1
EXHIBIT 10.5
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, June 1999 is made by and between Xxxxx X. Xxxxxxxx, Trustee of the
Xxxxxx X. Xxxxxxxx Trust ("LESSOR") and Digital Think, Inc., a California
Corporation ("LESSEE"), (collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 1064 & 0000 Xxxxxxxx Xxxxxx, located in the County of San Francisco,
State of California, and generally described as (describe briefly the nature of
the property and, if applicable, the "PROJECT", if the property is located
within a Project) warehouse/light industrial buildings ("PREMISES"). (See also
Paragraph 2)
1.3 TERM: Ten (10) years and -- months ("ORIGINAL TERM") commencing
see Addendum para. #51 ("COMMENCEMENT DATE") and ending 120 months after Phase I
Commencement Date ("EXPIRATION DATE", Subject to one (1) five-year extension
option, see Addendum Section 53). (See also Paragraph 3)
1.4 EARLY POSSESSION: One (1) week prior to Commencement Date
("EARLY POSSESSION DATE"). (See also Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $28 sq. ft. per month ("BASE RENT"), payable on the
first day of each month commencing on the Commencement Date for years 1 - 5,
then $33 sq. ft. (See also Paragraph 4)
[ ] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $-- as Base Rent for the
period 1999.
1.7 SECURITY DEPOSIT: $ see Addendum para. #58 ("SECURITY DEPOSIT").
(See also Paragraph 5)
1.8 AGREED USE: General office, sales, administrative, software
research and development and any other uses allowed under applicable zoning for
the Premises. (See also Paragraph 6)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY". The Annual
"Base Premium" is $ To be determined (See also Paragraph 6)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction (check applicable boxes):
[X] Xxxx X. Xxxxxx, Xxxxx & Xxxxx Company represents Lessor exclusively
("LESSOR'S BROKER");
[X] Xxx Xxxxxxx, CB Xxxxxxx Xxxxx represents Lessee exclusively ("LESSEE'S
BROKER"); or
[ ] _________________________ represents both Lessor and Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this
Lease by both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement (or if there is no such agreement, the sum of ______%
of the total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by Not applicable ("GUARANTOR"). (See also Paragraph 37)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 51 through 67 and Exhibits ____________________
_________________________________, all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver each phase of the Premises broom
clean and free of debris on the Commencement Date or the Early Possession Date,
whichever first occurs ("START DATE"), and warrants that the existing
electrical, plumbing, fire sprinkler shall be in good operating condition on
said date and that the surface and structural elements of the roof, bearing
walls and foundation of any buildings on the Premises (the "BUILDING") shall be
free of material defects. If a non-compliance with said warranty exists as of
the Start Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense.
2.3 COMPLIANCE. Lessor warrants that the improvements on each phase
of the Premises comply with all applicable laws, covenants or restrictions of
record, building codes, regulations and ordinances ("APPLICABLE REQUIREMENTS")
in effect on the Start Date. Said warranty does not apply to the use to which
Lessee will put the Premises or to any Alterations or Utility Installations (as
defined in Paragraph 7.3(a)) made or to be made by Lessee.
Page 1 of 16
2
If the Premises do not comply with said warranty, Lessor shall, except as
otherwise provided, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance, rectify the
same at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within twelve (12) months following completion
of Phase III, correction of that non-compliance shall be the obligation of
Lessee at Lessee's sole cost and expense. If the Applicable Requirements are
hereafter changed (as opposed to being in existence at the Start Date, which is
addressed in Paragraph 6.2(e) below) so as to require during the term of this
Lease the construction of an addition to or an alteration of the Building, the
remediation of any Hazardous Substance, or the reinforcement or other physical
modification of the Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall
allocate the cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided,
however, that if such Capital Expenditure is required during the last two years
of this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon ninety (90) days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within ten (10) days after receipt of Lessor's
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessor's share of such costs have been fully paid. If Lessee is
unable to finance Lessor's share, or if the balance of the Rent due and payable
for the remainder of this Lease is not sufficient to fully reimburse Lessee on
an offset basis, Lessee shall have the right to terminate this Lease upon thirty
(30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Rent shall be
abated for the period of such early possession. All other terms of this Lease
(including, but not limited to, the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. Rent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so
Page 2 of 16
3
stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee is in Breach under this Lease, Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, expense, loss or damage which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit monies
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease. Lessor shall not be required to keep the Security
Deposit separate from its general accounts. Within fourteen (14) days after the
expiration or termination of this Lease, if Lessor elects to apply the Security
Deposit only to unpaid Rent, and otherwise within thirty (30) days after the
Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall
return that portion of the Security Deposit not used or applied by Lessor. No
part of the Security Deposit shall be considered to bear interest or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to,
asbestos-containing materials, petroleum, gasoline, and/or crude oil or any
products, by-products or fractions thereof. Lessee shall not engage in any
activity in or on the Premises which constitutes a Reportable Use of Hazardous
Substances without the express prior written consent of Lessor and timely
compliance (at Lessee's expense) with all Applicable Requirements. "REPORTABLE
USE" shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements).
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party other than Lessor, Xxxxx Media Company or their
employees, contractors, agents or invitees.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party other than Lessor, Xxxxx Media Company or
their employees, contractors, agents or invitees (provided, however, that Lessee
shall have no liability under this Lease with respect to underground migration
of any Hazardous Substance under the Premises from adjacent properties).
Lessee's obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE OR LESSOR FROM THEIR OBLIGATIONS
UNDER THIS LEASE WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO
AGREED BY THE OTHER PARTY IN WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused
Page 3 of 16
4
by the active or gross negligence or willful misconduct of Lessor, Xxxxx Media
Company or their its agents or employees, contractors, or invitees. Lessor's
obligations, as and when required by the Applicable Requirements, shall include,
but not be limited to, the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, without regard to whether said requirements are now in effect or
become effective after the Start Date. Lessee shall, within ten (10) days after
receipt of Lessor's written request, provide Lessor with copies of all permits
and other documents, and other information evidencing Lessee's compliance with
any Applicable Requirements specified by Lessor, and shall immediately upon
receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving the failure of Lessee or the Premises to comply with
any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease. The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements caused by
Lessee, or a contamination is found to exist or be imminent, or the inspection
is requested or ordered by a governmental authority. In such case, Lessee shall
upon request reimburse Lessor for the cost of such inspections, so long as such
inspection is reasonably related to the violation or contamination.
MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's
Obligations), 9 (Damage and Destruction), and 14 (Condemnation), Lessee shall,
at Lessee's sole expense, keep the Premises, Utility Installations, and
Alterations in good order, condition and repair (whether or not the portion of
the Premises requiring repairs, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, but not limited to, all
equipment or facilities, such as plumbing, heating, ventilating,
air-conditioning, electrical, lighting facilities, fixtures, walls (interior and
exterior), ceilings, floors, windows, doors, skylights, signs, sidewalks and
parkways located in, on, or adjacent to the Premises. Lessor is responsible for
keeping the roof and roof drainage clean and free of debris. Lessor shall keep
the elevator (provided, however, Lessee and not Lessor shall be responsible to
make and pay for elevator repairs which do not exceed $2,500 in any calendar
year during the Lease Term: Lessor shall make and pay for all elevator repairs
and replacements in excess of such amount), fire sprinkler system, structural
floors, all pipes and conduit to the point of entry into the Premises, columns,
roof membrane, the surface and structural elements of the roof, foundations, and
bearing walls in good repair (see Paragraph 7.2). Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a condition (including, e.g., graffiti removal)
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, ("Basic Elements"), if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) fire
extinguishing systems, including fire alarm and/or smoke detection, and (iii)
elevator.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor
as set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is less than $10,000 in the aggregate during
any calendar year during the Lease Term, then such Basic Elements shall be
replaced by Lessor, and the cost over $10,000 shall be prorated between the
Parties and Lessee shall only be obligated to pay in addition to the first
$10,000, each month during the remainder of the term of this Lease, on the date
on which Base Rent is due, an amount equal to the product of multiplying the
cost of such replacement by a fraction, the numerator of which is one, and the
denominator of which is the number of months of the useful life of such
replacement as such useful life is specified pursuant to Federal income tax
regulations or guidelines for depreciation thereof (including interest on the
unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee
Page 4 of 16
5
reserving the right to prepay its obligation at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the
Parties hereto that Lessor have no obligation, in any manner whatsoever, to
repair and maintain the Premises, or the equipment therein, all of which
obligations are intended to be that of the Lessee, except for the items
specifically designated in Section 7.1, survive, as Lessor's responsibility. It
is the intention of the Parties that the terms of this Lease govern the
respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems and signs,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cost thereof does not exceed $20,000 in any one instance.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor, which shall
not be unreasonably withheld, shall be presented to Lessor in written form with
detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring
all applicable governmental permits, (ii) furnishing Lessor with copies of both
the permits and the plans and specifications prior to commencement of the work,
and (iii) compliance with all conditions of said permits and other Applicable
Requirements in a prompt and expeditious manner. Any Alterations or Utility
Installations shall be performed in a workmanlike manner with good and
sufficient materials. Lessee shall promptly upon completion furnish Lessor with
as-built plans and specifications. For work which costs $100,000 or more. Lessor
may condition its consent upon Lessee providing a lien and completion bond in an
amount equal to the estimated cost of such Alteration or Utility Installation.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessor's attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or
elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises unless Lessee obtains Lessor's consent for removal at
the time of installation of Alterations or Utility Installations.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings,
and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises without the express written consent of Lessor shall constitute a
holdover under the provisions of Paragraph 26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES
(a) Lessee shall pay to Lessor any insurance cost increase
("Insurance Cost Increase") occurring during the term of this Lease. "Insurance
Cost Increase" is defined as any increase in the actual cost of the premiums for
insurance required under Paragraphs 8.2(b), 8.3(a) and 8.3(b) ("Required
Insurance"), over and above the Base Premium as hereinafter defined calculated
on an annual basis. "Insurance Cost Increase" shall include but not be limited
to increases resulting from the nature of Lessee's occupancy, any act or
omission of Lessee, increased valuation of the Premises and/or a premium
rate increase. The Parties are encouraged to fill in the Base Premium in
Paragraph 1.9 with a reasonable premium for the Required Insurance based on the
Agreed Use of the Premises. If the Parties fail to insert a dollar amount in
Paragraph 1.9, then the Base Premium shall be the annual premium reasonably
obtainable for the Required Insurance as of the commencement of the Original
Term for the Agreed Use of the Premises. In no event, however, shall Lessee be
responsible for any portion of the increase in the premium cost attributable to
liability insurance carried by Lessor under Paragraph 8.1(b) in excess of
$5,000,000 per occurrence.
