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STANDARD OFFICE LEASE FORM
WESTLAKE NORTH BUSINESS PARK
LANDLORD:WESTLAKE NORTH ASSOCIATES, LLC
TENANT: homestore.com, Inc.
<PAGE>
LEASE
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Basic Lease Information
The foregoing Basic Lease Information is incorporated in and made a part of
the Lease to which it is attached. If there is any conflict between the Basic
Lease Information and the Lease, the Basic Lease Information shall control.
Date (for reference
purposes only): March 7, 2000
Landlord: Westlake North Associates, LLC,
a Delaware limited liability company
Tenant: homestore.com, Inc.,
a Delaware corporation
Guarantor: N/A
Premises (Section 1.1): All of Building I ("Building") outlined in Exhibit A-1,
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containing 137,762 rentable square feet ("RSF") and
125,509 usable square feet ("USF") of building area,
subject to remeasurement as provided in Section 1.2.
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Building: Building I is located at 30700 Russell Ranch Road,
Westlake Village, California which consists of a
two-story building.
Project (Section 1.1): The land and the buildings outlined in Exhibit A-2,
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containing 336,684 RSF of total building area, located
in Westlake Village, California and known as Westlake
North Business Park.
Term (Section 2.1): Ninety (90) months
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Anticipated Commencement
Date: August 1, 2000
Commencement Date: See Section 2.1
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Anticipated Expiration
Date: January 31, 2008 (See Section 2.1)
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Monthly Base Rent
(Section 3.1(a)): $216,286 34/100, subject to adjustment as provided in
-------------- Sections 1.2 and 3.1(a).
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Tenant's Percentage
Share (Section 3.1(b)): 100%
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Parking (Section 15.8): 538 spaces
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Security Deposit
(Section 3.3): Letter of Credit for $8,329,856 Exhibit L) to be
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delivered at Lease signing; one month's Rent to be
delivered when Letter of Credit expires.
Rent Payment
Address (Section 3.7): Westlake North Associates, LLC
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c/o Investment Development Services, Inc.
888 West Sixth Street, 9th Floor
Los Angeles, California 90017
Attention: David Saeta
Permitted Use
(Section 4.1): General business office use plus any other use
----------- permitted to a significant Tenant (i.e., one occupying
15,000 RSF or more) within the Project
Landlord's
Address (Section 14.1): Westlake North Associates, LLC
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c/o Investment Development Services, Inc.
888 West Sixth Street, 9th Floor
Los Angeles, California 90017
Attention: David G. Mgrublian
Tenant's
Address (Section 14.1): homestore.com, Inc.
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225 West Hillcrest Drive, Suite 100
Thousand Oaks, California 91360
Attention: Catherine Kwong Giffen
with a copy to:
Pillsbury Madison & Sutro LLP
725 South Figueroa Street
Los Angeles, California 90017
Attention: John J. Duffy, Esq.
After Commencement Date, the notice address for Tenant
should be the Premises with a copy to:
Pillsbury Madison & Sutro LLP
725 South Figueroa Street
Los Angeles, California 90017
Attention: John J. Duffy, Esq.
Guarantor's
Address (Section 14.1): N/A
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Landlord's Brokers
(Section 15.5): Investment Development Services, Inc.
------------ 888 West Sixth Street, 9/th/ Floor
Los Angeles, California 90017
Tel: (213) 362-9319
Fax: (213) 627-9937
Attention: David Saeta
and
Grubb & Ellis Company
15260 Ventura Blvd., Suite 1800
Sherman Oaks, California 91403
Attention: James F. Lindvall and Thomas A. Festa
Tenant's Broker
(Section 15.5): Grubb & Ellis Company
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15260 Ventura Blvd., Suite 1800
Sherman Oaks, California 91403
Attention: James F. Lindvall
Exhibits
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Exhibit A-1 Plan(s) Outlining the Premises and the Building
Exhibit A-2 Plan(s) Outlining the Project
Exhibit B Work Letter Agreement
Schedule B-1 Description of Base Building Improvements
Exhibit C Form of Memorandum Confirming Term
Exhibit D N/A
Exhibit E Rules and Regulations
Exhibit F Option to Extend
Exhibit G N/A
Exhibit H N/A
Exhibit I Right of First Offer/Fair Market Value Option
Exhibit J Janitorial Services
Exhibit K Parking Rules and Regulations
Exhibit L Letter of Credit Information
Exhibit M Certain CAM Expense Limitations
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TABLE OF CONTENTS
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ARTICLE PAGE
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ARTICLE 1 Premises.................................................... 1
1.1 Lease of Premises........................................... 1
1.2 Remeasurement............................................... 2
ARTICLE 2 Term........................................................ 2
2.1 Term of Lease............................................... 2
2.2 Landlord to Construct Base Building Improvements............ 4
2.3 Tenant to Construct Tenant Improvements..................... 4
2.4 Entry Into Premises......................................... 4
2.5 Memorandum Confirming Term.................................. 5
2.6 Holding Over................................................ 5
2.7 Building II and Building III................................ 6
ARTICLE 3 Rent........................................................ 6
3.1 Base Rent and Additional Rent............................... 6
3.2 Procedures.................................................. 7
3.3 Letter of Credit, Security Deposit and First Month's Rent... 9
3.4 Late Payment................................................ 10
3.5 Other Taxes Payable by Tenant............................... 10
3.6 Certain Definitions......................................... 11
3.7 Rent Payment Address........................................ 13
3.8 Management Oriented Services................................ 13
ARTICLE 4 Use of the Premises......................................... 13
4.1 Permitted Use............................................... 13
4.2 Environmental Definitions................................... 14
4.3 Environmental Requirements.................................. 14
4.4 Compliance With Law......................................... 15
4.5 Rules and Regulations....................................... 15
4.6 Entry by Landlord........................................... 15
ARTICLE 5 Utilities and Services...................................... 16
5.1 Tenant's Responsibilities................................... 16
5.2 Landlord's Responsibilities................................. 16
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ARTICLE 6 Maintenance and Repairs..................................... 18
6.1 Obligations of Landlord..................................... 18
6.2 Obligations of Tenant....................................... 20
6.3 Tenant's Obligations at the End of the Term................. 20
ARTICLE 7 Alteration of the Premises.................................. 22
7.1 No Alterations by Tenant.................................... 22
7.2 Landlord's Property; Removal at End of Term................. 23
ARTICLE 8 Indemnification and Insurance............................... 24
8.1 Damage or Injury............................................ 24
8.2 Insurance Coverages and Amounts............................. 24
8.3 Insurance Requirements...................................... 25
8.4 Subrogation................................................. 25
8.5 Landlord's Fire and Casualty Insurance...................... 26
ARTICLE 9 Assignment or Sublease...................................... 26
9.1 Prohibition................................................. 26
9.2 Landlord's Consent or Termination........................... 27
9.3 Completion.................................................. 28
9.4 Tenant Not Released......................................... 28
9.5 Landlord's Consent.......................................... 29
9.6 Remedies.................................................... 29
ARTICLE 10 Events of Default and Remedies.............................. 30
10.1 Default by Tenant........................................... 30
10.2 Termination................................................. 31
10.3 Continuation................................................ 31
10.4 Remedies Cumulative......................................... 31
10.5 Tenant's Primary Duty....................................... 32
10.6 Abandoned Property.......................................... 32
10.7 Landlord Default............................................ 32
ARTICLE 11 Damage or Destruction....................................... 32
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11.1 Restoration; Rent Abatement.................................... 32
11.3 Exclusive Remedy............................................... 33
ARTICLE 12 Eminent Domain................................................. 34
12.1 Condemnation................................................... 34
12.2 Award.......................................................... 34
12.3 Temporary Use.................................................. 34
12.4 Definition of Taking........................................... 35
12.5 Exclusive Remedy............................................... 35
ARTICLE 13 Subordination and Sale......................................... 35
13.1 Subordination.................................................. 35
13.2 Sale of the Project............................................ 35
13.3 Estoppel Certificate........................................... 35
ARTICLE 14 Notices........................................................ 36
14.1 Method......................................................... 36
ARTICLE 15 Miscellaneous.................................................. 37
15.1 General........................................................ 37
15.2 No Waiver...................................................... 37
15.3 Attorneys' Fees................................................ 37
15.4 Exhibits....................................................... 37
15.5 Broker(s)...................................................... 38
15.6 Waivers of Jury Trial and Certain Damages...................... 38
15.7 Entire Agreement............................................... 38
15.8 Parking........................................................ 38
15.9 Choice of Law.................................................. 39
15.10 No Air Rights.................................................. 39
15.11 Modification of Lease.......................................... 39
15.12 Landlord's Title............................................... 39
15.13 Application of Payments........................................ 39
15.14 Time of Essence................................................ 40
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15.15 Right to Lease........................................... 40
15.16 Force Majeure............................................ 40
15.17 Exculpation.............................................. 40
15.18 No Discrimination........................................ 40
15.19 Counterparts............................................. 41
15.20 Roof Rights.............................................. 41
15.21 Signage.................................................. 41
15.22 Consent/Duty to Act Reasonably........................... 41
ARTICLE 16 Arbitration.............................................. 42
16.1 Exclusive Remedy/Payment Under Protest................... 42
</TABLE>
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<PAGE>
LEASE
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This Lease (together with the Basic Lease Information and Exhibits A
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through M which are incorporated into the Lease by this reference, collectively,
---------
the "Lease") is made as of the date specified in the Basic Lease Information, by
and between WESTLAKE NORTH ASSOCIATES, LLC, a Delaware limited liability company
("Landlord"), and the tenant specified in the Basic Lease Information
("Tenant"), who hereby agree as follows:
ARTICLE 1
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Premises
--------
1.1 Lease of Premises. (a) Landlord hereby leases to Tenant, and Tenant
-----------------
hereby leases from Landlord, for the term and subject to the covenants
hereinafter set forth, to all of which Landlord and Tenant hereby agree, the
space(s) described on Exhibit A-1 (the "Premises") in the Building described on
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Exhibit A-1 (the "Building") specified in the Basic Lease Information located on
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the real property specified in the Basic Lease Information and described more
specifically on Exhibit A-2 (the "Project"). The Project includes the land and
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the Building in which the Premises are located. Subject to the effect of
Section 1.2, Landlord and Tenant stipulate that, for purposes of this Lease, the
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Premises and the Building contain the number of RSF and USF specified in the
Basic Lease Information, and Tenant's Percentage Share specified in the Basic
Lease Information is the ratio of such RSF of the Premises to the RSF in the
Building (i.e., 100% because Tenant is leasing the entire building). During the
term of this Lease, Tenant shall have the parking rights described in Section
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15.8 and, in addition, the nonexclusive right, in common with other tenants of
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the Project, to use only for their intended purposes the common areas (such as
driveways, sidewalks, parking areas, loading areas and access roads) in the
Project that are designated by Landlord as common areas and not leased to or
allocated for the exclusive use of another tenant of the Project. Landlord
shall have the right from time to time to change the size, location,
configuration, character or use of any such common areas, construct additional
improvements or facilities in any such common areas, or close any such common
areas; provided, that no such change, construction or closing shall materially
and adversely affect Tenant's access to or use of the Premises or the exclusive
parking areas described in Section 15.8, except as provided in such Section.
