<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
dated February 19, 1999
ILOG S.A.
9 Rue De Verdun BP 85
94253 Gentilly, France
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F .
----- -----
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X .
----- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82- N.A .
------
<PAGE>
ILOG S.A.
FORM 6-K
ILOG S.A. (the "Company") reported its results for the three months ended
December 31, 1998 in a press release dated January 28, 1999. Such press release
is attached as EXHIBIT 99.1 hereto and is incorporated by reference herein.
On October 26, 1998 the Company's subsidiary ILOG, Inc. entered into a lease
agreement with Shoreline 101, LLC, for new premises located at 1080 Linda Vista
Avenue, Mountain View, California. The Company fully guaranteed its
subsidiary's obligations under the lease. A copy of the Lease Agreement is
attached as Exhibit 99.2 hereto and is incorporated by reference herein.
In connection with the Lease Agreement, ILOG, Inc. and Shoreline 101, LLC
entered into an Improvement Agreement dated October 26, 1998. A copy of the
Improvement Agreement is attached at Exibit 99.3 hereto and is incorporated
by reference herein.
EXHIBIT INDEX
Exhibit Press release, dated January 28, 1999, announcing the results
99.1 of ILOG S.A. for the three months ended December 31, 1998.
99.2 Lease Agreement, dated October 26, 1998 between ILOG, Inc., ILOG S.A.,
and Shoreline 101, LLC.
99.3 Improvement Agreement dated October 26, 1998 between ILOG, Inc., and
Shoreline 101, LLC.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ILOG S.A.
By: /s/ Stuart Bagshaw
--------------------------------
Stuart Bagshaw
Chief Operating Officer
Date: February 19, 1999
<PAGE>
EXHIBIT 99.1
[LOGO]
FOR IMMEDIATE RELEASE
Contact: Roger Friedberger
ILOG
650-944-7115 or
+33-1-49083574
- or -
Taylor Rafferty Associates
212-889-4350
ILOG REPORTS RESULTS FOR QUARTER ENDED DECEMBER 31, 1998
PARIS, FRANCE - January 28, 1999 - ILOG S.A. (NASDAQ NMS: ILOGY and EURO.NM:
ILOG), the world's leading provider of software components, today reported
revenues of $18.3 million for its second fiscal quarter of 1999, ended December
31, 1998 -- an increase of 20% compared to $15.3 million in the same quarter of
the prior year. Income from operations before one-time charges was $1.3 million,
compared to $1.6 million in the previous year. Earnings per share, excluding the
one-time charges, was $0.09 for the December 1998 quarter compared to $0.10 in
the December 1997 quarter. The loss per share in the latest quarter was $0.08,
compared to earnings per share of $0.01 in the prior year after including the
one-time charges associated with the write off of software and intangibles
acquired from CPLEX Optimization, Inc.
One-time charges in the December 1998 quarter were the write off of software
under development acquired from Oasis Software, Inc., of $1.8 million, and $0.5
million of expenses incurred in connection with the listing of the Company's
shares on the Paris Nouveau Marche (EURO.NM), which resulted in a net loss for
the quarter of $1.1 million.
"This quarter was ILOG's best revenue quarter to date," said Pierre Haren,
ILOG's president and CEO. "We were able to achieve a license fee revenue growth
of 26% despite weakness in license and consulting revenues in our U.S.
transportation business. In the short term, this continuing U.S. transportation
weakness, together with the reported Y2K related worldwide softening of the
supply chain management industry may cause the year-over-year growth rate for
the March 1999 quarter to be similar to the year-over-year growth rate in the
December 1998 quarter.
<PAGE>
"We continued our R&D efforts in order to expand our addressable markets. The
technology acquisition from Oasis was praised by industry analyst firm AMR
Research, which called it a natural extension of ILOG's strategy," added Mr.
Haren.
BUSINESS DEVELOPMENTS DURING THE QUARTER
ILOG further consolidated its position in telecommunications network management
and manufacturing. In the telecommunications sector, the company introduced a
new Java version of ILOG TGO (Telecom Graphic Objects) and other new Java
products within its visualization and other product lines. These advanced new
Java products are well positioned to help ILOG capitalize on fast-growing demand
for web-enabled solutions. During the quarter, ILOG signed agreements with IBM
(NYSE: IBM) and other companies for its ILOG TGO family, and received additional
business from existing customers including Cisco Systems (NASDAQ: CSCO) and
Alcatel (NYSE: ALA).
During the quarter, ILOG announced an increase in multiple-product licenses,
such as an agreement with American Management Systems (NASDAQ: AMSY), as well as
a corporate-wide license for all ILOG products for the 1,000 developers within
Telefonica Group, the largest supplier of telecommunications services in the
Spanish-speaking world.
In the manufacturing sector, the Company continued its leadership in the area of
optimization components used within supply chain management (SCM) applications.
New agreements were signed with UK-based company Enterprise Software Systems,
Cybertec in Italy and Ford (NYSE: F) in the United States. The attention ILOG
has received through its relationships with market leaders such as SAP (NYSE:
SAP), i2 Technologies (NASDAQ: ITWO) and Manugistics (NASDAQ: MANU) helped its
SCM business. Called "the indisputable world leader in optimization software" by
the Benchmarking Partners Inc. analyst firm, ILOG is now the only company
offering the full breadth of optimization components, from linear programming
engines to products based on constraint programming.
In the transportation sector outside the United States, ILOG components were
again chosen to help address two major industry needs -- for real-time system
monitoring, as well as optimizing the management of personnel and vehicles.
Sales in the quarter were made to Aena, Air France, Singapore Aeradio, Smith
System Engineering and the U.S. leader, The SABRE Group (NYSE: TSG) for air
transportation applications, and to a number of bus transportation providers in
Spain for optimization applications.
In December, ILOG successfully completed the listing of its shares on the Paris
Nouveau Marche, which is part of the EURO.NM stock market. This has increased
the Company's visibility in the financial community and has simplified trading
for European investors while supplementing the Company's NASDAQ listing in the
United States.
<PAGE>
ABOUT ILOG
ILOG is a leading provider of advanced C, C++ and Java software components for
advanced graphics and resource optimization. ILOG products deliver
high-performance data visualization for 2-D and 3-D user interfaces; integer,
linear and constraint solvers for resource optimization, scheduling, logistics
and planning applications; dynamic rule systems for intelligent agents and
real-time data flow control, and components for integrating modules with
real-time and relational data sources. ILOG was founded in 1987 and now employs
approximately 460 people in seven countries. Visit www.ilog.com for additional
information.
<PAGE>
ILOG S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31 Dec. 31 Dec. 31 Dec. 31
-------- -------- -------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License fees $ 11,983 $ 9,532 $ 19,886 $ 14,861
Services 6,330 5,725 11,726 8,967
-------- -------- -------- --------
Total revenues 18,313 15,257 31,612 23,828
-------- -------- -------- --------
Cost of revenues
License fees 262 303 477 568
Services 3,876 3,015 7,059 4,710
-------- -------- -------- --------
Total cost of revenues 4,138 3,318 7,536 5,278
-------- -------- -------- --------
Gross profit 14,175 11,939 24,076 18,550
-------- -------- -------- --------
Operating expenses
Marketing and selling 8,777 7,310 15,048 12,905
Research and development 2,524 1,664 4,763 2,987
General and administrative 1,596 1,412 3,522 2,707
Nouveau Marche expenses 466 - 466 -
Write-off of acquired intangibles 1,847 1,327 1,908 29,694
-------- -------- -------- --------
Total operating expenses 15,210 11,713 25,707 48,293
-------- -------- -------- --------
Income (loss) from operations (1,035) 226 (1,631) (29,743)
Net interest income (expense) and other (87) (110) (471) (82)
-------- -------- -------- --------
Net income (loss) $ (1,122) $ 116 $ (2,102) $(29,825)
-------- -------- -------- --------
Net income (loss) per share - basic & diluted $ (0.08) $ 0.01 $ (0.15) $ (2.43)
Share and share equivalents used
in per share calculations 13,973 14,289 13,927 12,252
</TABLE>
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ILOG S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Dec. 31 June 30
-------- --------
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 14,838 $ 20,101
Accounts receivable 21,483 15,328
Other receivables and prepaid expenses 5,143 4,370
-------- --------
Total current assets 41,464 39,799
Property and equipment-net and other assets 4,466 3,850
-------- --------
Total assets $ 45,930 $ 43,649
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 12,309 $ 10,772
Current debt 1,483 2,055
Deferred revenue 5,166 5,044
-------- --------
Total current liabilities 18,958 17,871
Long-term portion of debt 6,181 5,979
-------- --------
Total liabilities 25,139 23,850
-------- --------
Shareholders' equity
Paid-in capital 61,760 60,296
Accumulated deficit and currency translation adjustment (40,969) (40,497)
-------- --------
Total shareholders' equity 20,791 19,799
-------- --------
Total liabilities and shareholders' equity $ 45,930 $ 43,649
-------- --------
</TABLE>
<PAGE>
DISCUSSION OF FINANCIAL HIGHLIGHTS
SIX-MONTH RESULTS
The company reported revenues of $31.6 million for the six months ended December
31, 1998, an increase of 33% compared to $23.8 million in the prior year.
Excluding the one-time write offs of acquired intangibles (CY 1998 and 1997) and
Nouveau Marche listing expenses (CY 1998) totaling $2.4 million and $29.7
million in CY1998 and 1997, respectively, the income from operations for the
six-month period was $0.7 million compared to a $49,000 loss in the
corresponding period of the prior year. Earnings per share for the six-month
period, excluding the one-time write offs, was $0.02, compared to a $0.01 per
share loss in the corresponding period of the prior year. The loss per share in
the six-month period was $0.15 compared to $2.43 in the corresponding period of
the prior year after including the write offs.
REVENUES AND GROSS MARGIN
Revenues in the quarter grew by 20%, with license and service revenues
increasing by 26% and 11%, respectively, over the same period in the preceding
year. The revenue growth was derived from license fees in North America and
Europe, and from consulting and support activities in Europe and Asia. Overall
gross margin for the quarter declined to 77% from 78% in the same period of the
preceding year due to lower capacity utilization of consulting resources in
North America.
OPERATING EXPENSES
Marketing and selling expenses for the quarter increased by 20% over the same
period in the prior year, reflecting continuing investment in the sales and
marketing organization.
Research and development expenses for the quarter, net of government funding,
increased by 52% over the same period in the prior year, reflecting R&D
headcount growth from 59 to 90 between December 31, 1997 and December 31, 1998
and is related to the growth in ILOG product offerings over the last year.
Government research and development funding in the quarter was $274,000 compared
to $183,000 for the same period in the preceding year.
General and administrative expenses for the quarter increased by 13% over the
same period in the prior year. $466,000 of one-time expenses were incurred
during the quarter in connection with the Company's listing on the Paris Nouveau
Marche stock exchange.
The write off of acquired intangibles for the quarter totaling $1.8 million
primarily represents research and development acquired from Oasis Software,
Inc., which will form the core of a new version of an ILOG optimization product
to be launched this year.
OTHER INCOME (EXPENSE)
Net interest and other income (expense) for the quarter decreased from
$(110,000) to $(87,000) over the same period in the prior year due to currency
fluctuations. However, currency fluctuations did not have a material effect on
the company's income from operations, net income or earnings per share for the
quarter ended December 31, 1998.
<PAGE>
BALANCE SHEET
Cash at December 31, 1998 decreased to $14.8 million from $20.1 million at June
30, 1998. This reflected $1.8 million paid in connection with the acquisition of
software acquired from Oasis Software, Inc., $0.5 spent in connection with the
Company's Nouveau Marche listing and the timing of operating cash flows. Days
sales outstanding of receivables improved to 106 days at December 31, 1998,
compared to 107 days at September 30, 1998. The length of receivables reflects
longer payment terms offered to certain strategic customers.
Long-term debt during the six-month period increased from $6.0 million to $ 6.2
million at December 31, 1998. Shareholders' paid-in capital during the six-month
period increased by $1.5 million to $61.8 at December 31, 1998, reflecting the
purchase of shares by employees under the Company's stock option and share
purchase plans. At December 31, 1998, the Company had 14.0 million shares issued
and outstanding compared to 13.7 million at June 30, 1998.
PRIOR YEAR COMPARATIVE DATA
ILOG's results of operations for the quarter and six months ended December 31,
1997 and the balance sheet as of June 30, 1998 have been restated to include
those of Compass Modeling Solutions, Inc., which was acquired in August 1998 and
accounted for as a pooling of interests. For the quarter and six months ended
December 31, 1997, Compass had net revenues of $238,000 and $366,000,
respectively, and profits of $82,000 and $85,000, respectively.
FORWARD-LOOKING INFORMATION
This release contains "forward-looking" information within the meaning of the
United States Securities laws that involve risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. Potential risks and uncertainties include, without limitation, the
economic, political and currency risks associated with the company's European,
North American and Asian operations, the timing and seasonality of significant
revenues and those risks and uncertainties mentioned under "Risk Factors" in the
Company's Form 20-F for the year ended June 30, 1998, which is on file with the
United States Securities and Exchange Commission.
ILOG and CPLEX are registered trademarks of ILOG. All other product and company
names are trademarks or registered trademarks of their respective owners.
RESULTS AND PRESS RELEASE FOR FRENCH SHAREHOLDERS
A translation of this press release in the French language and with the
financial statements expressed in French Francs is also available.
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into effective the
26th day of October, 1998 (date for reference purposes only), by and between
SHORELINE 101, LLC, a California limited liability company (hereinafter called
"Landlord"), and ILOG, Inc., a California Corporation, with a full guarantee of
Tenant's obligations hereunder by ILOG S. A. (hereinafter called "Tenant"),
hereinafter collectively referred to as the "Parties".
WITNESSETH
WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to lease
from Landlord, the Premises described below.
NOW, THEREFORE, in exchange for the reciprocal agreements contained
herein, and upon the terms, conditions and covenants hereinafter set forth, the
parties do hereby agree as follows:
AGREEMENT
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, those certain premises situated in the County of Santa
Clara, State of California, consisting of a newly constructed two story
commercial building (the "Building") and the paved parking area surrounding the
Building (the "Parking Area") consisting of not less than three and nine-tenths
(3.9) parking spaces per one thousand (1,000) square feet of Premises Gross
Leasable Area (the "Minimum Parking") to be constructed by Landlord in
accordance with the terms of this Lease and the Improvement Agreement attached
to this Lease as Exhibit H (the "Improvement Agreement"). The Building and the
Parking Lot are to be constructed on the real property located at 1080 Linda
Vista Avenue, Mountain View, California (the "Real Property"). A legal
description of the Real Property is set forth in Exhibit A attached hereto. As
used in this Lease, the term "Premises" shall include the Building (which shall
consist of approximately thirty-six thousand (36,000+) square feet of Premises
Gross Leasable Area, as hereinafter defined, making up the entirety of the
Building) and the Tenant Improvements to be constructed by Landlord in
accordance with this Lease. The general construction configuration and
description of the basic Building shell (the "Shell") is set forth in the Final
Building Shell Plans described in the Improvement Agreement. The location and
general configuration of the Premises is shown on the site plan attached hereto
as Exhibit C. The actual square footage of leasable space within the Building
(the "Premises Gross Leasable Area") shall be determined immediately prior to
the Commencement Date, as hereinafter defined, by the architect hired in
connection with the construction of the Building using the AIA Document 101
method of Calculating Areas of Buildings. Notwithstanding the above, the
Landlord reserves the right to install, maintain, use, and replace ducts, wires,
conduits, and pipes in and through the Premises in locations which will not
materially interfere with Tenant's use of the Premises.
Notwithstanding anything to the contrary in this Lease, during the Term
of this Lease, Tenant
<PAGE>
shall have the exclusive right to use (i) the Parking Area and the balance of
the Real Property, and (ii) the roof of the Building for the purpose of
installing and maintaining equipment on the roof for Tenant's own use only.
Landlord and its agents, contractors, and employees shall, however, have
access to and the right of entry onto the Real Property and the roof for the
purpose of the maintenance thereof and for the purpose of maintaining the
Landlord's equipment thereon. Landlord shall not have the right to use the
roof, the Parking Area or the Real Property for its own purposes, and
neither Tenant nor Landlord shall have the right to lease, license or
otherwise permit the use of, the roof, the Parking Area or the Real Property
to or by any other person or entity (other than Tenant's permitted subtenants
or assigns hereunder).
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth, and Tenant covenants, as a material part of
the consideration for this Lease, to perform and observe each and all of said
terms, covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
2. USE AND RESTRICTIONS.
2.1 USE. Tenant shall use the Premises only in conformance with
applicable Laws (as defined in Section 53.3), regulations, rules and ordinances
for the purpose of general office, research and development, and for no other
purpose without the prior written consent of the Landlord, which consent shall
not be unreasonably withheld or delayed.
2.2 RULES AND REGULATIONS. Tenant shall comply with the rules
attached to this Lease as Exhibit E (the "Rules and Regulations"). Tenant shall
also comply with any reasonable amendments or additions to the Rules and
Regulations promulgated by Landlord from time to time for the safety, care, and
cleanliness of the Premises, Building, and Real Property, and for the
preservation of good order, as long as:
2.2.1 The Rules and Regulations, as amended, do not
require Tenant to pay additional Basic Rent or Additional Rent;
2.2.2 No amendment or addition to the Rules and
Regulations is binding on Tenant until the tenth (10th) business day
after Tenant receives written notice of the change, and no amendment or
addition applies retroactively; and
2.2.3 The Rules and Regulations, as amended, do not
materially decrease Tenant's rights or materially increase Tenant's
obligations under the terms and conditions of this Lease.
