<PAGE> 1
U. S. 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 June 29, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________________ to
________________________
COMMISSION FILE NUMBER: 1-8145
THORATEC LABORATORIES CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C>
California 94-2340464
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
2023 Eighth Street, Berkeley, California 94710
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (510) 841-1213
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. Yes X No
As of August 8, 1996, registrant had 17,927,456 shares of common stock
outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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<CAPTION>
June 29, December 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,052,951 $ 1,645,523
Receivables 1,214,551 581,298
Inventories (Note 4) 1,673,424 1,374,164
Prepaid expenses and other 56,204 249,048
------------ ------------
Total current assets 3,997,130 3,850,033
Equipment and Leasehold Improvements, at cost 2,179,601 2,119,085
Construction in progress 48,177
Accumulated depreciation and amortization (1,781,479) (1,725,726)
------------ ------------
Equipment and leasehold improvements - net 446,299 393,359
Other Assets (Note 2) 1,091,966 136,645
------------ ------------
TOTAL ASSETS $ 5,535,395 $ 4,380,037
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable (Note 2) $ 1,445,125 $ 598,100
Accrued compensation 274,147 101,006
Other 429,091 343,260
------------ ------------
Total current liabilites 2,148,363 1,042,366
Long-term Debt (Note 5) 1,675,000
Shareholders' Equity (Notes 3, 5, 6):
Common shares, 100,000,000 authorized; issued and
outstanding 16,274,146 in 1996 and 14,933,136 in 1995 45,913,006 42,746,421
Additional paid-in capital 2,393,669 2,333,689
Accumulated deficit (44,917,662) (43,416,454)
Cumulative translation adjustment (1,981) (985)
------------ ------------
Total shareholders' equity 3,387,032 1,662,671
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,535,395 $ 4,380,037
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
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THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months Six Months
Ended Ended
------------------------------------ -----------------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Product sales - net $ 2,187,590 $ 1,000,345 $ 3,489,239 $ 1,939,446
Interest and other income 38,609 9,112 77,230 18,882
--------------- --------------- --------------- ---------------
Total revenue 2,226,199 1,009,457 3,566,469 1,958,328
--------------- --------------- --------------- ---------------
Costs and expenses:
Costs of products sold 817,921 580,575 1,639,820 1,023,039
Research and development 865,938 425,355 1,471,525 760,969
Selling, general and administrative 799,171 311,724 1,532,226 625,660
Debt conversion expense (Note 5) 378,295
Interest expense (Note 5) 46,120 45,811 92,004
--------------- --------------- --------------- ---------------
Total costs and expenses 2,483,030 1,363,774 5,067,677 2,501,672
--------------- --------------- --------------- ---------------
Net loss $ (256,831) $ (354,317) $ (1,501,208) $ (543,344)
=============== =============== =============== ===============
Net loss per common share $ (.02) $ (.02) $ (.10) $ (.04)
=============== =============== =============== ===============
Weighted average number of
common shares outstanding 15,837,512 14,252,612 15,481,950 14,249,680
</TABLE>
See notes to condensed consolidated financial statements.
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THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
-----------------------------------------------
June 29, July 1,
1996 1995
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,501,208) $ (543,344)
Adjustments to reconcile net loss to net cash used in
operating activities:
Debt conversion (Note 5) 378,295
Common stock options granted for services (Note 6) 59,980
Foreign currency translation adjustment (996) 1,303
Depreciation and amortization 62,003 52,686
Loss on disposal of equipment 162
Changes in assets and liabilities:
Receivables, prepaid expenses and other (440,409) (197,162)
Inventories (299,260) 289,586
Other assets 1,372 (95,814)
Accounts payable and other liabilities 326,260 337,543
---------------------- ----------------------
Net cash used in operating activities (1,413,963) (155,040)
---------------------- ----------------------
Cash flows from investing activities:
Proceeds from sale of long-term assets 500
Capital expenditures (108,693) (53,518)
---------------------- ----------------------
Net cash used in investing activities (108,693) (53,018)
---------------------- ----------------------
Cash flows from financing activities:
Common stock issued upon exercise of warrants 961,739
Common stock issued upon exercise of options 151,551 8,285
Deferred financing charges - net (Note 2) (183,206)
---------------------- ----------------------
Net cash provided by financing activities 930,084 8,285
---------------------- ----------------------
Net decrease in cash and cash equivalents (592,572) (199,773)
Cash and cash equivalents at beginning of period 1,645,523 1,026,229
---------------------- ----------------------
Cash and cash equivalents at end of period $ 1,052,951 $ 826,456
====================== ======================
Noncash Financing Transactions:
Conversion of notes into common stock (Note 5) $ 1,675,000
======================
Other Cash Flow Information:
Interest paid $ 45,811 $ 92,004
====================== ======================
</TABLE>
See notes to condensed consolidated financial statements.
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THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared
by Thoratec Laboratories Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments necessary (consisting
only of normal recurring adjustments) to present fairly the financial
position, results of operations and cash flows at June 29, 1996 and for all
periods presented. The results of operations for any interim period are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, has been
derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are presented as permitted by the Securities and
Exchange Commission and do not contain certain information included in the
annual consolidated financial statements and notes of the Company. It is
suggested that the accompanying condensed consolidated financial statements
be read in conjunction with the audited consolidated financial statements
and the notes thereto contained in the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995, filed with the Securities and
Exchange Commission.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the consolidated balance sheet dates and the
reported amounts of revenues and expenses for the periods presented.
2. FINANCIAL POSITION AND LIQUIDITY
In July 1996, subsequent to the end of the second quarter, the Company
sold, through an underwritten public offering, 1,644,000 shares of common
stock at $12.00 per share. Included in the 1,644,000 shares are 144,000
shares sold pursuant to an underwriters' over-allotment option. Net
proceeds received by the Company related to this offering were
approximately $17,643,000 after underwriters' commissions and approximately
$1,000,000 of other estimated expenses. Approximately $963,000 of the
estimated other expenses have been deferred and recorded as Other Assets as
of the end of June 1996, pending recognition upon the closing of the
offering. Approximately $780,000 of these expenses are included in Accounts
Payable as of the end of June.
With the proceeds of this offering, the Company believes that it has
sufficient funds to increase its marketing efforts, to increase
manufacturing efficiencies through construction of a new manufacturing
facility, and to develop new sources of revenue, including new products.
However, the Company expects that its operating expenses will increase in
future periods as the Company expends increased
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amounts on product manufacturing and marketing and on research and
development of new product lines. As a result, the Company expects to incur
net losses for at least the next year. There can be no assurance that the
Company will achieve profitability or positive cash flow.
3. REVERSE STOCK SPLIT
On April 26, 1996, the Board of Directors authorized a one-for-three
reverse split of the Company's common stock which was approved by the
shareholders on June 3, 1996. All references in the condensed consolidated
financial statements to number of shares, per share amounts and prices of
the Company's common stock have been retroactively restated to reflect the
decreased number of common shares outstanding.
4. INVENTORIES
Inventories consist of the following:
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June 29, December 30,
1996 1995
----------------------- -----------------------
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Finished goods $ 703,283 $ 397,462
Work in process 591,277 540,673
Raw materials 378,864 436,029
----------------------- -----------------------
Total $ 1,673,424 $ 1,374,164
======================= =======================
</TABLE>
5. LONG-TERM DEBT
In the last quarter of 1994, the Company placed $1.675 million of
convertible secured debt with private lenders. The notes were convertible
into common stock at rates ranging from $4.92 to $6.38 per share, bore
interest at 11% and were due in three years. The debt was secured by the
royalties payable pursuant to the Licensing Agreement with COBE
Laboratories, Inc., all accounts receivable, equipment and inventory.
Five-year warrants to purchase 210,201 shares of Thoratec common stock at
$6.38 per share were also issued with the convertible notes.
In the first quarter of 1996, all $1.675 million of these notes were
converted into 342,537 shares of common stock, according to the terms of
the original transaction. In connection with this conversion, the Company
reduced the exercise price of the related five-year warrants to $4.50 per
share for a thirty
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day period. All warrants issued in connection with the above noted
convertible secured debt (representing 213,720 shares as adjusted for
antidilutive provisions) were exercised for total proceeds of approximately
$960,000. As all warrants were exchanged and the exercise price reduced,
$378,000 of noncash debt conversion expense was recorded.
6. OPTIONS AND WARRANTS
In the first quarter of 1996, the Directors adopted the 1996 Stock Option
Plan ("1996 SOP") and the 1996 Nonemployee Directors Stock Option Plan
("Directors Option Plan"). The 1996 SOP consists of two parts. Part One
permits the Company to grant options to purchase up to 500,000 shares of
common stock. During the first quarter of 1996, 38,333 options were granted
at fair market value under this Part of the Plan. Part One of the 1996 SOP
was approved by Shareholders at the Annual Meeting of Shareholders held on
June 3, 1996. Part Two relates to the Chief Executive Officer (CEO) and
permits the Company to grant non-qualified options to the CEO to purchase
up to 333,333 shares of common stock. During the first quarter of 1996,
333,333 options were granted at fair market value under this Part of the
Plan. Part Two of the 1996 SOP required Director approval only. The
Directors Option Plan permits the Company to grant options to purchase up
to 150,000 shares of common stock. The Company currently has five
non-employee directors who are eligible to participate in the Directors
Option Plan. During the second quarter of 1996, 13,332 options were granted
at fair market value. The Directors Option Plan was approved by
Shareholders at the Annual Meeting of Shareholders held on June 3, 1996.
In the first quarter of 1996, agreements were made with selected
consultants whereby options to purchase the Company's common stock were
accepted by these consultants as partial payment for the services they
render to the Company. Options issued under these agreements totaled
184,075. The fair market value of the consulting service is the basis for
recording the transaction in the Company's financial records and will be
recognized as the related services are performed.
In the second quarter of 1996 the Company amended the terms of an
outstanding warrant to purchase 666,667 shares of the Company's common
stock at $.003 per share to add a net exercise provision. Subsequently, the
warrant was exercised using this provision and the Company issued 666,584
shares of stock to the warrant holder and withheld 83 shares to effect the
exercise.
7. MATERIAL SUBSEQUENT CONTRACT
Subsequent to the end of the second quarter, the Company entered into a
lease agreement on a new manufacturing facility to be located within 50
miles of its current facility. This building, when completed, will
accommodate all of the Company's manufacturing, engineering and
administrative activities. The building is scheduled to be completed and
ready for occupancy in mid 1997. The Company will invest approximately $5
million in equipment and leasehold improvements to the building prior to
occupancy. Annual lease payments will initially be approximately $612,000
for a lease term of 15 years and will commence four months after the
landlord has delivered the completed building shell to the Company. The
lease includes provisions, among others, for annual cost of living
adjustments to the lease payments, two five-year renewal options, a
purchase option, and a security
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deposit of $885,600, which the Company paid in July 1996. A significant
portion ($750,000) of the security deposit can be reduced or eliminated
before the end of the initial lease term if the Company meets certain
criteria as specified by the contract.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
At the end of the second quarter of 1996 the Company had working capital of
$1,849,000 compared with $2,808,000 at the end of 1995. The decrease in working
capital was due to increased loss from operations, accrued deferred financing
costs, and increases in accrued corporate and research and development expenses.
The preceding items decreasing working capital were partially offset by proceeds
received upon the exercise of warrants to purchase common stock in the first
quarter of 1996 (see Note 5 of Notes to the Condensed Consolidated Financial
Statements). Concurrent with the warrant exercise, all $1,675,000 of
outstanding secured notes payable were converted into common stock. Receivables
increased principally due to increasing sales. Finished goods inventory
increased in preparation for planned increases in sales activity. Accounts
payable increased due to deferred expenses associated with the public offering
of common stock discussed below.
Subsequent to the end of the second quarter, in July 1996, the Company sold,
through an underwritten public offering, 1,644,000 shares of common stock at
$12.00 per share. Included in the 1,644,000, are 144,000 shares sold pursuant
to an underwriters' over-allotment option. Net proceeds received by the Company
related to this offering were approximately $17,643,000 after underwriters'
commissions and approximately $1,000,000 of other estimated expenses.
Approximately $963,000 of these estimated other expenses have been deferred and
recorded as other assets as of the end of June 1996 pending recognition upon the
closing of the offering. Approximately $780,000 of these expenses are included
in accounts payable as of the end of June.
Subsequent to the end of the second quarter, the Company entered into a lease
agreement on a new manufacturing facility to be located within 50 miles of its
current facility. This building, when completed, will accommodate all of the
Company's manufacturing, engineering and administrative activities. The building
is scheduled to be completed and ready for occupancy in mid 1997. The Company
will invest approximately $5 million in equipment and leasehold improvements to
the building prior to occupancy. Annual lease payments will initially be
approximately $612,000 for a lease term of 15 years and will commence four
months after the landlord has delivered the completed building shell to the
Company. The lease includes provisions, among others, for annual cost of living
adjustments to the lease payments, two five-year renewal options, a purchase
option, and a security deposit of $885,600, which the Company paid in July 1996.
A significant portion ($750,000) of the security deposit can be reduced or
eliminated before the end of the initial lease term if the Company meets certain
criteria as specified by the contract.
With the proceeds of this offering, the Company believes that it has sufficient
funds to increase its marketing efforts, to increase manufacturing efficiencies
through construction of its new manufacturing facility and to develop new
sources of revenue, including new products. However, the Company expects that
its operating expenses will increase in future periods as the Company expends
increased amounts on
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product manufacturing and marketing and on research and development of new
product lines. As a result, the Company expects to incur net losses for at least
the next year. There can be no assurance that the Company will achieve
profitability or positive cash flow.
The Company does not expect that inflation will have a material impact on its
operations.
Results of Operations
Fiscal Quarters Ended June 29, 1996 and July 1, 1995
Product sales in the second quarter of 1996 were $2,187,590 compared to
$1,000,345 in the second quarter of 1995. The $1,187,245, or 119%, increase is
primarily the result of increased sales of the VAD System in the United States
following FDA approval of the System in late 1995 and efforts of a direct sales
organization established in late 1995 and early 1996. Domestic sales increased
$1,278,491, or 385%, in the second quarter of 1996 compared to the second
quarter of 1995. Interest and other income increased $29,497 to $38,609 in 1996
due to higher cash balances and a government project grant supporting the
development of the skeletal muscle powered VAD System. Cost of sales increased
$237,346, or 41%, in the second quarter of 1996 compared to the second quarter
of 1995 as a result of the higher sales volume in 1996. Gross margin increased
from 42% in 1995 to 63% in 1996 due to changes in sales mix with increased unit
sales of VAD pumps and the ability of the Company to raise selling prices of its
VAD pumps in the second quarter of 1996, after receiving FDA approval in late
1995. Research and development expenses for the second quarter of 1996 increased
$440,583, or 104%, compared to the second quarter of 1995 due to increased costs
associated with the development of the Company's portable VAD driver, the
TLC-II, and its graft products. Selling, general and administrative expenses in
the second quarter of 1996 increased $487,447, or 156%, compared to the second
quarter of 1995 principally as a result of establishing the domestic sales
and marketing organization, corporate and legal expenses associated with
trademark and patent submissions and general support needed for expected growth.
There was no interest expense in the second quarter of 1996, compared to $46,120
in 1995, because all $1,675,000 of convertible notes issued in 1994 were
converted into common stock in the first quarter of 1996.
Six Months Ended June 29, 1996 and July 1, 1995
Product sales in the first six months of 1996 were $3,489,239 compared to
$1,939,446 in the first six months of 1995. The 80% increase is primarily the
result of increased sales of the VAD System in the United States following FDA
approval of the System in late 1995 and efforts of a direct sales organization
established in late 1995 and early 1996. Domestic sales increased $1,665,664, or
226%, in the first six months of 1995. Interest and other income increased
$58,348 to $77,230 in 1996 due to higher cash balances and a government project
grant supporting the development of the skeletal muscle powered VAD System. Cost
of sales increased $616,781, or 60%, in the first six months of 1996 compared to
the first six months of 1995 as a result of the higher sales volume in 1996 and
approximately $100,000 incurred to upgrade existing investigational center
equipment. Gross margins increased from 47% in 1995 to 53% in 1996 due to the
ability of the Company to raise selling prices of its VAD pumps in the second
quarter of 1996, offset by the previously mentioned $100,000 upgrade charge.
Research and development expenses for the first six months of 1996 increased
$710,556, or 93%, compared to the first six months of 1995 due to increased
costs associated with the development of the Company's portable VAD driver, the
TLC-II, and its graft products. Selling, general and administrative expenses in
the first six months of
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1996 increased $906,566, or 145%, compared to the first six months of 1995
principally as a result of establishing the domestic sales and marketing
organization, increased recruiting costs for both marketing and administrative
personnel, corporate and legal expenses associated with trademark and patent
submissions and general support needed for expected growth. Interest expense for
the first six months of 1996 was $45,811 compared to $92,004 for the first six
months of 1995 due to conversion of $1,675,000 of convertible notes in the first
quarter of 1996 into 342,537 shares of common stock. In addition, the Company
recorded a $378,000 noncash debt conversion expense in the first quarter of
1996, representing the amount of value given up by the Company in order to
induce early exercise of the related warrants.
Forward-looking Statements
The portions of this report that relate to future plans, events or performance
are forward-looking statements. Investors are cautioned that all such statements
involve risks and uncertainties, including announcements by the Company's
competitors, risks related to the government regulatory approval processes,
delays in facility construction, delays in product development and new product
introductions, rapidly changing technology, an intensely competitive market,
market acceptance of new products, relationships with foreign distributors,
reimbursement policies and general economic conditions. These factors, and
others, are discussed more fully in the Company's prospectus dated June 27, 1996
and the Company's other filings with the Securities and Exchange Commission.
Actual results, events or performance may differ materially. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The annual meeting of Shareholders was held on June 3, 1996. The following items
were voted upon and approved at the meeting:
1. To elect directors to serve for the ensuing year and until
their successors are elected.
2. To approve the Thoratec 1996 Stock Option Plan.
3. To approve the Thoratec 1996 Nonemployee Directors Stock
Option Plan.
4. To approve amendments to the Company's Articles of
Incorporation to effect a one-for-three reverse split of the
Company's Common Stock.
5. To approve an amendment to the Company's Bylaws to set the
size of the Board of Directors between five to nine directors,
with the exact number fixed by the Board of Directors.
Number of Votes (without giving effect to the one-for-three
reverse stock split)
ITEM #1 FOR WITHHELD
--- --------
Christy W. Bell 34,891,136 7,950
Howard E. Chase 34,891,136 7,950
Wendell J. Gardner 34,888,836 10,250
D. Keith Grossman 34,891,136 7,950
Robert J. Harvey 34,888,936 10,150
J. Donald Hill 34,891,136 7,950
George W. Holbrook, Jr. 34,891,136 7,950
FOR AGAINST ABSTAIN
--- ------- -------
ITEM #2 34,471,147 420,274 7,665
ITEM #3 34,408,877 480,044 10,165
ITEM #4 34,470,591 421,490 7,005
ITEM #5 34,869,147 15,854 14,085
(No broker nonvotes were recorded on the above proposals.)
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits required by Item 601 of Regulation S-K
See Exhibit Index on the page immediately preceding exhibits.
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THORATEC LABORATORIES CORPORATION
Date: /s/ D. Keith Grossman
------------------- ------------------------------------------
D. Keith Grossman, Chief Executive Officer
Date: /s/ Cheryl D. Hess
------------------- ------------------------------------------
Cheryl D. Hess, Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number Document
-------------- --------
10 Lease Agreement By and Between Main Street
Associates and Thoratec Laboratories Corporation
dated July 25, 1996.
11 Statement Re: Computation of Per-Share Earnings
27 Financial Data Schedule
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EXHIBIT 10.
LEASE AGREEMENT
BY AND BETWEEN
MAIN STREET ASSOCIATES
AND
THORATEC LABORATORIES CORPORATION
Dated as of
July 25, 1996
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TABLE OF CONTENTS
PAGE
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1. Parties................................................................................................ 1
2. Demise of Premises..................................................................................... 1
3. Lease Term............................................................................................. 1
A. Lease Term.................................................................................... 1
B. Commencement Date............................................................................. 1
C. Rental Commencement Date...................................................................... 2
D. Failure to Deliver............................................................................ 2
4. Rent................................................................................................... 2
A. Time of Payment............................................................................... 2
B. Monthly Installment........................................................................... 3
C. Definitions................................................................................... 3
D. Late Charge................................................................................... 4
E. Additional Rent............................................................................... 4
F. Place of Payment.............................................................................. 5
5. Use of Premises........................................................................................ 5
A. Restrictions on Use........................................................................... 5
6. Taxes and Assessments.................................................................................. 5
A. Tenant's Property............................................................................. 5
B. Property Taxes................................................................................ 5
C. Proposition 13 Exclusion...................................................................... 6
D. Property Taxes Defined........................................................................ 6
E. Tenant's Right to Contest..................................................................... 7
7. Insurance.............................................................................................. 7
A. Indemnities................................................................................... 7
B. Liability Insurance........................................................................... 7
C. Property Insurance............................................................................ 8
D. Tenant's Property Insurance................................................................... 10
E. Mutual Waiver of Subrogation.................................................................. 10
8. Utilities.............................................................................................. 10
9. Repairs and Maintenance................................................................................ 10
A. Landlord's Repairs............................................................................ 10
B. Tenant's Repairs.............................................................................. 11
10. Alterations............................................................................................ 12
A. Limitations................................................................................... 12
B. Alterations Required by Law................................................................... 13
11. Acceptance of the Premises............................................................................. 13
12. Default................................................................................................ 14
A. Events of Default............................................................................. 14
B. Remedies...................................................................................... 15
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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13. Destruction............................................................................................ 16
A. Landlord's Duty to Restore.................................................................... 16
B. Landlord's Right to Terminate................................................................. 17
C. Tenant's Right to Terminate................................................................... 19
D. Abatement of Rent............................................................................. 19
14. Condemnation........................................................................................... 20
A. Definition of Terms........................................................................... 20
B. Rights........................................................................................ 20
C. Total Taking.................................................................................. 20
D. Partial Taking................................................................................ 21
15. Mechanics' Lien........................................................................................ 21
16. Inspection of the Premises............................................................................. 21
17. Compliance with Laws................................................................................... 21
18. Subordination.......................................................................................... 22
A. Priority...................................................................................... 22
B. Subsequent Security Instruments............................................................... 22
C. Documents..................................................................................... 22
D. Tenant's Attornment........................................................................... 23
E. Non-Disturbance Agreement from any Existing
Lender........................................................................................ 23
19. Holding Over........................................................................................... 23
20. Notices................................................................................................ 24
21. Attorneys' Fees........................................................................................ 24
22. Subleasing and Assignment.............................................................................. 24
A. Landlord's Consent Required................................................................... 24
B. Transferee Information Required............................................................... 25
C. Landlord's Rights............................................................................. 25
D. Permitted Transfers........................................................................... 26
23. Successors............................................................................................. 26
24. Mortgagee Protection................................................................................... 26
25. Estoppel Certificate and Financial Statements.......................................................... 26
26. Surrender of Lease Not Merger.......................................................................... 27
27. Waiver................................................................................................. 27
28. General................................................................................................ 27
A. Captions...................................................................................... 27
B. Definition of Landlord........................................................................ 27
C. Time of Essence............................................................................... 28
D. Severability.................................................................................. 28
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E. Quiet Enjoyment............................................................................... 28
F. Law........................................................................................... 28
G. Agent......................................................................................... 28
H. Lender........................................................................................ 28
I. Landlord Affiliate............................................................................ 28
J. Affiliate Deed of Trust....................................................................... 28
29. Sign................................................................................................... 28
30. Interest on Past Due Obligations....................................................................... 29
31. Surrender of the Premises.............................................................................. 29
32. Authority.............................................................................................. 29
33. Title.................................................................................................. 29
34. Brokers................................................................................................ 30
35. Limitation on Landlord's Liability..................................................................... 30
36. Hazardous Material..................................................................................... 30
A. Definitions................................................................................... 30
B. Obligations................................................................................... 31
C. Provisions Survive Termination................................................................ 31
D. Controlling Provisions........................................................................ 31
37. Option to Extend....................................................................................... 31
A. Exercise of Option............................................................................ 31
B. Option Term Rent.............................................................................. 32
C. Fair Market Rent.............................................................................. 32
D. Appraisal..................................................................................... 32
38. Reasonable Approval Standard........................................................................... 33
39. Memorandum of Lease.................................................................................... 33
40. Security Deposit....................................................................................... 34
41. Modifications for Lender............................................................................... 34
42. Right of First Opportunity to Purchase................................................................. 34
A. Grant of Right................................................................................ 34
B. Notice of Sale................................................................................ 35
C. Response by Tenant............................................................................ 35
D. No Response................................................................................... 35
E. Landlord's Re-Offer........................................................................... 35
F. Related Entitles.............................................................................. 36
G. Termination................................................................................... 36
H. No Assignment................................................................................. 36
I. Subordination................................................................................. 36
43. Letters of Credit...................................................................................... 37
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44. Purchase Agreement..................................................................................... 38
45. Parking and Access Easements........................................................................... 38
46. Tenant's Consent to New Contract Affecting the
Premises............................................................................................... 39
EXHIBITS
EXHIBIT "A" Legal Description of Parcel
EXHIBIT "B" Site Plan
EXHIBIT "C" Improvement Agreement
EXHIBIT "D" Title Report
EXHIBIT "E" Declaration of Covenants, Conditions and
Restrictions
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<PAGE> 6
LEASE AGREEMENT
1. Parties. This Lease, dated for reference purposes as of
July 25, 1996, is made by and between MAIN STREET ASSOCIATES, a
California general partnership ("Landlord"), and THORATEC
LABORATORIES CORPORATION, a California corporation ("Tenant").
