California-San Jose-Piercy Road Lease - WTA Piercy LLC and Packeteer Inc.
LEASE
THIS LEASE is made on the 30th day of October, 2000 by and between WTA Piercy
LLC, a California limited liability company (hereinafter called "Lessor") and
Packeteer, Inc., a Delaware corporation (hereinafter called "Lessee").
IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS
FOLLOWS:
1. Premises. Lessor leases to Lessee, and Lessee leases from Lessor, upon the
terms and conditions herein set forth, those certain Premises ("Premises")
situated in the City of San Jose, County of Santa Clara, California, as outlined
in Exhibit "A" attached hereto and described as follows: approximately 84,000
rentable square foot building known as ______ Piercy Road, San Jose, California.
Square footage is calculated from the exterior face of the building. Lessee
shall have the right to verify the measurement of building, and if Lessee
disagrees with Lessor's measurement, Lessee may notify Lessor within thirty days
of Lease Commencement. Lessor and Lessee will then work together to determine
the actual square footage and the rent, Security Deposit and Letter of Credit
shall be adjusted accordingly. Lessee's pro-rata share of the building is
100.00%.
2. Term. The term of this Lease shall be for twelve (12) years, commencing on
the Lease Commencement Date. The "Lease Commencement Date" shall be the date
which is the earlier of (i) the date Lessor delivers to Lessee a factually
correct written notice stating that the Premises are Substantially Complete (as
defined in Exhibit "B") and (ii) the date Lessor delivers to Lessee written
notice stating the date the Premises would have been Substantially Complete were
it not for any Lessee Delay (as defined in Exhibit "B").
3. Rent. Lessee shall pay to Lessor rent for the Premises according to the
schedule below in lawful money of the United States of America. Rent shall be
paid without deduction or offset, prior notice, or demand, at such place as may
be designated from time to time by Lessor. Lessee shall pay to Lessor
$273,000.00 upon execution of the Lease, which sum represents the amount of the
first month's rent. Monthly rent shall be paid in advance on the first (1st) day
of each calendar month as follows:
Monthly Rent/NNN (based
on $3.00 per rentable
Months square foot per month)
------- ----------------------
01 - 12 $273,000.00
13 - 24 $283,920.00
25 - 36 $295,277.00
37 - 48 $307,088.00
49 - 60 $319,371.00
61 - 72 $332,146.00
73 - 84 $345,432.00
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85 - 96 $359,249.00
97 - 108 $373,619.00
109 - 120 $388,564.00
121 - 132 $404,107.00
133 - 144 $420,271.00
Rent for any period during the term hereof which is for less than one (1)
full month shall be a pro-rata portion of the monthly rent payment based on the
actual number of days in such month. Lessee acknowledges that late payment by
Lessee to Lessor of rent or any other payment due Lessor will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impracticable to fix. Such costs include, without
limitation, processing and accounting charges, and late charges that may be
imposed on Lessor by the terms of any encumbrance and note secured by any
encumbrance covering the Premises. Therefore, if any installment of rent or
other payment due from Lessee is not received by Lessor within ten (10) days
following the date it is due and payable, Lessee shall pay to Lessor an
additional sum of ten percent (10%) of the overdue amount as a late charge.
Notwithstanding anything contained in this paragraph, if Lessee is delinquent in
the payment of Rent and is subject to a late charge, Lessor agrees to waive the
late charge if the Rent or Additional Rent due is paid within five (5) days of
Lessor's written notice to Lessee of the delinquent amount owed (which notice
shall be given after the expiration of the above-referenced ten (10) day grace
period) and provided Lessee has not been delinquent in its payment of Rent or
Additional Rent owed under this Lease during the twelve (12) month period
preceding the rent delinquency in question. However, Lessor shall only be
obligated to notify Lessee once of its intent to assess a late charge in any
twelve (12) month period. The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Lessor will incur by reason of
late payment by Lessee. Acceptance of any late charge shall not constitute a
waiver of Lessee's default with respect to the overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies available to Lessor.
If, for any reason whatsoever, Lessor cannot deliver possession of the
Premises on the commencement date set forth in Paragraph 2 above, this Lease
shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss
or damage resulting therefrom; but in such event, Lessee shall not be obligated
to pay rent until possession of the Premises is tendered to Lessee and the
commencement and termination dates of this Lease shall be revised to conform to
the date of Lessor's delivery of possession. However, in the event that either
(a) Lessor does not commence construction of the Premises by June 1, 2001, or
(b) Lessor does not deliver possession of the Premises by June 1, 2002 (which
dates shall not be extended for Force Majeure Delays), Lessee shall have the
option, at its sole discretion, to terminate the Lease by giving written notice
to Lessor, and all monies paid by Lessee to Lessor and the letter of credit
shall be returned immediately. Lessee shall have access to the Premises prior to
the Commencement Date at the appropriate times during the construction schedule
(which schedule shall be provided to Lessee prior to commencement of
construction) so that Lessee can install its phone and computer cabling and
other business systems, provided that such early access does not interfere with
Lessor's contractor. Such access shall be subject to all of the provisions of
this Lease, excluding the obligation to pay rent or Additional Rent.
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A. All taxes, insurance premiums, reimbursable expenses and utilities,
outside area charges, late charges, costs and expenses which Lessee is
required to pay hereunder, together with all interest and penalties that
may accrue thereon in the event of Lessee's failure to pay such amounts,
and all reasonable damages, costs, and attorney's fees and expenses which
Lessor may incur by reason of any default of Lessee or failure on Lessee's
part to comply with the terms of this Lease, shall be deemed to be
additional rent (hereinafter, "Additional Rent"), and, in the event of
non-payment by Lessee, Lessor shall have all of the rights and remedies
with respect thereto as Lessor has for the non-payment of monthly
installment of rent.
4. Option to Extend Term.
A. Lessee shall have the option to extend the term on all the provisions
contained in this Lease for two five-year periods ("extended terms") at an
adjusted rental calculated as provided in Subparagraph B below on the
condition that:
(a) Lessee has given to Lessor written notice of exercise of that
option ("option notice") at least nine (9) months but no more than
twelve (12) months before expiration of the initial term or extended
term(s), as the case may be.
(b) Lessee is not in default in the performance of any of the terms
and conditions of the Lease on the date of giving the option notice,
and Lessee is not in default on the date that the extended term is to
commence.
B. RENT FOR OPTION PERIOD: The rent during the extended term shall be the
then current fair market monthly rent ("Fair Market Rent") for the Premises
as of the commencement date of the applicable extended term, as determined
by the agreement of the parties or, if the parties cannot agree within
sixty (60) days prior to the commencement of such extended term, then by
determination by commercial real estate brokers as detailed below. In
determining the Fair Market Rent, the parties (and in the absence of their
agreement, the brokers) shall determine the Fair Market Rent by taking into
consideration the rents being charged at the time such determination is to
be made for similar space in similar properties in the South San
Jose/Edenvale area pursuant to leases with terms and provisions
substantially similar to those contained in this Lease. All other terms and
conditions contained in the Lease, as the same may be amended from time to
time by the parties in accordance with the provisions of the Lease, shall
remain in full force and effect and shall apply during the Extended Term.
If it becomes necessary to determine the fair market rental value for the
Premises by determination by brokers, all of whom shall have at least five (5)
years experience specializing in leasing commercial space located in the
vicinity of the Premises and none of whom shall have worked for either party in
the five (5) years period preceding the commencement date of the extended term
shall be appointed and shall act in accordance with the following procedures:
1. If the parties are unable to agree on the Fair Market Rent
within the
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allowed time, either party may demand a determination by brokers by
giving written notice to the other party, which demand to be effective
must state the name, address and qualifications of a broker selected
by the party demanding a determination (the "Notifying Party"). Within
ten (10) days following the Notifying Party's determination demand,
the other party (the "Non-Notifying Party") shall either approve the
broker selected by the notifying party or select a second properly
qualified broker by giving written notice of the name, address and
qualification of said broker to the Notifying Party. If the
Non-Notifying Party fails to select a broker within the ten (10) day
period, the broker selected by the Notifying Party shall be deemed
selected by both parties and no other broker shall be selected. If two
brokers are selected, they shall select a third appropriately
qualified broker. If the two brokers fail to select a third qualified
broker, the third broker shall be appointed by the then presiding
Superior Court judge of the county where the Premises are located upon
application by either party.
2. If only one broker is selected, that broker shall notify the
parties in simple letter form of its determination of the Fair Market
Rent for the Premises within fifteen (15) days following his
selection, which determination shall be conclusively determinative and
binding on the parties as the determined Fair Market Rent.
3. If multiple brokers are selected, the brokers shall meet no
later than ten (10) days following the selection of the last brokers.
At such meeting the brokers shall attempt to determine the Fair Market
Rent for the Premises as of the commencement date of the extended term
by the agreement of at least two (2) of the brokers.
4. If two (2) or more of the brokers agree on the Fair Market
Rent for the Premises at the initial meeting, such agreement shall be
determinative and binding upon the parties hereto and the agreeing
brokers shall, in simple letter form executed by the agreeing brokers,
notify both Lessor and Lessee of the amount set by such agreement. If
multiple brokers are selected and two (2) brokers are unable to agree
on the Fair Market Rent for the Premises, all brokers shall submit to
Lessor and Lessee an independent determination of the Fair Market Rent
for the Premises in simple letter form within twenty (20) days
following appointment of the final broker. The parties shall then
determine the Fair Market Rent for the Premises by averaging the
determinations; provided that any high or low determination, differing
from the middle determination by more than ten percent (10%) of the
middle determination, shall be disregarded in calculating the average.
Such determination shall be conclusively determinative and binding on
the parties as the determined Fair Market Rent.
5. The brokers' determination of Fair Market Rent shall be
based on rental of space of the same age, construction, size and
location as the Premises with the improvements installed therein at
Lessor's expense and shall take into account
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<PAGE> 5
Lessee's obligations to pay additional rent under this Lease. In
determining Fair Market Rent, the brokers shall not consider any
alterations or improvements installed in the Premises at Lessee's
expense.
6. If only one broker is selected, then each party shall pay
one-half of the fees and expenses of that broker. If three brokers are
selected, each party shall bear the fees and expenses of the broker it
selects and one-half of the fees and expenses of the third broker.