2.3 ADDITIONAL RESTRICTIONS ON USE. Tenant shall not do or
permit to be done in or about the Premises, nor bring or keep or permit to be
brought or kept in or about the Premises, anything which is prohibited by or
will in any way increase the existing rate of (or otherwise affect) fire or any
other insurance covering the Premises or any part thereof, or any of its
contents; provided,
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<PAGE>
however, subject to the limitations on use set forth in Sections 2.1 and 2.2
above, and further subject to any and all limitations on use imposed by any
local, city, county, state, or federal government or agency, Tenant may
engage in such activities as would result in an increase in insurance
premiums only so long as Tenant pays any such increase. Tenant shall not do
or permit to be done anything in, on, or about the Premises which will in any
way obstruct or interfere with any neighboring premises, or injure or annoy
them, or use or allow the Premises to be used for any unlawful purpose, nor
shall Tenant cause, maintain, or permit any nuisance in, on, or about the
Premises. No sale by auction shall be permitted on the Premises. Tenant
shall not place any loads upon the floors, walls, or ceiling which endanger
the structure, or place any harmful fluids or other materials in the drainage
system of the Building, or overload existing electrical or other mechanical
systems. No waste materials or refuse shall be dumped upon or permitted to
remain upon any part of the Premises or outside of the Building, except in
trash containers placed inside exterior enclosures designated by Landlord for
that purpose or inside of the Building proper where designated by Landlord.
No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain outside the Premises. Tenant shall not place anything or
allow anything to be placed near the glass of any window, door partition or
wall which may appear unsightly from outside the Premises. No loudspeaker or
other device, system or apparatus which can be heard outside the Premises
shall be used in or at the Premises without the prior written consent of
Landlord. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless
from and against any loss, expense, damage, reasonable attorneys' fees,
and/or liability arising out of the failure of the Tenant to comply with any
applicable law to the extent Tenant is required to comply with such laws
under the terms of this Lease and to the extent such compliance is
necessitated due to Tenant's particular use of the Premises. Tenant shall
not violate any covenant, condition, or restriction ("CC&R") affecting the
Premises. The provisions of this Section are for the benefit of Landlord
only, and shall not be construed to be for the benefit of any tenant or
occupant of the Premises.
3. TERM, POSSESSION, AND EARLY ENTRY.
3.1 TERM. The term of this Lease shall be for a period of
seventy-four (74) months commencing on the date (the "Commencement Date") that
possession is tendered to Tenant, as established under Subsection 3.2, below,
which date is estimated to be January 29, 1999, and, unless sooner terminated as
hereinafter provided, continuing until the last day of the seventy-fourth (74th)
month thereafter, which is estimated to be March 28, 2005 (the "Term" or "Lease
Term"). The actual Commencement Date, as so determined, shall be set forth in a
Commencement Date Memorandum which shall be signed by the parties and attached
to this Lease in the form of and as Exhibit F.
3.2 POSSESSION. Possession of the Premises shall be deemed
tendered, and the term of the Lease shall commence on the date by which all of
the following have occurred:
3.2.1 Landlord has substantially completed the Shell (as
defined in the
-3-
<PAGE>
Lease below) of the Building and the Tenant Improvements (as defined in
this Lease below) in accordance with this Lease, including the Improvement
Agreement as set forth in Exhibit H;
3.2.2 Landlord has delivered possession of the Premises
to Tenant;
3.2.3 There remains no incomplete or defective item of
Shell or Tenant Improvements that would have a material and adverse
effect on Tenant's intended use of the Premises;
3.2.4 Landlord has obtained all approvals and permits
from the appropriate governmental authorities required for the legal
occupancy of the Premises for Tenant's intended use; and
3.2.5 Utilities are ready for use in the Premises.
3.3 EARLY ENTRY. Notwithstanding the commencement of this Lease
on the delivery of possession as set forth in Section 3.2 above, Tenant shall
have a right of early access to the Premises as provided for in the Improvement
Agreement.
4. DELAYED POSSESSION. If the Commencement Date does not occur on or
before February 15, 1999, then Tenant shall be entitled to one (1) additional
day of occupancy free of Basic Rent for each day after February 15, 1999, that
possession is not tendered (provided, however, such occupancy free of Basic Rent
shall be in addition to the two months of occupancy free of Basic Rent as
detailed in Section 5.1 below). Such February 15, 1999, date shall be extended,
however, for each day that the Commencement Date has been delayed beyond
February 15, 1999, solely due to (i) fire, earthquake or other similar peril
(but specifically excluding inclement weather, such as rain), or (ii) Tenant's
negligence or willful misconduct or Tenant's breach of this Lease; provided,
however, that such February 15, 1999, date shall not be extended more than
fifteen (15) days, in the aggregate, due to causes described in the foregoing
clause (i). Subject to the foregoing, if for any reason whatsoever, Landlord
cannot deliver possession of said Premises to Tenant on or before February 15,
1999, this Lease shall not be void or voidable, no obligation of Tenant shall be
affected thereby, and neither Landlord nor Landlord's agents, shall be liable to
Tenant for any loss or damage resulting therefrom. Notwithstanding anything to
the contrary in this Lease, if the Commencement Date has not occurred for any
reason whatsoever (other than as a consequence of the negligence or willful
misconduct of Tenant or Tenant's breach of this Lease) on or before March 15,
1999, then, in addition to Tenant's other rights or remedies, Tenant may
terminate this Lease by written notice to Landlord, whereupon any monies
previously paid by Tenant to Landlord shall be reimbursed to Tenant, together
with interest thereon from the date of the termination until paid at the rate of
five percent (5%) per annum.
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<PAGE>
5. BASIC RENT; LATE CHARGE; ADDITIONAL RENT; SECURITY DEPOSIT.
5.1 BASIC RENT. Commencing on the Commencement Date, Tenant
agrees to pay to Landlord, at such place as Landlord may designate, in lawful
money of the United States of America, and without deduction, offset, prior
notice, or demand, and Landlord agrees to accept as rent for the Premises, Basic
Rent each month calculated from time to time for the periods indicated below
equal to the product of the Premises Gross Leasable Area, as ultimately
determined on the Commencement Date, multiplied by the following per square foot
rates:
<TABLE>
<CAPTION>
MONTHS OF OCCUPANCY BASIC RENT ESTIMATED BASIC RENT
PER SQUARE FOOT PER MONTH
<S> <C> <C>
1-2 $ 0.00 $ 0.00
3-14 $ 2.30 $ 82,800.00
15-26 $ 2.35 $ 84,600.00
27-38 $ 2.40 $ 86,400.00
39-50 $ 2.50 $ 90,000.00
51-62 $ 2.55 $ 91,800.00
63-74 $ 2.60 $ 93,600.00
</TABLE>
5.2 TIME FOR PAYMENT. The Basic Rent amount (as calculated
pursuant to Section 5.1 above) is due and payable in advance on the first day of
each calendar month during the term of this Lease. In the event that the term of
this Lease commences on a date other than the first day of a calendar month,
then, beginning in the month which Tenant is required to commence payment of
Basic Rent, Tenant shall pay to Landlord as rent for the period from such date
to the first day of the next succeeding calendar month that proportion of the
monthly rent hereunder which the number of days between such date and the first
day of the next succeeding calendar month bears to thirty (30). In the event
that the term of this Lease for any reason ends on a date other than the last
day of a calendar month, on the first day of the last calendar month of the term
hereof Tenant shall pay to Landlord, as rent for the period from said first day
of said last calendar month to and including the last day of the term hereof,
that proportion of the monthly rent hereunder which the number of days between
said first day of said last calendar month and the last day of the term hereof
bears to thirty (30).
5.3 LATE CHARGE. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent or other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, loss of use of the money due, and
late charges which may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Premises. Accordingly, if any installment of Basic
Rent, Additional Rent (as hereinafter defined), or any other sum due from Tenant
shall not be received by Landlord or Landlord's designee within ten (10) days
after such amount shall be due, Tenant shall pay to Landlord a late charge equal
to five
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percent (5%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of
the other rights and remedies granted hereunder.
5.4 ADDITIONAL RENT. Beginning with the Commencement Date of
the term of this Lease, Tenant shall pay to Landlord, or to Landlord's
designated agent, in addition to the Basic Rent, and as Additional Rent, the
following:
5.4.1 All Real Property Taxes (as hereinafter defined)
relating to the Premises as set forth in Section 12;
5.4.2 [Intentionally omitted]
5.4.3 All of the annual Operating Expenses (as defined
below);
5.4.4 The Management Fee (as defined below);
5.4.5 All charges, costs and expenses, which Tenant is
required to pay hereunder; and
5.4.6 All interest, penalties, costs, and expenses,
including, without limitation, reasonable attorney's fees and legal
expenses that Landlord may incur by reason of a default of Tenant.
In the event of nonpayment by Tenant of Additional Rent, Landlord
shall have all the rights and remedies with respect thereto as Landlord has for
nonpayment of Basic Rent.
5.5 METHOD OF PAYING ADDITIONAL RENT. Except for that portion
of the Additional Rent which constitutes "Operating Expenses," as hereinafter
defined, the Additional Rent due hereunder shall be paid to Landlord or
Landlord's agent within ten (10) days after presentation of an invoice from
Landlord or Landlord's agent setting forth such Additional Rent. The
obligations of Tenant under this Section 5.5 shall survive the expiration or
other termination of the Term of this Lease, and if the Term hereof shall expire
or shall otherwise terminate on a day other than the last day of a calendar
year, the actual Additional Rent incurred for the calendar year in which the
Term hereof expires or otherwise terminates shall be determined and settled on
the basis of the actual Additional Rent for such calendar year, and shall be
prorated in the proportion which the number of days in such calendar year
preceding such expiration or termination bear to three hundred sixty-five (365).
5.6 OPERATING EXPENSES. It is understood and agreed that, in
light of the letting of the entire Building to Tenant, this is a single tenant
Lease and, therefore, certain of the expenses associated with the operation of
the Real Property, the Parking Area, the Building, and the Premises
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will be paid directly by Tenant. Notwithstanding the "single-tenant"
nature of this Lease, it is agreed that Landlord shall maintain and
repair the Real Property, the Building, the Parking Area, and the
Premises, as hereinafter provided in Section 6, and that, subject to
Section 5.7, Tenant shall pay all of the expenses (the "Operating
Expenses") actually incurred by Landlord during the Term in connection
with such maintenance and repair that are not otherwise paid directly
by Tenant. The definition of "Operating Expenses" includes, without
limitation, any and all amounts paid or incurred for:
5.6.1 The cost of maintaining, servicing, and repairing
the utility, mechanical, sanitary, storm drainage, and elevator systems
and equipment, the plumbing, heating, ventilation, air-conditioning, and
electrical systems and equipment, and the cost of supplies, maintenance,
and service contracts in connection with those systems and equipment.
5.6.2 The cost of maintaining and repairing the
non-structural portions of the Premises (including all Tenant
Improvements and approved Alterations, but excluding Tenant's trade
fixtures and furnishings).
5.6.3 The cost of contesting the validity or
applicability of any government enactments that may affect the Operating
Expenses, but only in the event such contest actually results in a
reduction of the Operating Expenses contested.
5.6.4 Amortization of capital improvements to the
non-structural portions of the Real Property if such capital improvements
would generally be capitalized under generally accepted accounting
principles, but only to the extent (1) that such expenses would reduce
the Operating Expenses otherwise payable by Tenant under the Lease or (2)
are required under any government law or regulation which became
effective with respect to the Real Property after the Commencement Date.
All permitted capital expenditures shall be amortized (including interest
on the unamortized cost at the rate equal to the floating commercial loan
rate announced from time to time by Bank of America as its prime rate)
over their useful life, as reasonably determined by Landlord in
accordance with generally accepted accounting principles, and Tenant
shall only be required to pay on a monthly basis such amortized amount
during the Term.
5.6.5 Subject to Section 5.6.4, all landscaping, parking
areas, sidewalks, pedestrian ways, driveways, signs, and storage areas
inside and outside of the Premises, including, without limitation, (i)
the cost of resurfacing, resealing, remarking, painting or restriping the
parking area as necessary from damage or normal wear and tear; (ii) the
cost of the maintenance, repair, and replacement due to damage of
sidewalks, curbs, paving, walkways, parking area, landscaping, planting
and irrigation systems, trash facilities, and (iii) the cost of the
maintenance and repair of security systems and alarms.
5.6.6 All insurance premiums relating to insurance
required to be
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maintained by Landlord as set forth in Section 18; provided, however,
that Tenant shall not be required to pay premiums for earthquake
and flood insurance in excess of $11,000 for any 12-month period
(which $11,000 amount shall increase by five percent (5%) each
12-month period during the Lease Term).
5.7 EXCLUSIONS FROM OPERATING EXPENSES. Notwithstanding the
terms of Section 5.6, the term "Operating Expenses" shall not include any of the
following:
5.7.1 Leasing commissions or legal fees incurred in lease
preparation;
5.7.2 Depreciation, interest, or amortization on
promissory notes secured by the Real Property and all costs and expenses
relating to debts secured by the Real Property;
5.7.3 The cost of initial Tenant Improvements to the
extent of the Interior Improvement Allowance, as defined in the
Improvement Agreement attached as Exhibit H;
5.7.4 The cost of capital improvements other than as
specified above;
5.7.5 The costs reimbursed by insurance;
5.7.6 Insurance costs in excess of commercially
reasonable costs for comparable properties, co-insurance amounts, and
deductibles in excess of $10,000;
5.7.7 Bad debt or rent loss;
5.7.8 Reserves for loss, interest, or penalties resulting
from Landlord's negligence;
5.7.9 All costs associated with the operation of
Landlord's business (except to the extent such costs are otherwise
expressly permitted as Operating Expenses hereunder);
5.7.10 Advertising and leasing costs;
5.7.11 Costs of construction of the Building and
modification, alteration or repair of the Building due to defective
construction or latent defects;
5.7.12 Costs occasioned by the act, omission or violation
of law by Landlord or its managers, members, agents, employees, or
contractors;
5.7.13 Costs occasioned by fire, acts of God, or other
casualties or by the exercise of the power of eminent domain;
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5.7.14 Costs for which Landlord has a right of
reimbursement from others;
5.7.15 Costs to correct any construction defect in the
Premises, the Building or the Real Property, or to comply with any
CC&R's, underwriter's requirement, or Laws (as hereinafter defined in
Section 53.3) applicable to the Premises, the Building or the Real
Property on the Commencement Date;
5.7.16 Fees, commissions, attorneys' fees, costs or other
disbursements incurred in connection with negotiations or disputes with
any other occupant of the Real Property, if any, and costs arising from
the violation by Landlord of the terms and conditions of any lease or
other agreement;
5.7.17 Depreciation, amortization or other expense
reserves;
5.7.18 Costs and expenses for which Tenant reimburses
Landlord directly or which Tenant pays directly to a third person; and
5.7.19 Costs in the nature of management or administrative
fees or expenses, other than the Management Fee described in Section
5.10.
5.8 METHOD OF PAYING OPERATING EXPENSES. Commencing on the
Commencement Date (but prorated for a partial month, if applicable) and
continuing on the first day of each calender month during the Lease Term, Tenant
shall pay to Landlord, in advance, one-twelfth (1/12th) of the amount Landlord
estimates as the Operating Expenses for the then current calender year. Within
sixty (60) days after the end of each calender year, or as soon thereafter as is
practical, Landlord shall furnish to Tenant a statement of the actual amount of
the Operating Expenses for such year (the "Reconciliation Statement"). If the
amount paid by Tenant during such calender year is less that the actual
Operating Expenses, then Tenant shall pay the difference within twenty (20) days
after the date of the Reconciliation Statement. If the amount paid by Tenant
during such calendar year is more than the actual Operating Expenses, then
Tenant shall receive a credit on future payments of Operating Expenses hereunder
for the amount of such excess. Tenant shall have the right to audit the
Operating Expenses as set forth below.
5.9 RECONCILIATION OF OPERATING EXPENSES. Within sixty (60)
days after receipt of Landlord's Reconciliation Statement, Tenant shall have the
right to audit, at a mutually convenient time and at Landlord's office,
Landlord's records relating to the expenses identified therein. Such audit must
be conducted by Tenant or an independent Certified Public Accountant ("CPA")
reasonably approved by Landlord and, subject to the outcome of the audit, at the
sole cost and expense of Tenant; provided, however, such CPA shall not be
compensated by Tenant or third party on a contingency fee basis. Tenant shall
be provided a complete copy of said audit at no expense to Landlord. If such
audit reveals that Landlord has overcharged Tenant, the amount overcharged shall
be credited to Tenant's account within thirty (30) days after the audit is
concluded. In the event that such audit reveals that Tenant has been
overcharged by more than five percent (5%), Landlord
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shall reimburse Tenant for the costs of such audit within ten (10) business
days after receipt of a statement and supporting documents therefor.
5.10 FIXED MANAGEMENT FEE. Beginning on the Commencement Date
(but prorated for a partial month, if applicable), and continuing for each
month thereafter during the Term, Tenant shall pay to Landlord, in addition to
the Basic Rent and as part of the Additional Rent, a fixed monthly management
fee ("Management Fee") equal to three percent (3%) of the Basic Rent due for
such month during the Lease Term (or, as to the first two (2) months of the
Term, three percent (3%) of Basic Rent due for the third (3rd) month of the
Term). Notwithstanding the foregoing, if Tenant has elected to assume direct
responsibility for the maintenance and repair of any of the Real Property,
including, without limitation, Premises, the Parking Lot, and the Building, as
hereinafter provided in Section 6.2, then the Management Fee shall be reduced by
the percentage calculated by dividing the total costs incurred by Tenant in
performing such maintenance and repair by the aggregate amount of all costs
incurred by Landlord and Tenant to perform maintenance and repair under Section
6; provided, however, that unless Tenant has elected to assume responsibility
for all maintenance and repair of the Real Property (other than maintenance and
repair for which Landlord is in any event responsible under Section 9 of this
Lease), the Management Fee shall equal at least two percent (2%) of Basic Rent
due for each month during the Term.
5.11 PLACE OF PAYMENT OF RENT AND ADDITIONAL RENT. All Basic
Rent hereunder and all payments hereunder for Additional Rent, and other
charges, shall be paid to Landlord at the office to Landlord at 22 South Santa
Cruz Avenue, Los Gatos, California 95030 or to such other person or to such
other place as Landlord may from time to time designate in writing.
