California-San Francisco-345 Spear Street Lease - SRI Hills Plaza Venture LLC and Sharper Image Corp.
HILLS PLAZA PHASE I
OFFICE LEASE
SRI HILLS PLAZA VENTURE, LLC, a Delaware limited liability company, Landlord
and
SHARPER IMAGE CORPORATION, a Delaware corporation, Tenant
DATED AS OF: May 10, 2004
TABLE OF CONTENTS
Paragraph Page
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1. Premises 1
2. Certain Basic Lease Terms 1
3. Term; Delivery of Possession of Premises 2
4. Premises "As Is"; Initial Alterations;
Landlord's Allowance; Landlord's Work 3
5. Monthly Rent 6
6. Deleted 7
7. Additional Rent: Increases in Operating
Expenses and Tax Expenses 7
8 Use of Premises; Compliance with Law 11
9. Alterations and Restoration 15
10. Repair 16
11. Abandonment 17
12. Liens 17
13. Assignment and Subletting 17
14. Indemnification of Landlord 21
15. Insurance 22
16. Mutual Waiver of Subrogation Rights 23
17. Utilities 24
18. Personal Property and Other Taxes 26
19. Rules and Regulations 26
20. Surrender; Holding Over 26
21. Subordination and Attornment 27
22. Financing Condition 28
23. Entry by Landlord 28
24. Insolvency or Bankruptcy 29
25. Default and Remedies 29
26. Damage or Destruction 31
27. Eminent Domain 33
28. Landlord's Liability; Sale of Building 33
29. Estoppel Certificates 34
30. Right of Landlord to Perform 34
31. Late Charge 35
32. Attorneys' Fees; Waiver of Jury Trial 35
33 Waiver 35
34. Notices 36
35. Deleted 36
36. Defined Terms and Marginal Headings 36
37. Time and Applicable Law 36
38. Successors 36
39. Entire Agreement; Modifications 36
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40. Light and Air 37
41. Name of Building 37
42. Severability 37
43. Authority 37
44. No Offer 37
45. Real Estate Brokers 37
46 Consents and Approvals 37
47. Reserved Rights 38
48. Financial Statements 38
49. Deleted 38
50. Nondisclosure of Lease Terms 38
51. Hazardous Substance Disclosure 38
52. Options to Renew 39
53. Building Signage
54. Right of First Offer 40
55. Parking 41
EXHIBITS:
A - Outline of Premises
B - Rules and Regulations
C - Form of Commencement Date Letter
D - Appraisal Procedure
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LEASE
THIS LEASE is made as of the 10th day of May, 2004, between SRI HILLS
PLAZA VENTURE, LLC, a Delaware limited liability company ("Landlord"), and
SHARPER IMAGE CORPORATION, a Delaware corporation ("Tenant").
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, on the terms and conditions set forth herein, the space outlined
on the attached Exhibit A (the "Premises"; the Premises are comprised of the
"Office Premises" and the "Retail Premises", as defined in Paragraph 2.a.
below). The Premises are located on the floor(s) specified in Paragraph 2 below
of the building (the "Building") presently known as Hills Plaza Phase I, located
at 345 Spear Street, San Francisco, California. The Building is part of a
combined office, retail and residential condominium project (the "Project")
located on the entire block of Spear Street between Harrison Street and Folsom
Street, in San Francisco, California. The Building, the parcel(s) of land (the
"Land") on which the Building is located and any other improvements on the Land,
the common areas of the Project and the underground garage for the Project are
referred to herein as the "Real Property."
Tenant's lease of the Premises shall include the right to use, in
common with others and subject to the other provisions of this lease, the public
lobbies, entrances, stairs, elevators and other common areas of the Building.
All of the windows and outside walls of the Premises and any space in the
Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment
or other utilities or Building facilities are reserved solely to Landlord
(subject to Tenant's use of the same as expressly approved by Landlord in
writing as part of approved Initial Alterations (as defined in Paragraph 4a
below) or other Alterations (as defined in Paragraph 9 below)), and Landlord
shall have rights of access through the Premises in accordance with Paragraph 23
below for the purpose of operating, maintaining and repairing the same.
2. Certain Basic Lease Terms. As used herein, the following terms shall
have the meaning specified below:
a. Floor(s) on which the Premises are located: (i) all of the
rentable area on the sixth (6th) floor of the Building (the
"Office Premises") and (ii) certain ground floor space located
along the Building's frontage at the corner of Folsom and
Spear Streets (the "Retail Premises"). The Office Premises are
currently designated as Suite 600, and the Retail Premises are
currently designated as Suite 118. Landlord and Tenant agree
that for the purpose of this Lease, the Office Premises shall
be deemed to contain 63,970 rentable square feet of space, and
the Retail Premises shall be deemed to contain 3,094 rentable
square feet of space. Each of the Office Premises and the
Retail Premises is referred to in this Lease as an
"Increment".
b. Lease term: Approximately ten (10) years and seven (7) months,
commencing on the date Landlord delivers possession of the
Premises to Tenant in the condition required by Paragraph 4
below (the "Commencement Date"), and ending on the last day of
the one hundred twentieth (120th) full calendar month
following the Office Premises Rent Commencement Date (as
defined below) (the "Expiration Date" The scheduled
Commencement Date is July 1, 2005 (the "Scheduled Commencement
Date"). Upon either party's request after the Office Premises
Rent Commencement Date and the Retail Premises Rent
Commencement Date (as defined below), Landlord and Tenant
shall execute a letter in the form of Exhibit C attached
hereto confirming such dates, the Commencement date, and the
Expiration Date.
c. Monthly Rent: Office
Premises:
Lease Years 1 through 10 $170,586.67
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Retail Premises: The respective sums set forth as follows:
Period Monthly Rent
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Retail Premises Rent
Commencement Date
through Lease Year 3 $2,578.33
Lease Years 4 through 6 $3,094.00
Lease Years 7 through 10 $3,609.67
Lease Year 1 shall commence on the Office Premises Rent
Commencement Date and shall end on the last day of the twelfth
(1 ) full calendar month thereafter, and each subsequent Lease
Year shall be the twelve (12) full calendar month period
commencing on the day after the expiration of the prior Lease
Year, except that the last Lease Year hereunder shall in any
event end on the Expiration Date. The "Office Premises Rent
Commencement Date" shall be the earlier to occur of (i) one
hundred eighty (180) days after the Commencement Date with
respect to the Office Premises, or (ii) the date Tenant shall
commence the conduct of business in the Office Premises or any
portion thereof, but in no event shall the Office Premises
Rent Commencement Date be prior to February 1, 2006. In the
event that Tenant shall occupy the Office Premises or any
portion thereof for the conduct of business prior to February
1, 2006, then during such prior period Tenant shall pay, on a
monthly basis in advance, Tenant's Office Share (as defined in
Paragraph 2.e. below) of Operating Expenses and Tax Expenses
(as defined in Paragraph 7 below) allocable to such prior
period. The "Retail Premises Rent Commencement Date" shall be
the earlier to occur of (i) the later of (A) one hundred
eighty (180) days after the Commencement Date with respect to
the Retail Premises, or (B) February 1, 2006, or (ii) the date
Tenant shall commence the conduct of business in the Retail
Premises or any portion thereof.
d. Security Deposit: None.
e. Tenant's Office Share: 17.3 9%.
Tenant's Retail Share: 9.87%.
Tenant's Office Tax Share: 16.03%.
Tenant's Retail Tax Share: 0.77%.
f. Base Year: The calendar year 2006.
Base Tax Year: The calendar year 2006.
g. Business of Tenant: Retail specialty products.
h. Real estate broker(s); Shorenstein Management, Inc., and
McLellan Commercial Real Estate, Inc.
3. Term: Delivery of Possession of Premises.
a. The term of this Lease shall commence on the Commencement Date
(as defined in Paragraph 2.b.) and, unless sooner terminated or extended
pursuant to the terms hereof or at law, shall expire on the Expiration Date (as
defined in Paragraph 2.b.).
b. Landlord shall use commercially reasonable efforts (which
shall in no event require litigation or other legal proceedings except as
expressly set forth in clause (iv) of the next paragraph) to deliver possession
of the Premises to Tenant on or before the Scheduled Commencement Date. Landlord
acknowledges that "delivery of the Premises" (or the Retail Premises or the
Office Premises, as the case may be), or "delivery of possession of the
Premises" (or the Retail Premises or the Office Premises, as the case may be),
means delivery free and clear of all tenants and other occupants. If Landlord,
for any reason whatsoever, cannot deliver possession of the Premises to Tenant
on or before the Scheduled Commencement Date, except as provided below in this
Paragraph 3.b., this Lease shall not be void or voidable, nor shall Landlord be
liable to Tenant for any loss or damage resulting therefrom, but the
Commencement Date shall be delayed until the date Landlord delivers possession
of the Premises to Tenant in the condition required by this Lease. No delay in
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delivery of possession of the Premises shall operate to extend the term of this
Lease or amend Tenant's obligations under this Lease.
Notwithstanding the foregoing or Paragraph 2.b. or 3.a. above, (i) if
Landlord is unable to deliver possession of the Retail Premises to Tenant on the
same date as the Office Premises, then Landlord may deliver the Retail Premises
to Tenant after (but not before) delivery of the Office Premises, and in such
event the Commencement Date hereunder shall be the dare Landlord delivers the
Office Premises to Tenant in the condition required by Paragraph 4 below, but
notwithstanding that the Commencement Date shall have so occurred, the term of
this Lease shall not commence hereunder as respects the Retail Premises until
the date that Landlord delivers the Retail Premises to Tenant in the condition
required by Paragraph 4 below, (ii) if the Commencement Date with respect to the
Retail Premises does nor occur on or before May 1. 2006, as such date shall be
extended for delays in Retail Premises Commencement Date caused by Force Majeure
(as defined below) (such date, as so extended, the "Retail Trigger Date"), then
Tenant may terminate this Lease as respects the Retail Premises upon written
notice to Landlord given within ten (10) days after the Trigger date, and this
Lease shall terminate as respects the Retail Premises as of the date Landlord
receives such termination notice, (iii) if the Commencement Date with respect to
the Office Premises does not occur on or before July 1, 2006, as such date shall
be extended for delays in Office Premises Commencement Date caused by Force
Majeure (such date, as so extended, the "Office Trigger Date"), then Tenant may
terminate this Lease as respects the Office Premises upon written notice to
Landlord given within ten (10) days after the Office Trigger Date, and this
Lease shall terminate as respects the Office Premises as of the date Landlord
receives such termination notice, (iv) if Landlord is unable to deliver
possession of the Office Premises to Tenant by August 1, 2005 because the then
tenant of the Office Premises shall hold over therein, Landlord shall promptly
commence and diligently pursue such legal proceedings as shall be commercially
reasonable and permitted by applicable law in order to obtain possession of the
Office Premises and deliver the same to Tenant, and (v) if Landlord is unable to
deliver possession of the Office Premises to Tenant by November 1, 2005 because
the then tenant of the Office Premises shall hold over therein, then for each
two (2) days of additional delay in delivery of the Office Premises to Tenant
beyond November 1, 2005 that is caused by such tenant holdover, the Monthly Rent
first payable by Tenant for the Office Premises shall be abated one (1) day;
provided, however, that in no event shall the total number of days of so abated
Monthly Rent exceed the number of days from February 1, 2006 to the date that
Tenant shall commence the conduct of business in the Office Premises or any
portion thereof. Landlord and Tenant acknowledge that the provisions of clauses
(iv) and (v) above only apply to delays in delivery to the extent caused by
tenant holdover, and such clauses shall not apply to delivery delays to the
extent caused by Force Majeure.
Provided that Landlord shall have used commercially reasonable efforts
as aforesaid to deliver possession of the Premises to Tenant on or before the
Scheduled Commencement Date, the termination and abatement provisions set forth
above in this Paragraph 3.b. shall be Tenant's sole remedies for delays in the
Office Premises Commencement Date and/or the Retail Premises Commencement Dates,
but in no event shall the foregoing proviso be deemed to imply that the
limitations on Landlord's liability set forth in Paragraph 28 of this Lease are
not applicable, and the parties expressly confirm that such limitations on
Landlord's liability apply to Landlord's failure to timely deliver possession of
the Premises to Tenant for any reason.
"Force Majeure" shall mean strikes, lock-outs, labor disputes,
shortages of material or labor, fire, earthquake, flood or other casualty, war,
terror, riot, insurrection, acts of God, or any other cause (other than
financial inability) beyond the reasonable control of Landlord, except that for
purposes of this Paragraph 3.b. only, "Force Majeure" shall not include tenant
holdover.
4. Premises "As Is"; Initial Alterations: Landlord's Allowance:
Landlord's Work
a. Premises As Is. Tenant shall accept possession of the Premises in
their "as is" state and condition and, except for Landlord's Allowance and
Landlord's Work described in Paragraph 4.b. below, Landlord shall have no
obligation to make or pay for any alterations, improvements or renovations in or
to the Premises or to otherwise prepare the Premises for Tenant's occupancy, but
the foregoing shall not diminish Landlord's ongoing repair and maintenance
obligations pursuant to the provisions of this Lease, The parties acknowledge
that Tenant intends to make certain alterations and improvements (the "Initial
Alterations") to the Premises after the Commencement Date. The construction of
the Initial Alterations shall be subject to Landlord's approval in accordance
with Paragraph 9 hereof and otherwise governed by Paragraph 9 hereof. The
general contractor selected by Tenant in accordance with Paragraph 9 hereof to
construct the Initial Alterations is referred to hereinafter as `Contractor.'
b. Landlord's Allowance. Landlord shall contribute toward the cost
of the design, construction and installation of the Initial Alterations
(including, without limitation, Contractor's fee and the Alteration Operations
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Fee provided for in Paragraph 9 below) an aggregate amount ("Landlord's
Allowance") as follows: (I) with respect to the Initial Alterations in the
Office Premises, an aggregate amount not to exceed One Million Nine Hundred
Nineteen Thousand One Hundred Dollars ($1,919,100.00) (which equals $30.00 per
rentable square foot of the Office Premises); provided however, that a portion
of Landlord's Allowance, not to exceed, in the aggregate, Two Hundred
Twenty-Three Thousand Eight Hundred Ninety-Five Dollars ($223,895.00) (which
equals $3.50 per rentable square foot of the Office Premises), may be applied to
Tenant's space planning, architectural, engineering and other consultants' costs
for the design of the Initial Alterations in the Office Premises; and provided,
further, however, that a portion of Landlord's Allowance, not to exceed, in the
aggregate, Six Hundred Thirty-Nine Thousand Seven Hundred Dollars ($639,700.00)
(which equals $10.00 per rentable square foot of the Office Premises), may be
applied to Tenant's costs of personal property, equipment, trade fixtures,
furniture (including work stations and modular office furniture, regardless of
the method of attachment to walls and/or floors), voice, data or other cabling,
and signage, all to the extent located within the Office Premises, and expenses
of moving into the Office Premises; and (ii) with respect to the Initial
Alterations in the Retail Premises, an aggregate amount not to exceed Sixty-One
Thousand Eight Hundred Eighty Dollars ($61,880.00) (which equals $20.00 per
rentable square foot of the Retail Premises); provided, however, that a portion
of Landlord's Allowance, not to exceed, in the aggregate, Six Thousand One
Hundred Eighty-Eight Dollars ($6,188.00) (which equals $2.00 per rentable square
foot of the Retail Premises), may be applied to Tenant's space planning,
architectural, engineering and other consultants' costs for the design of the
Initial Alterations in the Retail Premises; and provided, further, however, no
portion of Landlord's Allowance with respect to the Retail Premises may be
applied to Tenant's costs of personal property, equipment, trade fixtures,
furniture (including work stations and modular office furniture, regardless of
the method of attachment to walls and/or floors) signage, or moving expenses
with respect to the Retail Premises or the Monthly Rent, Additional Rent or
other charges payable pursuant to this Lease. Notwithstanding anything to the
contrary in this Paragraph 4.b., Landlord's Allowance shall be available for
disbursement pursuant to the terms hereof only for the first eighteen (18)
months after the Office Premises Rent Commencement Date. Accordingly, if any
portion of Landlord's Allowance is not utilized prior to the date that is
eighteen (18) months from the Office Premises Rent Commencement Date, such
unused portion shall be forfeited by Tenant.
If the cost of construction of the Initial Alterations (including
the Alteration Operations Fee) exceeds the funds available therefor from
Landlord's Allowance, then Tenant shall pay all such excess (the "Excess Cost").
Based on the estimated cost (the "Estimated Costs") of the construction of the
Initial Alterations, the prorata share of the Estimated Costs payable by
Landlord and Tenant shall be reasonably determined and an appropriate percentage
share established for each (a "Share of Costs"). Tenant and Landlord shall fund
the cost of such work as the same is performed, in accordance with their
respective Share of Costs for such work. At such time as Landlord's Allowance
has been entirely disbursed, Tenant shall pay the remaining Excess Cost, if any,
which payments shall be made in installments as construction progresses in the
same manner as Tenant's payments of Tenant's Share of Costs were paid.
Landlord shall disburse the Landlord's Allowance directly to
Contractor, and/or to the applicable subcontractors, and/or to Tenant, as Tenant
shall request, within thirty (30) days after Landlord's receipt of (A) invoices
of Contractor furnished to Landlord by Tenant covering work actually performed,
construction in place and materials delivered to the site (as may be applicable)
describing in reasonable detail such work, construction and/or materials, (B)
conditional lien waivers executed by Contractor, subcontractors or suppliers, as
applicable, for their portion of the work covered by the requested disbursement,
and (C) unconditional lien waivers executed by Contractor and the persons and
entities performing the work or supplying the materials covered by Landlord's
previous disbursements for the work or materials covered by such previous
disbursements (all such waivers to be in the forms prescribed by California
Civil Code Section 3262). No payment will be made for materials or supplies not
incorporated into the construction, regardless of whether the materials or
supplies are located on the Premises. Landlord may withhold the amount of any
and all retentions provided for in original contracts or subcontracts until
expiration of the applicable lien periods or Landlord's receipt of unconditional
lien waivers and full releases upon final payment (in the form prescribed by
California Civil Code Section 3262) from Tenant's Contractor and all
subcontractors and suppliers involved in the Initial Alterations.
Notwithstanding anything to the contrary contained herein, in no event shall
Landlord be obligated to disburse any portion of Landlord's Allowance (i) during
any period that Tenant is in breach of or in default under this Lease, provided
that Landlord shall give Tenant notice that Landlord is withholding such
disbursement by reason of such breach or default (but the foregoing shall not
relieve Landlord from its obligation to make such disbursement promptly after
such breach or default shall be cured within any applicable cure period under
this Lease), or (ii) for any Initial Alterations (or other permitted associated
costs) in space Tenant intends to sublease prior to Tenant's initial occupancy
of such space for the conduct of Tenant's business.
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At the time Landlord makes any disbursement of Landlord's Allowance,
Landlord shall retain from Landlord's Allowance, as a partial payment of the
Alteration Operations Fee, a proportionate amount of the Alteration Operations
Fee based upon Landlord's reasonable estimation of the amount required to be
withheld from each disbursement in order to ensure that the entire Alteration
Operations Fee is retained over the course of construction on a prorata basis.
At such time as Landlord's Allowance has been entirely disbursed, Tenant shall,
within thirty (30) days of written demand, pay to Landlord the remainder, if
any, of the Alteration Operations Fee theretofore due and not yet paid to
Landlord. Upon completion of the Initial Alterations, Tenant shall furnish
Landlord with invoices and other documentation reasonably required by Landlord
to evidence the total cost of the Initial Alterations, so that the final amount
of the Alteration Operations Fee may be calculated, and Tenant shall, within
thirty (30) days of written demand, pay to Landlord the remainder, if any, of
the Initial Alteration Operations Fee not yet paid to Landlord.
If Landlord fails to timely disburse any portion of Landlord's
Allowance as required under this Paragraph 4, and such failure continues for ten
(10) days after Landlord's receipt of Tenant's written notice thereof describing
in reasonable detail the amounts Tenant claims were not so disbursed and the
party entitled to such disbursement, then interest shall accrue on the overdue
amount at the Interest Rate (as defined in Paragraph 5.c. below), from the
expiration of such ten (1O) day period until the date such disbursement is made
by Landlord, and such interest shall be payable to Tenant within thirty (30)
days after Tenant's demand.
Notwithstanding the provisions of Paragraph 9a below, the Alteration
Operations Fee payable to Landlord with respect to the Initial Alterations shall
be Sixty Seven Thousand Sixty-Four Dollars ($67,064.00) (which equals $1.00 per
rentable square foot of the Premises).
c. Landlord's Work. Landlord shall, at Landlord's sole cost and
expense, perform the following work with respect to the Office Premises:
(i) Perform all work necessary (if any) within the finished walls of
the two existing sets of core area restrooms on the sixth (6th) floor of the
Building to cause such restrooms to comply with Title 24 and Americans With
Disabilities Act ("ADA") requirements regarding handicap access and use (using
Building standard plans and finishes), to the extent such work is required under
laws and codes that are applicable as of the Commencement Date; and
(ii) Perform all work necessary (if any) to cause the common areas
of the Building that are reasonably anticipated to be in Tenant's path of travel
to the Office Premises to comply with Title 24 and ADA requirements regarding
handicap access and use (using Building standard plans and finishes), to the
extent such work is required under laws and codes that are applicable as of the
Commencement Data.
In no event shall Landlord's Work include any work required by reason
of or triggered by (v) any of the Initial Alterations to the Office Premises
that are not normal and customary general office improvements, (w) any of the
Initial Alterations to the Retail Premises that are not normal and customary
general retail improvements, (x) any Alterations of Tenant not included within
the Initial Alterations, (y) Tenant's particular use of the Office Premises (as
opposed to Tenant's use of the Office Premises for general office purposes in a
normal and customary manner), or Tenant's particular use of the Retail Premises
(as opposed to Tenant's use of the Retail Premises for general retail purposes
in a normal and customary manner), or (z) Tenant's particular employees or
employment practices, and Tenant shall be responsible for performing and paying
for any work so required or triggered. Landlord's Work may be performed prior to
or during construction of the Initial Alterations, as Landlord shall elect, but
Landlord's Work shall in any event be completed, subject only to the correction
or completion of Punch List Items, prior to the date ("Landlord's Work Required
Substantial Completion Date") that is one hundred eighty (180) days after the
Office Premises Commencement Date; provided, however, that in no event shall
Landlord be liable for any delay in substantial completion of Landlord's Work
caused by Force Majeure, or caused by any interference by Tenant or its
contractors in the performance of Landlord's Work (including any failure by
Tenant or its contractors to cooperate with the construction of Landlord's Work
as set forth below), and Landlord's Work Required Substantial Completion Date
shall be deemed extended by the number of days of any such delay in substantial
completion of Landlord's Work so caused. Paragraph 5.e. below contains certain
provisions for the postponement of the Office Premises Rent Commencement Date as
Tenant's sole and exclusive remedy for any delay in substantial completion of
Landlord's Work. As used herein, "Punch List Items" means shall mean incomplete
or defective work or materials with respect to Landlord's Work which do not
materially impair Tenant's use of the Premises for the conduct of Tenant's
business therein. Landlord shall correct or complete Punch List Items with due
diligence following notice thereof from Tenant, provided that Tenant gives
Landlord notice of such Punch List Items within thirty (30) days after the
Commencement Date. If any Punch List Item is of a nature which would not
normally be discoverable by Tenant in the exercise of reasonable diligence in
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inspecting the Premises at the time Tenant commences the conduct of business in
the Premises or any portion thereof, Landlord shall correct or complete such
Punch List Item with due diligence following notice thereof from Tenant,
provided that Tenant gives prompt notice of such matter to Landlord and in any
event within one-hundred eighty (180) days after the date Tenant commences the
conduct of business in the Premises or any portion thereof (or such longer
period, if any, not to exceed one (1) year, as to which the repair would be
covered by Landlord's contractor's warranties with respect to the applicable
Landlord's work). In any event, Tenant's commencement of the conduct of business
from the Premises or any portion thereof shall conclusively establish that
Landlord has substantially completed Landlord's Work. To the extent Landlord's
Work is performed during the period of construction of the Initial Alterations,
Tenant shall cause Contractor to cooperate with Landlord's contractor in the
coordination of the construction of Landlord's Work and the construction of the
Initial Alterations.
5. Monthly Rent.
a. Commencing as of the Office Premises Rent Commencement Date (as
to the Office Premises), and as of the Retail Premises Rent Commencement Date
(as to the Retail Premises), and continuing thereafter on or before the first
day of each calendar month during the term hereof, Tenant shall pay to Landlord,
as monthly rent for the Premises, the respective Monthly Rent amounts specified
in Paragraph 2 above. If Tenant's obligation to pay Monthly Rent hereunder for
either Increment commences on a day other than the first day of a calendar
month, or if the term of this Lease terminates on a day other than the last day
of a calendar month, then the Monthly Rent payable for such partial month shall
be appropriately prorated on the basis of a thirty (30)-day month. Monthly Rent
and the Additional Rent specified in Paragraph 7 shall be paid by Tenant to
Landlord, in advance, without deduction, offset, or, except as expressly
provided in this Lease, prior notice or demand, in immediately available funds
of lawful money of the United States of America, or by good check as described
below, to the lockbox location designated by Landlord, or to such other person
or at such other place as Landlord may from time to time designate in writing.