C. In no event shall the monthly rent for any extended term(s) be less
than the Monthly Rent paid immediately prior to such extended term(s). The
option to extend shall be personal to Lessee and any entity described in
Section 21.F., and shall not be transferable or assignable to any other
person or entity. If Lessee has exercised its option to extend, the phrase
"Lease term" as used in this Lease shall mean the initial term of the Lease
and the extended term(s).
5. Security Deposit. Lessor acknowledges that Lessee has deposited with Lessor
a Security Deposit in the sum of $420,271.00 to secure the full and faithful
performance by Lessee of each term, covenant, and condition of this Lease. If
Lessee shall at any time fail to make any payment or fail to keep or perform any
term, covenant, or condition on its part to be made or performed or kept under
this Lease, Lessor may, but shall not be obligated to and without waiving or
releasing Lessee from any obligation under this Lease, use, apply, or retain the
whole or any part of said Security Deposit (a) to the extent of any sum due to
Lessor; or (b) to compensate Lessor for any loss, damage, attorneys' fees or
expense sustained by Lessor due to Lessee's default. In such event, Lessee
shall, within ten (10) days of written demand by Lessor, remit to Lessor
sufficient funds to restore the Security Deposit to its original sum. No
interest shall accrue on the Security Deposit. Should Lessee comply with all the
terms, covenants, and conditions of this Lease and, at the end of the term of
this Lease, leave the Premises in the condition required by this Lease, then
said Security Deposit or any balance thereof, less any sums owing to Lessor,
shall be returned to Lessee within fifteen (15) days after the termination of
this Lease and vacancy of the Premises by Lessee. Lessor can maintain the
Security Deposit separate and apart from Lessor's general funds, or can
co-mingle the Security Deposit with the Lessor's general and other funds.
A. Additional Security Deposit.
(i) Letter of Credit. Prior to commencement of the building shell
construction, Lessee shall deliver to Lessor an irrevocable
transferable letter of credit in the amount of Three Million Two
Hundred Seventy-Six Thousand and 00/100ths Dollars ($3,276,000.00)
issued by a financial institution acceptable to Lessor in the form
reasonably acceptable to Lessor, with an original term of no less than
one year and automatic extensions through the end of the Term of this
Lease and thirty (30) days thereafter (the "Letter of Credit").
Failure of Lessee to deliver the Letter of Credit shall be deemed a
default under the terms of the Lease. Lessee shall keep the Letter of
Credit, at its expense, in full force and effect until the thirtieth
(30th) day after the Expiration Date or other termination of
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this Lease, to insure the faithful performance by Lessee of all of the
covenants, terms and conditions of this Lease, including, without
limitation, Lessee's obligations to repair, replace or maintain the
Premises. The Letter of Credit shall provide thirty (30) days' prior
written notice to Lessor of cancellation, material change or (if
automatic extensions are not provided) nonextension thereof, and shall
further provide that in the event of any nonextension of the Letter of
Credit (except for at the end of the Lease term) at least thirty (30)
days prior to its expiration, Lessor shall be entitled to present its
written demand for payment of the entire face amount of the Letter of
Credit, and the funds so obtained shall be held as the additional
security deposit required under this Lease. Any unused portion of the
funds so obtained by Lessor shall be returned to Lessee upon
replacement of the Letter of Credit or deposit of cash security in the
full amount required hereunder. If Lessor uses any portion of the cash
security deposit to cure any default by Lessee hereunder, Lessee shall
replenish the security deposit to the original amount within thirty
(30) days of notice from Lessor. Lessee's failure to do so shall
become a material breach of this Lease. Lessor shall keep any cash
security funds separate from its general funds, and shall invest such
cash security at Lessee's reasonable direction, and any interest
actually earned by Lessor on such cash security shall be paid to
Lessee quarterly. If an event of default occurs under this Lease
beyond any applicable cure period, Lessor may present its written
demand for payment of the entire face amount of the Letter of Credit
and the funds so obtained shall become due and payable to Lessor and
be held by Lessor as a cash security deposit as provided above, if any
of the following events occur: (i) Lessee is the subject of an
Insolvency Proceeding, (ii) Lessee does not replace the Letter of
Credit in the full amount required within thirty (30) business days
after Lessor makes a partial draw thereon to cure a default, (iii) an
event of default occurs under this Lease beyond any applicable cure
periods, (iv) Lessee does not provide a Replacement Letter of Credit,
if required by, and within the time period specified in this Section
5. Lessor may retain such funds to the extent required to compensate
Lessor for damages incurred, or to reimburse Lessor as provided
herein, in connection with any such event of default, and any
remaining funds shall be held as a cash security deposit.
Notwithstanding the foregoing, in the event that Lessor draws on the
entire face amount of the Letter of Credit pursuant to the terms of
this Section, said amount (plus any accrued interest) shall be
returned to Lessee immediately after Lessor provides Lessee with
written notice that it has drawn such amount pursuant to this Section,
Lessee cures the default at issue and provides Lessor with a
replacement Letter of Credit.
(ii) Reduction of Letter of Credit. Provided that Lessee is not
in default of any terms or conditions of the Lease, on the second
anniversary of the Lease Commencement Date and every year thereafter,
the Letter of Credit shall be reduced by one month's Base Rent
incurred during the first year of the Lease term.
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<PAGE> 7
(iii) Substitution of Cash Collateral. In lieu of, or in replacement
of, the Letter of Credit, Lessee may deliver to Lessor at any time
during the Term a cash deposit in the face amount required of the
Letter of Credit, provided that Lessor shall have no additional
liability or reduced benefits from that which Lessor would have if
Lessee provided a Letter of Credit. All terms, conditions and
requirements with respect to the Letter of Credit contained in this
Section 5, including, without limitation, application of proceeds,
reduction of amount, return of deposit, and investment requirements
for cash collateral, shall apply to any such cash collateral.
(iv) Conversion of Deposit to Loan. Lessor and Lessee acknowledge and
agree that, if Lessee defaults under this Lease and fails to fully
cure such default within the applicable cure period and Lessor elects
to pursue its remedies under California Civil Code Section 1951.2 or
under this Lease (or any such event, a "Lessor Action"), (i) Lessor
will incur certain damages, costs and expenses, including, without
limitation, marketing costs, commissions, relocation costs, Lessee
improvement costs, and carrying costs in connection with releasing the
Premises, in addition to the other damages, costs and/or expenses
Lessor may incur as a result of such default and/or other defaults
under this Lease (all of the foregoing collectively, "Default
Damages"); (ii) Lessor has no assurance of a source of funds to cover
such Default Damages other than the Proceeds of the Letter of Credit
(or cash collateral); and (iii) the Proceeds of the Letter of Credit
(or cash collateral) should be available to Lessor to apply to Default
Damages, even if the amount thereof exceeds that amount to which
Lessor is ultimately determined to be entitled under this Lease and
pursuant to applicable law. Accordingly, at Lessor's sole election,
Lessor shall be entitled to draw the full amount of the Letter of
Credit (or the full amount of cash collateral shall be released to
Lessor) which is then existing (after any previous application of
funds by Lessor and/or replenishment by Lessee pursuant to Section
5(A)(i) above), simultaneously with commencement of a Lessor Action or
at any time thereafter. All proceeds thereof in excess of amounts
applied (pursuant to Section 5(A)(i)) to Default Damages incurred by
Lessor prior to commencement of the Lessor Action shall be deemed a
loan from Lessee to Lessor (the "Default Loan"). The Default Loan
shall be unsecured and shall bear interest at the rate of interest
actually earned by Lessor on the loan proceeds held (and not applied)
by Lessor at any given time, in a money market or similar account, and
such interest shall be added to the principal balance when earned and
shall be applied or repaid as provided in this paragraph. Repayment of
the Default Loan shall be limited to the terms and conditions set
forth in this paragraph. Any sums to which Lessor from time to time
becomes entitled hereunder and pursuant to law as a result of Lessee's
default and any previous defaults of the Lease, to which the Letter of
Credit (or cash collateral) has not previously been applied pursuant
to Section 5(A)(i), shall be offset against the principal balance of
the Loan. The amount of the Default Loan remaining, if any, after such
offset shall be referred to herein as the "Excess Amount". The Excess
Amount shall be Payable by Lessor to Lessee from, and
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<PAGE> 8
only from, first any proceeds from the Letter of Credit (or cash
collateral) which have not been applied to Default Damages incurred by
Lessor after the same are finally determined (the "Remaining
Proceeds"), and then Excess Rent. The Remaining Proceeds shall be paid
by Lessor to Lessee promptly upon the earliest of the following: (i) a
judgment by a court as to the amount of damages, (ii) the date Lessor
ceases its pursuit of California Civil Code Section 1951.2 damages, if
applicable, and (iii) final determination after the entire Premises
are leased to a third party or parties. "Excess Rent" shall mean the
amount by which (x) rent received by Lessor (from the tenant or
tenants leasing all or a portion of the Premises after Lessee's
default) in any month exceeds (y) the amount of rent that would have
been Payable under this Lease for such month if this Lease had not
been terminated. Lessor shall pay Lessee one-half of the Excess Rent
until the earlier of (A) the date the Excess Amount is fully repaid or
(B) the date that would have been the Expiration Date (excluding any
Renewal Term) of this Lease. If the Default Loan is insufficient to
cover all Default Damages, Lessee shall pay Lessor any such shortfall
immediately upon demand by Lessor, and Lessor shall have all rights
and remedies available at law or elsewhere in the Lease with respect
to such shortfall. Notwithstanding the foregoing, in the event that
Lessor draws on the entire face amount of the Letter of Credit
pursuant to the terms of this Section and the Lease is not terminated
pursuant to California Civil Code Section 1951.2, said amount (plus
any accrued interest) shall be returned to Lessee immediately if
within ninety (90) days after Lessor provides Lessee with written
notice that it has drawn such amount pursuant to this Section, Lessee
cures the default at issue and provides to Lessor a replacement Letter
of Credit.
6. Use of the Premises. The Premises shall be used exclusively for the purpose
of general office, sales, marketing, engineering research and development, and
clean storage of computer related products and services.