(b) Lessee shall pay any such Insurance Cost Increase to Lessor
within thirty (30) days after receipt by Lessee
Page 5 of 16
6
of a copy of the premium statement or other reasonable evidence of the amount
due. If the insurance policies maintained hereunder cover other property
besides the Premises, Lessor shall also deliver to Lessee a statement of the
amount of such Insurance Cost Increase attributable only to the Premises
showing in reasonable detail the manner in which such amount was computed.
Premiums for policy periods commencing prior to, or extending beyond the term
of this Lease, shall be prorated to correspond to the term of this Lease.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $5,000,000 per
occurrence with an "ADDITIONAL INSURED -- MANAGERS OR LESSORS OF PREMISES
ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance
as described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, with loss payable
to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises (including, without limitation, the Tenant improvements),
as the same shall exist from time to time, or the amount required by any
Lenders, but in no event more than the commercially reasonable and available
insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee's personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor.
Such policy or policies shall insure against all risks of direct physical loss
or damage (except the perils of flood and/or earthquake), including coverage for
debris removal and the enforcement of any Applicable Requirements requiring the
upgrading, demolition, reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
Premises, the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $10,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, A-V, as set forth in the most current
issue of "Best's Insurance Guide". Lessee shall not do or permit to be done
anything which invalidates the required insurance policies. Lessee shall, prior
to the Start Date, deliver to Lessor certified copies of policies of such
insurance or certificates evidencing the existence and amounts of the required
insurance. No such policy shall be cancelable except after thirty (30) days
prior written notice to Lessor. Lessee shall, no later than ten (10) days after
the expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
contained in this Lease, Lessee and Lessor each hereby release and relieve the
other, and waive their entire right to recover damages against the other, for
loss of or damage to its property arising out of or incident to the perils
required to be insured against herein. The effect of such releases and waivers
is not limited by the amount of insurance carried or required, or by any
deductibles applicable hereto. The Parties agree to have their respective
property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee.
8.7 INDEMNITY. Except for Lessor's or its agents', contractors',
employees', or invitees' active or gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens,
Page 6 of 16
7
judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations,
Utility Installations and Trade Fixtures, which can reasonably be repaired in
270 days or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in 270
days or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved or which was caused by an event
not required to be covered by the insurance described in Section 8.3(a) and the
cost of repair or rebuilding does not exceed One Hundred Thousand Dollars
($100,000).
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE -- INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the foregoing, if the
required insurance was not in force or the insurance proceeds are not sufficient
to effect such repair, the Insuring Party shall promptly contribute the shortage
in proceeds as and when required to complete said repairs.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction. If the damage or destruction was caused by the
willful misconduct of Lessee, Lessor shall have the right to recover Lessor's
damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds three
(3) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date
Pages 7 of 16
8
specified in the termination notice and Lessee's option shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore
the Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice and such repair or restoration is not commenced within thirty (30)
days thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within said thirty (30) days,
this Lease shall continue in full force and effect. "COMMENCE" shall mean either
the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "REAL PROPERTY TAXES" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership
of the Premises.
10.2 (a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes
applicable to the Premises provided, however, that Lessee shall pay to Lessor
the amount, if any, by which Real Property Taxes applicable to the Premises
increase over the fiscal tax year during which the Commencement Date occurs
("Tax increase"). Subject to Paragraph 10.2(b), payment of any such Tax increase
shall be made by Lessee to Lessor within thirty (30) days after receipt of
Lessor's written statement setting forth the amount due and the computation
thereof. If any such taxes shall cover any period of time [word missing] after
the expiration or termination of this Lease. Lessee's share of such taxes shall
be prorated to cover only that portion of the tax xxxx applicable to the period
that this Lease is in effect.
(b) ADVANCE PAYMENT. In the event Lessee incurs more than two
(2) late charges in any calendar year on any Rent payment, Lessor may, at
Lessor's option, estimate the current Real Property Taxes, and require that the
Tax increase be paid in advance to Lessor by Lessee, either, (i) in a lump sum
amount equal to the amount due, at least twenty (20) days prior to the
applicable delinquency date; or (ii) monthly in advance with the payment of the
Base Rent. If Lessor elects to require payment monthly in advance, the monthly
payment shall be an amount equal to the amount of the estimated installment of
the Tax Increase divided by the number of months remaining before the month in
which said installment becomes delinquent. When the actual amount of the
applicable Tax increase in known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable Tax increase. If the amount collected by Lessor is insufficient to
pay the Tax increase when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. All monies paid to
Lessor under this Paragraph may be intermingled with other monies of Lessor and
shall not bear interest.
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding anything to the
contrary in this Paragraph 10.2, Lessee shall pay to Lessor upon demand therefor
the entirety of any increase in Real Property Taxes assessed by reason of
Alterations or Utility Installations placed upon the Premises by Lessee or at
Lessee's request.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Tax increase for all
of the land and improvements included within the tax parcel assessed, such
proportion to be determined by Lessor from the respective valuations assigned in
the assessor's work sheets or such other information as may be reasonably
available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.
Page 8 of 16
9
(d) An assignment or subletting without consent shall, at
Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may terminate this Lease.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease; (ii)
release Lessee of any obligations hereunder; or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefor to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of $2,500 or ten percent (10%) of the current monthly Base
Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is less, as consideration for
Lessor's considering and processing said request. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed to
have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all Rent payable on any sublease, and Lessor may collect
such Rent and apply same toward Lessee's obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "BREACH" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the
Premises without providing a commercially reasonable level of security, or
without providing reasonable assurances to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Page 9 of 16
10
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of fifteen (15) business days following written notice
to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making of any general arrangement or assignment for the benefit of creditors;
(ii) becoming a "DEBTOR" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph 13.1 (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery that any financial statement of Lessee or of
any Guarantor given to Lessor was materially or intentionally false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor; (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty; (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing; (iv) a Guarantor's refusal to honor the
guaranty; or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, and Lessee's failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or
security, which, when coupled with the then existing resources of Lessee, equals
or exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee is in Breach of its affirmative
duties or obligations, Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including, but not limited to the obtaining, of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and that portion of any leasing commission paid by Lessor in connection with
this Lease applicable to the unexpired term of this Lease. The worth at the time
of award of the amount referred to in provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of the District within which the Premises are
located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee's Breach of this Lease shall not waive
Lessor's right to recover damages under Paragraph 12. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages
as are recoverable therein, or Lessor may reserve the right to recover all or
any part thereof in a separate suit.
(b) Continue the Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interests, shall
not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to five percent (5%) of each such overdue
amount, it being understood that Lessor shall not charge Lessee a late charge
on the first late payment in any calendar year during the Lease Term if Lessee
pays the delinquent amount within five (5) days after its receipt of notice of
such.
Page 10 of 16
11
The parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of such late payment.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's Default or Breach with respect to such overdue amount, nor prevent
the exercise of any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for
three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("Interest") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be more than forty-five (45) days after receipt by
Lessor, and any Lender whose name and address shall have been furnished Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than forty-five (45) days are
reasonably required for its performance, then Lessor shall not be in breach if
performance is commenced within such forty-five (45) day period and thereafter
diligently pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within forty-five (45) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "CONDEMNATION"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
Premises, or more than twenty-five percent (25%) of the land area portion of the
Premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. BROKERS' FEE.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "RESPONDING PARTY") shall within ten (10)
days after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "ESTOPPEL CERTIFICATE" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party's performance,
and (iii) if Lessor is the Requesting Party, not more than one month's Rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
Page 11 of 16
12
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including, but not limited to,
Lessee's financial statements for the past three (3) years, if available. All
such financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease accruing after the date of the transfer and
thereafter to be performed by the Lessor. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as hereinabove defined. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor's interest in this
Lease shall remain liable and responsible with regard to the potential duties
and liabilities of Lessor pertaining to Hazardous Substances as outlined in
Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, insurance proceeds, condemnation proceeds, and proceeds from
the Security Deposit or sales proceeds in possession of Lessor which arise from
sale of the Premises and to no other assets of Lessor, for the satisfaction of
any liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted
by this Lease shall be in writing and may be delivered in person (or by
reputable overnight courier) or may be sent by certified or registered mail or
U.S. Postal Service Express Mail, with postage prepaid, and shall be deemed
sufficiently given on the second business day after delivery to the overnight
courier and on the third business day after mailing if sent by certified or
registered mail with postage prepaid. The addresses noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing of
notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee's taking possession of the Premises,
the Premises shall constitute Lessee's address for notice. A copy of all notices
to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by either party hereto, shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent Default
or Breach by the other party of the same or of any other term, covenant or
condition hereof. Lessor's consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Lessor's consent to, or approval
of, any subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. The acceptance of Rent by Lessor shall not be a waiver of any Default
or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account
of monies or damages due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements and/or
conditions shall be of no force or effect whatsoever unless specifically agreed
to in writing by Lessor at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
Page 12 of 16
13
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. CONSTRUCTION OF AGREEMENT. In construing this Lease, all headings and
titles are for the convenience of the Parties only and shall not be considered a
part of this Lease. Whenever required by the context, the singular shall include
the plural and vice versa. This Lease shall not be construed as if prepared by
one of the Parties, but rather according to its fair meaning as a whole, as if
both Parties had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof. Lessor
represents and warrants to Lessee that as of the date upon which Lessor and
Lessee fully execute and deliver an executed copy of this Lease to each other,
there will be no Security Device which is secured by the Premises.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership except with respect to defaults of a
continuing nature; (ii) be subject to any offsets or defenses which Lessee might
have against any prior lessor not specifically stated in this Lease; or (iii) be
bound by prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party brings an action or proceeding involving
the Premises to enforce the terms hereof or to declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may
be awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term, "PREVAILING
PARTY" shall include, without limitation, a Party who substantially obtains or
defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party of its claim or
defense. The attorneys' fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees,
costs and expenses incurred in the preparation and service of notices of Default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and
Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on or
about the Premises any ordinary "FOR SUBLEASE" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place
any sign upon the Premises without Lessor's prior written consent. All signs
must comply with all Applicable Requirements.
