<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _____ to _________.
Commission file number: 0-27596
CONCEPTUS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 97-3170244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1021 HOWARD AVENUE
SAN CARLOS, CA 94070
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 802-7240
___________________
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 at least the
past 90 days.
Yes X No
------------ ----------
As of April 30, 1997, 9,241,534 shares of the Registrant's
Common Stock were outstanding.
<PAGE>
CONCEPTUS, INC.
FORM 10-Q For the Quarter Ended March 31, 1997
INDEX
Page
Facing sheet 1
Index 2
Part I. Financial Information
Item 1. a) Consolidated balance sheets at March 31, 1997
and December 31,1996 3
b) Consolidated statements of operations for
the three-month periods ended March 31, 1997
and March 31, 1996 4
c) Consolidated statements of cash flows for
the three-month periods ended March 31, 1997
and March 31, 1996 5
d) Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Part II. Other Information 11
Signature 12
Index to Exhibits 13
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,949 $ 16,939
Short-term investments 14,043 18,286
Accounts receivable, net 175 105
Inventories 376 182
Other current assets 1,006 234
-------------- -----------
Total current assets 29,549 35,746
Property and equipment, net 607 543
Long-term investments 7,847 3,796
Other assets 7 8
-------------- -----------
$ 38,010 $40,093
-------------- -----------
-------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 807 $ 588
Accrued compensation 467 455
Accrued acquisition costs 1,000 1,000
Other accrued liabilities 272 302
Current portion of debt and capital lease obligations 93 119
-------------- -----------
Total current liabilities 2,639 2,464
Long-term portion of debt and capital lease obligations 17 34
Commitments
Stockholders' equity:
Common stock, $0.003 par value, 30,000,000 shares authorized, 62,377 61,876
9,241,416 and 9,206,795 shares issued and outstanding at
March 31, 1997 and December 31, 1996, respectively
Stockholder notes receivable (49) (49)
Deferred compensation (505) (559)
Deficit accumulated during the development stage (26,469) (23,673)
-------------- -----------
Total stockholders' equity 35,354 37,595
-------------- -----------
$ 38,010 $40,093
-------------- -----------
-------------- -----------
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 277 $ 82
Cost of sales 442 159
-------- --------
Gross profit (165) (77)
Operating expenses:
Research and development 1,431 788
Selling, general and administrative 1,692 992
-------- --------
Total operating expenses 3,123 1,780
-------- --------
Operating loss (3,288) (1,857)
Interest and investment income, net 492 392
-------- --------
Net loss $ (2,796) $ (1,465)
-------- --------
-------- --------
Net loss per share $ (0.30) $ (0.24)
-------- --------
-------- --------
Shares used in computing net loss per share 9,226 6,131
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $ (2,796) $ (1,465)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 90 63
Amortization of deferred compensation 164 57
Changes in operating assets and liabilities:
Accounts receivable (70) (38)
Inventories (194) 46
Other current assets (772) 194
Accounts payable 219 (159)
Accrued compensation 12 12
Other accrued liabilities 299 239
--------- ---------
Net cash used in operating activities (3,048) (1,051)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (13,991) (953)
Maturities of investments 14,183 1,906
Capital expenditures (153) (75)
Increase in other assets -- 2
--------- ---------
Net cash from investing activities 39 880
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 62 44,028
Principal payments on debt and capital obligations (43) (39)
--------- ---------
Net cash from financing activities 19 43,989
--------- ---------
Net change in cash and cash equivalents (2,990) 43,818
Cash and cash equivalents at beginning of period 16,939 2,848
--------- ---------
Cash and cash equivalents at end of period $ 13,949 $ 46,666
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 4 $ 8
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING INFORMATION
Conversion of preferred stock to common stock $ -- $ 16,624
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF PREPARATION
The accompanying consolidated balance sheet as of March 31,
1997 and the consolidated statements of operations and cash flows for the
quarters ended March 31, 1997 and 1996 have been prepared by Conceptus, Inc.
("Conceptus" or the "Company"), without audit. In the opinion of management,
all adjustments necessary to present fairly the financial position, results
of operations, and cash flows at March 31, 1997, and for all periods
presented, have been made.
Although the Company believes that the disclosures in these
consolidated financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures
required by Generally Accepted Accounting Principles for complete financial
statements have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). This financial data should be
reviewed in conjunction with the audited financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1996. The results of operations for the quarter ended March 31, 1997 may not
necessarily be indicative of the operating results for the full 1997 fiscal
year.
COMPUTATION OF NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The impact
of Statement 128 is expected to result in no change to the Company's net loss
per share for the quarters ended March 31, 1997 and 1996, because stock
options have been excluded from the current computation as they are
antidilutive. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be material.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the unaudited financial statements and notes thereto included in Part I-Item
1 of this Quarterly Report. In addition, except for the historical
statements contained therein, the following discussion contains
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. The Company wishes to alert
readers that the factors set forth in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 and in the Company's prospectus
dated February 1, 1996 under the heading "Risk Factors", as well as other
factors, including those set forth in the following discussion, could in the
future affect, and in the past have affected, the Company's actual results
and could cause the Company's results for future periods to differ materially
from those expressed in any forward-looking statements made by or on behalf
of the Company.
OVERVIEW
Since its inception on September 18, 1992, Conceptus has been
primarily engaged in the design, development and marketing of minimally
invasive devices for reproductive medical applications. The Company has a
limited history of operations and has experienced significant operating
losses since inception. Operating losses are expected to continue for at
least the next several years as the Company continues to expend substantial
resources to fund clinical trials in support of regulatory and reimbursement
approvals, conduct research and development, and expand marketing and sales
activities.
The Company's primary near-term commercial products, the T-TAC
(Transcervical Tubal Access Catheter) and STARRT (Selective Tubal Assessment
to Refine Reproductive Therapy) Falloposcopy systems have generated limited
sales to date. The Company currently sells its products to international
markets through a limited number of distributors who resell to physicians and
hospitals. Sales to distributors are made on open credit terms and may
include purchase discounts. In 1995 and 1996, the Company made adjustments
to the profile of its distributors, resulting in replacement and addition of
new distributors in domestic and international markets. Although the
Company began marketing components of its T-TAC system in April 1995, general
marketing of the system commenced upon the receipt of a 510(k) clearance for
diagnosis of proximal tubal occlusion in August 1995. Sales in 1996 were
through a small direct sales force and two new significant distributors on
open credit terms and consisted primarily of commercial shipments of T-TAC
products.
In the fourth quarter of 1996 the Company presented results
from the International Multicenter Study of Falloposcopy of its STARRT
Falloposcopy system. Study data showed that use of the STARRT system altered
infertility diagnosis in the majority of cases versus conventional
infertility diagnosis. The Company is developing a second generation STARRT
catheter designed to improve the ergonomics and performance of the STARRT
system. The Company is currently formulating its regulatory strategy to
obtain clearance of this second generation catheter.
On November 26, 1996, the Company completed the acquisition of
Microgyn, Inc. ("Microgyn") a privately held medical device company
developing products designed to improve the safety and performance of
resectoscope procedures, including therapeutic hysteroscopy. The Company
acquired all of the outstanding common stock of Microgyn in exchange for $3.0
million in cash on the acquisition date and $1.0 million in cash or stock (at
the option of Conceptus) payable six months after the acquisition date, plus
$752,000 due to assumption of certain liabilities and related acquisition
expenses. Additional contingent consideration in cash or stock, at the
option of Conceptus, is payable to the former shareholders of Microgyn based
upon meeting certain future milestones.
7
<PAGE>
Certain of the Company's products are currently manufactured
by certain original equipment manufacturers while others are manufactured by
Conceptus at its location in San Carlos, California. If the T-TAC, STARRT,
and Hysteroscopy products are successful, the Company expects to increase its
direct manufacturing operations in order to better control product costs and
increase gross margin. Future revenues and results of operations may
fluctuate significantly from quarter to quarter and will depend upon, among
other factors, actions relating to regulatory and reimbursement matters, the
extent to which the Company's products gain market acceptance, the rate at
which the Company establishes its domestic and international distribution
network, the timing and size of distributor purchases, the progress of
clinical trials, and the introduction of competitive products for diagnosis
and treatment of the female reproductive system.
RESULTS OF OPERATIONS
Sales increased to $277,000 for the three months ended March
31, 1997 from $82,000 for the same period in the prior year. The 238%
increase is primarily due to increased shipments of the Company's T-TAC
products to a significant U.S. distributor. Domestic sales comprised 91% of
total sales for the three months ended March 31, 1997, compared with 41% in
the same period in the prior year.
Cost of sales increased to $442,000 for the three months ended
March 31, 1997 from $159,000 for the same period in the prior year. This
increase is due to increased unit shipments in the current period of the
Company's T-TAC products.
Research and development ("R&D") expenses, which include
clinical and regulatory expenses, increased to $1,431,000 for the three
months ended March 31, 1997 from $788,000 for the same period in the prior
year. This increase is primarily due to on-going R&D expenses associated
with the Microgyn business, an increased number of R&D employees and related
personnel expenses as well as increased expenses associated with supporting
various R&D and clinical efforts. The Company believes that its investment in
product development is an essential element of its efforts to establish its
competitive position and continue the development of future products.
Accordingly, the Company expects to continue to make substantial expenditures
on product development and to increase the dollar amount expended for R&D.
Selling, general and administrative ("SG&A") expenses
increased to $1,692,000 for the three months ended March 31, 1997 from
$992,000 for the same period in the prior year. This increase is primarily
due to growth of the Company's direct sales force, both in the U.S. and
internationally, increased costs associated with marketing the Company's
T-TAC products in the U.S., and increased administrative costs associated
with being a publicly held company. The Company anticipates that the dollar
amount expended for SG&A will continue to increase, primarily due to expenses
associated with increasing the size of the domestic sales force, and
introducing and marketing the Company's products, which will require
increased physician training.
8
<PAGE>
Net interest and investment income increased to $492,000 for
the three months ended March 31, 1997 from $392,000 for the same period in
the prior year. The increase is due to a higher average cash balance from
proceeds of the Company's initial public offering, which took place on
February 1, 1996, and therefore provided a larger cash balance for only two
of the three months of the prior year quarter, which was invested in
investment grade securities. Interest expense for the three months ended
March 31, 1997 and the amount for the same period in the prior year was
insignificant.
As a result of the items discussed above, net loss increased
to $2,796,000 for the three months ended March 31, 1997 from $1,465,000 for
the three months ended March 31, 1996.
The Company has a limited history of operations. Since its
inception in September 1992, the Company has been engaged primarily in
research and development of its T-TAC and STARRT Falloposcopy systems and
tubal sterilization products. The Company has generated only limited
revenues, primarily from sales in international markets for clinical trials,
and to domestic and international distributors, and does not have experience
in manufacturing, marketing or selling its products in commercial quantities.
The Company has experienced significant operating losses since inception
and, as of March 31, 1997, had an accumulated deficit of $26.5 million. The
Company expects its operating losses to continue for at least the next
several years as it continues to expend substantial resources in funding
clinical trials in support of regulatory and reimbursement approvals,
expansion of manufacturing, marketing and sales activities and research and
product development or acquisition. Due to the expense and unpredictable
nature of these activities, there can be no assurance that the Company will
achieve or sustain profitability in the future.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's cash expenditures have
significantly exceeded its sales, resulting in an accumulated deficit of
$26.5 million at March 31, 1997. On February 1, 1996, the Company completed
an initial public offering of 3,450,000 shares of its common stock at $14.00
per share for net proceeds of $44.1 million. Prior to the initial public
offering, the Company funded its operations since incorporation primarily
through the private placement of equity securities, as well as through
interest income, equipment financing and secured loan arrangements. Through
December 31, 1996, the Company raised approximately $16.6 million from the
private placement of equity securities.
At March 31, 1997, Conceptus had cash, cash equivalents and
investments of $35.8 million compared with $39.0 million at December 31,
1996. The decrease is due to approximately $3.0 million used in operating
activities. Capital expenditures in the first quarter of 1997 increased to
$153,000 from $75,000 in the prior year period largely due to expenditures
for a new enterprise computer system.
9
<PAGE>
Conceptus believes that its existing capital resources will be
sufficient to fund its operations through 1998. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the progress of the Company's clinical research and product
development programs, the receipt of and the time required to obtain
regulatory clearances and approvals, and the resources the Company devotes to
developing, manufacturing and marketing its products. The Company's capital
requirements will also depend on, among other things, the resources required
to hire and develop a direct sales force in the United States, the resources
required to expand manufacturing capacity and facilities requirements and the
extent to which the Company's products generate market acceptance and demand.
