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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File number 000-29173
DIVERSA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-3297375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10665 Sorrento Valley Road, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code is (858) 453-7020
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) [X] Yes [_] No; (2) [_] Yes [X] No
(The Registrant has been subject to the filing requirements of Section 13(a) and
15(d) less than 90 days because the Registrant's Registration Statement on Form
8-A was declared effective by the Commission on February 11, 2000.)
The number of shares of the Registrant's Common Stock outstanding as of May 4,
2000 was 34,604,215.
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DIVERSA CORPORATION
INDEX
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<CAPTION>
Page No.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999........................................ 3
Condensed Statements of Operations (unaudited) for the
three months ended March 31, 2000 and 1999................... 4
Condensed Statements of Cash Flows (unaudited) for the
three months ended March 31, 2000 and 1999................... 5
Notes to Condensed Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 12
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.............................................. 13
Item 2 Change in Securities and Use of Proceeds....................... 13
Item 3 Defaults Upon Senior Securities................................ 13
Item 4 Submission of Matters to a Vote of Securities Holders.......... 13
Item 5 Other Information.............................................. 14
Item 6 Exhibits and Reports on Form 8-K............................... 15
SIGNATURES.............................................................. 16
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DIVERSA CORPORATION
CONDENSED BALANCE SHEETS
Dollars in thousands
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
2000 1999
----------------- -------------
(unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................. $166,465 $ 2,553
Short-term investments..................................................... 36,195 2,594
Accounts receivable........................................................ 1,168 15,571
Other current assets....................................................... 1,156 596
-------- --------
Total current assets................................................ 204,984 21,314
Property and equipment, net................................................... 4,861 3,096
Acquired technology rights, net............................................... 2,448 2,487
Long-term receivable.......................................................... 4,195 4,054
Other assets.................................................................. 135 121
-------- --------
Total assets.................................................................. $216,623 $ 31,072
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................................... $ 856 $ 668
Accrued liabilities........................................................ 2,248 1,653
Deferred revenue........................................................... 3,459 4,491
Current portion of capital lease obligations............................... 655 600
-------- --------
Total current liabilities........................................... 7,218 7,412
Capital lease obligations, less current portion............................... 3,310 2,677
Deposit from sublessee........................................................ 300 300
Long-term deferred revenue.................................................... 15,041 15,094
Redeemable Convertible Preferred Stock - $0.001 par value,
60,718,183 shares authorized and 60,220,183 shares issued and
outstanding at December 31, 1999............................................. --- 48,402
Stockholders' equity (deficit):
Series E Convertible Preferred Stock - $0.001 par value, 5,555,556
shares authorized, issued and outstanding at December 31, 1999.......... --- 6
Common Stock, $0.001 par value, 65,000,000 shares authorized
and 34,545,735 shares issued and outstanding at March 31, 2000;
28,630,349 shares authorized and 2,945,390 shares issued and
outstanding at December 31, 1999........................................ 34 3
Additional paid-in capital.................................................. 258,272 20,102
Deferred compensation....................................................... (4,061) (5,520)
Notes receivable from stockholders.......................................... --- (36)
Accumulated deficit......................................................... (63,348) (57,351)
Accumulated other comprehensive loss........................................ (143) (17)
-------- --------
Total stockholders' equity (deficit)........................... 190,754 (42,813)
-------- --------
Total liabilities and stockholders' equity (deficit)........... $216,623 $ 31,072
======== ========
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to condensed financial statements.
3
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DIVERSA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
2000 1999
----------------- ------------------
<S> <C> <C>
Revenue:
Collaborative revenue.................................................... $ 4,064 $ 432
Grant and product revenue................................................ 342 127
--------- ---------
Total revenue............................................................. 4,406 559
--------- ---------
Operating costs and expenses:
Research and development................................................. 4,574 2,197
Selling, general and administrative...................................... 1,303 1,028
Non-cash, stock based compensation charges............................... 5,555 511
--------- ---------
Total operating costs and expenses........................................ 11,432 3,736
--------- ---------
Loss from operations...................................................... (7,026) (3,177)
Interest income, net...................................................... 1,412 36
Other income, net......................................................... 2 21
--------- ---------
Loss before income taxes.................................................. (5,612) (3,120)
Provision for income taxes................................................ 75 ---
--------- ---------
Net loss before preferred dividends....................................... (5,687) (3,120)
Dividends on preferred stock.............................................. 310 ---
--------- ---------
Net loss applicable to common stockholders................................ $ (5,997) $ (3,120)
========= =========
Net loss per share, basic and diluted..................................... $ (0.32) $ (1.68)
Weighted average shares used in calculating basic and diluted
loss per share........................................................... 18,979 1,857
Pro forma net loss per share, basic and diluted........................... $ (0.20) $ (0.13)
Weighted average shares used in calculating pro forma basic and diluted
net loss per share................................................... 29,976 24,691
</TABLE>
See accompanying notes to condensed financial statements.
4
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DIVERSA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
In thousands
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
---------------- -----------------
<S> <C> <C>
Operating activities:
Net loss applicable to common stockholders.................................. $ (5,997) $(3,120)
Adjustments to reconcile net loss to net cash provided in operating
activities:
Depreciation and amortization.......................................... 484 329
Dividends payable to Series A, B and D preferred stockholders.......... 310 ---
Non-cash, stock based compensation charges............................. 5,555 511
Change in operating assets and liabilities:
Accounts receivable.................................................... 14,403 7
Other assets........................................................... (560) (121)
Accounts payable and accrued expenses.................................. 781 (81)
Deferred revenue....................................................... (1,171) 4,700
-------- -------
Net cash provided by operating activities.............................. 13,805 2,225
-------- -------
Investing activities:
Purchases of short-term investments......................................... (34,834) (3,601)
Sales and maturities of short-term investments.............................. 1,107 1,077
Purchases of property and equipment......................................... (2,248) (324)
Other....................................................................... (28) 4
-------- -------
Net cash used for investing activities.................................. (36,003) (2,844)
-------- -------
Financing activities:
Net proceeds from sale of common and preferred stock......................... 185,388 7,255
Principal payments on capital leases......................................... (132) (305)
Payments on long-term note payable........................................... --- (552)
Advances under capital lease obligations..................................... 819 111
Repayment of notes receivable from stockholders.............................. 35 6
-------- -------
Net cash provided by financing activities.............................. 186,110 6,515
-------- -------
Net increase in cash and cash equivalents..................................... 163,912 5,896
Cash and cash equivalents at beginning of period.............................. 2,553 4,473
-------- -------
Cash and cash equivalents at end of period.................................... $166,465 $10,369
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................................... $ 137 $ 135
======== =======
Unrealized holdings loss on investments................................ $ 143 $ 5
======== =======
</TABLE>
See accompanying notes to condensed financial statements.
5
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DIVERSA CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Business
Diversa Corporation (the "Company") was incorporated in Delaware in 1992 and
discovers and develops novel enzymes and other biologically active compounds
from diverse environmental sources for use in agricultural, chemical processing,
industrial and pharmaceutical applications.
2. Basis of Presentation
The accompanying unaudited financial statements have been prepared by the
Company in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management all adjustments, consisting
of normal recurring accruals, which are necessary for a fair statement of the
results of the interim periods presented, have been included. The results of
operations for the interim period are not necessarily indicative of results to
be expected for any other interim period or for the year as a whole. These
unaudited condensed financial statements and footnotes thereto should be read in
conjunction with the audited financial statements and footnotes thereto
contained in the Company's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on December 16, 1999, as amended.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the condensed financial statements and related
footnotes. Changes in the estimates may affect amounts reported in future
periods.
Certain reclassifications of prior year balances have been made to conform to
the current format.
3. Offering of Common Stock
On February 17, 2000, the Company completed its initial public offering of
8,337,500 shares of common stock at $24.00 per share, including 1,087,500 shares
of common stock issued pursuant to the underwriters' over-allotment option. The
combined gross proceeds raised by the Company from the offering and over-
allotment option was $200.1 million. Concurrent with the initial public
offering, 22,834,011 shares of redeemable and convertible shares of preferred
stock were converted to shares of common stock.
4. Income Taxes
The provision for income taxes for the quarter ended March 31, 2000 reflects the
expected combined federal and state tax rates offset by the benefit from the
utilization of net operating loss carryforwards.
6
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5. Computation of Net loss per share
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), basic earnings per share reflect the
historical weighted average shares of common stock and excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share include the dilutive effects of such securities. Earnings (loss) per
share amounts for all periods conform to SFAS 128 and the requirements of Staff
Accounting Bulletin No. 98.
For comparison purposes, the schedule below presents pro forma net loss per
common share (basic and diluted) for the three month periods ended March 31,
2000 and 1999, assuming the conversion of preferred stock to common stock upon
completion of the Company's initial public offering. For the first quarter
ended March 31, 2000, the Company paid dividends of $310,000 on preferred stock,
however, assuming the conversion of preferred stock to common stock and no
dividends, the net loss reported would have been $5.7 million. (in thousands,
except per share data).
<TABLE>
<CAPTION>
Three Months ended
March 31,
---------------------
2000 1999
---- -----
<S> <C> <C>
Net loss applicable to common shares...................................... $ (5,997) $ (3,120)
Net loss per common share, basic and diluted.............................. $ (0.32) $ (1.68)
Weighted average shares used in computing basic and diluted
loss per common share.................................................... 18,979 1,857
Pro forma net loss per common share basic and diluted..................... $ (0.20) $ (0.13)
Weighted average shares used in computing pro forma basic and diluted
net loss per share....................................................... 29,976 24,691
Net loss before preferred dividends....................................... $ (5,687) $ (3,120)
Pro forma net loss before preferred dividends per common share basic and
diluted.................................................................. $ (0.19) $ (0.13)
Weighted average shares used in computing pro forma basic and diluted
net loss per share....................................................... 29,976 24,691
</TABLE>
6. Recently Issued Accounting Standards
SFAS No. 133, "Accounting for Derivative Financial Instruments and for Hedging
Activities" ("SFAS 133"), will be effective for our fiscal year 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument, including derivative instruments embedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. SFAS 133 is not anticipated to have a significant
impact on our operating results or financial condition when adopted, since we
currently do not engage in hedging activities or invest in derivative
instruments.
7. Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"), requires reporting
and displaying comprehensive income (loss) and its components which, for the
Company, includes net loss and unrealized gains and losses on investments. In
accordance with SFAS 130, the accumulated balance of other comprehensive income
is disclosed as a separate component of stockholders' equity (deficit).
7
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For the three months ended March 31, 2000 and 1999, comprehensive loss consisted
of (in thousands):
2000 1999
---------- --------
Net loss $ (5,997) $ (3,120)
Other comprehensive loss:
Unrealized loss on investments (143) (5)
--------- --------
Comprehensive loss $ (6,140) $ (3,125)
========= ========
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The statements in this quarterly report that are not descriptions of historical
facts may be forward-looking statements that are subject to risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified below and in
our other publicly available documents. We are under no obligation to update
any of these forward-looking statements after the filing of this quarterly
report to reflect actual results or changes in our expectations.
The following information should be read in conjunction with the condensed
financial statements and the notes thereto included in Item 1 of this quarterly
report. We also urge readers to review and consider our disclosures describing
various factors that affect our business, including the disclosures under
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Risk Factors and the audited financial statements and notes
thereto contained in our Registration Statement on Form S-1, filed on December
16, 1999, as amended.
Overview
We were founded in December 1992 and began operations in May 1994. We believe
that we are the global leader in discovering and developing novel enzymes and
other biologically active compounds from diverse environmental sources for use
in agricultural, chemical processing, industrial and pharmaceutical
applications. To date, we have generated revenue from research collaborations,
government grants and enzyme product sales. Our strategic partners include
Novartis Seeds AG, Novartis Agribusiness Biotechnology Research, Inc., The Dow
Chemical Company, Aventis Animal Nutrition S.A. (formerly Rhone-Poulenc Animal
Nutrition S.A.) and Finnfeeds International Limited. Our current government
grants are from the National Institute of General Medical Sciences, the National
Cancer Institute and the National Institute of Environmental Health Sciences.
Our enzyme product sales to date are comprised of research kits and Pyrolase
160.
We have dedicated substantial resources to the development of our proprietary
technologies, which include capabilities for sample collection from the world's
microbial populations, generation of environmental gene libraries, screening of
these libraries using ultra-high throughput methods capable of analyzing more
than a billion genes per day and optimization employing our gene evolution
technologies.
8
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Our revenue has increased significantly since our inception, and for the quarter
ended March 31, 2000, revenue grew 688% compared to the quarter ended March 31,
1999. This increase was primarily attributable to the addition of new strategic
alliances, which included research funding and technology access and development
fees. Research funding is recognized as revenue when the services are rendered.
Revenue from technology access and development fees is recognized over the term
of the strategic alliance. Revenue from milestone payments is recognized when
the milestone is achieved. Our strategic partners often pay us before we
recognize the revenue, and these payments are deferred until earned. As of
March 31, 2000, we had current and long-term deferred revenue totaling $18.5
million.
We have incurred substantial operating losses since our inception. As of March
31, 2000, our accumulated deficit was $63.3 million. We expect to incur
additional operating losses over the next few years as we continue to develop
our technologies and fund internal product research and development.
Results of Operations
Quarters ended March 31, 2000 and March 31, 1999
Revenue
Our revenue increased $3.8 million to $4.4 million for the quarter ended March
31, 2000 from $0.6 million for the same period in 1999. This increase was
primarily attributable to the addition of new strategic alliances with Novartis
Agribusiness Biotechnology Research, Inc., Novartis Seeds AG, The Dow Chemical
Company and Aventis Animal Nutrition S.A. and, to a much lesser extent, the
addition of new government grants and enzyme product sales. Revenue from
collaborations accounted for 92% of total revenue for the quarter ended March
31, 2000 and for 77% of total revenue for the quarter ended March 31, 1999.
Research and Development Expenses
Our research and development expenses increased $2.4 million to $4.6 million for
the quarter ended March 31, 2000 from $2.2 million for the same period in 1999.
This increase was primarily attributable to expansion of collaborative research
activities and acceleration of internal product research and development. We
expect that our research and development expenses will continue to increase
substantially to support our collaborative research programs, internal product
research and development and technology development.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased $0.3 million to $1.3
million for the quarter ended March 31, 2000 from $1.0 million for the same
period in 1999. This increase was primarily attributable to the expansion of
administrative infrastructure to support our growth and requirements as a public
company. We expect that our selling, general and administrative expenses will
continue to increase to support our growth and requirements as a public company.
Non-Cash, Stock-Based Compensation Charges
Deferred compensation for options granted to employees has been determined as
the difference between the exercise price and the fair value of our common
stock, as estimated by us for
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financial reporting purposes, on the date options were granted. Deferred
compensation for options granted to consultants has been determined in
accordance with the Statement of Financial Accounting Standards No. 123 as the
fair value of the equity instruments issued, and is periodically remeasured as
the underlying options vest in accordance with EITF 96-18.
For the quarter ended March 31, 2000, we recorded amortization of deferred
compensation of approximately $1.1 million related to deferred compensation
recorded from 1997 through 1999, compared to amortization of deferred
compensation of $0.5 million for the quarter ended March 31, 1999.
We recorded additional deferred compensation of $1.7 million in the first
quarter of 2000, which is being amortized into expense over a two-year service
period, resulting from the acceleration of vesting for stock options held by a
director. Approximately $0.2 million was amortized into expense during the
quarter ended March 31, 2000.
We also recorded aggregate non-cash compensation charges of $4.2 million in the
quarter ended March 31, 2000, including $4.1 million in conjunction with the
acceleration of vesting for stock options held by employees and $0.1 million for
stock options granted to consultants.
Interest Income, net
Interest income increased to $1.5 million for the quarter ended March 31, 2000
from $0.1 for the same period in 1999 due to higher average cash balances.
Interest expense remained level at $0.1 million for the quarter ended March 31,
2000.
Provision for Income Taxes
We have significant net operating loss carryforwards for federal and state
income taxes. We also have federal research and development tax credit
carryforwards. Our utilization of the net operating loss and tax credit
carryforwards may be subject to substantial annual limitations pursuant to
Section 382 of the Internal Revenue Code, and similar state provisions, as a
result of changes in our ownership structure. The annual limitations may result
in the expiration of net operating losses and credits prior to utilization.
We recorded a provision for income taxes of $75,000 for the quarter ended March
31, 2000 based on our estimated tax liability for 2000 assuming we are subject
to alternative minimum taxes under which net operating loss carryforwards are
available to offset 90% of our tax liability. Our estimate generally reflects
upfront payments from collaborators as taxable in the year received. During
1999, we incurred a net operating loss and accordingly did not record a
provision for income taxes.
Dividends
From December 21, 1999 until the date of the consummation of the first sale of
common stock in an initial public offering ("IPO"), the Series A, B and D
Preferred Stockholders were entitled to a 5% dividend per annum. We recorded
dividends of $66,000 at the end of December 31, 1999 and during the first
quarter of 2000, we recorded additional dividends of $310,000. These dividends
were settled through the issuance of shares of common stock valued at the IPO
price on February 14, 2000.
10
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Liquidity and Capital Resources
Since inception, we have financed our business primarily through the sale of
common and preferred stock and funding from strategic partners and government
grants. As of March 31, 2000, we had cash, cash equivalents and short-term
investments of approximately $202.7 million. Our funds are currently invested
in U.S. Treasury and government agency obligations and investment-grade
corporate obligations.
As part of our plan to lease new executive offices and research and development
facilities in 2000, we plan to construct a pilot manufacturing facility that
will be used for process development activities. The pilot manufacturing
facility will include two 500-litre fermenters and will occupy approximately
3,000 square feet of the new facility. Our costs for property and equipment
relating to the pilot manufacturing facility will be approximately $2.6 million,
all of which we anticipate funding through an equipment financing line of
credit. Additionally, we expect to fund $1.5 million in enhancements to our
SciLect project in 2000, which will be funded through working capital. As of
March 31, 2000, we had purchase commitments totaling $1.2 million relating to
the pilot facility and $1.3 million relating to the SciLect project.
Our operating activities provided cash of $13.8 million for the quarter ended
March 31, 2000. Our cash provided by operating activities consisted primarily
of collections on accounts receivable as of December 31, 1999, offset in part by
cash used to fund operations.
Our investing activities used cash of $36.0 million in the quarter ended March
31, 2000. Our investing activities consisted primarily of purchases of U.S.
Treasury and government agency obligations and investment-grade corporate
obligations and of property and equipment.
Our financing activities provided $186.1 million for the quarter ended March 31,
2000. Our financing activities consisted primarily of the sale of 8,337,500
shares of common stock in connection with our initial public offering of common
stock in February 2000. Also contributing were proceeds received under our
equipment financing lines of credit, partially offset by principal payments made
against our lines of credit.
We expect that our current cash and cash equivalents, short-term investments,
and committed funding from existing strategic alliances and grants will be
sufficient to fund our operations for at least the next two years. This
estimate is a forward-looking statement that involves risks and uncertainties.
Our capital requirements depend on several factors, including: the level of
research and development investment required to maintain our technology
leadership position; our ability to enter into new agreements with strategic
partners or to extend the terms of our existing collaborative agreements, and
the terms of any agreement of this type; the success rate of our discovery
efforts associated with milestones and royalties; our ability to successfully
commercialize products developed independently and the demand for such products;
the timing and willingness of strategic partners to commercialize our products
that would result in royalties; costs of recruiting and retaining qualified
personnel; and our need to acquire or license complementary technologies or
acquire complementary businesses.
If additional capital is required to operate our business, we cannot assure you
that additional financing will be available on terms favorable to us, or at all.
If adequate funds are not available or are not available on acceptable terms,
our ability to fund our operations, take advantage of opportunities, develop
products or technologies or otherwise respond to competitive pressures
11
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could be significantly limited. In addition, if financing is not available, we
may need to cease operations.
If we raise additional funds through the issuance of equity securities, the
percentage ownership of our stockholders will be reduced, stockholders may
experience additional dilution or such equity securities may provide for rights,
preferences or privileges senior to those of the holders of our common stock. If
we raise additional funds through the issuance of debt securities, such debt
securities would have rights, preferences and privileges senior to holders of
common stock and the terms of such debt could impose restrictions on our
operations.
Year 2000
In our Registration Statement on Form S-1, filed on December 16, 1999, as
amended, we discussed the nature and progress of our plans to become Year 2000
compliant. We have completed our remediation and testing of systems and, as a
result of those planning and implementation efforts, we experienced no
significant disruptions in mission critical information technology and non-
information technology systems and believe those systems successfully responded
to the Year 2000 date change. We incurred expenses of less than $50,000 in
connection with remediating our systems. We are not aware of any material
problems resulting from Year 2000 issues, either with our products and services,
our internal systems, or the products and services of third parties. We will
continue to monitor our mission critical computer applications and those of our
suppliers throughout the year 2000 to ensure that we promptly address any latent
Year 2000 matters that may arise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our exposure to market risk for changes in interest rates relates primarily to
the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our various outstanding debt instruments.
Our risk associated with fluctuating interest expense is limited, however, to
our capital lease obligations, the interest rates under which are closely tied
to market rates, and our investments in interest rate sensitive financial
instruments. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We ensure the safety
and preservation of our invested principal funds by limiting default risks,
market risk and reinvestment risk. We mitigate default risk by investing in
investment grade securities. A hypothetical 100 basis point adverse move in
interest rates along the entire interest rate yield curve would not materially
affect the fair value of our interest sensitive financial instruments at
December 31, 1999 and March 31, 2000. Declines in interest rates over time
will, however, reduce our interest income while increases in interest rates over
time will increase our interest expense.
12
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities and Use of Proceeds
(a) During the quarter ended March 31, 2000, our Certificate of Incorporation
was amended prior to our initial public offering to effect a reverse stock
split, to increase the authorized number of shares of preferred stock and the
total authorized number of shares and to adopt certain stockholder protection
measures. In addition, upon the closing of the our initial public offering, each
outstanding share of preferred stock was converted into common stock and our
Certificate of Incorporation was amended to decrease the total authorized number
of shares, including a decrease in the authorized number of shares of common
stock and the authorized number of shares of preferred stock, to eliminate
provisions relating to the Series A, Series B, Series C, Series D and Series E
preferred stock and to authorize blank check preferred stock.
(b) A Registration Statement on Form S-1 (File No. 333-92853) relating to the
initial public offering of our common stock was declared effective by the
Securities and Exchange Commission on February 11, 2000. The underwriters'
over-allotment option was exercised on February 14, 2000 and the closing of the
offering was held on February 17, 2000.
In the aggregate, we sold 8,337,500 shares (which amount includes 1,087,500
shares for the underwriters' over-allotment option) in the offering for gross
proceeds of $200.1 million. The managing underwriters of the offering were
Bear, Stearns & Co. Inc., Chase H&Q and Deutsche Banc Alex. Brown.
In connection with the offering, we incurred total expenses of $15.4 million,
including underwriting discounts and commissions of $14.0 million and other
expenses of $1.4 million. After expenses, our net proceeds from the offering
were approximately $184.7 million. No expenses were paid or payments made to
our directors, officers or affiliates or 10% owners of any class of our equity
securities. From February 14, 2000 through March 31, 2000, we invested the net
proceeds from the offering in cash equivalents and short-term investments.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
On February 7, 2000, we held our Annual Meeting of Stockholders (the "Annual
Meeting"). At the Annual Meeting, 6,496,050 shares of common stock out of a
total of 8,660,031 shares of common stock outstanding at the record date were
represented in person or by proxy; 9,976,573 shares of Series A preferred stock
out of a total of 10,000,000 shares of Series A preferred stock outstanding at
the record date were represented in person or by proxy; 24,390,838 shares of
Series B preferred stock out of a total of 24,566,184 shares of Series B
preferred stock outstanding at the record date were represented in person or by
proxy; none of the of 844,444 shares of Series C preferred stock outstanding at
the record date were represented in person or by proxy; 24,667,918 shares of
Series D preferred stock out of a total of 24,809,555 shares of Series
13
<PAGE>
D preferred stock outstanding at the record date were represented in person or
by proxy; and all of the of 5,555,556 shares of Series E preferred stock
outstanding at the record date were represented in person or by proxy. All
stockholders represented in person or by proxy at the Annual Meeting voted for
the following proposals submitted for approval at the Annual Meeting:
(1) The election of the following directors to be elected by the Series A, B, C
and D Preferred shares to serve until the next Annual Meeting and until their
successors are elected: Daniel T. Carroll; James H. Cavanaugh; Patricia M.
Cloherty; Donald D. Johnston; Mark Leschly. 59,034,329 shares voted in favor of
the nominees, 0 shares voted against the nominees.
The election of the following directors to be elected by Common Stock and
Preferred Stock to serve until the next Annual Meeting and until their
successors are elected: Jay M. Short; Peter Johnson; and Melvin I. Simon.
71,086,935 shares voted in favor of the nominees, 0 shares voted against the
nominees.
(2) Approval of the amendment and restatement of our Certificate of
Incorporation to be effective prior to our initial public offering. 71,033,436
votes in favor of the proposal, 53,249, votes against the proposal and 0 votes
abstained.
(3) Approval of the amendment and restatement of our Certificate of
Incorporation to be effective following our initial public offering. 71,040,623
votes in favor of the proposal, 46,312, votes against the proposal and 0 votes
abstained.
(4) Approval of the amendment and restatement of our Bylaws. 71,028,123
votes in favor of the proposal, 46,312, votes against the proposal and 12,500
votes abstained.
(5) Approval of the form of Indemnity Agreement for the directors and officers
of the Company. 71,026,060 votes in favor of the proposal, 58,812 votes against
the proposal and 2,063 votes abstained.
(6) Approval of our 1999 Employee Stock Purchase Plan. 71,027,060 votes in
favor of the proposal, 58,812, votes against the proposal and 1,063 votes
abstained.
(7) Approval of our 1999 Non-Employee Directors' Stock Option Plan. 71,025,060
votes in favor of the proposal, 60,812, votes against the proposal and 1,063
votes abstained.
(8) Ratification of the selection of Ernst & Young, LLP as our independent
auditors of the fiscal year ending December 31, 2000. 71,086,935 votes in favor
of the proposal, 0 votes against the proposal and 0 votes abstained.
Item 5. Other Information
None
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------------------------------------------------------------------
3.4 Amended and Restated Certificate of Incorporation.
3.5 Amended and Restated Bylaws.
10.34 Lease Agreement, dated February 11, 2000, between the Company and
KR - Gateway Partners, LLC.
10.35 Lease Agreement, dated February 11, 2000, between the Company and
KR - Gateway Partners, LLC.
27.1 Financial Data Schedule.
- -----
(b) Reports on Form 8-K
None
15
<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.
DIVERSA CORPORATION
Date May 11, 2000 /s/ Karin Eastham
---------------------------------------------
Karin Eastham
Senior Vice President, Finance,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
TO
FORM 10-Q
DIVERSA CORPORATION
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------------------------------------------------------------------
3.4 Amended and Restated Certificate of Incorporation.
3.5 Amended and Restated Bylaws.
10.34 Lease Agreement, dated February 11, 2000, between the Company and
KR - Gateway Partners, LLC.
10.35 Lease Agreement, dated February 11, 2000, between the Company and
KR - Gateway Partners, LLC.
27.1 Financial Data Schedule.
- -----
(b) Reports on Form 8-K
None
17
<PAGE>
EXHIBIT 3.4
RESTATED CERTIFICATE OF INCORPORATION
OF
DIVERSA CORPORATION
DIVERSA CORPORATION (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), hereby certifies as follows:
FIRST: The name of the Corporation is Diversa Corporation. A Certificate
of Incorporation of the Corporation was originally filed by the Corporation with
the Secretary of State of Delaware on December 21, 1992. The Corporation was
originally incorporated under the name Industrial Genome Sciences, Inc.
SECOND: This Restated Certificate of Incorporation which restates, amends
and supersedes the Certificate of Incorporation of the Corporation as originally
filed and thereafter amended and restated, was duly adopted in accordance with
the provisions of Sections 242 and 245 of the DGCL, and was approved by written
consent of the stockholders of the Corporation given in accordance with the
provisions of Section 228 of the DGCL (prompt notice of such action having been
given to those stockholders who did not consent in writing).
THIRD: The text of the Certificate of Incorporation of the Corporation is
hereby amended, restated and superseded to read in its entirety as follows:
ARTICLE I.
NAME
The name of this corporation is Diversa Corporation.
ARTICLE II.
PURPOSE
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE III.
CAPITAL STOCK
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is seventy million
(70,000,000) shares. Sixty-five million (65,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of one-
tenth of one cent ($.001).
1.
<PAGE>
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the DGCL, to fix or alter from time
to time the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE IV.
REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of the registered agent of the Corporation at
such address is The Corporation Trust Company.
ARTICLE V.
MANAGEMENT AND BYLAWS
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
2. BOARD OF DIRECTORS
a. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1993 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the
2.
<PAGE>
second annual meeting of stockholders following the Initial Public Offering, the
term of office of the Class II directors shall expire and Class II directors
shall be elected for a full term of three years. At the third annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class III directors shall expire and Class III directors shall be elected for a
full term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting. During such
time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), this Section A.2.a of this Article
V shall become effective and be applicable only when the corporation is a
"listed" corporation within the meaning of Section 301.5 of the CGCL.
b. In the event that the corporation is unable to have a classified
board under applicable law, Section 301.5 of the CGCL, Section A. 2. a. of this
Article V shall not apply and all directors shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.
c. No stockholder entitled to vote at an election for directors may
cumulate votes to which such stockholder is entitled, unless, at the time of
such election, the corporation (i) is subject to Section 2115(b) of the CGCL and
(ii) is not or ceases to be a "listed" corporation under Section 301.5 of the
CGCL. During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. REMOVAL OF DIRECTORS
a. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire
3.
<PAGE>
number of directors authorized at the time of such director's most recent
election were then being elected.
b. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and the Board of Directors or any
individual director may be removed from office at any time without cause by the
affirmative vote of the holders of at least a majority of the outstanding shares
entitled to vote on such removal.
4. VACANCIES
a. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
c. At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors then
in office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(i) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
4.
<PAGE>
B.
1. BYLAW AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
ARTICLE VI.
LIMITATION OF LIABILITY
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the CGCL) for breach of duty to the corporation and
its shareholders through bylaw provisions or through agreements with the agents,
or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
ARTICLE VII.
AMENDMENTS AND REPEAL
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
5.
<PAGE>
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
6.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Restated Certificate
of Incorporation to be duly executed on behalf of the Corporation on February
__, 2000.
DIVERSA CORPORATION
By: /S/ JAY M. SHORT
-----------------
Jay M. Short, Ph.D.
President and Chief Executive Officer
7.
<PAGE>
EXHIBIT 3.5
BYLAWS
OF
DIVERSA CORPORATION
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES............................................ 1
Section 1 Registered Office.................................. 1
Section 2 Other Offices...................................... 1
ARTICLE II CORPORATE SEAL..................................... 1
Section 3 Corporate Seal..................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS............................. 1
Section 4 Place Of Meetings.................................. 1
Section 5 Annual Meetings.................................... 1
Section 6 Special Meetings................................... 3
Section 7 Notice Of Meetings................................. 4
Section 8 Quorum............................................. 5
Section 9 Adjournment And Notice Of Adjourned Meetings....... 5
Section 10 Voting Rights...................................... 5
Section 11 Joint Owners Of Stock.............................. 6
Section 12 List Of Stockholders............................... 6
Section 13 Action Without Meeting............................. 6
Section 14 Organization....................................... 6
ARTICLE IV DIRECTORS.......................................... 7
Section 15 Number And Term Of Office.......................... 7
Section 16 Powers............................................. 7
Section 17 Classes of Directors............................... 7
Section 18 Vacancies.......................................... 8
Section 19 Resignation........................................ 9
Section 20 Removal............................................ 9
Section 21 Meetings........................................... 10
Section 22 Quorum And Voting.................................. 10
Section 23 Action Without Meeting............................. 11
Section 24 Fees And Compensation.............................. 11
Section 25 Committees......................................... 11
Section 26 Organization....................................... 12
i.
<PAGE>
Page
ARTICLE V OFFICERS........................................... 13
Section 27 Officers Designated................................ 13
Section 28 Tenure And Duties Of Officers...................... 13
Section 29 Delegation Of Authority............................ 14
Section 30 Resignations....................................... 14
Section 31 Removal............................................ 14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION................ 15
Section 32 Execution Of Corporate Instruments................. 15
Section 33 Voting Of Securities Owned By The Corporation...... 15
ARTICLE VII SHARES OF STOCK.................................... 15
Section 34 Form And Execution Of Certificates................. 15
Section 35 Lost Certificates.................................. 16
Section 36 Transfers.......................................... 16
Section 37 Fixing Record Dates................................ 16
Section 38 Registered Stockholders............................ 17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION................ 17
Section 39 Execution Of Other Securities...................... 17
ARTICLE IX DIVIDENDS.......................................... 18
Section 40 Declaration Of Dividends........................... 18
Section 41 Dividend Reserve................................... 18
ARTICLE X FISCAL YEAR........................................ 18
Section 42 Fiscal Year........................................ 18
ARTICLE XI INDEMNIFICATION.................................... 18
Section 43 Indemnification Of Directors, Officers,
Employees And Other Agents......................... 18
ARTICLE XII NOTICES............................................ 21
Section 44 Notices............................................ 21
ARTICLE XIII AMENDMENTS......................................... 23
SECTION 45 AMENDMENTS......................................... 23
ii.
<PAGE>
Page
ARTICLE XIV LOANS TO OFFICERS.................................. 23
Section 45 Loans To Officers.................................. 23
iii.
<PAGE>
BYLAWS
OF
DIVERSA CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a
1.
<PAGE>
stockholder of record at the time of giving of notice provided for in the
following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a- 11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books,
2.
<PAGE>
and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total
3.
<PAGE>
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board of Directors for adoption) or (iv) the holders of shares entitled
to cast not less than 10% of the votes at the meeting.
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders only as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each
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stockholder entitled to vote at such meeting, such notice to specify the place,
date and hour and purpose or purposes of the meeting. Notice of the time, place
and purpose of any meeting of stockholders may be waived in writing, signed by
the person entitled to notice thereof, either before or after such meeting, and
will be waived by any stockholder by his attendance thereat in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only
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persons in whose names shares stand on the stock records of the corporation on
the record date, as provided in Section 12 of these Bylaws, shall be entitled to
vote at any meeting of stockholders. Every person entitled to vote shall have
the right to do so either in person or by an agent or agents authorized by a
proxy granted in accordance with Delaware law. An agent so appointed need not be
a stockholder. No proxy shall be voted after three (3) years from its date of
creation unless the proxy provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if
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any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
(a) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock of the corporation (the
"Initial Public Offering"), the directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the closing of the Initial Public Offering, the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the Initial
Public Offering, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the Initial Public Offering, the term
of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to
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Section 2115(b) of the CGCL, this Section 17(a) shall become effective and apply
only when the corporation is a "listed" corporation within the meaning of
Section 301.5 of the CGCL.
(b) In the event that the corporation is unable to have a
classified Board of Directors under applicable law, Section 17(a) of these
Bylaws shall not apply and all directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting.
(c) No stockholder entitled to vote at an election for directors
may cumulate votes to which such stockholder is entitled, unless, at the time of
the election, the corporation (i) is subject to (S)2115(b) of the CGCL and (ii)
is not or ceases to be a "listed" corporation under Section 301.5 of the CGCL.
During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
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shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL and subject to any limitations imposed by
law, Section 20(a) above shall no longer apply and the Board of Directors or any
individual director may be removed from office at any time without cause by the
affirmative vote of the holders of at least a majority of the outstanding shares
entitled to vote on such removal.
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SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a
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quorum shall be one-third of the exact number of directors fixed from time to
time in accordance with the Certificate of Incorporation, a quorum of the Board
of Directors shall consist of a majority of the exact number of directors fixed
from time to time by the Board of Directors in accordance with the Certificate
of Incorporation; provided, however, at any meeting whether a quorum be present
or otherwise, a majority of the directors present may adjourn from time to time
until the time fixed for the next regular meeting of the Board of Directors,
without notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
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(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
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ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
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(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights
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of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
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(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
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ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the DGCL or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power
to indemnify its employees and other agents as set forth in the DGCL or any
other applicable law. The Board of Directors shall have the power to delegate
the determination of whether indemnification shall be given to any such person
to such officers or other persons as the Board of Directors shall determine.
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(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Section 43 to a director or officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the DGCL or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and convincing evidence that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the corporation, or with respect to
any criminal action or proceeding that such person acted without reasonable
cause to believe that his conduct was lawful. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other
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applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
be indemnified, or to such advancement of expenses, under this Section 43 or
otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
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(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 43 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to
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such address as such director shall have filed in writing with the Secretary,
or, in the absence of such filing, to the last known post office address of such
director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such
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person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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EXHIBIT 10.34
LEASE
KILROY REALTY
SORRENTO GATEWAY
BUILDING A
KR-GATEWAY PARTNERS,
a Delaware limited liability company,
as Landlord,
and
DIVERSA CORPORATION,
a Delaware corporation,
as Tenant.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS............. 5
ARTICLE 2 INITIAL LEASE TERM; OPTION TERM........................... 6
ARTICLE 3 BASE RENT................................................. 10
ARTICLE 4 ADDITIONAL RENT........................................... 10
ARTICLE 5 USE OF PREMISES........................................... 18
ARTICLE 6 SERVICES AND UTILITIES.................................... 19
ARTICLE 7 REPAIRS................................................... 20
ARTICLE 8 ADDITIONS AND ALTERATIONS................................. 21
ARTICLE 9 COVENANT AGAINST LIENS.................................... 23
ARTICLE 10 INSURANCE................................................. 24
ARTICLE 11 DAMAGE AND DESTRUCTION.................................... 27
ARTICLE 12 NONWAIVER................................................. 29
ARTICLE 13 CONDEMNATION.............................................. 29
ARTICLE 14 ASSIGNMENT AND SUBLETTING................................. 30
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES................................. 35
ARTICLE 16 HOLDING OVER.............................................. 35
ARTICLE 17 ESTOPPEL CERTIFICATES..................................... 36
ARTICLE 18 SUBORDINATION............................................. 37
ARTICLE 19 DEFAULTS; REMEDIES........................................ 38
ARTICLE 20 COVENANT OF QUIET ENJOYMENT............................... 40
ARTICLE 21 SECURITY DEPOSIT; LETTER OF CREDIT........................ 41
ARTICLE 22 TELECOMMUNICATIONS EQUIPMENT.............................. 43
ARTICLE 23 SIGNS..................................................... 44
ARTICLE 24 COMPLIANCE WITH LAW....................................... 46
ARTICLE 25 LATE CHARGES.............................................. 47
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT...... 47
ARTICLE 27 ENTRY BY LANDLORD......................................... 48
ARTICLE 28 TENANT PARKING............................................ 48
ARTICLE 29 MISCELLANEOUS PROVISIONS.................................. 49
(iv)
<PAGE>
INDEX
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Page(s)
-------
Accountant........................... 18
Additional Rent...................... 10
Advocate Arbitrators................. 9
Affiliate............................ 34
Alterations.......................... 22
Award................................ 9
Bank Prime Loan...................... 47
Base Building........................ 22
Base Rent............................ 10
BOMA................................. 6
Brokers.............................. 54
BS Exception......................... 20
Builder's All Risk................... 23
Building Monument Sign............... 45
Building Signage..................... 45
Building Structure................... 20
Building Systems..................... 20
CC&Rs................................ 19
CGCC................................. 34
Comparable Area...................... 8
Comparable Buildings................. 8
Comparable Deals..................... 7
Comparable Term...................... 8
Cosmetic Alterations................. 21
Direct Expenses...................... 11
Environmental Laws................... 55
Estimate............................. 17
Estimate Statement................... 17
Estimated Direct Expenses............ 17
Excess............................... 17
Exclusive Negotiation Period......... 57
Exercise Notice...................... 8
Expense Year......................... 11
First Offer Notice................... 57
Force Majeure........................ 52
Hazardous Material(s)................ 55
Holdover Notice...................... 36
HVAC................................. 19
Landlord............................. 1
Landlord Parties..................... 24
Landlord Repair Notice............... 27
Landlord Response Date............... 8
Landlord Response Notice............. 8
Landlord's Option Rent Calculation... 8
(v)
<PAGE>
Page(s)
-------
L-C.................................. 41
L-C Amount........................... 41
L-C Security Deposit................. 42
Lease................................ 1
Lease Commencement Date.............. 6
Lease Expiration Date................ 6
Lease Term........................... 6
Lease Year........................... 6
Lines................................ 55
Mail................................. 52
Market Rent.......................... 7
Net Worth............................ 34
Neutral Arbitrator................... 9
Nondisturbance Agreement............. 37
Notices.............................. 52
Objectionable Name................... 45
Operating Expenses................... 11
Option Rent.......................... 7
Option Term.......................... 7
Option Term TI Allowance............. 8
Original Improvements................ 25
Other Improvements................... 56
Outside Agreement Date............... 9
PCA.................................. 6
Permitted Holdover Term.............. 36
Premises............................. 5
Proposition 13....................... 15
Rent Concessions..................... 7
Rent................................. 10
Sign Specifications.................. 45
Statement............................ 17
Subject Space........................ 30
Summary.............................. 1
Tax Expenses......................... 15
TCCs................................. 5
Telecommunications Equipment......... 43
Tenant............................... 1
Tenant Parties....................... 24
Tenant Work Letter................... 5
Tenant's Option Rent Calculation..... 8
Tenant's Share....................... 16
Tenant's Signage..................... 45
Transfer............................. 33
Transfer Notice...................... 30
Transfer Premium..................... 32
(vi)
<PAGE>
Page(s)
-------
Transferee........................... 30
Transfers............................ 30
(vii)
<PAGE>
SORRENTO GATEWAY
----------------
LEASE
-----
This Lease (the "LEASE"), dated as of the date set forth in Section 1 of
the Summary of Basic Lease Information (the "SUMMARY"), below, is made by and
between KR-GATEWAY PARTNERS, LLC, a Delaware limited liability company
("LANDLORD"), and DIVERSA CORPORATION, a Delaware corporation ("TENANT").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
<TABLE>
<CAPTION>
TERMS OF LEASE DESCRIPTION
- ---------------------------------------------- -----------------------------------------------
<S> <C>
1. Date: February 11, 2000
2. Premises
2.1 Building: That certain two (2) story building to be
located on lot 5 of the "Project," which
building shall contain approximately 75,520
rentable square feet of space, and shall be
commonly referred to in Project as "BUILDING
A", as indicated on the Project Site Plan
attached to the Lease as EXHIBIT A, and
referred to herein as the "BUILDING."
2.2 Premises: All of the approximately 75,520 rentable feet
of space located the Building, as further set
forth in EXHIBIT A to the Lease.
2.3 Project: The Building is part of an office project
known as "SORRENTO GATEWAY", as further set
forth in Section 1.1.2 of this Lease.
3. Lease Term
(Article 2).
3.1 Length of Term: Fifteen (15) years and no (0) months.
3.2 Lease Commencement Date:
The earlier to occur of (i) the date upon which
Tenant first commences to conduct business
in the Premises and (ii) the date upon which the
Premises are Ready for Occupancy, which is
anticipated to be November 15, 2000.
3.3 Lease Expiration Date: The date immediately preceding the 15th
anniversary of the Lease Commencement Date.
</TABLE>
<PAGE>
4. Base Rent (Article 3):
Monthly
Monthly Rental Rate
Annual Installment per Rentable
Lease Year Base Rent of Base Rent Square Foot
---------- ------------- ------------ --------------
1 - 2 $2,129,664.00 $177,472.00 $2.3500
3 - 4 $2,278,740.48 $189,895.04 $2.5145
5 - 6 $2,438,238.72 $203,186.56 $2.6905
7 - 8 $2,608,974.34 $217,414.53 $2.8789
9 - 10 $2,791,581.70 $232,631.81 $3.0804
11 - 12 $2,986,967.04 $248,913.92 $3.2960
13 - 14 $3,196,036.61 $266,336.38 $3.5267
15 $3,419,787.26 $284,982.27 $3.7736
To the extent Tenant reduces the amount of the Tenant and Core Improvement
Allowance pursuant to Section 2 of the Tenant Work Letter, for each $1.00 per
Rentable Square Foot of such reduction (up to a cumulative reduction of $10.00
per Rentable Square Foot of the Premises), the Monthly Rental Rate per Rentable
Square Foot attributable to the Premises shall be lowered by $0.01 (and the
corresponding amounts of Monthly Installment of Base Rent and Annual Base Rent
shall be reduced accordingly and the Base Rent for all 15 years recalculated,
based on a 7% increase on the first day of the 3rd, 5th, 7th, 9th, 11th, 13th,
and 15th Lease Years). To the extent Tenant elects to increase the amount of the
Tenant and Core Improvement Allowance pursuant to Section 2 of the Tenant Work
Letter, for each $1.00 per Rentable Square Foot of such increase (up to a
cumulative increase of $10.00 per Rentable Square Foot of the Premises), the
Monthly Rental Rate per Rentable Square Foot attributable to the Premises shall
be increased by $0.01 (and the corresponding amounts of Monthly Installment of
Base Rent and Annual Base Rent shall be increased accordingly and the Base Rent
for all 15 years recalculated, based on a 7% increase on the first day of the
3rd, 5th, 7th, 9th, 11th, 13th, and 15th Lease Years).
5. Intentionally Omitted
(Article 4):
6. Tenant's Project Share Approximately eleven and 55/100 Percent
(Article 4): (11.55%).
7. Permitted Use Tenant shall use the Premises solely for
(Article 5): general office, research and development,
labs, and any other legally permitted use
pursuant to the MIB zoning and Sorrento
Gateway P.I.D. applicable to the Building.
-2-
<PAGE>
8. Security Deposit Tenant shall fund a letter of credit in an
(Article 21): initial amount of either (i) $2,129,664.00,
(ii) $4,259,328.00 or (iii) $6,388,992.00
(which amounts equal 12, 24, and 36 months
of the initial Monthly Installment of Base
Rent, respectively), depending upon Tenants
financial condition as more particularly set
forth in Article 21, and subject to
reductions and/or reinstatements pursuant to
the provisions of Article 21. Such amounts
shall be recalculated in the event the amount
of Base Rent is adjusted as provided in
Paragraph 4 of this Summary, and Article 3
of the Lease.
9. Parking Pass Ratio Tenant shall have the exclusive right to use
(Article 28): the uilding parking area to be constructed
along with the construction of the Building,
in the location and with the number of spaces
indicated on the Project Site Plan attached
hereto as Exhibit A-1, and as more
specifically set forth in Article 28. Such
parking shall be provided at no charge to
Tenant.
10. Address of Tenant Diversa Corporation
(Section 29.18): 10665 Sorrento Valley Road
San Diego, California 92121
Attention: Mr. Pat Simms,
Vice President of Operations
(Prior to Lease Commencement Date)
and at the Premises to the
attention of Mr. Pat Simms
(After Lease Commencement Date)
with a copy to:
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Attention: Elizabeth A. Willes, Esq.
11. Address of Landlord See Section 29.18 of the Lease.
(Section 29.18):
-3-
<PAGE>
12. Broker(s)
(Section 29.24): Mr. Shaun Burnett
Senior Vice President
The Irving Hughes Group
501 West Broadway, Suite 2020
San Diego, California 92101
and
Brian Driscoll
Colliers International
4660 LaJolla Village Drive, Suite 200
San Diego, California 92121
13. Tenant and Core Improvement $110.00 per Rentable Square Foot of the
Allowance Premises ($8,307,200.00 based on 75,520
(Section 2 of EXHIBIT B): Rentable Square Feet of Space), subject to
increase or decrease (with a maximum of
$120.00 and a minimum of $100.00) pursuant
to Section 2 of the Tenant Work Letter.
-4-
<PAGE>
ARTICLE 1
---------
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
---------------------------------------------
1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.
---------------------------------------------
1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
------------
hereby leases from Landlord the premises which are to be constructed
by Landlord in accordance with the Tenant Work Letter which premises shall
contain the approximate number of square feet set forth in Section 2.2 of the
Summary (the "PREMISES"). The parties hereto agree that the lease of the
Premises is upon and subject to the terms, covenants and conditions (the "TCCS")
herein set forth, and Tenant covenants as a material part of the consideration
for this Lease to keep and perform each and all of such TCC's by it to be kept
and performed and that this Lease is made upon the condition of such
performance. The parties hereto hereby acknowledge that the purpose of EXHIBIT A
---------
is to show the approximate location of the "BUILDING," as that term
is defined in Section 1.1.2, below, only, and such Exhibit is not meant to
constitute an agreement, representation or warranty as to the construction of
the Premises, the precise area thereof or the specific location of the "COMMON
AREAS," as that term is defined in Section 1.1.3, below, or the elements thereof
or of the accessways to the Premises or the "PROJECT," as that term is defined
in Section 1.1.2, below. Except as specifically set forth in this Lease and in
the Tenant Work Letter attached hereto as EXHIBIT B (the "TENANT WORK
---------
LETTER"), Landlord shall not be obligated to provide or pay for any improvement
work or services related to the improvement of the Premises. Tenant also
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant's business, except as specifically set forth in this Lease
and the Tenant Work Letter. The taking of possession of the Premises when the
Premsies are Ready for Occupancy, by Tenant shall conclusively establish that
the Premises is at such time in good and sanitary order, condition and repair,
subject only to punchlist items and Landlord's obligations set forth in Article
7 of this Lease, including, without limitation, Landlord's obligation to
maintain in accordance with Section 7.1 the "Building Structure" as that term is
defined in Section 7.1 of this Lease.
1.1.2 THE BUILDING AND THE PROJECT. The Premises consist of all
----------------------------
of that certain two (2)-story building set forth in Section 2.1 of the Summary
(the "BUILDING"). The Building is part of an office project known as "SORRENTO
GATEWAY." The term "PROJECT," as used in this Lease, shall mean (i) the Building
and the Common Areas as shown on the Project Site Plan attached hereto as
Exhibit A-1, (ii) the land (which is to be improved with landscaping, and other
improvements) upon which the Building and the Common Areas are located and which
is known as "LOT 5", and (iii) the other future buildings to be located adjacent
to the Building and the land (commonly known as Lots 1 through 4, and 6 through
9) upon which such adjacent buildings are to be located after completion of
construction of such buildings.