Page 13 OF 16
14
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including, but not limited to, architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions regarding a subsequent matter as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the
term of or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee, any transferee under a
transfer permitted under Section 59 of the Addendum without Lessor's consent
hereinafter, a "Permitted Transferee"), and cannot be assigned or exercised by
anyone other than said original Lessee and only while the original Lessee or any
Permitted Transferee is in full possession of at least 50% of the Premises.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during
the period commencing with the giving of any notice of Default and continuing
until said Default is cured, (ii) during the period of time any Rent is unpaid
other than through advertence (without regard to whether notice thereof is given
Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the
event that Lessee has been given three (3) or more notices of separate Default,
whether or not the Defaults are cured, during the twelve (12) month period
immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee three (3) or more notices of separate Default during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems reasonably necessary, and to cause the recordation
of parcel maps and restrictions, so long as such easements, rights, dedications,
maps and restrictions do not unreasonably interfere with the use or access to
the Premises by Lessee. Lessee agrees to sign any documents reasonably requested
by Lessor to effectuate any such easement rights, dedication, map or
restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by
Page 14 of 16
15
one Party to the other under the provisions hereof, the Party against whom the
obligation to pay the money is asserted shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of said Party to institute suit
for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof, said
Party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each Party
shall, within thirty (30) days after request, deliver to the other Party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
increase Lessee's obligations hereunder or materially decrease Lessee's rights
hereunder or otherwise affect Lessee's use or occupancy of the Premises. Lessee
agrees to make such reasonable non-monetary modifications to this Lease as may
be reasonably required by a Lender in connection with the obtaining of normal
financing or refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease [X] is [ ] is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
________________________________________________________________________________
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
________________________________________________________________________________
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: San Francisco, CA Executed at: San Francisco, CA
------------------------------------- -------------------------------
on: June 18, 1999 on: June 18, 1999
--------------------------------------------- ---------------------------------------
By LESSOR: By LESSEE:
Xxxxx X. Xxxxxxxx Xxxxx Xxxxxxxx
------------------------------------------------- -------------------------------------------
By: By: /s/ XXXXX XXXXXXXX
---------------------------------------------- ----------------------------------------
Name Printed: Xxxxxx X. Xxxxxxxx Trust Name Printed: Digital Think, Inc.
------------------------------------------------- -------------------------------------------
Title: Trustee Title: President and CEO
------------------------------------------------- -------------------------------------------
By: /s/ XXXXX X. XXXXXXXX By: /s/ XXXXXXX XXXXXX
------------------------------------------------- -------------------------------------------
Name Printed: Xxxxx X. Xxxxxxxx Name Printed: Xxxxxxx Xxxxxx
------------------------------------------------- -------------------------------------------
Title: Trustee Title: Controller
------------------------------------------------- -------------------------------------------
Address: X.X. Xxx 000000, Xxx Xxxxxxxxx, XX 00000 Address: 0000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx
------------------------------------------------- -------------------------------------------
Telephone: (000) 000-0000 Telephone: (000) 000-0000
------------------------------------------------- -------------------------------------------
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
------------------------------------------------- -------------------------------------------
Federal ID No. 00-0000000 Federal ID No. 00-0000000
------------------------------------------------- -------------------------------------------
NOTE: These forms are often modified to meet the changing requirements of law
and industry needs. Always write or call to make sure
Page 15 of 16
16
you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 000 Xx. Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
(000) 000-0000. Fax No. (000) 000-0000
Page 16 of 16
17
ADDENDUM
This Addendum ("Addendum") is dated as of June 18, 1999, and is made by and
between the undersigned, identified as Lessor and Lessee, for the purpose of
amending that Standard Industrial/Commercial Single-Tenant Lease--Gross, dated
June 18, 1999, between Lessor and Lessee (the "Lease"). Capitalized terms not
defined herein shall have the meaning set forth in the Lease. The following
provisions are added to the Lease, and in the case of any inconsistency between
this Addendum and the Lease, the terms of this Addendum shall prevail.
50. PREMISES.
When completed, the Premises will consist of 33,955 rentable square
feet plus approximately 7,750 rentable square feet of second floor addition
space to be constructed in the portion of the Premises commonly known as 0000
Xxxxxxxx Xxxxxx, for a total rentable area of approximately 41,705 square feet.
The final rentable area of the second floor addition space shall be measured in
accordance with BOMA industry standards.
51. COMMENCEMENT DATE.
The Lease Commencement Date shall begin in phases based upon completion
of improvements for various portions of the Premises as follows:
(a) The first phase of this Lease ("Phase I") shall commence (the
"Phase I Commencement Date") on the date of Substantial Completion (as defined
below) of all Tenant Improvements (as defined below) for that portion of the
Premises commonly known as 0000 Xxxxxxxx Xxxxxx (the "Phase I Premises") and all
Lessor Improvements (as defined below) to the interior and building systems of
the Phase I Premises. The Phase I Premises is more particularly described on
Exhibit A attached hereto and made a part hereof. If the Phase I Commencement
date has not occurred for any reason on or before September 30, 1999 (which date
shall be extended by one (1) day for each day of any Lessee Delay), then Lessee
may terminate this Lease by giving written notice to Lessor at any time until
the Phase I Commencement Date has occurred, whereupon any monies previously paid
(including, without limitation, any Excess Costs) or security deposits made by
Lessee to Lessor, shall promptly be reimbursed to Lessee, but Lessor shall be
entitled to deduct from its reimbursement to Lessee the amount of all Tenant
Improvements Costs that have been incurred by Lessor, or at Lessee's option, in
lieu of such deduction, Lessee may make payment of such costs directly to
Lessor. Lessor shall within ten (10) business days after its receipt of written
request from Lessee, inform Lessee in writing of the amount of all Tenant
Improvement Costs that have been incurred to date by Lessor and provide
reasonable supporting backup documentation of such costs to Lessee. In addition
to the foregoing termination right, if the Phase I Commencement date has not
occurred on or before September 30, 1999 (which date shall be extended by one
(1) day for each day of any Lessee
1
18
Delay) due in whole or in part to any material default by Lessor (it being
understood that Lessor shall not be deemed in material default with respect to
any delay to the Substantial Completion of the Tenant Improvements and Lessor
Improvements for the Phase I Premises caused by an event or occurrence outside
of the control of Lessor and which is not due to Lessor's financial inability),
of its obligations to construct the Lessor Improvements and Tenant Improvements
in accordance with this Lease and Lessor fails to cure such default within
fifteen (15) days after written notice from Lessee specifying the nature of such
default, then Lessee may enter the Premises and complete the construction of the
Lessor Improvements and Tenant Improvements and take possession of and use all
or any part of Lessor's materials, equipment, supplies, labor, and other
property used by Lessor for the construction of the Lessor Improvements and the
Tenant Improvements, including engaging the services of Lessor's contractors,
the Architect and other parties therefor. Upon demand, (i) Lessor shall assign
and deliver to Lessee all drawings and specifications, construction contracts,
documents, tangible and intangible property, and contractual rights in the
possession or reasonably within the control of Lessor as Lessee may reasonably
demand for the purpose of completing the Tenant Improvements and Lessor
Improvements, and (ii) Lessor shall execute and deliver to Lessee such written
documentation as Lessee may reasonably request for the purpose of evidencing the
vesting in Lessee of the rights and benefits of Lessor with respect to the
documents and rights so delivered and assigned. Further, Lessee may deduct from
the Base Rent due under this Lease all reasonable costs incurred by Lessee in
completing the Lessor Improvements and Tenant Improvements (including interest
at the rate of 8% per annum on the amounts paid by Lessee that would otherwise
have been paid by Lessor hereunder until such amounts are offset pursuant to the
provisions hereof) in excess of the amount of the Lessee's Contribution (defined
below) that Lessee would have owed had Lessor completely and timely performed
the construction of the Lessor Improvements and Tenant Improvements in
accordance with the terms of this Lease. The Original Term shall commence on the
Phase I Commencement Date. In addition to any other rights or remedies that
Lessee may have, (A) if Lessor has not on or before the thirtieth (30th) day
after Lessee's execution of this Lease secured a commitment letter for funding
construction from a bank or other lending institution reasonably satisfactory to
Lessee, in an amount that will be required to complete the Lessor Improvements
and fund the Tenant Improvements to be paid by Lessor, then Lessee may terminate
this Lease by written notice to Lessor at any time thereafter until Lessor has
given Lessee satisfactory evidence of such funding, whereupon any monies
previously paid (including, without limitation, any Excess Costs) or security
deposits made by Lessee to Lessor, shall promptly be returned to Lessee, and (B)
if Lessor has not secured all governmental permits and approvals necessary to
construct the Tenant Improvements and Lessor Improvements by August 15, 1999,
then Lessee may terminate this Lease by written notice to Lessor at any time
thereafter until Lessor has given Lessee satisfactory evidence that Lessor has
secured the necessary governmental permits and approvals, whereupon any monies
previously paid (including, without limitation, any Excess Costs) or security
deposits made by Lessee to Lessor, shall promptly be reimbursed to Lessee;
provided, however, that so long as the delay in obtaining such governmental
permits and approvals was not due in whole or in part to any material default by
Lessor, other than a delay outside of the control of Lessor and which is not due
to Lessor's financial inability, of its obligations to obtain governmental
permits and approvals necessary to construct the Lessor Improvements and Tenant
Improvements in accordance with this Lease,
2
19
then, and only then, Lessor shall be entitled to deduct from its reimbursement
to Lessee the amount of all Tenant Improvements Costs that have been incurred
by Lessor, or at Lessee's option, in lieu of such deduction, Lessee may make
payment of such costs directly to Lessor. As used herein, the term "Lessee
Delay" shall mean a delay in the Substantial Completion of the Tenant
Improvements or Lessor Improvements for any phase of the Premises caused by
(aa) Lessee's failure to approve or disapprove of any matter hereunder requiring
Lessee's approval within the required time periods expressly set forth in
Paragraph 57 for such approval or disapproval, (bb) a Breach by Lessee under
this Lease, (cc) changes to previously approved preliminary plans or Final Plans
which have been made at Lessee's request, or (dd) any other delays caused by
Lessee for any reason other than the proper exercise by Lessee of its rights
under this Lease.
