This excerpt taken from the N 8-K filed Apr 28, 2008.
CONSTRUCTION OF THE TENANT IMPROVEMENTS
3.1 Selection of Contractors.
3.1.1 The Contractor. Tenant shall retain a general contractor (the Contractor) to perform the Tenant Improvement Work. The Contractor shall be selected by Tenant, by written notice to Landlord, from a list of general contractors provided by Landlord or, at Landlords option, from a list of general contractors provided by Tenant and approved in writing by Landlord. For purposes of this Section 3.1.1, Landlords approval of a proposed general contractor shall not be considered unreasonably withheld if such general contractor (a) does not have trade references reasonably acceptable to Landlord, (b) does not maintain insurance as required under the terms of the Lease, (c) cannot be bonded for the work in an amount equal to 150% of the Final Costs (defined in Section 3.2.1 below), (d) does not provide current financial statements reasonably acceptable to Landlord, or (e) is not licensed as a contractor in the state/municipality in which the Premises is located. Tenant acknowledges that the foregoing is not an exclusive list of the reasons why Landlord may reasonably disapprove a proposed general contractor. Anything herein to the contrary notwithstanding, Landlord hereby approves of the following contractors as potential general contractors: (i) Novo Construction, Inc., a California corporation, (ii) McLarney Construction, Inc., a California corporation, and (iii) Donnelly Kerley Builders, Inc., a California corporation.
3.1.2 Tenants Agents. All subcontractors, laborers, materialmen and suppliers used by Tenant (together with the Contractor) shall be referred to herein collectively as Tenants Agents. Landlord shall have the right to approve or disapprove any of the subcontractors that shall perform services for the Tenant in relation to the Base Building, such approval not to be unreasonably withheld, conditioned or delayed.
3.2.1 Construction Contract; Final Costs. Tenant shall not enter into a construction contract with the Contractor (the Contract) unless it complies with Section 3.2.3 below, and following execution of the same, Tenant shall promptly deliver a copy of such Contract to Landlord. Before commencing construction of the Tenant Improvement Work, Tenant shall deliver to Landlord a detailed breakdown of the schedule of values, by trade, of the final costs that will be or have been incurred, as set forth more particularly in Section 1.2.1 above, in connection with the performance of the Tenant Improvement Work and that form the basis for the amount of the Contract (the Final Costs). Tenant shall be responsible for all costs associated with the Tenant Improvement Work, including the costs of the Tenant Improvement Allowance Items, to the extent the same exceed the aggregate amount that Landlord is required to disburse for such purpose pursuant to this Tenant Work Letter.
3.2.2 Landlords General Conditions for Tenant Improvement Work. The Tenant Improvement Work shall be performed in a good and workmanlike manner and in strict accordance with the Approved Construction Drawings. Tenant shall cause Tenants Agents to submit to Landlord schedules of all work relating to the Tenant Improvement Work, whereupon Landlord, within five (5) business days, shall inform Tenants Agents of any necessary changes thereto, and Tenant shall cause Tenants Agents to adhere to such corrected schedule. Tenant shall abide by all rules established by Landlord relating to the performance of the Tenant Improvement Work, including rules relating to the use of freight, loading dock and service elevators; any required shutdown of utilities (including lifesafety systems); storage of materials; and coordination of work with other tenants contractors. In consideration of Landlords coordination of the performance of the Tenant Improvement Work, Tenant shall pay Landlord a fee (the Coordination Fee) in an amount equal to 3% of the sum of the Final Costs (as the same may be increased hereunder) plus any other amounts expended by Tenant in performing the Tenant Improvement Work.