Accordingly, there can be no assurance that the Company will not require
additional financing within this time frame and, therefore, may in the future
seek to raise additional funds through bank facilities, debt or equity
offerings or other sources of capital. Additional funding may not be
available when needed or on terms acceptable to the Company, which would have
a material adverse effect on the Company's business, financial condition and
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
10.16 Third Addendum to Lease Agreement with Dani
Investment Partners.
10.17 Lease Agreement with Three Sisters Ranch
Enterprises dated April 15, 1997.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CONCEPTUS, INC.
By: /s/ SANFORD FITCH
----------------------------------
Sanford Fitch
Senior Vice President
and Chief Financial Officer
(Duly Authorized and Principal
Financial and Accounting Officer)
Date: May 15, 1997
12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.16 Third Addendum to Lease Agreement with
Dani Investment Partners
10.17 Lease Agreement with Three Sisters Ranch
Enterprises dated April 15, 1997
27 Financial Data Schedule
</TABLE>
13
<PAGE>
THIS THIRD ADDENDUM TO THE LEASE, ENDING AUGUST 31, 1997, IS MADE BY AND
BETWEEN DANI INVESTMENT PARTNERS "LESSOR" AND CONCEPTUS, INC., A DELAWARE
CORPORATION "LESSEE", TO BE A PART OF THAT CERTAIN STANDARD INDUSTRIAL LEASE
DATED NOVEMBER 8, 1994 BETWEEN LESSOR AND LESSEE FOR THE PREMISES COMMONLY
KNOWN AS 1021 HOWARD AVENUE, SAN CARLOS, CA. (AS ATTACHED HERETO AND TOGETHER
WITH ITS FIRST ADDENDUM THE "LEASE").
Lessee and Lessor hereby agree the Lease is hereby modified and supplemented
as follows:
1. SECTION 3. TERM
The term of the lease shall be extended to encompass the period
commencing on September 1, 1997 and ending on February 28, 1998 (the
"Extension Period").
2. SECTION 4. RENT
The rent during the Extension Period shall be $17,500 per month.
3. SECTION 5. SECURITY DEPOSIT
The Security Deposit under the lease shall be increased FROM $14,000 to
an aggregate of $17,500 which shall include amounts previously
deposited. This additional sum of $3500 shall be due on September 1,
1997 when the new lease begins.
4. EFFECT OF ADDENDUM
Except as set forth above, the terms of the Lease shall continue to
govern the parties' relationship through the Extension Period. In the
event of any inconsistency between the terms of this Addendum and the
terms of the Lease, the terms of this Addendum shall control. As used
herein, the term "Lease" shall mean the Lease, this Addendum and all
exhibits referred to in the Lease and this Addendum.
5. SECTION 15: BROKER'S FEES
Each party warrants that it was not represented by a real estate broker
or agent in this transaction and that no broker's fees are due. If any
claim does arise it shall be the lessees obligation.
"LESSOR" "LESSEE"
DANI INVESTMENT PARTNERS CONCEPTUS, INC.
A FTW Delaware Corporation
BY: /s/ Dennis Farrey BY: /s/ Sanford Fitch
-------------------------- ----------------------------
ITS: President 4/22/97 ITS: Vice Pres. & CFO
------------------------- ----------------------------
<PAGE>
______________________________THREE SISTERS RANCH______________________________
ENTERPRISES
TABLE OF CONTENTS
PAGE
----
BASIC LEASE INFORMATION ............................................ 1
PREMISES ........................................................... 1
POSSESSION AND LEASE COMMENCEMENT .................................. 1
TERM ............................................................... 1
USE ................................................................ 1
RULES AND REGULATIONS .............................................. 2
RENT ............................................................... 2
BASIC OPERATING COST ............................................... 3
INSURANCE AND INDEMNIFICATION ...................................... 5
WAIVER OF SUBROGATION .............................................. 6
LANDLORD'S REPAIRS AND SERVICES .................................... 6
TENANT'S REPAIRS ................................................... 6
ALTERATIONS ........................................................ 7
SIGNS .............................................................. 7
INSPECTION/POSTING NOTICES ......................................... 7
UTILITIES .......................................................... 7
SUBORDINATION ...................................................... 8
FINANCIAL STATEMENTS ............................................... 8
ESTOPPEL CERTIFICATE ............................................... 8
SECURITY DEPOSIT ................................................... 8
TENANT'S REMEDIES .................................................. 8
ASSIGNMENT AND SUBLETTING .......................................... 9
AUTHORITY OF PARTIES ............................................... 9
CONDEMNATION ....................................................... 9
CASUALTY DAMAGE .................................................... 10
HOLDING OVER ....................................................... 10
DEFAULT ............................................................ 11
LIENS .............................................................. 12
TRANSFERS BY LANDLORD .............................................. 12
RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS .................... 12
WAIVER ............................................................. 13
NOTICES ............................................................ 13
ATTORNEYS' FEES .................................................... 13
SUCCESSORS AND ASSIGNS ............................................. 13
FORCE MAJEURE ...................................................... 13
BROKERAGE COMMISSION ............................................... 13
MISCELLANEOUS ...................................................... 14
ADDITIONAL PROVISIONS .............................................. 14
i
PLEASE INITIAL: Landlord
Tenant / / / /
<PAGE>
THREE SISTERS RANCH
E N T E R P R I S E S
BASIC LEASE INFORMATION
LEASE DATE:
TENANT Conceptus, Inc.
TENANT'S ADDRESS: 981 Industrial Road
San Carlos, CA 94070
LANDLORD: Three Sisters Ranch Enterprises
LANDLORD'S ADDRESS: P. O. Box 1444
San Carlos, CA 94070
Project: San Carlos Business Park
Description That six (6) building project totaling approximately
123,280 square feet commonly known as San Carlos
Business Park, San Carlos, California.
Building Description: BUILDING 1:
That approximately 23,000 square foot, one story
tilt-up concrete building known as 981 Industrial
Road in San Carlos, California. The building is
outlined in blue on Exhibit A.
BUILDING 2:
That approximately 21,680 square foot, one story
tilt-up concrete building known as 957 Industrial
Road in San Carlos, California. The building is
outlined in yellow on Exhibit A.
Premises: (a) That approximately 11,941 square feet of
rentable area known as Suites B and D of 981
Industrial Road, San Carlos, California. The
demised premises are outlined in red on Exhibit A.
See Paragraph 1.
(b) That approximately 8,217 square feet of
rentable area known as Suites L, J, D and F of
957 Industrial Road, San Carlos, California. The
demised premises are outlined in green on Exhibit A.
See Paragraph 1.
(c) That approximately 4380 square feet of
rentable area known as Suite P of 957 Industrial
Road, San Carlos, California. The demised premises
are outlined in pink on Exhibit A. See Paragraph 1.
Permitted Use: General office, storage and distribution, light
manufacturing not involving hazardous or toxic
materials other than those consistent with normal
office use and other directly related and concurrent
related legal uses. See Paragraph 4.
Parking Density: Three (3) unreserved automobile parking spaces per
1,000 square feet, free of charge throughout the term
of the Lease.
<PAGE>
Estimated Term
Commencement Date: The Lease Term shall commence on:
Suites B & D, 981 Industrial Road: 05/15/97
Suites D, F, L & J, 957 Industrial Road: 06/01/97
Suite P, 957 Industrial Road:
When vacated by existing tenant, Lessee shall have 30
days of free rent pursuant to the terms set forth
herein.
Length of Term: (a) INITIAL TERM: All leases shall expire on
May 31, 2002.
Tenant may not terminate any portion of the leases
premises hereunder , except as specified as to
asbestos remediation as set forth in this Lease.
Failure to pay rent on any suite, or other breach of
this lease as to any suite, shall be a default of
the entire lease and each suite shall be subject
to such default. THE OCCUPANCY RIGHTS OF THE SUITES
IS COTERMINOUS AND THE TERMINATION OF LEASE RIGHTS,
BY LAPSE OF TIME OR BY BREACH, SHALL TERMINATE ALL
LEASE OCCUPANCY RIGHTS AS TO ALL SUITES (EXCEPT AS
TO TERMINATION DUE TO ACM ABATEMENT AS PROVIDED FOR
BELOW).
(b) TERM EXTENSIONS: One (1) extension for a Sixty
(60) Month period according to the terms of
Paragraph 43.
Rent:
Base Rent
<TABLE>
<CAPTION>
Suite Numbers Sq. Ft Period Base NNN Rent Per Sq. Ft.
- ------------- ------ ------ -------------------------
<S> <C> <C> <C>
981 Ind. Ste. B & D 11, 941 5/15/97 - 5/31/98 $ 1.05
6/01/98 - 5/31/99 $ 1.10
6/01/99 - 5/31/00 $ 1.15
6/01/00 - 5/31/01 $ 1.20
6/01/01 - 5/31/02 $ 1.25
957 Ind. Ste. D, F, J & L 8,217 6/01/97 - 5/31/98 $ 1.05
6/01/98 - 5/31/99 $ 1.10
6/01/99 - 5/31/00 $ 1.15
6/01/00 - 5/31/01 $ 1.20
6/01/02 - 5/31/02 $ 1.25
957 Ind. Ste. P 4,380 When vacated by existing tenant leasee shall have
30 days of free rent thereafter per rent amounts for 957 Ind.
Ste. D, F, J & L.
Estimated First Year Basic Operating Cost: $0.20 /sq.ft./mo. NNN (not to exceed $0.20
/sq.ft./mo. NNN for 1997) See Paragraph 7.
</TABLE>
<PAGE>
FIRST MONTH'S RENT THRU 6/30/97 $27,434.92
Security Deposit: $25,764.90. See Paragraph 19.
Tenant's Proportionate Share:
Of Building 1: 51.9%
Of Building 2: 58.1%
Of Project: 19.9%
Broker: Tenant: CB/Madison See Paragraph 35.
Landlord: CB Commercial
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information above and shall be
construed to incorporate all of the terms provided under the particular Lease
paragraph pertaining to such information. In the event of any conflict
between the Basic Lease Information and the Lease, the latter shall control.
All square footage is approximate. Measurements are calculated uniformly
throughout the project. Tenant may have measurements verified by an architect
at its sole cost and expense.
<PAGE>
LEASE
THIS LEASE is made as of this 15th day of April, 1997, by and between
Three Sisters Ranch Enterprises (hereinafter called "Landlord") and Conceptus,
Inc. (hereinafter called "Tenant").
PREMISES 1. Landlord leases to Tenant and Tenant leases from Landlord,
upon the terms and conditions hereinafter set forth, those
premises (the "Premises") outlined in red on Exhibit A and
described in the Basic Lease Information. The Premises may be
all or part of the building(s) (the "Building(s)") or of the
project (the "Project") which may consist of more than one
building. Tenant's right to use the Premises shall include
the right of reasonable ingress and egress to the Premises,
the right to use any other reasonably necessary easements or
rights of way, and the right to use common and joint use areas
throughout the Project. The Building(s) and Project are
outlined in blue and green respectively on Exhibit A.
POSSESSION 2. A. EXISTING IMPROVEMENTS. In the event this Lease pertains
AND LEASE to a Premises in which the interior improvements have already
COMMENCE- been constructed ("Existing Improvements"), the provisions of
MENT this Paragraph 2.A. shall apply and the term commencement
date ("Term Commencement Date") shall be the earlier of the
date on which: (1) Tenant takes possession of some or all
of the Premises; or (2) Landlord delivers written notice to
Tenant that Tenant may occupy the Premises. If for any
reason Landlord cannot deliver possession of the Premises to
Tenant on the Estimated Term Commencement Date, Landlord
shall not be subject to any liability therefor, nor shall
Landlord be in default hereunder, and Tenant agrees to
accept possession of the Premises at such time as Landlord
is able to deliver the same, which date shall then be deemed
the Term Commencement Date. Tenant shall not be liable for
any Rent for any period prior to the Term Commencement Date.
Tenant acknowledges that Tenant has inspected and accepts
the Premises in their present condition, broom clean, "as
is", as suitable for the purpose for which the Premises are
leased. Tenant agrees that said Premises and other
improvements are in good and satisfactory condition as of
when possession was taken. Tenant further acknowledges that
no representations as to the condition or repair of the
Premises nor promises to alter, remodel or improve the
Premises have been made by Landlord unless such are
expressly set forth in this Lease. Tenant shall, upon
demand, execute and deliver to Landlord a letter of
acceptance of delivery of the Premises.