Lessee shall not use or permit the Premises, or any part thereof, to be
used for any purpose or purposes other than the purpose for which the Premises
are hereby leased; and no use shall be made or permitted to be made of the
Premises, nor acts done, which will increase the existing rate of insurance upon
the building in which the Premises are located, or cause a cancellation of any
insurance policy covering said building, or any part thereof, nor shall Lessee
sell or permit to be kept, used, or sold, in or about the Premises, any article
which may be prohibited by the standard form of fire insurance policies. Lessee
shall not commit or suffer to be committed any waste upon the Premises or any
public or private nuisance or other act or thing which may disturb the quiet
enjoyment of any other tenant in the building in which the premises are located;
nor, without limiting the generality of the foregoing, shall Lessee allow the
Premises to be used for any improper, immoral, unlawful, or objectionable
purpose.
Lessee shall not place any harmful liquids in the drainage system of the
Premises or of the building of which the Premises form a part. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises outside of the building proper except in trash containers placed
inside exterior enclosures designated for that purpose by Lessor, or inside the
building proper where designated by Lessor. No materials, supplies, equipment,
finished or semi-finished products, raw materials, or articles of any nature
shall be stored upon or permitted to
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remain on any portion of the Premises outside of the building proper.
Lessor represents and warrants to Lessee that to the best of its knowledge
there are no Toxic or Hazardous materials present on, at or under the Premises,
which shall be deemed to include underlying land and groundwater, at the time of
Lessee's occupancy. Lessor shall indemnify, defend and hold harmless Lessee, its
partners, directors, officers, employees, lenders, and successors against all
claims, obligations, liabilities, demands, damages, judgements, and costs,
including reasonable attorneys' fees arising from or in connection with any
prior Toxic or Hazardous materials that existed prior to Lessee's occupancy of
the Premises.
Lessee in turn represents to Lessor that it does not now and will not in
the future permit the use or storage on the Premises of Toxic or Hazardous
materials, excluding, however basic janitorial, maintenance and office supplies,
and materials commonly used in connection with Lessee's business as described in
paragraph 6 hereof, and an above-ground storage tank in which diesel fuel may be
stored for a backup generator. For purposes of this paragraph 6 "Toxic or
Hazardous Materials" shall mean any product, substance, chemical, material or
waste whose presence, nature, quality and/or intensity or existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the leased
premises, is either (i) potentially injurious to the public health, safety or
welfare, the environment, or the leased premises; (ii) regulated or monitored by
any governmental authority; or (iii) a basis for potential liability of Lessee
and Lessor to any governmental agency or third party under any applicable
statute or common law theory. "Toxic or Hazardous Materials" shall include, but
not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products
or by-products thereof.
Lessee hereunder shall be responsible for and indemnify, and hold Lessor
and its partners, directors, officers, employees, lenders, successors and
assigns harmless from all claims, obligations, liabilities, demands, damages,
judgments and costs, including reasonable attorneys' fees arising at any time
during or in connection with Lessee's causing or permitting any materials
referred to under any governmental provisions or regulatory scheme as
"hazardous" or "toxic" or which contain petroleum, gasoline, or other petroleum
product, to be brought upon, stored, manufactured, generated, handled, disposed,
or used on, under or about the Premises. Lessee's and Lessor's obligations
hereunder shall survive the termination of this Lease.
If, at any time during the term of this Lease, Lessor suspects that toxic
waste, spillage, or other contaminants may be present on the Premises, Lessor
may order a soils report, or its equivalent, at Lessee's expense (to the extent
such report clearly shows Lessee, Lessee's agents, employees, invitees or
contractors to be the direct source of such contamination) and Lessee shall pay
such costs within fifteen (15) days from the date of the invoice by Lessor. If
any such toxic waste, spillage, or other contaminants are found upon the
Premises (and Lessee, Lessee's agents, employees, invitees or contractors are
the direct source of such contamination), Lessee shall pay the amount necessary
to remove the substances and remedy the problem.
Lessee shall abide by all laws, ordinances, and statutes, as they now exist
or may hereafter be enacted by legislative bodies having jurisdiction thereof,
relating to its use and occupancy of the Premises as provided for in Section 18
hereof.
7. Improvements: Lessor shall provide Lessee with a tenant improvement
allowance of $20.00 per rentable square foot for a mutually agreed to space plan
to be installed by Lessor's contractor as per Exhibit B. Additionally, Lessor
will provide an "industrial shell" which includes
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all structural items of the building including the building exterior walls,
foundation, floors, parking areas, outside lighting, roof, roof structure, shell
sprinklers, landscaping, electrical room, power to the building (not including
the electrical panel), telephone and cable conduits stubbed to building,
elevator pit, and all other utilities stubbed in at the shell, and three (3) ADA
compliant stairs ("Base Building Improvements" as defined in Section 3(b) of
Exhibit B). Lessor's contractor shall install and Lessee shall pay in accordance
with the provisions of Exhibit B for all interior improvements in excess of said
$20.00 per rentable square foot tenant improvement allowance including the
elevator, bathrooms, lobby, plumbing distribution from Lessor's delivery of
plumbing to the slab, stairwells, roof screens, main electrical service panel,
common corridor, Lessee's HVAC systems, fire service, electrical distribution,
interior finishes and all other partitions, ceilings and improvements of the
Lessee's interior space as well as the cost of permits, drawings and consultant
fees related to design, approval and installation of the Lessee's tenant
improvements.
Lessor shall cause the Base Building Improvements and Tenant Improvements
to be constructed in accordance with Exhibit B in good and workmanlike manner in
compliance with all applicable codes, laws, regulations and governmental
requirements. Lessor shall obtain standard and customary construction
warranties, including but not limited to warranties on the Building Systems, and
shall ensure that all such warranties run to Lessee's benefit and shall be
enforceable by Lessee.
8. Taxes and Assessments.
A. Lessee shall pay before delinquency any and all taxes, assessments,
license fees, and public charges levied, assessed, or imposed upon or
against Lessee's fixtures, equipment, furnishings, furniture, appliances,
and personal property installed or located on or within the Premises.
Lessee shall cause said fixtures, equipment, furnishings, furniture,
appliances, and personal property to be assessed and billed separately from
the real property of Lessor. If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay to Lessor
the taxes attributable to Lessee within ten (10) days after receipt of a
written statement from Lessor setting forth the taxes applicable to
Lessee's property.
B. All property taxes or assessments levied or assessed by or hereafter
levied or assessed by any governmental authority against the Premises or
any portion of such taxes or assessments which becomes due or accrued
during the term of this Lease shall be paid by Lessor. Lessee shall pay to
Lessor Lessee's proportionate share of such taxes or assessments (based on
the ratio of the square footage of Premises to the aggregate square footage
of space on the tax parcel, and adjusted equitably to the extent the value
of the tenant improvements in the other building on the parcel are in
significant excess of the value of those in the Premises on a per square
foot basis result in an increase in the tax basis for the Premises) within
ten (10) days of receipt of Lessor's invoice demanding such payment.
Lessee's liability hereunder shall be prorated to reflect the commencement
and termination dates of this Lease, but in no event earlier than twenty
(20) days from the date such taxes would be delinquent if not paid..
Page 10 of 25
<PAGE> 11
9. Insurance.
A. Indemnity. Lessee agrees to indemnify, defend and save Lessor against
and hold Lessor harmless from any and all demands, claims, causes of
action, judgments, obligations, or liabilities, and all reasonable expenses
incurred in investigating or resisting the same (including reasonable
attorneys' fees) (collectively "Claims") on account of, or arising out of,
the condition, use, or occupancy of the Premises. This Lease is made on the
express condition that Lessor shall not be liable for, or suffer loss by
reason of, injury to person or property, from whatever cause, in any way
connected with the condition, use, or occupancy of the Premises,
specifically including, without limitation, any liability for injury to the
person or property of Lessee, its agents, officers, employees, licensees,
and invitees. Notwithstanding the foregoing, nothing herein shall be deemed
to require Lessee to indemnify, defend or save Lessor from Claims resulting
from the negligence or willful misconduct or breach of the terms of this
Lease by Lessor.
B. Liability Insurance. Lessee shall, at its expense, obtain and keep in
force during the term of this Lease a policy of Commercial General
Liability insurance insuring Lessor and Lessee, with cross-liability
endorsements, against any liability arising out of the condition, use, or
occupancy of the Premises and all areas appurtenant thereto, including
parking areas and property insurance to cover Lessee's personal property,
equipment, inventory, fixtures and tenant improvements on the Premises.
Such insurance shall be in an amount of one million dollars ($1,000,000)
for each occurrence for bodily injury and physical damage to the property
and two million dollars ($2,000,000) general aggregate limit. The insurance
shall be with companies approved by Lessor, which approval Lessor agrees
not to withhold unreasonably. Prior to possession, Lessee shall deliver to
Lessor a certificate of insurance and endorsement evidencing the existence
of the policy which (1) names Lessor as an additional insured, (2) shall
not be canceled or altered without thirty (30) days' prior written notice
to Lessor, (3) insures performance of the indemnity set forth in Section A
of Paragraph 9, and (4) coverage is primary and any coverage by Lessor is
in excess thereto.
C. Property Insurance. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or
damage to the Premises (which may include earthquake and/or flood
insurance), in the amount of the full replacement value thereof. Lessee
shall pay to Lessor its pro-rata share of the cost of said insurance within
ten (10) days of Lessee's receipt of Lessor's invoice demanding such
payment, but in no event earlier than twenty (20) days from the date such
premiums would be delinquent if not paid. Lessee acknowledges that such
insurance procured by Lessor shall contain a deductible which reduces
Lessee's cost for such insurance, and , in the event of loss or damage,
Lessee shall be required to pay to Lessor the amount of such deductible
(which shall not exceed $2,000 per occurrence). In the event Lessor
carriers earthquake insurance on the Premises, the premium for such
insurance shall not exceed two (2) times the premium for the property
insurance, and the deductible shall not exceed ten percent (10%).
D. Notwithstanding anything in this Lease to the contrary, Lessor and
Lessee hereby releases each other and their respective agents, employees,
successors, assignees and
Page 11 of 25
<PAGE> 12
sublessees from all liability for injury to any person or damage to any
property that is caused by or results from a risk which is actually insured
against, which is required to be insured against under this Lease, or which
would normally be covered by "all risk" property insurance, without regard
to the negligence or willful misconduct of the person or entity so
released. All of Lessor's and Lessee's repair and indemnity obligations
under this Lease shall be subject to the waiver and release contained in
this paragraph. Each party shall cause each insurance policy it obtains to
provide that the insurer thereunder waives all recovery by way of
subrogation as required herein in connection with any injury or damage
covered by such policy.
