Tenant determine that Operating Costs for the calendar year are less than reported, Landlord shall provide Tenant with a credit against the next installment of Rental in the amount of the overpayment by Tenant. Likewise, if Landlord and Tenant determine that Operating Costs for the calendar year are greater than reported, Tenant shall pay Landlord the amount of any underpayment within thirty (30) days. Landlord shall pay for Landlord’s CPA, Tenant shall pay for Tenant’s CPA and the cost of the Deciding CPA shall be divided equally among the parties. No books and records may be removed from Landlord’s office. Notwithstanding the foregoing, if it is determined that Operating Costs reflected in the Annual Statement have been overstated by five percent (5%) or more, than Landlord shall pay for the reasonable cost of Tenant’s CPA and the Deciding CPA.

      4.3 Other Taxes. Upon demand, Tenant will reimburse Landlord for taxes paid by Landlord on (a) Tenant’s Personal Property, (b) Rent, (c) Tenant’s occupancy of the Premises, or (d) this Lease. If Tenant cannot lawfully reimburse Landlord for these taxes, then the Base Rent will be increased to yield to Landlord the same amount after these taxes were imposed as Landlord would have received before these taxes were imposed.

      4.4 Terms of Payment. “Rent” means all amounts payable by Tenant under this Lease and the exhibits, including Base Rent and Additional Rent. If a time for payment of an item of Rent is not specified in this Lease, then Tenant will pay Rent within 30 days after receipt of Landlord’s statement or invoice. Unless otherwise provided in this Lease, Tenant shall pay Rent without notice, demand, deduction, abatement or setoff, in lawful U.S. currency, at Landlord’s Billing Address. Landlord will send invoices payable by Tenant to Tenant’s Billing Address; however, neither Landlord’s failure to send an invoice nor Tenant’s failure to receive an invoice for Base Rent (and installments of Estimated Direct Costs) will relieve Tenant of its obligation to timely pay Base Rent (and installments of Estimated Direct Costs). Any partial payment of Rent by Tenant will be considered a payment on account. No endorsement or statement on any Rent check or any letter accompanying Rent will be deemed an accord and satisfaction, affect Landlord’s right to collect the full Rent due, or require Landlord to apply any payment to any Rent other than Rent earliest due. No payment by Tenant to Landlord will be deemed to extend the Term or render any notice, pending suit or judgement ineffective. By notice to the other, each party may change its Billing Address.

      4.5 Late Payment. If Landlord does not receive all or part of any item of Rent when due, then Tenant shall pay Landlord 5% of the overdue Rent (“Late Charge”) as Additional Rent. Tenant agrees that the Late Charge is not a penalty, and will compensate Landlord for costs not contemplated under this Lease that are impracticable or extremely difficult to fix. Landlord’s acceptance of a Late Charge does not waive Tenant’s default.

5. USE & OCCUPANCY

      5.1 Use. Tenant shall use and occupy the Premises only for the Use. Landlord does not represent or warrant that the Project is suitable for the conduct of Tenant’s particular business.

      5.2 Compliance with Laws and Directives.

 

(a)

 

Tenant’s Compliance . Subject to the remaining terms of this Lease, Tenant shall comply at Tenant’s expense with all laws and directives of Landlord’s insurers concerning:

 

(1)

 

The Leasehold Improvements and Alterations,

 

 

 

 

 

(2)

 

Tenant’s use or occupancy of the Premises,

 

 

 

 

 

(3)

 

Tenant’s employer/employee obligations,

 

 

 

 

 

(4)

 

A condition created by Tenant, its Affiliates or their contractors or invitees,

 

 

 

 

 

(5)

 

Tenant’s failure to comply with this Lease,

 

 

 

 

 

(6)

 

The negligence of Tenant or its Affiliates or contractors, or

 

 

 

 

 

(7)

 

Any chemical wastes, contaminants, pollutants or substances that are hazardous, toxic, infectious, flammable or dangerous, or regulated by any local, state or federal statute, rule, regulation or

8


 

ordinance for the protection of health or the environment (“Hazardous Materials”) that are introduced to the Project, handled or disposed by Tenant or its Affiliates, or any of their contractors.

 

 

 

Notwithstanding the foregoing, nothing in this Paragraph 5.2(a) shall require Tenant to bear any expenses for any structural changes, modifications or Alterations to the Premises or the Project or any changes to the Systems unless such changes are necessitated by Tenant’s particular use of, or improvement to, the Premises or the Project.

 

 

 

 

 

(b)

 

Landlord’s Compliance. The cost of Landlord’s compliance with laws or directives of Landlord’s insurers concerning the Project, other than those that are Tenant’s obligation under subsection (a), will be included in Expenses to the extent allowed under §4.2.

      5.3 Occupancy. Tenant shall not interfere with Building services or other tenants’ rights to quietly enjoy their respective premises or the Common Areas. Tenant shall not make or continue a nuisance, including any objectionable odor, noise, fire hazard, vibration, or wireless or electromagnetic transmission. Tenant will not maintain any Leasehold Improvements or use the Premises in a way that increases the cost of insurance required under §9.2, or requires insurance in addition to the coverage required under §9.2.