2. Demise of Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, upon the terms and conditions hereinafter set
forth, those certain premises (the "Premises") situated in the City of
Pleasanton, County of Alameda, State of California, described as follows:
A. That certain parcel of real property more particularly
described in EXHIBIT "A" attached hereto, together with all parking areas,
driveways and landscape areas now or hereafter located thereon, together with
all rights and easements appurtenant thereto now or hereafter existing
(collectively, the "Parcel");
B. That certain two story building to be constructed by
Landlord on the Parcel at the general location shown on the site plan attached
hereto as EXHIBIT "B" containing approximately 57,688 square feet consisting of
approximately 50,688 square feet on the first floor and 7,000 square feet of
executive offices on the second floor (the "Building") and other improvements to
be constructed by Landlord in accordance with the provisions of the Improvement
Agreement attached hereto as EXHIBIT "C" (the "Improvement Agreement").
The Building and the other improvements to be performed by Landlord
pursuant to the Improvement Agreement are hereinafter collectively referred to
in this Lease as "Landlord Improvements"; the various improvements to be
constructed by Tenant in and about the Building in accordance with the
provisions of the Improvement Agreement are collectively referred to hereinafter
as "Tenant Improvements"; Landlord Improvements together with Tenant
Improvements are collectively referred to in this Lease as the "Improvements".
3. Lease Term.
A. Lease Term. The term of this Lease ("Lease Term") shall
commence on the Commencement Date (as defined below) and shall end on the date
fifteen (15) years following the Rental Commencement Date (as defined below)
unless sooner terminated pursuant to any provision hereof. Within five (5) days
after the Commencement Date and the Rental Commencement Date become
ascertainable, as provided in Subparagraphs 3.B and 3.C below, Landlord and
Tenant shall execute a written amendment to this Lease specifying the
Commencement Date, the Rental Commencement Date and the date on which the Lease
Term shall end.
B. Commencement Date. As used in this Lease, the term
"Commencement Date" shall mean the date when Landlord delivers to Tenant the
Premises, with the Landlord Improvements being
<PAGE> 7
Substantially Completed (as defined in the Improvement Agreement) in a clean and
tidy state, with vacant possession and with any previously existing buildings on
the Parcel having been removed. Landlord shall give Tenant at least thirty (30)
days prior written notice of the date when the Commencement Date shall occur.
C. Rental Commencement Date. As used in this Lease, the term
"Rental Commencement Date" shall mean the date four (4) months following the
Commencement Date, unless the Rental Commencement Date is delayed pursuant to
Subparagraph D below, in which case it shall mean such delayed date.
D. Failure to Deliver. If Landlord is unable to deliver
possession of the Premises to Tenant with the Landlord Improvements being
Substantially Completed on or before December 31, 1996 (the "Target Commencement
Date"), then the Rental Commencement Date shall be delayed one and three-eighths
(1 & 3/8) days for each day that the Commencement Date is delayed beyond the
Target Commencement Date. If the Rental Commencement Date is so delayed, the
Lease Term shall be automatically extended by the number of days equal to the
number of days the Rental Commencement Date is delayed (with any fractional
number of days to be rounded up to the next highest whole number).
Notwithstanding the occurrence of any Excused Delay (as defined in the
Improvement Agreement), if Landlord is unable to deliver possession of the
Premises with Landlord's Improvements Substantially Completed on or before
February 15, 1997, then Tenant shall have the right to terminate this Lease by
giving written notice of termination to Landlord at any time after such date,
but prior to the time that Landlord has delivered possession of the Premises to
Tenant, and to obtain an immediate return of its security deposit and letter of
credit; provided that, if, as of February 15, 1997, both Landlord's architect
and Tenant's architect shall in good faith agree that, with the exercise of due
diligence, Landlord shall be able to Substantially Complete the Landlord
Improvements prior to March 15, 1997, then the date on which Tenant shall have
the right to terminate this Lease by giving written notice of termination to
Landlord at any time after such date shall be March 15, 1997 if, as of such
date, Landlord has not yet delivered possession of the Premises with Landlord
Improvements Substantially Completed. Absent a wilful breach by Landlord, the
remedies provided to Tenant under this Subparagraph 3.D shall be Tenant's sole
and exclusive remedy for Landlord's failure to deliver possession of the
Premises to Tenant on or before the Target Commencement Date or any other date.
Except as specifically provided in this Subparagraph 3.D, Landlord shall not,
absent a wilful breach by Landlord, be subject to any liability for failing to
deliver the Premises to Tenant on or before the Target Commencement Date or any
other date, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder.
4. Rent.
A. Time of Payment. Tenant shall pay to Landlord as rent for
the Premises the respective sums specified in Subparagraph 4.B below (the
"Monthly Installment") each month in advance on the first day of each calendar
month, without deduction or offset,
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<PAGE> 8
prior notice or demand, commencing on the Rental Commencement Date and
continuing through the Lease Term, together with such additional rents as are
payable by Tenant to Landlord under the terms of this Lease. The Monthly
Installment for any period during the Lease Term which is less than one (1) full
month shall be a pro rata portion of the Monthly Installment based upon a thirty
(30) day month.
B. Monthly Installment. Subject to Paragraph 12 of the
Improvement Agreement, the initial Monthly Installment of rent shall be the
greater of (i) Fifty-One Thousand Forty Dollars ($51,040) or (ii) Eighty-Eight
Cents ($0.88) per square foot multiplied by the gross square foot area of the
Building as certified in writing by Landlord's Architect to Landlord and Tenant
following completion of construction of the Building, with the gross square foot
measurement to be measured from the exterior surface of the outside walls of the
Building (excluding any deviations in the exterior surface for minor
indentations or protrusions such as windows and window casings).
Commencing as of the first (1st) anniversary of the Rental Commencement
Date, and continuing every year thereafter throughout the remainder of the Lease
Term (each such date being referred to as a "Rent Adjustment Date"), the Monthly
Installment of rent shall be increased by an amount equal to the product
obtained by multiplying the Monthly Installment of rent in effect for the
calendar month immediately preceding the Rent Adjustment Date in question by a
fraction, the numerator of which is the New Index (as defined below) and the
denominator of which is the Prior Index (as defined below); provided, however,
that in no event shall the Monthly Installment of rent be increased in excess of
four percent (4%) per annum. If, on any Rent Adjustment Date, the New Index for
such Rent Adjustment Date has not yet been published, Tenant shall continue to
pay the rent then in effect until such time as the New Index is published, at
which time the entire increase specified above shall take effect retroactive to
the Rent Adjustment Date and Tenant shall pay to Landlord any portion of the
entire increase not already paid.
C. Definitions. As used in this Lease, the following
terms shall have the following meanings:
(i) "Index" means the Consumer Price Index for All
Urban Consumers (All Items) as published by the United States Department of
Labor, Bureau of Labor Statistics, for the San Francisco/Oakland Metropolitan
Area (1982-4 = 100 Base);
(ii) "Prior Index" means, with respect to the first
Rent Adjustment Date, the Index for the calendar month for which the Index is
published and which most nearly precedes the Rental Commencement Date, and with
respect to each subsequent Rent Adjustment Date, the Index for the calendar
month for which the Index is published and which most nearly precedes the
immediately preceding Rent Adjustment Date;
(iii) "New Index" means, with respect to each Rent
Adjustment Date, the Index for the calendar month for which the
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<PAGE> 9
Index is published and which most nearly precedes such Rent Adjustment Date;
If the Index is changed or the base year is altered from that used as
of the Commencement Date of this Lease, then the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics, to obtain the same result which would have
been obtained had the Index or the base year not been changed. If no conversion
factor is available, or if the Index is otherwise changed, revised or
discontinued for any reason, there shall be substituted in lieu thereof, and the
term "Index" shall thereafter refer to the most nearly comparable Official Price
Index of the United States Government in order to obtain substantially the same
result for any adjustment required by this Lease as would have been obtained had
the original Index not been changed, revised or discontinued.
D. Late Charge. Tenant acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord within ten (10) days after Landlord's delivery to
Tenant of written notice stating that such amount has not been paid when due,
then Tenant shall pay to Landlord, as additional rent, a late charge equal to
five percent (5%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of its other
rights and remedies granted hereunder.
E. Additional Rent. All taxes, insurance premiums, late
charges, costs, expenses and other sums which Tenant is required to pay under
this Lease, together with all interest and penalties that may accrue thereon in
the event of Tenant's failure to pay such amounts, and all reasonable damages,
costs, and attorneys' fees and expenses which Landlord may incur by reason of
any default of Tenant or failure on Tenant's part to comply with the terms of
this Lease, shall be deemed to be additional rent ("Additional Rent") and shall
be paid in addition to the Monthly Installment of rent, and, in the event of
nonpayment by Tenant, Landlord shall have all of the rights and remedies with
respect thereto as Landlord has for the nonpayment of the Monthly Installment of
rent. All Additional Rent shall be paid by Tenant within ten (10) business days
following receipt of an invoice therefor from Landlord unless an alternative
payment method is expressly provided for in this Lease. The parties acknowledge
that this Lease is intended to be a triple net lease and that all costs and
expenses related to the Premises arising during the Lease Term
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<PAGE> 10
shall be the responsibility of Tenant unless and to the extent Landlord is
expressly made responsible therefor under the Lease.
F. Place of Payment. Rent shall be payable in lawful money of
the United States of America to Landlord at Thomas Properties, 3100 Oak Road,
Suite 360, Walnut Creek, California 94596 or to such other person(s) or at such
other place(s) as Landlord may designate in writing.
5. Use of Premises.
A. Restrictions on Use. Tenant shall use the Premises only in
conformance with applicable governmental laws, regulations, rules and ordinances
for the purpose of general office, research, development and manufacturing and
reasonable ancillary uses, but for no other purpose without the consent of
Landlord. Tenant shall not commit or suffer to be committed, any waste upon the
Premises, or any nuisance, or other acts or things which may unreasonably
disturb the quiet enjoyment of any other tenant in the buildings adjacent to the
Premises, or allow any sale by auction upon the Premises, or allow the Premises
to be used for any unlawful purpose, or place any loads upon the floor, walls or
ceiling which would endanger the structure.
6. Taxes and Assessments.
A. Tenant's Property. Tenant shall pay before delinquency any
and all taxes and assessments, license fees and public charges levied, assessed
or imposed upon or against Tenant's fixtures, equipment, furnishings, furniture,
appliances and personal property installed or located on or within the Premises.
Tenant shall use due diligence to cause said fixtures, equipment, furnishings,
furniture, appliances and personal property to be assessed and billed separately
from the real property of Landlord. If any of Tenant's said personal property
shall be assessed with Landlord's real property, Tenant shall pay Landlord the
taxes attributable to Tenant within ten (10) days after receipt of a written
statement from Landlord setting forth the taxes applicable to Tenant's property.
B. Property Taxes. Tenant shall pay, as Additional Rent, one
hundred percent (100%) of all Property Taxes levied or assessed with respect to
the Premises which become due or accrue during the term of this Lease. Tenant
shall pay such Property Taxes to Landlord not later than (i) ten (10) days prior
to the delinquency date of such Property Taxes, or (ii) twenty (20) days after
receipt of billing, whichever is later. If Tenant fails to do so, Tenant shall
reimburse Landlord, on demand, for all interest, late fees and penalties that
the taxing authority charges Landlord. If, and so long as an Event of Default by
Tenant occurs under this Lease, then on the first day of each month during the
Lease Term, Tenant shall pay Landlord one twelfth (1/12) of the annual Property
Taxes. Tenant's liability hereunder shall be prorated to reflect the
commencement and termination dates of this Lease.
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<PAGE> 11
C. Proposition 13 Exclusion. Notwithstanding anything
contained in Subparagraph B above to the contrary, except as provided in this
Subparagraph C below, Tenant shall not be obligated to pay any increase in
Property Taxes resulting from a "change in ownership" as that term is defined in
California Revenue and Taxation Code Section 60-65, or any successor Law
implementing the provisions of Article XIIIA of the California Constitution
containing the provisions of that initiative commonly known as "Proposition 13";
provided, however, that the foregoing exclusion from Tenant's obligation to pay
Property Taxes shall not apply to increases in Property Taxes resulting from a
transfer caused by foreclosure (whether resulting from a judicial foreclosure,
non-judicial foreclosure, or deed in lieu of foreclosure) of a first mortgage or
first deed of trust encumbering the Premises other than any Affiliate Deed of
Trust (as defined below). Tenant acknowledges that Landlord may acquire the
Property from an unaffiliated third party pursuant to that certain Offer to
Purchase (NWC Hopyard Road and Stoneridge Drive, Pleasanton, California) between
Thomas Properties, Inc., a California corporation, as buyer, and CalProp, L.P.,
a Delaware limited partnership, as seller dated January 31, 1996 ("Purchase
Agreement") after the date of execution of this Lease and that the foregoing
exclusion from Tenant's obligation to pay Property Taxes shall not apply to
increases in Property Taxes resulting from such acquisition. Tenant further
acknowledges that it shall be obligated to pay increases in Property Taxes
resulting from the construction of the Improvements on the Parcel.
Notwithstanding the foregoing to the contrary, Tenant agrees that it shall be
obligated to pay any increase in Property Taxes resulting from a "change in
ownership" as such term is defined above in connection with the first two (2)
times during the initial fifteen (15) year term of this Lease that such change
in ownership occurs. Tenant hereby gives permission to Landlord for Landlord to
provide a copy of this Lease to the Alameda County Tax Assessor's Office for the
purpose of determining any increase in valuation of the Premises as a result of
construction of the Improvements.
D. Property Taxes Defined. For the purpose of this Lease,
"Property Taxes" means and includes all taxes, assessments (including, but not
limited to, assessments for public improvements or benefits), and all other
governmental impositions and charges of every kind and nature whatsoever,
whether or not customary or within the contemplation of the parties hereto and
regardless of whether the same shall be extraordinary or ordinary, general or
special, unforeseen or foreseen, or similar or dissimilar to any of the
foregoing which, at any time during the Lease Term, shall be applicable to the
Premises, the Building, the Improvements and/or the Parcel or assessed, levied
or imposed upon the Premises, the Building, the Improvements and/or the Parcel,
or become due and payable and a lien or charge upon the Premises, the Building,
the Improvements and/or the Parcel, or any part thereof, under or by virtue of
any present or future laws, statutes, ordinances, regulations or other
requirements of any governmental authority whatsoever together with any tax upon
rentals payable by Tenant hereunder to the extent such taxes are substituted for
other real property taxes. The term "Property Taxes" shall not include any
federal, state or local net income, franchise, excise, estate, gift
6
<PAGE> 12
or inheritance tax imposed on Landlord. Landlord agrees not to consent to the
imposition of any future special assessment without obtaining Tenant's consent
thereto.
E. Tenant's Right to Contest. Tenant shall have the right, by
appropriate proceedings, to protest or contest any assessment, reassessment or
allocation of Property Taxes or any change therein. In the contest or
proceedings, Tenant may act in its own name and/or the name of Landlord and
Landlord will, at Tenant's request and expense, cooperate with Tenant in any way
Tenant may reasonably require in connection with such contest. Tenant must pay
all Property Taxes as and when required by Paragraph 7.B, even those which are
the subject of such protest or contest, but Tenant may sue to recover
overpayments of Property Taxes as part of any such contest. With respect to any
contest of Property Taxes, Tenant shall indemnify and hold Landlord and the
Premises harmless from any liens or damage arising out of such protest or
contest and shall pay any judgment that may be rendered for which Tenant would
otherwise be liable under this Lease without such contest or protest. Any
contest conducted by Tenant under this paragraph shall be at Tenant's expense
and if interest or late charges become payable as a result of such contest or
protest, Tenant shall pay the same.
7. Insurance.
A. Indemnities. Tenant agrees to indemnify, protect and defend
Landlord against and hold Landlord harmless from any and all claims, causes of
action, judgments, obligations or liabilities, and all reasonable expenses
incurred in investigating or resisting the same (including reasonable attorneys'
fees), on account of, or arising out of, the operation, maintenance, use or
occupancy of the Premises by Tenant and/or its Agents (except for the active
negligence or willful misconduct of Landlord or its Agents). This Lease is made
on the express understanding that Landlord shall not be liable for, or suffer
loss by reason of, injury to person or property, from whatever cause (except for
the active negligence or willful misconduct of Landlord or its Agents), which in
any way may be connected with the operation, maintenance, use or occupancy of
the Premises by Tenant and/or its Agents specifically including, without
limitation, any liability for injury to the person or property of Tenant or its
Agents. Landlord agrees to indemnify, protect and defend Tenant against and hold
Tenant harmless from any and all claims, causes of action, judgments,
obligations or liabilities, and all reasonable expenses incurred in
investigating or resisting the same (including reasonable attorney's fees), on
account of, or arising out of the active negligence or willful misconduct of
Landlord or its Agents.
B. Liability Insurance. Tenant shall, at Tenant's expense,
obtain and keep in force during the term of this Lease a policy of comprehensive
public liability insurance insuring Landlord and Tenant against claims and
liabilities arising out of the operation, maintenance, use, or occupancy of the
Premises. Such insurance shall provide combined single limit coverage of not
less than Two Million Dollars ($2,000,000.00) per occurrence. Landlord shall
have the right to require Tenant to increase the
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<PAGE> 13
amount of coverage of such public liability insurance to the extent reasonably
necessary to bring such insurance coverage into conformity with the level of
coverage commonly carried by similar businesses in California, which right
Landlord may exercise no more frequently than once every five (5) years during
the lease term. The insurance shall be issued by a reputable company reasonably
acceptable to Landlord. Tenant shall deliver to Landlord, within ten (10) days
after delivery of possession, and at least ten (10) days prior to the expiration
thereof, a certificate of insurance evidencing the existence of the policy
required hereunder and such certificate shall certify that the policy (1) names
Landlord, Landlord's Lender, and any other parties that Landlord or Landlord's
Lender may reasonably request from time to time as additional insureds, (2)
shall not be canceled or reduced in coverage without thirty (30) days prior
written notice to Landlord, (3) insures performance of the indemnity set forth
in Subparagraph 7.A above, (4) the coverage is primary and any coverage by
Landlord is in excess thereto and (5) contains a cross-liability endorsement.
C. Property Insurance. Tenant shall, at Tenant's expense,
obtain and keep in force during the Lease Term a policy of insurance covering
loss or damage to the Landlord Improvements and other improvements paid for by
Landlord, in the amount of the guaranteed full replacement cost thereof with an
Agreed Amount Endorsement, providing protection against those perils included
within the classification of "all risk" insurance, flood insurance (if the
Premises are in a flood zone), earthquake insurance, plus a policy of rental
income insurance in the amount of one hundred percent (100%) of twelve (12)
months' rent, and any other coverages which may be required from time to time by
Landlord's Lender provided such coverages are customarily required by
institutional lenders for similar properties in the vicinity of the Premises.
Tenant shall also obtain Building Ordinance Insurance equal to no less than ten
percent (10%) of the then-replacement costs of the Landlord Improvements and
other improvements paid for by Landlord. Notwithstanding the foregoing, Tenant
shall not be required to maintain earthquake insurance unless required by
Landlord's lender or more than fifty percent (50%) of similar buildings in
Hacienda Business Park are then covered by earthquake insurance, and in any
event, only if the annual cost thereof is less than One Dollar ($1.00) per One
Thousand Dollars ($1,000) of replacement costs (unless Landlord agrees to pay
that portion of the annual cost of earthquake insurance which exceeds One Dollar
($1.00) per one Thousand Dollars ($1,000) of replacement costs (the "Premium
Limit")). Tenant shall provide Landlord with copies of any quotes it may receive
as to earthquake insurance, including at the lowest deductible levels then
reasonably available in the market. Landlord may direct that Tenant procure
earthquake insurance coverage exceeding the Premium Limit set forth above,
provided that Landlord shall then commit in writing to pay to Tenant or to the
insurer when due, the amount of the earthquake insurance premium that exceeds
the Premium Limit set forth above. Landlord may further direct that Tenant
select such policy of earthquake insurance as is then available with the lowest
deductible, provided that either (i) the cost of such policy does not exceed the
Premium Limit or (ii) Landlord shall then commit in writing to pay to
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Tenant or to the insurer when due, the amount of the earthquake insurance
premium that exceeds the Premium Limit set forth above. Tenant shall have the
right to procure any of the foregoing insurance coverages by means of a blanket
policy provided that the coverage allocated under such blanket policy with
respect to the Premises is at least equivalent to the coverage that Tenant is
obligated to provide under this Paragraph 7.C. Such insurance shall be provided
by companies reasonably acceptable to Landlord. Tenant shall deliver to
Landlord, within ten (10) days after the Commencement Date, and at least ten
(10) days prior to the expiration thereof, a duplicate original or certificate
evidencing the policy required hereunder. Such policy and/or certificate shall
certify that the policy:
(1) Names Landlord and Landlord's Lender as
insureds;
(2) Shall not be cancelled or reduced in coverage
without thirty (30) days prior written notice to Landlord and to Landlord's
Lender;
(3) Is primary and any coverage by Landlord is in
excess thereto; and
(4) Contains a standard Lender's Loss Payable
Endorsement in favor of Landlord's Lender.
If the coverage is in the form of a blanket policy, such certificate
shall also designate the amount of such insurance applicable to the Premises. If
any such policy (other than earthquake) obtained by Tenant contains a
deductible, Tenant shall be deemed self-insured as to the amount of such
deductible. Tenant shall not have any financial responsibility for any
deductible or other monetary limitations that may be applicable to any
earthquake insurance coverage that may be obtained.
If at any time Tenant fails to keep in effect the insurance coverage
required by this Paragraph 7.C, then Landlord and/or Landlord's Lender shall
have the right, but not the obligation, in addition to all other remedies which
Landlord may have, to obtain such insurance coverage. In such event, Tenant
shall, within ten (10) days after receipt of billing, reimburse Landlord and/or
Landlord's Lender as Additional Rent for the full cost of such insurance
procured by Landlord.
At the option of Landlord, Landlord shall, in lieu of Tenant, at
Landlord's expense, obtain and keep in force from time to time during the Lease
Term one or more policies of insurance covering loss or damage to Landlord
Improvements and other improvements paid for by Landlord, in the amount of
guaranteed full replacement cost thereof with an Agreed Amount Endorsement,
providing protection against those perils included within the classification of
"all risk" insurance, flood insurance (if the Premises are in a flood zone) and
earthquake insurance, plus a policy of rental income insurance in the amount of
one hundred percent (100%) of twelve (12) months' rent, and other coverages (not
including earthquake coverage) which may be required from time to time by
Landlord's
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Lender provided such coverages are customarily required by institutional lenders
for similar properties in the vicinity of the Premises. Landlord shall also have
the option to obtain building ordinance insurance equal to no less than ten
percent (10%) of the then-replacement costs of the Landlord Improvements and
other improvements paid for by Landlord. Notwithstanding the foregoing to the
contrary, Landlord may exercise such option to carry all of the foregoing
insurance coverages in lieu of Tenant only if Landlord shall be able to obtain
such insurance at a lower cost than Tenant and Landlord shall provide to Tenant
evidence thereof reasonably satisfactory to Tenant in Tenant's sole discretion.
Tenant shall reimburse Landlord for the premiums of such policies within thirty
(30) days after Landlord submits a bill to Tenant therefor. Notwithstanding the
foregoing to the contrary, Tenant shall not be required to reimburse Landlord
for earthquake insurance premiums unless Tenant would otherwise be required to
carry such insurance pursuant to the terms hereinabove and in any event, such
reimbursement shall not exceed annually One Dollar ($1.00) per One Thousand
Dollars ($1,000) of replacement costs. In no event shall the aggregate
deductible under all policies of insurance carried by Landlord pursuant to this
Paragraph 7.C be greater than Ten Thousand Dollars ($10,000). In any event,
Landlord shall be deemed to be self-insured in the amount of the applicable
deductibles, but not including any earthquake insurance deductibles.
D. Tenant's Property Insurance. Tenant, at Tenant's own
expense, shall maintain in full force and effect on Tenant Improvements and all
of its fixtures, equipment and personal property in the Premises, a policy of
"All Risk" coverage insurance to the extent of at least ninety percent (90%) of
their insurable value.
E. Mutual Waiver of Subrogation. Tenant and Landlord hereby
mutually waive their respective rights of recovery against each other of any
loss of or damage to the property of either party, to the extent such loss or
damage is insured by any insurance policy required to be maintained by this
Lease or otherwise in force at the time of such loss or damage. Each party shall
obtain any special endorsements, if required by the insurer, whereby the insurer
waives its right of subrogation against the other party hereto. The provisions
of this Subparagraph 7.E shall not apply in those instances in which the waiver
of subrogation would cause either party's insurance coverage to be voided or
otherwise made uncollectible.