------------
Tenant shall not interfere with the rights of Landlord and other tenants of the
Project to use such common areas.
(b) Common Area. Landlord and Tenant acknowledge that on the date hereof
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there is no "common area", as that term is used in this Lease. Landlord shall
have the absolute right to designate, improve and operate "common area" within
the Project from time to time in its sole discretion, although without Tenant's
written consent no CAM Expense, Capital Costs, depreciation, Property Taxes or
Insurance Costs related thereto shall be charged to Tenant. Tenant acknowledges
that it shall not have the right to utilize any such common area unless it
agrees in writing, in a form satisfactory to Landlord, to bear a reasonable
share of the costs related to such common area.
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<PAGE>
1.2 Remeasurement.
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(a) Landlord has caused its architect to measure the RSF and USF in the
Building and the Premises in accordance with the standards set forth in ANSI
Z65.1-1996, as promulgated by the Building Owners and Managers Association
("BOMA Standard"), and the results of such measurement are contained in the
Basic Lease Information. Tenant shall have the right, exercisable within
fifteen (15) days after the date hereof, to elect to cause its architect to
remeasure the Premises and the Building in accordance with the BOMA Standard.
If it so elects, Tenant shall deliver its architect's certification of the RSF
and USF of the Premises and the Building to Landlord within fifteen (15) days
after Tenant's election. If Tenant's architect certifies that the RSF or USF in
the Premises or the Building is less than ninety-eight percent (98%) or more
than one hundred two percent (102%) of the RSF or USF set forth in the Basic
Lease Information, Landlord and Tenant shall meet within fifteen (15) days after
Landlord's receipt of Tenant's architect's certification to attempt to resolve
the discrepancy. If they agree to change the RSF or USF in the Premises and the
Building, they shall reduce their agreement to writing and paragraph (b) shall
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apply. Otherwise, either Landlord or Tenant may submit the matter to
arbitration pursuant to Article 16 within thirty (30) days after the delivery to
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Landlord of Tenant's architect's certification, but if neither does so, the
measurements expressed in the Basic Lease Information shall bind both Landlord
and Tenant. Only a discrepancy (i.e., in RSF or USF) which is outside the 98%-
102% parameters set forth above may be disputed or arbitrated. If Tenant's
architect certifies that the RSF or USF of the Premises and the Building are
more than ninety-eight percent (98%) but less than one hundred two percent
(102%) of the RSF or USF set forth in the Basic Lease Information, no adjustment
to the RSF or USF of the Premises or the Building shall be made.
(b) If, by agreement of the parties or through arbitration, the RSF or USF
of the Premises and the Building are determined to be different than as stated
in the Basic Lease Information, then (i) all payments due from Tenant to
Landlord or from Landlord to Tenant based upon RSF or USF (including Base Rent
and Additional Monthly Rent) shall be proportionately, retroactively and
prospectively reduced or increased, as the case may be, to reflect the number of
RSF or USF or both as determined by agreement or arbitration, and (ii) Landlord
and Tenant shall promptly execute and deliver an amendment to this Lease which
memorializes the new RSF, USF or both and the revised payments.
ARTICLE 2
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Term
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2.1 Term of Lease. The term of this Lease ( the "Term") shall be the term
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specified in the Basic Lease Information, which shall commence on August 1,
2000, as such date is extended by Landlord Delays and Tenant Force Majeure
Delays, if any (the "Commencement Date").
(a) "Landlord Delays" are the actual periods of delay, if any, suffered by
Tenant in the construction of its Tenant Improvements or the installation of its
trade fixtures and personal property in the Premises on account of any of the
following: (i) the failure of the Entry Date
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<PAGE>
(defined in Section 2.4(a)) to occur by March 31, 2000; (ii) the failure of the
--------------
Delivery Date (defined below) to occur by May 1, 2000; provided, that after the
Delivery Date Landlord and its contractors and agents may remain in the Premises
for the purpose of completing the Base Building Improvements and for the other
purposes permitted in this Lease. However, during such period such Landlord
presence shall not interfere with or delay Tenant in the construction of its
Tenant Improvements. If such presence is interfering with or delaying Tenant,
Tenant shall notify Landlord in writing, and if Landlord does not within one (1)
business day thereafter correct the conduct which caused the interference or
delay, then Landlord Delay shall be deemed to have occurred to the extent of the
actual delay suffered thereby by Tenant; (iii) Tenant's failure or inability to
obtain a certificate of occupancy or temporary certificate of occupancy (either,
a "C of O") for the Building on account of a failure of Landlord to perform in a
timely manner its obligations in the Work Letter Agreement, including, without
limitation, Tenant's inability to obtain a C of O because Russell Ranch Road has
not been completed; and any other delay caused by Landlord; provided, that (A)
no reasonable exercise of its rights under this Lease shall be deemed to be a
delay by Landlord; and (B) no act, conduct or omission shall be deemed to be a
Landlord Delay if Landlord discontinues such act or conduct (or remedies an
omission) within one (1) business day after receiving written notice from Tenant
of the same (but Landlord shall be entitled to only five (5) such notices -- for
any delays after such five (5) notices have been given, the period of delay
shall begin on receipt by Landlord from Tenant of written notice of the act,
conduct or omission constituting the delay. Notwithstanding the foregoing, none
of the foregoing shall constitute a Landlord Delay, and the Commencement Date
shall not be postponed beyond August 1, 2000, to the extent that the reason for
the Landlord Delay was due to any Tenant Delay or any other action of Tenant
other than the normal construction of the Tenant's Improvements in the Premises.
For example, there shall be no Landlord Delay, and no postponement of the
Commencement Date beyond August 1, 2000, for the failure to obtain a C of O for
the Premises if the reason for the failure was the inability of Tenant to
complete portions of its work (e.g., restrooms) necessary to obtain the C of O
(assuming that such failure was not caused by another Landlord Delay).
(b) A "Tenant Force Majeure Delay" means any delay suffered by Tenant in
the completion of its Tenant Improvements on account of acts of God, strikes or
moratoriums on occupancy or the completion of the Tenant Improvements imposed by
any governmental agency, but only to the extent of the actual delay thereby
caused. However, unless such moratorium affects occupancy by tenants or the
completion of tenant improvements in the entire Project or a larger geographical
area (whether caused by the City of Westlake Village or the County of Los
Angeles), such as a moratorium on the granting of building permits within such
areas, such moratorium shall not be deemed to be a moratorium for purposes of
the preceding sentence.
(c) No act or circumstance shall constitute a Landlord Delay or a Tenant
Force Majeure Delay unless within three (3) business days after Tenant first
became aware of the alleged delay Tenant notifies Landlord of the occurrence of
the same and thereafter keeps Landlord reasonably informed of the continuance,
severity and likely end of the same. Tenant shall have the obligation to take
commercially reasonable actions, though not to spend significant amounts of
money, in order to shorten, terminate and otherwise avoid the effects of a
Landlord Delay and a Tenant Force Majeure Delay.
The Term shall end on the Expiration Date which shall be ninety (90)
calendar months following the Commencement Date. However, should the
Commencement Date occur
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<PAGE>
on other than the first day of a month, then the Term shall begin on the
Commencement Date and the Expiration Date shall be ninety (90) calendar months
following the end of the month in which the Commencement Date occurs. If the
Delivery Date does not occur on or before May 1, 2000, this Lease shall not be
void or voidable and Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom. Tenant acknowledges that (i) Tenant has inspected
the Premises and the Building (in their current state of completion) or has had
them inspected by professional consultants retained by Tenant, (ii) Tenant is
familiar with the plans for and condition of the Premises and the Building,
(iii) when completed in accordance with the plans therefor delivered to Tenant
and described in Schedule 1 to Exhibit B, the Premises and the Building will be
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suitable for Tenant's purposes, (iv) except for the Base Building Improvements
to be constructed or installed by Landlord pursuant to Exhibit B, the condition
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of the Premises and the Building is acceptable to Tenant. Except for the Base
Building Improvements, Landlord shall have no obligation to construct or install
any improvements in the Premises or the Project or to remodel, renovate,
recondition, alter or improve the Premises or the Building in any manner, and
Tenant shall accept the Premises "as is" on the Delivery Date, subject to (i)
Landlord's completion of minor aspects of and punch list items relating to the
Base Building Improvements, and (ii) completion by Landlord of the Base Building
Improvements in substantial accordance with the plans therefor and in compliance
with the applicable law. Tenant shall be deemed to have accepted the Premises,
however, subject to all matters reasonably discoverable or observable by Tenant
in the course of a standard punch list review.
2.2 Landlord to Construct Base Building Improvements. Landlord shall
------------------------------------------------
construct or install the Base Building Improvements to be constructed or
installed by Landlord pursuant to terms and conditions of the Work Letter
Agreement attached as Exhibit B. Landlord shall deliver possession of the
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Premises to Tenant on the Delivery Date, and Tenant shall accept such delivery
of the Premises, subject to the completion of minor items to be completed and
Landlord's punch list items described in the Work Letter Agreement attached
hereto as Exhibit B. The "Delivery Date" shall be the date on which
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construction of the Base Building Improvements (less any portion thereof which
Landlord is not required to construct on account of Tenant exercising its right,
under Section 4.2 of the Work Letter Agreement, to redesign the common areas
-----------
(lobbies and restrooms) of the Building and the second floor of the Building) is
in Landlord's reasonable judgment sufficiently complete, substantially in
accordance with the plans and specifications therefor and water tight, so that
Tenant may take possession of the Premises for the purpose of completing its
Tenant Improvements. Landlord shall give Tenant at least thirty (30) days'
notice of the anticipated Delivery Date and shall thereafter keep Tenant
informed of any changes in that schedule. Landlord shall in all cases give
Tenant at least ten (10) days' prior notice of the actual Delivery Date.
2.3 Tenant to Construct Tenant Improvements. Tenant shall construct the
---------------------------------------
Tenant Improvements pursuant to the terms and conditions of the Work Letter
Agreement attached as Exhibit B.
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2.4 Entry Into Premises.
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(a) Landlord shall permit Tenant early entrance to the Premises in order
to commence construction of the Tenants Improvements; provided, that the same
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can be accomplished by Tenant in a manner which not interfere with, or delay
Landlord in the completion of, the Base Building Improvements. Any such delay
shall constitute a Tenant Delay and shall not be a
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reason for the extension of or the postponement of the Commencement Date.