B. CONSTRUCTION OF IMPROVEMENTS. In the event this Lease
pertains to a Building to be constructed or improvements to be
construed within a Building, the provisions of this Paragraph
2.B shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement
Date") shall be the earlier of the date on which: (1)
Tenant takes possession of some or all of the Premises, or
(2) the improvements constructed or to be construed in the
Premises shall have been substantially completed in
accordance with the plans and specifications described on
Exhibit B, whether or not substantial completion of the
Building itself shall have occurred. If for any reason
Landlord cannot deliver possession of the Premises to Tenant
on the Estimated Term Commencement Date, Landlord shall not
be subject to any liability therefor, nor shall Landlord be
in default hereunder. In the event of any dispute as to
substantial completion of work performed or required to be
performed by Landlord, the certificate of Landlord's
architect or general contractor shall be conclusive.
Substantial completion shall have occurred notwithstanding
Tenant's submission of a punchlist to Landlord, which Tenant
shall submit, if at all, within thirty (30) days after the
Term Commencement Date. Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery
of the Premises.
TERM 3. The Term of this Lease shall commence on the Term
Commencement Date and continue in full force and effect for
the number of months as the Length of Term in the Basic Lease
Information or until this Lease is terminated as otherwise
provided herein (Initial Term). If the Term Commencement Date
is a date other than the first day of the calendar month, the
Term shall be the number of months of the Length of Term in
addition to the remainder of the calendar month following the
Term Commencement Date.
USE 4. A. GENERAL. Tenant shall use the Premises for the Permitted
Use and for no other use or purpose. Tenant shall control
Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants
(collectively, "Tenant's Parties") in such a manner that Tenant
and Tenant's Parties cumulatively do not exceed the Parking
Density at any time. Tenant and Tenant's parties shall have
nonexclusive right to use, in common with other parties
occupying the Building or Project, the parking areas and
driveways of the Project, subject to such rules and
regulations as Landlord may from time to time prescribe.
B. LIMITATIONS. Tenant shall not permit any odors, smoke,
dust, gas, substances, noise or vibrations to emanate from
the Premises, nor taken any action which could reasonably and
potentially constitute a nuisance or could disturb, obstruct
or endanger any other tenants of the Building or Project in
which the Premises are situated or interfere with their use
of their respective premises. Storage outside the Premises
of materials, vehicles or any other items is prohibited.
Tenant shall not use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor
shall Tenant cause or maintain or permit any nuisance in, on
or about the Premises. Tenant shall not commit or suffer the
commission of any waste in, on or about the Premises. Tenant
shall not allow any sale by auction upon the Premises, or
place any loads upon the floors, walls or ceilings which
endanger the structure, or place any harmful liquids in the
drainage system of the Building or Project. No waste,
materials or refuse shall be dumped upon or permitted to
remain outside the Premises except in trash containers placed
inside exterior enclosures designated for that purpose by
Landlord. Landlord shall not be responsible to Tenant for
the
APPROVAL INITIALS: Landlord
Tenant / / / /
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non-compliance by any other tenant or occupant of the
Building or Project with any of the above-referenced rules or
any other terms or provisions of such tenant's or occupant's
lease or other contract.
C. COMPLIANCE WITH REGULATIONS. Except as otherwise
provided in this Agreement, by entering the Premises, Tenant
accepts the Premises in the condition existing as of the date
of such entry, subject to all existing or future applicable
municipal, state and federal and other governmental statutes,
regulations, laws and ordinances, including zoning ordinances
and regulations governing and relating to the use, occupancy
and possession of the Premises and the use, storage,
generation and disposal of Hazardous Materials (hereinafter
defined) in, on and under the Premises (collectively
"Regulations"). Subject to the terms and conditions of this
Agreement, Tenant, at is sole expense, shall use and occupy
the Premises in compliance with all laws, including, without
limitation, the Americans With Disabilities Act, orders,
judgments, ordinances, regulations, codes, directives,
permits, licenses, covenants and restrictions now or
hereafter applicable to the Premises (collectively, "Legal
Requirements"). The Premises shall not be used as a place of
public accommodation under the Americans With Disabilities
Act or similar state statutes or local ordinances or any
regulations promulgated thereunder, all as may be amended
from time to time. Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises,
that are required by Legal Requirements related to Tenant's
use or occupation of the Premises. Except for pre-existing
obligations and those obligations placed on the Landlord by
this Lease Agreement, Tenant shall, at Tenant's sole expense,
strictly comply with all Regulations now in force or which
may hereafter be in force relating to the Premises and the
use of the Premises and/or the use, storage or generation of
Hazardous Materials in, on and under the Premises. Tenant
shall at its sole cost and expense obtain any and all
licenses or permits necessary for Tenant's use of the
Premises. Tenant shall comply with the requirements of any
board of fire underwriters or other similar body now or
hereafter constituted. Tenant shall be solely responsible
for compliance with any requirements for modification to the
Premises to provide for fire prevention or suppression
improvements or modifications, including sprinkler
requirements, as public officials or law may require. Tenant
shall not do or permit anything to be done in, on, or about
the Premises or bring or keep anything which will in any way
increase the rate of any insurance upon the Premises,
Building or Project, or upon any contents therein, or cause a
cancellation of said insurance. Tenant shall indemnify,
defend, protect and hold Landlord harmless from and against
any loss, cost, expense, damage, attorneys' fees or liability
arising out of the failure to Tenant to comply with any
applicable law or regulation or comply with the requirements
as set forth herein. The taking of possession of the
Premises shall be conclusive evidence that Tenant accepts the
Premises and that the Premises were in good condition at the
time possession was taken. Despite any provision herein to
the contrary, if any asbestos containing materials (ACM) is
found to exist in the Premises, which ACM is either (i)
friable or otherwise dangerous in its existing condition, or
(ii) necessary to remove for the purpose of completing the
tenant improvement work, then Landlord will be obligated to
remove the ACM at its own cost, up to a cumulative total of
$50,000. If the ACM abatement costs exceed $50,000 for the
total of all property leased hereunder, Landlord shall have
the right to terminate this lease with respect to any suite
where the $50,000 cap would be exceeded; Tenant shall have
the right to any amount in excess of $50,000 at its written
election within fifteen (15) days of notice; if either
Landlord or Tenant elect not to proceed with payment for ACM
abatement in excess of $50,000 they shall do so without
liability to the other for such election.
D. HAZARDOUS WASTES MATERIALS. Excepting those chemicals
consistent with normal office use (office cleaning
solutions, white out), Tenant shall not cause, or allow any
of Tenant's Parties to cause, any Hazardous Materials to be
used, generated, stored or disposed of on or about the
Premises, the Building or the Project. As used in this
Lease, "Hazardous Materials" shall include, but not be
limited to, "hazardous materials," "hazardous wastes,"
"toxic substances," or other similar designations in any
federal, state or local law, regulation, or ordinance.
Landlord shall have the right but not the obligation at all
reasonable times to inspect the Premises and to conduct
tests and investigations to determine whether Tenant is in
compliance with the foregoing provisions, the costs of all
such inspections, tests and investigations to be borne by
Tenant. Tenant shall indemnify, defend, protect and hold
Landlord harmless from and against all liabilities, losses,
costs and expenses, demands, causes of action, claims or
judgments directly or indirectly arising out of the use,
generation, storage or disposal of Hazardous Materials by
Tenant or any of Tenant's Parties, which indemnity shall
include, without limitation, the cost of any required or
necessary repair, cleanup or detoxification, and the
preparation of any closure or other required plans, whether
such action is required or necessary prior to or following
the termination of this Lease. Neither the written consent
by Landlord to the use, generation, storage or disposal of
Hazardous Materials nor the strict compliance by Tenant with
all laws pertaining to Hazardous Materials shall excuse
Tenant from Tenant's obligation of indemnification pursuant
to this Lease. Tenant's obligations pursuant to the
foregoing indemnity shall survive the termination of this
Lease. Tenant shall not be held liable in any manner for
the presence of any Hazardous Materials existing on or about
the Premises, Buildings or the Project prior to the first
Commencement Date of the Lease.
RULES AND 5. Tenant shall faithfully observe and comply with any rules
REGULATIONS and regulations Landlord may from time to time prescribe in
writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the
Premises or Project. Tenant shall cause Tenant's Parties to
comply with such rules and regulations. Landlord shall not
be responsible to Tenant for the non-compliance by any other
tenant or occupant of the Building or Project with any of the
rules and regulations.
RENT 6. A. BASE RENT. Tenant shall pay to Landlord, without demand
throughout the Term, Base Rent as specified in the Basic
Lease Information, payable in monthly installments in advance
on or before the first day of each calendar month, in lawful
money of the United States, without deduction or offset
whatsoever, at the address specified in the Basic Lease
Information or to such other place as Landlord may from time
to time designate in writing. Base Rent and estimated
monthly Basic Operating Cost for the first full month of the
Term shall be paid by Tenant upon
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Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on other than the first day of
a month, then Base Rent and the estimated monthly Basic
Operating Cost payment shall be prorated and the prorated
installment shall be paid on the first day of the calendar
month next succeeding the Term Commencement Date.
B. ADDITIONAL RENT. All monies other than Base Rent
required to be paid by Tenant hereunder, including, but not
limited to, the interest and late charge described in
Paragraph 26.D., any monies spent by Landlord pursuant to
Paragraph 30, and Tenant's Proportionate Share of Basic
Operating Cost, as specified in Paragraph 7 of this Lease,
shall be considered additional rent ("Additional Rent"). Rent
shall mean Base Rent and Additional Rent.
BASIC 7. A. BASIC OPERATING COST. In addition to the Base Rent
OPERATING required to be paid hereunder, Tenant shall pay as Additional
COST Rent, Tenant's Proportionate Share, as defined in the Basic
Lease Information, of Basic Operating Cost in the manner set
forth below. Landlord shall account for each item of Basic
Operating Cost as either a cost attributable to the Building
or to the Project, as determined by Landlord in Landlord's
sole discretion, and unless provided to the contrary in this
Lease, Tenant shall pay the applicable Tenant's Proportionate
Share of each such Basic Operating Cost, as set forth in the
Basic Lease Information. Basic Operating Cost shall mean all
expenses and costs of every kind and nature which Landlord
shall pay or become obligated to pay, because of or in
connection with the management, maintenance, preservation and
operation of the Project and its supporting facilities
(determined in accordance with generally accepted accounting
principles, consistently applied) including but not limited
to the following:
(1) TAXES. All real property taxes, possessory interest
taxes, business or license taxes or fees, service payments in
lieu of such taxes or fees, annual or periodic license or use
fees, excises, transit charges, housing fund assessments,
open space charges, assessments, levies, fees or charges
general and special, ordinary and extraordinary, unforeseen
as well as foreseen, of any kind (including fees "in-lieu" of
any such tax or assessment) which are assessed, levied,
charged, confirmed, or imposed by any public authority upon
the Project, its operations or the Rent (or any portion or
component thereof) (all of the foregoing being hereinafter
collectively referred to as "real property taxes"), or any tax
imposed in substitution, partially or totally, of any tax
previously included within the definition of real property
taxes, or any additional tax the nature of which was
previously included within the definition of real property
taxes, except (a) inheritance or estate taxes imposed upon or
assessed against the Project, or any part thereof or interest
therein, and (b) taxes computed upon the basis of net income
of Landlord or the owner of any interest therein, except as
otherwise provided in the following sentence. Basic
Operating Cost shall also include any taxes, assessments, or
any other fees imposed by any public authority upon or
measured by the monthly rental or other charges payable
hereunder, including, without limitation, any gross income
tax or excise tax levied by the local governmental body with
respect to receipt of such rental, or upon, with respect to
or by reason of the development, possession, leasing,
operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion
thereof, or upon this transaction or any document to which
Tenant is a party creating or transferring an interest or an
estate in the Premises. In the event that it shall not be
lawful for Tenant to reimburse Landlord for all or any part
of such taxes, the monthly rental payable to Landlord under
this Lease shall be revised to net to Landlord the same total
net rental after imposition of any such taxes by Landlord as
would have been payable to Landlord prior to the payment of
any such taxes.
(2) INSURANCE. All insurance premiums and costs, including
but not limited to, any deductible amounts, premiums and cost
of insurance incurred by Landlord, as more fully set forth in
Paragraph 8.A. herein.
