SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997
Commission File Number 1-6247
ALZA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0142070
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
950 Page Mill Road, P.O. Box 10950, Palo Alto, CA 94303-0802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 494-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock New York Stock Exchange
5 1/4% Liquid Yield Option Notes due 2014 New York Stock Exchange
(Zero Coupon-Subordinated)
5% Convertible Subordinated Debentures New York Stock Exchange
due 2006
Securities registered pursuant to Section 12(g) of the Act:
Warrants (to purchase Common Stock at $65 per share)
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 [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant, as of March 16, 1998:
$3,539,051,440.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 16, 1998:
Title of Class Number of Shares
Common Stock 86,052,152
DOCUMENTS INCORPORATED BY REFERENCE
Part II, Items 5, 6, 7 and 8 are incorporated by reference to
the registrant's Annual Report to Stockholders for the year ended
December 31, 1997; Part III, Items 10, 11, 12 and 13 are
incorporated by reference to the definitive proxy statement for the
registrant's Annual Meeting of Stockholders to be held on May 7,
1998.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Documents filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements: Incorporated by
reference to the Annual Report (see accompanying Index to
Consolidated Financial Statements).**
2. Consolidated Financial Statement Schedule: (see
accompanying Index to Consolidated Financial Statement Schedule).**
3. Exhibits:
3.1 Restated Certificate of Incorporation of
ALZA Corporation filed with the Delaware Secretary
of State on February 14, 1994**
3.2 Composite Bylaws of ALZA Corporation as
restated on February 10, 1994 and amended on
August 11, 1994, February 16, 1995, February 15,
1996, August 13, 1996 and February 10, 1998**
4.1 Indenture dated July 7, 1994 between ALZA
Corporation and the Chase Manhattan Bank, N.A. as
Trustee, relating to ALZA's 5 1/4% Liquid Yield
Option-trademark- Notes**
4.2 Specimen of LYONs-trademark- Certificate
(included in Exhibit 4.1)**
4.3 Form of Warrant Agreement between ALZA
Corporation and the Chase Manhattan Bank (with
attached Warrant Certificate)**
4.4 Indenture dated April 23, 1996 between ALZA
Corporation and the Chase Manhattan Bank, N.A., as
Trustee, relating to ALZA's 5% Convertible
Subordinated Debentures**
4.5 Specimen of 5% Convertible Subordinated
Debenture (included in Exhibit 4.4)**
10.1 Technology License Agreement between ALZA
Corporation and Crescendo Pharmaceuticals
Corporation**
See footnotes on page 4.
<PAGE>
10.2 Development Agreement between ALZA
Corporation and Crescendo Pharmaceuticals
Corporation**
10.3 License Option Agreement between ALZA
Corporation and Crescendo Pharmaceuticals
Corporation**
10.4 Restated Certificate of Incorporation of
Crescendo Pharmaceuticals Corporation**
10.5 Amended and Restated Executive Deferral
Plan II+**
10.6 Executive Deferral Plan II for Chief
Executive Officer+**
10.7 Executive Deferral Plan Amendments+**
10.8 Amendment Number 2 to Executive Deferral
Plans II+**
10.9 ALZA Corporation Amended and Restated
Stock Plan+**
10.10 Form of Executive Agreement between
ALZA Corporation and Certain Executive Officers+**
10.11 Lease Agreement between ALZA and
P/A Charleston Road LLC for Building One of
Charleston Road Development Project (a
substantially identical lease is in effect for
each of two other office buildings)
10.12 Construction Agreement between ALZA
and P/A Charleston Road LLC relating to three
office building lease agreements
10.13 Ground Lease between ALZA and the
Peery and Arrillaga Trusts relating to a seven-
acre parcel in Mountain View
13 Portions of Annual Report to
Stockholders expressly incorporated by reference
herein**
21 Subsidiaries**
23 Consent of Ernst & Young LLP,
Independent Auditors**
27.1 Financial Data Schedule for the year
ended December 31, 1997**
27.2 Restated Financial Data Schedule for the
quarters ended March 31, 1997 and June 30, 1997**
<PAGE>
27.3 Restated Financial Data Schedule for the
quarters ended June 30, 1996 and September 30,
1996 and for the year ended December 31, 1996**
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1997.
______________________________________________________________
+ A management contract or compensatory plan or arrangement
required to be filed as an Exhibit pursuant to Item 14(c) of
Form 10-K.
** Previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ALZA CORPORATION
By /s/ Ernest Mario
Dr. Ernest Mario
Chief Executive Officer
Date: July 16, 1998
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ernest Mario /s/ Dean O. Morton
Dr. Ernest Mario Dean O. Morton
Chairman of the Board of Director
Directors, Director and Chief Date: July 16, 1998
Executive Officer
Date: July 16, 1998
/s/ Isaac Stein
Isaac Stein
/s/ William G. Davis Director
William G. Davis Date: July 16, 1998
Director
Date: July 16, 1998
/s/ Julian N. Stern
Julian N. Stern
/s/ Robert J. Glaser Director
Dr. Robert J. Glaser Date: July 16, 1998
Director
Date: July 16, 1998
/s/ Bruce C. Cozadd
Bruce C. Cozadd
Senior Vice President, Chief
Financial Officer and
Principal Accounting Officer
Date: July 16, 1998
<PAGE>
EXHIBIT INDEX
Exhibit
10.11 Lease Agreement between ALZA and P/A Charleston Road LLC for
Building One of Charleston Road Development Project (a
substantially identical lease is in effect for each of two
other office buildings)
10.12 Construction Agreement between ALZA and P/A Charleston Road
LLC relating to three office building lease agreements
10.13 Ground Lease between ALZA and the Peery and Arrillaga Trusts
relating to a seven-acre parcel in Mountain View
ALZA Plaza
Building One
EXHIBIT 10.11
ALZA CORPORATION
LEASE AGREEMENT DATED SEPTEMBER 1, 1997
(BUILDING ONE)
THIS LEASE, made this 1st day of September, 1997, between
P/A CHARLESTON ROAD LLC, a California limited liability company,
("Landlord"), and ALZA CORPORATION, a Delaware corporation,
("Tenant", with Landlord and Tenant sometimes collectively
referred to herein as the "Parties").
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and
takes from Landlord those certain premises (the "Premises") as so
identified on Exhibit A, attached hereto and incorporated herein
by this reference thereto more particularly described as follows:
All of that certain building (hereinafter sometimes referred
to as the "Building" or "Building One") to be constructed in
accordance with the Construction Agreement between Landlord
and Tenant dated as of September 1, 1997 (the "Construction
Agreement") and the land exclusively associated with
Building One as so identified on Exhibit A to be located at
Amphitheatre Parkway and Charleston Road, Mountain View,
California, 94043. The entire single unsubdivided parcel of
land (the "Parcel"), of which the Premises is a part, is so
identified on Exhibit A. The on and off-site improvements,
building shell and interior improvements shall be
constructed by Tenant in accordance with the shell
specifications, site improvement specifications, and
interior improvement specifications as are now or hereafter
set forth in, attached to, or approved in accordance with
the terms of the Construction Agreement. Upon completion of
the "Shell Improvements" associated with the Premises (as
defined in the Construction Agreement), the Architect for
the Shell Improvements shall measure said Building in
accordance with the applicable provisions of the
Construction Agreement and the square footage shall be shown
on the lease commencement letter in the general form of
Exhibit D to be executed by the parties hereto on or prior
to the Commencement Date of this Lease (the "Lease
Commencement Letter"). Upon construction of the "Interior
Improvements" of the Premises (as defined in the
Construction Agreement), a plan reflecting the configuration
of the same shall be attached as Exhibit B hereto and
incorporated herein by this reference.
It is understood that the formal address for the Building
will be assigned by the City of Mountain View (the "City") some
time after issuance of a building permit for the Building. The
address for the Building as so assigned by the City, shall be
reflected in the Lease Commencement Letter.
As used herein the "Complex" shall mean and include all of
the Parcel as so identified on Exhibit A, attached hereto, and
all of the buildings, improvements, fixtures and equipment now or
hereafter situated on the Parcel. It is currently envisioned by
the Parties that there will be three occupiable multi-story
buildings constructed on the Parcel, which are currently
anticipated to be in the aggregate a minimum of approximately
300,000 square feet and a maximum of approximately 360,000 square
feet (collectively referred to herein as the "Three Buildings"
and individually as "Building One", "Building Two" and "Building
Three"). As neither the specific design or size of any or all of
the Three Buildings has been approved by the City, any
description of the location, size or design of the Building or of
the Three Buildings is necessarily only an approximation, and the
Parties agree to amend this Lease if necessary or appropriate to
reflect the final description of the location, size or design of
the Three Buildings as ultimately approved by the Parties and the
City. Tenant, as provided in the Construction Agreement, is
obligated to exercise due diligence to seek to obtain the
approval by the City for the development of an aggregate of at
least 300,000 square feet for all three Buildings.
Said letting and hiring is upon and subject to the terms,
covenants and conditions hereinafter set forth and as set forth
in the Construction Agreement, and Tenant covenants as a material
part of the consideration for this Lease to perform and observe
each and all of said terms, covenants and conditions. This Lease
is made upon the conditions of such performance and observance.
For convenience, attached hereto is an Index of Defined
Terms which identifies the Paragraph or other location where
various defined terms are defined in this Lease, with all such
defined terms being initially capitalized.
1. USE. ALZA Corporation("ALZA"), or an affiliate of ALZA
("ALZA Affiliate" as further defined in Paragraph 47C hereof), as
Tenant, under this Lease shall have the right to use the Premises
for any lawful use; in the event this Lease is assigned to any
person other than an ALZA Affiliate (an "Unaffiliated Assignee"),
such Unaffiliated Assignee, as Tenant, may use the Premises for
any or all of the following uses: office uses (including
executive, administrative or professional offices), research and
development uses (including laboratories and pilot production),
and any particular uses associated with companies engaged in
biotechnology research or production (including bio-research and
pharmaceutical uses), companies engaged in the design, research
or development (including pilot manufacturing) of computer or
electronics hardware, and companies engaged in the design,
research or development or manufacturing of computer or
electronics software, provided such purpose and/or use is in
conformance with applicable governmental laws, regulations, rules
and ordinances. Landlord will not unreasonably withhold its
approval to any other use requested by Tenant, provided such use
is not inappropriate as a use in the Complex. Tenant shall not
do or permit to be done in or about the Premises (or to the
extent within Tenant's control, the Complex) nor bring or keep or
permit to be brought or kept in or about the Premises (or to the
extent within Tenant's control, the Complex) anything which is
prohibited by or will in any way increase the existing rate of
(or otherwise adversely affect) fire or any insurance covering
the Complex or any part thereof, or any of its contents, or will
cause a cancellation of any insurance covering the Complex or any
part thereof, or any of its contents, except to the extent that
Landlord or Tenant, upon notice thereof, is able to arrange for
the continuation or replacement of such insurance coverage, with
any increased costs of such continued or replacement insurance to
be paid exclusively by Tenant. Tenant shall not do or permit to
be done anything in, on or about the Premises or the Complex
which will in any way unreasonably obstruct or interfere with the
rights of other tenants or occupants of the Complex or injure or
unreasonably annoy them, or use or allow the Premises to be used
for any improper, immoral, or unlawful purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the
Premises or the Complex. No sale by auction shall be permitted
on the Premises. Tenant shall not place any loads upon any
floors, walls, or ceilings of the Building which endanger the
structure, or place any harmful fluids or other materials in the
drainage system of the Building or the Common Area, or overload
the Building's electrical or other mechanical systems without
first obtaining Landlord's consent and, at Tenant's sole cost and
expense, upgrading such electrical and/or mechanical systems to
accommodate such enhanced uses. No waste materials or refuse
shall be dumped upon or permitted to remain upon any part of the
Building or on any portion of the Common Area of the Complex,
except in trash containers placed inside exterior enclosures
approved by Landlord (which approval is waived if ALZA and/or any
ALZA Affiliates is then the Tenant under each of the Three
Leases) for that purpose or inside of the Building proper in
areas designated for such purpose. No materials, supplies,
equipment, finished products or semi-finished products, raw
materials or articles of any nature shall be stored upon or
permitted to remain outside the Building, except in screened
storage areas approved by Landlord (which approval is waived if
ALZA and/or any ALZA Affiliates is then the Tenant under each of
the Three Leases). Tenant may install antennas, satellite
dishes, supplemental air conditioning, emergency generators, and
other equipment on the roof of the Building (or Landlord approved
screened area adjacent to the Building or in the Common Area),
provided (i) if on the roof, Tenant obtains a written statement
from a structural engineer approving the location of such
equipment and stating that the weight of such equipment will not
damage the roof and/or structural aspects of the Building and
(ii) said equipment is properly screened from view and provided
Tenant first obtains, at its expense, all required governmental
approvals for the same and provided Tenant, immediately upon such
installation, repairs any and all such damage resulting from said
installation. Tenant shall not place anything or allow anything
to be placed near the glass of any window, door, partition or
wall which may appear unsightly from outside the Premises. No
loudspeaker or other device, system or apparatus which can be
heard outside the Premises shall be used in or at the Premises
without the prior consent of Landlord (which approval is waived
if ALZA and/or any ALZA Affiliates is then the Tenant under each
of the Three Leases). Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall
indemnify, defend and hold Landlord harmless against any loss,
expense, damage, reasonable attorneys' fees, or liability arising
out of failure of Tenant to comply with any applicable law
relating to Tenant's use of the Premises or with which Tenant is
otherwise obligated to comply under the terms of this Lease.
Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises (if any), with the parties
acknowledging that currently there are no CC&R's, and if Landlord
in the future seeks to adopt any CC&R's, such adoption of CC&R's
shall be subject to the same standards as apply herein to the
adoption by Landlord of Rules and Regulations pursuant to
Paragraph 5 hereof. The provisions of this Paragraph are for the
benefit of Landlord only and shall not be construed to be for the
benefit of any tenant or occupant of the Premises or the Complex.
2. TERM.
A. Initial Term. The initial Term ("Initial Term") of this
Lease shall be for a period of FIFTEEN (15) years (unless
commenced early or sooner terminated or extended as hereinafter
provided) and, as provided in Paragraphs 2B and 2C, shall
commence on the Lease Commencement Date as defined in Paragraph
2B below and terminate fifteen (15) years later following the
Rent Commencement Date as defined in Paragraph 2B below. The
Initial Term, as it may be extended by the subsequent exercise of
the First Option to Extend or the Second Option to Extend as
provided herein, is referred to herein as the "Lease Term".
B. Lease Commencement Date and Rent Commencement Date.
Subject to Paragraph 2C below relating to any Early Occupancy
Period (which may result in the acceleration of the Lease
Commencement Date so as to precede the Rent Commencement Date),
possession of the Premises shall be deemed tendered and the
Initial Term of this Lease shall commence (the "Lease
Commencement Date") on the Rent Commencement Date. The "Rent
Commencement Date" is defined in Section 1.K of the Construction
Agreement and is to be the earlier of:
(i) eighteen (18) months (the "Agreed Construction
Period") following the earlier of the following dates
(regardless of whether or not Tenant has completed the Shell
Improvements or Interior Improvements as set forth in the
Construction Agreement):
(a) the date that Tenant obtains from the City of
Mountain View a Planned Community Permit (the "PCP
Permit") permitting Tenant to proceed generally
thereafter with seeking the issuance of building
permits for the construction of Buildings One, Two and
Three (but the issuance of a building permit is not a
condition to the commencement of the Agreed
Construction Period), or
(b) the date of October 31, 1997 (the "Outside
Date") subject to the right of Landlord to extend such
Outside Date pursuant to Section 2.C of the
Construction Agreement; or
(ii) the Substantial Completion (as defined in Section
1.J of the Construction Agreement) of the Shell Improvements
and Interior Improvements for the Building.
The Agreed Construction Period shall be subject to extension as
provided in the Construction Agreement only for (x) Damage Delays
as defined in Section 1.M of the Construction Agreement (with
Damage Delays being confined therein to delays in construction of
the Shell Improvements or Interior Improvements occasioned by any
damage or destruction occurring during the course of construction
where the estimated cost of repair or restoration equals or
exceeds One Million Dollars per occurrence), (y) Landlord Delays
as defined in Section 1.N of the Construction Agreement (with
Landlord Delays being confined therein to delays in construction
of the Shell Improvements or Interior Improvements caused by the
failure of Landlord either to timely make any payment of the
Improvement Allowance (as defined in the Construction Agreement),
or to timely approve or execute any reasonably appropriate plans
and specifications, working drawings, permits, utility easements
or other related documents which Landlord is responsible for
approving or executing under the provisions of the Construction
Agreement) or (z) Weather Delays as defined in Section 1.O of the
Construction Agreement (with Weather Delays being confined
therein to delays in construction of the Shell Improvements or
Interior Improvements caused by abnormally adverse weather
conditions (compared to the average seasonal weather conditions
experienced in Mountain View, California during the relevant
period of construction) in the nature of abnormal rains (and any
resultant flooding) such as might occur due to an el nino,
provided that there shall not be considered to be any Weather
Delay unless the aggregate affect of all Weather Delays
(excluding average seasonal weather conditions) are reasonably
estimated to have delayed the completion of construction of the
Shell Improvements or Interior Improvements by a period in excess
of thirty (30) calendar days), but the Agreed Construction Period
shall not otherwise be subject to extension regardless of the
status of the completion of the Shell Improvements or Interior
Improvements at the end of the Agreed Construction Period and
regardless of whether the actual construction period exceeded the
Agreed Construction Period. As provided in Section 2.C of the
Construction Agreement, either Landlord or Tenant shall have
certain rights as set forth in the Construction Agreement to
terminate this Lease upon written notice to the other within five
(5) business days after the Outside Date (as such date may be
extended by Landlord pursuant to Section 2.C of the Construction
Agreement), if the City Council of the City of Mountain View,
California fails to finally approve and cause the issuance by the
City of Mountain View of the PCP Permit in satisfaction of the
requirements set forth in Section 1.K of the Construction
Agreement (which Section 1.K sets forth the standards for
acceptability of the PCP Permit) on or before the Outside Date
(as such Outside Date may have been extended by Landlord). The
Lease Commencement Date shall be the earlier of (i) the Rent
Commencement Date or (ii) the date of commencement of any Early
Occupancy Period as provided in Paragraph 2C below. The Rent
Commencement Date for this Lease is scheduled to be the same as
the respective rent commencement date of the lease for Building
Two (the "Building Two Lease") and the lease for Building Three
(the "Building Three Lease", with this Lease and the Building Two
Lease and the Building Three Lease sometimes referred to herein
as the "Three Leases"). The Rent Commencement Date (and Tenant's
obligation to pay Rent beginning on the Rent Commencement Date)
shall not be extended due to any delay beyond the Outside Date
(as such date may be extended by Landlord pursuant to Section 2.C
of the Construction Agreement), related to the issuance of the
PCP Permit (or any delay in construction emanating therefrom) or
the status of completion of construction as of the Rent
Commencement Date, but the Rent Commencement Date shall in any
instance only remain subject to possible delay as provided in
Section 9 of the Construction Agreement for Damage Delays,
Landlord Delays or Weather Delays. If this Lease is terminated
as provided in the Construction Agreement, Tenant shall have no
further right to the Premises leased hereunder and Landlord shall
be free to lease the Premises to a third party without any
obligation, of any type whatsoever, to Tenant under this Lease.
It is agreed in the event this Lease commences on a date other
than the first day of any calendar month, the Lease Term will be
extended to account for the number of days in the partial month.
The Basic Rent during the resulting partial month will be pro-
rated (for the number of days in the partial month) at the Basic
Rent rate scheduled for the projected first month of the term of
the Lease.
C. Early Occupancy Period. In the event a portion of the
Premises are available for Tenant's occupancy prior to the Rent
Commencement Date, Tenant may occupy such portion of the Premises
and in such event, (i) subject to the terms of this Paragraph,
the Premises shall instead be deemed tendered and the term of the
Lease shall instead begin on such early occupancy date (with such
early occupancy date thereupon becoming the Lease Commencement
Date and the period between such early occupancy date and the
Rent Commencement Date being referred to as the "Early Occupancy
Period"), (ii) Tenant shall be responsible for paying all
Additional Rent expenses for the entire Premises and otherwise
complying with the terms of this Lease during the Early Occupancy
Period, (iii) Tenant shall be responsible for the prorata share
of Basic Rent reasonably allocable on a useable square footage
basis to such portion of the Premises during the Early Occupancy
Period, but the Rent Commencement Date as to the entire Premises
shall remain unchanged, and (iv) the maximum term of the Second
Option to Extend shall be reduced by the number of days of such
Early Occupancy Period. Notwithstanding clause (iii) above, if
Tenant so occupies more than fifty percent of the useable square
footage area of the Building prior to what would otherwise be the
Rent Commencement Date hereunder, then the Rent Commencement Date
shall be deemed to have occurred as to the entire Premises on the
date that Tenant so occupies more than fifty percent of the
useable square footage area of the Building.
3. POSSESSION - NOT APPLICABLE DUE TO FIXED LEASE COMMENCEMENT
DATE
4. RENT. The term Rent or Rental, as either may be used
hereunder, shall consist of (i) Basic Rent, as defined within
Paragraph 4A below, (ii) Additional Rent, as defined within
Paragraph 4E below and (iii) any Management Fee to the extent
then applicable hereunder, as defined within Paragraph 4D below.
In any instance where "Rent" or "Rental" is used in place of
"Basic Rent" or "Additional Rent", it shall be understood that
"Rent" or "Rental" includes "Basic Rent", "Additional Rent" and
"Management Fee".
A. Basic Rent. It is understood that Tenant, as of the
Lease Commencement Date, is leasing from Landlord, under three
separate lease agreements, the Three Buildings which are
currently anticipated to be in the aggregate a minimum of
approximately 300,000 square feet and a maximum of approximately
360,000 square foot, but with the exact size of each of the Three
Buildings being undetermined as of this date. The scheduled
monthly Basic Rent during the first year of the Initial Term for
this Lease following the Rent Commencement Date shall be a number
equal to twelve percent (12%) per annum of the total agreed Land
Value of $31,707,000 and the Improvement Allowance (as provided
for in Section 3.F of the Construction Agreement, which provides
for an initial Improvement Allowance of $31,707,000 and an
additional Improvement Allowance of up to $4,000,000,
collectively referred to herein as the "Total Improvement
Allowance"), divided by the total square footage of all Three
Buildings (calculated in the manner provided in the Construction
Agreement), multiplied by the total square footage of the
Building leased hereunder (calculated in the manner provided in
the Construction Agreement), divided by twelve. For example: If
the Total Improvement Allowance is $35,707,000 (the initial
Improvement Allowance of $31,707,000 plus the entire additional
Improvement Allowance of $4,000,000 as provided in the
Construction Agreement) and the total square footage of all Three
Buildings is 360,000 square feet and the Building under this
Lease is 120,000 square feet, the monthly Basic Rent during the
first twelve months of the Initial Term following the Rent
Commencement Date shall be $224,713.33 (31,707,000 + $35,707,000
x 12%/360,000 x 120,000/12). The initial Basic Rent for this
Lease shall be established once the following is determined: (i)
exact size of each of the Three Buildings; and (ii) the exact
amount of the Total Improvement Allowance used by Tenant. After
the information identified in (i) and (ii) above is known and
agreed to by the Parties hereto, the initial Basic Rent for this
Lease shall be memorialized in the Lease Commencement Letter.
Notwithstanding anything to the contrary herein, if the square
footages of the Building or of Building Two or Building Three is
not reasonably determinable as of the Rent Commencement Date,
then in such instance Tenant shall be obligated with respect to
the period from the Rent Commencement Date to the date that such
square footages of the Building and of Building Two and Building
Three are reasonably determinable, to pay estimated Base Rent
under this Lease based on an amount equal to one-third of the
aggregate Base Rent that would become due upon the respective
Rent Commencement Date under all Three Leases, with the Base Rent
to be retroactively recalculated under this Lease once the
respective square footages of the Building and of Building Two
and Building Three are so determined (with any amount of
overpayment or underpayment of Base Rent to be credited by
Landlord to Tenant or paid by Tenant to Landlord promptly
thereafter).
On each anniversary of the Rent Commencement Date during the
Initial Term, the monthly Basic Rent shall increase by the amount
of $0.05 per square foot per month and said increase shall be
shown in the Lease Commencement Letter.
Tenant agrees to pay to Landlord at such place as Landlord
may designate without deduction, offset, prior notice, or demand,
and Landlord agrees to accept as "Basic Rent" for the Lease
Premises the total sum due under the Lease.
B. Time for Payment. Full monthly Basic Rent, Management
Fee and Additional Rent (as scheduled by Landlord) is due in
advance on the first day of each calendar month. In the event
that the Lease Commencement Date occurs on a date other than the
first day of a calendar month, on the Lease Commencement Date
Tenant shall pay to Landlord Management Fee and Additional Rent
for the period from such Lease Commencement Date to the first day
of the next succeeding calendar month that proportion of the
monthly Management Fee and Additional Rent hereunder for the
number of days between the Lease Commencement Date and the first
day of the next succeeding calendar month. In the event that the
Rent Commencement Date occurs on a date other than the first day
of a calendar month, on the Rent Commencement Date Tenant shall
pay to Landlord Basic Rent for the period from such Rent
Commencement Date to the first day of the next succeeding
calendar month that proportion of the monthly Basic Rent
hereunder for the number of days between the Rent Commencement
Date and the first day of the next succeeding calendar month. In
the event that the Lease Term for any reason ends on a date other
than the last day of a calendar month, on the first day of the
last calendar month of the Lease Term, Tenant shall pay to
Landlord as Basic Rent, Management Fee and Additional Rent for
the period from said first day of said last calendar month to and
including the last day of the Lease Term that proportion of the
monthly Basic Rent, Management Fee and Additional Rent hereunder
for the number of days between said first day of said last
calendar month and the last day of the Lease Term.
C. Late Charge and Interest on Rent in Default.
Notwithstanding any other provision of this Lease, if any
installment of Basic Rent, Management Fee and/or Additional Rent
(collectively "Rent") is not received by Landlord from Tenant
within nine (9) calendar days after the same becomes due, Tenant
shall immediately pay to Landlord a late charge in an amount
equal to ten percent (10%) of the amounts due and not so paid.
In no event shall this provision for a late charge be deemed to
grant Tenant a grace period or extension of time within which to
pay any Rent installment as set forth in this Paragraph 4 or to
prevent Landlord from exercising any right or remedy available to
Landlord upon Tenant's failure to pay each Rent installment due
under this Lease when due. If any Rent remains delinquent for a
period in excess of nine (9) calendar days, then, in addition to
such late charge, Tenant shall pay to Landlord interest on any
Rent that is not so paid from said ninth day at the rate of Bank
of America's Prime Rate (or equivalent rate) plus five percent
(5%) per annum on the unpaid amount, but in no event greater then
the maximum rate of interest permitted by applicable law, until
paid in full.
D. Management Fee. Subject to the provisions of this
Paragraph 4D and Paragraph 19, Tenant shall pay to Landlord, in
addition to the Basic Rent and Additional Rent, a management fee
("Management Fee") on a monthly basis equal to three percent (3%)
of the Basic Rent and any scheduled Additional Rent payable to
Landlord for such month, with such Management Fee to be payable
throughout the Lease Term (including during either the First
Extension Term or the Second Extension Term (collectively
referred to as the "Extended Term(s)")).
The above requirement for a Management Fee is waived during
the time ALZA or an ALZA Affiliate is the Tenant under this
Lease, provided, however, that in the event a portion or all of
the Premises is sublet by ALZA or an ALZA Affiliate to an
unaffiliated third party, Tenant as sublandlord shall require the
subtenant to pay to Tenant a Management Fee equal to three
percent (3%) of the rental payable by the subtenant under the
sublease with respect to the sublet Premises (which Management
Fee shall be considered in the calculation of any Excess Rent
payable by Tenant to Landlord pursuant to Paragraph 19 hereof) .
If the Lease is assigned (voluntarily or involuntarily) to any
Unaffiliated Assignee, said Unaffiliated Assignee, as Tenant,
shall be liable for the payment of the Management Fee as noted
above. The Management Fee following an assignment to an
Unaffiliated Assignee shall be calculated as stated in the
preceding paragraph.
E. Additional Rent. Except as provided in the
Construction Agreement relating to the period prior to the Lease
Commencement Date, beginning on the Lease Commencement Date and
continuing throughout the Lease Term, Tenant shall pay to
Landlord or to Landlord's designated agent or, if so directed by
Landlord, to the governmental agency, public utility, or other
third party entitled to receive such payment, in addition to the
Basic Rent and Management Fee and as Additional Rent the
following:
(a) Tenant's proportionate share of all Taxes relating
to the Complex as set forth in Paragraph 12, and
(b) Tenant's proportionate share of all insurance
premiums relating to the Complex, as set forth in Paragraph 15,
and
(c) Tenant's proportionate share (or as otherwise
reasonably determined by Landlord) to the extent applicable, of
expenses for the operation, maintenance and repair of the
Building, and as set forth in Paragraph 10, of the Common Area of
the Complex (including, if this Lease relates to less than all of
the Building, the common areas of the Building), and
(d) All charges, costs and expenses which Tenant is
required to pay hereunder, together with all interest and
penalties, costs and expenses, including reasonable attorneys'
fees and legal expenses, that may accrue thereon in the event of
Tenant's failure to pay such amounts, and all damages, reasonable
costs and expenses which Landlord may incur by reason of default
of Tenant (pursuant to Paragraph 22 of this Lease, i.e. Tenant
has received notice of a default under this Lease and the
applicable cure period has expired and Tenant has not then cured
such default) or failure on Tenant's part to comply with the
terms and conditions of this Lease.
In the event of nonpayment by Tenant of Additional Rent,
Landlord shall have all the rights and remedies with respect
thereto as Landlord has for nonpayment of Basic Rent.
Notwithstanding anything to the contrary in the definition
of Additional Rent as set forth in this Paragraph 4E or Paragraph
10, Additional Rent shall not include any of the following:
(1) Any ground or underlying lease rental;
(2) Bad debt expenses and interest, principal, points
and fees on debts, bad debt expenses or amortization on any
mortgage or other debt instrument encumbering the Building or the
Complex;
(3) Costs incurred by Landlord for repair of damage to
the Complex to the extent Landlord is reimbursed by insurance
proceeds or by third parties (including third party tenants);
(4) Depreciation on the Premises, amortization and
interest (on loans Landlord may have against the Premises),
except on equipment, materials, tools, supplies and vendor-type
equipment purchased by any party to enable that party to supply
services that party might otherwise contract for with a third
party where such depreciation, amortization and interest payments
would otherwise have been included in the charge for such third
party's services, all as determined in accordance with generally
accepted accounting principles;
(5) Subject to Landlord's rights under Paragraph 21,
advertising and promotional expenditures, and costs of signs in
or on the Complex identifying other third party tenants, unless
such expenditure is related to damage caused by Tenant or a
default by Tenant;
(6) Except as otherwise provided in this Lease,
marketing costs, including leasing commissions, attorneys' fees,
space planning costs, and other costs and expenses incurred in
connection with lease negotiations;
(7) Except as otherwise provided in this Lease, costs,
including permit, license and inspection costs, incurred with
respect to the installation of tenant improvements made for other
third party tenants or incurred in renovating or otherwise
improving, decorating, painting or redecorating vacant space for
other third party tenants;
(8) Costs incurred due to the violation by Landlord or
other third party tenants of the terms and conditions of any
lease of space in the Complex which lease is not related to this
Building and which costs incurred are not related to Tenant
hereunder.
The Additional Rent due hereunder shall be paid to Landlord
or Landlord's agent (i) within ten (10) days for Taxes and
Property Insurance (to the extent such Taxes or Property
Insurance shall be payable to the applicable taxing authority
within thirty (30) days after the date of presentation of such
invoice) and within thirty (30) days for all other Additional
Rent items, after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii)
at the option of Landlord (except with respect to Taxes and
Property Insurance), Tenant shall pay to Landlord monthly, in
advance, Tenant's pro rata share of an amount estimated by
Landlord to be Landlord's approximate average monthly expenditure
for such Additional Rent items, which estimated amount shall be
reconciled within one hundred twenty (120) days after the end of
each calendar year, or more frequently if Landlord elects to do
so at Landlord's sole and absolute discretion, as compared to
Landlord's actual expenditure for said Additional Rent items,
with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount,
or Landlord refunding to Tenant (provided Tenant is not in
default in the performance of any of the terms, covenants and
conditions of this Lease) any amount of estimated payments made
by Tenant in excess of Landlord's actual expenditures for said
Additional Rent items. Within sixty (60) days after receipt of
Landlord's written reconciliation together with supporting
documentation, Tenant shall have the right, at Tenant's sole
expense, to commence a review and/or audit, at a mutually
convenient time at Landlord's office, of Landlord's records
relating to the foregoing expenses. Any audit must be conducted
by Tenant or an independent nationally recognized accounting firm
that is not being compensated by Tenant or other third party on a
contingency fee basis. If an audit (not a review) reveals that
Landlord has overcharged Tenant, the amount overcharged shall be
credited to Tenant's account within sixty (60) days after the
audit is concluded.
The respective obligations of Landlord and Tenant under this
Paragraph 4 shall survive the expiration or other termination of
the Lease Term, and if the Lease Term shall expire or shall
otherwise terminate on a day other than the last day of a
calendar year, the actual Additional Rent incurred for the
calendar year in which the Lease Term expires or otherwise
terminates shall be determined and settled on the basis of the
statement of actual Additional Rent for such calendar year and
shall be prorated in the proportion which the number of days in
such calendar year preceding such expiration or termination bears
to 365.
F. Place of Payment of Basic Rent, Management Fee and
Additional Rent. All Rent hereunder and all payments hereunder
for Additional Rent which are to be paid to Landlord shall be
paid to Landlord at a Bank of America Lock Box address to be
designated by written notice from Landlord to Tenant prior to the
Lease Commencement Date (and which address shall be confirmed in
the Lease Commencement Letter) or to such other person or to such
other place as Landlord may from time to time designate in
writing.
G. Security Deposit. Subject to the provisions herein, as
long as ALZA or an ALZA Affiliate is the Tenant under this Lease,
Tenant shall not be required to deposit with Landlord a security
deposit ("Security Deposit") under this Lease; however, Landlord
shall require a Security Deposit in an amount equal to two times
the last month's Basic Rent in this Lease in the event this Lease
is assigned to an Unaffiliated Assignee and ALZA is released from
liability for said Lease, in which case, said sum shall be held
by Landlord as a Security Deposit for the faithful performance by
Tenant of all of the terms, covenants, and conditions of this
Lease to be kept and performed by Tenant during the Lease Term.
If Tenant defaults with respect to any provision of this Lease
and such default is not cured within any applicable cure period,
including, but not limited to, the provisions relating to the
payment of Rent or any other monetary sums due hereunder,
Landlord may (but shall not be required to) use, apply or retain
all or any part of this Security Deposit for the payment of such
amount in default, or any other amount which Landlord may spend
by reason of Tenant's default or to compensate Landlord for any
other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of the Security Deposit is so
used or applied, Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in the amount
sufficient to restore the Security Deposit to its original
amount. Tenant's failure to do so shall be a material breach of
this Lease. Landlord shall not be required to keep this Security
Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and
faithfully performs every provision of this Lease to be performed
by it, the Security Deposit or any balance thereof shall be
returned to the last party recognized by Landlord as Tenant
hereunder (or at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of the Lease Term
and after Tenant has vacated the Premises. In the event of
termination of Landlord's interest in this Lease, Landlord shall
transfer the Security Deposit to Landlord's successor in interest
whereupon Tenant agrees to release Landlord from liability for
the return of such Deposit or the accounting therefor.
Notwithstanding the above, Tenant shall have the right, at
Tenant's sole election, to substitute for one-half of the cash
Security Deposit to be held by Landlord, an irrevocable letter of
credit, drawn upon an institutional lender reasonably acceptable
and accessible to Landlord in form and content reasonably
satisfactory to Landlord and for a term equal to at least one
year (with the letter of credit required to be renewed or
replaced by Tenant so as to be available to be drawn on at any
time during the Lease Term plus a period of sixty (60) days).
Said financial institution must agree that the presentment for
demand may be made in at least one of the following locations:
San Jose, Santa Clara, San Francisco or Palo Alto, California.
Such irrevocable letter of credit shall be renewed by the issuer
(or replaced with a similarly qualifying letter of credit
reasonably acceptable to Landlord) at least twenty (20) days
prior to the expiration date thereof from time to time during the
Lease Term, and shall be held by Landlord as security for the
faithful performance by Tenant of all the terms, covenants and
conditions of this Lease to be kept and performed by Tenant. If,
for any reason, Tenant fails to cause the irrevocable letter of
credit to be so renewed or replaced at least twenty (20) days
prior to its expiration date, Landlord shall have the right to
immediately draw upon the letter of credit in full and hold the
proceeds thereof as a cash Security Deposit hereunder. If Tenant
has theretofore funded the Security Deposit entirely in cash, one
half of the cash Security Deposit held by Landlord shall be
refunded to Tenant upon Landlord's receipt of an acceptable
irrevocable letter of credit. If Tenant defaults with respect
to any provisions of this Lease and such default is not cured
within any applicable cure period, including but not limited to
provisions relating to the payment of Rent, Landlord may (but
shall not be required to) draw down on the irrevocable letter of
credit for payment of any sum which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to
compensate Landlord for any loss or damage which Landlord may
suffer by reason of Tenant's default. Landlord and Tenant
acknowledge that such irrevocable letter of credit will be
treated as if it were a cash Security Deposit, and such
irrevocable letter of credit may be drawn down upon by Landlord
in the amount then due to Landlord upon demand and presentation
of evidence of the identity of Landlord to the issuing bank, in
the event that Tenant defaults with respect to any provision of
this Lease and such default is not cured within any applicable
cure period. Landlord acknowledges that it is not entitled to
and shall not draw down such irrevocable letter of credit unless
Landlord would have been entitled to draw upon a cash Security
Deposit pursuant to the terms of this Paragraph 4G. Concurrently
with the delivery of the required information to the issuing
bank, Landlord shall deliver to Tenant written evidence of the
default upon which the draw down was based, together with
evidence that Landlord has provided to Tenant the written notice
of such default which was required under the applicable provision
of the Lease, and evidence of the failure of Tenant to cure such
default within the applicable grace period following receipt of
such notice of default. If any portion of the irrevocable letter
of credit is used or applied pursuant hereto, Tenant shall,
within ten (10) days after receipt of a written demand therefor
from Landlord, restore and replace the value of such security by
either (i) depositing cash with Landlord in the amount equal to
the sum drawn down under the irrevocable letter of credit, or
(ii) increasing the irrevocable letter of credit to its value
immediately prior to such application. Tenant's failure to
replace the value of the security as provided in the preceding
sentence shall be a material breach of its obligation under this
Lease. The letter of credit shall further provide to the effect:
(i) that it shall automatically renew for additional periods of
one (1) year each from the expiry date or future expiry date,
unless at least twenty (20) days prior to any expiry date the
issuer notifies Landlord by registered mail of the issuer's
election not to renew the letter of credit and (ii) if the issuer
is unable or unwilling to so renew the letter of credit, the
issuer shall deem such to automatically constitute a draw request
from Landlord upon the letter of credit without further demand,
and with the issuer on or before the expiration of such letter of
credit to deposit for Landlord's account an amount equal to the
amount remaining committed but undrawn under the letter of credit
(unless issuer has sought and obtained from Landlord prior
thereto a written acknowledgment by Landlord of the termination
of the requirement of this Lease for such letter of credit to be
so renewed, in which event issuer shall not be required to make
such a deposit for Landlord's account).