Payments made by check must be drawn either on a California financial
institution or on a financial institution that is a member of the federal
reserve system. Notwithstanding the foregoing, within five (5) Business Days
after the mutual execution and delivery of this Lease, Tenant shall pay to
Landlord an amount equal to the Monthly Rent payable for the first full calendar
month of the Lease term after Tenant's obligation to pay Monthly Rent for the
entire Premises shall have commenced hereunder, which amount shall be applied to
the Monthly Rent first due and payable hereunder.
b. All amounts payable by Tenant to Landlord under this Lease, or
otherwise payable in connection with Tenant's occupancy of the Premises, in
addition to the Monthly Rent hereunder and Additional Rent under Paragraph 7,
shall constitute rent owed by Tenant to Landlord hereunder.
c. Any rent not paid by Tenant to Landlord when due shall bear
interest from the date due to the date of payment by Tenant at an annual rate of
interest (the "Interest Rate") equal to the lesser of (i) eighteen percent (18%)
per annum or (ii) the maximum annual interest rate allowed by law on such due
date for business loans (not primarily for personal, family or household
purposes) not exempt from the usury law. Notwithstanding the foregoing, Landlord
shall give Tenant notice of non-payment of rent when due and five (5) Business
Days after delivery of such notice to cure such non-payment once in each
calendar year (other than the calendar year of the Office Premises Rent
Commencement Date, during which such notice shall be give twice) before
assessing interest in such calendar year pursuant to this Paragraph 5.c. Failure
by Tenant to pay rent when due, including any interest accrued under this
subparagraph, shall, after the expiration of any applicable notice and cure
period pursuant to Paragraph 25 below, constitute an Event of Default (as
defined in Paragraph 25 below) giving rise to all the remedies afforded Landlord
under this Lease and at law for nonpayment of rent.
d. No security or guaranty which may now or hereafter be furnished
to Landlord for the payment of rent due hereunder or for the performance by
Tenant of the other terms of this Lease shall in any way be a bar or defense to
any of Landlord's remedies under this Lease or at law.
e. Notwithstanding the foregoing or anything to the contrary
contained in Paragraph 2.c. above, in the event that Landlord fails to
substantially complete Landlord's Work on or prior to Landlord's Work Required
Substantial Completion Date, to the extent such failure causes Substantial
Completion of the Initial Alterations with respect to the Office Premises (the
"Office Premises Initial Alterations") to be delayed beyond Landlord's Work
Substantial Completion Date, the Office Premises Rent Commencement Date shall be
delayed by the number of days of such delay so caused (which shall not in any
event exceed the number of days after Landlord's Work Required Substantial
Completion Date to and including the actual date Landlord substantially
completes Landlord's Work). "Substantial Completion" of the Office Premises
Initial Alterations shall be deemed to have occurred when they have been
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completed in accordance with plans and specifications applicable thereto,
subject only to the completion or correction of "Tenant's Punch List Items".
"Tenant's Punch List Items" shall mean incomplete or defective work or materials
with respect to the Office Premises Initial Alterations which do not materially
impair Tenant's use of the Office Premises for the conduct of Tenant's business
therein. Tenant's commencement of the conduct of business from the Office
Premises or any portion thereof shall conclusively establish for purposes of
this Paragraph 5.e. that the Office Premises Initial Alterations have been
Substantially Completed.
6. Deleted.
7. Additional Rent: Increases in Operating Expenses and Tax Expenses.
a. Operating Expenses. Commencing as of January 1, 2007, Tenant
shall pay to Landlord, at the times hereinafter set forth, Tenant's Office
Share, as specified in Paragraph 2.e. above, of any increase in the Operating
Expenses (as defined below) incurred by Landlord in each calendar year
subsequent to the Base Year specified in Paragraph 2.f. above, over the
Operating Expenses incurred by Landlord during the Base Year, in each case to
the extent the Operating Expenses are allocated by Landlord to office space in
the Building pursuant to the following paragraph. In addition, commencing as of
the Retail Premises Rent Commencement Date, Tenant shall pay to Landlord, at the
times hereinafter set forth, Tenant's Retail Share, as specified in Paragraph
2.e. above, of the Operating Expenses incurred by Landlord in each calendar year
(the amounts payable by Tenant pursuant to this sentence are termed "Tenant's
Retail Premises Additional Rent"), to the extent the Operating Expenses are
allocated by Landlord to retail space in the Building pursuant to the following
paragraph. The amounts payable under this Paragraph 7.a. and Paragraph 7.b.
below are termed "Additional Rent" herein.
The term "Operating Expenses" shall mean the total reasonable costs and
expenses incurred by Landlord in connection with the management, operation,
maintenance, repair and ownership of the Real Property, including, without
limitation, the following costs: (1) salaries, wages, bonuses and other
compensation (including hospitalization, medical, surgical, retirement plan,
pension plan, union dues, life insurance, including group life insurance,
welfare and other fringe benefits, and vacation, holidays and other paid absence
benefits) relating to employees of Landlord or its agents engaged in the
operation, repair, or maintenance of the Real Property; (2) payroll, social
security, workers' compensation, unemployment and similar taxes with respect to
such employees of Landlord or its agents, and the cost of providing disability
or other benefits imposed by law or otherwise, with respect to such employees;
(3) the cost of uniforms (including the cleaning, replacement and pressing
thereof) provided to such employees: (4) premiums and other charges incurred by
Landlord with respect to fire, other casualty, rent and liability insurance, any
other insurance as is deemed necessary or advisable in the reasonable judgment
of Landlord, or any insurance required by the holder of any Superior Interest
(as defined in Paragraph 21 below), and, after the Base Year, costs of repairing
an insured casualty to the extent of the deductible amount under the applicable
insurance policy, except to the extent that the deductible amount materially
exceeds that which prudent, efficient operators of first-class office buildings
in the San Francisco financial district would carry from time-to-time in the
exercise of reasonable business judgment; (5) water charges and sewer rents or
fees; (6) license, permit and inspection fees; (7) sales, use and excise taxes
on goods and services purchased by Landlord in connection with the operation,
maintenance or repair of the Real Property and Building systems and equipment;
(8) telephone, telegraph, postage, stationery supplies and other expenses
incurred in connection with the operation, maintenance, or repair of the Real
Property; (9) management fees and expenses; (10) costs of repairs to and
maintenance of the Real Property, including building systems and appurtenances
thereto and normal repair and replacement of worn-out equipment, facilities and
installations, but excluding the replacement of major building systems (except
to the extent provided in (16) and (17) below); (11) fees and expenses for
janitorial, window cleaning, guard, extermination, water treatment, rubbish
removal, plumbing and other services and inspection or service contracts for
elevator, electrical, mechanical, HVAC and other building equipment and systems
or as may otherwise be necessary or proper for the Operation, repair or
maintenance of the Real Property; (12) costs of supplies, tools, materials, and
equipment used in connection with the operation, maintenance or repair of the
Real Property; (13) accounting, legal and other professional fees and expenses;
(14) fees and expenses for painting the exterior or the public or common areas
of the Building and the cost of maintaining the sidewalks, landscaping and other
common areas of the Real Property; (15) costs and expenses for electricity,
chilled water, air conditioning, water for heating, gas, fuel, steam, heat,
lights, power and other energy related utilities required in connection with the
operation, maintenance and repair of the Real Property; (16) the cost of any
capital improvements made by Landlord to the Real Property or capital assets
acquired by Landlord after the Base Year in order to comply with any local,
state or federal law, ordinance, rule, regulation, code or order of any
governmental entity or insurance requirement (collectively, "Legal Requirement")
with which the Real Property was not required to comply during the Base Year, or
to comply with any amendment or other change to the enactment or interpretation
of any Legal Requirement from its enactment or interpretation during the Base
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Year; (17) the cost of any capital improvements made by Landlord to the Building
or capital assets acquired by Landlord after the Base Year for the protection of
the health and safety of the occupants of the Real Property or that are designed
to reduce other Operating Expenses; (18) the cost of furniture, draperies,
carpeting, landscaping and other customary and ordinary items of personal
property (excluding paintings, sculptures and other works of art) provided by
Landlord for use in common areas of the Building or the Real Property or in the
Building office (to the extent that such Building office is dedicated to the
operation and management of the Real Property); provided, however, that leasing
or rental costs of a rotating or other art program for the common areas of the
Building or the Real Property shall be included in Operating Expenses: (19) any
expenses and costs resulting from substitution of work, labor, material or
services in lieu of any of the above itemizations, or for any additional work,
labor, services or material resulting from compliance with any Legal Requirement
applicable to the Real Property or any parts thereof (20) Building office rent
or rental value; and (21) the Building's prorata share of the Project costs
under the Master Declaration (as described in Paragraph 21 below).
Notwithstanding anything to the contrary herein, as to the common areas of the
Project and the garage of the Project. Operating Expenses shall include only the
Building's prorata share (as reasonably determined by Landlord in its good faith
business judgment) of the above described costs and expenses for such common
areas and garage of the Project. Further, Landlord and Tenant acknowledge that
certain of the building systems serving the Building also serve the other office
building in the Project and that certain of the improvements, alterations or
repairs made by Landlord to the Building or the Land that are properly included
in Operating Expenses pursuant to the above may be a part of improvements,
alterations or repairs that also benefit the other office building in the
Project. In light of the foregoing, Landlord shall determine, in its reasonable
and good faith business judgment, the proper allocation of any such item of
Operating Expenses between the Building and any other building that benefits
from the Operating Expense so that Tenant shall be responsible only for
Operating Expenses to the extent they are attributable or allocable to the
Building and the Land. Landlord and Tenant also acknowledge that certain of the
items of Operating Expenses referenced above are allocable only to the office
space within the Building and certain of such items are allocable to both the
office space and the retail space in the Building. Landlord shall determine, in
its reasonable and good faith business judgment the proper allocation of any
such items to the office space and to the retail space, and Tenant's Office
Share shall be applied only with respect to those items so allocated to the
office space and Tenant's Retail Share shall be applied only with respect to
those items so allocated to the retail space. In the event that in accordance
with Paragraph 8a. above Tenant shall use the Retail Premises for general office
use rather than retail purposes, such change in use shall not in any manner
affect the Additional Rent payable by Tenant hereunder with respect to the
Retail Premises, and the Retail Premises shall continue to be treated as retail
space for purposes of allocating items of Operating Expenses thereto in
accordance with the preceding provisions and for all other purposes of
determining the Operating Expenses payable hereunder by Tenant with respect to
the Retail Premises. With respect to the costs of items included in Operating
Expenses under (16) and (17), and costs of any other repairs or improvements
that would properly be capitalized in accordance with generally accepted
property management practices and are included in Operating Expenses under any
of the other foregoing provisions, such costs shall be amortized over a
reasonable period, as determined by Landlord, together with interest on the
unamortized balance at a rate per annum equal to three (3) percentage points
over the six-month United States Treasury bill rate in effect at the time such
item is constructed or acquired, or at such higher rate as may have been paid by
Landlord on funds borrowed for the purpose of constructing or acquiring such
item, but in either case not more than the maximum rate permitted by law at the
time such item is constructed or acquired.
Notwithstanding the preceding paragraph or anything to the contrary
contained elsewhere in this Lease, Operating Expenses shall not include the
following: (i) depreciation on the Building or equipment or systems therein;
(ii) debt service; (iii) rental under any ground or underlying lease; (iv)
interest (except as expressly provided in this Paragraph 7.a.); (v) Tax Expenses
(as defined in Paragraph 7.b. below); (vi) attorneys' fees and expenses incurred
in connection with lease negotiations or disputes with Building tenants or
prospective Building tenants; (vii) the cost (including any amortization
thereof) of any improvements or alterations which would be properly classified
as capital expenditures according to generally accepted property management
practices (except to the extent expressly included in Operating Expenses
pursuant to this Paragraph 7a); (viii) the cost of decorating, improving for
tenant occupancy, painting or redecorating portions of the Building to be
demised to tenants; (ix) executive salaries; (x) advertising or promotional
expenditures; (xi) real estate broker's or other leasing commissions; (xii) the
costs of services made available at no special cost to any tenant in the
Building (including Excess Services (as defined in Paragraph 17 below)), but not
to Tenant; (xiii) subject to the provisions of item (4) of the preceding
paragraph, repairs and other work occasioned by fire, windstorm or other
casualty, to the extent Landlord is reimbursed by insurance proceeds (or would
have been reimbursed if Landlord had obtained the insurance required of it
pursuant to Paragraph 15.d. below), other repairs or work paid from insurance,
condemnation or Warranty proceeds, or other costs for which Landlord is
reimbursed by a third party or a tenant of the Building (other than by means of
a provision similar to this Paragraph 7), including, without limitation, payment
for Excess Services; (xiv) overhead and profit increments paid to subsidiaries
or affiliates of Landlord for goods or services (including management services),
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to the extent that the cost thereof materially exceeds the amounts normally
payable for similar goods or services under similar circumstances (taking into
account the market factors in effect on the date any relevant contracts were
negotiated) in comparable first class buildings in the San Francisco financial
district; (xvi) costs, penalties or fines arising from Landlord's violation of
any Legal Requirement, except to the extent such costs reflect costs that would
have been incurred by Landlord absent such violation; (xvii) costs associated
with the operation of the business of the legal entity which constitutes
Landlord, as the same are distinguished from the costs of the operation of the
Real Property by Landlord; (xviii) the cost of any large-scale abatement of
Hazardous Materials (as defined in Paragraph 8.c. below), provided, however,
Operating Expenses may include the costs attributable to those actions taken by
Landlord in connection with the ordinary operation and maintenance of the
Building, including costs incurred in removing limited amounts of Hazardous
Materials containing materials from common areas or other non-leaseable space
within the Building or the Real Property when such removal is directly related
to such ordinary maintenance and operation; (xix) penalties or other costs
incurred due to a violation by Landlord, as determined by written admission,
stipulation, final judgment or arbitration award, of any of the terms and
conditions of this Lease or any other lease relating to the Building or Project
except to the extent such costs reflect costs that would have been incurred by
Landlord absent such violation; (xx) costs directly and solely attributable to
the garage in the Project, including, without limitation, payroll for clerks,
attendants, book-keeping, parking, insurance premiums, parking management fees,
parking tickets, janitorial services, striping and painting of surfaces
(provided, however, that the cost of providing utilities to the garage shall be
included in Operating Expenses). In addition, for purposes of determining
Tenant's Retail Premises Additional Rent, the following shall be excluded: (A)
costs and expenses of providing janitorial services to leased or leaseable space
in the Real Property; and (B) costs and expenses of providing electricity to
leased or leaseable space in the Real Property.
b. Tax Expenses. Commencing as of January 1, 2007, Tenant shall pay
to Landlord as Additional Rent under this Lease, at the times hereinafter set
forth, Tenant's Office Tax Share, as specified in Paragraph 2.e, above, of any
increase in Tax Expenses (as defined below) incurred by Landlord in each
calendar year subsequent to the Base Tax Year specified in Paragraph 2.f. above,
over Tax Expenses incurred by Landlord during the Base Tax Year. In addition,
commencing as of the Retail Premises Rent Commencement Date, Tenant shall pay to
Landlord, at the times hereinafter set forth, Tenant's Retail Tax Share, as
specified in Paragraph 2.e. above, of the Tax Expenses incurred by Landlord in
each calendar year or portion thereof during the term of this Lease.
The term "Tax Expenses" shall mean all taxes, assessments (whether
general or special), excises, transit charges, housing fund assessments or other
housing charges, improvement districts, levies or fees, ordinary or
extraordinary, unforeseen as well as foreseen, of any kind, which are assessed,
levied, charged, confirmed or imposed on the Real Property, on Landlord with
respect to the Real Property, on the act of entering into leases of space in the
Real Property, on the use or occupancy of the Real Property or any part thereof,
with respect to services or utilities consumed in the use, occupancy or
operation of the Real Property, on any improvements, fixtures and equipment and
other personal property of Landlord located in the Real Property and used in
connection with the operation of the Real Property, or on or measured by the
rent payable under this Lease or in connection with the business of renting
space in the Real Property, including, without limitation, any gross income tax
or excise tax levied with respect to the receipt of such rent, by the United
States of America, the State of California, the City and County of San
Francisco, any political subdivision, public corporation, district or other
political or public entity or public authority, and shall also include any other
tax, fee or other excise, however described, to the extent levied or assessed in
lieu of or as a substitute (in whole or in part) for, any other Tax Expense (or
increase in the amount thereof). Tax Expenses shall include reasonable
attorneys' and professional fees, costs and disbursements incurred in connection
with proceedings to contest, determine or reduce Tax Expenses. If it shall not
be lawful for Tenant to reimburse Landlord for any increase in Tax Expenses as
defined herein, the Monthly Rent payable to Landlord prior to the imposition of
such increases in Tax Expenses shall be increased to net Landlord the same net
Monthly Rent after imposition of such increases in Tax Expenses as would have
been received by Landlord prior to the imposition of such increases in Tax
Expenses.
Tax Expenses shall not include income, franchise, transfer,
inheritance, succession, capital stock or recording taxes, unless (and only to
the extent), due to a change in the method of taxation, any of such taxes is
levied or assessed against Landlord in lieu of or as a substitute (in whole or
in part) for, any other charge which would otherwise constitute a Tax Expense
(or increase in the amount thereof). Landlord and Tenant acknowledge and agree
that certain other buildings exist or encroach upon the Land, that Tenant shall
have no liability as to any item of Tax Expense attributable or allocable to, or
assessed against, buildings other than the Building and that Landlord's good
faith determination of the proper allocation of any item of Tax Expense
(including items of Tax Expense attributable to the common areas and parking
garage of the Project) allocable to buildings other than the Building, shall be
binding on Landlord and Tenant.
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c. Adjustment for Occupancy Factor. Notwithstanding any other
provision herein to the contrary, in the event the Building is not fully
occupied during any calendar year during the term, including the Base Year, an
adjustment shall be made by Landlord in computing Operating Expenses for such
year so that the Operating Expenses shall be computed for such year as though
the Building had been fully occupied during such year. In addition, if any
particular work or service includable in Operating Expenses is not furnished to
a tenant who has undertaken to perform such work or service itself, Operating
Expenses shall be deemed to be increased by an amount equal to the additional
Operating Expenses which would have been incurred if Landlord had furnished such
work or service to such tenant. The parties agree that statements in this Lease
to the effect that Landlord is to perform certain of its obligations hereunder
at its own or sole cost and expense shall not be interpreted as excluding any
cost from Operating Expenses or Tax Expenses if such cost is an Operating
Expense or Tax Expense pursuant to the terms of this Lease.
d. Intention Regarding Expense Pass-Through. It is the intention of
Landlord and Tenant that, subject to the exclusions, limitations and conditions
set forth in this Paragraph 7, the Monthly Rent paid to Landlord throughout the
term of this Lease with respect to the Office Premises shall be absolutely net
of all increases, respectively, in Tax Expenses and Operating Expenses over,
respectively, Tax Expenses for the Base Tax Year and Operating Expenses for the
Base Year, and the foregoing provisions of this Paragraph 7 are intended to so
provide. In addition, it is the intention of Landlord and Tenant that, subject
to the exclusions, limitations and conditions set forth in this Paragraph 7, the
Monthly Rent paid to Landlord throughout the term of this Lease with respect to
the Retail Premises shall be absolutely net of all Tax Expenses and Operating
Expenses, and the foregoing provisions of this Paragraph 7 are intended to so
provide.
e. Notice and Payment. On or about the Retail Premises Rent
Commencement Date, or as soon as practicable thereafter, Landlord shall give to
Tenant notice of Landlord's reasonable estimate of the Additional Rent, if any,
payable by Tenant with respect to the Retail Premises pursuant to Paragraphs
7.a. and 7.b. for such then current calendar year and, if different, the Base
Year. On or before the first day of each calendar year during the term hereof
subsequent to the Base Year, or as soon as practicable thereafter, Landlord
shall give to Tenant notice of Landlord's reasonable estimate of the Additional
Rent, if any, payable by Tenant with respect to the Retail Premises and the
Office Premises pursuant to Paragraphs 7.a. and 7.b. for such calendar year
subsequent to the Base Year. On or before the first day of each month during
each such calendar year for which Landlord has given any such notice, Tenant
shall pay to Landlord one-twelfth (1/12th) of the estimated Additional Rent;
provided, however, that if Landlord's notice is not given prior to the first day
of any calendar year Tenant shall continue to pay Additional Rent on the basis
of the prior year's estimate until the month after Landlord's notice is given.
If at any time it reasonably appears to Landlord that the Additional Rent
payable under Paragraphs 7.a. and/or 7.b. will vary from Landlord's estimate by
more than five percent (5%), Landlord may, by written notice to Tenant,
reasonably revise its estimate for such year, and commencing no earlier than
thirty (30) days after any such revised estimate is delivered to Tenant.
Tenant's subsequent payments for such year shall be based upon the revised
reasonable estimate. On the first monthly payment date that is no less than
thirty (30) days after any new (or initial) estimate is delivered to Tenant
pursuant to this Paragraph 7.e., Tenant shall also pay any accrued cost
increases, based on such new (or initial) estimate.
f. Annual Accounting. Within one hundred fifty (150) days after the
close of each calendar year, or as soon after such one hundred fifty (150) day
period as practicable, Landlord shall deliver to Tenant a statement of the
Additional Rent payable under Paragraphs 7.a. and 7.b. for such year. The
statement shall be based on the results of an audit of the operations of the
Building prepared for the applicable year by a nationally recognized certified
public accounting firm selected by Landlord. Upon Tenant's request, Landlord
shall promptly deliver to Tenant a copy of the auditor's statement on which
Landlord's annual statement is based and such other information regarding the
annual statement as may be reasonably required by Tenant to ascertain Landlord's
compliance with this Paragraph 7 and Tenant's payment obligations under this
Lease with respect to Operating Expenses and Tax Expenses for the year covered
by such annual statement. If the annual statement shows that Tenant's payments
of Additional Rent for such calendar year pursuant to Paragraph 7.e. above
exceeded Tenant's obligations for the calendar year, Landlord shall credit the
excess to the next succeeding installments of estimated Additional Rent, or, if
none shall be due or if this Lease shall have expired, Landlord shall refund the
excess to Tenant within thirty (30) days after delivery of such statement,
provided that the excess shall have been determined within one (1) year of the
expiration or earlier termination of this Lease and that Tenant shall have
furnished Landlord with an address to which such refund may be sent. If the
annual statement shows that Tenant's payments of Additional Rent for such
calendar year pursuant to Paragraph 7.e. above were less than Tenant's
obligation for the calendar year, Tenant shall pay the deficiency to Landlord
within thirty (30) days after delivery of such statement.
Landlord's annual statement shall be final and binding upon Landlord
and Tenant unless either party, within one hundred eighty (180) days after
Tenant's receipt thereof shall contest any item therein by giving written notice
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to the other, specifying each item contested and the reason therefor.
Notwithstanding the foregoing, the Tax Expenses included in any such annual
statement may be modified by any subsequent adjustment or retroactive
application of Tax Expenses affecting the calculation of such Tax Expenses, and
any payments due from one party to the other shall be made as set forth in the
preceding paragraph. Paragraph 7.g. below provides Tenant with specific audit
rights in connection with the annual statement. Such audit rights shall also
apply to any revision of Landlord's annual statement by reason of the
modification of the Tax Expenses included therein pursuant to the preceding
provisions of this paragraph, but in such case Tenant's audit rights shall be
limited to the Tax Expenses as so modified.
g. Audit Right. If Tenant desires to dispute or question an amount
shown on the annual statement, Tenant shall give Landlord written notice of such
desire within one hundred eighty (180) days after Tenant's receipt of the annual
statement If Tenant does not give Landlord such notice within such time, Tenant
shall have waived its right to dispute or question the annual statement.
Promptly after the receipt of such written notice from Tenant, Landlord and
Tenant shall endeavor in good faith to resolve such dispute or address Tenant's
questions, as the case may be. Regardless of whether any such dispute or
question shall exist, Tenant shall have the right to cause a nationally
recognized independent certified public accountant designated by Tenant, to be
paid on an hourly and not a contingent fee basis, or Tenant's own employees, to
audit the annual statement or any amounts shown thereon, provided that Tenant
(i) notifies Landlord in writing of Tenant's intention to exercise such audit
right within ninety (90) days after the relevant initial written notice from
Tenant to Landlord with respect to such dispute or question, or if no such
notice shall have been given, within one hundred eighty (180) days after
Tenant's receipt of the annual statement. (ii) actually begins such audit within
sixty (60) days after the notice from Tenant to Landlord advising Landlord that
Tenant will require an audit (provided that such 60-day period within which the
audit must be commenced shall be extended by the length of any delay in the
commencement of the audit that is caused by Landlord) and (iii) diligently
pursues such audit to completion. Landlord agrees to make available to Tenant's
auditors, at Landlord's office in the Building, the books and records relevant
to the audit for review and copying (including accounting records on magnetic
tape or diskette), but such books and records (and tapes and diskettes) may not
be removed from Landlord's offices. Tenant shall bear all costs of such audit,
including Landlord's actual copying costs and personnel costs, if any incurred
in connection with such audit, except that, if the audit (as conducted and
certified by the auditor) shows an aggregate overstatement of Operating Expenses
of five (5%) or more, and Landlord's auditors concur in such findings (or, in
the absence of such concurrence, such overstatement is confirmed by a court of
competent jurisdiction or such other dispute resolution mechanism as to which
the parties mutually agree in writing), then Landlord shall bear all costs of
the audit. If the agreed or confirmed audit shows an underpayment of Operating
Expenses by Tenant, Tenant shall pay to Landlord, within thirty (30) days after
the audit is agreed to or confirmed, the amount owed to Landlord, and, if the
agreed or confirmed audit shows an overpayment of Operating Expenses by Tenant,
Landlord shall reimburse Tenant for such overpayment within thirty (30) days
after the audit is agreed to or confirmed.