(3) REPAIRS AND IMPROVEMENTS. Repairs, replacements and
general maintenance for the Premises, Building and Project
(except for those repairs or improvements expressly made the
financial responsibility of Landlord pursuant to the terms of
this Lease, repairs to the extent paid for by proceeds of
insurance or by Tenant or other third parties, and
alterations attributable solely to tenants of the Project
other than Tenant). Such repairs, replacements, and general
maintenance shall include the cost of any capital
improvements made to or capital assets acquired for the
Project, Building, or Premises after the Term Commencement
Date that reduce any other Basic Operating Cost, are
reasonably necessary for the health and safety of the
occupants of the Project, or are made to the Building by
Landlord after the date of this Lease and are required under
any governmental law or regulation, such costs or allocable
portions thereof to be amortized over such reasonable period
as Landlord shall determine, together with interest on the
unamortized balance at the "prime rate" charged at the time
such improvements or capital assets are constructed or
acquired by Bank of America, N. T. S. A. (San Francisco),
plus two (2) percentage points, but in no event more than the
maximum rate permitted by law.
(4) SERVICES. Except as otherwise provided in this Section
7, all expenses relating to maintenance, and service
agreements and services, and costs of supplies and equipment
used in maintaining the Premises, Building and Project and
the equipment therein and the adjacent sidewalks, driveways,
parking and service areas, including, without limitation,
alarm service, window cleaning, elevator maintenance,
Building exterior maintenance and landscaping.
(5) UTILITIES. Utilities which benefit all or a portion of
the Premises, Building or Project.
(6) MANAGEMENT FEE. A management and accounting cost
recovery fee equal to five percent (5%) of the Basic
Operating Cost.
(7) LEGAL AND ACCOUNTING. Legal and accounting expenses
relating to the Project, including the cost of audits by
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APPROVAL INITIALS: Landlord
Tenant / / / /
<PAGE>
certified public accountants. Legal and accounting expenses
shall be reasonable and shall not include the cost of any
enforcement or eviction action against another tenant at the
Project.
In the event that the Building is not fully occupied during
any fiscal year of the as determined by Landlord, an
adjustment shall be made in computing the Basic Operating
Cost for such year so that Tenant pays an equitable portion
of all variable items of Basic Operating Cost, as reasonably
determined by Landlord.
In calculating the Basic Operating Cost, Landlord shall
apply the following provision:
Any category of costs allocated to the Buildings in
question, the other Buildings of the Project shall also bear
the burden for those categories of costs, so that such costs
will be uniformly treated as Building costs throughout the
Project, on a consistent and non-discriminatory basis. The
same shall apply for categories of costs allocated as Project
costs.
Insurance deductibles in excess of $5,000 shall be
amortized over the useful life of the item repaired or
replaced. Tenant shall not be required to pay the insurance
deductible if the damage results from the gross negligence or
willful misconduct of Landlord or Landlord's agents,
employees or contractors.
Basic Operating Cost shall not include specific costs
incurred for the account of, separately billed to and paid by
specific tenants. Notwithstanding anything herein to the
contrary, in any instance wherein Landlord, in Landlord's
sole discretion, deems Tenant to be responsible for any
amounts greater than Tenant's Proportionate Share, Landlord
shall have the right to allocate costs in any manner Landlord
deems appropriate.
The following items shall be excluded from Basic Operating
Costs: loan payments; brokers' and finders' fees or other
commissions; leasing expenses; depreciation on improvements
or equipment and machinery; expenses for items which are not
generally of use to all tenants; advertising or promotional
expenses; wages, salaries, employee benefits and payroll
taxes for Landlord's personnel (except to the extent such
personnel are employed to operate or repair the Project or
the common area); costs incurred by Landlord in connection
with the clean-up or removal of any Hazardous Materials
existing prior to the respective Commencement Dates of the
Lease Term; or costs or expenses incurred due to violation by
Landlord of any term or condition of the Lease. In addition,
Basic Operating Costs shall be reduced by insurance or other
recoveries or user fees.
B. PAYMENT OF ESTIMATED BASIC OPERATING COST. "Estimated
Basic Operating Cost" for any particular year shall mean
Landlord's estimate of the Basic Operating Cost for such
fiscal year made prior to commencement of such fiscal year as
hereinafter provided. Landlord shall have the right from
time to time to revise its fiscal year and interim accounting
periods so long as the periods as so revised are reconciled
with prior periods in accordance with generally accepted
accounting principles applied in a consistent manner. During
the last month of each fiscal year during the Term, or as
soon thereafter as practicable, Landlord shall give Tenant
written notice of the Estimated Basic Operating Cost for the
ensuing fiscal year. Tenant shall pay Tenant's Proportionate
Share of the Estimated Operating Cost with installments of
Base Rent for the fiscal year to which the Estimated Basic
Operating Cost applies in monthly installments on the first
day of each calendar month during such year, in advance. If
at any time during the course of the fiscal year, Landlord
determines that Basic Operating Cost is projected to vary
from the then Estimated Basic Operating Cost by more than ten
percent (10%), Landlord may, by written notice to Tenant,
revise the Estimated Basic Operating Cost for the balance of
such fiscal year, and Tenant's monthly installments for the
remainder of such year shall be adjusted so that by the end
of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Basic Operating
Cost for such year.
C. COMPUTATION OF BASIC OPERATING COST ADJUSTMENT. "Basic
Operating Cost Adjustment" shall mean the difference between
Estimated Basic Operating Cost and Basic Operating Cost for
any fiscal year determined as hereinafter provided. Within
one hundred twenty (120) days after the end of each fiscal
year, as determined by Landlord, or as soon thereafter as
practicable, Landlord shall deliver to Tenant a statement of
Basic Operating Cost for the fiscal year just ended,
accompanied by a computation of Basic Operating Cost
Adjustment. Landlord's statement of Basic Operating Costs
should include a reasonable line-item breakdown and
reasonable supporting data. If such statement shows that
Tenant's payment based upon Estimated Basic Operating Cost is
less than Tenant's Proportionate Share of Basic Operating
Cost, then Tenant shall pay to Landlord the difference within
twenty (20) days after receipt of such statement. If such
statement shows that Tenant's payments of Estimated Basic
Operating Cost exceed Tenant's Proportionate Share of Basic
Operating Cost, then (provided that Tenant is not in default
under this Lease) Landlord shall pay to Tenant the difference
within twenty (20) days after delivery of such statement to
Tenant. If this Lease has been terminated or the Term hereof
has expired prior to the date of such statement, then the
Basic Operating Cost Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of
delivery of the statement. Should this Lease commence or
terminate at any time other than the first day of the fiscal
year, Tenant's Proportionate Share of the Basic Operating
Cost adjustment shall be prorated by reference to the exact
number of calendar days during such fiscal year that this
Lease is in effect.
D. NET LEASE. This shall be a net Lease and Base Rent shall
be paid to Landlord absolutely net of all costs and expenses,
except as specifically provided to the contrary in this
Lease. The provisions for payment of Basic Operating Cost and
the Basic Operating Cost Adjustment are intended to pass on
to Tenant and reimburse Landlord
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Tenant / / / /
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for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership,
maintenance and operation of the Building or Project and such
additional facilities now and in subsequent years as may be
determined by Landlord to the be necessary to the Building or
Project.
E. JANITORIAL SERVICE. Tenant shall be solely responsible
for all interior janitorial maintenance of the Premises.
F. TENANT AUDIT. In the event that Tenant shall dispute the
amount set forth in any statement provided by Landlord under
Paragraph 7.B or 7.C. above, Tenant shall have the right, not
later than thirty (30) days following the receipt of such
statement and upon the condition that Tenant shall first
deposit with Landlord the full amount in dispute, to cause
Landlord's books and records with respect to Basic Operating
Cost for such fiscal year to be audited by certified public
accountants selected by Tenant and subject to Landlord's
reasonable right of approval. The Basic Operating Cost
Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund
in excess of seven and one half percent (7.5%) of Tenant's
Proportionate Share of the Basic Operating Cost Adjustment
previously reported, the cost of such audit shall be borne by
Landlord; otherwise the cost of such audit shall be paid by
Tenant. If Tenant shall not request an audit in accordance
with the provisions of this Paragraph 7.E. within twenty (20)
days after receipt of Landlord's statement provided pursuant
to Paragraph 7.B. or 7.C., such statement shall be final and
binding for all purposes hereof.
G. THREE DAY NOTICE. In the event Tenant fails to pay Basic
Operating Costs when due as Additional Rent, Tenant shall be
subject to a three (3) day notice to pay rent or quit.
INSURANCE 8. A. LANDLORD'S INSURANCE. Landlord agrees to the extent
AND INDEMNI- reasonably available to maintain insurance insuring the
FICATION Building against fire, lightning, vandalism and malicious
mischief (including, if Landlord elects, "All Risk" coverage,
earthquake, and/or flood insurance), in an amount not less
than eight percent (80%) of the replacement cost thereof,
with deductibles and the form and endorsements of such
coverage as selected by Landlord. Any cost associated with
Landlord's procurement of "All Risk" coverage, earthquake,
and/or flood insurance shall be passed through to Tenant as a
Basic Operating Cost if such insurance is available at
commercially reasonable rates. In addition Landlord shall
procure insurance against loss of Base Rent and Additional
Rent, in an amount equal to the amount of Base Rent and
Additional Rent payable by Tenant for a period of at least
twelve (12) months commencing on the date of loss if such
insurance is available at commercially reasonable rates.
Such insurance shall be for the sole benefit of Landlord and
under Landlord's sole control. Landlord shall not be
obligated to insure any furniture, equipment, machinery,
goods or supplies which Tenant may keep or maintain in the
Premises, or any leasehold improvements, additions or
alterations within the Premises. Landlord may also carry
such other insurance as Landlord may deem prudent or
advisable, including, without limitation, liability insurance
in such amounts and on such terms as Landlord shall determine.
B. TENANT'S INSURANCE.
(1) PROPERTY INSURANCE. Tenant shall procure at Tenant's
sole cost and expense and keep in effect from the date of
this Lease and at all times until the end of the Term,
insurance on all personal property and fixtures of Tenant and
all improvements made by or for Tenant to the Premises,
insuring such property for the full replacement value of such
property.
(2) LIABILITY INSURANCE. Tenant shall procure at Tenant's
sole cost and expense and keep in effect from the date of
this Lease and at all times until the end of the Term either
Comprehensive General Liability Insurance or Commercial
General Liability insurance applying to the use and occupancy
of the Premises and the Building, and any part of either, and
any areas adjacent thereto, and the business operated by
Tenant, or by any other occupant on the Premises. Such
insurance shall include Broad Form Contractual Liability
insurance coverage insuring Tenant's indemnity obligations
under this Lease. Such coverage shall have a minimum combined
single limit of liability of at least One Million Dollars
($1,000,000.00), and a general aggregate limit of One Million
Dollars ($1,000,000.00). All such policies shall be written
to apply to bodily injury, property damage or loss, personal
injury and other covered loss, however occasioned, occurring
during the policy term, shall be endorsed to add Landlord and
any party holding an interest to which this Lease may be
subordinated as an additional insured, and shall provide that
such coverage shall be primary and that any insurance
maintained by Landlord shall be excess insurance only. Such
coverage shall also contain endorsements: (i) including
employees as additional insureds; (ii) deleting any liquor
liability exclusion; and (iii) providing for coverage of
employer's automobile non-ownership liability. All such
insurance shall provide for severability of interests; and
shall afford coverage for all claims based on acts,
omissions, injury and damage, which claims occurred or arose
(or the onset of which occurred or arose) in whole or in part
during the policy period. Said coverage shall be written on
an "occurrence" basis, if available. If an "occurrence" basis
form is not available, Tenant must purchase "tail" coverage for
the most number of years available, and tenant must also
purchase "tail" coverage if the retroactive date of a policy
form is changed so as to leave a gap in coverage for
occurrences that might have occurred in prior years. If a
"claims made" policy is ever used, the policy must be endorsed
so that Landlord is given the right to purchase "tail" coverage
should Tenant for any reason not do so or if the policy is to
be canceled for nonpayment of premium, provided such
endorsement is available at commercially reasonable rates.
(3) GENERAL INSURANCE REQUIREMENTS. All coverages described
in this Paragraph 8.B. shall be endorsed to provide Landlord
with thirty (30) days' notice of cancellation or change in
terms. If at any time during the Term the amount or coverage
of insurance which Tenant is required to carry under this
Paragraph 8.B. is, in Landlord's
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reasonable judgment, materially less than the amount or type
of insurance coverage typically carried by owners or tenants
of properties located in the general area in which the
Premises are located which are similar to and operated for
similar purposes as the Premises, Landlord shall have to
require Tenant to increase the amount or change the types of
insurance coverage required under this Paragraph 8.B. All
insurance policies required to be carried under this Lease
shall be written by companies rated A-V or better in "Best's
Insurance Guide" and authorized to do business in California.