5. RULES AND REGULATIONS AND COMMON AREA. At any time during
the Lease Term that ALZA (and/or any ALZA Affiliates) or an
Unaffiliated Assignee is the tenant under all Three Leases,
Tenant shall have the exclusive right to use all of the Common
Area without any right of Landlord to adopt any rules or
regulations relating to the Common Area. The remainder of this
Paragraph shall only apply to the leasing of the Premises if at
any time during the Lease Term ALZA (and/or any ALZA Affiliates)
or an Unaffiliated Assignee is not the tenant under all Three
Leases. Subject to the terms and conditions of this Lease and
such rules and regulations ("Rules and Regulations") as Landlord
may from time to time prescribe, Tenant and Tenant's employees,
invitees and customers shall, in common with other occupants of
the Complex in which the Premises are located, and their
respective employees, invitees and customers, and others entitled
to the use thereof, have the non-exclusive right to use the
access roads, parking areas, and facilities provided and
designated by Landlord for the general use and convenience of the
occupants of the Complex in which the Premises are located, which
areas and facilities are referred to herein as "Common Area".
This right shall terminate upon the termination of this Lease.
Landlord reserves the right from time to time to make reasonable
changes in the shape, size, location, amount and extent of Common
Area. Landlord further reserves the right to promulgate such
reasonable Rules and Regulations relating to the use of the
Common Area, and any part or parts thereof, as Landlord may deem
appropriate for the best interests of the occupants of the
Complex. The Rules and Regulations shall be binding upon Tenant
upon delivery of a copy of them to Tenant, and Tenant shall abide
by them and cooperate in their observance. Such Rules and
Regulations may be reasonably amended by Landlord from time to
time, with ten (10) days advance notice, and all amendments shall
be effective ten days after delivery of a copy to Tenant.
Landlord shall not be responsible to Tenant for the non-
performance by any other tenant or occupant of the Complex of any
of said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area
in conformity with a good standard of maintenance and repair, or
replacement, and in good and sanitary condition.
6. PARKING: If at any time during the Lease Term ALZA (and/or
any ALZA Affiliates) or an Unaffiliated Assignee is not the
tenant under all Three Leases, this Paragraph shall apply. Once
the ratio of the square footage size of the Building leased
hereunder is determined in relation to the aggregate square
footage of all Three Buildings, a specific number of non-
exclusive parking spaces shall be assigned to Tenant equating to
such ratio multiplied by all of the parking spaces in the
Complex. Tenant shall have the right to use with the other
tenants or other occupants of the Complex parking spaces so
assigned in the common parking area of the Complex. Tenant
agrees that Tenant, Tenant's employees, agents, representatives,
and/or invitees shall not use parking spaces in excess of said
assigned parking spaces allocated to Tenant hereunder. Landlord
shall have the right, at Landlord's reasonable discretion, to
specifically designate the location of Tenant's parking spaces
within the common parking area of the Complex in the event of a
dispute among the tenants occupying the Building and/or Complex
referred to herein, in which event Tenant agrees that Tenant,
Tenant's employees, agents, representatives and/or invitees shall
not use any parking spaces other than those parking spaces
specifically designated by Landlord for Tenant's use. Said
parking spaces, if specifically designated by Landlord to Tenant,
may be relocated by Landlord at any time, and from time to time.
Landlord reserves the right, at Landlord's reasonable discretion,
to rescind any specific designation of parking spaces, thereby
returning Tenant's parking spaces to the common parking area.
Landlord shall give Tenant written notice of any change in
Tenant's parking spaces. Tenant shall not, at any time, park, or
permit to be parked, any trucks or vehicles adjacent to the
loading area so as to interfere in any way with the use of such
areas, nor shall Tenant, at any time, park or permit the parking
of Tenant's trucks and other vehicles or the trucks and vehicles
of Tenant's suppliers or others, in any portion of the common
areas not designated by Landlord for such use by Tenant. Tenant
shall not park nor permit to be parked, any inoperative vehicles
or equipment on any portion of the common parking area or other
common areas of the building. Tenant agrees to assume
responsibility for compliance by its employees with the parking
provision contained herein. If Tenant or its employees park in
other than designated parking areas, then Landlord may charge
Tenant, as an additional charge, and Tenant agrees to pay Ten
Dollars ($10.00) per day for each day or partial day each such
vehicle is parking in any area other than that designated.
Tenant hereby authorizes Landlord, at Tenant's sole expense, to
tow away from the Complex any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions, or to
attach violation stickers or notices to such vehicles. Tenant
shall use the parking area for vehicle parking only and shall not
use the parking areas for storage. During the time ALZA (and/or
any ALZA Affiliates) or an Unaffiliated Assignee is the tenant
under all Three Leases, the tenant under all Three Leases shall
have the right to park in any area designated for parking in the
Common Area and the above terms and conditions shall not apply.
7. ACCEPTANCE AND SURRENDER OF PREMISES. Upon the Lease
Commencement Date, Tenant, as to Landlord (but not necessarily as
to any architect or contractor), accepts the Building and
improvements included in the Premises and the Common Area(s) as
being in good and sanitary order, condition and repair to the
extent of the then status as to construction and accepts the
Building and improvements included in the Premises in their then
present condition and without representation or warranty by
Landlord as to the condition of the Building or as to the use or
occupancy which may be made thereof. Any exceptions to the
foregoing must be by written agreement executed by Landlord and
Tenant. Landlord and Tenant shall cause an appropriate
description of the Interior Improvements as originally installed
by Tenant, once completed, to be attached as Exhibit B to this
Lease. If Tenant desires to make or has made any material
alterations to the initial design of the Interior Improvements
which Tenant would wish not to be required, pursuant to the
provisions of this Paragraph, to remove upon surrender of the
Premises to Landlord, Tenant may request Landlord's approval to
the modification of Exhibit B to reflect such alterations, with
Landlord to have the right in its reasonable discretion to grant
or withhold such approval. Tenant agrees on the last day of the
Lease Term, or on the sooner termination of this Lease, to
surrender the Premises promptly and peaceably to Landlord in good
condition and repair (damage by Acts of God, fire or other causes
for which Tenant is not obligated to repair pursuant to Paragraph
25 ("Destruction"), and normal wear and tear excepted), with all
interior walls painted, or cleaned, and repaired or replaced, if
damaged; all floors cleaned and waxed; all carpets cleaned and
shampooed; all broken, marred or nonconforming acoustical ceiling
tiles replaced; all interior and exterior windows washed; the air
conditioning and heating systems serviced by a reputable and
licensed service firm or by Tenant's in-house maintenance staff
(if approved by Landlord) and in good operating condition and
repair; the plumbing and electrical systems and lighting in good
order and repair, including replacement of any burned out or
broken light bulbs or ballasts; the roof membrane inspected and
any required repairs or replacements completed by a licensed roof
contractor and in good condition and repair; and to the extent
reasonably allocable on an exclusive basis to the Premises: the
lawn and shrubs in good condition including the replacement of
any dead or damaged plantings; the sidewalk, driveways and
parking areas in good order, condition and repair, including the
sealing and striping of the parking lot and asphalt areas (and to
the extent not so allocated on an exclusive basis to the Premises
to instead be the subject of Tenant's obligations under either
Paragraph 9C (Common Area Maintenance) or Paragraph 10 (Expenses
of Operation, Management, and Maintenance of the Common Areas of
the Complex), as applicable); together with all alterations,
additions, and improvements which may have been made, in, to, or
on the Premises (except moveable trade fixtures installed at the
expense of Tenant and such other items that Tenant, under this
Lease, is allowed to remove, if any) except that Tenant shall
ascertain from Landlord within thirty (30) days before the end of
the Lease Term, as to any portion of the Premises which does not
conform to the configuration reflected on Exhibit B, whether
Landlord desires to have such portion of the Premises or any part
or parts thereof restored to their configuration as then
reflected on Exhibit B, and if Landlord shall so desire, then
Tenant shall restore said portion of the Premises or such part or
parts thereof before the end of this Lease at Tenant's sole cost
and expense to the configuration as reflected on Exhibit B.
Notwithstanding the above, Tenant, in lieu of reconfiguring the
Premises to the configuration shown on Exhibit B, may instead
modify any non-conforming areas of such portion of the Premises
to provide an Open Office Area, as defined below. Tenant, on or
before the end of the Lease Term or sooner termination of this
Lease, shall remove all of Tenant's personal property and trade
fixtures from the Premises, and all property not so removed on or
before the end of the Lease Term or sooner termination of this
Lease shall be deemed abandoned by Tenant and title to same shall
thereupon pass to Landlord without compensation to Tenant.
Landlord, may, upon termination of this Lease, remove all
moveable furniture and equipment so abandoned by Tenant, at
Tenant's sole cost, and repair any damage caused by such removal
at Tenant's sole cost. If the Premises be not surrendered at the
end of the Lease Term or sooner termination of this Lease, Tenant
shall indemnify Landlord against loss or liability resulting from
the delay by Tenant in so surrendering the Premises including,
without limitation, any claims made by any succeeding Tenant
founded on such delay. Nothing contained herein shall be
construed as an extension of the Lease Term or as a consent of
Landlord to any holding over by Tenant. The voluntary or other
surrender of this Lease or the Premises by Tenant or a mutual
cancellation of this Lease shall not work as a merger and, at the
option of Landlord, shall either terminate all or any existing
subleases or subtenancies or operate as an assignment to Landlord
of all or any such subleases or subtenancies.
Notwithstanding the above, in the event Tenant installs any
permanently attached lab fixtures and equipment in the Building
or on the roof of the Building, including any electrical,
plumbing, ventilation or air conditioning equipment associated
with supporting the specific requirements of any other lab
equipment (collectively "Lab Equipment"), (i) Landlord shall have
the right to require Tenant to remove any or all Lab Equipment
prior to the end of the Lease Term and (ii) provided ALZA or an
ALZA Affiliate is the Tenant at the time of intended removal at
or near the end of the Lease Term, Tenant shall have the right to
elect to remove any or all Lab Equipment (despite its having been
permanently attached to the Premises), prior to the termination
date of this Lease. Lab Equipment as used herein shall not
include any supplemental HVAC equipment which is installed to
provide general supplemental air-conditioning or ventilation to
any occupied space in the Building. Subject to the terms of this
Paragraph 7, Tenant, in removing any such Lab Equipment, shall be
responsible and liable for (i) complying with all permit and
other governmental regulations related to the installation and/or
removal of the Lab Equipment, and (ii) immediately restoring any
and all damage to the Premises resulting from the installation
and/or removal of the Lab Equipment. In the event Tenant elects
or is required by Landlord to remove any of the Lab Equipment
prior to the termination date of this Lease, Tenant shall be
responsible and liable for (i) removing all lab related equipment
and cabinets in the former lab location where such Lab Equipment
is to be removed and (ii) creating an "Open Office Area" in such
former lab location as provided in the following sentence. If
Tenant is obligated to create an "Open Office Area" as provided
above, then Tenant shall, at Landlord's election made prior to
the termination date of this Lease, either (i) cause the
following items to be installed by Tenant at Tenant's sole cost
or (ii) be obligated to reimburse Landlord for any subsequent
cost reasonably incurred by Landlord after expiration of the
Lease in installing any of the following items in conjunction
with Landlord's preparing such portion of the Premises for the
immediately succeeding tenant, with such items being the
following: (a) a dropped ceiling using the same type of ceiling
tiles used throughout the Building in the office areas, (b)
Landlord's standard grade carpet and base board (as used in the
carpeted areas of the Premises), and (c) such re-configuration of
the electrical and HVAC systems and controls and lighting and may
be reasonably required to make it appropriate for open office
use.
8. ALTERATIONS AND ADDITIONS. After the completion of
construction of the Shell Improvements and Interior Improvements
in accordance with the provisions of the Construction Agreement,
Tenant shall not make, or suffer to be made, any alteration or
addition to the Premises, or any part thereof, without the
written consent of Landlord first had and obtained by Tenant
(such consent not to be unreasonably withheld), but at the cost
of Tenant, and (except as otherwise consented to in writing by
Landlord) any addition to, or alteration of, the Premises, except
moveable furniture, trade fixtures and any Lab Equipment which
Tenant is entitled to remove pursuant to Paragraph 7 above,
shall, upon Lease termination, become a part of the Premises and
belong to Landlord. Landlord reserves the right to approve all
contractors and mechanics proposed by Tenant to make such
alterations and additions, which approval shall not be
unreasonably withheld. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All office
heating, lighting, electrical, air conditioning, floor to ceiling
partitioning, drapery, carpeting, and floor installations made by
Tenant (but excluding any Lab Equipment installed by ALZA or any
ALZA Affiliate), together with all property that has become an
integral part of the Premises, shall not be deemed trade
fixtures. Tenant agrees that it will not proceed to make any
such alteration or addition, without having obtained consent from
Landlord to do so, and until five (5) days from the receipt of
such consent, in order that Landlord may post appropriate notices
to avoid any liability to contractors or material suppliers for
payment for Tenant's alteration or addition. Tenant will at all
times permit such notices to be posted and to remain posted until
the completion of work. Tenant shall, if required by Landlord,
secure at Tenant's own cost and expense, a completion and lien
indemnity bond, satisfactory to Landlord, for such work. Tenant
further covenants and agrees that any mechanic's lien filed
against the Premises or the Complex for work claimed to have been
done for, or materials claimed to have been furnished to Tenant,
will be discharged by Tenant, by bond or otherwise, within ten
(10) days after notice to Tenant of filing thereof, at the cost
and expense of Tenant. Any exceptions to the foregoing must be
made in writing and executed by both Landlord and Tenant.
Notwithstanding the above and provided ALZA or an ALZA
Affiliate is then the Tenant under this Lease, it is agreed that
Tenant may make alterations or additions to the non-structural
portions of the Building without obtaining the prior consent of
Landlord or providing any other notices to Landlord or securing
any bonds as otherwise provided above, provided Tenant (i) gives
Landlord a minimum of five (5) business days written notice of
its intent to make any material modifications to the Building;
(ii) designs any alterations or additions to comply with
Landlord's interior build out specifications as shown on Exhibit
C attached hereto; and (iii) as to any material alteration,
provides to Landlord, upon completion of said construction, a
1/8 inch scale sepia "as built" plan reflecting said alterations
and/or additions. All other terms and conditions of this
Paragraph 8 shall apply.
9. TENANT MAINTENANCE.
A. Tenant's Responsibilities: Subject to Paragraph 25
("Destruction"), Tenant shall, at its sole cost and expense, keep
and maintain the interior and exterior of the Building (including
structural portions and appurtenances thereto) and every part
thereof in a good standard of maintenance and repair, or
replacement, and in good and sanitary condition (collectively
"Tenant's Responsibilities"). Tenant's Responsibilities include,
but are not limited to, janitorization, all windows (interior and
exterior), window frames, plate glass and glazing (destroyed by
accident or act of third parties), truck doors, plumbing systems
(such as water and drain lines, sinks, toilets, faucets, drains,
showers and water fountains), electrical systems (such as panels,
conduits, outlets, lighting fixtures, lamps, bulbs, tubes and
ballasts), heating and air conditioning systems (such as
compressors, fans, air handlers, ducts, mixing boxes,
thermostats, time clocks, boilers, heaters, supply and return
grills), structural elements and exterior surfaces of the
Building (including repainting), store fronts, roofs, downspouts,
all interior improvements within the Building including but not
limited to wall coverings, window coverings, carpet, floor
coverings, partitioning, ceilings, doors (both interior and
exterior), including closing mechanisms, latches, locks,
skylights (if any), automatic fire extinguishing systems, and
elevators and all other interior improvements of any nature
whatsoever, and all exterior improvements to the Building. Areas
of excessive wear shall be replaced at Tenant's sole expense upon
Lease termination. Tenant hereby waives all rights under, and
benefits of, Subsection 1 of Section 1932 and Section 1941 and
1942 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect. In the event
any of the above Tenant's Responsibilities apply to any other
third party tenant(s) of Landlord where there is common usage
with other third party tenant(s), such maintenance
responsibilities shall be undertaken by Landlord and the related
charges shall be allocated to the Premises by square footage or
other equitable basis as reasonably calculated and determined by
Landlord.
B. Interior Common Area Maintenance. If at any time the
Lease has been amended so that Tenant is leasing less than the
entire Building (which amendment Landlord is under no obligation
to agree to or make) and said Building becomes a multi-tenant
building and said multi-tenants are third party tenants, then
Landlord shall maintain the interior portions of the Building
that are considered by Landlord to be common areas to two or more
tenants in the same manner that Tenant would have been obligated
to maintain them under the provisions of Paragraph 9A hereof (had
Tenant continued to lease the entire Building). All costs and
expenses incurred by Landlord in so maintaining said common areas
of the Building shall be allocated among Tenant and each space
that is either unleased or is leased to other third party tenants
in the Building based upon the square footage of the respective
tenants' premises or such other equitable manner as Landlord
reasonably determines.
C. Common Area Maintenance: At all times during the Lease
Term that ALZA (and/or any ALZA Affiliates) or an Unaffiliated
Assignee is the tenant under all Three Leases, the provisions of
this Paragraph 9C shall apply. Tenant shall, at its sole cost
and expense, keep, maintain, repair and replace as required, the
Common Area of the Complex (including appurtenances) and every
part thereof in a good standard of maintenance, repair and
replacement as required, and in good and sanitary condition.
Tenant's maintenance, repair and replacement responsibilities
herein referred to include, but are not limited to,
janitorization, landscaping, sidewalks, driveways, underground
and above ground parking areas, including striping and sealing,
irrigation sprinkler systems, parking lot and exterior Building
lighting, ponds, fountains, waterways, drains, lawns, shrubbery
and other planted areas, plumbing and utility systems within the
Common Area, and electrical systems within the Common Area. If
all Three Leases are terminating substantially simultaneously,
the surrender obligations of Tenant under Paragraph 7 of this
Lease shall extend to the surrender of all of the Common Area of
the Complex.
10. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE
COMMON AREAS OF THE COMPLEX. At all times during the Lease Term
that ALZA (and/or any ALZA Affiliates) or an Unaffiliated
Assignee is not the tenant under all Three Leases, this Paragraph
shall apply. As Additional Rent and in accordance with the
requirements and limitations of Paragraphs 4E of this Lease,
Tenant shall pay to Landlord Tenant's proportionate share
(calculated on a square footage or other equitable basis as
reasonably determined by Landlord) of all expenses of operation,
maintenance and repair of the Common Area of the Complex
including, but not limited to, license, permit, and inspection
fees; security; utility charges associated with exterior
landscaping and lighting (including water and sewer charges); all
charges incurred in the maintenance and replacement of landscaped
areas, lakes, parking lots, sidewalks, driveways, maintenance,
repair and replacement of all fixtures and electrical, mechanical
and plumbing systems; structural elements and exterior surfaces
of the Building and any improvements (but excluding any
structural elements or exterior surfaces of the Building to the
extent the maintenance thereof is the obligation of Tenant under
this Lease); salaries and employee benefits of personnel and
payroll taxes applicable thereto; supplies, materials, equipment
and tools; the cost of capital expenditures which have the effect
of reducing operating expenses, provided, however, that in the
event Landlord makes such capital improvements, Landlord may
amortize its investment in said improvements (together with
interest at the rate of Bank of America's Prime Rate (or
equivalent rate) plus five percent (5%) per annum on the
unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the
operating expenses.
"Additional Rent" as used herein shall not include
Landlord's debt repayments; interest on charges, expenses
directly or indirectly incurred by Landlord for the benefit of
any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants;
depreciation; interest; or executive salaries.
11. UTILITIES
A. This Paragraph is applicable so long as this Lease
pertains to the entire Building. Tenant shall pay promptly, as
the same become due, all charges for water, gas, electricity,
telephone, telex and other electronic communication service,
sewer service, waste pick-up and any other utilities, materials
or services furnished directly to or used by Tenant on or about
the Building and/or the Premises (including the Common Area
allocated to Tenant) during the Lease Term, including, without
limitation, any temporary or permanent utility surcharge or other
exactions whether now or hereafter imposed. In the event the
above charges apply to any other third party tenants of Landlord
where there is common usage with such other third party tenants,
such charges shall be allocated to the Building or Premises by
square footage or other equitable basis as reasonably calculated
and determined by Landlord.
Landlord shall not be liable for and Tenant shall not be
entitled to any abatement or reduction of Rent by reason of any
interruption or failure of utility services to the Premises when
such interruption or failure is caused by accident, breakage,
repair, strikes, lockouts, or other labor disturbances or labor
disputes of any nature, or by any other cause, similar or
dissimilar, beyond the reasonable control of Landlord.
B. This Paragraph 11B is applicable only if and at such
time as the Lease is amended not to include the entire Building
(which amendment Landlord is under no obligation to agree to or
make). As Additional Rent and in accordance with Paragraph 4E of
this Lease, Tenant shall pay its proportionate share (calculated
on a square footage or other equitable basis as reasonably
determined by Landlord) of the cost of all utility charges such
as water, gas, electricity, telephone, telex and other electronic
communications service, if applicable, sewer service, waste pick-
up and any other utilities, materials or services furnished
directly to the Building in which the Premises are located,
including, without limitation, any temporary or permanent utility
surcharge or other exactions whether now or hereafter imposed.
Landlord shall not be liable for and Tenant shall not be
entitled to any abatement or reduction of Rent by reason of any
interruption or failure of utility services to the Premises when
such interruption or failure is caused by accident, breakage,
repair, strikes, lockouts, or other labor disturbances or labor
disputes of any nature, or by any other cause, similar or
dissimilar, beyond the reasonable control of Landlord.
Landlord shall be responsible for causing to be furnished to
the Premises and subject to the Rules and Regulations of the
Common Area hereinbefore referred to, (i) water, gas and
electricity suitable for the permitted use of the Premises and
(ii) between the hours of 8:00 am and 6:00 p.m., Mondays through
Fridays (holidays excepted) heat and air-conditioning required
for the comfortable use and occupation of the Premises for the
uses permitted under this Lease. Tenant agrees that at all times
it will cooperate fully with Landlord and abide by all reasonable
regulations and requirements that Landlord may prescribe for the
proper functioning and protection of the Building heating,
ventilating and air-conditioning systems. Whenever heat
generating machines, equipment, or any other devices (including
exhaust fans) are used in the Premises by Tenant which affect the
temperature maintained by the air-conditioning system beyond the
reasonable handling capacity of the existing system, Landlord
shall have the right to install or require Tenant to install
supplementary air-conditioning units in the Premises and the cost
of installation, operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord. If Tenant uses
any apparatus or device in the Premises (including, without
limitation, electronic data processing machines or machines using
current in excess of 110 Volts) which increase the amount of
electricity, gas, water or air-conditioning consumed in the
Premises on an average per square foot basis above that which
would be furnished or supplied to any other portion of the
Building on an average per square foot basis for general office
use, Landlord shall be entitled to reasonably allocate to Tenant
the cost of any utilities supplied by Landlord to the Building
which are disproportionately consumed by Tenant provided that
Landlord shall correspondingly reasonably allocate any similar
disproportionate consumption by any other tenant(s) in the
Building to such other tenant(s). If Tenant shall require water,
gas, or electric current in excess of that usually furnished or
supplied to any similar sized space in the Building, Landlord may
cause an electric current, gas or water meter to be installed in
the Premises in order to measure the amount of electric current,
gas or water consumed for any such excess use. The cost of any
such meter and of the installation, maintenance and repair
thereof, all charges for such excess water, gas and electric
current consumed (as shown by such meters and at the rates then
charged by the furnishing public utility); and any additional
expense incurred by Landlord in keeping account of electric
current, gas, or water so consumed shall be paid by Tenant, and
Tenant agrees to pay Landlord such amount within ten (10) days
after receipt of a reasonably detailed invoice for the same from
Landlord.
12. TAXES
A. Real Property Taxes. As Additional Rent and in
accordance with Paragraph 4E of this Lease, Tenant shall pay to
Landlord, or if Landlord so directs, directly to the applicable
tax collector ("Tax Collector"), all Real Property Taxes
relating to the Premises accruing with respect to the Premises
commencing on the Lease Commencement Date and throughout the
Lease Term, including any Extended Term. In the event the
Premises leased hereunder consist of only a portion of the entire
tax parcel, Tenant shall pay to Landlord as they become due,
pursuant to statements submitted to Tenant by Landlord, Tenant's
proportionate share of such Real Property Taxes allocated to the
Premises by square footage or other reasonable basis as
calculated and determined by Landlord. If the tax billing
pertains 100% to the Premises, and Landlord chooses to have
Tenant pay said Real Property Taxes directly to the Tax
Collector, then in such event it shall be the responsibility of
Tenant to obtain the bills and pay, prior to delinquency, the
applicable Real Property Taxes pertaining to the Premises, and
failure to receive a bill for taxes and/or assessments shall not
provide a basis for cancellation of or non-responsibility for
payment of penalties for nonpayment or late payment by Tenant.
The term "Real Property Taxes", as used herein, shall mean (i)
all taxes, assessments, levies and other charges of any kind or
nature whatsoever, general and special, foreseen and unforeseen
(including all installments of principal and interest required to
pay any general or special assessments for public improvements
and any increases resulting from reassessments caused by any
change in ownership of the Complex) now or hereafter imposed by
any governmental or quasi-governmental authority or special
district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with
respect to the value, occupancy or use of, all or any portion of
the Complex (as now constructed or as may at any time hereafter
be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Complex
(regardless of ownership); the fixtures, equipment and other
property of Landlord, real or personal, that are an integral part
of and located in the Complex; or parking areas, public
utilities, or energy within the Complex; (ii) all area wide
taxes, charges, levies or fees imposed by reason of environmental
regulation or other governmental control, including, but not
limited to, any taxes, charges, levies or fees related to on-site
originated Hazardous Materials contamination caused or
contributed to by Tenant's Hazardous Materials Activities; and
(iii) all costs and fees (including reasonable attorneys' fees)
incurred by Landlord in reasonably contesting any Real Property
Tax and in negotiating with public authorities as to any Real
Property Tax. If at any time during the Lease Term the taxation
or assessment of the Complex prevailing as of the Lease
Commencement Date shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be
levied, assessed or imposed (whether by reason of a change in the
method of taxation or assessment, creation of a new tax or
charge, or any other cause) an alternate or additional tax or
charge (i) on the value, use or occupancy of the Complex or
Landlord's interest therein or (ii) on or measured by the gross
receipts, income or rentals from the Complex, on Landlord's
business of leasing the Complex, or computed in any manner with
respect to the operation of the Complex, then any such tax or
charge, however designated, shall be included within the meaning
of the term "Real Property Taxes" for purposes of this Lease. If
any Real Property Tax is based upon property or rents unrelated
to the Complex, then only that part of such Real Property Tax
that is fairly allocable to the Complex shall be included within
the meaning of the term "Real Property Taxes." Notwithstanding
the foregoing, the term "Real Property Taxes" shall not include
estate, inheritance, gift or franchise taxes of Landlord or the
federal or state net income tax imposed on Landlord's income from
all sources or penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments of,
and/or to file any tax or informational returns with respect to
any Real Property Taxes when due.
Notwithstanding anything within this Paragraph 12, it is
agreed that if any special assessments for capital improvements
are assessed, and if Landlord has the option to either pay the
entire assessment in cash or go to bond, and if Landlord elects
to pay the entire assessment in cash in lieu of going to bond,
the entire portion of the assessment assigned to Tenant's
Premises will be prorated over the same period that the
assessment would have been prorated had the assessment gone to
bond. It is additionally agreed that Tenant shall have the
right, at Tenant's sole cost and expense, to contest with any
taxing authority or appellate body the imposition or amount of
any Real Property Tax, but any such contest shall not excuse
Tenant from any of its obligations hereunder as to paying any
such Real Property Tax when payable hereunder.
Notwithstanding anything to the contrary in this Lease, in
the event prior to the Lease Commencement Date there is an
interim or supplemental reassessment of the Premises based upon
the added value of the Shell Improvements or Interior
Improvements leased hereunder, then Tenant shall pay no later
than five days prior to its delinquency date, any and all such
interim or supplemental taxes (but no penalties or interest in
connection therewith provided Tenant has prior thereto paid the
applicable Real Property Taxes when required by the terms of this
Lease) that have been levied against the Premises and are
attributable to the added value of the Shell Improvements and
Interior Improvements (as defined in the Construction Agreement)
during the period prior to said Lease Commencement Date.
B. Taxes on Tenant's Property.
(a) Tenant shall be liable for and shall pay five
business days before delinquency, taxes levied against any
personal property or trade fixtures placed by Tenant in or about
the Premises. If any such taxes on Tenant's personal property or
trade fixtures are levied against Landlord or Landlord's property
or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property
or trade fixtures of Tenant and if Landlord, after written notice
to Tenant, pays the taxes based on such increased assessment,
which Landlord shall have the right to do regardless of the
validity thereof, but only under proper protest if requested by
Tenant, Tenant shall within ten (10) business days after demand,
as the case may be, repay to Landlord the taxes so levied against
Landlord, or the portion of such taxes resulting from such
increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with
Landlord's full cooperation, but at no cost or responsibility or
liability of any type whatsoever to Landlord, to bring suit in
any court of competent jurisdiction to recover the amount of such
taxes on Tenant's personal property and trade fixtures so paid
under protest, and any net amount so recovered shall belong to
Tenant.
(b) If the Tenant improvements in the Premises,
whether installed, and/or paid for by Landlord or Tenant and
whether or not affixed to the Building so as to become a part
thereof, are assessed for Real Property Tax purposes at a
valuation higher than the valuation at which standard office
improvements in other space in the Complex are assessed, then the
Real Property Taxes levied against Landlord or the Complex by
reason of such excess assessed valuation shall be deemed to be
taxes levied against personal property of Tenant and shall be
governed by the provisions of Paragraph 12B(a) above. If the
records of the County Assessor are available and sufficiently
detailed to serve as a basis for determining whether said Tenant
improvements are assessed at a higher valuation that standard
office improvements in other space in the Complex, such records
shall be binding on both the Landlord and the Tenant. If the
records of the County Assessor are not available or sufficiently
detailed to serve as a basis for making said determination, the
actual cost of construction shall be used. Landlord agrees to
exercise good faith efforts to apply such standards on an
equivalent basis to any other tenants of the Complex whose tenant
improvements may be assessed for Real Property Tax purposes at a
valuation higher than the valuation at which standard office
improvements in other space in the Complex are assessed. As long
as ALZA or any ALZA Affiliate is the Tenant hereunder, Landlord
agrees to consult with Tenant in advance of any contemplated
change in ownership of the Premises or the Complex so as to have
the benefit of Tenant's recommendations, if any, as to any
possible way to avoid any reassessment of the Premises or the
Complex, but regardless of any such consultation Landlord shall
have no obligation to Tenant to follow, or any liability to
Tenant for failing to follow, any recommendations of Tenant.
13. LIABILITY INSURANCE. Tenant, at Tenant's expense, agrees to
keep in force during the Lease Term a policy of commercial
general liability insurance with combined single limit coverage
of not less than Five Million Dollars ($5,000,000) (which amount
may be obtained through primary or umbrella coverage or a
combination of both) per occurrence for bodily injury and
property damage occurring in, on or about the Premises or the
Complex, including parking and landscaped areas. Such insurance
shall be primary and noncontributory as respects any insurance
carried by Landlord, but may be provided under any blanket policy
maintained by Tenant. The policy or polices effecting such
insurance shall name Landlord as an additional insured, and shall
insure any liability of Landlord, contingent or otherwise, as
respects acts or omissions of Tenant, its agents, employees or
invitees or otherwise arising out of any conduct or transactions
of any of said persons in or about or concerning the Premises,
including any failure of Tenant to observe or perform any of its
obligations hereunder; shall be issued by an insurance company
admitted to transact business in the State of California; and
shall provide that the insurance effected thereby shall not be
canceled, except upon thirty (30) days' prior written notice to
Landlord. A certificate of insurance as to said policy shall be
delivered to Landlord. If, during the Lease Term, in the
considered opinion of Landlord's Lender, insurance advisor, or
counsel, the amount of insurance described in this Paragraph 13
is not adequate, Tenant agrees to increase said coverage to such
reasonable amount as Landlord's Lender, insurance advisor, or
counsel shall deem adequate.
14. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S
COMPENSATION INSURANCE. Tenant shall maintain a policy or
policies of fire and property damage insurance in "all risk" form
with a sprinkler leakage endorsement insuring the personal
property, inventory, trade fixtures, and special equipment
installed and paid for by Tenant within the Premises for the full
replacement value thereof. The proceeds from any of such
policies shall be used for the repair or replacement of such
items so insured.
Tenant shall also maintain a policy or policies of workman's
compensation insurance and any other employee benefit insurance
sufficient to comply with all laws.
15. REAL PROPERTY INSURANCE. Landlord shall purchase and keep
in force, and as Additional Rent and in accordance with
provisions of Paragraph 4E of this Lease, Tenant shall pay to
Landlord (or Landlord's agent if so directed by Landlord),
Tenant's proportionate share (allocated to the Premises by square
footage or other equitable basis as calculated and determined by
Landlord) of the deductibles (as provided in such insurance
policies to the extent allocable to damage occurring to the
Premises or the Common Area and subject to the provisions of
Paragraph 25) on insurance claims and the annual cost of the
policy or policies of insurance covering loss or damage to the
Premises and Complex (excluding routine maintenance and repairs
and incidental damage or destruction caused by accidents or
vandalism for which Tenant is responsible under Paragraph 9) in
the amount of the full replacement value thereof, providing
protection against those perils included within the
classification of "all risks" insurance and flood and/or
earthquake insurance, if available, plus a policy of rental
income insurance in the amount of one hundred (100%) percent of
twelve (12) months' (i) Basic Rent and (ii) Additional Rent
(collectively "Insurance Cost"). Tenant understands that (i) the
annual Insurance Cost is subject to change each year (or more
frequently if new policies are added or existing policies are
replaced), and (ii) Tenant shall be responsible for paying its
proportionate share of said total Insurance Cost, including any
such increased rates relating thereto as a result of any Excess
Insurance Cost (as defined below) resulting from Tenant's
particular use of the Premises of Complex. If the Insurance Cost
increases due to Tenant's particular use and/or some other
tenant's particular use of the Premises or Complex ("Excess
Insurance Cost"), (i) Tenant shall be obligated to pay one
hundred percent (100%) of said Excess Insurance Cost related to
Tenant's particular use, (ii) Tenant shall not be obligated to
pay any portion of said Excess Insurance Cost related to some
other tenant's particular use, and (iii) Tenant shall be
obligated to pay its proportionate share of the total Insurance
Cost (excluding any Excess Insurance Cost to be paid by Tenant or
any other tenant(s) pursuant to clauses (i) or (ii) above.
Landlord agrees to exercise good faith efforts to apply such
standards on an equivalent basis to any other tenants of the
Complex whose use causes the total Insurance Cost to be
disproportionately increased. Except as otherwise expressly
provided in this Lease, Tenant shall have no interest in nor any
right to the proceeds of any insurance procured by Landlord for
the Premises. The insurance covering the Premises or the Complex
shall include the Interior Improvements (and any subsequent
alterations, additions or improvements thereto, but excluding any
Lab Equipment or any alterations, additions or improvements that
are particular to using any portion of the Premises as a lab as
distinguished from using it as an office) made to the Building
which are a part of the Building.
Landlord and Tenant do each hereby respectively release the
other, to the extent of insurance coverage of the releasing
party, from any liability for loss or damage caused by fire or
any of the extended coverage casualties included in the releasing
party's insurance policies, irrespective of the cause of such
fire or casualty; provided, however, that if the insurance policy
of either releasing party prohibits such waiver, then this waiver
shall not take effect until consent to such waiver is obtained.
If such waiver is so prohibited, the insured party affected shall
promptly notify the other party thereof. For so long as ALZA or
any ALZA Affiliate is the Tenant, Landlord agrees to consult with
Tenant at the time of any insurance coverage renewal as to the
insurance coverage (including deductibles) to be carried by
Landlord with respect to the Premises and the Complex so as to
have the benefit of Tenant's recommendations, if any, as to any
possible way to reduce the cost of such insurance coverage, but
regardless of any such consultation Landlord shall have no
obligation to Tenant to follow, or any liability to Tenant for
failing to follow, any recommendations of Tenant.
16. INDEMNIFICATION. Landlord shall not be liable to Tenant and
Tenant hereby waives all claims against Landlord for any injury
to or death of any person or damage to or destruction of property
in or about the Premises by or from any cause whatsoever,
including, without limitation, gas, fire, oil electricity or
leakage of any character from the roof, walls, basement or other
portion of the Premises except to the extent that the same
results primarily from the willful misconduct or active
negligence of Landlord, its agents, servants, employees, invitees
or contractors of which negligence Landlord has knowledge and
reasonable time to correct. Except as to injury to persons or
damage to property to the extent arising from the willful
misconduct or the active negligence of Landlord, its agents,
servants, employees, invitees, or contractors, Tenant shall hold
Landlord harmless from and defend Landlord against any and all
expenses, including reasonable attorneys' fees, in connection
therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about
the Premises, or any part thereof, from any cause whatsoever,
occurring during the Lease Term.
17. COMPLIANCE. Tenant, at its sole cost and expense, shall
promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now or hereafter
in effect relating to the Premises; with the requirements of any
board of fire underwriters or other similar body now or hereafter
constituted; and with any direction or occupancy certificate
issued pursuant to law by any public officer; provided, however,
that no such failure shall be deemed a breach of the provisions
of this Lease if Tenant, immediately upon notification, commences
to remedy or rectify said failure. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action
against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or
provision, shall be conclusive of that fact as between Landlord
and Tenant. Tenant shall, at its sole cost and expense, comply
with any and all requirements pertaining to said Premises, of any
insurance organization or company, necessary for the maintenance
of reasonable fire and public liability insurance covering the
Premises.
18. LIENS. Tenant shall keep the Premises and the Complex free
from any liens arising out of any work performed, materials
furnished or obligations incurred by Tenant. In the event that
Tenant shall not, within ten (10) days following notice of the
imposition of any such lien, cause the same to be released of
record, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to
cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien.
All sums paid by Landlord for such purpose, and all expenses
incurred by it in connection therewith, shall be payable to
Landlord by Tenant on demand with interest at the Bank of America
Prime Rate (or equivalent thereof) of interest plus five percent
(5%) per annum, but in no event greater then the maximum rate of
interest permitted by applicable law. Notwithstanding anything
to the contrary in this Paragraph 18, Tenant shall have the right
to provide Landlord with a bond in the amount of the Lien in a
form satisfactory to Landlord and to contest the Lien, in which
event Landlord shall not be entitled to pay or discharge the
Lien, provided the Lien is removed within ninety (90) days from
the date the Lien is filed.