3.2.3 Warranty of Contractor. Tenant shall cause the Contractor to agree to be responsible for (a) the repair, replacement and/or removal, without additional charge, of any portion of the Tenant Improvements that is or becomes defective, in workmanship, materials or otherwise, on or before the date occurring one (1) year after the later to occur of (i) completion of the Tenant Improvements, or (ii) the Expansion Effective Date; and (b) the repair of any damage to the Building and/or Common Areas resulting from such repair, replacement and/or removal. Such agreement shall be expressly set forth in the Contract and, by its terms, shall inure to the benefit of both Landlord and Tenant as their respective interests may appear, and shall be enforceable by either Landlord or Tenant. Upon Landlords request, Tenant shall provide Landlord with any assignment or other assurance that may be necessary to enable Landlord to enforce such agreement directly against the Contractor.
3.2.4 Insurance Requirements. The Tenant Improvements shall be subject to the insurance provisions set forth in Sections 9.03 and 14 of the Lease.
3.2.5 Compliance. Subject to Sections 6.01 and 8.05 of the Agreement, the Tenant Improvement Work shall comply in all respects with (i) all applicable Laws; (ii) all applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) all applicable building material manufacturers specifications. Without limiting the foregoing, if, as a result of Tenants performance of the Tenant Improvement Work, Landlord becomes required under applicable Law to perform any inspection or give any notice relating to the Premises or the Tenant Improvement Work, or to ensure that the Tenant Improvement Work is performed in any particular manner, Tenant shall comply with such requirement on Landlords behalf and promptly thereafter provide Landlord with reasonable documentation of such compliance.
3.2.6 Inspection by Landlord. Notwithstanding anything to the contrary in the Lease, Landlord, at any time and without notice to Tenant, may enter the Premises to inspect the Tenant Improvement Work. Neither Landlords performance of such inspection nor its failure to perform such inspection shall result in a waiver of any of Landlords rights hereunder or be deemed to imply Landlords approval of the Tenant Improvement Work. If, by written notice to Tenant, Landlord reasonably identifies any defect in the Tenant Improvement Work, Tenant shall promptly cause the Contractor to correct such defect at no expense to Landlord. Notwithstanding anything else herein to the contrary, if a defect in the Tenant Improvement Work so identified by Landlord might adversely affect any system or structural component of the Building, the curtain wall or exterior appearance of the Building, or any other tenants use of the Building, or might give rise to liability on the part of Landlord to any third party, then (a) Landlord, at Tenants expense, may take such action (including suspension of construction of the Tenant Improvements) as Landlord reasonably deems necessary to correct such defect, and (b) until such defect is corrected, Landlord shall have no obligation to disburse any portion of the Tenant Improvement Allowance.
3.2.7 Meetings. Commencing upon the execution of the Agreement, Tenant shall hold weekly meetings with the Architect and the Contractor regarding the progress of the preparation of Plans, the obtaining of the Permits, and the performance of the Tenant Improvement Work. Such meetings shall be held at the Original Premises and at a reasonable
time of which Tenant shall provide Landlord with at least three (3) business days prior written notice. Landlord shall have the right to attend such meetings, and, upon Landlords request, Tenant shall cause Tenants Agents to attend such meetings. Tenant shall cause minutes of such meetings to be prepared and copies thereof to be delivered promptly to Landlord. One such meeting per month shall include a review of the Contractors current request for payment.
3.3 Tenants Covenants. Within 10 days after completing the Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located, in accordance with California Civil Code Section 3093 or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenants agent for such purpose, at Tenants expense. Within 30 days after completing the Tenant Improvements, (a) Tenant shall cause the Architect and the Contractor to (i) update the Approved Construction Drawings as necessary to reflect all changes made to the Approved Construction Drawings during the course of construction, (ii) certify to the best of their knowledge that the updated drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (iii) deliver to Landlord two (2) CD ROMS of such updated drawings in accordance with Landlords CAD Format Requirements (defined below); and (b) Tenant shall deliver to Landlord copies of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises. For purposes hereof, Landlords CAD Format Requirements shall mean (w) the version is no later than current Autodesk version of AutoCAD plus the most recent release version, (x) files must be unlocked and fully accessible (no cad-lock, read-only, password protected or signature files), (y) files must be in .dwg format, and (z) if the data was electronically in a non-Autodesk product, then files must be converted into dwg files when given to Landlord.