Landlord shall give Tenant five (5) business days prior notice of such date (the
"Entry Date"). If the Entry Date does not occur on or before September 1, 2000
for any reason other than damage described in Section 11.1 (in which case such
------------
Section shall control), Tenant shall have the right to terminate this Lease upon
written notice given to Landlord within thirty (30) days after September 1,
2000. In the event of such termination, Tenant shall have the right to recover
from Landlord its costs incurred in designing and building its Tenant
Improvements (but no other damages) but shall have no further obligation to
Landlord other than obligations arising prior to the date of termination.
(b) Landlord shall not be responsible for, and Tenant is required to
obtain insurance covering, any loss (including theft), damage or destruction to
any work or material installed or stored by Tenant or Landlord, or by any
contractor or individual involved in the construction of the Tenant
Improvements, or for any injury to Tenant or Tenant's employees, agents,
contractors, licensees, directors, officers, partners, trustees, visitors or
invitees or to any other person. Landlord shall have the right to post the
appropriate notices of non-responsibility and to require Tenant to provide
Landlord with evidence that Tenant has fulfilled its obligation to provide
insurance pursuant to this Lease. Such insurance shall be commercially
reasonable in coverage and amount, including deductibles (which shall be paid by
Tenant in the event of a covered loss). All terms and conditions of this Lease
shall apply to Tenant's early entry into the Premises except for the payment of
Base Rent, CAM Expenses, Property Taxes and Insurance pursuant to Section 3.1
-----------
below, which will not occur until the time described in such Section.
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(c) Following the Delivery Date, Tenant shall have the right to enter the
Premises for the purposes of completing Tenant Improvements and in order to
install its furniture, fixtures and equipment. Tenant's occupancy prior to the
Commencement Date shall be on all of the terms set forth in Section 2.4(a).
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2.5 Memorandum Confirming Term. Landlord and Tenant each shall, promptly
--------------------------
after the Commencement Date has been determined, execute and deliver to the
other a Memorandum Confirming Term in the form of Exhibit C attached hereto,
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which shall set forth the actual Commencement Date and the Expiration Date for
this Lease, but the term of this Lease shall commence and end in accordance with
this Lease whether or not the Memorandum Confirming Term is executed.
2.6 Holding Over. If, with the written consent of Landlord, Tenant holds
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possession of the Premises after expiration of the term of this Lease, Tenant
shall become a tenant from month to month under this Lease, but the Base Rent
during such month to month tenancy shall be equal to one hundred twenty-five
percent (125%) of the Base Rent in effect at the expiration of the term of this
Lease. Landlord and Tenant each shall have the right to terminate such month to
month tenancy by giving at least thirty (30) days' written notice of termination
to the other at any time, in which event such tenancy shall terminate on the
termination date set forth in such termination notice. If Tenant, without the
written consent of Landlord, holds possession of the Premises without the
written consent of Landlord, Tenant shall pay rent as set forth in the first
sentence of this Section 2.6 and shall be responsible to Landlord for all
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damages incurred by Landlord as a result of such holdover and reasonable
attorneys' fees and costs pursuant to Section 15.3 of this Lease. Nothing in
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this Lease shall be deemed to expressly, or by implication, grant Tenant the
right to hold over in the Premises, and Landlord's consent to any
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<PAGE>
holdover shall occur only if Landlord, in the exercise of its sole and absolute
discretion, agrees to such holdover pursuant to a separate written agreement
signed by both Landlord and Tenant.
2.7 Building II and Building III. Building II contains or will contain
----------------------------
65,517 rentable square feet and Building III contains or will contain 133,405
rentable square feet.
ARTICLE 3
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Rent
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3.1 Base Rent and Additional Rent. Tenant shall pay to Landlord the
-----------------------------
following amounts as rent for the Premises, subject to adjustment pursuant to
Section 1.2:
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(a) During the Term beginning with the Commencement Date, Tenant shall pay
to Landlord, as Base Rent each month the amount of Monthly Base Rent specified
below:
Monthly Base Rent Monthly Periods Following
Commencement Date
$108,143.17 Months 1-6
$216,286.34 Months 7-12
$224,937.79 Months 13-24
$233,935.31 Months 25-36
$243,292.72 Months 37-48
$253,024.43 Months 49-60
$263,145.40 Months 61-72
$273,671.22 Months 73-84
$284,618.07 Months 85-90
Notwithstanding the foregoing, if at any time during the first six (6)
months of the Term an Event of Default occurs with respect to a material
provision of this Lease, then the Monthly Base Rent for each of the first six
months of the Term shall be the same as the Monthly Base Rent for the second six
(6) months of the Term, and Tenant shall immediately pay to Landlord an amount
necessary so that the total amount paid as Monthly Base Rent to that point in
time is equal to the amount which would have been paid had Monthly Base Rent
been payable at the rate of $216,286.34 per month. In addition, Tenant shall
pay Monthly Base Rent for the balance of the first six (6) months of the Term at
such monthly rate. Should the Commencement Date occur other than on the first
day of a month, then the Monthly Base Rent for the partial
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month shall be at the rate of $216,286.34 prorated for such partial month, which
shall be paid on the Commencement Date.
(b) During each calendar year (or part thereof) during the Term, Tenant
shall pay to Landlord, as additional monthly rent ("Additional Monthly Rent"):
(i) Tenant's Percentage Share specified in the Basic Lease
Information of all CAM Expenses paid or incurred by Landlord in such year;
(ii) Tenant's Percentage Share specified in the Basic Lease
Information of the total dollar amount of all Property Taxes paid or
incurred by Landlord in such year; and
(iii) Tenant's Percentage Share specified in the Basic Lease
Information of the total dollar amount of all Insurance Costs paid or
incurred by Landlord in such year.
In addition, if prior to the Commencement Date Tenant occupies the Premises for
the conduct of regular business and the Tenant Improvements are substantially
completed, Tenant shall pay Landlord Additional Monthly Rent for the period
between the date of such occupation and the Commencement Date, upon receipt of
an invoice therefor from Landlord.
(c) Throughout the Term, Tenant shall pay, as additional rent, all other
amounts of money and charges required to be paid by Tenant under this Lease
("Additional Rent"), whether or not such amounts of money or charges are
designated Additional Rent. As used in this Lease, "rent" and "Rent" shall mean
and include all Base Rent, Additional Monthly Rent and Additional Rent payable
by Tenant in accordance with this Lease.
3.2 Procedures. The Additional Monthly Rent payable by Tenant pursuant to
----------
Section 3.1(b) hereof (CAM Expenses, Property Taxes and Insurance Costs) shall
--------------
be calculated and paid in accordance with the following procedures:
(a) On or before the Commencement Date, or as soon thereafter as
practicable, and on or before the first day of each subsequent calendar year
during the term of this Lease, or as soon thereafter as practicable, Landlord
shall give Tenant written notice of Landlord's estimate of the amounts payable
under Section 3.1(b) hereof for the balance of the first calendar year after the
--------------
Commencement Date or for the ensuing calendar year, as the case may be. Tenant
shall pay such estimated amounts to Landlord in equal monthly installments, in
advance, on or before the Commencement Date and on or before the first day of
each month during such balance of the first calendar year after the Commencement
Date or during such ensuing calendar year, as the case may be. If such notice
is not given for any calendar year, Tenant shall continue to pay on the basis of
the prior year's estimate until the month after such notice is given, and
subsequent payments by Tenant shall be based on Landlord's current estimate.
If, at any time, Landlord determines that the amounts payable under Section
-------
3.1(b) hereof for the current calendar year will vary from Landlord's estimate,
------
Landlord may, by giving written notice to Tenant, revise Landlord's estimate for
such year, and subsequent payments by Tenant for such year shall be based on
such revised estimate.
(b) By each April 1 during the Term, or a reasonable time thereafter,
Landlord shall give Tenant a written statement of the amounts payable by Tenant
under Section 3.1(b) hereof for the prior such calendar year certified by
--------------
Landlord. If such statement shows a total amount
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<PAGE>
owing by Tenant that is less than the estimated payments for such calendar year
previously made by Tenant, Landlord shall credit the excess to the next
installment(s) of Rent payable by Tenant (or, if the Term has ended, Landlord
shall refund the excess to Tenant with such statement). If such statement shows
a total amount owing by Tenant that is more than the estimated payments for such
calendar year previously made by Tenant, Tenant shall pay the deficiency to
Landlord within ten (10) days after delivery of such statement. Failure by
Landlord to give any notice or statement to Tenant under this Section 3.2 shall
-----------
not waive Landlord's right to receive, or Tenant's obligation to pay, the
amounts payable by Tenant under Section 3.1(b) hereof, unless the expense was
--------------
incurred more than two (2) years prior to the date it was assessed to Tenant.
(c) In the event that Tenant disputes the amount of CAM Expenses, Property
Taxes and Insurance Costs (collectively, "Operating Costs") set forth in any
annual statement delivered by Landlord, then subject to the terms and conditions
below, Tenant shall have the right to provide notice to Landlord that it intends
to inspect and copy Landlord's accounting records for the calendar year covered
by such statement during normal business hours ("Tenant Review") and shall sign
an agreement with Landlord whereby Tenant agrees not to disclose the results of
such (and the information obtained in connection with such) Tenant Review to
anyone other than Tenant's employees and/or attorneys and/or accountants or
other professionals who shall also sign an agreement to keep such information
confidential. If Tenant retains a third party to inspect Landlord's accounting
records (a "Third Party Auditor"), then as a condition precedent to any such
inspection, Tenant shall deliver to Landlord a copy of Tenant's written
agreement with such Third Party Auditor, which agreement shall include
provisions which state that (i) Landlord is an intended third-party beneficiary
of such agreement, (ii) such Third Party Auditor will not in any manner solicit
or agree to represent any other tenant of the Project with respect to an audit
or other review of Landlord's accounting records at the Building or Project, and
(iii) such Third Party Auditor shall maintain in strict confidence any and all
information obtained in connection with the Tenant Review and shall not disclose
such information to any person or entity other than to the management personnel
of Tenant and its attorneys. Any Tenant Review shall take place in Landlord's
office at the Project or at such other location as Landlord may reasonably
designate in Southern California, and Landlord will provide Tenant with
reasonable accommodations for such Tenant Review and reasonable use of such
available office equipment, but may charge Tenant for telephone calls, faxes,
and photocopies. Tenant shall provide Landlord with not less than two (2)
weeks' prior written notice of its desire to conduct such Tenant Review. In
connection with the foregoing review, Landlord shall furnish Tenant with such
reasonable supporting documentation relating to the subject statement as Tenant
may reasonably request. In no event shall Tenant have the right to conduct such
Tenant Review if (a) an Event of Default by Tenant is then in existence under
this Lease with respect to any of Tenant's monetary obligations, including,
without limitation, the payment by Tenant of Tenant's Percentage Share of
Operating Costs described in the statement which is the subject of Tenant's
Review, which payment, at Tenant's election, may be made under dispute or (b) if
any amount invoiced by Landlord to Tenant remains unpaid, but Tenant may make
such payment to Landlord under protest. In the event that following Tenant's
Review, Tenant and Landlord continue to dispute the amount of Operating Costs
shown on Landlord's statement and Landlord and Tenant are unable to resolve such
dispute, then subject to the last paragraph of this clause (c), either Landlord
or Tenant may submit the matter to arbitration pursuant to Article 16 of this
----------
Lease and the proper amount of the disputed items and/or categories of Operating
Costs shown on such statement shall be determined by such proceeding producing
an arbitration award. The
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<PAGE>
arbitration award shall be conclusive and binding upon both Landlord and Tenant.