(b) The second phase of this Lease ("Phase II") shall commence (the
"Phase II Commencement Date") on the date of Substantial Completion of the
Tenant Improvements for the space located in the existing second floor and the
space located immediately below such second floor in the portion of the Premises
commonly known as 0000 Xxxxxxxx Xxxxxx (collectively, the "Phase II Premises")
and the Lessor Improvements for the interior and building systems of the Phase
II Premises. The Phase II Premises is more particularly described on Exhibit A
attached hereto and made a part hereof. If the Phase II Commencement date has
not occurred for any reason on or before November 30, 1999 (which date shall be
extended by one (1) day for each day of any Lessee Delay), then Lessee may
terminate this Lease by giving written notice to Lessor at any time until the
Phase II Commencement Date has occurred, whereupon any monies previously paid
(including, without limitation, any Excess Costs) or security deposits made by
Lessee to Lessor, shall promptly be reimbursed to Lessee, but Lessor shall be
entitled to deduct from its reimbursement to Lessee the amount of all Tenant
Improvements Costs that have been incurred by Lessor, or at Lessee's option, in
lieu of such deduction. Lessee may make payment of such costs directly to
Lessor. Lessor shall within ten (10) business days after its receipt of written
request from Lessee, inform Lessee in writing of the amount of all Tenant
Improvement Costs that have been incurred to date by Lessor, and shall provide
reasonable supporting backup documentation of such costs to Lessee. In addition
to the foregoing termination right, if the Phase II Commencement date has not
occurred on or before November 30, 1999 (which date shall be extended by one (1)
day for each day of any Lessee Delay) due in whole or in part to any material
default by Lessor (it being understood that Lessor shall not be deemed in
material default with respect to any delay to the Substantial Completion of the
Tenant Improvements and Lessor Improvements for the Phase II Premises caused by
an event or occurrence outside of the control of Lessor and which is not due to
Lessor's financial inability), of its obligations to construct the Lessor
Improvements and Tenant Improvements in accordance with this Lease and Lessor
fails to cure such default within fifteen (15) days after written notice from
Lessee specifying the nature of such default, then Lessee may enter the Premises
and complete the construction of the Lessor Improvements and Tenant Improvements
and take possession of and use all or any part of Lessor's materials, equipment,
supplies, labor, and other property used by Lessor for the construction of the
Lessor Improvements and the Tenant Improvements, including engaging the services
of Lessor's contractors, the Architect and other parties therefor. Upon demand,
(i) Lessor shall assign and deliver to Lessee all drawings and specifications,
construction contracts,
3
20
documents, tangible and intangible property, and contractual rights in the
possession or reasonably within the control of Lessor as Lessee may reasonably
demand for the purpose of completing the Tenant Improvements and Lessor
Improvements, and (ii) Lessor shall execute and deliver to Lessee such written
documentation as Lessee may reasonably request for the purpose of evidencing the
vesting in Lessee of the rights and benefits of Lessor with respect to the
documents and rights so delivered and assigned. Further, Lessee may deduct from
the Base Rent due under this Lease all reasonable costs incurred by Lessee in
completing the Lessor Improvements and Tenant Improvements (including interest
at the rate of 8% per annum on the amounts paid by Lessee that would otherwise
have been paid by Lessor hereunder until such amounts are offset pursuant to the
provisions hereof) in excess of the amount of the Lessee's Contribution (defined
below) that Lessee would have owed had Lessor completely and timely performed
the construction of the Lessor Improvements and Tenant Improvements in
accordance with the terms of this Lease.
(c) The third phase of this Lease ("Phase III") shall commence (the "Phase
III Commencement Date") on the date by which both of the following have
occurred: (i) the Substantial Completion of the Tenant Improvements for all
space located in the Premises other than the Phase I Premises and the Phase II
Premises (collectively, the "Phase III Premises"); and (ii) the Substantial
Completion of all remaining interior and exterior Lessor Improvements to the
entire Premises. The Phase III Premises is more particularly described on
Exhibit A attached hereto and made a part hereof. If the Phase III Commencement
date has not occurred for any reason on or before December 31, 1999 (which date
shall be extended by one (1) day for each day of any Lessee Delay), then Lessee
may terminate this Lease by giving written notice to Lessor at any time until
the Phase III Commencement Date has occurred, whereupon any monies previously
paid (including, without limitation, any Excess Costs) or security deposits made
by Lessee to Lessor, shall promptly be reimbursed to Lessee, but Lessor shall be
entitled to deduct from its reimbursement to Lessee the amount of all Tenant
Improvements Costs that have been incurred by Lessor, or at Lessee's option, in
lieu of such deduction. Lessee may make payment of such costs directly to
Lessor. Lessor shall within ten (10) business days after its receipt of written
request from Lessee, inform Lessee in writing of the amount of all Tenant
Improvement Costs that have been incurred to date by Lessor, and shall provide
reasonable supporting backup documentation of such costs to Lessee. In addition
to the foregoing termination right, if the Phase III Commencement date has not
occurred on or before December 31, 1999 (which date shall be extended by one (1)
day for each day of any Lessee Delay) due in whole or in part to any material
default by Lessor (it being understood that Lessor shall not be deemed in
material default with respect to any delay to the Substantial Completion of the
Tenant Improvements and Lessor Improvements for the Phase III Premises caused by
an event or occurrence outside of the control of Lessor and which is not due to
Lessor's financial inability), of its obligations to construct the Lessor
Improvements and Tenant Improvements in accordance with this Lease and Lessor
fails to cure such default within fifteen (15) days after written notice from
Lessee specifying the nature of such default, then Lessee may enter the Premises
and complete the construction of the Lessor Improvements and Tenant Improvements
and take possession of and use all or any part of Lessor's materials, equipment,
supplies, labor, and other property used by Lessor for the construction of the
Lessor Improvements and the Tenant Improvements, including engaging the
4
21
services of Lessor's contractors and other parties therefor. Upon demand, (A)
Lessor shall assign and deliver to Lessee all drawings and specifications,
construction contracts, documents, tangible and intangible property, and
contractual rights in the possession or reasonably within the control of Lessor
as Lessee may reasonably demand for the purpose of completing the Tenant
Improvements and Lessor Improvements, and (B) Lessor shall execute and deliver
to Lessee such written documentation as Lessee may reasonably request for the
purpose of evidencing the vesting in Lessee of the rights and benefits of Lessor
with respect to the documents and rights so delivered and assigned. Further,
Lessee may deduct from the Base Rent due under this Lease all reasonable costs
incurred by Lessee in completing the Lessor Improvements and Tenant Improvements
(including interest at the rate of 8% per annum on the amounts paid by Lessee
that would otherwise have been paid by Lessor hereunder until such amounts are
offset pursuant to the provisions hereof) in excess of the amount of the
Lessee's Contribution (defined below) that Lessee would have owed had Lessor
completely and timely performed the construction of the Lessor Improvements and
Tenant Improvements in accordance with the terms of this Lease.
52. RENT.
The first sixty (60) months rent, running from the date of the Phase I
Commencement Date, shall be $28.00 per rentable square foot per annum or $2.33
per month. The second sixty (60) months rent, commencing with the fifth
anniversary date of the Phase I Commencement Date, shall be $33.00 per rentable
square foot per annum or $2.75 per month, payable in advance on the first day of
each and every month of the term of this Lease. Rent and any other charges under
this Lease payable by Lessor with respect to a phase shall not commence until
the occurrence of the applicable commencement date for such phase as set forth
in Paragraph 51. The "rentable" square footage of each phase of the Premises
shall be determined in accordance with applicable BOMA measurement standards
upon the Substantial Completion of each such phase.