Any deductible amounts under any insurance policies required
hereunder shall be subject to Landlord's prior written
approval. In any event deductible amounts shall not exceed
Ten Thousand Dollars ($10,000.00). Tenant shall deliver to
Landlord on or before the Term Commencement Date, and
thereafter at least thirty (30) days before the expiration
dates of the expiring policies, certified copies of Tenant's
insurance policies, or a certificate evidencing the same
issued by the insurer thereunder, showing that all premiums
have been paid for the full policy period; and, in the event
Tenant shall fail to procure such insurance, or to deliver
such policies or certificates, Landlord may, as an additional
insured, at Landlord's option and in addition to Landlord's
other remedies in the event of a default by Tenant hereunder,
procure the same for the account of Tenant, and the cost
thereof shall be paid to Landlord as Additional Rent.
C. INDEMNIFICATION. Landlord shall not be liable to Tenant
for any loss or damage to person or property caused by theft,
fire, acts of God, acts of a public enemy, riot, strike,
insurrection, war, court order, requisition or order of
governmental body or authority or for any damage or
inconvenience which may arise through repair or alteration of
any part of the Building or Project or failure to make any
such repair, except as expressly otherwise provided in
Paragraph 10. Tenant shall indemnify, defend by counsel
acceptable to Landlord, protect and hold Landlord harmless
from and against any and all liabilities, losses, costs,
damages, injuries or expenses, including reasonable
attorneys' fees and court costs, arising out of or related
to: (1) claims of injury to or death of persons or damage to
property occurring or resulting directly or indirectly from
the use or occupancy of the Premises, or from activities of
Tenant, Tenant's Parties or anyone in or about the Premises
or Project, or (2) claims for work or labor performed, or for
materials or supplies furnished to or at the request of
Tenant in connection with performance of any work done for
the account of Tenant in the performance of any covenant
contained in this Lease. The foregoing indemnity shall not
be applicable to claims arising from the active negligence or
willful misconduct of Landlord. The provisions of this
Paragraph shall survive the expiration or termination of this
Lease with respect to any claims or liability occurring prior
to such expiration or termination.
WAIVER OF 9. To the extent permitted by law and without affecting the
SUBROGA- coverage provided by insurance to be maintained hereunder,
TION Landlord and Tenant each waive any right to recover against
the other for: (a) damages for injury to or death of
persons; (b) damages to property; (c) damages to the Premises
or any part thereof, and (d) claims arising by reason of the
foregoing due to hazards covered by insurance to the extent
of proceeds recovered therefrom. This provision is intended
to waive fully, and for the benefit of each party, any rights
and/or claims which might give rise to a right of subrogation
in favor of any insurance carrier. The coverage obtained by
each party pursuant to this Lease shall include, without
limitation, a waiver of subrogation by the carrier which
conforms to the provisions of this paragraph.
LANDLORD'S 10. Landlord shall at Landlord's expense maintain the
REPAIRS AND structural soundness of the structural portions of the roof,
SERVICES foundations and exterior walls of the Building in good repair,
reasonable wear and tear excepted. The term exterior walls
as used herein shall not include windows, glass or plate
glass, doors, special store fronts or office entries.
Landlord shall perform on behalf of Tenant and other tenants
of the Project, as an item or office entries. Landlord shall
perform on behalf of Tenant and other tenants of the Project,
as an item of Basic Operating Cost, the maintenance of the
Building, Project, and public and common areas of the
Project, including but not limited to the roof, pest
extermination, the landscaped areas, parking areas,
driveways, the truck staging areas, fire sprinkler systems,
sanitary and storm sewer lines, non-structural portions of
the roof, roof membrane, utility services, electric and
telephone equipment servicing the Building(s) exterior
lighting, and anything which affects the operation and
exterior appearance of the Project, which determination shall
be at Landlord's sole discretion. Except for the expenses
directly involving the items specifically described in the
first sentence of this Paragraph 10, Tenant shall reimburse
Landlord for all costs in accordance with Paragraph 7. Any
damage caused by or repairs necessitated by any act of Tenant
may be repaired by Landlord at Landlord's option and at
Tenant's expense. Tenant shall immediately give Landlord
written notice of any defect or need of repairs after which
Landlord shall have a reasonable opportunity to repair same.
Landlord's liability with respect to any defects, repairs, or
maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of
such repairs or maintenance.
TENANT'S 11. Tenant shall at Tenant's expense maintain all parts of the
REPAIRS Premises in a good clean and secure condition and promptly
make all necessary repairs and replacements, including but
not limited to all windows, glass, doors, walls and wall
finishes, floor covering, heating, ventilating and air
conditioning systems, truck doors, dock bumpers, dock plates
and levelers, plumbing work and fixtures, downspouts,
electrical and lighting systems, and fire sprinklers. Tenant
shall at Tenant's expense also perform regular removal of
trash and debris. Tenant shall, at Tenant's own expense,
enter into a regularly scheduled preventative
maintenance/service contract with a maintenance contractor
for servicing all hot water, heating and air conditioning
systems and equipment within or serving the Premises. The
maintenance contractor and the contract must be approved by
Landlord. The service contract must include all services
suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective and a
copy thereof delivered to Landlord within thirty (30) days
after the Term Commencement Date. Tenant shall not damage
any demising wall or disturb the integrity and support
provided by any demising wall and shall, at its own expense,
immediately repair any damage to any demising wall caused by
Tenant or Tenant's Parties.
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ALTERATIONS 12. Excepting non-structural alterations to the Premises
costing less than five thousand dollars ($5,000.00), Tenant
shall not make, or allow to be made, any alterations or
physical additions in, about or to the Premises without
obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to
proposed alterations and additions which: (a) comply with
all applicable laws, ordinances, rules and regulations; (b)
are in Landlord's opinion compatible with the Project and its
mechanical, plumbing, electrical, heating/ventilation/air
conditioning systems; and (c) will not interfere with the use
and occupancy of any other portion of the Building or Project
by any other tenant or its invitees. Specifically, but
without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and
specifications for the proposed alterations or additions,
construction means and methods, all appropriate permits and
licenses, any contractor or subcontractor to be employed on
the work of alterations or additions, and the time for
performance of such work. Tenant shall also supply to
Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a
request for approval hereunder. Tenant shall reimburse
Landlord for all costs which Landlord may incur in connection
with the granting approval to Tenant for any such alterations
and additions, including any costs or expenses which Landlord
may incur in electing to have outside architects and
engineers review said plans and specifications. All such
alterations, physical additions or improvements shall remain
the property of Tenant until termination of this Lease, at
which time they shall be and become the property of Landlord
if Landlord so elects; provided, however, that Landlord may,
at Landlord's option, require that Tenant, at Tenant's
expense, remove any or all alterations, additions,
improvements and partitions made by Tenant and restore the
Premises by the termination of this Lease, whether by lapse
of time, or otherwise, to their condition existing prior to
the construction of any such alterations, additions,
partitions or leasehold improvements. All such removals and
restoration shall accomplished in a good and workmanlike
manner so as not to cause any damage to the Premises or
Project whatsoever. If Tenant fails to so remove such
alterations, additions, improvements and partitions or
Tenant's trade fixtures or furniture, Landlord may keep and
use them or remove any of them and cause them to be stored or
sold in accordance with applicable law, at Tenant's sole
expense. In addition to and wholly apart from Tenant's
obligations to pay Tenant's Proportionate Share of Basic
Operating Cost, Tenant shall be responsible for and shall pay
prior to delinquency any taxes or governmental service fees,
possessory interest taxes, fees or charges in lieu of any
such taxes, capital levies, or other charges imposed upon,
levied with respect to or assessed against its personal
property, on the value of the alterations, additions or
improvements within the Premises, and on Tenant's interest
pursuant to this Lease. To the extent that any such taxes
are not separately assessed or billed to Tenant, Tenant shall
pay the amount thereof as invoiced to Tenant by Landlord.
Tenant, at its own cost and expense and without Landlord's
prior approval, may erect such shelves, bins, machinery and
trade fixtures (collectively "Trade Fixtures") in the ordinary
course of its business provided that such do not alter the
basic character of the Premises, do not overload or damage
the Premises, and may be removed without injury to the
Premises, and the construction, erection, and installation
thereof complies with all Legal Requirements and with
Landlord's requirements set forth above. Tenant shall remove
its Trade Fixtures and shall repair any damage caused by such
removal.
SIGNS 13. Landlord shall allow at Tenant's sole cost and expense
the installation of building signage subject to Landlord's
and the City of San Carlos's approval and consistent with the
San Carlos Business Park's current signage program as
outlined by the Project's Sign Criteria, attached hereto as
Exhibit D and incorporated by this reference. Any
installation of signs or graphics on or about the Premises
and Project shall be subject to any applicable governmental
laws, ordinances, regulations and to any other requirements
imposed by Landlord. Tenant shall remove all such signs and
graphics prior to the termination of this Lease. Such
installations and removals shall be made in such manner as to
avoid injury or defacement of the Premises, Building or
Project and any other limitation, discoloration caused by
such installation or removal.
INSPECTION/ 14. After reasonable notice, except in emergencies where no
POSTING such notice shall be required, Landlord, and Landlord's agents
NOTICES and representatives, shall have the right to enter the
Pemises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs or
alterations to the Premises or Project or to other tenant
spaces therein, to deal with emergencies, to post such
notices as may be required by law to prevent the perfection
of liens against Landlord's interest in the Project or to
exhibit the Premises to prospective tenants, purchasers,
encumbrancers or others, or for any other purpose as Landlord
may deem necessary or desirable; provided, however, that
Landlord shall use reasonable efforts not to unreasonably
interfere with Tenant's business operations. Tenant shall
not be entitled to any abatement of Rent by reason of the
exercise of any such right of entry. At any time within six
(6) months prior to the end of the Term, Landlord shall have
the right to erect on the Premises and/or Project a suitable
sign indicating that the Premises are available for lease.
Tenant shall give written notice to Landlord at least thirty
(30) days prior to vacating the Premises and shall meet with
Landlord for a joint inspection of the Premises at the time
of vacating. In the event of Tenant's failure to give such
notice or participate in such joint inspection, Landlord's
inspection at or after Tenant's vacating the Premises shall
conclusively be deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
UTILITIES 15. Tenant shall pay directly for all water, gas, heat, air
conditioning, light, power, telephone, sewer, sprinkler
charges and other utilities and services used on or from the
Premises, together with any taxes, penalties, surcharges or
the like pertaining thereto, and maintenance charges for
utilities and shall furnish all electric light bulbs,
ballasts and tubes. If any such services are not separately
metered to Tenant, Tenant shall pay a reasonable proportion,
as determined by Landlord, of all charges jointly serving
other premises. Landlord shall not be liable for any damages
directly or indirectly resulting from nor shall the Rent or
any monies owed Landlord under this Lease herein reserved be
abated by reason of: (a) the installation, use or
interruption of use of any equipment used in connection with
the furnishing of any such utilities or services; (b) the
failure to furnish or delay in furnishing any such utilities
or
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services when such failure or delay is caused by acts of God
or the elements, labor disturbances of any character, or any
other accidents or other conditions beyond the reasonable
control of Landlord; or (c) the limitation, curtailment,
rationing or restriction on use of water, electricity, gas
or any other form of energy or any other service or utility
whatsoever serving the Premises or Project. Landlord shall
be entitled to cooperate voluntarily and in a reasonable
manner with efforts of national, state or local governmental
agencies or utility suppliers in reducing energy or other
resource consumption. The obligation to make services
available hereunder shall be subject to the limitations of
any such voluntary, reasonable program. Notwithstanding the
foregoing, in the event any interruption of utilities or
Building services specified in this Paragraph 15 continues
for more than seven (7) consecutive days, and the Premises
are rendered unusable for Tenant's proposed use, then Rent
shall be abated for the time period of such interruption.
SUBORDI- 16. Without the necessity of any additional document being
NATION executed by Tenant for the purpose of effecting a
subordination, the Lease shall be subject and subordinate at
all times to: (a) all ground leases or underlying leases
which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project
are situated, or both; and (b) any mortgage or deed of trust
which may now exist or be placed upon said Project, land,
ground leases or underlying leases, or Landlord's interest or
estate in any said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right
to subordinate or cause to be subordinated any such ground
leases or underlying leases or any such liens to this Lease.