If the resolution of the parties' dispute with regard to Tenant's Percentage
Share of Operating Costs shown on the statement, pursuant to the arbitration
award, reveals an error in the calculation of Tenant's Percentage Share of those
Operating Costs to be paid for such calendar year, the parties' sole remedy
shall be for the parties to make appropriate payments or reimbursements, as the
case may be, to each other as are determined to be owing. Any such payments
shall be made within thirty (30) days following the resolution of such dispute.
Tenant shall be responsible for all costs and expenses associated with Tenant's
Review, and Tenant shall be responsible for all reasonable audit fees,
attorney's fees and related costs of Tenant relating to an Arbitration Award
(collectively, the "Costs"), provided that if the parties' final resolution of
the dispute involves the overstatement by Landlord for such calendar year in
excess of five percent (5%), then Landlord shall be responsible for all Costs.
An overcharge by Landlord of Operating Costs shall not entitle Tenant to
terminate this Lease. Landlord shall not be obligated to make a refund to Tenant
until thirty (30) days after the issuance of a final arbitration award. Subject
to the terms set forth below, this provision shall survive the termination of
this Lease to allow the parties to enforce their respective rights hereunder.
Tenant shall have no further right to conduct a Tenant Review with respect
to any statement submitted by Landlord, or to dispute the amount of Tenant's
Percentage Share of Operating Costs set forth in the applicable statement,
unless Tenant (i) notifies Landlord within six (6) months after receipt of the
statement that Tenant disputes or wishes to audit the same, (ii) Tenant
completes its audit within twelve (12) months after receipt of such statement,
if an audit is performed, and (iii) unless the matter has otherwise been
resolved by Landlord and Tenant, commences arbitration with respect to such
dispute within twelve (12) months after receipt of such statement.
(d) If the term of this Lease commences or ends on a day other than the
first or last day of a calendar year, respectively, the amounts payable by
Tenant under Section 3.1(b) hereof applicable to the calendar year in which such
--------------
term commences or ends shall be prorated according to the ratio which the number
of days during the term of this Lease in such calendar year bears to three
hundred sixty-five (365). Termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 3.2(b) hereof to be
--------------
performed after such termination.
3.3 Letter of Credit, Security Deposit and First Month's Rent. Upon
---------------------------------------------------------
signing this Lease, Tenant shall deliver to Landlord a letter of credit in the
form and amount required by Exhibit L and an amount equal to the Base Rent for
---------
the first two (2) months of the term of this Lease for which the Base Rent is to
be paid, which amount Landlord shall apply to the Base Rent for such first two
(2) months. Upon the expiration of such letter of credit, Tenant shall pay to
Landlord an amount equal to the monthly Base Rent and Additional Rent then
applicable under this Lease (the "Security Deposit"). The Security Deposit
shall be held by Landlord as security for the performance by Tenant of all of
the covenants of this Lease to be performed by Tenant, and Tenant shall not be
entitled to interest thereon. If Tenant fails to perform any of the covenants
of this Lease to be performed by Tenant, then Landlord shall have the right, but
no obligation, to apply the proceeds of the Security Deposit, or so much thereof
as may be necessary, or to call on the letter of credit and utilize the proceeds
thereof to cure any such failure by Tenant, without prior notice to Tenant. If
Landlord applies the proceeds of the letter of credit or the Security Deposit or
any part thereof to cure any such failure by Tenant, then
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<PAGE>
Tenant shall immediately restore the letter of credit to its amount immediately
prior to such application and pay to Landlord the sum necessary to restore the
Security Deposit to the full amount required by this Section 3.3. Landlord shall
-----------
return any remaining portion of the Security Deposit to Tenant as soon after
termination of this Lease as Landlord is able to determine, acting reasonably,
whether Tenant owes any further obligation to Landlord under this Lease, but in
any event no later than ninety (90) days after termination of the Lease. Tenant
acknowledges that in the event this Lease is terminated following an Event of
Default by Tenant, Landlord shall have the right to utilize the proceeds of the
letter of credit, if any then remain, or the amount of the Security Deposit to
pay or reimburse Landlord for amounts due to Landlord under the terms of this
Lease. Upon termination of the original Landlord's or any successor owner's
interest in the Premises, the original Landlord or such successor owner shall be
released from further liability with respect to the letter of credit or Security
Deposit upon the original Landlord's or such successor owner's transferring the
letter of credit or Security Deposit to the new owner.
3.4 Late Payment. Tenant acknowledges that the late payment by Tenant of
------------
any monthly installment of Base Rent or Additional Monthly Rent will cause
Landlord to incur costs and expenses, the exact amount of which is extremely
difficult and impractical to fix. Such costs and expenses will include
administration and collection costs and processing and accounting expenses.
Therefore, if any monthly installment of Base Rent or Additional Monthly Rent is
not received by Landlord within five (5) days after such installment is due, or
three (3) days after Landlord notifies Tenant that such installment is due,
whichever is later, Tenant shall immediately pay to Landlord a late charge equal
to three percent (3%) of such delinquent installment; provided, that no late
--------
charge shall be due with respect to the first delinquent installment within any
twenty-four (24) month period. Landlord and Tenant agree that such late charge
represents a reasonable estimate of such costs and expenses and is fair
reimbursement to Landlord. In no event shall such late charge be deemed to
grant to Tenant a grace period or extension of time within which to pay any
monthly rent or prevent Landlord from exercising any right or enforcing any
remedy available to Landlord upon Tenant's failure to pay each installment of
monthly rent due under this Lease when due, including the right to terminate
this Lease and recover all damages from Tenant. All amounts of money payable by
Tenant to Landlord hereunder, if not paid when due, shall bear interest from the
due date (and disregarding the five (5) day period applicable to late charges)
until paid at the lower of the highest rate permitted by law and two percent
(2%) over the rate designated in the Wall Street Journal as the Prime Rate at
the time such amounts first become due, adjusted monthly ("Interest Rate") and
Tenant shall pay such interest to Landlord on written demand in addition to the
late charge, which late charge (as contrasted with interest) will not be due
unless Tenant is late in making such payment by more than five (5) days.
3.5 Other Taxes Payable by Tenant. Tenant shall reimburse Landlord upon
-----------------------------
written demand for all taxes, assessments, excises, levies, fees and charges,
including all payments related to the cost of providing facilities or services,
whether or not now customary or within the contemplation of Landlord and Tenant,
that are payable by Landlord and levied, assessed, charged, confirmed or imposed
by any public or government authority upon, or measured by, or reasonably
attributable to (a) the cost or value of Tenant's furniture, fixtures, equipment
and other personal property located in the Premises or the cost or value of any
improvements made in or to the Premises by or for Tenant, regardless of whether
title to such improvements is vested in Tenant or Landlord, but only to the
extent not included in Property Taxes, (b) any rent payable under this Lease,
including any gross income tax or excise tax levied by any public or
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<PAGE>
government authority with respect to the receipt of any such rent so long as
such tax is a tax on rent, (c) the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
(d) this transaction or any document to which Tenant is a party creating or
transferring Tenant's interest or Tenant's estate in the Premises. Such taxes,
assessments, excises, levies, fees and charges shall not include net income
(measured by the income of Landlord from all sources or from sources other than
solely rent) or franchise taxes of Landlord, unless levied or assessed against
Landlord in whole or in part in lieu of, as a substitute for, or as an addition
to any such taxes, assessments, excises, levies, fees and charges. All taxes,
assessments, excises, levies, fees and charges payable by Tenant under this
Section 3.5 shall be deemed to be, and shall be paid as, additional rent.
-----------
3.6 Certain Definitions. As used in this Lease, certain words are defined
-------------------
as follows:
(a) "CAM Expenses" shall mean all direct and indirect costs and expenses
paid or incurred by Landlord in connection with the ownership, management,
operation, maintenance or repair of the Premises, the Building, the parking
areas described in Section 15.8, any portion of the Project which is located
------------
East of Russell Ranch Road and (subject to Section 1.1(b)) the common areas in
--------------
the Project or providing services in accordance with this Lease, including but
not limited to the following, to the extent that each relates to the ownership,
management, operation, maintenance and repair of the Premises, the Building,
such common areas and parking areas and such portion of the Project: permit and
inspection fees; electricity, gas, fuel, steam, heat, light, power, water, sewer
and other utilities; the Management Fees (defined below); security and guard
service (which shall be supplied in the sole discretion of Landlord);
extermination, water treatment, garbage and waste disposal, rubbish removal,
janitorial services, plumbing and other services; maintenance of the fire
suppression systems; landscape maintenance; supplies, tools, materials and
equipment; accounting and other professional fees and expenses; painting the
exterior of the Building; maintaining and repairing the foundations, the
exterior walls and roof, the parking and loading areas, the sidewalks,
landscaping and common areas, and the other parts of the Project East of Russell
Ranch Road; amounts paid to Tenant pursuant to Section 6.1(b), other than
--------------
interest costs; costs and expenses required by or resulting from compliance with
any laws, ordinances, rules, regulations or orders applicable to the Project,
other than Buildings II and III, regardless of whether they are Capital Costs,
other than those costs and expenses which are Landlord's responsibility under
Exhibit B; and costs and expenses of contesting by appropriate proceedings any
---------
matter concerning managing, operating, maintaining or repairing the Project,
other than Buildings II and III, or the validity or applicability of any law,
ordinance, rule, regulation or order relating to the Project, or the amount or
validity of any Property Taxes with respect to the Premises. CAM Expenses shall
not include Property Taxes, Insurance Costs, charges payable by Tenant pursuant
---
to Section 3.5 hereof, depreciation on the Project, costs of tenants'
-----------
improvements, real estate brokers' commissions, the cost of repair or
restoration work necessitated by fire or other casualty damage to the extent of
net insurance proceeds received by Landlord with respect thereto; provided, that
the amount of such cost which is not covered by such net insurance proceeds
(other than the deductible amount) and thus is included in CAM Expenses shall
not exceed One Million Dollars ($1,000,000) and shall be amortized, with
interest at a reasonable rate, over the then remaining term of the Lease. The
deductible amounts under any casualty (including earthquake) insurance policies
maintained by Landlord with reference to the Premises and the Building shall be
CAM Expenses; provided, that the deductible amount under a policy of earthquake
--------
insurance shall be amortized (with interest) over the useful life of the
Improvements built or repaired by Landlord
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<PAGE>
following an earthquake; and provided further, that any such deductible amount
----------------
under a casualty insurance policy shall be amortized and included in CAM Expense
(with interest) in equal monthly installments over the balance of the Term of
the Lease. Notwithstanding the foregoing, if any of the foregoing CAM Expenses
are Capital Costs, then except as otherwise provided above Landlord shall
include in CAM Expenses for any particular year only that portion of such CAM
Expenses (together with a reasonable interest component) which is properly
allocable to such year in accordance with an amortization schedule permitted
under general accepted accounting principles. The costs which may be included in
CAM Expenses are further limited by the provisions of Exhibit M.