1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to
------------
use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain
-5-
<PAGE>
areas to be shared by Landlord and certain tenants, are collectively referred to
herein as the "COMMON AREAS"). The Common Areas shall consist of the portion of
the Project reasonably designated as such by Landlord; provided, however, such
Common Areas shall not include building common areas within the buildings to be
built within the Project. The manner in which the Common Areas are maintained
and operated shall be at the reasonable discretion of Landlord and the use
thereof shall be subject to such reasonable rules, regulations and restrictions
as Landlord may make from time to time as provided in Section 5.2 of this Lease,
provided that Landlord shall at all times maintain and operate the Common Areas
in a first-class manner consistent with the "Comparable Buildings, as such term
is defined in Section 1.5.2 of this Lease. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas, as long as such changes do not
change the nature of the Project to something other than a first-class project
or materially, adversely effect Tenant's use of the Premises for the Permitted
Use, as set forth in Section 7 of the Summary, Tenant's ingress to or egress
from the Project, Building, the Premises or the parking areas servicing the
same, or reduce the parking area available for use by Tenant. In connection with
the foregoing, Tenant hereby acknowledges that Landlord shall, pursuant to the
"Building B Lease," as that term is set forth in Section 29.37 of this Lease,
construct "Building B," as that term is set forth in Section 29.37 of this
Lease, and other improvements and Common Areas within the Project. Except when
and where Tenant's right of access is specifically excluded as the result of (i)
an emergency, (ii) a requirement by law, or (iii) a specific provision set forth
in this Lease, Tenant shall have, throughout the Lease Term, the right of
ingress and egress to the Premises, the Building and the Building parking areas
twenty-four (24) hours per day, seven (7) days per week.
1.2 VERIFICATION OF RENTABLE SQUARE FEET OF PREMISES AND BUILDING. For
-------------------------------------------------------------
purposes of this Lease, "rentable square feet" and "usable square feet" shall be
calculated pursuant to Standard Method of Measuring Floor Area in Office
Building, ANSI Z65.1 - 1996 ("BOMA") for single tenant buildings. Within thirty
(30) days after the Lease Commencement Date, Pacific Cornerstone Architects
("PCA") shall measure the rentable and usable square feet of the Premises. The
determination of PCA shall be conclusive and binding upon the parties. In the
event that PCA determines that the amounts thereof shall be different from those
set forth in this Lease, all amounts, percentages and figures appearing or
referred to in this Lease based upon such incorrect amount (including, without
limitation, the amount of the "RENT" and any "SECURITY DEPOSIT," as those terms
are defined in Section 4.1 and Article 21 of this Lease, respectively) shall be
------------ -----------
modified in accordance with such determination. If such determination is made by
PCA as set forth above, it will be confirmed in writing by Landlord to Tenant.
ARTICLE 2
---------
INITIAL LEASE TERM; OPTION TERM
-------------------------------
2.1 Initial Lease Term. The TCC's of this Lease shall be effective as of
------------------
the date of this Lease. The term of this Lease (the "LEASE TERM") shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
-----------
Section 3.2 of the Summary (the "LEASE COMMENCEMENT DATE"), and shall terminate
- -----------
on the date set forth in Section 3.3 of the Summary (the "LEASE EXPIRATION
-----------
DATE") unless this Lease is sooner terminated as hereinafter provided. For
purposes of this Lease, the term "LEASE YEAR" shall mean each consecutive twelve
(12)
-6-
<PAGE>
month period during the Lease Term; provided, however, that the first Lease Year
shall commence on the Lease Commencement Date and end on the last day of the
eleventh month thereafter and the second and each succeeding Lease Year shall
commence on the first day of the next calendar month; and further provided that
the last Lease Year shall end on the Lease Expiration Date. At any time during
the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth
in EXHIBIT C, attached hereto, as a confirmation only of the information set
---------
forth therein, which Tenant shall execute and return to Landlord within ten (10)
days of receipt thereof.
2.2 OPTION TERM.
-----------
2.2.1 OPTION RIGHT. Landlord hereby grants the Original Tenant and
------------
its Affiliates two (2) five (5)-year options (each, an "OPTION TERM") to extend
the Lease Term for the entire Premises. Such option(s) shall be exercisable only
by Notice delivered by Tenant to Landlord as provided below, provided that, as
of the date of delivery of such Notice, Tenant is not in Default under this
Lease. Upon the proper exercise of such option to extend, and provided that, as
of the end of the then applicable Lease term, Tenant is not in Default under
this Lease, the Lease Term, as it applies to the entire Premises, shall be
extended for a period of five (5) years. The rights contained in this
Section 2.2 shall only be exercised by the Original Tenant and its Affiliate
- -----------
(and not any other assignee, sublessee or other transferee of the Original
Tenant's interest in this Lease) if Original Tenant and/or its Affiliate is in
possession of the entire Premises.
2.2.2 OPTION RENT. The Rent payable by Tenant during each Option
-----------
Term (the "OPTION RENT") shall be equal to the Market Rent; provided, however,
that the average annual, effective (including free rent, if applicable, spread
on a straight line basis) base rent component of Market Rent, shall not be lower
than the Base Rent for the month immediately preceding such Option Term.
For purposes of this Lease, the term "MARKET RENT" shall mean the base rent,
which shall be adjusted to reflect a "triple net" transaction, including all
escalations, at which tenants, as of the commencement of the applicable term
are, pursuant to transactions completed within the prior twenty-four (24)
months, leasing non-sublease, non-encumbered, non-synthetic, non-equity space
(unless such space was leased pursuant to a definition of "fair market"
comparable to the definition of Market Rent) comparable in size, location and
quality to the Building for a "Comparable Term," as that term is defined in this
Section 2.2.2 (the "COMPARABLE DEALS"), which comparable space is located in the
- -------------
"Comparable Buildings," as that term is defined in this Section 2.2.2, giving
-------------
appropriate consideration to the annual rental rates per rentable square foot
(adjusting the base rent component of such rate to reflect a net value after
accounting for whether or not utility expenses are directly paid by the tenant
such as Tenant's direct utility payments provided for in Section 6.1 of this
Lease), the standard of measurement by which the rentable square footage is
measured, the ratio of rentable square feet to usable square feet, and taking
into consideration only, and granting only, the following concessions (provided
that the rent payable in Comparable Deals in which the terms of such Comparable
Deals are determined by use of a discounted fair market rate formula shall be
equitably increased in order that such Comparable Deals will not reflect a
discounted rate) (collectively, the "RENT CONCESSIONS"): (a) rental abatement
concessions, if any, being granted such tenants in connection with such
comparable
-7-
<PAGE>
spaces; (b) tenant improvements or allowances provided or to be provided for
such comparable space, taking into account the value of the existing
improvements in the Building, such value to be based upon the age, quality and
layout of the improvements, and (c) all other monetary concessions, if any,
being granted such tenants in connection with such comparable space; provided,
however, that notwithstanding anything to the contrary herein, no consideration
shall be given to (x) the fact that Landlord is or is not required to pay a real
estate brokerage commission in connection with the applicable term or the fact
that the Comparable Deals do or do not involve the payment of real estate
brokerage commissions, and (y) any period of rental abatement, if any, granted
to tenants in Comparable Deals in connection with the design, permitting and
construction of tenant improvements in such comparable spaces. The term
"COMPARABLE TERM" shall refer to the length of the lease term, without
consideration of options to extend such term, for the space in question. If in
determining the Market Rent for an Option Term, Tenant would, pursuant to the
Comparable Deals and the Rent Concessions set forth therein, otherwise be
entitled to a tenant improvement or comparable allowance for the improvement of
the Premises (the "OPTION TERM TI ALLOWANCE"), Tenant shall not be entitled to,
and shall not be compelled, to receive such Option Term TI Allowance, and
Landlord shall reduce the rental rate component of the Market Rent to be an
effective rental rate which takes into consideration that Tenant will not
receive any Option Term TI Allowance. The term "COMPARABLE BUILDINGS" shall mean
other office buildings in the Project, and other first-class lab buildings which
are comparable to the Building in terms of age (based upon the date of
completion of construction or major renovation as to the building containing the
portion of the Premises in question), quality of construction, level of services
and amenities, size and appearance, and are located in the Sorrento Mesa,
University Towne Center and Torrey Pines areas (the "COMPARABLE AREA").
2.2.3 EXERCISE OF OPTION. The option contained in this Section 2.2
------------------ -----------
shall be exercised by Tenant, if at all, only in the manner set forth in this
Section 2.2.3. Tenant shall deliver notice (the "EXERCISE NOTICE") to Landlord
- -------------
not more than fifteen (15) months nor less than nine (9) months prior to the
expiration of the then Lease Term, stating that Tenant is exercising its option.
Concurrently with such Exercise Notice, Tenant shall deliver to Landlord
Tenant's calculation of the Market Rent (the "TENANT'S OPTION RENT
CALCULATION"). Landlord shall deliver notice (the "LANDLORD RESPONSE NOTICE") to
Tenant on or before the later to occur of (i) the date which is thirty (30) days
after Landlord's receipt of the Exercise Notice and Tenant's Option Rent
Calculation, or (ii) the date which is nine (9) months prior to the expiration
of the then Lease Term (the "LANDLORD RESPONSE DATE"), stating that (A) Landlord
is accepting Tenant's Option Rent Calculation as the Market Rent, or (B)
rejecting Tenant's Option Rent Calculation and setting forth Landlord's
calculation of the Market Rent (the "LANDLORD'S OPTION RENT CALCULATION").
Within ten (10) business days of its receipt of the Landlord Response Notice,
Tenant may, at its option, accept the Market Rent contained in the Landlord's
Option Rent Calculation. If Tenant does not affirmatively accept or Tenant
rejects the Market Rent specified in the Landlord's Option Rent Calculation, the
parties shall follow the procedure, and the Market Rent shall be determined as
set forth in Section 2.2.4.
-------------
2.2.4 DETERMINATION OF MARKET RENT. In the event Tenant objects or
----------------------------
is deemed to have objected to the Market Rent, Landlord and Tenant shall attempt
to agree upon the Market Rent using reasonable good-faith efforts. If Landlord
and Tenant fail to reach agreement within sixty (60) days following Tenant's
objection or deemed objection to the
-8-
<PAGE>
Landlord's Option Rent Calculation (the (the "Outside Agreement Date"), then (i)
in connection with the Option Rent, Landlord's Option Rent Calculation and
Tenant's Option Rent Calculation, each as previously delivered to the other
party, shall be submitted to the arbitrators pursuant to the TCCs of this
Section 2.2.4, and (ii) in connection with any other contested calculation of
Market Rent, the parties shall each make a separate determination of the Market
Rent and shall submit the same to the arbitrators pursuant to the TCCs of this
Section 2.2.4. The submittals shall be made concurrently with the selection of
the arbitrators pursuant to this Section 2.2.4 and shall be submitted to
-------------
arbitration in accordance with Section 2.2.4.1 through 2.2.4.7 of this Lease,
-------------------------------
but subject to the conditions, when appropriate, of Section 2.2.3.
-------------
2.2.4.1 Landlord and Tenant shall each appoint one arbitrator
who shall by profession be a real estate broker, appraiser or attorney who shall
have been active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of first-class
office properties in the Comparable Area. The determination of the arbitrators
shall be limited solely to the issue of whether Landlord's or Tenant's submitted
Market Rent, is the closest to the actual Market Rent as determined by the
arbitrators, taking into account the requirements of Section 1.5.2 of this
-------------
Lease. Each such arbitrator shall be appointed within fifteen (15) days after
the applicable Outside Agreement Date. Landlord and Tenant may consult with
their selected arbitrators prior to appointment and may select an arbitrator who
is favorable to their respective positions. The arbitrators so selected by
Landlord and Tenant shall be deemed ("ADVOCATE ARBITRATORS").
2.2.4.2 The two Advocate Arbitrators so appointed shall be
specifically required pursuant to an engagement letter within ten (10) days of
the date of the appointment of the last appointed Advocate Arbitrator agree upon
and appoint a third arbitrator ("NEUTRAL ARBITRATOR") who shall be qualified
under the same criteria set forth hereinabove for qualification of the two
Advocate Arbitrators except that neither the Landlord or Tenant or either
party's Advocate Arbitrator may, directly or indirectly, consult with the
Neutral Arbitrator prior to subsequent to his or her appearance. The Neutral
Arbitrator shall be retained via an engagement letter jointly prepared by
Landlord's counsel and Tenant's counsel.
2.2.4.3 The three arbitrators shall within thirty (30) days of
the appointment of the Neutral Arbitrator reach a decision as to Market Rent and
determine whether the Landlord's or Tenant's determination of Market Rent as
submitted pursuant to Section 2.2.4.1 and Section 2.2.3 of this Lease is closest
--------------- -------------
to Market Rent as determined by the arbitrators and simultaneously publish a
ruling ("AWARD") indicating whether Landlord's or Tenant's submitted Market Rent
is closest to the Market Rent as determined by the arbitrators. Following
notification of the Award, the Landlord's or Tenant's submitted Market Rent
determination, whichever is selected by the arbitrators as being closest to
Market Rent shall become the then applicable Market Rent.
2.2.4.4 The Award issued by the majority of the three
arbitrators shall be binding upon Landlord and Tenant.
2.2.4.5 If either Landlord or Tenant fail to appoint an
Advocate Arbitrator within fifteen (15) days after the applicable Outside
Agreement Date, either party may petition the presiding judge of the Superior
Court of San Diego County to appoint such Advocate
-9-
<PAGE>
Arbitrator subject to the criteria in Section 2.2.4.1 of this Lease, or if he or
---------------
she refuses to act, either party may petition any judge having jurisdiction over
the parties to appoint such Advocate Arbitrator.
2.2.4.6 If the two Advocate Arbitrators fail to agree upon and
appoint the Neutral Arbitrator, then either party may petition the presiding
judge of the Superior Court of San Diego County to appoint the Neutral
Arbitrator, subject to criteria in Section 2.2.4.1 of this Lease, or if he or
---------------
she refuses to act, either party may petition any judge having jurisdiction over
the parties to appoint such arbitrator.
2.2.4.7 The cost of arbitration shall be paid by Landlord and
Tenant equally.
ARTICLE 3
---------
BASE RENT
---------
Tenant shall pay, without prior notice or demand, to Landlord or Landlord's
agent at the management office of the Project, or, at Landlord's option, at such
other place as Landlord may from time to time designate in writing, by a check
for currency which, at the time of payment, is legal tender for private or
public debts in the United States of America, base rent ("BASE RENT") as set
forth in Section 4 of the Summary, payable in equal monthly installments as set
forth in Section 4 of the Summary in advance on or before the first day of each
and every calendar month during the Lease Term, without any setoff or deduction
whatsoever. The Base Rent for the first full month of the Lease Term shall be
paid at the time of Tenant's execution of this Lease. If any Rent payment date
(including the Lease Commencement Date) falls on a day of the month other than
the first day of such month or if any payment of Rent is for a period which is
shorter than one month, the Rent for any fractional month shall accrue on a
daily basis for the period from the date such payment is due to the end of such
calendar month or to the end of the Lease Term at a rate per day which is equal
to 1/365 of the applicable annual Rent. All other payments or adjustments
required to be made under the terms of this Lease that require proration on a
time basis shall be prorated on the same basis.
ARTICLE 4
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ADDITIONAL RENT
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4.1 GENERAL TERMS. In addition to paying the Base Rent specified in
-------------
Article 3 of this Lease, Tenant shall pay "TENANT'S SHARE" of the annual "DIRECT
EXPENSES," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease.
Such payments by Tenant, together with any and all other amounts payable by
Tenant to Landlord pursuant to the TCC's of this Lease, are hereinafter
collectively referred to as the "ADDITIONAL RENT", and the Base Rent and the
Additional Rent are herein collectively referred to as "RENT." All amounts due
under this Article 4 as Additional Rent shall be payable for the same periods
and in the same manner as the Base Rent. Without limitation on other obligations
of Tenant which survive the expiration of the Lease Term, the obligations of
Tenant to pay the Additional Rent provided for in this Article 4 shall survive
the expiration of the Lease Term. Landlord and Tenant understand and agree that
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this Lease is a "Triple Net" Lease. Tenant recognizes and acknowledges, without
limiting the generality of any other TCC's of this Lease, that it is the intent
of the parties hereto that the Base Rent provided to be paid by Tenant to
Landlord shall be net to Landlord, and any and all expenses incurred in
connection with the Premises, the Building and a pro-rata portion of the Common
Areas, or in connection with the operations thereof, include any and all taxes,
assessments, general or special license fees, insurance premiums, public utility
bills and costs of repair, maintenance and operation of the Premise and the
Project and all buildings, structures, permanent fixtures and other improvements
comprised therein, together with the appurtenances thereto, shall be paid by
Tenant in addition to the Base Rent specified in this Lease.
4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in
----------------------------------------------------
this Article 4, the following terms shall have the meanings hereinafter set
forth:
4.2.1 Intentionally Omitted.
4.2.2 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "EXPENSE YEAR" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant's Share of Direct
Expenses shall be equitably adjusted for any Expense Year involved in any such
change.
4.2.4 "OPERATING EXPENSES" shall mean all expenses, costs and
amounts of every kind and nature which Landlord pays or accrues during any
Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement, restoration or operation of the
Project, or any portion thereof, except as specifically set forth below to the
contrary. Without limiting the generality of the foregoing, Operating Expenses
shall specifically include any and all of the following: (i) the cost of
supplying all utilities, the cost of operating, repairing, maintaining, and
renovating the utility, telephone, mechanical, sanitary, storm drainage, and
elevator systems, and the cost of maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with a
transportation system management program or similar program; (iii) the cost of
all insurance carried by Landlord in connection with the Project; (iv) the cost
of landscaping, relamping, and all supplies, tools, equipment and materials used
in the operation, repair and maintenance of the Project, or any portion thereof;
(v) costs incurred in connection with the parking areas servicing the Project;
(vi) fees and other costs, including management fees (which management fee shall
equal two percent (2%) of the Base Rent due under this Lease), consulting fees,
legal fees and accounting fees, of all contractors and consultants in connection
with the management, operation, maintenance and repair of the Project; (vii)
intentionally omitted; (viii) wages, salaries and other compensation and
benefits, including taxes levied thereon, of all persons engaged in the
operation, maintenance and security of the Project at the property manager level
or below; (ix) costs under any recorded instrument pertaining to the sharing of
costs by the Project; (x) operation, repair, maintenance and replacement of all
systems and equipment and components thereof of the Building; (xi) the cost of
security and other
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services, and fixtures in common areas, maintenance and replacement of curbs and
walkways, and repair to the Building roof membrane; (xii) amortization
(including interest on the unamortized cost) of the cost of acquiring or the
rental expense of personal property used in the maintenance, operation and
repair of the Project, or any portion thereof; (xiii) the cost of capital
improvements or other costs incurred in connection with the Project (A) which
are intended to effect economies in the operation or maintenance of the Project,
or any portion thereof, (B) that are required to comply with present or
anticipated conservation programs, (C) which are replacements or modifications
of nonstructural items located in the Common Areas required to keep the Common
Areas in good order or condition or are replacements or modifications of the
"Building Structure," as that term is set forth in Section 7.1 of this Lease, or
(D) that are required under any governmental law or regulation; provided,
however, that any capital expenditure shall be amortized with interest over its
useful life, as reasonably determined by Landlord pursuant to sound real estate
accounting and management principles, consistently applied; (xiv) costs, fees,
charges or assessments imposed by, or resulting from any mandate imposed on
Landlord by, any federal, state or local government for fire and police
protection, trash removal, community services, or other services which do not
constitute "Tax Expenses" as that term is defined in Section 4.2.5, below; and
(xv) payments under any easement, license, operating agreement, declaration,
restrictive covenant, or instrument pertaining to the sharing of costs by the
Building.
Notwithstanding anything in this Section 4.2.4 to the contrary, for
purposes of this Lease, Operating Expenses shall not, however, include the
following:
(A) all costs relating to the maintenance and repair of the following
structural items: (i) the foundation slab structure under the Building (ii)
exterior wall structure of the Building, and (iii) the roof structure of
the Building (excluding the membrane).
(B) marketing costs, costs of leasing commissions, attorneys' fees
and other costs and expenses incurred in connection with negotiations or
disputes with prospective tenants or other occupants of the Project;
(C) except as otherwise specifically provided in Section 4.2.4(xiii)
above, costs incurred by Landlord in the repairs, capital additions,
alterations or replacements made or incurred to rectify or correct defects
in design, materials or workmanship in connection with the Base Building
portions of the Project;
(D) costs (including permit, license and inspection costs) incurred
in renovating or otherwise improving, decorating or redecorating rentable
space for prospective tenants or vacant rentable space;
(E) cost of utilities or services sold to Tenant or others for which
Landlord is entitled to and actually receives reimbursement (other than
through any operating cost reimbursement provision identical or
substantially similar to the provisions set forth in this Lease);
(F) except as otherwise specifically provided in this Section 4.2.4,
costs incurred by Landlord for capital repairs, improvements, equipment and
alterations to the
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<PAGE>
Project which are considered capital improvements and replacements under
generally accepted accounting principles, consistently applied;
(G) costs incurred due to the violation by Landlord or any licensee
of the TCC's of any lease or license of space in the Project;
(H) costs of general overhead and general administrative expenses,
not including management fees and building office expenses which are
included in operating expenses by landlords of Comparable Buildings;
(I) costs of any compensation and employee benefits paid to clerks,
attendants or other persons in a commercial concession operated by
Landlord;
(J) marketing costs, legal fees, space planner's fees, and
advertising and promotional expenses and brokerage fees incurred in
connection with the original development, subsequent improvement, or
original or future leasing of the Project;
(K) costs of electrical power for which Tenant directly contracts
with and pays a local public service company
(L) any bad debt loss, rent loss, or reserves for bad debts or rent
loss;
(M) costs associated with the operation of the business of the
partnership or entity which constitutes the Landlord, as the same are
distinguished from the costs of operation of the Project (which shall
specifically include, but not be limited to, accounting costs associated
with the operation of the Project, costs of partnership accounting and
legal matters, costs of defending any lawsuits with any mortgagee (except
as the actions of the Tenant may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of the Landlord's
interest in the Project, and costs incurred in connection with any disputes
between Landlord and its employees, between Landlord and Project
management, or between Landlord and other tenants or occupants, and
Landlord's general corporate overhead and general and administrative
expenses);
(N) the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Project unless such
wages and benefits are prorated to reflect time spent on operating and
managing the Project vis-a-vis time spent on matters unrelated to operating
and managing the Project; provided, that in no event shall Operating
Expenses for purposes of this Lease include wages and/or benefits
attributable to personnel above the level of Project manager or Project
engineer;
(O) interest, charges and fees incurred on debt, payments on
mortgages and amounts paid as ground rental for the real property
underlying the Project by the Landlord;
(P) costs for sculpture, paintings, fountains or other objects of
art, other than those incurred in ordinary maintenance and repair;
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<PAGE>
(Q) any costs expressly excluded from Operating Expenses elsewhere in
this Lease;
(R) costs arising from Landlord's charitable or political
contributions;
(S) any gifts provided to any entity whatsoever, including, but not
limited to, Tenant, other tenants, employees, vendors, contractors,
prospective tenants and agents;
(T) any costs covered by any warranty, rebate, guarantee or service
contract which are actually collected by Landlord (which shall not prohibit
Landlord from passing through the costs of any such service contract if
otherwise includable in Operating Expenses);
(U) interest, late charges and tax penalties incurred as a result of
Landlord's gross negligence, inability or unwillingness to make payments or
file returns when due;
(V) all items and services for which Tenant reimburses Landlord;
(W) any costs included as a Tax Expense pursuant to Section 4.2.5
below;
(X) any expense resulting from the gross negligence of Landlord, its
agents, contractors or employees, or, to the extent landlord is entitled to
reimbursement for such costs, to remedy damage caused by or resulting from
the gross negligence of any licensees in the Project, including their
agents, contractors and employees;
(Y) reserves for anticipated future expenses;
(Z) costs or repairs or other work occasioned by fire, casualty or
other risk covered by insurance maintained (or obligated to be maintained
pursuant to Article 10 of this Lease) by Landlord;
(AA) costs, fines, or fees incurred by Landlord due to Landlord's
violations of any federal, state or local law, statute or ordinance, or any
rule, regulation, judgment or decree of any governmental rule or authority;
(BB) any costs representing an amount paid to a person, firm,
corporation or other entity related to Landlord which is in excess of the
amount which would have been paid in the absence of such relationship;
(CC) rentals for items (except when needed in connection with normal
repairs and maintenance of permanent systems) which if purchased, rather
than rented, would constitute a capital item which is specifically excluded
in this Lease (excluding, however, equipment not affixed to the Building
which is used in providing janitorial or similar services);
(DD) advertising and promotional expenditures, and costs of signs in
or on the Building identifying the owner of the Building;
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<PAGE>
(EE) costs of development or initial construction within the Project
(including, without limitation, such initial development or initial
construction costs incurred to comply with any now-existing CC&Rs,
development permits, design permit or use permit currently issued for the
Project);
(FF) reserves for depreciation, amortization and other expenses;
(GG) costs occasioned by the active negligence or willful misconduct
of Landlord or any other occupant of the Project or violations of
applicable law by Landlord or any such occupant of the Project;
(HH) deductibles payable under any earthquake insurance.
4.2.5 TAXES.
-----
4.2.5.1 "TAX EXPENSES" shall mean all federal, state, county,
or local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Project, or
any portion thereof), which shall be paid or accrued during any Expense Year
(without regard to any different fiscal year used by such governmental or
municipal authority) because of or in connection with the ownership, leasing and
operation of the Project, or any portion thereof. Notwithstanding anything to
the contrary set forth in this Section 4.2.5, Tax Expenses shall specifically
exclude bonds and/or assessments which have been or, subsequent to the date
hereof are, levied for the purpose of funding the costs of construction of all
or any portion of the Project or capital improvements constructed therein or
about, or on-or off-site improvements with respect thereto, to the extent such
improvements are the sole responsibility of Landlord under the TCCs of this
Lease.
4.2.5.2 Tax Expenses shall include, without limitation:
(i) Any tax on the rent, right to rent or other income from the Project, or any
portion thereof, or as against the business of leasing the Project, or any
portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to,
or in substitution, partially or totally, of any assessment, tax, fee, levy or
charge previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include any
governmental or private assessments or the Project's contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable
to or measured by the area of the
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<PAGE>
Premises or the Rent payable hereunder, including, without limitation, any
business or gross income tax or excise tax with respect to the receipt of such
rent, or upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon
this transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises.
4.2.5.3 Any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such
expenses are paid. Except as set forth in Section 4.2.5.4, below, refunds of Tax
Expenses shall be credited against Tax Expenses and refunded to Tenant
regardless of when received, based on the Expense Year to which the refund is
applicable, provided that in no event shall the amount to be refunded to Tenant
for any such Expense Year exceed the total amount paid by Tenant as Additional
Rent under this Article 4 for such Expense Year. If Tax Expenses for any period
---------
during the Lease Term or any extension thereof are increased after payment
thereof for any reason, including, without limitation, error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord upon
demand Tenant's Share of any such increased Tax Expenses included by Landlord as
Building Tax Expenses pursuant to the TCC's of this Lease. Notwithstanding
anything to the contrary contained in this Section 4.2.8 (except as set forth in
-------------
Section 4.2.8.1, above), there shall be excluded from Tax Expenses (i) all
- ---------------
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income
from all sources, (ii) any items included as Operating Expenses, (iii) any items
paid by Tenant under Section 4.5 of this Lease, and transfer taxes associated
-----------
with the sale or other transfer by Landlord of its interest in the Project.
4.2.6 "TENANT'S SHARE" shall mean the percentage set forth in Section
6 of the Summary, which percentage is equal to a fraction, the numerator of
which is the acreage of Lot 5, and the denominator of which is the acreage of
the entire Project (i.e., Lots 1 through 9).
4.3 ALLOCATION OF DIRECT EXPENSES; METHOD OF ALLOCATION. The parties
---------------------------------------------------
acknowledge that the Building is a part of what is to be a multi-building
project and that the costs and expenses incurred in connection with the Project
(i.e. the Direct Expenses) should be shared between Tenant (as the tenant of the
Building) and the tenants of the other buildings in the Project. Accordingly, as
set forth in Section 4.2 above, Direct Expenses (which consists of Operating
-----------
Expenses and Tax Expenses) are determined annually for the Project as a whole,
and a portion of the Direct Expenses, which portion shall be determined by
Landlord on a pro-rata basis as set forth in Section 4.2.6, shall be allocated
to the Building (as opposed to other buildings in the Project and the tenants of
such buildings) and such portion shall be the Direct Expenses for purposes of
this Lease. Such portion of Direct Expenses allocated to the Building shall
include all Direct Expenses attributable solely to the Building (e.g., 100% of
the Tax Expenses related solely to Lot 5) and a pro-rata portion of the Direct
Expenses attributable to the Project as a whole (provided, however, that for
purposes of determining the portion of Tax Expenses attributable to the Project
as a whole, only the Tax Expenses relating to the Common Areas (as opposed to
the Tax Expenses relating directly to another lot in the Project upon which
another building is to be built) shall be included in such determination).
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<PAGE>
4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. Tenant shall pay to
------------------------------------------
Landlord, in the manner set forth in Section 4.4.1, below, and as Additional
Rent Tenant's Share of Direct Expenses for each Expense Year.
4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
---------------------------------------------------------
Within one hundred fifty (150) days after the end of each Expense Year, Landlord
shall give to Tenant a statement (the "STATEMENT") which shall state the Direct
Expenses incurred or accrued for such preceding Expense Year, and which shall
indicate the amount of Tenant's Share of Direct Expenses. Within thirty (30)
days of receipt of the Statement for each Expense Year commencing or ending
during the Lease Term Tenant shall pay, with its next installment of Base Rent
due, the full amount of Tenant's Share of Direct Expenses for such Expense Year,
less the amounts, if any, paid during such Expense Year as "Estimated Direct
Expenses," as that term is defined in Section 4.4.2, below. The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's Share of Direct Expenses for the
Expense Year in which this Lease terminates, if is greater than then amount of
estimated Direct Expenses previously paid by Tenant to Landlord (an "EXCESS"),
Tenant shall pay to Landlord such amount within thirty (30) days of request
therefor. The provisions of this Section 4.4.1 shall survive the expiration or
earlier termination of the Lease Term.
4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition,
--------------------------------------
Landlord shall give Tenant a yearly expense estimate statement (the "ESTIMATE
STATEMENT") which shall set forth Landlord's reasonable estimate of Tenant's
Share of Direct Expenses (the "ESTIMATE") of what the total amount of Direct
Expenses for the then-current Expense Year shall be and the estimated excess
(the "ESTIMATED DIRECT EXPENSES"). Failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Estimated Direct Expenses under this Article
4, nor shall Landlord be prohibited from revising any Estimate Statement or
Estimated Direct Expenses theretofore delivered to the extent necessary. After
its receipt of the Estimate Statement, Tenant shall pay, with its next
installment of Base Rent due, a fraction of the Estimated Direct Expenses for
the then-current Expense Year (reduced by any amounts paid pursuant to the next
to last sentence of this Section 4.4.2). Such fraction shall have as its
numerator the number of months which have elapsed in such current Expense Year,
including the month of such payment, and twelve (12) as its denominator. Until a
new Estimate Statement is furnished (which Landlord shall have the right to
deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base
Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated
Direct Expenses set forth in the previous Estimate Statement delivered by
Landlord to Tenant.
4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
----------------------------------------------------------------
4.5.1 Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment, furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based
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upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof but only under proper protest if requested by
Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against
Landlord or the proportion of such taxes resulting from such increase in the
assessment, as the case may be.
4.5.2 Intentionally Omitted.
4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay
prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or
value added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.
4.6 LANDLORD'S BOOKS AND RECORDS. Within two (2) years after receipt of
----------------------------
a Statement by Tenant, if Tenant disputes the amount of Additional Rent set
forth in the Statement, a determination as to the proper amount shall be made,
at Tenant's expense, by an independent certified public accountant (the
"ACCOUNTANT") selected by Landlord and subject to Tenant's reasonable approval,
by inspecting Landlord's records with respect to the Statement at Landlord's
offices, provided that Tenant is not then in Default under this Lease and Tenant
has paid all amounts required to be paid under the applicable Estimate Statement
and Statement, as the case may be. In connection with such inspection, the
Accountant must agree in advance to follow Landlord's reasonable rules and
procedures regarding inspections of Landlord's records, and shall execute a
commercially reasonable confidentiality agreement regarding such inspection. If
such determination by the Accountant proves that Direct Expenses were overstated
by more than five percent (5%), then the cost of the Accountant and the cost of
such determination shall be paid for by Landlord. Tenant's failure to dispute
the amount of Additional Rent set forth in any Statement within two (2) years of
Tenant's receipt of such Statement shall be deemed to be Tenant's approval of
such Statement and Tenant, thereafter, waives the right or ability to dispute
the amounts set forth in such Statement. Tenant hereby acknowledges that
Tenant's sole right to inspect Landlord's books and records and to contest the
amount of Direct Expenses payable by Tenant shall be as set forth in this
Section 4.6, and Tenant hereby waives any and all other rights pursuant to
Applicable Law to inspect such books and records and/or to contest the amount of
Direct Expenses payable by Tenant.
ARTICLE 5
---------
USE OF PREMISES
---------------
5.1 PERMITTED USE. Tenant shall use the Premises solely for the
-------------
Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or
permit the Premises or the Project to be used for any other purpose or purposes
whatsoever without the prior written consent of Landlord, which may be withheld
in Landlord's reasonable discretion.
5.2 PROHIBITED USES. The uses prohibited under this Lease shall include,
---------------
without limitation, use of the Premises or a portion thereof for (i) offices of
any agency or bureau of the
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United States or any state or political subdivision thereof; (ii) offices or
agencies of any foreign governmental or political subdivision thereof; (iii)
offices of any health care professionals or service organization; (iv) schools
or other training facilities which are not ancillary to corporate, executive or
professional office use; (v) retail or restaurant uses; or (vi) communications
firms such as radio and/or television stations. Tenant further covenants and
agrees that Tenant shall not use, or suffer or permit any person or persons to
use, the Premises or any part thereof for any use or purpose contrary to the
provisions of the Rules and Regulations set forth in EXHIBIT D, attached hereto,
---------
or in violation of the laws of the United States of America, the State of
California, or the ordinances, regulations or requirements of the local
municipal or county governing body or other lawful authorities having
jurisdiction over the Project) including, without limitation, any such laws,
ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way damage the reputation of the Project or use or
allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises.
5.3 CC&RS. Tenant shall comply with all recorded covenants, conditions,
-----
and restrictions currently affecting the Project. Additionally, Tenant
acknowledges that it is anticipated that the Project will be subject to that
certain "Declaration of Covenants, Conditions and Restriction for Sorrento
Gateway," a substantially complete copy of which is attached hereto as
EXHIBIT F-1, and may be subject to amendments and modifications thereto as well
- -----------
as additional future covenants, conditions and restrictions (collectively, the
"CC&RS") which Landlord deems reasonably necessary and/or desirable (provided,
however, such amendments and/or modifications do not prohibit the Permitted Use
in the Project and do not materially adversely interfere with Tenant's use and
enjoyment of the Premises, and Tenant agrees that this Lease shall be subject
and subordinate to such CC&Rs. Landlord shall have the right to require Tenant
to execute and acknowledge, within fifteen (15) business days of a request by
Landlord, a "Recognition of Covenants, Conditions, and Restriction," in a form
substantially similar to that attached hereto as EXHIBIT F-2, agreeing to and
-----------
acknowledging the CC&Rs.
ARTICLE 6
---------
SERVICES AND UTILITIES
----------------------
6.1 STANDARD TENANT SERVICES. Landlord shall keep the Building
------------------------
Structure in condition and repair materially consistent with the Comparable
Buildings and shall maintain the Common Areas of the Project.
Notwithstanding the foregoing, Tenant shall directly pay for all utilities
(including without limitation, electricity, gas and water) attributable to its
use of the entire Premises. Such utility use shall include electricity, water,
and gas use for lighting, incidental use and heating and air-conditioning
("HVAC"). All such direct utility payments shall be excluded from Operating
Expenses (as opposed to the utility payments made by Landlord for the Common
Areas of the Project which shall be included in Operating Expenses) and shall be
paid directly by Tenant prior to the date on which the same are due to the
utility provider. The Premises shall be separately
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<PAGE>
metered as part of the Tenant Improvements to be constructed pursuant to the
Tenant Work Letter.
Landlord shall not be required to provide any services other than with
regard to its maintenance and repair obligation relating to the Building
Structure and the Common Areas of the Project (subject to the TCCs of Section
4.3 above).
6.2 INTENTIONALLY OMITTED.
---------------------
6.3 INTERRUPTION OF USE. Tenant agrees that Landlord shall not be
-------------------
liable for damages, by abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service (including telephone and telecommunication
services), or for any diminution in the quality or quantity thereof, when such
failure or delay or diminution is occasioned, in whole or in part, by breakage,
repairs, replacements, or improvements, by any strike, lockout or other labor
trouble, by inability to secure electricity, gas, water, or other fuel at the
Building or Project after reasonable effort to do so, by any riot or other
dangerous condition, emergency, accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any other cause; and such failures or
delays or diminution shall never be deemed to constitute an eviction or
disturbance of Tenant's use and possession of the Premises or relieve Tenant
from paying Rent or performing any of its obligations under this Lease.
Furthermore, Landlord shall not be liable under any circumstances for a loss of,
or injury to, property or for injury to, or interference with, Tenant's
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to a failure to furnish any of the
services or utilities as set forth in this Article 6.
---------
ARTICLE 7
---------
REPAIRS
-------
Landlord shall maintain in good condition and operating order and keep in
good repair and condition the structural portions of the Building, including the
foundation, floor/ceiling slabs, roof, curtain wall, exterior glass and
mullions, columns, beams, shafts (including elevator shafts), parking areas,
landscaping, exterior fountains, exterior water falls, exterior Project signage,
exterior plazas, exterior art work, exterior sculptures, and all exterior common
and public areas (collectively, "BUILDING STRUCTURE"). Tenant shall maintain in
good condition and operating order and keep in good repair and condition the
Base Building mechanical, electrical, life safety, plumbing, sprinkler systems
and HVAC systems, stairs, stairwells, elevator cabs, men's and women's
washrooms, and Building mechanical, electrical and telephone closets, including
those constructed by Tenant Parties (collectively, the "BUILDING SYSTEMS").
Notwithstanding anything in this Lease to the contrary, Tenant shall be required
to repair the Building Structure to the extent required because of Tenant's
negligence or willful misconduct, unless and to the extent such damage is
covered by insurance carried or required to be carried by Landlord pursuant to
Article 10 and to which the waiver of subrogation is applicable (such obligation
- ----------
to the extent applicable to Tenant as qualified and conditioned will hereinafter
be defined as the "BS EXCEPTION"). Tenant shall, at Tenant's own expense,
pursuant to the TCC's of this Lease, including without limitation Article 8
---------
hereof, keep the Premises, including all Tenant Improvements, "Alterations," as
that term is defined in Section 8.1 of this Lease, fixtures and the
-----------
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floor or floors of the Building on which the Premises are located, in good
order, repair and condition at all times during the Lease Term (but such
obligation shall not extend to the Building Structure except pursuant to the BS
Exception), except for damage caused by ordinary wear and tear or beyond the
reasonable control of Tenant. Tenant shall, at Tenant's own expense, but under
the supervision and subject to the prior approval of Landlord, and within any
reasonable period of time specified by Landlord, pursuant to the TCC's of this
Lease, including without limitation Article 8 hereof, promptly and adequately
---------
repair all damage to the Premises and replace or repair all damaged, broken, or
worn fixtures and appurtenances (but such obligation shall not extend to the
Building Structure except pursuant to the BS Exception), except for damage
caused by ordinary wear and tear or beyond the reasonable control of Tenant;
provided however, that, at Landlord's option, but only if Tenant fails to make
such repairs and replacements, Landlord may, but need not, make such repairs and
replacements, and Tenant shall pay Landlord the cost thereof, including a
percentage of the cost thereof (to be uniformly established for the Building
and/or the Project) sufficient to reimburse Landlord for all overhead, general
conditions, fees and other costs or expenses arising from Landlord's involvement
with such repairs and replacements forthwith upon being billed for same.
Landlord may, but shall not be required to, enter the Premises at all reasonable
times (after reasonable notice) to make such repairs, alterations, improvements
or additions to the Premises or to the Project or to any equipment located in
the Project as Landlord shall desire or deem necessary or as Landlord may be
required to do by governmental or quasi-governmental authority or court order or
decree. Tenant hereby waives any and all rights under and benefits of subsection
1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or
under any similar law, statute, or ordinance now or hereafter in effect.
Landlord shall procure a fifteen (15) year warranty on the roof membrane and
assign such warranty (and all other warranties for the Building) to Tenant. If,
on or before the eighth (8th) anniversary of the Lease Commencement Date, Tenant
becomes obligated, at Tenant's sole cost and expense, to make a repair to the
Building Systems pursuant to the TCCs of this Article 7 which shall be capital
in nature, Tenant may elect, upon immediate notice thereof to Landlord, to have
Landlord make such repair to the Building Systems, the cost of which shall be
amortized with interest over its useful life as reasonably determined by
Landlord pursuant to sound real estate accounting and management principles,
consistently applied, and shall be paid by Tenant to Landlord as Additional
Rent; provided, however, (i) Tenant shall not have such option to the extent
such repair is necessary due to the negligence or willful misconduct of Tenant
or the Tenant's Parties, and (ii) to the extent Tenant's use of the repaired
item reduces the useful life of such repair, the cost of such repairs shall be
amortized with interest over such shorter time period.
ARTICLE 8
---------
ADDITIONS AND ALTERATIONS
-------------------------
8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant shall have the right,
---------------------------------
without Landlord's consent but upon five (5) business days prior Notice to
Landlord, to make strictly cosmetic, non-structural additions and alterations
("COSMETIC ALTERATIONS") to the Premises that do not (i) involve the expenditure
of more than $100,000.00 in the aggregate in any Lease Year; (ii) affect the
exterior appearance of the Building, or (iii) affect the Building Systems or the
Building Structure. Except in connection with Cosmetic Alterations, Tenant may
not make any improvements, alterations, additions or changes to the Premises or
any mechanical, plumbing or
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HVAC facilities or systems pertaining to the Premises (collectively, the
"ALTERATIONS") without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld by Landlord, provided it shall be deemed reasonable for
Landlord to withhold its consent to any Alteration which adversely affects the
structural portions or the systems or equipment of the Building or is visible
from the exterior of the Building. The construction of the initial improvements
to the Premises shall be governed by the TCC's of the Tenant Work Letter and not
the TCC's of this Article 8.
---------
8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
----------------------
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its reasonable discretion may deem
desirable, including, but not limited to, the requirement that Tenant utilize
for such purposes only contractors, subcontractors, materials, mechanics and
materialmen selected by Tenant from a list provided and approved by Landlord,
the requirement that upon Landlord's request, Tenant shall, at Tenant's expense,
remove such Alterations upon the expiration or any early termination of the
Lease Term. If such Alterations will involve the use of or disturb hazardous
materials or substances existing in the Premises, Tenant shall comply with
Landlord's rules and regulations concerning such hazardous materials or
substances. Tenant shall construct such Alterations and perform such repairs in
a good and workmanlike manner, in conformance with any and all applicable
federal, state, county or municipal laws, rules and regulations and pursuant to
a valid building permit, issued by the City of San Diego, all in conformance
with Landlord's construction rules and regulations. In the event Tenant performs
any Alterations in the Premises which require or give rise to governmentally
required changes to the "Base Building," as that term is defined below, then
Landlord shall, at Tenant's expense, make such changes to the Base Building. The
"BASE BUILDING" shall consist of the Building Structure. In performing the work
of any such Alterations, Tenant shall have the work performed in such manner so
as not to obstruct access to the Project or any portion thereof, by any other
tenant of the Project, and so as not to obstruct the business of Landlord or
other tenants in the Project. Tenant shall not use (and upon notice from
Landlord shall cease using) contractors, services, workmen, labor, materials or
equipment that, in Landlord's reasonable judgment, would disturb labor harmony
with the workforce or trades engaged in performing other work, labor or services
in or about the Building or the Common Areas. In addition to Tenant's
obligations under Article 9 of this Lease, upon completion of any Alterations,
Tenant agrees to cause a Notice of Completion to be recorded in the office of
the Recorder of the County of San Diego in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute, and Tenant shall
deliver to the Project management office a reproducible copy of the "as built"
drawings of the Alterations as well as all permits, approvals and other
documents issued by any governmental agency in connection with the Alterations.
8.3 PAYMENT FOR IMPROVEMENTS. If payment is made directly to
------------------------
contractors, Tenant shall comply with Landlord's requirements for final lien
releases and waivers in connection with Tenant's payment for work to
contractors. Except with regard to Cosmetic Alterations for which there shall be
no such charge, whether or not Tenant orders any work directly from Landlord,
Tenant shall pay to Landlord a percentage of the cost of such work (not to
exceed one percent (1%) of the total cost of such work) sufficient to compensate
Landlord for all overhead, general
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conditions, fees and other costs and expenses arising from Landlord's
involvement with such work.
8.4 CONSTRUCTION INSURANCE. In addition to the requirements of Article
----------------------
10 of this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries "BUILDER'S ALL RISK" insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may require, it being understood and agreed that all of such
Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a co-
obligee.
8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures,
-------------------
equipment and/or appurtenances which may be installed or placed in or about the
Premises, from time to time, shall be at the sole cost of Tenant and shall be
and become the property of Landlord, except that Tenant may remove any
Alterations, improvements, fixtures and/or equipment which Tenant can
substantiate to Landlord have not been paid for with any Tenant improvement
allowance funds provided to Tenant by Landlord, provided Tenant repairs any
damage to the Premises and Building caused by such removal and returns the
affected portion of the Premises to a building standard tenant improved
condition as determined by Landlord. Furthermore, Landlord may, by written
notice to Tenant prior to the end of the Lease Term, or given following any
earlier termination of this Lease, require Tenant, at Tenant's expense, to (i)
remove any Alterations or improvements in the Premises, and/or (ii) remove any
"Above Building Standard Tenant Improvements," as that term is defined in the
Tenant Work Letter, located within the Premises and replace the same with then
existing "Building Standard Tenant Improvements," as that term is defined in the
Tenant Work Letter, and to repair any damage to the Premises and Building caused
by such removal and returns the affected portion of the Premises to a building
standard tenant improved condition as reasonably determined by Landlord;
provided, however, if, in connection with its request for Landlord's approval
for particular Alterations, (1) Tenant requests Landlord's decision with regard
to the removal of such Alterations, and (2) Landlord thereafter agrees in
writing to waive the removal requirement when approving such Alterations, then
Tenant shall not be required to so remove such Alterations. If Tenant fails to
complete such removal and/or to repair any damage caused by the removal of any
Alterations or improvements in the Premises, and returns the affected portion of
the Premises to a building standard tenant improved condition as reasonably
determined by Landlord, then at Landlord's option, either (A) Tenant shall be
deemed to be holding over in the Premises and Rent shall continue to accrue in
accordance with the TCC's of Article 16, below, until such work shall be
completed, or (B) Landlord may do so and may charge the cost thereof to Tenant.
Tenant hereby protects, defends, indemnifies and holds Landlord harmless from
any liability, cost, obligation, expense or claim of lien in any manner relating
to the violation of the foregoing provisions, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.
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<PAGE>
ARTICLE 9
---------
COVENANT AGAINST LIENS
----------------------
Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within ten (10) days after notice by Landlord,
and if Tenant shall fail to do so, Landlord may pay the amount necessary to
remove such lien or encumbrance, without being responsible for investigating the
validity thereof. The amount so paid shall be deemed Additional Rent under this
Lease payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Building or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Building or Premises arising in connection with any such work or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Project, Building and Premises.
ARTICLE 10
----------
INSURANCE
---------
10.1 INDEMNIFICATION AND WAIVER. Tenant hereby releases Landlord from
--------------------------
all risk of damage to property or injury to persons in, upon or about the
Premises from any cause whatsoever (other than Landlord's and Landlord Parties'
negligence or willful misconduct) and agrees that Landlord, its partners,
subpartners and their respective officers, agents, servants, employees, and
independent contractors (collectively, "LANDLORD PARTIES") shall not be liable
for, and are hereby released from any responsibility for, any damage either to
person or property or resulting from the loss of use thereof, which damage is
sustained by Tenant or by other persons claiming through Tenant (other than
Landlord's and Landlord Parties' negligence or willful misconduct). Tenant shall
indemnify, defend, protect, and hold harmless the Landlord Parties from any and
all loss, cost, damage, expense and liability (including without limitation
court costs and reasonable attorneys' fees) incurred in connection with or
arising from any cause in or on the Premises (other than Landlord's and Landlord
Parties' negligence or willful misconduct), any acts, omissions or negligence of
Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, invitees, guests or licensees of
Tenant (collectively, the "TENANT PARTIES") or any such Tenant Parties, in, on
or about the Project or any breach of the TCC's of this Lease, either prior to,
during, or after the expiration of the Lease Term, provided that the TCC's of
the foregoing indemnity shall not apply to the negligence or willful misconduct
of Landlord. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy of the Premises,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees. Further, Tenant's agreement to indemnify
Landlord pursuant to this Section 10.1 is not intended and shall not relieve any
------------
insurance carrier of its obligations under policies required to
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<PAGE>
be carried by Tenant pursuant to the provisions of this Lease, to the extent
such policies cover the matters subject to Tenant's indemnification obligations;
nor shall they supersede any inconsistent agreement of the parties set forth in
any other provision of this Lease. The provisions of this Section 10.1 shall
------------
survive the expiration or sooner termination of this Lease with respect to any
claims or liability arising in connection with any event occurring prior to such
expiration or termination.
10.2 TENANT'S COMPLIANCE WITH LANDLORD'S FIRE AND CASUALTY INSURANCE.
---------------------------------------------------------------
Tenant shall, at Tenant's expense, comply with all commercially reasonable
insurance company requirements pertaining to the use of the Premises. If
Tenant's conduct or use of the Premises causes any increase in the premium for
such insurance policies then Tenant shall reimburse Landlord for any such
increase. Tenant, at Tenant's expense, shall comply with all rules, orders,
regulations or requirements of the American Insurance Association (formerly the
National Board of Fire Underwriters) and with any similar body.
10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages
------------------
in the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operations, and contractual
liabilities (covering the performance by Tenant of its indemnity agreements)
including a Broad Form endorsement covering the insuring provisions of this
Lease and, to the extent consistent with commercially standard policies of such
insurance coverage, the performance by Tenant of the indemnity agreements set
forth in Section 10.1 of this Lease, for limits of liability not less than:
Bodily Injury and $5,000,000 each occurrence
Property Damage Liability $5,000,000 annual aggregate
Personal Injury Liability $5,000,000 each occurrence
$5,000,000 annual aggregate
0% Insured's participation
10.3.2 Physical Damage Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant
Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter,
-----------
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Base Building) (the "ORIGINAL IMPROVEMENTS"),
and (iii) all other improvements, alterations and additions to the Premises made
by Tenant. Such insurance shall be written on an "special cause of loss" of
physical loss or damage basis, for the full replacement cost value (subject to
reasonable deductible amounts) new without deduction for depreciation of the
covered items and in amounts that meet any co-insurance clauses of the policies
of insurance and shall include coverage for damage or other loss caused by fire
or other peril including, but not limited to, vandalism and malicious mischief,
theft, water damage of any type, including sprinkler leakage, bursting or
stoppage of pipes, and explosion, and providing business interruption coverage
for a period of one year.
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<PAGE>
10.3.3 Worker's Compensation and Employer's Liability or
other similar insurance pursuant to all applicable state and local statutes and
regulations.