5.12 SECURITY DEPOSIT. Within five (5) business days after
Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum of
One Hundred Sixty Five Thousand Six Hundred Dollars ($165,600.00). Said sum
shall be held by Landlord as a security deposit ("Security Deposit") for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. This
amount shall be paid either in cash or in the form of an irrevocable Letter of
Credit from a commercial institution and in a form reasonably acceptable to
Landlord and Tenant within five (5) business days after execution of this Lease.
If Tenant defaults (beyond any notice and applicable cure period), with respect
to any provisions of this Lease, including, but not limited to, the provisions
relating to the payment of Basic Rent, Additional Rent, or any of the monetary
sums due herewith, Landlord may (but shall not be required to) use, apply, or
retain all or any part of this Security Deposit for the payment of such amount
in default, and for any other amount which Landlord may spend by reason of
Tenant's default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
Security Deposit is so used or applied, Tenant shall, within ten (10) days after
written demand therefor, deposit with Landlord an amount sufficient to restore
the Security Deposit to its original amount. Such amount as is necessary to
restore the Security Deposit to the full amount indicated above shall be in the
form of cash or a replacement irrevocable Letter of Credit. Tenant's failure to
do so shall be a material breach of this Lease. Landlord shall not be required
to keep this Security Deposit separate from its general funds, and
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Tenant shall not be entitled to interest on such Security Deposit. If Tenant
fully and faithfully performs every provision of this Lease to be performed
by it, the Security Deposit, or any balance thereof, shall be returned to
Tenant at the expiration of the Lease term and after Tenant has vacated the
Premises. In the event of termination of Landlord's interest in this Lease,
Landlord shall transfer said Security Deposit to Landlord's
successor-in-interest, whereupon Tenant agrees to release Landlord from
liability for the return of such Security Deposit or the accounting therefor.
5.13 RENT DEPOSIT. On or before the Commencement Date, Tenant
shall deposit with Landlord the sum of Eighty-two Thousand Eight Hundred Dollars
($82,800.00), as a deposit toward the Basic Rent due for the third month of the
term of this Lease (the "Rent Deposit"). The Rent Deposit shall be in addition
to the Security Deposit, and shall be held by Landlord on account of the first
rent payment to come due under this Lease. In the event that the actual Basic
Rent first coming due, as calculated based on the actual Premises Gross Leasable
Area as finally determined, is more or less than the amount of the Rent Deposit,
Tenant shall pay to Landlord any deficiency, and Landlord shall refund to Tenant
any overage on the first day of the third month of the term of this Lease.
6. MAINTENANCE OF REAL PROPERTY.
6.1 MAINTENANCE BY LANDLORD. Landlord shall, throughout the
Term, maintain the Real Property (including the Parking Area, the Building and
the Premises) in a first-class manner, and in good operating order, condition,
and repair comparable to the maintenance of other first-class office buildings
in the vicinity of the Real Property. Landlord may at any time delegate such
maintenance and repair, or any portion thereof, to any other third party,
affiliated or non-affiliated, upon such terms and conditions as Landlord deems
necessary or appropriate; provided, however, that Tenant shall have the right to
approve of such affiliated or unaffiliated third party (if such party is
intended to perform regular maintenance and repair at the Real Property or, with
respect to individual repairs, if the estimated cost of such repair exceeds
$2,000 in any one instance) and any maintenance or service agreements or
contracts shall be on commercially reasonable terms which are customary for the
area in which the Real Property is located.
6.2 TENANT'S ELECTION TO MAINTAIN. Notwithstanding Section 6.1
above, Tenant may, at any time during the Term of this Lease, elect to itself
maintain one or more portions of the Real Property, the Parking Area, the
Building, and/or the Premises, and to directly pay all of the costs thereof. In
such event, the Landlord shall cease to provide the maintenance and repair
services which Tenant elects to provide, and the Operating Expenses shall be
reduced accordingly. In the event that Tenant elects to maintain all or any
portion of the Real Property, Tenant shall maintain such portion of the Real
Property in a first-class manner and in good operating order, condition, and
repair comparable to the maintenance of other first-class office buildings in
the vicinity of the Real Property. Tenant may, at any time, delegate such
maintenance, or any portion thereof, to any other third party, affiliated or
non-affiliated, upon such terms and conditions as Tenant deems necessary or
appropriate; provided, however that Landlord shall have the right to approve of
such affiliated or non-affiliated thirty party (if such party is intended to
perform regular maintenance and repair at the
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Real Property or, with respect to individual repairs, if the estimated cost
of such repair exceeds $2,000 in any one instance). If Landlord reasonably
determines that Tenant's performance of the maintenance and repair
obligations which Tenant elects to provide is not in accordance with the
standard set forth above, Landlord shall give Tenant written notice thereof.
Tenant shall thereafter have thirty (30) days to improve such maintenance and
repair. If Tenant has not improved such maintenance and repair within such
30-day period, then Landlord shall have the right to either (i) demand that
Tenant replace such persons or entities with such alternative persons or
entities approved by Landlord, or (ii) Landlord may suspend Tenant's right to
maintain, and Landlord shall thereafter again maintain and repair the Real
Property as provided in Section 6.1 above.
6.3 JANITORIAL AND SECURITY SERVICES. Notwithstanding the
provisions of Sections 6.1 and 6.2 above, Tenant shall, at its own cost and
expense, and at all times during the Term of this Lease and any renewals or
extensions thereof, provide regular, complete, and competent janitorial services
to and for the Building. Tenant may provide such janitorial services itself, or
may contract with an affiliated or unaffiliated party to provide such services
on any terms that the Tenant deems commercially reasonable; provided, however,
Tenant shall at all times assure that the interior of the Building is cleaned
on a regularly scheduled basis, and in a manner consistent with similar
commercial buildings in the vicinity of the Real Property, and Tenant shall be
solely responsible for the quality and the nature of any third party services
provided. Tenant further acknowledges that Landlord shall have no obligation to
provide security services to the Premises.
7. SURRENDER. Tenant agrees that, on the last day of the Lease Term,
or on the sooner termination of this Lease, Tenant shall surrender the Premises
promptly and peaceably to Landlord in as good a condition and repair as received
on the Commencement Date (damage by Acts of God, casualties, fire, normal wear,
tear and obsolescence, condemnation, and Alterations, as hereinafter defined,
which Tenant is not required to remove under the terms of this Lease, excepted),
together with the Tenant Improvements which may have been made in, to, or on the
Premises), with all interior walls cleaned and repaired or replaced, if damaged;
all floors broom cleaned; all carpets cleaned; and all broken, marred or
nonconforming acoustical ceiling tiles replaced. On or before the end of the
Term or sooner termination of this Lease, Tenant shall remove all of Tenant's
personal property and trade fixtures (the "Tenant's Property") from the Premises
as set forth in Section 8.10 below; provided, however, Tenant shall not remove
or demolish the Tenant Improvements. All of Tenant's Property not so removed on
or before the end of the Term or sooner termination of this Lease shall be
deemed abandoned by Tenant. Landlord may, upon termination of this Lease, remove
all Tenant's Property so abandoned by Tenant, at Tenant's sole cost and expense,
and repair any damage caused by such removal at Tenant's sole cost and expense.
On the expiration or sooner termination of this Lease, Tenant shall not be
required to remove or demolish the Tenant Improvements and Tenant shall not be
required to remove or demolish any Alterations made to the Premises by Tenant
during the term of this Lease except as described in Section 8 of this Lease.
If the Premises are not surrendered at the end of the term or sooner termination
of this Lease, Tenant shall indemnify and hold Landlord harmless from and
against loss or liability resulting from the delay by Tenant in so surrendering
the Premises, including, without limitation, any claims made by any succeeding
tenant founded on such delay. Nothing contained herein shall be construed as an
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extension of the Term hereof or as a consent of Landlord to any holding over by
Tenant. The cancellation of this Lease on the mutual agreement and consent of
both Landlord and Tenant shall not work as a merger and, at the option of
Landlord, shall either terminate all or any existing subleases or subtenancies
or operate as an assignment to Landlord of all or any such subleases or
subtenancies; provided that, if Landlord elects an assignment Landlord shall
fully and finally release Tenant from all further obligations under this Lease.
8. ALTERATIONS AND ADDITIONS. Except as hereinafter provided, Tenant
shall not make, or suffer to be made, any alterations, additions or improvements
to the Premises ("Alterations"), or to any part thereof, without the written
consent of Landlord first had and obtained by Tenant. Tenant's right to make
Alterations shall be subject to the following terms, conditions, and
requirements:
8.1 CONSENT PROCEDURE. Subject to the terms of Section 8.3,
Tenant shall request consent to make Alterations by written notice to Landlord,
which notice must be accompanied by detailed and complete plans and
specifications for the proposed work if any such plans and specifications are
prepared by or for Tenant. As a condition of its consent to Alterations,
Landlord may require that Tenant provide Landlord with a surety bond, or other
reasonable financial assurance that the cost of the Alterations will be paid
when due.
8.2 REASONABLE CONSENT. Landlord shall not unreasonably
withhold its consent to the proposed Alterations to which Landlord's consent is
required. If Landlord's consent is required for an Alteration, and Landlord
does not notify Tenant in writing of its approval or reasonable disapproval with
thirty (30) days following receipt of Tenant's written request, Landlord shall
be deemed to have approved the proposed Alteration. Without limitation, the
Alterations for which Landlord may reasonably withhold consent include those
that would or could:
8.2.1 Affect the structure of the Building or any portion
of the Real Property other than the Building;
8.2.2 Affect the Base Building Systems (as defined below)
of the Premises or the Building;
8.2.3 Result in Landlord being required under the Laws to
perform any work that Landlord could otherwise avoid or defer;
8.2.4 Result in an increase in the demand for utilities
or services that Landlord is required to provide and for which Tenant has
not agreed to pay; or
8.2.5 Cause an increase in the premiums for hazard or
liability insurance carried by Landlord for which Landlord is responsible
and for which Tenant has not agreed to pay.
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"Base Building Systems" means all systems and equipment (including
plumbing; heating, ventilation, and air-conditioning; electrical;
fire/life-safety; elevator; and security systems) that serve all or part of the
Building.
8.3 ALTERATIONS WITHOUT APPROVAL. Notwithstanding the above,
Tenant may construct one or more non-structural Alterations without Landlord's
approval or consent if the cost of such work does not exceed Twenty-Five
Thousand Dollars ($25,000.00) per Alteration and if the aggregate cost of all
Alterations to such date does not exceed One Hundred Twenty-Five Thousand
Dollars ($125,000.00); provided, however, Tenant shall be required to comply
with the provisions of Sections 8.5 through 8.8, inclusive, of this Lease even
where Landlord's consent to the proposed Alteration is not required.
8.4 COSTS OF REVIEW. As to those Alterations requiring
Landlord's consent, Tenant shall reimburse Landlord for the reasonable fees and
costs of any architects, engineers, or other consultants retained by Landlord to
review the proposed Alterations not to exceed Two Thousand Five Hundred Dollars
($2,500.00) per Alteration.
8.5 COMPLIANCE OF ALTERATIONS WITH LAWS AND INSURANCE
REQUIREMENTS. Tenant shall cause all Alterations made by Tenant to the Premises
to comply with the following:
8.5.1 Applicable Laws and Uniform Building Codes;
8.5.2 Commercially reasonable requirements of Landlord's
hazard insurance carrier to the extent that Tenant is informed of them.
Tenant shall also comply with the above requirements in the course
of constructing the Alterations to the extent such compliance is necessitated
due to Tenant's construction of Alterations. Before beginning construction of
any Alteration, Tenant shall obtain a valid building permit and any other
permits required to construct the proposed Alteration by any government entity
having jurisdiction over the Premises. Tenant shall provide copies of those
permits to Landlord before the work begins.
8.6 MANNER OF CONSTRUCTION. Tenant shall build Alterations
entirely within the Premises and in conformance with Landlord's reasonable
construction rules and regulations, using only contractors and subcontractors
approved in writing by Landlord, which approval shall not be unreasonably
withheld or delayed. If Landlord does not approve of any such contractor or
subcontractor within ten (10) business days after Tenant's request, Landlord's
approval shall be deemed given. All work relating to any Alterations shall be
done in a good and workmanlike manner, using new materials equivalent in quality
to those used in the construction of the initial Tenant Improvements to the
Premises. All work shall be diligently prosecuted to completion.
In connection with the Alterations of the Premises made by the
Tenant, Tenant shall
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take all reasonable measures necessary to ensure that labor peace is
maintained at all times.
Within twenty (20) days after completion of any Alterations, Tenant
shall deliver to Landlord a reproducible copy of the drawings of Alterations as
built, if applicable.
8.7 PAYMENT FOR ALTERATIONS. Tenant shall promptly pay all
charges and costs incurred in connection with any Alteration made to the
Premises by Tenant. At least seven (7) days before beginning construction of any
Alteration, Tenant shall give Landlord written notice of the expected
commencement date of the construction to permit Landlord to post and record a
notice of non-responsibility. Tenant further covenants and agrees that any
mechanic's lien filed against the Premises for work claimed to have been done
for, or materials claimed to have been furnished to Tenant at the request or
insistence of Tenant shall be discharged by Tenant, by bond or otherwise, within
twenty (20) days after the filing thereof, at the cost and expense of Tenant.
Any exceptions to the foregoing must be made in writing and executed by both
Landlord and Tenant.
On completion of any Alteration, Tenant shall:
8.7.1 Cause a timely notice of completion to be recorded
in the office of the recorder of the county in which the Building is
located, in accordance with Civil Code Section 3093 or any successor
statute; and
8.7.2 Deliver to Landlord evidence of full payment and
unconditional final waivers of all liens for labor, services, or
materials.
8.8 INDEMNIFICATION, Notwithstanding whether or not Landlord's
consent is required with respect to a particular Alteration, and without
limiting the generality of Section 20, Tenant shall indemnify, defend, and hold
Landlord and Landlord's members, managers, officers, agents, contractors,
successors, representatives, and assigns harmless from and against any Losses as
defined in Section 20, arising directly or indirectly out of or in connection
with the construction of the Alterations by Tenant or by Tenant's agents or
contractors in the same manner and to the same extent as provided in Section 20
of this Lease. Landlord's right of indemnification set forth above shall not in
any way be limited by the amount of insurance which Tenant is required to
provide as set forth in Section 8.9 below.
8.9 CONSTRUCTION INSURANCE. Before construction begins, Tenant
shall deliver to Landlord reasonable evidence that damage to, or destruction of,
the Alterations during construction will be covered either by the policies that
Tenant is required to carry under this Lease, or by a policy of builder's
all-risk insurance in an amount reasonably approved by Landlord, but not to
exceed twice the cost of the Alteration. If Landlord requires Tenant to provide
builder's all-risk insurance for the proposed Alterations, Tenant shall provide
an original certificate of such insurance to Landlord.
Tenant shall cause each contractor and subcontractor to maintain
all workers'
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compensation insurance required by law and liability insurance (including
property damage) in amounts reasonably required by Landlord. Tenant shall
provide evidence of that insurance to Landlord before construction begins.
8.10 TENANT'S PROPERTY. All Alterations, trade fixtures, and
personal property installed in the Premises at Tenant's expense ("Tenant's
Property") shall remain as Tenant's property, and Tenant shall be entitled to
all depreciation, amortization, and other tax benefits with respect thereto.
Prior to the expiration or earlier termination of this Lease, Tenant shall
remove all of Tenant's Property, and Tenant shall repair any damage to the
Premises, the Building, or the Parking Lot caused by that removal; provided,
however, Tenant shall not remove any Alterations that cannot removed without
structural injury to the Premises. If Tenant fails to complete the removal
and/or restoration before expiration of the Lease Term or, in the case of
earlier termination, within fifteen (15) days after written notice from Landlord
requesting the restoration, Landlord may do so and charge the cost of the
removal and/or restoration to Tenant.
Notwithstanding the above, Landlord shall promptly advise Tenant,
upon Tenant's request from time to time, of the Alterations which Tenant may
leave on the Premises if Tenant so elects. To the extent Landlord so advises
Tenant, Tenant may elect to leave the subject and identified Alterations in the
Premises without any liability to Landlord, in which event the subject
Alterations shall become the property of Landlord upon the termination of this
Lease.
9. TENANT MAINTENANCE. Subject to the provisions of Sections 6 above,
and Sections 10, 34, and 35 below, Tenant shall, at all times, operate its
business so as to keep and maintain the Premises (including appurtenances) and
every part thereof in a high standard of maintenance and repair, and in good and
sanitary condition.
Notwithstanding anything to the contrary in this Lease, but subject
to the next paragraph, Landlord shall perform and construct, and Tenant shall
have no responsibility to perform or construct or pay for (and the following
shall not constitute an Operating Expense), any repair, maintenance, replacement
or improvement (i) necessitated by the acts or omissions of Landlord or its
agents, employees, members, contractors or invitees, (ii) required as a
consequence of any violation of Law or construction defect in the Premises or
the Real Property as of the Commencement Date, (iii) for which Landlord has a
right of reimbursement from others, (iv) which, except as provided below, would
be treated as a "capital expenditure" under generally accepted accounting
principles ("GAAP"), (v) occasioned by fire, acts of God or other casualty or by
the exercise of the power of eminent domain, and (vi) to the structural portions
of the Building or Real Property, including, without limitation, the foundation,
floor slabs, exterior walls and roof structure.
Notwithstanding the foregoing, Tenant shall be required to pay the
cost of any repair or replacement to a nonstructural portion of the Premises
which is not covered under Landlord's warranties and which is not a Landlord
obligation as set forth in (i), (ii), (iii), (v) and (vi) in the immediately
preceding paragraph and which could be treated as a "capital expenditure" under
GAAP
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pursuant to monthly amortized payments in accordance with GAAP over its
useful life. The amortized payment for each month after such repair or
replacement is completed until the earlier of the expiration or sooner
termination of the Lease Term or the useful life shall be made by Tenant at the
same time payments of Basic Rent are due. For example, if a capital
expenditure cost One Hundred Twenty Thousand Dollars ($120,000.00) and has a
useful life of ten (10) years, Tenant's monthly amortized payment during the
Term of the Lease would be One Thousand Dollars ($1,000.00) per month.