53. OPTION TO EXTEND.
(a) General. Lessee is given the option to extend the Original Term
on all the provisions contained in this Lease, except for rent, for a five (5)
year period (the "Extended Term") following expiration of the Original Term by
giving notice of exercise of the option ("Option Notice") to Lessor at least
twelve (12) months and not earlier than eighteen (18) months before the
expiration of the Original Term; provided that, if Lessee is in monetary or
material non-monetary Breach as of the date of giving the Option Notice, the
Option Notice shall be ineffective, or if Lessee is in monetary or material
non-monetary Breach as of the date the Extended Term is to commence, the
Extended Term shall not commence and this Lease shall expire at the end of the
Original Term.
(b) Rent. The rent for the Extended Term shall be the fair market
rental value of the Premises (based upon the highest and best use for the
Premises under the Agreed Use) as of the date of commencement of the Extended
Term, which fair market rental value shall not be
5
22
less than the rent in effect during the last year of the Original Term and
shall be determined in accordance with paragraph c, below.
(c) Determination of Fair Market Rent.
(i) The parties shall endeavor by good faith negotiations to agree
upon the fair market rental value within thirty (30) days after Lessor's receipt
of the Option Notice.
(ii) In the event Lessor or Lessee cannot agree on the rent within
sixty (60) days after Lessor's receipt of the Option Notice, then within thirty
(30) days thereafter each party, at its own cost and by giving notice to the
other party, shall appoint a real estate broker with at least five (5) years'
full time commercial leasing experience in the San Francisco Bay Area, to
appraise and determine the fair market rental value of the Premises ("Fair
Market Rent"). If, in the time provided, only one party shall notice appointment
of a broker, the single broker appointed shall determine the Fair Market Rent.
If two brokers are appointed by the parties, the two brokers shall
independently, and without consultation between them, prepare an appraisal of
the Fair Market Rent within thirty (30) days. Each broker shall seal its
respective appraisal after completion. After both appraisals are completed, the
resulting estimates of the Fair Market Rent shall be opened and compared. If the
value of the appraisals differ by no more than ten percent (10%), then the Fair
Market Rent shall be the average of the two appraisals.
(iii) If the values of the appraisals differ by more than ten
percent (10%), then the two brokers shall designate a third broker meeting the
qualifications set forth in subparagraph (ii), above. If the two brokers have
not agreed on a third broker after ten (10) days, either Lessor or Lessee, by
giving ten (10) days' notice to the other party, may apply to the then Presiding
Judge of the Superior Court for the county in which the Premises are located for
the selection of a third broker who meets the qualifications set forth in
subparagraph (ii), above. The third broker, however selected, shall be a person
who has not previously acted in any capacity for either party. The third broker
shall make an appraisal of the Fair Market Rent within ten (10) days after
selection and without consultation with the first two brokers. The parties shall
then determine the Fair Market Rent for the Premises by averaging the
appraisals; provided, however, that any high or low appraisal, differing from
the middle appraisal by more than fifteen percent (15%) of the middle appraisal,
shall be disregarded in calculating the average.
(d) Costs. Each party shall pay the fees and expenses of its own
broker, and fifty percent (50%) of the fees and expenses of the third broker.
(e) Criteria. The brokers shall determine the Fair Market Rent using
the "market comparison approach," with the relevant market being that for the
highest and best use under the Agreed Use for similar space without improvements
in the immediate area where the Premises are located. The brokers shall use
their best efforts to fairly and reasonably appraise and determine the fair
market rental value of the Premises in accordance with the terms of this Lease,
and shall not act as advocates for either Lessor or Lessee.
6
23
(f) Rescission of Option Exercise. Notwithstanding anything to the
contrary contained in this Paragraph 53, if the rent during any extended term
is determined by appraisal and if Lessee does not, in its sole discretion,
approve the Fair Market Rent amount established by such appraisal, Lessee may
rescind its exercise of the option by giving Lessor written notice of such
election to rescind within thirty (30) days after receipt of all appraisals. If
Lessee rescinds its exercise of the option, then (i) this Lease shall terminate
on the one hundred eightieth (180th) day after Lessee's notice of rescission or
on the date this Lease would otherwise have terminated absent Lessee's exercise
of the Option, whichever is later, and (ii) Lessee shall pay all costs and
expenses of all appraisals required by either party in accordance with this
Paragraph 53.
(g) No Further Extension. Lessee shall have no further option to
extend the term of this Lease.
54. HAZARDOUS SUBSTANCES.
(a) Lessor represents and warrants to Lessee that to the best
knowledge of Lessor, (i) no Hazardous Substance is present on the Premises or
the soil, surface water or groundwater thereof, (ii) no underground storage
tanks or asbestos-containing building materials are present on the Premises,
and (iii) no action, proceeding or claim is pending or threatened concerning
the Premises concerning any Hazardous Substance or pursuant to any Applicable
Requirements.
(b) Except as provided for in (d) below, Lessee will not, in violation
of any Environmental Law, use, generate, manufacture, produce, store, release,
discharge or dispose of, on, under or about the Premises or transport to or
from the Premises any Hazardous Substances (as defined in Section 6.2(a) of
this Lease) or allow its employees, agents, contractors, invitees or any other
person or entity to do so.
(c) Lessee shall surrender the Premises in as good a condition as
when received by Lessee, reasonable wear and tear, casualties and condemnation
excepted, it being specifically agreed to by Lessor and Lessee that (i) the
presence at expiration or termination of this Lease of Hazardous Substances
which are generated, released, discharged or disposed of by Lessee on, under
or about the Premises shall not be "reasonable wear and tear" as that term is
used in this Lease, (ii) Lessee shall have no liability or responsibility with
respect to any Hazardous Substances that migrate onto the Premises from
adjacent or other premises, and (iii) Lessee shall have no liability or
responsibility with respect to any Hazardous Substances that are generated,
released, discharged or disposed of on or about the Premises by Lessor or Xxxxx
Media Company or any of their agents, employees, contractors or invitees.
(d) Lessee may, as required in the conduct of its business and in
compliance with all Environmental Laws, use supplies and cleaning agents
commonly used in a general office use, oils, solvents, adhesives, paints, and
other materials. All applicable laws regarding the use, storage, and disposal
of such materials shall be complied with. Upon commencing any activity
7
24
involving Hazardous Substances on the Property and continuing throughout the
term of this Lease. Lessor and its representatives shall have the right, upon
reasonable prior notice to Lessee, to enter the Property and to (i) conduct any
testing, monitoring and analysis for Hazardous Substances; (ii) review any
documents, materials, inventory, financial data or notices or correspondence to
or from private parties (except for attorney-client and proprietary documents
and correspondence) or to or from governmental entities in connection therewith;
and (iii) review all storage, use and disposal facilities and procedures
associated with the storage, use and disposal of Hazardous Substances
(collectively "Inspection") (except those prepared by or for legal counsel of
Lessee) at any time during the term of this Lease if, in Lessor's reasonable
judgment, Lessee is breaching its obligations under this Addendum or is not in
substantial compliance with any other provisions of this Lease.
55. LESSEE SIGNAGE.
Lessee shall have the right to install, affix and maintain any signs on the
exterior and on the interior of the buildings which shall signify Digital Think,
or its affiliates in the Premises; provided that such signs shall be subject to
the prior written approval of Lessor, which shall not be unreasonably withheld,
subject to the limitations and sign easement rights of Xxxxx Media Company
pursuant to the terms of the recorded easement described in Paragraph 60 below.
56. LESSOR'S IMPROVEMENTS
The following is a list of the improvements (collectively, "Lessor
Improvements") that Lessor shall at its sole cost caused to be completed in the
Premises at the times and with respect to the portions of the Premises set forth
in Paragraph 51 and which are separate from the Tenant Improvements described in
Paragraph 57 below.
A. Replacement of all broken windows
B. Fill, patch and otherwise repair the exterior wall areas of the
Premises and repaint the exterior of the Premises in a color to be
determined by Lessee; provided however, that upon the termination of
this Lease, Lessee shall be obligated at its expense to repaint the
exterior of the Premises in a color to be determined by Lessor (which
determination shall be made and given by Lessor to Lessee promptly
upon request by Lessee)
C. Repairs and replacements necessary to deliver the following existing
building systems and elements serving the Premises in water-tight and
good condition and repair:
(i) roof;
(ii) sprinkler system;
(iii) electrical system (1250 amp three-phase service) and;
(iv) plumbing system.
8
25
Any changes, additions or upgrades to the existing exterior walls
(including any doors or windows), roof, sprinkler system, electrical system, or
plumbing system, beyond those which are necessary to complete the foregoing
Lessor Improvements, shall not be deemed Lessor Improvements and shall be deemed
Tenant Improvements. In addition, any interior or exterior demolition of the
Premises beyond that which is necessary to complete the foregoing Lessor
Improvements shall be deemed Tenant Improvements.
Additionally, Lessor, at its expense, shall (i) install a passenger
elevator in the Premises that meets Title 24 Accessibility Requirements, and
(ii) make all improvements necessary to bring the Premises into compliance with
Applicable Requirements, including without limitation the Americans With
Disabilities Act and all necessary structural modifications and seismic upgrades
to the Premises, as may be required by the City and County of San Francisco;
provided, however, that if the cost to Lessor of any improvements necessary to
bring the Premises into compliance with Applicable Requirements as described in
the foregoing clause (ii) will in the aggregate exceed One Hundred Fifty
Thousand Dollars ($150,000) and Lessee does not agree in writing to fund the
Excess Costs within ten (10) days after Lessee's receipt of written notice from
Lessor of such costs in excess of $150,000 (the "Excess Costs"), which notice
shall include reasonable supporting backup documentation of such Excess Costs,
then Lessor may by giving written notice to Lessee within seven (7) days after
the expiration of such 10-day period, terminate this Lease, whereupon any monies
previously paid (including, without limitation, any Excess Costs) or security
deposits given by Lessee to Lessor, shall promptly be reimbursed to Lessee, but
Lessor shall be entitled to deduct from its reimbursement to Lessee fifty
percent (50%) of the amount of all Tenant Improvements Costs that have been
incurred by Lessor, or at Lessee's opinion, in lieu of such deduction. Lessee
may make payment of such costs directly to Lessor. Lessor shall be deemed to
have waived the foregoing termination right if it fails to give such termination
notice to Lessee within such 7-day period. If Lessee elects to fund such Excess
Costs, then this Lease shall remain in effect, and beginning on the seventh full
calendar month after the Phase III Commencement Date, and continuing each
calendar month thereafter during the Lease Term, Lessee shall be entitled to
offset against the rent due and payable under this Lease the full amount of the
Excess Costs (together with interest on the unpaid balance at the rate of eight
percent (8%) per annum) until such amount has been fully offset.