19. ASSIGNMENT AND SUBLETTING.
A. Subject only to the provisions of Paragraph D below,
provided that as of the effective date of any proposed assignment
or sublease as described below (i) ALZA or any ALZA Affiliate is
the Tenant under this Lease and (ii) Tenant is not then in
default under this Lease (i.e. Tenant has received notice of a
default under this Lease and the applicable cure period has
expired and Tenant has not then cured such default), Landlord
agrees to the following:
(a) Landlord waives any right hereunder (i) to consent
to any sublease of all or any portion of the Premises (but
Landlord shall have the right to approve any permitted use of the
Premises by any sublessee (other than an ALZA Affiliate) if such
use is beyond that permitted by any Unaffiliated Assignee
pursuant to Paragraph 1 hereof, and Tenant agrees to consult with
Landlord as to Tenant's subleasing activities and to allow
Landlord a ten (10) day period to review the principal terms of
any proposed sublease (other than a sublease to an ALZA
Affiliate) before Tenant enters into such sublease), (ii) to
consent to or to elect to terminate the Lease in the event of any
assignment to an Unaffiliated Assignee if ALZA or any ALZA
Affiliate is to remain liable under this Lease for the
performance by such Unaffiliated Assignee of the obligations of
Tenant under this Lease (but Landlord shall have the right to
approve or disapprove any permitted use of the Premises by any
Unaffiliated Assignee if such use is beyond that permitted by any
Unaffiliated Assignee pursuant to Paragraph 1 hereof and Tenant
agrees to consult with Landlord as to Tenant's assignment
activities and to allow Landlord a ten (10) day period to review
the principal terms of any proposed assignment before Tenant
enters into such assignment); and (iii) to consent to or to elect
to terminate the Lease in the event of any sublease or assignment
to any ALZA Affiliate or to share in any Excess Rent (as defined
below) related to any sublease or assignment to any ALZA
Affiliate. No assignment either to an ALZA Affiliate or to an
Unaffiliated Assignee shall result in the right of ALZA (or any
ALZA Affiliate which succeeds to ALZA's interest as Tenant
hereunder) to be released from any continuing liability for the
performance by such assignee of the obligations of Tenant under
this Lease, unless such assignee (whether an ALZA Affiliate or an
Unaffiliated Assignee) at the time of such assignment satisfies
the financial requirements of Paragraph C below and ALZA (or
such ALZA Affiliate) at the time of such assignment requests that
it be released from any such continuing liability in accordance
with the provisions of Paragraph C below.
(b) Landlord agrees that Tenant may deduct and retain
from any Excess Rent (including any Management Fee) received from
(1) any sublessee (which is not an ALZA Affiliate) or (2) any
Unaffiliated Assignee, the following: (i) if applicable, a third
party brokerage commission not to exceed $100,000 per
transaction, and (ii) with respect to (x) any sublease with a
sublessee which is not an ALZA Affiliate, and (y) any assignment
to an Unaffiliated Assignee if ALZA or any ALZA Affiliate is to
remain liable under this Lease for the performance by such
Unaffiliated Assignee of the obligations of Tenant under this
Lease, an amount equal to twelve percent (12%) per annum on the
portion of the initial improvement costs paid by Tenant for the
Shell Improvements and Interior Improvements made to the Complex,
including all Three Buildings (but excluding any additional cost
attributable to the installation by Tenant of any laboratory
space in any of the Three Buildings), to the extent such amount
exceeds the Improvement Allowance provided by Landlord under the
Construction Agreement (hereinafter referred to as "Tenant's
Excess Costs") to the extent allocable on a pro rata square
footage basis to the space being subleased or assigned. After
any such deductions as provided herein, any Excess Rent shall be
payable when received on a monthly basis by Tenant to Landlord.
For Example:
Example 1 - Excess Costs Allowance due Tenant Under
Sublease. If Tenant subleases 50,000 square feet of this
Building at $3.00 per square foot for a two year period; the
commission fee is $100,000; and Tenant's Excess Costs total
$8,000,000 for the Complex; and the total square feet of all
Three Buildings is 360,000; Tenant's Excess Costs allowance
per square foot would be $0.22 ($8,000,000 x 12% = $960,000/
360,000 s.f. = $2.67 per square foot/12 months = $0.22);
therefore, Tenant would be entitled to deduct from the
monthly Excess Rent as received: (i) the $100,000 commission
fee which would be deducted in full prior to any Excess Rent
being paid to Landlord, and (ii) Tenant's Excess Costs of
$0.22 per square foot per month during the entire term of
said Sublease, prior to paying to Landlord when received on
a monthly basis the balance of the Excess Rent.
Example 2 - Third Party Assignment of this Lease with Three
Years Remaining in the Lease Term with ALZA or any ALZA
Affiliate Remaining Obligated on the Lease: Assume: (i) a
broker fee of $100,000; (ii) Tenant's Excess Costs allowance
as stated above of $0.22 per square foot per month; and
(iii) $5,000,000 consideration received by Tenant for the
assignment of this Lease; Tenant would be entitled to deduct
from the excess consideration a total of $1,050,400 (120,000
s.f. x $0.22 x 36 months + $100,000) prior to paying
Landlord the balance of the Excess Rent, and Landlord would
not be entitled to elect to terminate the Lease.
B. Except as otherwise provided in this Paragraph 19,
Tenant shall not assign, transfer, or hypothecate the leasehold
estate under this Lease, or any interest therein, and shall not
sublet the Premises, or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person or
entity to occupy or use the Premises, or any portion thereof,
without, in each case, the prior written consent of Landlord
which consent will not be unreasonably withheld. As a condition
for Landlord granting its consent to any assignment, transfer, or
subletting and except as otherwise expressly provided herein,
Landlord shall require Tenant to pay when received to Landlord,
as Additional Rent, one hundred percent (100%) of all excess
rents and/or additional consideration (including any Management
Fee) as and when collected by Tenant from its assignees,
transferees, or subtenants to the extent in excess of the Rent
payable by Tenant to Landlord as allocable to the portion of the
Premises being subleased or assigned (collectively "Excess Rent",
with Excess Rent to be calculated after deducting any Additional
Rent or other payments or expenses being reasonably incurred by
Tenant under this Lease or any items of additional rent payable
by any subtenants under any sublease (and if a gross sublease,
after deducting the reasonable cost of such additional rent items
to the extent included in the base rent under any such sublease),
including by way of example, any payments by Tenant or any
subtenants relating to utility services, janitorial services,
security services and the costs of taxes, insurance, maintenance
and repair); provided, however, that before paying to Landlord
the remainder of such Excess Rent, Tenant shall first be entitled
to recover from such Excess Rent the amount of any reasonable
leasing commissions (not to exceed $100,000 as to any
transaction) paid by Tenant to third parties not affiliated with
Tenant. Tenant shall, by not less than ten (10) days written
notice, advise Landlord of its intent to assign or transfer
Tenant's interest in the Lease or to sublet the Premises or any
portion thereof for all or any part of the Lease Term. Within
ten (10) days after receipt of said written notice, Landlord may,
if an assignment to an Unaffiliated Assignee where neither ALZA
nor any ALZA Affiliate will remain liable for the obligations of
Tenant under this Lease accruing on and after the date of such
assignment, elect to terminate this Lease on the date specified
in Tenant's notice by giving written notice of such election to
terminate. Landlord shall respond to any request for its consent
to any assignment or sublease within ten (10) days following
written request therefore. In the event any proposed assignment
or sublease is approved by Landlord, no such permitted assignee
or sublessee shall assign or transfer this Lease, either in whole
or in part, or sublet the whole or any part of the Premises,
without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer,
hypothecation, subletting, occupation or use by any other person
shall not release Tenant from any of Tenant's obligations
hereunder or be deemed to be a consent to any subsequent similar
or dissimilar assignment, transfer, hypothecation, subletting,
occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without
such consent shall be void and shall constitute a breach of this
Lease by Tenant. Except as otherwise expressly provided to the
contrary in this Lease, the leasehold estate under this Lease
shall not, nor shall any interest therein, be assignable for any
purpose by operation of law without the written consent of
Landlord. As a condition to its consent, Landlord shall require
Tenant to pay all reasonable expenses incurred by Landlord in
connection with the assignment, and Landlord shall require
Tenant's assignee or transferee to assume in writing all of the
obligations under this Lease thereafter accruing and, except as
otherwise expressly provided herein, for Tenant to remain liable
to Landlord under the Lease. Any subtenant from Tenant shall
only have the right to enter into a sub-sublease with Landlord's
written approval.
C. Notwithstanding anything to the contrary herein but
subject to the provisions of Paragraph D below, after the later
of the effective date of the proposed assignment or the Rent
Commencement Date, and provided that as of the effective date of
the proposed assignment (i) ALZA or an ALZA Affiliate is the
Tenant under this Lease and (ii) Tenant is not in default under
this Lease (i.e. Tenant has received notice of a default under
this Lease and the applicable cure period has expired and Tenant
has not then cured said default), Landlord agrees that ALZA and
any ALZA Affiliate shall, upon its request, be released from all
thereafter accruing liability under this Lease (except for
Tenant's compliance obligations under Paragraph 17 of this Lease
and Tenant's indemnity obligations to Landlord under Paragraphs
16 and 24 of this Lease, which compliance and indemnity
obligations shall continue in effect in favor of Landlord with
respect to any events or matters which occurred or accrued
thereunder prior to the date of the assignment, and which
compliance and indemnity obligations shall survive the assignment
of this Lease whether the event or matter giving rise to such
compliance obligation or right of indemnification is asserted or
discovered by Landlord before or after such assignment), upon the
assignment of all of its interest as Tenant under this Lease to
any entity which has (i) a net worth at the time of such
assignment (applying generally accepted accounting principles,
consistently applied) equal to or greater than Five Hundred
Million Dollars ($500,000,000) as adjusted as provided below as
reflected on the most recent quarterly or annual audited
financial statements of the assignee preceding the date of such
assignment and (ii) not experienced any known material adverse
changes as of the date of said assignment in said assignee's
financial condition which reasonably calls into question whether
the foregoing net worth standard is then satisfied. The
foregoing net worth standard for release of liability shall apply
with respect to any assignment to an ALZA Affiliate as well as to
an Unaffiliated Assignee. Tenant shall provide Landlord at least
ten (10) days prior to the effective date of any assignment
(whether or not Tenant is seeking to be released of liability as
a result of such assignment) with written notice of said
assignment, which notice shall include the form of written
assignment and assumption to be entered into between Tenant and
the assignee, wherein such assignee shall agree in favor of
Landlord to assume all of the obligations and liabilities of
Tenant under this Lease accruing from and after the Commencement
Date of this Lease. Tenant and assignee shall further execute a
Consent to Assignment substantially in the form of Exhibit G
attached hereto completed as appropriate with respect to the
applicable assignment. Prior to or concurrently with the
assignment occurring, Tenant shall cause such assignment and
assumption agreement so earlier provided to Landlord and the
Consent to Assignment to be duly executed by Tenant and the
assignee and an original of each to be delivered to Landlord.
Landlord shall, within ten days after receipt of any such duly
executed assignment and assumption agreement which fully
satisfies all of the applicable conditions of this Paragraph 19
for obtaining the consent of Landlord thereto (or which otherwise
satisfies the conditions of this Paragraph 19 for the agreed
waiver of any requirement for obtaining the consent of Landlord),
cause the Consent to Assignment to be duly executed by Landlord
and returned to Tenant. Notwithstanding the above, Landlord
shall have the right to elect, by written notice to Tenant within
such ten day period, to terminate this Lease effective as of the
scheduled effective date of such assignment where Tenant is
seeking to be released of continuing liability under this Lease
in conjunction with a proposed assignment to an Unaffiliated
Assignee. The Five Hundred Million Dollars ($500,000,000)
standard set forth above for release of liability shall be
adjusted from on and after the Rent Commencement Date by the
percentage increase in the CPI with respect to the period from
the calendar month preceding the Rent Commencement Date to the
calendar month preceding the effective date of the assignment.
D. Notwithstanding anything to the contrary in this
Paragraph 19, Tenant may not assign its interest as Tenant
hereunder to any Unaffiliated Assignee until the cross default
condition set forth in Section 5.A of the Construction Agreement
relating to the construction of the Shell Improvements and
Interior Improvements for the Complex have been satisfied
pursuant to the terms and conditions of the Construction
Agreement.
20. SUBORDINATION AND MORTGAGES.
A. In the event Landlord's title or leasehold interest is
hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings upon which the Premises are
located, to secure a loan from a lender (hereinafter referred to
as "Lender") to Landlord, Tenant shall, at the request of
Landlord or Lender, execute in writing an agreement (in form
reasonably acceptable to Tenant), subordinating its rights under
this Lease (subject to customary nondisturbance protection in
favor of Tenant) to the lien of such deed of trust, or, if so
requested, agreeing that the lien of Lender's deed of trust shall
be or remain subject and subordinate to the rights of Tenant
under this Lease. Notwithstanding any such subordination,
Tenant's possession under this Lease shall not be disturbed if
Tenant is not in default beyond any applicable cure period and so
long as Tenant shall pay all Rent and observe and perform all of
the provisions set forth in this Lease, and any subordination
agreement shall reflect the agreement of the Lender to the same
and the Lender's agreement upon any foreclosure to recognize this
Lease. Landlord represents to Tenant that, as of the date of
this Lease, the Premises are not presently encumbered by any
mortgage, deed of trust or other security device in favor of any
Lender.
B. Tenant hereby agrees that during the Initial Term and
the Extended Term(s) of this Lease (if any), Tenant shall not
encumber or pledge (in any manner whatsoever) its leasehold
interest in the Premises, including the Interior Improvements
and/or Tenant's equipment.
21. ENTRY BY LANDLORD. Landlord reserves, and shall at all
reasonable times after at least twenty four (24) hours notice
(except in emergencies) have, the right to enter the Premises to
inspect them; to perform any services to be provided by Landlord
hereunder; to make repairs or provide any services to a
contiguous tenant(s) (if any); to submit the Premises to
prospective purchasers, mortgagees or tenants; to post notices of
non-responsibility; and to alter, improve or repair the Premises
or other parts of the Building and any portion of the Complex,
all without abatement of Rent, and may erect scaffolding and
other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed;
provided, however that the business of Tenant shall be interfered
with to the least extent that is reasonably practical. Any entry
to the Premises by Landlord for the purposes provided for herein
shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises
or any portion thereof.
22. BANKRUPTCY AND DEFAULT.
A. Default: The commencement of a bankruptcy action or
liquidation action or reorganization in bankruptcy action or
insolvency action or an assignment of or by Tenant for the
benefit of creditors, or any similar action undertaken by Tenant,
or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or
receiver appointed to serve during a bankruptcy, liquidation,
reorganization, insolvency or similar action elects to reject
Tenant's unexpired Lease, the trustee or receiver shall notify
Landlord in writing of its election within thirty (30) days after
any order for relief in any liquidation action or within thirty
(30) days after the commencement of any action.
Within thirty (30) days after the court approval of the
assumption of this Lease, the trustee or receiver shall cure (or
provide adequate assurance to the reasonable satisfaction of
Landlord that the trustee or receiver shall cure) any and all
previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate
assurance of future performance under said Lease to the
reasonable satisfaction of Landlord. Adequate assurance of
future performance, as used herein, includes, but shall not be
limited to: (i) assurance of source and payment of Rent, and
other consideration due under this Lease; and (ii) assurance that
the assumption or assignment of this Lease will not breach any
provision in any agreement relating to the above described
Premises.
Nothing contained in this Paragraph shall affect the
exercising of any right of Landlord to refuse to accept an
assignment upon commencement or in connection with a bankruptcy,
liquidation, reorganization or insolvency action or an assignment
of Tenant for the benefit of creditors or other similar act.
Nothing contained in this Lease shall be construed as giving or
granting or creating an equity in the Premises to Tenant. In no
event shall the leasehold estate under this Lease, or any
interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of
Landlord. In no event shall this Lease or any rights or
privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings.
The failure of Tenant to perform or honor any covenant,
condition or representation made under this Lease shall
constitute a default hereunder by Tenant upon expiration of the
appropriate grace period hereinafter provided. Tenant shall have
a period of ten (10) days following the date of written notice
from Landlord within which to cure any default in the payment of
Rent when otherwise due hereunder. Tenant shall have a period of
thirty (30) days following the date of written notice from
Landlord within which to cure any other default by Tenant under
this Lease; provided, however, that if the nature of Tenant's
failure is such that more than thirty (30) days is reasonably
required to cure the same, Tenant shall not be in default so long
as Tenant commences performance within such thirty (30) day
period and thereafter prosecutes the same to completion. Upon an
uncured default of this Lease by Tenant, Landlord shall have the
following rights and remedies in addition to any other rights or
remedies available to Landlord at law or in equity:
(a) The rights and remedies provided for by California
Civil Code Section 1951.2 including but not limited to, recovery
of the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Lease Term after the time of
award exceeds the amount of rental loss for the same period that
Tenant proves could be reasonably avoided, as computed pursuant
to subsection (b) of said Section 1951.2.
(b) The rights and remedies provided by California
Civil Code Section 1951.4 which allows Landlord to continue the
Lease in effect and to enforce all of its rights and remedies
under this Lease, including the right to recover Rent as it
becomes due, for so long as Landlord does not terminate Tenant's
right to possession; acts of maintenance or preservation, efforts
to relet the Premises, or the appointment of a receiver upon
Landlord's initiative to protect its interest under this Lease
shall not constitute a termination of Tenant's right to
possession.
(c) The right to terminate this Lease by giving notice
to Tenant in accordance with applicable law.
(d) To the extent provided by law, the right and power
to enter the Premises and remove therefrom all persons and
property, to store such property in a public warehouse or
elsewhere at the cost of and for the account of Tenant, and to
sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord may from time to time sublet
the Premises or any part thereof for such term or terms (which
may extend beyond the Lease Term) and at such Rent and such other
terms as Landlord in its reasonable sole discretion may deem
advisable, with the right to make alterations and repairs to the
Premises. Upon each subletting, (i) Tenant shall be immediately
liable to pay Landlord, in addition to any other indebtedness
other than Rent due from Tenant to Landlord hereunder, the
reasonable cost of such subletting (to the extent allocable to
the remaining Lease Term), including, but not limited to,
reasonable attorneys' fees, and any real estate commissions
actually paid, and the cost of such reasonable alterations and
repairs incurred by Landlord and the amount, if any, by which the
Rent hereunder allocable to the subleased premises for the period
of such subletting (to the extent such period does not exceed the
Lease Term) exceeds the amount to be paid as Rent by the
subtenant for the subleased premises for such period or (ii) at
the option of Landlord, rents received from such subletting shall
be applied first to payment of indebtedness other than Rent due
hereunder from Tenant to Landlord; second, to the payment of any
costs of such subletting and of such alterations and repairs;
third, to payment of Rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in payment
of future Rent as the same becomes due hereunder. If Tenant has
been credited with any Rent to be received by such subletting
under option (i) and such Rent shall not be promptly paid to
Landlord by the subtenant(s), or if such rentals received from
such subletting under option (ii) during any month be less than
that to be paid during the month by Tenant hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall
be calculated and paid monthly. No taking possession of the
Premises by Landlord shall be construed as an election on its
part to terminate this Lease unless a written notice of such
intention be given to Tenant. Notwithstanding any such
subletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such then uncured
previous default.
(e) The right to have a receiver appointed for Tenant
upon application by Landlord in accordance with applicable laws,
to take possession of the Premises and to apply any rental
collected from the Premises and to exercise all other rights and
remedies granted to Landlord pursuant to this Paragraph 22.
B. Cross Default: As provided in Section 5.A of the
Construction Agreement, any uncured default by Tenant under the
Construction Agreement in the construction of the Shell
Improvements and Interior Improvements for Building One, Building
Two and Building Three occurring prior to the satisfaction of the
requirements of such Section, shall entitle Landlord in
accordance with the applicable provisions of the Construction
Agreement to terminate all Three Leases (but in no event shall
Landlord be required to exercise such remedy).
23. ABANDONMENT. Tenant shall not vacate or abandon the
Building at any time during the Lease Term (except that Tenant
may vacate so long as it pays Rent, provides a security service
to check the Premises during normal business hours from Monday to
Friday, and otherwise performs its obligations hereunder) and if
Tenant shall abandon, vacate or surrender said Premises, or be
dispossessed by the process of law, or otherwise, any personal
property belonging to Tenant and left on the Premises shall be
deemed to be abandoned, at the option of Landlord.
24. HAZARDOUS MATERIALS. Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and the real
property located beneath said Premises and the Common Area
(hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall
mean any material, waste, chemical, mixture or byproduct which is
or hereafter is defined, listed or designated under Environmental
Laws (defined below) as a pollutant, or as a contaminant, or as a
toxic or hazardous substance, waste or material, or any other
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without
limitation, petroleum hydrocarbons or any distillates or
derivatives or fractions thereof, polychlorinated biphenyls, or
asbestos). As used herein, the term "Environmental Laws" shall
mean any applicable Federal, State of California or local
government law (including common law), statute, regulation, rule,
ordinance, permit, license, order, requirement, agreement, or
approval, or any determination, judgment, directive, or order of
any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or
public health and safety.
B. Tenant shall obtain Landlord's written consent, which
shall not be unreasonably withheld, prior to the occurrence of
any Tenant's Hazardous Materials Activities (defined below);
provided, however, that Landlord's consent shall not be required
for normal use in compliance with applicable Environmental Laws
of customary landscaping, cleaning, household and office
supplies, such as mild cleaners and other common janitorial
supplies, lubricants and copier toner and personal use items,
such as cigarettes and/or medicines. As used herein, the term
"Tenant's Hazardous Materials Activities" shall mean any and all
use, handling, generation, storage, disposal, treatment,
transportation, discharge, or emission of any Hazardous Materials
on, in, beneath, to, from, at or about the Property, in
connection with Tenant's use of the Property, or by Tenant or by
any of Tenant's agents, employees, contractors, vendors,
invitees, visitors or its future subtenants or assignees (unless
Tenant is released hereunder as to such assignee, in which event
Tenant shall not be liable for activities of such assignee unless
otherwise stated in any related Consent to Assignment agreement
executed by Landlord and Tenant). Tenant agrees that any and all
Tenant's Hazardous Materials Activities shall be conducted in
strict, full compliance with applicable Environmental Laws at
Tenant's expense, and shall not result in any contamination of
the Property or the environment. Tenant agrees to provide
Landlord with prompt written notice of any spill or release of
Hazardous Materials at the Property during the term of the Lease
of which Tenant becomes aware, and further agrees to provide
Landlord with prompt written notice of any material violation of
Environmental Laws in connection with Tenant's Hazardous
Materials Activities of which Tenant becomes aware. If Tenant's
Hazardous Materials Activities involve Hazardous Materials other
than normal use of customary landscaping, cleaning, household and
office supplies and personal use items, Tenant also agrees at
Tenant's expense: (i) to install such Hazardous Materials
monitoring, storage and containment devices as required by the
governing agencies associated with any Tenant's Hazardous
Materials Activities or otherwise specifically required by any
governing agency of Tenant; (ii) provide Landlord with a written
inventory of such Hazardous Materials (other than customary
landscaping, cleaning, household and office supplies and personal
use items), including an update of same each year upon the
anniversary date of the Lease Commencement Date ("Anniversary
Date"); and (iii) at any time that an Unaffiliated Assignee is
the Tenant hereunder, Tenant shall every five (5) years
thereafter on the respective anniversary of the Lease
Commencement Date, retain a qualified environmental consultant,
reasonably acceptable to Landlord, to evaluate whether Tenant is
in compliance with all applicable Environmental Laws with respect
to Tenant's Hazardous Materials Activities (with Tenant, at its
expense, to submit to Landlord a report from such environmental
consultant which discusses the environmental consultant's
findings within two (2) months following the respective Lease
Commencement Date). Tenant, at its expense, shall promptly
undertake and complete any and all steps necessary, and in full
compliance with applicable Environmental Laws, to fully correct
any and all problems or deficiencies identified by the
environmental consultant relating to Tenant's Hazardous Materials
Activities, and promptly provide Landlord with documentation of
all such corrections.
C. Prior to termination or expiration of the Lease,
Tenant, at its expense, shall (i) properly remove from the
Property all Hazardous Materials which came to be located at the
Property as a result of Tenant's Hazardous Materials Activities,
and (ii) fully comply with and complete all facility closure
requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x)
properly restoring and repairing the Property to the extent
damaged by such closure activities, and (y) if applicable,
obtaining from the local Fire Department or other appropriate
governmental authority with jurisdiction a written concurrence
that closure has been completed in compliance with applicable
Environmental Laws. Tenant shall promptly provide Landlord with
copies of all claims, notices, work plans, data and reports
prepared, received or submitted in connection with any such
closure activities.
D. If Landlord, in its reasonable discretion, believes
that the Property has become contaminated as a result of Tenant's
Hazardous Materials Activities, Landlord in addition to any other
rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to
obtaining and analyzing samples of soil and groundwater, for the
purpose of determining the nature and extent of such
contamination. Tenant shall promptly reimburse Landlord for the
costs of such an investigation, including but not limited to
reasonable attorneys' fees, Landlord incurs with respect to any
such investigation that discloses Hazardous Materials
contamination for which Tenant is liable under this Lease.
Except as may be required of Tenant by applicable Environmental
Laws, Tenant shall not perform any invasive sampling, testing, or
drilling to identify the presence of any Hazardous Materials at
the Property, without Landlord's prior written consent which
shall not be unreasonably withheld. Tenant shall promptly
provide Landlord with copies of any claims, notices, work plans,
data and reports prepared, received or submitted in connection
with any sampling, testing or drilling performed pursuant to the
preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, members, and agents from and against any and all
claims (including, but not limited to, third party claims from a
private party or a government authority), liabilities,
obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs
(including but not limited to reasonable attorneys', consultants'
and other experts' fees and costs), and damages, which arise from
or relate to: (i) Tenant's Hazardous Materials Activities; (ii)
releases or discharges of Hazardous Materials at the Property
during the time ALZA or an ALZA Affiliate is the Tenant under all
Three Leases; (and during the time ALZA or an ALZA Affiliate is
not the Tenant under all Three Leases, the reference to
"Property" within this item (ii) shall be deemed changed to
"Premises"); however, Tenant shall continue to be responsible for
any Hazardous Materials contamination of the Common Area caused
by Tenant's Hazardous Materials Activities), which occur during
the Lease Term; (iii) any Hazardous Materials contamination
caused by Tenant prior to the Lease Commencement Date; or (iv)
the breach of any obligation of Tenant under this Paragraph 24
(collectively, "Tenant's Environmental Indemnification").
Tenant's Environmental Indemnification shall include but is not
limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and
diminution in fair market value of the Property caused by or
resulting from any such indemnified matter. Tenant's
Environmental Indemnification shall further include but is not
limited to the obligation to diligently and properly implement to
completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting,
closure activities, or other environmental response action
(collectively, "Response Actions") associated with any such
indemnified matter. Tenant shall promptly provide Landlord with
copies of any claims, notices, work plans, data and reports
prepared, received or submitted in connection with any Response
Actions.
F. It is agreed that the Tenant's responsibilities related
to Hazardous Materials will survive the expiration or termination
of this Lease and that Landlord may obtain specific performance
of Tenant's responsibilities under this Paragraph 24. It is
further acknowledged by the Parties that Exhibit E attached
hereto reflects certain Hazardous Materials that Tenant and its
environmental consultants, during their earlier analysis,
inspection and testing of the Complex and certain adjacent
property, determined existed on or about the Complex ("Existing
Contamination"). The Parties agree that notwithstanding anything
to the contrary in this Lease, Tenant's Environmental
Indemnification shall not extend to, and Tenant shall have no
responsibility, liability or indemnification obligation to
Landlord under this Lease or at law for, any Hazardous Materials
present in, on, under or about the Complex or any adjacent
property as of the date of this Lease Agreement or for any
Hazardous Materials in groundwater that may hereafter migrate to
or under the Complex, including any such Existing Contamination
(including, but not limited to, in the event of any release of
any such Existing Contamination or any migration of any such
Existing Contamination onto or off of the Complex), except to the
extent, and then only to the extent, to which Tenant may
contribute to any such Existing Contamination or may cause any
such Existing Contamination to be released or migrate.
25. DESTRUCTION. In the event the Premises and/or Common Area
is destroyed in whole or in part from any cause, except for
routine maintenance and repairs and incidental damage and from
destruction caused from vandalism and accidents for which Tenant
is responsible under Paragraph 9, neither Landlord nor Tenant
shall have the right to terminate this Lease except upon the
occurrence of limited circumstances provided hereinbelow, and
Landlord shall be obligated to rebuild or restore the Premises
and/or Common Area so damaged or destroyed to its condition prior
to the damage or destruction at Landlord's sole cost and expense,
with the exception that Tenant shall be solely responsible for
all or such portion of the deductible amount of any insurance
coverage as is then reasonably allocable to the rebuilding or
restoration of the Premises under the insurance policies then
being carried by Landlord pursuant to Paragraph 15 hereof. In
the event any other portion of the Complex is damaged or
destroyed (such as either of the other two buildings in the
Complex), Landlord shall not be obligated hereunder to rebuild or
restore the same, but shall be obligated to cause such other
portion of the Complex to be restored to a safe and aesthetically
pleasing condition.
Tenant shall be entitled to a reduction in Rent after the
occurrence of such damage and while such rebuilding or
restoration is being made in the proportion that the area of the
Building rendered untenantable by such damage or destruction
bears to the total area of the Building. Landlord shall within
thirty (30) days after the occurrence of such damage or
destruction, provide Tenant with Landlord's contractor's estimate
of the time required to complete the rebuilding or restoration of
the Premises or the Common Area. If it is reasonably estimated
by Landlord's contractor that the rebuilding or restoration will
exceed thirteen (13) months following the date of the occurrence
of such damage or destruction, then Tenant shall have the right
to terminate this Lease by giving written notice to Landlord
within fifteen (15) days following receipt of Landlord's
estimated time to rebuild or restore the Premises and/or Common
Area. Notwithstanding anything herein to the contrary,
Landlord's obligation to rebuild or restore the Building shall be
limited to the Building and Interior Improvements (and any
subsequent alterations, additions or improvements thereto) as
they existed as of the date of such damage or destruction, but
excluding (i) any Lab Equipment or any alterations, additions or
improvements that are particular to using any portion of the
Premises as a lab as distinguished from using it as an office,
and (ii) any restoration of Tenant's trade fixtures, equipment,
inventory or merchandise (with the items reflected in clauses (i)
and (ii) collectively referred to as the "Excluded Items"). If
Landlord does not complete the rebuilding or restoration within
thirteen (13) months following the date of destruction (such
period of time to be extended for delays caused by the fault or
neglect of Tenant or because of Acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes,
rainy or stormy weather, inability to obtain materials, supplies
or fuels, or other such delays beyond the reasonable control of
Landlord or its contractors or subcontractors), then Tenant shall
have the right to terminate this Lease by giving written notice
to Landlord within fifteen (15) days after the expiration of said
thirteen (13) month period (as such period may be extended by any
of the foregoing enumerated excused delays). Landlord shall,
within twenty (20) days after the occurrence of any matter which
Landlord considers to constitute the basis for an excused delay,
advise Tenant of such occurrence and the estimated excused delay
that has been or will be occasioned thereby.
Notwithstanding anything to the contrary in this Paragraph
25, if the Premises and/or Common Area is to be rebuilt and/or
restored as provided for herein, and ALZA or an ALZA Affiliate is
the Tenant under all Three Leases at the time of said destruction
or damage, then Landlord and Tenant agree that: (a) Tenant shall
(i) enter into contracts with the general contractor(s) for the
restoration or rebuilding and (ii) oversee the construction; (b)
Landlord shall notify Tenant of the amount of the net insurance
proceeds ("Net Insurance Proceeds") available to be applied to
such restoration or rebuilding and provide adequate assurances to
Tenant as to the future availability from Landlord of Landlord's
Share (as hereinafter defined) of any additional amount, if any,
which is required to fund the cost of such restoration or
rebuilding (net of the Excluded Items) to the extent such cost
exceeds the aggregate of such net insurance proceeds and any
insurance deductible to be borne by Tenant (the "Non-Insured
Cost"); (c) Tenant shall provide adequate assurances to Landlord
as to the future availability for payment by Tenant of any
insurance deductible to be borne by Tenant and of Tenant's Share
(as hereinafter defined) of the Non-Insured Cost; (d) the Net
Insurance Proceeds and Landlord's Share of the Non-Insured Cost
shall be funded by Landlord during the course of such restoration
or rebuilding by Tenant on a pro rata basis with Tenant's funding
of any insurance deductible to be borne by Tenant and Tenant's
Share (as hereinafter defined) of the Non-Insured Cost in the
manner set forth below in this Paragraph 25 (with Landlord's
Disbursement Share as used in this Paragraph to equate to the
ratio of (i) the aggregate of the Net Insurance Proceeds and
Landlord's Share of the estimated Non-Insured Cost to (ii) the
aggregate of the Net Insurance Proceeds, the estimated Non-
Insured Cost (both Landlord's Share and Tenant's Share) and the
insurance deductible to be borne by Tenant (which should in all
events equal the total estimated cost of such rebuilding or
restoration); and (e) Tenant's right to terminate this Lease as a
result of subsequent delays in construction shall be
inapplicable. The Net Insurance Proceeds and Landlord's Share of
any estimated Non-Insured Cost shall be disbursed to, or for the
benefit of, Tenant in the following manner. Landlord shall be
obligated, but not more than one time per month, within ten (10)
business days after receipt of (i) an invoice from Tenant for any
amounts then due and payable to Tenant's design and construction
professionals or material suppliers for costs of such rebuilding
or restoration, together with (ii) a detailed accounting
reflecting the full expenditure of said amounts and all other
amounts since paid and to be paid with the current disbursement
from Landlord, to pay Landlord's Disbursement Share of any
amounts properly shown on such invoice. Unless otherwise agreed
by Landlord and Tenant, Landlord shall make its payment jointly
to Tenant and the general contractor (or, if applicable, to the
respective vendor) except in those instances where it is clearly
demonstrated to Landlord that Tenant has already paid the amount
in full for which reimbursement is then being sought (and any
potentially applicable mechanic's liens, if any, have been
released as respects the work to which such reimbursement is
sought), in which event such payment shall be made directly to
Tenant. Upon the completion of the rebuilding or restoration and
determination of the final cost of such rebuilding or
restoration, the amount of the Non-Insured Cost, if any,
respectively funded by Landlord and Tenant shall be adjusted so
as to cause (i) Tenant to fund the entirety of, but no more than,
the amount of any applicable insurance deductible allocable to
such rebuilding or restoration and Tenant's Share of the actual
Non-Insured Cost, (ii) Landlord to fund the entirety of, but no
more than, the amount of the Net Insurance Proceeds and
Landlord's Share of the actual Non-Insured Cost and (iii)
Landlord or Tenant, as applicable, to reimburse the other for any
excess amount funded by the other. As used in this Paragraph,
(i) "Landlord's Share" shall mean a fraction where (a) the
numerator is the Total Improvement Allowance ultimately funded by
Landlord under the Construction Agreement for the design and
construction of the Shell Improvements and Interior Improvements
for the Complex and (b) the denominator is the sum of such Total
Improvement Allowance so funded and Tenant's Excess Costs (as
defined and used in Paragraph 19(A)(b) above) for the design and
construction of the Shell Improvements and Interior Improvements
(net of the Excluded Items) for the Complex, and (ii) "Tenant's
Share" shall mean a fraction where (a) the numerator is Tenant's
Excess Costs (as defined and used in Paragraph 19(A)(b) above)
for the design and construction of the Shell Improvements and
Interior Improvements (net of the Excluded Items) for the Complex
and (b) the denominator is the sum of the Total Improvement
Allowance so funded and Tenant's Excess Costs for the design and
construction of the Shell Improvements and Interior Improvements
(net of the Excluded Items) for the Complex. By way of example
of the foregoing, assume that: (i) the total estimated cost of
repairing the damage to the Improvements is $21,000,000, of which
$1,000,000 relates to the estimated cost of repairing the damage
to the Excluded Items; (ii) the insurance deductible is
$5,000,000; (iii) the Net Insurance Proceeds are $12,000,000;
(iv) the Total Improvement Allowance funded by Landlord for the
Complex was $35,000,000; and (v) the Tenant's Excess Costs for
the design and construction of the Shell Improvements and
Interior Improvements (net of the Excluded Items) was
$17,500,000; then: (a) the Non-Insured Cost would be $3,000,000
(= $21,000,000 -$1,000,000 - $5,000,000 - $12,000,000); (b)
Landlord's Share would be 66.67 % (= $35,000,000 /($35,000,000 +
$17,500,000)), and Landlord's Share of the Non-Insured Cost would
be $2,000,100; (c) Tenant's Share would be 33.33 % (= $17,500,000/
($35,000,000 + $17,500,000)), and Tenant's Share of the Non-
Insured Cost would be $999,900; and (d) Tenant would also be
responsible for funding the insurance deductible of $5,000,000
and the $1,000,000 cost of repairing the Excluded Items.
Notwithstanding anything to the contrary herein, if Landlord
elects to terminate the Lease as provided hereinbelow versus
rebuilding and/or restoring said damage or destruction as
provided for herein and Tenant does not exercise its right to
require Landlord to rebuild or restore as provided for herein,
Tenant shall not be liable for paying any insurance deductible
related to such damage or destruction provided Tenant did not
cause such damage or destruction; if Tenant elects to terminate
the Lease as provided hereinbelow, Tenant shall be obligated to
pay the insurance deductible; and if this Lease is not
terminated, Tenant shall be obligated to pay the insurance
deductible.
Unless this Lease is terminated pursuant to the foregoing
provisions, this Lease shall remain in full force and effect.
The Parties hereby expressly waive the provision of Section 1932,
Subdivision 2, and Section 1933, Subdivision 4 of the California
Civil Code.
Notwithstanding the foregoing, (a) in the event that all or
any portion of the Premises and/or Common Area is damaged or
destroyed (i) within the final twenty four (24) months of the
Initial Term of this Lease, or (ii) within the final twenty four
(24) months of any Extended Term of this Lease, to such an extent
that Tenant cannot reasonably use the Premises for its intended
purpose, then either Landlord or Tenant shall have the right to
terminate this Lease, to be exercised by written notice to the
other, delivered, if at all, within thirty (30) days following
the date of such damage or destruction, provided that if there
then remains any unexercised Option to Extend, Tenant may, within
twenty (20) days following receipt of Landlord's notice of
termination, give notice of its exercise of its Option to Extend
the Lease Term, in which event such termination election by
Landlord shall be rendered null and void, and (b) in the event
that all or any portion of the Premises and/or Common Area is
damaged or destroyed on or after the commencement of the Second
Extended Term of this Lease under circumstances that are
reasonably expected to result in a Non-Insured Cost that would
under the provisions of this Paragraph 25 result in a requirement
of Tenant to fund Tenant's Share of such Non-Insured Cost, then
Tenant shall have the right to terminate this Lease, to be
exercised by written notice to Landlord, delivered, if at all,
prior to or within thirty (30) days following the date of
Landlord's delivery to Tenant of notice of the amount of Net
Insurance Proceeds available for rebuilding, provided that,
Landlord may, within twenty (20) days following receipt of
Tenant's notice of termination, give notice of Landlord's
election to waive any requirement for there to be a Tenant's
Share of such Non-Insured Cost, in which event such termination
election by Tenant shall be rendered null and void and Landlord
shall fund the entirety of the Non-Insured Cost (both Tenant's
Share and Landlord's Share) and Tenant shall fund the amount of
any applicable insurance deductible. Any notice of any election
to terminate under this Paragraph shall be effective ninety (90)
days after the date of the giving of such notice.
26. EMINENT DOMAIN. If all or any part of the Premises shall be
taken by any public or quasi-public authority under the power of
eminent domain or conveyance in lieu thereof, this Lease shall
terminate as to any portion of the Premises so taken or conveyed
on the date when title vests in the condemner, and Landlord shall
be entitled to any and all payment, income, rent, award, or any
interest therein whatsoever which may be paid or made in
connection with such taking or conveyance, and Tenant shall have
no claim against Landlord or otherwise for the value of any
unexpired Lease Term. Notwithstanding the foregoing sentence,
any compensation specifically awarded Tenant for loss of business
(including severance damages associated with Tenant's other
business activities), Tenant's Lab Equipment, trade fixtures,
personal property, moving costs or loss of goodwill, shall be and
remain the property of Tenant.