Notwithstanding any term or condition to the contrary set forth in this Lease,
Tenant shall be required to pay the uninsured portion of the cost of any
maintenance, repair, or replacement of any structural portion of the Premises
where such maintenance, repair, or replacement is necessitated by the negligent
or intentional acts or omissions of Tenant, or Tenant's agents, employees,
invitees, officers, directors, successors, or assigns.
10. DEFECTS. Notwithstanding the provisions of Section 9 above, during
the first twelve (12) months of the term of the Lease, Landlord shall, at
Landlord's sole cost and expense (without any pass through to Tenant), repair
any defects in the construction of the Building Shell and Tenant Improvements;
provided, however, Landlord shall retain a right of reimbursement and/or claims
against the contractors and subcontractors arising from any such defects.
11. UTILITIES. Landlord shall, at Landlord's sole cost and expense,
cause all standard utilities to be brought and installed to the Premises, and
ready for connection; provided, however, Tenant shall pay for the cost of
connecting all utilities to the Premises, including water, sewage, gas,
electricity, and telephones, other than sewer and water meter hook-up fees and
expenses (which shall be at Landlord's sole cost). Tenant shall contract
directly for all utilities services provided to the Premises. Tenant shall
promptly pay, as the same become due and payable, all bills, charges, fees,
assessments, and exactions for all water, gas, electricity, heat, refuse pickup,
sewer service, telephone, any other utilities, materials and services furnished
to or used by Tenant in, on, or about the Premises. Except as provided in
Section 53.15, in no event shall Landlord be liable for any interruption or
failure of any utility services for any cause, other than as a consequence of
Landlord's act or neglect.
12. REAL PROPERTY TAXES. As Additional Rent, and in accordance with
Section 5.4.1 of this Lease, Tenant shall pay to Landlord, within thirty (30)
days after receipt of invoice and supporting documentation (but in no event
earlier than forty (40) days prior to delinquency), all Real Property Taxes
relating to the Premises. The term "Real Property Taxes", as used herein, shall
mean (i) all taxes, assessments, levies and other charges of any kind or nature
whatsoever, general and special, foreseen and unforeseen, relative to the Real
Property (including all installments of principal and interest required to pay
any general or special assessments for public improvements, and any increases
resulting from reassessments caused by any change in ownership of the Premises
(as now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed)) or Landlord's interest therein; any improvements located
within the Premises (regardless of ownership); the fixtures, equipment and other
property of Landlord, real or personal, that are an integral part of and located
in the Premises; and the parking areas and public utilities on the Real
Property; and (ii) to the extent of any reduction achieved therefrom, all costs
and fees (including reasonable attorneys'
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fees) incurred by Landlord in reasonably contesting any Real Property Tax and
in negotiating with public authorities as to any Real Property Tax. Tenant,
at its sole discretion, shall have the right (but not the obligation) to
contest the amount of the "Real Property Taxes" provided Tenant pays the cost
of said contest. If at any time during the term of this Lease the taxation
or assessment of the Premises prevailing as of the Commencement Date of this
Lease shall be altered so that in lieu of or in addition to any Real Property
Tax described above there shall be levied, assessed or imposed (whether by
reason of a change in the method of taxation or assessment, creation of a new
tax or charge, or any other cause) an alternate or additional tax or charge
(i) on the value, use or occupancy of the Premises or Landlord's interest
therein, or (ii) on or measured by the gross receipts, income or rentals from
the Premises, on Landlord's business of leasing the Premises, or computed in
any manner with respect to the operation of the Premises, then any such tax
or charge, however designated, shall be included within the meaning of the
term "Real Property Taxes" for purposes or this Lease. Notwithstanding the
foregoing, the term "Real Property Taxes" shall not include excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other
taxes applied or measured by Landlord's general or net income as opposed to
rents, receipts, or income attributable to operations of the Premises.
13. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for and shall
pay, ten (10) days before delinquency, all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Premises. If any
such taxes on Tenant's personal property or trade fixtures are levied against
Landlord or Landlord's property, or if the assessed value of the Premises is
increased by the inclusion therein of a value placed upon such personal property
or trade fixtures of Tenant, and if Landlord, after written notice to Tenant,
pays the taxes based on such increased assessment, which Landlord shall have the
right to do regardless of the validity thereof (provided, however, such payment
shall be made 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;
provided, however, that, if Tenant requests that such taxes be paid under
protest, Tenant shall have the right, in the name of Landlord and with
Landlord's full cooperation, to bring suit in any court of competent
jurisdiction to recover the amount of such taxes so paid under protest, and any
amount so recovered shall belong to Tenant.
14. USE OF HAZARDOUS MATERIAL. Tenant shall not cause or permit any
Hazardous Material, as defined in Section 16, to be generated, brought onto,
used, stored, or disposed of in, on, or about the Premises, the Building, or the
Real Property, by Tenant or its agents, employees, contractors, subtenants, or
invitees, except for limited quantities of standard office and janitorial
supplies containing chemicals categorized as Hazardous Material ("Permitted
Hazardous Materials"). Tenant shall:
14.1 Use, store, and dispose of all such Permitted Hazardous
Material in strict compliance with all applicable statutes, ordinances, and
regulations in effect during the Lease Term that relate to public health and
safety and protection of the environment ("Environmental Laws"), including those
Environmental Laws identified in Section 16; and
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14.2 Comply at all times during the Lease Term with all
Environmental Laws regarding Tenant's use, storage or disposal of Hazardous
Materials in the Premises during the Term of this Lease.
15. INDEMNIFICATION REGARDING HAZARDOUS MATERIALS. Tenant shall, at
Tenant's sole expense, and with counsel reasonably acceptable to Landlord,
indemnify, defend, and hold harmless Landlord and Landlord's shareholders,
directors, officers, employees, partners, and agents with respect to all Losses
arising out of or resulting from the release of any Hazardous Material in or
about the Premises, the Building, or the Real Property, or the violation of any
Environmental Law, by Tenant or Tenant's agents, contractors, or invitees. This
indemnification includes:
15.1 Losses attributable to diminution in the value of the
Premises, the Building, or the Real Property;
15.2 Loss or restriction of use of rentable space in the
Building; and
15.3 All other liabilities, obligations, penalties, fines,
claims, actions (including remedial or enforcement actions of any kind and
administrative or judicial proceedings, orders, or judgments), damages
(including consequential damages), and costs (including attorney, consultant,
and expert fees and expenses) resulting from the release or violation. This
indemnification shall survive the expiration or termination of this Lease.
Notwithstanding anything to the contrary in the Lease, to the best
knowledge of Landlord (without investigation), (i) no Hazardous Materials are
present on or about the Premises, the Real Property of which the Premises is a
part, or the soil, surface water, or groundwater thereof, (ii) no underground
storage tanks or asbestos-containing building materials are present on the Real
Property, and (iii) no action, proceeding or claim is pending or threatened
regarding the Premises or the Real Property concerning any Hazardous Materials
or pursuant to any law. Under no circumstance shall Tenant be liable for, and
Landlord shall indemnify, defend, protect and hold harmless Tenant, its agents,
contractors, stockholders, directors, officers, successors, representatives, and
assigns from and against, all losses, costs, claims, damages, liabilities and
expenses (including attorneys' and consultants' fees) of every type and nature
(collectively "Losses"), directly or indirectly arising out of or in connection
with any Hazardous Materials present on or about the Premises or the Real
Property, or the soil, air, improvements, groundwater or surface water thereof,
except to the extent that any such Losses result from the release or emission of
Hazardous Materials by Tenant during the Term of this Lease. This Section
constitutes the entire agreement of Landlord and Tenant regarding Hazardous
Materials and the parties hereby agree that no other provision of the Lease
shall be deemed to apply thereto.
16. DEFINITION OF "HAZARDOUS MATERIAL". As used in this Lease, the
term "Hazardous Material" shall mean any hazardous or toxic substance, material,
or waste that is or becomes regulated by the United States, the State of
California, or any local government authority having
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jurisdiction over the Building or the Real Property. Hazardous Material
includes, without limitation:
16.1 Any "hazardous substance," as that term is defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) (42 United States Code sections 9601-9675);
16.2 "Hazardous waste," as that term is defined in the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 United States Code sections
6901-6992k);
16.3 Any pollutant, contaminant, or hazardous, dangerous, or
toxic chemical, material, or substance, within the meaning of any other
applicable federal, state, or local law, regulation, ordinance, or requirement
(including consent decrees and administrative orders imposing liability or
standards of conduct concerning any hazardous, dangerous, or toxic waste,
substance, or material, now or hereafter in effect);
16.4 Petroleum products;
16.5 Radioactive material, including any source, special nuclear,
or byproduct material as defined in 42 United States Code sections 2011-2297g-4;
16.6 Asbestos in any form or condition; and
16.7 Polychlorinated biphenyls (PCBs) and substances or compounds
containing PCBs.
17. TENANT'S INSURANCE. Tenant shall, at Tenant's sole cost and
expense, and at all times during the term of this Lease, maintain and keep in
force a policy or policies of insurance as follows:
17.1 A broad form comprehensive coverage policy of commercial
general liability insurance, issued by an insurance company reasonably approved
in advance by Landlord, insuring Tenant and Landlord against loss or liability
caused by or connected with Tenant's occupation and use of the Premises under
this Lease, with combined single limit coverage of not less than Two Million
Dollars ($2,000,000) per occurrence for bodily injury and property damage
occurring in, on, or about the Premises, including parking and landscaped areas.
17.2 A policy or policies insuring Tenant only covering loss or
damage to Tenant's fixtures, goods, wares, merchandise, equipment, and Tenant's
Alterations in an amount not less than the full replacement value thereof, as
well as a policy of business interruption insurance.
17.3 A policy or policies insuring Tenant only of Worker's
Compensation Insurance in an amount as is determined by statute.
17.4 A policy of full coverage plate glass insurance on the
Premises.
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17.5 A policy of insurance containing full sprinkler leakage
endorsements.
All insurance required to be carried by Tenant pursuant to this
Lease shall be in such form, and issued by such companies as are reasonably
satisfactory, at all times during the term of this Lease, to Landlord. Should
Tenant at any time fail to procure or maintain the insurance required by this
Lease, Landlord may obtain such insurance and pay the premiums on such insurance
for the benefit of Tenant. Any amounts paid by Landlord to procure or maintain
insurance pursuant to this Section 17 shall be immediately due and payable to
Landlord by Tenant as Additional Rent together with interest thereon at ten
percent (10%) per annum.
Such insurance shall be primary and non-contributory as respects
any insurance carried by Landlord. The policy or policies required to be
maintained by Tenant under Sections 17.1, 17.4 and 17.5 of this Lease above
effecting such insurance shall name Landlord as additional insured, and shall
insure, to the extent reasonably possible, any liability of Landlord, contingent
or otherwise, as respects acts or omissions of Tenant, its agents, employees or
invitees or otherwise by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company admitted to transact business in the State of California; and shall
provide that the insurance effected thereby shall not be canceled, except upon
thirty (30) days' prior written notice to Landlord. A certificate of insurance
of said policy shall be delivered to Landlord. The policy or policies of
insurance carried by Tenant pursuant to the terms of this Lease shall insure
performance by Tenant of the indemnity provisions of this Lease. The limits of
such insurance required by this Section 17 shall not limit the liability of
Tenant.
Tenant's liability insurance coverage may be provided by a
combination of primary, excess, and umbrella policies, but those policies must
be absolutely concurrent in all respects regarding the coverage afforded by the
policies. The coverage of any excess or umbrella policy must be at least as
broad as the coverage of the primary policy.
Landlord makes no representation that the limits of liability
specified to be carried by Tenant under the terms of this lease are adequate to
protect Tenant against Tenant's undertaking under this Section, and in the event
Tenant believes that any such insurance coverage called for under this lease is
insufficient, Tenant shall provide at its own expense such additional insurance
as Tenant deems adequate.
18. PROPERTY INSURANCE. Landlord shall purchase and keep in force a
policy or policies of insurance covering loss or damage to the Premises and the
Real Property for the full replacement value thereof, including, without
limitation, the Building (including the Tenant Improvements), the landscaping,
and the Parking Area, providing protection against those perils included within
the classification of "all risks" insurance, plus a policy of rental income
insurance in the amount equal to the sum of (i) one hundred (100%) percent of
the Basic Rent for the last twelve (12) months of the term of this Lease plus
(ii) all sums due to be paid as Additional Rent. Tenant shall have no interest
in nor any right to the proceeds of any insurance procured by Landlord for the
Premises. To
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the extent included as part of the Operating Expenses, Tenant shall pay and
reimburse to Landlord (or Landlord's agent if so directed by Landlord), the
premium or premiums for all such policies, as well as all deductibles on
insurance claims made under such policy or policies on account of any damage
to the Premises or the Building.
19. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary in
the Lease, Landlord and Tenant release each other, and each hereby waive any and
all rights of recovery against the other or against the officers, employees,
agents, subtenants, contractors, assignees and representatives of the other on
account of loss or damage occasioned to such waiving party for its property or
the property of others under its control that are caused by or result from risks
insured against under any insurance policies carried by the waiving party and in
force at the time of any damage or which is required to be insured by the
waiving party under this Lease, without regard to the negligence or willful
misconduct of the party so released. Tenant and Landlord shall, upon obtaining
policies of insurance covering the Premises, or any portion thereof, give notice
to the insurance carrier that the foregoing mutual waiver of Subrogation is
contained in this Lease and Tenant and Landlord shall cause each insurance
policy obtained by it to provide that the insurance company waives all right of
recovery by way of Subrogation against either Landlord or Tenant in connection
with any damage covered by such policy. Neither party shall be liable to the
other for any damage caused by fire or any of the risks insured against under
any insurance policy required by this Lease; provided, however, that if the
insurance policy of either releasing party prohibits such waiver, then this
waiver shall not take effect until consent to such waiver is obtained. If such
waiver is so prohibited, the party whose insurer prohibits such waiver shall
promptly notify the other party thereof and take such actions as are reasonably
required to obtain such waiver, including, without limitation, obtaining
insurance coverage from another insurance company who will provide the waiver
required under this Section 19.
20. TENANT'S INDEMNIFICATION OF LANDLORD. Tenant, as a material part
of the consideration for this Lease, shall indemnify, defend, and hold Landlord,
and Landlord's agents, contractors, stockholders, directors, officers,
successors, representatives, and assigns, harmless from and against any and all
liability, penalties, losses, damages, costs, expenses, causes of action,
claims, or judgments (collectively "Losses") arising by reason of any injury to,
or death of any person, and damage to property of any person, including, without
limitation, Tenant and Tenant's agents, employees, vendors, invitees, and
licensees, from any cause or causes whatsoever (other than the acts or omissions
of Landlord, Landlord's agents, employees, contractors, stockholders, directors,
officers, successors, representative and assigns) occurring in, on, or about the
Premises during the Term of this Lease or any extension thereof.
Notwithstanding anything to the contrary in the Lease, Landlord
shall not be indemnified for, and shall indemnify, defend, protect and hold
Tenant, its agents, employees, contractors, invitees, successors and assigns
harmless from, all losses, damages, liabilities, judgments, actions, claims,
attorneys' fees, costs and expenses arising from (i) the negligence or willful
misconduct of Landlord, its agents, employees, contractors or invitees, (ii)
Landlord's violation of any law, order or regulation, or (iii) a breach of
Landlord's obligations or representations
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under this Lease or (iv) any construction defect in the Premises.
21. EXONERATION OF LANDLORD. Landlord shall not be liable to Tenant,
and Tenant hereby waives all claims against Landlord, for any injury to or death
of any person or damage to or destruction of property in or about the Premises
by or from any cause whatsoever, including, without limitation, gas, fire, oil
or electricity, but excluding, however, the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors, or a breach
of Landlord's obligations under this Lease. Tenant further hereby expressly
waives, and agrees that Landlord shall not be liable for any claims for damages
or injuries to Tenant's business, or for any loss of income from Tenant's
business.
22. COMPLIANCE. Tenant, at its sole cost and expense, shall promptly
comply with all Laws, statutes, ordinances, and governmental rules, regulations
or requirements now or hereafter in effect, with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted, and
with any direction or occupancy certificate issued pursuant to law by any public
officer to the extent such compliance is necessitated due to Tenant's particular
use of the Premises; provided, however, that no such failure shall be deemed a
breach of the within provisions if Tenant, immediately upon notification,
commences to remedy or rectify said failure. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any such
law, statute, ordinance or governmental rule, regulation, requirement, direction
or provision, shall be conclusive of that fact as between Landlord and Tenant.
23. LIENS. Tenant shall keep the Premises free from any liens arising
out of any work performed, materials furnished, or obligation incurred by
Tenant. In the event that Tenant shall not, within thirty (30) days following
the imposition of such lien, cause the same to be released of record, Landlord
shall have, in addition to all other remedies provided herein and by law, the
right, but not the obligation, to cause the same to be released by such means as
it shall deem proper, including payment of the claim giving rise to such lien.
All sums paid by Landlord for such purpose, and all expenses incurred by it in
connection therewith, shall be payable to Landlord by Tenant on demand with
interest at the prime rate of interest as quoted by the Bank of America.
24. ASSIGNMENT AND SUBLETTING.
24.1 ASSIGNMENT, SUBLEASING, AND BONUS RENT. Tenant shall not
assign, transfer, or hypothecate the leasehold estate under this Lease, or any
interest therein, and shall not sublet the Premises, or any part thereof, or any
right or privilege appurtenant thereto, or suffer any other person or entity to
occupy or use the Premises, or any portion thereof, without, in each case, the
prior written consent of Landlord, which consent will not be unreasonably
withheld. As a condition for granting its consent to any assignment or
subleasing (and subject to the terms hereinafter provided) Tenant shall pay to
Landlord, as Additional Rent, one half (1/2) of the Adjusted Bonus Rent, as
hereinafter defined, received by Tenant, if any, from any assignee or subtenant
of Tenant. For the purposes of this Lease, the term "Adjusted Bonus Rent" shall
mean the difference between (i) the
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gross amount received by Tenant from any assignee or subtenant on account of
any assignment or sublease, minus (ii) the sum of (a) a proportionate share
of the Basic Rent and Additional Rent attributable to the assigned or sublet
space based on the Premises Gross Leasable Area thereof as compared to the
Gross Leasable Area of the Building, and (b) all of Tenant's costs and
expenses of assigning the Lease or subletting all or any portion of the
Premises consisting exclusively of the cost of any special improvements made
to the Premises by Tenant for any assignee or subtenant and the unamortized
cost of any Tenant Improvements or Alterations made to the Premises at
Tenant's expense, including the cost of any Tenant Improvements made with the
Additional Allowance, as defined in the Improvement Agreement attached as
Exhibit H, brokerage fees and legal fees associated with acquiring the tenant
and negotiating an assignment or sublease. Notwithstanding the above, Tenant
may keep all rents or consideration due Tenant from its assignees or
subtenants in excess of the scheduled Basic Rent and Additional Rent due to
Landlord ("Bonus Rent") for the initial twenty-four (24) months of the Term
of this Lease.