10.4 FORM OF POLICIES. The minimum limits of policies of insurance
----------------
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, and any other
party the Landlord so specifies (if such party has an insurable interest), as an
additional insured, including Landlord's managing agent, if any; (ii)
specifically cover the liability assumed by Tenant under this Lease, including,
but not limited to, Tenant's obligations under Section 10.1 of this Lease to the
extent consistent with commercially standard policies of such insurance
coverage,; (iii) be issued by an insurance company having a rating of not less
than A-X in Best's Insurance Guide or which is otherwise acceptable to Landlord
and licensed to do business in the State of California; (iv) be primary
insurance as to all claims thereunder and provide that any insurance carried by
Landlord is excess and is non-contributing with any insurance requirement of
Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi)
provide that said insurance shall not be canceled or coverage materially changed
unless ten (10) days' prior written notice shall have been given to Landlord and
any mortgagee of Landlord. Tenant shall deliver said policy or policies or
certificates thereof to Landlord on or before the Lease Commencement Date and at
least ten (10) days before the expiration dates thereof. In the event Tenant
shall fail to procure such insurance, or to deliver such policies or
certificate, Landlord may, at its option, procure such policies for the account
of Tenant, and the cost thereof shall be paid to Landlord within ten (10) days
after delivery to Tenant of bills therefor.
10.5 SUBROGATION. Landlord and Tenant intend that their respective
-----------
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective insurance
policies are now, or shall be, endorsed such that the waiver of subrogation
shall not affect the right of the insured to recover thereunder, so long as no
material additional premium is charged therefor.
10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
--------------------------------
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord.
10.7 LANDLORD'S INSURANCE. Landlord shall insure the Building (including
--------------------
the Building Structure and Building Systems) and the Project during the Lease
Term against loss or damage due to fire and other casualties covered within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage and special extended coverage. Such
coverage shall be in such amounts, from such companies, and on such other TCCs,
as Landlord may from time to time reasonably determine, provided that to the
extent consistent with the practices of landlords of the Comparable Buildings,
such coverage
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shall (i) be for full replacement of the Building and the Project in compliance
with all then existing Applicable Law; (ii) provide for rent continuation
insurance equal to at least twelve months rent; and (iii) be with companies and
have policies meeting the criteria set forth in Section 10.4(iii) in this Lease.
-----------------
Additionally, at the sole option of Landlord, such insurance coverage may
include the risks of earthquakes and/or flood damage and additional hazards, a
rental loss endorsement and one or more loss payee endorsements in favor of the
holders of any mortgages or deeds of trust encumbering the interest of Landlord
in the Building or the ground or underlying lessors of the Building, or any
portion thereof. In addition, Landlord shall maintain a Commercial General
Liability Insurance policy covering the insured against claims of bodily injury
and personal injury, for limits of liability not initially less than $5,000,000
each occurrence and $5,000,000 annual aggregate for each of bodily injury and
personal injury. Notwithstanding the foregoing TCCs of this Section 10.6, the
------------
coverage and amounts of insurance carried by Landlord in connection with the
Building need only, at the option of Landlord, be comparable to the coverage and
amounts of insurance which are carried by reasonably prudent landlords of
Comparable Buildings, and Worker's Compensation and Employee's Liability
coverage as required by Applicable Law. Upon inquiry by Tenant, from time to
time, Landlord shall inform Tenant of all such insurance carried by Landlord.
ARTICLE 11
----------
DAMAGE AND DESTRUCTION
----------------------
11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly
----------------------------------------
notify Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other TCC's of
this Article 11, restore the Base Building and such Common Areas. Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises shall not be
materially impaired. Upon the occurrence of any damage to the Premises, upon
notice (the "LANDLORD REPAIR NOTICE") to Tenant from Landlord, Tenant shall
assign to Landlord (or to any party designated by Landlord) all insurance
proceeds payable to Tenant under Tenant's insurance required under Section 10.3
of this Lease allocable to the Tenant Improvements and the Original
Improvements, and Landlord shall repair any injury or damage to the Tenant
Improvements and the Original Improvements installed in the Premises and shall
return such Tenant Improvements and Original Improvements to their original
condition; provided that if the cost of such repair by Landlord exceeds the
amount of insurance proceeds received by Landlord from Tenant's insurance
carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant
to Landlord prior to Landlord's commencement of repair of the damage. In the
event that Landlord does not deliver the Landlord Repair Notice within sixty
(60) days following the date the casualty becomes known to Landlord, Tenant
shall, at its sole cost and expense, repair any injury or damage to the Tenant
Improvements and the Original Improvements installed in the Premises and shall
return such Tenant Improvements and Original Improvements to their original
condition. Whether or not Landlord delivers a Landlord Repair Notice, prior to
the
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commencement of construction, Tenant shall submit to Landlord, for
Landlord's review and approval, all plans, specifications and working drawings
relating thereto, and Landlord shall select the contractors to perform such
improvement work. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof; provided however, that if such
fire or other casualty shall have damaged the Premises or Common Areas necessary
to Tenant's occupancy, Landlord shall allow Tenant a proportionate abatement of
Rent to the extent Landlord is reimbursed from the proceeds of rental
interruption insurance purchased by Landlord as part of Operating Expenses,
during the time and to the extent the Premises are unfit for occupancy for the
purposes permitted under this Lease, and not occupied by Tenant as a result
thereof; provided, further, however, that if the damage or destruction is due to
the negligence or willful misconduct of Tenant or any of its agents, employees,
contractors, invitees or guests, Tenant shall be responsible for any reasonable,
applicable insurance deductible (which shall be payable to Landlord upon demand)
and there shall be no rent abatement. In the event that Landlord shall not
deliver the Landlord Repair Notice, Tenant's right to rent abatement pursuant to
the preceding sentence shall terminate as of the date which is reasonably
determined by Landlord to be the date Tenant should have completed repairs to
the Premises assuming Tenant used reasonable due diligence in connection
therewith.
11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the TCC's of
---------------------------
Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
- ------------
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of discovery of the damage, such notice to include a termination date
giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect
only if the Building or Project shall be damaged by fire or other casualty or
cause, whether or not the Premises are affected, and one or more of the
following conditions is present: (i) in Landlord's reasonable judgment, repairs
cannot reasonably be completed within ninety (90) days after the date of
discovery of the damage (when such repairs are made without the payment of
overtime or other premiums); (ii) the holder of any mortgage on the Building or
Project or ground lessor with respect to the Building or Project shall require
that the insurance proceeds or any portion thereof be used to retire the
mortgage debt, or shall terminate the ground lease, as the case may be; (iii)
the damage is not fully covered by Landlord's and Tenant's insurance policies;
or (iv) Landlord cannot, pursuant to the applicable laws then in effect, rebuild
the Building or Common Areas so that they will be substantially the same
structurally or architecturally; (v) the damage occurs during the last twelve
(12) months of the Lease Term.
If the Premises, Building or Common Areas are damaged by any peril and
Landlord does not elect to terminate this Lease or is not entitled to terminate
this Lease pursuant to this Article 11, then as soon as reasonably practicable,
Landlord shall furnish Tenant with the written opinion of Landlord's architect
or construction consultant as to when the restoration work required of Landlord
is reasonably anticipated to be complete. Tenant shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Landlord of a written notice of election to
terminate within thirty (30) days after Tenant receives from Landlord the
estimate of the time anticipated to be needed to complete such restoration.
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(A) If the anticipated time to substantially complete such
restoration exceeds twelve (12) months from and after the date the written
opinion of the architect or construction consultant is delivered to Tenant; or
(B) If the date of such damage occurs within the last twelve (12)
months of the Lease Term.
11.3 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
------------------------------
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.
ARTICLE 12
----------
NONWAIVER
---------
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the Lease Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of said Rent shall not waive or affect said notice, suit or
judgment.
ARTICLE 13
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CONDEMNATION
------------
If the whole or any part of the Premises or the Building shall be taken by
power of eminent domain or condemned by any competent authority for any public
or quasi-public use or purpose, or if any adjacent property or street shall be
so taken or condemned, or reconfigured or
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vacated by such authority in such manner as to require the use, reconstruction
or remodeling of any part of the Premises or Building, or if Landlord shall
grant a deed or other instrument in lieu of such taking by eminent domain or
condemnation, Landlord shall have the option to terminate this Lease effective
as of the date possession is required to be surrendered to the authority. If
more than fifty percent (50%) of the rentable square feet of the Premises is
taken, or if access to the Premises is substantially impaired, in each case for
a period in excess of one hundred eighty (180) days, Tenant shall have the
option to terminate this Lease effective as of the date possession is required
to be surrendered to the authority. Tenant shall not because of such taking
assert any claim against Landlord or the authority for any compensation because
of such taking and Landlord shall be entitled to the entire award or payment in
connection therewith, except that Tenant shall have the right to file any
separate claim available to Tenant for any taking of Tenant's personal property
and fixtures belonging to Tenant and removable by Tenant upon expiration of the
Lease Term pursuant to the TCC's of this Lease, and for moving expenses, so long
as such claims do not diminish the award available to Landlord, its ground
lessor with respect to the Building or Project or its mortgagee, and such claim
is payable separately to Tenant. All Rent shall be apportioned as of the date of
such termination. If any part of the Premises shall be taken, and this Lease
shall not be so terminated, the Rent shall be proportionately abated. Tenant
hereby waives any and all rights it might otherwise have pursuant to Section
1265.130 of The California Code of Civil Procedure. Notwithstanding anything to
the contrary contained in this Article 13, in the event of a temporary taking of
----------
all or any portion of the Premises for a period of one hundred and eighty (180)
days or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises. Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.
ARTICLE 14
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ASSIGNMENT AND SUBLETTING
-------------------------
14.1 TRANSFERS. Tenant shall not, without the prior written consent of
---------
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder by
operation of law, sublet the Premises or any part thereof, or enter into any
license or concession agreements or otherwise permit the occupancy or use of the
Premises or any part thereof by any persons other than Tenant and its employees
and contractors (all of the foregoing are hereinafter sometimes referred to
collectively as "TRANSFERS" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "TRANSFEREE"). If
Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the "TRANSFER NOTICE") shall include (i) the proposed
effective date of the Transfer, which shall not be less than thirty (30) days
nor more than one hundred eighty (180) days after the date of delivery of the
Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "SUBJECT SPACE"), (iii) all of the TCC's of the proposed
Transfer and the consideration therefor, including calculation of the "TRANSFER
PREMIUM", as that term is defined in Section 14.3 below, in connection with such
Transfer, the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including all existing operative
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documents to be executed to evidence such Transfer or the agreements incidental
or related to such Transfer, (iv) current financial statements of the proposed
Transferee certified by an officer, partner or owner thereof, business credit
and personal references and history of the proposed Transferee and any other
information required by Landlord which will enable Landlord to determine the
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee's business and proposed use of the Subject Space and
(v) an executed estoppel certificate from Tenant in the form attached hereto as
Exhibit E. Any Transfer made without Landlord's prior written consent shall, at
Landlord's option, be null, void and of no effect, and shall, at Landlord's
option, constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall, within thirty (30) days after
written request by Landlord, reimburse Landlord for all reasonable and actual
out-of-pocket third-party costs and expenses incurred by Landlord in connection
with its review of a proposed Transfer; provided that such costs and expenses
shall not exceed One Thousand Five Hundred and No/100 Dollars ($1,500.00) for a
Transfer in the ordinary course of business. Landlord and Tenant hereby agree
that a proposed Transfer shall not be considered "in the ordinary course of
business" if such Transfer involves the review of documentation by Landlord on
more than two (2) occasions with regard to a single proposed Transfer.
14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
------------------
consent to any proposed Transfer of the Subject Space to the Transferee on the
TCC's specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:
14.2.1 The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Building or the
Project, or would be a significantly less prestigious occupant of the Building
than Tenant;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease; 14.2.3 The Transferee is either a
governmental agency or instrumentality thereof; 14.2.4 Intentionally Omitted;
14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;
14.2.6 The proposed Transfer would cause a violation of another lease
for space in the Project, or would give an occupant of the Project a right to
cancel its lease;
14.2.7 The TCC's of the proposed Transfer will allow the Transferee
to exercise a right of renewal, right of expansion, right of first offer, or
other similar right held by Tenant (or will allow the Transferee to occupy space
leased by Tenant pursuant to any such right); or
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14.2.8 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, (i) occupies space in the Project at the time of
the request for consent, or (ii) is negotiating with Landlord to lease space in
the Project at such time, or (iii) has negotiated with Landlord during the
twelve (12)-month period immediately preceding the Transfer Notice; or
14.2.9 The Transferee does not intend to occupy the entire Premises
and conduct its business therefrom for a substantial portion of the term of the
Transfer.
If Landlord consents to any Transfer pursuant to the TCC's of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same TCC's
as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant
to Section 14.1 of this Lease, provided that if there are any changes in the
TCC's from those specified in the Transfer Notice (i) such that Landlord would
initially have been entitled to refuse its consent to such Transfer under this
Section 14.2, or (ii) which would cause the proposed Transfer to be more
- ------------
favorable to the Transferee than the TCC's set forth in Tenant's original
Transfer Notice, Tenant shall again submit the Transfer to Landlord for its
approval and other action under this Article 14 (including Landlord's right of
recapture, if any, under Section 14.4 of this Lease). Notwithstanding anything
------------
to the contrary in this Lease, if Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under Section 14.2 or
otherwise has breached or acted unreasonably under this Article 14, their sole
remedies shall be a declaratory judgment and an injunction for the relief sought
without any monetary damages, and Tenant hereby waives all other remedies,
including, without limitation, any right at law or equity to terminate this
Lease, on its own behalf and, to the extent permitted under all applicable laws,
on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant's proposed subtenant or assignee) who claim
they were damaged by Landlord's wrongful withholding or conditioning of
Landlord's consent, unless a court of competent jurisdiction determines that
Landlord was wrongful in its withholding or conditioning of its consent.
14.3 TRANSFER PREMIUM. If Landlord consents to a Transfer, as a condition
----------------
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee. "TRANSFER
PREMIUM" shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, after deducting the reasonable expenses incurred by Tenant for (i)
any changes, alterations and improvements to the Premises in connection with the
Transfer, (ii) any free base rent reasonably provided to the Transferee, and
(iii) any brokerage commissions in connection with the Transfer. "Transfer
Premium" shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer. In the calculations of the Rent (as it relates to the Transfer Premium
calculated under this Section 14.3), and the Transferee's Rent and Quoted Rent
under Section 14.2 of this Lease, the Rent paid during each annual period for
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the Subject Space, and the Transferee's Rent and the Quoted Rent, shall be
computed after adjusting such rent to the actual effective rent to be paid,
taking into consideration any and all leasehold concessions granted in
connection therewith, including, but not limited to, any rent credit and tenant
improvement allowance. For purposes of calculating any such effective rent all
such concessions shall be amortized on a straight-line basis over the relevant
term.
14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. In the event that a proposed
-------------------------------------
Transfer, if consented to, would cause seventy-five percent (75%) or more of the
Premises to be assigned or subleased to a party other than Original Tenant
and/or its Affiliates, then notwithstanding anything to the contrary contained
in this Article 14, Landlord shall have the option, by giving written notice to
Tenant within thirty (30) days after receipt of any Transfer Notice, to
recapture the Subject Space. Such recapture notice shall cancel and terminate
this Lease with respect to the Subject Space as of the date stated in the
Transfer Notice as the effective date of the proposed Transfer until the last
day of the term of the Transfer as set forth in the Transfer Notice (or at
Landlord's option, shall cause the Transfer to be made to Landlord or its agent,
in which case the parties shall execute the Transfer documentation promptly
thereafter). In the event of a recapture by Landlord, if this Lease shall be
canceled with respect to less than the entire Premises, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same. If Landlord declines, or fails to elect in a timely
manner to recapture the Subject Space under this Section 14.4, then, provided
------------
Landlord has consented to the proposed Transfer, Tenant shall be entitled to
proceed to transfer the Subject Space to the proposed Transferee, subject to
provisions of this Article 14.
----------
14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the
------------------
TCC's of this Lease shall in no way be deemed to have been waived or modified,
(ii) such consent shall not be deemed consent to any further Transfer by either
Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish
upon Landlord's request a complete statement, certified by Tenant's chief
financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space. Landlord or its authorized
representatives shall have the right at all reasonable times to audit the books,
records and papers of Tenant relating to any Transfer, and shall have the right
to make copies thereof. If the Transfer Premium respecting any Transfer shall be
found understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than five percent (5%), Tenant shall pay
Landlord's costs of such audit.
14.6 ADDITIONAL TRANSFERS. For purposes of this Lease, the term
--------------------
"TRANSFER" shall also include (i) if Tenant is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of fifty percent (50%) or
more of the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held
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corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), (A) the dissolution, merger, consolidation or
other reorganization of Tenant or (B) the sale or other transfer of an aggregate
of fifty percent (50%) or more of the voting shares of Tenant (other than to
immediate family members by reason of gift or death), within a twelve (12)-month
period, or (C) the sale, mortgage, hypothecation or pledge of an aggregate of
fifty percent (50%) or more of the value of the unencumbered assets of Tenant
within a twelve (12)-month period. Notwithstanding anything to the contrary set
forth in this Article 14 to the contrary, in no event shall an offering of stock
to third parties by means of a public offering (either an initial public
offering or a subsequent public offering) through a recognized stock market
constitute a "Transfer."
14.7 OCCURRENCE OF DEFAULT. Any Transfer hereunder shall be subordinate
---------------------
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:
(i) treat such Transfer as cancelled and repossess the Subject Space by any
lawful means, or (ii) require that such Transferee attorn to and recognize
Landlord as its landlord under any such Transfer. If Tenant shall be in default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment, the assignee shall assume in writing all obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any Transferee shall be deemed a waiver
of any provision of this Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord's enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord's right to
enforce any term of this Lease against Tenant or any other person. If Tenant's
obligations hereunder have been guaranteed, Landlord's consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.
14.8 NON-TRANSFERS. Notwithstanding anything to the contrary contained
-------------
in this Article 14, an assignment or subletting of all or a portion of the
Premises to (a) an affiliate of Tenant (an entity which is controlled by,
controls or is under common control, as such term is defined in California
General Corporations Code ("CGCC") Sections 160 and 5045, with, Tenant), (b) an
entity which merges with or acquires or is acquired by, Tenant or a parent of
Tenant, as defined in CGCC Sections 175 and 5064, or a subsidiary, as defined in
CGCC Sections 189 and 5073, of Tenant's parent or Affiliate, or (c) a transferee
of substantially all of the assets of Tenant (a, b and c to be collectively be
referred to herein as an "AFFILIATE") along with any other entity which will
qualify as an "affiliate" under CGCC 150 and 5031, shall not be deemed a
Transfer under this Article 14, provided that at least thirty (30) days prior to
----------
such assignment or sublease (i) Tenant provides Landlord with reasonable
evidence, including a certified audit opinion of an independent certified public
accountant with a regional or national reputation, that any such entity
maintains a net worth, calculated in accordance with generally accepted
accounting principles, consistently applied ("NET WORTH"), equal to or greater
than the Net Worth of Tenant either immediately prior to the time of such
assignment or sublease or at the time this Lease is executed; (ii) Tenant
notifies Landlord of any such assignment or sublease and promptly supplies
Landlord with any documents or information requested by Landlord regarding such
assignment or sublease
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<PAGE>
and promptly supplies Landlord with any documents or information requested by
Landlord regarding such assignment or sublease or such Affiliate; and (iii) such
assignment or sublease is not a subterfuge by Tenant to avoid its obligations
under this Lease. In the event an assignment or sublease to an Affiliate is made
pursuant to the TCCs of this Section 14.8, Tenant shall be relieved of its
obligations under this Lease to the extent the same become the TCCs of such
Affiliate pursuant to such assignment or sublease.
ARTICLE 15
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SURRENDER OF PREMISES; OWNERSHIP AND
------------------------------------
REMOVAL OF TRADE FIXTURES
-------------------------
15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any
---------------------
agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such
intent is specifically acknowledged in writing by Landlord. The delivery of keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord, and notwithstanding
such delivery Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises or terminate any or all
such sublessees or subtenancies.
15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the
------------------------------------
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15, quit and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear, casualty and condemnation, and repairs which are specifically made the
responsibility of Landlord hereunder excepted. Upon such expiration or
termination, Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises all debris and rubbish, and such items of furniture,
equipment, business and trade fixtures, free-standing cabinet work, movable
partitions and other articles of personal property owned by Tenant or installed
or placed by Tenant at its expense in the Premises, and such similar articles of
any other persons claiming under Tenant, as Landlord may, in its sole
discretion, require to be removed, and Tenant shall repair at its own expense
all damage to the Premises and Building resulting from such removal, provided
that the removal of Alterations shall be governed by Article 8 hereof.
ARTICLE 16
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HOLDING OVER
------------
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not, except as set
forth below, constitute a renewal hereof or an extension for any further term,
and in such case Rent shall be payable at a monthly rate equal to
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the product of (i) the Rent applicable during the last rental period of the
Lease Term under this Lease, and (ii) a percentage equal to the sum of (A) 200%
and (B) the percentage by which Rent was increased at the time of the last
increase of Rent during the Lease Term. Such month-to-month tenancy shall be
subject to every other applicable term, covenant and agreement contained herein.
Notwithstanding the foregoing, Tenant shall have the one-time right, upon notice
(the "HOLDOVER NOTICE") to Landlord not less than nine (9) months prior to the
expiration of the then Lease Term, to extend the Lease Term for a period of up
to six (6) months (in one (1) month increments), the length of which shall be
set forth in the Holdover Notice (the "PERMITTED HOLDOVER TERM"), in which case
the Rent payable by Tenant during such Permitted Holdover Term shall equal the
product of (a) the Rent applicable during the last rental period of the Lease
Term under this Lease, and (b) one hundred twenty percent (120%) during the
first three (3)-month period of such Permitted Holdover Term, and one hundred
fifty percent (150%) during the second three (3)-month period of such Permitted
Holdover Term. For purposes of this Article 16, a holding over shall include
Tenant's remaining in the Premises after the expiration or earlier termination
of the Lease Term, as required pursuant to the TCC's of Section 8.5, above, to
-----------
remove any Alterations or Above Building Standard Tenant Improvements located
within the Premises and replace the same with Building Standard Tenant
Improvements. Except with respect to the Permitted Holdover Term, Nothing
contained in this Article 16 shall be construed as consent by Landlord to any
holding over by Tenant, and Landlord expressly reserves the right to require
Tenant to surrender possession of the Premises to Landlord as provided in this
Lease upon the expiration or other termination of this Lease. The provisions of
this Article 16 shall not be deemed to limit or constitute a waiver of any other
----------
rights or remedies of Landlord provided herein or at law. Except with respect to
the Permitted Holdover Term, If Tenant fails to surrender the Premises upon the
termination or expiration of this Lease, in addition to any other liabilities to
Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold
Landlord harmless from all loss, costs (including reasonable attorneys' fees)
and liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom.
ARTICLE 17
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ESTOPPEL CERTIFICATES
---------------------
Within ten (10) days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be substantially in the form of EXHIBIT
-------
E, attached hereto (or such other form as may reasonably be required by any
prospective mortgagee or purchaser of the Project, or any portion thereof),
indicating therein any exceptions thereto that may exist at that time, and shall
also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Any such certificate may be
relied upon by any prospective mortgagee or purchaser of all or any portion of
the Project. Tenant shall execute and deliver whatever other commercially
reasonable instruments may be reasonably required for such purposes. At any time
during the Lease Term, Landlord may require Tenant to provide Landlord with its
most recently prepared financial statement and financial statements of the two
(2) years prior to the most recently prepared financial statement year. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of
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Tenant, shall be audited by an independent certified public accountant. Failure
of Tenant to timely execute, acknowledge and deliver such estoppel certificate
or other commercially reasonable instruments shall constitute an acceptance of
the Premises and an acknowledgment by Tenant that statements included in the
estoppel certificate are true and correct, without exception. Any such financial
statement or other information which is marked "confidential" or "company
secret(s)" (or is otherwise similarly marked by Tenant) shall be confidential
and shall not be disclosed by Landlord to any third party (other than its
partners, administrators, consultants, financial, legal and a prospective or
current purchaser, mortgagee, or ground or underlying lessor of the Building or
the Project, a prospective Transferee, and except as required by applicable law
or in connection with a dispute or litigation hereunder or as required by a
subpoena) except as specifically provided in this Article 17 and then only if
the person to whom disclosure is made first agrees to be bound by the
requirements of this Article 17.
ARTICLE 18
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SUBORDINATION
-------------
Subject to Tenant's receipt of an appropriate non-disturbance agreement(s)
as set forth below, This Lease shall be subject and subordinate to all present
and future ground or underlying leases of the Building or Project and to the
lien of any mortgage, trust deed or other encumbrances now or hereafter in force
against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto. As of the date of this
Lease, Landlord covenants that no deed of trust, mortgage, other encumbrance, or
ground or underlying lease encumbers the Premises, Building or Project.
Landlord's delivery to Tenant of commercially reasonable non-disturbance
agreement(s) (the "NONDISTURBANCE AGREEMENT") in favor of Tenant from any ground
lessor, mortgage holders or lien holders of Landlord who later come into
existence at any time prior to the expiration of the Lease Term shall be in
consideration of, and a condition precedent to, Tenant's agreement to be bound
by the terms and conditions of this Article 18; provided Tenant shall execute
and return such Nondisturbance Agreement to Landlord within four (4) days of its
receipt thereof. Any such Nondisturbance Agreement shall include an express
agreement by the lessor, mortgage holder or lien holder to complete the
construction of the Building and fund the Tenant and Core Improvement Allowance
in accordance with the terms of this Lease and the Tenant Work Letter. Tenant
covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease
is terminated), to attorn, without any deductions or set-offs whatsoever
(excepting any unfunded portion of the Tenant and Core Improvement Allowance),
to the lienholder or purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof (or to the ground lessor), if so
requested to do so by such purchaser or lienholder or ground lessor, and to
recognize such purchaser or lienholder or ground lessor as the lessor under this
Lease, provided such lienholder or purchaser or ground lessor shall agree to
accept this Lease and not disturb Tenant's occupancy, so long as Tenant timely
pays the rent and observes and performs the TCC's of this Lease to be observed
and performed by Tenant. Landlord's interest herein may be assigned as security
at any time to any lienholder. Subject to Tenant's receipt of a Nondisturbance
Agreement, Tenant shall, within five (5) days of request by
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<PAGE>
Landlord, execute such further instruments or assurances as Landlord may
reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant waives the provisions of any current or future
statute, rule or law which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease and the
obligations of the Tenant hereunder in the event of any foreclosure proceeding
or sale.
ARTICLE 19
----------
DEFAULTS; REMEDIES
------------------
19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
-----------------
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within three (3) days after notice; or
19.1.2 Except where a specific time period is otherwise set forth for
Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this
Section 19.1.2, any failure by Tenant to observe or perform any other provision,
- --------------
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for ten (10) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a ten (10) day period, Tenant shall not
be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default, but
in no event exceeding a period of time in excess of sixty (60) days after
written notice thereof from Landlord to Tenant; or
19.1.3 To the extent permitted by law, a general assignment by Tenant
or any guarantor of this Lease for the benefit of creditors, or the taking of
any corporate action in furtherance of bankruptcy or dissolution whether or not
there exists any proceeding under an insolvency or bankruptcy law, or the filing
by or against Tenant or any guarantor of any proceeding under an insolvency or
bankruptcy law, unless in the case of a proceeding filed against Tenant or any
guarantor the same is dismissed within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant's assets located upon
the Premises or of Tenant's interest in this Lease, unless such seizure is
discharged within thirty (30) days; or
19.1.4 A default (beyond any applicable notice and cure periods) by
Tenant under the "Building B Lease," as that term is set forth in Section 29.37;
or
19.1.5 The failure by Tenant to observe or perform according to the
provisions of Section 5.2 of this Lease or Articles 14, 17 or 18 of this Lease
where such failure continues for more than ten (10) business days after notice
from Landlord.
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<PAGE>
The notice periods provided herein are in lieu of, and not in addition to,
any notice periods provided by law.
19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of default
---------------------
by Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has been
earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which
the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for
all the 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, specifically including but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a
different use, and any special concessions made to obtain a new tenant; and
(v) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
The term "RENT" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
TCC's of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover
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<PAGE>
rent as it becomes due, if lessee has the right to sublet or assign, subject
only to reasonable limitations). Accordingly, if Landlord does not elect to
terminate this Lease on account of any default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due.
19.2.3 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or
any law or other provision of this Lease), without prior demand or notice except
as required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
19.3 SUBLEASES OF TENANT. Whether or not Landlord elects to terminate
-------------------
this Lease on account of any default by Tenant, as set forth in this Article 19,
----------
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.4 FORM OF PAYMENT AFTER DEFAULT. Following the occurrence of an event
-----------------------------
of default by Tenant, Landlord shall have the right to require that any or all
subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.
19.5 EFFORTS TO RELET. No re-entry or repossession, repairs, maintenance,
----------------
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.
ARTICLE 20
----------
COVENANT OF QUIET ENJOYMENT
---------------------------
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other TCC's, provisions and agreements herein contained on the part of
Tenant to be kept, observed and performed, shall, during the Lease Term,
peaceably and quietly have, hold and enjoy the Premises subject to the TCC's,
provisions and agreements hereof without interference by any
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<PAGE>
persons lawfully claiming by or through Landlord. The foregoing covenant is in
lieu of any other covenant express or implied.
ARTICLE 21
----------
SECURITY DEPOSIT; LETTER OF CREDIT
----------------------------------
21.1 DELIVERY OF LETTER OF CREDIT. Tenant shall deliver to Landlord
----------------------------
within thirty (30) days of mutual execution of this Lease, an unconditional,
clean, irrevocable letter of credit (the "L-C") in an amount (the "L-C AMOUNT")
initially equal to the "Initial L-C Amount," as that term is set forth in
Section 21.2, below, which L-C shall be issued by a money-center bank (a bank
- ------------
which accepts deposits, maintains accounts, has a local San Diego office which
will negotiate a letter of credit, and whose deposits are insured by the FDIC)
reasonably acceptable to Landlord, and which L-C shall be in the form of EXHIBIT
-------
G, attached hereto. Tenant shall pay all expenses, points and/or fees incurred
- -
by Tenant in obtaining the L-C.
21.2 L-C AMOUNT.
----------
21.2.1 INITIAL L-C AMOUNT. For purposes of this Lease, the
------------------
"Initial L-C Amount" shall be (i) an amount equal to twelve (12) months of the
initial Monthly Installment of Base Rent (estimated to be $2,129,664.00) if
Tenant's "Market Capitalization," as that term set forth hereinbelow, is
$500,000,000 or greater, and Tenant has "Working Capital," as that term is set
forth hereinbelow, of $50,000,000 or greater; (ii) an amount equal to
twenty-four (24) months of the initial Monthly Installment of Base Rent
(estimated to be $4,259,328.00) if Tenant's Market Capitalization is between
$350,000,000 and $500,000,000 and Tenant has Working Capital of at least
$35,000,000; and (iii) an amount equal to thirty-six (36) months of the initial
Monthly Installment of Base Rent (estimated to be $6,388,992.00), if Tenant's
Market Capitalization is less than $350,000,000 or if Tenant has less than
$35,000,000 of Working Capital. "Market Capitalization" means product of (A) the
number of outstanding shares of Tenant, and (B) the average closing share price
during the last thirty (30) days of the applicable financial quarter. "Working
Capital," means then- current assets of Tenant less then-current liabilities
from Tenant's previous quarterly financial statements, which Working Capital
shall include then-current receivables (zero (0) to sixty (60) days only).
"Minimum Financial Requirements" means Tenant maintains a Market Capitalization
of no less than $350,000,000 and has Working Capital of no less than
$35,000,000.
21.2.2 CONDITIONAL REDUCTION OF L-C AMOUNT. The L-C Amount shall
-----------------------------------
be reduced as follows: (A) to fifty percent (50%) of the Initial L-C Amount if
Tenant maintains the Minimum Financial Requirements, for four (4) consecutive
financial quarters, or (B) to $0.00 if Tenant maintains the Minimum Financial
Requirements for eight (8) consecutive financial quarters, or (C) to $0.00 in
the event Tenant achieves either (i) an investment grade rating of no less than
"BBB" (Standard & Poor's) or "Baa3" (Moody's), or (ii) a Market Capitalization
of $1,000,000,000 or greater and Working Capital of no less than $100,000,000.
21.2.3 REESTABLISHMENT OF INITIAL L-C AMOUNT. Throughout the
-------------------------------------
initial Lease Term and any Option Terms, if any, in the event the L-C Amount has
been reduced to less than the Initial L-C Amount (i) pursuant to the TCC's of
Section 21.2.2(A) or (B) and Tenant
- ------------------------
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<PAGE>
thereafter fails, at the end of any quarter, to meet the Minimum Financial
Requirements, or (ii) pursuant to the TCC's of Section 21.2.2(C) and Tenant
-----------------
thereafter fails, at any time thereafter, to maintain a Market Capitalization of
at least $1,000,000,000 and Working Capital of no less than $100,000,000, then,
in such event, Landlord shall be entitled to require that the L-C be
reestablished with an L-C Amount equal to the Initial L-C Amount on the TCC's
set forth in this Article 21. Tenant shall, upon its receipt of written notice
----------
from Landlord (the "REESTABLISHMENT NOTICE"), cause the L-C to be immediately
re-issued/reestablished with an L-C Amount equal to the Initial L-C Amount.
21.2.4 FAILURE TO REINSTATE PENALTY. In the event that Tenant
----------------------------
fails, within ten (10) days following Tenant's receipt of a Reestablishment
Notice, to cause the L-C to be re-issued/reestablished, then Tenant's Monthly
Installment of Base Rent shall be increased by one hundred fifty percent (150%)
of its then existing level during the period commencing on the date of ten (10)
days after such Reestablishment Notice and ending on the earlier to occur of (i)
the date such L-C is re-issued/reestablished pursuant to the terms of this
Section 21.2, or (ii) the date which is ninety (90) days after the date of such
- ------------
Reestablishment Notice. In the event that Tenant fails, during such three (3)
month period following the date of the Reestablishment Notice, to cause the L-C
to be reissued/reestablished, then Tenant's Monthly Installment of Base Rent
shall be increased by two hundred percent (200%) of its then existing level
during the period commencing on the date which is ninety (90) days after the
date of such Reestablishment Notice and ending on the date such L-C is
re-issued/reestablished pursuant to the terms of this Section 21.2.
------------
21.3 APPLICATION OF LETTER OF CREDIT. The L-C shall be held by Landlord
-------------------------------
as security for the faithful performance by Tenant of all the TCC's of this
Lease to be kept and performed by Tenant during the Lease Term. The L-C shall
not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant
without the prior written consent of Landlord. If Tenant defaults with respect
to any provisions of this Lease, including, but not limited to, the provisions
relating to the payment of Rent, or if Tenant fails to renew the L-C at least
thirty (30) days before its expiration, Landlord may, but shall not be required
to, draw upon all or any portion of the L-C for payment of any Rent or any other
sum in default, or for the payment of any amount that Landlord may reasonably
spend or may become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any other loss or damage that Landlord may suffer by
reason of Tenant's default. The use, application or retention of the L-C, or any
portion thereof, by Landlord shall not prevent Landlord from exercising any
other right or remedy provided by this Lease or by law, it being intended that
Landlord shall not first be required to proceed against the L-C and shall not
operate as a limitation on any recovery to which Landlord may otherwise be
entitled. Any amount of the L-C which is drawn upon by Landlord, but is not used
or applied by Landlord, shall be held by Landlord and deemed a security deposit
(the "L-C SECURITY DEPOSIT"). If any portion of the L-C is drawn upon, Tenant
shall, within ten (10) days after written demand therefor, either (i) deposit
cash with Landlord (which cash shall be applied by Landlord to the L-C Security
Deposit) in an amount sufficient to cause the sum of the L-C Security Deposit
and the amount of the remaining L-C to be equivalent to the amount of the L-C
then required under this Lease or (ii) reinstate the L-C to the amount then
required under this Lease, and if any portion of the L-C Security Deposit is
used or applied, Tenant shall, within ten (10) days after written demand
therefor, deposit cash with Landlord (which cash shall be applied by Landlord to
the L-C Security Deposit) in an amount sufficient to restore the L-C Security
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Deposit to the amount then required under this Lease, and Tenant's failure to do
so shall be a default under this Lease; provided, however, that upon Tenant's
satisfaction of its economic obligations and restoration of the L-C Security
Deposit pursuant to this sentence, any unused portion of the drawn upon funds
shall be returned to Tenant. Tenant acknowledges that Landlord has the right to
transfer or mortgage its interest in the Real Property and the Center and in
this Lease and Tenant agrees that in the event of any such transfer or mortgage,
Landlord shall have the right to transfer or assign the L-C Security Deposit
and/or the L-C to the transferee or mortgagee, and in the event of such
transfer, Tenant shall look solely to such transferee or mortgagee for the
return of the L-C Security Deposit and/or the L-C. Landlord shall pay all costs
associated with the transfer or re-issuance of the L-C due to Landlord's
transfer or assignment. Tenant shall, within five (5) days of request by
Landlord, execute such further instruments or assurances as Landlord may
reasonably deem necessary to evidence or confirm Landlord's transfer or
assignment of the L-C Security Deposit and/or the L-C to such transferee or
mortgagee. If Tenant is not then in default under this Lease, the L-C Security
Deposit and/or the L-C, or any balance thereof, shall be returned to Tenant
within thirty (30) days following the expiration of the Lease Term.
21.4 AFTER SALE TO A THIRD PARTY NON-INSTITUTIONAL BUYER. In the event
---------------------------------------------------
the initial Landlord entity (KR-Gateway Partners LLC) or its Affiliates
transfers or sells its interest in the Project to a person or any entity other
than an institutional buyer (a "NON-INSTITUTIONAL BUYER"), Tenant shall have the
right to require that the L-C Security Deposit be held by the lender, if any,
providing the financing for such Non-Institutional Buyer, which account shall be
subject to escrow instructions specifying that (i) Landlord shall only have the
right to draw on the L-C to the extent the Landlord is entitled to pursuant to
the TCCs of this Article 21, (ii) Landlord shall deliver a statement to the
escrow holder prior to any draw down, certifying that Landlord is entitled to
draw on the L-C pursuant to the TCCs of this Article 21, and (iii) that within
ninety (90) days after the expiration of this Lease, the escrow holder shall
release the L-C to Tenant consistent with the terms of this Lease and this
Article 21. For purposes of this Section 21.4, the term "institutional buyer"
shall include, without limitation, life insurance companies, banks, pension
funds, pension fund advisors, opportunity funds, hedge funds, private owners who
directly or indirectly own more than $75,000,000 of real estate, or publicly
traded real estate investment trusts.
ARTICLE 22
----------
TELECOMMUNICATIONS EQUIPMENT
----------------------------
At any time during the Lease Term, subject to the TCCs of this Article 22
and Article 8 of this Lease, Tenant may install, at Tenant's sole cost and
expense, but without the payment of any Rent or a license or similar fee or
charge, a satellite or microwave dish or other communications, HVAC or other
equipment servicing the business conducted by Tenant from within the Premises
(all such equipment, including non-telecommunication equipment is, for the sake
of convenience, defined collectively as the "TELECOMMUNICATIONS EQUIPMENT") upon
the roof of the Building. The physical appearance and the size of the
Telecommunications Equipment shall be subject to Landlord's reasonable approval,
the location of any such installation of the Telecommunications Equipment shall
be designated by Tenant subject to Landlord's reasonable approval and Landlord
may require Tenant to install screening around
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such Telecommunications Equipment, at Tenant's sole cost and expense, as
reasonably designated by Landlord. Tenant shall maintain such Telecommunications
Equipment, at Tenant's sole cost and expense. In the event Tenant elects to
exercise its right to install the Telecommunication Equipment, then Tenant shall
give Landlord prior notice thereof. Tenant shall remove such Telecommunications
Equipment upon the expiration or earlier termination of this Lease and shall
restore such area to the condition the same existed prior to the installation of
such Telecommunications Equipment. Such Telecommunications Equipment shall be
installed pursuant to plans and specifications approved by Landlord, which
approval will not be unreasonably withheld. Such Telecommunications Equipment
shall, in all instances, comply with applicable governmental laws, codes, rules
and regulations. The rights contained in this Article 22 shall be personal to
the Original Tenant and its Affiliates and may only be exercised by the Original
Tenant or an Affiliate (and not any assignee, subleasee or other transferee of
the Original Tenant's interest in this Lease) if the Original Tenant and/or an
Affiliate occupies the entire Building. Landlord shall reserve the concurrent
right to use the roof for its own use and for third-party use for installation
of satellite dish and antenna devices similar to Tenant's Telecommunications
Equipment (collectively, the "LANDLORD TCE"), provided such Landlord TCE shall
not interfere with Tenant's operations on the roof of the Building, and provided
Landlord maintains, restores and repairs the Building rooftop space associated
with such Landlord TCE. To the extent Landlord elects to install Landlord TCE on
the Building rooftop, Landlord shall be responsible for the maintenance, repair
and restoration of such Landlord TCE and shall notify Tenant no less than
twenty-four (24) hours in advance of any entry/access onto the Building rooftop.
Landlord shall be responsible for (and shall make all necessary repairs and
replacements for) any damage to Tenant's Telecommunications Equipment due to the
actions or omissions of Landlord or Landlord Parties (or any third party to whom
Landlord has granted roof access rights). Tenant shall be responsible for (and
shall make all necessary repairs and replacements for) any damage to the
Landlord TCE due to the negligence or willful misconduct of Tenant.
ARTICLE 23
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SIGNS
-----
23.1 FULL FLOORS. Subject to Landlord's prior written approval, in its
-----------
reasonable discretion, Tenantat its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises.
23.2 INTENTIONALLY OMITTED.
---------------------
23.3 PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at the
sole expense of Tenant. Any signs, window coverings, or blinds (even if the same
are located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its reasonable discretion.
23.4 TENANT'S SIGNAGE.
----------------
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23.4.1 TENANT'S SIGNAGE RIGHTS. For purposes of this Lease,
-----------------------
"Tenant's Signage" shall mean the "Building Signage" as that term is defined
below; provided, however, Tenant's Signage is personal to Original Tenant and
its Affiliates, is non-transferable, and is conditioned upon the Original Tenant
and its Affiliates being in occupancy of at least sixty percent (60%) of the
Premises. Tenant shall be entitled to install the following signage in
connection with Tenant's lease of the Premises (collectively, the "BUILDING
SIGNAGE"):
(i) Two (2) signs identifying Tenant's name and logo
located at the top of, or on the eyebrow of, the Building and/or next to
Tenant's main entrance to the Premises; and
(ii) One (1) monument sign located adjacent to the main
entrance point to the Building (the "BUILDING MONUMENT SIGN"); provided,
however, that in any event Landlord shall be able to locate its standard
identification signage, in a size to be mutually and reasonably determined, on
the Building Monument Sign (with lowest/least prominent position, and provided
the size of the lettering on such Landlord identification signage is no greater
than 25% of the lettering on Tenant's portion of such Building Monument Sign);
and
(iii) One (1) monument sign located on the patio plaza wall
located adjacent to the Building (the "PLAZA WALL SIGN").
23.4.2 SPECIFICATIONS AND PERMITS. Tenant's Signage shall set
--------------------------
forth Tenant's name and logo as determined by Tenant in its sole discretion;
provided, however, in no event shall Tenant's Signage include an "Objectionable
Name," as that term is defined in Section 23.4.3, of this Lease. The graphics,
materials, color, design, lettering, lighting, size, illumination,
specifications and exact location of Tenant's Signage (collectively, the "SIGN
SPECIFICATIONS") shall be subject to the prior written approval of Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed, and
shall be consistent and compatible with the quality and nature of the Project
and the Building Standard Signage Specifications. Provided, however, that with
respect to the sign(s) at the top of the Building, Tenant may have the maximum
signage available by Applicable Law and the CC&R's. In the preceding sentence,
the reference to "name" shall mean name and/or logo. In addition, Tenant's
Signage shall be subject to Tenant's receipt of all required governmental
permits and approvals and shall be subject to all Applicable Law and to any
covenants, conditions and restrictions affecting the Project. Landlord shall use
commercially reasonable efforts to assist Tenant in obtaining all necessary
governmental permits and approvals for Tenant's Signage. Tenant hereby
acknowledges that, notwithstanding Landlord's approval of Tenant's Signage,
Landlord has made no representation or warranty to Tenant with respect to the
probability of obtaining all necessary governmental approvals and permits for
Tenant's Signage. In the event Tenant does not receive the necessary
governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's
rights and obligations under the remaining terms and conditions of this Lease
shall be unaffected.
23.4.3 OBJECTIONABLE NAME. To the extent Original Tenant or its
------------------
Affiliates desires to change the name and/or logo set forth on Tenant's Signage,
such name and/or logo shall not have a name which relates to an entity which is
of a character or reputation, or is associated with a political faction or
orientation, which is inconsistent with a first-class project, or which would
otherwise reasonably offend a landlord of the Comparable Buildings (an
"OBJECTIONABLE NAME").
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23.4.4 COST AND MAINTENANCE. The costs of the actual signs
--------------------
comprising Tenant's Signage and the installation, design, construction, and any
and all other costs associated with Tenant's Signage, including, without
limitation, utility charges and hook-up fees, permits, and maintenance and
repairs, shall, subject to the terms and conditions of this Lease, be the sole
responsibility of Tenant; provided that Landlord shall install the Project
Monument Sign(s), at Landlord's sole cost and expense, and Tenant shall be
responsible for the cost of Tenant's sign on the Project Monument Sign(s), but
Landlord shall maintain all monument signs set forth in this Article 23 in good
condition and repair, the cost of which in connection with the Project Monument
Sign(s) shall be included in Operating Expenses. Should Tenant's Signage require
repairs and/or maintenance, as determined in Landlord's reasonable judgment,
Landlord shall have the right to provide Notice thereof to Tenant and Tenant
(except as set forth above) shall cause such repairs and/or maintenance to be
performed within thirty (30) days after receipt of such Notice from Landlord, at
Tenant's sole cost and expense; provided, however, if such repairs and/or
maintenance are reasonably expected to require longer than thirty (30) days to
perform, Tenant shall commence such repairs and/or maintenance within such
thirty (30) day period and shall diligently prosecute such repairs and
maintenance to completion. Should Tenant fail to perform such repairs and/or
maintenance within the periods described in the immediately preceding sentence,
Landlord shall have the right to cause such work to be performed and to charge
Tenant as Additional Rent for the actual cost of such work plus interest at the
Interest Rate from the date of Landlord's payment of such actual costs to the
date of Tenant's reimbursement to Landlord. Upon the expiration or earlier
termination of this Lease, Tenant shall, at Tenant's sole cost and expense,
cause Tenant's Signage to be removed and shall cause the areas in which such
Tenant's Signage was located to be restored to the condition existing
immediately prior to the placement of such Tenant's Signage. If Tenant fails to
timely remove such Tenant's Signage or to restore the areas in which such
Tenant's Signage was located, as provided in the immediately preceding sentence,
then Landlord may perform such work, and all actual costs incurred by Landlord
in so performing, plus interest at the Interest Rate from the date of Landlord's
payment of such costs to the date of Tenant's reimbursement to Landlord, shall
be reimbursed by Tenant to Landlord within ten (10) days after Tenant's receipt
of an invoice therefor. The terms and conditions of this Section 23.4.4 shall
survive the expiration or earlier termination of this Lease.
ARTICLE 24
----------
COMPLIANCE WITH LAW
-------------------
Tenant shall not do anything or suffer anything to be done in or about the
Premises or the Project which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement now in force or
which may hereafter be enacted or promulgated. At its sole cost and expense,
Tenant shall promptly comply with all such governmental measures. Should any
standard or regulation now or hereafter be imposed on Tenant by a state, federal
or local governmental body charged with the establishment, regulation and
enforcement of occupational, health or safety standards for employers,
employees, landlords or tenants, then Tenant agrees, at its sole cost and
expense, to comply promptly with such standards or regulations. Tenant shall be
responsible, at its sole cost and expense, to make all alterations to the
Premises as are required to comply with the governmental rules, regulations,
requirements or standards described in this Article 24, except for any such
----------
alterations to the Building Structure,
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which shall be performed by Landlord pursuant to the TCCs of this Lease. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any judicial action, regardless of whether Landlord is a party thereto, that
Tenant has violated any of said governmental measures, shall be conclusive of
that fact as between Landlord and Tenant. If, on or before the eighth (8th)
anniversary of the Lease Commencement Date, Tenant becomes obligated, at
Tenant's sole cost and expense, to make an improvement or alteration to the
Building Systems which shall be capital in nature, Tenant may elect, upon
immediate notice thereof to Landlord, to have Landlord make such improvement or
alteration to the Building Systems, the cost of which shall be amortized with
interest over its useful life as reasonably determined by Landlord pursuant to
sound real estate accounting and management principles, consistently applied,
and shall be paid by Tenant to Landlord as Additional Rent; provided, however,
(i) Tenant shall not have such option to the extent such improvement or
alteration is necessary due to the negligence or willful misconduct of Tenant or
the Tenant's Parties, and (ii) to the extent Tenant's use of the improvement or
alteration reduces the useful life (as determined pursuant to GAAP) of such
improvement or alteration, the cost of such improvement or alteration shall be
amortized with interest over such shorter time period.
ARTICLE 25
----------
LATE CHARGES
------------
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord
by reason of Tenant's failure to pay Rent and/or other charges when due
hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) the
annual "BANK PRIME LOAN" rate cited in the Federal Reserve Statistical Release
Publication G.13(415), published on the first Tuesday of each calendar month (or
such other comparable index as Landlord and Tenant shall reasonably agree upon
if such rate ceases to be published) plus four (4) percentage points, and (ii)
the highest rate permitted by applicable law.
ARTICLE 26
----------
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
----------------------------------------------------
26.1 LANDLORD'S CURE. All covenants and agreements to be kept or
---------------
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or
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perform any such act on Tenant's part without waiving its rights based upon any
default of Tenant and without releasing Tenant from any obligations hereunder.
26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided to
----------------------
the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by
Landlord to Tenant of statements therefor: (i) sums equal to expenditures
reasonably made and obligations incurred by Landlord in connection with the
remedying by Landlord of Tenant's defaults pursuant to the provisions of Section
26.1; and (ii) sums equal to all expenditures made and obligations incurred by
Landlord in collecting or attempting to collect the Rent (where the same was not
paid within three days of notice that the same was not paid when due) or in
enforcing or attempting to enforce any rights of Landlord under this Lease or
pursuant to law, including, without limitation, all legal fees and other amounts
so expended. Tenant's obligations under this Section 26.2 shall survive the
expiration or sooner termination of the Lease Term.