---------
(b) "Property Taxes" shall mean all taxes, assessments, excises, levies,
fees and charges (and any tax, assessment, excise, levy, fee or charge levied
wholly or partly in lieu thereof or as a substitute therefor or as an addition
thereto) of every kind and description, general or special, ordinary or
extraordinary, foreseen or unforeseen, secured or unsecured, whether or not now
customary or within the contemplation of Landlord and Tenant, that are levied,
assessed, charged, confirmed or imposed by any public or government authority on
or against, or otherwise with respect to, the Premises or any part thereof or
any real property which is part of the Project East of Russell Ranch Road or any
personal property used in connection with the Premises. Property Taxes shall
include any gross receipts tax but shall not include net income (measured by the
income of Landlord from all sources or from sources other than solely rent) or
franchise taxes of Landlord, unless levied or assessed against Landlord in whole
or in part in lieu of, as a substitute for, or as an addition to any Property
Taxes. Property Taxes shall not include charges payable by Tenant pursuant to
Section 3.5 hereof.
-----------
(c) "Insurance Costs" shall mean all premiums and other charges for all
property, earthquake, flood, loss of rental income, business interruption,
liability and other insurance carried by Landlord relating to the Premises or
any real property which is part of the Project East of Russell Ranch Road.
(d) "Capital Costs" refers to costs which are required to be capitalized,
rather than expensed, in accordance with the generally accepted accounting
principles.
(e) To the extent Landlord is providing services or incurring costs
included within the categories of CAM Expenses and/or Insurance Costs or
incurring Property Taxes that pertain to Buildings I, II and III or the Project
as a whole as contrasted to CAM Expenses, Insurance Costs and Property Taxes
that pertain solely to Building I, the parking areas described in Section 15.8
------------
and that portion of the Project which is East of Russell Ranch Road (for
example, if such buildings are all covered by the same insurance policy or
security contract), such costs shall be allocated by Landlord to Building I and
included in CAM Expenses, Insurance Costs and Property Taxes allocable to
Building I on a pro rata basis based on the RSF in Building I (137,762 RSF) to
the RSF in all three Buildings (336,684 RSF), which pro rata share is 40.92%.
These percentages shall be applicable beginning with the Commencement Date
regardless of whether Buildings II and III have been started or completed on the
date thereof.
(f) In the event that the Premises, the Building, the parking areas
described in Section 15.8 and any other portion of the Project East of Russell
------------
Ranch Road ever become a single parcel for real property tax assessment purposes
(and Landlord agrees to use commercially reasonable efforts to cause them to
be), Landlord shall not unreasonably withhold or delay its consent to a
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request by Tenant to cause Tenant to be responsible only for CAM Expenses,
Property Taxes and Insurance Costs which relate to such single parcel alone,
subject to paragraph (e) above, plus Tenant's share which relates to common
-------------
areas within the Project, if any, permitted by Section 1.1(b).
--------------
(g) "Management Fees" mean an amount equal to Eight Thousand Eight Hundred
Eighty-Five and 65/100 dollars ($8,885.65) for each of the first twelve (12)
months following the Commencement Date, increased by three percent (3%) per
year, compounded, for each subsequent twelve (12) consecutive month period
during the Term, and prorated for any partial calendar month at the beginning of
the Term. The Management Fees are attributed to and applicable only to the
Premises and will not be allocated to any other portion of the Project.
3.7 Rent Payment Address. Tenant shall pay all Base Rent and Additional
--------------------
Monthly Rent under Section 3.1 hereof to Landlord, in advance, on or before the
-----------
first day of each and every calendar month during the term of this Lease.
Tenant shall pay all rent to Landlord without notice, demand, deduction,
abatement or offset, except as otherwise set forth in the Lease, in lawful money
of the United States of America, at the address for the payment of rent
specified in the Basic Lease Information, or to such other person or at such
other place as Landlord may from time to time designate in writing.
3.8 Management Oriented Services. Landlord agrees that it will not
----------------------------
provide to any other tenant in the Project management oriented services (such as
cleaning or repair services) on a basis which is more favorable to such tenant
than Landlord is willing to provide the same services to Tenant.
ARTICLE 4
---------
Use of the Premises
-------------------
4.1 Permitted Use. Tenant shall use the Premises only for the Permitted
-------------
Use of the Premises specified in the Basic Lease Information and for lawful
purposes incidental thereto, and no other purpose whatsoever. Tenant shall not
do or permit to be done in, on or about the Premises, nor bring or keep or
permit to be brought or kept therein, anything which is prohibited by or will in
any way conflict with any law, ordinance, rule, regulation or order now in force
or which may hereafter be enacted, or which is prohibited by any insurance
policy carried by Landlord for the Project, or will in any way increase the
existing rate of (except to the extent Tenant pays the cost of any such
increase), or disallow any fire rating or sprinkler credit, or cause a
cancellation of, or affect any insurance for the Project. If Tenant causes any
increase in the premium for any insurance covering the Project carried by
Landlord, Tenant shall pay to Landlord, on written demand as Additional Rent,
the entire amount of such increase. Tenant shall not do or permit anything to
be done in or about the Premises which will in any way unreasonably obstruct or
interfere with the rights of Landlord or other tenants of the Project, or injure
or annoy them. Tenant shall not use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable activity, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises or commit or suffer
to be committed any waste in, on or about the Premises. Tenant shall not store
any materials, equipment or vehicles outside the
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<PAGE>
Premises and agrees that no washing of any type (including washing vehicles)
shall take place in or outside the Premises. Tenant shall not receive, store or
otherwise handle any product or material that is explosive or highly
inflammable. Tenant shall not install any signs on the Premises except as
permitted in the Work Letter Agreement. Tenant shall, at Tenant's expense,
remove all such signs prior to or upon termination of this Lease, repair any
damage caused by the installation or removal of such signs, and restore the
Premises to the condition that existed before installation of such signs.
4.2 Environmental Definitions. As used in this Lease, "Hazardous
-------------------------
Material" shall mean any substance that is (a) defined under any Environmental
Law as a hazardous substance, hazardous waste, hazardous material, pollutant or
contaminant, (b) a petroleum hydrocarbon, including crude oil or any fraction or
mixture thereof, (c) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (d)
otherwise regulated pursuant to any Environmental Law. As used in this Lease,
"Environmental Law" shall mean all federal, state and local laws, statutes,
ordinances, regulations, rules, judicial and administrative orders and decrees,
permits, licenses, approvals, authorizations and similar requirements of all
federal, state and local governmental agencies or other governmental authorities
pertaining to the protection of human health and safety or the environment, now
existing or later adopted during the term of this Lease. As used in this Lease,
"Permitted Activities" shall mean the lawful activities of Tenant that are part
of the ordinary course of Tenant's business in accordance with the Permitted Use
specified in the Basic Lease Information. As used in this Lease, "Permitted
Materials" shall mean the materials that do not constitute Hazardous Materials
and which are otherwise handled by Tenant in the ordinary course of conducting
Permitted Activities.
4.3 Environmental Requirements. Tenant hereby agrees that: (a) Tenant
--------------------------
shall conduct, or permit to be conducted, on the Premises only activities which
are Permitted Activities; (b) Tenant shall not use, store or otherwise handle,
or permit any use, storage or other handling of, any Hazardous Material except
for small amounts of office supplies for the photocopy machine, white-out and
the like, on or about the Premises, and except for a diesel generator and fuel
therefor which are part of the Tenant Improvements, and which Tenant agrees to
install and operate in accordance with Environmental Law; (c) Tenant shall
obtain and maintain in effect all permits and licenses required pursuant to any
Environmental Law for Tenant's activities on the Premises, and Tenant shall at
all times comply with all applicable Environmental Laws; (d) Tenant shall not
engage in the storage, treatment or disposal on or about the Premises of any
Hazardous Material except for any temporary accumulation of waste generated in
the course of Permitted Activities; (e) Tenant shall not install any aboveground
or underground storage tank or any subsurface lines for the storage or transfer
of any Hazardous Material; (f) Tenant shall not cause or permit to occur any
release of any Hazardous Material or any condition of pollution or nuisance on
or about the Premises, whether affecting surface water or groundwater, air, the
land or the subsurface environment; (g) Tenant shall promptly remove from the
Premises any Hazardous Material introduced, or permitted to be introduced, onto
the Premises by Tenant; and (h) if any release of a Hazardous Material to the
environment, or any condition of pollution or nuisance, occurs on or about or
beneath the Premises as a result of any act or omission of Tenant or its agents,
officers, employees, contractors, invitees or licensees, Tenant shall, at
Tenant's sole cost and expense, promptly undertake all remedial measures
required to clean up and abate or otherwise respond to the release, pollution or
nuisance in accordance with all applicable Environmental Laws. Landlord and
Landlord's representatives
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<PAGE>
shall have the right, but not the obligation, to enter the Premises at any
reasonable time and upon reasonable notice for the purpose of inspecting the
Premises in order to determine Tenant's compliance with the requirements of this
Lease and applicable Environmental Law. If Landlord gives written notice to
Tenant that Tenant's use, storage or handling of any Hazardous Material on the
Premises may not comply with this Lease or applicable Environmental Law, Tenant
shall correct any such violation within five (5) days after Tenant's receipt of
such notice from Landlord, but nothing herein shall be construed to allow Tenant
to use, store or handle Hazardous Materials in the Premises. Tenant shall
indemnify and defend Landlord against and hold Landlord harmless from all
claims, demands, actions, judgments, liabilities, costs, expenses, losses,
damages, penalties, fines and obligations of any nature (including reasonable
attorneys' fees and disbursements incurred in the investigation, defense or
settlement of claims) that Landlord may incur as a result of, or in connection
with, claims arising from the presence, use, storage, transportation, treatment,
disposal, release or other handling, on or about or beneath the Premises, of any
Hazardous Material introduced or permitted on or about or beneath the Premises
by any act or omission of Tenant or its agents, officers, employees,
contractors, invitees or licensees. The liability of Tenant under this Section
-------
4.3 shall survive the termination of this Lease with respect to acts or
---
omissions that occur before such termination.