8. Utilities. Tenant shall pay for all water, gas, light, heat, power,
electricity, telephone, trash pick-up, sewer charges, and all other services
supplied to or consumed on the Premises, including hook-up fees therefor, and
all taxes and surcharges thereon.
9. Repairs and Maintenance.
A. Landlord's Repairs. Subject to the provisions of Paragraphs
13 and 14, Landlord, at its expense, shall keep and maintain the structural
elements of the Building in good order,
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condition and repair. Landlord shall not, however, be required to maintain,
repair or replace the interior surface of exterior walls, nor shall Landlord be
required to maintain, repair or replace windows, doors, skylights or plate
glass. Landlord shall have no obligation to make repairs under this Subparagraph
9.A until a reasonable time after receipt of written notice from Tenant of the
need for such repairs. Notwithstanding the foregoing, Tenant shall reimburse
Landlord, as Additional Rent, within fifteen (15) days after receipt of billing,
for the cost of maintenance and repairs of the structural elements of the
Building to the extent such maintenance or repair is required because of the
negligence or willful misconduct of Tenant or its Agents (but only to the extent
Landlord does not receive insurance proceeds for same). As used herein, the term
"structural elements of the Building" shall mean and be limited to the
foundations, exterior walls (but not the painting or glazing thereof), floor
slab (but not flooring) and roof structure (but not roofing or roof membrane).
So long as, and only so long as, Landlord is also the owner of any land
over which any easements appurtenant to the Premises are located, Landlord shall
maintain such easement areas located on land owned by Landlord in good order,
condition and repair. Landlord's obligation under the preceding sentence shall
automatically terminate with respect to any particular easement area when
Landlord no longer owns the land on which the easement area is located. So long
as, and only so long as, Landlord is also the owner of any land adjacent to the
Premises, Landlord shall maintain such adjacent land owned by Landlord in a safe
and presentable condition (Tenant agrees that the current condition of such
adjacent land is safe and presentable). Landlord's obligation under the
preceding sentence shall automatically terminate with respect to any particular
parcel of adjacent land when Landlord no longer owns such parcel of adjacent
land.
B. Tenant's Repairs. Except as expressly provided in
Subparagraph 9.A above and Paragraphs 13 and 14 below and EXHIBIT "C" hereto,
Tenant shall, at its sole cost, keep and maintain the entire Premises and every
part thereof, including without limitation, the windows, window frames, plate
glass, glazing, skylights, truck doors, doors and all door hardware, the
interior walls and partitions, interior surfaces of exterior walls, carpets,
flooring, roofing, roof membrane, gutters, down spouts, the electrical,
plumbing, lighting, heating, ventilating and air conditioning systems and
equipment, and all areas outside the Building (including all landscaping,
irrigation systems, paving, curbs, driveways, parking areas, sidewalks, fences,
signs, and exterior lighting) in good order, condition and repair. The term
"repair" shall include replacements, restorations and/or renewals when necessary
as well as painting of the interior and exterior walls. Tenant's obligation
shall extend to all alterations, additions and improvements to the Premises, and
all fixtures and appurtenances therein and thereto. Landlord shall assign to
Tenant for the term of this Lease the benefit of all assignable warranties
available to Landlord which would reduce the cost of performing the obligations
of Tenant to make repairs under this Subparagraph 9.B. Landlord shall cooperate
with Tenant in the enforcement of such warranties.
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Should Tenant fail to commence to make repairs required of Tenant
hereunder within twenty (20) days (unless a longer period is reasonably required
to commence to make the repair in question) after notice from Landlord or should
Tenant fail thereafter to diligently complete the repairs, Landlord, in addition
to all other remedies available hereunder or by law and without waiving any
alternative remedies, may make the same, and in that event, Tenant shall
reimburse Landlord as additional rent for the cost of such maintenance or
repairs within ten (10) days of written demand by Landlord.
Landlord shall have no maintenance or repair obligations whatsoever
with respect to the Premises except as expressly provided in Subparagraph 9.A,
Paragraph 13 and EXHIBIT "C" hereto. Tenant hereby expressly waives the
provisions of Subsection 1 of Section 1932 and Sections 1941 and 1942 of the
Civil Code of California and all rights to make repairs at the expense of
Landlord as provided in Section 1942 of said Civil Code.
10. Alterations.
A. Limitations. Tenant shall not make, or suffer to be made,
any alterations, improvements or additions in, on, about or to the Premises or
any part thereof, without a valid building permit (if required by law) issued by
the appropriate governmental authority. Additionally, if Tenant desires that
Landlord not require that any such alteration, improvement or addition be
removed at the end of the Lease Term, Tenant shall be required to obtain the
written consent of Landlord (which shall not be unreasonably withheld) to such
alteration, improvement or addition; At the time Landlord provides such written
consent, Landlord shall contemporaneously provide written notice as to whether
Tenant shall be required to remove such alternation, improvement or addition at
the end of the Lease Term; if Landlord fails to provide such notice it shall be
deemed that Landlord has agreed that such alteration, improvement or addition
need not be removed at the end of the Lease Term; in all such cases where
Landlord has agreed or been deemed to agree that the alteration, improvement or
addition need not be removed at the end of the Lease Term, Tenant shall
nevertheless have the right to remove the same at the end of the Lease Term
provided Tenant shall repair any damage caused by such removal. Notwithstanding
any provision herein above to the contrary, Tenant may elect to remove any
alteration, addition or improvement, other than Landlord Improvements or other
improvements paid for by Landlord, at the end of the Lease Term and repair any
damage caused by such removal. Any alteration, addition or improvement which
Tenant does not elect to remove at the end of the Lease Term in accordance with
its rights under this Paragraph 10.A., except movable furniture and trade
fixtures not affixed to the Premises and Tenant's personal property and
equipment, shall become the property of Landlord upon termination of the Lease
and remain upon and be surrendered with the Premises at the termination of this
Lease. Notwithstanding the foregoing to the contrary, in no event shall Tenant
be required to remove any alteration, addition or improvement which is
consistent with a general office use of the Premises or any of the Landlord
Improvements. Notwithstanding the foregoing to the contrary, Tenant acknowledges
that it shall be
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required to remove the Tenant Improvements at the end of the Lease Term.
B. Alterations Required by Law. If, during the Lease Term, any
alteration, addition or change of any sort to all or any portion of the Premises
is required by Law because of (i) Tenant's particular use or change of use of
the Premises, (ii) Tenant's application for a new permit or governmental
approval, or (iii) Tenant's construction or installation of any alterations,
additions or improvements, then Tenant shall promptly make the same at its sole
cost and expense. If, during the Lease Term, any alteration, addition or change
to the Premises is required by Law and is not made the responsibility of Tenant
pursuant to the immediately preceding sentence, Tenant shall promptly make the
same or, at Tenant's option, Landlord shall promptly make the same at Tenant's
expense; provided that, in either case, if the alteration, addition or change is
not necessary solely as a result of Tenant's particular use of the Premises, (a)
the cost of such alteration, addition or change shall be amortized over its
useful life together with interest on the unamortized balance at the rate of ten
percent (10%) per annum; and (b) at the end of the Lease Term Landlord shall
reimburse Tenant for all such unamortized costs (including interest thereon).
11. Acceptance of the Premises. By entry and taking possession of the
Premises pursuant to this Lease, Tenant accepts the Premises as being in good
and sanitary order, condition and repair and accepts the Premises in their
condition existing as of the date of such entry subject to the provisions of the
Improvement Agreement. Landlord warrants that no Hazardous Materials (as defined
in Paragraph 36A below) shall be incorporated into the construction of the
Landlord Improvements unless expressly first approved by Tenant in writing.
Except as provided in the previous sentence, Tenant acknowledges that neither
the Landlord nor Landlord's agents has made any representation or warranty as to
the suitability of the Premises to the conduct of Tenant's business. Any
agreements, warranties or representations not expressly contained herein shall
in no way bind either Landlord or Tenant, and Landlord and Tenant expressly
waive all claims for damages by reason of any statement, representation,
warranty, promise or agreement, if any, not contained in this Lease. This Lease
constitutes the entire understanding between the parties hereto and no addition
to, or modification of, any term or provision of this Lease shall be effective
until set forth in a writing signed by both Landlord and Tenant. If the Landlord
Improvements are subsequently found to contain any Hazardous Materials which
were incorporated into the construction of the Landlord Improvements by Landlord
or its Agents prior to the Commencement Date and which were not part of the
building materials specified in the Final Landlord Building Plans (as defined in
the Improvement Agreement) or otherwise approved by Tenant (the "Unauthorized
Landlord Installed Hazardous Materials"), then Landlord shall, upon request from
Tenant and at Landlord's sole cost and expense, promptly cause the same to be
entirely removed from the Landlord Improvements, as applicable. If under
applicable Law, Tenant is prevented from occupying or using all or any portion
of the Landlord Improvements due to the subsequently found presence or removal
of any
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Unauthorized Landlord Installed Hazardous Materials on or from the Landlord
Improvements, the Monthly Installment of rent and Additional Rent shall be
temporarily abated during the period between the date of such discovery and the
date such discovered Unauthorized Landlord Installed Hazardous Materials are
fully removed from the Landlord Improvements in proportion to the degree to
which Tenant's occupancy or use of the Premises is so prevented by such presence
or removal of such Unauthorized Landlord Installed Hazardous Materials.
12. Default.
A. Events of Default. A breach of this Lease by Tenant shall
exist if any of the following events (hereinafter referred to as "Event of
Default") shall occur:
(1) Default in the payment when due of any install-
ment of rent or other payment required to be made by Tenant hereunder, where
such default shall not have been cured within ten (10) days after written notice
of such default is given to Tenant;
(2) Tenant's failure to perform any other term,
covenant or condition contained in this Lease where such failure shall have
continued for thirty (30) days after written notice of such failure is given to
Tenant; provided, however, Tenant shall not be deemed in default if Tenant
commences to cure such failure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion;
(3) Tenant's abandonment of the Premises;
(4) Tenant's assignment of its assets for the benefit
of its creditors;
(5) The sequestration of, attachment of, or execution
on, any substantial part of the property of Tenant or on any property essential
to the conduct of Tenant's business, shall have occurred and Tenant shall have
failed to obtain a return or release of such property within sixty (60) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier;
(6) Tenant shall commence any case, proceeding or
other action seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seek appointment
of a receiver, trustee, custodian, or other similar official for it or for all
or any substantial part of its property;
(7) Any case, proceeding or other action against
Tenant shall be commenced seeking to have an order for relief entered against it
as debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or
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for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within seven (7) business days after the entry thereof or (ii)
remains undismissed for a period of sixty (60) days.
B. Remedies. Upon any Event of Default and during the
continuance of any Event of Default, Landlord shall have the following remedies,
in addition to all other rights and remedies provided by law, to which Landlord
may resort cumulatively, or in the alternative:
(1) Recovery of Rent. Landlord shall be entitled to
keep this Lease in full force and effect (whether or not Tenant shall have
abandoned the Premises) and to enforce all of its rights and remedies under this
Lease, including the right to recover rent and other sums as they become due,
plus interest at the Permitted Rate (as defined in Paragraph 30 below) from the
due date of each installment of rent or other sum until paid.
(2) Termination. Landlord may terminate this Lease by
giving Tenant written notice of termination. On the giving of the notice all of
Tenant's rights in the Premises shall terminate. Upon the giving of the notice
of termination, Tenant shall surrender and vacate the Premises in the condition
required by Paragraph 31, and Landlord may re-enter and take possession of the
Premises and all the remaining improvements or property and eject Tenant or any
of Tenant's subtenants, assignees or other person or persons claiming any right
under or through Tenant or eject some and not others or eject none. This Lease
may also be terminated by a judgment specifically providing for termination. Any
termination under this paragraph shall not release Tenant from the payment of
any sum then due Landlord or from any claim for damages or rent previously
accrued or then accruing against Tenant. In no event shall any one or more of
the following actions by Landlord constitute a termination of this Lease:
(a) maintenance and preservation of the
Premises;
(b) efforts to relet the Premises;
(c) appointment of a receiver in order to
protect Landlord's interest hereunder;
(d) consent to any subletting of the
Premises or assignment of this Lease by Tenant, whether pursuant to provisions
hereof concerning subletting and assignment or otherwise; or
(e) any other reasonable action by Landlord
or Landlord's agents intended to mitigate the adverse effects from any breach of
this Lease by Tenant.
(3) Damages. In the event this Lease is terminated
pursuant to Subparagraph 12.B(2) above, or otherwise, Landlord shall be entitled
to damages in the following sums:
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(a) the worth at the time of award of the
unpaid rent which has been earned at the time of termination; plus
(b) 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
(c) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; and
(d) any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant's failure to perform
Tenant's obligations under this Lease, or which in the ordinary course of things
would be likely to result therefrom including, without limitation, the
following: (i) expenses for cleaning, repairing or restoring the Premises,
including, without limitation, the clean-up and remediation of Hazardous
Materials introduced onto the Premises by Tenant; (ii) real estate broker's
fees, advertising costs and other expenses of reletting the Premises which are
reasonably incurred by Landlord including, without limitation, the cost actually
incurred by Landlord of any new improvements made to the Premises for the next
tenant in the Premises to the extent such cost is actually paid for by Landlord
and not subsequently reimbursed by third parties; (iii) reasonable costs of
carrying the Premises such as taxes and insurance premiums thereon, utilities
and security precautions; (iv) expenses in retaking possession of the Premises;
(v) attorneys' fees and court costs; and (vi) loan costs proximately caused by
Tenant's failure to perform its obligations under this Lease; provided that
Tenant shall be credited for the unamortized costs of any Tenant Improvements or
other improvements made by Tenant which are not intended solely for Tenant's
particular use of the Premises or which will actually be utilized by any new
tenant in the Premises.
(e) The "worth at the time of award" of the
amounts referred to in Subparagraphs (a) and (b) of this Paragraph 12.B(3), is
computed by allowing interest at the Permitted Rate. The "worth at the time of
award" of the amounts referred to in Subparagraph (c) of this Paragraph 12.B(3)
is 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%). The
term "rent" as used in this Paragraph 12 shall include all sums required to be
paid by Tenant to Landlord pursuant to the terms of this Lease.
13. Destruction.
A. Landlord's Duty to Restore. If the Improvements are damaged
by any peril after the Commencement Date of this Lease, Landlord shall restore
the Premises unless the Lease is terminated by Landlord pursuant to Paragraph
13.B or by Tenant pursuant to Paragraph 13.C. All insurance proceeds available
from the property damage insurance required to be carried by Tenant and/or
Landlord
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pursuant to Paragraph 7.C (including deductibles for which Tenant or Landlord
has self-insured, but not including any earthquake insurance deductible) shall
become the property of Landlord and be paid to Landlord (or other escrow agent
designated by Landlord and reasonably approved by Tenant) who shall hold such
proceeds in an interest-bearing account and shall disburse them to pay for costs
of restoration as the restoration progresses in accordance with customary
procedures. If this Lease is terminated pursuant to either Paragraphs 13.B or
13.C, then all insurance proceeds available from the insurance required to be
carried by Tenant pursuant to Paragraph 7.C (including deductibles for which
Tenant has self-insured, but not including any earthquake insurance deductible)
shall be paid to and become the property of Landlord. If this Lease is not so
terminated by Landlord pursuant to Paragraph 13.B or by Tenant pursuant to
Paragraph 13.C, then, (i) if the loss is covered by insurance, upon receipt by
Landlord from the insurer of the insurance proceeds (and from Tenant, the amount
of any applicable deductible for which Tenant has self-insured, but not
including any earthquake insurance deductible) or (ii) if the loss is not
covered by insurance, then Landlord shall diligently pursue the preparation of
all required plans and specifications for the restoration and shall diligently
pursue the issuance of all necessary governmental permits, and upon the issuance
of all necessary governmental permits, Landlord shall promptly commence and
diligently prosecute to completion the restoration of the Premises, to the
extent then allowed by Law, to substantially the same condition in which the
Premises were immediately prior to such damage. Landlord's obligation to restore
shall be limited to the cost of restoring the Landlord Improvements and other
improvements paid for by Landlord (as the same may have been subsequently
modified by Tenant to the extent such modifications do not materially increase
the cost of restoring the same), excluding any trade fixtures and/or personal
property and/or alterations constructed or installed by Tenant in the Premises.
Landlord shall not be responsible for replacing or repairing Tenant Improvements
or other improvements (or trade fixtures) installed by Tenant at its cost. If,
prior to Landlord's receipt of the insurance proceeds, Tenant agrees to pay for
the cost of preparing the plans and specifications for the restoration of the
Landlord Improvements, Landlord shall proceed with the preparation of the plans
and specifications for the restoration and Tenant shall pay or reimburse
Landlord for the full cost of preparing such plans and specifications as such
costs are incurred.
B. Landlord's Right to Terminate. Landlord 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 Tenant of a written notice of
election to terminate within thirty (30) days after the date of such damage:
(1) The Building is damaged by any peril either (i)
covered by the type of insurance Tenant or Landlord is required to carry
pursuant to Paragraph 7.C or (ii) covered by valid and collectible insurance
actually carried by Tenant or Landlord and in force at the time of such damage
or destruction, to such an extent that the estimated restoration cost exceeds
fifty percent (50%) of the then actual replacement cost of the Building and
Landlord in
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good faith notifies Tenant of its intention to demolish the Premises and
Landlord does not within the six (6) month period following such date of damage
or destruction enter into any discussions or negotiations with respect to any
rebuilding on the Parcel or with any prospective tenants on the Parcel.
(2) The Building is damaged by any peril both (i) not
covered by the type of insurance Tenant or Landlord is required to carry
pursuant to Paragraph 7.C and (ii) not covered by valid and collectible
insurance actually carried by Tenant or Landlord and in force at the time of
such damage or destruction, to such an extent that the estimated restoration
cost exceeds ten percent (10%) of the then actual replacement cost of the
Building; provided, however, that Landlord may not terminate this Lease pursuant
to this subparagraph if (a) Tenant agrees in writing to pay the amount by which
the restoration cost exceeds ten percent (10%) of the replacement cost of the
Building and deposits with Landlord an amount equal to the estimated amount of
such excess within thirty (30) days after Landlord has notified Tenant with its
election to terminate this Lease pursuant to this subparagraph, or (b) Landlord
intends to commence at any time within one hundred eighty (180) days after the
date of damage or destruction, the rebuilding of the Building to substantially
the same size and general design as existing prior to the date of damage or
destruction (with Tenant to have the right to elect to require that any earlier
termination notice from the Landlord be rescinded if Landlord within one hundred
eighty (180) days after the date of damage or destruction applies for a building
permit to rebuild the Building to substantially the same size and general design
as existing prior to the date of damage or destruction).
(3) The Building is damaged by any peril during the
last twelve (12) months of the Lease Term to such an extent that the estimated
cost to restore equals or exceeds an amount equal to six (6) times the Monthly
Installment of rent then due; provided, however, that Landlord may not terminate
this Lease pursuant to this subparagraph if Tenant, at the time of such damage,
has an express written option to further extend the term of this Lease and
Tenant exercises such option to so further extend the Lease Term within fifteen
(15) days following the date of Landlord's termination notice.
(4) The Building is damaged by any peril and, because
of the Laws then in force, (i) may not be restored to substantially the same
condition in which they were prior to such damage without incurring costs not
covered by insurance exceeding ten percent (10%) of the actual replacement cost
of the Building; provided, however, that Landlord may not terminate this Lease
pursuant to this clause (i) of this subparagraph (4) either if (a) Tenant agrees
in writing to pay the amount by which the restoration cost exceeds ten percent
(10%) of the replacement cost of the Building and deposits with Landlord an
amount equal to the estimated amount of such excess within thirty (30) days
after Landlord has notified Tenant of its election to terminate this Lease
pursuant to this subparagraph, or (b) Landlord intends to commence at any time
within one hundred eighty (180) days after the date of damage or destruction,
the rebuilding of the Building to
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substantially the same size and general design as existing prior to the date of
damage or destruction (with Tenant to have the right to elect to require that
any earlier termination notice from the Landlord be rescinded if Landlord within
one hundred eighty (180) days after the date of damage or destruction applies
for a building permit to rebuild the Building to substantially the same size and
general design as existing prior to the date of damage or destruction), or (ii)
if restored, may not be used for the same use being made thereof before such
damage.
C. Tenant's Right to Terminate. If the Improvements are
damaged by any peril and Landlord does not elect to terminate this Lease or is
not entitled to terminate this Lease pursuant to Paragraph 13.B, 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 may be completed. 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 needed to complete such restoration with respect to (1) and
(2) below, or within ten (10) days after expiration of applicable time period
with respect to (3) and (4) below:
(1) The Improvements are damaged by any peril and the
restoration of the Improvements reasonably cannot be substantially completed
within one hundred eighty (180) days after the date of damage or destruction.
(2) The Improvements are damaged by any peril within
twelve (12) months of the last day of the Lease Term and the restoration of the
Improvements reasonably cannot be substantially completed within ninety (90)
days after the date of such damage.
(3) The restoration of the Building is not
substantially completed within four (4) months after the date of the damage or
destruction.
(4) Landlord does not commence restoration of the
Building within thirty (30) days following the receipt of insurance proceeds.
D. Abatement of Rent. In the event of damage to the Premises,
the Monthly Installment of rent and Additional Rent shall be temporarily abated
during the period between the date of damage and the date the Improvements are
substantially restored in proportion to the degree to which Tenant's use of the
Premises is impaired by such damage. Tenant shall not be entitled to any
compensation from Landlord for loss of Tenant's property or loss to Tenant's
business caused by such damage or restoration. Tenant hereby waives the
provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of
the California Civil Code, and the provisions of any similar law, hereinafter
enacted. Similarly, as respects the present or future presence on, under, in,
over or adjacent to the Premises of any Hazardous Materials as to which Landlord
has the obligation under this Lease to remove or otherwise
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remediate, then if under applicable Law, Tenant for any period of time is
prevented from occupying or using all or any portion of the Premises due to the
presence, removal or remediation of any such Hazardous Materials, the Monthly
Installment of rent and Additional Rent shall be temporarily abated during any
such period of time in proportion to the degree to which Tenant's occupancy or
use of the Premises is so prevented by such presence, removal or remediation of
such Hazardous Materials.
14. Condemnation.
A. Definition of Terms. For the purposes of this Lease, the
term (1) "Taking" means a taking of the Premises or damage to the Premises
related to the exercise of the power of eminent domain and includes a voluntary
conveyance, in lieu of court proceedings, to any agency, authority, public
utility, person or corporate entity empowered to condemn property; (2) "Total
Taking" means the taking of the entire Premises or so much of the Premises as to
prevent or substantially impair the use thereof by Tenant for the uses herein
specified; (3) "Partial Taking" means a Taking which does not constitute a Total
Taking; (4) "Date of Taking" means the date upon which the title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor; and (5) "Award" means the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.
B. Rights. The parties agree that in the event of a Taking all
rights between them or in and to an Award shall be as set forth herein and
Tenant shall have no right to any Award except as set forth herein.
Notwithstanding the foregoing, Landlord and Tenant agree that each shall make
separate claims for an Award from the condemning authority, person or entity.
C. Total Taking. In the event of a Total Taking during the
term hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the Premises shall cease and terminate as of the Date of
Taking; (2) Landlord shall refund to Tenant any prepaid rent and any unapplied
security deposit; (3) Tenant shall pay Landlord any rent or charges due Landlord
under the Lease, each prorated as of the Date of Taking; and (4) Tenant shall
receive from the Award those portions of the Award attributable to trade
fixtures of Tenant, the unamortized value of the Tenant Improvements as well as
all other alterations, additions or improvements to the Premises paid for by
Tenant (with such unamortized value to be determined based on the useful life of
the particular alteration, addition or improvement), loss of Tenant's good will
and moving expenses of Tenant (but not any amount attributable to the value of
Tenant's leasehold estate) and Landlord shall receive from the Award those
portions thereof applicable to the Parcel and the unamortized value of the
Landlord Improvements and other improvements paid for by Landlord (with such
unamortized value to be determined based on the useful life of the particular
improvement).
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D. Partial Taking. In the event of a Partial Taking during the
term hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (2) from and after the Date of Taking the Monthly
Installment of rent shall be reduced in proportion to the degree to which
Tenant's use of the Premises is impaired by such Partial Taking; and (3) Tenant
shall receive from the Award the portions of the Award attributable to trade
fixtures of Tenant and the unamortized value of the Tenant Improvements as well
as other alterations, additions or improvements to the Premises paid for by
Tenant and located in the part of the Building taken by the Partial Taking and
Landlord shall receive from the Award those portions thereof applicable to the
Parcel and the unamortized value of the Landlord Improvements and other
improvements paid for by Landlord (with such unamortized value to be determined
based on the useful life of the particular improvement). In the event of a
Partial Taking, Landlord, upon receipt of the Award, shall promptly restore the
Parcel and the Landlord Improvements to an architecturally whole unit.