      5.4 OFAC Certification. Tenant represents that: (a) Tenant is not now and has never been listed or named as a Blocked Person, or (b) Tenant is not now and has never been acting directly or indirectly for, or on behalf of, any Blocked Person. “Blocked Person” means any person, group, entity or nation designated by the United States Treasury Department as a terrorist or a “Specially Designated National and Blocked Person,” or that is a banned or blocked person, entity, nation under any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control.

6.

 

SERVICES & UTILITIES

 

6.1

 

Standard Services.

 

 

 

 

 

(a)

 

Standard Services Defined. “Standard Services” means:

 

 

(1)

 

Heating, ventilation and air-conditioning (“HVAC”) during Business Hours as reasonably required to comfortably use and occupy the Premises and interior Common Areas;

 

 

 

 

 

(2)

 

Tempered water from the public utility for use in Common Areas rest rooms, and water from the public utility for use in customary kitchen facilities located in the Premises;

 

 

 

 

 

(3)

 

Janitorial services to the Premises and interior Common Areas 5 days a week, except Holidays, and pest control services in the Common Areas as needed to keep the Common Areas free from infestation;

 

 

 

 

 

(4)

 

Access to the Premises (by at least 1 passenger elevator if not on the ground floor);

 

 

 

 

 

(5)

 

Labor to replace fluorescent tubes and ballasts in Building Standard light fixtures in the Premises;

 

 

 

 

 

(6)

 

Access control services; and

 

 

 

 

 

(7)

 

Electricity from Landlord’s selected provider(s) for Common Areas lighting;

 

(b)

 

Standard Services Provided . During the Term, Landlord shall provide the Standard Services to Tenant. The cost of the Standard Services is included in Expenses. Landlord is not responsible for any inability to provide Standard Services due to either the concentration of personnel or equipment in the Premises; or Tenant’s use of equipment in the Premises that is not customary office equipment or has special cooling requirements.

      6.2 Additional Services. Landlord will provide utilities and services in excess of the Standard Services subject to the following:

 

(a)

 

HVAC. If Tenant requests HVAC service to the Premises during non-Business Hours, Tenant will pay as Rent Landlord’s scheduled rate for this service.

 

 

 

 

 

(b)

 

Lighting . Landlord will furnish Building Standard lamps, bulbs, ballasts and starters that are part of the Leasehold Improvements at no cost to Tenant (but shall be included in Direct Costs), and non Building standard lamps, bulbs, ballasts and starters that are part of the Leasehold Improvements for purchase by

9


 

 

 

 

 

Tenant at Landlord’s cost, plus Landlord’s standard administration fee. Landlord will install non-Building Standard items at Landlord’s scheduled rate for this service.

 

 

 

 

 

(c)

 

Other Utilities and Services. Tenant will pay as Rent the actual cost of utilities or services (other than HVAC and lighting addressed in (a) and (b), and subject to Section 6.3 below) either used by Tenant or provided at Tenant’s request in excess of that provided as part of the Standard Services, plus Landlord’s standard administration fee. Tenant’s excess consumption may be estimated by Landlord unless either Landlord requires or Tenant elects to install Building Standard meters to measure Tenant’s consumption.

 

 

 

 

 

(d)

 

Additional Systems and Metering. Landlord may require Tenant, at Tenant’s expense, to upgrade or modify existing Mechanical Systems serving the Premises or the Leasehold Improvements to the extent necessary to meet Tenant’s excess requirements (including installation of Building Standard meters to measure the same).

      6.3 Separate Metering and Electrical Billing. Notwithstanding anything to the contrary in this Article 6, Tenant shall contract directly with San Diego Gas and Electric Company (“Electric Provider”) for all electrical power and services in the Premises. Such services shall not be included in Landlord’s Standard Services. Tenant’s total consumption of electricity in the Premises, including lighting and convenience outlets, shall be separately metered and Tenant shall be solely responsible for the costs thereof. Landlord shall be responsible for (as part of Direct Costs) the installation of any meters in, on or about the Premises. Tenant shall pay all costs associated with electrical consumption directly to the Electric Provider or pay as Rent the actual cost of Tenant’s electricity consumption, plus Landlord’s standard administrative fee, at Landlord’s election. Notwithstanding the foregoing, the total connected load shall not exceed 4 watts per RSF of the Premises.

      6.4 Telecommunication Services. Tenant will contract directly with third party providers and will be solely responsible for paying for all telephone, data transmission, video and other telecommunication services (“Telecommunication Services”) subject to the following:

 

(a)

 

Providers . Each Telecommunication Services provider that does not already provide service to the Building shall be subject to Landlord’s approval, which Landlord may withhold in Landlord’s sole discretion. Without liability to Tenant, the license of any Telecommunication Services provider servicing the Building may be terminated under the terms of the license, or not renewed upon the expiration of the license.

 

 

 

 

 

(b)

 

Tenant’s Wiring. Landlord may, in its sole discretion, designate the location of all wires, cables, fibers, equipment, and connections (“Tenant’s Wiring”) for Tenant’s Telecommunication Services, restrict and control access to telephone cabinets and rooms. Tenant may not use or access the Base Building, Common Areas or roof for Tenant’s Wiring without Landlord’s prior written consent, which Landlord may withhold in Landlord’s sole discretion. Tenant’s Wiring will be subject to removal in accordance with §3.3.

 

 

 

 

 

(c)

 

No Beneficiaries . This §6.4 is solely for Tenant’s ben


 
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