If (A) (i) any action or proceeding is commenced for the
taking of the Premises or any material part thereof, or if
Landlord is advised in writing by any entity or body having the
right or power of condemnation of its intention to condemn the
Premises or any material part thereof, or (ii) any of the
foregoing events occur with respect to the taking of any material
portion of the Common Area which make it impractical for Landlord
to continue to lease the Building to Tenant with reasonable
Common Area amenities, and (B) Landlord shall decide to
discontinue the use and operation of the Complex, or decide to
demolish or materially redesign and rebuild the Complex, then, in
any of such events Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof and this Lease
shall then terminate on the date preceding the date of
conveyance.
In the event of such a partial taking or conveyance of the
Premises, if the portion of the Premises taken or conveyed is so
substantial that the Tenant can no longer reasonably conduct its
business, Tenant shall have the privilege of terminating this
Lease within sixty (60) days following the date of such taking or
conveyance, upon written notice to the Landlord of its intention
so to do, and upon giving of such notice this Lease shall
terminate on the last day of the calendar month next following
the month in which such notice is given, upon payment by Tenant
of the Rent (apportioned in such manner as provided in the
following paragraph) from the date of such taking or conveyance
to the date of termination.
If a portion of the Premises and/or Complex be taken by
condemnation or conveyance in lieu thereof and neither Landlord
nor Tenant shall terminate this Lease as provided herein, this
Lease shall continue in full force and effect as to the part of
the Premises not so taken or conveyed and the recipient of the
award shall restore the Premises and/or Complex to the extent
reasonably practicable, and the Rent herein shall be apportioned
as of the date of such taking or conveyance so that thereafter
the Rent to be paid by Tenant shall be in the ratio that the area
of the portion of the Premises not so taken or conveyed bears to
the total area of the Premises prior to such taking.
27. SALE OR CONVEYANCE BY LANDLORD. In the event of a sale or
conveyance of the Premises or the Complex or any interest therein
by any owner of the reversion then constituting Landlord, upon
written assumption by the successor in interest of the
obligations and liabilities under this Lease, the transferor
shall thereby be released from any then current and any further
liability upon any of the terms, covenants or conditions (express
or implied) herein contained in favor of Tenant, and in such
event, insofar as such transfer is concerned, Tenant agrees to
look solely to the responsibility of the successor in interest of
such transferor in and to the Premises and this Lease. This
Lease shall not be affected by any such sale or conveyance, and
Tenant agrees to attorn to the successor in interest of such
transferor. Notwithstanding anything to the contrary above, if
Landlord sells or otherwise conveys its interest in the Premises
or Complex, Landlord shall not be relieved of its obligations
under the Lease, unless Landlord's successor in interest assumes,
in writing, Landlord's obligations under the Lease.
28. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the
interest of Landlord in the Premises and/or Complex is encumbered
by deed of trust, and such interest is acquired by the Lender or
any third party through judicial foreclosure or by exercise of a
power of sale at private trustee's foreclosure sale, Tenant
hereby agrees to attorn to the purchaser at any such judicial
foreclosure or foreclosure sale and to recognize such purchaser
as the Landlord under this Lease. In the event the lien of the
deed of trust securing the loan from a Lender to Landlord is
prior and paramount to this Lease, this Lease shall nonetheless
continue in full force and effect for the remainder of the
unexpired Term, at the same Rental herein reserved and upon all
the other terms, conditions and covenants herein contained.
29. HOLDING OVER. Any holding over by Tenant after expiration
or other termination of the Lease Term with the written consent
of Landlord delivered to Tenant shall not constitute a renewal or
extension of the Lease or give Tenant any rights in or to the
Premises except as expressly provided in this Lease. Any holding
over after the expiration or other termination of the Lease Term,
with the consent of Landlord, shall be construed to be a tenancy
from month to month, on the same terms and conditions herein
specified insofar as applicable except that the monthly Basic
Rent shall be increased to an amount equal to one hundred fifty
(150%) percent of the monthly Basic Rent required during the last
month of the Lease Term.
30. CERTIFICATE OF ESTOPPEL. Tenant and/or Landlord shall at
any time upon not less than ten (10) days prior written notice
from the other party execute, acknowledge and deliver to the
requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and
the date to which the Rent and other charges are paid in advance,
if any, and (ii) acknowledging that there are not, to the party's
knowledge, any uncured defaults on the part of the requesting
party hereunder, or specifying such defaults, if any, are
claimed. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises, or any
assignee or subtenant of the Premises. A requested party's
failure to deliver such statement within such time shall be
conclusive upon the requested party that this Lease is in full
force and effect, without modification except as may be
represented by the requesting party; that there are no uncured
defaults in the requesting party's performance, and that not more
than one month's Rent has been paid in advance. Landlord and
Tenant further agree to appropriately and timely respond to the
respective reasonable inquiries of the auditors of the other
party, but such response shall be limited to the respective
knowledge of the responding party.
31. CONSTRUCTION CHANGES - NOT APPLICABLE
32. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and
conditions of this Lease to be performed or observed by Tenant
shall be performed or observed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent. If Tenant shall
fail to pay any sum of money, or other Rent, required to be paid
by it hereunder or shall fail to perform any other term of
covenant hereunder on its part to be performed, and such failure
shall continue for twenty (20) days after written notice thereof
by Landlord, Landlord, without waiving or releasing Tenant from
any obligation of Tenant hereunder, may, but shall not be obliged
to, make any such payment or perform any such other term or
covenant on Tenant's part to be performed. All sums so paid by
Landlord and all necessary costs of such performance by Landlord
together with interest thereon at the rate of Bank of America's
Prime Rate (or equivalent rate thereof) of interest plus five
percent (5%) per annum, but in no event greater then the maximum
rate of interest permitted by applicable law, from the date of
such payment or performance by Landlord, shall be paid (and
Tenant covenants to make such payment) to Landlord within ten
(10) business days after demand by Landlord, and Landlord shall
have (in addition to any other right or remedy of Landlord) the
same rights and remedies in the event of nonpayment by Tenant as
in the case of failure by Tenant in the payment of Rent
hereunder.
33. ATTORNEYS' FEES.
A. In the event that either Landlord or Tenant should
bring suit for the possession of the Premises, for the recovery
of any sum due under this Lease, or because of the breach of any
provision of this Lease, or for any other relief against the
other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party
therein shall be paid by the other party, which obligation on the
part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable
whether or not the action is prosecuted to judgment.
B. In addition to any other rights of Landlord under this
Lease to defense or indemnification by Tenant, should Landlord be
named by a third party as a defendant in any suit brought by such
third party principally against Tenant in connection with or
arising out of Tenant's alleged improper or tortious conduct
associated with the Premises or the Complex, Tenant shall pay to
Landlord Landlord's reasonable costs and expenses incurred in
such suit, including reasonable attorney's fees (but Landlord
agrees to cooperate with Tenant in Tenant's efforts to provide a
joint defense to such suit or otherwise to minimize the costs of
such defense or the settlement of such suit.)
34. WAIVER. The waiver by either party of the other party's
failure to perform or observe any term, covenant or condition
herein contained to be performed or observed by such waiving
party shall not be deemed to be a waiver of such term, covenant
or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or
condition therein contained, and no custom or practice which may
develop between the parties hereto during the Lease Term shall be
deemed a waiver of, or in any way affect, the right of either
party to insist upon performance and observance by the other
party in strict accordance with the terms hereof.
35. NOTICES. All notices, demands, requests, advices or
designations which may be or are required to be given by either
party to the other hereunder shall be in writing. All notices,
demands, requests, advices or designations by Landlord to Tenant
shall be sufficiently given, made or delivered if personally
delivered to or sent to Tenant by United States certified or
registered mail, postage prepaid or by a reputable same day or
overnight courier service addressed to Tenant at 950 Page Mill
Road, Palo Alto, CA 94303, Attn: Manager Corporate Real Estate (
and if such notice constitutes a notice of default under this
Lease, then an additional copy shall be sent to Tenant at 950
Page Mill Road, Palo Alto, CA 94303, Attn: General Counsel, Legal
Department). All notices, demands, requests, advices or
designations by Tenant to Landlord shall be sufficiently given,
made or delivered if personally delivered to or sent to Landlord
by United States certified or registered mail, postage prepaid,
or by a reputable same day or overnight courier service addressed
to Landlord at its offices at c/o Peery/Arrillaga, 2560 Mission
College Blvd., Suite 101, Santa Clara, CA 95054 Attn: Richard T.
Peery. Each notice, request, demand, advice or designation
referred to in this Paragraph shall be deemed received on the
date of receipt or refusal to accept receipt at the address so
provided for notices if sent in the manner herein provided, as
the case may be. Either party shall have the right, upon ten
(10) days written notice to the other, to change its address for
notices as provided herein; however, Landlord shall send Tenant
notices to only one address (provided that in the event of a
notice of default, Landlord will provide an additional copy of
such notice of default to such one additional addressee as may be
duly notified by Tenant to Landlord in accordance with the
provisions of this Lease).
36. EXAMINATION OF LEASE. Submission of this instrument for
examination or signature by either Tenant or Landlord does not
constitute a reservation of or option for a Lease, and this
instrument is not effective as a lease or otherwise until its
execution and delivery by both Landlord and Tenant.
37. DEFAULT BY LANDLORD. Landlord shall not be in default
unless Landlord fails to perform obligations required of Landlord
within a reasonable time, but in no event earlier than (30) days
after written notice by Tenant to Landlord and to the holder of
any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform
such obligations; provided, however, that if the nature of
Landlord's obligations is such that more than thirty (30) days
are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30)
day period and thereafter diligently prosecutes the same to
completion.
38. CORPORATE AUTHORITY. If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of
said corporation (or partnership) represents and warrants that he
or she is duly authorized to execute and deliver this Lease on
behalf of said corporation (or partnership) in accordance with
the by-laws of said corporation (or partnership in accordance
with the partnership agreement) and that this Lease is binding
upon said corporation (or partnership) in accordance with its
terms. If Tenant is a corporation, Tenant shall, within thirty
(30) days after execution of this Lease, deliver to Landlord a
certified copy of the resolution of the Board of Directors of
said corporation authorizing or ratifying the specific execution
of this Lease by the individual executing said Lease. In lieu of
said corporate resolution, Tenant may provide Landlord with an
outside legal opinion stating that the parties executing this
Lease on behalf of Tenant are authorized to do so by the Board of
Directors.
39. LIMITATION OF LIABILITY. In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns to
Tenant as respects Tenant's interest under this Lease, covenant
and agree that, in the event of any actual or alleged failure,
breach or default hereunder by Landlord:
(A) the sole and exclusive remedy shall be against
Landlord's interest in the Premises leased herein;
(B) no constituent member and/or no partner of Landlord
shall be sued or named as a party in any suit or action (except
as may be necessary to secure jurisdiction of the limited
liability company or partnership);
(C) no service of process shall be made against any
constituent member or partner of Landlord (except as may be
necessary to secure jurisdiction of the limited liability company
or partnership);
(D) no constituent member or partner of Landlord shall be
required to answer or otherwise plead to any service of process;
(E) no judgment will be taken against any constituent
member or partner of Landlord;
(F) any judgment taken against any constituent member or
partner of Landlord may be vacated and set aside at any time
without hearing;
(G) no writ of execution will ever be levied against the
assets of any constituent member or any partner of Landlord; and
(H) these covenants and agreements are enforceable both by
Landlord and also by any constituent member or any partner of
Landlord.
Tenant agrees that each of the foregoing covenants and
agreements shall be applicable to any covenant or agreement
either expressly contained in this Lease or imposed by statute or
at common law with respect to this Lease or the Construction
Agreement.
40. SIGNS. No sign, placard, picture, advertisement, name or
notice shall be inscribed, displayed or printed or affixed on or
to any part of the outside of the Premises or any exterior
windows of the Premises without the written consent of Landlord
first had and obtained and Landlord shall have the right, if
Tenant shall fail to have obtained such consent, to remove any
such sign, placard, picture, advertisement, name or notice to and
at the expense of Tenant. If Tenant is allowed to print or affix
or in any way place a sign in, on, or about the Premises, upon
expiration or other sooner termination of this Lease, Tenant at
Tenant's sole cost and expense shall both remove such sign and
repair all damage in such a manner as to restore all aspects of
the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on any outside doors or
walls of the Building shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved of by
Landlord (provided that such approval shall not be required if
ALZA or an ALZA Affiliate is then the Tenant).
Tenant shall not place anything or allow anything to be
placed near the glass of any window, door partition or wall which
may appear unsightly from outside the Premises.
Notwithstanding anything to the contrary above, at any time
during the Lease Term that ALZA (and/or any ALZA Affiliates) is
the tenant under all Three Leases, Landlord's approval shall not
be required; provided Tenant complies with all governing agency
requirements for said signage.
In addition to the foregoing, at any time during the Lease
Term that ALZA (and/or any ALZA Affiliates) is the tenant under
at least two of the Three Leases, Tenant shall have the exclusive
right, subject to obtaining the prior approval of Landlord
thereto, which approval shall not be unreasonably withheld, to
name the Complex after Tenant's corporate identity or the name or
nature of any business conducted on the Complex (as the name or
nature of its business may change from time to time), such as,
but not limited to, "ALZA Plaza", which name is hereby approved
by Landlord, and Tenant shall have the right to construct an
appropriately sized and tastefully designed monument signage
("Complex Sign") at such location or locations on the Complex
adjoining the dedicated streets as may be reasonably approved by
Landlord and otherwise in compliance with the City's
requirements. Neither Landlord nor Tenant shall cause the
Complex Sign to be named after any business which is then
reasonably considered to be a business competitor of Landlord or
any of its constituent members. In addition, the tenant of each
of the Three Buildings shall be entitled to erect a monument sign
identifying its business conducted in such building ("Building
Sign"), which Building Sign shall be in a location approved by
Landlord and in close proximity to such building. In all events,
any Building Sign shall be smaller in size and in a subservient
location to that of the Complex Sign.
41. CONSENT. Whenever the consent of one party to the other is
required hereunder, such consent shall not be unreasonably
withheld.
42. AUTHORITY TO EXECUTE. The parties executing this Lease
hereby warrant and represent that they are properly authorized to
execute this Lease and bind the parties on behalf of whom they
execute this Lease and to all of the terms, covenants and
conditions of this Lease as they relate to the respective parties
hereto.
43. BROKERS. Upon the Lease Commencement Date and after
Landlord shall have received from Tenant (i) payment in full of
the first month's Rent, (ii) an insurance certificate evidencing
Tenant's liability insurance coverage as required under Paragraph
13, (iii) an acceptable corporate authority as provided in
Paragraph 38, (iv) a copy of the Occupancy Permit for the
Premises and (v) a full, unconditional lien release for the
complete construction of the Premises, Landlord shall pay a
brokerage commission to Catalyst Real Estate Group in the amount
of $100,000.00 respecting Tenant's leasing of the Premises under
the terms of this Lease, pursuant to a separate written agreement
between Landlord and Catalyst Real Estate Group. Nothing herein
shall preclude Tenant from agreeing to pay any supplemental
compensation to Catalyst Real Estate Group for its services
rendered to or on behalf of Tenant. Except as provided above,
each of Landlord and Tenant represents and warrants to the other
that no party is entitled to any real estate brokerage or
salesperson commission or any finders' fee as a result of such
party's action in connection with the leasing of the Premises to
Tenant. Each of Landlord and Tenant shall save, protect, defend,
indemnify and hold the other harmless from and against any claim
to the contrary by any salesperson, broker or finder based upon
such salesperson's, broker's or finder's relationship with such
party.
44. FIRST OPTION TO EXTEND: Landlord hereby grants to Tenant an
Option to Extend ("First Option to Extend") this Lease for an
additional ten (10) year period upon the following terms and
conditions;
A. Tenant shall give Landlord written notice of Tenant's
exercise of this First Option to Extend not later than twelve
months prior to the expiration date of the Initial Term, in which
event this Lease shall be extended for an additional ten (10)
years ("First Extended Term") on all of the terms and conditions
of this Lease except that the Basic Rent shall be adjusted as set
forth below and this Paragraph 44 shall be of no further force
and effect and deemed deleted thereby. In the event that Tenant
fails to timely exercise Tenant's option as set forth herein in
writing, Tenant shall have no further Option to Extend this
Lease, and this Lease shall continue in full force and effect for
the full remaining Term, absent this Paragraph 44 and Paragraph
45 below.
B. It is hereby agreed that (i) the monthly Basic Rent for
the first year of the First Extended Term shall increase by $.05
per square foot per month over the monthly Basic Rent for the
last month in the Initial Term (i.e. if said Building is 120,000
square feet and the monthly Basic Rent for the last month in the
Initial Term is $2.461 per square foot per month); 120,000 x
($2.461 + $0.05) = $301,380.00), and (ii) commencing on the
anniversary following the date of commencement of the First
Extended Term, and on each successive anniversary thereafter, the
monthly Basic Rent (as provided for in Paragraph 4A) for each
succeeding one (1) year period of the First Extended Term, shall
be increased over the monthly Basic Rent in effect immediately
prior to such anniversary by a percentage amount thereof
equivalent to the percentage increase in the CPI (as defined
below) with respect to the period from the calendar month
preceding the date of commencement of the respective one (1) year
period of the Lease Term (including the month preceding the date
of commencement of the First Extended Term) to the calendar month
immediately preceding the date of expiration of the respective
one (1) year period of the Lease Term; For example: if the Rent
Commencement Date is November 1, 1999, then the Basic Rent
adjustment would be based on the increase in the Index from
October 2014 to October 2015; from October 2015 to October 2016;
from October 2016 to October 2017; from October 2017 to October
2018; from October 2018 to October 2019; from October 2019 to
October 2020; from October 2020 to October 2021; from October
2021 to October 2022; and from October 2022 to October 2023;
provided, however, that (i) in no event shall the monthly Basic
Rent for any one (1) year period of the First Extended Term,
after adjustment, be less than the monthly Basic Rent in effect
at the expiration of the one (1) year period of the Lease Term
immediately preceding, and (ii) in the event the CPI declines in
one year from the immediately preceding year CPI and then
escalates the following year, the following year's CPI increase
shall be the net increase over the prior two year period (or such
longer period if the CPI had fallen below its prior level for a
period of two years or more). For Example; if the CPI Index for
October 2013 is 152.1 and the CPI Index for October 2014 is
147.5, the change in the CPI Index is 147.5 / 152.1 = -3%;
therefore no increase shall be due for the year commencing
November 2014; if the CPI index for October 2015 is 154.9, the
net CPI increase from October 2013 to October 2015 shall be
1.84%.
Subject to the terms stated herein, the monthly Basic Rent
shall be subject to a CPI adjustment on the following dates
(assuming a November 1, 1999 Rent Commencement Date): 11/01/15,
11/01/16, 11/01/17, 11/01/18, 11/01/19, 11/01/20, 11/01/21,
11/01/22 and 11/01/23.
The First Extended Term's monthly Basic Rent, as stated
above, shall be adjusted, commencing on the first anniversary
following the date of commencement of the First Extended Term, in
accordance with the following formula based on the Consumer Price
Index for all Urban Consumers, subgroup "All Items", San
Francisco-Oakland-San Jose, California Metropolitan Area (1982-84
= 100) published by the Bureau of Labor Statistics, U.S.
Department of Labor (the "CPI" or "Index") which is published
for the calendar month which most nearly precedes each and every
adjustment date (the "Beginning Index") and the Index which is
published for the calendar month which most nearly precedes each
and every anniversary of the adjustment date (the "Adjustment
Index"). The initial "CPI" adjusted Basic Rent shall be
calculated by adding to the monthly Basic Rent due for the first
year of the First Extended Term an amount calculated by
multiplying the monthly Basic Rent due for the first year of the
First Extended Term by the percent increase in the Index (to wit:
the percent increase from Beginning Index for the calendar month
which immediately precedes the date of commencement of the First
Extended Term to the Adjustment Index for the calendar month
which immediately precedes the first anniversary of the date of
commencement of the First Extended Term). The Basic Rent for
each succeeding one-year period will be determined by using the
same formula applied to the prior year's adjusted monthly Basic
Rent.
Landlord will as soon as practicable, notify Tenant in
writing of each CPI increase and the adjusted Basic Rent, and
Tenant will make any Basic Rent payments falling due more than
ten (10) days after the receipt of notice of such adjusted Basic
Rent in the adjusted amount (and if such notice shall be delayed
so that Tenant shall have theretofore underpaid the Basic Rent
applicable to the period since the last anniversary of the date
of commencement of the First Extended Term, Tenant shall, within
ten (10) days following receipt from Landlord of notice of the
amount of such underpayment, pay such previously underpaid
amount. If the Index is changed so that the Base Year of the
Index differs from that used as of the month immediately
preceding the month in which the term commences, the Index shall
be converted in accordance with the conversion factor published
by the United States Department of Labor, Bureau of Labor
Statistics. If the Index is discontinued or revised during the
term, such other government index or other computation with which
it is replaced or if not replaced, which most closely resembles
it, shall be used in order to obtain substantially the same
result as would be obtained if the Index had not been
discontinued or revised. If the Index is no longer published on
a monthly basis, and it is no longer published for the respective
calendar month immediately preceding the date of commencement of
the First Extended Term, then the Index for such calendar month
for which the Index is published which most nearly precedes the
date of commencement of the First Extended Term shall instead be
used. Each annual increase in the Basic Rent will be calculated
as shown below in the example displayed (based on the below
reflected Basic Rent and CPI adjustment assumptions):
CPI Calculation Example
CPI ANNUAL
EXAMPLE CPI CHANGE INCREASE %
CPI increase 156.0 * 11/15 2.56%
152.1 * 11/14
(*factors used
for example only)
Basic Rent @ 10/15 $301,380.00
Increase of 2.56% $ 7,715.33
New Adjusted Basic Rent
commencing the second year
of the First Extended Term $309,095.33
C. Increased Security Deposit: Subject to the terms of
Paragraph 4G, in the event the term of Tenant's Lease is extended
pursuant to this Paragraph 44, Tenant's Security Deposit, if then
required under Paragraph 4G, shall be increased to equal twice
the anticipated Basic Rental due for the last month of the First
Extended Term.
45. SECOND OPTION TO EXTEND. Provided Tenant has extended the
Lease for an additional ten (10) year period as set forth in
Paragraph 44 above, Landlord hereby grants to Tenant an Option to
Extend ("Second Option to Extend") this Lease for an additional
term equal to nine (9) years and eleven (11) months reduced day
for day by (i) any Early Occupancy Period as provided in
Paragraph 2C above, and (ii) the period between the date of
execution of this Lease and the Lease Commencement Date (the
"Build-Out Period") except to the extent that legal counsel for
Tenant delivers to Landlord and Tenant prior to the exercise of
the Second Option to Extend, a legal opinion to the effect that
all or some portion of such Build-Out Period is not includible
for Proposition 13 reassessment purposes in the calculation of
the overall maximum term of this Lease (which term was to be in
all events less than 35 years in duration as of the date of
execution of this Lease), in which event such portion of the
Build-Out Period which has been so determined not to be
includible for Proposition 13 purposes shall not be deducted from
such nine year and eleven month term (as so calculated, the
"Second Extended Term") on the following terms and conditions;
A. Tenant shall give Landlord written notice of Tenant's
exercise of this Second Option to Extend not later than twelve
months prior to the expiration date of the First Extended Term,
in which event this Lease shall be extended for the Second
Extended Term on all of the terms and conditions of this Lease,
except that the Basic Rent shall be adjusted as set forth below
and this Paragraph 45 shall be of no further force and effect and
deemed deleted thereby. In the event that Tenant fails to timely
exercise Tenant's option as set forth herein in writing, Tenant
shall have no further Option to Extend this Lease, and this Lease
shall continue in full force and effect for the full remaining
Lease Term, absent this Paragraph 45.
B. The Second Extended Term's monthly Basic Rent shall be
adjusted based on annual adjustments in the CPI in an identical
manner to that provided in Paragraph 44 above with respect to the
First Extended Term, with the first adjustment during the Second
Extended Term to be effective as of the date of commencement of
the Second Extended Term. The initial "CPI" adjusted Basic Rent
for the Second Extended Term shall be calculated by adding to the
monthly Basic Rent during the last month of the First Extended
Term an amount calculated by multiplying the monthly Basic Rent
during the last month of the First Extended Term by the percent
increase in the Index over the last year of the First Extended
Term (to wit: the percent increase from Beginning Index for the
calendar month which immediately preceded the date of
commencement of the last year of the First Extended Term to the
Adjustment Index for the calendar month which immediately
preceded the date of commencement of the Second Extended Term).
The Basic Rent for each succeeding one-year period will be
determined by using the same formula applied to the prior year's
adjusted monthly Basic Rent. Assuming the Initial Term commences
on November 1, 1999, the Second Extended Term would commence on
November 1, 2024 and such CPI adjustments would be determined
with respect to the following annual periods: from October 2023
to October 2024; from October 2024 to October 2025; from October
2025 to October 2026; from October 2026 to October 2027; from
October 2027 to October 2028; from October 2028 to October 2029;
from October 2029 to October 2030; from October 2030 to October
2031; from October 2031 to October 2032 and from October 2032 to
October 2033 provided, however, that (i) in no event shall the
monthly Basic Rent for any one (1) year period of the Second
Extended Term, after adjustment, be less than the monthly Basic
Rent in effect at the expiration of the prior one (1) year
period, and (ii) in the event the CPI declines in one year from
the immediately preceding year CPI and then escalates the
following year, the following year's CPI increase shall be the
net increase over the prior two year period (or such longer
period if the CPI had fallen below its prior level for a period
of two years or more).
Subject to the terms stated herein, the monthly Basic Rent
shall be subject to a CPI adjustment on the following dates
(assuming the Initial Term commences on November 1, 1999):
11/01/24, 11/01/25, 11/01/26, 11/01/27, 11/01/28, 11/01/29,
11/01/30, 11/01/31, 11/01/32 and 11/01/33.
The respective obligations of Landlord and Tenant as to
notice of and payment of any CPI adjustments to Basic Rent shall
be as provided in Paragraph 44 above as to the First Extended
Term, and the provisions thereof relating to any change in the
manner of calculation or publishing of the CPI shall similarly
apply during the Second Extended Term.
C. Increased Security Deposit: Subject to Paragraph 4G, in
the event the term of Tenant's Lease is extended pursuant to this
Paragraph 45, Tenant's Security Deposit shall if then required
under Paragraph 4G, be increased to equal twice the anticipated
Basic Rental due for the last month of the Second Extended Term.
46. FIRST RIGHT OF REFUSAL EXCLUSIVE TO ALZA OR AN ALZA
AFFILIATE. In the event (i) ALZA or an ALZA Affiliate is the
Tenant under this Lease or this Lease has expired and ALZA or an
ALZA Affiliate was the Tenant under this Lease at the time of
such expiration (but the First Right of Refusal granted herein
shall in no event extend to any Unaffiliated Assignee) and (ii)
provided Tenant is not in default pursuant to Paragraph 22
("Bankruptcy and Default") of this Lease (i.e. Tenant has
received notice of a default under this Lease and the applicable
cure period has expired and Tenant has not then cured such
default), in any of the terms, covenants, and conditions of this
Lease (or if this Lease has then terminated, that this Lease was
not terminated as a result of any default of Tenant), and (iii)
the net worth of ALZA or such ALZA Affiliate at such time equals
or exceeds the amount provided in Paragraph 19C related to an
assignment of this Lease, then Tenant, during and after the
expiration of the Lease Term and subject to the provisions
hereinafter contained, shall have the First Right of Refusal to
lease this Building, or any portion of the Building then being
separately offered by Landlord for lease (hereinafter referred to
as "First Right Space") upon the following terms and conditions
(provided that if Landlord is offering this Building for lease
together with all or any portion of Building Two and/or Building
Three, the First Right Space shall include all of the space in
the Complex so offered for lease, but shall not include any space
outside of the Complex, and Tenant, if it exercises such First
Right of Refusal, shall be required to exercise it with respect
to the entirety of the First Right Space):
A. Landlord agrees that in the event Landlord receives an
offer from a third party(s) to lease all or any portion of this
Building at a rental and upon terms and conditions which are
satisfactory to Landlord, Landlord shall, prior to executing a
lease agreement with a third party for said First Right Space,
offer said First Right Space to Tenant at the same rental and
other economic terms and conditions upon which Landlord is
willing to lease said First Right Space to the third party.
Tenant shall have ten days after receipt of written notice of
said rental and other economic terms and conditions in which to
accept said rental and other economic terms and conditions in
writing; provided, however, that if such proposal contains any
unusually restrictive provision (such as a use clause that would
restrict Tenant from the uses permitted by any assignee
hereunder) such provision shall be inapplicable to Tenant in the
event of the acceptance of the rental and other economic terms
and conditions so offered. In the event Tenant rejects or fails
to accept said rental and other economic terms and conditions so
presented by Landlord within such ten day period, and Landlord
proceeds within one hundred eighty days thereafter to lease such
First Right Space to such third party upon terms no more
favorable to the third party than the rental and other economic
terms as presented to Tenant, then Tenant shall have no further
first right of refusal for such First Right Space (but if
Landlord does not so lease the First Right Space, then such first
right of refusal shall be reinstated as to such First Right
Space). In the event Tenant so accepts said rental and other
economic terms and conditions, Tenant must execute a lease
agreement for said First Right Space within twenty (20) days from
receipt of a lease agreement from Landlord which conforms to such
accepted terms and which embodies the terms and conditions which
are then customarily acceptable to landlords in the local
geographic area for leased premises and tenants of the size and
nature of the First Right Space and the then Tenant. Landlord
and Tenant shall act reasonably in considering and deciding
whether and how to incorporate any comments of Landlord or Tenant
as to the terms and conditions of the proposed lease agreement.
If Tenant fails to execute such a lease agreement within such
twenty day period, Tenant shall have no further first right of
refusal for said First Right Space, and Landlord shall be free to
execute a lease with a third party without further obligation to
Tenant with respect to said First Right Space so offered to
Tenant.
B. The first right of refusal of Tenant under this
Paragraph 46 are granted for the benefit of ALZA and any ALZA
Affiliate, and may not be otherwise assigned or transferred by
Tenant. The rights and obligations of Tenant and Landlord under
this Paragraph 46 shall survive the expiration of the Lease Term.
47. MISCELLANEOUS AND GENERAL PROVISIONS.
A. Use of Building Name. Tenant shall not, without the
written consent of Landlord, use the name of the Building for any
purpose other than as the address of the business conducted by
Tenant in the Premises, provided that for so long as the Building
or Complex is bearing the name designated by ALZA or any ALZA
Affiliate pursuant to Paragraph 40 hereof, ALZA or any ALZA
Affiliate may use such name as it considers appropriate.
Conversely, for so long as the Building or Complex is bearing the
name designated by ALZA or any ALZA Affiliate, Landlord shall not
use the name except as a reference to the Building or Complex.
B. Choice of Law; Severability. This Lease shall in all
respects be governed by and construed in accordance with the laws
of the State of California in the jurisdiction of Santa Clara
County. If any provision of this Lease shall be invalid,
unenforceable or ineffective for any reason whatsoever, all other
provisions hereof shall be and remain in full force and effect.
C. Definition of Terms. The term "Premises" includes the
space leased hereby and any improvements now or hereinafter
installed therein or attached thereto. The term "Landlord" or
any pronoun used in place thereof includes the plural as well as
the singular and the successors and assigns of Landlord. The
term "Tenant" or any pronoun used in place thereof includes the
plural as well as the singular and individuals, firms,
associations, partnerships and corporations, and their and each
of their respective heirs, executors, administrators, successors
and permitted assigns, according to the context hereof, and the
provisions of this Lease shall inure to the benefit of and bind
such heirs, executors, administrators, successors and permitted
assigns. The term "ALZA Affiliate" shall mean any person or
entity that at such time as it may become the tenant under any of
the Three Leases meets one or more of the following requirements:
(i) is directly, or indirectly through one or more
intermediaries, in control of, or controlled by or under common
control with ALZA; (ii) is the successor to ALZA or any other
ALZA Affiliate by merger, including an acquisition of all or
substantially all of the assets of any such entity or any
division operated by such entity; or (iii) is a corporation,
joint venture, partnership, limited liability company, trust or
other entity in which at least fifty percent of the beneficial
ownership is then held by ALZA or an ALZA Affiliate. As used in
the preceding sentence, the term "control" means holding 50% or
more of (i) the voting stock or (ii) both profits and capital
interests, as applicable, of any entity.
The term "person" includes the plural as well as the
singular and individuals, firms, associations, partnerships and
corporations. The term "including" means including, but not
limited to. Words used in any gender include other genders. If
there be more than one Tenant the obligations of Tenant hereunder
are joint and several. The paragraph headings of this Lease are
for convenience of reference only and shall have no effect upon
the construction or interpretation of any provisions hereof.
D. Time Of Essence. Time is of the essence of this Lease
and of each and all of its provisions.
E. Quitclaim. At the expiration or earlier termination of
this Lease, Tenant shall execute, acknowledge and deliver to
Landlord, within ten (10) days after written demand from Landlord
to Tenant, any quitclaim deed or other document reasonably
required by any reputable title company, licensed to operate in
the State of California, to remove the cloud or encumbrance
created by this Lease on the Property and/or Complex of which
Tenant's Premises are a part.
F. Incorporation of Prior Agreements; Amendments. This
Lease along with any exhibits and attachments hereto and the
related Construction Agreement constitutes the entire agreement
between Landlord and Tenant relative to the leasing by Tenant
from Landlord of the Premises and this Lease and the exhibits and
attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant.
Landlord and Tenant agree hereby that all prior or
contemporaneous oral agreements between and among themselves and
their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this Lease.
G. Recording. Landlord and Tenant shall record a short
form memorandum hereof in the form attached hereto as Exhibit F.
H. Diminution of Light, Air or View. Tenant covenants and
agrees that no diminution or shutting off of light, air or view
by any structure which may be hereafter erected (whether or not
by Landlord) shall in any way affect this Lease, entitle Tenant
to any reduction of Rent hereunder or result in any liability of
Landlord to Tenant.
48. AGREEMENT NOT TO CAPITALIZE REPAIRS AND/OR REPLACEMENTS TO
PREMISES, ETC. Landlord's willingness to enter into this Lease
with Tenant under the terms stated herein and for the benefit of
Tenant and for valuable consideration, which is hereby
acknowledged, the following agreement between the parties affects
the interpretation of the foregoing provisions of this Lease or
any rights that might otherwise exist in favor of Tenant at law
with respect to the leasing of the Premises from Landlord.
Tenant understands and acknowledges that this Lease shall be
deemed and construed to be a "net lease" and during the Initial
Term, and any Extended Term(s), of this Lease that Tenant shall
pay Landlord, the Rent and other payments due hereunder, free of
any charges, assessments, impositions, expenses or deductions of
any kind and without abatement, deduction or setoff unless
otherwise expressly provided in this Lease, and Landlord shall
not be expected or required as a result of the relationship
between Landlord and Tenant created by this Lease, to be
obligated to make any payment to or on behalf of Tenant or be
under any other obligation to Tenant hereunder except to the
extent specifically provided in this Lease, and Tenant agrees to
pay all costs and expenses of every kind which may arise or
become due from Tenant under the provisions of this Lease during
the Initial Term and any Extended Term(s). Except as expressly
provided in this Lease or the Construction Agreement, Landlord
shall not be liable and/or responsible under the provisions of
this Lease for contributing any money for any maintenance,
repairs and/or replacement of the Premises or any part thereof
and as to the maintenance, repairs or replacement obligations of
Tenant under this Lease, Tenant waives any and all rights it
might otherwise have to assert that such expenditure is more
appropriately a Landlord expenditure which should be treated as a
capital expenditure and/or to be amortized as an item of
Additional Rent hereunder. For example, if during the Lease Term
(including any Extended Term(s)), a portion or the entire roof
membrane and/or HVAC system needs to be repaired or replaced,
such expenditure shall not be treated as a capital expenditure to
be borne by Landlord, but rather Tenant shall be responsible,
upon such occurrence, for bearing the entire cost for such repair
and/or replacement. Nothing herein shall be deemed to relieve
Landlord from its express obligations under this Lease or the
Construction Agreement, including, but not limited to, Landlord's
obligations under Paragraph 25 hereof in the event of damage or
destruction, or under the various provisions herein applicable to
Landlord's maintenance and repair obligations with respect to the
Common Area if the Tenant hereunder is not then the tenant under
all Three Leases or with respect to the Building in the event
this Lease is amended so as not to apply to all of the Premises.
By placing their initials below, both parties acknowledge
their understanding and their agreement with the provisions of
this Paragraph 48.
Initials: __________ Initials:__________
Tenant Landlord
IN WITNESS WHEREOF, Landlord and Tenant have executed and
delivered this Lease as of the day and year last written below.
LANDLORD: TENANT:
P/A CHARLESTON ROAD LLC, ALZA CORPORATION
a California limited liability company a Delaware
corporation
By: /s/ John Arrillaga By: /s/ Gary V. Fulscher
John Arrillaga, Trustee, UTA dated 7/20/77
(John Arrillaga Survivor's Trust, formerly
known as the Arrillaga Family Trust),
as amended
Date: September 12, 1997 Date: September 12, 1997
By /s/Richard T. Peery
Richard T. Peery, Trustee, UTA dated
7/20/77 (Richard T. Peery Separate
Property Trust), as amended
Date: September 12, 1997
By ALZA Land Management, Inc.
a Delaware corporation
By: /s/Gary V. Fulscher
Title: President
Gary V. Fulscher
Type or Print Name
Date: September 12, 1997
EXHIBIT 10.12
CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENTS DATED
SEPTEMBER 1, 1997, BY AND BETWEEN P/A CHARLESTON ROAD LLC,
A CALIFORNIA LIMITED LIABILITY CORPORATION, AS LANDLORD,
AND ALZA CORPORATION, A DELAWARE CORPORATION, AS TENANT,
FOR ALL OF THOSE THREE CERTAIN BUILDINGS TO BE CONSTRUCTED
BY TENANT AND ASSOCIATED SITE IMPROVEMENTS, LOCATED AT
AMPHITHEATRE PARKWAY AND CHARLESTON ROAD, IN MOUNTAIN VIEW,
CALIFORNIA
THIS AGREEMENT ("Construction Agreement") sets forth the
agreement of P/A Charleston Road LLC, a California limited
liability company ("Landlord"), and ALZA Corporation, a Delaware
corporation ("Tenant", with Landlord and Tenant sometimes
hereinafter collectively referred to as the "Parties"), relative
to the design and construction of the Site Work (which includes
the Common Areas), Cold Shell Improvements, Warm Shell
Improvements (with Cold Shell Improvements, Warm Shell
Improvements and Site Work hereinafter collectively referred to
as "Shell Improvements") and Interior Improvements for three
buildings (collectively referred to as the "Buildings" and
individually as a "Building" (and as to a respective Building as
"Building One", "Building Two" and "Building Three")) suitable
for office and for research and development use to be constructed
pursuant to the terms and conditions of this Construction
Agreement at that certain undeveloped real property owned by
Landlord and consisting of approximately 13.48 acres located at
Amphitheatre Parkway and Charleston Road, in Mountain View,
California (the "Property"). Each of the Buildings is separately
the subject of a separate Lease each dated as of the date of this
Construction Agreement by and between Landlord and Tenant and
respectively referred to as the Building One Lease, the Building
Two Lease and the Building Three Lease (each a "Lease" and
collectively the "Leases"). The aggregate square footage of all
three Buildings is currently anticipated to be in the range of
approximately 300,000 to 360,000 square feet, dependent upon what
square footage is ultimately approved by the City of Mountain
View during the Planned Community Permit process, and ultimately
subject to final measurement as provided in Section 7 below. As
provided in Section 2.A below, Tenant is obligated to exercise
due diligence to maximize the size of the permitted development.