10. Reimbursable Expenses and Utilities. Lessee shall pay its pro-rata share
based on square footage of all water, gas, light, heat, HVAC, power,
electricity, telephone, trash removal, landscaping, sewer charges, and all other
services, including normal and customary property management fees not to exceed
three percent (3%) of the Base Rent, supplied to or consumed on the Premises. In
the event that any such services are billed directly to Lessor, then Lessee
shall pay Lessor for such expenses within twenty (20) days of Lessee's receipt
of Lessor's invoice demanding payment.
11. Repairs and Maintenance.
A. Subject to provisions of paragraph 15, Lessor shall keep and maintain
in good order, condition and repair the structural elements of the Premises
including the roof, roof membrane, paving, floor slab, foundation, exterior
walls, landscaping, irrigation and elevators. Lessor shall make such
repairs, replacements, alterations or improvements as Lessor deems
reasonably necessary with respect to such structural elements and Lessee
shall pay to Lessor, within ten days of Lessor's invoice to Lessee
therefor, Lessee's pro-rata share of such repairs, replacements,
alterations or improvements. In the event that the cost of any replacement
or improvement exceeds $25,000 per occurrence, the amount in excess of
$25,000 shall be amortized over the useful life of such replacements or
improvements. Lessee shall be obligated to pay its pro-rata share of such
excess on a monthly basis, as Additional Rent, for as long as the useful
life coincides with the lease term. Notwithstanding the foregoing subject
to the terms of Section 9.D. hereof, if the reason for any repair,
replacement, alteration or improvement is caused by Lessee or arises
because of a breach of Lessee's obligations under this Lease, then Lessee
shall pay 100% of the costs or expense to remedy the same.
B. Except as expressly provided in Subparagraph A above, Lessee shall, at
its sole cost, keep and maintain the entire Premises and every part
thereof, including, without limitation, the windows, window frames, plate
glass, glazing, truck doors, doors, all door hardware, interior of the
Premises, interior walls and partitions, and electrical, plumbing,
lighting, heating, and air conditioning systems in good and sanitary order,
condition, and repair. Notwithstanding the foregoing, Lessee shall have no
obligation to repair any damage caused by Lessor.
Should Lessee fail to maintain the Premises or make repairs required
of Lessee hereunder forthwith within the cure period provided for in
Section 14 hereof,
Page 12 of 25
<PAGE> 13
Lessor, in addition to all other remedies available hereunder or by law,
and without waiving any alternative remedies, may make the same, and in
that event, Lessee shall reimburse Lessor as additional rent for the cost
of such maintenance or repairs on the next date upon which rent becomes
due.
Lessee hereby expressly waives the provision of Subsection 1 of
Section 1932, and Sections 1941 and 1942 of the Civil Code of California
and all rights to make repairs at the expense of Lessor, as provided in
Section 942 of said Civil Code.
12. Alterations and Additions. Lessee shall not make, or suffer to be made, any
alterations, improvements, or additions in, on, or about, or to the Premises or
any part thereof, without prior written consent of Lessor, which consent shall
not be unreasonably withheld or delayed, and without a valid building permit
issued by the appropriate governmental authority. However, Lessee shall be
permitted to make alterations, improvements or additions to the Premises without
Lessor's prior written consent, but with written notification, if such
alteration, improvement or addition is less than $50,000 in cost in each
instance, is nonstructural in nature, does not affect the mechanical and
electrical systems of the building and does not penetrate the roof membrane.
Lessor retains, at his sole option, the right to retain a General Contractor of
his own choosing to perform all repairs, alterations, improvements, or additions
in, on, about, or to said Premises or any part thereof, provided that Lessor's
contractor is competitive in its costs and can perform the repair, alteration,
improvement or addition in a timely manner. As a condition to giving such
consent, Lessor may require that Lessee agree to remove any such alterations,
improvements, or additions at the termination of this Lease, and to restore the
Premises to their prior condition, provided that in no event shall the Tenant
Improvements be required to be removed by Lessee. At the time Lessee requests
Lessor's approval for any alteration, improvements or addition, Lessee may also
request in writing Lessor's decision as to whether or not Lessor will require
Lessee to remove said improvements at the end of the Lease term. Any alteration,
addition, or improvement to the Premises, shall become the property of Lessor
upon expiration or earlier termination of this Lease, and shall remain upon and
be surrendered with the Premises at the termination of this Lease. Alterations
and additions which are not to be deemed as trade fixtures include heating,
lighting, electrical systems, air conditioning, partitioning, electrical signs,
carpeting, or any other installation which has become an integral part of the
Premises. In the event that Lessor consents to Lessee's making any alterations,
improvements, or additions, Lessee shall be responsible for the timely posting
of notices of non-responsibility on Lessor's behalf, which shall remain posted
until completion of the alterations, additions, or improvements. Lessee's
failure to post notices of non-responsibility as required hereunder shall be a
breach of this Lease.
Notwithstanding anything to the contrary herein, if, during the term
hereof, any alteration, addition, or change of any sort through all or any
portion of the Premises or of the building of which the Premises form a part, is
required by law, regulation, ordinance, or order of any public agency then if
such legal requirement is not imposed because of Lessee's specific use of the
Premises and is not "triggered" by Lessee's alterations or Lessee's application
for a building permit or any other governmental approval (in which instance
Lessee shall be responsible for 100% of the cost of such improvement), Lessor
shall be responsible for constructing such improvement and Lessee shall be
responsible for its proportional share of the cost for said improvement,
amortized over the useful life of such improvement that coincides with the
remaining Lease term including
Page 13 of 25
<PAGE> 14
any extensions.
13. Acceptance of the Premises and Covenant to Surrender. By entry and taking
possession of the Premises pursuant to this Lease, Lessee accepts the Premises
as being in good and sanitary order, condition, and repair, and accepts the
Premises in their condition existing as of date of such entry, and Lessee
further accepts any tenant improvements to be constructed by Lessor, if any, as
being completed in accordance with the plans and specifications for such
improvements.
Lessee agrees on the last day of the term hereof, or on sooner termination
of this Lease, to surrender the Premises, together with all alterations,
additions, and improvements which may have been made in, to, or on the Premises
by Lessor or Lessee, unto Lessor in good and sanitary order, condition, and
repair, excepting for such wear and tear as would be normal for the period of
the Lessee's occupancy and damage caused by casualty or Lessor's actions.
Lessee, on or before the end of the term or sooner termination of this Lease,
shall remove all its personal property and trade fixtures from the Premises, and
all property not so removed shall be deemed abandoned by Lessee. Lessee further
agrees that at the end of the term or sooner termination of this Lease, Lessee,
at its sole expense, shall have the carpets steam cleaned, the walls and columns
cleaned, and if necessary, painted, the flooring waxed, any damaged ceiling tile
replaced, the windows cleaned, the drapes cleaned, and any damaged doors
replaced.
If the Premises are not surrendered at the end of the term or sooner
termination of this Lease, Lessee shall indemnify Lessor against loss or
liability resulting from delay by Lessee in so surrendering the Premises,
including, without limitation, any claims made by any succeeding tenant founded
on such delay.
14. Default. In the event of any breach of this Lease by the Lessee, or an
abandonment of the Premises by the Lessee for more than sixty (60) consecutive
days, the Lessor has the option of (1.) removing all persons and property from
the Premises and repossessing the Premises, in which case any of the Lessee's
property which the Lessor removes from the Premises may be stored in a public
warehouse or elsewhere at the cost of, and for the account of, Lessee; or (2.)
allowing the Lessee to remain in full possession and control of the Premises. As
used herein, the term "breach of Lease" shall mean either : (i) the failure of
Lessee to pay Rent or Additional Rent more than five (5) days after receipt of
written notice thereof (provided that if Lessee defaults more than two (2) times
in any twelve (12) month period, no such notice shall be necessary, or (ii) the
failure of Lessee to perform any obligation hereunder other than the payment of
Rent or Additional Rent for a period of more than thirty (30) days after receipt
of written notice such breach, provided that if such breach cannot be reasonably
cured within such thirty (30) day period, Lessee shall not be in default
hereunder, if Lessee commences the cure within such thirty (30) days period and
diligently pursues completion. If the Lessor chooses to repossess the Premises,
the Lease will automatically terminate in accordance with the provisions of the
California Civil Code, Section 1951.2. In the event of such termination of the
Lease, the Lessor may recover from the Lessee: (1.) the worth at the time of
award of the unpaid rent which had been earned at the time of termination,
including interest at the maximum rate an individual is permitted by law to
charge; (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 rental loss that the Lessee proves could have been
reasonably avoided, including interest at the maximum rate an individual is
permitted by law to charge; (3.) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after
Page 14 of 25
<PAGE> 15
the time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided; and (4.) any other amount necessary to compensate
the Lessor for all the detriment proximately caused by the Lessee's failure to
perform his obligations under the Lease or which, in the ordinary course of
things, would be likely to result therefrom. "The worth at the time of award,"
as used in (1.) and (2.) of this Paragraph, is to be computed by allowing
interest at the maximum rate an individual is permitted by law to charge. "The
worth at the time of award," as used in (3.) of this Paragraph, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award, plus one percent (1%).
If the Lessor chooses not to repossess the Premises, but allows the Lessee
to remain in full possession and control of the Premises, then, in accordance
with provisions of the California Civil Code, Section 1951.4, the Lessor may
treat the Lease as being in full force and effect, and may collect from the
Lessee all rents as they become due through the termination date of the Lease,
as specified in the Lease. For the purpose of this paragraph, the following do
not constitute a termination of Lessee's right to possession: (1.) acts of
maintenance or preservation, or efforts to relet the property; (2.) the
appointment of a receiver on the initiative of the Lessor to protect his
interest under this Lease.
Lessee shall be liable immediately to Lessor for all costs Lessor incurs in
reletting the Premises, including, without limitation, brokers' commissions,
expenses of remodeling the Premises required by the reletting, and like costs.