In the event that any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for
any reason, Tenant shall, notwithstanding any subordination,
attorn to and become the Tenant of the successor in interest
to Landlord at the option of such successor in interest.
Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing
Tenant's attornment or the subordination of this Lease with
respect to any such ground leases or underlying leases or any
such mortgage or deed of trust, in the form requested by
Landlord or by any ground landlord, mortgagee, or beneficiary
under a deed of trust. Landlord shall use its best efforts
to obtain a non-disturbance agreement for Tenant's benefit
but shall have no liability if its lender fails to do so.
Landlord's equity in the property is several million dollars.
FINANCIAL 17. At the request of Landlord, Tenant shall provide to
STATEMENTS Landlord Tenant's current financial statement or other
information discussing financial worth of Tenant, which
Landlord shall use solely for purposes of this Lease and in
connection with the ownership, management and disposition of
the Project.
ESTOPPEL 18. Tenant agrees from time to time, within ten (10) days
CERTIFICATE after request of Landlord, to deliver to Landlord, or
Landlord's designee, an estoppel certificate stating that
this Lease is in full force and effect, the date to which
Rent has been paid, the unexpired portion of this Lease, and
such other matters pertaining to this Lease as may be
reasonably requested by Landlord. Failure by Tenant to
execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that
the statements included are true and correct without
exception. Landlord and Tenant intend that any statement
delivered pursuant to this Paragraph may be relied upon by
any mortgagee, beneficiary, purchaser or prospective
purchaser of the Project or any interest therein. The
parties agree that Tenant's obligation to furnish such
estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of the Lease, and shall
be an event of default if Tenant fails to fully comply.
Tenant shall indemnify Lessor for any loss caused by Tenant's
failure to timely execute an estoppel certificate, including
consequential damages such as loss of financing or
refinancing or loss of a potential sale of the Property, all
of which events are deemed foreseeable by the parties to this
Lease.
SECURITY 19. Tenant agrees to deposit with Landlord upon execution
DEPOSIT of this Lease, a Security Deposit as stated in the Basic
Lease Information, which sum shall be held by Landlord,
without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit
or a measure of damages incurred by Landlord in case of
Tenant's default. Upon the occurrence of any event of
default by Tenant, Landlord may, from time to time, without
prejudice to any other remedy provided herein or provided by
law, use such fund to the extent necessary to make good any
arrears of Rent or other payments due to Landlord hereunder,
and any other damage, injury, expense or liability caused by
such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the
Security Deposit to its original amount. Although the
Security Deposit shall be deemed the property of Landlord,
any remaining balance of such deposit shall be returned by
Landlord to Tenant at such time after termination of this
Lease that all of Tenant's obligations under this Lease have
been fulfilled. Landlord may use and commingle the Security
Deposit with other funds of Landlord.
TENANT'S 20. The liability of Landlord to Tenant for any default by
REMEDIES Landlord under the terms of this Lease are not personal
obligations of the individual or other partners, directors,
officers and shareholders of Landlord, and Tenant agrees to
look solely to Landlord's interest in the Project for the
recovery of any amount from Landlord, and shall not look to
other assets of Landlord nor seek recourse against the assets
of the individual or other partners, directors, officers and
shareholders of Landlord. Any lien obtained to enforce any
such judgment and any levy of execution thereon shall be
subject and subordinate to any lien, mortgage or deed of
trust on the Project.
ASSIGN- 21. A. GENERAL. Tenant shall not assign or sublet the
MENT AND Premises or any part thereof without Landlord's prior written
SUBLETTING approval, such approval not to be unreasonably withheld,
conditioned or delayed except as provided herein. If Tenant
desires to assign this Lease or sublet any or all of the
Premises, Tenant shall give Landlord written notice
forty-five (45) days prior to the anticipated effective date
of the assignment or sublease. Landlord shall then have a
period of fifteen (15) days following receipt of such notice
to notify Tenant in writing that Landlord elects either:
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(1) to terminate this Lease as to the space so affected as of
the date so requested by Tenant; or (2) to permit Tenant to
assign this Lease or sublet such space, subject, however, to
Landlord's prior written approval of the proposed assignee or
subtenant and of any related documents or agreements
associated with the assignment or sublease. If Landlord
should fail to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived
option (1) above, but written approval by Landlord of the
proposed assignee or subtenant shall be required. If
Landlord does not exercise the option provided in subitem (1)
above, Landlord's consent to a proposed assignment or sublet
shall not be unreasonably withheld. Without limiting the
other instances in which it may be reasonable for Landlord to
withhold Landlord's consent to an assignment or subletting,
Landlord and Tenant acknowledge that it shall be reasonable
for Landlord to withhold Landlord's consent in the following
instances: The use of the Premises by such proposed assignee
or subtenant would not be a permitted use or would increase
the Parking Density of the Project; the proposed assignee or
subtenant is not of sound financial condition; the proposed
assignee or subtenant is a governmental agency; the proposed
assignee or subtenant does not have a good reputation as a
tenant of property; the proposed assignee or subtenant is a
person with whom Landlord is negotiating to lease space in
the Project; the assignment or subletting would entail any
alterations which would lessen the value of the leasehold
improvements in the Premises; or if Tenant is in default of
any obligation of Tenant under this Lease, or Tenant has
defaulted under this Lease on three (3) or more occasions
during any twelve months preceding the date that Tenant shall
request consent. Failure by Landlord to approve a proposed
assignee or subtenant shall not cause a termination of this
Lease. Upon a termination under this Paragraph 21.A.,
Landlord may lease the Premises to any party, including
parties with whom Tenant has negotiated an assignment or
sublease, without incurring any liability to Tenant.
B. BONUS RENT. Any Rent or other consideration realized by
Tenant under any such sublease or assignment in excess of the
Rent payable hereunder, after amortization of a reasonable
brokerage commission shall be divided and paid, ten percent
(10%) to Tenant, ninety percent (90%) to Landlord. In any
subletting or assignment undertaken by Tenant, Tenant shall
diligently seek to obtain the maximum rental amount available
in the marketplace for such subletting or assignment.
C. CORPORATION. If Tenant is a corporation, a transfer of
corporate shares by sale, assignment, bequest, inheritance,
operation of law or other disposition (including such a
transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings), so as to result
in a change in the present control of such corporation or any
of its parent corporations by the person or persons owning a
majority of said corporate shares, shall constitute an
assignment for purposes of this Lease.
Landlord's prior consent shall not be required for any
assignment or sublease of Tenant's interest in the Premises
or the Lease to any corporation with which Tenant may merge
or consolidate or become affiliated as a parent, subsidiary,
holding company or otherwise, or to an entity in which Tenant
has a controlling interest provided such entity's net worth
exceeds Tenant's net worth.
D. PARTNERSHIP. If Tenant is a partnership, joint venture
or other incorporated business form, a transfer of the
interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest,
inheritance, operation of law or other disposition, so as to
result in a change in the present control of said entity
and/or a change in the identity of the persons responsible
for the general credit obligations of said entity shall
constitute an assignment for all purposes of this Lease.
E. LIABILITY. Except as otherwise provided, no assignment
or subletting by Tenant shall relieve Tenant of any
obligation under this Lease. Any assignment or subletting
which conflicts with the provisions hereof shall be void.
AUTHORITY 22. Landlord represents and warrants that it has full right
OF PARTIES and authority to enter into this Lease and to perform all of
Landlord's obligations hereunder. Tenant represents and
warrants that it has full right and authority to enter into
this Lease and to perform all of Tenant's obligations
hereunder.
CONDEM- 23. A. CONDEMNATION RESULTING IN TERMINATION. If the whole or
NATION any substantial part of the Project of which the Premises are
a part should be taken or condemned for any public use under
governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and
the taking would prevent or materially interfere with the
Permitted Use of the Premises, this Lease shall terminate and
the Rent shall be abated during the unexpired portion of this
Lease, effective when the physical taking of said Premises
shall have occurred.
B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion
of the Project of which the Premises are a part should be
taken or condemned for any public use under any governmental
law, ordinance, or regulation, or by right of eminent domain,
or by private purchase in lieu thereof, and this Lease is not
terminated as provided in Paragraph 23.A. above, this Lease
shall not terminate, but the Rent payable hereunder during
the unexpired portion of the Lease shall be reduced,
beginning on the date when the physical taking shall have
occurred, to such amount as may be fair and reasonable under
all of the circumstances.
C. AWARD. 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 portion
of this Lease. Notwithstanding the foregoing, any
compensation specifically awarded Tenant for loss of
business, Tenant's personal property, moving costs or loss of
goodwill, shall be and remain the property of Tenant. In
addition, in the event of a taking or
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conveyance under this Section 23 Tenant shall be entitled to
compensation for the value of any of the unamortized tenant
improvements to the extent Tenant paid for any such
improvements.
CASUALTY 24. A. GENERAL. If the Premises or Building should be damaged
DAMAGE or destroyed by fire, tornado or other casualty, Tenant shall
give immediate written notice thereof to Landlord. Within
thirty (30) days after Landlord's receipt of such notice,
Landlord shall notify Tenant whether in Landlord's opinion
such repairs can reasonably be made either: (1) within one
hundred and eighty (180) days; or (2) in more than one
hundred and eighty (180) days from the date of such notice.
Landlord's determination shall be binding on Tenant.
B. LESS THAN 180 DAYS. If the Premises or Building should be
damaged by fire, tornado or other casualty but only to such
extent that rebuilding or repairs can in Landlord's
estimation be reasonably completed within one hundred and
eighty (180) days after the date of such damage, this Lease
shall not terminate, and Landlord shall proceed to rebuild
and repair the Premises in the manner determined by Landlord,
except that Landlord shall not be required to rebuild, repair
or replace any part of the partitions, fixtures additions and
other leasehold improvements which may have been placed in,
on or about the Premises. If the Premises are untenantable
in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable
shall be abated proportionately, but only to the extent of
rental abatement insurance proceeds received by Landlord
during the time and to the extent the Premises are unfit for
occupancy. If Landlord's insurer fails to make timely
payment of an insured loss, Landlord's obligation will be
abated for such period of delay, not to exceed thirty (30)
days.
C. GREATER THAN 180 DAYS. If the Premises or Building
should be damaged by fire, tornado or other casualty but only
to such extent that rebuilding or repairs can in Landlord's
estimation be reasonably completed in more than one hundred
and eighty (180) days, then Landlord shall have the option of
either: (1) terminating the Lease effective upon the date of
the occurrence of such damage, in which event the Rent shall
be abated during the unexpired portion of the Lease; or (2)
electing to rebuild or repair the Premises to substantially
the condition in which they existed prior to such damage,
provided that insurance proceeds are available, to fully
repair the damage, except that Landlord shall not be required
to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have
been placed in, on or about the Premises. If the Premises
are untenantable in whole or in part following such damage,
the Rent payable hereunder during the period in which they
are untenantable shall be abated proportionately, but only to
the extent of rental abatement insurance proceeds received by
Landlord during the time and to the extent the Premises are
unfit for occupancy. In the event that Landlord should fail
to complete such repairs and rebuilding within one hundred
eight (180) days after the date upon which Landlord is
notified by Tenant of such damage, 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 story
weather, inability to obtain materials, supplies or fuels, or
delays of the contractors or subcontractors or any other
causes or contingencies beyond the reasonable control of
Landlord, Tenant may at Tenant's option within ten (10) days
after the expiration of such one hundred eighty (180) day
period (as such may be extended), terminate this Lease by
delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights hereunder
shall cease and terminate thirty (30) days after Landlord's
receipt of such termination notice.
D. TENANT'S FAULT. If the Premises or any other portion of
the Building are damaged by fire or other casualty resulting
from the fault, negligence, or breach of this Lease by
Tenant, or Tenant's Parties, Base Rent and Additional Rent
shall not be diminished during the repair of such damage,
except to an amount recovered by Landlord through any rental
abatement insurance, and Tenant shall be liable to Landlord
for the cost and expense of the repair and restoration of the
Building caused thereby to the extent such cost and expense
is not covered by insurance proceeds.
F. UNINSURED CASUALTY. Notwithstanding anything herein to
the contrary, in the event that the Premises or Building are
damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord or in the event that
the holder of any indebtedness secured by mortgage or deed of
trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then in either case
Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within
thirty (30) days after the date of notice to Landlord that
said damage or destruction is not fully covered by insurance
or such requirement is made by any such holder, as the case
may be, whereupon all rights and obligations hereunder shall
cease and terminate.