1. DEFINITIONS: In addition to the defined terms set
forth above, as used in this Construction Agreement, the
following terms shall have the following meanings, and any
initially capitalized terms used in this Construction Agreement
which are not defined in this Construction Agreement, but which
are defined in the form of the Leases, shall have the meanings
ascribed to them by the form of the Leases:
A. Approved Specifications: The term "Approved
Specifications" means those certain plans and specifications for
the Shell Improvements and Interior Improvements to be
constructed by Tenant, which are from time to time referenced or
described on Schedule "A-1" to this Construction Agreement. The
Parties acknowledge that as of the date of this Construction
Agreement, the plans and specifications have not been completed
and accordingly will not be attached until agreed to by the
Parties in accordance with the terms of this Construction
Agreement (and despite the fact that such plans and
specifications are not yet completed, that except for Damage
Delays (as defined in Section 1.M), Landlord Delays (as defined
in Section 1.N), and Weather Delays (as defined in Section 1.O),
neither any delay in completing or failure to complete such plans
and specifications nor any delay in completing or failure to
complete the construction of the Improvements shall affect
Tenant's obligation to pay Rent in accordance with the terms of
the respective Lease on the Rent Commencement Date (as defined in
Section 1.K)).
B. Shell Improvements: The term "Shell Improvements"
shall mean the combination of the Cold Shell Improvements, Warm
Shell Improvements and Site Work which are to be constructed by
Tenant and paid for by the Parties as set forth in Section 3.F.
C. Cold Shell Improvements: The term "Cold Shell
Improvements" shall mean the following: (i) the shell of each of
the three (3) Buildings, consisting of a pile or spread footing
foundation, the exterior walls (including the architectural skin
of each Building), the floor slab for each story, the floor deck
for each story, the load bearing walls, the roof system, the roof
membrane with insulation, two standard width interior stairways,
exterior doors and exterior door hardware, duct shafts and the
shafts (but not equipment) for the elevators, (ii) the
underground parking that will serve all three Buildings,
including any lighting for such underground area, and (iii) all
paving and other parking areas, striping, sidewalks, loading
docks, monument sign for the Complex and each Building, parking
curbs, ramps, dumpsters, gutters, irrigation system, landscaping,
storm sewer, 4,000 amp electrical service per Building at 480
volts with primary transmitter, bus duct, pull section, switch,
main utility service conduits (excluding electrical panel) from
the street to each Building's perimeter, transformer pad, the
main plumbing line into each Building, water, gas and sewer
connection fees including cost to hook up to Mountain View sewer
system, any building permit fees, school fees, or other building
mitigation fees, premiums for any insurance required to be
carried hereunder (whether by Tenant or any Prime Contractors)
during the course of construction of the Cold Shell Improvements,
and any contractor's fees, architect's fees and engineer's fees,
applicable to the design or construction of any Cold Shell
Improvements, but excluding (w) roof screens, (x) building
connectors, (y) outside parking lot lighting, and (z) utility
pads (including exterior walls and all other construction
elements of any such utility pads and electrical panels).
D. Warm Shell Improvements: The term "Warm Shell
Improvements" shall mean the following for each of the three
Buildings: the core electrical systems (including distribution
panels, HVAC, main electrical power risers and energized
electrical power panels located in an electrical room (one on
each floor) as required by code, and similar items), the core
mechanical systems (including package units and shafts), fire
protection and life safety systems and equipment as required by
code to obtain a temporary occupancy permit (for shell
distribution, including master fire sprinkler grid system), main
plumbing and HVAC risers in the Building's core, main telephone
risers connected to telephone backboards located in a telephone
room/closet (one on each floor) as required by code, janitorial
closet (one on each floor), perimeter exterior and building core
walls finished with gypsum wall board (taped), core toilets (one
pair of toilet rooms per floor), building connectors (open on all
building levels, to the extent counterpart floors exist in the
other Buildings), elevators for passengers and freight in each
Building (with elevator cabs finished), exposed ceiling
structure, painting of the garage interior, loading docks, roof
screens, parking lot lighting (other than lighting in the
basement parking area that services all three Buildings), utility
pads (including all construction elements of utility pads such as
any exterior walls), any governmental or utility charges or fees
for connection to utilities (other than water, gas and sewer
connection fees), any building permit fees, school fees, or other
building mitigation fees associated with the Warm Shell
Improvements, premiums for any additional amount or period of
coverage of insurance required to be carried hereunder (whether
by Tenant or any Prime Contractors) with respect to the
construction of the Warm Shell Improvements, and any contractor's
fees, architect's fees and engineer's fees, applicable to the
design or construction of any Warm Shell Improvements.
E. Site Work: The term "Site Work", which includes Common
Area, shall mean onsite and offsite work to be constructed by
Tenant and paid for by the Parties as set forth in Section 3.F as
reasonably required to prepare the Property for development as
contemplated in this Construction Agreement (including any
additional onsite or offsite work that may be required in order
to obtain any required governmental approvals (including, but not
limited to, the Planned Community Permit and any building
permits) or to obtain approval for any increased size of
development on the Property), including, without limitation,
construction and improvement of the Common Areas of the Complex,
grading, any required street improvements, any required onsite or
offsite extension of utilities, any required onsite or offsite
landscaping, any required levee reinforcement, and the Property's
share (which is equal to 66% of the total) of any required onsite
or offsite burrowing owl mitigation. Tenant's legal fees and
consultant's fees associated with Tenant's due diligence review
of the Property and any costs related thereto (including, but not
limited to, any fees or costs related to the drafting and
negotiating of this Construction Agreement, the Leases, the
Ground Lease being entered into by Tenant and certain members of
Landlord, or the limited liability company formation documents
related to Landlord), shall not be included in the cost of the
Site Work but Tenant's legal fees and consultant's fees
associated with seeking or obtaining any governmental approvals
or permits associated with (or imposed as a condition to)
developing the Complex shall be included in the cost of the Site
Work (including by way of example, 66% of the legal fees and
consultant's fees associated with the negotiation, preparation
and review of the applications, reports, license agreements and
memorandums of understanding relating to the burrowing owl
mitigation plan).
F. Interior Improvements: The term "Interior
Improvements" shall mean all improvements to be constructed by
Tenant and paid for by Tenant, both within the Building shell of
each Building and any additional improvements which Tenant may,
with the approval of Landlord, desire to make to the Property, to
the extent not included in the definition of Shell Improvements
as set forth above. By way of example, Interior Improvements
shall include, but not be limited to, what are customarily
considered tenant space improvements as applicable to the use
being made of any interior portion of the Building, such as
carpeting, vinyl floor covering, drop ceilings, interior
plumbing, heating and air conditioning distribution systems,
electrical distribution systems, painting, interior walls, floor
to ceiling partitioning, the installation or distribution within
any tenant spaces of any fire sprinkler, fire protection and life
safety systems and equipment, any clean room modules, any
monument signs for a particular Building (to the extent not
constructed or completed as part of the Shell Improvements), any
building permit fees, school fees, or other building mitigation
fees associated with any Interior Improvements, premiums for any
additional amount or period of coverage of insurance required to
be carried hereunder (whether by Tenant or any Prime Contractors)
with respect to the construction of any Interior Improvements and
any contractor's fees, architect's fees and engineer's fees,
applicable to the design or construction of any Interior
Improvements. Interior Improvements as used herein shall include
only the initial full buildout of any portion of the Building
sufficient to obtain a certificate of occupancy or its equivalent
for the use of such portion of the Building (and shall not
include any subsequent alterations or additions to the initial
buildout of such portion of the Building). Section 4.A of this
Construction Agreement sets forth the obligation of Tenant as to
causing Interior Improvements to be constructed in each of the
Buildings.
G. Improvements: The term "Improvements" shall mean the
Shell Improvements and the Interior Improvements.
H. Architect: The term "Architect" shall mean such
licensed architect(s) as (i) are selected by Tenant and approved
by Landlord for the design of the Shell Improvements, with the
approval of Landlord not to be unreasonably withheld or delayed,
and with Hoover & Associates and EDAW Inc. being hereby approved
by Landlord as the building architect and landscape architect,
respectively, but without any obligation of Tenant to continue to
use either of such architects in the future, but in the event
either or both are to be replaced by Tenant, Tenant shall obtain
the approval of Landlord to the replacement Architect. While
Tenant has not committed to use any particular Architect for the
design of any of the Interior Improvements, and Tenant may use
different Architects for different portions of a Building,
Landlord hereby preapproves the use of each of Hoover &
Associates, RMW, Inc., MBI Inc., and Ken Kornberg & Associates,
Inc. as an interior architect for all or any portion of the
Interior Improvements
I. Prime Contractor(s): The term "Prime Contractor" shall
mean such licensed general contractor(s) (i) as is jointly
selected by Landlord and Tenant after consideration of a number
of potential candidates (which candidates shall include Vance
Brown, DPR Construction Inc., South Bay Construction Company,
Swinerton and Walberg and Rudolph & Sletten ), each of whose
approval shall not be unreasonably withheld, for the construction
of the Shell Improvements and (ii) as selected by Tenant, and
approved by Landlord, with respect to the construction of all or
any portion of the Interior Improvements. Vance Brown is
approved by Landlord and conditionally approved by Tenant as the
Prime Contractor for the Shell Improvements, but without any
obligation of Tenant to continue to use Vance Brown as the Prime
Contractor in the future. In the event Vance Brown is to be
replaced by Tenant, Landlord's approval of the replacement Prime
Contractor for the Shell Improvements shall be obtained. While
Tenant has not committed to use any particular Prime Contractor
for the construction of any of the Interior Improvements, and
Tenant may use different Prime Contractors for different portions
of a Building, Landlord hereby preapproves the use of any of the
following contractors: Vance Brown, DPR Construction Inc., South
Bay Construction Company, Swinerton and Walberg and Rudolph &
Sletten.
J. Substantial Completion: The term "Substantial
Completion" and "Substantially Completed", shall mean separately
as to each of the three (3) Buildings:
(1) As to the Shell Improvements, the date when all of
the following have occurred with respect to the Shell
Improvements with respect to each such Building, on a Building by
Building basis: (i) the construction of the Shell Improvements in
question have been substantially completed in accordance with the
approved plans therefor and with all applicable laws, statutes,
codes, rules and regulations (collectively, "Laws") except for
minor punch list items which do not prevent Tenant from
reasonably proceeding with the construction of the Interior
Improvements; (ii) the Architect has executed a certificate or
statement representing that, to its knowledge, such Shell
Improvements have been substantially completed in accordance with
the plans and specifications therefor and all applicable Laws,
except for minor punch list items which do not prevent Tenant
from reasonably proceeding with the construction of the Interior
Improvements; (iii) the Building Department of the City of
Mountain View has completed its final inspection of such Shell
Improvements and has "signed off" the building inspection card
approving such work as complete, except for minor punch list
items which do not prevent Tenant from reasonably proceeding with
the construction of the Interior Improvements; (iv) a Certificate
of Occupancy or other approval as to the Shell Improvements is
issued by the City of Mountain View (provided, however, that such
Certificate of Occupancy or other approval as to the Shell
Improvements may be issued subject to the condition that the
Interior Improvements be likewise approved); (v) Landlord has
received unconditional lien releases in form sufficient to
satisfy the applicable requirements of California Civil Code
Section 3262 from all contractors, subcontractors and materialmen
that have provided services or materials for the applicable Shell
Improvements, together with such other evidence of lien-free
completion of such Shell Improvements as Landlord may reasonably
request; and (vi) all Site Work improvements have been
sufficiently concluded and completed so as not unreasonably to
interfere with access to the applicable Building and the use of
the parking area and other outside areas (including the
elimination of any outside storage of construction materials and
the removal of any construction trailers from the Property); and
(2) As to all or any portion of the Interior
Improvements, the date when all of the following have occurred
with respect to such Interior Improvements, on a space by space
basis: (i) the construction of the Interior Improvements in
question have been substantially completed in accordance with the
approved plans therefor and with all applicable Laws except for
minor punch list items which do not prevent Tenant from occupying
the applicable portion of the Building for the purposes of
conducting business therein; (ii) the Architect has executed a
certificate or statement representing that, to its knowledge,
such Interior Improvements have been substantially completed in
accordance with the plans and specifications therefor and all
applicable Laws, except for minor punch list items which do not
prevent Tenant from occupying the applicable portion of the
Building for the purposes of conducting business therein; (iii)
the Building Department of the City of Mountain View has
completed its final inspection of such Interior Improvements and
has "signed off" the building inspection card approving such work
as complete, except for minor punch list items which do not
prevent Tenant from occupying the applicable portion of the
Building for the purposes of conducting business therein; (iv) a
Certificate of Occupancy or other approval as to the Interior
Improvements is issued by the City of Mountain View; and (v)
Landlord has received unconditional lien releases in form
sufficient to satisfy the applicable requirements of California
Civil Code Section 3262 from all contractors, subcontractors and
materialmen that have provided services or materials for the
applicable Interior Improvements, together with such other
evidence of lien-free completion of such Interior Improvements as
Landlord may reasonably request.
The Parties acknowledge that the Rent Commencement Date
of each respective Lease is fixed so as to be the earlier of:
(i) the Scheduled Rent Commencement Date (as defined in
Section 1.K) subject only to any extension arising from any
Landlord Delay (as defined in Section 1.N), any Damage Delay
(as defined in Section 1.M) or any Weather Delay (as defined
in Section 1.O) pursuant to Section 9 below, regardless of
the status of the completion of the Shell Improvements
and/or Interior Improvements as of the Scheduled Rent
Commencement Date, or
(ii) the applicable Substantial Completion Date (as
defined in Section 1.K) of the Building Shell and Tenant
Improvements as to the applicable Building.
K. Rent Commencement Date: The term "Rent Commencement
Date" for each of the three (3) Buildings shall mean the earlier
of:
(i) eighteen (18) months (the "Agreed Construction
Period") following the earlier of the following dates
(regardless of whether or not Tenant has completed the
Improvements as set forth in this Construction Agreement):
(a) the date that Tenant obtains from the City of
Mountain View a Planned Community Permit (the "PCP
Permit") permitting Tenant to proceed generally
thereafter with seeking the issuance of building
permits for the construction of the three (3) Buildings
(but the issuance of a building permit is not a
condition to the commencement of the Agreed
Construction Period), or
(b) the date of October 31, 1997 (the "Outside
Date") subject to the right of Landlord to extend such
Outside Date pursuant to Section 2.C below (with the
date as so determined pursuant to clause (i) hereof,
including as affected by any extension of the Outside
Date by Landlord pursuant to Section 2.C below, herein
referred to as the "Scheduled Rent Commencement Date");
or
(ii) the Substantial Completion of the Shell
Improvements and Interior Improvements on a Building by
Building basis (the "Substantial Completion Date").
Subject to the following sentence, the Agreed Construction
Period shall be subject to an automatic extension on a day for
day basis in the event and to the extent of the aggregate of (i)
any Landlord Delay, (ii) any Damage Delay, and (iii) any Weather
Delay, but shall not otherwise be subject to extension regardless
of the status of the completion of the Shell Improvements or
Interior Improvements and regardless of whether the actual
construction period exceeded the Agreed Construction Period. Any
delay in Substantial Completion of the Improvements caused by any
combination of Landlord Delay, Damage Delay and Weather Delay
shall not be double counted, to the effect that each single day
of delay in Substantial Completion of the Improvements occasioned
by more than one cause shall nevertheless be allocated to a
single category of delay (i.e. either Landlord Delay, Damage
Delay or Weather Delay).
Subject to the right of Landlord to extend such Outside Date
pursuant to Section 2.C below, either Landlord or Tenant shall
have the right, as provided in Section 2.C below, to terminate
this Construction Agreement and the Leases upon written notice to
the other within five (5) business days after the Outside Date if
the City Council of the City of Mountain View, California fails
to finally approve and cause the issuance by the City of Mountain
View of a PCP Permit on or before the Outside Date, where the PCP
Permit is consistent with the application for such PCP Permit
submitted by Tenant to the City of Mountain View on August 21,
1997 (or which PCP is otherwise reasonably acceptable to Landlord
and Tenant considering the standards for acceptability set forth
in the following sentence). Any conditions which may be imposed
by the City Council of the City of Mountain View, California in
otherwise approving the issuance of the PCP Permit shall not be
grounds for either Landlord or Tenant to elect, pursuant to
Section 2.C below, to terminate this Construction Agreement and
the Leases, unless one or more of such conditions would result in
any of the following: (i) any major change in the footprint of
any of the buildings to be located on the Complex or on the
Adjoining Property (as defined in Section 2.A below), (ii) any
major change in the conceptual architectural design of any of the
buildings to be located on the Complex or on the Adjoining
Property (where, for example, any requirement to redesign the
Buildings to be of a more avant-garde design (such as the nearby
Silicon Graphics building), or to adopt a stairstep indentation
design to the building floors, or to reduce the Three Buildings
to less than an aggregate of 300,000 square feet, or the like
would be a major change, whereas any required changes to on-site
landscaping, columns, window moulins or the like would not be
considered major changes), (iii) any major restriction imposed
on any use currently permitted by the applicable zoning for the
Complex or the Adjoining Property, or (iv) any requirements which
collectively are reasonably estimated to increase the cost to
Tenant (a) of designing or constructing the Complex or (b) of
contributing to or constructing any significant offsite
improvements (such as a fire or police station) where the cost
thereof is not being shared with all future developments in the
general area, by an aggregate amount for (a) and (b) above in
excess of Four Million Dollars.
L. Lease Commencement Date: The term "Lease Commencement
Date" for each of the three (3) Buildings shall be the earlier of
(i) the Rent Commencement Date or (ii) the date of commencement
of any "Early Occupancy Period" of a portion of the Building as
defined and provided in Paragraph 2C of the respective Lease.
Absent any early occupancy by Tenant of a portion of the
respective Building, the Lease Commencement Date shall be the
same as the Rent Commencement Date.
M. Damage Delay: The term "Damage Delay" shall mean, as
to the Complex and respectively as to each Building, as
applicable, the period of delay in the Substantial Completion of
construction of the applicable Improvements occasioned by any
damage to or destruction of the Improvements occurring during the
course of construction which results in damage or destruction to
the Improvements having an estimated cost of repair or
restoration equal to or in excess of One Million Dollars
($1,000,000) per occurrence.
N. Landlord Delay: The term "Landlord Delay" shall mean,
as to the Complex and respectively as to each Building, as
applicable, any material delay in the Substantial Completion of
the construction of the Improvements to the Complex or to any
particular Building caused solely by one or more of the following
reasons: (i) the failure of Landlord to timely make any payment
of the Improvement Allowance or (ii) the failure of Landlord to
timely or reasonably approve or execute any reasonably
appropriate plans and specifications, working drawings, permits,
utility easements or other related documents which Landlord is
responsible for approving or executing under the provisions of
this Construction Agreement, in each case, provided that Tenant,
after the observation or occurrence of any matter constituting an
event which will cause or likely cause a Landlord Delay, within
ten (10) days thereafter notifies Landlord in writing of the
observation or occurrence of such event and the then estimated
amount of any Landlord Delay that will be experienced as a result
thereof.
O. Weather Delay: The term "Weather Delay" shall mean, as
to the Complex and respectively as to each Building, as
applicable, the period of delay in the Substantial Completion of
construction of the applicable Improvements occasioned by any
abnormally adverse weather conditions (compared to the average
seasonal weather conditions experienced in Mountain View,
California during the relevant period of construction) in the
nature of abnormal rains (and any resultant flooding) such as
might occur due to an el nino, provided that there shall not be
considered to be any Weather Delay unless the aggregate affect of
all Weather Delays (excluding average seasonal weather
conditions) are reasonably estimated to have delayed the
Substantial Completion of the respective Improvements by a period
in excess of thirty (30) calendar days where such days of delay
are attributable solely to a Weather Delay.
2. PERFORMANCE: Landlord and Tenant shall each be
obligated to use commercially reasonable efforts to perform their
respective obligations under this Construction Agreement. The
Parties acknowledge that the failure of either Party to
accomplish any matter set forth in this Construction Agreement
within any particular time period shall not constitute a default
(sometimes referred to herein as an "Event of Default") by either
Party unless such failure constitutes a breach of the obligation
of a Party to use commercially reasonable efforts to perform such
obligation and appropriate written notice has been given and a
reasonable cure period has expired (which shall in any event be
not less than thirty (30) days) without such breach being cured.
Upon the occurrence and during the continuance of an Event of
Default by Tenant under this Construction Agreement, such shall
constitute a default under the respective Lease or Leases to
which such obligation hereunder relates (and if the cross-default
provision of Section 5.A hereof then remains in effect, such
Event of Default under this Construction Agreement with respect
to any Lease shall constitute a default under all Three Leases),
and Landlord may, at its option, exercise the right to terminate
such Lease or Leases at any time thereafter that such Event of
Default remains uncured, in accordance with the respective terms
of such Lease or Leases as a result of such Event of Default,
upon written notice by Landlord to Tenant in accordance with the
provisions of each such Lease, and Landlord shall have any and
all other rights and remedies thereunder against Tenant for
breach of such Lease.
A. Planned Community Permit: Tenant shall exercise due
diligence and commercially reasonable efforts to seek and obtain
approval of the City of Mountain View to the issuance of the PCP
Permit by October 31, 1997, which PCP Permit is required for
Tenant to proceed with the completion of the detailed design of
the Shell Improvements and, thereafter, to obtain building
permits for the construction of the Shell Improvements. Tenant
shall exercise due diligence to have the City of Mountain View
issue a PCP Permit which permits the maximum square footage of
improvements to be developed at the Property and Landlord agrees,
upon request of Tenant, to cooperate with and assist Tenant in
Tenant's efforts to obtain the PCP Permit for the maximum square
footage of Improvements, including seeking any available bonus
density that may be obtainable with respect to the Property
including assigning to the Property any bonus density that may be
obtainable with respect to the adjoining approximately 6.925 acre
undeveloped parcel of land (the "Adjoining Property") owned
jointly by the Richard T. Peery Separate Property Trust and John
Arrillaga Survivor's Trust, formerly known as the Arrillaga
Family Trust (which are members of Landlord hereunder), which
Adjoining Property is separately the subject of a Ground Lease
between such members as landlord and Tenant as tenant, and which
Adjoining Property is required by the City of Mountain View to be
considered at the time of issuance of the PCP Permit. Tenant
acknowledges that pursuant to the terms of the Ground Lease for
the Adjoining Property, Tenant is prohibited from seeking any
approval for more than 120,000 square feet of occupiable space
(as defined by the City of Mountain View for PCP Permit purposes)
to be constructed on the Adjoining Property under the PCP Permit.
B. Landlord's Termination Rights in the Event of Tenant's
Default: In the event (i) Tenant defaults in the performance of
any of its material obligations under this Construction Agreement
beyond the applicable cure period provided herein and (ii) the
cross-default condition set forth in Section 5.A hereof remains
in effect, then Landlord shall have the right to elect to
terminate all Three Leases as provided in Section 5.A, and if all
Three Leases are so terminated, then pursuant to the terms of
Section 2.7 of that certain LLC Operating Agreement of P/A
Charleston Road LLC among Peery and Arrillaga Trusts and ALZA
Land Management, Inc. ("ALM"), dated as of the date of this
Construction Agreement (the "LLC Operating Agreement"), the Peery
and Arrillaga Trusts may elect to repurchase the interest of ALM
in the LLC Operating Agreement in accordance with the terms set
forth therein.
C. Landlord's and Tenant's Termination Rights in the Event
of Delay in the Approval of the PCP Permit: In the event a PCP
Permit satisfying the requirements of Section 1.K is not approved
and issued by the Outside Date (as defined in Section 1.K),
either Landlord or Tenant shall have the right by written notice
to the other within five (5) business days after the Outside Date
to elect to cause all, but not less than all, of the following to
occur: (i) terminate this Construction Agreement effective as of
the Outside Date, (ii) terminate all Three Leases effective as of
the Outside Date, (iii) pursuant to the terms of Section 2.8 of
the LLC Operating Agreement, to have the LLC reacquire the
interest of ALM in the LLC Operating Agreement in accordance with
the terms set forth therein and (iv) pursuant to the terms of
Paragraph 3.3 of the Ground Lease for the Adjoining Property, to
rescind the Ground Lease effective as of the stated commencement
date of the Ground Lease in accordance with the terms set forth
therein. Landlord shall have the right upon written notice to
Tenant at any time prior to the occurrence of the Outside Date,
to extend the Outside Date from time to time for reasonable
additional periods of time based upon Landlord's good faith
belief that within the respective additional period established
by such extended Outside Date, Tenant will be able to obtain the
approval and issuance of a PCP Permit satisfying the requirements
of Section 1.K. The respective termination and extension rights
of Tenant and Landlord as provided in this Section 2.C shall
again apply if a PCP Permit satisfying the requirements of
Section 1.K is not approved and issued by such extended Outside
Date.
3. DESIGN AND CONSTRUCTION OF SITE WORK AND SHELL
IMPROVEMENTS: Subject to obtaining all required governmental
approvals, Tenant shall exercise due diligence to cause the Shell
Improvements to be expeditiously constructed in the approximate
locations shown on the Site Plan attached hereto and incorporated
herein as Schedule A-2 (as such Schedule may be amended by the
Parties in response to any changes, conditions or limitations
imposed by any governmental authorities or applicable Laws), in
accordance with the following:
A. Development and Approval of Approved Specifications:
Tenant shall exercise due diligence (i) to expedite the
processing of the PCP Permit and (ii) to expeditiously prepare
and deliver to Landlord for its review and approval
specifications for the Shell Improvements (the "Specifications").
Within ten (10) business days after presentation to Landlord,
Landlord shall either approve such Specifications or notify
Tenant in writing of its specific objections to such
Specifications, with Landlord's approval not to be unreasonably
withheld. If Landlord reasonably objects to such Specifications,
the Parties shall meet and confer to develop Specifications that
are acceptable to both Landlord and Tenant within five (5)
business days after Landlord has notified Tenant of its
objections. The Parties agree to act reasonably to finalize the
Specifications, and once finalized, the Specifications shall be
referenced or described on Schedule "A-1" to this Construction
Agreement as the "Approved Specifications". The Approved
Specifications shall be revised by the Parties as necessary to
respond to any changes, conditions or limitations imposed by any
governmental authorities or applicable Laws.
B. Development and Approval of Preliminary Site Work and
Cold Shell Improvement Plans: Tenant shall exercise due
diligence to expeditiously prepare and deliver to Landlord for
its review and approval preliminary plans for the Site Work and
Cold Shell Improvements that are consistent with and conform to
the Approved Specifications, together with a detailed, line item
budget for the construction of the Site Work and Cold Shell
Improvements (collectively, the "Preliminary Cold Shell
Improvement Plans"). Within ten (10) business days after
presentation to Landlord, Landlord shall either approve such
Preliminary Cold Shell Improvement Plans or notify Tenant in
writing of its specific objections to the Preliminary Cold Shell
Improvement Plans, with Landlord's approval not to be
unreasonably withheld. If Landlord reasonably so objects to the
Preliminary Cold Shell Improvement Plans, the Parties shall meet
and confer to develop Preliminary Cold Shell Improvement Plans
that are acceptable to both Landlord and Tenant within five (5)
business days after Landlord has notified Tenant of its
objections. The Parties agree to act reasonably to finalize the
Preliminary Cold Shell Improvement Plans.
C. Development and Approval of Final Shell Improvement
Plans: Once the Preliminary Cold Shell Improvement Plans have
been approved by Landlord and Tenant, Tenant shall informally
consult with the staff of the City of Mountain View to obtain
comfort that the Preliminary Cold Shell Improvement Plans do not
incorporate any design element that would likely preclude the
future issuance of any required permits and approvals for the
construction of the Site Work and the Cold Shell Improvements.
Thereafter, Tenant shall exercise due diligence to expeditiously
complete and submit to Landlord for its approval final working
drawings for the Shell Improvements (i.e. for the Site Work, the
Cold Shell Improvements and the Warm Shell Improvements). Within
ten (10) business days after presentation to Landlord, Landlord
shall approve the final working drawings for the Shell
Improvements or notify Tenant in writing of its specific
objections, which approval shall not be unreasonably withheld.
If Landlord reasonably so objects, the Parties shall confer and
reach agreement upon final working drawings for the Shell
Improvements within five (5) business days after Landlord has
notified Tenant of its objections. The Parties agree to act
reasonably so as to promptly finalize the plans for the Shell
Improvements ("Final Shell Improvement Plans").
D. Governmental Approvals: Tenant shall exercise due
diligence to expeditiously obtain all required permits and
approvals from the City of Mountain View of the Final Shell
Improvement Plans, or which may otherwise be required under
applicable Laws for the construction of the Shell Improvements,
with copies of all such permits and approvals to be delivered to
Landlord, by Tenant, at no cost to Landlord. Landlord shall
cooperate with Tenant in such approval process. Tenant shall
diligently prosecute to completion such approval process.
Landlord agrees, upon Tenant's request, at no cost or liability
to Landlord, to reasonably assist Tenant in accordance with the
provisions of Section 13 hereof, to obtain all required permits
and approvals.
E. Commencement of Construction: Promptly after all
building permits (and any other required permits or approvals)
for the construction of the Shell Improvements are issued, Tenant
shall instruct the Prime Contractor to commence construction of
the Shell Improvements and to diligently prosecute such
construction to completion in accordance with the Final Shell
Improvement Plans, including the detailed, line item budget for
the Shell Improvements (the "Shell Budget"), and all applicable
Laws, using commercially reasonable efforts to achieve
Substantial Completion of the Shell Improvements as soon as
reasonably practicable, consistent with the orderly construction
of the Shell Improvements and any Interior Improvements then
being constructed.
F. Payment of Cost of Design and Construction of Shell
Improvements: The cost of the design and construction of the
Shell Improvements shall be paid as provided in this Section 3.F.
It is acknowledged that Tenant has advanced (i) costs of design
of the Shell Improvements, (ii) costs associated with the
planning for, obtaining governmental approval of, and
implementing mitigation measures associated with the relocation
of the burrowing owls located near the Property (only 66% of
which are allocable to the Property), and (iii) costs of seeking
design review approval for the issuance of the PCP Permit prior
to the date of this Construction Agreement (collectively "Prior
Expenditure"), with the amount of any Prior Expenditure to be
included as amounts paid by Tenant towards the cost of the Cold
Shell Improvements and Site Improvements as provided in this
Section 3.F. Except as provided herein, Landlord shall be
responsible for the payment of all costs incurred in connection
with the design and construction of the Shell Improvements, up to
the total amount of $31,707,000 (the "Improvement Allowance").
In addition, if the cost of the Cold Shell Improvements and Site
Work exceed an aggregate amount equal to $86 per occupiable
square foot based upon the square footage of the three Buildings,
(as measured by the City for purposes of approval of the PCP
Permit), then Landlord shall, at the request of Tenant, increase
the Improvement Allowance by an additional amount equal to the
lesser of (i) the difference between $31,707,000 and the total
cost of the Cold Shell Improvements and Site Work, and (ii)
$4,000,000, to pay (or assist in paying) the excess costs of the
Cold Shell Improvements and Site Work. All costs of designing
and constructing the Shell Improvements in excess of the
Improvement Allowance of $31,707,000 (plus the additional amount
of up to $4,000,000, if applicable) shall be the obligation of
Tenant, as provided in the balance of this Section 3.F, with the
portion to be so borne by Tenant referred to herein as "Tenant's
Share". Landlord shall not be obligated to reimburse Tenant for
any Prior Expenditure, but such Prior Expenditure shall be deemed
part of the cost of the Cold Shell Improvements and Site Work as
applicable, and shall be deemed amounts paid by Tenant which
shall be credited against Tenant's Share. Such Prior Expenditure
shall be credited dollar for dollar against Tenant's Share of the
first installment or installments of progress payments until
Tenant's Prior Expenditure is fully credited against Tenant's
Share and such Prior Expenditure shall be considered part of the
cost of the Shell Improvements which are included in the first
installment or installments of progress payments until such point
as Tenant has received full credit for its Prior Expenditure, but
in no event shall Landlord be obligated to directly reimburse
Tenant for any Prior Expenditure. Landlord shall have no
obligation to fund and Tenant shall have no right to request any
payments by Landlord of any portion of the Improvement Allowance
prior to the later of (i) the approval and issuance of a PCP
Permit and associated lapse of the respective termination rights
of Landlord and Tenant as provided in Section 2.C above and (ii)
the funding of P/A Charleston Road LLC by the required
contribution by ALZA Land Management, Inc. of the amount required
by Paragraph 2.1.A of the First Amended and Restated Operating
Agreement for P/A Charleston Road LLC dated September 1, 1997
(which funding amount exceeds the amount provided herein as the
maximum amount of the Improvement Allowance).
Any such amounts to be paid by Landlord to Tenant shall be
paid as follows: For purposes of illustration only, if the total
cost of constructing the Shell Improvements is $40,000,000
(including any Prior Expenditure) then Tenant's Share thereof
would be $4,293,000 (the excess over the total Improvement
Allowance of $35,707,000 ($31,707,000 plus the additional
$4,000,000)), or 10.7325% of the total cost. If the first
progress payment amount is $1,000,000 (with the amount due the
Prime Contractor being $950,000 and the remaining $50,000 being
the credit to Tenant for its Prior Expenditure), then Tenant's
Share of such progress payment would be $107,325.00 (or 10.7325%
of such progress payment) against which would be credited
Tenant's Prior Expenditure of $50,000, to the end that Tenant
would pay to the Prime Contractor the sum of $57,325.00 and
Landlord would be responsible to pay to the Prime Contractor from
the Improvement Allowance the sum of $892,675.00. For each
succeeding progress payment, Tenant would likewise be obligated
for 10.7325% thereof (and Landlord would be obligated for
89.2675%, but in no event in the aggregate more than the
Improvement Allowance). Assuming the same facts, but instead the
Prime Contractor is currently owed $880,000 and Tenant's Prior
Expenditure was $120,000, then (i) a portion of Tenant's Prior
Expenditure would instead offset all of the Tenant's Share of the
first progress payment, (ii) Landlord would be responsible to pay
to the Prime Contractor from the Improvement Allowance the sum of
$880,000, (iii) the total amount of the first progress payment
would instead be deemed to be $985,801 (calculated by treating
Landlord's payment of $880,000 as equating to Landlord's pro rata
share of 89. 2675% of the first progress payment), (iv) Tenant
would be deemed to have had $105,801 of its Prior Expenditure
offset by such first progress payment by Landlord ($985,801 -
$880,000), and (v) Landlord would not be obligated to directly
reimburse Tenant for its excess uncredited Prior Expenditure of
$14,199 ($120,000 - $105,801) but such amount would be available
to be applied as a remaining credit for Tenant's Prior
Expenditure to the next occurring progress payment.
Landlord shall be obligated, but not more than one time per
month, within ten (10) business days after receipt of (i) an
invoice from Tenant for any amounts then due and payable to
Tenant's design and construction professionals or material
suppliers for costs of design and construction of the Shell
Improvements, together with (ii) a detailed accounting reflecting
the full expenditure of said amounts and all other amounts since
paid and to be paid with the current disbursement from Landlord,
to pay Landlord's pro rata share of any amounts properly shown on
such invoice. Unless otherwise agreed by Landlord and Tenant,
Landlord shall make its payment jointly to Tenant and the General
Contractor (or, if applicable, to the respective vendor) except
in those instances where it is clearly demonstrated to Landlord
that Tenant has already paid the amount in full for which
reimbursement is then being sought (and any potentially
applicable mechanic's liens, if any, have been released as
respects the work to which such reimbursement is sought), in
which event such payment shall be made directly to Tenant. Any
portion of the Improvement Allowance which is not applied to the
payment of the cost of constructing the Shell Improvements, may
thereafter be used by Tenant to pay the cost of any Interior
Improvements. Absent the occurrence and continuance of any Event
of Default by Tenant hereunder, Landlord shall not incur any
costs on Tenant's behalf with respect to the design or
construction of the Shell Improvements without Tenant's prior
written consent.
As provided in Section 5.C hereof, any contracts with any
Prime Contractor(s) shall provide for the Prime Contractor to
acknowledge the limitation on Landlord's liability for any costs
incurred thereunder in the manner provided in Section 5.C.
G. Audit Rights: Landlord shall have the right to audit
the books, records and supporting documents of Tenant or, if
Landlord requests, of Tenant's design and construction
professionals and material suppliers, to the extent reasonably
necessary to determine the accuracy of Tenant's statements of the
costs of design and construction of the Shell Improvements,
during normal business hours, after giving Tenant at least five
(5) business days prior notice. Landlord shall bear the cost of
such audit unless such audit discloses a discrepancy whereby
Landlord has on an overall basis paid at least Ten Thousand
Dollars as an Improvement Allowance in excess of the total cost
of the Improvements which would have otherwise been payable or
reimbursable from the Improvement Allowance in accordance with
the provisions of this Construction Agreement. Any such audit of
the Shell Improvements shall be conducted, if at all, within one
(1) year following the date of Substantial Completion of the
Shell Improvements.
4. CONSTRUCTION OF INTERIOR IMPROVEMENTS:
A. Development and Construction Requirements Related to
Interior Improvements: Tenant shall have the right to take such
time as Tenant considers desirable under all the circumstances to
plan for and construct the Interior Improvements and to obtain
all required permits for such Interior Improvements, but in any
event, Tenant shall cause the Interior Improvements to be
constructed as to each Building prior to the expiration or
termination of the term of the respective Lease for such
Building. The Interior Improvements or any portion thereof, as
applicable, which are to be constructed and paid for at Tenant's
sole expense (except to the extent, if any, the Improvement
Allowance is not fully expended in constructing the Shell
Improvements), shall be designed by one or more Architects
approved by Landlord as provided in this Construction Agreement
and in a manner to comply with the Interior Build-Out
Specifications attached as Exhibit C to the Leases. The plans for
the Interior Improvements or any portion thereof, as applicable
(the "Interior Improvement Plans"), shall be subject to the
reasonable approval of Landlord, provided that Landlord's
approval shall be confined to matters which may adversely affect
any structural elements of the Building or which are inconsistent
with the Interior Build-Out Specifications. Any approval by
Landlord of Interior Improvement Plans which do not provide for
baseboards, drop ceilings or standard HVAC for office use in any
portion of the Building which would otherwise be suitable for
office use, shall not affect Tenant's surrender obligations under
Paragraph 7 of any Lease which may require Tenant to install such
improvements in such portion of the Building prior to the
surrender of the Building by Tenant to Landlord upon termination
of the respective Lease. The Interior Improvements or any
portion thereof, as applicable, shall be constructed by one or
more Prime Contractors approved by Landlord as provided in this
Construction Agreement. Copies of all permits and approvals
relating to any Interior Improvements, shall, once obtained by
Tenant, be delivered to Landlord, at no cost to Landlord.
Subsequent to obtaining all such permits and approvals and
Landlord's approval of the Interior Improvement Plans, Tenant
shall be authorized to instruct the applicable Prime Contractor
to construct the Interior Improvements substantially in
accordance with the Interior Improvement Plans.
