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LNR WARNER CENTER

 

OFFICE LEASE

 

This Office Lease, which includes the preceding Summary attached hereto and incorporated herein by this reference (the Office Lease and Summary to be known sometimes collectively hereafter as the “Lease”), dated as of the date set forth in Section 1 of the Summary, is made by and between LNR WARNER CENTER, LLC, a California limited liability company (“Landlord”), and NETZERO, INC., a Delaware corporation (“Tenant”).

 

ARTICLE 1

 

REAL PROPERTY/PROJECT, BUILDING AND PREMISES

 

1.1      Real Property/Project, Building and Premises.

 

1.1.1        Premises.  Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6 of the Summary (the “Premises”), which Premises are located in that certain “Building” commonly known as “LNR Warner Center – Building H”, with an address of 21301 Burbank Boulevard, Woodland Hills, California.  The outline of the floor plan of each floor of the Premises is set forth in Exhibits A-1, A-2 and A-3, respectively, attached hereto.  Subject to Landlord’s reasonable regulations, restrictions and guidelines, Tenant’s rights to the Premises include Tenant’s right to use and access the space within the ceilings, walls and floors of the Premises (excluding limited areas reasonably designated by Landlord which may interfere with any other tenant’s use or equipment therein) to install and service wire, conduit and cable that serve Tenant’s equipment, provided such use and access is in accordance with, and subject to, the other terms and provisions of this Lease.  Concurrently with the mutual execution and delivery of this Lease, Landlord shall deliver possession of the entire Premises to Tenant for the purpose of enabling Tenant to commence therein, subject to and in accordance with the terms of the Tenant Work Letter attached hereto as Exhibit D (the “Tenant Work Letter”), the design and construction of the Tenant Improvements (as defined in the Tenant Work Letter), and Landlord’s failure to timely deliver the same shall be subject to the Landlord Delay provisions of Section 4.6 of the Tenant Work Letter.

 

1.1.2        Building and Real Property/Project.  The Building is part of “Phase III” of a multi-building office building project currently owned by Landlord and other entities and known as “LNR Warner Center” and located on the approximately 35-acre site at the northeast corner of Canoga Avenue and Burbank Boulevard in Woodland Hills, California.  Such office building project:  (i) currently contains (A) the Building and the surface parking areas surrounding the Building (the “Building H Parking Facilities”); (B) a 5-level above-grade parking structure located northeast of the Building whose address is 5790 Canoga Avenue (the “Phase III Parking Structure”); (C) five (5) other existing office buildings located thereon (collectively, the “Other Existing Office Buildings”), whose addresses are 5800 Canoga Avenue, 21261 Burbank Boulevard, 21281 Burbank Boulevard, 21271 Burbank Boulevard and 5820 Canoga Avenue, (D) a 4 level above-grade parking structure whose address is 5830 Canoga Boulevard (the “Phase I Parking Structure”); (D) a retail food court building whose address is 5870 Canoga Avenue (the “Food Court Building”); and (E) related surface parking areas, landscaping, driveways, plazas, walkways, courtyards, public and private streets and other improvements and facilities surrounding and/or appurtenant to the Other Existing Office Buildings and Food Court Building; and (ii) may be expanded, in Landlord’s sole and absolute discretion and/or the discretion of any other owners of LNR Warner Center, to include additional office and other buildings, parking structures, parking facilities, landscaping, driveways, plazas, walkways, courtyards, public and private streets and other improvements and facilities; provided, however, that no such expansions shall result in an Adverse Condition (as such term is defined in Section 1.1.4 below).  As used in this Lease, the terms “Real Property” and “Project”, shall mean, collectively:  (1) the Building; (2) the Other Existing Office Buildings and Food Court Building (collectively, the “Other Existing Buildings”); (3) any outside plaza areas, walkways, driveways, courtyards, public and private streets, transportation facilitation areas and other improvements and facilities now or hereafter constructed surrounding and/or servicing the Building and the Other Existing Buildings, including the Phase I Parking Structure, the Building H Parking Facilities, the Phase III Parking Structure, surface parking facilities and other parking structures now or hereafter servicing the Building, the Other Existing Buildings and any other buildings which may be constructed within LNR Warner Center (collectively, the “Parking Facilities”), which are designated from time to time by Landlord (and/or any common area association formed by Landlord or Landlord’s assignee for LNR Warner Center) as common areas (or parking facilities, as the case may be) appurtenant

 