G. WAIVER. Except as otherwise provided in this Paragraph
24, Tenant hereby waives the provisions of Sections 1932(a),
1933(4), 1941 and 1942 of the Civil Code of California.
HOLDING 25. If Tenant shall retain possession of the Premises or any
OVER portion thereof without Landlord's consent following the
expiration of the Lease or sooner termination for any reason,
then Tenant shall pay to Landlord for each day of such
retention triple the amount of the daily rental as of the
last month prior to the date of expiration or termination.
Tenant shall also indemnify, defend, protect and hold
Landlord harmless from any loss, liability or cost, including
reasonable attorneys' fees, resulting form delay by tenant in
surrendering the Premises, including, without limitation, any
claims made by any succeeding tenant founded on such delay.
Acceptance of Rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease, and
nothing contained in this Paragraph 25 shall waive Landlord's
right or reentry or any other right. Unless Landlord
consents in writing to Tenant's holding over, Tenant shall be
only a Tenant at sufferance, whether or not Landlord accepts
any Rent from Tenant while Tenant is holding over without
Landlord's written consent. Additionally, in the event that
upon termination of the Lease, Tenant has not fulfilled its
obligation with respect to repairs and cleanup of the
Premises or any other Tenant
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obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems
necessary at Tenant's sole cost and expense, and any time
required by Landlord to complete such obligations shall be
considered a period of holding over and the terms of this
Paragraph 25 shall apply.
DEFAULT 26. A. EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an event of default on the part of
Tenant:
(1) ABANDONMENT. Abandonment of the Premises for a
continuous period in excess of five (5) days "unless Tenant
continues to pay rent and perform all other obligations of
Tenant required under this Lease, in which case Tenant shall
not be in default." Tenant waives any right to notice Tenant
may have under Section 1951.3 of the Civil Code of the State
of California, the terms of this Paragraph 26.A. being deemed
such notice to Tenant as required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of
Rent or any other amount due and payable hereunder upon the
date when said payment is due, and such failure is not cured
within five (5) days notice from Landlord specifying such
failure.
(3) OTHER OBLIGATIONS. Failure to perform any obligation,
agreement or covenant under this Lease other than those
matters specified in subparagraphs (1) and (2) of this
Paragraph 26.A, such failure continuing for fifteen (15) days
after written notice of such failure, provided, however, that
if the nature of Tenant's default is such that more than
fifteen (15) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default under this Lease
if Tenant shall commence the cure of such default within said
fifteen (15) day period and use his best efforts to prosecute
the same to completion.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for
the benefit of credits.
(5) BANKRUPTCY. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary
petition by Tenant's creditors, which involuntary petition
remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy
or Tenant has the right to affirm this Lease and continue to
perform the obligations of Tenant hereunder, such trustee or
Tenant shall, in such time period as may be permitted by the
bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance
of this Lease and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the
continued performance of Tenant's obligations under this
Lease.
(6) RECEIVERSHIP. The employment of a receiver to take
possession of substantially all of Tenant's assets or the
Premises, if such appointment remains undismissed or
undischarged for a period of ten (10) days after the order
therefor.
(7) ATTACHMENT. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or the
Premises, if such attachment or other seizure remains
undismissed or undischarged for a period of ten (10) days
after the levy thereof.
B. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any
event of default ( and such default remains uncured after the
expiration of any applicable cure period provided herein),
Landlord shall have the right to give a written termination
notice to Tenant, and on the date specified in such notice,
Tenant's right to possession shall terminate, and this Lease
shall terminate unless or before such date all arrears of
rental and all other sums payable by Tenant under this Lease
and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all
other events of default of this Lease by Tenant at the time
existing shall have been fully remedied to the satisfaction
of Landlord. At any time after such termination, Landlord
may recover possession of the Premises or any part thereof
and expel and remove therefrom Tenant and any other person
occupying the same, by any lawful means, and again repossess
and enjoy the Premises without prejudice to any of the
remedies that Landlord may have under this Lease, or at law
or equity by reason of Tenant's default or of such
termination.
(2) CONTINUATION AFTER DEFAULT. Even though an event of
default may have occurred, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's
right to possession under Paragraph 26.B.(1) hereof, and
Landlord may enforce all of Landlord's rights and remedies
under this Lease, including without limitation, the right to
recover Rent as it becomes due, and Landlord, without
terminating this Lease may exercise all of the rights and
remedies of a Landlord under Section 1951.4 of the Civil Code
of the State of California or any successor code section.
Acts of maintenance, preservation or efforts for lease the
Premises or the appointment of a receiver upon application of
Landlord to protect Landlord's interest under this Lease
shall not constitute an election to terminate Tenant's right
to possession.
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this
Lease pursuant to the provisions of Paragraph 26.B.(1)
hereof, Landlord shall have the rights and remedies of a
Landlord provided by Section 1951.2 of the Civil Code of the
State of California, or successor code sections. Upon such
termination, in addition to any other rights and remedies to
which Landlord may be entitled under applicable law, Landlord
shall be entitled to recover from Tenant: (1) the worth at
the time of award of the unpaid Rent and other amounts which
had been earned at the time of
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termination, (2) the worth at the time of award of the amount
by which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of
such Rent loss that Tenant proves could have been reasonably
avoided; (3) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the
time of award exceeds the amount of such Rent loss that
Tenant proves could be reasonably avoided; and (4) any other
amount necessary to compensate Landlord or all the detriment
proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which, in the ordinary course
of things, would be likely to result therefrom. The worth at
the time of award of the amounts referred to in (1) and (2)
above shall be computed by discounting such amount at the
Federal Discount Rate of the Federal Reserve Bank of San
Francisco at the time of the award. If this Lease provides
for any periods during the Term during which Tenant is not
required to pay Base Rent or if Tenant otherwise receives a
Rent concession, then upon the occurrence of an event of
default, Tenant shall owe to Landlord the full amount of such
Base Rent or value of such Rent concession, plus interest at
the Applicable Interest Rate, calculated from the date that
such Base Rent or Rent concession would have been payable.
D. LATE CHARGE. If any installment of Rent is not paid
promptly when due, and such failure is not cured prior to the
expiration of the applicable cure period provided herein,
such amount shall bear interest at the Applicable Interest
Rate from the date on which said payment shall be due until
the date on which Landlord shall receive said payment. In
addition, Tenant shall pay Landlord a late charge equal to
five percent (5%) of the delinquency, to compensate Landlord
for the loss of the use of the amount not paid and the
administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such
delinquencies would be difficult to compute and the amount
stated herein represents a reasonable estimate thereof. This
provision shall not relieve Tenant of Tenant's obligation to
pay Rent at the time and in the manner herein specified.
E. REMEDIES CUMULATIVE. All rights, privileges and
elections or remedies of the parties are cumulative and not
alternative, to the extent permitted by law and except as
otherwise provided herein.
LIENS 27. Tenant shall keep the Premises free from liens arising
out of or related to work performed, materials or supplies
furnished or obligations incurred by Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in
or on the Premises or Project. In the event that Tenant
shall not, within ten (10) days following the imposition of
any such lien, cause the same to be released of record by
payment or posting of a proper bond, Landlord shall have, in
addition to all other remedies provided herein and by law,
the right, but not obligation, to cause the same to be
released by such means as Landlord shall deem proper,
including payment of the claim giving rise to such lien. All
sums paid by Landlord on behalf of Tenant and all expenses
incurred by Landlord in connection therefor shall be payable
to Landlord by Tenant on demand with interest at the
Applicable Interest Rate. Landlord shall have the right at
all times to post and keep posted on the Premises any notices
permitting or required by law, or which Landlord shall deem
proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from
mechanics' and materialmen's liens, and Tenant shall give
Landlord not less than ten (10) business days prior written
notice of the commencement of any work in the Premises or
Project which could lawfully give rise to a claim for
mechanics' or materialmen's liens.
TRANSFERS 28. In the event of a sale or conveyance by Landlord of the
BY Building or a foreclosure by any creditor of Landlord, the
LANDLORD same shall operate to release Landlord from any liability
upon any of the covenants or conditions, express or implied,
herein contained in favor of Tenant, to the extent required
to be performed after the passing of title to Landlord's
successor-in-interest. In such event, Tenant agrees to look
solely to the responsibility of the successor-in-interest of
Landlord under this Lease with respect to the performance of
the covenants and duties of "Landlord" to be performed after
the passing of title to Landlord's successor-in-interest.
This Lease shall not be affected by any such sale and Tenant
agrees to attorn to the purchaser or assignee. Landlord's
successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform all of the obligations
of "Landlord", to the extent required to be performed prior to
the date such successor(s)-in-interest became the owner of
the Building.
RIGHT OF 29. All covenants and agreements to be performed by Tenant
LANDLORD TO under any of the terms of this Lease shall be performed by
PERFORM Tenant at Tenant's sole cost and expense and without any
TENANT'S abatement of Rent. If Tenant shall fail to pay any sum of
COVENANTS money, other than Base Rent and Basic Operating Cost,
required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed
hereunder, and such failure shall continue for five (5) days
after notice thereof by Landlord, Landlord may, but shall not
be obligated to do so, and without waiving or releasing
Tenant from any obligations of Tenant, make any such payment
or perform any such act on Tenant's part to be made or
performed. All sums, so paid by Landlord and all necessary
incidental costs together with interest thereon at the
Applicable Interest Rate from the date of such payment by
Landlord shall be payable to Landlord on demand, and Tenant
covenants to pay such sums, and Landlord shall have, in
addition to any other right or remedy of Landlord, the same
right and remedies in the event of the non-payment thereof by
Tenant as in the case of default by Tenant in the payment of
Base Rent and Basic Operating Cost.
WAIVER 30. If either Landlord or Tenant waives the performance of any
term, covenant or condition contained in this Lease, such
waiver shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition
contained herein. The acceptance of Rent by Landlord shall
not constitute a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time
Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for
any length of time shall not be deemed to waive or to
decrease the right of Landlord to insist thereafter upon
strict performance by Tenant. Waiver by Landlord of any term,
covenant or
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condition contained in this Lease may only be made by a
written document signed by Landlord.
NOTICES 31. Each provision of this Lease or of any applicable
governmental laws, ordinances, regulations and other
requirements with reference to sending, mailing or delivery
of any notice or the making of any payment by Landlord or
Tenant to the other shall be deemed to be compiled with when
and if the following steps are taken:
A. RENT. All Rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at
the address set forth in the Basic Lease Information, or at
such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's
obligation to pay Rent and any other amounts to Landlord
under the terms of this Lease shall not be deemed satisfied
until such Rent and other amounts have been actually received
by Landlord.
B. OTHER. All notices, demands, consents and approvals
which may or are required to be given by either party to the
other hereunder shall be in writing and either personally
delivered, sent by commercial overnight courier, or mailed,
certified or registered, postage prepaid, and addressed to
the other party to be notified at the address for such party
as specified in the Basic Lease Information or to such other
place as the party to be notified may from time to time
designate by at least fifteen (15) days notice to the
notifying party.
Notices shall be deemed served upon receipt or refusal to
accept delivery. Tenant appoints as its agent to receive the
service of all default notices and notice of commencement of
unlawful detainer proceedings the person in charge of or
apparently in charge of occupying the Premises at the time,
and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the
Premises and a copy of such notice being sent via commercial
overnight carrier or mailed, certified or registered, postage
prepaid to the address listed for Tenant in the Basic Lease
Information.
ATTORNEYS' 32. In the event that either Landlord or Tenant should bring
FEES 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.
SUCCESSORS 33. This Lease shall be binding upon and inure to the
AND ASSIGNS benefit of Landlord, its successors and assigns, and shall be
binding upon and inure to the benefit of Tenant, its
successors, and to the extent assignment is approved by
Landlord hereunder, Tenant's assigns. Landlord may transfer
its obligations under this Lease to its successors in title,
in which event Lessor shall be relieved of all obligations
under this Lease and Tenant shall look solely to Landlord's
successor for performance of this Lease.
FORCE 34. Whenever a period of time is herein prescribed for
MAJEURE action to be taken by Landlord, Landlord shall not be liable
or responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to
strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions or any
other causes of any kind whatsoever which are beyond the
control of Landlord.