B. Payment of Interior Improvements Costs: Tenant shall
be responsible for the payment of all costs of design and
construction of the Interior Improvements, including any costs of
the applicable Prime Contractor(s) and Architects in the design
and construction of the Interior Improvements (excepting any
amount thereof which may be payable from any portion of the
Improvement Allowance which is not applied to the cost of
constructing the Shell Improvements). Absent the occurrence and
continuance of any Event of Default by Tenant hereunder, Landlord
shall not incur any costs on Tenant's behalf with respect to the
design or construction of the Interior Improvements without
Tenant's prior written consent.
C. Audit Rights: Landlord shall have the right to audit
the books, records and supporting documents of Tenant or, if
Landlord requests, of Tenant's design and construction
professionals and material suppliers, to the extent reasonably
necessary to determine the accuracy of Tenant's statements of the
costs of design and construction of the Interior Improvements,
during normal business hours, after giving Tenant at least five
(5) business days prior notice. Landlord shall bear the cost of
such audit unless such audit discloses a discrepancy whereby
Landlord has on an overall basis paid at least Ten Thousand
Dollars as an Improvement Allowance in excess of the total cost
of the Improvements which would have otherwise been payable or
reimbursable from the Improvement Allowance in accordance with
the provisions of this Construction Agreement. Any such audit of
the Interior Improvements shall be conducted, if at all, within
one (1) year following the date of Substantial Completion of the
Interior Improvements.
5. GENERAL OBLIGATIONS OF TENANT:
A. Cross Default Remedy: As provided in Section 2 above,
if Tenant commits an uncured Event of Default under this
Construction Agreement, such shall constitute a default under
each of the three Leases until such time as (i) the Shell
Improvements have been Substantially Completed and (ii) either
(a) the Interior Improvements have been Substantially Completed
or (b) Tenant has instead satisfied the provisions of Section 5.B
below as to the posting of either a Letter of Credit or an
Account. Any Event of Default with respect to the construction
of any Interior Improvements as to any particular Building shall
at all times constitute a default with respect to the respective
Lease of that Building that includes such Interior Improvements
(but upon satisfaction of the Letter of Credit Substitution
Condition pursuant to Section 5.B below, shall not constitute a
default as to the respective Lease of any other Building).
B. Letter of Credit Substitute for Interior Improvement
Construction Obligation: If Tenant desires to eliminate the
cross-default remedy provided in Section 5.A hereof as a result
of the Interior Improvements not then being Substantially
Completed, Tenant may elect to deliver to Landlord an irrevocable
unconditional Letter of Credit issued for a period of at least
one year (the "Letter of Credit") in an amount representing
Twenty Five Dollars ($25) per square foot of such square footage
usable area in the Building as to which the Interior Improvements
are not then Substantially Completed. Said Letter of Credit must
be issued by an institutional lender reasonably acceptable to
Landlord and shall be unconditionally payable upon demand by
Landlord, and Landlord shall be entitled to draw upon the Letter
of Credit, without proof, for the purpose of completing
construction of the Interior Improvements or repayment of any
amounts owed with respect to such construction upon ten (10) days
notice to Tenant, in the event of the occurrence of any of the
following which is not cured within such ten (10) day period: (i)
Tenant fails to pay any sums when due under any construction
contract for the Interior Improvements (unless Tenant is in good
faith contesting such sum and has paid all amounts which Tenant
is not so contesting and bonds any liens that arise therefrom in
accordance with the requirements of Section 5.C hereof) or (ii)
Tenant fails to complete the construction of the Interior
Improvements as to any Building prior to the expiration or
termination of the respective Lease as to such Building or (iii)
Tenant allows any liens to be filed against the Property
associated with such Interior Improvements which are not removed
within the period provided in Section 5.C hereof. Any amount
drawn on the Letter of Credit which is not so applied by Landlord
shall be returned to Tenant. Tenant shall be obligated to cause
the Letter of Credit to be renewed at least twenty (20) days
prior to its expiration in the event that all of the Interior
Improvements are not then Substantially Completed, but the amount
of such Letter of Credit may then be reduced by an amount
representing Twenty Five Dollars ($25) per square foot of such
square footage usable area in the Building as to which the
Interior Improvements have been Substantially Completed since the
date of issuance of the Letter of Credit. In the event the
Letter of Credit is not so renewed as required above, Tenant
shall promptly establish and deposit into the Account (as defined
below) the dollar amount then required hereunder to be so
deposited. In lieu of the foregoing Letter of Credit, Tenant may
instead cause to be deposited in a restricted interest bearing
bank account, at the San Francisco Bay Area office of a major
bank reasonably acceptable to Landlord (the "Account"), an amount
in cash equating to the dollar amount provided for above. The
Account shall permit Landlord to draw upon it from time to time
upon ten (10) days notice to Tenant, solely upon Landlord's
certification to the bank that the amount of such drawing is to
pay the cost of completion of the construction of the Interior
Improvements (if applicable) or to pay the amount of any liens
filed against the Property associated with the construction of
the Interior Improvements (if applicable). The Account shall be
considered a restricted account and the funds contained therein
shall not be reduced by Tenant for any reason, except to pay the
contractor(s) directly for Tenant's Share of the cost of the
Interior Improvements. Upon Substantial Completion of the
Interior Improvements, Tenant shall request from Landlord that
any such Letter of Credit or the Account, as applicable, reduced
by any amount duly drawn thereon by Landlord, be returned to
Tenant, and Landlord shall within ten (10) business days
thereafter return such Letter of Credit or the Account to Tenant.
C. No Liens: During the construction of the Shell
Improvements and the Interior Improvements (including the
installation of any trade fixtures by Tenant), Tenant shall keep
the Property and each Building free from any liens arising out of
any work performed, materials furnished or obligation incurred by
Tenant, except to the extent any lien may arise from the breach
by Landlord of its obligations under this Construction Agreement
as to the making of payments from the Improvement Allowance. In
the event that Tenant shall not, within fifteen (15) days
following notice of the imposition of any such lien, cause the
same to be released of record, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but
not the obligation, to cause the same to be released by such
reasonable means as Landlord shall deem proper, including payment
of the claim giving rise to such lien, except to the extent that
Tenant is diligently contesting any such lien, in which event
Tenant may allow such lien to continue in existence during the
period of such contest, provided that (i) Landlord is satisfied,
in Landlord's reasonable discretion, that such contest will not
result in a foreclosure of all or any portion of the Property or
any Building as a result of such lien and (ii) Tenant bonds said
lien with a bonding company reasonably acceptable to Landlord and
in a form reasonably satisfactory to Landlord with said bond in
the amount of the lien, in which event Landlord shall not be
entitled to pay or discharge the lien, provided the lien is
removed within sixty (60) days from the date the lien is filed.
All sums paid by Landlord for such purpose, and all expenses
incurred by Landlord in connection therewith, shall be payable to
Landlord by Tenant within ten (10) days after written demand with
interest at the rate of Bank of America's Prime Rate (or
equivalent rate) plus five percent (5%), but in no event greater
then the maximum rate of interest permitted by applicable law.
Any construction contract with a Prime Contractor shall provide
therein (or by means of a separate agreement with the Prime
Contractor) that such Prime Contractor acknowledges and agrees
that (i) Landlord's obligations and liability under such
construction contract (and any associated contracts) is limited
to Landlord's payment of the Improvement Allowance as provided
herein, (ii) that Landlord shall have no liability or
responsibility to the Prime Contractor or any third parties for
the payment of any monies in excess thereof, and (iii) it shall
look solely to Tenant for any payment for which Landlord is not
obligated to pay from the Improvement Allowance hereunder.
D. Tenant Delivery: Tenant hereby assigns to Landlord,
effective upon either (i) the date of termination of this
Construction Agreement pursuant to Section 2.C above or (ii) an
Event of Default by Tenant hereunder (following written notice
from Landlord of the occurrence of a default and the expiration
of a reasonable period of time for Tenant to cure such alleged
default without such default having been cured) all of its
interest in and to the plans and specifications prepared for the
Improvements and Interior Improvements, all studies, data and
drawings with respect thereto (excluding any confidential
programming) prepared by or for Tenant, and the contracts and
agreements relating to such plans and specifications or studies,
data and drawings, or to the construction of the Shell
Improvements and Interior Improvements, including but not limited
to the general contracts therefor, in each case, to the extent
assignable and without any representation or warranty. Landlord
shall not have any obligation under any of the contracts unless
Landlord expressly agrees to assume such obligations in writing.
Subject to the requirement for any third party consents to the
foregoing assignment, Landlord shall have the right to exercise
any rights of Tenant under the contracts at any time following
the occurrence of such assignment. Following the completion of
the Improvements and Interior Improvements, Tenant shall, at
Tenant's sole cost, (i) deliver to Landlord a final as-built set
of plans on mylar sepia drawn to 1/8" scale, prepared by a
licensed engineer or architect, of the Final Shell Improvement
Plans and Interior Improvement Plans and (ii) file or cause to be
filed a Notice of Completion in accordance with all applicable
laws, and deliver a copy of said Notice of Completion to
Landlord.
E. Five Day Notice Requirement: Notwithstanding that
Landlord has approved plans as aforesaid, the first Prime
Contractor (or any subcontractor under such Prime Contractor),
shall not enter upon the Property to commence the construction of
the Shell Improvements until at least five (5) days' prior
written notice has been given to Landlord specifying the
construction of the Shell Improvements is about to commence. No
prior notice shall be required as to any subsequent contractors
or subcontractors once the construction of the Shell Improvements
has commenced.
F. Tenant's Indemnification Related to the Shell
Improvements and the Interior Improvements: Except as to the
obligations of Landlord hereunder as to the funding of the
Improvement Allowance, Tenant shall be liable to Landlord for,
and shall fully and completely indemnify and hold Landlord and
its members harmless from, any cost, expense, claim, damage,
loss, obligation or liability of any kind or nature whatsoever
(including Landlord's attorneys' fees) which occurs or accrues
during the course of construction of the Improvements as set
forth herein, including, but not limited to any loss, damage,
injury or death related to the construction of the Shell
Improvements and/or Interior Improvements occurring during the
course of construction of the Shell Improvements and/or Interior
Improvements. This indemnity shall also extend to any claims of
third parties asserting any breach of any license agreements,
memorandums of understanding or other agreements of Tenant (or of
Landlord entered into by Landlord at Tenant's request) related to
any burrowing owl mitigation plan associated with the relocation
of the former burrowing owls located near the Property, whether
any such claim may arise before or after the completion of
construction of the Improvements. In the event any claim is
asserted which is covered by the foregoing indemnity, Tenant
shall defend Landlord with legal counsel reasonably acceptable to
Landlord.
G. Insurance Requirements: Tenant shall in its
construction contract with any Prime Contractor, require such
contractor to carry and maintain with insurance companies having
"A.M. Best's" rating of "A" "VII" or better (unless a different
rating is expressly approved in writing by Landlord as to any
particular insurance coverage), the insurance coverage indicated
below as a minimum requirement:
Type of Coverage Limits of Liability
Worker's Compensation * Statutory per State of
California
Employer's Liability $2,000,000.00
Commercial General Liability ** $2,000,000.00
Occurrence Form
Broad Form Contractual Liability
Automobile Liability $2,000,000.00
* Tenant shall cause the Prime Contractor to furnish an
endorsement from its insurer waiving rights of subrogation
against Landlord and its insurers under such insurance
coverage.
** Tenant shall cause the Prime Contractor to have its
insurer or insurance agency furnish Landlord with an
appropriate certificate of insurance reflecting Landlord and
its members named as "Additional Insureds".
Tenant shall cause appropriate Builder's Risk insurance
(covering "all risks", including earthquake and flood) in form
and content reasonably acceptable to Landlord to be carried
during the course of construction of the Shell Improvements and
the Interior Improvements. Landlord and Tenant shall consult as
to any insurance coverage programs which either Landlord or
Tenant may propose with regard to seeking to provide appropriate
insurance coverage at the least expense during the course of
construction of the Improvements. Tenant or its Prime Contractor
shall bear the sole responsibility for the payment of the
premiums for the foregoing insurance policies (but such shall not
preclude Tenant from subsequently including any such premium
costs in any requests for any disbursements of the Improvement
Allowance pursuant to Paragraphs 3 and 4 above to the extent any
such insurance is included within the category of expenses which
are subject to payment from such Improvement Allowance)
H. Application of Lease Terms During Construction Period:
All of the terms of the Lease shall apply to any entry by Tenant
pursuant to this Construction Agreement (including provisions of
said Lease regarding indemnification and insurance) with the
exceptions related to the payment of monthly Basic Rent and
Additional Rent (except as otherwise noted in said Lease or this
Construction Agreement). The obligations of Tenant contained in
this Section 5.H shall survive the expiration of this
Construction Agreement.
I. Ownership and Encumbering of Shell Improvements and
Interior Improvements: Except as otherwise provided in the
respective Lease as to Interior Improvements, all of the
Improvements shall become and remain a part of the Property upon
installation or construction and shall be the property of
Landlord. Tenant shall have only a leasehold interest therein,
subject to all of the terms and conditions of the Lease. None of
the Shell Improvements and/or Interior Improvements shall be
encumbered, liened or pledged, transferred, removed or materially
altered, except as otherwise provided in the Lease.
J. Inspection Following Completion of Shell Improvements
and Interior Improvements: Within ninety (90) days after the
Shell Improvements and Interior Improvements are respectively
Substantially Completed (as that term is defined herein),
Landlord (or Landlord's representative) and Tenant shall conduct
a joint walk-through of the Property, and inspect such Shell
Improvements and Interior Improvements, using due diligence to
discover all incomplete or defective construction. After such
inspection has been completed, Landlord or its representative
shall prepare, and both Parties shall sign, a list of all "punch
list" items which the Parties agree are to be corrected by
Tenant. Tenant shall use reasonable efforts to complete and/or
repair such "punch list" items within thirty (30) days after
executing such list, it being agreed however, that the existence
of any "punch list" items will not result in any delay of the
respective Rent Commencement Date as provided in Section 1.K
above.
6. GENERAL DESIGN AND CONSTRUCTION OBLIGATIONS:
A. Design Requirements: Tenant shall cause all plans,
drawings and specifications for the Shell Improvements and
Interior Improvements, whether preliminary or final, to be
prepared by licensed architects and, where appropriate, licensed
mechanical, electrical and structural engineers. Tenant shall
require the Architect to prepare all plans, drawings and
specifications for the Shell Improvements and Interior
Improvements in strict compliance with the requirements of all
applicable Laws. The review and approval of any plans, drawings
and specifications by Landlord shall not alter or diminish
Tenant's or the Architect's obligations under this Section 6.A.
Landlord's approval of such plans shall not be construed as
approval of any construction detail with respect to conformance
to any applicable City or governmental ordinance or code, and by
approving such plans, Landlord assumes no liability or
responsibility therefor, or for any defect in said plans and/or
the related construction by Tenant.
B. Changes to Approved Final Improvement Plans: Once the
Final Improvement 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 Shell
Improvements (including any Site Work) without the prior written
consent of the other Party, which consent shall not be
unreasonably withheld, provided there is a reasonable basis for
such change or such change is required by any errors or omissions
in the Final Improvement Plans or any requirements of any
applicable Laws.
C. Good Faith: Landlord and Tenant shall act reasonably
and in good faith in considering whether to approve any plans and
specifications contemplated in this Construction Agreement.
D. Contracts with Design and Construction Professionals:
Any Architect or Prime Contractor for the Shell Improvements or
the Interior Improvements shall be selected in the manner
provided in Sections 1.H and 1.I respectively. Tenant shall
enter into the agreements for the design and construction of the
Shell Improvements with the Architect and Prime Contractor so
selected in Tenant's name, but each of such agreements shall be
subject to Landlord's prior review and written approval, and each
shall expressly name Landlord as a third party beneficiary
thereof.
7. DELIVERY OF POSSESSION, PUNCH LIST AND ACCEPTANCE
AGREEMENT: Promptly following the construction of the Shell
Improvements for each Building, the gross leaseable square
footage contained within the applicable building shell shall be
measured by the Prime Contractor for the Shell Improvements; such
measurement shall be from the outside of the exterior walls and
shall include any fully enclosed atriums, and to the extent any
such areas constitute an indentation into the prevailing outside
wall line of any Building, any covered entrance or egress areas
or covered loading areas. The square footage of each of the
three Buildings as so determined shall be used as the square
footage of each respective Building and the total of all three
Buildings for all purposes under the respective Lease; provided,
however, that none of the following areas shall be included when
determining such square footage calculation: enclosed
ground-level or elevated walkways that are not for occupancy
between Buildings, any building tower for connecting or accessing
any elevated walkways, external unoccupied equipment areas
(whether below ground, on the roof, in a roof penthouse or
otherwise), provided that such areas are not considered by the
City of Mountain View to count against the approved maximum
square footage which Tenant may develop pursuant to the
provisions of the PCP Permit. As provided in Section 5.J, within
ninety (90) days after the Shell Improvements and Interior
Improvements are respectively Substantially Completed (as to each
Building), Landlord and Tenant and/or their respective employees
and agents, shall together inspect the Shell Improvements and
Interior Improvements so completed and prepare a punch list.
After such inspection has been completed, each Party shall sign
an acceptance agreement which shall include a list of all punch
list items which are to be corrected by Tenant. Such acceptance
agreement shall neither preclude Landlord or Tenant from later
discovering any additional punch list items or latent defects and
requiring the Prime Contractor or any subcontractors to complete
and/or repair any such additional punch list items or latent
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.
8. STANDARD OF CONSTRUCTION AND ENFORCEMENT OF WARRANTIES:
Tenant shall cause the architect contract with the respective
Architect for the Building Shell and for any Interior
Improvements to require the Architect to cause the Improvements
being designed by it to be designed in compliance with all
requirements of applicable Laws. Tenant shall cause the
construction contract with the Prime Contractor to require the
Prime Contractor to cause the Improvements being constructed by
it to be constructed (i) in a good and workmanlike manner, (ii)
in material compliance with all requirements of applicable Laws,
(iii) substantially in accordance with the Final Shell
Improvement Plans and Final Interior Improvement Plans as
modified by change orders approved in accordance with the
provisions of this Construction Agreement, and (iv) with all
materials and equipment to be furnished to be new, of good
quality and installed in accordance with the vendor's or
manufacturer's specifications, instructions and requirements.
Tenant shall cause copies of any contractor's, manufacturer's or
installer's warranties received by Tenant to be delivered to
Landlord. Each of the Parties agree that it shall, upon the
other Party's request, cooperate with the other Party in
enforcing any third party warranties with respect to the
construction of any Improvements.
9. EXTENSION OF AGREED CONSTRUCTION PERIOD CAUSED BY
LANDLORD, DAMAGE OR WEATHER DELAYS: If because of any Landlord
Delay, Damage Delay or Weather Delay, Tenant is delayed in
completing any Shell Improvements or Interior Improvements, then
the Agreed Construction Period shall be extended one (1) day for
each day that the substantial completion of such Shell
Improvements and/or Interior Improvements is delayed because of
either a Landlord Delay (as defined in Section 1.N above), a
Damage Delay (as defined in Section 1.M above) or a Weather Delay
(as defined in Section 1.O), which extension of the Agreed
Construction Period may result in a delay in the Rent
Commencement Date (provided that as provided in Section 1.K
above, there shall be no double counting of any delay where the
delay is caused by more than one cause). Absent a willful breach
by Landlord, the remedy provided to Tenant under this Section 9
shall be Tenant's sole and exclusive remedy for any Landlord
Delay, and Landlord shall not be subject to any other liability
of any type whatsoever for any delay in the Substantial
Completion of the Shell Improvements or Interior Improvements.
10. DELIVERY OF DOCUMENTS: Tenant shall, within thirty
(30) days after the same is obtained by Tenant, deliver to
Landlord (i) a copy of any temporary or permanent certificate of
occupancy issued by the City of Mountain View with respect to any
of the Shell Improvements and Interior Improvements, (ii) a
recorded Notice of Completion, (iii) all final lien releases and
(iv) as-built drawings with respect to the Shell Improvements and
Interior Improvements as respectively completed.
11. LANDLORD DISCLAIMER: Except as expressly otherwise
provided in this Construction Agreement or in any Lease, (i)
Landlord shall have no responsibility for the design, engineering
or construction of the Improvements or the maintenance or repair
thereof, and (ii) Landlord makes no representation or warranty
regarding the suitability or quality of the Improvements or any
land entitlements.
12. TAX INCREASES DURING CONSTRUCTION PERIOD:
Notwithstanding anything to the contrary in this Construction
Agreement or the related Leases, in the event prior to the
respective Lease Commencement Date there is an interim or
supplemental reassessment of the Property based upon the added
value of the Shell Improvements and/or Interior Improvements,
then within ten (10) days after Tenant's receipt of the
applicable tax bill from Landlord, Tenant shall pay any interim
or supplemental taxes (but no penalties or interest in connection
therewith) that have been levied against the Property and are
attributable to the added value of the Shell Improvements and/or
Interior Improvements during the period prior to the Lease
Commencement Date. As of the Lease Commencement Date, the
provisions of the Lease shall control as to the payment of Real
Property Taxes accruing thereafter.
13. LANDLORD COOPERATION AND COORDINATION: Landlord shall
cooperate with Tenant to the extent reasonably necessary, at no
cost or liability to Landlord, in Tenant's processing of all
necessary building permits for the construction of the
Improvements. Provided there is no cost or liability to Landlord
with respect to the same, upon the request of Tenant and at no
cost to Tenant, Landlord shall reasonably assist Tenant with the
negotiation of any construction contracts or architect contracts
pertaining to any Shell Improvements and/or Interior Improvements
to be constructed. Landlord shall not be entitled to any fee
for its involvement therein. Notwithstanding any implication
herein to the contrary, other than the failure of Landlord to
approve or execute any documents required to be approved or
executed by Landlord as provided herein, any failure of Landlord
to assist Tenant in the obtaining of any governmental approvals
or in negotiating any contracts shall not form the basis for any
Landlord Delay as defined herein or any Event of Default by
Landlord.
Landlord shall cooperate with Tenant, at no cost to
Landlord, to assist Tenant in obtaining the PCP Permit, any
required building permits and any other permits and approvals
which are required or are desirable from the City of Mountain
View or any other governmental authority for the construction of
any of the Improvements, as well as any other required approval
under any applicable Laws. Landlord's cooperation shall extend
to executing any reasonably appropriate applications for permits,
grants of easements to public utilities or other documents as may
be reasonably required or appropriate for obtaining all required
approvals for the construction of the Improvements or for
satisfying any conditions that may be imposed by the City of
Mountain View or any other governmental authority as a condition
to the PCP Permit, as a condition to any building permit, or as a
condition to any other governmental or public utility approval or
permit to the development of the Property in the manner
contemplated by this Construction Agreement, provided such
conditions do not directly and adversely affect any other real
property (other than the Adjoining Property) owned by any of the
members of Landlord, or any affiliate of any such member.
Landlord shall not be entitled to any fee for management or
coordination of any design or construction professionals engaged
by Tenant in the construction of any Improvements, nor shall
Landlord be entitled to reimbursement for any overhead or
administrative costs associated with its cooperation with Tenant
as provided for in this Construction Agreement. Notwithstanding
any implication herein to the contrary, other than the failure of
Landlord to approve or execute any documents required to be
approved or executed by Landlord as provided herein, any failure
of Landlord to assist Tenant in the obtaining of any governmental
approvals or in negotiating any contracts shall not form the
basis for any Landlord Delay as defined herein or any Event of
Default by Landlord.
It is acknowledged that Landlord and Tenant are
required to cooperate in an effort to obtain City of Mountain
View approval of the PCP Permit and City of Mountain View and the
State of California approval of various agreements associated
with the Burrowing Owl Mitigation Plan (including associated
license agreements with the City of Mountain View and Memorandums
of Understandings with the State of California, Department of
Fish and Game) which are considered necessary or desirable for
obtaining approval for the design or construction of the
Improvements. Landlord agrees that it shall upon the request of
Tenant join in executing any reasonable agreements with such
governmental authorities as are appropriate for the purposes of
obtaining or implementing such approvals if such execution by
Landlord is required by the applicable governmental authority,
with it being further agreed between Landlord and Tenant that for
so long as any Lease shall continue in effect, Tenant shall be
solely responsible for performing any obligations of Landlord
under any such agreements and shall hold Landlord harmless from
any costs, expenses and liabilities relating to the performance
of any such obligations under such agreements (including any
attorneys' fees and costs reasonably incurred by Landlord in
defending against any attempt to require Landlord (as opposed to
Tenant) to perform any such obligations under any such
agreements).
14. CHOICE OF LAW; SEVERABILITY: This Agreement shall in
all respects be governed by and construed in accordance with the
laws in the State of California and the jurisdiction of Santa
Clara County. If any provisions of this Construction Agreement
shall be invalid, unenforceable, or ineffective for any reason
whatsoever, all other provisions hereof shall be and remain in
full force and effect.
15. AUTHORITY TO EXECUTE: The Parties executing this
Construction Agreement hereby warrant and represent that they are
properly authorized to execute this Construction Agreement and
bind the Parties on behalf of whom they execute this Construction
Agreement as to all of the terms, covenants and conditions of
this Construction Agreement as they relate to the respective
Parties hereto.
16. MISCELLANEOUS MATTERS:
A. Representatives of the Parties: Each of Landlord and
Tenant shall designate to the other in writing the name of one
individual representative who will work with the other's
representative throughout the respective period of construction
of the Shell Improvements and Interior Improvements upon the
Property and within each Building. At any time, either Landlord
or Tenant may change the identity of its representative by
delivering written notice to the other of the identity of a
replacement representative.
B. No Fee to Landlord or Tenant: Neither Landlord nor
Tenant nor any affiliate of either shall receive any fee for its
involvement as stated in this Construction Agreement in
connection with the design, review, approval or construction of
the Improvements.
C. Cleanup Expenses: In conjunction with the Substantial
Completion of all of the Improvements for each Building, Tenant
shall thoroughly clean the adjoining portion of the Property and
the applicable Building, including, without limitation, removal
of all rubbish and debris.
D. No Miscellaneous Charges: Neither Tenant nor its
design and construction professionals shall be charged for
parking or the use of parking during the construction of any of
the Shell Improvements and/or the Interior Improvements. Any
utilities consumed during construction of the Shell Improvements
and/or Interior Improvements shall be appropriately allocated as
either a cost of the Shell Improvement or a cost of the Interior
Improvements.
E. Bonding: Notwithstanding anything to the contrary set
forth in the Lease, Tenant shall not be required to obtain or
provide any completion or performance bond in connection with any
construction, alteration or improvement work performed by or on
behalf of Tenant in the design and construction of the Shell
Improvements or the Interior Improvements (other than that Tenant
shall be obligated, in accordance with the requirements of
Section 5.C hereof, to bond against any liens that may be filed
against the Property arising out of any work performed, materials
furnished or obligation incurred by Tenant).
F. Consent: Whenever the consent or approval of one Party
to the other Party's requests, actions or submittals is required
hereunder, such consent or approval shall not be unreasonably
withheld.
IN WITNESS WHEREOF, Landlord and Tenant have executed and
delivered this Construction Agreement as of the day and year
first stated above.
LANDLORD: TENANT:
P/A CHARLESTON ROAD LLC, ALZA CORPORATION,
a California limited liability company a Delaware
corporation
By: /s/ John Arrillaga By: /s/ Gary V. Fulscher
John Arrillaga, Trustee, UTA
dated 7/20/77 (John Arrillaga Title:Senior Vice
President,
Survivor's Trust, formerly known Commercial
Services
as Arrillaga Family Trust), as
amended Gary V. Fulscher
Type or Print Name
By: /s/ Richard T. Perry
Richard T. Peery, Trustee, UTA
dated 7/20/77 (Richard T. Peery
Separate Property Trust), as
amended
By: ALZA Land Management, Inc.,
a Delaware corporation
By: /s/ Gary V. Fulscher
Title: President
Gary V. Fulscher
Type or Print Name
ALZA
Ground Lease
EXHIBIT 10.13
GROUND LEASE
THIS GROUND LEASE (this "Lease"), dated this first day of
September, 1997 is made and entered into by and between Richard T.
Peery, Trustee, or his Successor Trustee, UTA dated July 20, 1977
(Richard T. Peery Separate Property Trust), as amended, and John
Arrillaga, Trustee, or his Successor Trustee, UTA dated July 20, 1977
(John Arrillaga Survivor's Trust, formerly known as the Arrillaga
Family Trust), as amended (collectively, "Landlord"), and ALZA
Corporation, a Delaware corporation ("Tenant").
Landlord and Tenant (sometimes referred to collectively as the
"Parties") agree to the terms, covenants and conditions of this Lease,
as follows:
1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord that certain unimproved parcel of land consisting
of approximately 6.925 acres, located at Amphitheatre Parkway and
Garcia Avenue in Mountain View, California. The 6.925 acres of land
("Premises") leased hereunder is leased strictly on an "as is" basis
and subject to all assessments, covenants, conditions, liens,
encumbrances and title matters and is more particularly described in
Exhibit A attached hereto and by reference made a part hereof. The
Premises together with all buildings ("Buildings") and other
improvements to be located thereon from time to time shall hereafter
be referred to as the "Project".
2. USE.
2.1. Permitted Uses. Subject to all of the terms and provisions of
this Lease, Tenant shall be entitled to use the Project for any lawful
purpose.
2.2. Compliance. Tenant, at its sole cost and expense, shall promptly
comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now or hereafter in effect relating to the
Project; with the requirements of any board of fire underwriters or
other similar body now or hereafter constituted; and with any
direction or occupancy certificate issued pursuant to law by any
public officer; provided, however, that no such failure shall be
deemed a breach of the provisions of this Lease if Tenant, immediately
upon notification, commences to remedy or rectify said failure. The
judgment of any court of competent jurisdiction, following the
expiration of any appeal period, or the admission of Tenant in any
action against Tenant, whether Landlord be a party thereto or not,
that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision,
shall be conclusive of that fact as between Landlord and Tenant.
2.3. Restriction on Use. Tenant shall not do or permit to be done in
or about the Project nor bring or keep or permit to be brought or kept
in or about the Project anything which is prohibited by or will in any
way increase the existing rate of (or otherwise adversely affect) fire
or any insurance covering the Project or any part thereof, or any of
its contents, or will cause a cancellation of any insurance covering
the Project or any part thereof, or any of its contents, except to the
extent that Tenant, upon notice thereof, is able to arrange for the
continuation or replacement of such insurance coverage, with any
increased costs of such continued or replacement insurance to be paid
exclusively by Tenant. No materials, supplies, equipment, finished
products or semi-finished products, raw materials or articles of any
nature shall be stored upon or permitted to remain outside any
Building, except in screened storage areas. Tenant shall not commit
or suffer to be committed any waste in or upon the Project. Tenant
shall indemnify, defend and hold Landlord harmless against any loss,
expense, damage, reasonable attorneys' fees, or liability arising out
of failure of Tenant to comply with any applicable law relating to
Tenant's use of the Project or with which Tenant is otherwise
obligated to comply under the terms of this Lease. The provisions of
this Paragraph are for the benefit of Landlord only and shall not be
construed to be for the benefit of any tenant or occupant of the
Project.
2.4. Hazardous Materials. Landlord and Tenant agree as follows with
respect to the existence or use of "Hazardous Materials" (as defined
herein) on, in, under or about the Project and the real property
located beneath said Project (hereinafter collectively referred to as
the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean any
material, waste, chemical, mixture or byproduct which is or hereafter
is defined, listed or designated under Environmental Laws (defined
below) as a pollutant, or as a contaminant, or as a toxic or hazardous
substance, waste or material, or any other hazardous, toxic,
biohazardous, or radioactive material, waste, chemical, mixture or
byproduct, or which is listed, regulated or restricted by any
Environmental Law (including, without limitation, petroleum
hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term
"Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or public
health and safety.
B. As used herein, the term "Tenant's Hazardous Materials
Activities" shall mean any and all use, handling, generation, storage,
disposal, treatment, transportation, discharge, or emission of any
Hazardous Materials on, in, beneath, to, from, at or about the
Property, in connection with Tenant's use of the Property, or by
Tenant or by any of Tenant's agents, employees, contractors, vendors,
invitees, visitors or its future subtenants or assignees. Tenant
agrees that any and all Tenant's Hazardous Materials Activities shall
be conducted in strict, full compliance with applicable Environmental
Laws at Tenant's expense, and shall not result in any contamination of
the Property or the environment. Tenant agrees to provide Landlord
with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant
becomes aware, and further agrees to provide Landlord with prompt
written notice of any material violation of Environmental Laws in
connection with Tenant's Hazardous Materials Activities of which
Tenant becomes aware. If Tenant's Hazardous Materials Activities
involve Hazardous Materials other than normal use of customary
landscaping, cleaning, household and office supplies and personal use
items, Tenant also agrees at Tenant's expense: (i) to install such
Hazardous Materials monitoring, storage and containment devices as
required by the governing agencies associated with any Tenant's
Hazardous Materials Activities or otherwise specifically required by
any governing agency of Tenant and (ii) provide Landlord annually with
copy of the Hazardous Materials Business Plan that Tenant is required
to file with the Certified Unified Program Agency ("CUPA") that
exercises jurisdiction over the Property at the same time each year
that Tenant files such plan with the CUPA, as contemplated in the
California Health and Safety Code. Tenant, at its expense, shall
promptly undertake and complete any and all steps necessary, and in
full compliance with applicable Environmental Laws, to fully correct
any and all problems or deficiencies relating to Tenant's Hazardous
Materials Activities, and promptly provide Landlord with documentation
of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which came to be located at the Property as a result of
Tenant's Hazardous Materials Activities, and (ii) fully comply with
and complete all facility closure requirements of applicable
Environmental Laws regarding Tenant's Hazardous Materials Activities,
including but not limited to (x) properly restoring and repairing the
Property to the extent damaged by such closure activities, and (y) if
applicable, obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written
concurrence that closure has been completed in compliance with
applicable Environmental Laws. Tenant shall promptly provide Landlord
with copies of all claims, notices, work plans, data and reports
prepared, received or submitted in connection with any such closure
activities.
D. If Landlord, in its reasonable discretion, believes that the
Property has become contaminated as a result of Tenant's Hazardous
Materials Activities, Landlord in addition to any other rights it may
have under this Lease or under Environmental Laws or other laws, may
enter upon the Property and conduct inspection, sampling and analysis,
including but not limited to obtaining and analyzing samples of soil
and groundwater, for the purpose of determining the nature and extent
of such contamination. Tenant shall promptly reimburse Landlord for
the costs of such an investigation, including but not limited to
reasonable attorneys' fees, Landlord incurs with respect to any such
investigation that discloses Hazardous Materials contamination for
which Tenant is liable under this Lease. Except as may be required of
Tenant by applicable Environmental Laws, Tenant shall not perform any
invasive sampling, testing, or drilling to identify the presence of
any Hazardous Materials at the Property, without Landlord's prior
written consent which shall not be unreasonably withheld. Tenant
shall promptly provide Landlord with copies of any claims, notices,
work plans, data and reports prepared, received or submitted in
connection with any sampling, testing or drilling performed pursuant
to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, members, and agents from and against any and all claims
(including, but not limited to, third party claims from a private
party or a government authority), liabilities, obligations, losses,
causes of action, demands, governmental proceedings or directives,
fines, penalties, expenses, costs (including but not limited to
reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's
Hazardous Materials Activities which occur during the Lease Term; (ii)
any Hazardous Materials contamination caused by Tenant prior to the
Lease Commencement Date; or (iii) the breach of any obligation of
Tenant under this Paragraph 2 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully
reimburse Landlord for losses in or reductions to rental income, and
diminution in fair market value of the Property caused by or resulting
from any such indemnified matter. Tenant's Environmental
Indemnification shall further include but is not limited to the
obligation to diligently and properly implement to completion, at
Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action (collectively, "Response Actions")
associated with any such indemnified matter. Tenant shall promptly
provide Landlord with copies of any claims, notices, work plans, data
and reports prepared, received or submitted in connection with any
Response Actions.
F. It is agreed that the Tenant's responsibilities related to
Hazardous Materials will survive the expiration or termination of this
Lease and that Landlord may obtain specific performance of Tenant's
responsibilities under this Paragraph 2. It is further acknowledged
by the Parties that Exhibit B attached hereto reflects certain
Hazardous Materials that Tenant and its environmental consultants,
during their earlier analysis, inspection and testing of the Property,
determined existed on or about the Property ("Existing
Contamination"). The Parties agree that notwithstanding anything to
the contrary in this Lease, Tenant's Environmental Indemnification
shall not extend to, and Tenant shall have no responsibility,
liability or indemnification obligation to Landlord under this Lease
or at law for, any Hazardous Materials present in, on, under or about
the Property as of the date of this Lease or for any Hazardous
Materials in groundwater that may hereafter migrate to or under the
Property, including any such Existing Contamination (including, but
not limited to, in the event of any release of any such Existing
Contamination or any migration of any such Existing Contamination onto
or off of the Property), except to the extent, and then only to the
extent, to which Tenant may contribute to any such Existing
Contamination or may cause any such Existing Contamination to be
released or migrate.
3. TERM.
3.1. Commencement Date. The term of this Lease shall commence as of
November 1, 1997 (the "Commencement Date") and shall continue for a
period of thirty-three (33) years and nine (9) months thereafter,
expiring on July 31, 2031 (the "Lease Term"), unless sooner terminated
as provided herein. Prior to the Commencement Date, Tenant shall pay
to Landlord an amount equal to $1,989,396.52 as a lease commitment fee
("Lease Commitment Fee") in consideration for Landlord's holding the
Premises off of the market during the period of negotiation of this
Lease. Tenant's failure to pay such amount to Landlord prior to the
Commencement Date shall create the same rights and remedies in favor
of Landlord as Tenant's failure to pay Rent under this Lease.
3.2. Proration. In the event that the Lease Term for any reason ends
on a date other than the last day of a calendar month, on the first
day of the last calendar month of the Lease Term, Tenant shall pay to
Landlord as rent for the period from the first day of said last
calendar month to and including the last day of the term hereof that
proportion of the rent then due hereunder which the number of days
between the first day of said last calendar month and the last day of
the term hereof bears to thirty (30).
3.3. Rescission Right. Tenant submitted on August 21, 1997 to the
City of Mountain View, California an application for a Planned
Community Permit (the "PCP Permit") seeking approval for Tenant to
proceed generally thereafter with seeking the issuance of building
permits for the construction of two (2) Buildings on the Premises
together with three other buildings on certain adjacent property
(constituting 13.48 acres located at Amphitheatre Parkway and
Charleston Road in Mountain View) which adjacent property is the
subject of a certain Construction Agreement between Tenant and P/A
Charleston Road LLC dated September 1, 1997 (the "Construction
Agreement"). As provided in Section 2C of the Construction Agreement,
either P/A Charleston Road LLC or Tenant shall have the right to
terminate the Construction Agreement and certain other agreements
pursuant to the provisions of the Construction Agreement upon written
notice to the other within five (5) business days after the "Outside
Date", if the City Council of the City of Mountain View, California
fails to finally approve and cause the issuance by the City of
Mountain View of the PCP Permit in satisfaction of the requirements
set forth in Section 1.K of the Construction Agreement (which Section
1.K sets forth the standards for acceptability of the PCP Permit) on
or before the Outside Date (as such Outside Date may have been
extended by Landlord). As provided in the Construction Agreement, the
Outside Date is initially agreed to be the date of October 31, 1997,
but is subject to certain rights of P/A Charleston Road LLC as set
forth in the Construction Agreement to extend the Outside Date. As
respects this Lease, Landlord and Tenant agree that if either P/A
Charleston Road LLC or Tenant validly exercise their right under
Section 2C of the Construction Agreement to terminate the Construction
Agreement, then in such event (i) this Ground Lease shall be deemed
automatically rescinded, (ii) if Tenant has theretofore paid to or
for the benefit of Landlord the Lease Commitment Fee, any Base Rent or
any Additional Rent hereunder, any and all such amounts shall be
promptly repaid by to Tenant by Landlord, (iii) Landlord and Tenant
shall acknowledge in writing the formal rescission of this Lease, and
(iv) Landlord shall thereupon be free to lease the Premises to anyone
without regard to Tenant.