Notwithstanding the foregoing, but without limiting Tenant's liability
under this Section 4.3, Tenant shall be entitled to use at the Premises office
-----------
supplies regularly used in the conduct of Tenant's business so long as the same
are purchased, used, stored and disposed of in accordance with applicable
Environmental Laws. From time to time at Landlord's request Tenant shall advise
Landlord which, if any, of these supplies constitute Hazardous Material. Tenant
acknowledges that (i) Landlord has delivered to Tenant a copy of the most
recent Phase I environmental report pertaining to the Premises which is in
Landlord's possession, and (ii) Tenant has read and is satisfied with the same.
4.4 Compliance With Law. Tenant shall, at Tenant's sole cost and expense,
-------------------
promptly comply with all laws, ordinances, rules, regulations, orders and other
requirements of any government or public authority now in force or which may
hereafter be in force, with all requirements of any board of fire underwriters
or other similar body now or hereafter constituted, and with all directions and
certificates of occupancy issued pursuant to any law by any governmental agency
or officer, insofar as any thereof relate to or are required by the condition,
use or occupancy of the Premises or the operation, use or maintenance of any
personal property, trade fixtures, machinery, equipment or improvements in the
Premises, but Tenant shall not be required to make structural changes or changes
to the systems included in Base Building Improvements unless such changes are
related to or required by Tenant's acts or use of the Premises or by
improvements made by or for Tenant or are otherwise specifically made the
responsibility of Tenant in this Lease.
4.5 Rules and Regulations. Tenant shall faithfully observe and fully
---------------------
comply with all reasonable rules and regulations (the "Rules and Regulations")
from time to time made in writing and delivered to Tenant by Landlord for the
safety, care, use and cleanliness of the Project or the common areas of the
Project and the preservation of good order therein. If there is any conflict,
this Lease shall prevail over the Rules and Regulations.
4.6 Entry by Landlord. Landlord shall have the right to enter the
-----------------
Premises at any reasonable time and upon reasonable prior notice (except in the
event of an emergency) to (a)
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<PAGE>
inspect the Premises, (b) exhibit the Premises to prospective purchasers,
lenders or tenants, (c) determine whether Tenant is performing all of Tenant's
obligations, (d) supply any service to be provided by Landlord, (e) post notices
of nonresponsibility, and (f) make any repairs to the Premises, or make any
repairs to any adjoining space or utility services, or make any repairs,
alterations or improvements to any other portion of the Project, provided all
such work shall be done as promptly as reasonably practicable and so as to cause
as little interference to Tenant as reasonably practicable. Tenant waives all
claims for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or
any other loss occasioned by such entry, except to the extent caused by
Landlord's gross negligence or willful misconduct. Tenant shall provide Landlord
at all times, without request, with a key or keys to all locks for all doors in,
on or about the Premises (excluding Tenant's vaults, safes and similar special
security areas designated in writing by Tenant). Landlord shall have the right
to use any and all means which Landlord may deem proper to open such doors in an
emergency to obtain entry to the Premises. Any entry to the Premises obtained by
Landlord by any of such means shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof.
ARTICLE 5
---------
Utilities and Services
----------------------
5.1 Tenant's Responsibilities. Tenant shall pay, directly to the
-------------------------
appropriate supplier before delinquency, for all telephone services supplied to
the Premises (and with any other service or utility that Landlord, in the
exercise of its reasonable discretion, agrees that Tenant may provide directly
to itself rather than through Landlord, collectively "Exempt S&U") together with
all taxes, assessments, surcharges and similar expenses relating to such
utilities and services. If any such utilities or services are jointly metered
with the Premises and another part of the Project, Landlord shall reasonably
determine Tenant's share of the cost of such jointly metered utilities and
services based on Landlord's estimate of usage, and Tenant shall pay as
additional rent Tenant's share of the cost of such jointly metered utilities and
services to Landlord within ten (10) days after receipt of Landlord's written
statement for such cost. Landlord shall not be in default under this Lease or
be liable for any damage or loss directly or indirectly resulting from, nor
shall the rent be abated (except as provided in Section 5.2(i)) or a
--------------
constructive or other eviction be deemed to have occurred by reason of, any
interruption of or failure to supply or delay in supplying any such utilities
and services, including those described in Section 5.2 below, or any limitation,
-----------
curtailment, rationing or restriction on use of water, electricity, gas or any
resource or form of energy or other service serving the Premises or the Project,
whether such results from mandatory restrictions or voluntary compliance with
guidelines. To the extent Tenant is permitted by Landlord to provide an Exempt
S&U, there shall be excluded from CAM Expenses any service or utility supplied
to the Building by the Exempt S&U.
5.2 Landlord's Responsibilities. Landlord shall provide the following
---------------------------
utilities and services to the Building:
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<PAGE>
(a) HVAC. Landlord shall, on Monday through Friday, from 8:00 A.M. to 6:00
----
P.M. and Saturday, from 9:00 A.M. to 1:00 P.M. ("Normal Hours") except for the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
("Normal Holidays"), provide to the Premises heating, ventilation, and air
conditioning ("HVAC") for the comfortable occupancy of the Premises in
accordance with the capacity of the HVAC system furnished by Landlord as part of
the Base Building Improvements (as described on Schedule 1 to Exhibit B). With
---------
respect to Tenant's computer room, Tenant will provide, at its sole cost and
expense (except as may be reimbursed from the Tenant Improvement Allowance), any
supplemental HVAC unit required to provide air conditioning to such computer
room on a twenty-four (24) hour basis.
(b) Electricity. Landlord shall provide to the Premises, twenty-four (24)
-----------
hours a day, seven (7) days a week, every day of the year, a minimum of five (5)
watts consumed load per USF of the Premises of electric power (in addition to
the electrical power required for lighting) for the operation of Tenant's
computers, equipment and machines for the conduct of business offices ("General
Use"), not to exceed the reasonable capacity of the Base Building.
(c) Water. Landlord shall provide at all times reasonably necessary
-----
amounts of water for restrooms and drinking fountains furnished by Landlord.
(d) Janitorial. Landlord shall provide janitorial services to the Premises
----------
each evening, five days per week (except for normal holidays) which shall at
least include the services on the attached Exhibit J. Such services may be
---------
expanded, or provided by Tenant rather than Landlord, to the extent provided in
Exhibit J.
---------
(e) Lights. Landlord shall replace all electric light bulbs, tubes and
------
ballasts in the Premises throughout the Term promptly following notice from
Tenant and shall charge Tenant separately for the actual costs incurred by
Landlord in connection therewith. Landlord may, at Landlord's reasonable
discretion and following prior notice to Tenant, adopt a system of relamping and
reballasting periodically on a group basis in accordance with good practice and
shall charge Tenant separately for the actual costs incurred by Landlord in
connection therewith.
(f) Window Washing/Window Washing Equipment. Landlord shall furnish as a
---------------------------------------
service for the Building window washing of all windows in the Premises, both
inside and out, at such times as shall be required in Landlord's reasonable
judgment, but all exterior windows shall be washed at least twice each year and
the interior side of such exterior windows shall be washed one (1) time per
year.
(g) Separate Metering. Landlord anticipates that all utilities it provides
-----------------
to the Premises will be separately metered to measure only Tenant's use.
(h) Excess Usage. In the event Tenant utilizes the HVAC at other than
------------
Normal Hours, Landlord shall have the right to charge Tenant for each
utilization by imposing a fee of ten dollars forty-two cents ($10.42) per hour
(increased by 4% per year, compounded, on each anniversary of the Commencement
Date). Such hourly amount is the charge for HVAC for the entire Building - if
Tenant utilizes the HVAC for less than the entire Building, the hourly fee
charged shall be an appropriate pro rata portion of $10.42 per hour. Tenant
agrees to install, at
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<PAGE>
Tenant's expense, monitoring equipment reasonably acceptable to Landlord, which
will measure and report HVAC after hours use. Such fee shall be additional rent.
In the event Tenant utilizes at the Premises a second or third shift of
personnel or its equivalent, Tenant acknowledges that there will be wear and
tear on the Base Building Improvements, including non-HVAC and other systems,
which exceed that contemplated by Landlord on the date hereof, and that Landlord
shall have the right to recover for the cost of the excess wear and tear in one
or both of the following ways, although Landlord may not recover twice for the
same cost: (i) by imposing a periodic change on Tenant which Landlord reasonably
determines is proportionate to the excess wear and tear caused by Tenant and to
the shortened economic life of the components of the Base Building Improvements
or any of them (other than HVAC); and (ii) should any of such Base Building
Improvements (other than HVAC) require replacement or repairs which are Capital
Expenses during the Lease Term, by amortizing the cost of such replacement or
repair over a period of time permitted by generally accepted accounting
principles and including such amortization during the Lease Term as part of
Additional Monthly Rent. For these purposes, (a) Landlord's cost may include
actual or anticipated interest expense and a fee of five percent (5%) of such
cost for management, (b) this paragraph (h) shall control over anything to the
contrary in Section 3.6 or Exhibit M and (c) nothing in this paragraph (h) shall
----------- ---------
relieve Landlord of its responsibilities in Exhibit B with respect to the
---------
construction of the Base Building Improvements.
(i) In the event that Tenant is prevented from using, and does not use,
the Premises or any significant portion thereof for three (3) consecutive
business days or ten (10) business days in any twelve (12) month period (the
"Eligibility Period") as a result the failure of Landlord to provide the
services described above in this Section 5.2, then the Base Rent and Additional
-----------
Rent shall be abated or reduced, as the case may be, after expiration of the
Eligibility Period for such time that Tenant continues to be so prevented from
using, and does not use, the Premises or any substantial portion thereof, in the
proportion that the rentable area of the portion of the Premises Tenant is
prevented from using, and does not use, bears to the total rentable area of the
Premises, but only to the extent that the foregoing is caused by Landlord's
negligence or willful misconduct or that of its agents, employees or contractors
(other than the suppliers of utilities). If Tenant's non use is not caused by
Landlord's negligence or willful misconduct but Landlord receives proceeds of
rent or other insurance to compensate it for any abatement afforded to Tenant,
then Base Rent and Additional Rent shall be abated to the extent that Landlord
actually receives such rent or other insurance.