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to or servicing the Building, the Other Existing Buildings and any such other buildings; provided, however, that no such expansions shall result in an Adverse Condition; (4) any additional buildings, improvements, facilities, parking areas and structures and common areas which Landlord and/or any other owners of LNR Warner Center (and/or any common area association formed by Landlord or Landlord’s assignee for LNR Warner Center) may add thereto from time to time within or as part of LNR Warner Center; provided, however, that no such additions shall result in an Adverse Condition; and (5) the land upon which any of the foregoing are situated.  The site plan depicting the current configuration of the Real Property and the remainder of proposed Phase III of LNR Warner Center (which site plan and the buildings, parking facilities, common areas and other improvements thereon may be revised by Landlord and/or any other owners of LNR Warner Center from time to time so long as such revisions will not result in an Adverse Condition) is set forth in Exhibit A-4 attached hereto.  Notwithstanding the foregoing or anything contained in this Lease to the contrary:  (x) Landlord has no obligation to expand or otherwise make any improvements within the Project, including, without limitation, any of the landscaping, outside plaza areas, walkways, driveways, courtyards, public and private streets, transportation facilitation areas and other improvements and facilities which may be depicted on Exhibit A-4 attached hereto, other than Landlord’s obligations set forth in the Tenant Work Letter to complete any items of the Base, Shell and Core of the Building not completed as of the date of execution of this Lease; and (y) Landlord and/or any other owners of LNR Warner Center shall have the right from time to time to include or exclude any improvements or facilities within the Project, at such party’s sole election provided such inclusions or exclusions will not result in an Adverse Condition.  In addition, although LNR Warner Center, and the “Real Property” and “Project”, are currently defined above and elsewhere in this Lease to include real property and improvements (including the Building) owned by Landlord as well as certain real property and improvements now or hereafter owned by other owners (including any common area association formed for LNR Warner Center which now or may hereafter own any common parking structures, surface parking areas and other common areas within LNR Warner Center), and the provisions of Article 4 below contemplate a procedure for cost-sharing and allocation of Operating Expenses, Tax Expenses and Utilities Costs with respect to the entire LNR Warner Center:  (a) except as otherwise expressly contained elsewhere in this Lease, Landlord shall have no maintenance, repair, operation, management, leasing or other obligations or responsibilities, and is making no representations, warranties or with respect to any such real property and improvements not owned by Landlord or the costs incurred in connection therewith (and all references in this Lease to “Real Property” and “Project” shall exclude such portions of the real property and improvements not owned by Landlord for purposes of determining such obligations, responsibilities, representations, warranties and covenants, to the extent appropriate and consistent); provided, however, Landlord shall use commercially reasonable efforts to enforce its rights under the Underlying Documents (as defined in Section 5.1 below) to eliminate any Adverse Condition of which Landlord is aware and resulting from the failure by the common area association formed for the Underlying Documents to enforce the Underlying Documents in accordance with its terms and/or the violation of the Underlying Documents by such common area association and/or any other owner subject to the Underlying Documents; and (b) to the extent any such other owner of land and/or improvements in LNR Warner Center (other than any common area association formed for LNR Warner Center which now or may hereafter own any common parking structures, surface parking areas and other common areas within LNR Warner Center) incurs maintenance, repair, operation, management, employee and other costs which are attributable solely to such owner’s property and/or the improvements thereon (and not properly allocable to the Building or any other owner’s property as part of any shared common areas/facilities within or serving LNR Warner Center or otherwise), the same shall not be included in the general Operating Expenses, Tax Expenses and Utilities Costs payable by Landlord or such other owners.

 

1.1.3        Tenant’s and Landlord’s Rights.  Subject to the following provisions of this Section 1.1.3, Tenant is hereby granted the right to the nonexclusive use by Tenant and Tenant’s employees, agents, contractors and invitees, of (i) the common corridors and hallways, stairwells, elevators, closets, electrical and telephone rooms, restrooms and other public or common areas located within the Building (excluding the roof, except  as expressly set forth in Section 26.30 below), and (ii) the areas located on the Real Property designated by Landlord (and/or any common area association formed by Landlord or Landlord’s assignee for LNR Warner Center) from time to time as common areas for the Building, including the Building H Parking Facilities and the Phase III Parking Structure, but specifically excluding (A) the Other Existing Buildings and the Phase I Parking Structure, and (B) any other improvements located on and/or areas within the Project (including surface parking areas) which are designated by the owners thereof and/or any such common area association as exclusive or reserved areas.  Notwithstanding the foregoing to the contrary, Tenant’s use of such common areas (1) shall not damage or interfere with the operation of the Building or any other portion of the Project, and (2) shall be subject to (a) the approval of the City of Los Angeles and all other applicable governmental authorities to the extent required thereby, and the rights of any party under, and the provisions and restrictions contained in, the Underlying Documents (as defined in Section 5.1 below), and Tenant’s compliance with all applicable Laws (as defined in Article 22 below) and the Underlying Documents, and (b) such reasonable, non-discriminatory rules, regulations and restrictions as Landlord may make from time to time (which shall be provided in writing to Tenant); provided, however, any such rules, regulations and restrictions made by Landlord shall not result in an Adverse Condition.  Landlord reserves the right from time to time to use