4. RENT.
4.1. Base Rent. Commencing as of the Commencement Date, Tenant
shall pay monthly base rent ("Base Rent") as hereinafter set forth to
Landlord without deduction, offset, prior notice, or demand, in
advance on the first day of each calendar month of the Lease Term and
in lawful money of the United States. On November 1, 1997, the sum of
One Hundred Forty One Thousand Four Hundred Twenty Four and 98/100
Dollars ($141,424.98) shall be due, and a like sum due on the first
day of each month thereafter, through and including August 1, 2001.
The Base Rent shall be increased pursuant to Paragraph 4.2 below. Base
Rent shall be absolutely net to Landlord. Tenant shall pay directly
to the charging entity or authority all other costs, expenses, charges
or required payments of any nature whatsoever related to the Property,
and shall reimburse Landlord for any such charges incurred by Landlord
as provided in Paragraph 4.3 below.
4.2. Base Rent Increases. The Base Rent provided for in Paragraph 4.1
above shall be subject to adjustment on September 1, 2001 (the "First
Adjustment Date"), and annually thereafter on every subsequent
September 1st occurring during the Lease Term (each of which dates is
an "Adjustment Date") as follows:
A. Index. The base for computing the adjustment shall be the
Consumer Price Index for All Urban Consumers (base year 1982-84 = 100)
for the San Francisco/Oakland/ San Jose Metropolitan Area, published
by the United States Department of Labor, Bureau of Labor Statistics
(the "Index"). The "Beginning Index" for an Adjustment Date shall be
(i) with respect to the first Adjustment Date (i.e. September 1,
2001), the Index in effect for the month of September 1996, and (ii)
with respect to each subsequent Adjustment Date, the Index for the
month in which the immediately preceding Adjustment Date occurred
(i.e. September of each year beginning with September 2001). The
"Adjustment Index" for an Adjustment Date shall be the Index for the
month in which the Adjustment Date occurs.
B. Calculation of Increase. If the Adjustment Index as of any
Adjustment Date has increased over the Beginning Index, the monthly
Base Rent for the following twelve (12) months (until the next
Adjustment Date) shall be determined by multiplying the Base Rent in
effect on the day prior to said Adjustment Date by a fraction, the
numerator of which is the Adjustment Index and the denominator of
which is the Beginning Index. In no event, however, shall the Base
Rent be reduced from the Base Rate, as previously adjusted. For
Example; if the CPI Index for September 1996 is 147.5 and the CPI
Index for September 2001 is 152.1, the ratio of the CPI Index is 152.1
/ 147.5= 103.119%; therefore the Base Rent in effect for the year
commencing September 1, 2001 shall be $141,424.98 x 103.119% =
$145,836.05; then if the CPI Index for September 2002 is 151.9, the
change in the CPI Index is 151.9 / 152.1 = .9987%; therefore the
monthly Base Rent for the year commencing September 1, 2002 would
remain at $145,836.05.
C. Change in Index. If the Index is changed so that the base year
differs from that in effect on the Commencement Date, the Index shall
be converted in accordance with the conversion factor published by the
United States Department of Labor, Bureau of Labor Statistics. If the
Index remains in effect but is not published for the specific calendar
month which includes the Adjustment Date, then the index which is
published for the most immediately preceding calendar month to the
Adjustment Date shall instead be used. If the Index is discontinued
or revised during the term of the Lease, such other government index
or computation with which it is replaced, as determined by Landlord,
shall be used in order to obtain substantially the same result as
would have been obtained if the Index had not been discontinued or
revised. If no governmental agency publishes a replacement for the
Index, Landlord shall be entitled to use such private index or
computation as most closely approximates the Index, as determined by
Landlord.
D. Acknowledgment of Adjusted Rent. Upon adjustment of the Base
Rent as provided above, the parties shall immediately execute a
written acknowledgment of the new monthly Base Rent. In the event the
Adjustment Index will not be available until after the applicable
Adjustment Date, Tenant shall continue to pay monthly Base Rent at the
rate in effect on the day immediately preceding the applicable
Adjustment Date until such time as the Adjustment Index becomes
available and notice of the adjusted monthly Base Rent is given by
Landlord to Tenant, at which time the adjustment provided in this
Paragraph 4.2 shall be made retroactively to the Adjustment Date, and
Tenant shall promptly pay to Landlord the aggregate amount, if any, by
which the new Base Rent thus determined exceeds the Base Rent actually
paid by Tenant for the period from and after the Adjustment Date. The
monthly Base Rent shall be subject to a CPI adjustment on the
following dates: September 1, 2001; September 1, 2002; September 1,
2003; September 1, 2004; September 1, 2005; September 1, 2006;
September 1, 2007; September 1, 2008; and September 1, 2009; September
1, 2010; September 1, 2011; September 1, 2012; September 1, 2013;
September 1, 2014; September 1, 2015; September 1, 2016; September 1,
2017; September 1, 2018; September 1, 2019; September 1, 2020;
September 1, 2021; September 1, 2022; September 1, 2023; September 1,
2024; September 1, 2025; September 1, 2026; September 1, 2027;
September 1, 2028; September 1, 2029; and September 1, 2030.
4.3. Additional Rent.
A. Tenant shall pay directly to the charging authority or, to the
extent Landlord incurs any of the below-described expenses or charges,
to Landlord, in addition to Base Rent during the Lease Term,
additional rent ("Additional Rent") equal to the sum of the following:
1. All Real Property Taxes relating to the Project as set
forth in Paragraph 10;
2. All Operating Expenses relating to the Project as set forth in
Paragraph 6; and
3. All charges, costs and expenses which Tenant is required to pay
hereunder, together with all interest and penalties, costs and
expenses, including reasonable attorneys' fees and legal expenses,
that may accrue thereon in the event of Tenant's failure to pay such
amounts, and all damages, reasonable costs and expenses which Landlord
may incur by reason of default of Tenant (pursuant to Paragraph 15 of
this Lease, i.e. Tenant has received notice of a default under this
Lease and the applicable cure period has expired and Tenant has not
then cured such default) or failure on Tenant's part to comply with
the terms and conditions of this Lease.
4. Tenant shall be solely responsible and liable for the
Project's share (which is equal to 34% of the total) for the design,
implementation and maintenance (and 34% of all reasonable costs and
expenses related thereto) of the burrowing owl mitigation program as
related to this Project and to the adjacent 13.48 acres located at
Amphitheatre Parkway and Charleston Road in Mountain View. It is
agreed that if the Lease is terminated as set forth in Paragraph 3.3
above, that all such costs for the design, implementation and
maintenance of the burrowing owl mitigation program incurred prior to
the Lease commencement or accrued through the date of such termination
shall be borne by Tenant.
5. It is the intention of the parties hereto that this
Lease shall be deemed and construed to be a "net lease" and that Tenant
shall pay to Landlord, absolutely net, throughout the Term of this
Lease, the Base Rent and other payments due hereunder free of any
charges, assessments, impositions, or expenses or deductions of any
kind and without abatement, deduction or offset, and under no
circumstances or conditions, whether now existing or hereafter
arising, or whether within or beyond the present contemplation of the
parties, shall Landlord bear any such costs.
B. In the event of nonpayment by Tenant of Additional Rent,
Landlord shall have all the rights and remedies with respect thereto as
Landlord has for nonpayment of Base Rent. Notwithstanding anything to
the contrary in the definition of Additional Rent as set forth in
Paragraph 4.3A or Paragraph 10, Additional Rent shall not include any
of the following:
1. Any ground or underlying lease rental;
2. Bad debt expenses and interest, principal, points
and fees on debts, bad debt expenses or amortization on any mortgage
or other debt instrument encumbering all or any portion of the Project;
3. Depreciation on the Project, amortization and interest
(on loans Landlord may have against the Project);
4. Except as otherwise provided in this Lease,
marketing costs, including leasing commissions, attorneys' fees, space
planning costs,and other costs and expenses incurred in connection with
lease negotiations; and
5. Costs incurred due to the violation by Landlord of
the terms and conditions of this Lease.
The Additional Rent due hereunder shall be paid to Landlord or
Landlord's agent (i) within ten (10) days for Real Property Taxes (to
the extent such Real Property Taxes shall be payable to the applicable
taxing authority within thirty (30) days after the date of
presentation of such invoice) and within thirty (30) days for all
other Additional Rent items (if any), after presentation of invoice
from Landlord or Landlord's agent setting forth such Additional Rent
and/or (ii) at the option of Landlord (except with respect to Real
Property Taxes), Tenant shall pay to Landlord monthly, in advance,
Tenant's pro rata share of an amount estimated by Landlord to be
Landlord's approximate average monthly expenditure for such Additional
Rent items, which estimated amount shall be reconciled within one
hundred twenty (120) days after the end of each calendar year, or more
frequently if Landlord elects to do so at Landlord's sole and absolute
discretion, as compared to Landlord's actual expenditure for said
Additional Rent items, with Tenant paying to Landlord, upon demand,
any amount of actual expenses expended by Landlord in excess of said
estimated amount, or Landlord refunding to Tenant (provided Tenant is
not in default in the performance of any of the terms, covenants and
conditions of this Lease pursuant to Paragraph 15 of this Lease, i.e.
Tenant has received notice of a default under this Lease and the
applicable cure period has expired and Tenant has not then cured such
default) any amount of estimated payments made by Tenant in excess of
Landlord's actual expenditures for said Additional Rent items.
4.4. Late Charge and Interest. Notwithstanding any other provision
of this Lease, if any installment of Base Rent and/or Additional Rent
(collectively "Rent") is not received by Landlord from Tenant within
nine (9) calendar days after the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to ten
percent (10%) of the amounts due and not so paid. In no event shall
this provision for a late charge be deemed to grant Tenant a grace
period or extension of time within which to pay any Rent installment
as set forth in this Paragraph 4 or to prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's
failure to pay each Rent installment due under this Lease when due.
If any Rent remains delinquent for a period in excess of nine (9)
calendar days, then, in addition to such late charge, Tenant shall pay
to Landlord interest on any Rent that is not so paid from said ninth
day at the rate of Bank of America's Prime Rate (or equivalent rate)
plus five percent (5%) per annum on the unpaid amount, but in no event
greater then the maximum rate of interest permitted by applicable law,
until paid in full.
4.5. Triple Net Lease. It is intended by the parties (i) that the
Rent provided for in this Paragraph 4 shall be absolutely net to
Landlord throughout the Term of this Lease, free of any expenses,
charge or deduction whatsoever, and that payment of all charges or
expenses, including without limitation, property taxes and
assessments, parking surcharges, rent taxes, environmental
investigations, responses, abatement, amelioration and remediation,
insurance, repair and maintenance, utilities, repairs, constructions,
reconstruction, shall be the responsibility of Tenant and at Tenant's
sole cost and expense and (ii) that the Rent is due as stated in this
Lease regardless of the status of any Buildings or other improvements
that may be constructed by Tenant on the Premises (collectively
"Improvements").
4.6. Place of Payment. All Base Rent hereunder and all payments
hereunder for Additional Rent shall be paid to Landlord at: File 1504,
Box 60000, San Francisco, California 94160, or to such other person or
to such other place as Landlord may from time to time designate in
writing.
4.7. Audit Rights. Within sixty (60) days after receipt of
Landlord'swritten reconciliation together with supporting documentation,
Tenant shall have the right, at Tenant's sole expense, to commence a review
and/or audit, at a mutually convenient time at Landlord's office, of
Landlord's records relating to the foregoing expenses. Any audit must
be conducted by Tenant or an independent nationally recognized
accounting firm that is not being compensated by Tenant or other third
party on a contingency fee basis. If an audit (not a review) reveals
that Landlord has overcharged Tenant, the amount overcharged shall be
credited to Tenant's account within thirty (30) days after the audit
is concluded.
4.8. Survival. The respective obligations of Landlord and Tenant
under this Paragraph 4 shall survive the expiration or other
termination of the Lease Term.
5. MAINTENANCE AND REPAIRS.
5.1. Tenant's Obligations. Following Tenant's construction of any
Improvements, Tenant shall, at Tenant's sole cost, keep such
Improvements in good and safe condition, order and repair. Tenant
hereby waives the benefit of any statute now or hereinafter in effect
which would otherwise afford Tenant the right to make repairs at
Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Project in good condition, order and repair.
Tenant specifically waives all rights it may have under Sections
1932(1), 1941, and 1942 of the California Civil Code, and any similar
or successor statute or law.
5.2. No Obligations or Liability for Landlord. Landlord shall not be
obligated to make any repairs or replacements of any kind, nature or
description whatsoever to the Project or any portion thereof.
Landlord shall not be liable for any loss, damage or injury of any
kind, nature or character to any person or property arising from any
use of the Project, or caused by any defect in any Building or other
improvements to be constructed thereon or in any equipment or other
facility therein, or caused by or arising from any act or omission of
Tenant or any of its agents, employees, licensees, or invitees or by
or from any accident on the Project or any fire or other casualty
thereon, or occasioned by the failure of Tenant to maintain the
Project or any Improvements constructed thereon in a safe condition;
and Tenant, as a material part of the consideration of this Lease,
waives on its behalf all claims and demands against Landlord for any
such loss, damage, or injury of Tenant or other third parties.
6. OPERATING EXPENSES. In addition to the Rent to be paid by Tenant
under Paragraph 4, Tenant shall at its sole expense, pay for any and
all costs of every kind and nature related to the construction,
maintenance, operation or repair of the Project and/or to Tenant's use
thereof during the term of this Lease.
7. ACCEPTANCE AND SURRENDER OF PREMISES.
7.1. Tenant acknowledges that Tenant is accepting the Premises "as-is"
and has inspected the Premises hereunder and observed its physical
characteristics and conditions and hereby waives any and all
objections to the Premises. Tenant acknowledges that neither Landlord
nor any of Landlord's employees, agents, or representatives has made
any representations, warranties, or agreements concerning the present
use thereof, or the suitability of Tenant's intended use of the
Premises.
7.2. Tenant further acknowledges and agrees that no patent or latent
physical condition of the Premises, whether known or unknown, or
discovered, shall affect the rights or obligations of either party
hereto. All costs, fees, studies, reports, approvals, plans, surveys,
permits, and expenses whatsoever necessary or desirable in connection
with Tenant leasing, using and/or operating the Project shall be
obtained and paid for by and shall be the sole responsibility of
Tenant. Tenant has investigated and has knowledge of operative or
proposed governmental laws and regulations (including, but not limited
to, zoning, environmental (including the Environmental Protection
Agency and the Bay Area Pollution Control District), and land use laws
and regulations and obligations) to which the Project may be subject,
and is leasing the Premises upon the basis of its review and
determination of the applicability and effect of such laws and
regulations. Tenant has neither received nor relied upon any
representations concerning such laws and regulations made by Landlord,
Landlord's employees, agents, or any other person acting on or in
behalf of Landlord.
7.3. Tenant has obtained a Preliminary Title Report (the "Title
Report") on the Premises showing the present state of title, a copy of
which is attached hereto as Exhibit C. Tenant agrees to accept its
leasehold of the Premises in its present state based on its own
investigation and examination and the Title Report and other studies
and investigations Tenant has conducted. Except as expressly provided
in this Lease or in the Purchase Agreement attached hereto as Exhibit
D, Landlord makes no warranty and shall not be liable to Tenant with
respect to this Lease (or title to the Project if Tenant exercises its
Option to Purchase the Premises as set forth in Paragraph 33) or with
respect to the Preliminary Title Report or conditions of title to the
Premises or any unrecorded easements or easements by use or other
conditions or defect of title, if any. Tenant shall be obligated to
make its own investigation as to the state of title to the Premises
and to obtain prior to execution of this Lease any title insurance
that Tenant may desire. Notwithstanding the foregoing, Landlord
agrees that other than any financing which may be permitted by the
terms of this Lease, it shall take no action after the date of this
Lease which would create any lien or other encumbrance upon the
Premises without the prior written consent of Tenant, which consent
Tenant may withhold in its reasonable discretion.
7.4. Tenant agrees on the last day of the Lease Term, or on the sooner
termination of this Lease, to surrender the Project and every portion
thereof promptly to Landlord in good condition and repair (damages by
acts of God, fire, normal wear and tear excepted). Any Improvements
which may have been made in, to, or on the Project and which exist as
of such date shall be surrendered in good condition and repair,
provided that Tenant shall have the right to remove any trade fixtures
and any permanently attached lab fixtures and equipment in any
Building or on the roof of any Building, including any electrical,
plumbing, ventilation or air conditioning equipment associated with
supporting the specific requirements of any other lab equipment
(collectively "Trade Fixtures"). On or before the end of the Lease
Term or sooner termination of this Lease, Tenant shall remove all of
Tenant's personal property and Trade Fixtures from the Project, and
all property not so removed shall be deemed abandoned by Tenant and
title to same shall thereupon pass to Landlord without compensation to
Tenant. Upon termination of this Lease, Landlord may remove all
moveable furniture and equipment so abandoned by Tenant, at Tenant's
sole cost, and repair any damage caused by such removal.
Notwithstanding anything to the contrary herein or in this Lease,
Landlord may, at its sole and absolute discretion, require Tenant (at
Tenant's sole cost and expense) to remove any and/or all of the
Improvements and Alterations to the Project upon Lease Termination.
8. IMPROVEMENTS AND ALTERATIONS.
8.1. Initial Improvements. It is currently contemplated that Tenant
will construct prior to September 1, 2003, at Tenant's sole cost and
expense, one or more Buildings, and all on and off site work,
including landscaping (collectively referred to as "Initial
Improvements"). The Initial Improvements, if constructed, shall in
all events comply with the requirements of the PCP Permit ultimately
issued by the City of Mountain View ("PCP"). Landlord hereby
approves, subject to the terms and conditions of this Lease, Tenant's
construction of the Initial Improvements so long as the exterior
components thereof are generally in conformity with the PCP as such
PCP is ultimately issued by the City of Mountain View. If Tenant
desires to make any material changes to the exterior design of the
Initial Improvements, then prior to submitting any application for
amendment of the PCP to the City of Mountain View, Tenant shall
deliver such proposed amendment to Landlord for Landlord's review and
approval, which approval will not be unreasonably withheld or delayed.
Any such disapproval must be in writing stating with particularity the
reasons for such disapproval and the actions Tenant may take to modify
such proposal in a manner that Landlord would approve. Landlord's
failure to deliver such written disapproval within five (5) business
days after Tenant has delivered such request for approval to Landlord
shall be deemed Landlord's approval of such proposed amendment to the
PCP. Landlord shall cooperate with Tenant as reasonably requested by
Tenant with respect to any required governmental approvals, including,
without limitation, any application for amendment of the PCP, in
connection with the Initial Improvements, including the signing of any
reasonable applications or requests which are required to be signed by
the owner of the Project in order to obtain required approvals,
provided that Landlord shall not be required to incur any costs or
expenses or liability in connection therewith. Without limiting
Landlord's discretion concerning its approval rights as to any
amendments to the PCP that Tenant may reasonably request, the parties
agree that (i) Tenant shall not, without Landlord's prior written
consent, design or seek governmental approvals to construct more than
120,000 square feet of floor area (calculated as square footage is
calculated by the City of Mountain View pursuant to the City of
Mountain View Shoreline West Precise Plan) within the Initial
Improvements, and (ii) the general design of the Initial Improvements
shall be reasonably compatible, as reasonably determined by Landlord,
with the design of the buildings to be constructed on the 13.48 acre
parcel of property located on the opposite side of Amphitheater
Parkway from the Project. Promptly following completion of the
Initial Improvements, Tenant shall deliver to Landlord as built
drawings thereof on original sepia drawn to 1/8" scale, prepared at
Tenant's sole cost. Notwithstanding the foregoing, if Tenant fails to
substantially complete construction of the Initial Improvements on or
before September 1, 2003, then Landlord may, by written notice to
Tenant delivered at any time after such date and prior to substantial
completion of the Initial Improvements, elect to terminate this Lease,
which termination shall be effective ninety (90) days following the
date of delivery of such written notice to Tenant. Notwithstanding
the foregoing, (i) if Tenant substantially completes the construction
of the Initial Improvements prior to the expiration of such ninety-day
period, then such termination notice shall be deemed rescinded, and
(ii) if Tenant delivers to Landlord an Exercise Notice of the Purchase
Option to purchase the Premises as contemplated in Paragraph 34 of
this Lease, prior to the expiration of such 90-day period, then such
termination notice shall be deemed suspended until the date upon which
the closing pursuant to the Purchase Option is scheduled to occur
under the terms of this Lease. If Tenant thereafter fails to perform
its obligations under the Purchase Option after Tenant's delivery of
the Exercise Notice for any reason other than Landlord's failure to
perform its obligations with respect to the Purchase Option, then the
termination notice earlier delivered to Tenant by Landlord shall be
deemed reinstated, effective as of the business day following the
scheduled date for such closing which did not occur.
8.2. Assignment of Plans. Tenant hereby assigns to Landlord,
effective as of (i) the date of rescission of this Lease pursuant to
Paragraph 3.3 above or (ii) the date that Tenant comes to be in
default (pursuant to Paragraph 15 of this Lease, i.e. Tenant has
received notice of a default under this Lease and the applicable cure
period has expired and Tenant has not then cured such default), all of
its interest in and to the plans and specifications prepared for the
Initial Improvements, all studies, data and drawings with respect
thereto prepared by or for Tenant, and the contracts and agreements
relating to such plans and specifications or studies, data and
drawings, or to the construction or the Initial Improvements,
including but not limited to the general contract therefor, in each
case, to the extent assignable and without any representation or
warranty (but fully paid for by Tenant through the date of such
assignment), but Landlord shall not have any obligation under those
contracts or agreements unless it expressly agrees to assume such
obligations in writing. Landlord shall have the right to exercise any
rights of Tenant under those contracts and agreements or with respect
to such plans, specifications, studies, data and drawings at any time
following the occurrence of such assignment. If this Lease terminates
without the Purchase Option or Sales Option being exercised in
accordance with Paragraph 34 of this Lease, then Tenant shall at such
time assign its interest in the foregoing plans and other documents to
Landlord. Any assignment of any plans or other documents under this
Paragraph shall be made by Tenant to Landlord at no charge to
Landlord.
8.3. Subsequent Alterations and Additions. Following the completion
of the Initial Improvements, Tenant may make alterations to any
Building ("Alterations") without the prior written consent of
Landlord, provided Tenant (i) gives Landlord a minimum of five (5)
business days written notice of its intent to make any material
modifications to any Building; and (ii) as to any material Alteration,
provides to Landlord, upon completion of said construction, a 1/8
inch scale sepia "as built" plan reflecting said alterations and/or
additions. Notwithstanding the foregoing, Tenant shall not make any
Alteration to the exterior of any Building that would be inconsistent
with the design approved by the PCP, as amended with Landlord's
consent as provided above, unless Landlord first consents to such
Alteration, which consent shall not be unreasonably withheld.
8.4. Plans and Permits. Any Alteration to the Project which requires
the consent of Landlord shall be presented to Landlord in written form
for Landlord's approval, with proposed detailed plans and
specifications therefor, including an original sepia at 1/8" scale,
prepared at Tenant's sole cost. Any consent by Landlord thereto shall
be deemed conditioned upon Tenant's acquisition of all permits
required to make such Alterations from all appropriate governmental
agencies, the furnishing of copies thereof to Landlord prior to
commencement of the work, and the compliance by Tenant with all
conditions of said permits, all at Tenant's sole cost. Upon
completion of any such Alterations, Tenant shall, at Tenant's sole
cost, immediately deliver to Landlord "as-built" plans and
specifications therefor, including an original sepia at 1/8" scale,
prepared at Tenant's sole cost. Landlord shall cooperate with Tenant
as reasonably requested by Tenant with respect to any required
governmental approvals, including, without limitation, any application
for amendment of the PCP, in connection with the Alterations,
including the signing of any reasonable applications or requests which
are required to be signed by the owner of the Project in order to
obtain required approvals, provided that Landlord shall not be
required to incur any costs or expenses or liability in connection
therewith.
8.5. Construction Work Done by Tenant. All construction work required
or permitted to be done by Tenant, including the Initial Improvements,
shall be performed by a licensed contractor, at Tenant's sole cost and
expense, and in a good and workmanlike manner. All exterior
construction work subsequent to the completion of the Initial
Improvements shall conform in quality and design with that of the
Initial Improvements. All construction work shall be performed in
compliance with all applicable Governmental Regulations. Tenant shall
pay, when due, all claims for labor or materials furnished or alleged
to have been furnished to or for Tenant at or for use in the Project,
which claims are or may be secured by any mechanic's liens.
8.6. Title to Initial Improvements and/or Alterations. Any Initial
Improvements and/or Alterations which may be made on the Project and
not earlier removed by Tenant as a result of any earlier Alterations
to the Project shall become the property of Landlord upon the
expiration or earlier termination of this Lease. Without limiting the
generality of the foregoing, all heating, lighting, electrical
(including all wiring, conduits, main and subpanels), air
conditioning, partitioning (except movable partitions), drapery, and
carpet installations made by Tenant, regardless of how affixed to the
Project, unless included within the definition herein of Trade
Fixtures (as defined in Paragraph 7.4 above), shall be and become the
property of Landlord upon the expiration or earlier termination of
this Lease, and shall remain upon and be surrendered with the Project
at the expiration or sooner termination of this Lease. Tenant's
furnishings, machinery, equipment and Trade Fixtures, shall remain the
property of Tenant and may be removed by Tenant, and Tenant shall, at
Tenant's sole cost, immediately after removal repair any damage to the
Project caused thereby. Tenant shall be solely responsible for the
maintenance and repair of any and all Alterations made by Tenant to
the Project.
8.7. Notice. Tenant shall give Landlord notice of the date of
commencement of any work in the Project not less than five (5)
business days prior thereto, and Landlord shall have the right to post
notices of non-responsibility or similar notices in or on the Project
in connection therewith.
9. UTILITIES AND SERVICES. Tenant shall pay when due all metering
and, if applicable, connection charges and all costs of utility
services used upon or furnished to the Project. Tenant shall pay when
due all charges for water, gas, electricity, telephone, refuse pickup,
janitorial services, and all other utilities and services supplied or
furnished to the Project during the term of this Lease, together with
any taxes thereon, directly to the charging entity, and, if, due to
Tenant's failure to pay any such amounts prior to delinquency,
Landlord should elect to pay any such charges on Tenant's behalf,
Tenant shall reimburse Landlord for such amounts as Additional Rent
within ten (10) days after written request therefor. In no event
shall Landlord be liable to Tenant for any failure or interruption in
utility or service. No failure or interruption of any such utilities
or services shall entitle Tenant to terminate this Lease or to
withhold Rent or other sums due hereunder. Landlord shall not be
responsible for providing security guards or services or any other
services for any portion of the Project, and Tenant shall at its own
expense provide all such services.
10. TAXES.
10.1. Real Property Taxes. Tenant shall pay directly to the
applicable tax collector ("Tax Collector") and prior to delinquency
all Real Property Taxes (as hereinafter defined) which become due
during the Lease Term, as Additional Rent. The term "Real Property
Taxes" as used herein shall mean (1) all taxes, assessments, levies,
and other charges of any kind or nature whatsoever, general and
special, foreseen and unforeseen (including all installments of
principal and interest required to pay any general or special
assessments for public improvements and any increases resulting from
reassessments caused by any change in ownership of the Premises or the
Project) now or hereafter imposed by any governmental or quasi-
governmental authority or special district having the direct or
indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to (a) the value, occupancy, or use
of, all or any portion of the Premises or the Project (as now
constructed or as may at any time hereafter be constructed, altered,
or otherwise changed) or Landlord's interest therein, including
Landlord's interest in this Lease; or (b) any improvements located on
the Premises or the Project (regardless of ownership); and (2) all
area wide taxes, charges, levies or fees imposed by reason of
environmental regulation or other governmental control of the Project.
If at any time during the Lease Term the taxation or assessment of the
Project prevailing as of the Commencement Date shall be altered so
that in lieu of or in addition to any Real Property Taxes described
above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new
tax or charge, or any other cause) an alternate or additional tax or
charge (a) on the value, use or occupancy of the Project or Landlord's
interest therein; (b) on or measured by the gross receipts, income or
rentals from the Project; (c) on Landlord's business of leasing the
Premises; or (d) computed in any manner with respect to the operation
of the Premises or the Project, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real
Property Taxes". Notwithstanding the foregoing, the term "Real
Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax
imposed on Landlord's income from all sources. Notwithstanding
anything within this Paragraph 10.1, it is agreed that if any special
assessments for capital improvements are assessed, and if Landlord has
the option to either pay the entire assessment in cash or go to bond,
Landlord shall elect to go to bond so that Tenant will pay such
special assessment in installments rather than in a lump sum. It is
additionally agreed that Tenant shall have the right, at Tenant's sole
cost and expense, to contest with any taxing authority or appellate
body the imposition or amount of any Real Property Tax, but any such
contest shall not excuse Tenant from any of its obligations hereunder
as to paying any such Real Property Tax when payable hereunder. In
addition, Landlord agrees to consult with Tenant in advance of any
contemplated change in ownership of the Project so as to have the
benefit of Tenant's recommendations, if any, as to any possible way to
avoid any reassessment of the Project, but regardless of any such
consultation, Landlord shall have no obligation to Tenant to follow,
or any liability to Tenant for failing to follow, any recommendations
of Tenant.
10.2. Taxes on Tenant's Property. Tenant shall pay at least ten
(10) days prior to delinquency all taxes, license fees and public
charges assessed or levied against all equipment, personal property or
trade fixtures placed by Tenant in or about the Project. If any such
taxes, fees or charges are levied against Landlord or the Project or
if the assessed value of the Project is increased by the inclusion
therein of the value placed upon such equipment, personal property or
trade fixtures of Tenant and if Landlord pays the taxes, fees or
charges based on such increased assessment due to Tenant's failure to
pay the same prior to delinquency, which Landlord shall have the right
to do regardless of the validity thereof, Tenant shall upon demand,
repay to Landlord the taxes, fees or charges so levied against
Landlord, or the proportion thereof such taxes resulting from such
increase in the assessment.
11. INSURANCE.
11.1. Builder's Risk Insurance. Tenant shall obtain and keep in
force, at its sole cost, upon the commencement and during the period
of construction of the Initial Improvements, until completion of
construction of the Initial Improvements, a policy of builder's
completed value risk insurance against all risks of physical loss in
the amount of the guaranteed replacement cost of the Initial
Improvements and insurance against loss or damage to personal property
located on the Project by fire and other hazards covered by such
insurance, for the aggregate cost of the work performed and equipment
and supplies and materials furnished.
11.2. Tenant's Liability Insurance. Tenant shall, at Tenant's
sole cost, keep in force during the Lease Term a policy of commercial
general liability insurance on an occurrence policy form covering
property damage and liability for personal injury occurring in, on or
about the Project, with limits in the amount of at least Five Million
Dollars ($5,000,000) per occurrence combined single limit for injuries
to or death of persons and for property damage, and with a contractual
liability endorsement insuring Tenant's performance of Tenant's
obligation to indemnify Landlord contained in Paragraph 12. Landlord
shall have the right from time to time to require Tenant to increase
coverage limits under the foregoing policy to commercially reasonable
levels. Tenant shall, at Tenant's sole cost, pay all insurance
deductibles. Tenant may provide such insurance coverage under blanket
policies of insurance.
11.3. Property Insurance. Tenant shall, at Tenant's sole cost,
obtain and keep in force during the term of this Lease a policy or
policies of insurance for the benefit of Landlord and Tenant covering
loss or damage to the buildings, the common areas, and all other
portions of the Project, in the amount of the full replacement value
thereof, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), including boiler and
machinery coverage (if applicable) and an inflation endorsement, but
excluding earthquake coverage. The insurance coverage shall include
sprinkler leakage insurance as to all portions of the Project
containing fire sprinklers. Throughout the Term of this Lease Tenant
shall be responsible, at Tenant's sole cost, for paying any and all
insurance deductibles and premiums. Tenant may provide such insurance
under blanket policies of insurance provided that such insurance is on
an occurrence basis.
11.4. Form and Certificates. Each policy of insurance required to
be carried by Tenant pursuant to Paragraph 11.1, 11.2 and 11.3 shall
be with a company rated A:IX or better in "Best's Insurance Guide" and
shall name Landlord and such other parties in interest as Landlord
reasonably designates as additional insured. Tenant's insurance
policy shall also be primary insurance, without right of contribution
from any policy carried by Landlord, and shall contain a cross-
liability and severability endorsement. A certificate of insurance
(ACCORD form) and a copy of each policy shall be provided to Landlord
which indicates that the coverage required hereunder is in effect and
which provides that such policy is not subject to cancellation,
expiration or change, except upon thirty (30) days' prior written
notice to Landlord.
11.5. Payment. Tenant shall pay all of the premiums and
deductibles for any insurance obtained pursuant to this Paragraph 11.
11.6. Waiver of Subrogation. Tenant and Landlord each hereby
waives any and all rights of recovery against the other, and against
the officers, employees, agents and representatives of the other, for
loss of or damage to the property of the waiving party or the property
of others under its control, to the extent such loss or damage is
covered by proceeds received under any insurance policy carried by
Landlord or Tenant and in force at the time of such loss or damage.
Each of Tenant and Landlord shall, upon obtaining the policies of
insurance required hereunder or otherwise carried by such party, give
notice to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease.
11.7. No Limitation of Liability. Landlord makes no
representation that the limits of liability specified to be carried by
Tenant or Landlord under the terms of this Lease are adequate to
protect any party. If Tenant believes that the insurance coverage
required under this Lease is insufficient to adequately protect
Tenant, Tenant shall provide, at its own expense, such additional
insurance as Tenant deems adequate.
11.8. Restoration and Disposition of Casualty Insurance
Proceeds. Subject to the provisions of Paragraph 20.2, in the event
any Building and/or any of the Improvements and/or attached
furnishings and equipment located on the Project leased hereunder are
damaged or destroyed by fire or other casualty during the Lease Term,
Tenant shall, at Tenant's sole cost, repair or restore the same to the
external condition approved by the PCP, as the same may be amended
with Landlord's consent as provided in Paragraph 8.1 of this Lease.
The internal condition of the Project may be repaired and restored to
any appropriate condition and configuration in Tenant's reasonable
discretion. Such work of repair or restoration shall be commenced
within one (1) year after the damage or loss occurs and be completed
with due diligence, and shall be otherwise done in accordance with the
requirements of Paragraph 8. The available insurance proceeds
collected for such damage, shall be segregated by Tenant in an
appropriate account for Tenant's benefit to be applied to the cost of
such repairs or restoration, but if such insurance proceeds shall be
insufficient to complete the repairs or restoration, Tenant shall pay
the deficiency out of its own funds. If there are any excess
insurance proceeds following the full payment of the cost of such
repairs or restoration, such excess shall be retained by Tenant.
Until the repair or restoration is completed, Tenant shall keep
Landlord apprised of the amount deposited in and any withdrawals from
such account so as to provide Landlord with reasonable comfort that
the insurance proceeds will be available to be applied by Tenant to
the repair and restoration as required. If any such damage or
destruction occurs at any time on or after September, 1, 2003 and if
Tenant's net worth at the time of such damage or destruction (applying
generally accepted accounting principles, consistently applied) is
less than Five Hundred Million Dollars ($500,000,000) as reflected on
the most recent quarterly or annual audited financial statements of
Tenant preceding the date of such damage or destruction, then in such
event the account to be so established shall provide that any
withdrawals from such account shall require the joint signatures of
Tenant and Landlord (which signature Landlord agrees not to
unreasonably withhold in conjunction with any disbursements requested
by Tenant (i) to pay any reasonably documented costs of repairing and
restoring such damage or destruction and (ii) after the completion of
such repair or restoration, to pay the remaining funds in such account
to Tenant). Should Tenant fail or refuse to make the repairs or
restoration as hereinabove provided, then in such event such failure
or refusal shall constitute a default (under the provisions of
Paragraph 15 of this Lease, i.e. Tenant has received notice of a
default under this Lease and the applicable cure period has expired
and Tenant has not then cured such default) under the covenants and
conditions hereof.
12. WAIVER AND INDEMNIFICATION. Landlord shall not be liable to
Tenant and Tenant hereby waives all claims against Landlord for any
injury to or death of any person or damage to or destruction of
property in or about the Project by or from any cause whatsoever,
including, without limitation, gas, fire, oil electricity or leakage
of any character from the roof, walls, basement or other portion of
the Project except to the extent that the same results primarily from
the willful misconduct or active negligence of Landlord, its agents,
servants, employees, invitees or contractors of which negligence
Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the
willful misconduct or the active negligence of Landlord, its agents,
servants, employees, invitees, or contractors, Tenant shall hold
Landlord harmless from and defend Landlord against any and all
expenses, including reasonable attorneys' fees, in connection
therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about the
Project, or any part thereof, from any cause whatsoever, occurring
during the Lease Term.
13. LIENS. Tenant shall keep the Project free from any liens arising
out of any work performed, materials furnished or obligations incurred
by Tenant. In the event that Tenant shall not, within ten (10) days
following notice of the imposition of any such lien, cause the same to
be released of record, Landlord shall have, in addition to all other
remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as it shall
deem proper, including payment of the claim giving rise to such lien.
All sums paid by Landlord for such purpose, and all expenses incurred
by it in connection therewith, shall be payable to Landlord by Tenant
on demand with interest at the Bank of America Prime Rate (or
equivalent thereof) of interest plus five percent (5%) per annum, but
in no event greater then the maximum rate of interest permitted by
applicable law. Notwithstanding anything to the contrary in this
Paragraph 13, Tenant shall have the right to provide Landlord with a
bond in the amount of the Lien in a form satisfactory to Landlord and
to contest the Lien, in which event Landlord shall not be entitled to
pay or discharge the Lien, provided the Lien is removed within ninety
(90) days from the date the Lien is filed.
14. ASSIGNMENT AND SUBLETTING.
14.1. Permitted Transfers. Tenant may sublease all or any
portion of the Project or assign this Lease from time to time during
the Term without Landlord's consent, provided that Tenant shall deliver
prior written notice to Landlord, together with a copy of the sublease or
assignment agreement. Notwithstanding any sublease or assignment,
Tenant shall remain liable to Landlord for Tenant's performance of all
of its obligations under the Lease.
14.2. Form of Sublease and Assignment. Tenant shall provide
Landlord with a fully executed copy of any sublease or assignment
promptly upon execution thereof. Each assignment shall provide that
the assignee assumes and agrees to comply with each and every
obligation of Tenant under this Lease from the effective date of the
assignment through the termination date of the Lease, and that the
assignee shall pay all Rent thereafter falling due under this Lease
directly to Landlord. Each sublease shall provide that the subtenant
in its use and occupancy of any portion of the Complex shall observe
and not violate any provisions or restrictions of this Lease to the
extent applicable to the subleased premises from the commencement date
of the sublease through the termination date of the sublease, and that
upon written demand by Landlord in the event of an uncured default by
Tenant hereunder in the payment of Rent, Landlord may require the
subtenant to pay all rent otherwise payable to Tenant under the
sublease to be paid directly to Landlord to be applied against the
obligations of Tenant to Landlord under this Lease.