24.2 NOTICE OF ASSIGNMENT OR SUBLEASE. Tenant shall, by twenty
(20) days written notice, advise Landlord of its intent to assign or transfer
Tenant's interest in the Lease or sublet the Premises or any portion thereof for
any part of the Term hereof. If Tenant's request is to sublease the entire
Premises for the balance of the Lease Term, within ten (10) days after receipt
of said written notice, Landlord may, in its sole discretion, elect to terminate
this Lease and recapture the Premises on the date specified in Tenant's notice
by giving written notice of such election to terminate. If no such notice to
terminate is given to Tenant within said ten (10) day period, Tenant may proceed
to locate an acceptable subtenant, assignee, or other transferee for presentment
to Landlord for Landlord's approval, all in accordance with the terms,
covenants, and conditions of this Section 24. In the event Tenant is allowed to
assign, transfer or sublet the whole or any part of the Premises, with the prior
written consent of Landlord, no assignee, transferee or subtenant shall assign
or transfer this Lease, either in whole or in part, or sublet the whole or any
part of the Premises, without also having obtained the prior written consent of
Landlord which consent shall not be unreasonably withheld; provided, however, no
subsequent subtenant, assignee, or transferee (except a Tenant Affiliate, as
hereinafter defined) shall be entitled to any Bonus Rent hereunder. A consent of
Landlord to one assignment, transfer, hypothecation, subletting, occupation or
use by any other person shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be a consent to any subsequent similar or
dissimilar assignment, transfer, hypothecation, subletting, occupation or use by
any other person. Any such assignment, transfer, hypothecation, subletting,
occupation or use without such consent shall be void and shall constitute a
curable breach of this Lease by Tenant. The leasehold estate under this Lease
shall not, nor shall any interest therein, be assignable for any purpose by
operation of law without the written consent of Landlord which consent shall not
be unreasonably withheld. As a condition to its consent, Landlord shall require
Tenant to pay all reasonable expenses, not to exceed Five Hundred Dollars
($500.00) per request, in connection with the assignment, and Landlord shall
require Tenant's assignee or transferee (or other assignees or transferees) to
assume in writing all of the obligations under this Lease and for Tenant to
remain liable to Landlord under the Lease.
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24.3 ASSIGNMENT TO AFFILIATE. Notwithstanding the provisions of
Sections 24.1 and 24.2, Tenant may, without Landlord's prior written consent,
assign the Lease or sublet the Premises to (i) any subsidiary, affiliate,
division, or corporation controlling, controlled by, or under common control
with Tenant as of the Commencement Date (ii) a successor corporation related to
Tenant by merger, consolidation, non-bankruptcy reorganization, or government
action; or (iii) a purchaser of substantially all of Tenant's assets located in
the Premises (collectively, "Tenant Affiliate"), provided that:
24.3.1 The Tenant Affiliate has a tangible net worth, as
evidenced by financial statements delivered to Landlord and prepared in
accordance with generally accepted accounting principles that are
consistently applied ("Net Worth"), at least equal to Tenant's Net Worth
either immediately before the Transfer or as of the date of this Lease,
whichever is less; and
24.3.2 The Tenant Affiliate will continue to operate the
Premises for a use permitted under this Lease.
For the purpose of this Lease, any sale or transfer of Tenant's capital stock,
including, without limitation, any transfer in connection with the merger,
consolidation or non-bankruptcy reorganization of Tenant, and any sale through
any national market system or public exchange, shall not be deemed an
assignment, subletting, or any other transfer of the Lease or the Premises.
Landlord's consent to any proposed assignment or subletting shall not be
unreasonably withheld and, if not given or withheld within fourteen (14) days
following Tenant's request for consent, shall be deemed given.
24.4 CONTINUING LIABILITY. Notwithstanding whether or not any
sublease or assignment requires Landlord's consent, and further notwithstanding
whether any sublease or assignment is to a Tenant Affiliate, Tenant shall
continue to remain liable as a principal under the terms of this Lease and shall
be primarily responsible for the performance of all obligations of the Tenant
hereunder.
25. SUBORDINATION AND MORTGAGES. In the event Landlord's title or
leasehold interest is now or hereafter encumbered by a deed of trust upon the
interest of Landlord in the land and buildings in which the demised Premises are
located to secure a loan from a lender (hereinafter referred to as "Lender") to
Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing
an agreement subordinating its rights under this Lease to the lien of such deed
of trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding anything to the contrary in the Lease, this Lease shall
not be subject or subordinate to any ground or underlying lease, or to any lien,
mortgage, deed of trust, or security affecting the Premises, which is created or
arises after the Commencement Date ("Subsequent Security Interest"), nor shall
Tenant be required to execute any documents subordinating this Lease to any such
Subsequent Security Interest, unless the ground
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lessor, lender, or other holder of the interest to which this Lease would or
shall be subordinated executes a Recognition and Non-Disturbance Agreement
which (i) provides that this Lease shall not be terminated so long as Tenant
is not in default (beyond any applicable notice and cure periods) under this
Lease, and (ii) recognizes all of Tenant's rights, interest and options under
this Lease. Landlord hereby represents that, as of the date of both parties'
execution of the Lease, there is no loan, mortgage, deed of trust or ground
lease affecting the Premises other than a Deed of Trust and Assignment of
Rents in favor of First Bank ("Construction Lender"). As a condition to
Tenant's obligations under the Lease, prior to the Commencement Date,
Landlord shall provide Tenant with a Recognition and Non-Disturbance
Agreement from Construction Lender in a form reasonably satisfactory to
Tenant and the Construction Lender providing for recognition of Tenant's
interests under the Lease in the event of a foreclosure of the Construction
Lender's security interest.
26. ENTRY BY LANDLORD. Landlord reserves and shall, at all reasonable
times after at least twenty-four (24) hours written notice (except in
emergencies), have the right (through its managers, members, officers, agents,
contractors, and employees) to enter the Premises to inspect them; to perform
any services to be provided by Landlord hereunder; to make repairs; to show the
Premises to prospective purchasers and mortgagees; to post notices of
non-responsibility; and to alter, improve or repair the Premises or other parts
of the Building if reasonably necessary to comply with this Lease, applicable
building codes, or other laws or regulations, all without abatement of rent, and
may erect scaffolding and other necessary structures in or through the Premises
where reasonably required by the character of the work to be performed;
provided, however, that the business of Tenant and use of the Premises shall be
interfered with to the least extent that is reasonably practical. Any entry to
the Premises by Landlord for the purposes provided for herein shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry into
or a detainer of the Premises or an eviction, actual or constructive, of Tenant
from the Premises or any portion thereof.
27. DEFAULT BY TENANT. Tenant shall have breached this Lease and be in
default hereunder, giving Landlord the remedies specified in Section 28 of this
Lease, and any other remedies provided by law where:
27.1 Any Basic Rent, Additional Rent, or other payment to be made
by Tenant to Landlord is unpaid when due and remains unpaid for ten (10) days
after written notice to pay such rent or surrender possession of any Premises is
served on Tenant by Landlord;
27.2 Tenant fails in the performance of, or breaches any
covenant, term, condition or agreement contained in, this Lease (other than with
respect to the payment of Basic Rent, Additional Rent, or other amounts due
hereunder), and such default or breach is not cured within thirty (30) days
after written notice thereof is given by Landlord to Tenant or such longer
period of time if such default or breach cannot reasonably be cured within said
(30) thirty day period provided Tenant commences such cure within said thirty
(30) day period and diligently prosecutes such cure to completion;
27.3 Tenant abandons the Premises; or
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27.4 At the option and election of Landlord, if Tenant becomes
Insolvent, as hereinafter defined in Section 31.
28. REMEDIES ON TENANT'S DEFAULT. Should Tenant breach this Lease and
be in default hereunder, Landlord shall, in addition to any other remedy given
Landlord by law or equity, have the following rights and remedies:
28.1 The right to terminate this Lease and, pursuant to by
California Civil Code Section 1951.2, recover from Tenant:
28.1.1 The worth at the time of award of the unpaid rent
which had been earned at the time of termination of the Lease;
28.1.2 The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination of
the Lease until the time of award exceeds the amount of rental loss that
Tenant proves could have been reasonably avoided;
28.1.3 The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount or rental loss for the same period that Tenant proves
could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1951.2; and
28.1.4 Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's failure to perform its
obligations under this Lease, or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to, any
costs or expenses incurred by Landlord in retaking possession of the
Premises, including reasonable attorneys' fees therefor, maintaining or
preserving the Premises after such default, preparing the Premises for
reletting to a new tenant, including reasonable and necessary repairs or
alterations to the Premises for such reletting and leasing commissions.
28.2 The right to continue the Lease as provided in California
Civil Code Section 1951.4, which allows Landlord to continue the Lease in effect
after Tenant's breach and abandonment, and to enforce all of its rights and
remedies under this Lease, including the right to recover rent as it becomes
due, for so long as Landlord does not terminate Tenant's right to possession,
and for so long as Tenant has a right to sublet or assign, subject only to
reasonable limitations.
28.3 The right to terminate this Lease and, in addition to any
recoveries Landlord may seek under subparagraph 28.1 above, bring an action to
reenter and regain possession of the Premises in the manner provided by the laws
of unlawful detainer of the State of California then in effect. Termination of
the Lease by the Landlord under this Section shall be effective only upon giving
of notice to Tenant in the manner provided in this Lease.
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28.4 To the extent permitted by law, the right and power to enter
the Premises and remove therefrom all persons and property, to store such
property in a public warehouse or elsewhere at the cost of and for the account
of Tenant, and to sell such property and apply such proceeds therefrom pursuant
to applicable California law.
28.5 The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises, and to apply any
rental collected from the Premises in accordance with California law.
The remedies given to Landlord in this Section 28 shall not be
exclusive but shall be cumulative and in addition to all other remedies now or
hereafter allowed by law or authorized elsewhere in this lease.
29. PROOF OF AVOIDABLE RENTAL LOSS. Any proof by Tenant under
subparagraphs (2) and (3) of Section 1951.2(a) of the California Civil Code of
the amount of rental loss that could be reasonably avoided shall be made by
Landlord and Tenant each selecting a licensed real estate broker in the business
of renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
30. NON-TERMINATING ACTIONS. Acts of maintenance or preservation or
efforts to relet the Premises, or the appointment of a receiver on the
initiative of Landlord to protect his interest under this Lease, shall not
constitute termination of Tenant's right to possession.
31. INSOLVENCY. If, during the term of this Lease, (a) a petition to
have Tenant adjudicated bankrupt, or a petition for reorganization or
arrangement under any of the laws of the United States relating to bankruptcy or
any Chapter thereof be filed by or against Tenant which is not withdrawn or
released within sixty (60) days thereafter; (b) the assets of Tenant or the
business conducted by Tenant on the Premises be assumed by any trustee or other
person pursuant to any bankruptcy proceedings; (c) Tenant becomes insolvent or
makes an assignment for the benefit of creditors; or (d) any corporate Tenant or
assignee or successor in interest of Tenant commences proceedings for winding
up, Tenant shall, for the purposes of this Lease, be deemed to be "Insolvent",
and Landlord may, at its election, terminate this Lease by giving not less that
three (3) days written notice to Tenant, and when so terminated, Landlord may
re-enter the Premises, and the leasehold interest created by the Lease shall not
be treated as an asset of the Tenant's estate.
Nothing contained in this Section shall affect the existing right
of Landlord to refuse to accept an assignment upon commencement of or in
connection with a bankruptcy, liquidation, reorganization or insolvency action
or an assignment of Tenant for the benefit of creditors or other similar act.
Nothing contained in this Lease shall be construed as giving or granting or
creating an
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equity in the demised premises to Tenant. In no event shall the leasehold
estate under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of
Landlord. In no event shall this Lease or any rights or privileges hereunder
be an asset of Tenant under any bankruptcy, insolvency or reorganization
proceedings.
32. WAIVER OF BREACH. The waiver of either party of any breach by the
other party of any covenant, term, condition, or agreement of this Lease shall
not constitute a continuing waiver or a waiver of any subsequent default or
breach by such party either of the same or a different provision of this Lease.
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 rental or
other sum so accepted, regardless of Landlord's knowledge of such preceding
breach at the time of acceptance of such payment. No covenant, term, or
condition of this Lease shall be deemed to have been waived by a party unless
such waiver be in writing signed by the waiving party.
33. ABANDONMENT. Tenant shall not abandon the Premises at any time
during the term of this Lease and if Tenant shall abandon said Premises, or be
dispossessed by the process of law, or otherwise, any personal property
belonging to Tenant and left on the Premises shall be deemed to be abandoned, at
the option of Landlord, except such property as may be mortgaged to Landlord.
34. DESTRUCTION. In the event the Premises, the Building, the Parking
Area or the Real Property are damaged or destroyed in whole or in part from any
cause, Landlord may, at its option:
34.1 Rebuild or restore the Premises, the Parking Area and the
Building, including, without limitation, any improvements made to the Building,
at Landlord's expense, to their condition immediately prior to the damage or
destruction; or
34.2 If the Premises is damaged to the extent of one-third
(1/3rd) or more of the replacement cost of the Building, terminate this Lease
upon written notice to Tenant.
If Landlord does not give Tenant notice in writing within thirty
(30) days from the destruction of its election to either rebuild and restore
them, or to terminate this Lease, Landlord shall be deemed to have elected to
rebuild or restore them, in which event Landlord agrees, at its expense, except
for any deductible which is the responsibility of Tenant, promptly to rebuild or
restore the Premises, the Building, the Parking Area and the Real Property to
their condition prior to the damage or destruction. Tenant shall be entitled to
an equitable reduction in rent while such repair is being made in the proportion
that such damage has interfered with or diminished Tenant's use and enjoyment of
the Premises, the Building, the Parking Area, and the Real Property. If
Landlord initially estimates that the rebuilding or restoration will exceed one
hundred eighty (180) days or if Landlord does not complete the rebuilding or
restoration within one hundred eighty (180) days following the date of
destruction (such period of time to be extended for delays caused by the fault
or neglect of Tenant), then Tenant shall have the right to terminate this Lease
by giving fifteen (15) days prior written notice to Landlord. Notwithstanding
anything herein to the contrary,
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Landlord's obligation to rebuild or restore shall be limited to the Parking
Area and other exterior improvements to the Real Property and the Building
and interior improvements constructed by Landlord as they existed as of the
Commencement Date of the Lease, and shall not include restoration of Tenant's
trade fixtures, equipment, merchandise, or any improvements, Alterations, or
additions made by Tenant to the Premises, which Tenant shall forthwith
replace or fully repair at Tenant's sole cost and expense provided this Lease
is not canceled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing
provisions, this Lease shall remain in full force and effect, except as set
forth above. Tenant hereby expressly waives the provisions of Section 1932,
Subdivision 2, in Section 1933, Subdivision 4 or the California Civil Code.
Notwithstanding anything to the contrary in the Lease, Landlord
shall not have the right to terminate the Lease if damage to or destruction of
the Premises or the Building, or both, results from a casualty covered by
insurance required to be carried by Landlord under the Lease. In the case of
damage which is not required to be covered by insurance, Landlord shall not have
the right to terminate the Lease if the damage (i) is relatively minor (e.g.,
repair or restoration would take fewer than ninety (90) days and (ii) would cost
less than five percent (5%) of the replacement cost of the Building). Landlord
shall notify Tenant within thirty (30) days following any damage to or
destruction of the Premises (or the Building if such damage or destruction
interferes with Tenant's use of the Premises) the length of time Landlord
reasonably estimates to be necessary for repair or restoration.
35. EMINENT DOMAIN. If all or any part of the Real Property,
including, without limitation, the Building, the Parking Lot, or the Premises,
shall be taken by any public or quasi-public authority under the power of
eminent domain or conveyance in lieu thereof, this Lease shall terminate as to
any portion of the Real Property so taken or conveyed on the date when title
vests in the condemnor, and Landlord shall be entitled to any and all payment,
income, rent, award, or any interest therein whatsoever which may be paid or
made in connection with such taking or conveyance, and Tenant shall have no
claim against Landlord or otherwise for the value on any unexpired term of this
Lease. Notwithstanding the foregoing, any compensation specifically awarded
Tenant for loss of business, Tenant's personal property, moving cost, or loss of
goodwill, shall be and remain the property of Tenant.
If any action or proceeding is commenced for such taking of the
Real Property or any part or portion thereof, or if Landlord is advised in
writing by any entity or body having the right or power of condemnation of its
intention to condemn the Premises or any portion thereof, then Landlord shall
have the right to terminate this Lease as to the portion of the Premises to be
condemned by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, taking or conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such notice is given or the date on which title to the Premises shall
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vest in the condemnor.
In the event of such a partial taking or conveyance of the Real
Property or any portion thereof, if the portion of the Real Property taken or
conveyed is so substantial that the Tenant can no longer reasonably conduct its
business, Tenant shall have the privilege of terminating this Lease within sixty
(60) days from the date of such taking or conveyance, upon written notice to
Landlord of its intention so to do, and upon giving of such notice this Lease
shall terminate.