 

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any of the common areas of the Real Property, and the roof, risers and conduits of the Building for telecommunications and/or any other purposes, and to do any of the following, as long as such acts are performed in accordance with all applicable Laws and do not result in an Adverse Condition:  (w) make any changes, additions, improvements, repairs and/or replacements in or to the Real Property or any portion or elements thereof, including, without limitation, (I) changes in the location, size, shape and number of driveways, entrances, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways, public and private streets and roads, plazas, courtyards, transportation facilitation areas and common areas, and, subject to the limitations and Tenant’s rights set forth in Article 24 below, parking spaces, parking structures and parking areas, and (II) expanding or decreasing the size of the Real Property and any common areas and other elements thereof, including adding or deleting buildings thereon and therefrom (other than the Building); (x) close temporarily any of the common areas while engaged in making repairs, improvements or alterations to the Real Property; (y) form and/or modify any existing common area association(s) under covenants, conditions and restrictions to own, manage, operate, maintain, repair and/or replace all or any portion of the landscaping, driveways, walkways, parking areas, public and private streets, plazas, courtyards, transportation facilitation areas and/or other common areas located outside of the Building, and, subject to Section 4.2.4 below, include the common area assessments, fees and taxes charged by the association(s) and the cost of maintaining, managing, administering and operating the association(s), in Operating Expenses, Tax Expenses and/or Utilities Costs (as applicable); and (z) perform such other acts and make such other changes with respect to the Real Property as Landlord may, in the exercise of reasonable and good faith business judgment, deem to be appropriate.

 

1.1.4        Adverse Condition.  As used herein, an “Adverse Condition” shall mean:  (i) a material adverse interference with Tenant’s use of the Premises for the Permitted Use (as such term is defined in Article 5 below); (ii) an unreasonable interference with Tenant’s access to the Premises; (iii) a change in character of the Building to something other than a first-class office building; (iv) other than on a temporary basis (not to exceed one (1) month or such longer period as is reasonably necessary due to a damage or destruction, condemnation or other events of “Force Majeure,” as that term is defined in Section 26.17 below), (A) a relocation of any of Tenant’s Reserved Parking Passes from the locations specified therefor in Section 10 of the Summary, or (B) a relocation of Tenant’s Unreserved Parking Structure Passes from the Phase III Parking Structure; (v) a reduction in the number of parking passes within the Parking Allotment (as defined in Section 24.1 below), other than during such period as is reasonably necessary due to a damage or destruction, condemnation or other Force Majeure events; or (vi) an event which increases Tenant’s monetary obligations under this Lease, except (A) for increases in Operating Expenses, Tax Expenses or Utilities Costs to the extent such increases are otherwise permitted in Article 4 below, and/or (B) as imposed under and/or to comply with applicable Laws.  In the event temporary relocation of Tenant’s parking passes is required in connection with the exercise of any of Landlord’s rights set forth in this Article 1 and/or Section 24.4 below, Landlord shall, at no expense to Tenant, relocate such parking passes to other Parking Facilities of the Project and/or parking facilities located within a reasonable walking distance of the Project (such relocation obligation shall not, however, apply in the event any damage or destruction, condemnation or other Force Majeure event, although Landlord shall use commercially reasonable efforts to make available to Tenant parking passes within other areas of the Project’s Parking Facilities for those parking passes displaced thereby during the period such displacement occurs).