ARTICLE 27
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees,
or to current or prospective mortgagees, ground or underlying lessors or
insurers, or, during the last six (6) months of the Lease Term, prospective
tenants; (iii) post notices of nonresponsibility; or (iv) for alterations,
repairs or improvements to the Building Structure. Notwithstanding anything to
the contrary contained in this Article 27, Landlord may enter the Premises at
any time to (A) perform services required of Landlord under this Lease; (B) take
possession due to any breach of this Lease in the manner provided herein; and
(C) perform any covenants of Tenant which Tenant fails to perform (after any
applicable notice and cure periods). Landlord may make any such entries without
the abatement of Rent and may take such reasonable steps as required to
accomplish the stated purposes. Tenant hereby waives any claims for damages or
for any injuries or inconvenience to or interference with Tenant's business,
lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby. For each of the above purposes, Landlord shall at
all times have a key with which to unlock all the doors in the Premises,
excluding Tenant's vaults, safes and special security areas designated in
advance by Tenant. In an emergency, Landlord shall have the right to use any
means that Landlord may deem proper to open the doors in and to the Premises.
Any entry into the Premises by Landlord in the manner hereinbefore described
shall not be deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an actual or constructive eviction of Tenant from any portion
of the Premises. No provision of this Lease shall be construed as obligating
Landlord to perform any repairs, alterations or decorations except as otherwise
expressly agreed to be performed by Landlord herein.
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ARTICLE 28
----------
TENANT PARKING
--------------
Tenant shall, at all times during the Lease Term and at no additional
charge, have the exclusive use of the parking areas on Lot 5 (the legal parcel
on which the Building is located), which parking areas are indicated on Exhibit
A attached hereto. Tenant shall have the right to designate visitor, car-
pooling, executive and other parking as Tenant may reasonably require, subject
to Landlord's reasonable approval. Tenant shall be responsible for the full
amount of any taxes imposed by any governmental authority in connection with the
use of such parking areas by Tenant. Tenant's continued right to use the parking
passes is conditioned upon Tenant abiding by all reasonable rules and
regulations which are prescribed from time to time for the orderly operation and
use of such parking area, including any sticker or other identification system
established by Landlord, Tenant's cooperation in seeing that Tenant's employees
and visitors also comply with such rules and regulations and Tenant not being in
default under this Lease. The parking areas to be used by Tenant pursuant to
this Article 28 are provided exclusively to Tenant solely for use by Tenant's
own personnel and such area (and the right to use such area) may not be
transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval; provided, however, Landlord shall be deemed to have
granted such approval with regard to Non-Transfers and Transfers approved
pursuant to the TCC's of Article 14.
ARTICLE 29
----------
MISCELLANEOUS PROVISIONS
------------------------
29.1 TERMS; CAPTIONS. The words "Landlord" and "Tenant" as used herein
---------------
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.
29.2 BINDING EFFECT. Subject to all other provisions of this Lease, each
--------------
of the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.3 NO AIR RIGHTS. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.
29.4 MODIFICATION OF LEASE. Should any current or prospective mortgagee
---------------------
or ground lessor for the Building or Project require a modification of this
Lease, which modification will not cause an increased cost or expense to Tenant
or in any other way materially and adversely change the rights and obligations
of Tenant hereunder, then and in such event, Tenant agrees that this Lease may
be so modified and agrees to execute whatever documents are reasonably
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required therefor and to deliver the same to Landlord within ten (10) days
following a request therefor. At the request of Landlord or any mortgagee or
ground lessor, Tenant agrees to execute a short form of Lease and deliver the
same to Landlord within ten (10) days following the request therefor.
29.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord
-------------------------------
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security Deposit,
and Tenant shall attorn to such transferee. Tenant further acknowledges that
Landlord may assign its interest in this Lease to a mortgage lender as
additional security and agrees that such an assignment shall not release
Landlord from its obligations hereunder and that Tenant shall continue to look
to Landlord for the performance of its obligations hereunder.
29.6 PROHIBITION AGAINST RECORDING. Except as set forth hereinbelow
-----------------------------
and/or provided in Section 29.4 of this Lease, neither this Lease, nor any
memorandum, affidavit or other writing with respect thereto, shall be recorded
by Tenant or by anyone acting through, under or on behalf of Tenant.
Concurrently with the execution of this Lease, Landlord and Tenant shall deliver
recordable counterparts of a Short Form of Lease, in the form attached hereto as
Exhibit H, which may be recorded in the Official Records of the County Recorder
of San Diego, by either Landlord or Tenant. The recordation of any such document
shall be at the sole cost and expense of the party conducting such recordation,
and where requested by Landlord, such cost shall not be included as an Operating
Expense.
29.7 LANDLORD'S TITLE. Landlord's title is and always shall be paramount
----------------
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord.
29.8 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
-----------------------
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9 APPLICATION OF PAYMENTS. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.
29.10 TIME OF ESSENCE. Time is of the essence with respect to the
---------------
performance of every provision of this Lease in which time of performance is a
factor.
29.11 PARTIAL INVALIDITY. If any term, provision or condition contained
------------------
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
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provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12 NO WARRANTY. In executing and delivering this Lease, Tenant has not
-----------
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.
29.13 LANDLORD EXCULPATION. The liability of Landlord or the Landlord
--------------------
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
(1) to the extent such liability arises prior to the Lease Commencement Date,
the interest of Landlord in the Building (including any insurance proceeds which
Landlord receives); provided that if the Building is encumbered by third-party
debt in excess of eighty percent (80%) of the value of the Building, such value
shall be the equity interest Landlord would have in the Building if the Building
were encumbered by such third-party debt in an amount equal to eighty percent
(80%) of the value of the Building, or (2) to the extent such liability arises
after the Lease Commencement Date, the lesser of (a) the interest of Landlord in
the Building (including any insurance, condemnation or sales proceeds which
Landlord receives (which sales proceeds shall include the monetary value of any
non- monetary interests received)); provided that if the Building is encumbered
by third-party debt in excess of eighty percent (80%) of the value of the
Building, such value shall be the equity interest Landlord would have in the
Building if the Building were encumbered by such third-party debt in an amount
equal to eighty percent (80%) of the value of the Building, or (b) the equity
interest Landlord would have in the Building if the Building were encumbered by
third- party debt in an amount equal to eighty percent (80%) of the value of the
Building (as such value is determined by Landlord), provided, however, that
except as specifically stated above with regard to the calculation of Landlord's
interests, in no event shall such liability extend to any sales or insurance
proceeds received by Landlord or the Landlord Parties in connection with the
Project, Building or Premises. Neither Landlord, nor any of the Landlord Parties
shall have any personal liability therefor, and Tenant hereby expressly waives
and releases such personal liability on behalf of itself and all persons
claiming by, through or under Tenant. The limitations of liability contained in
this Section 29.13 shall inure to the benefit of Landlord's and the Landlord
Parties' present and future partners, beneficiaries, officers, directors,
trustees, shareholders, agents and employees, and their respective partners,
heirs, successors and assigns. Under no circumstances shall any present or
future partner of Landlord (if Landlord is a partnership), or trustee or
beneficiary (if Landlord or any partner of Landlord is a trust), have any
liability for the performance of Landlord's obligations under this Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties shall be liable under any circumstances for injury or damage to, or
interference with, Tenant's business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring.
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29.14 ENTIRE AGREEMENT. It is understood and acknowledged that there are
----------------
no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties' entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the TCC's of this Lease can be modified, deleted or added to
except in writing signed by the parties hereto.
29.15 RIGHT TO LEASE. Landlord reserves the absolute right to effect such
--------------
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
-------------
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease and except as to Tenant's obligations under Section 5.2
and Article 24 of this Lease (collectively, a "FORCE MAJEURE"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
29.17 WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives, for Tenant
------------------------------
and for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.
29.18 NOTICES. All notices, demands, statements, designations,
-------
approvals or other communications (collectively, "NOTICES") given or required to
be given by either party to the other hereunder or by law shall be in writing,
shall be (A) sent by United States certified or registered mail, postage
prepaid, return receipt requested ("MAIL"), (B) transmitted by telecopy, if such
telecopy is promptly followed by a Notice sent by Mail, (C) delivered by a
nationally recognized overnight courier, or (D) delivered personally. Any Notice
shall be sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be deemed
given (i) three (3) days after the date it is posted if sent by Mail, (ii) the
date the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be made (if
such notice is refused). If Tenant is notified of the identity and address of
Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such
mortgagee or ground or underlying lessor written notice of any default by
Landlord under the TCC's of this Lease by registered or certified mail, and such
mortgagee or ground or underlying lessor shall be
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given a reasonable opportunity to cure such default prior to Tenant's exercising
any remedy available to Tenant. As of the date of this Lease, any Notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
following addresses:
Kilroy Realty Corporation
2250 East Imperial Highway
Suite 1200
El Segundo, California 90245
Attention: Legal Department
with copies to:
Kilroy Realty Corporation
12348 High Bluff Drive, Suite 110
San Diego, California 92130
Attention: Ms. Lisa Irvin
and
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
29.19 JOINT AND SEVERAL. If there is more than one Tenant, the
-----------------
obligations imposed upon Tenant under this Lease shall be joint and several.
29.20 AUTHORITY. If Tenant or Landlord is a corporation, trust or
---------
partnership, each individual executing this Lease on behalf of Tenant or
Landlord hereby represents and warrants that Landlord or Tenant, as appropriate,
is a duly formed and existing entity qualified to do business in California and
that Landlord or Tenant, as appropriate, has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Landlord or
Tenant, as appropriate, is authorized to do so.
29.21 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, then all costs and expenses, including
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 judgment.
29.22 GOVERNING LAW; WAIVER OF TRIAL BY JURY. This Lease shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of California.
IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT
TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA,
(II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN
THE INTEREST OF SAVING TIME AND EXPENSE,
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TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM
FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.
29.23 SUBMISSION OF LEASE. Submission of this instrument for examination
-------------------
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
29.24 BROKERS. Landlord and Tenant hereby warrant to each other that
-------
they have had no dealings with any real estate broker or agent in connection
with the negotiation of this Lease, excepting only the real estate brokers or
agents specified in Section 12 of the Summary (the "BROKERS"), and that they
know of no other real estate broker or agent who is entitled to a commission in
connection with this Lease. Each party agrees to indemnify and defend the other
party against and hold the other party harmless from any and all claims,
demands, losses, liabilities, lawsuits, judgments, costs and expenses (including
without limitation reasonable attorneys' fees) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of any
dealings with any real estate broker or agent, other than the Brokers, occurring
by, through, or under the indemnifying party.
29.25 INDEPENDENT COVENANTS. This Lease shall be construed as though the
---------------------
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26 PROJECT OR BUILDING NAME AND SIGNAGE. Landlord shall have the right
------------------------------------
at any time to change the name of the Project or Building. Tenant shall not use
the name of the Project or Building or use pictures or illustrations of the
Project or Building in advertising or other publicity or for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
without the prior written consent of Landlord.
29.27 COUNTERPARTS. This Lease may be executed in counterparts with the
------------
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28 CONFIDENTIALITY. Tenant acknowledges that the content of this Lease
---------------
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants, and except as required to be disclosed by
any applicable law or regulation. Landlord and Tenant hereby acknowledge that a
copy of this Lease will be attached to Tenant's filings with the Securities and
Exchange Commission.
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29.29 TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all
-------------------------
present or future governmental programs intended to manage parking,
transportation or traffic in and around the Building, and in connection
therewith, Tenant shall take responsible action for the transportation planning
and management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other
transportation- related committees or entities.
29.30 BUILDING RENOVATIONS. It is specifically understood and agreed that
--------------------
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no representations
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant except as specifically set forth herein or in the Tenant Work
Letter.
29.31 NO VIOLATION. Tenant hereby warrants and represents that neither
------------
its execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.32 COMMUNICATIONS AND COMPUTER LINES. Tenant may install, maintain,
---------------------------------
replace, remove or use any communications or computer wires and cables
(collectively, the "LINES") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord's prior written consent, use an
experienced and qualified contractor approved in writing by Landlord, and comply
with all of the other provisions of Articles 7 and 8 of this Lease, (ii) the
Lines therefor (including riser cables) shall be appropriately insulated to
prevent excessive electromagnetic fields or radiation, and shall be surrounded
by a protective conduit reasonably acceptable to Landlord, (iii) any new or
existing Lines servicing the Premises shall comply with all applicable
governmental laws and regulations, (iv) as a condition to permitting the
installation of new Lines, Landlord may require that Tenant remove existing
Lines located in or serving the Premises and repair any damage in connection
with such removal, and (v) Tenant shall pay all costs in connection therewith.
Landlord reserves the right to require that Tenant remove any Lines located in
or serving the Premises which are installed in violation of these provisions, or
which are at any time in violation of any laws or represent a dangerous or
potentially dangerous condition.
29.33 HAZARDOUS SUBSTANCES.
--------------------
29.33.1 DEFINITIONS. For purposes of this Lease, the following
-----------
definitions shall apply: "HAZARDOUS MATERIAL(S)" shall mean any substance or
material that is described as a toxic or hazardous substance, waste, material,
pollutant, contaminant or infectious waste, or any matter that in certain
specified quantities would be injurious to the public health or welfare, or
words of similar import, in any of the "Environmental Laws," as that term is
defined below in this Section 29.33.1, or any other words which are intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or reproductive
toxicity and includes, without limitation, asbestos, petroleum (including crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or
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synthetic gas usable for fuel, or any mixture thereof), petroleum products,
polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter,
medical waste, and chemicals which may cause cancer or reproductive toxicity.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and quasi-
governmental laws (whether under common law, statute or otherwise), ordinances,
decrees, codes, rulings, awards, rules, regulations and guidance documents now
or hereafter be enacted or promulgated as amended from time to time, in any way
relating to or regulating Hazardous Materials.
29.33.2 COMPLIANCE WITH ENVIRONMENTAL LAWS. Landlord covenants
----------------------------------
that during the Lease Term, Landlord shall comply with all Environmental Laws in
accordance with, and as required by, the terms and conditions of Article 24 of
this Lease; provided, however, such compliance is not the responsibility of
Tenant under this Lease, and provided further that Landlord's failure to comply
therewith would prohibit Tenant from obtaining or maintaining a certificate of
occupancy for the Premises, or would unreasonably and materially affect the
safety of Tenant's Parties or create a significant health hazard for Tenant's
Parties or otherwise materially interfere with or materially affect Tenant's
Permitted Use and enjoyment of the Premises.
29.33.3 INDEMNIFICATIONS. Landlord agrees to indemnify, defend,
----------------
protect and hold harmless Tenant and the Tenant Parties from any and all claims
of liability asserted against Tenant or any Tenant Parties by a third party,
including without limitation any agency or instrumentality of the federal, state
or local government, for bodily injury, including death, physical damage to or
loss of use of property or cleanup activities to the extent required by
applicable law (remedial or removal), arising from any Hazardous Materials
(collectively, "HAZARDOUS MATERIALS CLAIMS") to the extent placed in, on, under
or about the Project by Landlord Parties. Tenant agrees to indemnify, defend,
protect and hold harmless Landlord and the Landlord Parties from any and all
Hazardous Materials Claims arising from any Hazardous Materials to the extent
placed in, on, under or about the Premises or the Project by Tenant or Tenant
Parties.
29.33.4 PRE-EXISTING HAZARDOUS MATERIALS. Tenant shall be under
--------------------------------
no obligation to investigate or remediate any Hazardous Material located in, on,
under or about the Premises as of the Lease Commencement Date (the "EXISTING
HAZARDOUS MATERIALS") or any Hazardous Materials which have migrated onto the
Property from off-site or which are brought onto the Property by Landlord or
Landlord's agents, employees or contractors. Additionally, Landlord agrees that
it shall indemnify, defend and hold Tenant and any Tenant Party harmless from
any cost and all claims of liability asserted against Tenant/Tenant Party by a
third party, including any agency or instrumentality of the federal, state or
local government, for cleanup activities to the extent required by applicable
law (remedial or removal), or governmental fines or penalties, relating to the
Existing Hazardous Materials and those Hazardous materials which are brought
onto the Property by Landlord or Landlord's agents, employees or contractors.
29.34 DEVELOPMENT OF THE PROJECT.
--------------------------
29.34.1 SUBDIVISION. Landlord reserves the right to further
-----------
subdivide all or a portion of the Project. Tenant agrees to execute and deliver,
upon demand by Landlord and
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<PAGE>
in the form requested by Landlord, any additional documents needed to conform
this Lease to the circumstances resulting from such subdivision.
29.34.2 THE OTHER IMPROVEMENTS. If portions of the Project or
----------------------
property adjacent to the Project (collectively, the "OTHER IMPROVEMENTS") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements to
provide (i) for reciprocal rights of access and/or use of the Project and the
Other Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, (iii) for the allocation of a portion of the Direct Expenses to
the Other Improvements and the operating expenses and taxes for the Other
Improvements to the Project, and (iv) for the use or improvement of the Other
Improvements and/or the Project in connection with the improvement,
construction, and/or excavation of the Other Improvements and/or the Project;
provided that none of the foregoing materially adversely interfere with Tenant's
rights under this Lease. Nothing contained herein shall be deemed or construed
to limit or otherwise affect Landlord's right to convey all or any portion of
the Project or any other of Landlord's rights described in this Lease.
29.34.3 CONSTRUCTION OF PROJECT AND OTHER IMPROVEMENTS. Tenant
----------------------------------------------
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Landlord
shall use its commercially reasonable efforts to minimize the disruption to
Tenant and Tenant's business from such construction and in no event shall
Landlord be entitled to use Tenant's parking areas for construction staging,
storage of equipment or other construction related activities without Tenant's
approval, which may be granted or withheld in Tenant's sole discretion. Tenant
hereby waives any and all rent offsets or claims of constructive eviction which
may arise in connection with such construction.
29.35 TENANT RIGHT OF FIRST OFFER TO PURCHASE BUILDING. Landlord shall
------------------------------------------------
grant to the Original Tenant and its Affiliates a right of first offer with
respect to purchasing the Project, but only to the extent Landlord chooses to
sell the Building on an individual, single-building basis, and provided that
Tenant is not then in Default under this Lease (beyond any applicable notice and
cure periods). Landlord shall notify Tenant (the "First Offer Notice") in the
event Landlord desires to sell the Project on such an individual,
single-building basis, and shall notify Tenant of the material price, terms
(both monetary and non-monetary) and conditions pursuant to which it is willing
to sell the Project. Tenant shall, during the fifteen (15) day period after
Tenant's receipt of such First Offer Notice (the "EXCLUSIVE NEGOTIATION
PERIOD"), have an exclusive opportunity to agree with Landlord upon such price,
terms and conditions. If Tenant does not agree to such price, terms and
conditions within the Exclusive Negotiation Period, Landlord shall have no
obligation to sell the Building to Tenant and Landlord shall be free to
negotiate and enter into a purchase agreement for the Building to anyone whom it
desires on any price, terms and conditions it may agree. In the event Landlord
thereafter consummates the sale of the Building pursuant to such a purchase
agreement identified in the preceding sentence, the rights contained in this
Section 29.35 shall terminate and be of no further force or effect. The rights
contained in this Section 29.35 shall be personal to the Original Tenant and its
Affiliates and may only be exercised by the Original Tenant or an Affiliate (and
not any assignee, subleasee or
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<PAGE>
other transferee of the Original Tenant's interest in this Lease) if the
Original Tenant and/or an Affiliate occupies the entire Premises.
29.36 SUCCESSFUL IPO CONDITION PRECEDENT. This Lease is subject to and
----------------------------------
expressly conditioned upon Tenant having a "Successful IPO," as that terms is
set forth below, on or before February 29, 2000. For purposes of this section
29.36, a "Successful IPO" means (A) an initial public offering of shares of
Tenant's stock on a recognized national stock market, (B) where the share price
of tendered shares is no less than $13.00, (C) resulting in a Market
Capitalization of no less than $350,000,000.00 and (D) with Tenant thereafter
having no less than $35,000,000 of Working Capital. In the event Tenant fails to
complete a Successful IPO on or before February 29, 2000, this Lease shall
immediately terminate and be of no further force or effect; provided, however,
Tenant shall reimburse Landlord for its expenditures through the date of such
termination pursuant to that certain side letter dated December 27th, 1999 and
countersigned on December 28th, 1999 by and between Landlord and Tenant.
29.37 BUILDING B LEASE. Landlord and Tenant hereby acknowledge that
----------------
Landlord and Tenant are, concurrently with the execution of this Lease, entering
into another lease (the "BUILDING B LEASE") for an approximately 60,060 rentable
square foot building to be constructed on Lot 4 of the Project and to be known
as "BUILDING B". Tenant's execution and delivery of the Building B Lease is a
material condition to Landlord's execution and delivery of this Lease. Tenant
hereby acknowledges that a default (beyond any applicable notice and cure
periods) of this Lease shall constitute a default under the Building B Lease
and, conversely, a default (beyond any applicable notice and cure periods) of
the Building B Lease shall constitute a default of Section 19.1.4 of this Lease.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
"LANDLORD":
KR-GATEWAY PARTNERS,
a Delaware limited liability company
By: Kilroy Realty, L.P.,
a Delaware limited partnership
Managing Member
By: Kilroy Realty Corporation,
a Maryland corporation
General Partner
By:______________________________
Name:____________________________
Its:______________________
By:______________________________
Name:____________________________
Its:______________________
"TENANT":
DIVERSA CORPORATION,
a Delaware corporation
By:______________________________
Name:____________________________
Its:______________________
By:______________________________
Name:____________________________
Its:______________________
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<PAGE>
EXHIBIT A
---------
SORRENTO GATEWAY
OUTLINE OF PREMISES
[ATTACHED]
EXHIBIT A
-1-
<PAGE>
EXHIBIT B
---------
SORRENTO GATEWAY
TENANT WORK LETTER
[ATTACHED]
EXHIBIT B
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<PAGE>
EXHIBIT C
---------
SORRENTO GATEWAY
NOTICE OF LEASE TERM DATES
To:
__________________________
__________________________
__________________________
__________________________
Re: Lease dated ____________, 19__ between ____________________, a
__________________ ("Landlord"),and _______________________, a
____________________("Tenant") concerning that certain 75,520 rentable
square foot building located at ______________________, San Diego,
California.
Gentlemen:
In accordance with the lease (the "Lease"), we wish to advise you and/or
confirm as follows:
1. The Lease Term shall commence on or has commenced on ______________
for a term of __________________ ending on __________________.
2. Rent commenced to accrue on __________________, in the amount of
________________.
3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall be
for the full amount of the monthly installment as provided for in the
Lease.
4. Your rent checks should be made payable to __________________ at
___________________.
5. The exact number of rentable/usable square feet within the Premises is
____________ square feet.
EXHIBIT C
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<PAGE>
6. Tenant's Share as adjusted based upon the exact number of usable
square feet within the Premises is ________%.
"Landlord":
___________________________,
a _________________________
By:________________________
Its:____________________
Agreed to and Accepted
as of ____________, 19___.
"Tenant":
_________________________
a _______________________
By:______________________
Its:__________________
EXHIBIT C
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<PAGE>
EXHIBIT D
---------
SORRENTO GATEWAY
RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of any
conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.
1. Landlord shall have the right to prescribe the weight, size and position
of all safes and other heavy property brought into the Building and also the
times and manner of moving the same in and out of the Building. Safes and other
heavy objects shall, if considered necessary by Landlord, stand on supports of
such thickness as is necessary to properly distribute the weight. Landlord will
not be responsible for loss of or damage to any such safe or property in any
case. Any damage to any part of the Building, its contents, occupants or
visitors by moving or maintaining any such safe or other property shall be the
sole responsibility and expense of Tenant.
2. The requirements of Tenant will be attended to only upon application at
the management office for the Project or at such office location designated by
Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.
3. No advertisement, notice or handbill shall be exhibited, distributed,
painted or affixed by Tenant on any part of the Premises or the Building without
the prior written consent of the Landlord. Tenant shall not disturb, solicit,
peddle, or canvass any occupant of the Project and shall cooperate with Landlord
and its agents of Landlord to prevent same.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the tenant who, or whose servants, employees, agents, visitors or
licensees shall have caused same.
5. Tenant shall not overload the floor of the Premises.
6. Tenant shall not use or keep in or on the Premises, the Building, or the
Project any kerosene, gasoline, explosive material, corrosive material, material
capable of emitting toxic fumes, or other inflammable or combustible fluid
chemical, substitute or material, except in compliance with applicable law.
Tenant shall provide material safety data sheets for any Hazardous Material used
or kept on the Premises.
7. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises to the extent the same is
noticeable in the Common Areas of the
EXHIBIT D
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<PAGE>
Project or which affects other tenants of the Project. Tenant shall not throw
anything out of doors, windows or skylights or down passageways.
8. Except with respect to an approved "Deli Operator," no cooking shall be
done or permitted on the Premises (unless Tenant receives Landlord's prior
written approval to install a cafeteria for its employees in the Premises), nor
shall the Premises be used for lodging or for any improper, objectionable or
immoral purposes. Notwithstanding the foregoing, Underwriters' laboratory-
approved equipment and microwave ovens may be used in the Premises for heating
food and brewing coffee, tea, hot chocolate and similar beverages for employees
and visitors, provided that such use is in accordance with all applicable
federal, state, county and city laws, codes, ordinances, rules and regulations.
9. Tenant shall not occupy or permit any portion of the Premises to be
occupied as an office for a messenger-type operation or dispatch office, public
stenographer or typist, or for the manufacture or sale of liquor, narcotics, or
tobacco in any form, or as a medical office, or as a barber or manicure shop, or
as an employment bureau without the express prior written consent of Landlord.
Tenant shall not engage or pay any employees on the Premises except those
actually working for such tenant on the Premises nor advertise for laborers
giving an address at the Premises.
10. Tenant shall store all its trash and garbage within the interior of the
Premises or in the appropriate external trash area(s) for the Building. No
material shall be placed in the trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in San Diego, California
without violation of any law or ordinance governing such disposal. If the
Premises is or becomes infested with vermin as a result of the use or any misuse
or neglect of the Premises by Tenant, its agents, servants, employees,
contractors, visitors or licensees, Tenant shall forthwith, at Tenant's expense,
cause the Premises to be exterminated from time to time to the satisfaction of
Landlord and shall employ such licensed exterminators as shall be approved in
writing in advance by Landlord.
11. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by any governmental agency.
12. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord (which shall not
be unreasonably withheld or delayed), and no curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window or door
of the Premises other than Landlord standard window and door coverings unless
otherwise consented to in writing by Landlord. All electrical ceiling fixtures
hung in the Premises or spaces along the perimeter of the Building must be
fluorescent and/or of a quality, type, design and a warm white bulb color
approved in advance in writing by Landlord. Neither the interior nor exterior of
any windows shall be coated or otherwise sunscreened without the prior written
consent of Landlord. Tenant shall be responsible for any damage to the window
film on the exterior windows of the Premises and shall promptly repair any such
damage at Tenant's sole cost and expense. Tenant shall keep its window coverings
closed during any period of the day when the sun is shining directly on the
windows of the Premises.
EXHIBIT D
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<PAGE>
13. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.
14. Tenant must comply with any applicable "NO-SMOKING" Ordinances. If
Tenant is required under the ordinance to adopt a written smoking policy, a copy
of said policy shall be on file in the office of the Building. Additionally,
Tenant must provide at least one area within the Premises in which its
employees, invitees and visitors may smoke, to the extent such area is required
by law.
15. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.
16. No auction, liquidation, fire sale, going-out-of-business or bankruptcy
sale shall be conducted in the Premises without the prior written consent of
Landlord.
17. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.
18. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate, visibly marked and properly operational fire extinguisher next to
any duplicating or photocopying machines or similar heat producing equipment,
which may or may not contain combustible material, in the Premises.
Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary (relative to a building occupied solely by one tenant) for the
management, safety, care and cleanliness of the Premises, Building, the Common
Areas and the Project, and for the preservation of good order therein, as well
as for the convenience of other occupants and tenants therein. Landlord may
waive any one or more of these Rules and Regulations for the benefit of any
particular tenants, but no such waiver by Landlord shall be construed as a
waiver of such Rules and Regulations in favor of any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules or Regulations against any or
all tenants of the Project. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.
EXHIBIT D
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<PAGE>
EXHIBIT E
---------
SORRENTO GATEWAY
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Lease (the "Lease") made and
entered into as of ___________, 199__ by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises on the ______________
floor(s) of the building located at ______________, San Diego, California
____________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease and
all amendments and modifications thereto. The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on ____________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6. Tenant shall not modify the documents contained in Exhibit A without the
prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is $_________.
8. All conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder. In addition, the undersigned has not delivered any notice to
Landlord regarding a default by Landlord thereunder.
9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
EXHIBIT E
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<PAGE>
10. As of the date hereof, there are no existing defenses or offsets, or,
to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
12. There are no actions pending against the undersigned under the
bankruptcy or similar laws of the United States or any state.
13. Other than in compliance with the TCCs of the Lease, the undersigned
has not used or stored any hazardous substances in the Premises.
14. To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and
allowances due to the undersigned under the Lease in connection with any tenant
improvement work have been paid in full.
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 19__.
"Tenant":
_____________________,
a ___________________
By:__________________
Its:_____________
By:__________________
Its:_____________
EXHIBIT E
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<PAGE>
EXHIBIT F
---------
KILROY REALTY
-------------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
ALLEN, MATKINS, LECK, GAMBLE
& MALLORY LLP
1999 Avenue of the Stars
18th Floor
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
===============================================================================
RECOGNITION OF COVENANTS,
-------------------------
CONDITIONS, AND RESTRICTIONS
----------------------------
This Recognition of Covenants, Conditions, and Restrictions (this
"AGREEMENT") is entered into as of the __ day of ________, 199__, by and between
__________________ ("Landlord"), and ________________ ("Tenant"), with reference
to the following facts:
A. Landlord and Tenant entered into that certain Lease Agreement dated
_____, 199__ (the "Lease"). Pursuant to the Lease, Landlord leased to Tenant and
Tenant leased from Landlord space (the "PREMISES") located in an office building
on certain real property described in EXHIBIT "A" attached hereto and
-----------
incorporated herein by this reference (the "PROPERTY").
B. The Premises are located in an office building located on real property
which is part of an area owned by Landlord containing approximately ___(__)
acres of real property located in the City of ____________, California (the
"PROJECT"), as more particularly described in EXHIBIT "B" attached hereto and
-----------
incorporated herein by this reference.
C. Landlord, as declarant, has previously recorded, or proposes to record
concurrently with the recordation of this Agreement, a Declaration of Covenants,
Conditions, and Restrictions (the "DECLARATION"), dated ________________, 19__,
in connection with the Project.
D. Tenant is agreeing to recognize and be bound by the terms of the
Declaration, and the parties hereto desire to set forth their agreements
concerning the same.
NOW, THEREFORE, in consideration of (a) the foregoing recitals and the
mutual agreements hereinafter set forth, and (b) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows,
1. Tenant's Recognition of Declaration. Notwithstanding that the Lease
-----------------------------------
has been executed prior to the recordation of the Declaration, Tenant agrees to
recognize and by bound by all of the terms and conditions of the Declaration.
EXHIBIT F
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<PAGE>
2. Miscellaneous.
-------------
2.1 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, estates, personal
representatives, successors, and assigns.
2.2 This Agreement is made in, and shall be governed,
enforced and construed under the laws of, the State of California.
2.3 This Agreement constitutes the entire understanding and
agreements of the parties with respect to the subject matter hereof, and shall
supersede and replace all prior understandings and agreements, whether verbal or
in writing. The parties confirm and acknowledge that there are no other
promises, covenants, understandings, agreements, representations, or warranties
with respect to the subject matter of this Agreement except as expressly set
forth herein.
2.4 This Agreement is not to be modified, terminated, or
amended in any respect, except pursuant to any instrument in writing duly
executed by both of the parties hereto.
2.5 In the event that either party hereto shall bring any
legal action or other proceeding with respect to the breach, interpretation, or
enforcement of this Agreement, or with respect to any dispute relating to any
transaction covered by this Agreement, the losing party in such action or
proceeding shall reimburse the prevailing party therein for all reasonable costs
of litigation, including reasonable attorneys' fees, in such amount as may be
determined by the court or other tribunal having jurisdiction, including matters
on appeal.
2.6 All captions and heading herein are for convenience and
ease of reference only, and shall not be used or referred to in any way in
connection with the interpretation or enforcement of this Agreement.
2.7 If any provision of this Agreement, as applied to any
party or to any circumstance, shall be adjudged by a court of competent
jurisdictions to be void or unenforceable for any reason, the same shall not
affect any other provision of this Agreement, the application of such provision
under circumstances different form those adjudged by the court, or the validity
or enforceability of this Agreement as a whole.
2.8 Time is of the essence of this Agreement.
2.9 The Parties agree to execute any further documents, and
take any further actions, as may be reasonable and appropriate in order to carry
out the purpose and intent of this Agreement.
2.10 As used herein, the masculine, feminine or neuter
gender, and the singular and plural numbers, shall each be deemed to include the
others whenever and whatever the context so indicates.
EXHIBIT F
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<PAGE>
SIGNATURE PAGE OF RECOGNITION OF
COVENANTS, CONDITIONS AND RESTRICTIONS
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
"Landlord":
-------------------------,
a ________________________
By:_______________________
Its:___________________
"Tenant":
_________________________,
a _______________________
By:______________________
Its:__________________
By:______________________
Its:__________________
EXHIBIT F
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<PAGE>
EXHIBIT G
---------
FORM OF LETTER OF CREDIT
------------------------
(Letterhead of a money center bank
acceptable to the Landlord)
______________, 2000
_______________________
_______________________
_______________________
_______________________
Gentlemen:
We hereby establish our Irrevocable Letter of Credit and authorize you to
draw on us at sight for the account of _____________________, a
_____________________, the aggregate amount of _____________________ and No/100
Dollars ($_________).
Funds under this Letter of Credit are available to the beneficiary hereof
as follows:
Any or all of the sums hereunder may be drawn down at any time and from
time to time from and after the date hereof by _____________________
("Beneficiary") when accompanied by this Letter of Credit and a written
statement signed by __________________________, certifying that such moneys are
due and owing to Beneficiary, together with a certificate of incumbency executed
by ___________________ certifying the position and signature of the officer
signing the statement, and a sight draft executed and endorsed by _____________,
as a ________________ of Beneficiary.
This Letter of Credit is transferable in its entirety. Should a transfer be
desired, such transfer will be subject to the return to us of this advice,
together with written instructions.
The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank. We hereby agree that this Letter of Credit shall be duly
honored upon presentation and delivery of the certification specified above.
This Letter of Credit shall expire on ______________, 200__.
Notwithstanding the above expiration date of this Letter of Credit, the
term of this Letter of Credit shall be automatically renewed for successive,
additional one (1) year periods unless, at least thirty (30) days prior to any
such date of expiration, the undersigned shall give written notice to Holder, by
certified mail, return receipt requested and at the address set forth above or
at such other address as may be given to the undersigned by Holder, that this
Letter of Credit will not be renewed.
EXHIBIT G
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<PAGE>
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1983 Revision), International Chamber of Commerce
Publication 400.
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1983 Revision). International Chamber of Commerce
Publication 400.
Very truly yours.
(Name of Issuing Bank)
By:____________________________
EXHIBIT G
-2-
<PAGE>
EXHIBIT H
---------
FORM OF SHORT FORM OF LEASE
---------------------------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
_______________________
_______________________
_______________________
_______________________
===============================================================================
SHORT FORM OF LEASE
-------------------
THIS SHORT FORM OF LEASE ("MEMORANDUM") is made as of February 11, 2000, by
and between KR-Gateway Partners, a Delaware limited liability company
("LANDLORD") and Diversa Corporation, a Delaware corporation ("TENANT").
Pursuant to that certain Retail Lease by and between Landlord and Tenant dated
as of November 16, 1999 (the "LEASE"), subject to and in accordance with the
terms of such Lease, Landlord hereby leases to Tenant that certain premises
contained therein within the project comprised of that certain real property
described in Schedule 1 attached hereto and incorporated herein by reference.
----------
All the terms, conditions, covenants and agreements in the Lease are
incorporated into this Memorandum with the same force and effect as if they were
fully recited herein.
EXHIBIT H
-1-
<PAGE>
In the event of any inconsistency between the terms of this Memorandum and
the terms of the Lease, the Lease shall control.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date first set forth above.
"Landlord":
____________________________,
a __________________________
By:_________________________
Name:_______________________
Its:________________________
"Tenant":
____________________________,
a __________________________
By:_________________________
Name:_______________________
Its:________________________
EXHIBIT H
-2-
<PAGE>
EXHIBIT B
---------
SORRENTO GATEWAY
----------------
TENANT WORK LETTER
------------------
PREAMBLE
--------
This Tenant Work Letter sets forth the TCCs relating to the construction of
the Premises. This Tenant Work Letter is essentially organized chronologically
and specifically addresses the issues of the construction of the Premises, in
sequence, as such issues will arise during the actual construction of the
Premises. All references in this Tenant Work Letter to Articles or Sections of
"this Lease" shall mean the relevant portions of Articles 1 through 29 of the
Lease to which this Tenant Work Letter is attached as EXHIBIT B, and all
---------
references in this Tenant Work Letter to Sections of this "Tenant Work Letter"
shall mean the relevant portions of Sections 1 through 6 of this Tenant Work
Letter. Except as defined to the contrary, all defined terms used in the Tenant
Work Letter shall have the same meaning as the terms defined in the Lease.
SECTION 1
---------
DELIVERY OF THE PREMISES AND BASE BUILDING
------------------------------------------
1.1 BASE BUILDING. In accordance with the TCCs of this Lease, Landlord
-------------
shall deliver to Tenant the Base Building, which materially shall comply with
and include the items and matters set forth on SCHEDULE 1 attached to this
----------
EXHIBIT B, at Landlord's sole cost and expense and without deduction from the
- ---------
Tenant and Core Improvement Allowance. The Base Building shall be in good
condition and working order and shall comply with applicable building codes and
other governmental laws, ordinances and regulations which were enacted prior to
the Lease Commencement Date and applicable to new construction for unoccupied
space to the extent required to obtain a certificate of occupancy (collectively,
the "CODE") and Tenant shall, except as otherwise set forth in this Lease or in
this Tenant Work Letter, accept the Premises and Base Building from Landlord in
their then existing, "as-is" condition as of the Commencement Date of this
Lease, subject to the terms of this Tenant Work Letter, subject only to
punchlist items and Landlord's obligations set forth in Article 7 of the Lease,
including, without limitation, Landlord's obligation to maintain in accordance
with Section 7.1 of the Lease the Building Structure.
1.2 INTENTIONALLY OMITTED.
---------------------
SECTION 2
---------
TENANT AND CORE IMPROVEMENTS
----------------------------
2.1 TENANT AND CORE IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a
-------------------------------------
one-time tenant and core improvement allowance (the "TENANT AND CORE IMPROVEMENT
ALLOWANCE") in the amount of $110.00 per rentable square foot of the Premises
for (A) the costs relating to the
<PAGE>
initial design and construction of the additional work of Landlord regarding the
structures and systems of the Building and its core above the level of the Base
Building (the "CORE IMPROVEMENTS"), and (B) the costs relating to the initial
design and construction of Tenant's improvements and any other improvements to
the Building above the level of the Core Improvements and the Base Building,
which are permanently affixed to the Premises, specifically including, but not
limited to Tenant's office improvements, lab improvements (including built-in
lab equipment) and other related interior improvements (the "TENANT
IMPROVEMENTS"). In addition, pursuant to Sections 2.2.1(vii) and (viii) of this
Tenant Work Letter, Tenant may use a portion of the Tenant and Core Improvement
Allowance for Tenant's FF&E and Building Signage. In no event shall Landlord be
obligated to make disbursements pursuant to this Tenant Work Letter in a total
amount which exceeds the Tenant and Core Improvement Allowance. Landlord and
Tenant acknowledge that for purposes of this Lease, the Tenant and Core
Improvement Allowance shall consist of (i) the "Base Tenant Improvement
Allowance" and the "Core Allowance," which collectively equal to $40.00 per
rentable square foot of the Premises, (ii) the "Above Standard Allowance" which
equals $70.00 per rentable square foot of the Premises, and (iii) the "Optional
Above Standard Allowance" of up to $10.00 per rentable square foot of the
Premises pursuant to the terms of Section 2.2.2 of this Tenant Work Letter.
Landlord and Tenant further acknowledge that (1) the Tenant and Core Improvement
Allowance has been factored into the Base Rent of the Lease, amortized with
interest of twelve percent (12%) per annum over the initial Lease Term, and (2)
the allocations set forth in the preceding sentence shall not affect Tenant's
usage of the Tenant and Core Improvement Allowance.
2.2 DISBURSEMENT OF THE TENANT AND CORE IMPROVEMENT ALLOWANCE.
---------------------------------------------------------
2.2.1 TENANT AND CORE IMPROVEMENT ALLOWANCE ITEMS. Except as
-------------------------------------------
otherwise set forth in this Tenant Work Letter, the Tenant and Core Improvement
Allowance shall be disbursed by Landlord (each of which disbursements shall be
made pursuant to Landlord's disbursement process) for costs related to the
construction of the Core Improvements and Tenant Improvements and for the
following items and costs (collectively the "TENANT AND CORE IMPROVEMENT
ALLOWANCE ITEMS"): (i) payment of the fees of the "Architect" and the
"Engineers," as those terms are defined in Section 3.1 of this Tenant Work
-----------
Letter; (ii) the payment of plan check, permit and license fees relating to
construction of the Tenant Improvements; (iii) the cost of any changes to the
Base Building when such changes are required by the Construction Drawings; (iv)
the cost of any changes to the Construction Drawings or Tenant Improvements
required by all applicable building codes (the "CODE"); (v) the cost of the
"Landlord Supervision Fee," as that term is defined in Section 4.3.2 of this
-------------
Tenant Work Letter; (vi) sales and use taxes; (vii) the cost of delivering,
installing and purchasing Tenant's security systems, telephone switch, and
communications equipment and cabling and Tenant's work stations, furniture,
fixtures and equipment (collectively, "FF&E"), provided that the reimbursement
for such costs does not, in the aggregate, exceed Seven and No/100 Dollars
($7.00) per rentable square foot of the Premises (the "FF&E ALLOWANCE CAP");
(viii) the cost of designing, permitting and constructing the Building Signage,
provided that the reimbursement for such costs does not, in the aggregate,
exceed 50/100 Dollars ($0.50) per rentable square foot of the Premises; and (ix)
all other third-party costs actually and reasonably expended by Landlord in
connection with the construction of the Tenant Improvements pursuant to the TCCs
of this Tenant Work Letter. Notwithstanding the foregoing, the Tenant and Core
Improvement
-2-
<PAGE>
Allowance shall not be used for (and Tenant shall have no responsibility for)
the following costs: (1) Property Maintenance Costs prior to the Lease
Commencement Date, (2) costs to correct construction defects to the Base
Building, (3) principal or interest on any construction loan obtained by
Landlord for the construction of the Tenant Improvements, or (4) Base Building
costs.
2.2.2 ABOVE STANDARD ALLOWANCE ELECTION. Tenant may, upon written
---------------------------------
notice to Landlord given on or before August 1, 2000 (provided Tenant may give
notice of a final adjustment of up to $2.00 per rentable square foot of the
Premises up to and including October 1, 2000) elect to cause the Tenant and Core
Improvement Allowance to be increased by the Above Standard Allowance in an
amount (the "TIA INCREASE") set forth in such notice; provided, however, that
the amount of such TIA Increase shall (i) be an amount equal to the product of
(A) an even number of United States Dollars (as opposed to fractions of United
States Dollars) and (B) the rentable square feet in the Premises, and (ii) in no
event exceed $10.00 per rentable square foot of the Premises. In the event
Tenant elects to increase the amount of the Tenant and Core Improvement
Allowance pursuant to the foregoing sentence, for each $1.00 per Rentable Square
Foot of such increase (up to the cumulative increase of $10.00 per Rentable
Square Foot of the Premises), the Monthly Rental Rate per Rentable Square Foot
attributable to the Premises shall be increased by $0.01 (and the corresponding
amounts of Monthly Installment of Base Rent and Annual Base Rent shall be
increased accordingly and the Base Rent for all 15 years shall be recalculated,
based on a seven percent (7%) increase every 24 months of the Lease Term).
2.2.3 TENANT IMPROVEMENT EXCESS. Any unused portion of the Tenant
-------------------------
and Core Improvement Allowance (which unused amount, when calculated on a per
rentable square foot basis, shall be the "UNUSED TIA/RSF"), shall be applied
against Rent as a reduction in the Monthly Rental Rate per Rentable Square Foot
of the Initial Premises equal to $0.01 per square foot for each $1.00 of the
Unused TIA/RSF (with the corresponding amounts of the Monthly Installment of
Base Rent and Annual Base Rent reduced accordingly) (cumulatively, the "RENT
REDUCTION").
2.3 STANDARD TENANT IMPROVEMENT PACKAGE. For purposes of this Lease, the
-----------------------------------
"BUILDING STANDARD TENANT IMPROVEMENTS" shall mean any Tenant Improvements
(approved pursuant to the TCCs of this Tenant Work Letter) constructed wholly
with the Tenant and Core Improvement Allowance.
2.4 REMOVAL OF ABOVE BUILDING STANDARD TENANT IMPROVEMENTS. "ABOVE
------------------------------------------------------
STANDARD TENANT IMPROVEMENTS" shall mean any part of the Tenant Improvements
which do not constitute Building Standard Tenant Improvements, including, but
not limited to, plumbing and millwork. If so directed by Landlord prior to the
end of the Term of this Lease, Tenant, at its sole cost and expense, shall
remove from the Premises any Above Standard Tenant Improvements designated by
Landlord, and shall replace such designated Above Standard Tenant Improvements
to be removed with Building Standard Tenant Improvements. Such removal and
replacement of Above Standard Tenant Improvements shall be performed promptly
and shall be completed by Tenant on or before the end of the Term of this Lease
if notice of removal is given at least thirty (30) days prior to the end of the
Term, and if Tenant fails to remove and/or replace any Above Standard Tenant
Improvements, Landlord may do so and Tenant shall reimburse Landlord for the
cost of such removal and/or replacement.
-3-
<PAGE>
2.5 FAILURE TO DISBURSE TENANT AND CORE IMPROVEMENT ALLOWANCE AND OTHER
-------------------------------------------------------------------
ALLOWANCES. If Landlord fails to timely fulfill its obligation to fund any
- ----------
portion of the Tenant and Core Improvement Allowance, Tenant shall be entitled
to deliver Notice ("PAYMENT NOTICE") thereof to Landlord and to any mortgage or
trust deed holder of the Building whose identity and address have been
previously provided to Tenant. If Landlord still fails to fulfill any such
obligation within twenty (20) days after Landlord's receipt of the Payment
Notice from Tenant and if Landlord fails to deliver Notice to Tenant within such
twenty (20) day period explaining Landlord's reasons that Landlord believes that
the amounts described in Tenant's Payment Notice are not due and payable by
Landlord ("REFUSAL NOTICE"), Tenant shall be entitled to fund such portion of
the Tenant and Core Improvement Allowance as defined above in Section 2.1 of
this Tenant Work Letter and to offset the amount so funded, together with
interest at the Interest Rate from the date of funding until the date of offset,
against Tenant's next obligations to pay Rent. However, if Tenant is in Default
under Section 19.1.1 of this Lease at the time that such offset would otherwise
be applicable, Tenant shall not be entitled to such offset until such Default is
cured.
SECTION 3
---------
CONSTRUCTION DRAWINGS
---------------------
3.1 SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant has retained (or
--------------------------------------------
will retain) Pacific Cornerstone Architects as the architect/space planner (the
"ARCHITECT") to prepare the "Construction Drawings," as that term is defined in
this Section 3.1. Tenant has retained Prim Structural Engineers (structural),
-----------
McParlane and Associates (mechanical) and Michael Wall Engineering (electrical)
as the engineering consultants (collectively, the "ENGINEERS") to prepare all
plans and engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises,
which work is not part of the Base Building. The plans and drawings to be
prepared by Architect and the Engineers hereunder shall be known collectively as
the "CONSTRUCTION DRAWINGS." All Construction Drawings shall comply with the
drawing format and specifications determined by Landlord, and shall be subject
to Landlord's approval, which approval shall not be unreasonably withheld.
Tenant and Architect shall verify, in the field, the dimensions and conditions
as shown on the relevant portions of the base building plans, and Tenant and
Architect shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. Landlord's review of the Construction
Drawings as set forth in this Section 3, shall be for its sole purpose and shall
---------
not imply Landlord's review of the same, or obligate Landlord to review the
same, for quality, design, Code compliance or other like matters. Accordingly,
notwithstanding that any Construction Drawings are reviewed by Landlord or its
space planner, architect, engineers and consultants, and notwithstanding any
advice or assistance which may be rendered to Tenant by Landlord or Landlord's
space planner, architect, engineers, and consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for
any omissions or errors contained in the Construction Drawings, and Tenant's
waiver and indemnity set forth in this Lease shall specifically apply to the
Construction Drawings.
3.2 FINAL SPACE PLAN. On or before the date set forth in Schedule 2,
---------------- ----------
attached hereto, Tenant and the Architect shall prepare the final space plan for
Tenant Improvements in the Premises (collectively, the "FINAL SPACE PLAN"),
which Final Space Plan shall include a layout
-4-
<PAGE>
and designation of all offices, rooms and other partitioning, their intended
use, and equipment to be contained therein, and shall deliver the Final Space
Plan to Landlord for Landlord's approval, which approval shall not be
unreasonably withheld, delayed or conditioned. Landlord shall advise Tenant
within five (5) business days after Landlord's receipt of the Final Space Plan
for the Premises if the same is unsatisfactory or incomplete in any material
respect. If Tenant is so advised, Tenant shall promptly cause the Final Space
Plan to be revised to correct any such deficiencies, and immediately thereafter
re-submitted to Landlord for its approval.
3.3 FINAL WORKING DRAWINGS. On or before the date set forth in Schedule
---------------------- --------
2, Tenant, the Architect and the Engineers shall complete the architectural and
- -
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "FINAL WORKING
DRAWINGS") and shall submit the same to Landlord for Landlord's approval, which
approval shall not be unreasonably withheld, delayed or conditioned. Landlord
shall advise Tenant within five (5) business days after Landlord's receipt of
the Final Working Drawings for the Premises if the same is unsatisfactory or
incomplete in any material respect. If Tenant is so advised, Tenant shall
promptly cause the Final Working Drawings to be revised to correct any such
deficiencies, and immediately thereafter re-submitted to Landlord for its
approval.
3.4 PERMITS. The Final Working Drawings shall be approved by Landlord as
-------
set forth in Section 3.3 above (the "Approved Working Drawings") prior to the
commencement of the construction of the Tenant Improvements. Landlord shall
immediately submit the Approved Working Drawings to the appropriate municipal
authorities for all applicable building permits necessary to allow "Contractor,"
as that term is defined in Section 4.1, below, to commence and fully complete
-----------
the construction of the Tenant Improvements (the "PERMITS"), it being Landlord's
responsibility for obtaining any building permit with regard to the Base
Building and the Tenant and Core Improvements, or certificate of occupancy for
the Premises (as opposed to any use or other permit required due to Tenant's
particular use of the Premises). No changes, modifications or alterations in
the Approved Working Drawings may be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned, subject to such changes being deemed a "Delay" as set forth in
Section 5.2 of this Tenant Work Letter.