15. DEFAULT BY TENANT.
15.1. Default. The commencement of a bankruptcy action or
liquidation action or reorganization in bankruptcy action or
insolvency action or an assignment of or by Tenant for the benefit of
creditors, or any similar action undertaken by Tenant, or the
insolvency of Tenant, shall, at Landlord's option, constitute a breach
of this Lease by Tenant. If the trustee or receiver appointed to
serve during a bankruptcy, liquidation, reorganization, insolvency or
similar action elects to reject Tenant's unexpired Lease, the trustee
or receiver shall notify Landlord in writing of its election within
thirty (30) days after any order for relief in any liquidation action
or within thirty (30) days after the commencement of any action.
Within thirty (30) days after the court approval of the
assumption of this Lease, the trustee or receiver shall cure (or
provide adequate assurance to the reasonable satisfaction of Landlord
that the trustee or receiver shall cure) any and all previous defaults
under the unexpired Lease and shall compensate Landlord for all actual
pecuniary loss and shall provide adequate assurance of future
performance under said Lease to the reasonable satisfaction of
Landlord. Adequate assurance of future performance, as used herein,
includes, but shall not be limited to: (i) assurance of source and
payment of Rent, and other consideration due under this Lease; and
(ii) assurance that the assumption or assignment of this Lease will
not breach any provision in any agreement relating to the above
described Premises.
Nothing contained in this Paragraph shall affect the
exercising of any right of Landlord to refuse to accept an assignment
upon commencement or in connection with a bankruptcy, liquidation,
reorganization or insolvency action or an assignment of Tenant for the
benefit of creditors or other similar act. Nothing contained in this
Lease shall be construed as giving or granting or creating an equity
in the Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of
Landlord. In no event shall this Lease or any rights or privileges
hereunder be an asset of Tenant under any bankruptcy, insolvency or
reorganization proceedings.
The failure of Tenant to perform or honor any covenant,
condition or representation made under this Lease shall constitute a
default hereunder by Tenant upon expiration of the appropriate grace
period hereinafter provided. Tenant shall have a period of ten (10)
days following the date of written notice from Landlord within which
to cure any default in the payment of Rent when otherwise due
hereunder. Tenant shall have a period of thirty (30) days following
the date of written notice from Landlord within which to cure any
other default by Tenant under this Lease; provided, however, that if
the nature of Tenant's failure is such that more than thirty (30) days
is reasonably required to cure the same, Tenant shall not be in
default so long as Tenant commences performance within such thirty
(30) day period and thereafter prosecutes the same to completion.
Upon an uncured default of this Lease by Tenant, Landlord shall have
the following rights and remedies in addition to any other rights or
remedies available to Landlord at law or in equity:
(a) The rights and remedies provided for by California Civil
Code Section 1951.2 including but not limited to, recovery of the worth at
the time of award of the amount by which the unpaid Rent for the
balance of the Lease Term after the time of award exceeds the amount
of rental loss for the same period that Tenant proves could be
reasonably avoided, as computed pursuant to subsection (b) of said
Section 1951.2.
(b) The rights and remedies provided by California Civil Code
Section 1951.4 which allows Landlord to continue the Lease in effect and to
enforce all of its rights and remedies under this Lease, including the
right to recover Rent as it becomes due, for so long as Landlord does
not terminate Tenant's right to possession; acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a
receiver upon Landlord's initiative to protect its interest under this
Lease shall not constitute a termination of Tenant's right to
possession.
(c) The right to terminate this Lease by giving notice to Tenant
in accordance with applicable law.
(d) To the extent provided by law, the right and power to enter
the Premises and remove therefrom all persons and property, to store such
property in a public warehouse or elsewhere at the cost of and for the
account of Tenant, and to sell such property and apply such proceeds
therefrom pursuant to applicable California law. Landlord may from
time to time sublet the Premises or any part thereof for such term or
terms (which may extend beyond the Lease Term) and at such Rent and
such other terms as Landlord in its reasonable sole discretion may
deem advisable, with the right to make alterations and repairs to the
Premises. Upon each subletting, (i) Tenant shall be immediately
liable to pay Landlord, in addition to any other indebtedness other
than Rent due from Tenant to Landlord hereunder, the reasonable cost
of such subletting (to the extent allocable to the remaining Lease
Term), including, but not limited to, reasonable attorneys' fees, and
any real estate commissions actually paid, and the cost of such
reasonable alterations and repairs incurred by Landlord and the
amount, if any, by which the Rent hereunder allocable to the subleased
premises for the period of such subletting (to the extent such period
does not exceed the Lease Term) exceeds the amount to be paid as Rent
by the subtenant for the subleased premises for such period or (ii) at
the option of Landlord, rents received from such subletting shall be
applied first to payment of indebtedness other than Rent due hereunder
from Tenant to Landlord; second, to the payment of any costs of such
subletting and of such alterations and repairs; third, to payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held
by Landlord and applied in payment of future Rent as the same becomes
due hereunder. If Tenant has been credited with any Rent to be
received by such subletting under option (i) and such Rent shall not
be promptly paid to Landlord by the subtenant(s), or if such rentals
received from such subletting under option (ii) during any month be
less than that to be paid during the month by Tenant hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. No taking possession of the Premises by
Landlord shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such subletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for
such then uncured previous default.
(e) The right to have a receiver appointed for Tenant upon
application by Landlord in accordance with applicable laws, to take
possession of the Premises and to apply any rental collected from the
Premises and to exercise all other rights and remedies granted to
Landlord pursuant to this Paragraph 15.
16. DEFAULT BY LANDLORD Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event earlier than (30) days after written
notice by Tenant to Landlord (and, after September 1, 2003, to the
holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Tenant
in writing), specifying wherein Landlord has failed to perform such
obligations; provided, however, that if the nature of Landlord's
obligations is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord
commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
17. RIGHT TO ENCUMBER; SUBORDINATION.
17.1. Landlord's Interest. In the event Landlord's title to the
Premises is encumbered by a deed of trust on or after September 1,
2003, to secure a loan from a lender (hereinafter referred to as
"Lender") to Landlord, Tenant shall, at the request of Landlord or
Lender, execute in writing an agreement (in form reasonably acceptable
to Tenant), subordinating its rights under this Lease (subject to
customary nondisturbance protection in favor of Tenant) to the lien of
such deed of trust, or, if so requested, agreeing that the lien of
Lender's deed of trust shall be or remain subject and subordinate to
the rights of Tenant under this Lease. Notwithstanding any such
subordination, Tenant's possession under this Lease shall not be
disturbed if Tenant is not in default beyond any applicable cure
period and so long as Tenant shall pay all Rent and observe and
perform all of the provisions set forth in this Lease, and any
subordination agreement shall reflect the agreement of the Lender to
the same and the Lender's agreement upon any foreclosure to recognize
this Lease, including Tenant's Purchase Option under Paragraph 34.
hereof. Landlord represents to Tenant that, as of the date of this
Lease, the Premises are not presently encumbered by any mortgage, deed
of trust or other security device in favor of any Lender. Landlord
further agrees that it shall not encumber the Project by the lien of
any mortgage, deed of trust or other security device in favor of any
Lender during the period prior to September 1, 2003.
17.2. Tenant's Interest. Tenant hereby agrees that during the
Term of this Lease, Tenant shall not encumber or pledge (in any manner
whatsoever) its leasehold interest in the Premises.
18. ENTRY BY LANDLORD. Landlord reserves, and shall at all
reasonable times after at least twenty four (24) hours notice (except
in emergencies) have, the right to enter the Project to inspect it; to
perform any services or to make any repairs if Tenant is then in
default in the performance of such obligations under this Lease
pursuant to Paragraph 15 of this Lease, i.e. Tenant has received
notice of a default under this Lease and the applicable cure period
has expired and Tenant has not then cured such default); to submit the
Premises to prospective purchasers or mortgagees (and during the last
12 months of the term of this Lease to prospective tenants); to post
notices of non-responsibility; and (only if Tenant is then in default
in the performance of any of the terms, covenants and conditions of
this Lease pursuant to Paragraph 15 of this Lease, i.e. Tenant has
received notice of a default under this Lease and the applicable cure
period has expired and Tenant has not then cured such default) to
alter, improve or repair any Building or any other portion of the
Project, all without abatement of Rent, and may erect scaffolding and
other necessary structures in or through the Project where reasonably
required by the character of the work to be performed; provided,
however that the business of Tenant shall be interfered with to the
least extent that is reasonably practical. Any entry to the Project
by Landlord for the purposes provided for herein shall not under any
circumstances be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Project or an eviction, actual or
constructive, of Tenant from the Project or any portion thereof.
19. ABANDONMENT. Tenant shall not abandon the Project at any
time during the term of this Lease (except that Tenant may vacate so
long as it pays Rent and otherwise performs its obligations
hereunder), and if Tenant shall abandon or surrender said Project, or
be dispossessed by the process of law, or otherwise, any personal
property belonging to Tenant and left on the Project shall be deemed
to be abandoned, at the option of Landlord.
20. DAMAGE OR DESTRUCTION.
20.1 Destruction. If prior to expiration of the Term, there
is a partial or total destruction of any Buildings or other
Improvements on the Project from any cause, the provisions of
Paragraph 11.8 shall control; provided, however, that if Tenant is
entitled to and does terminate this Lease pursuant to Paragraph 20.2
and if Landlord elects to require the hereinafter described removal of
any damaged Building or other Improvements, Tenant shall remove the
damaged Buildings or other Improvements and restore the affected
portions of the Premises as nearly as possible to the condition that
existed prior to the construction of the damaged Building and other
Improvements. Any and all work described in the prior sentence shall
be done at Tenant's expense, with Tenant to be entitled to all
associated insurance proceeds and shall be solely entitled to
negotiate any insurance claim settlements. Except as expressly
provided in Paragraph 20.2 below, Tenant shall have no right to
terminate this Lease on account of any damage to or destruction of the
Project and no such damage or destruction shall relieve or discharge
Tenant from the payment of any Rent or Additional Rent due hereunder
or from the performance and fulfillment of any of Tenant's obligations
and responsibilities as set forth herein. Notwithstanding any such
termination, Tenant shall fully perform any obligation under this
Lease relating to an event occurring or circumstances existing prior
to the date of termination of this Lease, including the payment of all
Rent and any Real Property Taxes which Tenant is obligated to pay
hereunder.
20.2 Limitation on Obligation to Replace. Tenant shall not
be obligated to repair or replace any Building or any other
Improvements or fixtures situated on or used in connection with the
Project if (i) the destruction occurs within the last twenty four (24)
months of the Lease Term, and (ii) the repair or replacement of the
destroyed building, improvements or fixtures would require more than
one hundred eighty (180) days to complete. If Tenant elects to
terminate this Lease following such destruction, Tenant shall (1)
notify Landlord of such election within twenty (20) days following the
date of such damage, (2) execute, acknowledge and deliver to Landlord
a deed, in form reasonably satisfactory to Landlord, conveying unto
Landlord all right, title and interest herein conveyed to Tenant in
and to the Project, (3) thereupon deliver the Project and any
remaining portion of any Building or other Improvements to Landlord
and (4) assign to Landlord the right to receive any net insurance
proceeds that may have been paid or thereafter be payable to Tenant
relating to the cost of repairing any such damage to any Building or
other Improvements (but excluding Trade Fixtures), net of the cost of
collection of such insurance proceeds and any costs incurred by Tenant
(a) in making the Project safe and secure, (b) in making any
reasonable repairs or restoration necessitated by the circumstances of
any damage or destruction to any Building or other Improvements, and
(c) in removing any Building or other Improvements and restoring the
affected portions of the Premises pursuant to the following sentence.
Notwithstanding the foregoing, Landlord shall be entitled to require
Tenant to remove any damaged Building and Improvements and restore the
affected portions of the Premises as nearly as possible to the
condition that existed prior to the construction of the damaged
Building and other Improvements by delivering written notice of such
election within twenty (20) days following Tenant's delivery to
Landlord of such cancellation notice. Termination of this Lease shall
become effective only upon compliance with the provisions of this
subparagraph, but Rent and Additional Rent shall abate as of the date
of Tenant's delivery of such cancellation notice. Except in the event
of the termination of the Lease as provided above, Tenant shall retain
all proceeds of insurance that remain after Tenant has performed its
obligations to restore or remove under this Paragraph 20.
20.3 Waiver. Each of Landlord and Tenant waives the
provisions of California Civil Code Sections 1932(2) and 1933(4), and
any similar or successor statutes relating to termination of leases
when the thing leased is substantially or entirely destroyed, and
agrees that any such occurrence shall instead be governed by the terms
of this Lease.
21. EMINENT DOMAIN. If title to all or any part of the Project
shall be taken for any public or quasi-public use under any statute,
or eminent domain, or by any conveyance to avoid or compromise and
settle the same or by private or public purchase in lieu of any such
taking, the rights of Landlord and Tenant in such event shall be
determined as follows:
21.1 Total or Partial Taking. The term "total taking" as
used in this Paragraph means the taking of all of the Project under
the power of eminent domain or a taking of so much of the Project as
to prevent or substantially impair the conduct of Tenant's business
thereon in Tenant's reasonable discretion. The term "partial taking"
means the taking of a portion only of the Project which does not
constitute a total taking as above defined.
If, during the Lease Term, there shall be a total
taking by public authority under the power of eminent domain, the
leasehold estate of Tenant in or to the Project shall cease and
terminate as of the date the actual physical possession shall be
taken.
If, during the Lease Term, there shall be a partial
taking of the Project, this Lease shall terminate as to the portion of
the Project taken upon the date upon which actual physical possession
of said portion of the Project is taken pursuant to eminent domain
proceedings, but this Lease shall continue in full force and effect as
to the remainder of the Project. The Rent payable by Tenant for the
balance of the Lease Term shall be abated in the ratio that the square
footage ground area of the Project taken bears to the total ground
area of the Project at the time of such taking.
21.2 Distribution of Award. All compensation and damages
awarded for the taking of the land that constitutes a part of the
Project or any portion thereof shall, except as otherwise herein
provided, belong to and be the sole property of Landlord, and Tenant
shall not have any claim or be entitled to any award for diminution in
value of its leasehold or for the value of any unexpired Lease Term,
provided however that the net amount of any award so received by
Landlord (net of the cost of collection) shall constitute a credit
against the Purchase Price calculated pursuant to Paragraph 34.4
hereof in the event of the exercise of either the Purchase Option or
the Sales Option pursuant to Paragraph 34. All compensation and
damages awarded for the taking of any Building or other Improvements,
or any portion thereof, shall, except as otherwise herein provided,
belong to and be the sole property of Tenant, and Landlord shall not
have any claim or be entitled to any award for diminution in value of
the land as a result thereof, as severance damages or otherwise. In
addition, Tenant shall be entitled to any award specifically awarded
by the agency to Tenant for Tenant's moving and relocation costs
including the value of personal property and equipment of Tenant which
cannot be relocated and Tenant's loss of good will. Notwithstanding
the foregoing, in the event of any taking first occurring on or after
September 1, 2003, then any compensation and damages awarded for the
taking of any Building or other Improvements, or any portion thereof,
net of the cost of collection of such award and the cost of
repairing the Building or other Improvements, shall belong to and be
the sole property of Landlord, provided however that the net amount of
any award so received by Landlord (net of such costs of collection and
repair) shall constitute a credit against the Purchase Price
calculated pursuant to Paragraph 34.4 hereof in the event of the
exercise of either the Purchase Option or the Sales Option pursuant to
Paragraph 34.
21.3 Reconstruction. In the event of a partial taking of
the Project which does not result in a termination of this Lease
pursuant to the foregoing provisions, and subject to Paragraph 8
above, Tenant shall promptly reconstruct or restore the Project and
the buildings and all Improvements located thereon so that the
remainder of the Project and the buildings and Improvements thereon
will be suitable for Tenant's continued use of the Project. Any award
for such partial taking of the land portion of the Project shall be
available to Tenant for Tenant's use in paying the costs (hard and
soft) of the reconstruction or restoration of any sidewalks,
driveways, parking lots, landscaping or the like (provided the cost of
any such reconstruction or restoration was not otherwise included in
the award for the partial taking of any Buildings or other
Improvements). Any award for such partial taking of any Buildings or
other Improvements shall be available to Tenant for Tenant's use in
paying the costs (hard and soft) of the reconstruction or restoration
of the Buildings and other Improvements. Any excess amount of such
awards shall be divided between Landlord and Tenant as provided above
in Paragraph 21.2. Such reconstruction or restoration shall be
performed by Tenant, subject to the following provisions:
A. such reconstruction shall be completed by Tenant as if
they were the Initial Improvements in accordance with Paragraph 8, and
in a good and workmanlike manner and in conformity to, and with, all
requirements pertaining thereto;
B. all the costs and expenses of such reconstruction shall
be paid and borne by Tenant (subject to reimbursement from any award,
as provided above); and
during the period when such reconstruction is being performed, the
monthly Base Rent shall continue without abatement, but adjusted as
provided above.
21.4 Contest. Either Tenant or Landlord may contest any award
made on account of any such taking and may prosecute appeals
therefrom; provided, however, that all of the costs and expenses
thereof shall be paid and borne by the party hereto who so contests
the same.
22. SALE OR CONVEYANCE BY LANDLORD. In the event of a sale or
conveyance of the Premises or any interest therein by any owner of the
reversion then constituting Landlord, upon written assumption by the
successor in interest of the obligations and liabilities under this
Lease, the transferor shall thereby be released from any then current
and any further liability upon any of the terms, covenants or
conditions (express or implied) herein contained in favor of Tenant,
and in such event, insofar as such transfer is concerned, Tenant
agrees to look solely to the responsibility of the successor in
interest of such transferor in and to the Premises and this Lease.
This Lease shall not be affected by any such sale or conveyance, and
Tenant agrees to attorn to the successor in interest of such
transferor. Notwithstanding anything to the contrary set forth above,
if Landlord sells or otherwise conveys its interest in the Premises,
Landlord shall not be relieved of its obligations under the Lease,
unless Landlord's successor in interest assumes, in writing,
Landlord's obligations under the Lease. Prior to any such sale or
conveyance of the Premises or any interest therein, Landlord shall
consult with Tenant as contemplated in Paragraph 10.1.
23. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the interest
of Landlord in the Premises is on or after September 1, 2003,
encumbered by deed of trust, and such interest is thereafter acquired
by the Lender or any third party through judicial foreclosure or by
exercise of a power of sale at private trustee's foreclosure sale,
Tenant hereby agrees, upon receipt of written recognition by the
purchaser of Tenant's interest in the Premises under this Lease
(including Tenant's Purchase Option), to attorn to the purchaser at
any such judicial foreclosure or foreclosure sale and to recognize
such purchaser as the Landlord under this Lease. In the event the
lien of the deed of trust securing the loan from a Lender to Landlord
is prior and paramount to this Lease, this Lease shall nonetheless
continue in full force and effect for the remainder of the unexpired
Term, at the same Rental herein reserved and upon all the other terms,
conditions and covenants herein contained (including Tenant's Purchase
Option).
24. HOLDING OVER. Any holding over by Tenant after expiration or
other termination of the Lease Term with the written consent of
Landlord delivered to Tenant shall not constitute a renewal or
extension of the Lease or give Tenant any rights in or to the Project
except as expressly provided in this Lease. Any holding over after
the expiration or other termination of the Lease Term, with the
consent of Landlord, shall be construed to be a tenancy from month to
month, on the same terms and conditions herein specified insofar as
applicable except that the monthly Base Rent shall be increased to an
amount equal to one hundred fifty (150%) percent of the monthly Base
Rent required during the last month of the Lease Term.
25. ESTOPPEL CERTIFICATE. Tenant and/or Landlord shall at any time
upon not less than ten (10) days prior written notice from the other
party execute, acknowledge and deliver to the requesting party a
statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in
full force and effect) and the date to which the Rent and other
charges are paid in advance, if any, and (ii) acknowledging that there
are not, to the party's knowledge, any uncured defaults on the part of
the requesting party hereunder, or specifying such defaults, if any,
are claimed. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises or any
portion of the Project, or any assignee or subtenant of the Project.
A requested party's failure to deliver such statement within such time
shall be conclusive upon the requested party that this Lease is in
full force and effect, without modification except as may be
represented by the requesting party; that there are no uncured
defaults in the requesting party's performance, and that not more than
one month's Rent has been paid in advance. Landlord and Tenant
further agree to appropriately and timely respond to the respective
reasonable inquiries of the auditors of the other party, but such
response shall be limited to the respective knowledge of the
responding party.
26. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and
conditions of this Lease to be performed or observed by Tenant shall
be performed or observed by Tenant at Tenant's sole cost and expense
and without any reduction of Rent. If Tenant shall fail to pay any
sum of money, or other Rent, required to be paid by it hereunder or
shall fail to perform any other term of covenant hereunder on its part
to be performed, and such failure shall continue for twenty (20) days
after written notice thereof by Landlord, Landlord, without waiving or
releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obliged to, make any such payment or perform any such
other term or covenant on Tenant's part to be performed. All sums so
paid by Landlord and all necessary costs of such performance by
Landlord together with interest thereon at the rate of Bank of
America's Prime Rate (or equivalent rate thereof) of interest plus
five percent (5%) per annum, but in no event greater then the maximum
rate of interest permitted by applicable law, from the date of such
payment or performance by Landlord, shall be paid (and Tenant
covenants to make such payment) to Landlord within ten (10) business
days after demand by Landlord, and Landlord shall have (in addition to
any other right or remedy of Landlord) the same rights and remedies in
the event of nonpayment by Tenant as in the case of failure by Tenant
in the payment of Rent hereunder.
ATTORNEYS' FEES.
A. In the event that either Landlord or Tenant should bring
suit for the possession of the Project, for the recovery of any sum
due under this Lease, or because of the breach of any provision of
this Lease, or for any other relief against the other party hereunder,
then all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party therein shall be paid by the other
party, which obligation on the part of the other party shall be deemed
to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to
judgment.
B. In addition to any other rights of Landlord under this Lease
to defense or indemnification by Tenant, should Landlord be named by a
third party as a defendant in any suit brought by such third party
principally against Tenant in connection with or arising out of
Tenant's alleged improper or tortious conduct associated with the
Project, Tenant shall pay to Landlord Landlord's reasonable costs and
expenses incurred in such suit, including reasonable attorney's fees
(but Landlord agrees to cooperate with Tenant in Tenant's efforts to
provide a joint defense to such suit or otherwise to minimize the
costs of such defense or the settlement of such suit).
28. WAIVER. The waiver by either party of the other party's failure
to perform or observe any term, covenant or condition herein contained
to be performed or observed by such waiving party shall not be deemed
to be a waiver of such term, covenant or condition or of any
subsequent failure of the party failing to perform or observe the same
or any other such term, covenant or condition therein contained, and
no custom or practice which may develop between the parties hereto
during the Lease Term shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and
observance by the other party in strict accordance with the terms
hereof.
29. NOTICES. All notices (including, without limitation, any
Exercise Notice) , demands, requests, advices or designations which
may be or are required to be given by either party to the other
hereunder shall be in writing. All notices, demands, requests,
advices or designations by Landlord to Tenant shall be sufficiently
given, made or delivered if personally delivered to or sent to Tenant
by United States certified or registered mail, postage prepaid or by a
reputable same day or overnight courier service addressed to Tenant at
950 Page Mill Road, Palo Alto, CA 94303, Attn: Manager Corporate Real
Estate ( and if such notice constitutes a notice of default under this
Lease or any Exercise Notice or other notice pertaining either to the
Purchase Option or the Sales Option, then an additional copy shall be
sent to Tenant at 950 Page Mill Road, Palo Alto, CA 94303, Attn:
General Counsel, Legal Department). All notices, demands, requests,
advices or designations by Tenant to Landlord shall be sufficiently
given, made or delivered if personally delivered to or sent to
Landlord by United States certified or registered mail, postage
prepaid, or by a reputable same day or overnight courier service
addressed to Landlord at its offices at c/o Peery/Arrillaga, 2560
Mission College Blvd., Suite 101, Santa Clara, CA 95054 Attn: Richard
T. Peery. Each notice, request, demand, advice or designation
referred to in this Paragraph shall be deemed received on the date of
receipt or refusal to accept receipt at the address so provided for
notices if sent in the manner herein provided, as the case may be.
Either party shall have the right, upon ten (10) days written notice
to the other, to change its address for notices as provided herein;
however, Landlord shall send Tenant notices to only one address
(provided that in the event of a notice of default and any Exercise
Notice or other notice pertaining either to the Purchase Option or the
Sales Option, Landlord will provide an additional copy of such notice
of default to such one additional addressee as may be duly notified by
Tenant to Landlord in accordance with the provisions of this Lease).
30. EXAMINATION OF LEASE. Submission of this instrument for
examination or signature by either Tenant or Landlord does not
constitute a reservation of or option for a Lease, and this instrument
is not effective as a lease or otherwise until its execution and
delivery by both Landlord and Tenant.
31. CORPORATE AUTHORITY. If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he or she is
duly authorized to execute and deliver this Lease on behalf of said
corporation (or partnership) in accordance with the by-laws of said
corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or
partnership) in accordance with its terms. If Tenant is a
corporation, Tenant shall, within thirty (30) days after execution of
this Lease, deliver to Landlord a certified copy of the resolution of
the Board of Directors of said corporation authorizing or ratifying
the specific execution of this Lease by the individual executing said
Lease. In lieu of said corporate resolution, Tenant may provide
Landlord with an outside legal opinion stating that the parties
executing this Lease on behalf of Tenant are authorized to do so by
the Board of Directors.
CONSENT. Whenever the consent of one party to the other is required
hereunder, such consent shall not be unreasonably withheld.
32. LIMITATION OF LIABILITY. Except as set forth in the final
sentence of this Paragraph 33, in consideration of the benefits
accruing hereunder, Tenant and all successors and assigns to Tenant as
respects Tenant's interest under this Lease, covenant and agree that,
in the event of any actual or alleged failure, breach or default
hereunder by Landlord:
(A) the sole and exclusive remedy shall be against Landlord's
interest in the Project leased herein;
(B) no constituent member and/or no partner of Landlord shall be
sued or named as a party in any suit or action (except as may be
necessary to secure jurisdiction of the limited liability company or
partnership);
(C) no service of process shall be made against any constituent
member or partner of Landlord (except as may be necessary to secure
jurisdiction of the limited liability company or partnership);
(D) no constituent member or partner of Landlord shall be
required to answer or otherwise plead to any service of process;
(E) no judgment will be taken against any constituent member or
partner of Landlord;
(F) any judgment taken against any constituent member or partner
of Landlord may be vacated and set aside at any time without hearing;
(G) no writ of execution will ever be levied against the assets
of any constituent member or any partner of Landlord; and
these covenants and agreements are enforceable both by Landlord and
also by any constituent member or any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements
shall be applicable to any covenant or agreement either expressly
contained in this Lease or imposed by statute or at common law with
respect to this Lease. Notwithstanding the foregoing provisions of
this Paragraph 33, such provisions shall not apply to, and Tenant
shall in no event be prohibited from pursuing any remedy against
Landlord, including seeking specific performance to enforce its rights
under the provisions of Paragraph 34 of this Lease, in the event of
Landlord's failure to perform any of its obligations under Paragraph
34 of this Lease (relating to the Purchase Option or Sales Option) or
under the Purchase Agreement to be delivered pursuant to the exercise
of either the Purchase Option or the Sales Option.
34. OPTION TO PURCHASE AND SELL.
34.1 Grant of Option. Landlord hereby grants to Tenant an option
to purchase the Premises "as is", without any warranties or
representations from Landlord, on the terms and conditions contained
in this Paragraph 34 (the "Purchase Option"). If Tenant exercises the
Purchase Option, Tenant shall purchase from Landlord and Landlord
shall sell and convey to Tenant by grant deed fee title to the
Premises for the Purchase Price (as defined below) and on the terms
set forth in this Paragraph 34. Landlord shall also have the option
(the "Sales Option") to elect to sell and to require Tenant to
purchase Landlord's interest in the Premises on the terms and
conditions contained in this Paragraph 34. In the event either
Landlord or Tenant exercises its respective Option, the parties shall
execute a purchase agreement in the form attached hereto as Exhibit D
("Purchase Agreement").
34.2 Exercise of Sales Option. At any time prior to the date of
August 31, 2001, Landlord shall be entitled to exercise the Sales
Option. Landlord shall exercise the Sales Option, if at all, by (i)
delivering to Tenant written notice (the "Sales Notice") of Landlord's
intention to exercise the Sales Option which notice shall include the
Closing Date selected by Landlord as described in Paragraph 34.6
below, and (ii) delivering to Tenant three originals of the Purchase
Agreement duly completed and executed by Landlord. Promptly following
receipt of the foregoing items, Tenant shall execute the three
originals of the Purchase Agreement. Tenant shall then deliver one
such original to Landlord, one such original to the Escrow Agent as
provided for in the Purchase Agreement, and retain one for its own
records. If Tenant defaults in performing its obligations as provided
in the Purchase Agreement to purchase the Premises following delivery
by Landlord of the Sale Notice, then the Purchase Option defined
hereinbelow shall lapse and be of no further force or effect and
Landlord shall be entitled to compel Tenant to purchase the Premises
by bringing an action for specific performance respecting said
purchase obligation.
34.2 Exercise of Purchase Option. The Purchase Option may be
exercised by Tenant at any time following the date of August 31, 2000,
unless the Purchase Option has lapsed pursuant to the terms of this
Paragraph 34. Tenant shall exercise the Purchase Option, if at all,
by (i) delivering to Landlord written notice (the "Exercise Notice")
of Tenant's intention to exercise the Purchase Option which notice
shall include the Closing Date selected by Tenant as described in
Paragraph 34.6 below, and (ii) delivering to Landlord three originals
of the Purchase Agreement duly completed and executed by Tenant.
Promptly following receipt of the foregoing items, Landlord shall
execute the three originals of the Purchase Agreement, then deliver
two of those originals to Tenant. Tenant shall deliver one such
original to the Escrow Agent as provided for in the Purchase
Agreement, and retain one for its own records.
34.4 Purchase Price. Upon exercise of the Sale Option or the
Purchase Option as herein provided, Tenant shall be obligated to
purchase, and Landlord shall be obligated to sell, the Premises at a
purchase price (the "Purchase Price") determined as follows: (i) if
Landlord gives the Sale Notice to Tenant, then the Purchase Price
shall be the sum of Sixteen Million Nine Hundred Seventy Thousand Nine
Hundred Ninety-Seven Dollars ($16,970,997), (ii) if Tenant gives an
Exercise Notice to Landlord, which, in accordance with the provisions
of Paragraph 34.3 above, provides for the Closing Date to occur on or
prior to September 30, 2002, then the Purchase Price shall be the sum
Sixteen Million Nine Hundred Seventy Thousand Nine Hundred Ninety-
Seven Dollars ($16,970,997), and (iii) if Tenant gives an Exercise
Notice to Landlord which, in accordance with the provisions of
Paragraph 34.3 above, provides for the Closing Date to occur after
September 30, 2002, then the Purchase Price shall be determined by
multiplying: (A) the sum of Sixteen Million Nine Hundred Seventy
Thousand Nine Hundred Ninety-Seven Dollars ($16,970,997) by (B) the
Purchase Price Adjustment Factor. The "Purchase Price Adjustment
Factor" shall be that fraction, the numerator of which is the Index
published for the month of September immediately prior to the Closing
Date set forth in the Exercise Notice, and the denominator of which is
the Index published for the month of September 2001.
34.5 Transfer of Title. Subject to the "Permitted Exceptions" as
provided in Section 3.2 of the Purchase Agreement, Landlord shall
convey to Tenant at the Close of Escrow by grant deed (the "Grant
Deed"), fee title to the Premises free of all monetary liens and
encumbrances, except for non-delinquent real property taxes and
assessments and free of any exceptions to title caused by any acts or
wrongful omissions of Landlord which were not otherwise caused or
consented to by Tenant. Landlord shall also assign to Tenant at Close
of Escrow all of Landlord's interest in this Lease and any
reversionary or other interest in any Buildings or other Improvements
then or thereafter to be constructed on the Premises. Tenant's
obligation to purchase shall be conditioned upon its obtaining at
Close of Escrow an ALTA extended coverage title insurance policy
naming Tenant as the insured party in the amount of the Purchase
Price, showing fee title to the Premises and the Project vested in
Tenant free of all such monetary liens and encumbrances other than the
"Permitted Exceptions" as provided in Section 3.2 of the Purchase
Agreement. Landlord agrees that, following the date of this Lease,
Landlord shall not take any actions, or wrongfully omit to take any
action (excepting only actions that are the obligation of Tenant under
this Lease) that would cause any new exceptions to title to the
Premises or the Project to arise without the prior written consent of
Tenant, which consent Tenant may withhold in its reasonable
discretion.
34.6 Escrow.
A. Close of Escrow. If Landlord exercises the Sale
Option, then the date for the Close of Escrow (the "Closing Date")
shall be as selected by Landlord, but no sooner than forty-five (45)
days following the date of delivery of the Sale Notice to Tenant. If
Tenant exercises the Purchase Option, then the Closing Date shall be
as selected by Tenant, but no sooner than one (1) year following the
date of the delivery of the Exercise Notice to Landlord. If any date
so selected as the Closing Date is not a business day, then the next
occurring business day shall be the Closing Date. The "Close of
Escrow" shall be deemed to occur at the moment the Grant Deed is
recorded in the County Recorder's Office.
B. Closing Costs. The Purchase Price shall be paid to
Landlord by Tenant in cash net of all customary closing costs, escrow
fees, transfer taxes and/or other customary closing costs, all of
which shall be paid by Tenant. Notwithstanding the foregoing,
Landlord shall bear its own attorney's fees, if any, any costs and
expenses incurred in clearing any title issues caused by Landlord as
provided in Paragraph 34.5, in prepaying or releasing any financing
obtained by Landlord, or in connection with any Exchange for the
benefit of Landlord.
C. Prorations in Escrow. Current rents and other payments
(if any) received as of the Close of Escrow by Landlord under this
Lease shall be prorated through the Escrow as of the Close of Escrow.
34.7 Cooperate with Tax-Free Exchange. In the event that the
Sale Option or the Purchase Option is exercised, each party agrees to
cooperate in any reasonable manner requested by the other, in order to
accomplish any like-kind exchange (the "Exchange") for the Premises
pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended, so long as (i) the cooperating party incurs no additional
cost as the result of such cooperation, (ii) is not required to take
or hold title to other property and (iii) the Closing Date is not
extended by more than three (3) months from the date selected pursuant
to Paragraph 34.6. Each Party shall remain fully liable to the other
for any breach of its obligations or any of its representations and
warranties under this Lease and the Purchase Agreement, regardless of
any assignment of this Lease to any third party intermediary in the
Exchange.
35. MEMORANDUM OF LEASE.
35.1 Upon the execution of this Lease, the parties hereto will
also execute and acknowledge the memorandum of lease in the form
attached hereto as Exhibit E for the purposes of recording at either
party's election.
36. MISCELLANEOUS AND GENERAL PROVISIONS.
A. This Lease shall in all respects be governed by and
construed in accordance with the laws of the State of California. If
any provision of this Lease shall be invalid, unenforceable or
ineffective for any reason whatsoever, all other provisions hereof
shall be and remain in full force and effect.
B. The term "Landlord" or any pronoun used in place thereof
includes the plural as well as the singular and the successors and
assigns of Landlord. The term "Tenant" or any pronoun used in place
thereof includes the plural as well as the singular and individuals,
firms, associations, partnerships and corporations, and their and each
of their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions
of this Lease shall inure to the benefit of and bind such heirs,
executors, administrators, successors and permitted assigns. The term
"person" includes the plural as well as the singular and individuals,
firms, associations, partnerships and corporations. Words used in any
gender include other genders. If there be more than one Tenant the
obligations of Tenant hereunder are joint and several. The paragraph
headings of this Lease are for convenience of reference only and shall
have no effect upon the construction or interpretation of any
provision hereof.
C. Time is of the essence of this Lease and of each and all of
its provisions.
D. At the expiration or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord, within ten
(10) days after written demand from Landlord to Tenant, any quitclaim
deed or other document required by any reputable title company,
licensed to operate in the State of California, to remove the cloud or
encumbrance created by this Lease from the Premises.
E. This instrument along with any exhibits and attachments
hereto constitutes the entire Agreement between Landlord and Tenant
relative to the Premises and the Project and this agreement and the
exhibits and attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant. Landlord
and Tenant agree hereby that all prior or contemporaneous oral
agreements between and among themselves and their agents or
representatives relative to the leasing of the Premises are merged in
or revoked by this agreement.
F. Tenant further agrees, following the period of September 1,
2003, to execute any tenant estoppel certificates in favor of Lender
as may be reasonably requested by Landlord in order for Landlord
thereafter to obtain financing for the Premises.
G. All Paragraphs listed in the Lease Summary as additional
paragraphs are added hereto and are included as a part of this Lease.
H. Clauses, plats and riders, if any, signed by Landlord and
Tenant and endorsed on or affixed to this Lease are a part hereof.
I. Tenant covenants and agrees that no diminution or shutting
off of light, air or view by any structure which may be hereafter
erected (whether or not by Landlord) on real property other than the
Premises shall in any way affect his Lease, entitle Tenant to any
reduction of Rent hereunder or result in any liability of Landlord to
Tenant.
J. The voluntary or other surrender of this Lease or the
Premises by Tenant or a mutual cancellation of this Lease shall not
work as a merger and, at the option of Landlord, shall either
terminate all or any existing subleases or subtenancies or operate as
an assignment to Landlord of all or any such subleases or
subtenancies.
37. BROKERS. Landlord shall not be responsible or liable for the
payment of commission to Catalyst Real Estate Group or any third party
broker in connection with the negotiation or consummation of this
Lease (or the purchase of the Premises by Tenant). Tenant agrees to
pay a commission to Catalyst Real Estate Group pursuant to the terms
of their separate written agreement, and to indemnify and hold
Landlord harmless from any cost, expense, or liability for any
compensation, commission or charges claimed by any realtor, broker, or
agent, with respect to this Lease or the negotiation of this Lease or
the potential sale of the Premises pursuant to Paragraph 34. Except
as provided above, each of Landlord and Tenant represents and warrants
to the other that no party is entitled to any real estate brokerage or
salesperson commission or any finders' fee as a result of such party's
action in connection with the leasing of the Premises to Tenant or the
potential sale of said Premises as provided for in Paragraph 34. Each
of Landlord and Tenant shall save, protect, defend, indemnify and hold
the other harmless from and against any claim to the contrary by any
salesperson, broker or finder based upon such salesperson's, broker's
or finder's relationship with such party.
IN WITNESS WHEREOF, Landlord and Tenant have executed and
delivered this Lease as of the day and year last written below.
LANDLORD: TENANT:
Richard T. Peery, as Trustee ALZA Corporation,
Under Trust Agreement dated a Delaware corporation
July 20, 1977, as Amended
(Richard T. Peery Separate
Property Trust)
By: /s/ Richard T. Peery By: s/ Gary V. Fulscher
Richard T. Peery, Trustee Gary V. Fulscher
Date: September 12, 1997 Gary V. Fulscher
(Typed or Printed Name)
John Arrillaga, as Trustee Title: Senior Vice President,
under Trust Agreement dated Commerical Services
July 20, 1977, as amended(John
Arrillaga Survivor's Trust, Date: September 12, 1997
formerly known as the
Arrillaga Family Trust)
By: /s/John Arrillaga
John Arrillaga, Trustee
Date: September 12, 1997