 

1.2      Rentable and Usable Square Feet.

 

1.2.1        Premises and Building.  The rentable and usable square feet of the Premises are hereby stipulated to be as set forth in Section 6 of the Summary and are not subject to remeasurement by Landlord or Tenant.  The rentable square feet of the Building is approximately 179,342 rentable square feet and is not subject to remeasurement by Landlord or Tenant, except that Landlord shall have the right to remeasure the Building from time to time in accordance with the BOMA Standard (as defined in Section 1.2.2 below) to reflect actual physical increases or decreases due to physical expansions or contractions in the rentable area of the Building.

 

1.2.2        First Offer Space.  For purposes hereof, the “usable square feet” and “rentable square feet” of any First Offer Space leased by Tenant pursuant to Section 1.4 below shall be calculated by Landlord pursuant to the Building Owners and Managers Association International Standard Method for Measuring Floor Area in Office Building, ANSI Z65.1-1996 (the “BOMA Standard”); provided, however, that notwithstanding the foregoing to the contrary, the BOMA Standard shall not include any area below the ground floor of the building in which the First Offer Space is located, any areas outside the perimeter walls of such building, any elevator shafts, or any base building stairwells.  The rentable and usable square feet of any such First Offer Space leased by Tenant pursuant to Section 1.4 below are subject to measurement and verification by Landlord’s planner/designer prior to the applicable First Offer Commencement Date (as defined in Section 1.4 below) for such First Offer Space, and all such measurements and verifications shall be made in accordance with the provisions of this Section 1.2.  Tenant’s architect may consult with Landlord’s planner/designer regarding such measurements and

 

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verifications; provided, however, the determination of Landlord’s planner/designer shall be conclusive and binding upon the parties unless Tenant objects to such determination by written notice delivered to Landlord within sixty (60) days after the date Landlord gives Tenant written notice of such determination.  If Tenant timely objects to any such measurements and verifications, Tenant shall have the right, within such 60-day period, to remeasure the applicable First Offer Space in accordance with the BOMA Standard and the other terms of this Section 1.2.  If Tenant fails to timely elect to remeasure and complete any such remeasurement within such 60-day period, then Landlord’s final measurements shall be conclusive and binding on Landlord and Tenant.  If Tenant’s remeasurement(s) undertaken within such 60-day period differs from Landlord’s measurement(s) and Tenant notifies Landlord thereof within such 60-day period, the parties shall, within thirty (30) days thereafter, attempt in good faith to resolve such differences, but if the parties cannot resolve such differences within such 30-day period, the final measurements of the applicable First Offer Space shall be resolved pursuant to binding arbitration in accordance with Section 26.32 below.

 

1.2.3        Effect of Remeasurement.  In the event that any measurement pursuant to the terms of this Section 1.2 determines that the rentable square feet of the Building and/or the rentable or usable square feet of the applicable First Offer Space shall be different from the amounts thereof set forth in this Lease, Landlord shall modify all amounts, percentages and figures appearing or referred to in this Lease to conform to such corrected square footage amounts therefor (including, without limitation, the amount of the Base Rent payable for such applicable First Offer Space, and Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs).  Any such modifications shall be confirmed in writing by Landlord to Tenant.

 

1.3      Condition of the Premises.  Except as specifically set forth in this Lease and in the Tenant Work Letter, (i) Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises, the Building, the Other Existing Buildings or the Real Property, and (ii) Landlord has made no representation or warranty regarding the condition of the Premises, the Building, the Other Existing Buildings or the Real Property.

 

1.4      Right of First Offer.  Landlord hereby grants to Tenant a continuing right of first offer to lease up to one (1) full floor of space (the “First Offer Space”) located either (i) within the Building, or (ii) in the building which may be constructed adjacent to the Building as part of Phase III of the Project, as depicted on the site plan attached hereto as Exhibit A-4 (“Building G”) but only if and during the period of time when both Building G and the Building are concurrently owned by the same Landlord or Landlord Affiliate, as defined below (it being agreed by Tenant that the obligations of Landlord set forth in this Section 1.4 pertaining to Building G shall only be binding upon Landlord when Landlord or any Landlord Affiliate, or any of their successors and assigns, concurrently own both the Building and Building G).  As used herein, the term “Landlord Affiliate” shall mean any person or entity which controls, is controlled by or is under common control with Landlord.  Such right of first offer shall be upon and subject to the terms and conditions set forth below in this Section 1.4.