3.5 TIME DEADLINES. Tenant and Landlord shall use their best, good faith,
--------------
efforts and all due diligence to cooperate with the Architect, the Engineers,
and each other to complete all phases of the Construction Drawings and the
permitting process and to receive the permits, and with Contractor for approval
of the "Cost Proposal," as that term is defined in Section 4.2 of this Tenant
-----------
Work Letter, as soon as possible after the execution of the Lease, and, in that
regard, shall meet with Landlord on a scheduled basis to be determined by
Landlord, to discuss Tenant's progress in connection with the same. The
applicable dates for approval of items, plans and drawings as described in this
Section 3, Section 4, below, and in this Tenant Work Letter are set forth and
- --------- ---------
further elaborated upon in Schedule 2 (the "TIME DEADLINES"), attached hereto.
----------
Tenant and Landlord agree to comply with the Time Deadlines.
-5-
<PAGE>
SECTION 4
---------
CONSTRUCTION OF THE TENANT AND CORE IMPROVEMENTS
------------------------------------------------
4.1 CONTRACTOR. Landlord has designated Reno Construction ("Contractor")
----------
to the be the contractor which shall construct the Tenant Improvements.
4.2 COST PROPOSAL. After the Approved Working Drawings are signed by
-------------
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant and Core Improvement
Allowance Items to be incurred by Tenant in connection with the design and
construction of the Tenant Improvements (the "COST PROPOSAL"). Tenant shall
approve (or disapprove) the Cost Proposal to Landlord within five (5) business
days of the receipt of the same, and upon receipt of an approved Cost Proposal
by Landlord, Landlord shall be released by Tenant to purchase the items set
forth in the Cost Proposal and to commence the construction relating to such
items. The date by which Tenant must approve and deliver the Cost Proposal to
Landlord shall be known hereafter as the "Cost Proposal Delivery Date".
4.3 CONSTRUCTION OF TENANT AND CORE IMPROVEMENTS BY CONTRACTOR UNDER THE
--------------------------------------------------------------------
SUPERVISION OF LANDLORD.
- -----------------------
4.3.1 OVER-ALLOWANCE AMOUNT. On the Cost Proposal Delivery Date,
---------------------
Tenant shall deliver to Landlord cash in an amount (the "OVER-ALLOWANCE AMOUNT")
equal to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the Tenant and Core Improvement Allowance (including any Above
Standard Allowance). The Over-Allowance Amount shall be disbursed by Landlord
prior to the disbursement of any then remaining portion of the Tenant and Core
Improvement Allowance, and such disbursement shall be pursuant to the same
procedure as the Tenant and Core Improvement Allowance. In the event that,
after the Cost Proposal Delivery Date, any revisions, changes, or substitutions
shall be made to the Construction Drawings or the Tenant Improvements, any
additional costs which arise in connection with such revisions, changes or
substitutions or any other additional costs shall be paid by Tenant to Landlord
immediately upon Landlord's request as an addition to the Over-Allowance Amount.
In addition, if the Final Working Drawings or any amendment thereof or
supplement thereto shall require alterations in the Base, Shell and Core (as
contrasted with the Tenant Improvements), and if Landlord in its reasonable
discretion agrees to any such alterations, and notifies Tenant of the need and
cost for such alterations, then Tenant shall pay the cost of such required
changes upon receipt of bills therefor. Tenant shall pay all direct
architectural and/or engineering fees in connection therewith.
4.3.2 LANDLORD'S RETENTION OF CONTRACTOR. Landlord shall
----------------------------------
independently retain Contractor, to construct the Tenant Improvements in
accordance with the Approved Working Drawings and the Cost Proposal (on a GMAX
("guaranteed maximum cost") basis) and Landlord shall supervise the construction
by Contractor, and Tenant shall pay a construction supervision and management
fee (the "LANDLORD SUPERVISION FEE") to Landlord in an amount equal to one
percent (1%) of that portion of the Tenant and Core Improvement Allowance
attributable to hard costs of construction of the Tenant Improvements.
-6-
<PAGE>
4.3.3 CONTRACTOR'S WARRANTIES AND GUARANTIES. Landlord hereby
--------------------------------------
assigns to Tenant all warranties and guaranties by Contractor relating to the
Tenant Improvements, and Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Tenant Improvements,
except to the extent resulting from the negligence or willful misconduct of
Landlord or the Landlord Parties and except as otherwise specifically set forth
in the Lease.
4.3.4 TENANT'S COVENANTS. Within ten (10) days after completion of
------------------
construction of the Tenant Improvements, Tenant shall cause Contractor and
Architect to cause a Notice of Completion to be recorded in the office of the
County Recorder of the county in which the Building is located in accordance
with Section 3093 of the Civil Code of the State of California or any successor
statute and furnish a copy thereof to Landlord upon recordation, failing which,
Landlord may itself execute and file the same on behalf of Tenant as Tenant's
agent for such purpose. In addition, immediately after the Substantial
Completion of the Premises, Tenant shall have prepared and delivered to the
Building a copy of the "as built" plans and specifications (including all
working drawings) for the Tenant Improvements.
SECTION 5
---------
COMPLETION OF THE TENANT IMPROVEMENTS;
--------------------------------------
LEASE COMMENCEMENT DELAY
------------------------
5.1 READY FOR OCCUPANCY. The Premises shall be deemed "Ready for
-------------------
Occupancy" upon the Substantial Completion of the Premises. For purposes of
this Lease, "Substantial Completion" of the Premises shall occur upon the last
to occur of the following, subject to Section 5.2 of this Work Letter: (i) a
temporary certificate of occupancy having been issued for the Premises and
Tenant is legally permitted to occupy the Premises for operations of its
business (excepting any specialized permits Tenant may need for Tenant's
particular use of the Premises, such as hazardous materials permits, (ii) the
Building Systems are in good working order to reasonably support operations
within the Premises, (iii) the completion of construction of the Tenant
Improvements in the Premises pursuant to the Approved Working Drawings, with the
exception of any industry-standard punch list items and long lead time items,
and (iv) the parking and access roads are materially complete.
5.2 DELAY OF THE SUBSTANTIAL COMPLETION OF THE PREMISES. Except as
---------------------------------------------------
provided in this Section 5.2, the Lease Commencement Date shall occur as set
forth in the Lease and Section 5.1, above. If there shall be a delay or there
are delays in the Substantial Completion of the Premises or in the occurrence of
any of the other conditions precedent to the Lease Commencement Date, as set
forth in the Lease, as a direct, indirect, partial, or total result of:
5.2.1 Tenant's failure to comply with the Time Deadlines;
5.2.2 Tenant's failure to approve any matter requiring Tenant's
approval within the time periods set forth in this Tenant Work Letter;
5.2.3 A breach by Tenant of the terms of this Tenant Work Letter or
the Lease;
-7-
<PAGE>
5.2.4 Changes in any of the Construction Drawings after reasonable
disapproval of the same by Landlord;
5.2.5 Tenant's request for changes in the Approved Working Drawings;
5.2.6 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, the Standard Improvement
Package;
5.2.7 Changes to the Base Building required by the Approved Working
Drawings; or
5.2.8 Any other acts or omissions of Tenant, or its agents, or
employees;
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of the Premises, the Lease Commencement Date shall be deemed to be
the date the Lease Commencement Date would have occurred if no Tenant delay or
delays, as set forth above, had occurred.
5.3 CHANGES. Any request by Tenant for a change in the Tenant
-------
Improvements after approval of the Final Plans (a "CHANGE") shall be accompanied
by all information necessary to clearly identify and explain the proposed
Change. As soon as practicable after receipt of such a request from Tenant,
Landlord shall notify Tenant of the estimated cost of such Changes as well as
the increase in construction time caused by the Change (including any delay
pursuant to Section 5.2 of this Tenant Work Letter), if any. Tenant shall
approve in writing such estimates within two (2) business days after receipt of
Landlord's notice. Upon receipt of such written approval, Landlord shall be
authorized to cause the Contractor to proceed with the implementation of the
requested Change.
5.4 OUTSIDE DATE. In the event the Premises are not Ready for Occupancy
------------
on or before May 15, 2001 (the "OUTSIDE DATE"), which Outside Date shall be
subject to day-for-day extension due to a delay set forth in Section 5.2 of this
Tenant Work Letter and/or a Force Majeure delay (up to a maximum of sixty (60)
days due to such Force Majeure delay), then Tenant shall receive a credit
against Base Rent for a number of days equal to the number of days in the period
commencing on the Outside Date and ending on the Commencement Date (the
"Extended Period"); provided, however, that other than the extension to the
Lease Commencement Date, Tenant's receipt of such credit shall be Tenant's sole
and exclusive remedy for such delay.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1 TENANT'S ENTRY INTO THE PREMISES PRIOR TO SUBSTANTIAL COMPLETION.
----------------------------------------------------------------
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the Premises for the purpose of
Tenant installing overstandard equipment or fixtures (including
-8-
<PAGE>
Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry
into the Premises as permitted by the terms of this Section 6.1, Tenant shall
-----------
submit a schedule to Landlord and Contractor, for their approval, which schedule
shall detail the timing and purpose of Tenant's entry. Tenant shall hold
Landlord harmless from and indemnify, protect and defend Landlord against any
loss or damage to the Building or Premises or injury to any persons caused by
Tenant's entry into the Premises prior to Substantial Completion pursuant to
this Section 6.1.
-----------
6.2 TENANT'S REPRESENTATIVE. Tenant has designated Mr. Shaun Burnett as
-----------------------
its sole representative with respect to the matters set forth in this Tenant
Work Letter, who shall have full authority and responsibility to act on behalf
of the Tenant as required in this Tenant Work Letter.
6.3 LANDLORD'S REPRESENTATIVE. Landlord has designated Mr. James Edwards
-------------------------
as "Project Manager" who shall be responsible for the implementation of all
Tenant Improvements to be performed by Landlord in the Premises. With regard to
all matters involving such Tenant Improvements, Tenant shall communicate with
the Project Manager rather than with the Contractor. Landlord shall not be
responsible for any statement, representation or agreement made between Tenant
and the Contractor or any subcontractor. It is hereby expressly acknowledged by
Tenant that such Contractor is not Landlord's agent and has no authority
whatsoever to enter into agreements on Landlord's behalf or otherwise bind
Landlord. The Project Manager will furnish Tenant with notices of substantial
completion, cost estimates for Above Standard Tenant Improvements, Landlord's
approvals or disapprovals of all documents to be prepared by Tenant pursuant to
this Tenant Work Letter and changes thereto.
6.4 INTENTIONALLY OMITTED.
---------------------
6.5 TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise
----------------------------------------------
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by
Landlord, the procedure for preparation of the document and approval thereof
shall be repeated until the document is approved by Landlord.
6.6 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the contrary
----------------------
contained in this Lease, if an event of default (beyond any applicable notice
and cure period(s)) as described in the Lease or this Tenant Work Letter has
occurred at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Landlord
pursuant to this Lease, Landlord shall have the right to withhold payment of all
or any portion of the Tenant Improvement Allowance and/or Landlord may cause
Contractor to cease the construction of the Premises (in which case, Tenant
shall be responsible for any delay in the substantial completion of the Premises
caused by such work stoppage), and (ii) all other obligations of Landlord under
the terms of this Tenant Work Letter shall be stayed until such time as such
default is cured pursuant to the terms of this Lease (in which case, Tenant
shall be responsible for any delay in the substantial completion of the Premises
caused by such inaction by Landlord).
-9-
<PAGE>
SCHEDULE 1 TO EXHIBIT B
-----------------------
BASE BUILDING
-------------
(attached)
SCHEDULE 1 TO
EXHIBIT B
-1-
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
TIMING FOR SUBMISSIONS AND APPROVALS
(attached)
SCHEDULE 2 TO
EXHIBIT B
-1-
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
(BUILDING A)
------------
This FIRST AMENDMENT TO LEASE (BUILDING A) (the "AMENDMENT") is made and
entered into as of March 3, 2000 by and between KR-GATEWAY PARTNERS, a Delaware
limited partnership ("LANDLORD"), and DIVERSA CORPORATION, a Delaware
corporation ("TENANT").
R E C I T A L S :
----------------
A. Landlord and Tenant entered into that certain Lease dated as of February
11, 2000 (the "LEASE"), whereby Landlord leased to Tenant and Tenant leased from
Landlord all of that certain two (2) story building to be located on lot 5 of
"Sorrento Gateway" (the "PROJECT"), containing approximately 75,520 rentable
square feet of space, and commonly referred to in the Project as "BUILDING A"
(the "PREMISES") located in San Diego.
B. Landlord and Tenant desire to amend the Lease on the terms and
conditions set forth in this Amendment.
A G R E E M E N T :
------------------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows.
1. CAPITALIZED TERMS. All capitalized terms when used herein shall have the
-----------------
same meaning as is given such terms in the Lease unless expressly superseded by
the terms of this Amendment.
2. SUBORDINATION. Article 18 of the Lease is hereby amended such that the
------------- ----------
forth (4th) sentence of such Article 18, which sentence commences with "Any such
----------
Nondisturbance Agreement . . . " is deleted and replaced as follows: "Any such
Nondisturbance Agreement shall not contain language which allows the ground
lessor, mortgage holder or lien holder, the right to terminate this Lease when
the Tenant is not in default under the terms of this Lease."
3. CESSATION OF CONSTRUCTION; TENANT COMPLETION RIGHT. The Tenant Work
--------------------------------------------------
Letter attached as EXHIBIT B to the Lease is hereby amended, whereby the
following Section 5.5 is inserted:
-----------
5.5 TENANT COMPLETION. In the event either (i) Landlord discontinues the
-----------------
construction of the Building for a period of time which would render it
unreasonable for completion of such construction to occur on or before
-1-
<PAGE>
the Outside Date, or (ii) the ground lessor, mortgage holder or lien holder
identified in Article 18 of the Lease (A) succeeds to the interests of
----------
Landlord and (B) elects not to complete the construction of the Building,
then Tenant may, upon delivery of notice, within thirty (30) days of such
determination, to Landlord and any such ground lessor, mortgage holder or
lien holder (the "TENANT COMPLETION NOTICE"), elect, effective upon the
date occurring fifteen (15) business days following receipt by Landlord
(and/or any such ground lessor, mortgage holder or lien holder) of such
Completion Termination Notice, without terminating this Lease, to (a)
assume all of Landlord's obligations, right, title and interest in, to and
under any or all of the "Construction Documents," as that term is set forth
below, by delivering a copy of such Completion Termination Notice to all
parties to those "Construction Documents which Tenant elects to assume. The
effectiveness of any such Completion Termination Notice delivered by Tenant
to Landlord shall be governed by the terms of this Section 5.5. In the
-----------
event Tenant exercises its rights under this Section 5.5 the determination
-----------
of the Premises being Ready for Occupancy shall remain unchanged and, with
regard to this Tenant Work Letter, references to "Landlord" shall mean to
Tenant, except with regard to Landlord's disbursement obligations
hereunder. The Outside Date shall be postponed due to due to delays caused
by Force Majeure (up to sixty (60) days) and Tenant delays pursuant to
Section 5.2 of this Tenant Work Letter.
-----------
4. BROKERS. Landlord and Tenant hereby warrant to each other that they have
-------
had no dealings with any real estate broker, agent or finder in connection with
the negotiation of this Amendment, excepting only the "Brokers," as that term is
defined in Section 12 of the Summary and Section 29.24 of the Lease, and that
---------- -------------
they know of no other real estate broker, agent or finder who is entitled to a
commission in connection with this Amendment. Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including, without limitation, reasonable attorneys' fees) with
respect to any leasing commission or equivalent compensation alleged to be owing
on account of the indemnifying party's dealings with any real estate broker,
agent or finder other than the Broker. The terms of this Section 7 shall
---------
survive the expiration or earlier termination of this Amendment.
5. TIME OF ESSENCE. Time is of the essence with respect to the performance
---------------
of every provision of this Amendment, including, without limitation, the Tenant
Work Letter, in which time of performance is a factor. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.
-2-
<PAGE>
6. NO FURTHER MODIFICATION. Except as set forth in this Amendment, all of
-----------------------
the terms and provisions of the Lease shall apply with respect to the Expansion
Premises and shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the day and year
first above written.
"LANDLORD" "TENANT"
KR-GATEWAY PARTNERS, DIVERSA CORPORATION,
a Delaware limited liability company a Delaware corporation
By: Kilroy Realty, L.P., By:
a Delaware limited partnership ---------------------------
Managing Member Its:
---------------------
By: Kilroy Realty Corporation, By:
a Maryland corporation ---------------------------
General Partner Its:
---------------------
By:
------------------------------
Its:
------------------------
By:
------------------------------
Its:
------------------------
-3-
<PAGE>
EXHIBIT 10.35
LEASE
KILROY REALTY
SORRENTO GATEWAY
BUILDING B
KR-GATEWAY PARTNERS,
a Delaware limited liability company,
as Landlord,
and
DIVERSA CORPORATION,
a Delaware corporation,
as Tenant.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS........... 5
ARTICLE 2 INITIAL LEASE TERM; OPTION TERM......................... 6
ARTICLE 3 BASE RENT............................................... 10
ARTICLE 4 ADDITIONAL RENT......................................... 10
ARTICLE 5 USE OF PREMISES......................................... 19
ARTICLE 6 SERVICES AND UTILITIES.................................. 19
ARTICLE 7 REPAIRS................................................. 20
ARTICLE 8 ADDITIONS AND ALTERATIONS............................... 22
ARTICLE 9 COVENANT AGAINST LIENS.................................. 24
ARTICLE 10 INSURANCE............................................... 24
ARTICLE 11 DAMAGE AND DESTRUCTION.................................. 27
ARTICLE 12 NONWAIVER............................................... 29
ARTICLE 13 CONDEMNATION............................................ 30
ARTICLE 14 ASSIGNMENT AND SUBLETTING............................... 30
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES............................... 35
ARTICLE 16 HOLDING OVER............................................ 36
ARTICLE 17 ESTOPPEL CERTIFICATES................................... 37
ARTICLE 18 SUBORDINATION........................................... 37
ARTICLE 19 DEFAULTS; REMEDIES...................................... 38
ARTICLE 20 COVENANT OF QUIET ENJOYMENT............................. 41
ARTICLE 21 SECURITY DEPOSIT; LETTER OF CREDIT...................... 41
ARTICLE 22 TELECOMMUNICATIONS EQUIPMENT............................ 44
ARTICLE 23 SIGNS................................................... 45
ARTICLE 24 COMPLIANCE WITH LAW..................................... 47
ARTICLE 25 LATE CHARGES............................................ 47
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.... 48
ARTICLE 27 ENTRY BY LANDLORD....................................... 48
ARTICLE 28 TENANT PARKING.......................................... 49
ARTICLE 29 MISCELLANEOUS PROVISIONS................................ 49
(i)
<PAGE>
INDEX
-----
Page(s)
-------
Accountant...................................................... 18
Additional Rent................................................. 11
Advocate Arbitrators............................................ 9
Affiliate....................................................... 35
Alterations..................................................... 22
Anticipated LC Date............................................. 7
Award........................................................... 9
Bank Prime Loan................................................. 47
Base Building................................................... 22
Base Rent....................................................... 10
BOMA............................................................ 6
Brokers......................................................... 54
BS Exception.................................................... 21
Builder's All Risk.............................................. 23
Building Monument Sign.......................................... 45
Building Signage................................................ 45
Building Structure.............................................. 20
Building Systems................................................ 21
CC&Rs........................................................... 19
CGCC............................................................ 35
Comparable Area................................................. 8
Comparable Buildings............................................ 8
Comparable Deals................................................ 7
Comparable Term................................................. 8
Cosmetic Alterations............................................ 22
Direct Expenses................................................. 11
Environmental Laws.............................................. 56
Estimate........................................................ 17
Estimate Statement.............................................. 17
Estimated Direct Expenses....................................... 17
Excess.......................................................... 17
Exclusive Negotiation Period.................................... 58
Exercise Notice................................................. 8
Expense Year.................................................... 11
First Offer Notice.............................................. 57
Force Majeure................................................... 52
Hazardous Material(s)........................................... 56
Holdover Notice................................................. 36
HVAC............................................................ 20
Landlord........................................................ 1
Landlord Parties................................................ 24
Landlord Repair Notice.......................................... 27
Landlord Response Date.......................................... 8
Landlord Response Notice........................................ 8
(ii)
<PAGE>
Landlord's Option Rent Calculation.............................. 8
L-C............................................................. 41
L-C Amount...................................................... 41
L-C Security Deposit............................................ 43
Lease........................................................... 1
Lease Commencement Date......................................... 6
Lease Expiration Date........................................... 6
Lease Term...................................................... 6
Lease Year...................................................... 6
Lines........................................................... 55
Mail............................................................ 52
Market Rent..................................................... 7
Net Worth....................................................... 35
Neutral Arbitrator.............................................. 9
Nondisturbance Agreement........................................ 37
Notices......................................................... 52
Objectionable Name.............................................. 46
Operating Expenses.............................................. 11
Option Rent..................................................... 7
Option Term..................................................... 7
Option Term TI Allowance........................................ 8
Original Improvements........................................... 26
Other Improvements.............................................. 57
Outside Agreement Date.......................................... 9
PCA............................................................. 6
Permitted Holdover Term......................................... 36
Premises........................................................ 5
Proposition 13.................................................. 15
Rent Concessions................................................ 8
Rent............................................................ 11
Sign Specifications............................................. 45
Statement....................................................... 17
Subject Space................................................... 31
Summary......................................................... 1
Tax Expenses.................................................... 15
TCCs............................................................ 5
Telecommunications Equipment.................................... 44
Tenant.......................................................... 1
Tenant Parties.................................................. 25
Tenant Work Letter.............................................. 5
Tenant's Option Rent Calculation................................ 8
Tenant's Share.................................................. 16
Tenant's Signage................................................ 45
Tolling Notice.................................................. 7
Tolling Payment................................................. 7
(iii)
<PAGE>
Transfer........................................................ 34
Transfer Notice................................................. 31
Transfer Premium................................................ 33
Transferee...................................................... 31
Transfers....................................................... 31
(iv)
<PAGE>
SORRENTO GATEWAY
----------------
LEASE
-----
This Lease (the "LEASE"), dated as of the date set forth in Section 1 of
the Summary of Basic Lease Information (the "SUMMARY"), below, is made by and
between KR-GATEWAY PARTNERS, LLC, a Delaware limited liability company
("LANDLORD"), and DIVERSA CORPORATION, a Delaware corporation ("TENANT").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
<TABLE>
<CAPTION>
TERMS OF LEASE DESCRIPTION
- ---------------------------------------------- -----------------------------------------------
<S> <C>
1. Date: February 11, 2000
2. Premises
2.1 Building: That certain two (2) story building to be
located on lot 4 of the "Project," which
building shall contain approximately 60,060
rentable square feet of space, and shall be
commonly referred to in Project as "BUILDING
B", as indicated on the Project Site Plan
attached to the Lease as EXHIBIT A, and
referred to herein as the "BUILDING."
2.2 Premises: All of the approximately 60,060 rentable feet
of space located the Building, as further set
forth in EXHIBIT A to the Lease.
2.3 Project: The Building is part of an office project
known as "SORRENTO GATEWAY", as further set
forth in Section 1.1.2 of this Lease.
3. Lease Term
(Article 2).
3.1 Length of Term: Fifteen (15) years and no (0) months.
3.2 Lease Commencement Date:
The earlier to occur of (i) the
date upon which Tenant first
commences to conduct business
in the Premises and (ii) the
date upon which the Premises
are Ready for Occupancy, which
is anticipated to be November
15, 2001, subject to extension
pursuant to Section 2.1 of this
Lease.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.3 Lease Expiration Date: The date immediately preceding the 15th
anniversary of the Lease Commencement Date.
4. Base Rent (Article 3):
</TABLE>
<TABLE>
<CAPTION>
Monthly
Monthly Rental Rate
Annual Installment per Rentable
Lease Year Base Rent of Base Rent Square Foot
- -------------------- -------------------------- ------------------------ -----------------------
<S> <C> <C> <C>
1 - 2 $1,715,313.60 $142,942.80 $2.3800
3 - 4 $1,835,385.55 $152,948.80 $2.5466
5 - 6 $1,963,862.54 $163,655.21 $2.7249
7 - 8 $2,101,362.22 $175,113.52 $2.9156
9 - 10 $2,248,424.42 $187,368.70 $3.1197
11 - 12 $2,405,820.30 $200,485.02 $3.3381
13 - 14 $2,574,243.91 $214,520.33 $3.5717
15 $2,754,389.32 $229,532.44 $3.8217
</TABLE>
To the extent Tenant reduces the amount of the Tenant and Core Improvement
Allowance pursuant to Section 2 of the Tenant Work Letter, for each $1.00 per
Rentable Square Foot of such reduction (up to a cumulative reduction of $10.00
per Rentable Square Foot of the Premises), the Monthly Rental Rate per Rentable
Square Foot attributable to the Premises shall be lowered by $0.01 (and the
corresponding amounts of Monthly Installment of Base Rent and Annual Base Rent
shall be reduced accordingly and the Base Rent for all 15 years recalculated,
based on a 7% increase on the first day of the 3rd, 5th, 7th, 9th, 11th, 13th,
and 15th Lease Years). To the extent Tenant elects to increase the amount of the
Tenant and Core Improvement Allowance pursuant to Section 2 of the Tenant Work
Letter, for each $1.00 per Rentable Square Foot of such increase (up to a
cumulative increase of $10.00 per Rentable Square Foot of the Premises), the
Monthly Rental Rate per Rentable Square Foot attributable to the Premises shall
be increased by $0.01 (and the corresponding amounts of Monthly Installment of
Base Rent and Annual Base Rent shall be increased accordingly and the Base Rent
for all 15 years recalculated, based on a 7% increase on the first day of the
3rd, 5th, 7th, 9th, 11th, 13th, and 15th Lease Years).
<TABLE>
<S> <C>
5. Intentionally Omitted
(Article 4):
6. Tenant's Project Share Approximately nine and 19/100 Percent (9.19%).
(Article 4):
7. Permitted Use Tenant shall use the Premises solely for general
(Article 5): office, research and development, labs, and any
other legally permitted use pursuant to the MIB
zoning and Sorrento Gateway P.I.D. applicable to
the Building.
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
8. Security Deposit Tenant shall fund a letter of credit in an
(Article 21): initial amount of either (i) $1,715,313.60,
(ii) $3,430,627.20 or (iii) $5,145,940.80 (which
amounts equal 12, 24, and 36 months of the initial
Monthly Installment of Base Rent, respectively),
depending upon Tenants financial condition as more
particularly set forth in Article 21, and subject
to reductions and/or reinstatements pursuant to
the provisions of Article 21. Such amounts shall be
recalculated in the event the amount of Base Rent is
adjusted as provided in Paragraph 4 of this Summary,
and Article 3 of the Lease.
9. Parking Pass Ratio Tenant shall have the exclusive right to use the
(Article 28): Building parking area to be constructed along
with the construction of the Building, in the location
and with the number of spaces indicated on the
Project Site Plan attached hereto as Exhibit A-1, and
as more specifically set forth in Article 28. Such
parking shall be provided at no charge to Tenant.
10. Address of Tenant Diversa Corporation
(Section 29.18): 10665 Sorrento Valley Road
San Diego, California 92121
Attention: Mr. Pat Simms,
Vice President of Operations
(Prior to Lease Commencement Date)
and at the Premises to the
attention of Mr. Pat Simms
(After Lease Commencement Date)
with a copy to:
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Attention: Elizabeth A. Willes, Esq.
11. Address of Landlord See Section 29.18 of the Lease.
(Section 29.18):
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C>
12. Broker(s)
(Section 29.24): Mr. Shaun Burnett
Senior Vice President
The Irving Hughes Group
501 West Broadway, Suite 2020
San Diego, California 92101
and
Brian Driscoll
Colliers International
4660 LaJolla Village Drive, Suite 200
San Diego, California 92121
13. Tenant and Core Improvement Allowance $110.00 per Rentable Square Foot of the Premises
(Section 2 of EXHIBIT B): ($6,606,600.00 based on 60,060 Rentable Square
Feet of Space), subject to decrease (with a maximum of
$120.00 and a minimum of $100.00) pursuant to Section
2 of the Tenant Work Letter.
</TABLE>
-4-
<PAGE>
ARTICLE 1
---------
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
---------------------------------------------
1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.
---------------------------------------------
1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
------------
hereby leases from Landlord the premises which are to be constructed by Landlord
in accordance with the Tenant Work Letter which premises shall contain the
approximate number of square feet set forth in Section 2.2 of the Summary (the
"PREMISES"). The parties hereto agree that the lease of the Premises is upon and
subject to the terms, covenants and conditions (the "TCCS") herein set forth,
and Tenant covenants as a material part of the consideration for this Lease to
keep and perform each and all of such TCC's by it to be kept and performed and
that this Lease is made upon the condition of such performance. The parties
hereto hereby acknowledge that the purpose of EXHIBIT A is to show the
---------
approximate location of the "BUILDING," as that term is defined in Section
1.1.2, below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the "COMMON AREAS," as that term is
defined in Section 1.1.3, below, or the elements thereof or of the accessways to
the Premises or the "PROJECT," as that term is defined in Section 1.1.2, below.
Except as specifically set forth in this Lease and in the Tenant Work Letter
attached hereto as EXHIBIT B (the "TENANT WORK LETTER"), Landlord shall not be
---------
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant also acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty regarding the
condition of the Premises, the Building or the Project or with respect to the
suitability of any of the foregoing for the conduct of Tenant's business, except
as specifically set forth in this Lease and the Tenant Work Letter. The taking
of possession of the Premises when the Premises are Ready for Occupancy, by
Tenant shall conclusively establish that the Premises is at such time in good
and sanitary order, condition and repair, subject only to punchlist items and
Landlord's obligations set forth in Article 7 of this Lease, including, without
limitation, Landlord's obligation to maintain in accordance with Section 7.1 the
"Building Structure" as that term is defined in Section 7.1 of this Lease.
1.1.2 THE BUILDING AND THE PROJECT. The Premises consist of all of
----------------------------
that certain two (2)-story building set forth in Section 2.1 of the Summary (the
"BUILDING"). The Building is part of an office project known as "SORRENTO
GATEWAY." The term "PROJECT," as used in this Lease, shall mean (i) the Building
and the Common Areas as shown on the Project Site Plan attached hereto as
Exhibit A-1, (ii) the land (which is to be improved with landscaping, and other
improvements) upon which the Building and the Common Areas are located and which
is known as "LOT 4", and (iii) the other buildings to be located adjacent to the
Building and the land (commonly known as Lots 1 through 3, and 5 through 9) upon
which such adjacent buildings are to be located after completion of construction
of such buildings.
1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to
------------
use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain
-5-
<PAGE>
areas to be shared by Landlord and certain tenants, are collectively referred to
herein as the "COMMON AREAS"). The Common Areas shall consist of the portion of
the Project reasonably designated as such by Landlord; provided, however, such
Common Areas shall not include building common areas within the buildings to be
built within the Project. The manner in which the Common Areas are maintained
and operated shall be at the reasonable discretion of Landlord and the use
thereof shall be subject to such reasonable rules, regulations and restrictions
as Landlord may make from time to time as provided in Section 5.2 of this Lease,
provided that Landlord shall at all times maintain and operate the Common Areas
in a first-class manner consistent with the "Comparable Buildings, as such term
is defined in Section 1.5.2 of this Lease. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas, as long as such changes do not
change the nature of the Project to something other than a first-class building
project or materially, adversely effect Tenant's use of the Premises for the
Permitted Use, as set forth in Section 7 of the Summary, Tenant's ingress to or
egress from the Project, Building, the Premises or the parking areas servicing
the same, or reduce the parking area available for use by Tenant. Except when
and where Tenant's right of access is specifically excluded as the result of (i)
an emergency, (ii) a requirement by law, or (iii) a specific provision set forth
in this Lease, Tenant shall have, throughout the Lease Term, the right of
ingress and egress to the Premises, the Building and the Building parking areas
twenty-four (24) hours per day, seven (7) days per week.
1.2 VERIFICATION OF RENTABLE SQUARE FEET OF PREMISES AND BUILDING. For
-------------------------------------------------------------
purposes of this Lease, "rentable square feet" and "usable square feet" shall be
calculated pursuant to Standard Method of Measuring Floor Area in Office
Building, ANSI Z65.1 - 1996 ("BOMA") for single tenant buildings. Within thirty
(30) days after the Lease Commencement Date, Pacific Cornerstone Architects
("PCA") shall measure the rentable and usable square feet of the Premises. The
determination of PCA shall be conclusive and binding upon the parties. In the
event that PCA determines that the amounts thereof shall be different from those
set forth in this Lease, all amounts, percentages and figures appearing or
referred to in this Lease based upon such incorrect amount (including, without
limitation, the amount of the "RENT" and any "SECURITY DEPOSIT," as those terms
are defined in Section 4.1 and Article 21 of this Lease, respectively) shall be
------------ ----------
modified in accordance with such determination. If such determination is made by
PCA as set forth above, it will be confirmed in writing by Landlord to Tenant.
ARTICLE 2
---------
INITIAL LEASE TERM; OPTION TERM
-------------------------------
2.1 Initial Lease Term. The TCC's of this Lease shall be effective as of
------------------
the date of this Lease. The term of this Lease (the "LEASE TERM") shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
Section 3.2 of the Summary (the "LEASE COMMENCEMENT DATE"), and shall terminate
- -----------
on the date set forth in Section 3.3 of the Summary (the "LEASE EXPIRATION
-----------
DATE") unless this Lease is sooner terminated as hereinafter provided. For
purposes of this Lease, the term "LEASE YEAR" shall mean each consecutive twelve
(12) month period during the Lease Term; provided, however, that the first Lease
Year shall commence on the Lease Commencement Date and end on the last day of
the eleventh month thereafter and the second and each succeeding Lease Year
shall commence on the first day of the
-6-
<PAGE>
next calendar month; and further provided that the last Lease Year shall end on
the Lease Expiration Date. At any time during the Lease Term, Landlord may
deliver to Tenant a notice in the form as set forth in EXHIBIT C, attached
---------
hereto, as a confirmation only of the information set forth therein, which
Tenant shall execute and return to Landlord within ten (10) days of receipt
thereof. Notwithstanding the anticipated Lease Commencement Date set forth in
Section 3.3 of the Summary (the "ANTICIPATED LC DATE"), Tenant may toll such
Anticipated LC Date in one (1) month increments, up to a maximum extension of
six (6) months, by delivering the following to Landlord on or before the date
which is twelve (12) months prior to the then- existing Anticipated LC Date, as
previously extended: (i) written notice (a "TOLLING NOTICE") to Landlord setting
forth that Tenant is thereby extending the Anticipated LC Date by one (1) or
more months (up to the cumulative total of six (6) months), and (ii)
concurrently with such Tolling Notice, a payment ("TOLLING PAYMENT") in an
amount equal to $20,000 for each month so extended by such Tolling Notice.
Notwithstanding the foregoing, Landlord shall have no liability to Tenant for
any damages resulting from any delay in delivering possession of Building B to
Tenant on the scheduled Anticipated LC Date, except as specifically set forth in
this Lease and Section 5.4 of the Tenant Work Letter.
2.2 OPTION TERM.
-----------
2.2.1 OPTION RIGHT. Landlord hereby grants the Original Tenant and
------------
its Affiliates two (2) five (5)-year options (each, an
"OPTION TERM") to extend the Lease Term for the entire Premises. Such option(s)
shall be exercisable only by Notice delivered by Tenant to Landlord as provided
below, provided that, as of the date of delivery of such Notice, Tenant is not
in Default under this Lease. Upon the proper exercise of such option to extend,
and provided that, as of the end of the then applicable Lease term, Tenant is
not in Default under this Lease, the Lease Term, as it applies to the entire
Premises, shall be extended for a period of five (5) years. The rights contained
in this Section 2.2 shall only be exercised by the Original Tenant and its
-----------
Affiliate (and not any other assignee, sublessee or other transferee of the
Original Tenant's interest in this Lease) if Original Tenant and/or its
Affiliate is in possession of the entire Premises.
2.2.2 OPTION RENT. The Rent payable by Tenant during each Option
-----------
Term (the "OPTION RENT") shall be equal to the Market Rent; provided, however,
that the average annual, effective (including free rent, if applicable, spread
on a straight line basis) base rent component of Market Rent, shall not be lower
than the Base Rent for the month immediately preceding such Option Term.
For purposes of this Lease, the term "MARKET RENT" shall mean the base rent,
which shall be adjusted to reflect a "triple net" transaction, including all
escalations, at which tenants, as of the commencement of the applicable term
are, pursuant to transactions completed within the prior twenty-four (24)
months, leasing non-sublease, non-encumbered, non-synthetic, non-equity space
(unless such space was leased pursuant to a definition of "fair market"
comparable to the definition of Market Rent) comparable in size, location and
quality to the Building for a "Comparable Term," as that term is defined in this
Section 2.2.2 (the "COMPARABLE DEALS"), which comparable space is located in the
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"Comparable Buildings," as that term is defined in this Section 2.2.2, giving
-------------
appropriate consideration to the annual rental rates per rentable square foot
(adjusting the base rent component of such rate to reflect a net value after
accounting for whether
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<PAGE>
or not utility expenses are directly paid by the tenant such as Tenant's direct
utility payments provided for in Section 6.1 of this Lease), the standard of
measurement by which the rentable square footage is measured, the ratio of
rentable square feet to usable square feet, and taking into consideration only,
and granting only, the following concessions (provided that the rent payable in
Comparable Deals in which the terms of such Comparable Deals are determined by
use of a discounted fair market rate formula shall be equitably increased in
order that such Comparable Deals will not reflect a discounted rate)
(collectively, the "RENT CONCESSIONS"): (a) rental abatement concessions, if
any, being granted such tenants in connection with such comparable spaces; (b)
tenant improvements or allowances provided or to be provided for such comparable
space, taking into account the value of the existing improvements in the
Building, such value to be based upon the age, quality and layout of the
improvements, and (c) all other monetary concessions, if any, being granted such
tenants in connection with such comparable space; provided, however, that
notwithstanding anything to the contrary herein, no consideration shall be given
to (x) the fact that Landlord is or is not required to pay a real estate
brokerage commission in connection with the applicable term or the fact that the
Comparable Deals do or do not involve the payment of real estate brokerage
commissions, and (y) any period of rental abatement, if any, granted to tenants
in Comparable Deals in connection with the design, permitting and construction
of tenant improvements in such comparable spaces. The term "COMPARABLE TERM"
shall refer to the length of the lease term, without consideration of options to
extend such term, for the space in question. If in determining the Market Rent
for an Option Term, Tenant would, pursuant to the Comparable Deals and the Rent
Concessions set forth therein, otherwise be entitled to a tenant improvement or
comparable allowance for the improvement of the Premises (the "OPTION TERM TI
ALLOWANCE"), Tenant shall not be entitled to, and shall not be compelled, to
receive such Option Term TI Allowance, and Landlord shall reduce the rental rate
component of the Market Rent to be an effective rental rate which takes into
consideration that Tenant will not receive any Option Term TI Allowance. The
term "COMPARABLE BUILDINGS" shall mean other lab buildings in the Project, and
other first-class lab buildings which are comparable to the Building in terms of
age (based upon the date of completion of construction or major renovation as to
the building containing the portion of the Premises in question), quality of
construction, level of services and amenities, size and appearance, and are
located in the Sorrento Mesa, University Towne Center and Torrey Pines areas
(the "COMPARABLE AREA").
2.2.3 EXERCISE OF OPTION. The option contained in this Section 2.2
------------------ -----------
shall be exercised by Tenant, if at all, only in the manner set forth in this
Section 2.2.3. Tenant shall deliver notice (the "EXERCISE NOTICE") to Landlord
- -------------
not more than fifteen (15) months nor less than nine (9) months prior to the
expiration of the then Lease Term, stating that Tenant is exercising its option.
Concurrently with such Exercise Notice, Tenant shall deliver to Landlord
Tenant's calculation of the Market Rent (the "TENANT'S OPTION RENT
CALCULATION"). Landlord shall deliver notice (the "LANDLORD RESPONSE NOTICE") to
Tenant on or before the later to occur of (i) the date which is thirty (30) days
after Landlord's receipt of the Exercise Notice and Tenant's Option Rent
Calculation, or (ii) the date which is nine (9) months prior to the expiration
of the then Lease Term (the "LANDLORD RESPONSE DATE"), stating that (A) Landlord
is accepting Tenant's Option Rent Calculation as the Market Rent, or (B)
rejecting Tenant's Option Rent Calculation and setting forth Landlord's
calculation of the Market Rent (the "LANDLORD'S OPTION RENT CALCULATION").
Within ten (10) business days of its receipt of the Landlord Response Notice,
Tenant may, at its option, accept the Market Rent contained in the Landlord's
Option
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<PAGE>
Rent Calculation. If Tenant does not affirmatively accept or Tenant rejects the
Market Rent specified in the Landlord's Option Rent Calculation, the parties
shall follow the procedure, and the Market Rent shall be determined as set forth
in Section 2.2.4.
-------------
2.2.4 DETERMINATION OF MARKET RENT. In the event Tenant objects or is
----------------------------
deemed to have objected to the Market Rent, Landlord and Tenant shall attempt to
agree upon the Market Rent using reasonable good-faith efforts. If Landlord and
Tenant fail to reach agreement within sixty (60) days following Tenant's
objection or deemed objection to the Landlord's Option Rent Calculation (the
(the "Outside Agreement Date"), then (i) in connection with the Option Rent,
Landlord's Option Rent Calculation and Tenant's Option Rent Calculation, each as
previously delivered to the other party, shall be submitted to the arbitrators
pursuant to the TCCs of this Section 2.2.4, and (ii) in connection with any
other contested calculation of Market Rent, the parties shall each make a
separate determination of the Market Rent and shall submit the same to the
arbitrators pursuant to the TCCs of this Section 2.2.4. The submittals shall be
made concurrently with the selection of the arbitrators pursuant to this Section
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2.2.4 and shall be submitted to arbitration in accordance with Section 2.2.4.1
- ----- ---------------
through 2.2.4.7 of this Lease, but subject to the conditions, when appropriate,
- ---------------
of Section 2.2.3.
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2.2.4.1 Landlord and Tenant shall each appoint one arbitrator
who shall by profession be a real estate broker, appraiser or attorney who shall
have been active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of first-class
office properties in the Comparable Area. The determination of the arbitrators
shall be limited solely to the issue of whether Landlord's or Tenant's submitted
Market Rent, is the closest to the actual Market Rent as determined by the
arbitrators, taking into account the requirements of Section 1.5.2 of this
--------------
Lease. Each such arbitrator shall be appointed within fifteen (15) days after
the applicable Outside Agreement Date. Landlord and Tenant may consult with
their selected arbitrators prior to appointment and may select an arbitrator who
is favorable to their respective positions. The arbitrators so selected by
Landlord and Tenant shall be deemed ("ADVOCATE ARBITRATORS").
2.2.4.2 The two Advocate Arbitrators so appointed shall be
specifically required pursuant to an engagement letter within ten (10) days of
the date of the appointment of the last appointed Advocate Arbitrator agree upon
and appoint a third arbitrator ("NEUTRAL ARBITRATOR") who shall be qualified
under the same criteria set forth hereinabove for qualification of the two
Advocate Arbitrators except that neither the Landlord or Tenant or either
party's Advocate Arbitrator may, directly or indirectly, consult with the
Neutral Arbitrator prior to subsequent to his or her appearance. The Neutral
Arbitrator shall be retained via an engagement letter jointly prepared by
Landlord's counsel and Tenant's counsel.
2.2.4.3 The three arbitrators shall within thirty (30) days of
the appointment of the Neutral Arbitrator reach a decision as to Market Rent and
determine whether the Landlord's or Tenant's determination of Market Rent as
submitted pursuant to Section 2.2.4.1 and Section 2.2.3 of this Lease is closest
--------------- -------------
to Market Rent as determined by the arbitrators and simultaneously publish a
ruling ("AWARD") indicating whether Landlord's or Tenant's submitted Market Rent
is closest to the Market Rent as determined by the arbitrators. Following
notification of the Award, the Landlord's or Tenant's submitted Market Rent
determination,
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<PAGE>
whichever is selected by the arbitrators as being closest to Market Rent shall
become the then applicable Market Rent. 2.2.4.4 The Award issued by the majority
of the three arbitrators shall be binding upon Landlord and Tenant.
2.2.4.5 If either Landlord or Tenant fail to appoint an
Advocate Arbitrator within fifteen (15) days after the applicable Outside
Agreement Date, either party may petition the presiding judge of the Superior
Court of San Diego County to appoint such Advocate Arbitrator subject to the
criteria in Section 2.2.4.1 of this Lease, or if he or she refuses to act,
---------------
either party may petition any judge having jurisdiction over the parties to
appoint such Advocate Arbitrator.
2.2.4.6 If the two Advocate Arbitrators fail to agree upon and
appoint the Neutral Arbitrator, then either party may petition the presiding
judge of the Superior Court of San Diego County to appoint the Neutral
Arbitrator, subject to criteria in Section 2.2.4.1 of this Lease, or if he or
---------------
she refuses to act, either party may petition any judge having jurisdiction over
the parties to appoint such arbitrator.
2.2.4.7 The cost of arbitration shall be paid by Landlord and
Tenant equally.
ARTICLE 3
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BASE RENT
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Tenant shall pay, without prior notice or demand, to Landlord or Landlord's
agent at the management office of the Project, or, at Landlord's option, at such
other place as Landlord may from time to time designate in writing, by a check
for currency which, at the time of payment, is legal tender for private or
public debts in the United States of America, base rent ("BASE RENT") as set
forth in Section 4 of the Summary, payable in equal monthly installments as set
forth in Section 4 of the Summary in advance on or before the first day of each
and every calendar month during the Lease Term, without any setoff or deduction
whatsoever. The Base Rent for the first full month of the Lease Term shall be
paid at the time of Tenant's execution of this Lease. If any Rent payment date
(including the Lease Commencement Date) falls on a day of the month other than
the first day of such month or if any payment of Rent is for a period which is
shorter than one month, the Rent for any fractional month shall accrue on a
daily basis for the period from the date such payment is due to the end of such
calendar month or to the end of the Lease Term at a rate per day which is equal
to 1/365 of the applicable annual Rent. All other payments or adjustments
required to be made under the terms of this Lease that require proration on a
time basis shall be prorated on the same basis.
ARTICLE 4
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ADDITIONAL RENT
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4.1 GENERAL TERMS. In addition to paying the Base Rent specified in
-------------
Article 3 of this Lease, Tenant shall pay "TENANT'S SHARE" of the annual "DIRECT
- ---------
EXPENSES," as those terms are
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<PAGE>
defined in Sections 4.2.6 and 4.2.2 of this Lease. Such payments by Tenant,
together with any and all other amounts payable by Tenant to Landlord pursuant
to the TCC's of this Lease, are hereinafter collectively referred to as the
"ADDITIONAL RENT", and the Base Rent and the Additional Rent are herein
collectively referred to as "RENT." All amounts due under this Article 4 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent. Without limitation on other obligations of Tenant which survive
the expiration of the Lease Term, the obligations of Tenant to pay the
Additional Rent provided for in this Article 4 shall survive the expiration of
the Lease Term. Landlord and Tenant understand and agree that this Lease is a
"Triple Net" Lease. Tenant recognizes and acknowledges, without limiting the
generality of any other TCC's of this Lease, that it is the intent of the
parties hereto that the Base Rent provided to be paid by Tenant to Landlord
shall be net to Landlord, and any and all expenses incurred in connection with
the Premises, the Building and a pro-rata portion of the Common Areas, or in
connection with the operations thereof, include any and all taxes, assessments,
general or special license fees, insurance premiums, public utility bills and
costs of repair, maintenance and operation of the Premise and the Project and
all buildings, structures, permanent fixtures and other improvements comprised
therein, together with the appurtenances thereto, shall be paid by Tenant in
addition to the Base Rent specified in this Lease.
4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in this
----------------------------------------------------
Article 4, the following terms shall have the meanings hereinafter set forth:
4.2.1 INTENTIONALLY OMITTED.
4.2.2 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "EXPENSE YEAR" shall mean each calendar year in which any portion
of the Lease Term falls, through and including the calendar year in which the
Lease Term expires, provided that Landlord, upon notice to Tenant, may change
the Expense Year from time to time to any other twelve (12) consecutive month
period, and, in the event of any such change, Tenant's Share of Direct Expenses
shall be equitably adjusted for any Expense Year involved in any such change.
4.2.4 "OPERATING EXPENSES" shall mean all expenses, costs and amounts
of every kind and nature which Landlord pays or accrues during any Expense Year
because of or in connection with the ownership, management, maintenance,
security, repair, replacement, restoration or operation of the Project, or any
portion thereof, except as specifically set forth below to the contrary. Without
limiting the generality of the foregoing, Operating Expenses shall specifically
include any and all of the following: (i) the cost of supplying all utilities,
the cost of operating, repairing, maintaining, and renovating the utility,
telephone, mechanical, sanitary, storm drainage, and elevator systems, and the
cost of maintenance and service contracts in connection therewith; (ii) the cost
of licenses, certificates, permits and inspections and the cost of contesting
any governmental enactments which may affect Operating Expenses, and the costs
incurred in connection with a transportation system management program or
similar program; (iii) the cost of all insurance carried by Landlord in
connection with the Project; (iv) the cost of landscaping, relamping, and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof; (v) costs incurred in
connection with the parking areas servicing the Project; (vi) fees and other
costs, including management fees
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<PAGE>
(which management fee shall equal two percent (2%) of the Base Rent due under
this Lease), consulting fees, legal fees and accounting fees, of all contractors
and consultants in connection with the management, operation, maintenance and
repair of the Project; (vii) intentionally omitted; (viii) wages, salaries and
other compensation and benefits, including taxes levied thereon, of all persons
engaged in the operation, maintenance and security of the Project at the
property manager level or below; (ix) costs under any recorded instrument
pertaining to the sharing of costs by the Project; (x) operation, repair,
maintenance and replacement of all systems and equipment and components thereof
of the Building; (xi) the cost of security and other services, and fixtures in
common areas, maintenance and replacement of curbs and walkways, and repair to
the Building roof membrane; (xii) amortization (including interest on the
unamortized cost) of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are intended to effect economies in the
operation or maintenance of the Project, or any portion thereof, (B) that are
required to comply with present or anticipated conservation programs, (C) which
are replacements or modifications of nonstructural items located in the Common
Areas required to keep the Common Areas in good order or condition or are
replacements or modifications of the "Building Structure," as that term is set
forth in Section 7.1 of this Lease, or (D) that are required under any
governmental law or regulation; provided, however, that any capital expenditure
shall be amortized with interest over its useful life, as reasonably determined
by Landlord pursuant to sound real estate accounting and management principles,
consistently applied; (xiv) costs, fees, charges or assessments imposed by, or
resulting from any mandate imposed on Landlord by, any federal, state or local
government for fire and police protection, trash removal, community services, or
other services which do not constitute "Tax Expenses" as that term is defined in
Section 4.2.5, below; and (xv) payments under any easement, license, operating
agreement, declaration, restrictive covenant, or instrument pertaining to the
sharing of costs by the Building.