Notwithstanding anything to the contrary set forth above, Tenant's
audit rights under this Paragraph 7.g. shall be conditioned upon (i) Tenant
having paid the total amounts billed by Landlord under this Paragraph 7 within
the time stipulated in Paragraph 7.e. for payment (including, without
limitation, the contested amounts) and (ii) Tenant and its auditor executing,
prior to the commencement of the audit, a confidentiality agreement in form and
substance reasonably satisfactory to Landlord in which Tenant and its auditor
shall agree to keep confidential, and not disclose to any other party, the
results of any such audit or any action taken by Landlord in response thereto,
except that Tenant may disclose that information to its attorneys, accountants,
auditors, and other advisors and consultants, to actual or prospective lenders,
assignees or sublessees of Tenant under this Lease, as may legally required and
as may be reasonably necessary in connection with any litigation or other
proceeding with respect to this Lease or the Premises.
h. Proration for Partial Lease Year. If Tenant's obligation to pay
Additional Rent with respect to any portion of the Premises commences on other
than the first day of a calendar year, or if this Lease terminates on a day
other than the last day of a calendar year, the Additional Rent payable by
Tenant pursuant to this Paragraph 7 applicable to the calendar year in which
such Additional Rent obligation commences or in which this Lease terminates, as
the case may be, shall be prorated on the basis that the number of days in such
partial year bears to three hundred sixty (360).
8. Use of Premises: Compliance with Law,
a. Use of Premises. The Office Premises shall be used solely for
general office purposes for the business of Tenant as described in Paragraph
2.g. above, or for any other general office use consistent with the nature of
the Building as a first class office building in the San Francisco financial
district, and for no other use or purpose; except that incidental to the
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foregoing general office use Tenant may utilize up to fifteen percent (15%) of
the then rentable square footage of the Office Premises for a photography studio
for Tenant's internal purposes (and not for purposes of producing products or
rendering services for third parties or the public). The Retail Premises shall
be used solely for the purpose of operating a retail Sharper Image store (but
not any other retail use), or for any general office use consistent with the
nature of the Building as a first class office building in the San Francisco
financial district, and for no other use or purpose.
Tenant shall not do or suffer or permit anything to be done by any
Tenant Parties (as defined in Paragraph 8.c.) in or about the Premises or the
Real Property, nor bring or keep anything therein, which would in any way
subject Landlord, Landlord's agents or the holder of any Superior Interest (as
defined in Paragraph 21) to any liability, increase the premium rate of any
fire, casualty, liability, rent or other insurance relating to the Real Property
or any of the contents of the Building above the rates that would otherwise
generally apply, or cause a cancellation of, or give rise to any defense by the
insurer to any claim under, or conflict with, any policies for such insurance.
If any act or omission of Tenant results in any such increase in premium rates
above the rates that would otherwise generally apply, Tenant shall pay to
Landlord within thirty (30) days after demand and reasonable supporting
documentation the amount of such increase. Tenant shall not do or suffer or
permit anything to be done by any Tenant Parties in or about the Premises or the
Real Property which will in any way unreasonably obstruct or interfere with the
rights of other tenants or occupants of the Building or injure or annoy them, or
use or suffer or permit the Premises to he used for any immoral or unlawful
purpose, nor shall Tenant cause, maintain any nuisance in, on or about the
Premises or the Real Property or suffer or permit any nuisance in, on or about
the Premises or the Real Property by any Tenant Parties. Without limiting the
foregoing, no loudspeakers or other similar device which can be heard outside
the Premises shall, without the prior `written approval of' Landlord, be used in
or about the Premises. Tenant shall not commit or suffer to be committed any
waste in, to or about the Premises. Landlord may from time to time conduct fire
and life safety training for tenants of the Building, including evacuation
drills and similar procedures. Tenant agrees to participate in such activities
as reasonably requested by Landlord.
Tenant agrees not to employ any person, entity or contractor for any
work in the Premises (including moving Tenant's equipment and furnishings in,
out or around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.
b. Compliance with Law. Tenant shall not do or permit anything to be
done by any Tenant Parties in or about the Premises which will in any way
conflict with any Legal Requirement (as defined in Paragraph 7.a.(16) above) now
in force or which may hereafter be enacted. Tenant, at its sole cost and
expense, shall promptly comply with all such present and future Legal
Requirements relating to the condition, use or occupancy of the Premises, and
shall perform all work to the Premises or other portions of the Real Property
required to effect such compliance (or, at Landlord's election, Landlord may
perform such work at Tenant's cost). Notwithstanding the foregoing, however,
Tenant shall not be required to perform any structural work to the Premises or
any work (structural or otherwise) to portions of the Real Property other than
the Premises unless such work is related to or affected or triggered by (i)
Initial Alterations to the Office Premises that are not normal and customary
general office improvements or Initial Alterations to the Retail Premises that
are not normal and customary general retail improvements, (ii) Tenant's
particular use of the Office Premises (as opposed to Tenant's use of the Office
Premises for general office purposes in a normal and customary manner), (iii)
Tenant's particular use of the Retail Premises (as opposed to Tenant's use of
the Retail Premises for general retail purposes in a normal and customary
manner)(iv) Tenant's particular employees or employment practices, or (v) any
Alterations by Tenant subsequent to the Initial Alterations. The judgment of any
court of competent jurisdiction or the admission of Tenant in an action against
Tenant, whether or not Landlord is a party thereto, that Tenant has violated any
Legal Requirement shall be conclusive of that fact as between Landlord and
Tenant. Tenant shall immediately furnish Landlord with any notices received from
any insurance company or governmental agency or inspection bureau regarding any
unsafe or unlawful conditions within the Premises or the violation of any Legal
Requirement. Any work that Tenant is not obligated to perform by reason of any
of the foregoing clauses (i) through (v) shall be performed by Landlord to the
extent such performance is required in order for Tenant to use and occupy the
Premises as contemplated under this Lease.
c. Hazardous Materials. Tenant shall not cause or permit the
storage, use, generation, release, handling or disposal (collectively,
"Handling") of any Hazardous Materials (as defined below), in, on, or about the
Premises or the Real Property by Tenant or any agents, employees, contractors,
licensees or subtenants of Tenant, or, during the period that they are in the
Premises, Tenant's customers, guests Or invitees (all of the foregoing,
collectively with Tenant. "Tenant Parties"), except that Tenant shall be
permitted to use normal quantities of office supplies or products (such as
copier fluids or cleaning supplies) customarily used in the conduct of general
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business office activities ("Common Office Chemicals"; which term shall also
include, as respects the photography studio permitted in the Office Premises
pursuant to Paragraph 8.a. above, normal quantities of photography supplies or
products customarily used in a photography studio), provided that the Handling
of such Common Office Chemicals shall comply at all times with all Legal
Requirements, including Hazardous Materials Laws (as defined below). For
purposes of this Lease, in no event shall Landlord be deemed a "Tenant Party",
whether by reason of the performance of Landlord's Work pursuant to Paragraph
4.c., exercise by Landlord of its rights under Paragraph 30, or otherwise.
Notwithstanding anything to the contrary contained herein, however, in no event
shall Tenant permit any usage of Common Office Chemicals in a manner that may
cause the Premises or the Real Property to be contaminated by any Hazardous
Materials or in violation of any Hazardous Materials Laws. Tenant shell
immediately advise Landlord in writing of (a) any and all enforcement, cleanup,
remedial, removal, or other governmental or regulatory actions instituted,
completed, or threatened pursuant to any Hazardous Materials Laws relating to
any Hazardous Materials affecting the Premises; and (b) all claims made or
threatened by any third party against Tenant, Landlord, the Premises or the Real
Property relating to damage, contribution, cost recovery, compensation, loss, or
injury resulting from any Hazardous Materials on or about the Premises. Without
Landlord's prior written consent, Tenant shall not take any remedial action or
enter into any agreements or settlements in response to the presence of any
Hazardous Materials in, on, or about the Premises. Tenant shall be solely
responsible for and shall indemnify, defend and hold Landlord and all other
Indemnities (as defined in Paragraph 14.b. below), harmless from and against all
Claims (as defined in Paragraph 14.b. below), arising out of or in connection
with, or otherwise relating to (i) any Handling of Hazardous Materials by any
Tenant Party or Tenant's breach of its obligations hereunder, or (ii) any
removal, cleanup, or restoration work and materials necessary to return the Real
Property or any other property of whatever nature located on the Real Property
to their condition existing prior to the Handling of Hazardous Materials in, on
or about the Premises by any Tenant Party Tenant's obligations under this
Paragraph shall survive the expiration or other termination of this Lease. For
purposes of this Lease, "Hazardous Materials" means any explosive, radioactive
materials, hazardous wastes, or hazardous substances, including without
limitation asbestos containing materials, PCB's, CFC's, or substances defined as
"hazardous substances" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657; the
Hazardous Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987; or
any other Legal Requirement regulating, relating to, or imposing liability or
standards of conduct concerning any such materials or substances now or at any
time hereafter in effect (collectively, "Hazardous Materials Laws").
d. Applicability of Paragraph. The provisions of this Paragraph 8
are for the benefit of Landlord, the holder of any Superior Interest (as defined
in Paragraph 21 below), and the other Indemnitees only and are not nor shall
they be construed to be for the benefit of any tenant or occupant of the
Building other than Tenant.
e. Additional Provisions applicable to Retail Premises. In addition
to the foregoing provisions, which shall apply to the Office Premises and the
Retail Premises, so long as the Retail Premises shall be used for retail
purposes as permitted hereunder, the following shall be applicable
i. Standards and Hours of Operations. Tenant covenants that it will
operate Tenant's business in the Retail Premises in a first-class manner as a
quality establishment in accordance with reputable business standards and
practices. Tenant may open its business in the Retail Premises for additional
hours beyond Business Hours on Business Days (as defined in Paragraph 17 below),
provided that Tenant complies with all reasonable requirements of Landlord
relating to Building security and operations during the additional hours.
ii. Failure to Operate; Landlord's Termination Right. Tenant shall not
have any obligation to commence or continue the conduct of business in the
Retail Premises. In the event that Tenant shall vacate the Retail Premises or
otherwise discontinue (or fail to commence) the normal and customary operation
of a retail Sharper Image store from the Retail Premises, and such vacation or
discontinuance shall continue for a period of one (1) year (or Tenant shall fail
to commence the conduct of business of a retail Sharper Image store in the
Retail Premises within one (1) year after the Retail Premises Rent Commencement
Date), Landlord shall have the right to terminate this Lease as to the Retail
Premises upon notice to Tenant given at any time prior to Tenant's resumption
(or commencement, as applicable) of the normal and customary operation of a
retail Sharper Image store from the Retail Premises. Any such termination shall
be effective as of the date set forth in Landlord's termination notice, provided
that such effective termination date shall not be earlier than thirty (30) days
after the date of Landlord's termination notice, nor later than one (1) year
after the date of Landlord's termination notice. Notwithstanding the foregoing,
so long as the Tenant under this Lease shall be the tenant entity originally
named herein or an Affiliate (as defined in Paragraph 13.g. below) thereof),
Landlord's termination right set forth in this paragraph shall not be applicable
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so long as such Tenant shall be using the Retail Premises for general office
purposes as permitted pursuant to Paragraph 8 above and not discontinue such
general office use for a period of one (1) year. The aforesaid one (1) year
period shall not take into account any period that the Retail Premises are
closed for business due to construction of approved Alterations or strikes,
lock-outs, labor disputes, shortages of material or labor, fire, earthquake,
flood or other casualty, war, terror, riot, insurrection, acts of God, or any
other cause (other than financial inability) beyond the reasonable control of
Tenant. No fee or other payment shall be due to Tenant in connection with
Landlord's termination of this Lease as to the Retail Premises as set forth
above.
iii. Miscellaneous Operating Matters. Tenant shall carefully supervise
and control the operation of its business in the Retail Premises, and shall
employ a competent, courteous and adequate staff therefor, all of whom shall be
Tenant's employees and none of whom shall be deemed for any purpose whatsoever
to be Landlord's employees.
iv. Appearance of Store: Health and Safety. Tenant shall maintain high
standards of sanitation and shall maintain the Retail Premises at all times in a
clean and sanitary manner in compliance with all applicable health and
sanitation laws and with any reasonable health and safety guidelines promulgated
by Landlord. Tenant shall install and maintain at all times in the Retail
Premises high quality fixtures, furnishings, fittings and equipment adequate,
appropriate and properly laid out to sustain Tenant's business. All articles in
the Retail Premises and the arrangement, style, color and general appearance
thereof which are visible to the public, including window displays, advertising
matter, signs, merchandise and store fixtures, shall be dignified and maintained
in a neat, uncluttered, and visually attractive manner that is appropriate for
space at ground level in a first-class office building, in keeping with the
character and standards of the Building and in conformity with the standards of
practice maintained among stores conducting similar businesses in first-class
office building properties in the San Francisco financial district
v. Lighting of Retail Premises. Tenant shall keep all display windows
and signs of the Retail Premises well-lighted until one-half hour after the
Building closes for business or such shorter period as may be prescribed by any
applicable policies or regulations adopted by any utility or governmental
agency, and shall maintain adequate night lights within the Retail Premises
after such period.
vi. Landlord's Right to Construct Visual Barrier. During any period
that Tenant shall discontinue the operation of a retail Sharper Image store in
the Retail Premises (including any period during which the Retail Premises shall
be used for general office purposes), Landlord may, at Landlord's sole option,
elect to install a visual barrier (such as window film or paint) in the lower
half of the exterior windows of the Retail Premises. Such action shall not give
rise to any claims of actual or constructive eviction or entitle Tenant to any
abatement of rent. Landlord shall provide Tenant with not less than five (5)
Business Days prior written notice of Landlord's election to construct such
barrier, which notice shall specify the date on which Landlord's construction in
connection with such barrier shall commence.
vii. Clean-Up. Tenant shall clean up, as necessary, any areas of the
Real Property or Project that are dirtied by trash generated as a result of
Tenant's activities, and in the event that Landlord shall elect to perform such
work, Tenant shall pay to Landlord within thirty (30) days after demand, for all
expenses incurred by Landlord in performing such cleaning.
viii. Control of Lines. If, due to the size of the Retail Premises,
customers of the Retail Premises are required to stand in a line which extends
outside the Retail Premises, Tenant shall comply with Landlord's reasonable
requirements with regard to the direction and control of such line. Without
limiting the generality of the foregoing, Tenant shall ensure that such line
does not interfere with access to the Building, the adjacent building or other
tenants' premises in such buildings.
ix. Deliveries. Tenant shall arrange for all deliveries to and
retrievals from the Retail Premises to be made in compliance with all legal and
insurance requirements, only prior to 9:00 a.m. or during such other hours as
may be reasonably designated by Landlord, only over those routes reasonably
designated by Landlord. It is the intention of Landlord and Tenant that Tenant's
deliveries be minimized to the extent practicable and that such traffic and
deliveries should have no adverse effect on the image and operation of the
Building as a prestigious, first class office building. Tenant shall ensure that
all items delivered to or retrieved from the Retail Premises are completely
wrapped and sealed so as to prevent any spillage and to avoid any nuisance or
unsightly situation or mess.
x. Janitorial Services; Refuse Removal; Extermination Services; Window
Washing. Tenant shall maintain in clean condition the Retail Premises and its
signs, metal work, doors and the interior and exterior surfaces of all windows
in the Retail Premises. In the event that Tenant shall not maintain in clean
condition the exterior surfaces of the storefront windows of the Retail
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Premises, and such failure shall continue for ten (10) days after Landlord's
notice thereof to Tenant, Landlord may elect to perform such cleaning and Tenant
shall reimburse Landlord, within thirty (30) days of Landlord's written demand,
for Landlord's cost of such cleaning. Tenant shall be responsible for providing
janitorial services to the Retail Premises at Tenant's sole cost and expense and
Landlord shall have no responsibility therefor, unless Landlord agrees to
furnish janitorial services to the Retail Premises on terms and conditions
agreed by Landlord and Tenant, each in its sole discretion. Tenant shall ensure
that the janitors used by Tenant shall not cause any labor disturbance in or at
the Real Property or Project, and such janitors shall be subject to Landlord's
approval, which approval shall not be unreasonably withheld. Tenant shall comply
with Landlord's reasonable rules and procedures concerning temporary storage of
refuse and time and manner of disposal. Tenant shall procure and maintain during
the term of this Lease, at Tenant's sole cost and expense, a contract providing
for extermination services to the Retail Premises as frequently as Landlord
reasonably deems necessary. Tenant shall submit such contract to Landlord for
Landlord's prior approval, which approval shall not be unreasonably withheld.
9. Alterations and Restoration.
a. Tenant shall not make or permit to be made any alterations,
modifications, additions, decorations, or improvements to the Premises, or any
other work whatsoever that would directly or indirectly involve the penetration
or removal (whether permanent or temporary) of, or require access through, in,
under, or above any floor, wall or ceiling, or surface or covering thereof in
the Premises (collectively, "Alterations"), except as expressly provided in this
Paragraph 9. If Tenant desires any Alteration other than a Cosmetic Alteration
(as defined in the next paragraph), Tenant must obtain Landlord's prior written
approval of such Alteration, which approval shall not be unreasonably withheld.
Tenant shall have the right, without Landlord's consent, to make any
Alteration that insets all of the following criteria (a "Cosmetic Alteration"):
(a) the Alteration is decorative in nature (such. as paint, carpet or other wall
or floor finishes, movable partitions or other such work), (b) at least ten (10)
days' prior to commencement of work with respect to such Alteration, Tenant
provides Landlord with plans with respect thereto or, if the Alteration is of
such a nature that formal plans will not be prepared for the work, Tenant
provides Landlord with a reasonably specific written description of the work,
(c) such Alteration does not affect the Building's electrical, mechanical, life
safety, plumbing, security, or HVAC systems or any structural components or any
part of the Building other than the Premises, (d) the work will not decrease the
value of the Premises, does not require a building permit or other governmental
permit, uses only new materials comparable in quality to those being replaced
and is performed in a workman like manner and in accordance with all Legal
Requirements, (a) the work does not involve opening the ceiling of the Premises,
(f) the work does not involve any Hazardous Materials, and (g) the total cost of
the Alteration, including architectural and engineering fees, if any, does not
exceed Seventy-Five Thousand Dollars ($75,000.00).
All Alterations shall be made at Tenant's sole cost and expense
(including the expense of complying with all present and future Legal
Requirements, including those regarding Hazardous Materials, if applicable, and
any other work required to be performed in other areas within or outside the
Premises by reason of the Alterations). Tenant shall either (i) arrange for
Landlord to perform the work on terms and conditions acceptable to Landlord and
Tenant, each in its sole discretion or (ii) bid the project out to contractors
approved by Landlord in writing in advance (which approval shall not be
unreasonably withheld). Tenant shall provide Landlord with a copy of the
information submitted to bidders at such time as the bidders receive their copy.
Regardless of the contractors who perform the work pursuant to the above, Tenant
shall pay Landlord on demand prior to or during the course of such construction
an amount (the "Alteration Operations Fee") equal to three percent (3%) of the
total cost of the Alteration (and for purposes of calculating the Alteration
Operations Fee, such cost shall include architectural and engineering fees, but
shall not include permit fees) as compensation to Landlord for Landlord's
internal review of Tenant's plans and general oversight of the construction
(which oversight shall be solely for the benefit of Landlord and shall in no
event be a substitute for Tenant's obligation to retain such project management
or other services as shall be necessary to ensure that the work is performed
properly and in accordance with the requirements of this Lease); provided,
however, that Landlord's approval of Tenant's plans shall stop Landlord from
thereafter objecting to the Alterations specifically detailed thereon, subject
to Tenant's compliance with the other provision of this Paragraph 9.a. with
respect to the performance of such Alterations (including Tenant's compliance
with all Legal Requirements and Landlord's Construction Standards (as defined
below) as in effect at the time Tenant performs such Alterations. Tenant shall
also pay Landlord for any Excess Services (as defined in Paragraph 17 below)
utilized by Tenant in connection with the work.
All such work shall be performed diligently and in a first-class
workmanlike manner and in accordance with plans and specifications approved by
Landlord, which approval shall not be unreasonably withheld, and shall comply
with all Legal Requirements and Landlord's reasonable construction standards,
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procedures, conditions and requirements for the Building as in effect from time
to time (including Landlord's requirements relating to insurance and contractor
qualifications) ("Landlord's Construction Standards"). In no event shall Tenant
employ any person, entity or contractor to perform work in the Premises whose
presence may give rise to a labor or other disturbance in the Building. Default
by Tenant in the payment of any sums agreed to be paid by Tenant for or in
connection with an Alteration (regardless of whether such agreement is pursuant
to this Paragraph 9 or separate instrument) shall entitle Landlord to all the
same remedies as for non-payment of rent hereunder. Any Alterations, including,
without limitation, movable partitions that are affixed to the Premises (but
excluding moveable, free standing partitions) and all carpeting, shall at once
become part of the Building and the property of Landlord- Tenant shall give
Landlord not less than five (5) days prior written notice of the date the
construction of the Alteration is to commence. Landlord may post and record an
appropriate notice of nonresponsibility with respect to any Alteration and
Tenant shall maintain any such notices posted by Landlord in or on the Premises.
b. At Landlord's sole election any or all Specialty Alterations (as
defined below) made for or by Tenant shall be removed by Tenant from the
Premises at the expiration or sooner termination of this Lease and the Premises
shall be restored by Tenant to their condition prior to the making of the
Alterations, ordinary wear and tear excepted. If so requested by Tenant in
writing at the time Tenant requests approval for an Alteration (including the
Initial Alterations), and provided that such written request shall expressly
reference this Paragraph 9.b., Landlord shall advise Tenant at the time of
Landlord's approval of such Alterations as to whether Landlord reasonably
determines the Alterations specified by Tenant to be Specialty Alterations, and
if so, whether Landlord will waive the requirement that such Specialty
Alterations be removed by Tenant from the Premises. Landlord's failure to
expressly waive in writing such requirement shall preserve Landlord's right to
make the foregoing election. The removal of the Specialty Alterations and the
restoration of the Premises shall be performed by a general contractor selected
by Tenant and approved by Landlord (which approval shall not be unreasonably
withheld), in which event Tenant shall pay the general contractor's fees and
costs in connection with such work. Any separate work letter or other agreement
which is hereafter entered into between Landlord and Tenant pertaining to
Alterations shall be deemed to automatically incorporate the terms of this Lease
without the necessity for further reference thereto.
As used in this Lease, "Specialty Alterations" mean (1) as to the
Office Premises, any Alterations that are not normal and customary general
office improvements, and (ii) as to the Retail Premises, any Alterations that
are not normal and customary general retail improvements or normal and customary
general office improvements. Landlord and Tenant agree that, without limitation,
the following constitute Specialty Alterations: internal stairwells; raised
floors; voice, data and other cabling; library, file, computer or meeting rooms;
classroom facilities; kitchens and cafeterias (which shall not be deemed to
include small kitchenette areas); any areas requiring floor reinforcement or
enhanced systems requirements; and any supplemental HVAC or other special or
supplemental systems and equipment used in connection therewith, and
non-Building standard lighting and electrical wiring, installed specifically for
Tenant.
10. Repair.
a. Tenant's Obligations. Tenant, at Tenants sole cost and expense,
shall keep the Premises and every part thereof (including the interior walls and
ceilings of the Premises, the plate glass in the storefront of the Retail
Premises, those portions of the Building systems located within and exclusively
serving the Premises, and Improvements and Alterations) in good condition and
repair, reasonable wear and tear excepted; provided that Tenant shall not be
responsible for repairs to the extent such repairs are (i) necessitated by the
negligence or willful misconduct of Landlord or Landlord's agents, employees or
contractors, or (ii) Landlord's obligation pursuant to Paragraph 10.b. below.
Repairs to the Premises necessitated by fire, earthquake, act of God or the
elements (other than to the plate glass in the storefront of the Retail
Premises) shall be governed by Paragraph 26 below. Tenant waives all rights to
make repairs at the expense of Landlord as provided by any Legal Requirement now
or hereafter in effect. It is specifically understood and agreed that, except as
specifically set forth in this Lease, Landlord has no obligation and has made no
promises to alter, remodel, improve, repair, decorate or paint the Premises or
any part thereof, and that no representations respecting the condition of the
Premises or the Building have been made by Landlord to Tenant. Tenant hereby
waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942
and of any similar Legal Requirement now or hereafter in effect.
b. Landlord's Obligations. Repairs to the Premises necessitated by
fire, earthquake, act of God or the elements (other than to the plate glass in
the Retail Premises and the storefront thereof, which shall be Tenant's
responsibility pursuant to Paragraph l0.a. above) shall be governed by Paragraph
16 below. Landlord shall repair the Premises if they are damaged due to item (i)
described in Paragraph 10.a. above. Further, Landlord shall repair and maintain
in good condition and repair the Base Building (other than the portions of those
systems that are Tenant's responsibility to maintain and repair pursuant to
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Paragraph 10.a. above); provided, however, that to the extent repairs which
Landlord is required to make pursuant to this sentence are necessitated by the
negligence or willful misconduct of Tenant or Tenant's agents, employees or
contractors, then Tenant shall reimburse Landlord for the reasonable cost of
such repair to the extent Landlord is not reimbursed therefor by insurance (or
Landlord would have been reimbursed if Landlord had obtained the insurance
required of it pursuant to Paragraph 15.d. below). Landlord shall in no event be
obligated to repair any wear and tear to the Premises. Landlord shall repair and
maintain the common areas of the Real Property in a manner consistent with the
standards of a first class office building in the San Francisco financial
district.
For purposes of this Paragraph 10.b., "Base Building" means the
structural portions of the Building (including exterior walls, roof, foundation,
floor slabs and core of the Building), all Building systems, including, without
limitation, elevator, plumbing, heating, electrical, security, life safety and
power; except those special or supplemental systems (including air-conditioning
systems), and equipment used in connection therewith, and non-Building standard
lighting and electrical wiring, installed specifically for Tenant or any other
tenants.