15. Mechanics' Lien. Tenant shall (A) pay for all labor and services
performed for, materials used by or furnished to, Tenant or any contractor
employed by Tenant with respect to the Premises; (B) indemnify, defend, protect
and hold Landlord and the Premises harmless and free from any liens, claims,
liabilities, demands, encumbrances, or judgments created or suffered by reason
of any labor or services performed for, materials used by or furnished to,
Tenant or any contractor employed by Tenant with respect to the Premises; (C)
give notice to Landlord in writing five (5) days prior to employing any laborer
or contractor to perform services related to, or receiving materials for use
upon the Premises; and (D) permit Landlord to post a notice of nonresponsibility
in accordance with the statutory requirements of California Civil Code Section
3094 or any amendment thereof. If any lien arising out of any work performed,
materials furnished or obligations incurred by Tenant is filed against the
Premises, within thirty (30) days following the notice to the Tenant of the same
Tenant shall cause such lien to be discharged of record or, if Tenant desires to
contest the lien, Tenant shall post security in an amount sufficient to ensure
release of the lien if a final nonappealable judgment establishing the validity
of the lien is entered at a later date. In the event Tenant is required to post
an improvement bond with a public agency in connection with the above, Tenant
agrees to include Landlord as an additional obligee.
16. Inspection of the Premises. Tenant shall permit Landlord and its
agents to enter the Premises (subject to Tenant's reasonable security
requirements) at any reasonable time for the purpose of inspecting the same,
performing Landlord's maintenance and repair responsibilities (upon 2 business
days prior notice except in an emergency), posting a notice of
non-responsibility for alterations, additions or repairs and at any time within
one hundred eighty (180) days prior to expiration of this Lease, to place upon
the Premises, ordinary "For Lease" or "For Sale" signs.
17. Compliance with Laws. Tenant shall, at its own cost, comply with
all of the requirements of all municipal, county, state
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and federal authorities now in force, or which may hereafter be in force,
pertaining to Tenant's use and occupancy of the Premises, and shall faithfully
observe all municipal, county, state and federal laws, statutes or ordinances
now in force or which may hereafter be in force pertaining to the use and
occupancy of the Premises. Tenant shall indemnify, protect, defend, and hold
Landlord harmless against any loss, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any applicable
law. Notwithstanding anything in this Paragraph 17 to the contrary, Tenant's
obligations with respect to alterations required by Law are governed by
Subparagraph 10.B above.
18. Subordination. The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Premises or Landlord's interest or estate
therein and any renewal, modification, consolidation, replacement, or extension
thereof (a "Security Instrument").
A. Priority. This Lease is subject and subordinate to all
Security Instruments existing as of the Commencement Date. However, if any
Lender so requires, this Lease shall become prior and superior to any such
Security Instrument.
B. Subsequent Security Instruments. At Landlord's election,
this Lease shall become subject and subordinate to any Security Instrument
created after the Commencement Date provided that the Lender holding such
Security Instrument agrees that in the event of foreclosure of the Security
Instrument in question, such Lender (or any purchaser at any foreclosure sale)
shall agree that, so long as there is not then an uncured Event of Default on
the part of Tenant hereunder, this Lease shall remain in full force and effect
notwithstanding the foreclosure of any such Security Instrument and such Lender
(or any purchaser at any foreclosure sale) shall recognize the tenancy of Tenant
on the terms and conditions contained in this Lease.
C. Documents. Tenant shall execute any reasonable document or
instrument required by Landlord or any Lender to make this Lease either prior or
subordinate to a Security Instrument, which may include such other matters as
the Lender customarily requires in connection with such reasonable agreements
which are not otherwise inconsistent with the provisions of this Lease,
including provisions that the Lender, if it succeeds to the interest of Landlord
under this Lease, shall not be (i) liable for any act or omission of any prior
landlord (including Landlord), (ii) subject to any offsets or defenses which
Tenant may have against any prior landlord (including Landlord), (iii) bound by
any rent or Additional Rent paid more than one (1) month in advance of the date
due under this Lease unless the Lender receives it from Landlord, (iv) liable
for any defaults on the part of Landlord occurring prior to the time that the
Lender takes possession of the Premises in connection with the enforcement of
its Security Instrument, (v) liable for the return of any security deposit
unless such deposit has been delivered to Lender, or (vi) bound by any agreement
or modification of the Lease made without the prior written consent of the
Lender. Tenant's failure to execute any
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such document or instrument conforming to the above requirements within twenty
(20) days after written demand therefor shall constitute a default by Tenant.
Tenant's obligation to execute and deliver any subordination agreement to any
future Lender shall be conditioned upon such Lender agreeing that in the event
of foreclosure of the mortgage or termination of the ground lease in question,
such Lender (or any purchaser at any foreclosure sale) shall agree that so long
as there is not then an uncured Event of Default on the part of Tenant under
this Lease, this Lease shall remain in full force and effect notwithstanding
such foreclosure or termination and such Lender (or any purchaser at any
foreclosure sale) shall recognize the tenancy of Tenant on the terms and
conditions contained in this Lease. If any Lender shall be a lender with respect
to a Security Instrument falling within the definition of Affiliate Deed of
Trust, then such agreement with Lender shall conform to the additional
requirements of Paragraph 18.E below.
D. Tenant's Attornment. Tenant shall attorn (1) to any
purchaser of the Premises at any foreclosure sale or private sale conducted
pursuant to any Security Instrument encumbering the Premises; (2) to any grantee
or transferee designated in any deed given in lieu of foreclosure; or (3) to the
lessor under any underlying ground lease should such ground lease be terminated.
E. Non-Disturbance Agreement from any Existing Lender. If
either at the time of execution of this Lease or the recording of a short form
memorandum of this Lease pursuant to Paragraph 44 hereof, there is then a deed
of trust existing as a lien against title to the Premises (hereinafter referred
to as an "Existing Deed of Trust"), Landlord shall cause the beneficiary under
the Existing Deed of Trust to execute and deliver to Tenant within sixty (60)
days after the date of execution of this Lease or as soon thereafter as
reasonably practicable but in no event later than November 1, 1996, a
Non-Disturbance Agreement in form and content reasonably acceptable to both
Tenant and the beneficiary under the Existing Deed of Trust, pursuant to which
the beneficiary shall agree that in the event of foreclosure of the Existing
Deed of Trust, such beneficiary (or any purchaser at any foreclosure sale) shall
agree that so long as there is not then an uncured Event of Default on the part
of Tenant under this Lease, this Lease shall remain in full force and effect and
such beneficiary (or any purchaser at any foreclosure sale) shall recognize the
tenancy of Tenant on the terms and conditions contained in this Lease, and shall
further expressly acknowledge that absent an Event of Default by Tenant under
this Lease or termination of this Lease, any insurance proceeds associated with
any damage or destruction of the Premises shall be made available for
restoration of the Premises in accordance with the provisions of Paragraph 13 of
this Lease.
19. Holding Over. This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after expiration
shall not constitute a renewal or extension or give Tenant any rights in or to
the Premises except as expressly provided in this Lease. Any holding over after
the expiration without the consent of Landlord shall be construed to be a
tenancy
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from month to month, at one hundred twenty-five percent (125%) of the monthly
rent for the last month of the Lease Term, and shall otherwise be on the terms
and conditions herein specified insofar as applicable.
20. Notices. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated below and shall be
given either by certified mail; by hand delivery; by overnight courier service;
or by telecopy with an original by regular mail. Any notice given by certified
mail shall be deemed to have been given when seventy-two (72) hours have elapsed
from the time such notice was deposited in the United States mails, certified
and postage prepaid, return receipt requested, addressed to the party to be
served at the last address given by that party to the other party under the
provisions of this paragraph. Any notice given by means other than certified
mail shall be deemed to have been given to the party to be served when delivered
to the last address given by that party to the other party under the provisions
of this paragraph. At the date of execution of this Lease, the address of
Landlord is:
Main Street Associates
c/o Thomas Properties
3100 Oak Road
Suite 360
Walnut Creek, CA 94596
and the address of Tenant is:
Thoratec Laboratories Corporation
2023 8th Street
Berkeley, CA 94710
which address shall change to the address of the Premises after Tenant has
commenced occupancy of the same.
Either party may change its address for notices by giving notice in accordance
with the provisions of this Paragraph 20.
21. Attorneys' Fees. In the event either party shall bring any action
or legal proceeding for damages for any alleged breach of any provision of this
Lease, to recover rent or possession of the Premises, to terminate this Lease,
or to enforce, protect or establish any term or covenant of this Lease or right
or remedy of either party, the prevailing party shall be entitled to recover as
a part of such action or proceeding, reasonable attorneys' fees and court costs,
including attorneys' fees and costs for appeal, as may be fixed by the court or
jury. The term "prevailing party" shall mean the party who received
substantially the relief requested, whether by settlement, dismissal, summary
judgment, judgment, or otherwise.
22. Subleasing and Assignment.
A. Landlord's Consent Required. Tenant's interest in this
Lease is not assignable, by operation of law or otherwise, nor shall Tenant have
the right to sublet the Premises, transfer any
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interest of Tenant therein or permit any use of the Premises by another party,
without the prior written consent of Landlord to each such assignment,
subletting, transfer or use, which consent Landlord agrees not to withhold
unreasonably, subject to the provisions of Subparagraphs 22.C and 22.D below. A
consent to one assignment, subletting, occupancy or use by another party shall
not be deemed to be a consent to any subsequent assignment, subletting,
occupancy or use by another party. Any assignment or subletting without such
consent shall be void and shall, at the option of Landlord, constitute an Event
of Default by Tenant.
Landlord's waiver or consent to any assignment or subletting hereunder
shall not relieve Tenant from any obligation under this Lease unless the consent
shall so provide.
B. Transferee Information Required. Subject to Subparagraph
22.D below, if Tenant desires to assign its interest in this Lease or sublet the
Premises, or transfer any interest of Tenant therein, or permit the use of the
Premises by another party (hereinafter collectively referred to as a
"Transfer"), Tenant shall give Landlord at least fifteen (15) business days
prior written notice of the proposed Transfer and of the terms of such proposed
Transfer, including, but not limited to, the name and legal composition of the
proposed transferee, a financial statement of the proposed transferee, the
nature of the proposed transferee's business to be carried on in the Premises,
the payment to be made or other consideration to be given to Tenant on account
of the Transfer, and such other pertinent information as may be requested by
Landlord, all in sufficient detail to enable Landlord to evaluate the proposed
Transfer and the prospective transferee.
C. Landlord's Rights. In the event Tenant seeks to Transfer
its interest in this Lease or the Premises (excluding a transfer permitted by
Subparagraph 22.D below), Landlord shall have the following options, which may
be exercised at its sole choice without limiting Landlord in the exercise of any
other right or remedy which Landlord may have by reason of such proposed
Transfer:
(i) Landlord may consent to the proposed Transfer on
the condition that Tenant agrees to pay to Landlord, as additional rent, fifty
percent (50%) of any and all rents or other consideration (including key money)
received by Tenant from the transferee by reason of such Transfer in excess of
the rent payable by Tenant to Landlord under this Lease less: (a) any brokerage
commissions, attorneys' fees and advertising expenses incurred by Tenant in
connection with the Transfer; (b) the costs of any alterations that must be made
by Tenant in order to obtain the Transfer in question; (c) the unamortized cost
of any alterations, additions or improvements to the Premises paid for by
Tenant, which cost shall be amortized, together with ten percent (10%) interest
on the unamortized balance, on a straight line basis over the useful life of the
particular alteration, addition or improvement, but only to the extent any such
alteration, addition or improvement (X) was not intended solely for Tenant's
particular use of the Premises or (Y) will actually be utilized by the
prospective transferee; and (d) the cost to Tenant of removing any or all of the
other alterations, additions or improvements to the Premises
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paid for by Tenant which Tenant shall be required or elect to remove. Tenant
expressly agrees that the foregoing is a reasonable condition for obtaining
Landlord's consent to any Transfer; or
(ii) Landlord may reasonably withhold its consent to
the proposed Transfer (with the provisions of Paragraph 43 below to apply to the
granting or withholding of such consent).
D. Permitted Transfers. Notwithstanding the foregoing, Tenant
may with notice to Landlord, but without Landlord's prior written consent and
without complying with Subparagraphs 22.B or 22.C, assign its interest in the
Lease or sublet the Premises or a portion thereof to (i) a subsidiary,
affiliate, division or corporation controlled by or under common control with
Tenant (a "Tenant Affiliate"); (ii) a successor corporation related to Tenant by
merger, consolidation, non-bankruptcy reorganization or government action; (iii)
a partnership, joint venture, limited liability company or other entity in which
Tenant or a Tenant Affiliate has a twenty-five percent (25%) or more ownership
interest: or (iv) a purchaser of substantially all of the Tenant's assets;
provided that, in each instance described above, (a) the transferee (in the case
of an assignment) assumes the obligations of the Tenant under this Lease in a
written instrument delivered to Landlord, and (b) the transferor tenant remains
liable as a primary obligor for the obligations of Tenant under this Lease.
23. Successors. The covenants and agreements contained in this Lease
shall be binding on the parties hereto and on their respective heirs, successors
and assigns (to the extent the Lease is assignable).
24. Mortgagee Protection. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage encumbering the
Premises, whose address shall have been previously furnished to Tenant. So long
as such beneficiary or mortgagee is making diligent efforts to cure the default,
including, but not limited to, obtaining possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effect a cure,
Tenant shall not have the right to terminate this Lease, provided, however, that
in order for the limitation on Tenant's right to terminate this Lease as set
forth in this sentence to be effective in the event it is necessary for
beneficiary or mortgagee to pursue obtaining possession of the Premises by power
of sale or judicial foreclosure to effect a cure, such beneficiary or mortgagee
must first have agreed in writing with Tenant that such beneficiary or mortgagee
will complete such cure as soon as is commercially reasonable under the
circumstances.
25. Estoppel Certificate and Financial Statements. At all times during
the Lease Term, each party agrees, within ten (10) business days following
request by the other party, to execute and deliver to the requesting party an
estoppel certificate (i) certifying that this Lease is unmodified and in full
force and effect or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect, (ii)
stating the date to which the rent and other charges
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are paid in advance, if any, (iii) acknowledging that there are not, to the
certifying party's knowledge, any uncured defaults on the part of any party
hereunder or, if there are uncured defaults, specifying the nature of such
defaults, and (iv) certifying such other information about the Lease as may be
reasonably required by the requesting party.
26. Surrender of Lease Not Merger. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases or
subtenants, or operate as an assignment to Landlord of any or all such subleases
or subtenants.
27. Waiver. The waiver by Landlord or Tenant of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. Any waiver shall be in
writing and signed by both Landlord and Tenant.
28. General.
A. Captions. The captions and paragraph headings used in this
Lease are for the purposes of convenience only. They shall not be construed to
limit or extend the meaning of any part of this Lease, or be used to interpret
specific sections. The word(s) enclosed in quotation marks shall be construed as
defined terms for purposes of this Lease. As used in this Lease, the masculine,
feminine and neuter and the singular or plural number shall each be deemed to
include the other whenever the context so requires.
B. Definition of Landlord. Subject to the provisions of
Paragraph 35 below (as relate to certain obligations of the initial Landlord
hereunder expressly surviving any assignment of the interest of Landlord under
this Lease), the term Landlord as used in this Lease, so far as the covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner at the time in question of the fee title of the Premises,
and in the event of any transfer or transfers of the title of such fee, the
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved of all liability
with respect to performance of any covenants or obligations on the part of
Landlord contained in this Lease to be performed after the date of such transfer
or conveyance; provided that any funds in the hands of Landlord or the then
grantor at the time of such transfer, in which Tenant has an interest, shall be
turned over to the grantee and Tenant receives a copy of a written assumption
agreement whereby the transferee assumes the obligations of Landlord under this
Lease to be performed after the date of such transfer or conveyance. It is
intended that the covenants and obligations contained in this Lease on the part
of Landlord shall, subject as aforesaid, be binding upon each Landlord, its
heirs, personal representatives, successors and assigns only during its
respective period of ownership.
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C. Time of Essence. Time is of the essence for the performance
of each term, covenant and condition of this Lease.
D. Severability. In case any one or more of the provisions
contained herein, except for the payment of rent, shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
E. Quiet Enjoyment. Upon Tenant paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant shall
have quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease.
F. Law. As used in this Lease, the term "Law" or "Laws" shall
mean any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any government
agency or authority having jurisdiction over the parties to this Lease or the
Premises or both, in effect at the Commencement Date of this Lease or any time
during the Lease Term, including, without limitation, any regulation, order, or
policy of any quasi-official entity or body (e.g., board of fire examiners,
public utility or special district).
G. Agent. As used in this Lease, the term "Agent" shall mean,
with respect to either Landlord or Tenant, its respective agents, employees,
contractors (and their subcontractors), and invitees (and in the case of Tenant,
its subtenants).
H. Lender. As used in this Lease, the term "Lender" shall mean
any beneficiary, mortgagee, secured party or other holder of any deed of trust,
mortgage or other written security device or agreement affecting Landlord's
interest in the Premises.
I. Landlord Affiliate. As used in this Lease, the term
"Landlord Affiliate" shall mean a constituent partner of Landlord or an entity
controlling, controlled by, or under common control with Landlord or a
constituent partner of Landlord.
J. Affiliate Deed of Trust. As used in this Lease, the term
"Affiliate Deed of Trust" shall mean any deed of trust now or hereafter executed
whose beneficiary is a Landlord Affiliate.
29. Sign. Provided Tenant first obtains all required permits and
approvals from the City of Pleasanton and any other governmental entity having
jurisdiction thereover, Tenant may install, at its cost, monument and building
signage complying with City ordinances. Except as provided in the previous
sentence, Tenant shall not place or permit to be placed any sign or decoration
on the Parcel or the exterior of the Building without
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the prior written consent of Landlord. Tenant, upon written notice by Landlord,
shall immediately remove any sign or decoration that Tenant has placed or
permitted to be placed on the Parcel or the exterior of the Building in
violation of this paragraph and if Tenant fails to so remove such sign or
decoration within thirty (30) days after Landlord's written notice, Landlord may
enter upon the Premises and remove said sign or decoration and Tenant agrees to
pay Landlord, as additional rent upon demand, the cost of such removal. At the
termination of this Lease, Tenant shall remove any sign which it has placed on
the Parcel or Building and shall repair any damage caused by the installation or
removal of such sign.
30. Interest on Past Due Obligations. Any Monthly Installment of rent
due from Tenant, or any other sum due under this Lease from Tenant to Landlord
or from Landlord to Tenant, which is received by Landlord or Tenant, as
applicable, after the date ten (10) days following the date written notice is
given by Landlord to Tenant or Tenant to Landlord, as applicable, that such sum
has not been paid when due, shall bear interest from said due date until paid,
at an annual rate equal to the lower of (the "Permitted Rate"): (1) the maximum
rate of interest permitted by law; or (2) the rate of interest as publicly
announced from time to time by Bank of America (main office - San Francisco) as
its prime or reference rate plus one percent (1%). Payment of such interest
shall not excuse or cure any default by Tenant. In addition, each party shall
pay all costs and attorneys' fees incurred by the other party in collection of
such amounts.
31. Surrender of the Premises. On the last day of the term hereof, or
on the sooner termination of this Lease, Tenant shall, subject to Paragraphs 13
and 14, surrender the Premises to Landlord in their condition existing as of the
Commencement Date of this Lease, ordinary wear and tear excepted, and as to any
office portion of the Premises, all interior walls cleaned or washed as
appropriate and the floors cleaned and waxed. Tenant shall remove all of
Tenant's personal property and trade fixtures from the Premises, and all
property not so removed shall be deemed abandoned by Tenant. Tenant, at its sole
cost, shall repair any damage to the Premises caused by the removal of Tenant's
personal property, machinery and equipment, which repair shall include, without
limitation, the patching and filling of holes and repair of structural damage.
If the Premises are not so surrendered at the termination of this Lease, Tenant
shall indemnify, defend, protect and hold Landlord harmless from and against
loss or liability resulting from delay by Tenant in so surrendering the Premises
including without limitation, any claims made by any succeeding tenant or losses
to Landlord due to lost opportunities to lease to succeeding tenants.
32. Authority. The undersigned parties hereby warrant that they have
proper authority and are empowered to execute this Lease on behalf of Landlord
and Tenant, respectively.
33. Title. This Lease is made subject to all matters of public record
affecting title to the Premises as described in the Preliminary Title Report
dated July 5, 1996 prepared by First American Title Guaranty Company, Order No.
SP15640, a copy of which
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is attached hereto as EXHIBIT "D" (the "Title Report") excluding Exception Nos.
10 and 14 therein.
Landlord shall use due diligence to enforce all rights and easements
which are appurtenant to the Premises.
34. Brokers. Tenant represents and warrants to Landlord that it has not
dealt with any broker respecting this transaction other than TRI Commercial
Oncor International and hereby agrees to indemnify and hold Landlord harmless
from and against any brokerage commission or fee, obligation, claim or damage
(including attorneys' fees) paid or incurred respecting any broker claiming
through Tenant or with which/whom Tenant has dealt with respect to the Premises,
other than TRI Commercial Oncor International. Landlord shall pay any and all
leasing commissions due to TRI Commercial Oncor International, as a result of
this transaction pursuant to the terms of a separate agreement between Landlord
and TRI Commercial Oncor International. Landlord agrees to indemnify and hold
Tenant harmless from and against any brokerage, commission or fee, obligation,
claim or damage (including attorneys' fees) paid or incurred respecting any
broker claiming through Landlord or with which/whom Landlord has dealt with
respect to the Premises other than TRI Commercial Oncor International.
35. Limitation on Landlord's Liability. So long as Landlord is a
corporation, trust, partnership, joint venture, unincorporated association or
other form of business entity, (i) the obligations of Landlord shall not
constitute personal obligations of the officers, directors, trustees, partners,
joint venturers, members, owners, stockholders, or other principals of such
business entity ("Beneficial Owners"), and (ii) Tenant shall have recourse only
to the assets of such business entity which are real property subject to this
Lease or proceeds therefrom (e.g., condemnation proceeds, insurance proceeds, or
rent) (the "Project Assets") for the satisfaction of such obligations and not
against the other assets of such business entity or its Beneficial Owners, other
than to the extent of their interests in the Project Assets owned by such
business entity.
36. Hazardous Material.
A. Definitions. As used herein, the term "Hazardous Material"
shall mean any substance: (i) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; (ii) which is or becomes defined as a
"hazardous waste," "hazardous substance," pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and/or the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); (iii)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; (iv) the presence
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of which on the Premises poses or threatens to pose a known material risk to the
health or safety of persons on or about the Premises; (v) without limitation
which contains gasoline, diesel fuel or other petroleum hydrocarbons; (vi)
without limitation which contains polychlorinated biphenyls (PCBs), asbestos or
urea formaldehyde foam insulation; or (vii) without limitation radon gas.
B. Obligations. Landlord, at its sole cost, shall comply with
all Laws which impose liability or responsibility upon either Landlord or Tenant
to investigate, remediate or otherwise take any action with respect to any
Hazardous Materials existing in, or under or about the Premises as of the date
of delivery of possession to Tenant (the "Existing Environmental Condition").
Landlord shall defend, protect, hold harmless and indemnify Tenant and its
Agents with respect to all actions or claims by federal, state, and local
governmental agencies or by other third parties for fines, penalties, fees
(including, but not limited to, reasonable attorneys' and consultants' fees),
costs, damages, liabilities, losses, remediation costs, investigation costs,
response costs and other expenses arising out of, resulting from, or caused by
Landlord's failure to perform the foregoing obligations in this Subparagraph B
or the introduction onto the Premises by Landlord or its Agents of any Hazardous
Materials. Tenant shall defend, protect, hold harmless and indemnify Landlord
and its Agents with respect to all actions or claims by federal, state, and
local governmental agencies or by other third parties for fines, penalties, fees
(including, but not limited to, reasonable attorneys' and consultants' fees),
costs, damages, liabilities, losses, remediation costs, investigation costs,
response costs and other expenses arising out of, resulting from, or caused by
the introduction onto the Premises by Tenant or its Agents of any Hazardous
Materials.
C. Provisions Survive Termination. The provisions of this
Paragraph 36 shall survive the expiration or termination of this Lease.
D. Controlling Provisions. The provisions of this Paragraph 36
are intended to govern the rights and liabilities of the Landlord and Tenant
hereunder respecting Hazardous Materials to the exclusion of any other
provisions in this Lease that might otherwise be deemed applicable. The
provisions of this Paragraph 36 shall be controlling with respect to any
provisions in this Lease that are inconsistent with this Paragraph 36.
37. Option to Extend.
A. Exercise of Option. Provided that Tenant is not in default
under this Lease at the time of exercise of the hereinafter described options,
Tenant shall have two (2) options to extend the term of this Lease, each for a
period of five (5) years. Said options shall be exercised only by written notice
delivered to Landlord not later than twelve (12) months prior to the expiration
date of the then existing term of this Lease. In all respects, the terms,
covenants and conditions of this Lease shall remain unchanged during each of the
Option Terms, except that the Monthly
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<PAGE> 37
Installment of rent payable during each Option Term shall be revised in
accordance with Subparagraph 37.B below, and except that there shall be no
further option to extend the term of this Lease at the end of the Second Option
Term.
B. Option Term Rent. The Monthly Installment of rent payable
during each of the Option Terms shall be the Fair Market Rent as defined in
Subparagraph 37.C below for the Premises for the Option Term in question.