Notwithstanding anything in this Section 4.2.4 to the contrary, for
purposes of this Lease, Operating Expenses shall not, however, include the
following:
(A) all costs relating to the maintenance and repair of the following
structural items: (i) the foundation slab structure under the Building (ii)
exterior wall structure of the Building, and (iii) the roof structure of
the Building (excluding the membrane).
(B) marketing costs, costs of leasing commissions, attorneys' fees and
other costs and expenses incurred in connection with negotiations or
disputes with prospective tenants or other occupants of the Project;
(C) except as otherwise specifically provided in Section 4.2.4(xiii)
above, costs incurred by Landlord in the repairs, capital additions,
alterations or replacements made or incurred to rectify or correct defects
in design, materials or workmanship in connection with the Base Building
portions of the Project;
(D) costs (including permit, license and inspection costs) incurred in
renovating or otherwise improving, decorating or redecorating rentable
space for prospective tenants or vacant rentable space;
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<PAGE>
(E) cost of utilities or services sold to Tenant or others for which
Landlord is entitled to and actually receives reimbursement (other than
through any operating cost reimbursement provision identical or
substantially similar to the provisions set forth in this Lease);
(F) except as otherwise specifically provided in this Section 4.2.4,
costs incurred by Landlord for capital repairs, improvements, equipment and
alterations to the Project which are considered capital improvements and
replacements under generally accepted accounting principles, consistently
applied;
(G) costs incurred due to the violation by Landlord or any licensee of
the TCC's of any lease or license of space in the Project;
(H) costs of general overhead and general administrative expenses, not
including management fees and building office expenses which are included
in operating expenses by landlords of Comparable Buildings;
(I) costs of any compensation and employee benefits paid to clerks,
attendants or other persons in a commercial concession operated by
Landlord;
(J) marketing costs, legal fees, space planner's fees, and advertising
and promotional expenses and brokerage fees incurred in connection with the
original development, subsequent improvement, or original or future leasing
of the Project;
(K) costs of electrical power for which Tenant directly contracts with
and pays a local public service company
(L) any bad debt loss, rent loss, or reserves for bad debts or rent
loss;
(M) costs associated with the operation of the business of the
partnership or entity which constitutes the Landlord, as the same are
distinguished from the costs of operation of the Project (which shall
specifically include, but not be limited to, accounting costs associated
with the operation of the Project, costs of partnership accounting and
legal matters, costs of defending any lawsuits with any mortgagee (except
as the actions of the Tenant may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of the Landlord's
interest in the Project, and costs incurred in connection with any disputes
between Landlord and its employees, between Landlord and Project
management, or between Landlord and other tenants or occupants, and
Landlord's general corporate overhead and general and administrative
expenses);
(N) the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Project unless such
wages and benefits are prorated to reflect time spent on operating and
managing the Project vis-a-vis time spent on matters unrelated to operating
and managing the Project; provided, that in no event shall Operating
Expenses for purposes of this Lease include wages and/or benefits
attributable to personnel above the level of Project manager or Project
engineer;
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<PAGE>
(O) interest, charges and fees incurred on debt, payments on mortgages
and amounts paid as ground rental for the real property underlying the
Project by the Landlord;
(P) costs for sculpture, paintings, fountains or other objects of art,
other than those incurred in ordinary maintenance and repair;
(Q) any costs expressly excluded from Operating Expenses elsewhere in
this Lease;
(R) costs arising from Landlord's charitable or political
contributions;
(S) any gifts provided to any entity whatsoever, including, but not
limited to, Tenant, other tenants, employees, vendors, contractors,
prospective tenants and agents;
(T) any costs covered by any warranty, rebate, guarantee or service
contract which are actually collected by Landlord (which shall not prohibit
Landlord from passing through the costs of any such service contract if
otherwise includable in Operating Expenses);
(U) interest, late charges and tax penalties incurred as a result of
Landlord's gross negligence, inability or unwillingness to make payments or
file returns when due;
(V) all items and services for which Tenant reimburses Landlord;
(W) any costs included as a Tax Expense pursuant to Section 4.2.5
below;
(X) any expense resulting from the gross negligence of Landlord, its
agents, contractors or employees, or, to the extent landlord is entitled to
reimbursement for such costs, to remedy damage caused by or resulting from
the gross negligence of any licensees in the Project, including their
agents, contractors and employees;
(Y) reserves for anticipated future expenses;
(Z) costs or repairs or other work occasioned by fire, casualty or
other risk covered by insurance maintained (or obligated to be maintained
pursuant to Article 10 of this Lease) by Landlord;
(AA) costs, fines, or fees incurred by Landlord due to Landlord's
violations of any federal, state or local law, statute or ordinance, or any
rule, regulation, judgment or decree of any governmental rule or authority;
(BB) any costs representing an amount paid to a person, firm,
corporation or other entity related to Landlord which is in excess of the
amount which would have been paid in the absence of such relationship;
(CC) rentals for items (except when needed in connection with normal
repairs and maintenance of permanent systems) which if purchased, rather
than rented, would
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<PAGE>
constitute a capital item which is specifically excluded in this Lease
(excluding, however, equipment not affixed to the Building which is used in
providing janitorial or similar services);
(DD) advertising and promotional expenditures, and costs of signs in
or on the Building identifying the owner of the Building;
(EE) costs of development or initial construction within the Project
(including, without limitation, such initial development or initial
construction costs incurred to comply with any now-existing CC&Rs,
development permits, design permit or use permit currently issued for the
Project);
(FF) reserves for depreciation, amortization and other expenses;
(GG) costs occasioned by the active negligence or willful misconduct
of Landlord or any other occupant of the Project or violations of
applicable law by Landlord or any such occupant of the Project;
(HH) deductibles payable under any earthquake insurance.
4.2.5 TAXES.
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4.2.5.1 "TAX EXPENSES" shall mean all federal, state, county,
or local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Project, or
any portion thereof), which shall be paid or accrued during any Expense Year
(without regard to any different fiscal year used by such governmental or
municipal authority) because of or in connection with the ownership, leasing and
operation of the Project, or any portion thereof. Notwithstanding anything to
the contrary set forth in this Section 4.2.5, Tax Expenses shall specifically
exclude bonds and/or assessments which have been or, subsequent to the date
hereof are, levied for the purpose of funding the costs of construction of all
or any portion of the Project or capital improvements constructed therein or
about, or on-or off-site improvements with respect thereto, to the extent such
improvements are the sole responsibility of Landlord under the TCCs of this
Lease.
4.2.5.2 Tax Expenses shall include, without limitation: (i) Any
tax on the rent, right to rent or other income from the Project, or any portion
thereof, or as against the business of leasing the Project, or any portion
thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in
substitution, partially or totally, of any assessment, tax, fee, levy or charge
previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided
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<PAGE>
without charge to property owners or occupants, and, in further recognition of
the decrease in the level and quality of governmental services and amenities as
a result of Proposition 13, Tax Expenses shall also include any governmental or
private assessments or the Project's contribution towards a governmental or
private cost-sharing agreement for the purpose of augmenting or improving the
quality of services and amenities normally provided by governmental agencies;
(iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the
area of the Premises or the Rent payable hereunder, including, without
limitation, any business or gross income tax or excise tax with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax,
fee, levy or charge, upon this transaction or any document to which Tenant is a
party, creating or transferring an interest or an estate in the Premises.
4.2.5.3 Any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such
expenses are paid. Except as set forth in Section 4.2.5.4, below, refunds of Tax
Expenses shall be credited against Tax Expenses and refunded to Tenant
regardless of when received, based on the Expense Year to which the refund is
applicable, provided that in no event shall the amount to be refunded to Tenant
for any such Expense Year exceed the total amount paid by Tenant as Additional
Rent under this Article 4 for such Expense Year. If Tax Expenses for any period
---------
during the Lease Term or any extension thereof are increased after payment
thereof for any reason, including, without limitation, error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord upon
demand Tenant's Share of any such increased Tax Expenses included by Landlord as
Building Tax Expenses pursuant to the TCC's of this Lease. Notwithstanding
anything to the contrary contained in this Section 4.2.8 (except as set forth in
-------------
Section 4.2.8.1, above), there shall be excluded from Tax Expenses (i) all
- ---------------
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income
from all sources, (ii) any items included as Operating Expenses, (iii) any items
paid by Tenant under Section 4.5 of this Lease, and transfer taxes associated
-----------
with the sale or other transfer by Landlord of its interest in the Project.
4.2.6 "TENANT'S SHARE" shall mean the percentage set forth in
Section 6 of the Summary, which percentage is equal to a fraction, the numerator
of which is the acreage of Lot 4, and the denominator of which is the acreage of
the entire Project (i.e., Lots 1 through 9).
4.3 ALLOCATION OF DIRECT EXPENSES; METHOD OF ALLOCATION. The parties
---------------------------------------------------
acknowledge that the Building is a part of what is to be a multi-building
project and that the costs and expenses incurred in connection with the Project
(i.e. the Direct Expenses) should be shared between Tenant (as the tenant of the
Building) and the tenants of the other buildings in the Project. Accordingly, as
set forth in Section 4.2 above, Direct Expenses (which consists of Operating
-----------
Expenses and Tax Expenses) are determined annually for the Project as a whole,
and a portion of the Direct Expenses, which portion shall be determined by
Landlord on a pro-rata basis as set forth in Section 4.2.6, shall be allocated
to the Building (as opposed to other buildings in the Project and the tenants of
such buildings) and such portion shall be the Direct Expenses for purposes of
this Lease. Such portion of Direct Expenses allocated to the Building
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<PAGE>
shall include all Direct Expenses attributable solely to the Building (e.g.,
100% of the Tax Expenses related solely to Lot 5) and a pro-rata portion of the
Direct Expenses attributable to the Project as a whole (provided, however, that
for purposes of determining the portion of Tax Expenses attributable to the
Project as a whole, only the Tax Expenses relating to the Common Areas (as
opposed to the Tax Expenses relating directly to another lot in the Project upon
which another building is to be built) shall be included in such determination).
4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. Tenant shall pay to
------------------------------------------
Landlord, in the manner set forth in Section 4.4.1, below, and as Additional
-------------
Rent Tenant's Share of Direct Expenses for each Expense Year.
4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
---------------------------------------------------------
Within one hundred fifty (150) days after the end of each Expense Year, Landlord
shall give to Tenant a statement (the "STATEMENT") which shall state the Direct
Expenses incurred or accrued for such preceding Expense Year, and which shall
indicate the amount of Tenant's Share of Direct Expenses. Within thirty (30)
days of receipt of the Statement for each Expense Year commencing or ending
during the Lease Term Tenant shall pay, with its next installment of Base Rent
due, the full amount of Tenant's Share of Direct Expenses for such Expense Year,
less the amounts, if any, paid during such Expense Year as "Estimated Direct
Expenses," as that term is defined in Section 4.4.2, below. The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's Share of Direct Expenses for the
Expense Year in which this Lease terminates, if is greater than then amount of
estimated Direct Expenses previously paid by Tenant to Landlord (an "EXCESS"),
Tenant shall pay to Landlord such amount within thirty (30) days of request
therefor. The provisions of this Section 4.4.1 shall survive the expiration or
earlier termination of the Lease Term.
4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition, Landlord
--------------------------------------
shall give Tenant a yearly expense estimate statement (the "ESTIMATE STATEMENT")
which shall set forth Landlord's reasonable estimate of Tenant's Share of Direct
Expenses (the "ESTIMATE") of what the total amount of Direct Expenses for the
then-current Expense Year shall be and the estimated excess (the "ESTIMATED
DIRECT EXPENSES"). Failure of Landlord to timely furnish the Estimate Statement
for any Expense Year shall not preclude Landlord from enforcing its rights to
collect any Estimated Direct Expenses under this Article 4, nor shall Landlord
be prohibited from revising any Estimate Statement or Estimated Direct Expenses
theretofore delivered to the extent necessary. After its receipt of the Estimate
Statement, Tenant shall pay, with its next installment of Base Rent due, a
fraction of the Estimated Direct Expenses for the then-current Expense Year
(reduced by any amounts paid pursuant to the next to last sentence of this
Section 4.4.2). Such fraction shall have as its numerator the number of months
which have elapsed in such current Expense Year, including the month of such
payment, and twelve (12) as its denominator. Until a new Estimate Statement is
furnished (which Landlord shall have the right to deliver to Tenant at any
time), Tenant shall pay monthly, with the monthly Base Rent installments, an
amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set
forth in the previous Estimate Statement delivered by Landlord to Tenant.
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4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
----------------------------------------------------------------
4.5.1 Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment, furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.
4.5.2 Intentionally Omitted.
4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay
prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or
value added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.
4.6 LANDLORD'S BOOKS AND RECORDS. Within two (2) years after receipt of a
----------------------------
Statement by Tenant, if Tenant disputes the amount of Additional Rent set forth
in the Statement, a determination as to the proper amount shall be made, at
Tenant's expense, by an independent certified public accountant (the
"ACCOUNTANT") selected by Landlord and subject to Tenant's reasonable approval,
by inspecting Landlord's records with respect to the Statement at Landlord's
offices, provided that Tenant is not then in Default under this Lease and Tenant
has paid all amounts required to be paid under the applicable Estimate Statement
and Statement, as the case may be. In connection with such inspection, the
Accountant must agree in advance to follow Landlord's reasonable rules and
procedures regarding inspections of Landlord's records, and shall execute a
commercially reasonable confidentiality agreement regarding such inspection. If
such determination by the Accountant proves that Direct Expenses were overstated
by more than five percent (5%), then the cost of the Accountant and the cost of
such determination shall be paid for by Landlord. Tenant's failure to dispute
the amount of Additional Rent set forth in any Statement within two (2) years of
Tenant's receipt of such Statement shall be deemed to be Tenant's approval of
such Statement and Tenant, thereafter, waives the right or ability to dispute
the amounts set forth in such Statement. Tenant hereby acknowledges that
Tenant's sole right to inspect Landlord's books and records and to contest the
amount of Direct Expenses payable by Tenant shall be as set forth in this
Section 4.6, and Tenant hereby waives any and all other rights pursuant to
Applicable Law to inspect such books and records and/or to contest the amount of
Direct Expenses payable by Tenant.
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<PAGE>
ARTICLE 5
---------
USE OF PREMISES
---------------
5.1 PERMITTED USE. Tenant shall use the Premises solely for the Permitted
-------------
Use set forth in Section 7 of the Summary and Tenant shall not use or permit the
---------
Premises or the Project to be used for any other purpose or purposes whatsoever
without the prior written consent of Landlord, which may be withheld in
Landlord's reasonable discretion.
5.2 PROHIBITED USES. The uses prohibited under this Lease shall include,
---------------
without limitation, use of the Premises or a portion thereof for (i) offices of
any agency or bureau of the United States or any state or political subdivision
thereof; (ii) offices or agencies of any foreign governmental or political
subdivision thereof; (iii) offices of any health care professionals or service
organization; (iv) schools or other training facilities which are not ancillary
to corporate, executive or professional office use; (v) retail or restaurant
uses; or (vi) communications firms such as radio and/or television stations.
Tenant further covenants and agrees that Tenant shall not use, or suffer or
permit any person or persons to use, the Premises or any part thereof for any
use or purpose contrary to the provisions of the Rules and Regulations set forth
in EXHIBIT D, attached hereto, or in violation of the laws of the United States
---------
of America, the State of California, or the ordinances, regulations or
requirements of the local municipal or county governing body or other lawful
authorities having jurisdiction over the Project) including, without limitation,
any such laws, ordinances, regulations or requirements relating to hazardous
materials or substances, as those terms are defined by applicable laws now or
hereafter in effect. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way damage the reputation of the Project or
use or allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises.
5.3 CC&RS. Tenant shall comply with all recorded covenants, conditions, and
-----
restrictions currently affecting the Project. Additionally, Tenant acknowledges
that it is anticipated that the Project will be subject to that certain
"Declaration of Covenants, Conditions and Restriction for Sorrento Gateway," a
substantially complete copy of which is attached hereto as EXHIBIT F-1, and may
-----------
be subject to amendments and modifications thereto as well as additional future
covenants, conditions and restrictions (collectively, the "CC&RS") which
Landlord deems reasonably necessary and/or desirable (provided, however, such
amendments and/or modifications do not prohibit the Permitted Use in the Project
and do not materially adversely interfere with Tenant's use and enjoyment of the
Premises, and Tenant agrees that this Lease shall be subject and subordinate to
such CC&Rs. Landlord shall have the right to require Tenant to execute and
acknowledge, within fifteen (15) business days of a request by Landlord, a
"Recognition of Covenants, Conditions, and Restriction," in a form substantially
similar to that attached hereto as EXHIBIT F-2, agreeing to and
-----------
acknowledging the CC&Rs.
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<PAGE>
ARTICLE 6
---------
SERVICES AND UTILITIES
----------------------
6.1 STANDARD TENANT SERVICES. Landlord shall keep the Building Structure in
------------------------
condition and repair materially consistent with the Comparable Buildings and
shall maintain the Common Areas of the Project.
Notwithstanding the foregoing, Tenant shall directly pay for all utilities
(including without limitation, electricity, gas and water) attributable to its
use of the entire Premises. Such utility use shall include electricity, water,
and gas use for lighting, incidental use and heating and air-conditioning
("HVAC"). All such direct utility payments shall be excluded from Operating
Expenses (as opposed to the utility payments made by Landlord for the Common
Areas of the Project which shall be included in Operating Expenses) and shall be
paid directly by Tenant prior to the date on which the same are due to the
utility provider. The Premises shall be separately metered as part of the Tenant
Improvements to be constructed pursuant to the Tenant Work Letter.
Landlord shall not be required to provide any services other than with
regard to its maintenance and repair obligation relating to the Building
Structure and the Common Areas of the Project (subject to the TCCs of Section
4.3 above).
6.2 INTENTIONALLY OMITTED.
---------------------
6.3 INTERRUPTION OF USE. Tenant agrees that Landlord shall not be liable
-------------------
for damages, by abatement of Rent or otherwise, for failure to furnish or delay
in furnishing any service (including telephone and telecommunication services),
or for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Premises or relieve Tenant from paying Rent
or performing any of its obligations under this Lease. Furthermore, Landlord
shall not be liable under any circumstances for a loss of, or injury to,
property or for injury to, or interference with, Tenant's business, including,
without limitation, loss of profits, however occurring, through or in connection
with or incidental to a failure to furnish any of the services or utilities as
set forth in this Article 6.
---------
ARTICLE 7
---------
REPAIRS
-------
Landlord shall maintain in good condition and operating order and keep in
good repair and condition the structural portions of the Building, including the
foundation, floor/ceiling slabs, roof, curtain wall, exterior glass and
mullions, columns, beams, shafts (including elevator shafts), parking areas,
landscaping, exterior fountains, exterior water falls, exterior Project signage,
exterior plazas, exterior art work, exterior sculptures, and all exterior common
and public areas (collectively, "BUILDING STRUCTURE"). Tenant shall maintain in
good condition and operating order and keep in good repair and condition the
Base Building mechanical, electrical,
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life safety, plumbing, sprinkler systems and HVAC systems, stairs, stairwells,
elevator cabs, men's and women's washrooms, and Building mechanical, electrical
and telephone closets, including those constructed by Tenant Parties
(collectively, the "BUILDING SYSTEMS"). Notwithstanding anything in this Lease
to the contrary, Tenant shall be required to repair the Building Structure to
the extent required because of Tenant's negligence or willful misconduct, unless
and to the extent such damage is covered by insurance carried or required to be
carried by Landlord pursuant to Article 10 and to which the waiver of
----------
subrogation is applicable (such obligation to the extent applicable to Tenant as
qualified and conditioned will hereinafter be defined as the "BS EXCEPTION").
Tenant shall, at Tenant's own expense, pursuant to the TCC's of this Lease,
including without limitation Article 8 hereof, keep the Premises, including all
---------
Tenant Improvements, "Alterations," as that term is defined in Section 8.1 of
-----------
this Lease, fixtures and the floor or floors of the Building on which the
Premises are located, in good order, repair and condition at all times during
the Lease Term (but such obligation shall not extend to the Building Structure
except pursuant to the BS Exception), except for damage caused by ordinary wear
and tear or beyond the reasonable control of Tenant. Tenant shall, at Tenant's
own expense, but under the supervision and subject to the prior approval of
Landlord, and within any reasonable period of time specified by Landlord,
pursuant to the TCC's of this Lease, including without limitation Article 8
---------
hereof, promptly and adequately repair all damage to the Premises and replace or
repair all damaged, broken, or worn fixtures and appurtenances (but such
obligation shall not extend to the Building Structure except pursuant to the BS
Exception), except for damage caused by ordinary wear and tear or beyond the
reasonable control of Tenant; provided however, that, at Landlord's option, but
only if Tenant fails to make such repairs and replacements, Landlord may, but
need not, make such repairs and replacements, and Tenant shall pay Landlord the
cost thereof, including a percentage of the cost thereof (to be uniformly
established for the Building and/or the Project) sufficient to reimburse
Landlord for all overhead, general conditions, fees and other costs or expenses
arising from Landlord's involvement with such repairs and replacements forthwith
upon being billed for same. Landlord may, but shall not be required to, enter
the Premises at all reasonable times (after reasonable notice) to make such
repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or
deem necessary or as Landlord may be required to do by governmental or
quasi-governmental authority or court order or decree. Tenant hereby waives any
and all rights under and benefits of subsection 1 of Section 1932 and Sections
1941 and 1942 of the California Civil Code or under any similar law, statute, or
ordinance now or hereafter in effect. Landlord shall procure a fifteen (15) year
warranty on the roof membrane and assign such warranty (and all other warranties
for the Building) to Tenant. If, on or before the eighth (8th) anniversary of
the Lease Commencement Date, Tenant becomes obligated, at Tenant's sole cost and
expense, to make a repair to the Building Systems pursuant to the TCCs of this
Article 7 which shall be capital in nature, Tenant may elect, upon immediate
notice thereof to Landlord, to have Landlord make such repair to the Building
Systems, the cost of which shall be amortized with interest over its useful life
as reasonably determined by Landlord pursuant to sound real estate accounting
and management principles, consistently applied, and shall be paid by Tenant to
Landlord as Additional Rent; provided, however, (i) Tenant shall not have such
option to the extent such repair is necessary due to the negligence or willful
misconduct of Tenant or the Tenant's Parties, and (ii) to the extent Tenant's
use of the repaired item reduces the useful life of such repair, the cost of
such repairs shall be amortized with interest over such shorter time period.
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ARTICLE 8
---------
ADDITIONS AND ALTERATIONS
-------------------------
8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant shall have the right, without
---------------------------------
Landlord's consent but upon five (5) business days prior Notice to Landlord, to
make strictly cosmetic, non-structural additions and alterations ("COSMETIC
ALTERATIONS") to the Premises that do not (i) involve the expenditure of more
than $100,000.00 in the aggregate in any Lease Year; (ii) affect the exterior
appearance of the Building, or (iii) affect the Building Systems or the Building
Structure. Except in connection with Cosmetic Alterations, Tenant may not make
any improvements, alterations, additions or changes to the Premises or any
mechanical, plumbing or HVAC facilities or systems pertaining to the Premises
(collectively, the "ALTERATIONS") without first procuring the prior written
consent of Landlord to such Alterations, which consent shall be requested by
Tenant not less than thirty (30) days prior to the commencement thereof, and
which consent shall not be unreasonably withheld by Landlord, provided it shall
be deemed reasonable for Landlord to withhold its consent to any Alteration
which adversely affects the structural portions or the systems or equipment of
the Building or is visible from the exterior of the Building. The construction
of the initial improvements to the Premises shall be governed by the TCC's of
the Tenant Work Letter and not the TCC's of this Article 8.
---------
8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
----------------------
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its reasonable discretion may deem
desirable, including, but not limited to, the requirement that Tenant utilize
for such purposes only contractors, subcontractors, materials, mechanics and
materialmen selected by Tenant from a list provided and approved by Landlord,
the requirement that upon Landlord's request, Tenant shall, at Tenant's expense,
remove such Alterations upon the expiration or any early termination of the
Lease Term. If such Alterations will involve the use of or disturb hazardous
materials or substances existing in the Premises, Tenant shall comply with
Landlord's rules and regulations concerning such hazardous materials or
substances. Tenant shall construct such Alterations and perform such repairs in
a good and workmanlike manner, in conformance with any and all applicable
federal, state, county or municipal laws, rules and regulations and pursuant to
a valid building permit, issued by the City of San Diego, all in conformance
with Landlord's construction rules and regulations. In the event Tenant performs
any Alterations in the Premises which require or give rise to governmentally
required changes to the "Base Building," as that term is defined below, then
Landlord shall, at Tenant's expense, make such changes to the Base Building. The
"BASE BUILDING" shall consist of the Building Structure. In performing the work
of any such Alterations, Tenant shall have the work performed in such manner so
as not to obstruct access to the Project or any portion thereof, by any other
tenant of the Project, and so as not to obstruct the business of Landlord or
other tenants in the Project. Tenant shall not use (and upon notice from
Landlord shall cease using) contractors, services, workmen, labor, materials or
equipment that, in Landlord's reasonable judgment, would disturb labor harmony
with the workforce or trades engaged in performing other work, labor or services
in or about the Building or the Common Areas. In addition to Tenant's
obligations under Article 9 of this Lease, upon completion of any Alterations,
Tenant agrees to cause a Notice of Completion to be recorded in the office of
the Recorder of the County of San Diego in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute, and Tenant shall
deliver to the Project management
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<PAGE>
office a reproducible copy of the "as built" drawings of the Alterations as well
as all permits, approvals and other documents issued by any governmental agency
in connection with the Alterations.
8.3 PAYMENT FOR IMPROVEMENTS. If payment is made directly to contractors,
------------------------
Tenant shall comply with Landlord's requirements for final lien releases and
waivers in connection with Tenant's payment for work to contractors. Except with
regard to Cosmetic Alterations for which there shall be no such charge, whether
or not Tenant orders any work directly from Landlord, Tenant shall pay to
Landlord a percentage of the cost of such work (not to exceed one percent (1%)
of the total cost of such work) sufficient to compensate Landlord for all
overhead, general conditions, fees and other costs and expenses arising from
Landlord's involvement with such work.
8.4 CONSTRUCTION INSURANCE. In addition to the requirements of Article 10
----------------------
of this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries "BUILDER'S ALL RISK" insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may require, it being understood and agreed that all of such
Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a co-
obligee.
8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures, equipment
-------------------
and/or appurtenances which may be installed or placed in or about the Premises,
from time to time, shall be at the sole cost of Tenant and shall be and become
the property of Landlord, except that Tenant may remove any Alterations,
improvements, fixtures and/or equipment which Tenant can substantiate to
Landlord have not been paid for with any Tenant improvement allowance funds
provided to Tenant by Landlord, provided Tenant repairs any damage to the
Premises and Building caused by such removal and returns the affected portion of
the Premises to a building standard tenant improved condition as determined by
Landlord. Furthermore, Landlord may, by written notice to Tenant prior to the
end of the Lease Term, or given following any earlier termination of this Lease,
require Tenant, at Tenant's expense, to (i) remove any Alterations or
improvements in the Premises, and/or (ii) remove any "Above Building Standard
Tenant Improvements," as that term is defined in the Tenant Work Letter, located
within the Premises and replace the same with then existing "Building Standard
Tenant Improvements," as that term is defined in the Tenant Work Letter, and to
repair any damage to the Premises and Building caused by such removal and
returns the affected portion of the Premises to a building standard tenant
improved condition as reasonably determined by Landlord; provided, however, if,
in connection with its request for Landlord's approval for particular
Alterations, (1) Tenant requests Landlord's decision with regard to the removal
of such Alterations, and (2) Landlord thereafter agrees in writing to waive the
removal requirement when approving such Alterations, then Tenant shall not be
required to so remove such Alterations. If Tenant fails to complete such removal
and/or to repair any damage caused by the removal of any Alterations or
improvements in the Premises, and returns the affected portion of the Premises
to a building standard tenant improved condition as reasonably determined by
Landlord, then at Landlord's option, either (A)
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<PAGE>
Tenant shall be deemed to be holding over in the Premises and Rent shall
continue to accrue in accordance with the TCC's of Article 16, below, until such
work shall be completed, or (B) Landlord may do so and may charge the cost
thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds
Landlord harmless from any liability, cost, obligation, expense or claim of lien
in any manner relating to the violation of the foregoing provisions, which
obligations of Tenant shall survive the expiration or earlier termination of
this Lease.
ARTICLE 9
---------
COVENANT AGAINST LIENS
----------------------
Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within ten (10) days after notice by Landlord,
and if Tenant shall fail to do so, Landlord may pay the amount necessary to
remove such lien or encumbrance, without being responsible for investigating the
validity thereof. The amount so paid shall be deemed Additional Rent under this
Lease payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Building or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Building or Premises arising in connection with any such work or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Project, Building and Premises.
ARTICLE 10
----------
INSURANCE
---------
10.1 INDEMNIFICATION AND WAIVER. Tenant hereby releases Landlord from all
--------------------------
risk of damage to property or injury to persons in, upon or about the Premises
from any cause whatsoever (other than Landlord's and Landlord Parties'
negligence or willful misconduct) and agrees that Landlord, its partners,
subpartners and their respective officers, agents, servants, employees, and
independent contractors (collectively, "LANDLORD PARTIES") shall not be liable
for, and are hereby released from any responsibility for, any damage either to
person or property or resulting from the loss of use thereof, which damage is
sustained by Tenant or by other persons claiming through Tenant (other than
Landlord's and Landlord Parties' negligence or willful misconduct). Tenant shall
indemnify, defend, protect, and hold harmless the Landlord Parties from any and
all loss, cost, damage, expense and liability (including without limitation
court costs and reasonable attorneys' fees) incurred in connection with or
arising from any cause in or on the Premises (other than Landlord's and Landlord
Parties' negligence or willful misconduct), any acts, omissions or negligence of
Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, invitees, guests or licensees of
Tenant (collectively, the "TENANT PARTIES") or any such Tenant Parties, in, on
or about the Project or any breach of the TCC's of this Lease, either prior to,
during, or after the expiration of the Lease Term, provided that the TCC's of
the foregoing indemnity shall not apply to the negligence or willful
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<PAGE>
misconduct of Landlord. Should Landlord be named as a defendant in any suit
brought against Tenant in connection with or arising out of Tenant's occupancy
of the Premises, Tenant shall pay to Landlord its costs and expenses incurred in
such suit, including without limitation, its actual professional fees such as
appraisers', accountants' and attorneys' fees. Further, Tenant's agreement to
indemnify Landlord pursuant to this Section 10.1 is not int ended and shall not
------------
relieve any insurance carrier of its obligations under policies required to be
carried by Tenant pursuant to the provisions of this Lease, to the extent such
policies cover the matters subject to Tenant's indemnification obligations; nor
shall they supersede any inconsistent agreement of the parties set forth in any
other provision of this Lease. The provisions of this Section 10.1 shall survive
the ------------ expiration or sooner termination of this Lease with respect to
any claims or liability arising in connection with any event occurring prior to
such expiration or termination.
10.2 TENANT'S COMPLIANCE WITH LANDLORD'S FIRE AND CASUALTY INSURANCE.
--------------------------------------------------------------- Tenant
shall, at Tenant's expense, comply with all commercially reasonable insurance
company requirements pertaining to the use of the Premises. If Tenant's conduct
or use of the Premises causes any increase in the premium for such insurance
policies then Tenant shall reimburse Landlord for any such increase. Tenant, at
Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body.
10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages in
------------------
the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operations, and contractual
liabilities (covering the performance by Tenant of its indemnity agreements)
including a Broad Form endorsement covering the insuring provisions of this
Lease and, to the extent consistent with commercially standard policies of such
insurance coverage, the performance by Tenant of the indemnity agreements set
forth in Section 10.1 of this Lease, for limits of liability not less than:
Bodily Injury and $5,000,000 each occurrence
Property Damage Liability $5,000,000 annual aggregate
Personal Injury Liability $5,000,000 each occurrence
$5,000,000 annual aggregate
0% Insured's participation
10.3.2 Physical Damage Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of
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Tenant, (ii) the "Tenant Improvements," as that term is defined in Section 2.1
-----------
of the Tenant Work Letter, and any other improvements which exist in the
Premises as of the Lease Commencement Date (excluding the Base Building) (the
"ORIGINAL IMPROVEMENTS"), and (iii) all other improvements, alterations and
additions to the Premises made by Tenant. Such insurance shall be written on an
"special cause of loss" of physical loss or damage basis, for the full
replacement cost value (subject to reasonable deductible amounts) new without
deduction for depreciation of the covered items and in amounts that meet any
co-insurance clauses of the policies of insurance and shall include coverage for
damage or other loss caused by fire or other peril including, but not limited
to, vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing
business interruption coverage for a period of one year.
10.3.3 Worker's Compensation and Employer's Liability or other similar
insurance pursuant to all applicable state and local statutes and regulations.
10.4 FORM OF POLICIES. The minimum limits of policies of insurance required
----------------
of Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. Such insurance shall (i) name Landlord, and any other party the
Landlord so specifies (if such party has an insurable interest), as an
additional insured, including Landlord's managing agent, if any; (ii)
specifically cover the liability assumed by Tenant under this Lease, including,
but not limited to, Tenant's obligations under Section 10.1 of this Lease to the
------------
extent consistent with commercially standard policies of such insurance
coverage,; (iii) be issued by an insurance company having a rating of not less
than A-X in Best's Insurance Guide or which is otherwise acceptable to Landlord
and licensed to do business in the State of California; (iv) be primary
insurance as to all claims thereunder and provide that any insurance carried by
Landlord is excess and is non-contributing with any insurance requirement of
Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi)
provide that said insurance shall not be canceled or coverage materially changed
unless ten (10) days' prior written notice shall have been given to Landlord and
any mortgagee of Landlord. Tenant shall deliver said policy or policies or
certificates thereof to Landlord on or before the Lease Commencement Date and at
least ten (10) days before the expiration dates thereof. In the event Tenant
shall fail to procure such insurance, or to deliver such policies or
certificate, Landlord may, at its option, procure such policies for the account
of Tenant, and the cost thereof shall be paid to Landlord within ten (10) days
after delivery to Tenant of bills therefor.
10.5 SUBROGATION. Landlord and Tenant intend that their respective property
-----------
loss risks shall be borne by reasonable insurance carriers to the extent above
provided, and Landlord and Tenant hereby agree to look solely to, and seek
recovery only from, their respective insurance carriers in the event of a
property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective insurance
policies are now, or shall be, endorsed such that the waiver of subrogation
shall not affect the right of the insured to recover thereunder, so long as no
material additional premium is charged therefor.
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10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
--------------------------------
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and
- ----------
in such reasonable amounts covering the Premises and Tenant's operations
therein, as may be reasonably requested by Landlord.
10.7 LANDLORD'S INSURANCE. Landlord shall insure the Building (including
--------------------
the Building Structure and Building Systems) and the Project during the Lease
Term against loss or damage due to fire and other casualties covered within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage and special extended coverage. Such
coverage shall be in such amounts, from such companies, and on such other TCCs,
as Landlord may from time to time reasonably determine, provided that to the
extent consistent with the practices of landlords of the Comparable Buildings,
such coverage shall (i) be for full replacement of the Building and the Project
in compliance with all then existing Applicable Law; (ii) provide for rent
continuation insurance equal to at least twelve months rent; and (iii) be with
companies and have policies meeting the criteria set forth in Section 10.4(iii)
-----------------
in this Lease. Additionally, at the sole option of Landlord, such insurance
coverage may include the risks of earthquakes and/or flood damage and additional
hazards, a rental loss endorsement and one or more loss payee endorsements in
favor of the holders of any mortgages or deeds of trust encumbering the interest
of Landlord in the Building or the ground or underlying lessors of the Building,
or any portion thereof. In addition, Landlord shall maintain a Commercial
General Liability Insurance policy covering the insured against claims of bodily
injury and personal injury, for limits of liability not initially less than
$5,000,000 each occurrence and $5,000,000 annual aggregate for each of bodily
injury and personal injury. Notwithstanding the foregoing TCCs of this Section
-------
10.6, the coverage and amounts of insurance carried by Landlord in connection
- ----
with the Building need only, at the option of Landlord, be comparable to the
coverage and amounts of insurance which are carried by reasonably prudent
landlords of Comparable Buildings, and Worker's Compensation and Employee's
Liability coverage as required by Applicable Law. Upon inquiry by Tenant, from
time to time, Landlord shall inform Tenant of all such insurance carried by
Landlord.
ARTICLE 11
----------
DAMAGE AND DESTRUCTION
----------------------
11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly notify
---------------------------------------- Landlord of any damage to the
Premises resulting from fire or any other casualty. If the Premises or any
Common Areas serving or providing access to the Premises shall be damaged by
fire or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord's
reasonable control, and subject to all other TCC's of this Article 11, restore
----------
the Base Building and such Common Areas. Such restoration shall be to
substantially the same condition of the Base Building and the Common Areas prior
to the casualty, except for modifications required by zoning and building codes
and other laws or by the holder of a mortgage on the Building or Project or any
other modifications to the Common Areas deemed desirable by Landlord, provided
that access to the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, upon notice (the "LANDLORD REPAIR
NOTICE") to Tenant from Landlord, Tenant shall assign to Landlord (or to
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<PAGE>
any party designated by Landlord) all insurance proceeds payable to Tenant under
Tenant's insurance required under Section 10.3 of this Lease allocable to the
------------
Tenant Improvements and the Original Improvements, and Landlord shall repair any
injury or damage to the Tenant Improvements and the Original Improvements
installed in the Premises and shall return such Tenant Improvements and Original
Improvements to their original condition; provided that if the cost of such
repair by Landlord exceeds the amount of insurance proceeds received by Landlord
from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs
shall be paid by Tenant to Landlord prior to Landlord's commencement of repair
of the damage. In the event that Landlord does not deliver the Landlord Repair
Notice within sixty (60) days following the date the casualty becomes known to
Landlord, Tenant shall, at its sole cost and expense, repair any injury or
damage to the Tenant Improvements and the Original Improvements installed in the
Premises and shall return such Tenant Improvements and Original Improvements to
their original condition. Whether or not Landlord delivers a Landlord Repair
Notice, prior to the commencement of construction, Tenant shall submit to
Landlord, for Landlord's review and approval, all plans, specifications and
working drawings relating thereto, and Landlord shall select the contractors to
perform such improvement work. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises or
Common Areas necessary to Tenant's occupancy, Landlord shall allow Tenant a
proportionate abatement of Rent to the extent Landlord is reimbursed from the
proceeds of rental interruption insurance purchased by Landlord as part of
Operating Expenses, during the time and to the extent the Premises are unfit for
occupancy for the purposes permitted under this Lease, and not occupied by
Tenant as a result thereof; provided, further, however, that if the damage or
destruction is due to the negligence or willful misconduct of Tenant or any of
its agents, employees, contractors, invitees or guests, Tenant shall be
responsible for any reasonable, applicable insurance deductible (which shall be
payable to Landlord upon demand) and there shall be no rent abatement. In the
event that Landlord shall not deliver the Landlord Repair Notice, Tenant's right
to rent abatement pursuant to the preceding sentence shall terminate as of the
date which is reasonably determined by Landlord to be the date Tenant should
have completed repairs to the Premises assuming Tenant used reasonable due
diligence in connection therewith.
11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the TCC's of Section 11.1
--------------------------- ------------
of this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, and instead terminate this Lease, by notifying Tenant
in writing of such termination within sixty (60) days after the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the Premises, but Landlord may so elect only if the
Building or Project shall be damaged by fire or other casualty or cause, whether
or not the Premises are affected, and one or more of the following conditions is
present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be
completed within ninety (90) days after the date of discovery of the damage
(when such repairs are made without the payment of overtime or other premiums);
(ii) the holder of any mortgage on the Building or Project or ground lessor with
respect to the Building or Project shall require that the insurance proceeds or
any portion thereof be used to retire the mortgage debt, or shall terminate the
ground lease, as the case may be; (iii) the damage is not fully covered by
Landlord's and Tenant's insurance policies; or (iv) Landlord cannot, pursuant to
the applicable laws then in effect, rebuild the Building or
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<PAGE>
Common Areas so that they will be substantially the same structurally or
architecturally; (v) the damage occurs during the last twelve (12) months of the
Lease Term.
If the Premises, Building or Common Areas are damaged by any peril and
Landlord does not elect to terminate this Lease or is not entitled to terminate
this Lease pursuant to this Article 11, then as soon as reasonably practicable,
Landlord shall furnish Tenant with the written opinion of Landlord's architect
or construction consultant as to when the restoration work required of Landlord
is reasonably anticipated to be complete. Tenant shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Landlord of a written notice of election to
terminate within thirty (30) days after Tenant receives from Landlord the
estimate of the time anticipated to be needed to complete such restoration.
(A) If the anticipated time to substantially complete such restoration
exceeds twelve (12) months from and after the date the written opinion of the
architect or construction consultant is delivered to Tenant; or
(B) If the date of such damage occurs within the last twelve (12)
months of the Lease Term.
11.3 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
------------------------------
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.
ARTICLE 12
----------
NONWAIVER
---------
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after
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<PAGE>
the giving of any notice shall reinstate, continue or extend the Lease Term or
affect any notice given Tenant prior to the receipt of such monies, it being
agreed that after the service of notice or the commencement of a suit, or after
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of said Rent shall not waive or affect said
notice, suit or judgment.
ARTICLE 13
----------
CONDEMNATION
------------
If the whole or any part of the Premises or the Building shall be taken by
power of eminent domain or condemned by any competent authority for any public
or quasi-public use or purpose, or if any adjacent property or street shall be
so taken or condemned, or reconfigured or vacated by such authority in such
manner as to require the use, reconstruction or remodeling of any part of the
Premises or Building, or if Landlord shall grant a deed or other instrument in
lieu of such taking by eminent domain or condemnation, Landlord shall have the
option to terminate this Lease effective as of the date possession is required
to be surrendered to the authority. If more than fifty percent (50%) of the
rentable square feet of the Premises is taken, or if access to the Premises is
substantially impaired, in each case for a period in excess of one hundred
eighty (180) days, Tenant shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation because of such taking and
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant's personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the TCC's of this Lease, and for moving expenses, so long as such
claims do not diminish the award available to Landlord, its ground lessor with
respect to the Building or Project or its mortgagee, and such claim is payable
separately to Tenant. All Rent shall be apportioned as of the date of such
termination. If any part of the Premises shall be taken, and this Lease shall
not be so terminated, the Rent shall be proportionately abated. Tenant hereby
waives any and all rights it might otherwise have pursuant to Section 1265.130
of The California Code of Civil Procedure. Notwithstanding anything to the
contrary contained in this Article 13, in the event of a temporary taking of all
----------
or any portion of the Premises for a period of one hundred and eighty (180) days
or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises. Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.
ARTICLE 14
----------
ASSIGNMENT AND SUBLETTING
-------------------------
14.1 TRANSFERS. Tenant shall not, without the prior written consent of
---------
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder by
operation of law, sublet the Premises or any part thereof, or
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<PAGE>
enter into any license or concession agreements or otherwise permit the
occupancy or use of the Premises or any part thereof by any persons other than
Tenant and its employees and contractors (all of the foregoing are hereinafter
sometimes referred to collectively as "TRANSFERS" and any person to whom any
Transfer is made or sought to be made is hereinafter sometimes referred to as a
"TRANSFEREE"). If Tenant desires Landlord's consent to any Transfer, Tenant
shall notify Landlord in writing, which notice (the "TRANSFER NOTICE") shall
include (i) the proposed effective date of the Transfer, which shall not be less
than thirty (30) days nor more than one hundred eighty (180) days after the date
of delivery of the Transfer Notice, (ii) a description of the portion of the
Premises to be transferred (the "SUBJECT SPACE"), (iii) all of the TCC's of the
proposed Transfer and the consideration therefor, including calculation of the
"TRANSFER PREMIUM", as that term is defined in Section 14.3 below, in connection
with such Transfer, the name and address of the proposed Transferee, and a copy
of all existing executed and/or proposed documentation pertaining to the
proposed Transfer, including all existing operative documents to be executed to
evidence such Transfer or the agreements incidental or related to such Transfer,
(iv) current financial statements of the proposed Transferee certified by an
officer, partner or owner thereof, business credit and personal references and
history of the proposed Transferee and any other information required by
Landlord which will enable Landlord to determine the financial responsibility,
character, and reputation of the proposed Transferee, nature of such
Transferee's business and proposed use of the Subject Space and (v) an executed
estoppel certificate from Tenant in the form attached hereto as Exhibit E. Any
Transfer made without Landlord's prior written consent shall, at Landlord's
option, be null, void and of no effect, and shall, at Landlord's option,
constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall, within thirty (30) days after
written request by Landlord, reimburse Landlord for all reasonable and actual
out-of-pocket third-party costs and expenses incurred by Landlord in connection
with its review of a proposed Transfer; provided that such costs and expenses
shall not exceed One Thousand Five Hundred and No/100 Dollars ($1,500.00) for a
Transfer in the ordinary course of business. Landlord and Tenant hereby agree
that a proposed Transfer shall not be considered "in the ordinary course of
business" if such Transfer involves the review of documentation by Landlord on
more than two (2) occasions with regard to a single proposed Transfer.
14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
------------------
consent to any proposed Transfer of the Subject Space to the Transferee on the
TCC's specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:
14.2.1 The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Building or the
Project, or would be a significantly less prestigious occupant of the Building
than Tenant;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
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<PAGE>
14.2.4 Intentionally Omitted;
14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;
14.2.6 The proposed Transfer would cause a violation of another lease
for space in the Project, or would give an occupant of the Project a right to
cancel its lease;
14.2.7 The TCC's of the proposed Transfer will allow the Transferee to
exercise a right of renewal, right of expansion, right of first offer, or other
similar right held by Tenant (or will allow the Transferee to occupy space
leased by Tenant pursuant to any such right); or
14.2.8 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, (i) occupies space in the Project at the time of
the request for consent, or (ii) is negotiating with Landlord to lease space in
the Project at such time, or (iii) has negotiated with Landlord during the
twelve (12)-month period immediately preceding the Transfer Notice; or
14.2.9 The Transferee does not intend to occupy the entire Premises
and conduct its business therefrom for a substantial portion of the term of the
Transfer.
If Landlord consents to any Transfer pursuant to the TCC's of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same TCC's
as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant
to Section 14.1 of this Lease, provided that if there are any changes in the
TCC's from those specified in the Transfer Notice (i) such that Landlord would
initially have been entitled to refuse its consent to such Transfer under this
Section 14.2, or (ii) which would cause the proposed Transfer to be more
- ------------
favorable to the Transferee than the TCC's set forth in Tenant's original
Transfer Notice, Tenant shall again submit the Transfer to Landlord for its
approval and other action under this Article 14 (including Landlord's right of
recapture, if any, under Section 14.4 of this Lease). Notwithstanding anything
------------
to the contrary in this Lease, if Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under Section 14.2 or
otherwise has breached or acted unreasonably under this Article 14, their sole
remedies shall be a declaratory judgment and an injunction for the relief sought
without any monetary damages, and Tenant hereby waives all other remedies,
including, without limitation, any right at law or equity to terminate this
Lease, on its own behalf and, to the extent permitted under all applicable laws,
on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant's proposed subtenant or assignee) who claim
they were damaged by Landlord's wrongful withholding or conditioning of
Landlord's consent, unless a court of competent jurisdiction determines that
Landlord was wrongful in its withholding or conditioning of its consent.
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<PAGE>
14.3 TRANSFER PREMIUM. If Landlord consents to a Transfer, as a condition
----------------
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee. "TRANSFER
PREMIUM" shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, after deducting the reasonable expenses incurred by Tenant for (i)
any changes, alterations and improvements to the Premises in connection with the
Transfer, (ii) any free base rent reasonably provided to the Transferee, and
(iii) any brokerage commissions in connection with the Transfer. "Transfer
Premium" shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer. In the calculations of the Rent (as it relates to the Transfer Premium
calculated under this Section 14.3), and the Transferee's Rent and Quoted Rent
under Section 14.2 of this Lease, the Rent paid during each annual period for
the Subject Space, and the Transferee's Rent and the Quoted Rent, shall be
computed after adjusting such rent to the actual effective rent to be paid,
taking into consideration any and all leasehold concessions granted in
connection therewith, including, but not limited to, any rent credit and tenant
improvement allowance. For purposes of calculating any such effective rent all
such concessions shall be amortized on a straight-line basis over the relevant
term.
14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. In the event that a proposed
-------------------------------------
Transfer, if consented to, would cause seventy-five percent (75%) or more
of the Premises to be assigned or subleased to a party other than Original
Tenant and/or its Affiliates, then notwithstanding anything to the contrary
contained in this Article 14, Landlord shall have the option, by giving written
notice to Tenant within thirty (30) days after receipt of any Transfer Notice,
to recapture the Subject Space. Such recapture notice shall cancel and terminate
this Lease with respect to the Subject Space as of the date stated in the
Transfer Notice as the effective date of the proposed Transfer until the last
day of the term of the Transfer as set forth in the Transfer Notice (or at
Landlord's option, shall cause the Transfer to be made to Landlord or its agent,
in which case the parties shall execute the Transfer documentation promptly
thereafter). In the event of a recapture by Landlord, if this Lease shall be
canceled with respect to less than the entire Premises, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same. If Landlord declines, or fails to elect in a timely
manner to recapture the Subject Space under this Section 14.4, then, provided
------------
Landlord has consented to the proposed Transfer, Tenant shall be entitled to
proceed to transfer the Subject Space to the proposed Transferee, subject to
provisions of this Article 14. Notwithstanding anything to the contrary set
----------
forth in this Section 14.4, Landlord shall not have a recapture right under this
------------
Section 14.4 during the first thirty-six (36) months of the Lease Term.
- ------------
14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the TCC's
------------------
of this Lease shall in no way be deemed to have been waived or modified, (ii)
such consent shall not be deemed consent to any further Transfer by either
Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish
upon Landlord's request a complete statement, certified by Tenant's chief
financial officer,
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<PAGE>
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than five percent (5%), Tenant shall pay
Landlord's costs of such audit.
14.6 ADDITIONAL TRANSFERS. For purposes of this Lease, the term "TRANSFER"
--------------------
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of fifty percent (50%) or more of
the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period. Notwithstanding
anything to the contrary set forth in this Article 14 to the contrary, in no
event shall an offering of stock to third parties by means of a public offering
(either an initial public offering or a subsequent public offering) through a
recognized stock market constitute a "Transfer."