ARTICLE 6
---------
Maintenance and Repairs
-----------------------
6.1 Obligations of Landlord.
-----------------------
(a) Landlord shall maintain, and keep in good repair and operating
condition, reasonable wear and tear excepted, the Building, the Premises (other
than the Tenant Improvements and Tenant's furniture, trade fixtures and
equipment which shall be the responsibility of Tenant to keep in good repair and
operating condition), the roof and other structural components of the Premises
and the common areas of the Project. Tenant shall give Landlord written notice
of the need for any maintenance or repair for which Landlord is
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<PAGE>
responsible, after which Landlord shall have a reasonable opportunity to perform
the maintenance or make the repair, and Landlord shall not be liable for any
failure to do so unless such failure continues for an unreasonable time after
Tenant gives such written notice to Landlord. Tenant waives any right to perform
maintenance or make repairs for which Landlord is responsible at Landlord's
expense, except as provided in paragraph (b) below. Landlord's liability with
respect to any maintenance or repair for which Landlord is responsible shall be
limited to the cost of the maintenance or repair. Any damage to any part of the
Project for which Landlord is responsible that is caused by Tenant or any agent,
officer, employee, contractor, licensee or invitee of Tenant shall be repaired
by Landlord at Tenant's expense and Tenant shall pay to Landlord, upon billing
by Landlord, as Additional Rent, the cost of such repairs incurred by Landlord
to the extent such repairs are not covered by insurance carried by Landlord
pursuant to this Lease.
(b) Tenant's Right to Make Repairs. Notwithstanding paragraph (a) above,
------------------------------
if Tenant provides written notice to Landlord of Landlord's failure to repair or
replace any portion of the Building or the Premises which Landlord is required
to repair or replace hereunder and Landlord fails to repair within a reasonable
period of time, given the circumstances, after the receipt of such notice, but
in any event not later than twenty-one (21) days after receipt of such notice
(plus such additional time as is reasonably required under the circumstances,
assuming that Landlord began work within such twenty-one (21) day period), then
Tenant may proceed to make the repair or replacement upon delivery of an
additional ten (10) business days' notice to Landlord specifying that Tenant is
doing so if such repairs or replacement was not made by Landlord within such ten
(10) business day period (or commenced to be made and thereafter pursued
diligently to completion). If Tenant makes such repair or replacement following
Landlord's refusal to do so, Tenant shall be entitled to prompt reimbursement by
Landlord of Tenant's reasonable costs and expenses in doing so plus interest
thereon at the Interest Rate as defined in Section 3.4 of the Lease. In the
-----------
event Tenant makes the repair or replacement, and such work will affect the
structure of the Building and/or the Building systems, Tenant shall use only
those contractors used by Landlord in the Building for work on such structure of
the Building or Building systems unless such contractors are unwilling or unable
to perform, or timely and competitively perform, such work, in which event
Tenant may utilize the services of any other qualified contractor which normally
and regularly performs similar work in comparable buildings. Furthermore, if
Landlord does not deliver a detailed written objection to Tenant within thirty
(30) days after receipt of an invoice by Tenant of its costs of taking action
which Tenant claims should have been taken by Landlord, and if such invoice from
Tenant sets forth a reasonably particularized breakdown of its costs and
expenses in connection with taking such action on behalf of Landlord, then
Tenant shall be entitled to deduct, from Rent payable by Tenant under the Lease,
the amount set forth in such invoice. If, however, Landlord delivers to Tenant,
within thirty (30) days after receipt of Tenant's invoice, a written objection
to the payment of such invoice, setting forth with reasonable particularity
Landlord's reasons for its claim that such action did not have to be taken by
Landlord pursuant to the terms of the Lease or that the charges are excessive
(in which case Landlord shall pay the amount it contends would not have been
excessive), then Tenant shall not then be entitled to such deduction from Rent,
but as Tenant's sole remedy, Tenant may proceed to claim a default by Landlord
or, if elected by either Landlord or Tenant, the matter shall proceed to
resolution by the selection of an arbitrator to resolve the dispute, which
arbitrator shall be selected and qualified pursuant to the procedures set forth
in Section 16 (Arbitration) of the Lease, and whose costs shall be paid for by
----------
the losing
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<PAGE>
party, unless it is not clear that there is a "losing party," in which event the
costs of arbitration shall be shared equally. If Tenant prevails in the
arbitration, the amount of the award (which shall include interest at the
Interest Rate from the time of each expenditure by Tenant until the date Tenant
receives such amount by payment or offset and attorneys' fees and related costs)
may be deducted by Tenant from the rents next due and owing under the Lease.
Notwithstanding the foregoing, Tenant shall have the right to make repairs
or replacements which Landlord is otherwise required to make hereunder, and to
recover up to $25,000 of the cost thereof as provided in the preceding
paragraph, without written notice to Landlord, if each of the following
conditions is met: (i) such repairs or replacements must be made immediately in
order to avoid imminent danger to life or significant property damage, (ii) the
need for such repairs or replacements became known to Tenant in such a time
frame that written notice to Landlord is not practical and (iii) Tenant gives
such notice to Landlord as is practical in the circumstances.
6.2 Obligations of Tenant. Tenant shall, at all times during the term of
---------------------
this Lease and at Tenant's sole cost and expense, maintain and repair the
Premises and every part thereof (except only the parts for which Landlord is
expressly made responsible under this Lease) and all equipment, fixtures and
improvements therein and keep all of the foregoing clean and in good order and
operating condition, ordinary wear and tear excepted. Tenant shall not damage
the Premises or disturb the integrity and support provided by the floor and
ceiling slabs and each wall within the Premises. Tenant shall, at Tenant's
expense (to the extent such repairs are not covered by insurance carried by
Landlord pursuant to this Lease), repair any damage to the Premises caused by
Tenant or any agent, officer, employee, contractor, licensee or invitee of
Tenant. Tenant shall take good care of the Premises and keep the Premises free
from dirt, rubbish, waste and debris at all times. Tenant shall not overload
the floors in the Premises or exceed the load-bearing capacity of the floors in
the Premises. Tenant hereby waives the benefit of California Civil Code
Sections 1932, 1941 and 1942 or under any similar law, statute or ordinance now
----------------------------
or hereafter in effect.
6.3 Tenant's Obligations at the End of the Term.
-------------------------------------------
(a) Tenant shall, at the end of the Term, surrender to Landlord the
Premises and all alterations, additions, fixtures (other than trade fixtures)
and improvements therein or thereto in the same condition as when received,
ordinary wear and tear and casualty damage excepted. In the event of any damage
to the Premises on account of the removal of any movable furniture, equipment,
trade fixtures, computers, office machines or other personal property, as
permitted by Section 7.2, Tenant shall repair such damage at its expense prior
-----------
to the end of the Term.
(b) Under the circumstances specified in the Work Letter Agreement, Tenant
may alter certain major components of the Building (such as the second floor,
lobbies and restrooms). If Tenant elects to do so:
(i) before commencing such alteration and after Landlord's approval
of the plans therefor, Tenant shall deliver to Landlord a letter of credit
issued by a financial institution, and in form and substance, satisfactory
to Landlord. The face amount of the letter of credit shall be for such
amount as Landlord reasonably determines would be necessary to restore the
major components of the Building so altered by Tenant to their
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<PAGE>
design and condition as described in the plans therefor contained in
Schedule 1 to Exhibit B hereto, increased by four percent (4%) per year.
---------
Such letter of credit shall be held as security for Tenant's obligation to
reimburse to Landlord all of its Restoration Costs described below. The
expiration date on such letter of credit shall be at least one year after
the Commencement Date and shall be renewed by Tenant for at least one year
at a time no later than thirty (30) days prior to each scheduled
expiration. In the event that Tenant does not deliver to Landlord written
evidence of such renewal prior to the beginning of each of such thirty (30)
day periods, Landlord may call the letter of credit in full and hold the
proceeds thereof, without paying interest, as security for the obligations
of Tenant under clauses (ii) and (iii) below;
(ii) in the event Landlord determines, in the exercise of its
reasonable judgment, that it is desirable at the end of the Term to restore
the major components of the Building which were altered by Tenant to the
design and condition contemplated by the plans therefor, which are
described in Schedule 1 to Exhibit B hereto, then Landlord shall have the
---------
right to so restore such major components to such design and condition (A)
after the end of the Term or (B) if in Landlord's reasonable judgment it is
necessary to complete the work of such restoration before the end of the
Term in order to avoid an economic hardship to Landlord on account of a
then active lease negotiation, then before the end of the Term (provided,
that Landlord shall in all cases have the right to commence and complete
such restoration so that it will be complete no later than sixty (60) days
after the end of the Term). Landlord shall give Tenant notice at the time
Landlord approves Tenant's space plan pursuant to Exhibit B of Landlord's
---------
determination of whether such major components must be removed at the end
of the Term. Under no circumstances shall an open ceiling plan be deemed a
"major component" for this purpose. All of the reasonable costs and
expenses of Landlord in prosecuting and completing such restoration
(including the fees of architects, contractors and others, the costs of
permits and approvals and a fee of five percent (5%) to Landlord for
supervision) ("Restoration Costs") shall be paid by Tenant or reimbursed to
Landlord within ten (10) days after receipt of an invoice from Landlord
itemizing such costs and requesting payment or reimbursement. Landlord
shall bid competitively the hard costs of the Restoration Work. Landlord
shall have the right to call on the letter of credit described above in the
event any such payment by Tenant is not made when due. At Landlord's
election, it may design and construct such restoration in a way which is
different from the plans described in Schedule I of Exhibit B; however,
---------
Tenant shall not be obligated to reimburse Landlord for any sum which
exceeds what the Restoration Cost would have been had the restoration been
in accordance with such plans;
(iii) Tenant shall grant Landlord full access to the Building for the
purpose of designing and carrying out the restoration described above, and
no interruption or disturbance by Landlord or its agents or contractors of
Tenant's operations in the conduct of such restoration shall constitute a
default by Landlord hereunder or grant Tenant the right to damages or to
terminate this Lease; and
(iv) Landlord shall use commercially reasonable efforts in conducting
the restoration described above to coordinate with Tenant in order to
mitigate disruption to and interference with Tenant's business operations.
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<PAGE>
ARTICLE 7
---------
Alteration of the Premises
--------------------------
7.1 No Alterations by Tenant. Tenant shall not make any alterations,
------------------------
additions or improvements in or to the Premises or any part thereof
(collectively, "Alterations"), including attaching any fixtures or equipment
thereto, without Landlord's prior written consent which shall not be withheld
unreasonably. However, Tenant may make Alterations without Landlord's consent if
the total cost of such Alterations in any calendar year is fifty thousand
dollars ($50,000) or less and such Alterations do not affect Building systems,
the structure or roof of the Building or the exterior aesthetics of the
Building. Tenant shall give Landlord at least ten (10) days prior written
notice before commencing any such Alterations. All Alterations (except
improvements made by Landlord pursuant to Exhibit B, if any) in or to the
---------
Premises shall be made by Tenant at Tenant's sole cost and expense as follows:
(a) Tenant shall submit to Landlord, for Landlord's written approval if it
is required, complete plans and specifications for all Alterations to be done by
Tenant. If it is usual and customary for similarly situated tenants to prepare
less than complete plans and specifications before commencing comparable work,
then Tenant may deliver to Landlord what is usual and customary. Such plans and
specifications shall be prepared by responsible interior designers and
engineer(s), shall comply with all applicable codes, laws, ordinances, rules and
regulations, shall demonstrate that the exterior appearance of the Building will
not be affected by such Alterations, shall be in a form sufficient to secure the
approval of all government authorities with jurisdiction over the Project, and
shall not propose Alterations which will adversely affect the structure or the
structural integrity of the Building or any systems, components or elements of
the Building or Project, unreasonably interfere with any other tenant's normal
and customary business office operations, or affect the aesthetics of the
exterior of the Building (individually and collectively, the "Design Criteria").