C. Fair Market Rent. For the purposes of this Paragraph 37,
the term "Fair Market Rent" shall mean the going market rental and any
adjustment or adjustments to such rental at such time(s) in such amount or using
such formula as is prevailing at the time of the commencement of the Option Term
in question, for comparably equipped space in buildings containing between
50,000 to 65,000 square feet, located within the general area of the Premises
but paying particular attention to the Hacienda Business Park, and in a
condition comparable to then condition of the Premises, taking into account all
legal uses for which the Premises could be used without material alteration
thereto and the value of all the Improvements in the Premises made by Landlord
for a tenant proposing to sign a lease for a similar term and having financial
qualifications similar to Tenant and using as a guide equivalent space in the
size range specified above of similar age, construction, quality and location.
There shall be excluded from any determination of "Fair Market Rent" the rental
value attributable to any alterations constructed by Tenant with its own funds.
Any determination of "Fair Market Rent" shall take into account rental
concessions and other economic inducements then prevailing in the market. Also,
if there is no leasing commission payable by Landlord in connection with
Tenant's exercise of an option to extend, then there shall be excluded from any
determination of "Fair Market Rent" the rental value attributable to a standard
leasing commission customarily paid by a lessor in connection with a five (5)
year lease amortized on a straight line basis over the five (5) year Option Term
in question. In no event shall the Fair Market Value Rent in each Option Term be
less than the last monthly installment of rent payable during the previous term.
D. Appraisal. Promptly following exercise of any option to
extend, the parties shall meet and endeavor to agree upon the Fair Market Rent
of the Premises for the Option Term in question. If within thirty (30) days
after exercise of the option, the parties cannot agree upon the Fair Market
Rent, the parties shall submit the matter to binding appraisal in accordance
with the following procedure: Within thirty (30) days after exercise of the
option, the parties shall either (1) jointly appoint an appraiser for this
purpose or (2) failing this joint action, separately designate a disinterested
appraiser. No person shall be appointed or designated an appraiser unless he or
she has at least five (5) years experience in appraising major commercial
property in Alameda County and is a member of a recognized society of real
estate appraisers. If, within thirty (30) days after their appointment, the two
appraisers reach agreement on the Fair Market Rent, that value shall be binding
and conclusive upon the parties. If the two
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<PAGE> 38
appraisers thus appointed cannot reach agreement on the question presented
within thirty (30) days after their appointment, then the appraisers thus
appointed shall appoint a third disinterested appraiser having like
qualifications. Within thirty (30) days after the appointment of the third
appraiser, the two appraisers appointed by the parties shall each submit to the
third appraiser and to the parties their independent appraisal of the Fair
Market Rent of the Premises for the Option Term in question. Within thirty (30)
days after receipt of the two independent appraisals, the third appraiser shall
select one of the two appraisals submitted by the two appraisers appointed by
the parties as the appraisal closest to the Fair Market Rent of the Premises.
The appraisal of the Fair Market Rent so selected by the third appraiser shall
be binding and conclusive upon the parties. Each party shall pay the fees and
expenses of the appraiser appointed by it and shall share equally the fees and
expenses of the third appraiser. If the two appraisers appointed by the parties
cannot agree on the appointment of the third appraiser, they or either of them
shall give notice of such failure to agree to the parties and if the parties
fail to agree upon the selection of such third appraiser within ten (10) days
after the appraisers appointed by the parties give such notice, then either of
the parties, upon notice to the other party may request such appointment by the
American Arbitration Association, or on its failure, refusal or inability to
act, may apply for such appointment to the presiding judge of the Superior Court
of Alameda County, California.
38. Reasonable Approval Standard. Whenever in this Lease the review,
acceptance, approval or consent of either Landlord or Tenant ("Reviewing Party")
is required to the taking of or refraining from taking any action under the
Lease, or to the manner of performing or observing any covenant or condition of
the Lease (collectively "Matter"), the favorable review, acceptance, approval or
consent (collectively "Approval") as to any such Matter shall neither be
unreasonably withheld nor unduly delayed by the Reviewing Party, and if the
Reviewing Party desires to deny or withhold its Approval as to any such matter,
the Reviewing Party shall, by written notice to the other party given within the
time period for the giving of such Approval as provided herein or elsewhere in
this Lease, state with particularity the basis for the denial or withholding by
such Reviewing Party of such Approval. Provided the request made of the
Reviewing Party for the Approval references this Paragraph 38 and indicates to
the effect that a lack of an appropriate response within thirty (30) days (or
within such other period of time for response if the Lease otherwise expressly
provides a specific period for such Approval) will be deemed to constitute
Approval, then the failure of the Reviewing Party to so respond in writing
(including stating with particularity the basis for any denial or withholding of
such Approval) to any Matter within thirty (30) days of receipt of the written
request of the other party (or within such other period of time for response if
the Lease otherwise expressly provides a specific period for such Approval),
shall be deemed to constitute the Approval by such Reviewing Party as to the
Matter.
39. Memorandum of Lease. Promptly following the execution of this
Lease, both Landlord and Tenant shall execute, acknowledge and
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<PAGE> 39
cause to be recorded in the official records of Alameda County, California, a
short form memorandum of this Lease, including the right of first opportunity
under Section 42 of this Lease, in form reasonably acceptable to Landlord and
Tenant.
40. Security Deposit. By execution hereof, Landlord acknowledges
receipt of the sum of Eight Hundred Eighty-Five Thousand Six Hundred Sixty
Dollars ($885,660) in cash from Tenant, as security for the faithful performance
by Tenant of all of the terms and conditions of this Lease to be kept and
performed by Tenant during the term hereof ("Security Deposit"). The Security
Deposit shall secure Tenant's obligations hereunder to construct the Tenant
Improvements, pay rent and all other sums due to Landlord hereunder, to maintain
the Premises and repair damages thereto as provided in this Lease, to surrender
the Premises to Landlord in clean condition and good repair upon termination of
this Lease and timely to discharge Tenant's other obligations hereunder. Except
as provided below, Landlord may use and commingle the Security Deposit with
other funds of Landlord. If Tenant fails to perform its obligations hereunder,
then Landlord may, but without any obligation so to do, apply all or any portion
of the Security Deposit toward fulfillment of Tenant's unperformed obligations.
If Landlord does so apply any portion of the Security Deposit, Tenant, upon
demand by Landlord, shall immediately pay to Landlord a sufficient amount in
cash to restore the Security Deposit to its full original amount. On termination
of this Lease, if Tenant has then fully performed all its obligations hereunder,
Landlord shall return the Security Deposit, with interest thereon, to Tenant. If
Landlord, prior to the expiration of the term of this Lease, sells or otherwise
transfers Landlord's rights or interest under this Lease, Landlord may deliver
the Security Deposit to the transferee, whereupon, Landlord shall have no
further liability to Tenant concerning the Security Deposit. Notwithstanding any
provision hereinabove to the contrary, Landlord shall hold, at its own risk, a
portion of the Security Deposit equal to SEVEN HUNDRED FIFTY THOUSAND ($750,000)
in a certificate of deposit account at Civic Commerce Bank in Walnut Creek, with
all interest thereon accruing to the benefit of Tenant, until such time as
Tenant has commenced occupancy of the Premises, at which time said amount and
all interest thereon shall be returned to Tenant and Tenant shall obtain the
letter of credit required pursuant to Section 43 of this Lease.
41. Modifications for Lender. If, in connection with obtaining
financing for the Premises, or any portion thereof, Landlord's Lender shall
request reasonable modifications to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not materially adversely affect Tenant's rights
hereunder as determined by Tenant in its sole reasonable judgment and do not
increase Tenant's monetary obligations hereunder.
42. Right of First Opportunity to Purchase.
A. Grant of Right. Landlord shall not, at any time during the
term of this Lease, offer to sell or accept an offer to purchase (collectively
herein called an "offer to sell") the
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Premises without first giving to Tenant at least thirty (30) days prior written
notice of Landlord's election to sell the Premises, which notice is hereinafter
referred to as the "Notice of Sale".
B. Notice of Sale. The Notice of Sale shall include the price
and other terms and conditions reasonably appropriate to a sales transaction on
which Landlord is willing to sell the Premises.
C. Response by Tenant. For a period of fifteen (15) days after
receipt by Tenant of the Notice of Sale, and only during such period, Tenant
shall have the right to accept the offer of sale set forth in the Notice of Sale
only by doing all of the following prior to the expiration of said fifteen (15)
day period: (i) giving written notice of acceptance to Landlord, which notice
shall state that Tenant agrees to purchase the Premises on the same terms, price
and conditions as set forth in the Notice of Sale and (ii) delivering to
Landlord at the same time the full amount of any reasonable earnest money
deposit specified in the Notice of Sale.
D. No Response. In the event that Landlord does not receive
written notice of Tenant's acceptance of the offer to sell and the earnest money
deposit within said fifteen (15) day period, there shall be a conclusive
presumption that Tenant has elected not to exercise Tenant's right to purchase
the Premises pursuant to this Paragraph 42, and Landlord may sell the Premises
to a third party at any time thereafter so long as the purchase price paid by
the third party purchaser is no less than ninety five percent (95%) of the
Purchase Price specified in the Notice of Sale. Other than the limitation on
price specified in the previous sentence, the terms and conditions of the sale
to the third party may be different than those specified in the Notice of Sale.
E. Landlord's Re-Offer. If, after having given Tenant a Notice
of Sale, Landlord decides to offer to sell the Premises at a purchase price less
than ninety five percent (95%) of the Purchase Price specified in the Notice of
Sale, Landlord shall give Tenant a new Notice of Sale (as used in this Paragraph
42, the "Re- Offer Notice"). For a period of five (5) business days after
receipt by Tenant of the Re-Offer Notice, and only during such period, Tenant
shall have the right to accept the offer of sale set forth in the Re-Offer
Notice only by doing all of the following prior to the expiration of said five
(5) business day period: (i) giving written notice of acceptance to Landlord,
which notice shall state that Tenant agrees to purchase the Premises on the same
terms, price and conditions as set forth in the Re-Offer Notice and (ii)
delivering to Landlord at the same time the full amount of any earnest money
deposit specified in the Re-Offer Notice. In the event Landlord does not receive
written notice of Tenant's acceptance of the offer of sale set forth in the
Re-Offer Notice and the earnest money deposit within said five (5) business day
period, there shall be a conclusive presumption that Tenant has elected not to
exercise Tenant's right to purchase the Premises pursuant to this Paragraph 42,
and Landlord may sell the Premises to a third party at any time thereafter so
long as the purchase price paid by the third party purchaser is no less than
ninety five percent (95%) of the purchase price specified in the Re-Offer
Notice. Other than the limitation on price specified in the
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<PAGE> 41
previous sentence, the terms and conditions of the sale to the third party may
be different than those specified in the Re-Offer Notice.
F. Related Entitles. Notwithstanding the foregoing provisions,
the right of first opportunity to purchase granted in this Paragraph 42 shall
not apply to any transaction, conveyance, sale, transfer or agreement affecting
the Premises entered into between the general partners of Landlord, or between
one of the general partners and any entity controlling, controlled by or under
common control with such general partner.
G. Termination. The foregoing right of first opportunity to
purchase shall terminate:
(i) upon expiration or other termination of the term
of this Lease;
(ii) in the event the Premises is sold at a
foreclosure sale or transferred pursuant to a deed in lieu of foreclosure;
(iii) in the event that an Event of Default shall
occur under this Lease and remain uncured as of the date Tenant attempts to
exercise its right to purchase the Premises under this Paragraph 42;
(iv) in the event that Tenant shall have assigned
this Lease or sublet substantially all of the Premises (except to a party
described in Paragraph 22.D above); and
(v) in the event Tenant fails to exercise its rights
under this Paragraph 42 at its first opportunity to do so and a sale to a person
or entity (other than a Landlord Affiliate or other entity described in
Paragraph 42.F above) consistent with the requirements of this Paragraph 42 has
occurred.
H. No Assignment. The rights granted to Tenant under this
Paragraph 42 may not be severed from this Lease or separately sold, assigned or
otherwise transferred.
I. Subordination. Notwithstanding anything in the foregoing to
the contrary, the rights granted to Tenant under this Paragraph 42 are, and
shall be at all times subject and subordinate to, any mortgage or deed of trust
constituting a lien against the Premises or any part thereof, whether such
mortgage or deed of trust has heretofore been, or may hereafter be placed
against the Premises by Landlord. Tenant agrees to execute any documents
required by the holder of any mortgage or deed of trust to effectuate or confirm
the subordination of the rights of Tenant under this Paragraph 42 to such
mortgage or deed of trust. With respect to the Existing Deed of Trust only, the
Tenant may require, as a condition to executing such subordination agreement,
that the beneficiary of the Existing Deed of Trust agree to recognize Tenant's
rights under this Paragraph 42 with respect to any sale occurring after any
foreclosure sale or deed in lieu of foreclosure in which the beneficiary of the
Existing Deed of Trust acquires
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title to the Premises at such foreclosure sale or by deed in lieu
of foreclosure.
43. Letters of Credit. Tenant shall cause to be delivered to Landlord,
within fifteen (15) business days following the receipt by Tenant of that
portion of its Security Deposit (and all interest thereon) to which Tenant is
entitled pursuant to the last sentence of Section 40 of this Lease, an
irrevocable and unconditional letter of credit, in form and substance reasonably
satisfactory to Landlord and issued by an issuing bank reasonably satisfactory
to Landlord. The letter of credit shall be in the amount of SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($750,000). Subject to the terms below, the letter of credit
shall expire on the final date of the initial fifteen (15) year Lease Term. If
the expiration date of the letter of credit is prior to such date, then the
letter of credit shall be renewed and provided to Landlord no later than fifteen
(15) days prior to the expiration date on its face. If Tenant fails to pay Rent
or any other sum when due under this Lease or fails to meet any other obligation
under this Lease, and such failure, with the passing of time or the giving of
notice or both, would constitute an event of default under this Lease, then
Landlord shall have the right to draw immediately on said letter of credit in an
amount which Landlord deems necessary to cure any such failure, and thereafter
to apply all or part of any amounts so drawn to cure such default. If and until
any amounts drawn on the letter of credit by Landlord are applied to cure a
default by Tenant as provided above, such applied amounts shall be held by
Landlord as a security deposit pursuant to the terms of Section 40 hereof. In
the event that Landlord applies any amount drawn under the letter of credit as
provided above, Tenant shall, within ten (10) days after demand by Landlord, pay
to Landlord a cash amount to be held as a security deposit pursuant to Paragraph
40 hereof, such that, at all times, except as provided below, the amount
remaining to be drawn on the letter of credit plus the amount held by Landlord
as a security deposit under Paragraph 40 hereof shall total at least Eight
Hundred Eighty-Five Thousand Six Hundred Sixty Dollars ($885,660).
Notwithstanding the foregoing, if Tenant is not in default under this Lease as
of the expiration of the letter of credit (as the same has been renewed pursuant
to the provisions above) the same shall be returned to Tenant. Further,
notwithstanding any provision in this Lease to the contrary, provided Tenant is
not then in default under this Lease:
(i) if at any time during the Lease Term (A) Tenant has a net
worth equal to or in excess of Sixty Million Dollars
($60,000,000) or (B) Tenant has an overall trend of positive
earnings as measured in eight out of any ten consecutive
quarters and Tenant has a net worth of at least Twenty Million
Dollars ($20,000,000), then, in either case (A) or (B), the
amount of the letter of credit shall be reduced to Five
Hundred Thousand Dollars ($500,000);
(ii) if at any time during the Lease Term (A) Tenant has a net
worth equal to or in excess of Eighty Million Dollars
($80,000,000) or (B) Tenant has an overall trend of positive
earnings in any twelve out of fourteen consecutive quarters
and Tenant has a net worth of at
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least Twenty Million Dollars ($20,000,000), then, in either
case (A) or (B), the letter of credit shall be reduced to Two
Hundred Fifty Thousand Dollars ($250,000);
(iii) if at any time after July 31, 2003 Tenant has a net worth of
at least Twenty Million Dollars ($20,000,000), the letter of
credit shall be immediately returned to Tenant and Landlord
shall have no further right to draw upon such letter of credit
or to require any replacement therefor; and
(iv) if at any time during the Lease Term Tenant has a net worth
equal to or in excess of One Hundred Ten Million Dollars
($110,000,00) or a credit rating of (A--) or its equivalent,
the letter of credit shall be immediately returned to Tenant
and Landlord shall have no further right to draw upon such
letter of credit or to require any replacement thereof.
Notwithstanding any provision hereinabove to the contrary, at any time or at
such times as the amount of Tenant's letter of credit shall be reduced in
accordance with the foregoing sentence, Landlord shall have no right to require
that the amount of the letter of credit be subsequently increased at a later
date. For purposes of this Section 43, Tenant's net worth shall be determined in
accordance with GAAP.
44. Purchase Agreement. No later than five (5) business days following
execution of this Lease, Landlord shall present Tenant evidence that either (a)
the Purchase Agreement has been amended by the parties thereto to eliminate
Section 6 (City of Pleasanton Planned Development Permit) therefrom and that all
references therein to the rights of CalProp, L.P. with respect to the approval
of the design and development of any structure on the Parcel shall be deleted
therefrom, or (b) CalProp, L.P. shall have provided all necessary design and
development approvals pursuant to the Purchase Agreement in a form reasonably
acceptable to Tenant so as to provide assurance to Tenant that CalProp, L.P.
will not withhold consent to any of the Improvements to be constructed on the
Premises as determined by Landlord and Tenant.
45. Parking and Access Easements. Landlord and Tenant acknowledge that
Tenant would not have entered into this Lease without the parking and access
easements to which the Owner of the Parcel is entitled pursuant to that certain
Declaration of Covenants, Conditions and Restrictions made on July 6, 1995 by
CalProp, L.P. which provides for reciprocal parking and access easements subject
to certain limitations ("Declaration"). Landlord hereby warrants that the
Declaration entitles Tenant to use all of the parking spaces located on the
entirety of the Property (as such term is defined in the Declaration) except for
the use of three parking spaces presently identified by appropriate signage and
located adjacent to the building which is presently located on Parcel 1 (as such
term is defined in Declaration). Said Declaration is attached to this Agreement
as EXHIBIT "E". Landlord agrees that, in no event, shall it agree to any
amendment to the Declaration or any other agreement which materially and
adversely affects Tenant's parking and access rights over the entirety of the
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Property (as defined in Declaration). Notwithstanding the foregoing to the
contrary, in no event shall Tenant be required to pay for, either directly or
indirectly, by way of reimbursement to Landlord or otherwise, any costs incurred
by Landlord as the Managing Owner (as such term is defined in Declaration) for
which the Owner of Parcel 1 (as such term is defined in Declaration) is
responsible pursuant to the terms of the Declaration.
46. Tenant's Consent to New Contract Affecting the Premises. Landlord
shall not, after the date of execution of this Lease, enter into or provide
consent for any other party to enter into, without Tenant's written consent
which shall not be unreasonably withheld or delayed, any contract or agreement
pertaining to the Premises which may be reasonably expected to adversely
interfere with any of Tenant's rights under this Lease. In the event that any
contract or agreement which interferes with any of Tenant's rights under this
Lease is entered into by Landlord or by any other party, including, without
limitation, CalProp, L.P. or any affiliate of CalProp, L.P., without the prior
written consent of Tenant, then Tenant shall have the unilateral right to
terminate this Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
TENANT:
THORATEC LABORATORIES CORPORATION
a California corporation
DATED: July 25, 1996 By: /s/ CHERYL D. HESS
-------------------------------
Name: Cheryl D. Hess
-------------------------------
Title: Chief Financial Officer,
-------------------------------
Vice President-Finance and
-------------------------------
Secretary
-------------------------------
LANDLORD:
MAIN STREET ASSOCIATES
a California general partnership
DATED: July 25, 1996 By: /s/ STEVEN T. THOMAS
-------------------------------
Name: Steven T. Thomas
-------------------------------
Title: General Partner
-------------------------------
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<PAGE> 45
EXHIBIT "A"
LEGAL DESCRIPTION OF PARCEL
(See the immediately following 1-page legal description)
<PAGE> 46
LEGAL DESCRIPTION
REAL PROPERTY in the City of Pleasanton, County of Alameda, State of
California, described as follows:
PARCEL ONE:
Parcel 2, Parcel Map 6859, filed August 4, 1995, Book 218, of Parcel Maps, Page
75, Alameda County Records.
Excepting therefrom:
All oil, gas, minerals and other hydrocarbon substances in and under or that
may be produced from a depth below 500 feet from the surface of said land,
without right of entry upon the surface of said land, for the purpose of
mining, drilling, exploring or extracting such oil, gas, minerals and other
hydrocarbon substances or other use of or rights in or to any portion of the
surface of said land to a depth of 500 feet below the surface thereof, as
reserved in the Deed from Volk-McLain Communities, Inc. to Qualified
Investments, Inc., recorded June 27, 1967, Reel 1988, Image 207, Series No.
AZ/60836, Official Records.
A.P. No. 941-1301-062 (portion)
PARCEL TWO:
Non-Exclusive easement appurtenant to Parcel One for ingress, egress and access
for the passage of vehicles and pedestrians as created by Paragraph 2.3 of the
instrument entitled "Declaration of Covenants, Conditions and Restrictions
(Parcels 1 and 2, Parcel Map 6859)" recorded August 4, 1995, Series No.
95172357, Alameda County Records, upon the terms and conditions contained in
said instrument over lands in the City of Pleasanton, County of Alameda, State
of California; described as follows:
The Westerly 40 feet of Parcel 1, Parcel Map 6859 filed August 4, 1995, Book
218, of Parcel Maps, Page 75, Alameda County Records.
PARCEL THREE:
Non-exclusive parking and passage of Motor Vehicles appurtenant to Parcel One
as contained in the Declaration of Covenants, Conditions and Restrictions
recorded August 4, 1995, Series No. 95172357, Official Records, upon the terms
and conditions therein.
* * * * *
EXHIBIT A
<PAGE> 47
EXHIBIT "B"
SITE PLAN
(See the immediately following 1-page Site Plan)
<PAGE> 48
Diagram
<PAGE> 49
EXHIBIT "C"
IMPROVEMENT AGREEMENT
This Improvement Agreement is made part of that Lease dated July 25,
1996 (the "Lease") by and between MAIN STREET ASSOCIATES, a California general
partnership ("Landlord"), and THORATEC LABORATORIES CORPORATION, a California
corporation ("Tenant"). Landlord and Tenant agree that the following terms are
part of the Lease:
1. Purpose of Improvement Agreement. The purpose of this Improvement
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of the Improvements (which includes both the
Landlord Improvements and the Tenant Improvements) on the Parcel.
2. Definitions. As used in this Improvement Agreement, the following
terms shall have the following meanings, and initially capitalized terms which
are not defined below, but which are defined in the Lease and which are used in
this Improvement Agreement, shall have the meanings ascribed to them by the
Lease:
A. Approved Specifications. The term "Approved Specifications"
shall mean those specifications for the Landlord Improvements to be constructed
by Landlord which are described on Schedule "C-1" to this Improvement Agreement.
B. Building or Building Shell. The term "Building" or
"Building Shell" shall mean the Building to be constructed by Landlord on the
Parcel in accordance with the Final Building Plans, and prior to the
construction or addition thereto of the Tenant Improvements.
C. Final Building Plans. The term "Final Building Plans" shall
mean those plans and specifications for the Building Shell and all additional
improvements to be constructed by Landlord which are to be designed by Landlord
and approved by Tenant pursuant to Paragraph 4 below.
D. Final Tenant Improvement Plans. The term "Final
Tenant Improvement Plans" shall mean those plans and specifications
for the Tenant Improvements to be constructed and designed by
Tenant and approved by Landlord pursuant to Paragraph 5 below.
E. Tenant Improvements. The term "Tenant Improvements" shall
mean the tenant improvements to be constructed by Tenant in accordance with the
Final Tenant Improvement Plans.
F. Substantial Completion and Substantially Complete. The
terms "Substantial Completion" and "Substantially Complete" shall each mean the
date when both of the following have occurred with respect to the Landlord
Improvements: (i) the construction of the Landlord Improvements has been
substantially completed in accordance with the provisions of this Improvement
Agreement as certified by Landlord's architect and Tenant's architect (except
C-1
<PAGE> 50
for minor punch list items which will not substantially interfere with Tenant's
construction of Tenant Improvements or Tenants subsequent use of the Premises);
and (ii) any activities in and improvements to the outside area of the Premises
have been sufficiently concluded and completed so as not unreasonably to
interfere with Tenant's access to the Building, use of the parking area and
other outside areas and construction of Tenant Improvements (including the
elimination of any outside storage of construction materials and the removal of
any construction trailers from the Premises).
G. Target Completion Date. The term "Target Completion Date"
shall mean December 31, 1996.