14.7 OCCURRENCE OF DEFAULT. Any Transfer hereunder shall be subordinate and
---------------------
subject to the provisions of this Lease, and if this Lease shall be terminated
during the term of any Transfer, Landlord shall have the right to: (i) treat
such Transfer as cancelled and repossess the Subject Space by any lawful means,
or (ii) require that such Transferee attorn to and recognize Landlord as its
landlord under any such Transfer. If Tenant shall be in default under this
Lease, Landlord is hereby irrevocably authorized, as Tenant's agent and
attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment, the assignee shall assume in writing all obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any Transferee shall be deemed a waiver
of any provision of this Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord's enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord's right to
enforce any term of this Lease against Tenant or any other person. If Tenant's
obligations hereunder have been guaranteed, Landlord's consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.
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<PAGE>
14.8 NON-TRANSFERS. Notwithstanding anything to the contrary contained in
-------------
this Article 14, an assignment or subletting of all or a portion of the Premises
to (a) an affiliate of Tenant (an entity which is controlled by, controls or is
under common control, as such term is defined in California General Corporations
Code ("CGCC") Sections 160 and 5045, with, Tenant), (b) an entity which merges
with or acquires or is acquired by, Tenant or a parent of Tenant, as defined in
CGCC Sections 175 and 5064, or a subsidiary, as defined in CGCC Sections 189 and
5073, of Tenant's parent or Affiliate, or (c) a transferee of substantially all
of the assets of Tenant (a, b and c to be collectively be referred to herein as
an "AFFILIATE") along with any other entity which will qualify as an "affiliate"
under CGCC 150 and 5031, shall not be deemed a Transfer under this Article 14,
----------
provided that at least thirty (30) days prior to such assignment or sublease (i)
Tenant provides Landlord with reasonable evidence, including a certified audit
opinion of an independent certified public accountant with a regional or
national reputation, that any such entity maintains a net worth, calculated in
accordance with generally accepted accounting principles, consistently applied
("NET WORTH"), equal to or greater than the Net Worth of Tenant either
immediately prior to the time of such assignment or sublease or at the time this
Lease is executed; (ii) Tenant notifies Landlord of any such assignment or
sublease and promptly supplies Landlord with any documents or information
requested by Landlord regarding such assignment or sublease or such Affiliate;
and (iii) such assignment or sublease is not a subterfuge by Tenant to avoid its
obligations under this Lease. In the event an assignment or sublease to an
Affiliate is made pursuant to the TCCs of this Section 14.8, Tenant shall be
------------
relieved of its obligations under this Lease to the extent the same become the
TCCs of such Affiliate pursuant to such assignment or sublease.
ARTICLE 15
----------
SURRENDER OF PREMISES; OWNERSHIP AND
------------------------------------
REMOVAL OF TRADE FIXTURES
-------------------------
15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any agent
---------------------
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.
15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the Lease
------------------------------------
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
----------
to Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear,
casualty and condemnation, and repairs which are specifically made the
responsibility of Landlord hereunder excepted. Upon such expiration or
termination, Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises all
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debris and rubbish, and such items of furniture, equipment, business and trade
fixtures, free-standing cabinet work, movable partitions and other articles of
personal property owned by Tenant or installed or placed by Tenant at its
expense in the Premises, and such similar articles of any other persons claiming
under Tenant, as Landlord may, in its sole discretion, require to be removed,
and Tenant shall repair at its own expense all damage to the Premises and
Building resulting from such removal, provided that the removal of Alterations
shall be governed by Article 8 hereof.
ARTICLE 16
----------
HOLDING OVER
------------
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not, except as set
forth below, constitute a renewal hereof or an extension for any further term,
and in such case Rent shall be payable at a monthly rate equal to the product of
(i) the Rent applicable during the last rental period of the Lease Term under
this Lease, and (ii) a percentage equal to the sum of (A) 200% and (B) the
percentage by which Rent was increased at the time of the last increase of Rent
during the Lease Term. Such month-to-month tenancy shall be subject to every
other applicable term, covenant and agreement contained herein. Notwithstanding
the foregoing, Tenant shall have the one-time right, upon notice (the "HOLDOVER
NOTICE") to Landlord not less than nine (9) months prior to the expiration of
the then Lease Term, to extend the Lease Term for a period of up to six (6)
months (in one (1) month increments), the length of which shall be set forth in
the Holdover Notice (the "PERMITTED HOLDOVER TERM"), in which case the Rent
payable by Tenant during such Permitted Holdover Term shall equal the product of
(a) the Rent applicable during the last rental period of the Lease Term under
this Lease, and (b) one hundred twenty percent (120%) during the first three
(3)-month period of such Permitted Holdover Term, and one hundred fifty percent
(150%) during the second three (3)-month period of such Permitted Holdover Term.
For purposes of this Article 16, a holding over shall include Tenant's remaining
in the Premises after the expiration or earlier termination of the Lease Term,
as required pursuant to the TCC's of Section 8.5, above, to remove any
-----------
Alterations or Above Building Standard Tenant Improvements located within the
Premises and replace the same with Building Standard Tenant Improvements. Except
with respect to the Permitted Holdover Term, Nothing contained in this Article
-------
16 shall be construed as consent by Landlord to any holding over by Tenant, and
- --
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises to Landlord as provided in this Lease upon the expiration or
other termination of this Lease. The provisions of this Article 16 shall not be
deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law. Except with respect to the Permitted
Holdover Term, If Tenant fails to surrender the Premises upon the termination or
expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all loss, costs (including reasonable attorneys' fees) and
liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom.
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ARTICLE 17
----------
ESTOPPEL CERTIFICATES
---------------------
Within ten (10) days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be substantially in the form of EXHIBIT
-------
E, attached hereto (or such other form as may reasonably be required by any
- -
prospective mortgagee or purchaser of the Project, or any portion thereof),
indicating therein any exceptions thereto that may exist at that time, and shall
also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Any such certificate may be
relied upon by any prospective mortgagee or purchaser of all or any portion of
the Project. Tenant shall execute and deliver whatever other commercially
reasonable instruments may be reasonably required for such purposes. At any time
during the Lease Term, Landlord may require Tenant to provide Landlord with its
most recently prepared financial statement and financial statements of the two
(2) years prior to the most recently prepared financial statement year. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited by an
independent certified public accountant. Failure of Tenant to timely execute,
acknowledge and deliver such estoppel certificate or other commercially
reasonable instruments shall constitute an acceptance of the Premises and an
acknowledgment by Tenant that statements included in the estoppel certificate
are true and correct, without exception. Any such financial statement or other
information which is marked "confidential" or "company secret(s)" (or is
otherwise similarly marked by Tenant) shall be confidential and shall not be
disclosed by Landlord to any third party (other than its partners,
administrators, consultants, financial, legal and a prospective or current
purchaser, mortgagee, or ground or underlying lessor of the Building or the
Project, a prospective Transferee, and except as required by applicable law or
in connection with a dispute or litigation hereunder or as required by a
subpoena) except as specifically provided in this Article 17 and then only if
the person to whom disclosure is made first agrees to be bound by the
requirements of this Article 17.
ARTICLE 18
----------
SUBORDINATION
-------------
Subject to Tenant's receipt of an appropriate non-disturbance agreement(s)
as set forth below, This Lease shall be subject and subordinate to all present
and future ground or underlying leases of the Building or Project and to the
lien of any mortgage, trust deed or other encumbrances now or hereafter in force
against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto. As of the date of this
Lease, Landlord covenants that no deed of trust, mortgage, other encumbrance, or
ground or underlying lease encumbers the Premises, Building or Project.
Landlord's delivery to Tenant of commercially reasonable non-disturbance
agreement(s) (the "NONDISTURBANCE AGREEMENT") in favor of Tenant from any ground
lessor, mortgage holders or lien holders of Landlord who later come into
existence at any time prior to the expiration of the Lease Term
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<PAGE>
shall be in consideration of, and a condition precedent to, Tenant's agreement
to be bound by the terms and conditions of this Article 18; provided Tenant
shall execute and return such Nondisturbance Agreement to Landlord within four
(4) days of its receipt thereof. Any such Nondisturbance Agreement shall include
an express agreement by the lessor, mortgage holder or lien holder to complete
the construction of the Building and fund the Tenant and Core Improvement
Allowance in accordance with the terms of this Lease and the Tenant Work Letter.
Tenant covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease
is terminated), to attorn, without any deductions or set-offs whatsoever
(excepting any unfunded portion of the Tenant and Core Improvement Allowance),
to the lienholder or purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof (or to the ground lessor), if so
requested to do so by such purchaser or lienholder or ground lessor, and to
recognize such purchaser or lienholder or ground lessor as the lessor under this
Lease, provided such lienholder or purchaser or ground lessor shall agree to
accept this Lease and not disturb Tenant's occupancy, so long as Tenant timely
pays the rent and observes and performs the TCC's of this Lease to be observed
and performed by Tenant. Landlord's interest herein may be assigned as security
at any time to any lienholder. Subject to Tenant's receipt of a Nondisturbance
Agreement, Tenant shall, within five (5) days of request by Landlord, execute
such further instruments or assurances as Landlord may reasonably deem necessary
to evidence or confirm the subordination or superiority of this Lease to any
such mortgages, trust deeds, ground leases or underlying leases. Tenant waives
the provisions of any current or future statute, rule or law which may give or
purport to give Tenant any right or election to terminate or otherwise adversely
affect this Lease and the obligations of the Tenant hereunder in the event of
any foreclosure proceeding or sale.
ARTICLE 19
----------
DEFAULTS; REMEDIES
------------------
19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
-----------------
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within three (3) days after notice; or
19.1.2 Except where a specific time period is otherwise set forth for
Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this
Section 19.1.2,
- --------------
any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure
continues for ten (10) days after written notice thereof from Landlord to
Tenant; provided that if the nature of such default is such that the same cannot
reasonably be cured within a ten (10) day period, Tenant shall not be deemed to
be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure such default, but in no event
exceeding a period of time in excess of sixty (60) days after written notice
thereof from Landlord to Tenant; or
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<PAGE>
19.1.3 To the extent permitted by law, a general assignment by Tenant
or any guarantor of this Lease for the benefit of creditors, or the taking of
any corporate action in furtherance of bankruptcy or dissolution whether or not
there exists any proceeding under an insolvency or bankruptcy law, or the filing
by or against Tenant or any guarantor of any proceeding under an insolvency or
bankruptcy law, unless in the case of a proceeding filed against Tenant or any
guarantor the same is dismissed within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant's assets located upon
the Premises or of Tenant's interest in this Lease, unless such seizure is
discharged within thirty (30) days; or
19.1.4 A default (beyond any applicable notice and cure periods) by
Tenant under the "Building A Lease," as that term is set forth in Section 29.37;
or
19.1.5 The failure by Tenant to observe or perform according to the
provisions of Section 5.2 of this Lease or Articles 14, 17 or 18 of this Lease
where such failure continues for more than ten (10) business days after notice
from Landlord.
The notice periods provided herein are in lieu of, and not in addition to,
any notice periods provided by law.
19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of default by
---------------------
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has
been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) The worth at the time of award of the amount by which
the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this
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<PAGE>
Lease or which in the ordinary course of things would be likely to result
therefrom, specifically including but not limited to, brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any special concessions made to obtain a new tenant; and
(v) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
The term "RENT" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
TCC's of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
19.2.3 Landlord shall at all times have the rights and remedies (which
shall be cumulative with each other and cumulative and in addition to those
rights and remedies available under Sections 19.2.1 and 19.2.2, above, or any
law or other provision of this Lease), without prior demand or notice except as
required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
19.3 SUBLEASES OF TENANT. Whether or not Landlord elects to terminate this
-------------------
Lease on account of any default by Tenant, as set forth in this Article 19,
----------
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.4 FORM OF PAYMENT AFTER DEFAULT. Following the occurrence of an event of
-----------------------------
default by Tenant, Landlord shall have the right to require that any or all
subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.
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19.5 EFFORTS TO RELET. No re-entry or repossession, repairs, maintenance,
----------------
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.
ARTICLE 20
----------
COVENANT OF QUIET ENJOYMENT
---------------------------
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other TCC's, provisions and agreements herein contained on the part of
Tenant to be kept, observed and performed, shall, during the Lease Term,
peaceably and quietly have, hold and enjoy the Premises subject to the TCC's,
provisions and agreements hereof without interference by any persons lawfully
claiming by or through Landlord. The foregoing covenant is in lieu of any other
covenant express or implied.
ARTICLE 21
----------
SECURITY DEPOSIT; LETTER OF CREDIT
----------------------------------
21.1 DELIVERY OF LETTER OF CREDIT. Tenant shall deliver to Landlord within
----------------------------
thirty (30) days of mutual execution of this Lease, an unconditional, clean,
irrevocable letter of credit (the "L-C") in an amount (the "L-C AMOUNT")
initially equal to the "Initial L-C Amount," as that term is set forth in
Section 21.2, below, which L-C shall be issued by a money-center bank (a bank
- ------------ which accepts deposits, maintains accounts, has a local San Diego
office which will negotiate a letter of credit, and whose deposits are insured
by the FDIC) reasonably acceptable to Landlord, and which L-C shall be in the
form of EXHIBIT G, attached hereto. Tenant shall pay all expenses, points and/or
---------
fees incurred - by Tenant in obtaining the L-C.
21.2 L-C AMOUNT.
----------
21.2.1 INITIAL L-C AMOUNT. For purposes of this Lease, the "Initial
------------------
L-C Amount" shall be (i) an amount equal to twelve (12) months of the initial
Monthly Installment of Base Rent (estimated to be $1,715,313.60) if Tenant's
"Market Capitalization," as that term set forth hereinbelow, is $500,000,000 or
greater, and Tenant has "Working Capital," as that term is set forth
hereinbelow, of $50,000,000 or greater; (ii) an amount equal to twenty-four (24)
months of the initial Monthly Installment of Base Rent (estimated to be
$3,430,627.20) if Tenant's Market Capitalization is between $350,000,000 and
$500,000,000 and Tenant has Working Capital of at least $35,000,000; and (iii)
an amount equal to thirty-six (36) months of the initial Monthly Installment of
Base Rent (estimated to be $5,145,940.80), if Tenant's Market Capitalization is
less than $350,000,000 or if Tenant has less than $35,000,000 of Working
Capital. "Market Capitalization" means product of (A) the number of outstanding
shares of
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Tenant, and (B) the average closing share price during the last thirty (30) days
of the applicable financial quarter. "Working Capital," means then- current
assets of Tenant less then-current liabilities from Tenant's previous quarterly
financial statements, which Working Capital shall include then-current
receivables (zero (0) to sixty (60) days only). "Minimum Financial Requirements"
means Tenant maintains a Market Capitalization of no less than $350,000,000 and
has Working Capital of no less than $35,000,000.
21.2.2 CONDITIONAL REDUCTION OF L-C AMOUNT. The L-C Amount shall be
-----------------------------------
reduced as follows: (A) to fifty percent (50%) of the Initial L-C Amount if
Tenant maintains the Minimum Financial Requirements, for four (4) consecutive
financial quarters, or (B) to $0.00 if Tenant maintains the Minimum Financial
Requirements for eight (8) consecutive financial quarters, or (C) to $0.00 in
the event Tenant achieves either (i) an investment grade rating of no less than
"BBB" (Standard & Poor's) or "Baa3" (Moody's), or (ii) a Market Capitalization
of $1,000,000,000 or greater and Working Capital of no less than $100,000,000.
21.2.3 REESTABLISHMENT OF INITIAL L-C AMOUNT. Throughout the initial
-------------------------------------
Lease Term and any Option Terms, if any, in the event the L-C Amount has been
reduced to less than the Initial L-C Amount (i) pursuant to the TCC's of Section
- ------- 21.2.2(A) or (B) and Tenant thereafter fails, at the end of any quarter,
to meet ---------------- the Minimum Financial Requirements, or (ii) pursuant to
the TCC's of Section ------- 21.2.2(C) and Tenant thereafter fails, at any time
thereafter, to maintain a --------- Market Capitalization of at least
$1,000,000,000 and Working Capital of no less than $100,000,000, then, in such
event, Landlord shall be entitled to require that the L-C be reestablished with
an L-C Amount equal to the Initial L-C Amount on the TCC's set forth in this
Article 21. Tenant shall, upon its receipt of ---------- written notice from
Landlord (the "REESTABLISHMENT NOTICE"), cause the L-C to be immediately
re-issued/reestablished with an L-C Amount equal to the Initial L-C Amount.
21.2.4 FAILURE TO REINSTATE PENALTY. In the event that Tenant fails,
----------------------------
within ten (10) days following Tenant's receipt of a Reestablishment Notice, to
cause the L-C to be re-issued/reestablished, then Tenant's Monthly Installment
of Base Rent shall be increased by one hundred fifty percent (150%) of its then
existing level during the period commencing on the date of ten (10) days after
such Reestablishment Notice and ending on the earlier to occur of (i) the date
such L-C is re-issued/reestablished pursuant to the terms of this Section 21.2,
------------
(ii) the date which is ninety (90) days after the date of such Reestablishment
Notice. In the event that Tenant fails, during such three (3) month period
following the date of the Reestablishment Notice, to cause the L-C to be
reissued/reestablished, then Tenant's Monthly Installment of Base Rent shall be
increased by two hundred percent (200%) of its then existing level during the
period commencing on the date which is ninety (90) days after the date of such
Reestablishment Notice and ending on the date such L-C is re-
issued/reestablished pursuant to the terms of this Section 21.2.
------------
21.3 APPLICATION OF LETTER OF CREDIT. The L-C shall be held by
-------------------------------
Landlord as security for the faithful performance by Tenant of all the TCC's of
this Lease to be kept and performed by Tenant during the Lease Term. The L-C
shall not be mortgaged, assigned or encumbered in any manner whatsoever by
Tenant without the prior written consent of Landlord. If Tenant defaults with
respect to any provisions of this Lease, including, but not limited to, the
provisions relating to the payment of Rent, or if Tenant fails to renew the L-C
at least thirty (30) days before its
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expiration, Landlord may, but shall not be required to, draw upon all or any
portion of the L-C for payment of any Rent or any other sum in default, or for
the payment of any amount that Landlord may reasonably spend or may become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any other loss or damage that Landlord may suffer by reason of Tenant's default.
The use, application or retention of the L-C, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, it being intended that Landlord shall not
first be required to proceed against the L-C and shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled. Any
amount of the L-C which is drawn upon by Landlord, but is not used or applied by
Landlord, shall be held by Landlord and deemed a security deposit (the "L-C
SECURITY DEPOSIT"). If any portion of the L-C is drawn upon, Tenant shall,
within ten (10) days after written demand therefor, either (i) deposit cash with
Landlord (which cash shall be applied by Landlord to the L-C Security Deposit)
in an amount sufficient to cause the sum of the L-C Security Deposit and the
amount of the remaining L-C to be equivalent to the amount of the L-C then
required under this Lease or (ii) reinstate the L-C to the amount then required
under this Lease, and if any portion of the L-C Security Deposit is used or
applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord (which cash shall be applied by Landlord to the L-C
Security Deposit) in an amount sufficient to restore the L-C Security Deposit to
the amount then required under this Lease, and Tenant's failure to do so shall
be a default under this Lease; provided, however, that upon Tenant's
satisfaction of its economic obligations and restoration of the L-C Security
Deposit pursuant to this sentence, any unused portion of the drawn upon funds
shall be returned to Tenant. Tenant acknowledges that Landlord has the right to
transfer or mortgage its interest in the Real Property and the Center and in
this Lease and Tenant agrees that in the event of any such transfer or mortgage,
Landlord shall have the right to transfer or assign the L-C Security Deposit
and/or the L-C to the transferee or mortgagee, and in the event of such
transfer, Tenant shall look solely to such transferee or mortgagee for the
return of the L-C Security Deposit and/or the L-C. Landlord shall pay all costs
associated with the transfer or re-issuance of the L-C due to Landlord's
transfer or assignment. Tenant shall, within five (5) days of request by
Landlord, execute such further instruments or assurances as Landlord may
reasonably deem necessary to evidence or confirm Landlord's transfer or
assignment of the L-C Security Deposit and/or the L-C to such transferee or
mortgagee. If Tenant is not then in default under this Lease, the L-C Security
Deposit and/or the L-C, or any balance thereof, shall be returned to Tenant
within thirty (30) days following the expiration of the Lease Term.
21.4 AFTER SALE TO A THIRD PARTY NON-INSTITUTIONAL BUYER. In the event
---------------------------------------------------
the initial Landlord entity (KR-Gateway Partners LLC) or its Affiliates
transfers or sells its interest in the Project to a person or any entity other
than an institutional buyer (a "NON-INSTITUTIONAL BUYER"), Tenant shall have the
right to require that the L-C Security Deposit be held by the lender, if any,
providing the financing for such Non-Institutional Buyer, which account shall be
subject to escrow instructions specifying that (i) Landlord shall only have the
right to draw on the L-C to the extent the Landlord is entitled to pursuant to
the TCCs of this Article 21, (ii) Landlord shall deliver a statement to the
escrow holder prior to any draw down, certifying that Landlord is entitled to
draw on the L-C pursuant to the TCCs of this Article 21, and (iii) that within
ninety (90) days after the expiration of this Lease, the escrow holder shall
release the L-C to Tenant consistent with the terms of this Lease and this
Article 21. For purposes of this Section 21.4, the term "institutional buyer"
shall include, without limitation, life insurance companies, banks,
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pension funds, pension fund advisors, opportunity funds, hedge funds, private
owners who directly or indirectly own more than $75,000,000 of real estate, or
publicly traded real estate investment trusts.
ARTICLE 22
----------
TELECOMMUNICATIONS EQUIPMENT
----------------------------
At any time during the Lease Term, subject to the TCCs of this Article 22
and Article 8 of this Lease, Tenant may install, at Tenant's sole cost and
expense, but without the payment of any Rent or a license or similar fee or
charge, a satellite or microwave dish or other communications, HVAC or other
equipment servicing the business conducted by Tenant from within the Premises
(all such equipment, including non-telecommunication equipment is, for the sake
of convenience, defined collectively as the "TELECOMMUNICATIONS EQUIPMENT") upon
the roof of the Building. The physical appearance and the size of the
Telecommunications Equipment shall be subject to Landlord's reasonable approval,
the location of any such installation of the Telecommunications Equipment shall
be designated by Tenant subject to Landlord's reasonable approval and Landlord
may require Tenant to install screening around such Telecommunications
Equipment, at Tenant's sole cost and expense, as reasonably designated by
Landlord. Tenant shall maintain such Telecommunications Equipment, at Tenant's
sole cost and expense. In the event Tenant elects to exercise its right to
install the Telecommunication Equipment, then Tenant shall give Landlord prior
notice thereof. Tenant shall remove such Telecommunications Equipment upon the
expiration or earlier termination of this Lease and shall restore such area to
the condition the same existed prior to the installation of such
Telecommunications Equipment. Such Telecommunications Equipment shall be
installed pursuant to plans and specifications approved by Landlord, which
approval will not be unreasonably withheld. Such Telecommunications Equipment
shall, in all instances, comply with applicable governmental laws, codes, rules
and regulations. The rights contained in this Article 22 shall be personal to
the Original Tenant and its Affiliates and may only be exercised by the Original
Tenant or an Affiliate (and not any assignee, subleasee or other transferee of
the Original Tenant's interest in this Lease) if the Original Tenant and/or an
Affiliate occupies the entire Building. Landlord shall reserve the concurrent
right to use the roof for its own use and for third-party use for installation
of satellite dish and antenna devices similar to Tenant's Telecommunications
Equipment (collectively, the "LANDLORD TCE"), provided such Landlord TCE shall
not interfere with Tenant's operations on the roof of the Building, and provided
Landlord maintains, restores and repairs the Building rooftop space associated
with such Landlord TCE. To the extent Landlord elects to install Landlord TCE on
the Building rooftop, Landlord shall be responsible for the maintenance, repair
and restoration of such Landlord TCE and shall notify Tenant no less than
twenty-four (24) hours in advance of any entry/access onto the Building rooftop.
Landlord shall be responsible for (and shall make all necessary repairs and
replacements for) any damage to Tenant's Telecommunications Equipment due to the
actions or omissions of Landlord or Landlord Parties (or any third party to whom
Landlord has granted roof access rights). Tenant shall be responsible for (and
shall make all necessary repairs and replacements for) any damage to the
Landlord TCE due to the negligence or willful misconduct of Tenant.
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ARTICLE 23
----------
SIGNS
-----
23.1 FULL FLOORS. Subject to Landlord's prior written approval, in its
-----------
reasonable discretion, Tenant at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises.
23.2 INTENTIONALLY OMITTED.
---------------------
23.3 PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at the
sole expense of Tenant. Any signs, window coverings, or blinds (even if the same
are located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its reasonable discretion.
23.4 TENANT'S SIGNAGE.
----------------
23.4.1 TENANT'S SIGNAGE RIGHTS. For purposes of this Lease, "Tenant's
-----------------------
Signage" shall mean the "Building Signage" as that term is defined below;
provided, however, Tenant's Signage is personal to Original Tenant and its
Affiliates, is non-transferable, and is conditioned upon the Original Tenant and
its Affiliates being in occupancy of at least sixty percent (60%) of the
Premises. Tenant shall be entitled to install the following signage in
connection with Tenant's lease of the Premises (collectively, the "BUILDING
SIGNAGE"):
(i) Two (2) signs identifying Tenant's name and logo located at
the top of, or on the eyebrow of, the Building and/or next to Tenant's
main entrance to the Premises; and
(ii) One (1) monument sign located adjacent to the main
entrance point to the Building (the "BUILDING MONUMENT SIGN"); provided,
however, that in any event Landlord shall be able to locate its standard
identification signage, in a size to be mutually and reasonably determined,
on the Building Monument Sign (with lowest/least prominent position, and
provided the size of the lettering on such Landlord identification signage
is no greater than 25% of the lettering on Tenant's portion of such
Building Monument Sign).
23.4.2 SPECIFICATIONS AND PERMITS. Tenant's Signage shall set forth
--------------------------
Tenant's name and logo as determined by Tenant in its sole discretion; provided,
however, in no event shall Tenant's Signage include an "Objectionable Name," as
that term is defined in Section 23.4.3, of this Lease. The graphics, materials,
color, design, lettering, lighting, size, illumination, specifications and exact
location of Tenant's Signage (collectively, the "SIGN SPECIFICATIONS") shall be
subject to the prior written approval of Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed, and shall be consistent and
compatible with the quality and nature of the Project and the Building Standard
Signage Specifications. Provided, however, that with respect to the sign(s) at
the top of the Building, Tenant may have the maximum signage available by
Applicable Law and the CC&R's. In the preceding sentence, the reference to
"name" shall mean name and/or logo. In addition, Tenant's Signage shall be
subject to Tenant's receipt of all required governmental permits and approvals
and shall be
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subject to all Applicable Law and to any covenants, conditions and restrictions
affecting the Project. Landlord shall use commercially reasonable efforts to
assist Tenant in obtaining all necessary governmental permits and approvals for
Tenant's Signage. Tenant hereby acknowledges that, notwithstanding Landlord's
approval of Tenant's Signage, Landlord has made no representation or warranty to
Tenant with respect to the probability of obtaining all necessary governmental
approvals and permits for Tenant's Signage. In the event Tenant does not receive
the necessary governmental approvals and permits for Tenant's Signage, Tenant's
and Landlord's rights and obligations under the remaining terms and conditions
of this Lease shall be unaffected.
23.4.3 OBJECTIONABLE NAME. To the extent Original Tenant or its
------------------
Affiliates desires to change the name and/or logo set forth on Tenant's Signage,
such name and/or logo shall not have a name which relates to an entity which is
of a character or reputation, or is associated with a political faction or
orientation, which is inconsistent with a first-class project, or which would
otherwise reasonably offend a landlord of the Comparable Buildings (an
"OBJECTIONABLE NAME").
23.4.4 COST AND MAINTENANCE. The costs of the actual signs comprising
--------------------
Tenant's Signage and the installation, design, construction, and any and all
other costs associated with Tenant's Signage, including, without limitation,
utility charges and hook-up fees, permits, and maintenance and repairs, shall,
subject to the terms and conditions of this Lease, be the sole responsibility of
Tenant; provided that Landlord shall install the Project Monument Sign(s), at
Landlord's sole cost and expense, and Tenant shall be responsible for the cost
of Tenant's sign on the Project Monument Sign(s), but Landlord shall maintain
all monument signs set forth in this Article 23 in good condition and repair,
the cost of which in connection with the Project Monument Sign(s) shall be
included in Operating Expenses. Should Tenant's Signage require repairs and/or
maintenance, as determined in Landlord's reasonable judgment, Landlord shall
have the right to provide Notice thereof to Tenant and Tenant (except as set
forth above) shall cause such repairs and/or maintenance to be performed within
thirty (30) days after receipt of such Notice from Landlord, at Tenant's sole
cost and expense; provided, however, if such repairs and/or maintenance are
reasonably expected to require longer than thirty (30) days to perform, Tenant
shall commence such repairs and/or maintenance within such thirty (30) day
period and shall diligently prosecute such repairs and maintenance to
completion. Should Tenant fail to perform such repairs and/or maintenance within
the periods described in the immediately preceding sentence, Landlord shall have
the right to cause such work to be performed and to charge Tenant as Additional
Rent for the actual cost of such work plus interest at the Interest Rate from
the date of Landlord's payment of such actual costs to the date of Tenant's
reimbursement to Landlord. Upon the expiration or earlier termination of this
Lease, Tenant shall, at Tenant's sole cost and expense, cause Tenant's Signage
to be removed and shall cause the areas in which such Tenant's Signage was
located to be restored to the condition existing immediately prior to the
placement of such Tenant's Signage. If Tenant fails to timely remove such
Tenant's Signage or to restore the areas in which such Tenant's Signage was
located, as provided in the immediately preceding sentence, then Landlord may
perform such work, and all actual costs incurred by Landlord in so performing,
plus interest at the Interest Rate from the date of Landlord's payment of such
costs to the date of Tenant's reimbursement to Landlord, shall be reimbursed by
Tenant to Landlord within ten (10) days after Tenant's receipt of an invoice
therefor. The terms and conditions of this Section 23.4.4 shall survive the
expiration or earlier termination of this Lease.
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ARTICLE 24
----------
COMPLIANCE WITH LAW
-------------------
Tenant shall not do anything or suffer anything to be done in or about the
Premises or the Project which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement now in force or
which may hereafter be enacted or promulgated. At its sole cost and expense,
Tenant shall promptly comply with all such governmental measures. Should any
standard or regulation now or hereafter be imposed on Tenant by a state, federal
or local governmental body charged with the establishment, regulation and
enforcement of occupational, health or safety standards for employers,
employees, landlords or tenants, then Tenant agrees, at its sole cost and
expense, to comply promptly with such standards or regulations. Tenant shall be
responsible, at its sole cost and expense, to make all alterations to the
Premises as are required to comply with the governmental rules, regulations,
requirements or standards described in this Article 24, except for any such
----------
alterations to the Building Structure, which shall be performed by Landlord
pursuant to the TCCs of this Lease. The judgment of any court of competent
jurisdiction or the admission of Tenant in any judicial action, regardless of
whether Landlord is a party thereto, that Tenant has violated any of said
governmental measures, shall be conclusive of that fact as between Landlord and
Tenant. If, on or before the eighth (8th) anniversary of the Lease Commencement
Date, Tenant becomes obligated, at Tenant's sole cost and expense, to make an
improvements or alteration to the Building Systems which shall be capital in
nature, Tenant may elect, upon immediate notice thereof to Landlord, to have
Landlord make such improvement or alteration to the Building Systems, the cost
of which shall be amortized with interest over its useful life as reasonably
determined by Landlord pursuant to sound real estate accounting and management
principles, consistently applied, and shall be paid by Tenant to Landlord as
Additional Rent; provided, however, (i) Tenant shall not have such option to the
extent such improvement or alteration is necessary due to the negligence or
willful misconduct of Tenant or the Tenant's Parties, and (ii) to the extent
Tenant's use of the improvement or alteration reduces the useful life of such
improvement or alteration, the cost of such improvement or alteration shall be
amortized with interest over such shorter time period.
ARTICLE 25
----------
LATE CHARGES
------------
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord
by reason of Tenant's failure to pay Rent and/or other charges when due
hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) the
annual "BANK PRIME LOAN" rate cited in the Federal Reserve Statistical Release
Publication G.13(415), published on the first Tuesday of each calendar month (or
such other comparable index as
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Landlord and Tenant shall reasonably agree upon if such rate ceases to be
published) plus four (4) percentage points, and (ii) the highest rate permitted
by applicable law.
ARTICLE 26
----------
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
----------------------------------------------------
26.1 LANDLORD'S CURE. All covenants and agreements to be kept or performed
---------------
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided to the
----------------------
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor: (i) sums equal to expenditures reasonably made
and obligations incurred by Landlord in connection with the remedying by
Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; and
(ii) sums equal to all expenditures made and obligations incurred by Landlord in
collecting or attempting to collect the Rent (where the same was not paid within
three days of notice that the same was not paid when due) or in enforcing or
attempting to enforce any rights of Landlord under this Lease or pursuant to
law, including, without limitation, all legal fees and other amounts so
expended. Tenant's obligations under this Section 26.2 shall survive the
expiration or sooner termination of the Lease Term.
ARTICLE 27
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees,
or to current or prospective mortgagees, ground or underlying lessors or
insurers, or, during the last six (6) months of the Lease Term, prospective
tenants; (iii) post notices of nonresponsibility; or (iv) for alterations,
repairs or improvements to the Building Structure. Notwithstanding anything to
the contrary contained in this Article 27, Landlord may enter the Premises at
any time to (A) perform services required of Landlord under this Lease; (B) take
possession due to any breach of this Lease in the manner provided herein; and
(C) perform any covenants of Tenant which Tenant fails to perform (after any
applicable notice and cure periods). Landlord may make any such entries without
the abatement of Rent and may take such reasonable steps as required to
accomplish the stated purposes. Tenant hereby waives any claims for damages or
for any injuries or inconvenience to or interference with Tenant's business,
lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby. For each of the above purposes, Landlord shall at
all times have a key with which to unlock all the doors in the Premises,
excluding Tenant's vaults, safes and special security areas designated in
advance by Tenant. In an
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emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises. Any entry into the Premises by
Landlord in the manner hereinbefore described shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises. No provision
of this Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed to be performed
by Landlord herein.
ARTICLE 28
----------
TENANT PARKING
--------------
Tenant shall, at all times during the Lease Term and at no additional
charge, have the exclusive use of the parking areas on Lot 4 (the legal parcel
on which the Building is located), which parking areas are indicated on Exhibit
A attached hereto. Tenant shall have the right to designate visitor, car-
pooling, executive and other parking as Tenant may reasonably require, subject
to Landlord's reasonable approval. Tenant shall be responsible for the full
amount of any taxes imposed by any governmental authority in connection with the
use of such parking areas by Tenant. Tenant's continued right to use the parking
passes is conditioned upon Tenant abiding by all reasonable rules and
regulations which are prescribed from time to time for the orderly operation and
use of such parking area, including any sticker or other identification system
established by Landlord, Tenant's cooperation in seeing that Tenant's employees
and visitors also comply with such rules and regulations and Tenant not being in
default under this Lease. The parking areas to be used by Tenant pursuant to
this Article 28 are provided exclusively to Tenant solely for use by Tenant's
own personnel and such area (and the right to use such area) may not be
transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval; provided, however, Landlord shall be deemed to have
granted such approval with regard to Non-Transfers and Transfers approved
pursuant to the TCC's of Article 14.
ARTICLE 29
----------
MISCELLANEOUS PROVISIONS
------------------------
29.1 TERMS; CAPTIONS. The words "Landlord" and "Tenant" as used herein
---------------
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.
29.2 BINDING EFFECT. Subject to all other provisions of this Lease, each of
--------------
the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
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29.3 NO AIR RIGHTS. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.
29.4 MODIFICATION OF LEASE. Should any current or prospective mortgagee or
---------------------
ground lessor for the Building or Project require a
modification of this Lease, which modification will not cause an increased cost
or expense to Tenant or in any other way materially and adversely change the
rights and obligations of Tenant hereunder, then and in such event, Tenant
agrees that this Lease may be so modified and agrees to execute whatever
documents are reasonably required therefor and to deliver the same to Landlord
within ten (10) days following a request therefor. At the request of Landlord or
any mortgagee or ground lessor, Tenant agrees to execute a short form of Lease
and deliver the same to Landlord within ten (10) days following the request
therefor.
29.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord has
-------------------------------
the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security Deposit,
and Tenant shall attorn to such transferee. Tenant further acknowledges that
Landlord may assign its interest in this Lease to a mortgage lender as
additional security and agrees that such an assignment shall not release
Landlord from its obligations hereunder and that Tenant shall continue to look
to Landlord for the performance of its obligations hereunder.
29.6 PROHIBITION AGAINST RECORDING. Except as set forth hereinbelow and/or
-----------------------------
provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by Tenant or
by anyone acting through, under or on behalf of Tenant. Concurrently with the
execution of this Lease, Landlord and Tenant shall deliver recordable
counterparts of a Short Form of Lease, in the form attached hereto as Exhibit H,
which may be recorded in the Official Records of the County Recorder of San
Diego, by either Landlord or Tenant. The recordation of any such document shall
be at the sole cost and expense of the party conducting such recordation, and
where requested by Landlord, such cost shall not be included as an Operating
Expense.
29.7 LANDLORD'S TITLE. Landlord's title is and always shall be paramount to
----------------
the title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.
29.8 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
-----------------------
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
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29.9 APPLICATION OF PAYMENTS. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.
29.10 TIME OF ESSENCE. Time is of the essence with respect to the
---------------
performance of every provision of this Lease in which time of performance is a
factor.
29.11 PARTIAL INVALIDITY. If any term, provision or condition contained in
------------------
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12 NO WARRANTY. In executing and delivering this Lease, Tenant has not
-----------
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.
29.13 LANDLORD EXCULPATION. The liability of Landlord or the Landlord
--------------------
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
(1) to the extent such liability arises prior to the Lease Commencement Date,
the interest of Landlord in the Building (including any insurance proceeds which
Landlord receives); provided that if the Building is encumbered by third-party
debt in excess of eighty percent (80%) of the value of the Building, such value
shall be the equity interest Landlord would have in the Building if the Building
were encumbered by such third-party debt in an amount equal to eighty percent
(80%) of the value of the Building, or (2) to the extent such liability arises
after the Lease Commencement Date, the lesser of (a) the interest of Landlord in
the Building (including any insurance, condemnation or sales proceeds which
Landlord receives (which sales proceeds shall include the monetary value of any
non- monetary interests received)); provided that if the Building is encumbered
by third-party debt in excess of eighty percent (80%) of the value of the
Building, such value shall be the equity interest Landlord would have in the
Building if the Building were encumbered by such third-party debt in an amount
equal to eighty percent (80%) of the value of the Building, or (b) the equity
interest Landlord would have in the Building if the Building were encumbered by
third- party debt in an amount equal to eighty percent (80%) of the value of the
Building (as such value is determined by Landlord), provided, however, that
except as specifically stated above with regard to the calculation of Landlord's
interests, in no event shall such liability extend to any sales or insurance
proceeds received by Landlord or the Landlord Parties in connection with the
Project, Building or Premises. Neither Landlord, nor any of the Landlord Parties
shall have any personal liability therefor, and Tenant hereby expressly waives
and releases such personal liability on behalf of itself and all persons
claiming by, through or under Tenant. The limitations of liability contained in
this Section 29.13 shall
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inure to the benefit of Landlord's and the Landlord Parties' present and future
partners, beneficiaries, officers, directors, trustees, shareholders, agents and
employees, and their respective partners, heirs, successors and assigns. Under
no circumstances shall any present or future partner of Landlord (if Landlord is
a partnership), or trustee or beneficiary (if Landlord or any partner of
Landlord is a trust), have any liability for the performance of Landlord's
obligations under this Lease. Notwithstanding any contrary provision herein,
neither Landlord nor the Landlord Parties shall be liable under any
circumstances for injury or damage to, or interference with, Tenant's business,
including but not limited to, loss of profits, loss of rents or other revenues,
loss of business opportunity, loss of goodwill or loss of use, in each case,
however occurring.
29.14 ENTIRE AGREEMENT. It is understood and acknowledged that there are no
----------------
oral agreements between the parties hereto affecting this Lease and this Lease
constitutes the parties' entire agreement with respect to the leasing of the
Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the TCC's of this Lease can be modified, deleted or added to
except in writing signed by the parties hereto.
29.15 RIGHT TO LEASE. Landlord reserves the absolute right to effect such
--------------
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
-------------
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease and except as to Tenant's obligations under Section 5.2
and Article 24 of this Lease (collectively, a "FORCE MAJEURE"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
29.17 WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives, for Tenant and
------------------------------
for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.
29.18 NOTICES. All notices, demands, statements, designations, approvals or
-------
other communications (collectively, "NOTICES") given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be (A)
sent by United States certified or registered mail, postage prepaid, return
receipt requested ("MAIL"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
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recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be deemed
given (i) three (3) days after the date it is posted if sent by Mail, (ii) the
date the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be made (if
such notice is refused). If Tenant is notified of the identity and address of
Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such
mortgagee or ground or underlying lessor written notice of any default by
Landlord under the TCC's of this Lease by registered or certified mail, and such
mortgagee or ground or underlying lessor shall be given a reasonable opportunity
to cure such default prior to Tenant's exercising any remedy available to
Tenant. As of the date of this Lease, any Notices to Landlord must be sent,
transmitted, or delivered, as the case may be, to the following addresses:
Kilroy Realty Corporation
2250 East Imperial Highway
Suite 1200
El Segundo, California 90245
Attention: Legal Department
with copies to:
Kilroy Realty Corporation
12348 High Bluff Drive, Suite 110
San Diego, California 92130
Attention: Ms. Lisa Irvin
and
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
29.19 JOINT AND SEVERAL. If there is more than one Tenant, the obligations
-----------------
imposed upon Tenant under this Lease shall be joint and several.
29.20 AUTHORITY. If Tenant or Landlord is a corporation, trust or
---------
partnership, each individual executing this Lease on behalf of Tenant or
Landlord hereby represents and warrants that Landlord or Tenant, as appropriate,
is a duly formed and existing entity qualified to do business in California and
that Landlord or Tenant, as appropriate, has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Landlord or
Tenant, as appropriate, is authorized to do so.
29.21 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, then all costs
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and expenses, including 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 judgment.
29.22 GOVERNING LAW; WAIVER OF TRIAL BY JURY. This Lease shall be construed
--------------------------------------
and enforced in accordance with the laws of the State of California. IN ANY
ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I)
THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II)
SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE
INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY.
29.23 SUBMISSION OF LEASE. Submission of this instrument for examination or
-------------------
signature by Tenant does not constitute a reservation of, option for or option
to lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.
29.24 BROKERS. Landlord and Tenant hereby warrant to each other that they
-------
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the "BROKERS"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.
29.25 INDEPENDENT COVENANTS. This Lease shall be construed as though the
---------------------
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26 PROJECT OR BUILDING NAME AND SIGNAGE. Landlord shall have the right
------------------------------------
at any time to change the name of the Project or Building. Tenant shall not use
the name of the Project or Building or use pictures or illustrations of the
Project or Building in advertising or other publicity or for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
without the prior written consent of Landlord.
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29.27 COUNTERPARTS. This Lease may be executed in counterparts with the
------------
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28 CONFIDENTIALITY. Tenant acknowledges that the content of this Lease
---------------
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants, and except as required to be disclosed by
any applicable law or regulation. Landlord and Tenant hereby acknowledge that a
copy of this Lease will be attached to Tenant's filings with the Securities and
Exchange Commission.
29.29 TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all present
-------------------------
or future governmental programs intended to manage parking, transportation or
traffic in and around the Building, and in connection therewith, Tenant shall
take responsible action for the transportation planning and management of all
employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other transportation-
related committees or entities.
29.30 BUILDING RENOVATIONS. It is specifically understood and agreed that
--------------------
Landlord has made no representation or warranty to Tenant and has no
obligation and has made no promises to alter, remodel, improve, renovate, repair
or decorate the Premises, Building, or any part thereof and that no
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant except as specifically set forth herein or in
the Tenant Work Letter.
29.31 NO VIOLATION. Tenant hereby warrants and represents that neither its
------------
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.32 COMMUNICATIONS AND COMPUTER LINES. Tenant may install, maintain,
---------------------------------
replace, remove or use any communications or computer wires and cables
(collectively, the "LINES") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord's prior written consent, use an
experienced and qualified contractor approved in writing by Landlord, and comply
with all of the other provisions of Articles 7 and 8 of this Lease, (ii) the
Lines therefor (including riser cables) shall be appropriately insulated to
prevent excessive electromagnetic fields or radiation, and shall be surrounded
by a protective conduit reasonably acceptable to Landlord, (iii) any new or
existing Lines servicing the Premises shall comply with all applicable
governmental laws and regulations, (iv) as a condition to permitting the
installation of new Lines, Landlord may require that Tenant remove existing
Lines located in or serving the Premises and repair any damage in connection
with such removal, and (v) Tenant shall pay all costs in connection therewith.
Landlord reserves the right to require that Tenant remove any Lines located in
or serving the Premises which are installed in violation of these provisions, or
which are at any time in violation of any laws or represent a dangerous or
potentially dangerous condition.
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29.33 HAZARDOUS SUBSTANCES.
--------------------
29.33.1 DEFINITIONS. For purposes of this Lease, the following
-----------
definitions shall apply: "HAZARDOUS MATERIAL(S)" shall mean any substance or
material that is described as a toxic or hazardous substance, waste, material,
pollutant, contaminant or infectious waste, or any matter that in certain
specified quantities would be injurious to the public health or welfare, or
words of similar import, in any of the "Environmental Laws," as that term is
defined below in this Section 29.33.1, or any other words which are intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or reproductive
toxicity and includes, without limitation, asbestos, petroleum (including crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel, or any mixture thereof), petroleum
products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive
matter, medical waste, and chemicals which may cause cancer or reproductive
toxicity. "ENVIRONMENTAL LAWS" shall mean all federal, state, local and quasi-
governmental laws (whether under common law, statute or otherwise), ordinances,
decrees, codes, rulings, awards, rules, regulations and guidance documents now
or hereafter be enacted or promulgated as amended from time to time, in any way
relating to or regulating Hazardous Materials.
29.33.2 COMPLIANCE WITH ENVIRONMENTAL LAWS. Landlord covenants that
----------------------------------
during the Lease Term, Landlord shall comply with all Environmental Laws in
accordance with, and as required by, the terms and conditions of Article 24 of
this Lease; provided, however, such compliance is not the responsibility of
Tenant under this Lease, and provided further that Landlord's failure to comply
therewith would prohibit Tenant from obtaining or maintaining a certificate of
occupancy for the Premises, or would unreasonably and materially affect the
safety of Tenant's Parties or create a significant health hazard for Tenant's
Parties or otherwise materially interfere with or materially affect Tenant's
Permitted Use and enjoyment of the Premises.
29.33.3 INDEMNIFICATIONS. Landlord agrees to indemnify, defend,
----------------
protect and hold harmless Tenant and the Tenant Parties from any and all claims
of liability asserted against Tenant or any Tenant Parties by a third party,
including without limitation any agency or instrumentality of the federal, state
or local government, for bodily injury, including death, physical damage to or
loss of use of property or cleanup activities to the extent required by
applicable law (remedial or removal), arising from any Hazardous Materials
(collectively, "HAZARDOUS MATERIALS CLAIMS") to the extent placed in, on, under
or about the Project by Landlord Parties. Tenant agrees to indemnify, defend,
protect and hold harmless Landlord and the Landlord Parties from any and all
Hazardous Materials Claims arising from any Hazardous Materials to the extent
placed in, on, under or about the Premises or the Project by Tenant or Tenant
Parties.
29.33.4 PRE-EXISTING HAZARDOUS MATERIALS. Tenant shall be under no
------------------------
obligation to investigate or remediate any Hazardous Material located in, on,
under or about the Premises as of the Lease Commencement Date (the "EXISTING
HAZARDOUS MATERIALS") or any Hazardous Materials which have migrated onto the
Property from off-site or which are brought onto the Property by Landlord or
Landlord's agents, employees or contractors. Additionally, Landlord agrees that
it shall indemnify, defend and hold Tenant and any Tenant Party harmless from
any
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cost and all claims of liability asserted against Tenant/Tenant Party by a third
party, including any agency or instrumentality of the federal, state or local
government, for cleanup activities to the extent required by applicable law
(remedial or removal), or governmental fines or penalties, relating to the
Existing Hazardous Materials and those Hazardous materials which are brought
onto the Property by Landlord or Landlord's agents, employees or contractors.
29.34 DEVELOPMENT OF THE PROJECT.
--------------------------
29.34.1 SUBDIVISION. Landlord reserves the right to further subdivide
-----------
all or a portion of the Project. Tenant agrees to execute and deliver, upon
demand by Landlord and in the form requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from such
subdivision.
29.34.2 THE OTHER IMPROVEMENTS. If portions of the Project or
----------------------
property adjacent to the Project (collectively, the "OTHER IMPROVEMENTS") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements to
provide (i) for reciprocal rights of access and/or use of the Project and the
Other Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, (iii) for the allocation of a portion of the Direct Expenses to
the Other Improvements and the operating expenses and taxes for the Other
Improvements to the Project, and (iv) for the use or improvement of the Other
Improvements and/or the Project in connection with the improvement,
construction, and/or excavation of the Other Improvements and/or the Project;
provided that none of the foregoing materially adversely interfere with Tenant's
rights under this Lease. Nothing contained herein shall be deemed or construed
to limit or otherwise affect Landlord's right to convey all or any portion of
the Project or any other of Landlord's rights described in this Lease.
29.34.3 CONSTRUCTION OF PROJECT AND OTHER IMPROVEMENTS. Tenant
----------------------------------------------
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Landlord
shall use its commercially reasonable efforts to minimize the disruption to
Tenant and Tenant's business from such construction and in no event shall
Landlord be entitled to use Tenant's parking areas for construction staging,
storage of equipment or other construction related activities without Tenant's
approval, which may be granted or withheld in Tenant's sole discretion. Tenant
hereby waives any and all rent offsets or claims of constructive eviction which
may arise in connection with such construction.
29.35 TENANT RIGHT OF FIRST OFFER TO PURCHASE BUILDING. Landlord shall
------------------------------------------------
grant to the Original Tenant and its Affiliates a right of first offer with
respect to purchasing the Project, but only to the extent Landlord chooses to
sell the Building on an individual, single-building basis, and provided that
Tenant is not then in Default under this Lease (beyond any applicable notice and
cure periods). Landlord shall notify Tenant (the "First Offer Notice") in the
event Landlord desires to sell the Project on such an individual,
single-building basis, and shall notify Tenant of the material price, terms
(both monetary and non-monetary) and conditions pursuant to which it is willing
to sell the Project. Tenant shall, during the fifteen (15) day period after
Tenant's
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receipt of such First Offer Notice (the "EXCLUSIVE NEGOTIATION PERIOD"), have an
exclusive opportunity to agree with Landlord upon such price, terms and
conditions. If Tenant does not agree to such price, terms and conditions within
the Exclusive Negotiation Period, Landlord shall have no obligation to sell the
Building to Tenant and Landlord shall be free to negotiate and enter into a
purchase agreement for the Building to anyone whom it desires on any price,
terms and conditions it may agree. In the event Landlord thereafter consummates
the sale of the Building pursuant to such a purchase agreement identified in the
preceding sentence, the rights contained in this Section 29.35 shall terminate
and be of no further force or effect. The rights contained in this Section 29.35
shall be personal to the Original Tenant and its Affiliates and may only be
exercised by the Original Tenant or an Affiliate (and not any assignee,
subleasee or other transferee of the Original Tenant's interest in this Lease)
if the Original Tenant and/or an Affiliate occupies the entire Premises.