The cost of the foregoing items shall not be included in the Tenant
Improvements Allowance described in Paragraph 57 below; however, any additional
upgrades to the Base Buildings, their systems and elements which are not
described above and which are desired by Lessee (and will not be covered by the
Tenant Improvements Allowance) shall be the responsibility of the Lessee and
shall be done at Lessee's expense.
57. TENANT IMPROVEMENTS.
Immediately upon execution of this Lease and posting by Lessee of the
Letter of Credit described in Paragraph 58, below, Lessor shall use commercially
reasonable efforts to have constructed on the Premises in a good and workmanlike
manner and in accordance with this
9
26
Addendum, the Tenant Improvements specified by Lessee in accordance with the
Final Plans defined in this paragraph.
(a) As soon as reasonably possible after the date of mutual execution of
this Lease by Lessor and Lessee, Lessor shall retain a qualified, licensed
architect (the "Architect") to prepare preliminary plans and specifications and
preliminary cost estimates for the construction of the Tenant Improvements. The
Architect retained by Lessor shall be subject to the prior approval of Lessee,
which approval shall not be unreasonably withheld. Within five (5) days after
Lessee's receipt of such preliminary plans and specifications and preliminary
cost estimates, at its election, (i) Lessee may terminate this Lease and
receive a full refund of all monies paid and deposits made by it to Lessor
under this Lease after deduction or payment by Lessee of all Tenant Improvement
Costs incurred by Lessor; (ii) Lessee may approve such preliminary plans and
specifications and preliminary cost estimate; or (iii) Lessee may deliver to
Lessor the specific written changes to such plans that it deems necessary or to
reduce Lessee's cost. If Lessee desires changes to the preliminary plans and
specifications, Lessor shall not unreasonably withhold its approval of such
changes.
(b) As soon as reasonably possible after the date that both parties have
approved in writing the preliminary plans and specifications and preliminary
cost estimates, Lessor shall cause final plans and specifications (the "Final
Plans") and a final cost estimate ("Final Cost Estimate") to be prepared. Within
five (5) days after receipt thereof, at its selection, (i) Lessee may terminate
this Lease and receive a full refund of all monies paid and deposits made by it
to Lessor under this Lease after deduction or payment by Lessee of all Tenant
Improvement Costs incurred by Lessor; (ii) Lessee may approve such Final Plans
and Final Cost Estimate; or (iii) Lessee may deliver to Lessor the specific
written changes to such Final Plans that it deems necessary to reduce Lessee's
cost. If Lessee desires changes to the Final Plans, Lessor shall not
unreasonably withhold its approval of such changes.
(c) Lessor shall be responsible for obtaining approval for the Final Plans
from all necessary government agencies. The parties agree that they shall be
bound by any change in the Final Plans ordered as a condition of government
approval; provided, however that if any such change will (i) materially impair
Lessee's use and occupancy of the Premises, (ii) materially increase Lessee's
cost of operating in the Premises, or (iii) materially delay the anticipated
completion of the Tenant Improvements, then Lessee may terminate this Lease by
written notice to Lessor and receive a full refund of all monies paid and
deposits made by Lessee to Lessor under this Lease after deduction or payment
by Lessee of all Tenant Improvement Costs incurred by Lessor.
(e) After approval of the Final Plans, neither party may require extra
work or make any modifications with respect to the construction of the Tenant
Improvements, without the prior written consent of the other party as to the
change, which consent shall not be unreasonably withheld. All Lessee
requested change orders shall specify any change in the Final Cost Estimate
as a consequence of the change orders, and any and all Lessor requested change
orders approved by Lessee shall be made at no cost to Lessee.
10
27
(f) Lessor shall cause at least three (3) general contractors approved in
advance by Lessee (which approval shall not be unreasonably withheld or delayed)
to bid for construction of the Tenant Improvements. If Lessee so desires, Lessee
may also select a general contractor, reasonably acceptable to Lessor, to bid
the work. All bids shall be opened simultaneously and shall be subject to
Lessee's approval, which approval shall not be unreasonably withheld or delayed.
Unless otherwise agreed to in writing by Lessee, the "General Contractor"
selected by Lessor from the approved bidders list shall be the lowest responsive
bidder and if the lowest responsive bid is in excess of the Final Cost Estimate,
Lessee shall have the right to propose changes to the Final Plans to reduce the
amount of such bid, and any delay to the Substantial Completion of any phase of
the work as a result of any such changes shall be deemed a Lessee Delay.
Notwithstanding Lessee's right to approve the General Contractor, the General
Contractor shall be the contractor only of Lessor, and Lessee shall have no
liability to the General Contractor under any construction contract or otherwise
with respect to the Premises.
(g) Lessor shall cause the General Contractor to prosecute diligently to
completion the construction of the Tenant Improvements and Lessor Improvements.
Lessee's only obligation to pay any cost of constructing the Tenant Improvements
shall be limited to the positive difference, if any, between the General
Contractor's approved bid for such work (as such amount may later be adjusted by
change orders requested by Lessee and approved by Lessor) and the Tenant
Improvement Allowance, such difference being referred to herein as the "Lessee's
Contribution." The parties acknowledge that Lessee shall have no obligation to
pay any cost of constructing any portion of the Tenant Improvements in excess of
the Lessee's Contribution. Lessee shall pay the Lessee's Contribution as
follows: Lessee shall pay to Lessor ninety percent (90%) of a proportionate
share of each progress payment due to the General Contractor which bears the
same relationship to the total amount of the progress payment in question as the
Lessee's Contribution bears to the approved General Contractor's bid. Within ten
(10) days after the Tenant Improvements are fully and finally completed
(including all "punch list" items) and the amount of all Tenant Improvement
Costs have been finally determined as provided below, Lessee shall pay Lessor
any portion of the Lessee's Contribution that remains due and unpaid, including
without limitation the ten percent (10%) retention held by Lessee. As used
herein, the term "Tenant Improvement Allowance" shall mean the product of
Twenty-Five Dollars ($25.00) multiplied by the number of square feet of rentable
area of the Premises (which amount Lessor must contribute for the design,
development and construction of the Tenant Improvements); provided, however,
that with respect to the portion of the Premises located at 0000 Xxxxxxxx
Xxxxxx, (i) Lessor shall contribute Thirty Dollars ($30.00) per rentable square
foot toward the construction of a second floor addition consisting of
approximately 7,750 square feet of space, (B) Lessee shall be responsible for
the payment of the next Ten Dollars ($10.00) per rentable square foot of the
cost of construction of the second floor addition, and (C) Lessor shall be
responsible for the balance of the cost of the second floor addition in excess
of Forty Dollars ($40.00) per rentable square foot. For purposes of this
paragraph, the second floor addition shall consist of a "bare bones" second
level addition of not more than Seven Thousand Seven Hundred Fifty (7,750)
square feet and generally described as follows: a self-supporting structure
supported by new concrete foundations with pipe columns to hold steel beams,
which steel beams will in
11
28
turn hold truss joists and on top of the truss joints will be plywood decking,
and a new stair exit and sprinklers under the deck will be provided, if and to
the extent required by the City and County of San Francisco. If Lessee shall be
required to contribute toward the cost of the second floor addition
construction, then (in addition to any funds contributed by Lessee for Excess
Costs) beginning on the seventh full calendar month after the Phase III
Commencement Date, and continuing each calendar month thereafter during the
Lease Term, Lessee shall be entitled to offset against the rent due and payable
under this Lease the full amount of such costs (with interest on such amount at
the rate of eight percent (8%) per annum until fully offset) until such amount
(along with any Excess Costs) has been fully offset. After the General
Contractor's bid has been approved by Lessee, Lessee shall not substantially
delay or impede the construction by requesting material changes or material
alterations to the Final Plans. Any changes requested by Lessee in the Final
Plans must be approved by Lessor, which approval not to be unreasonably withheld
or delayed and any and all such changes or alterations which cause an increase
in the Lessee's Contribution shall be paid for by Lessee.
(i) When construction of each phase of the Tenant Improvements, as defined
in Paragraph 51 above is Substantially Completed, Lessor shall submit to Lessee
a final and detailed accounting of all Tenant Improvement Costs for such phase
paid by Lessor, certified to be true and correct by Lessor's representative.
Lessee may audit the books, records, and supporting documents of Lessor to the
extent necessary to determine the accuracy of such accounting during normal
business hours after giving Lessor at least forty-eight (48) hours written
notice. Lessee shall bear the cost of such audit, unless such audit discloses
that Lessor has overstated the total costs by more than two percent (2%) of the
actual amount of such costs, in which event Lessor shall pay the costs of
Lessee's audit. Lessor shall promptly refund any overpayments to Lessee. As used
herein, the term "Tenant Improvement Costs" shall mean the sum of the following:
(i) payments to the General Contractor and its subcontractors for labor and
materials furnished pursuant to any construction contract for construction of
the Tenant Improvements, which is entered into by Lessor and approved by Lessee
in accordance with this Lease; (ii) reasonable fees paid by Lessor to permit
expediters, and use attorneys, architects, space planners, designers, inspectors
and other construction professionals; (iii) permit and license fees for use and
occupancy permits required for Lessee to occupy the Premises; (iv) attorney's
fees incurred in connection with negotiation of construction contracts; and (v)
the amounts paid to governmental authorities or agencies for inspections and
issuance of building permits and approvals for the Tenant Improvements.