11. Abandonment. Tenant shall not abandon (which, for all purposes of
this Paragraph 11, shall have the meaning set forth in Section 1951.3 of the
California Civil Code) the Premises or any Increment thereof at any time during
the term hereof. Tenant understands that if Tenant abandons the Premises or any
Increment thereof, the risk of fire, other casualty and vandalism to the
Premises and the Building will be increased. Accordingly, such action by Tenant
shall constitute an Event of Default hereunder. Upon the expiration or earlier
termination of this Lease, or if Tenant abandons or surrenders all or any part
of the Premises or is dispossessed of the Premises by process of law, or
otherwise, any movable furniture, equipment, trade fixtures, or other personal
property belonging to Tenant and left on the Premises (or the applicable part
thereof so abandoned or surrendered) shall at the option of Landlord be deemed
to be abandoned and, whether or not the property is deemed abandoned, Landlord
shall have the right to remove such property from the Premises and charge Tenant
for the removal and any restoration of the Premises as provided in Paragraph 9.
Landlord may charge Tenant for the storage of Tenant's property left on the
Premises at such rates as Landlord may from time to time reasonably determine,
or, Landlord may, at its option, store Tenant's property in a public warehouse
at Tenant's expense. Notwithstanding the foregoing, neither the provisions of
this Paragraph 11 nor any other provision of this Lease shall impose upon
Landlord any obligation to care for or preserve any of Tenant's property left
upon the Premises, and Tenant hereby waives and releases Landlord from any claim
or liability in connection with the removal of such property from the Premises
and the storage thereof and specifically waives the provisions of California
Civil Code Section 1542 with respect to such release. Landlord's action or
inaction with regard to the provisions of this Paragraph 11 shall not be
construed as a waiver of Landlord's right to require Tenant to remove its
property, restore any damage to the Premises and the Building caused by such
removal, and make any restoration required pursuant to Paragraph 9 above.
Tenant's mere vacating of the Premises or any Increment thereof during the term
hereof shall not constitute an Event of Default so long as Tenant continues to
pay Monthly Rent, Additional Rent and all other sums due Landlord under this
Lease, maintains the insurance coverage required pursuant to Paragraph 15 of
this Lease and Tenant otherwise continues to perform its obligations under this
Lease, and so long as Tenant provides Landlord with written notice of an
alternate address for notices to Tenant under this Lease (other than the
Increment(s) so vacated) if such vacancy exceeds thirty (30) consecutive days.
12. Liens. Tenant shall not permit any mechanic's, materialman's or
other liens arising out of work performed at the Premises by or on behalf of
Tenant to be filed against the fee of the Real Property nor against Tenant's
interest in the Premises. Landlord shall have the right to post and keep posted
on the Premises any notices which it deems necessary for protection from such
liens. If any such liens are filed, Tenant shall cause the same to be discharged
of record (by payment, bond or otherwise) within twenty (20) days after written
notice thereof from Landlord. If Tenant shall fail to do so, Landlord may,
without further notice to Tenant, and without waiving its rights based on such
breach by Tenant and without releasing Tenant from any obligations hereunder,
pay and satisfy the same and in such event the sums so paid by Landlord shall be
due and payable by Tenant immediately without notice or demand, with interest
from the date paid by Landlord through the date Tenant pays Landlord, at the
Interest Rate. Tenant agrees to indemnify, defend and hold Landlord and the
other Indemnities (as defined in Paragraph 14.b. below) harmless from and
against any Claims (as defined in Paragraph 14.b. below) for mechanics',
materialmen's or other liens in connection with any Alterations, repairs or any
work performed, materials furnished or obligations incurred by or for Tenant.
13. Assignment and Subletting.
a. Landlord's Consent. Landlord's and Tenant's agreement with regard
to Tenant's right to transfer all or part of its interest in the Premises is as
expressly set forth in this Paragraph 13. Tenant agrees that, except upon
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Landlord's prior written consent, which consent shall not (subject to Landlord's
rights under Paragraph 13.d. below) be unreasonably withheld, neither this Lease
nor all or any part of the leasehold interest created hereby shall, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, be
assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant or
Tenant's legal representatives or successors in interest (collectively, an
"assignment") and neither the Premises nor any part thereof shall be sublet or
be used or occupied for any purpose by anyone other than Tenant (collectively, a
"sublease"). Any assignment or subletting without Landlord's prior written
consent (other than an assignment or subletting pursuant to Paragraph 13.g.
below) shall, at Landlord's option, be void and shall constitute an Event of
Default entitling Landlord to terminate this Lease and to exercise all other
remedies available to Landlord under this Lease and at law.
The parties hereto agree and acknowledge that, among other
circumstances for which Landlord may reasonably withhold its consent to an
assignment or sublease, it shall be reasonable for Landlord to withhold its
consent where: (i) the assignment or subletting would materially increase the
operating costs for the Building or the burden on the Building services, or
generate material additional foot traffic, elevator usage or security concerns
in the Building, or create an increased probability of the comfort and/or safety
of Landlord and other tenants in the Building being materially compromised or
reduced, (ii) the space will be used for a school or training facility, an
entertainment, sports or recreation facility, retail sales to the public (except
as to the Retail Premises, except that in no event shall the Retail Premises be
used for any retail purpose other than the operation of a Sharper Image store),
a personnel or employment agency, an office or facility of any governmental or
quasigovernmental agency or authority, a place of public assembly (including
without limitation a meeting center, theater or public forum), any use by or
affiliation with a foreign government (including without limitation an embassy
or consulate or similar office), or a facility for the provision of social,
welfare or clinical health services or sleeping accommodations (whether
temporary, daytime or overnight); (iii) the proposed assignee or subtenant is a
current tenant of the Building or a prospective tenant of the Building, in each
such case with whom Landlord has entered into a letter of intent or exchanged an
offer and counteroffer or similar correspondence (including a draft lease)
within the ninety (90) day period preceding Landlord's receipt of the Sublease
Notice (as defined in Paragraph 13.d. below), and in each such case Landlord has
or will have reasonably equivalent space available in the Project to meet such
proposed assignee's or subtenant's requirements (including space delivery
schedule) as set forth in the Sublease Notice; (iv) Landlord reasonably
disapproves of the proposed assignee's or subtenant's reputation or
creditworthiness; (v) Landlord reasonably determines that the character of the
business that would be conducted by the proposed assignee or subtenant at the
Premises, or the manner of conducting such business, would be inconsistent with
the character of the Building as a first-class office building; (vi) the
assignment or subletting conflicts with any exclusive uses granted to other
tenants of the Real Property, or with the terms of any easement covenant,
condition or restriction, or other agreement affecting the Real Property; (vii)
the assignment or subletting would be a use of the Premises or the applicable
Increment thereof not permitted pursuant to Paragraph 8 above; or (viii)
Landlord reasonably determines that the proposed assignee may be unable to
perform all of Tenant's obligations under this Lease or the proposed subtenant
may be unable to perform all of its obligations under the proposed sublease.
Landlord's foregoing rights and options shall continue throughout the entire
term of this Lease.
For purposes of this Paragraph 13, the following events shall be deemed
an assignment or sublease, as appropriate: (i) the issuance of equity interests
(whether stock, partnership interests or otherwise) in Tenant or any subtenant
or assignee, or any entity controlling any of them, to any person or group of
related persons, in a single transaction or a series of related or unrelated
transactions, such that, following such issuance, such person or group shall
have Control (as defined below) of Tenant or any subtenant or assignee; (ii) a
transfer of Control of Tenant or any subtenant or assignee, or any entity
controlling any of them, in a single transaction or a series of related or
unrelated transactions (including, without limitation, by consolidation, merger,
acquisition or reorganization), except that (A) transfers of securities (or
depository receipts therefor) that are listed on a national or international
securities exchange or that are included for quotation on the Nasdaq National
Market or similar automated quotation system shall not be included in
determining whether Control has been transferred, and (B) so long as Tenant
shall be the Tenant originally named in this Lease, the transfer of outstanding
capital stock or other listed equity interests pursuant to bequest or
inheritance between or among the shareholders of Tenant and their immediate
family (i.e. spouses, parents, siblings, children and grandchildren) shall not
be included in determining whether Control has been transferred; (iii) a
reduction of Tenant's assets to the point that this Lease is substantially
Tenant's only asset; (iv) a change or conversion in the form of entity of
Tenant, any subtenant or assignee, or any entity controlling any of them, which
has the effect of limiting the liability of any of the partners, members or
other owners of such entity beyond the limitations, if any, that previously
existed with respect to this Lease. "Control" shall mean direct or indirect
ownership of fifty percent (50%) or more of all of the voting stock of a
corporation or fifty percent (50%) or more of the legal or equitable interest in
any other business entity, or the power to direct the operations of any entity
(by equity ownership, contract or otherwise).
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If this Lease is assigned, whether or not in violation of the terms of
this Lease, Landlord may collect rent from the assignee. If the Premises or any
part thereof is sublet, Landlord may, upon an Event of Default by Tenant
hereunder, collect rent from the subtenant. In either event, Landlord may apply
the amount collected from the assignee or subtenant to Tenant's monetary
obligations hereunder.
The consent by Landlord to an assignment or subletting hereunder shell
not relieve Tenant or any assignee or subtenant from obtaining Landlord's
express prior written consent to any other or further assignment or subletting.
In no event shall any subtenant be permitted to assign its sublease or to
further sublet all or any portion of its subleased premises without Landlord's
prior written consent, which consent may be withheld by Landlord at its sole and
absolute discretion. Neither an assignment or subletting nor the collection of
rent by Landlord from any person other than Tenant, nor the application of any
such rent as provided in this Paragraph 13.a. shall be deemed a waiver of any of
the provisions of this Paragraph 13.a. or release Tenant from its obligation to
comply with the provisions of this Lease and Tenant shall remain fully and
primarily liable for all of Tenant's obligations under this Lease.
b. Processing Expanses. Tenant shall pay to Landlord, as Landlord's
cost of processing each proposed assignment or subletting, an amount equal to
the sum of (i) Landlord's reasonable attorneys' and other professional fees,
plus (ii) the sum of One Thousand Dollars ($1,000.O0) for the cost of Landlord's
administrative, accounting and clerical time (collectively, "Processing Costs"),
and the amount of all direct and indirect costs and expenses incurred by
Landlord arising from the assignee or sublessee taking occupancy of the subject
space (including, without limitation, costs of freight elevator operation for
moving of furnishings and trade fixtures, security service, janitorial and
cleaning service, and rubbish removal service). Notwithstanding anything to the
contrary herein, Landlord shall not be required to process any request for
Landlord's consent to an assignment or subletting until Tenant has paid to
Landlord the amount of Landlord's estimate of the Processing Costs and all other
direct and indirect costs and expenses of Landlord and its agents arising from
the assignee or subtenant taking occupancy.
c. Consideration to Landlord. In the event of any assignment or
sublease, other than an assignment or sublease pursuant to Paragraph 13.g.
below, Landlord shall be entitled to receive, as additional rent hereunder,
fifty percent (50%) of any consideration (including, without limitation, payment
for leasehold improvements) paid by the assignee or subtenant for the assignment
or sublease and, in the case of a sublease, fifty percent (50%) of the excess of
the amount of rent paid for the sublet space by the subtenant over the amount of
Monthly Rent under Paragraph 5 above and Additional Rent under Paragraph 7 above
attributable to the sublet space for the corresponding month; except that Tenant
may recapture, on an amortized basis over the term of the sublease or
assignment, any brokerage commissions paid by Tenant in connection with the
subletting or assignment (not to exceed commissions typically paid in the market
at the time of such subletting or assignment), reasonable marketing costs paid
by Tenant in connection with the subletting or assignment, reasonable attorneys
fees in connection with the subletting or assignment, any improvement allowance
paid by Tenant to the subtenant or assignee and any improvement costs incurred
by Tenant specifically to prepare the space for such assignment or subletting
(which costs shall exclude, without limitation, all costs of the Initial
Alterations pursuant to Paragraph 4 above, whether paid by Tenant or Landlord),
(collectively the "Assignment or Subletting Costs"), provided that, as a
condition to Tenant recapturing the Assignment or Subletting Costs, Tenant shall
provide to Landlord, within ninety (90) days of Landlord's execution of
Landlord's consent to the assignment or subletting, a detailed accounting of the
Assignment or Subletting Costs and supporting documents, such as receipts and
construction invoices. To effect the foregoing, Tenant shall deduct from the
monthly amounts received by Tenant from the subtenant or assignee as rent or
consideration (i) the Monthly Rent and Additional Rent payable by Tenant to
Landlord for the subject space for the corresponding month, and (ii) the
incremental amount, on an amortized basis, of the Assignment or Subletting
Costs, and fifty percent (50%) of the then remaining sum shall be paid promptly
to Landlord. Upon Landlord's request, Tenant shall assign to Landlord all
amounts to be paid to Tenant by any such subtenant or assignee and that belong
to Landlord and shall direct such subtenant or assignee to pay the same directly
to Landlord. If there is more than one sublease under this Lease, the amounts
(if any) to be paid by Tenant to Landlord pursuant to this Paragraph 13.c.,
shall be separately calculated for each sublease and amounts due Landlord with
regard to any one sublease may not be offset against rental and other
consideration pertaining to or due under any other sublease.
d. Procedures. If Tenant desires to assign this Lease or any
interest therein or sublet all or part of the Premises (except for an assignment
or sublease pursuant to Paragraph 13.g. below), Tenant shall give Landlord
written notice thereof and the terms proposed (the "Sublease Notice"), which
Sublease Notice shall be accompanied by Tenant's proposed assignment or sublease
agreement (in which the proposed assignee or subtenant shall be named, shall be
executed by Tenant and the proposed assignee or subtenant, and which agreement
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shall otherwise meet the requirements of Paragraph 13.e. below), together with a
current financial statement of such proposed assignee or subtenant and any other
information reasonably requested by Landlord. Landlord shall have the prior
right and option (to be exercised by written notice to Tenant given within
thirty (30) days after receipt of Tenant's notice) (i) in the case of any
proposed sublet, to sublet from Tenant any portion of the Premises proposed by
Tenant to be sublet, for the term for which such portion is proposed to be
sublet, at the proposed sublease rent (subject to credit in favor of Landlord
for any amounts due to Landlord in connection with such sublease pursuant to
Paragraph 13.c. above) and on the other terms set forth in the Sublease Notice;
(ii) to terminate this Lease in its entirety (in the case of any proposed
assignment) or as it pertains to the portion of the Premises so proposed by
Tenant to be sublet (in the ease of any proposed sublet that expires during the
last one (1) year of the than current term of this Lease); or (iii) to approve
or reasonably disapprove the proposed assignment or sublease. If Landlord
exercises its option in (i) above, then Landlord may, at Landlord's sale cost,
construct improvements in the subject space and, so long as the improvements are
suitable for general office purposes, Landlord shall have no obligation to
restore the subject space to its original condition following the termination of
the sublease (and in no event shall Tenant have any removal or restoration
obligation with respect to any improvements constructed in the subject space by
Landlord); provided, however, that if the Sublease Notice shall expressly impose
such removal and restoration obligation on the subtenant, then Landlord (and any
other subtenant proposed by Tenant for the applicable space if Landlord elects
not to exercise its option in (i) above), shall be required to so restore the
subject space. If Landlord fails to exercise any such option to sublet or to
terminate, this shall not be construed as or constitute a waiver of any of the
provisions of Paragraphs 13.a., b., c. or d. herein. If Landlord exercises any
option to sublet or to terminate, any costs of demising the portion of the
Premises affected by such subleasing or termination shall be borne by Tenant;
provided, however, that if the Sublease Notice shall expressly impose such
demising obligation on the subtenant, then Landlord (and any other subtenant
proposed by Tenant for the applicable space if Landlord elects not to exercise
its option in (i) or (ii) above), shall be required to so demise the subject
space. In addition. Landlord shall have no liability for any real estate
brokerage commission(s) Or with respect to any of the costs and expenses that
Tenant may have incurred in connection with its proposed assignment or
subletting, and Tenant agrees to indemnify, defend and hold Landlord and all
other Indemnitees harmless from and against any and all Claims (as defined in
Paragraph 14.b. below), including, without limitation, claims for commissions,
arising from such proposed assignment or subletting. Landlord's foregoing rights
and options shall continue throughout the entire term of this Lease.
e. Documentation. No permitted assignment or subletting by Tenant
shall be effective until there has been delivered to Landlord a fully executed
counterpart of the assignment or sublease which expressly provides that (i) the
assignee or subtenant may not further assign this Lease or the sublease, as
applicable, or sublet the Premises or any portion thereof, without Landlord's
prior written consent (which, in the case of a further assignment or sublease
proposed by an assignee of this Lease, shall not be unreasonably withheld,
subject to Landlord's rights under the provisions of this Paragraph 13, and
subject further to such assignee's rights to assign or sublease without
Landlord's consent pursuant to Paragraph 13.g. below), and in the case of a
subtenant's assignment of its sublease or further subletting of its subleased
premises or any portion thereof may he withheld in Landlord's sole and absolute
discretion), (ii) the assignee or subtenant will comply with all of the
provisions of this Lease, and Landlord may enforce the Lease provisions directly
against such assignee or subtenant, (iii) in the ease of an assignment, the
assignee assumes all of Tenant's obligations under this Lease arising on or
after the date of the assignment, and (iv) in the case of a sublease, the
subtenant agrees to be and remain jointly and severally liable with Tenant for
the payment of rent pertaining to the sublet space in the amount set forth in
the sublease, and for the performance of all of the terms and provisions of this
Lease applicable to the sublet space. In addition to the foregoing, no
assignment or sublease by Tenant, other than en assignment or sublease pursuant
to Paragraph 13.g. below, shall be effective until there has been delivered to
Landlord a fully executed counterpart of Landlord's reasonable consent to
assignment or consent to sublease form. The failure or refusal of a subtenant or
assignee to execute any such instrument shall not release or discharge the
subtenant or assignee from its liability as set forth above. Notwithstanding the
foregoing, however, no subtenant or assignee shall be permitted to occupy the
Premises or any portion thereof unless and until such subtenant or assignee
provides Landlord with certificates evidencing that such subtenant or assignee
is carrying all insurance coverage required of such subtenant or assignee under
this Lease.
f. No Merger. Without limiting any of the provisions of this
Paragraph 13, if Tenant has entered into any subleases of any portion of the
Premises, the voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies or,
at the option of Landlord, operate as an assignment to Landlord of any or all
such subleases or subtenancies. If Landlord does elect that such surrender or
cancellation operate as an assignment of such subleases or subtenancies,
Landlord shall in no way be liable for any previous act or omission by Tenant
under the subleases or for the return of any deposit(s) under the subleases that
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have not been actually delivered to Landlord, nor shall Landlord be bound by any
sublease modification(s) executed without Landlord's consent or for any advance
rental payment by the subtenant in excess of one month's rent.
g. Affiliates. Notwithstanding anything to the contrary in
Paragraphs 13.a., 13.c. and 13.d., but subject to Paragraphs 13.b, 13.e. and
13.f. Tenant may assign this Lease or sublet the Premises or any portion
thereof, without Landlord's consent, to any partnership, corporation or other
entity that controls, is controlled by, or is under common control with Tenant
or Tenant's parent (control being defined for such purposes as ownership of at
least fifty percent (50%) of the equity interests in, and the power to direct
the management of the relevant entity) or to any partnership, corporation or
other entity resulting from a merger or consolidation with Tenant or Tenant's
parent, or to any person or entity that acquires substantially all the assets
(including by means of a purchase of all or substantially all of Tenant's stock,
any such purchaser being a "Stock Purchaser") of Tenant as a going concern
(collectively, an "Affiliate"), provided that (i) Landlord receives at least ten
(10) days' prior written notice of an assignment or subletting, together wit
evidence reasonably satisfactory to Landlord that the requirements of this
Paragraph 13.g. have been met, or, in the case of an assignment by merger or
stock purchase or where such prior notice is not otherwise permitted by
applicable law or contractual restriction, such later notice (but no later than
the effective date of the assignment) as may be permitted by the applicable
merger agreement or the stock purchase agreement (if the assignment is effected
by means thereof) or as may be the earliest notice date permitted by applicable
law or the applicable contract, (ii) the Affiliate's net worth (other than in
the case of an Affiliate that is a Stock Purchaser, in which case the following
net worth test shall be applied to Tenant rather than the Affiliate) is not less
than the lesser of (A) One Hundred Twenty Million Dollars ($l20,000,000.00),
subject to the last sentence of this Paragraph 13.g., or (B) the greater of
Tenant's net worth immediately prior to the assignment or subletting (or series
of transactions of which the same is a part) or Tenant's net worth as of the
date of this Lease, (iii) except in the case of an assignment where the assignor
is dissolved as a matter of law following the series of transactions of which
the assignment is a part and where such assignor makes sufficient reserves for
contingent liabilities (including its obligations under this Lease) as required
by applicable law, the Affiliate remains an Affiliate for the duration of the
subletting or the balance of the term in the event of an assignment, (iv) the
Affiliate assumes (in the event of an assignment) in writing all of Tenant's
obligations under this Lease, (v) Landlord receives a fully executed copy of an
assignment or sublease agreement between Tenant and the Affiliate (which, in the
case of an assignment effected by means of a merger or stock purchase, may be
contained within the merger agreement or stock purchase agreement) at least ten
(10) days prior to the effective date of such assignment or sublease or, in the
case of an assignment by merger or stock purchase or where such prior delivery
is not otherwise permitted by applicable law or contractual restriction, such
later date (but no later than the effective date of the assignment) as may be
permitted by the applicable merger agreement or the stock purchase agreement (if
the assignment is effected by means thereof) or as may be the earliest notice
date permitted by applicable law or the applicable contract, and (vi) in the
case of an assignment, the essential purpose of such assignment is to transfer
an active, ongoing business with substantial assets in addition to this Lease,
and in the case of an assignment or sublease the transaction is for legitimate
business purposes unrelated to this Lease and the transaction is not a
subterfuge by Tenant to avoid its obligations under this Lease or the
restrictions on assignment and subletting contained herein. Notwithstanding
clause (ii) above, in the case of an transaction pursuant to this Paragraph
13.g. which has an effective date on or after the commencement of any renewal
period pursuant to Paragraph 52 below, the One Hundred Twenty Million Dollars
($l20,000,000.00) amount set forth in said clause (ii) shall be increased by the
same percentage increase, if any, in the Monthly Rent payable during such
renewal term over the Monthly Rent payable during the initial term of this Lease
(each as calculated on a net effective basis per rentable square foot).
14. Indemnification of Landlord.
a. Landlord and the holders of any Superior Interests (as defined in
Paragraph 21 below) shall not be liable to Tenant and Tenant hereby waives all
claims against such parties for any loss, injury or other damage to person or
property in or about the Premises or the Real Property from any cause
whatsoever, including without limitation, water leakage of any character from
the roof, walls, basement, fire sprinklers, appliances, air conditioning,
plumbing or other portion of the Premises or the Real Property, or gas, fire,
explosion, falling plaster, steam, electricity, or any malfunction within the
Premises or the Real Property, or acts of other tenants of the Building;
provided, however, that, subject to Paragraph 16 below, the foregoing waiver
shall be inapplicable to any loss, injury or damage to the extent resulting from
Landlord's gross negligence or willful misconduct, Tenant acknowledges that from
time to time throughout the term of this Lease, construction work may be
performed in and about the Building and the Real Property by Landlord,
contractors of Landlord, or other tenants or their contractors, and that such
construction work may result in noise and disruption to Tenant's business. In
addition to and without limiting the foregoing waiver or any other provision of
this Lease, Tenant agrees that Landlord shall not be liable for, and Tenant
expressly waives and releases Landlord and the other Indemnitees (as defined in
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Paragraph 14.b. below) from any Claims (as defined in Paragraph 14.b. below),
including without limitation, any and all consequential damages or interruption
or loss of business, income or profits, or claims of actual or constructive
eviction or for abatement of rental, arising or alleged to be arising as a
result of any such construction activity. Landlord shall use its good faith
efforts to minimize such noise and disruption to Tenant's business, and, without
limitation, Landlord shall perform any extraordinarily noisy or disruptive work
after Business Hours or on weekends to the extent such procedures would be
generally followed by managers of other first class office buildings in the San
Francisco financial district (except to the extent an emergency and/or Legal
Requirements require otherwise, as reasonably determined by Landlord).
b. Tenant shall hold Landlord and the holders of any Superior
Interest, and the constituent shareholders, partners or other owners thereof,
and all of their agents, servants, officers, directors and employees
(collectively with Landlord, the "Indemnitees") harmless from and indemnify the
Indemnitees against any and all claims, liabilities, damages, costs and
expenses. including reasonable attorneys' fees and costs incurred in defending
against the same (collectively. "Claims"), to the extent arising from (a) the
negligence or willful misconduct of Tenant or any other Tenant Parties (as
defined in Paragraph 8.c. above) in, on or about the Real Property, or (b) any
construction or other work undertaken by or on behalf of Tenant (other than by
Landlord) in, on or about the Premises, whether prior to or during the term of
this Lease, or (c) any Event of Default under this Lease by Tenant, or (d) any
accident, injury or damage, howsoever and by whomsoever caused, to any person or
property, occurring in the Premises; except to the extent such Claims are caused
by the negligence or willful misconduct of Landlord or its authorized
representatives. In case any action or proceeding be brought against any of the
Indemnitees by reason of any such Claim, Tenant, upon notice from Landlord,
covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Paragraph 14.b. shall survive the expiration or earlier termination of this
Lease with respect to any injury, illness, death or damage occurring prior to
such expiration or termination.