29.36 SUCCESSFUL IPO CONDITION PRECEDENT. This Lease is subject to and
----------------------------------
expressly conditioned upon Tenant having a "Successful IPO," as that terms is
set forth below, on or before February 29, 2000. For purposes of this section
29.36, a "Successful IPO" means (A) an initial public offering of shares of
Tenant's stock on a recognized national stock market, (B) where the share price
of tendered shares is no less than $13.00, (C) resulting in a Market
Capitalization of no less than $350,000,000.00 and (D) with Tenant thereafter
having no less than $35,000,000 of Working Capital. In the event Tenant fails to
complete a Successful IPO on or before February 29, 2000, this Lease shall
immediately terminate and be of no further force or effect; provided, however,
Tenant shall reimburse Landlord for its expenditures through the date of such
termination pursuant to that certain side letter dated December 27th, 1999 and
countersigned on December 28th, 1999 by and between Landlord and Tenant.
29.37 BUILDING A LEASE. Landlord and Tenant hereby acknowledge that
----------------
Landlord and Tenant are, concurrently with the execution of this Lease, entering
into another lease (the "BUILDING A LEASE") for an approximately 75,520 rentable
square foot building to be constructed on Lot 5 of the Project and to be known
as "BUILDING A". Tenant's execution and delivery of the Building A Lease is a
material condition to Landlord's execution and delivery of this Lease. Tenant
hereby acknowledges that a default (beyond any applicable notice and cure
periods) of this Lease shall constitute a default under the Building A Lease
and, conversely, a default (beyond any applicable notice and cure periods) of
the Building A Lease shall constitute a default of Section 19.1.4 of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
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"LANDLORD":
KR-GATEWAY PARTNERS,
a Delaware limited liability company
By: Kilroy Realty, L.P.,
a Delaware limited partnership
Managing Member
By: Kilroy Realty Corporation,
a Maryland corporation
General Partner
By: ____________________________________
Name: __________________________________
Its: _____________________________
By: ____________________________________
Name: __________________________________
Its: _____________________________
"TENANT":
DIVERSA CORPORATION,
a Delaware corporation
By: ______________________________________________
Name: ____________________________________________
Its: ___________________________________
By: ______________________________________________
Name: ____________________________________________
Its: ___________________________________
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EXHIBIT A
---------
SORRENTO GATEWAY
OUTLINE OF PREMISES
[ATTACHED]
EXHIBIT A
-1-
<PAGE>
EXHIBIT B
---------
SORRENTO GATEWAY
TENANT WORK LETTER
[ATTACHED]
EXHIBIT B
-1-
<PAGE>
EXHIBIT C
---------
SORRENTO GATEWAY
NOTICE OF LEASE TERM DATES
To: _______________________
_______________________
_______________________
_______________________
Re: Lease dated ____________, 19__ between ____________________, a
_____________________ ("Landlord"), and _______________________, a
_______________________ ("Tenant") concerning that certain 75,520
rentable square foot building located at ____________________________,
San Diego, California.
Gentlemen:
In accordance with the lease (the "Lease"), we wish to advise you and/or
confirm as follows:
1. The Lease Term shall commence on or has commenced on ______________
for a term of __________________ ending on __________________.
2. Rent commenced to accrue on __________________, in the amount of
_________________.
3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall be
for the full amount of the monthly installment as provided for in the
Lease.
4. Your rent checks should be made payable to __________________ at
___________________.
5. The exact number of rentable/usable square feet within the Premises is
____________ square feet.
EXHIBIT C
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<PAGE>
6. Tenant's Share as adjusted based upon the exact number of usable
square feet within the Premises is ________%.
"Landlord":
__________________________________________,
a__________________________________________
By:________________________________________
Its:________________________________
Agreed to and Accepted
as of ____________, 19___.
"Tenant":
_______________________________
a______________________________
By:____________________________
Its:______________________
EXHIBIT C
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<PAGE>
EXHIBIT D
---------
SORRENTO GATEWAY
RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of any
conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.
1. Landlord shall have the right to prescribe the weight, size and position
of all safes and other heavy property brought into the Building and also the
times and manner of moving the same in and out of the Building. Safes and other
heavy objects shall, if considered necessary by Landlord, stand on supports of
such thickness as is necessary to properly distribute the weight. Landlord will
not be responsible for loss of or damage to any such safe or property in any
case. Any damage to any part of the Building, its contents, occupants or
visitors by moving or maintaining any such safe or other property shall be the
sole responsibility and expense of Tenant.
2. The requirements of Tenant will be attended to only upon application at
the management office for the Project or at such office location designated by
Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.
3. No advertisement, notice or handbill shall be exhibited, distributed,
painted or affixed by Tenant on any part of the Premises or the Building without
the prior written consent of the Landlord. Tenant shall not disturb, solicit,
peddle, or canvass any occupant of the Project and shall cooperate with Landlord
and its agents of Landlord to prevent same.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the tenant who, or whose servants, employees, agents, visitors or
licensees shall have caused same.
5. Tenant shall not overload the floor of the Premises.
6. Tenant shall not use or keep in or on the Premises, the Building, or the
Project any kerosene, gasoline, explosive material, corrosive material, material
capable of emitting toxic fumes, or other inflammable or combustible fluid
chemical, substitute or material, except in compliance with applicable law.
Tenant shall provide material safety data sheets for any Hazardous Material used
or kept on the Premises.
7. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises to the extent the same is
noticeable in the Common Areas of the
EXHIBIT D
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<PAGE>
Project or which affects other tenants of the Project. Tenant shall not throw
anything out of doors, windows or skylights or down passageways.
8. Except with respect to an approved "Deli Operator," no cooking shall be
done or permitted on the Premises (unless Tenant receives Landlord's prior
written approval ot install a cafeteria for its employees in the Premises), nor
shall the Premises be used for lodging or for any improper, objectionable or
immoral purposes. Notwithstanding the foregoing, Underwriters'
laboratory-approved equipment and microwave ovens may be used in the Premises
for heating food and brewing coffee, tea, hot chocolate and similar beverages
for employees and visitors, provided that such use is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.
9. Tenant shall not occupy or permit any portion of the Premises to be
occupied as an office for a messenger-type operation or dispatch office, public
stenographer or typist, or for the manufacture or sale of liquor, narcotics, or
tobacco in any form, or as a medical office, or as a barber or manicure shop, or
as an employment bureau without the express prior written consent of Landlord.
Tenant shall not engage or pay any employees on the Premises except those
actually working for such tenant on the Premises nor advertise for laborers
giving an address at the Premises.
10. Tenant shall store all its trash and garbage within the interior of the
Premises or in the appropriate external trash area(s) for the Building. No
material shall be placed in the trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in San Diego, California
without violation of any law or ordinance governing such disposal. If the
Premises is or becomes infested with vermin as a result of the use or any misuse
or neglect of the Premises by Tenant, its agents, servants, employees,
contractors, visitors or licensees, Tenant shall forthwith, at Tenant's expense,
cause the Premises to be exterminated from time to time to the satisfaction of
Landlord and shall employ such licensed exterminators as shall be approved in
writing in advance by Landlord.
11. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by any governmental agency.
12. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord (which shall not
be unreasonably withheld or delayed), and no curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window or door
of the Premises other than Landlord standard window and door coverings unless
otherwise consented to in writing by Landlord. All electrical ceiling fixtures
hung in the Premises or spaces along the perimeter of the Building must be
fluorescent and/or of a quality, type, design and a warm white bulb color
approved in advance in writing by Landlord. Neither the interior nor exterior of
any windows shall be coated or otherwise sunscreened without the prior written
consent of Landlord. Tenant shall be responsible for any damage to the window
film on the exterior windows of the Premises and shall promptly repair any such
damage at Tenant's sole cost and expense. Tenant shall keep its window coverings
closed during any period of the day when the sun is shining directly on the
windows of the Premises.
EXHIBIT D
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<PAGE>
13. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.
14. Tenant must comply with any applicable "NO-SMOKING" Ordinances. If
Tenant is required under the ordinance to adopt a written smoking policy, a copy
of said policy shall be on file in the office of the Building. Additionally,
Tenant must provide at least one area within the Premises in which its
employees, invitees and visitors may smoke, to the extent such area is required
by law.
15. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.
16. No auction, liquidation, fire sale, going-out-of-business or bankruptcy
sale shall be conducted in the Premises without the prior written consent of
Landlord.
17. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.
18. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate, visibly marked and properly operational fire extinguisher next to
any duplicating or photocopying machines or similar heat producing equipment,
which may or may not contain combustible material, in the Premises.
Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary (relative to a building occupied solely by one tenant) for the
management, safety, care and cleanliness of the Premises, Building, the Common
Areas and the Project, and for the preservation of good order therein, as well
as for the convenience of other occupants and tenants therein. Landlord may
waive any one or more of these Rules and Regulations for the benefit of any
particular tenants, but no such waiver by Landlord shall be construed as a
waiver of such Rules and Regulations in favor of any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules or Regulations against any or
all tenants of the Project. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.
EXHIBIT D
-3-
<PAGE>
EXHIBIT E
---------
SORRENTO GATEWAY
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Lease (the "Lease") made and
entered into as of ___________, 199__ by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises on the ______________
floor(s) of the building located at ______________, San Diego, California
____________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease and
all amendments and modifications thereto. The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on ____________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A. 5. Tenant
has not transferred, assigned, or sublet any portion of the Premises nor entered
into any license or concession agreements with respect thereto except as
follows:
6. Tenant shall not modify the documents contained in Exhibit A without the
prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is
$_____________________.
8. All conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder. In addition, the undersigned has not delivered any notice to
Landlord regarding a default by Landlord thereunder.
9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
EXHIBIT E
-1-
<PAGE>
10. As of the date hereof, there are no existing defenses or offsets, or,
to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
12. There are no actions pending against the undersigned under the
bankruptcy or similar laws of the United States or any state.
13. Other than in compliance with the TCCs of the Lease, the undersigned
has not used or stored any hazardous substances in the Premises.
14. To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and
allowances due to the undersigned under the Lease in connection with any tenant
improvement work have been paid in full.
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 19__.
"Tenant":
_______________________________,
a_______________________________
By:_____________________________
Its:_______________________
By:_____________________________
Its:_______________________
EXHIBIT E
-2-
<PAGE>
EXHIBIT F
---------
KILROY REALTY
-------------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
ALLEN, MATKINS, LECK, GAMBLE
& MALLORY LLP
1999 Avenue of the Stars
18th Floor
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
RECOGNITION OF COVENANTS,
-------------------------
CONDITIONS, AND RESTRICTIONS
----------------------------
This Recognition of Covenants, Conditions, and Restrictions (this
"AGREEMENT") is entered into as of the __ day of ________, 199__, by and between
__________________ ("Landlord"), and ________________ ("Tenant"), with reference
to the following facts:
A. Landlord and Tenant entered into that certain Lease Agreement dated
_____, 199__ (the "Lease"). Pursuant to the Lease, Landlord leased to Tenant and
Tenant leased from Landlord space (the "PREMISES") located in an office building
on certain real property described in EXHIBIT "A" attached hereto and
-----------
incorporated herein by this reference (the "PROPERTY").
B. The Premises are located in an office building located on real property
which is part of an area owned by Landlord containing approximately ___(__)
acres of real property located in the City of ____________, California (the
"PROJECT"), as more particularly described in EXHIBIT "B" attached hereto and
-----------
incorporated herein by this reference.
C. Landlord, as declarant, has previously recorded, or proposes to record
concurrently with the recordation of this Agreement, a Declaration of Covenants,
Conditions, and Restrictions (the "DECLARATION"), dated ________________, 19__,
in connection with the Project.
D. Tenant is agreeing to recognize and be bound by the terms of the
Declaration, and the parties hereto desire to set forth their agreements
concerning the same.
NOW, THEREFORE, in consideration of (a) the foregoing recitals and the
mutual agreements hereinafter set forth, and (b) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows,
1. Tenant's Recognition of Declaration. Notwithstanding that the Lease has
-----------------------------------
been executed prior to the recordation of the Declaration, Tenant agrees to
recognize and by bound by all of the terms and conditions of the Declaration.
EXHIBIT F
-1-
<PAGE>
2. Miscellaneous.
-------------
2.1 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, estates, personal
representatives, successors, and assigns.
2.2 This Agreement is made in, and shall be governed, enforced and
construed under the laws of, the State of California.
2.3 This Agreement constitutes the entire understanding and agreements
of the parties with respect to the subject matter hereof, and shall supersede
and replace all prior understandings and agreements, whether verbal or in
writing. The parties confirm and acknowledge that there are no other promises,
covenants, understandings, agreements, representations, or warranties with
respect to the subject matter of this Agreement except as expressly set forth
herein.
2.4 This Agreement is not to be modified, terminated, or amended in
any respect, except pursuant to any instrument in writing duly executed by both
of the parties hereto.
2.5 In the event that either party hereto shall bring any legal action
or other proceeding with respect to the breach, interpretation, or enforcement
of this Agreement, or with respect to any dispute relating to any transaction
covered by this Agreement, the losing party in such action or proceeding shall
reimburse the prevailing party therein for all reasonable costs of litigation,
including reasonable attorneys' fees, in such amount as may be determined by the
court or other tribunal having jurisdiction, including matters on appeal.
2.6 All captions and heading herein are for convenience and ease of
reference only, and shall not be used or referred to in any way in connection
with the interpretation or enforcement of this Agreement.
2.7 If any provision of this Agreement, as applied to any party or to
any circumstance, shall be adjudged by a court of competent jurisdictions to be
void or unenforceable for any reason, the same shall not affect any other
provision of this Agreement, the application of such provision under
circumstances different form those adjudged by the court, or the validity or
enforceability of this Agreement as a whole.
2.8 Time is of the essence of this Agreement.
2.9 The Parties agree to execute any further documents, and take any
further actions, as may be reasonable and appropriate in order to carry out the
purpose and intent of this Agreement.
2.10 As used herein, the masculine, feminine or neuter gender, and the
singular and plural numbers, shall each be deemed to include the others whenever
and whatever the context so indicates.
EXHIBIT F
-2-
<PAGE>
SIGNATURE PAGE OF RECOGNITION OF
COVENANTS, CONDITIONS AND RESTRICTIONS
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
"Landlord":
_______________________________,
a _____________________________
By:____________________________
Its:___________________
"Tenant":
_______________________________
a______________________________
By:____________________________
Its:___________________
By:____________________________
Its:___________________
EXHIBIT F
-3-
<PAGE>
EXHIBIT G
---------
FORM OF LETTER OF CREDIT
------------------------
(Letterhead of a money center bank
acceptable to the Landlord)
______________, 2000
________________________
________________________
________________________
________________________
Gentlemen:
We hereby establish our Irrevocable Letter of Credit and authorize you to
draw on us at sight for the account of _____________________, a
_____________________, the aggregate amount of _____________________ and No/100
Dollars ($_________).
Funds under this Letter of Credit are available to the beneficiary hereof
as follows:
Any or all of the sums hereunder may be drawn down at any time and from
time to time from and after the date hereof by _____________________
("Beneficiary") when accompanied by this Letter of Credit and a written
statement signed by __________________________, certifying that such moneys are
due and owing to Beneficiary, together with a certificate of incumbency executed
by ___________________ certifying the position and signature of the officer
signing the statement, and a sight draft executed and endorsed by _____________,
as a ________________ of Beneficiary.
This Letter of Credit is transferable in its entirety. Should a transfer be
desired, such transfer will be subject to the return to us of this advice,
together with written instructions.
The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank. We hereby agree that this Letter of Credit shall be duly
honored upon presentation and delivery of the certification specified above.
This Letter of Credit shall expire on ______________, 200__.
Notwithstanding the above expiration date of this Letter of Credit, the
term of this Letter of Credit shall be automatically renewed for successive,
additional one (1) year periods unless, at least thirty (30) days prior to any
such date of expiration, the undersigned shall give written notice to Holder, by
certified mail, return receipt requested and at the address set forth above or
at such other address as may be given to the undersigned by Holder, that this
Letter of Credit will not be renewed.
EXHIBIT G
-1-
<PAGE>
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1983 Revision), International Chamber of Commerce
Publication 400.
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1983 Revision). International Chamber of Commerce
Publication 400.
Very truly yours.
(Name of Issuing Bank)
By:____________________________
EXHIBIT G
-2-
<PAGE>
EXHIBIT H
---------
FORM OF SHORT FORM OF LEASE
---------------------------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
___________________________
___________________________
___________________________
================================================================================
SHORT FORM OF LEASE
-------------------
THIS SHORT FORM OF LEASE ("MEMORANDUM") is made as of February 11, 2000, by
and between KR-Gateway Partners, LLC, a Delaware limited liability company
("LANDLORD") and Diversa Corporation, a Delaware corporation ("TENANT").
Pursuant to that certain Retail Lease by and between Landlord and Tenant dated
as of November 16, 1999 (the "LEASE"), subject to and in accordance with the
terms of such Lease, Landlord hereby leases to Tenant that certain premises
contained therein within the project comprised of that certain real property
described in Schedule 1 attached hereto and incorporated herein by reference.
----------
All the terms, conditions, covenants and agreements in the Lease are
incorporated into this Memorandum with the same force and effect as if they were
fully recited herein.
EXHIBIT H
-1-
<PAGE>
In the event of any inconsistency between the terms of this Memorandum and
the terms of the Lease, the Lease shall control.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date first set forth above.
"Landlord":
_______________________________,
a _____________________________
By:____________________________
Name:__________________________
Its:___________________________
"Tenant":
_______________________________
a______________________________
By:____________________________
Name:__________________________
Its:___________________________
EXHIBIT H
-2-
<PAGE>
EXHIBIT B
---------
SORRENTO GATEWAY
----------------
TENANT WORK LETTER
------------------
PREAMBLE
--------
This Tenant Work Letter sets forth the TCCs relating to the construction of
the Premises. This Tenant Work Letter is essentially organized chronologically
and specifically addresses the issues of the construction of the Premises, in
sequence, as such issues will arise during the actual construction of the
Premises. All references in this Tenant Work Letter to Articles or Sections of
"this Lease" shall mean the relevant portions of Articles 1 through 29 of the
Lease to which this Tenant Work Letter is attached as EXHIBIT B, and all
---------
references in this Tenant Work Letter to Sections of this "Tenant Work Letter"
shall mean the relevant portions of Sections 1 through 6 of this Tenant Work
Letter. Except as defined to the contrary, all defined terms used in the Tenant
Work Letter shall have the same meaning as the terms defined in the Lease.
SECTION 1
---------
DELIVERY OF THE PREMISES AND BASE BUILDING
------------------------------------------
1.1 BASE BUILDING. In accordance with the TCCs of this Lease, Landlord
--------------
shall deliver to Tenant the Base Building, which materially shall comply with
and include the items and matters set forth on SCHEDULE 1 attached to this
----------
EXHIBIT B, at Landlord's sole cost and expense and without deduction from the
- ---------
Tenant and Core Improvement Allowance. The Base Building shall be in good
condition and working order and shall comply with applicable building codes and
other governmental laws, ordinances and regulations which were enacted prior to
the Lease Commencement Date and applicable to new construction for unoccupied
space to the extent required to obtain a certificate of occupancy (collectively,
the "CODE") and Tenant shall, except as otherwise set forth in this Lease or in
this Tenant Work Letter, accept the Premises and Base Building from Landlord in
their then existing, "as-is" condition as of the Commencement Date of this
Lease, subject to the terms of this Tenant Work Letter, subject only to
punchlist items and Landlord's obligations set forth in Article 7 of the Lease,
including, without limitation, Landlord's obligation to maintain in accordance
with Section 7.1 of the Lease the Building Structure.
1.2 INTENTIONALLY OMITTED.
----------------------
SECTION 2
---------
TENANT AND CORE IMPROVEMENTS
----------------------------
2.1 TENANT AND CORE IMPROVEMENT ALLOWANCE. Tenant shall be entitled to
-------------------------------------
a one-time tenant and core improvement allowance (the "TENANT AND CORE
IMPROVEMENT ALLOWANCE") in the amount of $110.00 per rentable square foot of the
Premises for (A) the costs relating to the
<PAGE>
initial design and construction of the additional work of Landlord regarding the
structures and systems of the Building and its core above the level of the Base
Building (the "CORE IMPROVEMENTS"), and (B) the costs relating to the initial
design and construction of Tenant's improvements and any other improvements to
the Building above the level of the Core Improvements and the Base Building,
which are permanently affixed to the Premises, specifically including, but not
limited to Tenant's office improvements, lab improvements (including built-in
lab equipment) and other related interior improvements (the "TENANT
IMPROVEMENTS"). In addition, pursuant to Sections 2.2.1(vii) and (viii) of this
Tenant Work Letter, Tenant may use a portion of the Tenant and Core Improvement
Allowance for Tenant's FF&E and Building Signage. In no event shall Landlord be
obligated to make disbursements pursuant to this Tenant Work Letter in a total
amount which exceeds the Tenant and Core Improvement Allowance. Landlord and
Tenant acknowledge that for purposes of this Lease, the Tenant and Core
Improvement Allowance shall consist of (i) the "Base Tenant Improvement
Allowance" and the "Core Allowance," which collectively equal to $40.00 per
rentable square foot of the Premises, (ii) the "Above Standard Allowance" which
equals $70.00 per rentable square foot of the Premises, and (iii) the "Optional
Above Standard Allowance" of up to $10.00 per rentable square foot of the
Premises pursuant to the terms of Section 2.2.2 of this Tenant Work Letter.
Landlord and Tenant further acknowledge that (1) the Tenant and Core Improvement
Allowance has been factored into the Base Rent of the Lease, amortized with
interest of twelve percent (12%) per annum over the initial Lease Term, and (2)
the allocations set forth in the preceding sentence shall not affect Tenant's
usage of the Tenant and Core Improvement Allowance.
2.2 DISBURSEMENT OF THE TENANT AND CORE IMPROVEMENT ALLOWANCE.
---------------------------------------------------------
2.2.1 TENANT AND CORE IMPROVEMENT ALLOWANCE ITEMS. Except as
-------------------------------------------
otherwise set forth in this Tenant Work Letter, the Tenant and Core Improvement
Allowance shall be disbursed by Landlord (each of which disbursements shall be
made pursuant to Landlord's disbursement process) for costs related to the
construction of the Core Improvements and Tenant Improvements and for the
following items and costs (collectively the "TENANT AND CORE IMPROVEMENT
ALLOWANCE ITEMS"): (i) payment of the fees of the "Architect" and the
"Engineers," as those terms are defined in Section 3.1 of this Tenant Work
-----------
Letter; (ii) the payment of plan check, permit and license fees relating to
construction of the Tenant Improvements; (iii) the cost of any changes to the
Base Building when such changes are required by the Construction Drawings; (iv)
the cost of any changes to the Construction Drawings or Tenant Improvements
required by all applicable building codes (the "CODE"); (v) the cost of the
"Landlord Supervision Fee," as that term is defined in Section 4.3.2 of this
-------------
Tenant Work Letter; (vi) sales and use taxes; (vii) the cost of delivering,
installing and purchasing Tenant's security systems, telephone switch, and
communications equipment and cabling and Tenant's work stations, furniture,
fixtures and equipment (collectively, "FF&E"), provided that the reimbursement
for such costs does not, in the aggregate, exceed Seven and No/100 Dollars
($7.00) per rentable square foot of the Premises (the "FF&E ALLOWANCE CAP");
(viii) the cost of designing, permitting and constructing the Building Signage,
provided that the reimbursement for such costs does not, in the aggregate,
exceed 50/100 Dollars ($0.50) per rentable square foot of the Premises; and (ix)
all other third-party costs actually and reasonably expended by Landlord in
connection with the construction of the Tenant Improvements pursuant to the TCCs
of this Tenant Work Letter. Notwithstanding the foregoing, the Tenant and Core
Improvement
-2-
<PAGE>
Allowance shall not be used for (and Tenant shall have no responsibility for)
the following costs: (1) Property Maintenance Costs prior to the Lease
Commencement Date, (2) costs to correct construction defects to the Base
Building, (3) principal or interest on any construction loan obtained by
Landlord for the construction of the Tenant Improvements, or (4) Base Building
costs.
2.2.2 ABOVE STANDARD ALLOWANCE ELECTION. Tenant may, upon
---------------------------------
written notice to Landlord given on or before August 1, 2001 (provided Tenant
may give notice of a final adjustment of up to $2.00 per rentable square foot of
the Premises up to and including October 1, 2001; provided further, however,
that both such dates shall be extended to the extent Tenant elects to toll the
Lease Commencement Date pursuant to the terms of Section 2.1 of this Lease)
elect to cause the Tenant and Core Improvement Allowance to be increased by the
Above Standard Allowance in an amount (the "TIA INCREASE") set forth in such
notice; provided, however, that the amount of such TIA Increase shall (i) be an
amount equal to the product of (A) an even number of United States Dollars (as
opposed to fractions of United States Dollars) and (B) the rentable square feet
in the Premises, and (ii) in no event exceed $10.00 per rentable square foot of
the Premises. In the event Tenant elects to increase the amount of the Tenant
and Core Improvement Allowance pursuant to the foregoing sentence, for each
$1.00 per Rentable Square Foot of such increase (up to the cumulative increase
of $10.00 per Rentable Square Foot of the Premises), the Monthly Rental Rate per
Rentable Square Foot attributable to the Premises shall be increased by $0.01
(and the corresponding amounts of Monthly Installment of Base Rent and Annual
Base Rent shall be increased accordingly and the Base Rent for all 15 years
shall be recalculated, based on a seven percent (7%) increase every 24 months of
the Lease Term).
2.2.3 TENANT IMPROVEMENT EXCESS. Any unused portion of the
-------------------------
Tenant and Core Improvement Allowance (which unused amount, when calculated on a
per rentable square foot basis, shall be the "UNUSED TIA/RSF"), shall be applied
against Rent as a reduction in the Monthly Rental Rate per Rentable Square Foot
of the Initial Premises equal to $0.01 per square foot for each $1.00 of the
Unused TIA/RSF (with the corresponding amounts of the Monthly Installment of
Base Rent and Annual Base Rent reduced accordingly) (cumulatively, the "RENT
REDUCTION").
2.3 STANDARD TENANT IMPROVEMENT PACKAGE. For purposes of this Lease,
-----------------------------------
the "BUILDING STANDARD TENANT IMPROVEMENTS" shall mean any Tenant Improvements
(approved pursuant to the TCCs of this Tenant Work Letter) constructed wholly
with the Tenant and Core Improvement Allowance.
2.4 REMOVAL OF ABOVE BUILDING STANDARD TENANT IMPROVEMENTS. "ABOVE
------------------------------------------------------
STANDARD TENANT IMPROVEMENTS" shall mean any part of the Tenant Improvements
which do not constitute Building Standard Tenant Improvements, including, but
not limited to, plumbing and millwork. If so directed by Landlord prior to the
end of the Term of this Lease, Tenant, at its sole cost and expense, shall
remove from the Premises any Above Standard Tenant Improvements designated by
Landlord, and shall replace such designated Above Standard Tenant Improvements
to be removed with Building Standard Tenant Improvements. Such removal and
replacement of Above Standard Tenant Improvements shall be performed promptly
and shall be completed by Tenant on or before the end of the Term of this Lease
if notice of removal is given at least thirty (30) days prior to the end of the
Term, and if Tenant fails to
-3-
<PAGE>
remove and/or replace any Above Standard Tenant Improvements, Landlord may do so
and Tenant shall reimburse Landlord for the cost of such removal and/or
replacement.
2.5 FAILURE TO DISBURSE TENANT AND CORE IMPROVEMENT ALLOWANCE AND
-------------------------------------------------------------
OTHER ALLOWANCES. If Landlord fails to timely fulfill its obligation to fund any
- ----------------
portion of the Tenant and Core Improvement Allowance, Tenant shall be entitled
to deliver Notice ("PAYMENT NOTICE") thereof to Landlord and to any mortgage or
trust deed holder of the Building whose identity and address have been
previously provided to Tenant. If Landlord still fails to fulfill any such
obligation within twenty (20) days after Landlord's receipt of the Payment
Notice from Tenant and if Landlord fails to deliver Notice to Tenant within such
twenty (20) day period explaining Landlord's reasons that Landlord believes that
the amounts described in Tenant's Payment Notice are not due and payable by
Landlord ("REFUSAL NOTICE"), Tenant shall be entitled to fund such portion of
the Tenant and Core Improvement Allowance as defined above in Section 2.1 of
this Tenant Work Letter and to offset the amount so funded, together with
interest at the Interest Rate from the date of funding until the date of offset,
against Tenant's next obligations to pay Rent. However, if Tenant is in Default
under Section 19.1.1 of this Lease at the time that such offset would otherwise
be applicable, Tenant shall not be entitled to such offset until such Default is
cured.
SECTION 3
---------
CONSTRUCTION DRAWINGS
---------------------
3.1 SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant has retained
--------------------------------------------
(or will retain) Pacific Cornerstone Architects as the architect/space planner
(the "ARCHITECT") to prepare the "Construction Drawings," as that term is
defined in this Section 3.1. Tenant has retained Prim Structural Engineers
-----------
(structural), McParlane and Associates (mechanical) and Michael Wall Engineering
(electrical) as the engineering consultants (collectively, the "ENGINEERS") to
prepare all plans and engineering working drawings relating to the structural,
mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the
Premises, which work is not part of the Base Building. The plans and drawings to
be prepared by Architect and the Engineers hereunder shall be known collectively
as the "CONSTRUCTION DRAWINGS." All Construction Drawings shall comply with the
drawing format and specifications determined by Landlord, and shall be subject
to Landlord's approval, which approval shall not be unreasonably withheld.
Tenant and Architect shall verify, in the field, the dimensions and conditions
as shown on the relevant portions of the base building plans, and Tenant and
Architect shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. Landlord's review of the Construction
Drawings as set forth in this Section 3, shall be for its sole purpose and shall
---------
not imply Landlord's review of the same, or obligate Landlord to review the
same, for quality, design, Code compliance or other like matters. Accordingly,
notwithstanding that any Construction Drawings are reviewed by Landlord or its
space planner, architect, engineers and consultants, and notwithstanding any
advice or assistance which may be rendered to Tenant by Landlord or Landlord's
space planner, architect, engineers, and consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for
any omissions or errors contained in the Construction Drawings, and Tenant's
waiver and indemnity set forth in this Lease shall specifically apply to the
Construction Drawings.
-4-
<PAGE>
3.2 FINAL SPACE PLAN. On or before the date set forth in Schedule 2,
---------------- ----------
attached hereto, Tenant and the Architect shall prepare the final space plan for
Tenant Improvements in the Premises (collectively, the "FINAL SPACE PLAN"),
which Final Space Plan shall include a layout and designation of all offices,
rooms and other partitioning, their intended use, and equipment to be contained
therein, and shall deliver the Final Space Plan to Landlord for Landlord's
approval, which approval shall not be unreasonably withheld, delayed or
conditioned. Landlord shall advise Tenant within five (5) business days after
Landlord's receipt of the Final Space Plan for the Premises if the same is
unsatisfactory or incomplete in any material respect. If Tenant is so advised,
Tenant shall promptly cause the Final Space Plan to be revised to correct any
such deficiencies, and immediately thereafter re-submitted to Landlord for its
approval.
3.3 FINAL WORKING DRAWINGS. On or before the date set forth in
----------------------
Schedule 2, Tenant, the Architect and the Engineers shall complete the
- ----------
architectural and engineering drawings for the Premises, and the final
architectural working drawings in a form which is complete to allow
subcontractors to bid on the work and to obtain all applicable permits
(collectively, the "FINAL WORKING DRAWINGS") and shall submit the same to
Landlord for Landlord's approval, which approval shall not be unreasonably
withheld, delayed or conditioned. Landlord shall advise Tenant within five (5)
business days after Landlord's receipt of the Final Working Drawings for the
Premises if the same is unsatisfactory or incomplete in any material respect. If
Tenant is so advised, Tenant shall promptly cause the Final Working Drawings to
be revised to correct any such deficiencies, and immediately thereafter re-
submitted to Landlord for its approval.
3.4 PERMITS. The Final Working Drawings shall be approved by Landlord
-------
as set forth in Section 3.3 above (the "Approved Working Drawings") prior to the
commencement of the construction of the Tenant Improvements. Landlord shall
immediately submit the Approved Working Drawings to the appropriate municipal
authorities for all applicable building permits necessary to allow "Contractor,"
as that term is defined in Section 4.1, below, to commence and fully complete
-----------
the construction of the Tenant Improvements (the "PERMITS"), it being Landlord's
responsibility for obtaining any building permit with regard to the Base
Building and the Tenant and Core Improvements, or certificate of occupancy for
the Premises (as opposed to any use or other permit required due to Tenant's
particular use of the Premises). No changes, modifications or alterations in the
Approved Working Drawings may be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned, subject to such changes being deemed a "Delay" as set forth in
Section 5.2 of this Tenant Work Letter.
3.5 TIME DEADLINES. Tenant and Landlord shall use their best, good
--------------
faith, efforts and all due diligence to cooperate with the Architect, the
Engineers, and each other to complete all phases of the Construction Drawings
and the permitting process and to receive the permits, and with Contractor for
approval of the "Cost Proposal," as that term is defined in Section 4.2 of this
-----------
Tenant Work Letter, as soon as possible after the execution of the Lease, and,
in that regard, shall meet with Landlord on a scheduled basis to be determined
by Landlord, to discuss Tenant's progress in connection with the same. The
applicable dates for approval of items, plans and drawings as described in this
Section 3, Section 4, below, and in this Tenant Work Letter are set forth and
- --------- ---------
further elaborated upon in Schedule 2 (the "TIME DEADLINES"), attached hereto.
----------
Tenant and Landlord agree to comply with the Time Deadlines.
-5-
<PAGE>
SECTION 4
---------
CONSTRUCTION OF THE TENANT AND CORE IMPROVEMENTS
------------------------------------------------
4.1 CONTRACTOR. Landlord has designated Reno Construction
----------
("Contractor") to the be the contractor which shall construct the Tenant
Improvements.
4.2 COST PROPOSAL. After the Approved Working Drawings are signed by
-------------
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant and Core Improvement
Allowance Items to be incurred by Tenant in connection with the design and
construction of the Tenant Improvements (the "COST PROPOSAL"). Tenant shall
approve (or disapprove) the Cost Proposal to Landlord within five (5) business
days of the receipt of the same, and upon receipt of an approved Cost Proposal
by Landlord, Landlord shall be released by Tenant to purchase the items set
forth in the Cost Proposal and to commence the construction relating to such
items. The date by which Tenant must approve and deliver the Cost Proposal to
Landlord shall be known hereafter as the "Cost Proposal Delivery Date".
4.3 CONSTRUCTION OF TENANT AND CORE IMPROVEMENTS BY CONTRACTOR UNDER
----------------------------------------------------------------
THE SUPERVISION OF LANDLORD.
- ---------------------------
4.3.1 OVER-ALLOWANCE AMOUNT. On the Cost Proposal Delivery
---------------------
Date, Tenant shall deliver to Landlord cash in an amount (the "OVER-ALLOWANCE
AMOUNT") equal to the difference between (i) the amount of the Cost Proposal and
(ii) the amount of the Tenant and Core Improvement Allowance (including any
Above Standard Allowance). The Over-Allowance Amount shall be disbursed by
Landlord prior to the disbursement of any then remaining portion of the Tenant
and Core Improvement Allowance, and such disbursement shall be pursuant to the
same procedure as the Tenant and Core Improvement Allowance. In the event that,
after the Cost Proposal Delivery Date, any revisions, changes, or substitutions
shall be made to the Construction Drawings or the Tenant Improvements, any
additional costs which arise in connection with such revisions, changes or
substitutions or any other additional costs shall be paid by Tenant to Landlord
immediately upon Landlord's request as an addition to the Over-Allowance Amount.
In addition, if the Final Working Drawings or any amendment thereof or
supplement thereto shall require alterations in the Base, Shell and Core (as
contrasted with the Tenant Improvements), and if Landlord in its reasonable
discretion agrees to any such alterations, and notifies Tenant of the need and
cost for such alterations, then Tenant shall pay the cost of such required
changes upon receipt of bills therefor. Tenant shall pay all direct
architectural and/or engineering fees in connection therewith.
4.3.2 LANDLORD'S RETENTION OF CONTRACTOR. Landlord shall
----------------------------------
independently retain Contractor, to construct the Tenant Improvements in
accordance with the Approved Working Drawings and the Cost Proposal (on a GMAX
("guaranteed maximum cost") basis) and Landlord shall supervise the construction
by Contractor, and Tenant shall pay a construction supervision and management
fee (the "LANDLORD SUPERVISION FEE") to Landlord in an amount equal to one
percent (1%) of that portion of the Tenant and Core Improvement Allowance
attributable to hard costs of construction of the Tenant Improvements.
-6-
<PAGE>
4.3.3 CONTRACTOR'S WARRANTIES AND GUARANTIES. Landlord hereby
--------------------------------------
assigns to Tenant all warranties and guaranties by Contractor relating to the
Tenant Improvements, and Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Tenant Improvements,
except to the extent resulting from the negligence or willful misconduct of
Landlord or the Landlord Parties and except as otherwise specifically set forth
in the Lease.
4.3.4 TENANT'S COVENANTS. Within ten (10) days after
------------------
completion of construction of the Tenant Improvements, Tenant shall cause
Contractor and Architect to cause a Notice of Completion to be recorded in the
office of the County Recorder of the county in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute and furnish a copy thereof to Landlord upon recordation,
failing which, Landlord may itself execute and file the same on behalf of Tenant
as Tenant's agent for such purpose. In addition, immediately after the
Substantial Completion of the Premises, Tenant shall have prepared and delivered
to the Building a copy of the "as built" plans and specifications (including all
working drawings) for the Tenant Improvements.
SECTION 5
---------
COMPLETION OF THE TENANT IMPROVEMENTS;
--------------------------------------
LEASE COMMENCEMENT DELAY
------------------------
5.1 READY FOR OCCUPANCY. The Premises shall be deemed "Ready for
-------------------
Occupancy" upon the Substantial Completion of the Premises. For purposes of this
Lease, "Substantial Completion" of the Premises shall occur upon the last to
occur of the following, subject to Section 5.2 of this Work Letter: (i) a
temporary certificate of occupancy having been issued for the Premises and
Tenant is legally permitted to occupy the Premises for operations of its
business (excepting any specialized permits Tenant may need for Tenant's
particular use of the Premises, such as hazardous materials permits, (ii) the
Building Systems are in good working order to reasonably support operations
within the Premises, (iii) the completion of construction of the Tenant
Improvements in the Premises pursuant to the Approved Working Drawings, with the
exception of any industry-standard punch list items and long lead time items,
and (iv) the parking and access roads are materially complete. .
5.2 DELAY OF THE SUBSTANTIAL COMPLETION OF THE PREMISES. Except as
---------------------------------------------------
provided in this Section 5.2, the Lease Commencement Date shall occur as set
forth in the Lease and Section 5.1, above. If there shall be a delay or there
are delays in the Substantial Completion of the Premises or in the occurrence of
any of the other conditions precedent to the Lease Commencement Date, as set
forth in the Lease, as a direct, indirect, partial, or total result of:
5.2.1 Tenant's failure to comply with the Time Deadlines;
5.2.2 Tenant's failure to approve any matter requiring
Tenant's approval within the time periods set forth in this Tenant Work Letter;
5.2.3 A breach by Tenant of the terms of this Tenant Work
Letter or the Lease;
-7-
<PAGE>
5.2.4 Changes in any of the Construction Drawings after
reasonable disapproval of the same by Landlord;
5.2.5 Tenant's request for changes in the Approved Working
Drawings;
5.2.6 Tenant's requirement for materials, components,
finishes or improvements which are not available in a commercially reasonable
time given the anticipated date of Substantial Completion of the Premises, as
set forth in the Lease, or which are different from, or not included in, the
Standard Improvement Package;
5.2.7 Changes to the Base Building required by the Approved
Working Drawings; or
5.2.8 Any other acts or omissions of Tenant, or its agents,
or employees;
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of the Premises, the Lease Commencement Date shall be deemed to be
the date the Lease Commencement Date would have occurred if no Tenant delay or
delays, as set forth above, had occurred.
5.3 CHANGES. Any request by Tenant for a change in the Tenant
-------
Improvements after approval of the Final Plans (a "CHANGE") shall be accompanied
by all information necessary to clearly identify and explain the proposed
Change. As soon as practicable after receipt of such a request from Tenant,
Landlord shall notify Tenant of the estimated cost of such Changes as well as
the increase in construction time caused by the Change (including any delay
pursuant to Section 5.2 of this Tenant Work Letter), if any. Tenant shall
approve in writing such estimates within two (2) business days after receipt of
Landlord's notice. Upon receipt of such written approval, Landlord shall be
authorized to cause the Contractor to proceed with the implementation of the
requested Change.
5.4 OUTSIDE DATE. In the event the Premises are not Ready for
------------
Occupancy on or before May 15, 2002 (the "OUTSIDE DATE"), which Outside Date
shall be (i) extended to the extent Tenant elects to toll the Lease Commencement
Date pursuant to the terms of Section 2.1 of this Lease, and (ii) subject to
day-for-day extension due to a delay set forth in Section 5.2 of this Tenant
Work Letter and/or a Force Majeure delay (up to a maximum of sixty (60) days due
to such Force Majeure delay), then Tenant shall receive a credit against Base
Rent for a number of days equal to the number of days in the period commencing
on the Outside Date and ending on the Commencement Date (the "Extended Period");
provided, however, that other than the extension to the Lease Commencement Date,
Tenant's receipt of such credit shall be Tenant's sole and exclusive remedy for
such delay.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1 TENANT'S ENTRY INTO THE PREMISES PRIOR TO SUBSTANTIAL COMPLETION.
----------------------------------------------------------------
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the
-8-
<PAGE>
Premises for the purpose of Tenant installing overstandard equipment or fixtures
(including Tenant's data and telephone equipment) in the Premises. Prior to
Tenant's entry into the Premises as permitted by the terms of this Section 6.1,
-----------
Tenant shall submit a schedule to Landlord and Contractor, for their approval,
which schedule shall detail the timing and purpose of Tenant's entry. Tenant
shall hold Landlord harmless from and indemnify, protect and defend Landlord
against any loss or damage to the Building or Premises or injury to any persons
caused by Tenant's entry into the Premises prior to Substantial Completion
pursuant to this Section 6.1.
-----------
6.2 TENANT'S REPRESENTATIVE. Tenant has designated Mr. Shaun Burnett
-----------------------
as its sole representative with respect to the matters set forth in this Tenant
Work Letter, who shall have full authority and responsibility to act on behalf
of the Tenant as required in this Tenant Work Letter.
6.3 LANDLORD'S REPRESENTATIVE. Landlord has designated Mr. James
-------------------------
Edwards as "Project Manager" who shall be responsible for the implementation of
all Tenant Improvements to be performed by Landlord in the Premises. With regard
to all matters involving such Tenant Improvements, Tenant shall communicate with
the Project Manager rather than with the Contractor. Landlord shall not be
responsible for any statement, representation or agreement made between Tenant
and the Contractor or any subcontractor. It is hereby expressly acknowledged by
Tenant that such Contractor is not Landlord's agent and has no authority
whatsoever to enter into agreements on Landlord's behalf or otherwise bind
Landlord. The Project Manager will furnish Tenant with notices of substantial
completion, cost estimates for Above Standard Tenant Improvements, Landlord's
approvals or disapprovals of all documents to be prepared by Tenant pursuant to
this Tenant Work Letter and changes thereto.
6.4 INTENTIONALLY OMITTED.
---------------------
6.5 TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise
----------------------------------------------
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by Landlord,
the procedure for preparation of the document and approval thereof shall be
repeated until the document is approved by Landlord.
6.6 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the
----------------------
contrary contained in this Lease, if an event of default (beyond any applicable
notice and cure period(s)) as described in the Lease or this Tenant Work Letter
has occurred at any time on or before the Substantial Completion of the
Premises, then (i) in addition to all other rights and remedies granted to
Landlord pursuant to this Lease, Landlord shall have the right to withhold
payment of all or any portion of the Tenant Improvement Allowance and/or
Landlord may cause Contractor to cease the construction of the Premises (in
which case, Tenant shall be responsible for any delay in the substantial
completion of the Premises caused by such work stoppage), and (ii) all other
obligations of Landlord under the terms of this Tenant Work Letter shall be
stayed until such time as such default is cured pursuant to the terms of this
Lease (in which case, Tenant shall be responsible for any delay in the
substantial completion of the Premises caused by such inaction by Landlord).
-9-
<PAGE>
SCHEDULE 1 TO EXHIBIT B
-----------------------
BASE BUILDING
-------------
(attached)
SCHEDULE 1 TO
EXHIBIT B
-1-
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
TIMING FOR SUBMISSIONS AND APPROVALS
(attached)
SCHEDULE 2 TO
EXHIBIT B
-1-
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
(BUILDING B)
------------
This FIRST AMENDMENT TO LEASE (BUILDING B) (the "AMENDMENT") is made and
entered into as of March 3, 2000 by and between KR-GATEWAY PARTNERS, a Delaware
limited partnership ("LANDLORD"), and DIVERSA CORPORATION, a Delaware
corporation ("TENANT").
R E C I T A L S :
---------------
A. Landlord and Tenant entered into that certain Lease dated as of February
11, 2000 (the "LEASE"), whereby Landlord leased to Tenant and Tenant leased from
Landlord all of that certain two (2) story building to be located on lot 4 of
"Sorrento Gateway" (the "PROJECT"), containing approximately 60,060 rentable
square feet of space, and commonly referred to in the Project as "BUILDING B"
(the "PREMISES") located in San Diego.
B. Landlord and Tenant desire to amend the Lease on the terms and
conditions set forth in this Amendment.
A G R E E M E N T :
-----------------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows.
1. CAPITALIZED TERMS. All capitalized terms when used herein shall have the
-----------------
same meaning as is given such terms in the Lease unless expressly superseded by
the terms of this Amendment.
2. SUBORDINATION. Article 18 of the Lease is hereby amended such that the
------------- ----------
forth (4th) sentence of such Article 18, which sentence commences with "Any such
----------
Nondisturbance Agreement . . . " is deleted and replaced as follows: "Any such
Nondisturbance Agreement shall not contain language which allows the ground
lessor, mortgage holder or lien holder, the right to terminate this Lease when
the Tenant is not in default under the terms of this Lease."
3. CESSATION OF CONSTRUCTION; TENANT COMPLETION RIGHT. The Tenant Work
--------------------------------------------------
Letter attached as EXHIBIT B to the Lease is hereby amended, whereby the
following Section 5.5 is inserted:
-----------
5.5 TENANT COMPLETION. In the event either (i) Landlord discontinues
-----------------
the construction of the Building for a period of time which would render it
unreasonable for completion of such construction to occur on or before
-1-
<PAGE>
the Outside Date, or (ii) the ground lessor, mortgage holder or lien holder
identified in Article 18 of the Lease (A) succeeds to the interests of
----------
Landlord and (B) elects not to complete the construction of the Building,
then Tenant may, upon delivery of notice, within thirty (30) days of such
determination, to Landlord and any such ground lessor, mortgage holder or
lien holder (the "TENANT COMPLETION NOTICE"), elect, effective upon the
date occurring fifteen (15) business days following receipt by Landlord
(and/or any such ground lessor, mortgage holder or lien holder) of such
Completion Termination Notice, without terminating this Lease, to (a)
assume all of Landlord's obligations, right, title and interest in, to and
under any or all of the "Construction Documents," as that term is set forth
below, by delivering a copy of such Completion Termination Notice to all
parties to those "Construction Documents which Tenant elects to assume. The
effectiveness of any such Completion Termination Notice delivered by Tenant
to Landlord shall be governed by the terms of this Section 5.5. In the
-----------
event Tenant exercises its rights under this Section 5.5 the determination
-----------
of the Premises being Ready for Occupancy shall remain unchanged and, with
regard to this Tenant Work Letter, references to "Landlord" shall mean to
Tenant, except with regard to Landlord's disbursement obligations
hereunder. The Outside Date shall be postponed due to due to delays caused
by Force Majeure (up to sixty (60) days) and Tenant delays pursuant to
Section 5.2 of this Tenant Work Letter.
-----------
4. BROKERS. Landlord and Tenant hereby warrant to each other that they have
-------
had no dealings with any real estate broker, agent or finder in connection with
the negotiation of this Amendment, excepting only the "Brokers," as that term is
defined in Section 12 of the Summary and Section 29.24 of the Lease, and that
---------- -------------
they know of no other real estate broker, agent or finder who is entitled to a
commission in connection with this Amendment. Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including, without limitation, reasonable attorneys' fees) with
respect to any leasing commission or equivalent compensation alleged to be owing
on account of the indemnifying party's dealings with any real estate broker,
agent or finder other than the Broker. The terms of this Section 7 shall
---------
survive the expiration or earlier termination of this Amendment.
5. TIME OF ESSENCE. Time is of the essence with respect to the performance
---------------
of every provision of this Amendment, including, without limitation, the Tenant
Work Letter, in which time of performance is a factor. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.
-2-
<PAGE>
6. NO FURTHER MODIFICATION. Except as set forth in this Amendment, all of
-----------------------
the terms and provisions of the Lease shall apply with respect to the Expansion
Premises and shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the day and year
first above written.
"LANDLORD" "TENANT"
KR-GATEWAY PARTNERS, DIVERSA CORPORATION,
a Delaware limited liability company a Delaware corporation
By: Kilroy Realty, L.P., By:
a Delaware limited partnership ---------------------------
Managing Member Its:
---------------------
By:
By: Kilroy Realty Corporation, ----------------------------
a Maryland corporation Its:
General Partner ---------------------
By:
----------------------------
Its:
----------------------
By:
----------------------------
Its:
----------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED BALANCE SHEET AS OF MARCH 31, 2000, AND THE RELATED
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
THE NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY RERERENCE TO SUCH
CONDENSED FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 166,465
<SECURITIES> 36,195
<RECEIVABLES> 1,502
<ALLOWANCES> 0
<INVENTORY> 51
<CURRENT-ASSETS> 204,984
<PP&E> 10,535
<DEPRECIATION> 5,674
<TOTAL-ASSETS> 216,623
<CURRENT-LIABILITIES> 7,218
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 190,720
<TOTAL-LIABILITY-AND-EQUITY> 216,623
<SALES> 0
<TOTAL-REVENUES> 4,406
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,612)
<INCOME-TAX> 75
<INCOME-CONTINUING> (5,687)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,997)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