Reletting can be for a period shorter or longer than the remaining term of this
Lease. Lessee shall pay to Lessor the rent due under this Lease on the dates the
rent is due, less the rent Lessor receives from any reletting. No act by Lessor
allowed by this Section shall terminate this Lease unless Lessor notifies Lessee
that Lessor elects to terminate this Lease. After Lessee's default and for as
long as Lessor does not terminate Lessee's right to possession of the Premises,
if Lessee obtains Lessor's consent, Lessee shall have the right to assign or
sublet its interest in this Lease, but Lessee shall not be released from
liability. Lessor's consent to a proposed assignment or subletting shall not be
unreasonably withheld.
If Lessor elects to relet the Premises as provided in this Paragraph, rent
that Lessor receives from reletting shall be applied to the payment of: (1.) any
indebtedness from Lessee to Lessor other than rent due from Lessee; (2.) all
costs, including for maintenance, incurred by Lessor in reletting; (3.) rent due
and unpaid under this Lease. After deducting the payments referred to in this
Paragraph, any sum remaining from the rent Lessor receives from reletting shall
be held by Lessor and applied in payment of future rent as rent becomes due
under this Lease. In no event shall Lessee by entitled to any excess rent
received by Lessor. If, on the date rent is due under this Lease, the rent
received from reletting is less than the rent due on that date, Lessee shall pay
to Lessor, in addition to the remaining rent due, all costs, including for
maintenance, Lessor incurred in reletting that remain after applying the rent
received from the reletting, as provided in this Paragraph.
Lessor, at any time after Lessee commits a default, can cure the default at
Lessee's cost. If Lessor at any time, by reason of Lessee's default, pays any
sum or does any act that requires the payment of any sum, the sum paid by Lessor
shall be due immediately from Lessee to Lessor at the time the sum is paid, and
if paid at a later date shall bear interest at Bank of America's Prime rate plus
two percent (2%) from the date the sum is paid by Lessor until Lessor is
reimbursed by Lessee. The sum, together with interest on it, shall be additional
rent.
Rent not paid when due shall bear interest at Bank of America's Prime rate
plus two percent (2%) from the date due until paid.
Page 15 of 25
<PAGE> 16
15. Destruction. In the event the Premises are destroyed in whole or in part
from any cause, Lessor may, at its option, (1.) rebuild or restore the Premises
to their condition prior to the damage or destruction or (2.) terminate the
Lease as provided for below.
If Lessor does not give Lessee notice in writing within thirty (30) days
from the destruction of the Premises of its election either to rebuild and
restore the Premises, or to terminate this Lease, Lessor shall be deemed to have
elected to rebuild or restore them, in which event Lessor agrees, at its
expense, promptly to rebuild or restore the Premises to its condition prior to
the damage or destruction. If Lessor does not complete the rebuilding or
restoration within one hundred eighty (180) days following the date of
destruction (such period of time to be extended for delays caused by the fault
or neglect of Lessee of because of acts of God, acts of public agencies, labor
disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability
to obtain materials, supplies or fuels, acts of contractors or subcontractors,
or delay of the contractors or subcontractors due to such causes or other
contingencies beyond control of Lessor), then Lessee shall have the right to
terminate this Lease by giving fifteen (15) days prior written notice to Lessor.
Lessor's obligation to rebuild or restore shall not include restoration of
Lessee's trade fixtures, equipment, merchandise, or any improvements,
alterations, or additions made by Lessee to the Premises.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Lessee hereby expressly waives the
provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of
the California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than thirty-three and one-third
percent (33 1/3%) of the replacement cost thereof, Lessor may elect to terminate
this Lease, whether the Premises be injured or not.
The rent due hereunder shall equitably abate during the time period the
Premises are damaged or being repaired to the extent of Lessee's lack of use
thereof.
16. Condemnation. If any part of the Premises shall be taken for any public or
quasi-public use, under any statute of by right of eminent domain, or private
purchase in lieu thereof, and a part thereof remains, which is susceptible of
occupation hereunder, this Lease shall, as to the part so taken, terminate as of
the date title shall vest in the condemnor or purchaser, and the rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the term only such portion of such rent as the value of the part
remaining after taking such bears to the value of the entire Premises prior to
such taking. Lessor shall have the option to terminate this Lease in the event
that such taking causes a reduction in rent payable hereunder by fifty percent
(50%) or more. If all of the Premises or such part thereof be taken so that
there does not remain a portion susceptible for occupation hereunder, as
reasonably necessary for Lessee's conduct of its business as contemplated in
this Lease, this Lease shall thereupon terminate. If a part of all of the
Premises be taken, all compensation awarded upon such taking shall go to the
Lessor, and the Lessee shall have no claim thereto, and the Lessee hereby
irrevocably assigns and transfers to the Lessor any right to compensation or
damages to which the Lessee may become entitled during the term hereof by reason
of the purchase or condemnation of all or a part of the Premises, except that
Lessee shall have the right to recover its share of any award or consideration
for (1.) moving expenses; (2.) loss or damage to Lessee's trade fixtures,
furnishings, equipment, and other personal property; and (3.) business goodwill,
and (4) alterations paid for by Lessee. Each party waives the provisions of the
Code of Civil Procedure, Section 1265.130, allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial taking of the
Premises.
Page 16 of 25
<PAGE> 17
17. Free from Liens. Lessee shall (1.) pay for all labor and services performed
for materials used by or furnished to Lessee, or any contractor employed by
Lessee with respect to the Premises, and (2.) indemnify, defend, and hold Lessor
and the Premises harmless and free from any liens, claims, demands,
encumbrances, or judgments created or suffered by reason of any labor or
services performed for materials used by or furnished to Lessee or any
contractor employed by Lessee with respect to the Premises, and (3.) give notice
to Lessor in writing five (5) days prior to employing any laborer or contractor
to perform services related, or receiving materials for use upon the Premises,
and (4.) shall post, on behalf of Lessor, a notice of non-responsibility in
accordance with the statutory requirements of the California Civil Code, Section
3904, or any amendment thereof. In the event an improvement bond with a public
agency in connection with the above is required to be posted, Lessee agrees to
include Lessor as an additional obligee.
18. Compliance with Laws. Subject to Section 12, Lessee shall, at its own cost,
comply with and observe all requirements of all municipal, county, state, and
federal authority now in force, or which may hereafter be in force, pertaining
to the use and occupancy of the Premises.
19. Subordination. Lessee agrees that this Lease shall, at the option of
Lessor, be subjected and subordinated to any mortgage, deed of trust, or other
instrument of security, which has been or shall be placed on the land and
building, or land or building of which the Premises form a part, and this
subordination is hereby made effective without any further act of Lessee or
Lessor, provided that such subordination shall be conditioned upon Lessee's
receipt of non-disturbance protection from such lender in lender's standard
form. The Lessee shall, at any time hereinafter, on demand, execute any
instruments, releases, or other documents that may be required by any mortgagee,
mortgagor, trustor, or beneficiary under any deed of trust, for the purpose of
subjecting or subordinating this Lease to the lien of any such mortgage, deed of
trust, or other instrument of security. Lessee's failure to execute and deliver
any such documents or instruments shall be deemed a breach of Lease.
20. Abandonment. Lessee shall not vacate or abandon the Premises at any time
during the term; and if Lessee shall abandon, vacate, or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor, except such property as may be mortgaged to
Lessor; provided, however, that Lessee shall not be deemed to have abandoned or
vacated the Premises so long as Lessee continues to pay all rents as and when
due, and otherwise performs pursuant to the terms and conditions of this Lease.
21. Assignment and Subletting.
A. Definitions. For purposes of this Paragraph 21, the following terms
shall be defined as follows:
(i) Sublet. The term "Sublet" shall mean any transfer, sublet,
assignment, license or concession agreement, change of ownership,
mortgage, or hypothecation of this Lease or the Lessee's interest in
the Lease or in and to all or a portion of the
Page 17 of 25
<PAGE> 18
Premises.
(ii) Subrent. The term "Subrent" shall mean any consideration of any
kind received, or to be received, by Lessee from a Sublessee if such
sums are related to Lessee's interest in this Lease or in the
Premises, including, but not limited to, bonus money and payments (in
excess of book value) for Lessee's assets including its trade
fixtures, equipment and other personal property, goodwill, and general
intangibles.
(iii) Sublessee. The term "Sublessee" shall mean the person or entity
with whom a Sublet agreement is proposed to be or is made.
B. Lessor's Consent. Lessee shall not enter into a Sublet without
Lessor's prior written consent, which consent shall not be unreasonably
withheld or delayed. Any attempted or purported Sublet without Lessor's
prior written consent shall be void and confer no rights upon any third
person and, at Lessor's election, shall terminate this Lease. In
determining whether or not to consent to a proposed Sublet, Lessor may
consider the following factors, among others, all of which shall be deemed
reasonable; (i) whether the proposed Sublessee has a net worth equal to or
greater than the net worth of Lessee; (ii) whether the proposed use of the
Premises by the proposed Sublessee is consistent with the permitted use for
the Premises set forth in Paragraph 6 of this Lease; (iii) whether the
experience and business reputation of the proposed Sublessee is equal to or
greater than that of Lessee; (iv) whether the rent payable by the Sublessee
under the proposed Sublet reflects the current fair market rent for the
subleased Premises as reasonably determined by Lessor. Each Sublessee shall
agree in writing, for the benefit of Lessor, to assume, to be bound by, and
to perform the terms and conditions and covenants of this Lease to be
performed by Lessee. Notwithstanding anything contained herein, Lessee
shall not be released from liability for the performance of each term,
condition and covenant of this Lease by reason of Lessor's consent to a
Sublet unless Lessor specifically grants such release in writing. Consent
by Lessor to any Sublet shall not be deemed a consent to any subsequent
Sublet. Lessee shall reimburse Lessor for all reasonable costs and
attorneys' fees incurred by Lessor in connection with the evaluation,
processing and/or documentation of any requested Sublet, whether or not
Lessor's consent is granted. Lessor's reasonable costs shall include the
cost of any review or investigation by Lessor of any hazardous or toxic
materials which may be used, stored, or disposed of at the Premises by the
Sublessee, including fees paid to consultants hired to perform such review
or investigation.