15 Insurance
a. Tenant's Insurance. Tenant shall, at Tenant's expense, maintain
during the term of this Lease (and, if Tenant occupies or conducts activities in
or about the Premises prior to or after the term hereof, then also during such
pre-term or post-term period): (i) commercial general liability insurance
including contractual liability coverage, with minimum coverages of One Million
Dollars ($1,000,000.00) per occurrence combined single limit for bodily injury
and property damage, One Million Dollars ($1,000,000.00) for products-completed
operations coverage, One Hundred Thousand Dollars ($100,000.00) fire legal
liability, One Million Dollars ($1,000,000.00) for personal and advertising
injury (which coverage shall not be subject to the contractual liability
exclusion), with a Two Million Dollars ($2,000,000.00) general aggregate limit,
for injuries to, or illness or death of, persons and damage to property
occurring in or about the Premises or otherwise resulting from Tenant's
operations in the Building; provided, however, that so long as the Retail
Premises shall be used for retail purposes (without any implication that the
Retail Premises may he used for other than retail purposes except as expressly
permitted by this Lease), the commercial general liability insurance limit and
general aggregate limit set forth above shall be increased to Three Million
Dollars ($3,000,000.00) and Five Million Dollars ($5,000,00000) respectively,
(ii) property insurance protecting Tenant against loss or damage by fire and
such other risks as are insurable under then-available standard forms of
"special form" (previously known as "all risk") insurance policies (excluding
earthquake, terror and flood but including water damage), covering Tenant's
personal property and trade fixtures in or about the Premises or the Real
Property, and any improvements and/or Alterations made by Tenant in the
Premises, for the fall replacement value thereof without deduction for
depreciation; (iii) workers' compensation insurance in statutory limits; (iv) at
least three months' coverage for loss of business income and continuing
expenses, providing protection against any peril included within the
classification "special form" insurance, excluding earthquake and flood but
including water damage; (v) if Tenant operates owned, leased or non-owned
vehicles on the Real Property, comprehensive automobile liability insurance with
a minimum coverage of One Million Dollars ($1,000,000.00) per occurrence,
combined single limit; and (vi) with respect to the Retail Premises, insurance
covering the plate glass in the storefront of the Retail Premises against
breakage for its full replacement costs; provided, however, that so long as
Tenant hereunder shall be the tenant originally named in this Lease, Tenant may
self-insure such plate glass breakage The above described policies shall protect
Tenant, as named insured, and, except for workers' compensation insurance
described in clause (iii) above, shall protect Landlord and all the other
Indemnitees and any other parties designated by Landlord, as additional
insureds; shall insure Landlord's and such other parties' contingent liability
with regard to acts or omissions of Tenant; shall include standard contractual
liability coverage with respect to Tenant's liability under this Lease
(provided, however, that such contractual liability coverage shall not limit or
be deemed to satisfy Tenant's indemnity obligations under this Lease); and, if
subject to deductibles, shall provide for deductible amounts not in excess of
those approved by Landlord in its reasonable discretion (which approval shall be
deemed given until Landlord gives written notice to Tenant of Landlord's
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reasonable disapproval, upon which Tenant shall have an additional thirty (30)
days to modify the deductible amounts so as to be reasonably acceptable to
Landlord). Landlord reserves the right to increase the foregoing amount of
liability coverage from time to time (but not more frequently than one (1) time
in any three (3) year period) as Landlord reasonably determines is required to
adequately protect Landlord and the other parties designated by Landlord from
the matters insured thereby; provided, however, such increased amounts shall not
materially exceed the greater of (a) those amounts normally required for
comparable first class office buildings in the San Francisco financial district
or (b) those amounts required to provide Landlord with the same relative
protection as the amounts set forth above as of the date of this Lease.
Notwithstanding the foregoing, Landlord makes no representation that the limits
of liability required hereunder from time to time shall be adequate to protect
Tenant. Landlord reserves the right to require that Tenant cause any of its
contractors, vendors, movers or other parties conducting activities in or about
or occupying the Premises to obtain and maintain insurance as reasonably
determined by Landlord and as to which Landlord and such other parties
designated by Landlord shall be additional insureds.
b. Policy Form. Each insurance policy required pursuant to Paragraph
15.a. above shall be issued by an insurance company licensed in the State of
California and with a general policyholders' rating of "A-" or better and a
financial size ranking of "Class VIII" or higher in the most recent edition of
Best's Insurance Guide. Each insurance policy, other than Tenant's workers'
compensation insurance, shall (i) provide that it may not be materially changed,
cancelled or allowed to lapse unless ten (10) days' prior written notice to
Landlord and any other insureds designated by Landlord is first given, (ii)
provide that no act or omission of Tenant shall affect or limit the obligations
of the insurer with respect to any other insured, (iii) include all waiver of
subrogation rights endorsements necessary to effect the provisions of Paragraph
16 below, and (iv) provide that the policy and the coverage provided shall be
primary, that Landlord, although an additional insured, shall nevertheless be
entitled to recovery under such policy for any damage to Landlord or the other
Indemnitees by reason of acts or omissions of Tenant, and that any coverage
carried by Landlord shall be noncontributory with respect to policies carried by
Tenant. Each such insurance policy or a certificate thereof shall be delivered
to Landlord by Tenant on or before the effective date of such policy and
thereafter Tenant shall deliver to Landlord renewal policies or certificates at
least five (5) Business Days prior to the expiration dates of expiring policies.
If Tenant fails to procure such insurance or to deliver such policies or
certificates, Landlord may, at its option, procure the same for Tenant's
account, and the cost thereof shall be paid to Landlord by Tenant upon demand.
Landlord may at any time, and from time to time, inspect and/or copy any and all
insurance policies required by this Lease.
c. Nothing in this Paragraph 15 shall be construed as creating or
implying the existence of (i) any ownership by Tenant of any fixtures,
additions, Alterations, or improvements in or to the Premises or (ii) any right
on Tenant's part to make any addition, Alteration or Improvement in or to the
Premises.
d. Landlord's Insurance. During the term hereof, Landlord shall keep
the Building insured through reputable insurance underwriters against perils
covered by a standard "special form" (previously known as "all risk") insurance
policy or policies as such policies are in use from time to time for comparable
first-class office buildings in the San Francisco financial district (excluding,
at Landlord's option, perils such as earthquake, terrorism, flood and other
standard "special form" policy exclusions), with a deductible provision, if any,
that does not materially exceed that which prudent, efficient operators of
first-class office buildings in the San Francisco financial district would carry
from time--to-time in the exercise of reasonable business judgment, in an amount
or amounts equal to not less than eighty percent (80%) of the full replacement
value of the Building (excluding the land and die footings, foundations and
installations below the basement level) (or such greater percentage as shall be
required to preclude Landlord from being deemed a coinsurer), without deduction
for depreciation, including the costs of demolition and debris removal, or such
other fire and property damage insurance as Landlord shall reasonably determine
to give substantially equal or granter protection.
16. Mutual Waiver of Subrogation Rights. Each party hereto hereby
releases the other respective party and, in the case of Tenant as the releasing
party, the other Indemnitees, and the respective partners, shareholders, agents,
employees, officers, directors and authorized representatives of such released
party, from any claims such releasing party may have for damage to the Project,
the Real Property, the Building, the Premises or any of such releasing party's
fixtures, personal property, improvements and alterations in or about the
Project, the Real Property, the Building or the Premises that is caused by or
results from risks insured against under "special form" insurance policies
(whether such insurance policies are actually carried by the releasing party) or
risks that are insured against under any broader form property damage insurance
policies that are actually carried by such releasing party; provided, however,
that in the case of such broader form policies, such waiver shall be limited to
the extent of the net insurance proceeds actually payable by the relevant
insurance company with respect to such loss or damage. Each party hereto shall
cause each such "special form" insurance policy obtained by it (and any broader
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form properly damage insurance policy obtained by it, if applicable) to provide
that the insurance company waives all rights of recovery by way of subrogation
against the other respective party and the other released parties in connection
with any matter covered by such policy.
17. Utilities.
a. Basic Services. Landlord shall furnish the following utilities
and services ("Basic Services") for the Premises: (i) electricity for lighting
and all other power requirements totaling up to 0.758 kilowatt hours of
aggregate consumption per rentable square foot of the Premises per month
("Tenant's Electricity Basket"), (ii) to the Office Premises only, during the
hours of 8 A.M. to 6 P.M. ("Business Hours") Monday through Friday (except
public holidays) ("Business Days"), heat and air conditioning required in
Landlord's reasonable judgment for the comfortable use and occupancy of the
Office Premises for ordinary general office purposes, (iii) unheated water for
the restroom(s) and drinking fountain(s) in the public areas serving the
Premises, (iv) elevator service to the floor(s) of the Premises by nonattended
automatic elevators for general office pedestrian usage, and (v) to the Office
Premises only, on Business Days after the date that Tenant shall have commenced
the conduct of business from the Office Premises, janitorial services limited to
emptying and removal of general office refuse, light vacuuming as needed and
window washing as reasonably determined by Landlord. Tenant shall be solely
responsible, at Tenant's sole cost and expense, for providing heat and air
conditioning to the Retail Premises, including all equipment and facilities as
shall be necessary for the same. Tenant shall either arrange for janitorial
service to the Retail Premises at Tenant's sole cost and expense by a licensed
party approved by Landlord (such approval not to be unreasonably withheld), or
reach agreement with Landlord as to the provision of such janitorial service to
the Retail Premises as an Excess Service as provided below. Notwithstanding the
above, subject to temporary shutdown for maintenance and repairs, for security
purposes, for compliance with Legal Requirements, or due to strikes, lockouts,
labor disputes, fire or other casualty, acts of God, or other causes of Force
Majeure, (A) Tenant shall have access to the Premises 24 hours a day, each day
of the Lease term, (B) the services described in (iii) and (iv) above shall be
provided to the Premises 24 hours a day, each day of the Lease term, and (C)
Tenant may use water, beat, air conditioning, electric current, elevator and
janitorial service in excess of that provided in Basic Services ("Excess
Services," which shall include without limitation electricity in excess of
Tenant's Electricity Basket, water consumed by Tenant in connection with any
dedicated or supplemental heating, ventilating and/or air conditioning, computer
power, telecommunications and/or other special units or systems of Tenant;
chilled, heated or condenser water; or water used for any purpose other than
ordinary drinking and lavatory purposes), provided that the Excess Services
desired by Tenant are reasonably available to Landlord and to the Premises (it
being understood that in no event shall Landlord be obligated to make available
to the Premises more than the pro rata share of the capacity of any Excess
Service available to the Building or the applicable floor of the Building, as
the case may be), and provided further that Tenant complies with the procedures
established by Landlord from time to time for requesting and paying for such
Excess Services and with all other provisions of this Paragraph 17. Tenant
acknowledges that any heat and air-conditioning required by Tenant in the Retail
Premises that is excess of the standard set forth in clause (ii) above shall
constitute Excess Services. Landlord reserves the right to install in the
Premises or the Real Property electric current and/or water meters (including,
without limitation, any additional wiring, conduit or panel required therefor)
to measure the electric current or water consumed by Tenant or to cause the
usage to be measured by other reasonable methods (e.g. by temporary "check"
meters or by survey).
b. Payment for Utilities and Services. The cost of Basic Services
shall be included in Operating Expenses, except that the cost of the electricity
furnished to the Retail Premises (including any electricity required to power
any dedicated or supplemental heating, ventilating and/or air conditioning,
computer power, telecommunications and/or other special units or systems of
Tenant) shall be paid directly by Tenant to the public utility provider so long
as the Retail Premises shall be separately metered and such direct payment shall
be permitted by the public utility provider and applicable Legal Requirements.
If such direct metering and/or payment shall not be in place, Tenant shall pay
Landlord for the electricity furnished to the Retail Premises, which cost shall
be at the average rate charged to Landlord for electricity supplied to the
Building by the utility provider thereof for the applicable period, together
with a reasonable overhead component to cover Landlord's administrative costs,
and determined by Landlord on the basis of a separate electrical meter or
sub-meter to be installed in the Building at Tenant's sole cost and expense to
measure such electricity. In addition, Tenant shall pay to Landlord upon demand
(i) the cost, at Landlord's prevailing rate, of any Excess Services used by
Tenant, (ii) the cost of installing, operating, maintaining or repairing any
meter or other device used to measure Tenant's consumption of utilities in the
Retail Premises or Tenant's consumption of utilities that constitute Excess
Services in the Office Premises, (iii) the cost of installing, operating,
maintaining or repairing any Temperature Balance Equipment (as defined in
Paragraph 1 7.d. below) for the Premises and/or any equipment required in
connection with any Excess Services requested by Tenant, and (iv) any cost
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otherwise incurred by Landlord in keeping account of or determining any Excess
Services used by Tenant. Landlord's failure to bill Tenant for any of the
foregoing shall not waive Landlord's right to bill Tenant for the same at a
later time, provided that such bill is delivered to Tenant no later than one
hundred eighty (180) days after the end of the calendar year in which such
utilities or services were performed or such costs incurred by Landlord, as
applicable.
Landlord acknowledges that Tenant shall not be obligated to use
telecommunication equipment, facilities or services provided by Landlord or any
company that contracts with or is affiliated with Landlord.
c. Utility Connections. Tenant shall not connect or use any
apparatus or device in the Premises which would exceed the capacity of the then
existing panel or transformer serving the Office Premises or the Retail
Premises, as applicable. Tenant shall not connect with electric current (except
through existing outlets in the Premises or such additional outlets as may be
installed in the Premises as part of initial improvements or Alterations
approved by Landlord), or water pipes, any apparatus or device for the purpose
of using electrical current or water.
Landlord will not permit additional coring or channeling of the floor
of the Premises in order to install new electric outlets in the Premises unless
Landlord is satisfied, on the basis of such information to be supplied by Tenant
at Tenant's expense, that coring and/or channeling of the floor in order to
install such additional outlets will not weaken the structure of the floor
d. Temperature Balance. If the temperature otherwise maintained in
any portion of the Office Premises by the heating, air conditioning or
ventilation system is affected as a result of (i) the type or quantity of any
lights, machines or equipment (including without limitation typical office
equipment) used by Tenant in the Office Premises, (ii) the occupancy of such
portion of the Office Premises by more than one person per two hundred (200)
square feet of rentable area therein, (iii) an electrical load for lighting or
power in the Office Premises excess of the limits specified in Paragraph 17.c.
above, or (iv) any rearrangement of partitioning or other improvements in the
Office Premises, then at Tenant's sole cost, Landlord may install any equipment,
or modify any existing equipment (including the standard air conditioning
equipment) Landlord reasonably deems necessary to restore the temperature
balance in the Office Premises (such new equipment or modifications to existing
equipment termed herein "Temperature Balance Equipment"). Tenant agrees to keep
closed, when necessary, draperies and/or window treatments in the Office
Premises which, because of the sun's position, must be closed to provide for the
efficient operation of the air conditioning system, and Tenant agrees to
cooperate with Landlord and to abide by the reasonable regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the heating, ventilating and air conditioning system serving the
Office Premises. Landlord makes no representation to Tenant regarding the
adequacy or fitness of the heating, air conditioning or ventilation equipment in
the Building to maintain temperatures that may be required for, or because of,
any computer or communications rooms, machine rooms, conference rooms or other
areas of high concentration of personnel or electrical usage, or any other uses
other than or in excess of the fractional horsepower normally required for
office equipment, and Landlord shall have no liability for loss or damage
suffered by Tenant or others in connection therewith.
e. Interruption of Services. Landlord's obligation to provide
utilities, services and access to the Premises is subject to the Rules and
Regulations of the Building, applicable Legal Requirements (including the rules
or actions of the public utility company furnishing the utility or service), and
shutdowns for maintenance and repairs, for security purposes, or due to strikes,
lockouts, labor disputes, fire or other casualty, acts of God, or other causes
beyond the control of Landlord. In the event of an interruption in, or failure
or inability to provide any service or utility for the Premises or access to the
Premises for any reason, such interruption, failure or inability shall not
constitute an eviction of Tenant, constructive or otherwise, or impose upon
Landlord any liability whatsoever, including, but not limited to, liability for
consequential damages or loss of business by Tenant, or entitle Tenant to any
abatement or offset of Monthly Rent, Additional Rent or any other amounts due
from Tenant under this Lease. Tenant hereby waives the provisions of California
Civil Code Section 1932(1) or any other applicable existing or future Legal
Requirement permitting the termination of this Lease due to such interruption,
failure or inability. Landlord shall use its good faith efforts to minimize
interruptions in utilities, services and access to the Premises, and without
limitation, Landlord shall perform any maintenance or repairs that are
reasonably anticipated to give rise to any such interruption after Business
Hours or on weekends to the extent such procedures would be generally followed
by operators of other first class office buildings located in the San Francisco
financial district (except to the extent an emergency and/or Legal Requirements
require otherwise, as reasonably determined by Landlord).
Notwithstanding the foregoing. (i) if any interruption in or failure
or inability to provide access to the Premises or any of the services or
utilities described in Paragraph 17.a. is within Landlord's reasonable control
and continues for ten (10) or more consecutive Business Days after Tenant's
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written notice thereof to Landlord, and Tenant is unable to conduct and does not
conduct any business in a material portion of the Premises as a result thereof,
then Tenant shall be entitled to an abatement of Monthly Rent under Paragraph 5
hereof and Additional Rent under Paragraph 7 hereof which abatement shall
commence as of the first day after the expiration of such ten (10) Business Day
period and terminate upon the cessation of such interruption, failure or
inability, and which abatement shall be based on the portion of the Premises
rendered inaccessible or unusable for Tenant's business by such interruption,
failure or inability, and (ii) lf any interruption in or failure or inability to
provide access to the Premises or any of the services or utilities described in
Paragraph 17.a. is not within Landlord's reasonable control and continues for
thirty (30) or more consecutive days after Tenant's written notice thereof to
Landlord, and Tenant is unable to conduct and does not conduct any business in a
material portion of the Premises as a result thereof, Tenant shall be entitled
to an abatement of Monthly Rent under Paragraph 5 hereof and Additional Rent
under Paragraph 7 hereof, which abatement shall commence as of the first day
after the expiration of such thirty (30) day period and terminate upon the
cessation of such interruption, failure or inability, and which abatement shall
be based on the portion of the Premises rendered inaccessible or unusable for
Tenant's business by such interruption, failure or inability, and which
abatement shall be applicable only to the extent and for long as Landlord is
reimbursed for the so abated rent pursuant to Landlord's rental loss insurance.
The abatement provisions set forth above shall be inapplicable to any
interruption, failure or inability described in this Paragraph 17.e. that is
caused by (x) damage from fire or other casualty (it being acknowledged that
such situation shall be governed by Paragraph 26), or (y) the negligence or
willful misconduct of Tenant or its agents, employees or contractors, except
where Tenant reimburses Landlord for the deductible required under Landlord's
property damage/rental loss insurance.
f. Governmental Controls. In the event any governmental authority
having jurisdiction over the Real Property or the Building promulgates or
revises any Legal Requirement or building, fire or other code or imposes
mandatory or voluntary controls or guidelines on Landlord or the Real Property
or the Building relating to the use or conservation of energy or utilities or
the reduction of automobile or other emissions (collectively, "Controls") or in
the event Landlord is required or elects to make alterations to the Real
Property or the Building in order to comply with such mandatory or voluntary
Controls, Landlord may, in its sole discretion, comply with such Controls or
make such alterations to the Real Property or the Building related thereto. Such
compliance and the making of such alterations shall not constitute an eviction
of Tenant, constructive or otherwise, or impose upon Landlord any liability
whatsoever, including, but not limited to, liability for consequential damages
or loss of business by Tenant. Landlord shall use its good faith efforts to
minimize noise and disruption to Tenant's business and access to the Premises by
reason of its compliance with Controls, and, without limitation, Landlord shall
perform any extraordinarily noisy or disruptive work after Business Hours or on
weekends to the extent such procedures would be generally followed by managers
of other first class office buildings the San Francisco financial district
(except to the extent an emergency and/or Legal Requirements require otherwise,
as reasonably determined by Landlord).
18. Personal Property and Other Taxes. Tenant shall pay, at least ten
(10) days before delinquency, any and all taxes, fees, charges or other
governmental impositions levied or assessed against Landlord or Tenant (a) upon
Tenant's equipment, furniture, trade fixtures, and other personal property
(including carpeting installed by Tenant) located in the Premises. (b) by virtue
of any Specialty Alterations made by Tenant to the Premises, and (c) upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises. It any such fee, charge or other
governmental imposition is paid by Landlord, Tenant shall reimburse Landlord for
Landlord's payment within thirty (30) days after Landlord's written demand.
19. Rules and Regulations. Tenant shall comply with the rules and
regulations set forth on Exhibit B attached hereto, as such rules and
regulations may be reasonably modified or amended by Landlord from time to time
(the "Rules and Regulations"). Landlord shall not be responsible to Tenant for
the nonperformance or noncompliance by any other tenant or occupant of the
Building of or with any of the Rules and Regulations, but Landlord shall not
enforce the Rules and Regulations in a discriminatory manner. In the event of
any conflict between the Rules and Regulations and the balance of this Lease,
the balance of this Lease shall control.
20. Surrender; Holding Over.
a. Surrender. Upon the expiration or other termination of this
Lease, Tenant shall surrender the Premises, to Landlord vacant and broom-clean,
with all improvements and Alterations (except as provided below) in their
original condition, except for reasonable wear and tear, damage from casualty or
condemnation and any changes resulting from approved Alterations and Cosmetic
Alterations; provided, however, that prior to the expiration Or termination of
this Lease Tenant shall remove from the Premises any Alterations that Tenant is
required by Landlord to remove under the provisions of this Lease, and all of
Tenant's personal property (including, without limitation, all voice and data
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cabling) and trade fixtures. If such removal is not completed at the expiration
or other termination of' this Lease, Landlord may remove the same at Tenant's
expense. Any damage to the Premises or the Building caused by such removal shall
be repaired promptly by Tenant (including the patching or repairing of ceilings
and walls) or, if Tenant fails to do so, Landlord may do so at Tenant's expense.
The removal of Alterations from the Premises shall be governed by Paragraph 9
above. Tenant's obligations under this Paragraph shall survive the expiration or
other termination of this Lease. Upon expiration or termination of this Lease or
of Tenant's possession, Tenant shall surrender all keys to the Premises or any
other part of the Building and shall make known to Landlord the combination of
locks on all safes, cabinets and vaults that may be located in the Premises.
b. Holding Oven If Tenant remains in possession of the Premises
after the expiration or earlier termination of this Lease with the express
written consent of Landlord, Tenant's occupancy shall be a month-to-month
tenancy at a rent agreed upon by Landlord and Tenant, but in no event less than
the greater of (i) one hundred fifty percent (150%) of the Monthly Rent and
Additional Rent payable under this Lease during the last full month prior to the
date of the expiration of this Lease or (ii) the then fair market rental (as
reasonably determined by Landlord) for the Premises. Except as provided in the
preceding sentence, the month-to-month tenancy shall be on the terms and
conditions of this Lease, except that any renewal options, expansion options,
rights of first refusal, rights of first negotiation or any other rights or
options pertaining to additional space in the Building contained in this Lease
shall be deemed to have terminated and shall be inapplicable thereto. Landlord's
acceptance of rent after such holding over with Landlord's written consent shall
not result in any other tenancy or in a renewal of the original term of this
Lease. If Tenant remains in possession of the Premises after the expiration or
earlier termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as Monthly Rent during the holdover period an amount equal to the greater of (i)
one hundred fifty percent (150%) of the fair market rental (as reasonably
determined by Landlord) for the Premises or (ii) two hundred percent (200%) of
the Monthly Rent and Additional Rent payable under this Lease for the last full
month prior to the date of such expiration or termination.
c. Indemnification. Tenant shall indemnify, defend and hold Landlord
harmless from and against all Claims incurred by or asserted against Landlord
and arising directly or indirectly from Tenant's failure to surrender the
Premises on the expiration or earlier termination of this Lease, including but
not limited to (i) any rent payable by or any loss, cost, or damages, including
lost profits, claimed by any prospective tenant of the Premises or any portion
thereof and (ii) Landlord's damages as a result of such prospective tenant
rescinding or refusing to enter into the prospective lease of the Premises or
any portion thereof by reason of such failure to timely surrender the Premises.
21. Subordination and Attornment.
a. This Lease is expressly made subject and subordinate to any
mortgage, deed of trust, ground lease, underlying lease or like encumbrance
affecting any part of the Real Property or any interest of Landlord therein
which is now existing or hereafter executed or recorded, any present or future
modification, amendment or supplement to any of the foregoing, and to any
advances made thereunder (any of the foregoing being a "Superior Interest")
without the necessity of any further documentation evidencing such
subordination. Notwithstanding the foregoing, Tenant shall, within ten (10) days
after Landlord's request, execute and deliver to Landlord a document evidencing
the subordination of this Lease to a particular Superior Interest. Tenant
acknowledges and agrees that its failure to timely execute any such document,
where such failure shall continue for five (5) Business Days after written
notice thereof from Landlord, may cause Landlord serious financial damage by
causing the failure of a financing transaction and giving Landlord all of its
rights and remedies under Paragraph 25 below, including its right to damages
caused by the loss of such financing. If the interest of Landlord in the Real
Property or the Building is transferred to any person ("Purchaser") pursuant to
or in lieu of proceedings for enforcement of any Superior Interest, unless
Purchaser shall elect otherwise (pursuant to such enforcement proceedings or
otherwise), Tenant shall immediately and automatically attorn to the Purchaser,
and this Lease shall continue in fill force and effect as a direct lease between
the Purchaser and Tenant on the terms and conditions set forth herein. This
Lease is further subject to that certain Master Declaration of Easements,
Covenants, Conditions and Restrictions For Hills Plaza Subdivision (the "Master
Declaration"), dated February 21, 1991, recorded on February 28, 1991, in Reel
No. F322, image No. 0357, in the Official Records of the City and County of San
Francisco, California. Notwithstanding the foregoing, if a Superior interest is
created following the execution of this Lease, Landlord's delivery to Tenant of
a non-disturbance agreement with respect thereto as described in Paragraph 21.b.
below and otherwise in such holder's reasonable form shall be a condition to the
subordination of this Lease thereto. Landlord shall pay any fees or charges
required by such holder in order to obtain such non-disturbance agreement.