Notwithstanding the foregoing, in no event shall Tenant Improvement Costs
include nor shall Lessor apply any of the Tenant Improvement Allowance toward
(A) costs attributable to Lessor Improvements or improvements installed outside
the demising walls of the Premises; (B) costs for improvements which are not
shown on or described in the Final Plans unless otherwise approved by Lessee;
(C) costs incurred to remove Hazardous Substances from the Premises or the
surrounding area; (D) attorneys' fees, experts' fees and other costs in
connection with disputes with third parties; (E) interest and other costs of
financing construction costs; (F) restoration costs in excess of insurance
proceeds as a consequence of casualties; (G) penalties and late charges
attributable to Lessor's failure to pay construction costs through no fault of
Lessee; and (H) costs to bring the Premises into compliance with Applicable
12
29
Requirements pursuant to the provisions set forth in the second to the last
grammatical paragraph of Paragraph 56.
(j) As used herein, the terms "Substantially Completed" and
"Substantial Complete" with respect a phase of the Tenant Improvements shall
mean the date by which all of the following have occurred: (i) all necessary
governmental approvals for occupancy of the applicable phase of the Premises
have been obtained by Lessor (including a final "sign-off" and, if applicable, a
certificate of occupancy); (ii) the Architect has certified that the applicable
phase of the Tenant Improvements has been constructed in accordance with the
Final Plans, except for minor "punch list" items which will not interfere with
Lessee's use and occupancy of the Premises; and (iii) Lessor has delivered
possession of the Premises to Lessee and Lessee has had at least seven (7) days
to complete furniture, equipment and cabling installation in the applicable
phase of the Premises.
(k) As soon as possible after the commencement of the Lease, Lessor and
Lessee shall designate as Lessee's property Tenant Improvements having a cost
approximately equal to the Lessee's Contribution. In determining which Tenant
Improvements will be designated as Lessee's property, Lessor and Lessee shall
act reasonably and in good faith, shall not designate any improvements which
will be needed for occupancy by future tenants of the Premises, and shall give
preference to those Tenant Improvements which are most readily removable from
the Premises and which shall have the greatest utility for Lessee outside of the
Premises. Property designated as Lessee's property under the terms of this
subparagraph shall constitute Lessee's property for purposes of the Lease, may
be removed from the Premises at any time by Lessee so long as such removal will
not cause any structural injury to the Premises and Lessee repairs any damage to
the Premises caused by such removal, and Lessee shall be entitled to all
investment tax credit, depreciation, and other tax attributes relating to such
property. At the expiration or sooner termination of the Lease, all Tenant
Improvements not designated as Lessee's property under this subparagraph shall
be surrendered to Lessor in accordance with the terms of the Lease.
(l) Within thirty (30) days after the Commencement Date for each phase
of the Lease, Lessee shall have the right to submit a written "punch list" to
Lessor, setting forth any defective item of construction in such phase, and
Lessor shall promptly cause such items to be corrected. The parties' preparation
of such a "punch list" shall not, however, be deemed an acceptance by Lessee of
the Premises or phase thereof as complete or free from defects and shall not in
any way affect Lessor's warranty obligations under this Lease. Notwithstanding
anything to the contrary in the Lease, effective upon the Substantial Completion
of the last phase of the Tenant Improvements, Lessor does hereby warrant (i)
that the Tenant Improvements and Lessor Improvements were constructed in
accordance with all Applicable Requirements, (ii) that Tenant Improvements and
Lessor Improvements were constructed in accordance with the Final Plans and in
a good and workmanlike manner, and (iii) that all material and equipment
installed in the Premises conformed to the Final Plans, were new and otherwise
of good quality and were installed in accordance with all vendor's and
manufacturer's specifications, instructions and requirements. If the Premises do
not comply with such warranty, Lessor shall, promptly upon receipt of written
notice from Lessee setting forth the nature and extent of such non-compliance,
13
30
rectify the same at Lessor's expense. If Lessee does not give Lessor written
notice of a non-compliance with this warranty with respect to the Tenant
Improvements and Lessor Improvements within twelve (12) months after the start
of the warranty period, then correction of such non-compliance with respect to
the Tenant Improvements and Lessor Improvements shall be at Lessee's expense.
All construction product and equipment warranties and guarantees obtained by
Lessor shall, to the extent obtainable, provide that such warranties and
guarantees shall also run to the benefit of Lessee and its successors and
assigns. Lessee shall have the benefit of any construction, product and
equipment warranties and guarantees in favor of Lessor that would assist
Lessee in correcting defects and in discharging any of Lessee's obligations
regarding the repair and maintenance of the Premises. Upon written request by
Lessee, Lessor shall inform Lessee of all written construction, product and
equipment warranties and guarantees in favor of Lessor that affect the
Premises. Lessor shall cooperate with Lessee in enforcing such warranties and
guarantees and in bringing any suit that may be necessary to enforce liability
(A) at Lessor's sole expense with regard to any defect for which Lessor is
responsible under this paragraph or under the Lease, and (B) also with regard
to any defect for which Lessor is not responsible under this paragraph or under
this Lease so long as Lessee pays all costs reasonably incurred by Lessor in
doing so. Notwithstanding anything to the contrary contained in the Lease.
Lessee's acceptance of the Premises or phase thereof shall not be deemed a
waiver of the foregoing warranty, and Lessor shall promptly repair all
violations of the warranty to the extent required under this paragraph at its
sole cost and expense.
58. LETTER OF CREDIT.
As and for its Security Deposit hereunder pursuant to the provisions of
Paragraph 5 of this Lease, above, and to assure and secure Lessee's obligations
under all other provisions of this Lease and Addendum, including but not limited
to Lessee's obligations under Xxxxxxxxx 00, Xxxxxx shall deposit with Lessor a
Letter of Credit in form subject to the reasonable approval of Lessor's
attorneys and issued by a national bank or lending institution, cash, or a
combination thereof, in the total amount of $1,800,000.00. This Lease shall have
no force or effect, nor shall Lessor have any obligations hereunder unless and
until it is in receipt of such Security Deposit. Commencing on the first day of
the first full month following the Phase I Commencement Date and continuing on
the first day of each month thereafter during the Lease Term until the required
Security Deposit amount has been reduced to $700,000, the amount of the Security
Deposit may be reduced by Lessee in an amount equal to the Base Rent payment for
each such month; provided, however, that no reduction shall occur at any time
that Lessee is in Breach of any of the provisions of this Lease. Lessee may
reduce the Security Deposit amount by substituting a new Letter of Credit (in
form reasonably acceptable to Lessor's attorneys), cash or any combination
thereof, in the reduced amount. Cash, a Letter of Credit, or a combination
thereof, in a sum of not less than $700,000 shall remain on deposit with Lessor
(after Lessee has paid in rent not less than $1,100,000) for the Original Term
and the Extended Term, if any, and shall secure all of Lessee's obligations
hereunder. Any Letter of Credit shall require that any draw on the Letter of
Credit shall be made only upon receipt by the issuer of a written certification
from Lessor certifying that Lessee is in Breach under the Lease or that Lessee
has terminated this Lease
14
31
pursuant to Sections 51, 56 or 57 hereunder, and that the amount drawn on the
Letter of Credit is the amount due Lessor on account of the Breach or
termination by Lessee. In the event such Letter of Credit is not payable in
amounts less than the full amount thereof, and if Lessee's Breach is less than
such amount, Lessor shall nonetheless be entitled to draw against such Letter of
Credit to satisfy Lessee's obligations in the event of a Breach by Lessee and
to hold any excess sums as a cash Security Deposit. Lessee shall restore its
Letter of Credit to the full amount, or deposit the necessary additional cash
required within ten (10) days after written notice from Lessor. Upon Lessee's
restoration of the Letter of Credit, Lessor shall promptly refund to Lessee all
of the excess cash Security Deposit then held by Lessor. Lessor shall look
first to any cash portion of the Security Deposit then held by Lessor hereunder
before drawing on any Letter of Credit portion of the Security Deposit.
59. ASSIGNMENT AND SUBLETTING.
Notwithstanding the provisions of Section 12 of this Lease, Lessee may sublet
all or any portion of the Premises or assign its interest in this Lease, on the
following terms and conditions.
(a) Lessee must first obtain the written consent of Lessor to the
assignment or subletting, which consent shall not be unreasonably withheld. A
consent to one assignment or subletting by Lessor shall not be deemed to be a
consent to any subsequent assignment or subletting. Any assignment or
subletting without the prior written consent of Lessor shall be void and shall,
at the option of Lessor, terminate this Lease.
(b) Lessee shall pay to Lessor one half (1/2) of all rents received
from the subtenant and/or assignee in excess of the rent payable by Lessee to
Lessor under this Lease, after deducting therefrom all reasonable costs
incurred by Lessee in effectuating such assignment or subletting, including,
without limitation, brokerage commissions, reasonable attorneys' fees, and
tenant improvement costs. Any assignment or subletting that does not comply
with the foregoing shall be void and shall at the option of Lessor, terminate
this Lease.
Lessee may, without Lessor's prior written consent and without any sharing of
excess rental proceeds, sublet the Premises or assign this Lease to:
(c) A subsidiary, affiliate, divisional or corporation controlled or
under common control with Lessee, or
(d) A successor corporation related to Lessee by merger,
consolidation, non-bankruptcy reorganization or government action. For the
purpose of this Lease, a sale or transfer of Lessee's capital stock, including
without limitation a transfer in connection with the merger, consolidation or
non-bankruptcy reorganization of Lessee and any sale through any public
exchange, shall not be deemed an assignment, subletting or any other transfer
of this Lease or the Premises.