C. Information to be Furnished. If Lessee desires at any time to Sublet
the Premises or any portion thereof, it shall first notify Lessor of its
desire to do so and shall submit in writing to Lessor: (i) the name and
legal composition of the proposed Sublessee, (ii) the nature of the
proposed Sublessee's business to be carried on in the Premises; (iii) the
terms and provisions of the proposed Sublet and a copy of the proposed
Sublet form containing a description of the subject premises; (iv) a
statement of all consideration to be paid by the Sublessee in connection
with the Sublet; (v) a current financial statement of Lessee; and (vi) such
financial information, including financial statements, as Lessor may
reasonably request concerning the proposed Sublessee.
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<PAGE> 19
D. Lessor's Alternatives. At any time within ten (10) days after the
Lessor's receipt of the information specified in Paragraph 21.C., Lessor
may, by written notice to Lessee, elect: (i) to consent to the Sublet by
Lessee; (ii) to refuse its consent to the Sublet, or (iii) elect to
terminate this Lease, or in the case of a partial Sublet, terminate this
Lease as to the portion of the Premises proposed to be Sublet, provided
that if Lessor chooses (iii), then Lessee shall have a period of three (3)
business days from receipt of such termination notice in which to revoke
its sublet request. If Lessor terminates this Lease with respect to a
portion of the Premises, then the rent, Lessee's pro-rata share and the
amount of the Security Deposit and Letter of Credit shall be
proportionately reduced based on square footage. If Lessor consents to the
Sublet, Lessee may thereafter enter into a valid Sublet of the Premises or
portion thereof, upon the terms and conditions and with the proposed
Sublessee set forth in the information furnished by Lessee to Lessor
pursuant to Paragraph 21.B., subject, however, at Lessor's election, to the
condition of any excess of the Subrent over the Rent required to be paid by
Lessee under this Lease, after first deducting a leasing commission, shall
be split equally between Lessor and Lessee. Lessor's alternative of
terminating this Lease as described above shall not be applicable for a
proposed sublet of a portion of the Premises during the first four (4)
years of the Lease term.
E. Proration. If a portion of the Premises is Sublet, the pro rata share
of the Rent attributable to such partial area of the Premises shall be
determined by Lessor by dividing the Rent payable by Lessee hereunder by
the total square footage of the Premises and multiplying the resulting
quotient (the per square foot rent) by the number of square feet of the
Premises which are Sublet.
F. Exempt Sublets. Notwithstanding the above, Lessor's prior written
consent shall not be required for an assignment of this Lease to an entity
which controls, is controlled by or under common control with, Lessee, or a
corporation into which Lessee merges or consolidates, provided that (i)
Lessee gives Lessor prior written notice of the name any such assignee,
(ii) at the time of such assignment, the assignee has net worth that is
equal to or greater than the net worth of Lessee immediately prior to such
assignment; and (iii) the assignee assumes, in writing, for the benefit of
Lessor, all of Lessee's obligations under the Lease. An assignment or other
transfer of this Lease to a purchaser of all or substantially all of the
assets of Lessee shall not be deemed a Sublet requiring Lessor's prior
written consent.
22. Parking Charges. Lessee agrees to pay upon demand, based on its percent of
occupancy of the entire Premises, its pro-rata share of any parking charges,
surcharges, or any other cost hereafter levied or assessed by local, state, or
federal governmental agencies in connection with the use of the parking
facilities serving the Premises, including, without limitation, parking
surcharge imposed by or under the authority of the Federal Environmental
Protection Agency.
23. Insolvency or Bankruptcy. Either (1.) the appointment of a receiver to take
possession of all or substantially all of the assets of Lessee which is not
removed within sixty (60) days, or (2.) a general assignment by Lessee for the
benefit of creditors, or (3.) any action taken or suffered by
Page 19 of 25
<PAGE> 20
Lessee under any insolvency or bankruptcy act shall constitute a breach of this
Lease by Lessee. Upon the happening of any such event, this Lease shall
terminate ten (10) days after written notice of termination from Lessor to
Lessee. This section is to be applied consistent with the applicable state and
federal law in effect at the time such event occurs.
24. Lessor Loan or Sale. Lessee agrees promptly following request by Lessor to
(1.) execute and deliver to Lessor any documents, including estoppel
certificates presented to Lessee by Lessor, (a.) certifying that this Lease is
unmodified and in full force and effect, or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect and the date to which the rent and other charges are paid in
advance, if any, and (b.) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, and (c.)
evidencing the status of the Lease as may be required either by a lender making
a loan to Lessor, to be secured by deed of trust or mortgage covering the
Premises, or a purchaser of the Premises from Lessor, and (2.) to deliver to
Lessor the current financial statements of Lessee certified by a corporate
officer, including a balance sheet and profit and loss statement, for the
current fiscal year and the two immediately prior fiscal years, all prepared in
accordance with Generally Accepted Accounting Principles consistently applied.
Lessee's failure to deliver an estoppel certificate within seven (7) days
following such request shall constitute a default under this Lease and shall be
conclusive upon Lessee that this Lease is in full force and effect and has not
been modified except as may be represented by Lessor. Lessee's failure to
deliver the estoppel certificates within the seven (7) days shall be a breach of
the Lease.
25. Surrender of Lease. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger nor relieve
Lessee of any of Lessee's obligations under this Lease, and shall, at the option
of Lessor, terminate all or any existing Subleases or Subtenancies, or may, at
the option of Lessor, operate as an assignment to him of any or all such
Subleases or Subtenancies.
26. Attorneys' Fees. If, for any reason, any suit be initiated to enforce any
provision of this Lease, the prevailing party shall be entitled to legal costs,
expert witness expenses, and reasonable attorneys' fees, as fixed by the court.
27. Notices. All notices to be given to Lessee may be given in writing,
personally, or by depositing the same in the United States mail, postage prepaid
or by national overnight courier service, and addressed to Lessee at the said
Premises, whether or not Lessee has departed from, abandoned, or vacated the
Premises. Any notice or document required or permitted by this Lease to be given
Lessor shall be addressed to Lessor at the address set forth below, or at such
other address as it may have theretofore specified by notice delivered in
accordance herewith:
LESSOR: WTA Piercy LLC
900 Welch Road, Suite 10
Palo Alto, California 94304
Page 20 of 25
<PAGE> 21
LESSEE: Packeteer, Inc. (Before Lease Commencement)
10495 North De Anza Boulevard
Cupertino, CA 95014
Packeteer, Inc. (After Lease Commencement)
Piercy Road
San Jose, CA
28. Transfer of Security. If any security be given by Lessee to secure the
faithful performance of all or any of the covenants of this Lease on the part of
Lessee, Lessor may transfer and/or deliver the security, as such, to the
purchaser of the reversion, in the event that the reversion be sold, and
thereupon Lessor shall be discharged from any further liability in reference
thereto, upon the assumption by such transferee of lessor's obligations under
this Lease.
29. Waiver. The waiver by Lessor or Lessee of any breach of any term, covenant,
or condition, herein contained shall not be deemed to be a waiver of such term,
covenant, or condition, or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant, or condition of this Lease, other than the
failure of Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
30. Holding Over. Any holding over after the expiration of the term or any
extension thereof, shall be construed to be a tenancy from month-to-month, at a
rental of one and one-half (1 1/2) times the previous month's rental rate per
month, and shall otherwise be on the terms and conditions herein specified, so
far as applicable.
31. Covenants, Conditions, and Restrictions. Not applicable.
32. Limitation on Lessor's Liability. If Lessor is in default of this Lease,
and, as a consequence, Lessee recovers a money judgment against Lessor, the
judgment shall be satisfied only out of the proceeds of sale received on
execution of the judgment and levy against the right, title, and interest of
Lessor in the Premises, or in the building, other improvements, and land of
which the Premises are part, and out of rent or other income from such real
property receivable by Lessor or out of the consideration received by Lessor
from the sale or other disposition of all or any part of Lessor's right, title,
and interest in the Premises or in the building, other improvements, and land of
which the Premises are part. Neither Lessor nor any of the partners comprising
the partnership designated as Lessor shall be personally liable for any
deficiency.
33. Disclosure. Lessor's listing brokers, Bart Edises and Steve Horton of CPS,
are members of WTA Piercy LLC, the ownership entity of the Project.
34. BROKERS. Lessor and Lessee each warrant that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this Lease
excepting only CPS (Lessor's broker) and Colliers International (Lessee's
broker) and that it knows of no other real estate broker
Page 21 of 25
<PAGE> 22
or agent who is, or might be, entitled to a commission in connection with this
Lease. Lessor shall be solely responsible for the payment of the commission due
such brokers under separate agreement by and between Lessor and CPS in
connection with this Lease. Each party agrees to indemnify and hold the other
party harmless from and against all claims for brokerage commissions, finder's
fees or other compensation made by any other agent, broker, salesman or finder
than the Broker.
34. Contingency. Lessor's execution of this Lease is contingent upon Lessor
successfully concluding the underlying land purchase for the Premises. If such
purchase does not occur by February 1, 2001, then either party may terminate
this Lease upon written notice thereof to the other.
35. Signage. Lessor, without warranty of success, shall cooperate with Lessee
and the appropriate governmental agencies to acquire Lessee's pro-rata share of
the maximum allowable signage for Lessee, including monument and building
signage, all of which shall comply with governmental regulations and the
project's signage program. All signage shall be at Lessee's sole cost. Lessee
shall be entitled to the top portion of any monument sign approved by the City.
36. Right of First Offer. Lessor and Lessee agree that if at any time during
the term of this Lease, Lessor shall receive a bona fide offer (hereinafter
called the "Offer") from a third party other than the initial tenant
(hereinafter called the "Offeror") to Lease the adjacent building known as
______ Piercy Road, and Lessor shall desire to accept said Offer, Lessor shall
give notice to Lessee setting forth the terms and conditions of the Offer and
stating in such notice that Lessor is willing to accept such Offer. Lessee shall
have the right of first refusal to Lease the Premises as described in the Offer,
on the exact same terms and conditions as set forth in the Offer, provided
Lessee must elect to exercise such right of first refusal by giving Lessor
written notice of its election to exercise within five (5) business days
following the date of receipt by Lessee of Lessor's notice of intention to
accept said Offer by giving written notice to Lessor of its election to Lease on
the same terms and conditions as set forth in the Offer.