If a portion of the Real Property is taken by condemnation or
conveyance in lieu thereof, and neither Landlord nor Tenant shall terminate this
Lease as provided herein, this Lease shall continue in full force and effect as
to the part of the Premises and the Real Property not so taken or conveyed, and
the Basic Rent and Additional Rent herein shall be equitably reduced as of the
date of such taking or conveyance based upon the extent to which such
condemnation or conveyance has interfered with or diminished Tenant's use and
enjoyment of the Real Property, including the Building, the Premises and the
Parking Area.
Notwithstanding any of the above, the parties acknowledge that a
portion of the Real Property is due to be taken by eminent domain for the
purpose of constructing an entry/exit ramp from California State Highway 101,
which runs immediately adjacent to the Real Property, a diagram of which is
attached hereto as Exhibit G (the "Highway 101 Taking"). Tenant acknowledges
that Tenant has been advised of and is aware of the Highway 101 Taking, and has
had an opportunity to assess the impact of the Highway 101 Taking and the
construction associated therewith on the Premises, all as currently planned
pursuant to Exhibit G, and Tenant's use and occupancy thereof. Tenant further
acknowledges and agrees that, except as provided herein, Tenant shall not have a
right to terminate this Lease or to a reduction in Basic Rent as a consequence
of such Highway 101 Taking; provided, however, that Tenant shall have the right
to receive and retain, and Landlord shall pay or cause to be paid to Tenant, any
and all sums paid by the condemning authority for any temporary taking of any of
the Premises related to the Highway 101 Taking during a time when this Lease is
in effect. In addition, if any construction or other activities relating to the
improvement of the land subject to the Highway 101 Taking materially and
adversely affects Tenant's operations at the Premises for more than sixty (60)
days in the aggregate (including, without limitation, any interference with
Tenant's primary access to the Premises or any inability of Tenant reasonably to
use over twenty-five percent (25%) of the parking spaces in the Parking Area),
then Tenant shall have the right to terminate this Lease by written notice to
Landlord. If, in conjunction with the Highway 101 Taking, Landlord obtains
title to any property adjacent to the Real Property ("Adjacent Property"),
Landlord shall (at Landlord's sole cost) improve such Adjacent Property for
additional parking in a manner comparable to the Parking Area, and Tenant shall
have the exclusive right to use the Adjacent Property as an additional parking
area throughout the Term. Notwithstanding anything to the contrary in this
Lease, if the Highway 101 Taking (i) encroaches upon the area described as the
Private Easement for Ingress & Egress & Utilities for Benefit of Parcel A as
shown on Parcel Map recorded as Instrument No. 7688976 in Book 512, Page 48,
Official Records of Santa Clara County to such an extent as materially
interferes with Tenant's access to the Premises (Landlord and Tenant
acknowledging that any such encroachment of over two
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(2) feet into such easement area shall in any event be deemed to constitute
such a material interference), or (ii) results in a relocation of any area
subject to such easement, or (iii) permanently results in the number of
parking spaces in the Parking Area to be less than the Minimum Parking (after
taking into account parking spaces constructed on an Adjacent Parcel, if
any), then, in any such event, Tenant shall have the right to terminate this
Lease upon written notice to Landlord. Upon any termination by Tenant under
this paragraph, Landlord shall immediately return to Tenant any pre-paid
Basic Rent, Additional Rent, and the Security Deposit (less any amount of the
Security Deposit that Landlord has previously and properly applied under
Section 5.12).
36. SALE OR CONVEYANCE BY LANDLORD. On a transfer of all of Landlord's
interest in the Building and Real Property and in this Lease, Landlord shall be
released from all liability and obligations under this Lease that accrue after
the effective date of transfer, subject to Section 5.12 and the following
restrictions:
36.1 If Landlord assigns its interest in this Lease to a Lender
as additional security, this assignment shall not release Landlord from its
obligations under this Lease;
36.2 Landlord shall not be released from its obligations or
liabilities under this Lease that accrue before the date of transfer; and
36.3 The transferee must agree in writing to assume and perform
all of obligations of Landlord under this Lease from and after the effective
date of the transfer.
37. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the interest of
Landlord in the land and buildings in which the leased Premises are located
(whether such interest of Landlord is a fee title interest or a leasehold
interest) is encumbered by deed of trust, and such interest is acquired by the
Lender or any third party through judicial foreclosure or by exercise of a power
of sale at private trustee's foreclosure sale, Tenant hereby agrees to attorn to
the purchaser at any such foreclosure sale and to recognize such purchaser as
the Landlord under this Lease provided such purchaser agrees to recognize all of
Tenant's rights, interests and options under this Lease in writing. In the event
the lien of the deed of trust securing the loan from a Lender to Landlord is
prior and paramount to the Lease, this Lease shall nonetheless continue in full
force and effect for the remainder of the unexpired term hereof, at the same
rental herein reserved and upon all the other terms, conditions and covenants
herein contained.
38. HOLDING OVER. Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred twenty-five percent (125%) of the monthly Basic
Rent required during the last month of the Lease term.
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39. CERTIFICATE OF ESTOPPEL. Tenant shall at any time upon not less
than ten (10) days prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance, and that not more than one month's rent has been sold in
advance.
40. RIGHT OF LANDLORD TO PERFORM. Except as otherwise set forth in
this Lease, all terms, covenants and conditions of this Lease to be performed or
observed by Tenant shall be performed or observed by Tenant at Tenant's sole
cost and expense and without any reduction of rent. If Tenant shall fail to pay
any sum of money, or other rent, required to be paid by it hereunder and such
failure shall continue for ten (10) days after written notice by Landlord, or
shall fail to perform any other term or covenant hereunder on its part to be
performed, and such failure shall continue for thirty (30) days after written
notice thereof by Landlord, Landlord, without waiving or releasing Tenant from
any obligation of Tenant hereunder, may, but shall not be obliged to, make any
such payment or perform any such other term or covenant on Tenant's part to be
performed. All sums so paid by Landlord together with interest thereon at the
rate of the prime rate of interest per annum as quoted by the Bank of America
from the date of such payment on performance by Landlord, shall be paid (and
Tenant covenants to make such payment) to Landlord on demand by Landlord, and
Landlord shall have (in addition to any other right or remedy of Landlord) the
same rights and remedies in the event of nonpayment by Tenant as in the case of
failure by Tenant in the payment of rent hereunder.
41. ATTORNEYS' FEES. In the event that either Landlord or Tenant
should bring suit for the possession of the Premises, for the recovery of any
sum due under this Lease, or because of the breach of any provision of this
Lease, or for any other relief against the other party hereunder, then all costs
and reasonable attorneys' fees, incurred by the prevailing party therein shall
be paid by the other party, which obligation on the part of the other party
shall be deemed to have accrued on the date of the commencement of such action
and shall be enforceable whether or not the action is prosecuted to judgement.
Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall defend Landlord in such suit at Tenant's sole cost and expense and with
counsel reasonably acceptable to Landlord.
42. WAIVER. The waiver by either party of the other party's failure to
perform or observe any term, covenant or condition herein contained to be
performed or observed by such waiving party
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shall not be deemed to be a waiver of such term, covenant or condition of any
subsequent failure of the party failing to perform or observe the same or any
other such term, covenant or condition therein contained, and no custom or
practice which may develop between the parties hereto during the term hereof
shall be deemed a waiver of, or in anyway affect, the right of either party
to insist upon performance and observance by the other party in strict
accordance with the terms hereof.
43. NOTICES. All notices, demands, requests, advices, or designations
which may be or are required to be given by either party to the other hereunder
shall be in writing. All notices, demands, requests, advices or designations by
Landlord to Tenant shall be sufficiently given, made or delivered if personally
served on Tenant at the Premises or if sent by overnight courier or United
Stated certified or registered mail, postage prepaid, addressed to Tenant at the
Premises. All notices, demands, requests, advices or designations by Tenant to
Landlord shall be sent by United States certified or registered mail, postage
prepaid, addressed to Landlord at its offices at 22 South Santa Cruz Avenue, Los
Gatos, California, 95030, (408) 399-4950; FAX: (408) 399-4960. Each notice,
request, demand, advice or designation referred to in this Section shall be
deemed received on the date of the personal service or the next business day if
sent by overnight courier or three (3) business days after mailing thereof in
the manner herein provided, as the case may be.
44. EXAMINATION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for a lease, and this instrument is not effected as a lease or otherwise
until its execution and delivery by both Landlord and Tenant.
45. DEFAULT BY LANDLORD; LANDLORD'S LIABILITY. Landlord shall not be
in default unless Landlord fails to perform obligations required of Landlord
within a reasonable time, but in no event earlier than (30) days after written
notice by Tenant to Landlord and, if required by Landlord's lender, to the
holder of any first mortgage or deed of trust covering the Premises whose name
and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion. Concurrently with
providing notice to Landlord of its failure to perform, Tenant shall advise
Landlord of what curative actions Tenant intends to take in the event Landlord
fails to timely complete performance as hereinabove provided. In the event that
Landlord fails to complete performance (or to commence completion, as
applicable) within such thirty (30) day period, Tenant may, at any time
thereafter, cure the default in the manner identified by Tenant in its notice.
If Tenant, at any time, by reason of Landlord's default, pays any reasonable
amount in excess of the amounts Tenant would have otherwise paid on account
thereof as Additional Rent, the reasonable amount paid by Tenant (in excess of
what Tenant would have otherwise paid) in order to complete Landlord's
performance shall be due immediately from Landlord to Tenant within five (5)
days after written notice.
46. [Intentionally omitted]
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47. CORPORATE AUTHORITY TENANT. If Tenant is a corporation (or a
partnership), the corporation (or partnership) represents and warrants that each
individual executing this Lease on behalf of the corporation is duly authorized
to execute and deliver this Lease on behalf said corporation (or partnership) in
accordance with the by-laws of said corporation (or partnership in accordance
with the partnership agreement) and that this Lease is binding upon said
corporation (or partnership) in accordance with its terms. If Tenant is a
corporation, Tenant shall, if required by Landlord after execution of this
Lease, deliver to Landlord a certified copy of the resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.
48. COMPANY AUTHORITY LANDLORD. Landlord is a limited liability
company, and each individual executing this Lease on behalf of said limited
liability company represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf said limited liability company in accordance
with the operating agreement of such limited liability company and that this
Lease is binding upon said company, corporation (or partnership) in accordance
with its terms.
49. LIMITATION OF LIABILITY. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:
49.1 The sole and exclusive remedy for damages shall be against
Landlord's interest in the Premises, the Building, the Parking Area and the Real
Property;
49.2 No member of Landlord shall be sued or named as a party in
any suit or action (except as may be necessary to secure jurisdiction of the
limited liability company);
49.3 No service of process shall be made against any member of
Landlord (except as may be necessary to secure jurisdiction of the limited
liability company);
49.4 No member of Landlord shall be required to answer or
otherwise plead to any service of process except as authorized agents of
Landlord;
49.5 No judgment will be taken against any member of Landlord;
49.6 Any judgment taken against any member of Landlord with
respect to this Lease may be vacated and set aside at any time without hearing;
49.7 No writ of execution will ever by levied against the assets
of any member of Landlord with respect to this Lease;
49.8 These covenants and agreements are enforceable both by
Landlord and also by any member of Landlord.
Tenant agrees that each of the foregoing covenants and agreements
shall be applicable
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to any covenant or agreement either expressly contained in this Lease or
imposed by statute or at common law.
50. SIGNS. Landlord hereby agrees that, upon full execution of this
Lease by Landlord and Tenant, Tenant shall be entitled to place, inscribe,
display, print or affix any sign, placard, picture, advertisement, name or
notice on the outside of the Premises or any exterior windows of the Premises
provided Tenant complies with all of the signage requirements of the City of
Mountain View and this Section 50 ("Tenant's Signage"). The cost of Tenant's
Signage for the Premises may be paid for with the Tenant Improvement Allowance
(as defined above). If Tenant is allowed to print or affix or in any way place a
sign in, on, or about the Premises, upon expiration or other sooner termination
of this Lease, Tenant, at Tenant's sole cost and expense, shall both remove such
sign and repair all damage caused by said removal.
All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person reasonably
approved of by Landlord. Tenant shall not place anything or allow anything to
be placed near the glass of any window, door partition or wall, which may appear
unsightly from outside the Premises.
51. OPTION TO RENEW LEASE. Provided Tenant is not in default beyond
any notice and applicable cure period, Tenant shall have two (2) successive
options to renew the term of this Lease for a period of five (5) years each
(hereinafter referred to as "renewal terms"), upon the same terms, conditions,
and covenants contained herein, except that the Basic Rent provided in Section
5.1 shall be adjusted as provided in Section 52. Such option shall be
exercisable only upon Landlord's receipt of written notice to such effect not
less than twelve (12) months prior to the expiration of the original or then
renewal term.
52. RENEWAL TERM BASIC RENT. In the event that the Tenant elects to
exercise its option to extend the term of this Lease, the Basic Rent payable
during the renewal term shall be the greater of one hundred percent (100%) of
the prevailing fair market rent at the time of renewal for similar properties in
the same market area, or an amount equal to the Basic Rent paid in the last
calendar year of the previous term as it would be increased per the Basic Rent
Schedule. The fair market rental value of the Premises shall be determined as
follows:
52.1 Not less than ninety (90) days and not more than one
hundred-twenty (120) days prior to the commencement of the renewal term, the
Landlord and the Tenant shall each choose a qualified real estate professional,
as hereinafter defined, to assess the current fair market rent for the Premises.
For the purposes of this Agreement, a "qualified real estate professional" shall
mean a commercial real estate leasing agent or broker with at least five (5)
years experience in negotiating leases for commercial property within the area
in which the Premises is located.
52.2 Within thirty (30) days after appointment, the qualified
real estate professionals chosen by the parties (the "Appraisers") shall provide
an opinion as to the fair market rent for the Premises based on the then market
conditions and on the size, type, location, condition,
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and purpose of the Premises (the "Appraisals"). If the Appraisers agree as
to the fair market rent for the Premises, then that amount shall be the Basic
Rent during the first year of the renewal term, provided it is equal to or
greater than the Basic Rent paid in the last calendar year of the previous
term as it would be increased per the Basic Rent Schedule. In the event that
the Appraisers fail to agree as to the fair market rent, the parties shall
confer and shall attempt to reach a mutual agreement as to the fair market
rent based on the Appraisals provided by the Appraisers.
52.3 In the event that the Landlord and Tenant fail to reach an
agreement within forty-five (45) days prior to the commencement of the renewal
term, the two Appraisers shall choose a third qualified real estate professional
(the "Arbitrator") who shall, within thirty (30) days after appointment, choose
one of the two Appraisals as the Fair Market Rent, which amount shall be the
Basic Rent for the first year of the renewal term if it is greater than the
Basic Rent paid in the last calendar year of the previous term as it would be
increased per the Basic Rent Schedule. In reviewing the prior Appraisals, the
Arbitrator shall endorse that Appraisal amount which, in the opinion of the
Arbitrator most closely represents the then fair market rent for the Premises,
and the Arbitrator shall have no ability to average the two or to determine the
fair market rent on some other basis.
52.4 Commencing on each anniversary of the renewal term, the
Basic Rent for the next succeeding twelve (12) months shall be increased by an
amount equal to three percent (3%) of the Basic Rent for the immediately
proceeding twelve (12) months.
52.5 The parties shall each pay the costs and fees of their own
qualified real estate professional, and shall equally share the cost of a third
qualified real estate professional, if required.
If it becomes necessary to determine the fair market rent for the
Premises by Appraisers, the Appraisers shall have at least five (5) years
experience appraising office and R&D space located in the vicinity or "market
area" of the Premises which market area shall include the area from Highway 237
(as the southern boundary) to Embarcadero Road (as the northern boundary) and
from El Camino Real (as the western boundary) and the Bay (as the eastern
boundary). The Appraisers determination of fair market rent shall be based on
rental of space of the same age, construction, size and location as the Premises
with the improvements installed therein at Landlord's expense and shall take
into account Tenant's obligations to pay Additional Rent, Operating Expenses,
and Management Fee under this Lease. In determining fair market rent, the
Appraisers shall not consider any alterations installed in the Premises at
Tenant's expense.
Notwithstanding anything to the contrary in this Lease, if the rent
during any extended term is determined by appraisal and if Tenant does not, in
its sole discretion, approve of the fair market rent established by such
appraisal, Tenant may rescind its exercise of the Option by giving Landlord
written notice of such election to rescind within thirty (30) days after receipt
if all appraisals. If Tenant rescinds its exercise of the Option, then (i) the
Lease shall terminate on the thirtieth (30th) day after Tenant's notice of
rescission or on the date the Lease would have otherwise terminated absent
Tenant's exercise of the Option, whichever date is later; and (ii) Tenant shall
pay
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all costs and expenses of the appraisal.
53. MISCELLANEOUS AND GENERAL PROVISIONS.
53.1 USE OF BUILDING NAME. Tenant shall not, without the written
consent of Landlord, use the name of the building for any purpose other than as
the address of the business conducted by Tenant in the Premises.
53.2 CHOICE OF LAW; SEVERABILITY. This Lease shall in all
respects be governed by and construed in accordance with the laws of the State
of California. If any provision of this Lease shall be invalid, unenforceable or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.
53.3 DEFINITION CERTAIN OF TERMS. The term "Landlord" or any
pronoun used in place thereof includes the plural as well as the singular and
the successors and assigns of Landlord. The term "Tenant" or any pronoun used in
place thereof includes the plural as well as the singular and individuals,
firms, associations, partnerships and corporations, and their and each of their
respective heirs, executors, administrators, successors and permitted assigns,
according to the context hereof, and the provisions of this Lease shall inure to
the benefit of and bind such heirs, executors, administrators, successors and
permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than one Tenant the
obligations of Tenant hereunder are joint and several. The paragraph headings of
this Lease are for convenience of reference only and shall have no effect upon
the construction or interpretation of any provision hereof.
The term "Law" or "Laws" shall mean and include all federal, state,
county, city, or government agency laws, statutes, ordinances, standards, rules,
requirements, or orders now in force or hereafter enacted, promulgated, or
issued. The term also includes government measures regulating or enforcing
public access, occupational, health, or safety standards for employers,
employees, landlords, or tenants.