BROKERAGE 35. Landlord shall pay a full brokerage commission to
COMMISSION Brokers in accordance with CB Commercial's listing Agreement
(Brokerage Commission). Each Broker named in the Basic Lease
Information (Brokers) shall receive fifty percent of the
Brokerage Commission based on the terms and conditions
provided in this Lease, including expansion space. Tenant
warrants to Landlord that Tenant's sole contact with Landlord
or with the Premises in connection with this transaction has
been directly with Landlord and Brokers, and that no other
broker or finder can properly claim a right to a commission
or a finder's fee based upon contacts between the claimant
and Tenant with respect to Landlord or the Premises. Tenant
shall indemnify, defend by counsel acceptable to Landlord,
protect and hold Landlord harmless from and against any loss,
cost or expense, including, but not limited to attorneys'
fees and costs, resulting from any claim for a fee or
commission by any broker or finder in connection with the
Premises and this Lease other than Broker.
MISCELLA- 36. A. GENERAL. The term "Tenant" or any pronoun used in place
NEOUS thereof shall indicate and include the masculine or feminine,
the singular or plural number, individuals, firms or
corporations, and their respective successors, executors,
administrators and permitted assigns, according to the
context hereof.
B. TIME. Time is of the essence regarding this Lease and
all of its provisions.
C. CHOICE OF LAW. This Lease shall in all respects be
governed by the laws of the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its
Exhibits, contains all the agreements of the parties hereto
and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made
between the parties other than those set forth in this Lease
and its exhibits.
E. MODIFICATION. This Lease may not be modified except by a
written instrument by the parties hereto.
F. SEVERABILITY. If, for any reason whatsoever, any of the
provisions hereof shall be unenforceable or ineffective, all
of the other provisions shall be and remain in full force and
effect.
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G. RECORDATION. Tenant shall not record this Lease or a
short form memorandum hereof.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant
does not constitute an option or offer to lease and this
Lease is not effective otherwise until execution and delivery
by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a
lesser amount than the Rent nor any endorsement on any check
or letter accompanying any check or payment of Rent shall be
deemed an accord and satisfaction of full payment of Rent,
and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of such Rent or to
pursue other remedies.
J. EASEMENTS. Landlord may grant easements on the Project
and dedicate for public use portions of the Project without
Tenant's consent; provided that no such grant or dedication
shall substantially interfere with Tenant's use of the
Premises. Upon Landlord's demand, Tenant shall execute,
acknowledge and deliver to Landlord documents, instruments,
maps and plats necessary to effectuate Tenant's covenants
hereunder.
K. DRAFTING AND DETERMINATION. The parties acknowledge that
this Lease has been agreed to by both parties, that both
Landlord and Tenant have consulted with attorneys with
respect to the terms of this Lease and that no presumption
shall be created against Landlord because Landlord drafted
this Lease. Except as otherwise specifically set forth in
this Lease, with respect to any consent, determination or
estimation of Landlord required in this Lease or requested of
Landlord, Landlord's consent, determination or estimation
shall be made in Landlord's good faith opinion, whether
objectively reasonable or unreasonable.
L. EXHIBITS. Exhibits A and B attached hereto are hereby
incorporated herein by this reference.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or
shutting off of light, air or view by any structure which may
be erected on lands adjacent to or in the vicinity of the
Building shall in no way affect this Lease or impose any
liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between
Landlord and Tenant and nothing herein is intended to create
any third party benefit.
O. SECURITY, RELEASE AND INDEMNITY. Tenant acknowledges and
agrees that, while Landlord may elect to patrol the Project,
Landlord is not providing any security services with respect
to the Premises and that Landlord shall not be liable to
Tenant for, and Tenant waives any claim against Landlord with
respect to, any loss by theft or any other damage to person
or property suffered or incurred by Tenant, Tenant's
employees and invitees, including but not limited to, in
connection with any unauthorized entry into the Premises or
any other breach of security with respect to the Premises.
Tenant shall be responsible for provisions of security for
its premises. Tenant shall defend, indemnify and hold
Landlord harmless with respect to the Premises and any claims
arising from or related to a purported breach of security or
failure to provide security.
ADDITIONAL 38. Paragraphs 39 through 46, and Exhibits A and B are
PROVISIONS attached hereto and made apart thereof.
39. BASE RENT: Rent for the Premises shall be as follows:
<TABLE>
<CAPTION>
SUITE NUMBERS SQ. FT+/- PERIOD BASE NNN RENT PER SQ. FT.
- ------------- --------- ------ -------------------------
<S> <C> <C> <C>
981 Ind. Ste. B & D 11,941 5/15/97 - 5/31/98 $ 1.05
6/01/98 - 5/31/99 $ 1.10
6/01/99 - 5/31/00 $ 1.15
6/01/00 - 5/31/01 $ 1.20
6/01/01 - 5/31/02 $ 1.25
957 Ind. Ste. D, F, J & L 8,217 6/01/97 - 5/31/98 $ 1.05
6/01/98 - 5/31/99 $ 1.10
6/01/99 - 5/31/00 $ 1.15
6/01/00 - 5/31/01 $ 1.20
6/01/02 - 5/31/02 $ 1.25
957 Ind. Ste. P 4,380 When vacated by existing tenant leasee shall have
30 days of free rent thereafter per rent amounts for 957
Ind. Ste. D, F, J & L.
</TABLE>
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40. A. TENANT IMPROVEMENT ALLOWANCE. Tenant shall be
entitled to a one-time tenant improvement allowance (the
"Tenant Improvement Allowance") in the amount of five dollars
($5.00) for each of the useable square feet of the Premises
listed in the Basic Lease Information for the direct and
indirect costs relating to the initial designing, procuring,
constructing and installing of Tenant's improvements which
are permanently affixed to the Premises (the Tenant
Improvements). Subject to Landlord's review and approval of
Tenant's proposed space plan for the Premises, Tenant will
use its architect for design services and Tenant's own
general contractor to perform any tenant improvement work.
Landlord reserves the right to approve Tenant's construction
management company and general contractor. In no event shall
Landlord be obligated to make disbursements in a total amount
which exceeds the Tenant Improvement Allowance.
B. DISBURSEMENT OF THE TENANT IMPROVEMENT ALLOWANCE.
Except as otherwise set forth in any Tenant Work Letter, the
Tenant Improvement Allowance shall be disbursed by Landlord
(each of which disbursements shall be made pursuant to
Landlord's disbursement process) for costs related to the
construction of the Tenant Improvements and for the following
items and costs (collectively, the "Tenant Improvement
Allowance Items"): (i) payment of the fees of Tenant's
architect and/or engineers; (ii) the cost of construction of
the Tenant Improvements (iii) the cost of procuring and
installing fixtures in or on the Premises; and (iv) the cost
of other items related to the design and construction of the
Tenant Improvements as designated by Tenant.
41. LANDLORD'S OBLIGATIONS PRIOR TO OCCUPANCY. Landlord
shall be responsible, at its sole cost and expense, prior to
Tenant's occupancy, for providing the following: (i) men's
and women's restrooms are complete and operable, and include
all exhaust and supply HVAC, lighting, water heaters,
partitions, doors, fixtures, and finishes in compliance with
the requirements of the Americans With Disabilities Act of
1990; (ii) all building systems, including existing
electrical, mechanical, HVAC and plumbing shall be in good
working condition and are not subject to deferred maintenance
or in need of immediate replacement. In addition Landlord,
prior to Tenant's occupancy, shall supply Tenant with any
existing floor plans for the Premises known as Suites B & D
of 981 Industrial Road. The Premises will be provided to
Tenant in "broom clean" condition. The roof membrane shall be
free of known leaks and in good condition.
42. EARLY OCCUPANCY: To the extent suites to be rented
hereunder are available and occupancy will not interfere with
tenant improvement construction, prior to the Estimated Term
Commencement Dates set forth in the Basic Lease Information
section above, Tenant shall be allowed to occupy the Premises
provided it pays Base Rent and Basic Operating Costs. Tenant
shall perform all duties and obligations imposed by this
Lease, including, but not limited to, those provisions
relating to insurance and indemnification.
43. RENEWAL OPTION: While this Lease is in full force and
effect, provided that Tenant is not in default, nor has
Tenant been in default more than three (3) times during the
Term of the Lease of any terms, covenants and conditions
hereof, and this Lease has not been assigned or the Premises
(or a part thereof), Tenant shall have one (1) option to
renew this lease, under the same terms and conditions prior
to then expiration of this Lease for one (1) sixty (60) month
period. Such extension of the original term shall be on the
same terms, covenants and conditions as provided for in the
original term, except the beginning monthly rental rate, for
the option period, shall be at rate equal to the then
prevailing fair market rate of comparable R&D buildings in
the market. Tenant's desire to exercise the option must be
given to Landlord, in writing, not less than one-hundred
eighty (180) days prior to the expiration of the term or this
option shall terminate and be of no further effect.
44. EXPANSION SPACE. Landlord will use its best efforts to
inform Tenant of any and all available contiguous space to
the Premises available in the Buildings known as 981
Industrial Road and 957 Industrial Road, San Carlos.
45. ASBESTOS/HAZARDOUS MATERIALS. To the best of Landlord's
knowledge, there is no asbestos or any hazardous materials on
about or within the Building(s), Project or Premises.
46. INDEMNITY. Despite any provision herein to the contrary,
Tenant agrees to fully and complete indemnify, protect,
defend and hold Landlord, its partners, members, managers,
directors, officers, employees, attorneys, agents,
successors, assigns and lenders harmless from and against all
claims, actions, losses, damages, costs expenses and
liabilities relating to or arising out of all Property uses
by Tenant, including but not limited to claims of Petroleum
Products and Hazardous Material contamination on site (except
those claims caused solely by willful acts or omissions of
Landlord or environmental conditions pre-existing Tenant's
tenancy) or arising out of any other actual or alleged injury
to or death of any persons or loss of or damages to property
in or upon the Project, including the person and property of
Landlord, its partners, members, managers, directors,
officers, employees, agents or others arising from or related
to Tenant's use or occupancy of the Premises.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
"Landlord"
THREE SISTERS RANCH ENTERPRISES
By:
--------------------------------------
Martin E. Ruberry
General Manager
"Tenant"
CONCEPTUS, INC.
By:
--------------------------------------
Sanford Fitch
Chief Financial Officer
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APPROVAL INITIALS: Landlord
Tenant / / / /
<PAGE>
EXHIBIT A
This exhibit contains three diagrams.
Diagram 1 - A diagram of the San Carlos Business Park highlighting the suites
to be rented by Conceptus, Inc.
Diagram 2 - A detailed diagram of 981 Industrial Road, Suite D.
Diagram 3 - A detailed diagram of 981 Industrial Road, Suite B.
<PAGE>
EXHIBIT D
SIGN CRITERIA FOR SAN CARLOS BUSINESS PARK
WALL SIGNS
Tenant allowed one or two wall signs at discretion of landlord. Letters shall
be manufactured by Gemini Incorporated, 1-800-538-8377. Letters to be 10"
high, 1" deep injection molded plastic ("Minnesota Letters"), gloss black,
Helvetica typeface, all capital letters, mounted with #2 pads, glued flush to
wall. Company name only (no divisions, phone numbers, tag lines, etc.). Up to
two lines allowed, justified either left or right margin based on
nearest corner of building. If two lines, allow 5" space between lines.
Conform to vertical placements used on existing signs.
WINDOW SIGNS
Tenant allowed one window or door sign at main entrance. Sign shall be
computer-cut white vinyl, placed on exterior of glass. Tenant may use door or
window, but not both. Message may contain company name, logo, division, tag
line, and up to three services provided, at discretion of tenant. No
lettering to exceed 3" in height, no logo or trademark to exceed 6" in
height. Total sign area not to exceed 16" high by 30" wide. Center all
graphics 60" above ground level. Landlord to provide 4" high white address
number at top of door, Helvetica Medium, 2" down from top of door.
REAR DOOR SIGNS
Tenant allowed one sign on rear main door. Sign shall be computer-cut black
vinyl, placed on exterior of door. Text only, no logos allowed. Message may
contain company name and shipping/receiving hours and information only, at
discretion of tenant. Lettering to be Helvetica Medium, upper and lower case,
2" high, with 1" space between lines, centered. Up to four lines maximum
allowed. Top line to be placed 2" below small window in door. Landlord to
provide 4" high black address number at top of door, Helvetica Medium, 2"
down from top of door.
TENANT DIRECTORY MONUMENT SIGNS
Landlord shall provide lettering for tenant directory monument, at tenant's
expense. Tenant shall provide to landlord exact name that will be used on the
appropriate sign. Name shall appear on both sides of one sign, as determined
by landlord. Long company names may be edited or abbreviated as required to
fit on the sign, subject to approval of tenant. Lettering shall be 3 5/8" high
Univers Light Condensed, upper and lower case, white.
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<PAGE>
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<S> <C>
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<PERIOD-START> JAN-01-1997
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