15
32
Additionally, Lessee may, without Lessor's prior written consent, but
subject to an equal sharing with Lessor of the bonus value (i.e., the then
present value of any difference between the Rent due under this Lease and the
fair market value rent for the Premises) of this Lease, if any, assign this
Lease to an entity which purchases substantially all of the assets of Lessee
located in the Premises. If Lessor and Lessee are unable to agree upon the
amount of the bonus value of this Lease at the time of any such sale of assets,
then this amount shall be determined by appraisal in accordance with the
appraisal procedures set forth in Paragraphs 53(c), (d) and (e).
60. SIGN EASEMENT AND ACCESS RIGHTS.
Lessee is aware and acknowledges that Lessor has sold to Xxxxx Media
Company certain sign easement and access rights for the maintenance of outdoor
advertising display structures and sign supporting structures, panels, moldings
connections and components on the roof of the Premises located at 0000 Xxxxxxxx
Xxxxxx. Lessee agrees to honor all such rights, including without limitation,
the right to repair and maintain such signs, structures and equipment and will
not interfere with any required maintenance, repairs or servicing required by
Xxxxx Media Company, its successors and assigns. Notwithstanding anything to the
contrary in this Lease, Lessor shall indemnify, defend, protect and hold
harmless Lessee from all claims, demands, liabilities or causes of action,
personal injuries, damages and expenses arising out of the negligence or willful
misconduct of, or damage to the Premises caused by, Xxxxx Media Company or its
agents, employees or contractors.
61. LIMITATION ON ARBITRATION.
Notwithstanding anything to the contrary set forth in this Lease or in any
addendum thereto, no dispute concerning rent, rental payments or any sum claimed
to be owing to Lessor under this Lease shall be subject to arbitration.
62. INSURANCE.
Lessor shall be named as an additional insured under the general liability
insurance policy required to be obtained by Lessee under this Lease. Such policy
shall insure against loss, damage or liability for personal injury or death of
any person or loss or damage to property occurring in, upon or about the
Premises and shall include broad form contractual liability insurance. The
property insurance required to be carried by Lessee under this Lease shall be in
so called "all risk" form, which shall include vandalism and malicious mischief
coverage. The provisions of this paragraph are intended to be in addition to,
and not as a limitation of, the insurance obligations of Lessee under Section 8
of this Lease.
Lessee shall furnish to Lessor upon the Commencement Date and thereafter
within ten (10) days prior to the expiration of each policy required by this
Lease, a Certificate of Insurance and endorsement(s) affording evidence of the
above insurance requirements issued by the
16
33
insurance carrier of each policy of insurance carried by Lessee pursuant hereto.
All such carriers shall be required to give notice to Lessor of the termination
of any such policy. If at any time during the Original Term of this Lease, or
any Extended Term, but not more often than once every four (4) years, the amount
or coverage of insurance which Lessee is required to carry under this Lease is,
in Lessor's independent insurance advisor's reasonable judgment, materially less
than the amount or type of insurance coverage typically carried by lessees of
comparable property located in the relevant San Francisco market area, Lessor
shall have the right to require Lessee to increase the amount or change the
types of insurance coverage required under this Lease. Lessee shall submit
annually to Lessor a copy of the insurance limits then in effect.
63. REAL PROPERTY TAXES.
(a) If any assessments for public improvements, services or benefits are
levied against the Premises, Lessor may elect to pay the assessment either in
full or in installments. In either such case, however, Lessee shall pay to
Lessor with each payment of real property taxes due hereunder only that amount
of any tax increase based on the installments of principal and interest which
would have become due during this Lease Term had Lessor elected to pay the
assessment in installments. Lessee shall pay the Real Property Taxes applicable
to the Premises within (i) twenty (20) days after receipt of billing or (ii) ten
(10) days prior to the delinquency date of such real property taxes, whichever
is later. Any Tax Increase attributable to the cost of the Lessor Improvements
and Tenant Improvements shall be payable by Lessee; provided, however, that if
the construction of the Lessor Improvements and Tenant Improvements shall
trigger a full fair market value reassessment of the Premises, then Lessee shall
only be required to pay a share of any such resulting Tax Increase, which share
shall be determined by multiplying the amount of the Tax Increase by a fraction,
the numerator of which shall be the sum of the cost of the Lessor Improvements
and Tenant Improvements incurred by both Lessor and Lessee and the denominator
of which shall be the amount of the reassessed fair market value of the
Premises, it being understood that Lessor shall be responsible for paying the
remaining share of the Tax Increase.
(b) During the Original Term of this Lease, Lessee shall not be obligated
to pay, and Lessor shall pay, any Tax Increase resulting from any "change of
ownership" and consequent reassessment of the Premises pursuant to Chapter 3.5
of the California Revenue and Taxation Code, as amended.
(c) Lessee, at its cost, shall have the right at any time, to seek a
reduction in the assessed valuation of the Premises or to contest any Tax
Increase that is to be paid by Lessee. Lessor shall not be required to join in
any proceeding or contest brought by Lessee unless the provisions of any law
require that the proceeding or contest be brought by or in the name of Lessor.
In that case, Lessor shall join in the proceedings or contest or permit it to
be brought in Lessor's name as long as Lessor is not required to bear any cost.
Lessor shall cooperate in good faith with Lessee in connection with any such
proceeding or contest. On final determination of the proceedings or contest,
(i) Lessee shall immediately pay or discharge its share of any Tax Increase
based on the decision or judgment rendered, together with all costs, charges,
interest and
17
34
penalties incidental to the decision or judgment, or (ii) Lessor shall promptly
refund to Lessee any overpayment of any Tax Increase made by Lessee, as
applicable.
64. ENTRY BY LESSOR.
Lessor and Lessor's agents, except in the case of emergency, shall provide
Lessee with twenty-four (24) hours' notice prior to entry of the Premises. Any
such entry by Lessor or Lessor's agents shall comply with all reasonable
security measures of Lessee and shall not interrupt Lessee's business
operations more than reasonably necessary. During any such entry, except in the
case of emergency, Lessor and Lessor's agents shall at all times be accompanied
by a representative of Lessee.
65. LESSOR REPRESENTATIONS.
Lessor represents and warrants to Lessee that (i) the Xxxxxx X. Xxxxxxxx
Trust (the "Trust") is a valid and existing trust and that the Trust holds fee
title to the Premises; (ii) Lessor is empowered to enter into this Lease on
behalf of the Trust and to lease the Premises to Lessee; and (iii) that Lessor
has or will secure the funding necessary to satisfy its obligations to
construct the Lessor Improvements and Tenant Improvements.
66. RULES AND REGULATIONS.
(a) Lessee and Lessee's employees shall comply with any and all
reasonable rules and regulations as may from time to time be promulgated by
Lessor relating to the ordinary care and maintenance of the Premises which do
not otherwise conflict with Lessee's rights under this Lease, including, but not
limited, to the following:
(1) All garbage and refuse shall be kept in standard trash
containers, and shall be placed outside of the Premises prepared for
collection in the manner and at the times and places specified by the
refuse collection service. Lessee shall pay the cost of removal of
Lessee's refuse or rubbish.
(2) No loudspeakers, televisions, phonographs, radios or other
devices shall be used in a manner so as to be heard or seen outside of
the Premises without the prior written consent of Lessor. Lessee shall
conduct its business so as not to create unreasonable or unnecessary
noise.
(3) The outside areas immediately adjoining the Premises shall
be kept clear and free from dirt and rubbish by Lessee to the
reasonable
18
35
satisfaction of Lessor and Lessee shall not place or permit any
obstructions in such areas.
(4) The plumbing facilities shall not be used for any other
purpose than that for which they are constructed, and no foreign
substance of any kind shall be thrown therein, and the expense of any
breakage, stoppage, or damage resulting from a violation of this
provision shall be borne by Lessee.
67. DAMAGE AND DESTRUCTION.
The following provisions shall supplement and amend Paragraph 9 of the
Lease: Lessor shall notify Lessee within thirty (30) days following any damage
to or destruction of the Premises of the length of time Lessor reasonably
estimates to be necessary for the repair or restoration. Lessee may terminate
this Lease by written notice to Lessor if the restoration or repair of the
Premises will take more than one hundred eighty (180) days. Additionally, if
neither party elects, or has the right to elect, to terminate this Lease
following any such damage or destruction, and such damage or destruction is not
corrected within nine (9) months of the date of such damage or destruction,
unless such damage or destruction is caused by a negligent or willful act of
Lessee, then Lessee may elect to terminate this Lease by delivering to Lessor
written notice of Lessee's election to terminate, in which event the Lease shall
terminate thirty (30) days after such notice if the correction is not then
complete. If this Lease is not terminated by Lessor or Lessee pursuant to any
express right of termination that either of them may have under Paragraph 9 or
this Paragraph 67, then Lessor shall restore the Premises and all Tenant
Improvements and Lessor Improvements to the condition in which they existed
immediately prior to the destructive event.
AGREED AND ACCEPTED: AGREED AND ACCEPTED:
LESSOR: The Xxxxxx X. Xxxxxxxx Trust LESSEE: Digital Think, Inc. a
California Corporation
By /s/ XXXXX X. XXXXXXXX By /s/ XXXXX X. GOETLNER
-------------------------------- ---------------------------------
Xxxxx X. Xxxxxxxx, Trustee Its President and CEO
And By /s/ XXXXXXX XXXXXX
-----------------------------
Its Controller
Dated: 6/18/99 Dated: 6/18/99
---------------------------- -----------------------------
36
EXHIBIT A (PAGE 1)
[FLOOR PLAN]
37
EXHIBIT A (PAGE 2)
[FLOOR PLAN]