If Lessee shall fail to give notice to Lessor of its election to Lease
hereunder within said five business (5) days following date Lessee shall have
received from Lessor its notice of intention to accept the Offer, Lessor may
then Lease to the Offeror upon the same terms and conditions as set forth in
said Offer.
Lessee's Right of First Offer shall be contingent upon Lessee's financial
status at the time of the Offer being acceptable to Lessor's lender(s).
37. Miscellaneous.
A. Time is of the essence of this Lease, and of each and all of its
provisions.
B. The term "building" shall mean the building in which the Premises are
situated.
C. If the building is leased to more than one tenant, then each such
tenant, its agents, officers, employees, and invitees, shall have the
non-exclusive right (in conjunction with the use of the part of the
building leased to such Tenant) to make reasonable use of any driveways,
sidewalks, and parking areas located on the parcel of land on which the
building is situated. Lessee shall have the nonexclusive use of at least
Page 22 of 25
<PAGE> 23
294 parking stalls. Lessee shall have the exclusive right to eight (8)
parking spaces at a location to be mutually agreed upon. Lessor shall have
no obligation to police and/or enforce said parking spaces.
D. The term "assign" shall include the term "transfer."
E. The invalidity or unenforceability of any provision of this Lease
shall not affect the validity or enforceability of the remainder of this
Lease.
F. All parties hereto have equally participated in the preparation of
this Lease.
G. The headings and titles to the Paragraphs of this Lease are not a part
of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.
H. Lessor has made no representation(s) whatsoever to Lessee (express or
implied) except as may be expressly stated in writing in this Lease
instrument.
I. This instrument contains all of the agreements and conditions made
between the parties hereto, and may not be modified orally or in any other
manner than by agreement in writing, signed by all of the parties hereto or
their respective successors in interest.
J. It is understood and agreed that the remedies herein given to Lessor
shall be cumulative, and the exercise of any one remedy by Lessor shall not
be to the exclusion of any other remedy.
K. The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors,
executors, and administrators, and assigns of all the parties hereto; and
all of the parties hereto shall jointly and severally be liable hereunder.
L. This Lease has been negotiated by the parties hereto and the language
hereof shall not be construed for or against either party.
M. All exhibits to which reference is made are deemed incorporated into
this Lease, whether covenants or conditions, on the part of Lessee shall be
deemed to be both covenants and conditions.
Page 23 of 25
<PAGE> 24
N. Each party executing this Lease on behalf of a party hereto represents
and warrants that it can legally bind such party to its obligations
hereunder.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date first
above-written.
LESSOR: LESSEE:
WTA Piercy LLC, Packeteer, Inc.
a California limited liability company a Delaware corporation
BY: /s/ HOWARD J. WHITE, III BY: /s/ DAVID YNTEMA
------------------------------- -------------------------------
Howard J. White, III David Yntema
Managing Member CFO
DATE: 10/31/00 DATE: 10/31/00
------------------------------- -------------------------------
/s/ [SIGNATURE ILLEGIBLE]
Secretary and CFO
10/31/00
Page 24 of 25
<PAGE> 25
EXHIBIT A
A site plan of the Building and project to be attached once completed.
Page 25 of 25
<PAGE> 26
EXHIBIT "B"
WORK LETTER AGREEMENT
This WORK LETTER AGREEMENT ("AGREEMENT") is made and entered into as of the 30th
day of October, 2000, by and between WTA Piercy LLC, a California limited
liability company ("LESSOR") and Packeteer, Inc., a Delaware corporation
("LESSEE"), in connection with the execution of the Lease between Lessor and
Lessee of even date herewith ("LEASE"), who hereby agree as follows:
1. GENERAL.
(a) PURPOSE OF WORK LETTER AGREEMENT. The purpose of this Agreement
is to set forth how the Base Building Improvements (as defined in Section 3(b)
below) and the Tenant Improvements (as defined in Section 5 below), are to be
constructed, who will undertake the construction of the Base Building
Improvements and the Tenant Improvements, who will pay for the construction of
the Base Building Improvements and the Tenant Improvements, and the time
schedule for completion of the construction of the Base Building Improvements
and the Tenant Improvements.
(b) INCORPORATION OF LEASE DEFINITIONS. Except as defined in this
Agreement to the contrary, all terms utilized in this Agreement shall have the
same meaning ascribed to them in the Lease. When work, services, consents or
approvals are to be provided by or on behalf of Lessor, the term "Lessor" shall
include Lessor's agents, contractors, employees and affiliates.
(c) INCORPORATION OF LEASE TERMS. The provisions of the Lease, except
where clearly inconsistent or inapplicable to this Agreement, are incorporated
into this Agreement.
(d) LANDLORD TO PAY FOR BASE BUILDING IMPROVEMENTS. The Base Building
Improvements shall be constructed pursuant to this Agreement by Lessor at
Lessor's sole cost and expense.
(e) TENANT IMPROVEMENT ALLOWANCE. The Tenant Improvements shall be
constructed by Lessor, at Lessee's expense, subject to Lessor's obligations to
provide the Tenant Improvement Allowance as described in Section 6 below.
2. LEASE COMMENCEMENT DATE. The "LEASE COMMENCEMENT DATE" shall be the
date which is the earlier of (i) the date Lessor delivers to Lessee a factually
accurate written notice stating that the Premises are Substantially Complete (as
defined in Section 2(a)(i) below), and (ii) the date Lessor delivers to Lessee
written notice stating the date the Premises would have
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<PAGE> 27
been Substantially Complete were it not for any Lessee Delay (as defined in
Section 2(a)(ii) below).
(a) CERTAIN DEFINITIONS.
(i) The term "SUBSTANTIALLY COMPLETE" or "SUBSTANTIAL
COMPLETION" as used in the Lease or this Agreement shall mean: (1) the Base
Building Improvements are complete and in compliance with all applicable laws,
statutes, codes, rules and regulations (collectively, "LAWS ") and all of the
Building's heating, ventilating, air-conditioning ("HVAC") and plumbing, life
safety, mechanical and/or electrical systems (collectively, "BUILDING SYSTEMS")
are operational to the extent necessary to service the Premises; (2) the Tenant
Improvements are complete in accordance with the Final Plans and all applicable
Laws, and Lessor has sufficiently completed all the work required to be
performed by Lessor in accordance with this Agreement (except minor punch list
items which Lessor shall thereafter promptly complete); (3) Lessor has obtained
a certificate of occupancy for the Building, or a temporary certificate of
occupancy (except to the extent delayed by any Lessee Delay); and (4) Lessee has
been provided with the number of parking privileges and spaces to which it is
entitled under the Lease, (5) Piercy Road has been rebuilt and extended to allow
free access to the Building and as required by law; and (6) all of the utilities
servicing the Building are hooked up and fully operational.
(ii) The term "LESSEE DELAY" as used in the Lease, or this
Agreement shall mean any delay that Lessor actually encounters in the
performance of Lessor's obligations under the Lease which actually delays the
Substantial Completion of the Base Building or Tenant Improvements because of:
(1) delay attributable to changes in or additions to the Final Plans (as defined
in Section 3(d) below) requested by Lessee (and not due to revisions to the Base
Building Plans, if not requested by Lessee) following approval by Lessee; (2)
delay attributable to the postponement of any Tenant Improvements at the request
of Lessee; and (3) delay by Lessee in the submission of information or the
giving of authorizations or approvals within the time limits set forth in this
Agreement; and (4) delay attributable to the failure of Lessee to pay, when due,
any amounts required to be paid by Lessee pursuant to this Agreement. Lessee
shall pay all actual costs and expenses incurred by Lessor which result from any
Lessee Delay, including, without limitation, any actual costs and expenses
attributable to increases in the cost of labor or materials.
No Lessee Delay shall be deemed to have occurred unless and until
Lessor has given written notice to Lessee specifying the action or inaction by
Lessee which Lessor contends constitutes a Lessee Delay. If such action or
inaction is not cured within three (3) business day after receipt of such
notice, then a Lessee Delay, as set forth in such notice, shall be deemed to
have occurred commencing as of the date Lessee received such notice and
continuing for the number of days the Substantial Completion of the Premises was
in fact delayed as a direct result of such action or inaction.
(iii) The term "FORCE MAJEURE DELAY" as used in the Lease or this
Agreement shall mean any delay in the Substantial Completion of the Tenant
Improvements which is attributable to any: (1) actual delay affecting the
Building, attributable to any strike,
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<PAGE> 28
lockout or other labor or industrial disturbance (whether or not on the part of
the employees of either party hereto), civil disturbance, future order claiming
jurisdiction, act of the public enemy, war, riot, sabotage, blockade, embargo,
inability to secure customary materials or Lessee's special requirements after a
commercially reasonable search therefor, supplies or labor through ordinary
sources by reason of regulation or order of any government or regulatory body or
lack of availability; (2) delay attributable to the failure of Lessor to secure
building permits and approvals (including any failure to obtain a temporary
certificate of occupancy), despite Lessor's best efforts to obtain such permits
and approvals, within the same time period that normally prevailed for obtaining
such permits and approvals at the time this Lease was negotiated, which time
period Lessor and Lessee hereby stipulate to be one hundred and twenty (120)
days; (3) delay in completing the Final Plans, the construction of the Tenant
Improvements, and/or Lessee's move into the Premises because of changes in any
Laws or Building Requirements (as defined in Section 3(b) below), or the
interpretation thereof; or (4) delay attributable to lightning, earthquake,
fire, storm, hurricane, tornado, flood, washout, explosion, or any other similar
industry-wide or Building-wide cause beyond the reasonable control of the party
from whom performance is required, or any of its contractors or other
representatives. Any prevention, delay or stoppage due to any Force Majeure
Delay shall excuse the performance of the party affected for a period of time
equal to any such prevention, delay or stoppage (except the obligations of
either party to pay money, including rental and other charges, pursuant to the
Lease).