H. Excused Delay. The term "Excused Delay" shall mean (a) any
delay in the construction of the Landlord Improvements beyond the Target
Completion Date to the extent reasonably demonstrated by Landlord to have been
caused solely by one or more of the following reasons: (i) the fault or neglect
of Tenant, (ii) Tenant's failure to submit or approve plans as required by this
Improvement Agreement or otherwise to perform its obligations under this
Improvement Agreement, (iii) change orders requested by Tenant to the extent of
the Excused Delay agreed upon by Landlord and Tenant at the time of approval of
any change order by such parties, (iv) entry by Tenant onto the Premises prior
to the Substantial Completion of the Building to the extent that such entry
materially interferes with the construction of the Building and is contrary to
the Construction Schedule (as hereinafter defined), (v) Landlord's inability to
obtain particular items of equipment or building materials specified by Tenant
despite the timely and diligent effort by Landlord and its contractor to obtain
such equipment and materials (and thereafter promptly to seek the agreement of
Tenant to the substitution of such other equipment or materials as may be more
reasonably available, and if such substitution is approved, then despite the
timely and diligent effort of Landlord and its contractor to obtain such
substituted equipment or materials), or (vi) acts of God, fire, earthquake,
flood, rainfall which materially interferes with the critical path of the
construction of the Improvements, vandalism, acts or delays of public agencies,
any moratorium on the issuance of governmental approvals or utility service
connections or other similar government actions, strikes, union labor disputes
or other union work stoppages, freight embargoes or inability to obtain basic
materials, supplies or fuels, or other similar events beyond the reasonable
control of Landlord, or its contractor or subcontractors, provided (b) Landlord
after the observation or occurrence of any matter constituting an event which
will cause or likely cause an Excused Delay, promptly notifies Tenant in writing
of the observation or occurrence of such event and the then estimated amount of
any Excused Delay that will be experienced as a result thereof.
I. Landlord Improvement Costs. The Term "Landlord Improvement
Costs" shall mean any and all reasonable costs and expenses paid or incurred by
Landlord in connection with any of the following: the construction of the
Landlord Improvements and any governmentally required off-site work required in
connection with the Landlord Improvements; building permit fees and other
C-2
<PAGE> 51
governmental fees and taxes imposed as a condition to or in connection with the
construction of the Landlord Improvements, including, without limitation,
utility fees and utility hook-up fees (collectively, "Governmental Fees");
general conditions, project management, supervision and insurance costs, to the
extent incurred in constructing the Landlord Improvements consistent with the
terms and conditions of this Improvement Agreement (including the terms provided
herein relating to the construction contract and the bidding subcontracts); and
general contractors profit and overhead not to exceed in total fifteen percent
(15%) of the cost of construction of the Landlord Improvements. Notwithstanding
the foregoing to the contrary, except as provided in Section 6.C below, Landlord
Improvement Costs shall not include the costs of Landlord's architect or other
soft costs. For the purposes of the foregoing definition of Landlord Improvement
Costs, it is agreed that, to the extent Landlord is required to perform
additional site work solely as a result of (i) the provision of a two inch (2")
water meter instead of a one inch (1") water meter, (ii) the provision of
electrical primary service of 4,000 amps instead of 2,000 amps, (iii) the
provision of reinforcement to the five inch (5") thick concrete slab with #4
rebar [two feet by two feet grid] to be provided by Landlord or (iv) the
provision of any other Landlord Improvements not contemplated by the
specifications attached as Exhibit C-1 to the Improvement Agreement, the costs
of such additional site work shall be deemed Landlord Improvement Costs.
J. Base Landlord Improvement Costs. The term "Base Landlord
Improvement Costs" shall mean the sum of Two Million One Hundred Thousand
Dollars ($2,100,000).
K. Excess Landlord Improvement Costs. The term "Excess
Landlord Improvement Costs" shall mean all Landlord Improvement Costs in excess
of the Base Landlord Improvement Costs.
3. Schedule of Performance. Landlord and Tenant desire to cause the
Landlord Improvements to be Substantially Completed by the Target Completion
Date. The Target Completion Date is based upon information gathered and
estimates made by Landlord, which are reflected in the Schedule of Performance
(as defined below). Achieving Substantial Completion of the Landlord
Improvements by the Target Completion Date requires that certain objectives be
met within certain time periods. Set forth in this Paragraph is a schedule of
certain critical dates relating to Landlord's and Tenant's respective
obligations regarding the construction of the Landlord Improvements (the
"Schedule of Performance") that must be adhered to in order to achieve
Substantial Completion of the Landlord Improvements by the Target Completion
Date. Landlord and Tenant shall each be obligated to use reasonable efforts to
perform their respective obligations within the time periods set forth in the
Schedule of Performance and elsewhere in this Improvement Agreement; provided,
however, that the time periods for such performance shall be extended by events
constituting causes beyond the reasonable control of the party obligated to
perform. The Parties acknowledge that the Construction Schedule is only an
estimate of the time needed to complete certain stages of the construction
process, and the failure of either party to accomplish
C-3
<PAGE> 52
any step in the process set forth in the Construction Schedule shall not
constitute a default by either party unless such failure constitutes a breach of
the obligation of a party to use reasonable efforts to perform its obligations
within the time periods set forth in the Schedule of Performance and elsewhere
in this Agreement. The Schedule of Performance is as follows:
<TABLE>
<CAPTION>
Responsible
Action Items Due Date Party
------------ -------- -----
<S> <C> <C>
A. Delivery of Date of execution of Landlord
Preliminary this Lease
Building Plans
to Tenant
B. Approval of Within five (5) business days Tenant
Preliminary after Tenant receives
Building Plans Preliminary Building Plans
by Tenant
C. Delivery of Concurrently with delivery of Landlord
Final Building Final Building Plans to the
Plans building department of the
City of Pleasanton
D. Approval of Within five (5) business days Tenant
Final Building after Tenant receives final
Plans by Tenant site and Building Shell
working drawings, as approved
by Building Department of
City of Pleasanton
E. Obtain permits September 7, 1996 Landlord
for site work
F. Obtain building September 15, 1996 Landlord
permits for
Building Shell
from the City
of Pleasanton
G. Substantial Target Completion Date Landlord
Completion
</TABLE>
4. Construction of Landlord Improvements. Landlord shall, at its sole
cost and expense, construct the Landlord Improvements on the Parcel in the
approximate location shown on the Site Plan attached to the Agreement as EXHIBIT
"B", in accordance with the following:
A. Development and Approval of Preliminary Building Plans. On
or before the due date specified in the Schedule of Performance, Landlord shall
prepare and deliver to Tenant for its review and approval preliminary plans for
the Building (the "Preliminary Building Plans") which are consistent with and
conform to the Approved Specifications and the general building schematic
attached hereto as Schedule "C-2" to this Improvement Agreement (with such
general building schematic as it may be subsequently modified by the agreement
of Landlord and Tenant, hereinafter referred to as the "General Building
Schematic"). On or before the
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<PAGE> 53
due date specified in the Schedule of Performance, Tenant shall either approve
such plans or notify Landlord in writing of its specific objections to the
Preliminary Building Plans. If Tenant so objects, Landlord shall revise the
Preliminary Building Plans in question to address such objections in a manner
consistent with the parameters for the Landlord Improvements set forth in this
Improvement Agreement and the Approved Specifications and shall resubmit such
revised Preliminary Building Plans to Tenant for its Approval as soon as
reasonably practicable. When such revised Preliminary Building Plans are
resubmitted to Tenant, it shall either approve such plans or notify Landlord of
any further objections in writing within five (5) business days after receipt
thereof. If Tenant has further objections to such revised Preliminary Building
Plans, the Parties shall meet and confer to develop Preliminary Building Plans
that are acceptable to both Landlord and Tenant within five (5) business days
after Tenant has notified Landlord of its second set of objections. In the event
Tenant and Landlord do not resolve all of Tenant's objections within such five
(5) business day period, Landlord and Tenant shall immediately cause Landlord's
architect to meet and confer with Tenant's architect or construction consultant,
who shall apply the standards set forth in this Improvement Agreement to resolve
Tenant's objections and incorporate such resolution into the Preliminary
Building Plans, which process Landlord and Tenant shall cause to be completed
within five (5) business days after the conclusion of the five (5) business day
period referred to in the immediately preceding sentence. The "standards set
forth in this Improvement Agreement" to be applied by Landlord's architect and
Tenant's architect or construction consultant to resolve objections pursuant to
the paragraph (and pursuant to Subparagraphs 4.B, 5.A and 5.B) shall be (i) the
Approved Specifications, (ii) any plans and specifications that have been
previously approved by Landlord and Tenant, (iii) the requirement that at each
stage of development, the plans and specifications in question are to be the
logical and reasonable evolution and development of plans and specifications
previously approved by Landlord and Tenant, (iv) requirements of Laws, (v)
Landlord and Tenant are obligated to act reasonably and in good faith, and (vi)
unless there is an agreement to the contrary, Landlord and Tenant have agreed
that the improvement requirements of each shall be evaluated in accordance with
custom prevailing in the County in which the Premises is located for the
development of comparable facilities.
B. Development and Approval of Final Building Plans. Once the
Preliminary Building Plans have been approved by Landlord and Tenant (including
all changes made to resolve Tenant's objections approved by Landlord's architect
and Tenant's architect or construction consultant pursuant to Subparagraph 4.A)
and Landlord has received a site development permit, Landlord shall complete and
submit to Tenant for its approval final working drawings for the Landlord
Improvements by the due date specified in the Schedule of Performance. Tenant
shall approve the final plans for the Landlord Improvements or notify Landlord
in writing of its specific objections by the due date specified in the Schedule
of Performance. If Tenant so objects, the Parties shall confer and reach
agreement upon final working drawings for the Landlord Improvements within five
(5) business days after Tenant has
C-5
<PAGE> 54
notified Landlord of its objections. In the event Tenant and Landlord do not
resolve all of Tenant's objections within such five (5) business day period,
Landlord and Tenant shall immediately cause Landlord's architect to meet and
confer with Tenant's architect or construction consultant, who shall apply the
standards set forth in this Improvement Agreement to resolve Tenant's objections
and incorporate such resolution into the Final Building Plans, which process
Landlord and Tenant shall cause to be completed within five (5) business days
after the conclusion of the five (5) business day period referred to in the
immediately preceding sentence. The final working drawings so approved by
Landlord and Tenant (including all changes made to resolve Tenant's objections
approved by Landlord's architect and Tenant's architect or construction
consultant) are referred to herein as the "Final Building Plans."
C. Governmental Approvals. As soon as the Final Building Plans
have been approved by Landlord and Tenant and have received final approval of
the planning department of the City of Pleasanton, Landlord shall promptly apply
for a building permit for the Landlord Improvements, and shall diligently
prosecute to completion such approval process.
D. Commencement of Building. As soon as the building permit
for the Landlord Improvements is issued, Landlord shall promptly commence
construction of the Landlord Improvements and shall diligently prosecute such
construction to completion, using all reasonable efforts to achieve Substantial
Completion of the Landlord Improvements by the due date specified in the
Schedule of Performance.
5. Construction of Tenant Improvements. Tenant shall, at its sole cost
and expense, construct the Tenant Improvements in accordance with the following:
A. Development and Approval of Preliminary Tenant Improvement
Plans. Tenant shall prepare and deliver to Landlord for its review and approval
preliminary plans for the Tenant Improvements (the "Preliminary Tenant
Improvements Plans"). Within five (5) business days following receipt of the
same, Landlord shall either approve such plans or notify Tenant in writing of
its specific objections to the Preliminary Tenant Improvements Plans. If
Landlord so objects, Tenant shall revise the Preliminary Tenant Improvements
Plans to address such objections in a manner consistent with and conform to the
Approved Specifications to the extent applicable and shall resubmit such revised
Preliminary Tenant Improvements Plans as soon as reasonably practicable to
Landlord for its approval. When such revised Preliminary Tenant Improvements
Plans are resubmitted to Landlord, it shall either approve such plans or notify
Tenant of any further objections in writing within five (5) business days after
receipt thereof. If Landlord has further objections to the revised Preliminary
Tenant Improvements Plans, the Parties shall meet and confer to develop
Preliminary Tenant Improvements Plans that are acceptable to both Landlord and
Tenant within five (5) business days after Landlord has notified Tenant of its
second set of objections. In the event Tenant and Landlord do not resolve all of
Landlord's objections
C-6
<PAGE> 55
within such five (5) business day period, Landlord and Tenant shall immediately
cause Landlord's architect to meet and confer with Tenant's architect or
construction consultant, who shall apply the standards set forth in this
Improvement Agreement to resolve Landlord's objections and incorporate such
resolution into the Preliminary Tenant Improvements Plans, which process
Landlord and Tenant shall cause to be completed within five (5) business days
after the conclusion of the five (5) business day period referred to in the
immediately preceding sentence.
B. Development and Approval of Final Tenant Improvement Plans.
Once the Preliminary Tenant Improvements Plans have been approved by Landlord
and Tenant (including all changes made to resolve Landlord's objections approved
by Landlord's architect and Tenant's architect or construction consultant
pursuant to Subparagraph 5.A), Tenant shall complete and submit to Landlord for
its approval final working drawings for the Tenant Improvements. Landlord shall
approve the final plans for the Tenant Improvements or notify Tenant in writing
of its specific objections within three (3) business days following receipt. If
Landlord so objects, the parties shall confer and reach agreement upon final
working drawings for the Tenant Improvements within five (5) business days after
Landlord has notified Tenant of its objections. In the event Tenant and Landlord
do not resolve all of Landlord's objections within such five (5) business day
period, Landlord and Tenant shall immediately cause Landlord's architect to meet
and confer with Tenant's architect or construction consultant, who shall apply
the standards set forth in this Improvement Agreement to resolve Tenant's
objections and incorporate such resolution into the Final Tenant Improvements
Plans, which process Landlord and Tenant shall cause to be completed within five
(5) business days after the conclusion of the five (5) business days period
referred to in the immediately preceding sentence. The final working drawings so
approved by Landlord and Tenant (including all changes made to resolve Tenant's
objections approved by Landlord's architect and Tenant's architect or
construction consultant) are referred to herein as the "Final Tenant
Improvements Plans". The Final Tenant Improvement Plans shall be attached hereto
as Schedule C-3.
C. Building Permit. As soon as the Final Tenant Improvements
Plans have been approved by Landlord and Tenant, Tenant shall apply for a
building permit for such Tenant Improvements, and shall diligently prosecute to
completion such approval process.
D. Commencement of Tenant Improvements. As soon as the
building permit for the Tenant Improvements has been issued, Tenant shall
commence construction of the Tenant Improvements and shall diligently prosecute
such construction to completion.
6. General Design and Construction Obligations.
A. Obtainable Materials. In developing the Final Building
Plans, Landlord and Tenant shall exercise due diligence to designate and select
material and equipment which can be obtained with normal lead times. If at any
time during the plan development process or the course of construction, it
becomes apparent that
C-7
<PAGE> 56
despite the exercise of due diligence by Landlord, a particular material or item
of equipment is not or will not be obtainable within a period of time that will
enable Landlord to complete construction by the Target Completion Date, the
parties shall meet and confer to find, where practicable, a substitute therefor
which will enable Landlord to meet the Target Completion Date.
B. Design Requirements. Landlord and Tenant shall cause all
plans, drawings and specifications for the Landlord Improvements and Tenant
Improvements, whether preliminary or final, to be prepared by licensed
architects and, where appropriate, mechanical, electrical and structural
engineers. Landlord and Tenant shall cause all plans, drawings and
specifications for the Landlord Improvements and Tenant Improvements to be
prepared in strict compliance with all governmental laws, ordinances, codes and
regulations. The review and approval of any plans, drawings and specifications
by Tenant or Landlord shall not alter or diminish Landlord's obligations under
this Paragraph 6.B.
C. Cost of Plans. Except as provided in Section 7 below,
Landlord shall pay all costs of preparing the Preliminary Building Plans, the
Final Building Plans and any required or requested changes thereto. Except as
provided in Section 7 below, Tenant shall pay all cost of preparing the
Preliminary Tenant Improvement Plans and the Final Tenant Improvement Plans or
any required or requested changes thereto.
D. Design Professionals. Landlord shall have the unilateral
right to select and hire the architects, engineers and any other design
professionals Landlord may desire to design the Preliminary Building Plans, the
Final Building Plans. Tenant shall have the same right with respect to the
Preliminary Tenant Improvement Plans and the Final Tenant Improvement Plans.
E. Tenant Access. To the extent reasonably feasible, Tenant
and Tenant's Agents shall be afforded reasonable access to the Premises prior to
Landlord's delivery of possession of the Landlord Improvements to Tenant for the
purpose of commencing Tenant Improvement work. Any delay in the Substantial
Completion of the Landlord Improvements caused by such activities of Tenant or
its Agents shall constitute an Excused Delay. Tenant shall be responsible for
causing to be repaired any damage to the Landlord Improvements caused by the
activities of Tenant or its Agents and any delay in the Substantial Completion
of the Landlord Improvements caused by the occurrence or repair of any such
damage shall be an Excused Delay.
F. Construction Contract. Landlord shall engage Tioga
Construction Incorporated ("Contractor") as the general contractor to construct
the Building pursuant to a construction contract consistent with the
requirements of this Lease. Tenant acknowledges that Contractor is an affiliate
of the Landlord. Tenant shall be expressly acknowledged in the construction
contract to be a third party beneficiary of the construction contract with the
right to directly enforce any contractor's covenants, representations or
warranties thereunder. Tenant shall be afforded
C-8
<PAGE> 57
the opportunity to review and reasonably approve the construction contract prior
to its execution by Landlord.
G. Subcontractors. Excepting any subcontractors as to which
Landlord and Tenant may agree are too small in size to submit to competitive
bidding or as to which Landlord and Tenant may otherwise agree are not to be
competitively bid, all subcontractors for the Landlord Improvements shall be
chosen by a competitive bid process where: (i) Tenant shall have the right to
approve or disapprove subcontractors who bid on specific parts of the job
provided Tenant shall exercise such right within two (2) business days following
Tenant's receipt from Landlord of relevant information with respect to such
subcontractor; (ii) Tenant shall have a right to review and approve or
disapprove all bid documents prior to submission to subcontractors (with all
bids to be based on a fixed price basis, unless otherwise agreed by Landlord and
Tenant); (iii) Tenant shall have the right to review and approve all bids of
subcontractors provided Tenant shall exercise such right within two (2) business
days following the receipt by Tenant from Landlord of such bids and all relevant
information concerning such bids; (iv) Landlord and Contractor shall actively
and promptly participate in seeking to clarify any uncertainties or errors or
omissions in the scope of work, that may be reflected in any bids that may be
received; (v) the subcontract shall be awarded to the lowest responsible bidder
unless Landlord and Tenant otherwise agree (which decision may arise from
concerns as to whether the subcontractor will be able to complete its work in a
timely manner); and (vi) Landlord and Contractor shall seek where appropriate in
awarding any contracts, to negotiate more favorable pricing or terms than were
incorporated in the bid of such subcontractor.
7. Changes to Building Plans. Once the Final Building Plans have been
approved by Landlord and Tenant, neither shall have the right to order extra
work or change orders with respect to the construction of the Building without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, provided there is a reasonable basis for such change or
such change is required by any Law. All extra work or change orders requested by
either Landlord or Tenant shall be made in writing, shall specify any added or
reduced cost and/or any change in the Target Completion Date resulting
therefrom, and shall become effective and a part of the Final Building Plans as
applicable once approved in writing by both parties. Landlord, Contractor and
Tenant shall reasonably cooperate in determining any applicable change in cost
or Target Completion Date. If a change order requested by Tenant results in a
net increase in the cost of constructing the Landlord Improvements and the
change order is not the result of any failure of the Final Building Plans or
Final Tenant Improvement Plans to conform to the requirements of this
Improvement Agreement, then Landlord may condition its approval of such change
order upon the agreement of Tenant to pay to Landlord all or a portion of the
amount of such net increase in the cost of constructing the Improvements. Upon
such agreement, such net increase shall be deemed to be a part of the Landlord
Improvement Costs and shall be subject to the terms of payment as provided in
Section 12 hereinbelow.
C-9
<PAGE> 58
8. Delivery of Possession, Punch List and Acceptance Agreement. As soon
as the Landlord Improvements are Substantially Completed, Landlord and Tenant
and their respective Agents, shall together inspect the Building. After such
inspection has been completed, each party shall sign an acceptance agreement
which shall include a list of all "punch list" items which the parties agree are
to be corrected by Landlord. Landlord shall use due diligence to complete and/or
repair such "punch list" items within thirty (30) days after executing the
acceptance agreement. Such acceptance agreement shall neither preclude Tenant
from later reporting to Landlord and requiring the completion and/or repair of
any additional punch list items or defects which were not readily apparent at
the time of such inspection, nor affect any of Landlord's or Tenant's rights
under any contractor's or subcontractor's warranties or under Paragraph 9
hereof.
9. Standard of Construction and Warranty. Landlord warrants that the
Landlord Improvements shall be constructed in a good and workmanlike manner
substantially in accordance with the Final Building Plans (as modified by change
orders approved by Landlord and Tenant). All materials and equipment furnished
shall be new, of good quality and installed in accordance with the vendor's or
manufacturer's specifications, instructions and requirements. The foregoing
warranty shall terminate one (1) year following the date of Substantial
Completion of the Building unless Tenant makes a written claim against Landlord
under the foregoing warranty within said one (1) year period, in which case the
warranty shall survive only as to the specific matter described in such claim.
Copies of any contractor's, manufacturer's or installer's warranties shall be
delivered to Tenant at the time of Substantial Completion, and the originals
thereof shall be delivered to Tenant on the first anniversary of the date of
Substantial Completion. Landlord shall, upon Tenant's request, cooperate with
Tenant in enforcing any third party warranties.
10. Effect of Agreement. In the event of any inconsistency
between this Improvement Agreement and the Lease, the terms of this
Improvement Agreement shall prevail.
11. Accounting. When the Landlord Improvements are Substantially
Completed and all costs therefor have been determined, Landlord shall submit to
Tenant a final and detailed accounting of all Landlord Improvement Costs paid by
Landlord. Tenant shall have the right to audit books, records and supporting
documents of Landlord and Contractor to the extent necessary to determine the
accuracy of such accounting during normal business hours after giving Landlord
at least ten (10) days prior written notice. Any such audit must be commenced,
if at all, within one hundred eighty (180) days after Landlord delivers such
accounting to Tenant. If, as a result of any review of such accounting or audit,
it is reasonably demonstrated that the Landlord Improvement Costs incurred by
Landlord have been overstated by Landlord, Landlord shall promptly reimburse
Tenant for the full amount of such overstatement which pursuant to the terms of
this Improvement Agreement, Tenant should not have otherwise been required to
pay or bear and any necessary downward adjustments to any previously
C-10
<PAGE> 59
determined increases in the Monthly Installments of rent as provided in
Paragraph 12 below shall be made.
12. Payment of Landlord Improvement Costs. Subject to Paragraph 11
above, the Landlord Improvement Costs for the Landlord Improvements shall be
paid by Landlord and Tenant as follows:
A. Landlord shall pay all Landlord Improvement Costs up to the
Base Landlord Improvement Cost.
B. Landlord shall pay all Excess Landlord Improvement Costs up
to an additional Three Hundred Fifty Thousand Dollars ($350,000). In such event
Tenant shall have the option of either reimbursing Landlord for such Excess
Landlord Improvement Costs at the time of Substantial Completion of the Landlord
Improvements, or, in lieu of such reimbursement, increasing each Monthly
Installment of rent during the Lease Term by an amount equal to one percent (1%)
of the Excess Landlord Improvement Costs. Notwithstanding the foregoing to the
contrary, except as provided below, in no event shall Tenant be obligated to pay
any increased rent as a result of total Landlord Improvement Costs in excess of
Two Million Four Hundred Fifty Thousand Dollars ($2,450,000).
C. Notwithstanding any provision contained herein or in the
Lease to the contrary, Landlord shall have the right to terminate the Lease and
this Improvement Agreement and return all previously paid security deposits to
Tenant in the event that, in Landlord's reasonable good faith estimation, the
Landlord Improvements Costs are expected to exceed Two Million Six Hundred
Thousand Dollars ($2,600,000). Such right to cancel the Lease and this
Improvement Agreement may be exercised only if Landlord shall send written
notice of such election to Tenant on or before September 1, 1996, which notice
shall contain the total amount of Landlord Improvement Costs which Landlord in
good faith estimates it shall have to pay in connection with the construction of
the Landlord Improvements. Notwithstanding the foregoing, within thirty (30)
days of the delivery of such notice, Tenant may elect in writing to reimburse
Landlord in cash for all Landlord Improvement Costs in excess of Two Million Six
Hundred Thousand Dollars ($2,600,000) at the time of the Substantial Completion
of Landlord Improvements or Tenant may agree that the Monthly Installment of
rent during the Lease Term shall be increased by one percent (1%) of the actual
amount of Landlord Improvement Costs in excess of Two Million Six Hundred
Thousand Dollars ($2,600,000); in either of such cases Landlord's right
thereafter to cancel this Lease shall be null and void and Landlord shall
thereafter continue to carry out its obligations under this Lease and
Improvement Agreement. If Tenant fail to make such election within thirty (30)
days of dispatch of Landlord's notice to Tenant terminating the Lease and this
Improvement Agreement, then, in such event, Landlord shall have the further
right within ten (10) days following the expiration of such thirty (30) day
period to elect to absorb such additional costs and continue the Lease and this
Improvement Agreement in effect by so notifying Tenant within such ten (10) day
period; provided that, if Tenant shall affirmatively notify Landlord during such
thirty (30) day period that Tenant shall elect neither to reimburse Landlord for
Landlord Improvement Costs in excess of Two Million Six Hundred Thousand Dollars
($2,600,000) nor
C-11
<PAGE> 60
to agree to any increase in Monthly Installments of rent to reflect such excess
costs, then within ten (10) days following the giving of Tenant's notice,
Landlord shall elect, if at all, to absorb such excess costs and to continue the
Lease and this Improvement Agreement in effect. If, pursuant to this Subsection
12.C. Landlord is obligated or elects to continue this Lease and the Improvement
Agreement in full force and effect, Landlord shall be obligated to bear, at its
own expense, without any right of direct or indirect reimbursement from Tenant,
the Landlord Improvement Costs in excess of Two Million Four Hundred Fifty
Thousand ($2,450,000) but less than Two Million Six Hundred Thousand Dollars,
($2,600,000) (i.e. One Hundred Fifty Thousand ($150,000) in total).