53.4 TIME OF ESSENCE. Time is of the essence of this Lease and of
each and all of its provisions.
53.5 QUITCLAIM. At the expiration or earlier termination of this
Lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten
(10) days after written demand from Landlord to Tenant, any quitclaim deed or
other document required by any reputable title company licensed to operate in
the State of California, to remove the cloud or encumbrance created by this
Lease from the real property of which Tenant's Premises are a part.
53.6 INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This
instrument along with
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any exhibits and attachments hereto constitutes the entire agreement between
Landlord and Tenant relative to the Premises and this Lease and the exhibits
and attachment may be altered, amended or revoked only by an instrument in
writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby
that all prior or contemporaneous oral agreements between and among
themselves and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this agreement.
53.7 RECORDING. Neither Landlord nor Tenant shall record this
Lease or a short form memorandum hereof without the consent of the other.
53.8 AMENDMENTS FOR FINANCING. Tenant further agrees to execute
any amendments required by a lender to enable Landlord to obtain financing, so
long as such amendments do not decrease Tenant's rights or increase Tenant's
obligations hereunder are not affected.
53.9 CLAUSES, PLATS AND RIDERS. Clauses, plats and riders, if
any, signed by Landlord and Tenant and endorsed on or affixed to this Lease are
a part hereof.
53.10 DIMINUTION OF LIGHT, AIR OR VIEW. Tenant covenants and
agrees that no diminution or shutting off of light, air or view by any structure
which may be hereafter erected (whether or not by Landlord) shall in any way
affect this Lease, entitle Tenant to any reduction of rent hereunder or result
in any liability of Landlord to Tenant.
53.11 EXHIBITS. Attached hereto and by this reference made a part
hereof are Exhibits referring to the Legal Description of the Property (Exhibit
A); Intentionally omitted (Exhibit B); Site Plan (Exhibit C); Intentionally
omitted (Exhibit D); Rules and Regulations for the Property (Exhibit E),
Commencement Date Memorandum (Exhibit F), Highway 101 Taking (Exhibit G), and
Improvement Agreement (Exhibit H).
53.12 APPROVALS. Notwithstanding anything to the contrary in the
Lease, whenever the Lease requires an approval, consent, designation,
determination or judgment by either Landlord or Tenant, such approval, consent,
designation, determination or judgment (including, without limiting the
generality of the foregoing, those required in connection with assignment and
subletting) shall not be unreasonable or unreasonably withheld or delayed and in
exercising any right or remedy hereunder, each party shall at all times act
reasonably and in good faith.
53.13 REASONABLE EXPENDITURES. Notwithstanding anything to the
contrary in the Lease, any expenditure by a party permitted or required under
the Lease, for which such party is entitled to demand and does demand
reimbursement from the other party, shall be limited to the fair market value of
the goods and services involved, shall be reasonably incurred, and shall be
substantiated by documentary evidence available for inspection and review by the
other party or its representative during normal business hours.
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53.14 REAL ESTATE BROKERS. The brokers involved in this Lease
transaction are BT Commercial and Catalyst Cresa (the "Brokers"). Landlord
hereby agrees to pay any and all fees and/or commissions owed to said Brokers in
connection with this transaction and any other fees and/or commissions owed to
any other broker or finder Landlord or its agents have dealt with in connection
with this Lease.
53.15 INTERRUPTION. Notwithstanding anything in this Lease:
Landlord hereby represents and warrants that the Building utilities will be
available for use by Tenant Seven (7) days a week, Twenty-Four (24) hours per
day throughout the Term of this Lease. If the Premises should become unsuitable
for Tenant' s use as a consequence of the cessation of utilities or other
services, interference with access to the Premises, legal restriction or the
presence of any Hazardous Material and in any of the foregoing cases the
interference with Tenant's intended use of the Premises continues for a period
of seventy-two (72) hours or more, notwithstanding the cause of such
interruption, Tenant shall be entitled to an equitable abatement of Basic Rent
and Additional Rent from the date of the first occurrence through the time in
which the Premises are suitable for Tenant's intended use. If such interruption
continues for a period of thirty (30) days or more, Tenant shall be entitled to
terminate this Lease, upon written notice to Landlord.
53.16 QUIET POSSESSION. Tenant shall peacefully have, hold and
enjoy the Premises, subject to the other terms of this Lease, provided that
Tenant pays the Basic Rent and Additional Rent and performs all of Tenant's
covenants and agreement contained in this Lease.
53.17 MARKETING OF PROPERTY. Landlord reserves the right to place
"For Lease" and/or "For Rent" signs on or about the Building and the Real
Property at any time during the one hundred eighty (180) days immediately
preceding the expiration or earlier termination of this Lease. Landlord further
reserves the right to place "For Sale" signs on or about the Real Property at
any time and from time to time during the term of this Lease.
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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year first written above.
LANDLORD: TENANT:
SHORELINE 101, LLC ILOG, INC.
BY: /s/ David Gardner BY: /s/ Stuart Bagshaw
----------------------------- ---------------------------
DAVID GARDNER, Manager STUART BAGSHAW
Date: 10/26/98 Date: 10/26/98
----------------------------- --------------------------
GUARANTOR:
The undersigned, ILOG, S.A., hereby unconditionally guarantees Tenant's full and
timely performance of each and every term, covenant, and condition of the above
Lease to be kept and performed by said Tenant, and further guarantees payment to
Landlord of any and all amounts due under the Lease from Tenant on account of
Base Rent, Additional Rent, and any other indebtedness which may become payable
by Tenant under such Lease.
ILOG S. A.
BY: /s/ Stuart Bagshaw
------------------------------
Date: 10/26/98
---------------------------
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EXHIBIT 99.3
ILOG, Inc. Improvement Agreement
IMPROVEMENT AGREEMENT
This Improvement Agreement ("Agreement") is dated for reference purposes
only as of October 26, 1998, and is made by and between SHORELINE 101, LLC
("Landlord") and ILOG, INC. ("Tenant") in connection with that certain Lease
Agreement ("Lease") of even date herewith between Landlord and Tenant
affecting certain real property commonly known as 1080 Linda Vista Avenue, in
the City of Mountain View, County of Santa Clara, State of California.
Landlord and Tenant hereby agree as follows:
1. DEFINITIONS: Throughout this Agreement, the following terms shall
have the following meanings:
A. ARCHITECT: The term "Architect" shall mean LRS Associates
Architecture and Planning of Sunnyvale, California.
B. BUILDING: The term "Building" shall mean the Building Shell
and the Interior Improvements.
C. BUILDING PLANS: The term "Building Plans" shall mean the
Final Building Shell Plans and Final Interior Improvement Plans, as the same
may be modified from time to time by change orders issued and approved by the
parties in accordance with this Agreement.
D. BUILDING SHELL: The term "Building Shell" shall mean (i) a
concrete and steel two (2) story tilt-up building containing approximately
thirty-six thousand (36,000) square feet of floor space (measured in
accordance with American Institute of Architects ("AIA") Document D101,
"Methods of Calculating Areas and Volumes of Buildings"), which shall be
constructed by Landlord in the location and configuration shown on EXHIBIT
"C" to the Lease, including, without limitation, the foundation system and
slab, walls, structural and finished roof, exterior glazing (including
sound-proofing reasonably acceptable to Tenant), hydraulic elevator with
finishes, fire sprinkler uppers, domestic water meter, roof screen, entry
doors, and all improvements necessary for such building to comply with the
Americans with Disabilities Act ("ADA"); (ii) all parking areas (including
striping and ADA-required signage), driveways, curbs, sidewalks, utility
installations, exterior lighting, decorative water facilities, irrigation
systems, landscaping, and other outside area improvements specified on the
Building Plans; and (iii) all other on-site and off-site improvements
required by any governmental authority as a condition of its issuance of any
approval for construction of the Building Shell or the Interior Improvements
(including road widening, resurfacing and striping, signalization, sidewalks,
curbs, lighting and other improvements).
E. FINAL BUILDING SHELL PLANS: The term "Final Building Shell
Plans" shall mean those plans, specifications, and working drawings for the
Building Shell prepared by Architect,
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bearing Job No. 19.16.18, dated June 16, 1997, and consisting of pages A-O,
A1, A2.1, A2.2, A3.1, A3.2, A4.1, A4.2, A4.3, A5.0, A6.0, A7.0, A8.0, A9.0,
SP.1 through SP.4, C-1, C-2, C-3, S1 through S12, and L1 through L6.
F. FINAL INTERIOR IMPROVEMENT PLANS: The term "Final Interior
Improvement Plans" shall mean those plans, specifications, and working
drawings for the Interior Improvements prepared and approved by the parties
in accordance with this Agreement.
G. GENERAL CONTRACTOR: The term "General Contractor" shall mean
Wentz Construction.
H. INTERIOR IMPROVEMENT ALLOWANCE: The term "Interior
Improvement Allowance" shall mean the sum of (i) a base amount (the "Base
Allowance") equal to the sum of (a) Nine Hundred Fifty Thousand Dollars
($950,000), plus (b) the aggregate amount of all Soft Costs (including those
reasonably incurred by Tenant), which Base Allowance Landlord must contribute
for the design, development and construction of the Interior Improvements,
PLUS (ii) an additional amount ("the Additional Allowance") equal to Two
Hundred Fifty-Two Thousand Dollars ($252,000), which Additional Allowance
Landlord must, at the option of Tenant, also contribute for the design,
development and construction of the Interior Improvements.
I. INTERIOR IMPROVEMENTS: The term "Interior Improvements" shall
mean all partitions, windows, interior non-load-bearing walls, wall
coverings, HVAC equipment, interior lighting, finished ceilings, interior
utility fixtures, signage, and other improvements and fixtures installed in
the Building Shell to the extent that such improvements and fixtures are
specified on the Final Interior Improvement Plans.
J. INTERIOR IMPROVEMENT COSTS: The term "Interior Improvement
Costs" shall mean the sum of the following: (1) payments to the General
Contractor and its subcontractors for labor and materials furnished pursuant
to any construction contract for construction of the Interior Improvements,
which is entered into by Landlord and approved by Tenant in accordance with
this Agreement; (2) reasonable fees paid by Landlord to architects, engineers
and other construction professionals (other than employees of Landlord) for
services required in connection with the design and construction of the
Interior Improvements; (3) reasonable fees paid by Tenant to architects,
engineers, space planners, designers, inspectors and other construction
professionals (other than fees and costs paid by Tenant to Sigmatech
Facilities and Nissen Associates); (4) utility connection charges incurred by
Tenant (subject to clause (xiii) below); (5) permit and license fees paid by
Tenant for use and occupancy permits required for Tenant to occupy the
Premises; (6) the amounts paid to governmental authorities or agencies for
inspections and issuance of building permits and approvals for the Interior
Improvements (but not that portion of such amounts applicable to, or based on
the value of, the Building Shell); and (7) such other reasonable costs as
Tenant incurs which relate directly to the design, construction and
development of the Interior Improvements (excluding the cost of any security
systems, office furniture systems and moving expenses) and which have been
specified by Tenant to Landlord as Interior Improvement Costs by written
notice(s) given by Tenant
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to Landlord from time to time. In no event shall Interior Improvement Costs
include nor shall Landlord apply any of the Interior Improvement Allowance
toward (i) charges and expenses for changes to the Building Plans which have
not been approved by Tenant; (ii) wages, labor and overhead for overtime and
premium time; (iii) additional costs and expenses incurred by Landlord on
account of any contractor's or subcontractor's default or construction
defects; (iv) principal, interest and fees for construction and permanent
financing; (v) offsite management or other general overhead costs incurred by
Landlord; (vi) bond premiums; (vii) costs for which Landlord has a right of
reimbursement from others (including, without limitation, insurers and
warrantors); (viii) the cost of bringing the Building and the Premises into
compliance with applicable building codes, environmental laws, and other
statutes, laws, rules and regulations; (ix) restoration costs in excess of
insurance proceeds as a consequence of casualties; (x) any penalties and late
charges attributable to Landlord's failure to pay other Interior Improvement
Costs; (xi) Landlord's attorneys', experts' and other fees and costs in
connection with contracts and disputes; (xii) fees or charges by or for
Landlord for construction management, supervision, profit, overhead or
general conditions; (xiii) sewer and water meter hook-up fees and expenses;
and (xiv) costs in excess of the Interior Improvement Cost Estimate, all of
which items described in the foregoing clauses (i) through (xiv) shall be the
sole obligation of Landlord.
K. INTERIOR IMPROVEMENT COST ESTIMATE: The term "Interior
Improvement Cost Estimate" shall mean the total estimated cost of
constructing the Interior Improvements prepared and approved by Landlord and
Tenant in accordance with this Agreement.
L. PRELIMINARY INTERIOR IMPROVEMENT PLANS: The term "Preliminary
Interior Improvement Plans" shall mean those plans and specifications for the
Interior Improvements prepared by the Architect bearing Job No. 21.1826,
dated October 16, 1998, and consisting of pages A-2.1, A-2.2, A-3.1 and
A-3.2, and the LRS Associates Outline Specifications for ILOG, Inc.
consisting of four pages and presented by Architect to Tenant on August 28,
1998, as modified by the memorandum dated October 5, 1998, by Phillip Warnes
of Sigmatech to the General Contractor.
M. SOFT COSTS: The term "Soft Costs" shall mean the aggregate
amount of all of the following costs, fees and expenses incurred in
connection with the design, construction and development of the Interior
Improvements: (i) all architectural and engineering fees, (ii) all costs of
obtaining governmental approval and permits for the development and
construction of the Interior Improvements, including all building permit
fees, zoning fees, utility connection and use fees, and area fees imposed by
any governmental or quasi-governmental authority or public utility, (iii) the
cost of premiums for surety bonds, if any, including payment and performance
bonds and mechanics' lien bonds, (iv) fees for any reports necessary in the
design, construction and development of the Interior Improvements, including
environmental impact reports, soils reports, topographical maps, and other
reports, (v) premiums and costs of fire/casualty, liability and builders'
risk insurance coverage, (vi) all costs associated with the testing and
inspection of the Premises, and (vii) fees and expenses of all surveyors,
consultants (including project managers and construction consultants),
accountants, attorneys and others providing professional or extra services in
connection with the preparation and negotiation of the Lease and this
Agreement and/or the design, construction and
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development of the Premises (excluding Tenant's attorneys, project managers
and construction consultants).
N. SUBSTANTIAL COMPLETION: The terms "Substantial Completion"
and "Substantially Completed" shall mean that (i) all necessary governmental
approvals for occupancy of the Building for Tenant's Intended Use have been
obtained (including a final "sign-off" and, if applicable, a certificate of
occupancy); (ii) Tenant has had fifteen (15) days to install its Trade
Fixtures in the Building; (iii) all utilities are hooked up and available for
use; (iv) the Architect has certified that the Building has been constructed
in accordance with the Building Plans; (v) all incomplete or defective
construction, which materially interferes with Tenant's use of the Building,
has been remedied and repaired; and (vi) Landlord has delivered possession of
the Building to Tenant.
O. TENANT'S CONTRIBUTION: The term "Tenant's Contribution" is
defined in paragraph 5A(1).
P. TENANT'S INTENDED USE: The term "Tenant's Intended Use" shall
mean Tenant's legal occupancy of the Premises to operate office, research and
development facilities.
Q. TRADE FIXTURES: The term "Trade Fixtures" shall mean anything
affixed to the Premises and used by Tenant for purposes of trade,
manufacture, ornament or domestic use unless such thing has, by the manner in
which it is affixed, become an integral part of the Premises. Such Trade
Fixtures shall include, without limitation, Tenant's telephone,
telecommunications, data cabling and security systems, furniture, signage,
equipment, and other operating systems located in or used in connection with
the Premises.
2. BUILDING PLANS:
A. FINAL BUILDING SHELL PLANS AND PRELIMINARY INTERIOR
IMPROVEMENT PLANS: Landlord and Tenant each acknowledges that it has
reviewed and approved the Final Building Shell Plans and the Preliminary
Interior Improvement Plans prior to the date of this Agreement.
B. FINAL INTERIOR IMPROVEMENT PLANS AND COST ESTIMATE: On or
before the tenth (10th) business day after the date of this Agreement, (i)
Landlord shall cause the Architect to prepare and deliver to Tenant proposed
final plans, specifications and fully-engineered working drawings for the
Interior Improvements (the "Proposed Final Plans"), which shall be consistent
with and logical evolutions of the Preliminary Interior Improvement Plans,
and (ii) Landlord shall deliver to Tenant a proposed Interior Improvement
Cost Estimate for the Interior Improvements shown on the Proposed Final
Plans, which shall include a detailed line-item budget of all estimated
Interior Improvement Costs. If such proposed Interior Improvement Cost
Estimate is more than One Million Two Hundred Seventy-Seven Thousand Dollars
($1,277,000), then Tenant shall have the right to terminate this Agreement
and the Lease by delivery of written notice to Landlord on or before the
tenth (10th) business day following delivery of the Proposed Final Plans and
such proposed Interior
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Improvement Cost Estimate to Tenant. In addition, if Tenant disapproves the
Proposed Final Plans or proposed Interior Improvement Cost Estimate in any
respect, then within ten (10) business days following receipt of the Proposed
Final Plans and proposed Interior Improvement Cost Estimate, Tenant may
deliver to Landlord its written proposal for the changes necessary, in
Tenant's opinion, to conform the Proposed Final Plans to the approved
Preliminary Interior Improvements Plans or to reduce costs. If Tenant fails
to approve or disapprove the Proposed Final Plans within the allowed time
period, the Proposed Final Plans shall be deemed to be the approved Final
Interior Improvement Plans for the purpose of this Agreement. If Tenant fails
to approve or disapprove the proposed Interior Improvement Cost Estimate
within the allowed time period, the Interior Improvement Cost Estimate
proposed by Landlord shall be deemed to be the approved Interior Improvement
Cost Estimate for the purposes of this Agreement. Landlord shall, and shall
cause the General Contractor to, cooperate reasonably with Tenant and its
representatives in reviewing the Final Proposed Plans and the proposed
Interior Improvement Cost Estimate. If Tenant proposes changes to the
Proposed Final Plans and/or Landlord's proposed Interior Improvement Cost
Estimate, Landlord shall not unreasonably withhold its approval of such
changes and the parties shall confer and negotiate in good faith to reach
agreement on specific required modifications to the Proposed Final Plans and
Landlord's proposed Interior Improvement Cost Estimate as a consequence of
such changes. If Tenant reasonably believes that the cost estimate is
incorrect, it may require that all or any portion of the work be submitted
for competitive bids. The Proposed Final Plans, modified for changes proposed
by Tenant and approved by Landlord pursuant to this paragraph, shall be the
approved Final Interior Improvement Plans and the cost estimate approved by
Tenant shall be the Interior Improvement Cost Estimate for the purposes of
this Agreement.