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b. Landlord will endeavor to cause the holders of any Superior
Interests in place as of the date of this Lease ("Existing Holders") to execute
a written "non-disturbance agreement" on Tenant's behalf in such holder's
reasonable form providing that, if Tenant is not in default under this Lease
beyond any applicable grace period, that such party will recognize this Lease
and Tenant's rights hereunder and will not disturb Tenant's possession
hereunder, and if this Lease is by operation of law terminated in a foreclosure,
that a new lease will be entered into on the same terms as this Lease for the
remaining term hereof The failure of any such holder of a Superior Interest to
execute and deliver such a non-disturbance agreement shall not constitute a
default hereunder by Landlord. Landlord shall pay any fees or charges required
by such holder in order to obtain such non-disturbance agreement. If Landlord
shall not deliver to Tenant a non-disturbance agreement as described above in
this Paragraph 21 .b. from the Existing Holders within fifteen (15) Business
Days after the data of this Lease, Tenant shall have the right to terminate this
Lease. Such termination right shall be exercised by Tenant, if at all, by
Tenant's notice thereof given to Landlord no later than five (5) Business Days
after the expiration of the aforesaid fifteen (15) Business Days period, and
Tenant's failure to exercise such termination right within such five (5)
Business Day period shall serve to forever extinguish such termination right.
22. Financing Condition. If any lender or ground lessor that intends to
acquire an interest in, or holds a mortgage, ground lease or deed of trust
encumbering any portion of the Real Property should require either the execution
by Tenant of an agreement requiring Tenant to send such lender written notice of
any default by Landlord under this Lease, giving such lender the right to cure
such default until such lender has completed foreclosure, and preventing Tenant
from terminating this Lease (to the extent such termination right would
otherwise be available) unless such default remains uncured after foreclosure
has been completed, and/or any modification of the agreements, covenants,
conditions or provisions of this Lease, then Tenant agrees that it shall, within
ten (10) days after Landlord's request, execute and deliver such agreement and
modify this Lease as required by such lender or ground lessor; provided,
however, that no such modification shall affect the length of the term or
increase the rent payable by Tenant under Paragraphs 5 and 7 or otherwise
materially adversely affect Tenant's rights or materially increase Tenant's
obligations (other than notice requirements and other similar ministerial
obligations). Tenant acknowledges and agrees that its failure to timely execute
any such agreement or modification required by such lender or ground lessor,
where such failure shall continue for five (5) Business Days after written
notice thereof from Landlord, may cause Landlord serious financial damage by
causing the failure of a financing transaction and giving Landlord all of its
rights and remedies under Paragraph 25 below, including its right to damages
caused by the loss of such financing.
23. Entry by Landlord. Landlord may, at any and all reasonable times
and upon reasonable advance notice (provided that no advance notice need be
given if an emergency (as determined by Landlord in its good faith judgment)
necessitates an immediate entry or prior to entry to provide routine janitorial
services), enter the Premises to (a) inspect the same and to determine whether
Tenant is in compliance with its obligations hereunder, (b) supply janitorial
and any other service Landlord is required to provide hereunder, (c) show the
Premises to prospective lenders, purchasers or, during the last one (1) year of
the then current term of this Lease, tenants, (d) post notices of
nonresponsibility, and (e) alter, improve or repair the Premises or any other
portion of the Real Property; provided, however, that Landlord shall not make
any alterations or improvements to the Premises or the storefront windows of the
Retail Premises that materially affect Tenant's use and occupancy thereof except
to the extent reasonably required in connection with Landlord's maintenance and
repair of the Real Property or to the extent an emergency and/or Legal
Requirements require otherwise, as reasonably determined by Landlord. In
connection with any such alteration, improvement or repair. Landlord may erect
in the Premises or elsewhere in the Real Property scaffolding and other
structures reasonably required for the work to be performed. In no event shall
such entry or work entitle Tenant to an abatement of rent (except as provided in
Paragraph 17.e. above), constitute an eviction of Tenant, constructive or
otherwise, or impose upon Landlord any liability whatsoever, including but not
limited to liability for consequential damages or loss of business or profits by
Tenant. Landlord shall use good faith efforts to cause all such work to be done
in such a manner as to cause as little interference to Tenant as reasonably
possible without incurring additional expense, and Landlord shall perform any
extraordinarily noisy or disruptive work after Business Hours or on weekends to
the extent such procedures would be generally followed by managers of other
first class office buildings the San Francisco financial district (except to the
extent an emergency and/or Legal Requirements require otherwise, as reasonably
determined by Landlord). Landlord shall pay the cost of any additional
janitorial services to the Premises required by reason of Landlord's entry or
work pursuant to this Paragraph 23, and Landlord shall perform any repair work
to the Premises required pursuant to Paragraph l0.b. above by reason of such
entry or work. Landlord shall at all times retain a key with which to unlock all
of the doors in the Premises, except Tenant's vaults and safes. If an emergency
necessitates immediate access to the Premises, Landlord may use whatever force
is necessary to enter the Premises and any such entry to the Premises shall not
constitute a forcible or unlawful entry into the Premises, a detainer of the
Premises, or an eviction of Tenant from the Premises, or any portion thereof.
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24. Insolvency or Bankruptcy. The occurrence of any of the following
shall constitute an Event of Default under Paragraph 25 below:
a. Tenant ceases doing business as a going concern, makes an
assignment for the benefit of creditors, is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of such
petition) seeking for Tenant any reorganization, arrangement. composition,
readjustment, liquidation, dissolution or similar arrangement under any state or
federal bankruptcy or other law, or Tenant consents to or acquiesces in the
appointment, pursuant to any state or federal bankruptcy or other law, of a
trustee, receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets; or
b. Tenant fails within sixty (60) days after the commencement of any
proceedings against Tenant seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any state or
federal bankruptcy or other Legal Requirement, to have such proceedings
dismissed, or Tenant fails, within sixty (60) days after an appointment pursuant
to any state or federal bankruptcy or other Legal Requirement without Tenant's
consent or acquiescence, of any trustee, receiver or liquidator for the
Premises, for Tenant or for all or any substantial part of Tenant's assets, to
have such appointment vacated; or
c. Tenant is unable, or admits in writing its inability, to pay its
debts as they mature; or
d. Tenant gives notice to any governmental body of its insolvency or
pending insolvency, or of its suspension or pending suspension of operations.
In no event shall this Lease be assigned or assignable by reason of any
voluntary or involuntary bankruptcy, insolvency or reorganization proceedings,
nor shall any rights or privileges hereunder be an asset of Tenant, the trustee,
debtor-in-possession, or the debtor's estate in any bankruptcy, insolvency or
reorganization proceedings.
25. Default and Remedies.
a. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" by Tenant:
1. Tenant fails to pay when due Monthly Rent, Additional Rent
or any other rent due hereunder and such failure continues for five (5) Business
Days after written notice thereof from Landlord to Tenant, except that Landlord
shall only be required to give two (2) such notices in any calendar year, and
after such two (2) notices are given any failure by Tenant in such calendar year
to pay Monthly Rent, Additional Rent or any other rent due hereunder when due
shall itself constitute an Event of Default, without the requirement of notice
from Landlord of such failure; or
2. Tenant abandons the Premises; or
3. Tenant fails to deliver any estoppel certificate pursuant
to Paragraph 29 below, subordination agreement pursuant to Paragraph 21 above,
or document required pursuant to Paragraph 22 above, within the ten (10) day
period set forth therein, and such failure continues for five (5) Business Days
after notice thereof from Landlord; or
4. Tenant violates the bankruptcy and insolvency provisions of
Paragraph 24 above; or
5. Tenant makes or has made or furnishes or has furnished any
material warranty, representation or statement to Landlord in connection with
this Leases, or any other agreement made by Tenant for the benefit of Landlord,
which is or was false or misleading in any material respect when made or
furnished, and Landlord has relied thereon to its detriment; or
6. Tenant assigns this Lease or subleases any portion of the
Premises in violation of Paragraph 13 above; or
7. Tenant fails to comply with any other provision of this
Lease in the manner and within the time required pursuant to this Lease within
thirty (30) days after written notice from Landlord of such failure (or if the
noncompliance cannot by its nature be cured within the thirty (30) day period,
if Tenant fails to commence to cure such noncompliance within the thirty (30)
day period and thereafter diligently prosecute such cure to completion); except
that such thirty (30) day period shall be shortened as set forth in Landlord's
written notice to Tenant as Landlord reasonably determines is necessary if
waiting for such thirty (30) day period to expire would materially jeopardize
the health, safety or quiet enjoyment of the Building by its tenants and
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occupants or cause further material damage or loss to Landlord or the Real
Property or result in any violation (or continuance of any violation) of any
Legal Requirement or result in any breach or default (or continuance of any
breach or default) under any Superior Interest.
b. Remedies. Upon the occurrence of an Event of Default
Landlord shall have the following remedies, which shall not be exclusive but
shall be cumulative and shall be in addition to any other remedies now or
hereafter allowed by law:
1. Landlord may terminate Tenant's right to possession of
the Premises at any time by written notice to Tenant. Tenant expressly
acknowledges that in the absence of such written notice from Landlord, no other
act of Landlord, including, but not limited to, its re-entry into the Premises,
its efforts to relet the Premises, its reletting of the Premises for Tenant's
account, its storage of Tenant's personal property and trade fixtures, its
acceptance of keys to the Premises from Tenant, its appointment of a receiver,
or its exercise of any other rights and remedies under this Paragraph 25 or
otherwise at law, shall constitute an acceptance of Tenant's surrender of the
Premises or constitute a termination of this Lease or of Tenant's right to
possession of the Premises.
Upon such termination in writing of Tenant's right to possession of the
Premises, this Lease shall terminate and Landlord shall be entitled to recover
damages from Tenant as provided in California Civil Code Section 1951.2 or any
other applicable existing or future Legal Requirement providing for recovery of
damages for such breach, including but not limited to the following:
(i) The reasonable cost of recovering the Premises;
plus
(ii) The reasonable cost of removing Tenant's trade
fixtures and personal property and Alterations that Tenant is required to remove
pursuant to Paragraph 9.b. above; plus
(iii) All unpaid rent due or earned hereunder prior
to the date of termination, less the proceeds of any reletting or any rental
received from subtenants prior to the date of termination applied as provided in
Paragraph 25.b.2. below, together with interest at the Interest Rate, on such
sums from the date such rent is due and payable until the date of the award of
damages; plus
(iv) The amount by which the rent which would be
payable by Tenant hereunder, including Additional Rent under Paragraph 7 above,
as reasonably estimated by Landlord, from the date of termination until the date
of the award of damages, exceeds the amount of such rental loss as Tenant proves
could have been reasonably avoided, together with interest at the Interest Rate
on such sums from the date such rent is due and payable until the date of the
award of damages; plus
(v) The amount by which the rent which would be
payable by Tenant hereunder, including Additional Rent under Paragraph 7 above,
as reasonably estimated by Landlord. from the remainder of the then term, after
the date of the award of damages exceeds the amount such rental loss as Tenant
proves could have been reasonably avoided, discounted at the discount rate
published by the Federal Reserve Bank of San Francisco for member banks at the
time of the award plus one percent (1%); plus
(vi) Such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by applicable law, including
without limitation any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
2. Landlord has the remedy described in California Civil
Code Section 1951.4 (a landlord may continue the lease in effect after the
tenant's breach and abandonment and recover rent as it becomes due, if the
tenant has the right to sublet and assign subject only to reasonable
limitations), and may continue this Lease in full force and effect and may
enforce all of its rights and remedies under this Lease, including, but not
limited to, the right to recover rent as it becomes due. During the continuance
of an Event of Default, Landlord may enter the Premises without terminating this
Lease and sublet all or any part of the Premises for Tenant's account to any
person, for such term (which may be a period beyond the remaining term of this
Lease), at such rents and on such other terms and conditions as Landlord deems
advisable. In the event of any such subletting, rents received by Landlord from
such subletting shall be applied (i) first, to the payment of the costs of
maintaining, preserving, altering and preparing the Premises for subletting, the
other costs of subletting, including but not limited to brokers' commissions,
attorneys' fees and expenses of removal of Tenant's personal property, trade
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fixtures and Alterations; (ii) second, to the payment of rent then due and
payable hereunder; (iii) third, to the payment of future rent as the same may
become due and payable hereunder; (iv) fourth, the balance, if any, shall be
paid to Tenant upon (but not before) expiration of the term of this Lease. If
the rents received by Landlord from such subletting. after application as
provided above, are insufficient in any month to pay the rent due and payable
hereunder for such month, Tenant shall pay such deficiency to Landlord monthly
upon demand. Notwithstanding any such subletting for Tenant's account without
termination, Landlord may at any time thereafter, by written notice to Tenant,
elect to terminate this Lease by virtue of a previous Event of Default.
During the continuance of an Event of Default, for so long as Landlord
does not terminate Tenant's right to possession of the Premises and subject to
Paragraph 13, entitled Assignment and Subletting, and the options granted to
Landlord thereunder, Landlord shall not unreasonably withhold its consent to an
assignment or sublease of Tenant's interest in the Premises or in this Lease.
3. During the continuance of an Event of Default,
Landlord may enter the Premises without terminating this Lease and remove all
Tenant's personal property and trade fixtures from the Premises and store them
at Tenant's risk and expense. If Landlord removes such property from the
Premises and stores it at Tenant's risk and expense, and if Tenant fails to pay
the coat of such removal and storage after written demand therefor and/or to pay
any rent then due, then after the property has been stored for a period of
thirty (30) days or more Landlord may sell such property at public or private
sale, in the manner and at such times and places as Landlord deems commercially
reasonable following reasonable notice to Tenant of the time and place of such
sale. The proceeds of any such sale shall be applied first to the payment of the
expenses for removal and storage of the property, the preparation for and the
conducting of such sale, and for attorneys' fees and other legal expanses
incurred by Landlord in connection therewith, and the balance shall be applied
as provided in Paragraph 25.b.2. above.
Tenant hereby waives all claims for damages that may be caused by
Landlord's reentering and taking possession of the Premises or removing and
storing Tenant's personal property pursuant to this Paragraph 25, and Tenant
shall indemnity, defend and hold Landlord harmless from and against any and all
Claims resulting from any such act. No reentry by Landlord shall constitute or
be construed as a forcible entry by Landlord.
4. If Landlord shall have terminated Tenant's right to
possession of the Premises by appropriate legal proceedings, Landlord may
require Tenant to remove any and all Alterations from the Premises that Tenant
is required to remove pursuant to Paragraph 9.b. above, or, if Tenant fails to
do so within ten (10) days after Landlord's request, Landlord may do so at
Tenant's expense.
5. Landlord may cure the Event of Default at Tenant's
expense, it being understood that such performance shall not waive or cure the
subject Event of Default. If Landlord pays any sum or incurs any expense in
curing the Event of Default, Tenant shall reimburse Landlord upon demand for the
amount of such payment or expense with interest at the Interest Rate from the
date the sum is paid or the expense is incurred until Landlord is reimbursed by
Tenant. Any amount due Landlord under this subsection shall constitute
additional rent hereunder.
c. Waiver of Redemption. Tenant hereby waives, for itself and all
persons claiming by and under Tenant, all rights and privileges which it might
have under any present or future Legal Requirement to redeem the Premises or to
continue this Lease after being dispossessed or ejected from the Premises.
26. Damage or Destruction. If all or any part of the Premises or any
materiel portion of the balance of the Real Property is damaged by fire or other
casualty, within forty-five (45) days of the date of the damage Landlord shall
give Tenant notice of Landlord's reasonable estimate of the time required from
the date of the damage to repair the damage (the "Damage Estimate"). Landlord
shall diligently proceed to repair the damage and this Lease shall remain in
full force and effect if (i) the damage is caused by a peril covered by
Landlord's insurance (or required under this Lease to be covered by Landlord's
insurance), the proceeds from such insurance, together with cash in the amount
of the applicable deductible, are sufficient to repair the damage (an "Insured
Casualty"), and the Damage Estimate is One hundred eighty (180) days or less, or
(ii) the damage is caused by a peril not covered (and not required to be
covered) by Landlord's insurance or the proceeds from Landlord's insurance are
not sufficient to repair the damage (an "Uninsured Casualty"), and the Damage
Estimate is ninety (90) days or less. If the Damage Estimate is more than one
hundred eighty (180) days, in the case of an Insured Casualty, or more than
ninety (90) days, in the case of an Uninsured Casualty, Landlord, at its option
exercised by written notice to Tenant within sixty (60) days of the date of the
damage, shall either (a) diligently proceed to repair the damage, in which event
this Lease shall continue in full force and effect, or (B) terminate this Lease
as of the date specified by Landlord in the notice, which date shall be not less
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than thirty (30) days nor more than sixty (60) days after the date such notice
is given, and this Lease shall terminate on the date specified in the notice;
provided, however, that if the damage is not to the Premises or the common areas
of the Real Property necessary for Tenant's use and occupancy of the Premises,
Landlord may only terminate this Lease pursuant to this clause (b) if Landlord
also terminates the leases of substantially all other tenants of the Building
tat were, in Landlord's reasonable judgment, similarly affected by the damage
(and under which Landlord has such a termination right) and whose leases have a
then remaining term of substantially the same duration (or less) as the then
remaining term of this Lease. If the damage is to the Premises and/or to the
common areas of the Real Property necessary for Tenant's use and occupancy of
the Premises, and the Damage Estimate is more than one (1) year, and Landlord
does not give notice terminating this Lease within the sixty (60) day period
provided above, then Tenant may give notice to Landlord, within fifteen (15)
calendar days after the expiration of the aforesaid sixty (60) day period,
terminating this Lease as of the date specified in Tenant's termination notice,
which date shall not he before the date of such notice or more than thirty (30)
days after the date of Tenant's termination notice. Tenant shall have the
additional right to terminate this Lease by reason of a fire or other casualty
if the Damage Estimate is less than one (1) year, and Landlord fails to
substantially complete repair of the damage to an extent that permits Tenant's
use and occupancy of the Premises within one hundred eighty (180) days after the
expiration of the time period originally set forth by Landlord as the Damage
Estimate, as such one hundred eighty (180) day period shall be extended by
reason of Force Majeure.
Notwithstanding anything to contrary contained in this Paragraph 26, if
the initial Damage Estimate is more than ninety (90) days, and the date on which
Landlord reasonably anticipates the repairs of such damage will be completed is
during the last twelve (12) months of the Lease term, Landlord and Tenant shall
each have the option to terminate this Lease by giving written notice to the
other, in the case of Landlord together with the Damage Estimate, or, in the
case of Tenant, within thirty (30) days of Tenant's receipt of the Damage
Estimate, and this Lease shall terminate as of the date specified by the party
in its termination notice, which date shall not be before the date of such
notice or more than thirty (30) days after the date of such notice; provided,
however, that Tenant's right to terminate this Lease shall be conditioned upon
the damage being to the Promises or to the common areas of the Real Property
necessary for Tenant's use and occupancy of the Premises, and provided further,
however, that if Landlord shall exercise its termination option pursuant to this
paragraph and at the time of Tenant receipt of Landlord's termination notice
Tenant has any theretofore unexercised renewal option remaining pursuant to
Paragraph 52 below, Tenant may nullify Landlord's exercise of Landlord's
termination option pursuant to this paragraph if (i) within ten (10) Business
Days after Tenant's receipt of Landlord's termination notice Tenant exercises
such renewal option, and (ii) the Damage Estimate is less than one hundred
eighty (180) days.
Tenant's termination rights set forth above shall be applied separately
as to the Office Premises and the Retail Premises, and the foregoing provisions
permitting Tenant to terminate this "Lease" shall only mean that Tenant shall
have the right to terminate this Lease as respects the Increment that was
damaged or rendered unusable by the fire or other casualty; provided, however,
that where Tenant shall have a right to terminate this Lease as respects the
Office Premises in accordance with the foregoing, at Tenant's election (which
shall be set forth in Tenant's termination notice as respects the Office
Premises. if given), Tenant's termination right shall also apply to the Retail
Premises. Landlord's termination rights set forth above shall be applied to
termination of the entire Lease as set forth in the preceding paragraphs, it
being acknowledged that the terms of such termination right already take into
account the parties agreement regarding Landlord's right to terminate this Lease
where only one Increment of the Premises is affected; provided, however, that if
the fire or other casualty is solely to the Retail Premises, and no other
portion of the Building or the Real Property is damaged or otherwise affected by
such fire or other casualty, and Landlord shall have a right to terminate this
Lease in accordance with the foregoing paragraphs of this Paragraph 26 by reason
of such fire or other casualty, such termination right shall only apply as
respects the Retail Premises.
Notwithstanding anything to the contrary in the Paragraph 26, if damage
which would otherwise lead to a right to terminate this Lease results from the
willful misconduct of Landlord or Tenant, the parry from whose misconduct such
damage results shall have no right to terminate this Lease.
If the fire or other casualty damages the Premises or the common areas
of the Real Property necessary for Tenant's use and occupancy of the Premises,
Tenant ceases to use any portion of the Premises as a result of such damage,
then during the period the Premises or portion thereof are rendered unusable by
such damage and repair, Tenant's Monthly Rent and Additional Rent under
Paragraphs 5 and 7 above shall be proportionately reduced based upon the extent
to which the damage and repair prevents Tenant from conducting, and Tenant does
not conduct its business at the Premises; provided, however, if the damage
results from the negligence or willful misconduct of Tenant or any other Tenant
Party, then Tenant's Monthly Rent and Additional Rent will not abate unless
Tenant reimburses Landlord for the deductible under Landlord's rental loss
insurance. Landlord shall not be obligated to repair or replace any of Tenant's
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movable furniture, equipment, trade fixtures, and other personal property, nor
any Specialty Alterations installed in the Premises by Tenant, and no damage to
any of the foregoing shall entitle Tenant to any abatement, and Tenant shall, at
Tenant's sole cost and expense, repair and replace such items. All such repair
and replacement of Alterations shall be constructed in accordance with Paragraph
9 above regarding Alterations
A total destruction of the Building shall automatically terminate this
Lease. In no event shall Tenant be entitled to any compensation or damages from
Landlord for loss of use of the whole or any part of the Premises or for any
inconvenience occasioned by any such destruction, rebuilding or restoration of
the Premises, the Building or access thereto, except for the rent abatement
expressly provided above. Tenant hereby waives California Civil Code Sections
1932(2) and 1933(4), providing for termination of hiring upon destruction of the
thing hired and Sections 1941 and 1942, providing for repairs to and of
premises.
27. Eminent Domain.
a. If all or any part of the Premises is taken by any public or
quasi-public authority under the power of eminent domain, or any agreement in
lieu thereof (a "taking"), this Lease shall terminate as to the portion of the
Premises taken effective as of the date of taking. If only a portion of the
Premises is taken, Landlord or Tenant may terminate this Lease as to the
remainder of the Premises upon written notice to the other party within ninety
(90) days after the taking; provided, however, that Landlord's right to
terminate this Lease is conditioned upon the portion of the Premises being taken
being a material portion, and provided, further however, that Tenant's right to
terminate this Lease is conditioned upon the remaining portion of the Premises
being of such size or configuration that such remaining portion of the Premises
is unusable or uneconomical for Tenant's business, as reasonably determined by
Tenant. Notwithstanding the foregoing, in the event of a taking that entitles
either party to terminate this Lease as respects the Office Premises in
accordance with the foregoing, if such party exercises its right to terminate
this Lease as respects the Office Premises such party shall also be entitled to
terminate this Lease as to the Retail Premises. In no event shall any taking of
the Retail Premises in and of itself entitle either party to terminate this
Lease as to the Office Premises. Landlord shall he entitled to all compensation,
damages, income, rent awards and interest thereon whatsoever which may be paid
or made in connection with any taking and Tenant shall have no claim against
Landlord or any governmental authority for the value of any unexpired term of
this Lease or of any of the improvements or Alterations in the Premises;
provided. however, that the foregoing shall not prohibit Tenant from prosecuting
a separate claim against the taking authority for an amount separately
designated for Tenant's relocation expenses or the interruption of or damage to
Tenant's business or as compensation for Tenant's personal property, trade
fixtures, Alterations or other improvements paid for by Tenant so long as any
award to Tenant will not reduce the award to Landlord.
In the event of a partial taking of the Premises which does not result
in a termination of this Lease, the Monthly Rent and Additional Rent under
Paragraphs 5 and 7 hereunder shall be equitably reduced. If all or any material
part of the Real Property other than the Premises is taken, Landlord may
terminate this Lease upon written notice to Tenant given within ninety (90) days
after the date of taking; provided, however, that if the taking is not to the
common areas of the Real Property necessary for Tenant's use and occupancy of
the Premises, Landlord may only terminate this Lease pursuant to this paragraph
if Landlord also terminates the leases of substantially all other tenants of the
Building that were, in Landlord's reasonable judgment, similarly affected by the
taking (and under which Landlord has such a termination right) and whose leases
have a then remaining term of substantially the same duration (or less) as the
then remaining term of this Lease.
b. Notwithstanding the foregoing, if all or any portion of the
Premises is taken for a period of time of one (1) year or less ending prior to
the end of the term of this Lease, this Lease shall remain in full force and
effect and Tenant shall continue to pay all rent and to perform all of its
obligations under this Lease; provided, however, that Tenant shall be entitled
to all compensation, damages, income, rent awards and interest thereon that is
paid or made in connection with such temporary taking of the Premises (or
portion thereof), except that any such compensation in excess of the rent or
other amounts payable to Landlord hereunder shall be promptly paid over to
Landlord as received. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section l265.l30 and any other applicable
existing or future Legal Requirement providing for, or allowing either party to
petition the courts of the state in which the Real Property is located for, a
termination of this Lease upon a partial taking of the Premises and/or the
Building.