(b) Tenant shall obtain all required permits for the Alterations. Tenant
shall engage responsible licensed contractor(s) and subcontractor(s) to perform
all work. The contractor(s) shall be subject to Landlord's consent, which shall
not be withheld unreasonably. Tenant shall perform all work in accordance with
the plans and specifications approved by Landlord, in a good and workmanlike
manner, in full compliance with all applicable laws, codes, ordinances, rules
and regulations, and free and clear of any mechanics' liens and in full
compliance with the construction rules and regulations included as part of the
Tenant Improvement Manual identified in Section 4.1 of the Work Letter
-----------
Agreement. Tenant shall pay for all work (including the cost of all utilities,
permits, fees, taxes, and property and liability insurance premiums in
connection therewith) required to make the Alterations. In addition, Tenant
shall pay Landlord a construction management fee of three (3%) percent of the
total cost of the Alterations, additions and/or improvements, such fee to be
paid in installments as the work progresses. Under no circumstances shall
Landlord be liable to Tenant for any damage, loss, cost or expense incurred by
Tenant on account of design of any work, construction of any work, or delay in
completion of any work. All work of the Alterations, regardless of whether
Landlord's consent is required, shall be scheduled through and be subject to the
reasonable supervision of Landlord and shall be performed in accordance with any
reasonable conditions or regulations imposed by Landlord. In this regard,
Landlord's construction manager shall safeguard the interests of Tenant as well
as
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<PAGE>
represent Landlord. All work of Alterations shall be in compliance with the
Union Requirement described in Section 13 of the Work Letter Agreement.
-----------
(c) Tenant shall give written notice to Landlord of the date on which
construction of any work will be commenced at least ten (10) business days prior
to such date. Tenant shall keep the Premises and the Project free from
mechanics', materialmen's and all other liens arising out of any work performed,
labor supplied, materials furnished or other obligations incurred by Tenant.
Tenant shall promptly and fully pay and discharge all claims on which any such
lien could be based. Tenant shall have the right to contest the amount or
validity of any such lien, provided Tenant gives prior written notice of such
contest to Landlord, prosecutes such contest by appropriate proceedings in good
faith and with diligence, and, upon request by Landlord, furnishes such bond as
may be required by law or such security as Landlord may require to protect the
Premises and the Project from such lien. Landlord shall have the right to post
and keep posted on the Premises any notices that may be provided by law or which
Landlord may deem to be proper for the protection of Landlord, the Premises and
the Project from such liens, and to take any other action Landlord deems
necessary to remove or discharge liens or encumbrances at the expense of Tenant.
(d) In connection with any work performed by Tenant in accordance with
this Section 7.1, upon completion of any such work, at Landlord's request,
-----------
Tenant agrees to prepare and Landlord shall execute if factually correct, and
Tenant shall cause a Notice of Completion to be recorded in the County
Recorder's Office in accordance with Section 3093 of the Civil Code of the State
------------
of California or any successor statute. On completion of the work, Tenant shall
deliver to Landlord both a hard copy and copy on CAD Diskette of the "as built"
plan and specifications (including working drawings) for all Alterations.
Promptly following the completion of any Alterations, Tenant shall deliver to
Landlord a copy of any signed-off permits, inspection cards or other
documentation, if any is required and available given the nature of the
Alteration, evidencing governmental approval of completion of the work. Any
supervision by Landlord of Alteration shall in no event constitute Landlord's
approval of the work so performed.
7.2 Landlord's Property; Removal at End of Term. All Alterations,
-------------------------------------------
including Alterations made pursuant to Exhibit B, whether temporary or permanent
---------
in character, made in or to the Premises by Landlord or Tenant shall become part
of the Project and Landlord's property. Upon expiration or earlier termination
of this Lease, Landlord shall have the right, at Landlord's option, by giving
written notice to Tenant at any time before or within sixty (60) days after such
expiration or termination, to retain all such Alterations in the Premises,
without compensation to Tenant. Under the circumstances described below,
Landlord may on expiration or termination remove some or all of such
Alterations, repair all damage caused by any such removal, restore the Premises
to the condition in which the Premises existed before such Alterations were made
and charge the cost thereof to Tenant. The circumstances are these: (i) in the
case of the Alterations described in Exhibit B (i.e., the original Tenant
---------
Improvements), Landlord may remove at Tenant's expense only nonstandard
improvements which it identifies to Tenant in writing at the time of Landlord's
approval of Tenant's plans therefor, as provided in Exhibit B; and (ii) in the
---------
case of other Alterations, Landlord may remove those which in Landlord's
reasonable judgment would not have significant value in connection with
reletting the Premises; provided, that if Tenant requests Landlord's approval to
--------
make such Alterations, Landlord will advise Tenant at that time whether Landlord
will require removal. Where Tenant
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<PAGE>
is responsible for the cost of removal, repair and restoration, it shall pay to
Landlord, upon billing by Landlord, the cost of such removal, repair and
restoration (including a reasonable charge for Landlord's overhead and profit).
Landlord shall have the hard costs of removal, repair and restoration
competitively bid. All movable furniture, equipment, trade fixtures, computers,
office machines and other personal property shall remain the property of Tenant.
Upon termination of this Lease, Tenant shall, at Tenant's expense, remove all
such movable furniture, equipment, trade fixtures, computers, office machines
and other personal property from the Project and repair all damage caused by any
such removal. Termination of this Lease shall not affect the obligations of
Tenant pursuant to this Section 7.2 to be performed after such termination.
-----------
ARTICLE 8
---------
Indemnification and Insurance
-----------------------------
8.1 Damage or Injury. Landlord shall not be liable to Tenant, and Tenant
----------------
hereby waives all claims against Landlord, for any damage to or loss or theft of
any property or for any bodily or personal injury, illness or death of any
person in, on or about the Premises or the Building or the Project arising at
any time and from any cause whatsoever, except to the extent caused by the gross
negligence or willful misconduct of Landlord, its agents, employees or
contractors. Tenant shall indemnify and defend Landlord against and hold
Landlord harmless from all claims, demands, liabilities, damages, losses, costs
and expenses, including reasonable attorneys' fees and disbursements, arising
from or related to (i) any use or occupancy of the Premises or any condition of
the Premises (provided, that Tenant shall have no responsibility for Hazardous
Materials existing on or in the Premises or the Project on the date hereof or
hereafter brought onto the Project by Landlord), (ii) any default in the
performance of Tenant's obligations under this Lease, (iii) any damage to any
property (including property of employees and invitees of Tenant), or (iv) any
bodily or personal injury, illness or death of any person (including employees
and invitees of Tenant), in each case which occurs in, on or about the Premises
or any part thereof arising at any time and from any cause whatsoever (except to
the extent caused by the gross negligence or willful misconduct of Landlord its
agents, employees or contractors), or which occurs in, on or about any other
part of the Project to the extent caused by any act or omission of Tenant or its
agents, officers, employees, contractors, invitees or licensees. This Section
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8.1 shall survive the termination of this Lease with respect to any damage,
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bodily or personal injury, illness or death occurring prior to such termination.
Under no circumstances shall Landlord or Tenant be liable to the other, or to
the officers, directors, members, agents or employees of the other, for
consequential or exemplary damages arising from or relating to a breach by
Landlord or Tenant of its obligations under this Lease.
8.2 Insurance Coverages and Amounts. Tenant shall, at all times during
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the term of this Lease and at Tenant's sole cost and expense, obtain and keep in
force the insurance coverages and amounts set forth in this Section 8.2. Tenant
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shall maintain commercial general liability insurance, including contractual
liability for the obligations of Tenant in this Lease, broad form property
damage liability, fire, legal liability, premises and completed operations, and
medical payments, with limits not less than three million dollars ($3,000,000)
per occurrence and aggregate, insuring against claims for bodily injury,
personal injury and property damage
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arising from the use, occupancy or maintenance of the Premises and the Project.
The policy shall contain an exception to any pollution exclusion which insures
damage or injury arising out of heat, smoke or fumes from a hostile fire. Any
general aggregate shall apply on a per location basis. Tenant shall maintain
business auto liability insurance with limits not less than two million dollars
($2,000,000) per accident covering owned, hired and non-owned vehicles used by
Tenant. Tenant shall maintain umbrella excess liability insurance on a following
form basis in excess of the required commercial general liability, business auto
and employers liability insurance with limits not less than five million dollars
($5,000,000) per occurrence and aggregate. Tenant shall carry workers'
compensation insurance for all of its employees in statutory limits in the state
in which the Project is located and employers liability insurance which affords
not less than five hundred thousand dollars ($500,000) for each coverage. Tenant
shall maintain all risk property insurance for all personal property of Tenant
and improvements, fixtures and equipment constructed or installed by Tenant or
Landlord (including Tenant Improvements and subsequent Alterations) in the
Premises in an amount not less than the full replacement cost. If required by
Landlord, Tenant shall maintain boiler and machinery insurance against loss or
damage from an accident from the equipment in the Premises in an amount
determined by Landlord and plate glass insurance coverage against breakage of
plate glass in the Premises. Any deductibles selected by Tenant shall be the
sole responsibility of Tenant.
8.3 Insurance Requirements. All insurance and all renewals thereof shall
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be issued by companies with a rating of at least "A-" "VIII" or better in the
current edition of Best's Insurance Reports and be licensed to do and doing
business in the state in which the Project is located. Each policy shall
expressly provide that the policy shall not be canceled or materially altered
without thirty (30) days' prior written notice to Landlord and shall remain in
effect notwithstanding any such cancellation or alteration until such notice
shall have been given to Landlord and such period of thirty (30) days shall have
expired. All liability insurance (except employers' liability) shall name
Landlord and any other parties designated by Landlord (including any investment
manager, asset manager or property manager) as an additional insured, shall be
primary and noncontributing with any insurance which may be carried by Landlord,
shall afford coverage for all claims based on any act, omission, event or
condition that occurred or arose (or the onset of which occurred or arose)
during the policy period and in any way pertaining to this Lease or Tenant's
occupancy of the Premises, and shall expressly provide that Landlord, although
named as an insured, shall nevertheless be entitled to recover under the policy
for any loss, injury or damage to Landlord. All property insurance shall name
Landlord as loss payee as respects Landlord's interest in any improvements and
betterments. Tenant shall deliver certificates of insurance, acce