No Force Majeure Delay shall be deemed to have occurred unless
and until the party claiming such Force Majeure Delay has provided written
notice to the other party specifying the action or inaction that such notifying
party contends constitutes a Force Majeure Delay. If such action or inaction is
not cured within one (1) business day after receipt of such notice, then a Force
Majeure Delay, as set forth in such notice, shall be deemed to have occurred
commencing as of the date such notice is received and continuing for the number
of days the Substantial Completion of the Premises was in fact delayed as a
direct result of such action or inaction.
(b) DELAY OF RENT COMMENCEMENT DATE.
The Lease Commencement Date shall be delayed by one (1) business day
for each business day of delay in the Substantial Completion of the Premises
that is caused by any Force Majeure Delay or any Lessor Delay.
3. CONSTRUCTION SCHEDULE AND PROCEDURES.
(a) SELECTION OF DESIGNER. Lessor shall retain an architect or
designer ("DESIGNER") familiar with all applicable Laws and Building
Requirements (as defined in Section 3(b) below). Lessor and Lessee mutually
agree that the Designer shall be TSH Architects.
(b) BASE BUILDING PLANS. Lessor has submitted instructions and
Building plans and specifications prepared by TSH Architects and described on
the attached Schedule 3 ("BASE BUILDING PLANS") and the improvements detailed
therein the "BASE BUILDING
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<PAGE> 29
IMPROVEMENTS") and all rules, regulations, instructions and procedures
promulgated by Lessor with respect to tenant design and/or construction in the
Building (collectively, "BUILDING REQUIREMENTS") sufficient to allow Lessee to
complete a Space Plan (as defined in Section 3(c) below). To the extent the Base
Building Plans are revised to accommodate the requirements of the City of San
Jose during the permit approval process, Lessor shall submit such revised plans
to Lessee for its approval, which approval shall not be unreasonably withheld.
(c) PREPARATION AND APPROVAL OF SPACE PLAN. Lessee shall submit to
the Designer all additional information including occupancy requirements for the
Premises ("INFORMATION") necessary to enable the Designer to prepare a space
plan showing all demising walls, corridors, entrances, exits, doors, interior
partitions, and the locations of all offices, conference rooms, computer rooms,
mini-service kitchens, and the reception area, and other requirements of Lessee
("SPACE PLAN"). Once completed the Space Plan shall be attached hereto as
Schedule 1.
Lessor shall cause the Designer to submit to Lessee and Lessor
the Space Plan with sufficient time to ensure that Lessor can complete its
review and Lessee and Lessor can finally approve the Space Plan no later than
April 1, 2001.
(d) INTEGRATION OF FINAL PLANS AND CONSTRUCTION OF TENANT
IMPROVEMENTS. Lessor shall integrate the Space Plan and any working drawings or
engineering drawings that may be required in order to construct the Tenant
Improvements as shown on the approved Space Plan into the plans, specifications
and drawing for the Base Building Improvements, which integrated drawings
("FINAL PLANS") shall be thereafter delivered by Lessor to Lessee no later than
September 1, 2001. Lessee and Lessor shall approve the Final Plans within five
(5) business days after receipt of same.
(e) BIDDING. As soon as practical following receipt of all necessary
permits and approvals, Lessor shall put the Final Plans out to bid to multiple
licensed and insured subcontractors. Lessee may submit subcontractors to Lessor
for Lessor's review and Lessee shall have the right to review all bids. Lessor,
with Lessee's approval, shall select which subcontractors will perform the
Tenant Improvements each party acting reasonably, taking into account issues of
cost, quality of work and scheduling of labor.
(f) NOTICE OF SUBSTANTIAL COMPLETION. Lessor shall deliver to Lessee
two (2) week's prior written notice stating the date that the Premises are
expected to be Substantially Complete, or would be Substantially Complete were
it not for any Lessee Delay.
4. CHANGE ORDERS. In the event that Lessee requests any changes to the
Final Plans after such plans have been approved by Lessee and Lessor, Lessor
shall not unreasonably withhold its consent to any such changes, and shall grant
its consent to such changes within three (3) business days after Lessor's
receipt of same, provided the changes do not adversely affect the Building's
structure, systems, equipment or appearance. Any changes to the Final Plans by
Lessor shall require prior written consent of Lessee, which consent shall not
4
<PAGE> 30
be unreasonably withheld or delayed. If any changes requested by Lessee and
approved by Lessor increase the cost to Lessor of constructing the Tenant
Improvements shown on the Final Plans, Lessor shall provide Lessee invoices
documenting and evidencing such increased costs, and Lessee shall reimburse
Lessor for such increased costs as provided in Section 8. The costs charged by
Lessor to Lessee pursuant to this Section shall be an amount equal to the actual
costs incurred by Lessor to review the requested changes and to cause the Tenant
Improvements, as reflected by revised Final Plans, to be constructed above the
costs that Lessor would have had to pay to cause the Tenant Improvements to be
constructed if such changes had not been made. Subject to Section 2(a)(ii)
above, if such changes requested by Lessee delay Lessor's completion of the work
shown on the Final Plans, then such delay shall constitute a Lessee Delay.
5. TENANT IMPROVEMENTS. The term "TENANT IMPROVEMENTS" shall mean all
improvements shown in the Final Plans other than the Base Building Improvements.
Tenant Improvements shall not include any personal property of Lessee.
6. TENANT IMPROVEMENT ALLOWANCE AMOUNT. Landlord will pay on behalf of
Tenant an amount equal to Twenty Dollars ($20.00) per rentable square foot of
the Premises, for an approximate total of One Million Six Hundred Eighty
Thousand and No/100ths Dollars ($1,680,000.00) ("TENANT IMPROVEMENT ALLOWANCE")
over and above the items included in the Base Building Improvements, as set
forth in the Base Building Plans, for the costs of the design and construction
of the Tenant Improvements. The Tenant Improvement Allowance shall be used to
pay for Tenant Improvement Costs (as defined in Section 7 below) and shall be
disbursed by Landlord to the contractor engaged to construct the Tenant
Improvements.
7. TENANT IMPROVEMENT COSTS. The Tenant Improvements' Cost ("TENANT
IMPROVEMENT COSTS") shall mean and include any and all costs and expenses of
construction the Tenant Improvements, including, without limitation, all of the
following:
(a) All costs of preliminary space planning and final architectural
and engineering plans and specifications for the Tenant Improvements, and
architectural fees, engineering costs and fees, and other costs associated with
completion of the Space Plan;
(b) All costs of obtaining building permits and other necessary
authorizations and approvals from the City of San Jose and other applicable
jurisdictions for the Tenant Improvements, but not for the Base Building
Improvements;
(c) All costs of interior design and finish schedule plans and
specifications including as-built drawings for Tenant Improvements;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit (not to exceed ten percent
(10%) of the cost of the work), the cost of all on-site supervisory and
administrative staff, office, equipment and temporary services rendered by
Lessor's consultants and the General Contractor in connection with construction
of the Tenant Improvements, and all labor (including overtime) and materials.
5
<PAGE> 31
(e) All fees payable to the General Contractor, architect and
Lessor's engineering firm if they are required by Lessee to redesign any portion
of the Tenant Improvements due to requests therefor by Lessee or for other
reasons other than a request therefor by Lessor following Lessee's approval of
the Final Plans.
8. EXCESS TENANT IMPROVEMENT COSTS. Prior to commencing the Tenant
Improvements, Lessor shall submit to Lessee a written statement of the actual
Tenant Improvement Costs (the "Actual TI Costs") (which shall include the amount
of any overtime projected as necessary to Substantially Complete the Tenant
Improvements by the Completion Date if the necessity of using such overtime to
meet the Scheduled Completion date was made necessary by a Lessee Delay) as then
known by Lessor, and such statement shall indicate the amount, if any, by which
the Actual TI Costs exceeds the Tenant Improvement Allowance (including the
additional allowance amortized as provided for in Section 7 of the Lease) (the
"EXCESS TENANT IMPROVEMENT COSTS"). The term "EXCESS TENANT IMPROVEMENT COSTS"
shall also include the costs related to any and all Change Orders required by
Lessee's requesting a change in the Final Plans following Final Approval. Lessee
agrees, within five (5) business days after submission to it of such statement,
to execute and deliver to Lessor, in the form then in use by Lessor or Lessor's
contractor, an authorization to proceed with the Tenant Improvements. No Tenant
Improvements shall be commenced until Tenant has fully complied with the
preceding provisions of this Section 8. In no event shall Lessee be required to
pay any Excess Tenant Improvement Costs in excess of ten percent (10%) of those
shown in such statement without the prior written consent of Lessee, unless due
to changes requested by Lessee.
(a) PAYMENT OF EXCESS TENANT IMPROVEMENTS COSTS. Immediately prior to
commencement of construction of Tenant Improvements, Lessee shall deposit into
an escrow account at MidPeninsula Bank the Excess Tenant Improvement Costs.
Lessor shall submit to Lessee, on a monthly basis, progress payment bills for
Excess Tenant Improvement Costs. Said progress payments will be drawn from the
escrow account on the 10th of each following month on a dollar-per-dollar basis
such that the progress payments are paid 50% with the amounts deposited by
Lessee and 50% at Lessor's expense, until the Tenant Improvement Allowance is
fully depleted, with the final payment to be made upon Lessee taking occupancy
of the Premises. If Tenant fails to release the sums so demanded by Lessor
pursuant to this Section 8 within the time periods required, Lessor may, at its
option, declare Lessee in default under the Lease.
9. INSPECTION. After Lessor has completed the construction of the Tenant
Improvements (excepting punch list items) and again thirty (30) days after the
Premises are Substantially Complete ("SECOND TIME"), in each case following two
(2) business days' advance written notice from Lessee to Lessor, Lessor shall
cause the Contractor to inspect the Premises with a representative of Lessee and
complete a punch list of unfinished items of the Tenant Improvements. Authorized
representatives for Lessor and Lessee shall execute said punch list to indicate
their approval thereof. The items listed on such punch list shall be completed
by the Contractor within thirty (30) days after the approval of such punch list
or as soon thereafter as reasonably practicable.
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<PAGE> 32
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
LESSOR: LESSEE:
WTA Piercy LLC, Packeteer, Inc.
a California limited liability company a Delaware corporation
By: /s/ HOWARD J. WHITE, III By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------ ------------------------------
Howard J. White, III
Managing Member
/s/ [SIGNATURE ILLEGIBLE]
------------------------------
Secretary and CFO
10/31/00
7