28. Landlord's Liability: Sale of Building. The term "Landlord," as
used in this Lease, shall mean only the owner or owners of the Real Property at
the time in question. Notwithstanding any other provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to
Landlord's interest in the Real Property as the same may from time to time be
encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against the constituent
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shareholders, partners, members, or other owners of Landlord, or the directors,
officers, employees and agents of Landlord or such constituent shareholder,
partner, member or other owner, on account of any of Landlord's obligations or
actions under this Lease. In addition, in the event of any conveyance of title
to the Real Property, then the grantor or transferor shall be relieved of all
liability with respect to Landlord's obligations to be performed under this
Lease after the date of such conveyance. In no event shall Landlord be deemed to
be in default under this Lease unless Landlord fails to perform its obligations
under this Lease, Tenant delivers to Landlord written notice specifying the
nature of Landlord's alleged default, and Landlord fails to cure such default
within thirty (30) days following receipt of such notice (or, if the default
cannot reasonably be cured within such period, to commence action within such
thirty (30)-day period and proceed diligently thereafter to cure such default).
Upon any conveyance of title to the Real Property, the grantee or transferee
shalll be deemed to have assumed Landlord's obligations to be performed under
this Lease from and after the date of such conveyance, subject to the
limitations on liability set forth above in this Paragraph 28. If Tenant
provides Landlord with any security for Tenant's performance of its obligations
hereunder, Landlord shall transfer such security to the grantee or transferee of
Landlord's interest in the Real Property, and upon such transfer Landlord shall
be released from any further responsibility or liability for such security.
Notwithstanding any other provision of this Lease (including, without
limitation. Landlord's obligations under Paragraph 3.b. above with respect to
delivery of the Premises to Tenant), but not in limitation of the provisions of
Paragraph 14.a. above, Landlord shall not be liable for any consequential
damages or interruption or loss of business, income or profits, or claims of
constructive eviction, nor shall Landlord be liable for loss of or damage to
artwork, currency, jewelry, bullion, unique or valuable documents, securities or
other valuables, or for other property not in the nature of ordinary fixtures,
furnishings and equipment used in general administrative and executive office
activities and functions. Wherever in this Lease Tenant (a) releases Landlord
from any claim or liability, (b) waives or limits any right of Tenant to assert
any claim against Landlord or to seek recourse against any property of Landlord
or (c) agrees to indemnity Landlord against any matters, the relevant release,
waiver, limitation or indemnity shall run in favor of and apply to Landlord, the
constituent shareholders, partners, members, or other owners of Landlord, and
the directors, officers, employees and agents of Landlord and each such
constituent shareholder, partner, member or other owner.
29. Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) days' prior notice from Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a statement certifying the commencement date
of this Lease, stating that this Lease is unmodified and in full force and
effect (or if there have been modifications, that this Lease is in full force
and effect as modified and the date and nature of each such modification), that
to the best of Tenant's knowledge Landlord is not in default under this Lease
(or, if Landlord is in default, specifying the nature of such default), that
Tenant is not in default under this Lease (or, if Tenant is in default,
specifying the nature of such default), the current amounts of and the dates to
which the Monthly Rent and Additional Rent has been paid, and setting forth such
other matters as may be reasonably requested by Landlord. Any such statement may
be conclusively relied upon by a prospective purchaser of the Real Property or
by a tender obtaining a lien on the Real Property as security. If Tenant fails
to deliver such statement within the time required hereunder, and such failure
continues for five (5) Business Days after notice thereof from Landlord, such
failure shall be conclusive upon Tenant that (i) this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii)
there are no uncured defaults in Landlord's performance of its obligations
hereunder, (iii) not more than one month's installment of Monthly Rent has been
paid in advance, and (iv) any other statements of fact included by Landlord in
such statement are correct. Tenant acknowledges and agrees that its failure to
timely execute such certificate, where such failure shall continue for five (5)
Business Days after written notice thereof from Landlord, may cause Landlord
serious financial damage by causing the failure of a sale or financing
transaction and giving Landlord all of its rights and remedies under Paragraph
25 above, including its right to damages caused by the loss of such sale or
financing, but only to the extent any such loss is attributable to Tenant's
failure to deliver any such certificate. At any time and from time to time, upon
not less than thirty (30) days' prior notice from Tenant, in connection with a
legitimate business transaction of Tenant Landlord shall execute and deliver to
Tenant, a statement certifying the aforesaid matters to Landlord's knowledge.
30. Right of Landlord to Perform If Tenant fails to make any payment
required hereunder (other than Monthly Rent and Additional Rent) or fails to
perform any other of its obligations hereunder, Landlord may, but shall not be
obliged to, and without waiving any default of Tenant or releasing Tenant from
any obligations to Landlord hereunder, make any such payment or perform any
other such obligation on Tenant's behalf; provided, however, that unless in
Landlord's good faith judgment earlier payment or performance is required by
reason of emergency or to preclude jeopardy to the health, safety or quiet
enjoyment of the Building by its tenants or occupants, or further damage or loss
to Landlord. or the Real Property, or to preclude any violation (or continued
violation) of any Legal Requirement or any default (or continued default) under
any Superior Interest, then Landlord shall provide Tenant with not less than
five (5) Business Days prior written notice that Landlord will make such payment
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or perform such obligation on Tenant's behalf if the same is not paid or
performed by Tenant prior to the expiration of such five (5) Business Days
notice period. All sums so paid by Landlord and all necessary incidental costs
in connection with the performance by Landlord of an obligation of Tenant
(together with interest thereon from the date of such payment by Landlord until
paid at the Interest Rate) shall be payable by Tenant to Landlord upon demand,
and Tenant's failure to make such payment upon demand shall entitle Landlord to
the same rights and remedies provided Landlord in the event of non-payment of
rent.
31. Late Charge. Tenant acknowledges that late payment of any
installment of Monthly Rent or Additional Rent or any other amount required
under this Lease will cause Landlord to incur costs not contemplated by this
Lease and that the exact amount of such costs would be extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, late charges that may be imposed on Landlord by the terms of
any encumbrance or note secured by the Real Property and the loss of the use of
the delinquent funds. Therefore, if any installment of Monthly Rent or
Additional Rent or any other amount due from Tenant is not received when due,
Tenant shall pay to Landlord on demand, on account of the delinquent payment, an
additional sum equal to the greater of (i) three percent (3%) of the overdue
amount, or (ii) One Hundred Dollars ($100.00), which additional sum represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
late payment by Tenant. Notwithstanding the foregoing, Landlord shall give
Tenant notice of non-payment when due of any Monthly Rent, Additional Rent or
other amounts required of Tenant under this Lease and five (5) Business Days
after delivery of such notice to cure such non-payment once in each calendar
year (other than the calendar year of the Office Premises Rent Commencement
Date, during which such notice shall be give twice) before assessing the late
charge in such calendar year pursuant to this Paragraph 31. Acceptance of any
late charge shall not constitute a waiver of Tenant's default with respect to
the overdue amount, nor prevent Landlord from exercising its right to collect
interest as provided above, rent, or any other damages, or from exercising any
of the other rights and remedies available to Landlord.
32. Attorneys' Fees; Waiver of Jury Trial. In the event of any action
or proceeding between Landlord and Tenant (including an action or proceeding
between Landlord and the trustee or debtor in possession while Tenant is a
debtor in a proceeding under any bankruptcy law) to enforce any provision of
this Lease, the losing party shall pay to the prevailing party all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred in such action and in any appeal in connection therewith by
such prevailing party. The "prevailing party" will be determined by the court
before whom the action was brought based upon an assessment of which party's
major arguments or positions taken in the suit or proceeding could fairly be
said to have prevailed over the other party's major arguments or positions on
major disputed issues in the court's decision. Notwithstanding the foregoing,
however, Landlord shall be deemed the prevailing party in any unlawful detainer
or other action or proceeding instituted by Landlord based upon any default or
alleged default of Tenant hereunder if (i) judgment is entered in favor of
Landlord, or (ii) prior to trial or judgment Tenant pays all or any portion of
the rent claimed by Landlord, vacates the Premises, or otherwise cures the
default claimed by Landlord.
If Landlord becomes involved in any litigation or dispute, threatened
or actual, by or against anyone not a party to this Lease, but arising by reason
of or related to any act or omission of Tenant or any Tenant Party and Tenant or
a Tenant Parry is also a party in such litigation or dispute. Tenant agrees to
pay Landlord's reasonable attorneys' fees and other costs incurred in connection
with the litigation or dispute, regardless of whether a lawsuit is actually
filed.
IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE
PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND
THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING
UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL. Landlord and Tenant agree that
this Paragraph constitutes a written consent to waiver of trial by jury within
the meaning of California Code of Civil Procedure Section 631 (a)(2), and Tenant
does hereby authorize and empower Landlord to file this Paragraph and/or this
Lease, as required, with the clerk or judge of any court of competent
jurisdiction as a written consent to waiver of jury trial.
33. Waiver. No provisions of this Lease shall be deemed waived by
Landlord or Tenant unless such waiver is in a writing signed by the party giving
such waiver. The waiver by either party of any breach of any provision of this
Lease by the other party shall not be deemed a waiver of any subsequent breach
of the same or any other provision of this Lease. No delay or omission in the
exercise of any right or remedy of Landlord upon any default by Tenant, or of
Tenant upon any default of Landlord, shall impair such right or remedy or be
construed as a waiver. Landlord's acceptance of any payments of rent due under
this Lease shall not be deemed a waiver of any default by Tenant under this
Lease (including Tenant's recurrent failure to timely pay rent) other than
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Tenant's nonpayment of the accepted sums, and no endorsement or statement on any
check or accompanying any check or payment shall be deemed an accord and
satisfaction. Tenant's payment of rent due and Tenant's continuance in
possession shall not constitute a waiver by Tenant of any default of Landlord.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant. Tenant's
consent to or approval of any act by Landlord requiring Tenant's consent or
approval shall not be deemed to waive or render unnecessary Tenant's consent to
or approval of any subsequent act by Landlord.
34. Notices. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing. All notices
and demands by Landlord to Tenant shall be delivered personally or sent by
registered or certified United States mail, postage prepaid, return receipt
requested, or by any reputable overnight or same-day courier that obtains a
written signature acknowledging receipt, addressed to Tenant at the Premises, or
to such other place as Tenant may from time to time designate by notice to
Landlord hereunder; provided, however, that prior to the Office Premises Rent
Commencement Date, notices to Tenant shall be addressed to Tenant at 650 Davis
Street, San Francisco. California 94111. Attention: Ann Tarrel, with a copy to
Tenant at the same address, Attention: Real Estate Department; and provided
further, however, that a copy of any default notice given by Landlord to Tenant
pursuant to Paragraph 25.a.3. of this Lease shall also be sent by Landlord to
Davis, Polk & Wardwell, Attention: Bruce Dallas, 1600 El Camino Real, Menlo
Park, California 94025, or to such other counsel as Tenant may from time to time
designate by notice to Landlord hereunder. All notices and demands by Tenant to
Landlord shall be sent by United States mail, postage prepaid, or by any
reputable overnight or same-day courier, addressed to Landlord in care of
Shorenstein Company LLC. 555 California Street, 49th floor, San Francisco,
California 94104, Attn: Corporate Secretary, with a copy to the management
office of the Building, or to such other place as Landlord may from time to time
designate by notice to Tenant hereunder. Notices will be deemed effective upon
delivery to the addressee at the designated address. regardless of whether
delivery is refused. In the event Tenant requests multiple notices hereunder,
tenant will be bound by such notice from the earlier of the effective times of
the multiple notices.
35. Deleted.
36. Defined Terms and Marginal Headings. When required by the context
of this Lease, the singular includes the plural. If more than one person or
entity signs this Lease as Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several, and the act of, written notice to or from, refund
to, or signature of, any Tenant signatory to this Lease (including, without
limitation, modifications of this Lease made by fewer than all such Tenant
signatories) shall bind every other Tenant signatory as though every other
Tenant signatory had so acted, or received or given the written notice or
refund, or signed. The headings and titles to the Paragraphs of this Lease are
for convenience only and are not to be used to interpret or construe this Lease.
Wherever the term "including" or "includes" is used in this Lease it shall be
construed as if followed by the phrase "without limitation." The language in all
parts of this Lease shall in all cases be construed as a whole and in accordance
with its fair meaning and not construed for or against any party simply because
one party was the drafter thereof.
37. Time and Applicable Law. Time is of the essence of this Lease and
of each and all of its provisions, except that Tenant's rights and remedies by
reason of any delay in delivery of possession of the Premises to Tenant shall be
limited as expressly set forth in Paragraph 3.b. above. This Lease shall be
governed by and construed in accordance with the laws of the State of
California, and the venue of any action or proceeding under this Lease shall be
the City and County of San Francisco, California.
38. Successors. Subject to the provisions of Paragraphs 13 and 28
above, the covenants and conditions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors, executors, administrators and assigns.
39. Entire Agreement; Modifications. This Lease (including any exhibit,
rider or attachment hereto) constitutes the entire agreement between Landlord
and Tenant with respect to Tenant's lease of the Premises. No provision of this
Lease may be amended or otherwise modified except by an agreement in writing
signed by the parties hereto. Neither Landlord nor Landlord's agents have made
any representations or warranties with respect to the Premises, the Building,
the Real Property or this Lease except as expressly set forth herein, including
without limitation any representations or warranties as to the suitability or
fitness of the Premises for the conduct of Tenant's business or for any other
purpose, nor has Landlord Or its agents agreed to undertake any alterations or
construct any improvements to the Premises except those, if any, expressly
provided in this Lease, and no rights, easements or licenses shall be acquired
by Tenant by implication or otherwise unless expressly set forth herein. Neither
this Lease nor any memorandum hereof shall be recorded by Tenant.
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40. Light and Air. Tenant agrees that no diminution of light, air or
view by any structure which may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any
liability of Landlord to Tenant, or in any other way affect this Lease.
41. Name of Building. Tenant shall nor use the name of the Building for
any purpose other than as the address of the business conducted by Tenant in the
Premises without the written consent of Landlord. Landlord reserves the right to
change the name of the Building at any time in its sole discretion by written
notice to Tenant and Landlord shall not be liable to Tenant for any loss, cost
or expense on account of any such change of name. Notwithstanding anything
contained in this Lease to the contrary, Landlord and any merchants'
association, promotion fund, media fund or any other entity or agency related to
or affiliated with Landlord or the Project or Building may not use Tenant's
trademarks, service marks, trade name, copyrights or logos of its business in
any manner without Tenant's prior written consent in each and every instance,
which consent may be withheld in Tenant's sole discretion. Tenant hereby
consents to Landlord's use of Tenant's trade name in any Project or Building
directories and advertisements provided that such use is limited to and solely
for the purpose of identifying Tenant as a tenant of the Project and Building
and the location of Tenant's premises within the Building and Project.
42. Severability. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
43. Authority. If Tenant is a corporation, partnership, trust,
association or other entity, Tenant hereby covenants and warrants that (a)
Tenant is duly incorporated or otherwise established or formed and validly
existing under the laws of its state of incorporation, establishment or
formation, (b) Tenant has and is duly qualified to do business in the state in
which the Real Property is located, (c) Tenant has full corporate. partnership,
trust, association or other appropriate power and authority to enter into this
Lease and to perform all Tenant's obligations hereunder, and (d) each person
(and all of the persons if more than one signs) signing this Lease on behalf of
Tenant is duly and validly authorized to do so.
44. No Offer. Submission of this instrument for examination and
signature by Tenant does not constitute an offer to lease or a reservation of or
option for lease, and is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
45. Real Estate Brokers. Tenant represents and warrants that it has
negotiated this Lease directly with the real estate broker(s) identified in
Paragraph 2 (the "Brokers") and has not authorized or employed, or acted by
implication to authorize or to employ, any other real estate broker or salesman
to act for Tenant in connection with this Lease. Tenant shall indemnify, defend
and hold Landlord harmless from and against any and all Claims by any real
estate broker or salesman other than the Brokers for a commission, finder's fee
or other compensation as a result of Tenant's any inaccuracy in or breach of
Tenant's foregoing representation and warranty. Landlord shall pay any
commission owing to the Brokers pursuant to separate agreement(s), and shall
indemnify, defend and hold Tenant harmless from and against any and all Claims
in connection with this Lease by the Brokers or any other broker or salesman
employed by Landlord or as to which Landlord has acted by implication to employ.
46. Consents and Approvals. Wherever the consent, approval, judgment or
determination of Landlord is required or permitted under this Lease, Landlord
may exercise its sole discretion in granting or withholding such consent or
approval or in making such judgment or determination without reference to any
extrinsic standard of reasonableness, unless the provision providing for such
consent, approval, judgment or determination specifies that Landlord's consent
or approval is not to be unreasonably withheld, or that the standard for such
consent, approval, judgment or determination is to be reasonable, or otherwise
specifies the standards under which Landlord may withhold its consent. If it is
determined that Landlord failed to give its consent or approval where it was
required to do so under this Lease, unless it is also determined that Landlord's
failure was in bad faith, Tenant's sole remedy will he an order of specific
performance or mandatory injunction of the Landlord's agreement to give its
consent or approval. The review and/or approval by Landlord of any item shall
not impose upon Landlord any liability for accuracy Or sufficiency of any such
item or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Real Property, and neither Tenant nor any Tenant Party nor any person or
entity claiming by, through or under Tenant, nor any other third party shall
have any rights hereunder by virtue of such review and/or approval by Landlord,
but Landlord's approval thereof shall estop Landlord from thereafter objecting
to any items expressly approved, subject to Tenant's compliance with any
applicable provisions of this Lease with respect to such items.
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47. Reserved Rights. Landlord retains and shall have the rights set
forth below, exercisable without notice and without liability to Tenant for
damage or injury to property, person or business and without effecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
of the Premises or, except as provided in Paragraphs 17.e and 23 above, giving
rise to any claim for rent abatement;
a. To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building and its tenants, provided that such
exclusive right shall not operate to require Tenant to use or patronize such
business or service or to exclude Tenant from its use of the Premises expressly
permitted herein or its sale from the Retail Premises of any items generally
sold in other Sharper Image stores in the San Francisco Bay Area, except that
Landlord may prohibit Tenant's right to sell from the Retail Premises food and
beverages other than pre-packaged foods.
b. To perform, Or cause or permit to be performed, at any time and
from time to time, including during Business Hours, construction in the common
areas and facilities or other leased areas in the Real Property.
c. To reduce, increase, enclose or otherwise change at any time and
from time to time the size, number, location, lay-out and nature of the common
areas and facilities and other tenancies and premises in the Real Property and
to create additional rentable areas through use or enclosure of common areas.
Landlord shall use its good faith efforts to minimize noise and
disruption to Tenant's business and access to the Premises by reason of the
matters described in Paragraph 47.b. and 47.c., and, without limitation,
Landlord shall perform any extraordinarily noisy or disruptive work after
Business Hours or on weekends to the extent such procedures would be generally
followed by managers of other first class office buildings the San Francisco
financial district (except to the extent an emergency and/or Legal Requirements
require otherwise, as reasonably determined by Landlord).
48. Financial Statements. Upon submission of this Lease to Landlord and
at any time thereafter within thirty (30) days after Landlord's request
therefor, Tenant shall furnish to Landlord copies of true and accurate financial
statements reflecting Tenant's then current financial situation (including
without limitation balance sheets, statements of profit and loss, and changes in
financial condition), Tenant's most recent audited or certified annual financial
statements, and in addition shall cause to be furnished to Landlord similar
financial statements for any guarantor(s) of this Lease. Tenant agrees to
deliver to any lender, prospective lender, purchaser or prospective purchaser
designated by Landlord such financial statements of Tenant as may be reasonably
requested by such lender or purchaser. Notwithstanding the foregoing, so long as
Tenant hereunder shall be a publicly traded entity, Tenant may satisfy its
obligations hereunder by delivery to Landlord of its financial statements most
recently available to the public. Landlord shall use its good faith efforts to
keep any financial statements delivered to it pursuant to this Paragraph 48
(other than publicly available financial statements) confidential, and shall
inform any party to whom it delivers such nonpublic financial statements of the
confidential nature of the same.
49. Deleted.
50. Nondisclosure of Lease Terms. Tenant agrees that disclosure of the
terms hereof could adversely affect the ability of Landlord to negotiate with
other tenants. Tenant hereby agrees that Tenant and its partners, officers,
directors, and employees shall not disclose the terms of this Lease to any other
person without Landlord's prior written consent, except to Tenant's attorneys,
any auditors or accountants of Tenant in connection with the preparation of
Tenant's financial statements or tax returns, to an assignee of this Lease or
sublessee of the Premises, or to an entity or person to whom disclosure is
required by applicable law or in connection with any action brought to enforce
this Lease, or otherwise for a legitimate business purpose of Tenant. Tenant
shall not be responsible for the failure of any such party to keep such terms
confidential. Landlord acknowledges that the Tenant originally named in this
Lease is a publicly traded company, and that such Tenant has informed Landlord
that so long as such Tenant remains a publicly traded company, such Tenant is
required to file this Lease with the Securities and Exchange Commission (the
"SEC"), and that such filing is available to the general public, and that
Tenant's officers are legally obligated to answer questions regarding this Lease
and its terms.
51. Hazardous Substance Disclosure. California law requires landlords
to disclose to tenants the existence of certain hazardous substances.
Accordingly, the existence of gasoline and other automotive fluids, maintenance
fluids, copying fluids and other office supplies and equipment, certain
construction and finish materials, tobacco smoke, cosmetics and other personal
items, and asbestos-containing materials ("ACM") must be disclosed. Gasoline and
other automotive fluids are found in the garage area of the Building. Cleaning,
lubricating and hydraulic fluids used in the operation and maintenance of the
Building are found in the utility areas of the Building not generally accessible
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to Building occupants or the public. Many Building occupants use copy machines
and printers with associated fluids and toners, and pens, markers, inks, and
office equipment that may contain hazardous substances. Certain adhesives,
paints and other construction materials and finishes used in portions of the
Building may contain hazardous substances. Although smoking is prohibited in the
public areas of the Building, these areas may, from time to time, be exposed to
tobacco smoke. Building occupants and other persons entering the Building from
time-to-time may use or carry prescription and non-prescription drugs, perfumes,
cosmetics and other toiletries, and foods and beverages, some of which may
contain hazardous substances. Further, certain portions of the Building contain
ACM in the form of fireproofing on structural elements, heat insulation sealed
within fire doors, and small areas of resilient floor tile, but these areas are
generally inaccessible to Building occupants and visitors, such as machinery and
utility rooms, the inside of sealed walls and above suspended ceilings. Landlord
has made no special investigation of the Premises with respect to any hazardous
substances. Tenant agrees not to expose or disturb any ACM unless Landlord has
given Tenant prior written consent thereto and Tenant complies with all
applicable Legal Requirements and Landlord's written procedures for handling
ACM. Tenant may obtain a copy of Landlord's written procedures for handling ACM
from the Building office.
52. Options to Renew
a. Options to Renew. Tenant shall have the option to renew this
Lease for two (2) additional terms of five (5) years each, commencing upon the
expiration of the initial term of this Lease or the prior renewal term, as
applicable. Each renewal option must be exercised, if at all, by written notice
given by Tenant to Landlord not later than one (1) year prior to expiration of
the initial term of this Lease or the prior renewal term, as applicable.
Notwithstanding the foregoing, at Landlord's election, each renewal option shall
be null and void and Tenant shall have no right to renew this Lease pursuant
thereto if on the date Tenant exercises the option or on the date immediately
preceding the commencement of the applicable renewal period (i) the Tenant
originally named in this Lease or an Affiliate thereof (collectively, "Original
Tenant") is not in occupancy of at least seventy-five percent (75%) of the
entire Office Premises then demised hereunder or such Tenant does not intend to
continue to occupy at least seventy-five percent (75%) of the entire Office
Premises (but intends to assign this Lease or sublet the space in whole or in
part), or (ii) an Event of Default (or a default that subsequently matures into
an Event-of Default) shall have occurred and be continuing hereunder.
b. Terms and Conditions. If Tenant exercises the renewal option,
then all of the terms and conditions set forth in this Lease as applicable to
the Premises during the initial term shall apply during the renewal term, except
that (i) Tenant shall take the Premises in their then as-is state and condition,
(ii) the Monthly Rent payable by Tenant for the Premises shall be ninety-five
percent (95%) of the then-fair market rent for the Premises based upon the terms
of this Lease, as renewed, (iii) the Base Year for the Premises shall be the
calendar year in which the renewal term commences, and (iv) the Base Tax Year
shall be the calendar year in which the renewal term commences. Fair market rent
shall include the periodic rental increases, if any, that would be included for
space leased for the period the space will be covered by the Lease. For purposes
of this Paragraph 52, the term "fair market rent" shall mean the rental rate for
comparable space under primary lease (and not sublease) to new tenants, taking
into consideration the quality and prestige of the Building and such amenities
as existing improvements, view, floor on which the Premises are situated and the
like, situated in first-class, reputable, established high-rise office buildings
in comparable locations in the San Francisco financial district, in comparable
physical and economic condition, taking into consideration the then prevailing
ordinary rental market practices with respect to tenant concessions (if any)
(e.g., not offering extraordinary rental, promotional deals and other
concessions to tenants which deviate from what is the then-prevailing ordinary
practice in an effort to alleviate cash flow problems, difficulties in meeting
loan obligations or other financial distress, or in response to a greater than
average vacancy rate). For purposes of determining the fair market rent of the
Premises, separate determinations shall be made for the Office Premises and the
Retail Premises, taking into account the permitted purposes for which each can
be used pursuant to Paragraph 8 above of this Lease. The fair market rent shall
be mutually agreed upon by Landlord and Tenant in writing within the thirty (30)
calendar day period commencing six (6) months prior to commencement of the
renewal period. If Landlord and Tenant are unable to agree upon the fair market
monthly rent within said thirty (30)-day period, then the fair market rent shall
be established by appraisal in accordance with the procedures set forth in
Exhibit D attached hereto.