TENANT:
THORATEC LABORATORIES, CORPORATION,
a California corporation
DATED: July 25, 1996 By: /s/ CHERYL D. HESS
-------------------------------
Name: Cheryl D. Hess
-------------------------------
Title: Chief Financial Officer,
-------------------------------
Vice President-Finance and
-------------------------------
Secretary
LANDLORD:
MAIN STREET ASSOCIATES,
a California general partnership
DATED: July 25, 1996 By: /s/ STEVEN T. THOMAS
-------------------------------
Name: Steven T. Thomas
-------------------------------
Title: General Partner
-------------------------------
C-12
<PAGE> 61
SCHEDULE "C-1"
(See the immediately following 2-pages of Approved Specifications)
<PAGE> 62
SPECIFICATIONS
The following work is to be done by Landlord:
A. Site Work
1. Access roads, and parking areas complete with hard surfaced paving,
striping, signs, meter clocked lighting, and drainage.
2. Landscaping and planting.
3. Sidewalks, exterior ramps and stairways.
B. Offsite Work as govermentally required in connection with
Landlord Improvements
C. Utility Distribution Systems Exterior to Tenant's Demised
Premises
1. Domestic and fire protection water supply mains, up to a 2" water
meter, shutoff valves, cold water service and fire protection mains, hydrants
and valves for same.
2. Storm sewers, up to a six inch (6") sanitary sewers and waste lines
shall be stubbed into the building 5 feet.
3. A natural gas main line will be brought to a gas meter.
4. Electrical primary service of 4,000 amp 277/48OV, 3 phase 4 wire to
distribution point.
D. Building
1. Structure:
a. Concrete, masonry, steel and/or wood
2. Roofing:
a. Quality built-up roof (excluding insulation), engineered
and constructed to carry proposed Tenant Mechanical and equipment loads.
3. Materials and finishes
a. Exterior walls: Masonry veneer paved concrete and/or other
Landlord And Tenant approved finishes.
b. Slab: Five inch (5") thick concrete slab with #4 rebar [2'
by 2' grid] with a six inch (6") by six inch (6") metal fabric reinforcement or
any other alternative design approved by Tenant's architect.
[Notwithstanding any provision in this Lease to the contrary, Landlord
shall not be required to construct any restrooms or provide any HVAC systems as
part of the Landlord Improvements.]
1 of 2
<PAGE> 63
Tenant shall provide as part of its Tenant Improvements such
improvements to the Building as will be necessary for Tenant to use the Premises
as its main manufacturing site for its FDA approved product.
2 of 2
<PAGE> 64
SCHEDULE "C-2"
(See the immediately following 3-pages of
General Building Schematic)
<PAGE> 65
Diagram
<PAGE> 66
Diagram
<PAGE> 67
Diagram
<PAGE> 68
EXHIBIT "D"
TITLE REPORT
(See the immediately following 12-page Preliminary
Report issued by First American Title Guaranty Company under
Order No. SP15640 and dated as of July 5, 1996)
<PAGE> 69
APPLICANT: YOUR CONTACT PERSON IS: EVELYN CHAMBERS
CALL : (510) 763-0500
SUMMIT COMMERCIAL ESCROW FAX NO. : (510) 763-6111
300 N. CONTINENTAL BOULEVARD ESCROW ORDER NO. : SP156410
SUITE 370 TITLE ORDER NO. : SP156410 UPDATE
EL SEGUNDO, CA 90245 TITLE OFFICER : PAUL DONAHUE
ATTENTION: DEE RICHARDSON CUSTOMER REFERENCE : THOMAS PROPERTIES
(310) 648-7500 PROPERTY ADDRESS : STONERIDGE DRIVE,
(310) 648-7251 (FAX) JOHNSON DRIVE AND
BRADLEY DRIVE
PLEASANTON,
CALIFORNIA
COPIES TO: NONE
Subject to a minimum charge required by Section 12404 of the Insurance Code.
The form of policy of title insurance contemplated by this report is: TO BE
DETERMINED
In response to the above-referenced application for a policy of title
insurance, this Company hereby reports that it is prepared to issue, or cause
to be issued, as of the date hereof, a Policy or Policies of Title Insurance
in the form specified above, describing the land and the estate or interest
therein hereinafter set forth, insuring against loss which may be sustained by
reason of any defect, lien or encumbrance not shown or referred to as an
Exception below or not excluded from coverage pursuant to the printed
Schedules, Conditions and Stipulations of said Policy forms.
The printed Exceptions and Exclusions from the coverage of said Policy or
Policies are set forth in Exhibit A attached. Copies of the Policy forms should
be read. They are available from the office which issued this report.
PLEASE READ THE EXCEPTIONS SHOWN OR REFERRED TO BELOW AND THE EXCEPTIONS AND
EXCLUSIONS SET FORTH IN EXHIBIT A OF THIS REPORT CAREFULLY. THE EXCEPTIONS AND
EXCLUSIONS ARE MEANT TO PROVIDE YOU WITH NOTICE OF MATTERS WHICH ARE NOT
COVERED UNDER THE TERMS OF THE TITLE INSURANCE POLICY AND SHOULD BE CAREFULLY
CONSIDERED.
IT IS IMPORTANT TO NOTE THAT THIS PRELIMINARY REPORT IS NOT A WRITTEN
REPRESENTATION AS TO THE CONDITION OF TITLE AND MAY NOT LIST ALL LIENS,
DEFECTS, AND ENCUMBRANCES AFFECTING TITLE TO THE LAND.
This report (and any supplements or amendments thereto) is issued solely for
the purpose of facilitating the issuance of a policy of title insurance and no
liability is assumed hereby. If it is desired that liability be assumed prior
to the issuance of a policy of title insurance, a Binder of Commitment should
be requested.
/s/ Sandra J. Wing
-----------------------------------
Vice President
EXHIBIT D
FIRST AMERICAN TITLE
<PAGE> 70
Order No. SP156410
Page No. 2
Dated as July 5, 1995 at 7:30 a.m.
Title to said estate or interest at the date hereof is vested in:
CALPROP, L.P., A DELAWARE LIMITED PARTNERSHIP
The estate or interest in the land hereinafter described or referred to covered
by this Report is:
A FEE AS TO PARCEL ONE; AN EASEMENT AS TO PARCELS TWO AND THREE
AT THE DATE HEREOF EXCEPTIONS TO COVERAGE IN ADDITION TO THE PRINTED EXCEPTIONS
AND EXCLUSIONS CONTAINED IN SAID POLICY FORM WOULD BE AS FOLLOWS:
1. PROPERTY TAXES, including any assessments collected with taxes, for the
fiscal year 1996-1997, a lien not yet due or payable.
2. THE LIEN of supplemental taxes, if any, assessed pursuant to
Chapter 3.5 commencing with Section 75 of the California Revenue and
Taxation Code.
3. The lien of assessment as created by that certain Notice of
ReAssessment for Consolidated ReAssessment District 1993-1 recorded
August 16, 1993, Series No. 93-291324, Official Records, disclosing an
original principal assessment amount of $609,373.00. Issued amounts to
follow upon request.
4. The lien of assessments as created by that certain Notice of
ReAssessment for Consolidated ReAssessment District 1993-2 recorded
August 16, 1993, Series No. 93-291334, Official Records, disclosing an
original principal assessment amount of $142,838.00. Issued amounts to
follow upon request.
Said matter affects this and other property.
5. The lien of assessment as created by that certain Notice of
ReAssessment for Consolidated ReAssessment District 1993-3 recorded
August 13, 1993, Series No. 93-290193, Official Records, disclosing an
original principal assessment amount of $311,252.00. Issued amounts to
follow upon request.
Said matter affects this and other property.
6. EASEMENT shown on filed Parcel Map 3971, and incidents thereto
Purpose: PUBLIC SERVICE
Affects: THE SOUTHERLY, WESTERLY AND NORTHWESTERLY 33 FEET OF SAID LAND
FIRST AMERICAN TITLE
<PAGE> 71
Order No. SP156410
Page No. 3
7. EASEMENT for the purposes stated herein and incidents thereto
Purpose : PUBLIC SERVICE FACILITIES
Granted to : CITY OF PLEASANTON, A MUNICIPAL CORPORATION
Recorded : JULY 28, 1982, SERIES NO. 82-112379, OFFICIAL RECORDS
Affects : THE SOUTHERLY, WESTERLY AND NORTHWESTERLY 33 FEET OF
SAID LAND
8. AGREEMENT on the terms and conditions contained therein,
For : PARTICIPATION IN ASSESSMENT DISTRICTS
Between : ROBERT E. MEYER
And : CITY OF PLEASANTON
Recorded : SEPTEMBER 16, 1982, INSTRUMENT NO. 82-140679,
OFFICIAL RECORDS.
9. LIMITATIONS, Covenants, Conditions, Restrictions, Reservations,
Easements, Exceptions, Terms, Assessments, Liens and Charges in an
instrument recorded JUNE 30, 1983, Series NO. 83115477, OFFICIAL
RECORDS, which provide that a violation thereof shall not defeat or
render invalid the lien of any mortgage or deed of trust made in good
faith and for value, but deleting any covenant, condition or restriction
indicating a preference, limitation or discrimination based on race,
color, religion, sex, handicap, familial status, or national origin to
the extent such covenants, conditions or restrictions violate 42 USC
3604(c).
Declaration further provides that any lien created by the terms therein
shall be subordinate to any mortgage or deed of trust made in good
faith and for value.
The liens and charges for upkeep and maintenance in the above mentioned
Declaration are payable to SIGNATURE CENTER OWNERS ASSOCIATION.
MODIFICATION thereof recorded APRIL 18, 1985, SERIES NO. 85-75389,
OFFICIAL RECORDS.
MODIFICATION thereof recorded OCTOBER 11, 1989, SERIES NO. 89-277713,
OFFICIAL RECORDS.
MODIFICATION thereof recorded FEBRUARY 22, 1996, SERIES NO. 96-43351,
OFFICIAL RECORDS.
10. A Deed of Trust to secure an indebtedness in the amount shown below
and any other amounts and/or obligations secured thereby
Amount : $77,000
Dated : DECEMBER 29, 1994
Trustor : CALPROP, L.P., A DELAWARE LIMITED PARTNERSHIP
Trustee : FIRST AMERICAN TITLE INSURANCE COMPANY
Beneficiary : SALOMON BROTHERS REALTY CORP.
Address: : C/O MILLBANK, TWEED, HADLEY, AND MCCLOY, 1 CHASE
MANHATTAN PLAZA, NEW YORK, NEW YORK 10005
Loan No. : NONE SHOWN
Recorded : JANUARY 4, 1995, SERIES NO. 95001094, OFFICIAL
RECORDS.
FIRST AMERICAN TITLE
<PAGE> 72
Order No. SP156410
Page No. 4
MODIFICATION OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT, AND FIXTURE FILING pertaining to said Deed of Trust
Executed by : CALPROP L.P., A DELAWARE LIMITED PARTNERSHIP AND
SALOMON BROTHERS REALTY CORP.
Recorded : SEPTEMBER 1, 1995, SERIES NO. 95201963,
OFFICIAL RECORDS.
Said matter affects this and other property.
11. EASEMENT shown on filed map, and incidents thereto
Purpose : PRIVATE SANITARY SEWER, STORM DRAIN AND UTILITIES
Affects : A PORTION OF SAID LAND
12. AGREEMENT on the terms and conditions contained therein,
Entitled : AGREEMENT RE STREET IMPROVEMENTS AND PARK AND
RECREATION FACILITIES
Between : CALPROP L.P., A DELAWARE LIMITED PARTNERSHIP
And : CITY OF PLEASANTON
Recorded : AUGUST 4, 1995, SERIES NO. 95172356, OFFICIAL
RECORDS.
Said matter affects this and other property.
13. LIMITATIONS, covenants, conditions, restrictions, reservations,
exceptions, or terms, but deleting any covenant, condition or
restriction indicating a preference, limitation or discrimination based
on race, color, religion, sex, handicap, familial status, or national
origin to the extent such covenants, conditions or restrictions violate
42 USC 3604(c), contained in the instrument recorded AUGUST 4, 1995,
SERIES NO. 95172357, OFFICIAL RECORDS.
14. ANY and all subsisting leases.
15. Matters which may be disclosed by an inspection or by a survey of said
land that is satisfactory to this Company, or by inquiry of the parties
in possession thereof.
First American Title
<PAGE> 73
Order No. SP156410
Page No. 5
================================================================================
INFORMATION NOTES:
A. TAXES for the fiscal year 1995-1996
1st Installment : $78,715.32 PAID
2nd Installment : $78,715.32 PAID
Land : $2,630,940.00
Improvements : $809,520.00
Personal Property : $NONE SHOWN
Exemption : $NONE SHOWN
Assessee : CALPROP LP
A. P. No. : 941-1301-062
Code Area : 19-006
Said matter affects this and other property.
B. AN ESCAPED BILL OF TAXES for the fiscal year 1995-1996
1st Installment : $2,370.82 PAID
2nd Installment : $2,370.82 PAID
Land : $324,060.00
Improvements : $85,480.00
Personal Property : $NONE SHOWN
Exemption : $NONE SHOWN
Assessee : CALPROP, LP
A. P. No. : 941-1301-062
Code Area : 19-006
C. Supplemental Taxes, general and special, are assessed as follows:
A. P. No. : 941-1301-0621
Code Area : 19-006
Fiscal Year : 1994-1995
1st Installment : $1,079.65 PAID
2nd Installment : $1,079.65 PAID
Land : $355,000.00
Improvements : $95,000.00
Personal Property : $NONE SHOWN
Exemption : $NONE SHOWN
Assessee : CALPROP, LP
Tracer No. : 583447-00
Bill No. : NONE SHOWN
Event : CHANGE OF OWNERSHIP
Event Date : JANUARY 4, 1995
Bill Date : APRIL 1996
First American Title
<PAGE> 74
Order No. SP156410
Page No. 6
D. Collect $10.00 (per parcel) user fee for each Grant Deed for County
Monument Preservation Fund.
E. The requirement that a copy of the partnership agreement for CALPROP L.P.,
a partnership together with any amendments thereto, be submitted to this
Company; together with an affidavit from one of the general partners
stating that it is a true copy, that said partnership is in full force and
effect, and that there have been no further amendments to the Agreement.
THIS REPORT MAY THEN BE SUBJECT TO SUCH FURTHER REQUIREMENTS AS DEEMED
NECESSARY.
F. Secretary of State Office reports CALPROP L.P. is an active limited
partnership as of JULY 5, 1996.
G. The most current statement/certificate of partnership for CALPROP L.P. a
partnership recorded APRIL 11, 1995, as SERIES NO. 95077446, OFFICIAL
RECORDS of Alameda County.
The following parties are listed therein as general partners:
Highridge-Calprop, Inc. and Calprop Portfolio, Inc.
H. THE REQUIREMENT that a resolution of the board of directors of
HIGHRIDGE-CALPROP, INC. be submitted authorizing execution of any deed or
loan documents and that the by-laws be submitted prior to the recordation
of such instruments.
I. Secretary of State Office reports HIGHRIDGE-CALPROP, INC. is in good
standing as of JULY 5, 1996.
J. THE REQUIREMENT that a resolution of the board of directors of CALPROP
PORTFOLIO, INC. be submitted authorizing execution of any deed or loan
documents and that the by-laws be submitted prior to the recordation of
such instruments.
K. Secretary of State Office reports CALPROP PORTFOLIO, INC. is in good
standing as of JULY 5, 1996.
L. LENDER'S SPECIAL INFORMATION
According to the public records, there have been no deeds conveying the
herein described property recorded within two years prior to the date
hereof except as follows:
Grant Deed
From : CALFRONT ASSOCIATES, a California corporation, formerly
known as PACTEL PROPERTIES, a California corporation
To : CALPROP, L.P., a Delaware limited partnership
Recorded : January 4, 1995, Series No. 95001088, Official Records.
FIRST AMERICAN TITLE
<PAGE> 75
Order No. SP156410
Page No. 7
LEGAL DESCRIPTION
REAL PROPERTY in the City of Pleasanton, County of Alameda, State of
California, described as follows:
PARCEL ONE:
Parcel 2, Parcel Map 6859, filed August 4, 1995, Book 218, of Parcel Maps, Page
75, Alameda County Records.
Excepting therefrom:
All oil, gas, minerals and other hydrocarbon substances in and under or that
may be produced from a depth below 500 feet from the surface of said land,
without right of entry upon the surface of said land, for the purpose of
mining, drilling exploring or extracting such oil, gas, minerals and other
hydrocarbon substances or other use of or rights in or to any portion of the
surface of said land to a depth of 500 feet below the surface thereof, as
reserved in the Deed from Volk-McLain Communities, Inc. to Qualified
Investments, Inc., recorded June 27, 1967, Reel 1988, Image 207, Series No.
AZ/60836, Official Records.
A.P. No. 941-1301-062 (portion)
PARCEL TWO:
Non-Exclusive easement appurtenant to Parcel One for ingress, egress and access
for the passage of vehicles and pedestrians as created by Paragraph 2.3 of the
instrument entitled "Declaration of Covenants, Conditions and Restrictions
(Parcels 1 and 2, Parcel Map 6859)" recorded August 4, 1995, Series No.
95172357, Alameda County Records, upon the terms and conditions contained in
said instrument over lands in the City of Pleasanton, County of Alameda, State
of California; described as follows:
The Westerly 40 feet of Parcel 1, Parcel Map 6859 filed August 4, 1995, Book
218, of Parcel Maps, Page 75, Alameda County Records.
PARCEL THREE:
Non-exclusive parking and passage of Motor Vehicles appurtenant to Parcel One
as contained in the Declaration of Covenants, Conditions and Restrictions
recorded August 4, 1995, Series No. 95172357, Official Records, upon the terms
and conditions therein.
*****
EXHIBIT A
FIRST AMERICAN TITLE
<PAGE> 76
NOTICE
Section 12413.1 of the California Insurance Code effective January 1, 1990,
requires that any Title Insurance Company, underwritten Title Company, or
controlled Escrow Company handling funds in an escrow or sub-escrow capacity,
wait a specified number of days after depositing funds, before recording any
documents in connection with the transaction or disbursing funds. This statute
allows for funds deposited by wire transfer to be disbursed the same day as
deposit. In the case of cashier's checks or certified checks, funds may be
disbursed the next day after deposit. In order to avoid unnecessary delays of
three to seven days, or more, please use wire transfer, cashier's checks, or
certified checks whenever possible.
If you have any questions about the effect of this new law, please contact your
local First American Office for more details.
NOTICE
In accordance with Sections 18662 and 18668 of the Revenue and Taxation Code, a
buyer may be required to withhold an amount equal to three and one-third
percent of the sales price in the case of the disposition of California real
property interest by either:
1. A seller who is an individual with a last known street address
outside of California or when the disbursement instructions authorize
the proceeds be sent to a financial intermediary of the seller, OR
2. A corporate seller which has no permanent place of business in
California.
The buyer may become subject to penalty for failure to withhold an
amount equal to the greater of 10 percent of the amount required to be
withheld or five hundred dollars ($500).
However, notwithstanding any other provision included in the California
statutes referenced above, no buyer will be required to withhold any
amount or be subject to penalty for failure to withhold if:
1. The sales price of the California real property conveyed does not
exceed one hundred thousand dollars ($100,000), OR
2. The seller executes a written certificate, under the penalty of
perjury, certifying that the seller is a resident of California, or if a
corporation, has a permanent place of business in California, OR
3. The seller, who is an individual, executes a written certificate,
under the penalty of perjury, that the California real property being
conveyed is the seller's principal residence (as defined in Section 1034
of the Internal Revenue Code).
The seller is subject to penalty for knowingly filing a fraudulent
certificate for the purpose of avoiding the withholding requirement.
The California statutes referenced above include provisions which
authorize the Franchise Tax Board to grant reduced withholding and
waivers from withholding on a case-by-case basis.
The parties to this transaction should seek an attorney's, accountant's,
or other tax specialist's opinion concerning the effect of this law on
this transaction and should not act on any statements made or omitted by
the escrow or closing officer.
FIRST AMERICAN TITLE [LOGO]
<PAGE> 77
[RECORDING STAMP]
Recording Requested by and
When Recorded Mail to:
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: James F. Donlan, Esq.
FIRST AMER 500974
DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS
(Parcels 1 and 2, Parcel Map 6859)
This Declaration of Covenants, Conditions and Restrictions
("Declaration") is made on JULY 6, 1995 by CalProp, L.P., a Delaware limited
partnership ("Declarant"), with reference to the following facts:
A. Declarant is the owner of real property in the City of
Pleasanton, California, known as Parcel A of Amended Parcel Map 3971, filed June
27, 1983, in Book 138 of Parcel Maps, at Page 63, Alameda County Records, as
amended December 14, 1989, in Book 187 of Parcel Maps, at Page 78, Alameda
County Records (the "Property");
B. Concurrently herewith, Declarant is recording Parcel Map
6859 in the Alameda County Records, pursuant to which the Property will be
subdivided into Parcel 1 of said Parcel Map 6859 ("Parcel 1") and Parcel 2 of
said Parcel Map 6859 ("Parcel 2");
C. Parcel 1 has been improved with improvements, including a
building containing approximately 3,937 square feet currently utilized as a
retail banking branch office (the "Parcel 1 Building"), together with surface
parking for 61 motor vehicles, vehicular roadways and pedestrian passageways,
as depicted on Exhibit "A" hereto;
D. Declarant has established a general plan described in this
Declaration for the improvement and development of the Property, and each of the
parcels on the Property, and desires to provide for the harmonious and uniform
development of the Property in accordance with said plan of development;
E. Pursuant to the general plan of development, Parcel 2
will be improved with retail and/or other commercial improvements, together
with surface parking, vehicular roadways and pedestrian passageways that will
serve the retail and/or other commercial improvements and will be coordinated
with and complementary to the surface parking, vehicular roadways and
pedestrian passageways on Parcel 1;
EXHIBIT E
<PAGE> 78
F. As a condition to its approval of Parcel Map 6859, the City of
Pleasanton (the "City") has required that Declarant record reciprocal access,
parking and utility casements between Parcel 1 and Parcel 2 (the "Parcels"), and
covenants, conditions and restrictions that provide for a single party to be
responsible for the maintenance and repair of the Property:
G. Declarant is making this Declaration to describe its general
plan of development for the Property, and to provide for reciprocal access,
parking, and utility casements and to provide for the coordinated maintenance
and repair of the Property as required by the City.
NOW, THEREFORE, Declarant declares that the Property, and each of the
Parcels on the Property, is, and shall be, held, conveyed, hypothecated,
encumbered, leased, rented, used and occupied subject to the following
limitations, reservations, covenants, conditions, and servitudes, all of which
are declared and agreed to be in furtherance of and pursuant to a general plan
for the development of the Property, and all of which are declared and agreed
to be for the purpose of enhancing, maintaining and protecting the value and
attractiveness of the Property. These provisions are imposed upon Declarant
and its successors in interest as owners of all or part of the Property, and
are for the benefit of each of the Parcels, and shall bind the owners thereof.
These provisions shall not only be a burden upon and a benefit to the original
owners of each of the Parcels, but shall also be a burden upon and a benefit to
their respective successors and assigns. All covenants are intended as and are
declared to be covenants running with the Property as well as equitable
servitudes upon the Property.
1. DEFINITIONS
1.1 Easement Areas. The Parcel 1 Easement Area, the Driveway
Easement Area, and the Parcel 2 Easement Area are sometimes referred to herein
collectively and individually respectively as the "Easement Areas" or an
"Easement Area."
1.2 Managing Owner. Until such time as the first Certificate of
Occupancy is issued for a building constructed on Parcel 2, the "Managing
Owner" shall mean the Owner of Parcel 1. From and after the time when the first
Certificate of Occupancy is issued for a building constructed on Parcel 2, the
"Managing Owner" shall mean the Owner whose Parcel contains more than 50% of
the total floor area of all buildings constructed on the Property; provided,
however, in the event the total building floor area of Parcel 1 is equal to the
total building floor area of Parcel 2, the Owner of Parcel 2 shall be the
Managing Owner.
1.3 Non-Managing Owner. Any Owner who is not the Managing Owner
shall be a "Non-Managing Owner."
1.4 Parcels. Parcel 1 and Parcel 2 are sometimes referred to
herein collectively as the "Parcels" or each individually a "Parcel".