C. APPLICATION FOR APPROVALS: As soon as the Final Interior
Improvement Plans are approved by Landlord and Tenant, Landlord shall submit
the approved Final Interior Improvement Plans to all appropriate governmental
agencies for their approval and issuance of all required permits. Landlord
shall use reasonable efforts to obtain all governmental approvals and permits
necessary for construction of the Interior Improvements in accordance with
Final Interior Improvement Plans on or before December 4, 1998. Landlord and
Tenant shall initial the Building Plans immediately after all governmental
approvals and permits have been obtained.
D. TERMINATION: If Landlord and Tenant have not previously
agreed upon the Final Interior Improvement Plans, then Tenant, in its sole
discretion, may terminate this Agreement and the Lease by giving Landlord
written notice on or before the later of (i) the third (3rd) business day
after Landlord has delivered to Tenant the Proposed Final Plans and
Landlord's proposed Interior Improvement Cost Estimate, or (ii) November 4,
1998. If Landlord and Tenant have not previously agreed upon the Final
Interior Improvement Plans, then Landlord may terminate this Agreement and
the Lease by giving Tenant written notice on or before the tenth (10th)
business day after Landlord has delivered to Tenant the Proposed Final Plans
and Landlord's proposed Interior Improvement Cost Estimate. In addition, if
all permits required for construction of the Building have not been issued on
or before December 18, 1998, then Tenant, in its sole discretion, may
terminate this Agreement and the Lease by giving Landlord written notice.
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E. CHANGES TO BUILDING PLANS: Effective immediately, with
respect to the Building Shell, and after the Final Interior Improvement Plans
have been approved by Landlord and Tenant as provided above, with respect to
the Interior Improvements, neither party shall have the right to require
extra work or make any modifications with respect to the construction of the
Building, without the prior written consent of the other party as to the
change. Landlord shall not unreasonably withhold or delay its consent to
changes or extra work proposed by Tenant provided that Tenant agrees (i) to
pay the reasonable increase (if any) in Landlord's Interior Improvement Costs
to make such changes or perform such extra work (such costs to be determined
as provided in the definition of Interior Improvement Costs under paragraph
1J), and (ii) if Architect determines that such extra work will delay
Substantial Completion, that any delay in Substantial Completion caused by
such extra work shall advance the "Commencement Date" under the Lease on a
day-for-day basis. Tenant shall not unreasonably withhold or delay its
consent to changes or extra work proposed by Landlord which do not increase
Interior Improvement Costs or delay construction. Tenant may withhold its
consent, in its sole discretion, to any change in the Final Interior
Improvement Plans or Interior Improvement Cost Estimate.
3. CONSTRUCTION CONTRACT:
A. SELECTION OF GENERAL CONTRACTOR: Landlord and Tenant agree
that Wentz Construction shall be the general contractor for the Interior
Improvements (the "General Contractor"). Landlord and the General Contractor
shall enter a construction contract for a fixed price equal to the Interior
Improvement Cost Estimate. The General Contractor shall be the contractor
only of Landlord, and Tenant shall have no liability to the General
Contractor under any construction contract or otherwise with respect to the
Building.
B. SELECTION OF SUBCONTRACTORS: Landlord represents and warrants
that all subcontractors shall be well-qualified and experienced in their
trades and duly licensed by all applicable authorities. Air Systems shall be
the mechanical subcontractor and Young Electric shall be the electrical
subcontractor for the Project. Each subcontractor shall be a contractor only
of the General Contractor and/or Landlord, and Tenant shall have no liability
to any subcontractor under any subcontract or otherwise with respect to the
Building.
4. COMMENCEMENT AND COMPLETION OF BUILDING:
A. LANDLORD'S OBLIGATION TO CONSTRUCT THE BUILDING: Landlord and
Tenant acknowledge that Landlord has already commenced construction of the
Building Shell. Landlord shall continue and diligently prosecute to
completion construction of the Building Shell and shall commence and
thereafter diligently complete construction of the Interior Improvements, and
Landlord shall use reasonable efforts to Substantially Complete the Building
by January 29, 1999.
B. DELIVERY OF POSSESSION: When the Building is Substantially
Complete, Landlord shall deliver possession of the Building to Tenant.
However, Tenant shall have no obligation to accept possession of the Building
or deem the Building to be Substantially Complete
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until the later of (i) the "Commencement Date" under the Lease, (ii) the date
the Building is in fact Substantially Complete, or (iii) January 29, 1999.
5. PAYMENT OF CONSTRUCTION COSTS:
A. TENANT'S CONTRIBUTION TO INTERIOR IMPROVEMENT COSTS:
(1) Landlord shall pay and be solely responsible for all
costs to design, construct and develop the Building Shell. Tenant's only
obligation to pay any cost of constructing the Building shall be limited to
the positive difference, if any, between the Interior Improvement Cost
Estimate approved by Tenant and the Interior Improvement Allowance, such
difference being referred to herein as the "Tenant's Contribution." The
parties acknowledge that, except as provided in Section 5.B regarding
amortization of the Additional Allowance, Tenant shall have no obligation to
pay any cost of constructing any portion of the Building in excess of the
Tenant's Contribution. In particular, but without limitation, Landlord shall
pay and be solely responsible for all Interior Improvement Costs exceeding
the Interior Improvement Cost Estimate approved by Tenant. Tenant shall pay
the Tenant's Contribution as follows: No more frequently than once every
thirty (30) days, Landlord shall deliver to Tenant a copy of the General
Contractor's progress payment request for the Interior Improvements, together
with all supporting documents (including the Architect's applicable
certificate of progress). Within ten (10) days after Tenant's receipt of
such materials, Tenant shall pay Landlord Tenant's Percentage of such
progress payment that is then due and payable to the General Contractor. For
purposes of this paragraph, "Tenant's Percentage" shall equal the percentage
obtained by dividing the Tenant's Contribution by the approved Interior
Improvement Cost Estimate. Within thirty (30) days after the Building is
Substantially Complete and the amount of all Interior Improvement Costs has
been finally determined as provided below, Tenant shall pay Landlord any
portion of the Tenant's Contribution that remains due and unpaid.
(2) As soon as possible after commencement of the Lease,
Tenant shall reasonably designate as Tenant's property Interior Improvements
having a cost approximately equal to the sum of the Tenant's Contribution
plus such other Interior Improvement Costs, if any, as Tenant shall have
paid. Property designated as Tenant's property under the terms of this
paragraph shall constitute Tenant's property for purposes of the Lease, may
be removed from the Building at any time by Tenant, and Tenant shall be
entitled to all investment tax credit, depreciation, and other tax attributes
relating to such property. In determining which Interior Improvements will be
designated as Tenant's property, Tenant shall give preference to those
Interior Improvements which are most readily removable from the Building and
which shall have the greatest utility for Tenant outside of the Building. At
the expiration or sooner termination of the Lease, all Interior Improvements
not designated as Tenant's property under this paragraph shall be surrendered
to Landlord in accordance with the terms of the Lease.
(3) When the Building is Substantially Completed, Landlord shall
submit to Tenant a final and detailed accounting of all Interior Improvement
Costs (the "Excess Costs") in excess of the One Million Eighty Thousand Dollar
($1,080,000) amount (the "Reference Amount")
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as currently budgeted by Landlord to design, construct and develop the
Interior Improvements as described in the Preliminary Interior Improvement
Plans dated August 28, 1998, without modification. Landlord covenants that
the unit costs of all labor and materials constituting Excess Costs shall be
identical to the unit costs of analogous labor and materials used by Landlord
and the General Contractor in calculating the Reference Amount. Tenant may
audit the books, records, and supporting documents of Landlord and the
General Contractor to the extent necessary to determine the accuracy of such
accounting during normal business hours after giving Landlord at least
forty-eight (48) hours written notice. In particular, but without
limitation, Landlord shall, and shall cause the General Contractor to,
substantiate with evidence reasonably satisfactory to Tenant that such unit
costs constituting Excess Costs are identical to those used in calculating
the Reference Amount. Tenant shall bear the cost of such audit, unless such
audit discloses that Landlord has overstated such costs by more than two
percent (2%) of the actual amount of such costs, in which event Landlord
shall pay the costs of Tenant's audit. Landlord shall promptly refund any
overpayments to Tenant, and (subject to paragraph 5A(i)) Tenant shall
promptly pay any underpayments to Landlord.
B. ADJUSTMENT OF BASIC RENT: The Base Allowance shall not
constitute an Operating Expense under the Lease, and Tenant shall not be
required to pay or otherwise reimburse Landlord for any of the Base
Allowance. If, however, Tenant elects to apply any portion of the Additional
Allowance toward Interior Improvement Costs, then Basic Rent payable monthly
under the Lease shall be increased by an amount necessary to amortize the
aggregate amount of the Additional Allowance that Tenant has elected to apply
toward Interior Improvement Costs over the initial seventy-four (74) month
Lease Term, calculated at an annual rate of interest equal to eight percent
(8%). If, to the contrary, the total Interior Improvement Cost is less than
the Base Allowance, then Basic Rent shall be decreased by an amount necessary
to amortize the difference between such total Interior Improvement Cost and
the Base Allowance over the initial seventy-four (74) month Lease Term,
calculated at an annual rate of interest equal to eight percent (8%).
Promptly after Tenant has approved Landlord's final accounting of Interior
Improvement Costs paid out of the Additional Allowance pursuant to paragraph
5A(3), Landlord and Tenant shall execute an amendment to the Lease specifying
such adjustment, if any, in Basic Rent.
C. FINANCING OF BUILDING: Landlord represents and warrants that
Landlord has already closed on financing sufficient to complete construction
of the Building as provided in this Agreement. For purposes of this
Agreement, "closed on" such financing shall mean that Landlord has satisfied
all conditions and performance of all obligations required by Landlord's
lender so that such lender is prepared to fund such financing in accordance
with reasonable and customary construction disbursement procedures
established by such lender.
6. TENANT'S RIGHT TO ENTER: Tenant, and its authorized
representatives, shall have the right to enter the Building at all reasonable
times for the purpose of inspecting the progress of construction of the
Building Shell and the Interior Improvements. Landlord shall give Tenant at
least twenty (20) business days prior written notice of its estimated date
for Substantial Completion of the Building, so that Tenant may cause its
fixtures and equipment to be ordered. When construction of the Building has
proceeded to the point where Tenant's work of installing its fixtures
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and equipment in the Building can be commenced in accordance with good
construction practice, Landlord also shall notify Tenant to that effect and
shall permit Tenant and its authorized representatives and contractors to
have access to the Building for a period of not less than fifteen (15) days
for the purpose of installing Tenant's Trade Fixtures and equipment. In
installing such Trade Fixtures and equipment, Tenant shall use reasonable
efforts to minimize any interference with the General Contractor's work.
7. CONSTRUCTION WARRANTY FOR THE BUILDING: Notwithstanding anything
to the contrary in the Lease, effective upon delivery of the Building to
Tenant, Landlord does hereby warrant (i) that the Building Shell and the
Interior Improvements were constructed in accordance with all applicable
easements, agreements, underwriters' requirements, covenants, conditions and
restrictions and the rules, regulations, requirements, codes, statutes,
ordinances, orders and laws of all governmental and quasi-governmental
authorities having jurisdiction over the Building, (ii) that the Building
Shell and Interior Improvements were constructed in accordance with the
Building Plans and in a good and workmanlike manner; (iii) that all material
and equipment installed in the Building conformed to the Building Plans, was
new and otherwise of good quality and was installed in accordance with all
vendor's and manufacturer's specifications, instructions and requirements;
and (iv) that all material and equipment installed in the Building has been
paid for and is free of liens, security interests or chattel mortgages. All
construction, product and equipment warranties and guarantees obtained by
Landlord shall, to the extent obtainable, provide that such warranties and
guarantees shall also run to the benefit of Tenant and its successors and
assigns. Tenant shall have the benefit of any construction, product and
equipment warranties and guarantees in favor of Landlord that would assist
Tenant in correcting defects and in discharging any of Tenant's obligations
regarding the repair and maintenance of the Premises. Upon written request by
Tenant, Landlord shall inform Tenant of all written construction, product and
equipment warranties and guarantees in favor of Landlord which affect the
Building. Landlord shall cooperate with Tenant in enforcing such warranties
and guarantees and in bringing any suit that may be necessary to enforce
liability (i) at Landlord's sole expense with regard to any defect for which
Landlord is responsible under this paragraph 7 or under the Lease, and (ii)
also with regard to any defect for which Landlord is not responsible under
this paragraph 7 or under this Lease so long as Tenant pays all costs
reasonably incurred by Landlord in doing so. Notwithstanding anything to the
contrary contained in the Lease or this Agreement, Tenant's acceptance of the
Building shall not be deemed a waiver of the foregoing warranty, and Landlord
shall promptly repair all violations of the warranty set forth in this
paragraph at its sole cost and expense.
8. DELIVERY OF POSSESSION, PUNCH LIST AND ACCEPTANCE AGREEMENT: As
soon as the Building is Substantially Completed and Landlord has given Tenant
reasonable prior written notice of the time and date therefor, Landlord and
Tenant shall together walk through the Premises and inspect all of the
Building. After such inspection has been completed, each party shall sign an
acceptance agreement, which shall (i) include a list of all "punch list"
items which the parties agree are to be corrected by Landlord and (ii) shall
state the Commencement Date. Landlord shall use reasonable efforts to
complete and/or repair such "punch list" items within thirty (30) days after
executing the acceptance agreement. The parties' preparation
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of such a "punch list" and execution of an acceptance agreement shall not,
however, be deemed an acceptance by Tenant of the Building as complete or
free from defects and shall not in any way affect Landlord's warranty
obligations under this Agreement.
9. DELIVERY OF DOCUMENTS: Landlord shall deliver to Tenant (i) within
thirty (30) days after the same is obtained by Landlord, any temporary or
permanent certificates of occupancy issued by the City of Mountain View or
Santa Clara County with respect to any of the Building; (ii) within sixty
(60) days after Substantial Completion of the Building, a complete "as-built"
set of Mylar reproducible Building Plans reflecting all approved changes in
the work; and (iii) within thirty (30) days after Substantial Completion of
the Building, complete maintenance and operating manuals for all the
equipment, fixtures and systems that are part of the Building.
10. RISK OF LOSS: Risk of loss of the Building prior to the
Commencement Date of the Lease shall be borne by Landlord. At all times
prior to the Commencement Date of the Lease, Landlord at its sole cost and
expense shall maintain so-called contingent liability and broad form
"builder's risk" insurance with coverage in an amount equal to the
replacement cost of the Building Shell plus the Interior Improvement Cost
Estimate. The insurance policy (i) shall be in a form reasonably
satisfactory to Tenant, (ii) shall be carried with a company reasonably
acceptable to Tenant, (iii) shall provide that such policy shall not be
subject to cancellation or change except after at least ten (10) days prior
written notice to Tenant, and (iv) shall contain a "cross liability"
provision insuring Landlord and Tenant against any loss caused by the
negligence of the other party. Tenant shall be designated as a named insured
on said insurance policy and the "deductible" thereunder shall not exceed Ten
Thousand Dollars ($10,000). If the Building is damaged or destroyed prior to
the Commencement Date of the Lease, Tenant shall have the right to terminate
the Lease, if the Building, in the reasonable opinion of the Architect,
cannot be Substantially Complete prior to March 15, 1999. If the Lease is so
terminated, Tenant shall be entitled to that amount of the builder's risk
insurance proceeds equal to the amount, if any, paid by Tenant in connection
with the construction of the Interior Improvements prior to the termination
date or payable by Tenant for cancellation of any contract for any such work.
If the Building is damaged or destroyed and the Lease is not terminated
pursuant to the terms of the Lease or this Agreement, Landlord shall promptly
and diligently complete construction of the Building in accordance with this
Agreement and all insurance proceeds with respect to the loss shall be paid
to an independent depository, reasonably acceptable to Landlord and Tenant,
for disbursement to the contractors completing the Building as the work
progresses in accordance with customary institutional lending practices.
11. RIGHTS UPON TERMINATION: If the Lease is terminated pursuant to
any provision of this Agreement, then in addition to all other amounts due
Tenant hereunder, all security deposits, prepaid rent, and other monies paid
by Tenant under the terms of the Lease or this Agreement (including, without
limitation, the Tenant's Contribution) shall be returned to Tenant upon
demand and, thereupon, neither party shall have any further rights or
obligations under the terms of the Lease or this Agreement.
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12. MISCELLANEOUS: Time is of the essence of this Agreement. This
Agreement is the result of negotiations among and has been reviewed by all
parties. Accordingly, this Agreement shall be deemed to be the product of
both parties hereto, and no ambiguity shall be construed in favor of or
against either party. This Agreement may not be modified or amended, nor may
any provision hereof be waived, except in a writing signed by the parties to
this Agreement. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. The captions used in this Agreement
are for convenience only and shall not be considered in interpreting this
Agreement. All capitalized terms used, but not defined, in this Agreement
shall have the meanings ascribed to them in the Lease. In the event of any
conflict between the terms of this Agreement and the Lease, this Agreement
shall prevail.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
intending to be bound thereby.
LANDLORD: TENANT:
SHORELINE 101, LLC, ILOG, INC.,
a California limited liability company a California corporation
By: /s/ David Gardner By: /s/ Stuart Bagshaw
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Title: Manager Title: Chief Operating Officer
-------------------------------- ----------------------------
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