53. Building Signage.
a. Office Premises Signage. Tenant may, at Tenant's expense, install
a sign identifying Tenant's business in the Embarcadero lobby entrance of the
Building, provided that the design. size, color and location of the sign shall
be subject to Landlord's prior reasonable approval and to applicable Legal
Requirements. Subject to applicable Legal Requirements, Landlord agrees that
such lobby signage may be up to as large and prominent as the tenant signage
currently in such lobby. Tenant shall be entitled, at no cost to Tenant, to have
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the name of Tenant's company listed on (i) the Building directory situated in
the main lobby of the Building and (ii) the Tenant directory in the lobby of any
multi-tenant floor of the Building on which any portion of the Office Premises
is located. If, after any such names are initially listed on the directories,
Tenant requests a change in any name as printed thereon, Tenant shall reimburse
Landlord for Landlord's cost of reprinting the name for the directories.
b. Retail Premises Signage. So long as the Retail Premises shall
continue to be operated as a retail Sharper Image store, Tenant shall be
permitted to maintain storefront signage identifying Tenant's business, provided
that the design, size, color and location of the sign shall be subject to
Landlord's prior approval in its good faith sole discretion and to applicable
Legal Requirements. So long as the Retail Premises shall continue to be operated
as a retail Sharper Image store, Landlord shall not place or allow any other
party to place any signage on the storefront of the Retail Premises, except as
may be required by applicable Legal Requirements.
54. Right of First Offer.
a. First Offer Right; Available Space. Tenant shall have an ongoing
right of first offer to lease any increments of space of six thousand (6,000)
rentable square feet or more on the fifth (5th) or seventh (7th) floor of the
Building (each such increment, "First Offer Space"), if the First Offer Space
shall become "available for lease" and delivery to Tenant during the period (the
"First Offer Period") commencing on the Commencement Data and ending on the data
that is five (5) years after the Office Premises Rent Commencement Date. Space
shall not be deemed "available for lease" if the tenant under an expiring lease
of such space desires to renew or extend its lease (whether pursuant to a right
or option or pursuant so new arrangements entered into with Landlord) or if any
tenant of the Building exercises an option or right of first offer or refusal or
other right to lease such space, which option or right has been granted (i)
prior to the date of this Lease, (ii) in any Initial Lease (as defined below) as
originally executed, or (iii) in any lease entered into by Landlord as a result
of Tenant not exercising a right of first offer pursuant to this Paragraph 54.
Space that is vacant and un-leased as of the date of this Lease shall not be
deemed "available for lease" until the initial lease of such space (the "Initial
Lease") entered into after the date of this Lease shall expire and such space
shall otherwise be "available for lease" within the meaning described above.
Upon First Offer Space becoming available for lease, Landlord shall notify
Tenant in writing of such availability prior to Leasing the space to any other
party, which notice shall mention the actual or estimated availability date of
the First Offer Space; provided, however, that Landlord shall have no obligation
to deliver any such availability notice (i) prior to the Commencement Date (and
Tenant shall have no rights under this Paragraph 54 prior to such date), (ii)
prior to one (1) year prior to the estimated availability date, or (iii) if the
estimated availability date of the First Offer Space is later than five (5)
years after the Office Premises Rent Commencement Date. For a period of seven
(7) Business Days after receipt of such availability notice from Landlord,
Tenant shall have a right to elect to lease such First Offer Space. If Tenant
docs not elect to lease the First Offer Space within such seven (7) Business Day
period, Landlord shall have the right to lease the First Offer Space or any
portion thereof to any third party or parties for a term and on such other
conditions as Landlord may determine in Landlord's sole discretion and all
rights of Tenant under this Paragraph 54 with respect to that particular First
Offer Space shall thereafter cease and forever terminate, unless and until such
First Offer Space shall again become available for lease within the meaning
described above, at which time it shall again be offered to Tenant pursuant to
the terms of this Paragraph 54.
b. Terms and Conditions. Upon Tenant's election to lease the First
Offer Space, Landlord and Tenant shall promptly enter into an amendment of this
Lease, adding such First Offer Space to the Premises on all the terms and
conditions set forth in this Lease as to the Premises originally demised under
this Lease, except that (i) the term of the lease to Tenant of the First Offer
Space shall commence upon the date on which the First Offer Space is delivered
to Tenant and shall continue co-terminously with the remaining term hereof and
any extension thereof, (ii) the Monthly Rent payable by Tenant under Paragraphs
2.c. and 5 of this Lease for the First Offer Space shall be the fair market rent
for such space, as provided for below, (iii) the Base Year for the First Offer
Space shall be the calendar year in which the First Offer Space is added to this
Lease and the Base Tax Year for the First Offer Space shall be the calendar year
in which the First Offer Space is added to this Lease, (iv) Tenant's
proportionate share payable under Paragraph 7 hereof with respect to the First
Offer Space shall be determined by dividing the rentable square footage of such
First Offer Space, as set forth in Landlord's availability notice, by the
rentable square footage of the Building, and (v) Tenant shall take the First
Offer Space in its then "as is" condition.
The fair market rent for the First Offer Space shall be mutually agreed
upon by Landlord and Tenant in writing within the thirty (30) day period
commencing with Tenant's exercise of the option to lease the First Offer Space,
but no sooner than six (6) months prior to the data the First Offer Space is to
be added to this Lease. For purposes of this Paragraph 54, the term "fair market
rent" shall have the meaning set forth in Paragraph 52.b. hereof. If Landlord
and Tenant are unable to agree upon the fair market monthly rent within such
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thirty (30) day period, then the fair market monthly rent shall be established
by appraisal in accordance with the procedures set forth in Exhibit D. If the
fair market rent for the First Offer Space has not been established prior to the
date the First Offer Space is to be added to this Lease, then Tenant shall pay
as minimum Monthly Rent for the First Offer Space the minimum Monthly Rent
described in the next paragraph. If the fair market rent, as subsequently
determined, exceeds the rent paid by Tenant for the First Offer Space during the
period prior to the date the fair market rent was determined, Tenant shall pay
the deficiency to Landlord within thirty (30) days after such determination, and
if the fair market rent, as subsequently determined, is less than the rent so
paid by Tenant, Landlord shall credit Tenant's overpayment against Tenant's next
accruing Monthly Rent obligations with respect to the Premises.
Notwithstanding anything in the foregoing or Exhibit D to the contrary,
in no event shall the Monthly Rent for the First Offer Space be less than the
amount produced by multiplying the rentable square footage of the First Offer
Space by the average of the monthly rental rate per rentable square foot payable
by Tenant for all Premises (excluding the Retail Premises) then leased under
this Lease under Paragraphs 2, 5 and 7 hereof for the calendar month immediately
preceding the date the First Offer Space is added to this Lease.
If Tenant shall exercise the right of first offer granted herein,
Landlord shall use its reasonable efforts to delivery the First Offer Space to
Tenant on or about the availability rate set forth in Landlord's availability
notice, but Landlord does not guarantee that the First Offer Space will be
available on the stated availability date for the lease thereof, if the then
existing occupants of the First Offer Space shall hold over, or delivery is
delayed for any other reason beyond Landlord's reasonable control. In such
event, as Tenant's sole recourse, rent with respect to the First Offer Space
shall be abated until Landlord lawfully delivers the same to Tenant; provided,
however, that if the First Offer Space is not delivered to Tenant within one
hundred eighty (180) days after the availability date set forth in Landlord's
availability notice, as such one hundred eighty (180) day period shall be
extended for delays caused by Force Majeure, Tenant shall have the right to
terminate this Lease as respects such First Offer Space, which termination right
shall be exercised, if at all, no later than tea (10) Business Days after the
expiration of such one hundred eighty (180) day period, as so extended.
c. Limitation on Tenant's Right of First Offer. Notwithstanding the
foregoing, if on the date of exercise of the right of first offer, or the date
immediately preceding the date the Lease term for the First Offer Space is to
commence, (i) Tenant is in default under this Lease, or (ii) the Tenant
originally named herein or an Affiliate thereof (a) is not in occupancy of at
least seventy-five percent (75%) of the entire Office Premises then leased under
this Lease or (b) does not intend to occupy at least seventy-five percent (75%)
of the entire Office Premises then leased under this Lease, together with the
entire First Offer Space (but intends to assign this Lease or sublease the
Office Premises such that such occupancy threshold will not be met, or to
sublease the First Offer Space in whole or part), then, at Landlord's election,
Tenant shall have no right to lease the First Offer Space and the exercise of
the right of first offer shall be null and void.
55. Parking.
a. Commencing on the date that Tenant shall commence the conduct of
business from the Office Premises, Landlord shall provide Tenant, thirty (30)
parking spaces in the parking garage of the Building, and Tenant shal1 pay
Landlord or the operator of the garage, as directed by Landlord, for such
parking at the rate or charge in effect from time to time for parking in the
garage. Of such thirty (30) spaces, five (5) spaces shall be on a reserved,
assigned and labeled basis, fifteen (15) shall be grouped together in a
designated area of the parking garage, and ten (10) spaces shall be on an
unassigned, non-exclusive and unlabelled basis anywhere in the garage. Tenant
acknowledges that the monthly and hourly rates or charges in effect may vary
from time to time based on, among other things, the time of day, type of parking
(e.g., valet, self-park, or tandem) and general rate increases.
b. Tenant shall provide Landlord with advance written notice of the
names of each individual to whom Tenant from time to time distributes Tenant's
parking rights hereunder, and shall cause each such individual to execute
Landlord's standard waiver form for garage users. If the parking charge is not
paid when due, and such failure continues for ten (10) Business Days after
written notice to Tenant of such failure, then Landlord may terminate Tenant's
rights under this Paragraph 55 with respect to the number of spaces as to which
the parking charge remains unpaid. Further, if at any time Tenant releases to
Landlord (or Tenant fails to initially lease from Landlord) any parking space
provided for in this Paragraph 55, then Tenant's right under this Paragraph 55
to use such released parking space shall automatically forever terminate.
c. At Landlord's election from time to time (which may be On a daily
basis), Landlord may alternate the parking made available hereunder between
valet-type parking and the self-parking described in Paragraph 55.a. above;
provided, however, that in no event shall the five (5) reserved spaces described
41
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above be subject to valet parking unless required by applicable Legal
Requirements. In addition, at Landlord's election from time to time, upon at
least thirty (30) days' prior written notice to Tenant, Landlord may change all
of the parking hereunder to self parking on an assigned basis (subject to
Landlord's right from time to time thereafter to return to valet-type parking or
self-parking as described in Paragraph 55.a. above). In any case where
self-parking shall, be in effect, the parking spaces to be made available to
Tenant hereunder may contain a reasonable mix of spaces for compact cars.
Landlord shall take reasonable actions to ensure the availability of the parking
spaces leased by Tenant, but Landlord does not guarantee the availability of
those spaces at all times against the actions of other tenants of the Building
and users of the parking facility. Without limiting the foregoing, in no event
shall this Lease be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage, nor shall there be any abatement of rent hereunder (other
than the parking charge paid hereunder for any parking space no longer made
available), by reason of any reduction in Tenant's parking rights hereunder by
reason of strikes, lock-outs, labor disputes, shortages of material or labor,
fire, flood or other casualty, acts of God or any other cause beyond the control
of Landlord. Access to the parking spaces to be made available to Tenant shall,
at Landlord's option, be by card, pass, bumper sticker, decal or other
appropriate identification issued by Landlord, and Tenant's right to use the
parking facility is conditioned on Tenant's abiding by and shall otherwise be
subject to such reasonable rules and regulations as may be promulgated by
Landlord from time to time for the parking facility.
d. The parking rights set forth in this Paragraph 55 are
transferable to any permitted assignee of this Lease or subtenant of the
Premises or any portion thereof, but are otherwise non-transferable and shall
not inure to the benefit of any other transferee of Tenant. In the event of any
assignment or sublease of parking space rights that is approved by Landlord
(provided, however, that such approval may be granted or withheld by Landlord in
its sole and absolute discretion), Landlord shall be entitled to receive one
hundred percent (100%) of any profit received by Tenant in connection with such
assignment or sublease.
e. Upon Tenant's lease of any First Offer Space pursuant to
Paragraph 54 above, commencing as of the date of Tenant's occupancy of the
respective space for the conduct of business, Tenant shall have the right to
require that Landlord provide parking in the garage of the Building for up to
one (1) additional automobile for each two thousand one hundred (2,100) rentable
square feet contained within the respective space (as rounded down to the
nearest whole parking space), on all of the terms and conditions of this
Paragraph 55, except that all such additional parking spaces shall be on an
unassigned, non-exclusive and unlabelled basis anywhere in the garage (subject
to Paragraph 55.c. above).
THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set
forth at the top of page 1 hereof
LANDLORD: TENANT:
SKI HILLS PLAZA VENTURE, LLC, SHARPER IMAGE CORPORATION,
a Delaware limited liability company a Delaware corporation
By: /s/ James A. Pierre By: /s/ Jeffrey P. Forgan
----------------------------- --------------------------
Name: James A. Pierre Name: Jeffrey P. Forgan
----------------------------- --------------------------
Title: Vice President Title: EVP/CPO
----------------------------- --------------------------
By: /s/ Joe Williams
--------------------------
Name: Joe Williams
--------------------------
Title: SVP
--------------------------
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EXHIBIT A
OUTLINE OF PREMISES
Page 1 of 2
[GRAPHIC GOES HERE]
345 Spear Street
Floor 01
Exhibit A
Page 1 of 2
<PAGE>
EXHIBIT A
OUTLINE OF PREMISES
Page 2 of 2
[GRAPHIC GOES HERE]
345 Spear Street
Floor 06
Exhibit A
Page 2 of 2
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
HILLS PLAZA
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the Building
outside of the Premises without the prior written consent of Landlord, which
consent may he withheld by Landlord in Landlord's sole discretion, nor may any
sign, placard, picture, advertisement, name or notice be inscribed, displayed or
printed or affixed on or to any part of the Premises visible from the exterior
of the Premises if the item is disapproved by Landlord because Landlord
determines in good faith that the item is not consistent with the stature of the
Building as a first class office building. Landlord shall have the right to
remove, at Tenant's expense and without further notice to Tenant, any such sign,
placard, picture, advertisement, name or notice that remains in place in
violation of the preceding provisions where such violation shall continue for
five (5) Business Days after Landlord's written notice thereof to Tenant.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord.
If Landlord notifies Tenant in writing that Landlord objects to any
curtains, blinds, shades or screens attached to or hung in or used in connection
with any window or door of the Premises, such use of such curtains, blinds,
shades or screens shall be removed immediately by Tenant. No awning shall be
permitted on any part of the Premises.
2. No ice, drinking water, towel, barbering or bootblacking,
shoeshining or repair services, or other similar services shall be provided to
the Premises, except from persons authorized by Landlord and at the hours and
under regulations fixed by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Tenant Parties or used by Tenant
for any purpose other than for ingress to and egress from its Premises. The
halls, passages, exits, entrances, elevators, stairways, balconies and roof are
not for the use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Building and its tenants. No tenant and no employees or
invitees of any tenant shall go upon the roof of the Building.
5. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any interior or exterior door of the Premises without the
prior written consent of Landlord.
6. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
7. Tenant shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in any way
deface the Premises or any part thereof.
8. No furniture, freight or equipment of any kind shall be brought into
the Building without the consent of Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the tunes and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on a
platform of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Tenant. The elevator designated for freight by Landlord shall be available for
use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons employed to
move Tenant's equipment, material, furniture or other property in or out of the
Building must be acceptable to Landlord. The moving company must be a locally
recognized professional mover, whose primary business is the performing of
relocation services, and must be bonded and fully insured. In no event shall
Tenant employ any person or company whose presence may give rise to a labor or
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<PAGE>
other disturbance in the Project. A certificate or other verification of such
insurance must be received and approved by Landlord prior to the start of any
moving operations. Insurance must be sufficient in Landlord's sole opinion, to
cover all personal liability, theft or damage to the Project, including, but not
limited to, floor coverings, doors, walls, elevators, stairs, foliage and
landscaping. Special care must be taken to prevent damage to foliage and
landscaping during adverse weather. All moving operations shall be conducted at
such times and in such a manner as Landlord shall direct, and all moving shall
take place during non-business, hours unless Landlord agrees in writing
otherwise.
9. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning the Premises, unless otherwise agreed to
by Landlord. Except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be permitted to enter the Building
for the purpose of cleaning the Building or the Premises. Tenant shall not cause
any unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness.
10. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building. In no event shall Tenant keep, use, or permit to be used in the
Premises or the Building any guns, firearm, explosive devices or ammunition.
11. No cooking shall be done or permitted by Tenant in the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
Notwithstanding the foregoing, however, Tenant may maintain and use microwave
ovens and equipment for brewing coffee, tea, hot chocolate and similar
beverages, provided that Tenant shall (i) prevent the emission of any food or
cooking odor from leaving the Premises, (ii) be solely responsible for cleaning
the areas where such equipment is located and removing food-related waste from
the Premises and the Building, or shall pay Landlord's standard rate for such
service as an addition to cleaning services ordinarily provided, (iii) maintain
and use such areas solely for Tenant's employees and business invitees, not as
public facilities, and (iv) keep the Premises free of vermin and other pest
infestation and shall exterminate, as needed, in a manner and through
contractors reasonably approved by Landlord, preventing any emission of odors,
due to extermination, from leaving the Premises. Notwithstanding clause (ii)
above, Landlord shall, without special charge, empty and remove the contents of
one (1) 15-gallon (or smaller) waste container from the food preparation area so
long as such container is fully lined with, and the contents can be removed in,
a waterproof plastic liner or bag, supplied by Tenant, which will prevent any
leakage of food related waste or odors; provided, however, that if at any time
Landlord must pay a premium or special charge to Landlord's cleaning or
scavenger contractors for the handling of food-related or so-called "wet"
refuse, Landlord's obligation to provide such removal, without special charge,
shall cease.
12. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
13. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced into the Premises and the Building. No
boring or cutting for wires will be allowed without the prior consent of
Landlord. The location of telephones, call boxes and other office equipment
affixed to the Premises shall be subject to the prior approval of Landlord.
14. Upon the expiration or earlier termination of the Lease, Tenant
shall deliver to Landlord the keys of offices, rooms and toilet rooms which have
been furnished by Landlord to Tenant and any copies of such keys which Tenant
has made. In the event Tenant has lost any keys furnished by Landlord, Tenant
shall pay Landlord for such keys.
15. Tenant shall not lay linoleum, tile, carpet Or other similar floor
covering so that the same shall be affixed to the floor of the Premises, except
to the extent and in the manner approved in advance by Landlord. The expense of
repairing any damage resulting from a violation of this rule or removal of any
floor covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
16. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by Landlord, which
elevator usage shall be subject to the Building's customary charge therefor as
established from time to time by Landlord.
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<PAGE>
17. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls,
corridors, elevators or stairways in the Building, or to the Premises may be
refused unless the person seeking access is known to the person or employee of
the Building in charge and has a pass or is properly identified; provided,
however, that the foregoing shall not be applicable to the Retail Premises so
long as the same shall be operated as a retail Sharper Image store. Landlord
shall in no case be liable for damages for any good faith error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, Landlord reserves
the right to prevent access to the Building during the continuance of the same
by closing the doors or otherwise, for the safety of the tenants and protection
of property in the Building.
18. Tenant shall be responsible for insuring that the doors of the
Premises are closed and securely locked before leaving the Building and must
observe strict care and caution that all water faucets or water apparatus are
entirely shut off before Tenant or Tenant's employees leave the Building, and
that all electricity, gas or air shall likewise be carefully shut off so as to
prevent waste or damage, and for any default or carelessness Tenant shall make
good all injuries sustained by other tenants or occupants of the Building or
Landlord. Landlord shall not be responsible to Tenant for loss of property On
the Premises, however occurring, or for any damage to the property of Tenant
caused by the employees Or independent contractors of Landlord or by any other
person.
19. Landlord reserves the right to exclude or expel from the Building
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of the rules and regulations of the Building.
20. The requirements of any tenant will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord, and no employee will admit any person
(tenant or otherwise) to any office without specific instructions from Landlord.
21. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises without the prior written
consent of Landlord, except those intended solely for use by Tenant's employees
and located in break areas or lunch rooms.
22. Subject to Tenant's right of access to the Premises in accordance
with Building security procedures, Landlord reserves the right to close and keep
locked all entrance and exit doors of the Building on Saturdays, Sundays and
legal holidays and on other days between the hours of 6:00 PM. and 8:00 AM., and
during such further hours as Landlord may deem advisable for the adequate
protection of the Building and the property of its tenants.
3
<PAGE>
EXHIBIT C
FORM OP COMMENCEMENT DATE LETTER
Sharper Image Corporation
----------------------------------
----------------------------------
Re: Lease dated as of May 10, 2004 (the "Lease") between SRI HILLS PLAZA
VENTURE, LLC, a Delaware limited liability company ("Landlord"), and
Sharper Image Corporation, a Delaware corporation ("Tenant"), for office
premises (the "Office Premises") located on the 6th floor of the building
located at 345 Spear Street, San Francisco, California (the "Budding") and
for retail premises (the "Retail Premises") located on the ground floor of
the Building.
Ladies and Gentlemen:
This letter is given pursuant to Paragraph 2.b. of the Lease. Capitalized terms
not otherwise defined herein are used herein as defined in the Lease.
The Office Premises Commencement Date under the Lease occurred on
_____________________, which is the date Landlord delivered the Office Premises
to Tenant in the condition required by the Lease. The Office Premises Rent
Commencement Date, as determined in accordance with the Lease, is _____________
The Retail Premises Commencement Date under the Lease occurred on
_____________________, which is the date Landlord delivered the Retail Premises
to Tenant in the condition required by the Lease. The Retail Premises Rent
Commencement Date, as determined in accordance with the Lease, is _____________.
The Expiration Date under the Lease is ______________, which is the last day of
the 120th full calendar month following the Office Premises Rent Commencement
Date.
Please sign and return the enclosed copy of this letter evidencing your
agreement with the foregoing.
SRI HILLS PLAZA VENTURE, LLC,
a Delaware limited liability company
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
AGREED
------
SHARPER IMAGE CORPORATION.
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
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<PAGE>
EXHIBIT D
Appraisal Procedure
Within fifteen (15) days after the expiration of the thirty (30)-day
period set forth in Paragraphs 52.b. and 54.b. of the Lease for the mutual
agreement of Landlord and Tenant as to the fair market monthly rental, each
party hereto, at its cost, shall engage a real estate broker to act on its
behalf in determining the fair marker monthly rental. The brokers each shall
have at least ten (10) years' expense with leases in first-class high-rise
office buildings in the San Francisco financial district and shall submit to
Landlord and Tenant in advance for Landlord's and Tenant's reasonable approval
the appraisal methods to be used. If a party does not appoint a broker within
such fifteen (15)-day period but a broker is appointed by the other respective
party, the single broker appointed shall be the sole broker and shall set the
fair market monthly rental. If the two brokers are appointed by the parties as
stated in this paragraph, such brokers shall meet promptly and attempt to set
the fair market monthly rental. If such brokers are unable to agree within
thirty (30) days after appointment of the second broker, the brokers shall elect
a third broker meeting the qualifications stated in this paragraph within ten
(10) days after the last date the two brokers are given to set the fair market
monthly rental. Each of the parties hereto shall bear one-half (1/2) the cost of
appointing the third broker and of the third broker's fee. The third broker
shall be a person who has not previously acted in any capacity for either party.
The third broker shall conduct his own investigation of the fair market
monthly rent, and shall be instructed not to advise either party of his
determination of the fair marker monthly rent except as follows: When the third
broker has made his determination, he shall so advise Landlord and Tenant and
shall establish a date, at least five (5) days after the giving of notice by the
third broker to Landlord and Tenant, on which he shall disclose his
determination of the fair market monthly rent. Such ??? shall take place in the
third broker's office unless otherwise agreed by the parties. After having
initialed a paper on which his determination of fair market monthly rent is set
forth, the third broker shall place his determination of the fair market monthly
rent in a sealed envelope. Landlord's broker and Tenant's broker shall each set
forth their determination of fair market monthly rent on a paper, initial the
same and place them In sealed envelopes. Each of the three envelopes shall be
marked with the name of the party whose determination is inside the envelope.
In the presence of the third broker, the determination of the fair
market monthly rent by Landlord's broker and Tenant's broker shall be opened and
examined. If the higher of the two determinations is one hundred five percent
(105%) or less of the amount set forth in the lower determination, the average
of the two (2) determinations shall be the fair market monthly rent, the
envelope containing the determination of the fair market monthly rent by the
third broker shall be destroyed and the third broker shall be instructed not to
disclose his determination. If either party's envelope is blank, or does not set
forth a determination of fair market monthly rent, the determination of the
other party shall prevail and be treated as the fair market monthly rent. If the
higher of the (2) two determinations is more than one hundred five percent
(105%) of the amount of the lower determination, the envelope containing the
third broker's determination shall be opened. If the value determined by the
third broker is the average of the values proposed by Landlord's broker and
Tenant's broker, the third broker's determination of fair market monthly rent
shall be the fair market monthly rent. If such is not the case, fair market
monthly rent shall be the rent proposed by whichever of Landlord's broker or
Tenant's broker is closest to the determination of fair market monthly rent by
the third broker.
1