-2-
<PAGE> 79
1.5 Owner. "Owner" means each person or entity holding a record
ownership interest in a Parcel, including Declarant, but shall not include
persons or entities who hold an interest in a Parcel only as security for the
performance of an obligation.
1.6 Parking Areas. The term "Parking Areas" shall mean those areas
of the Parcels which are now or hereafter utilized for the parking of vehicles
and vehicular and pedestrian circulation.
1.7 Permittees. The term "Permittees" shall mean an Owner's lessees
and sublessees, including their agents, employees, officers, directors,
licensees, invitees and guests, as shall be authorized by an Owner from time
to time.
1.8 Signature Center Owners Association. "Signature Center Owners
Association" shall mean the owners association contemplated by the Declaration
of Covenants, Conditions and Restrictions of Meyer Center - Pleasanton recorded
on June 30, 1983, as Instrument No. 83-115477, currently known as Signature
Center Owners Association, a California nonprofit mutual benefit corporation.
2. EASEMENTS FOR ACCESS AND PARKING
2.1 General Plan of Development. Notwithstanding that Parcel 1 and
Parcel 2 may have separate ownerships in the future, Declarant desires that (a)
the design of the driveways and parking areas constructed on Parcel 2 will be
coordinated with the design of the driveways and parking areas on Parcel 1 (and,
to the extent necessary or desirable to accomplish the same, the design of the
driveways and parking areas on Parcel 1 may be modified by the Owner of Parcel
2, at such Owners' sole cost and expense); (b) the Owner of Parcel 1 and its
Permittees will have the right to travel upon Parcel 2 and to park in the
designated Parking Areas located on Parcel 2, (c) the Owner of Parcel 2 and its
Permittees will have the right to travel upon Parcel 1 and to park in the
designated Parking Areas located on Parcel 1, and (d) the Owner of Parcel 2
will have a perpetual, non-exclusive right of access over and across Parcel 1
to provide ingress to and egress from the public right of way commonly known as
Stoneridge Drive. The easements hereby created in order to accomplish the
foregoing shall be perpetual and appurtenant to the stated dominant tenements
and shall be limited to the purposes set forth herein.
2.2 Parking and Access Easements for the Benefit of Parcel 2. The
Owner of Parcel 2 shall have a perpetual, non-exclusive easement appurtenant to
Parcel 2 for the benefit of Parcel 2, and for the use of its Owner and
such Owner's Permittees, for the parking of motor vehicles and the passage of
motor vehicles and pedestrians on, over, across and through portions of Parcel
1 constructed and maintained for the parking of motor vehicles and for the
passage of vehicles and pedestrians, as the same may from time to time (and
subject to the other provisions of this Agreement) be modified or altered (the
"Parcel 1 Easement Area"). Notwithstanding the foregoing, the Owner of Parcel 1
shall retain for the benefit of its Permittees the exclusive right to park
vehicles in up to three parking spaces located adjacent to the Parcel 1 Building
and identified by appropriate signage.
-3-
<PAGE> 80
2.3 Easement for Access to Public Right-of-Way for the Benefit of
Parcel 2. Without limiting the generality of the easement for access described
in Paragraph 2.2, the Owner of Parcel 2 shall have a perpetual, non-exclusive
easement appurtenant to Parcel 2 for the benefit of Parcel 2, and for the use
of its Owner and such Owner's Permittees, on, over, across and through the
westerly forty feet of Parcel 1 (the "Driveway Easement Area") for the purpose
of providing ingress, egress and access for the passage of vehicles and
pedestrians between Parcel 2 and the public right of way commonly known as
Stoneridge Drive.
2.4 Pricing and Access Easements for the Benefit of Parcel 1. The
Owner of Parcel 1 shall have a perpetual, non-exclusive easement appurtenant to
Parcel 1 for the benefit of Parcel 1, and for the use of its Owner and such
Owner's Permittees, for the parking of motor vehicles and the passage of motor
vehicles and pedestrians on, over, across and through such portions of Parcel 2
as may from time to time be improved and maintained for the parking of motor
vehicles and for the passage of vehicles and pedestrians (the "Parcel 2
Easement Area"). Notwithstanding the foregoing, there is reserved to the Owner
of Parcel 2 the right at all times to designate reasonable and customary
numbers of parking spaces on Parcel 2 for the exclusive use of handicapped
Permittees.
2.5 Non-Exclusive Parking. In order to facilitate the availability
of parking spaces, whether located on Parcel 1 or Parcel 2, for the benefit of
the entire Property, except as otherwise provided herein, or except as
expressly approved by the City, no parking space within the Property will be
designated for the exclusive use of any Owner or any Owner's tenant or other
Permittee. In the event the City approves such exclusive use, the Owners will
execute such documents, and take any and all actions required in connection
with effectuating the same, including but not limited to amending this
Declaration.
2.6 Restriction on Parcel 1 Building. Purchaser acknowledges that
Parcel 1 currently is improved with the Parcel 1 Building, which contains
approximately 3,937 square feet of floor area, and provides parking spaces for
61 motor vehicles as depicted on Exhibit "A" hereto. In order that a
determinable number of parking spaces on Parcel 1 will be available for the
benefit of improvements that may in the future be constructed on Parcel 2, the
building floor area of the Parcel 1 Building will not be increased to more than
4,000 square feet, nor shall the Parcel 1 Building for any reason (including
following any event of damage or destruction or condemnation) be replaced with
improvements containing more than 4,000 square feet of building floor area.
2.7 Redesign of Parcel 1 Easement Area. In furtherance of
Declarant's general plan that the surface parking, vehicular roadways and
pedestrian passageways serving the retail and/or other commercial improvements
constructed on Parcel 2 be coordinated with and complementary to the surface
parking, vehicular roadways and pedestrian passageways located on Parcel 1, as
well as that the vehicular roadways and pedestrian passageways located on the
Property be coordinated with and complementary to the vehicular roadways and
surface parking located on the improved property located immediately to the
north of the Property and commonly known as 4900 Hopyard Road, to the extent
necessary or desirable to provide for such a coordinated and complementary
design, the Owner of Parcel 2 will have the right to enter upon Parcel 1 for
the purpose of modifying the locations of the
-4-
<PAGE> 81
parking spaces and driveways (and, to the extent necessary to accomplish the
same, the locations of curbs, sidewalks, landscaping, and other improvements
located on Parcel 1, but excluding the Parcel 1 Building) from those depicted
on Exhibit A at such Owner's sole cost and expense, provided that (a) such
modifications have been approved by City, (b) the construction of such
modifications does not prevent access between Parcel 1 and the public right
of way commonly known as Stoneridge Drive, and (c) during the course of such
construction at least the number of parking spaces required by the City's zoning
code for a building used for retail banking services with a building floor area
of 4,000 square feet will remain available and fully accessible to Permittees
of the Owner of Parcel 1 at all times during customary banking hours. Without
limiting the generality of the foregoing, the Owner of Parcel 2, in improving
Parcel 2 with buildings and other improvements, will have the right to relocate
the driveway access between Parcel 2 and Stoneridge Drive to another location
on Parcel 1 or the Property.
2.8 Restrictions on Easements. The easements created by Paragraphs
2.2, 2.3 and 2.4, above shall be subject to the following reservations as well
as other provisions contained in this Declaration:
(a) Except as specifically provided for otherwise in the
following subparagraphs, no fence or other barrier which would unreasonably
prevent or obstruct the passage of pedestrian or vehicular travel for the
purposes herein permitted shall be erected or permitted within or across any
portion of the Property.
(b) In connection with any construction, reconstruction, repair
or maintenance on its Parcel, there is hereby reserved to each Owner the right
to create a temporary staging area on its Parcel at such location as will not
unreasonably interfere with access to the Parking Areas on its Parcel.
(c) There is hereby reserved to each Owner the right, from time
to time, without obtaining the consent or approval of any other Owner, to make,
from time to time, at its own expense changes, modifications or alterations to
the Parking Area on its Parcel, provided that:
(i) the accessibility of such Parking Area for
pedestrian and vehicular traffic (as it relates to the other Owner's Property)
is not unreasonably restricted or hindered;
(ii) with respect to Parcel 1, all parking stalls and
rows and vehicular traffic lanes shall remain generally as shown on Exhibit "A"
hereto, except to the extent modified pursuant to Paragraph 2.7;
(iii) no governmental rule, ordinance or regulation
shall be violated as a result of such action, and such action shall not result
in any other Owner being in violation of any governmental rule, ordinance or
regulation;
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<PAGE> 82
(iv) except as otherwise provided in Paragraph 2.7, no change
shall be made in the access points between the Parking Area and the public
streets, provided, however, that additional access points may be created with
the approval of each other Owner, such approval not to be unreasonably withheld;
and
(v) at least thirty (30) days prior to making any such
change, modification or alteration, the Owner desiring to do such work shall
deliver to the other Owner copies of the plans therefor, and provided further
that, if possible, such work shall not occur between October 1 and the following
January 31.
(d) There is further reserved to each Owner the right to close off
such portion of an Easement Area located on its Parcel for such reasonable
period of time as may be legally necessary, in the opinion of such Owner's
counsel, to prevent the acquisition of prescriptive rights by anyone; provided,
however, that prior to closing off any portion of an Easement Area, as herein
provided, such Owner shall give written notice to each other Owner of its
intention to do so, and shall attempt to coordinate such closing with each
other Owner so as not to materially interfere with each other Owner's business
operations.
2.9 Utility Easements. There are hereby created in favor of each Owner,
for the benefit of the Owner of each Parcel, together with the right to transfer
the same, perpetual, non-exclusive easements for utilities appurtenant to each
Parcel, and burdening each other Parcel, provided, however, that such easements
will not be located under any improvements designed for human occupancy. In the
event any Owner wishes to construct a building or other improvements within an
existing utility easement, such Owner will have the right to relocate such
easement and/or utility transmission lines, at such Owner's sole cost and
expense; any such relocation shall be effected in a manner that minimizes the
interference to the business conducted on the other Owner's Parcel.
2.10 Drainage Easements. There is hereby created in favor of each Owner for
the benefit of the Owner of each Parcel, a perpetual, non-exclusive easement
appurtenant to each Parcel, and burdening each other Parcel, for the purpose of
drainage of water (including, but not limited to excess storm water), to the
extent necessary to accommodate the general drainage plan for the Property
approved by the City and/or other governmental authorities.
3. PLAN OF MAINTENANCE AND REPAIR
3.1 Responsibility for Maintenance and Repair. The Managing Owner will be
responsible for causing the Easement Areas located on the Property to be kept
and maintained in a first class condition of cleanliness and repair in the
manner described in this Article 3. Notwithstanding the foregoing, the Managing
Owner will not have responsibility for any matters that are the responsibility
of Signature Center Owners Association.
3.2 Cost of Maintenance and Repair. All Owners will be required to
contribute their respective pro rata shares of the cost of maintenance and
repair of the Easement Areas (including but not limited to maintenance, repair
and replacement of all parking areas, driveways, landscaping, and cleaning,
selling, restriping, repaving the parking areas),
-6-
<PAGE> 83
including all costs of utilities related thereto and reasonable management fees
charged by third-party property managers, incurred by the Managing Owner. Each
Owner's pro rata share will be equal to a fraction, the numerator of which
shall be the number of square feet of land within the Owner's Parcel, and the
denominator of which shall be the total number of square feet of land within
the Property. Such costs will be billed by the Managing Owner not more
frequently than monthly; the Managing Owner's invoice shall be accompanied by
materials supporting the calculation stated on the invoice. The amount stated
on the invoice may include an administrative fee not to exceed 10% of the cost
of labor and materials, and will be due and payable within 10 days after
receipt of the Managing Owner's invoice. The Managing Owner, at its election,
may bill the other owners on the basis of reasonable estimates of the cost to
maintain the Property, with a reconciliation to actual costs not less
frequently than annually. If an Owner fails to pay its pro rata share of
maintenance costs within 10 days after receiving a written statement, the
invoiced Owner will owe, in addition to the amounts shown on the invoice, a
late charge equal to 5% of the amount not paid. If any invoice is not paid
within 30 days, the amount not paid will thereafter bear interest at the rate
of 10% per annum until paid. In the event an action is commenced to collect any
such amount, the prevailing party will have the right to recover its attorneys'
fees and costs; for purposes of the foregoing, the Managing Owner will be
considered the prevailing party if any amounts are determined to be owned by
the Non-Managing Owner, even if the amount of damages awarded by the court is
less than the amount sought in the Managing Owner's complaint.
3.3 Excessive Need for Maintenance or Repair. If, in the reasonable
opinion of the Managing Owner, any portion of the Property requires
disproportionate expense in order to be kept in a first-class condition of
cleanliness and repair, and/or has been damaged to an extent beyond that
attributable to normal wear and tear or damage by the elements, the Managing
Owner shall have the right to send written notice of such failure to the Owner
who (or whose Permittee) is responsible, which notice shall be in writing and
specify what action is to be taken. If after thirty (30) days' written notice
the responsible Owner fails to take the required action, then the Managing
Owner sending the notice shall have the right to cause to be done all acts
required to maintain or repair the Easement Area. All cost of such maintenance
and repair, including management and administrative fees, shall be payable by
the responsible Owner to the Managing Owner.
3.4 Maintenance or Repair by the City. In the event the Managing
Owner has failed to perform its responsibilities for repair and maintenance of
the Property, the City may give notice of that fact to the Managing Owner. Any
such notice shall be in writing and shall specify in detail the manner in which
the City believes the Property is not being maintained and/or repaired to the
standards specified in this Article 3. If, within 30 days after receipt of such
notice, the Managing Owner has not performed such maintenance or repair (or, if
such maintenance or repair could reasonably be expected to require more than 30
days to complete, if the Managing Owner has not commenced such repair, and is
not pursuing it to completion with reasonable diligence), then, following
further written notice from the City, the City may at its election perform
such maintenance and repair and recover the cost thereof from the respective
Owners in accordance with the provisions of Paragraph 3.2 hereof; provided,
however, that nothing in this Paragraph 3.4 shall be deemed to or obligate the
City
-7-
<PAGE> 84
to perform the maintenance responsibilities of the Managing Owner, or relieve
the Managing Owner of its responsibility under this Article 3.
3.5 Joint and Several Liability. In the event a Parcel is owned by
more than one Owner, all Owners will be jointly and severally liable for their
obligations set forth in this Article 3.
4. DAMAGE AND DESTRUCTION
If any portion of an Easement Area is damaged, regardless of the cost
of repair or the existence of insurance coverage, each Owner having an easement
therein for parking shall have the right (provided that such Owner or such
Owner's Permittee was not the cause of the damage) to require that the damage
be repaired and the damaged improvements be restored by the Owner of the
damaged parcel (the "Responsible Owner") to the condition existing immediately
prior to the damage or to a condition providing comparable facilities, provided
the cost is no greater than that of restoring the same to the condition
existing prior to the damage. Any such work shall be promptly performed or
caused to be promptly performed by the Responsible Owner; if the Responsible
Owner fails to do so after thirty (30) days written notice from any other
Owner, then the Owner sending the notice shall have the right to enter onto
such Parcel and to do or cause to be done all acts required to repair the
damage. All insurance proceeds payable for the damage shall be made available
to the Owner who performs or causes the performance of the work to pay for the
cost of repairs. Any cost of repairs in excess of available insurance proceeds
shall be payable by the Responsible Owner to the Owner who performs or causes
the work to be performed.
5. CONDEMNATION
In the event that all or a portion of a servient tenement is taken
pursuant to the exercise of the power of eminent domain or pursuant to an
agreement entered into under the threat of the exercise of the power of eminent
domain (a "Taking") so as to result in the loss of one or more parking spaces
or the loss of access to or egress from such parking spaces, then any portion
of the parking easements that the Owner of the affected dominant tenement
determines can no longer be used for the purposes specified herein shall cease
and terminate as of the date of transfer of title to the condemning authority
or the date that the condemning authority takes possession of the affected
servient tenement, whichever first occurs. The amounts payable by the
condemning authority as proceeds, awards, damages, compensation and payments of
every other kind for the complete or partial Taking of the servient tenement
shall be paid to the Owner of the Parcel constituting the servient tenement,
except that each other Owner of the Parcel constituting the dominant tenement
shall have the right to receive severance damages that may accrue to its Parcel
as a result of the Taking.
6. INDEMNIFICATION
Each Owner shall hold harmless, indemnify, and defend the other Owner
against any and all claims, demands, actions, causes of action, damages,
losses, liabilities, costs and expenses (including reasonable attorneys' fees),
which arise out of or in connection with
-8-
<PAGE> 85
injury or damage to persons or property caused by the indemnifying Owner, or
the agents, contractors, employees, lessees or Permittees of such Owner, in
connection with the use of the Easement Areas. An Owner shall have no
obligation to indemnify another Owner against any such matters arising in whole
or in part from the negligence or willful act or omission of the other Owner,
or the other Owner's agents, contractors, employees, lessees, or Permittees.
7. TERM AND TERMINATION
7.1 Term. This Declaration and the easements provided for herein
shall run with the land and shall continue in full force and effect for a
perpetual term commencing on the date hereof unless terminated with the consent
of all the Owners or in accordance with law.
7.2 Amendment. Any provision, covenant, condition or restriction
contained within this Declaration may be terminated or modified only with the
written consent of the Owners who have an interest in the right being
terminated or modified. No termination or modification will be effective until
a written instrument setting forth its terms and referring to this Agreement
has been executed and acknowledged by the required owners and recorded in the
office of the Recorder of Alameda County, California. All Permittees and other
persons having a possessory interest in any of the Properties or any portion
thereof or any interest in the easements granted herein will be bound by and
subject to the terms of any such modification or termination accomplished in
accordance with the provisions of this Paragraph 7.2.
8. MISCELLANEOUS
8.1 Relationship of Owners. This Declaration shall not constitute nor
be deemed to constitute the Owners as partners or joint venturers with each
other nor constitute any Owner the agent of any other Owner nor shall it impose
upon any Owner any fiduciary duty.
8.2 Severability. If any clause, sentence or other portion of the
terms, conditions, covenants and restrictions of this Declaration is now or
subsequently becomes illegal, null or void for any reason, or is held by any
court of competent jurisdiction to be so, the remaining portions will remain in
full force and effect.
8.3 Lawful Money. All amounts payable under this Agreement shall be
paid in lawful money of the United States of America. Except as otherwise
provided in Paragraph 3.2, any moneys expended by one Owner for which the Owner
is entitled to demand repayment from another Owner as provided in this
Agreement shall bear interest at the rate of ten percent (10%) per annum.
8.4 Title and Captions. The title of this Agreement and the captions
for various sections, paragraphs and subparagraphs shall not be deemed to
limit, or be used in any way to interpret or describe, the scope, content or
intent of this Agreement or any part or parts of this Agreement.
-9-
<PAGE> 86
8.5 Attorneys' Fees. In the event of any litigation or other
proceedings (including arbitration) involving the parties hereto for the
enforcement or interpretation of any of the provisions of this Agreement, or
any right of either party hereto, the unsuccessful party in such litigation or
other proceedings hereby agrees to pay to the successful party all costs and
expenses, including reasonable attorneys' fees and court costs (whether
incurred at the trial, appellate or administrative levels), incurred by the
successful party in such litigation or other proceedings, all of which may be
included in, and is a part of, any judgment or decision rendered in such
litigation or other proceedings.
8.6 Entire Agreement. This document contains the entire agreement of
the parties hereto concerning the grant and use of the easements granted herein
and the covenants made herein and supersedes all prior or contemporaneous oral
or written understandings or agreements.
8.7 Notices. All notices, statements, demands, approvals or other
communications ("Notices") to be given under or pursuant to this Agreement
shall be in writing, addressed to a party at its respective address as provided
opposite its signature and will be delivered in person, or by first-class mail,
postage prepaid. Notices will be deemed to have been given on the commencement
of the second full day after the date of mailing or, if delivered in person, on
the date of delivery. Any change in the address may be changed by delivery of
notice in compliance with the provisions of this paragraph.
8.8 Binding. This Agreement shall be binding upon and inure to the
benefit of the heirs, personal representatives, assigns or successors of each
of the parties hereto.
8.9 Future Assurances. The Owners of the Parcels will take such
further actions, including but not limited to entering into and recording
additional easement agreements, as may be necessary or desirable (or required
by any lender or title insurer) to effectuate the intention of the parties to
this Agreement. Without limiting the generality of the foregoing, the Owner of
Parcel 1 shall grant such additional easements as are necessary and appropriate
to facilitate the development of Parcel 2 and do not materially adversely
affect Parcel 1, including, but not limited to, easements for utilities and
easements for storm water runoff and drainage, and will join in any
applications to the City or any other governmental authority required in
connection with the redesign of the Parcel 1 Easement Area as contemplated by
Paragraph 2.7. PUD 80-16-3M (the "PUD"), which was approved by the City as
Ordinance No. 1477 for the development of Parcel 2, may be modified in the
future, and Declarant's general plan for the Property contemplates that Parcel
2 may be developed in a manner that is materially different from that described
in the PUD.
8.10 Mortgagee Protection. No breach of any of the covenants,
conditions and restrictions herein contained shall render invalid the lien of
any mortgage or deed of trust
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<PAGE> 87
made in good faith and for value, but all of said covenants, conditions and
restrictions shall be binding upon and effective against any Owner whose title
is derived through foreclosure or trustee's sale, or otherwise.
CALPROP, L.P., a Delaware
limited partnership,
By: HIGHRIDGE CALPROP, INC.,
a California corporation,
its general partner
By: /s/
-------------------------
Its: Vice President
By: CALPROP PORTFOLIO, INC.,
a Delaware corporation,
its general partner
By: /s/
---------------------------
Its: Vice President
-11-
<PAGE> 88
STATE OF CALIFORNIA )
SS.
COUNTY OF LOS ANGELES )
On July 7, 1995, before me, Nina Cochrane, notary public, personally appeared
Jack Mahoney, personally known to me to be the person whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in
his authorized capacity, and that by his signature on the instrument the person,
or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Nina Cochrane [SEAL]
- ---------------------------------
STATE OF CALIFORNIA )
SS.
COUNTY OF LOS ANGELES )
On July 11, 1995, before me, Muthiah Nachiappan, notary public, personally
appeared Andrew Isaac Sands, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity(ies), and that by his signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Muthiah Nachiappan [SEAL]
- ---------------------------------
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<PAGE> 89
BENEFICIARY'S CONSENT
The undersigned, being the beneficiary of the deed of trust recorded in
the Official Records of Alameda County on January 4, 1995 as Instrument No.
95-897 (the "Deed of Trust"), hereby consents to the covenants, conditions and
restrictions contained in this Declaration, and agrees that the lien of the
Deed of Trust shall be and is hereby made subordinate to the covenants,
conditions and restrictions hereof.
SALOMON BROTHERS REALTY CORP.,
a New York corporation
By: /s/ Kenneth R. Spears
--------------------------
Its: Authorized Agent
STATE OF NEW YORK )
SS.
COUNTY OF NEW YORK )
On July 6th, 1995, before me, Krystyna Gaboff, notary public, personally
appeared Kenneth R. Spears, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the name of his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Krystyna Gaboff
- ----------------------------
KRYSTYNA GABOFF
NOTARY PUBLIC, State of New York
No. 01GA4846117
Qualified in Kings County
Commission Expires Sept. 30, 1995
-13-
<PAGE> 90
EXHIBIT A
<PAGE> 1
Exhibit 11
STATEMENT RE: COMPUTATION OF PER-SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- -------------------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Number of common shares
outstanding for entire period 15,575,352 14,252,344 14,933,136 14,243,611
Weighted average number
of shares issued upon
conversion of convertible notes
and exercise of warrants 241,728 490,683
Weighted average number of
shares issued upon exercise of
options 20,432 268 58,131 6,069
--------------- --------------- --------------- -----------------
Weighted average number of
common shares outstanding 15,837,512 14,252,612 15,481,950 14,249,680
=============== =============== =============== =================
Net loss $ (256,831) $ (354,317) $ (1,501,208) $ (543,344)
=============== =============== =============== =================
Net loss per common share $ (.02) $ (.02) $ (.10) $ (.04)
=============== =============== =============== =================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED BALANCE SHEET, THE CONDENSED CONSOLIDATED STATEEMENT OF
OPERATIONS, AND THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) QUARTERLY REPORT (FORM 10-Q)
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR
THE QUARTERLY PERIOD ENDED JUNE 29, 1996.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 1,052,951
<SECURITIES> 0
<RECEIVABLES> 1,214,551
<ALLOWANCES> 0
<INVENTORY> 1,673,424
<CURRENT-ASSETS> 3,997,130
<PP&E> 2,227,778
<DEPRECIATION> 1,781,479
<TOTAL-ASSETS> 5,535,395
<CURRENT-LIABILITIES> 2,148,363
<BONDS> 0
0
0
<COMMON> 45,913,006
<OTHER-SE> (42,525,974)
<TOTAL-LIABILITY-AND-EQUITY> 5,535,395
<SALES> 3,489,239
<TOTAL-REVENUES> 3,566,469
<CGS> 1,639,820
<TOTAL-COSTS> 1,639,820
<OTHER-EXPENSES> 3,382,046
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,811
<INCOME-PRETAX> (1,501,208)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,501,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,501,208)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