 

1.4.1        Second Generation Space.  Notwithstanding anything to the contrary contained in this Section 1.4, (i) Tenant’s right of first offer shall only apply with respect to First Offer Space located within the Building when such space becomes (or will become) available for lease (as reasonably determined by Landlord) after the expiration or sooner termination of Landlord’s lease of such space to the tenant thereof existing as of the date of execution of this Lease, as such existing lease may be extended (whether or not pursuant to formal extension or renewal provisions in such existing lease), and (ii) Tenant’s right of first offer with respect to any First Offer Space located in Building G shall only apply after:  (A) the initial leasing of such space to a third party; (B) such space becomes (or will become) available for lease (as reasonably determined by Landlord) after the expiration or sooner termination of such initial lease, as such initial lease may be extended (whether or not pursuant to a formal extension or renewal provision in such initial lease); and (C) no other tenant of space within Building G desires to lease all or any portion of such space pursuant to either (1) the exercise of a first offer, expansion or similar right contained in such tenant’s initial lease, or (2) the lease by such tenant (or its affiliate, successor or assignee) of any space (or portion thereof) which was included in any expansion, first offer or similar right contained in such tenant’s initial lease whether or not pursuant to the exercise of such right, so long as the terms of such lease are agreed to by Landlord and such party prior to the termination of such right contained in such initial lease (herein, a “Superior Right Holder”).

 

1.4.2        Procedure for Offer.  With respect to the first time Landlord receives a bona fide proposal from a third party (which is other than (i) the existing tenant of the First Offer Space or its affiliate, successor or assignee, or (ii) a Superior Right Holder with respect to space located in Building G) to lease First Offer Space containing not more than a full floor increment of space and which is available (or will become available) for lease as described in Section 1.4 above, which proposal Landlord would accept or submit a counter proposal thereto (such third-party bona fide proposal which Landlord would accept, or the counter-proposal which Landlord would submit to such third party in response thereto, shall be referred to herein as the “Third Party Offer”), then prior to the date that

 

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Landlord accepts or submits such Third Party Offer to such third-party, Landlord shall give Tenant written notice (the “First Offer Notice”) specifying that the First Offer Space or specified portion thereof identified in the First Offer Notice is available for lease by Tenant pursuant to the provisions of this Section 1.4.  If Landlord’s First Offer Notice pertains to space containing less than a full floor, and Tenant exercises its first offer right herein to lease such space so identified in such First Offer Notice, then notwithstanding anything in this Section 1.4 to the contrary, any future right of Tenant to lease any First Offer Space under this Section 1.4 shall only apply to the remaining space located on such partial floor and no other space in the Building or Building G when such space becomes (or will become) available for lease as provided herein.  In addition, Landlord’s obligation to deliver a First Offer Notice to Tenant shall not apply during (A) the last year of the initial Lease Term unless Tenant has previously delivered to Landlord the Exercise Notice extending the initial Lease Term pursuant to the Extension Option Rider, or (B) the Option Term.

 

1.4.3        Lease Terms for First Offer Space.  Any such First Offer Notice delivered by Landlord in accordance with the provisions of Section 1.4.2 above shall set forth Landlord’s calculation of the rentable and usable square feet of such First Offer Space, as determined in accordance with the BOMA Standard set forth in Section 1.2 above, and the following economic terms upon which Landlord would lease such First Offer Space to Tenant (it being acknowledged and agreed to by the parties that all other non-economic terms for Tenant’s lease of such First Offer Space shall be upon the same non-economic terms as set forth in this Lease to the extent not modified by or inconsistent with this Section 1.4):

 

(i)       the anticipated date upon which such First Offer Space will be available for lease by Tenant following the expiration or termination of Landlord’s then existing lease of such space, the build-out time for Tenant to construct improvements and fixturize such First Offer Space following Landlord’s delivery of such First Offer Space to Tenant (the “Construction Period”), which shall be determined as part of the Fair Market Rental Rate for such First Offer Space, and the anticipated commencement date therefor (with the actual commencement date to be determined as set forth in Section 1.4.6 below);

 

(ii)      the total number of parking passes available for lease by Tenant (and the number thereof that are must-rent and/or right-to-rent parking passes) with respect to such First Offer Space, which total number of available parking passes shall be not less than four (4) unreserved, undesignated parking passes per 1,000 usable square feet of such First Offer Space;

 

(iii)          the monthly parking rates payable for such parking passes, which shall be at the prevailing parking rates charged by Landlord or Landlord’s parking operator from time to time or such reduced or abated rates (if applicable) as determined as part of the Fair Market Rental Rate for such First Offer Space;

 

(iv)          the Base Rent payable for such First Offer Space (the “First Offer Space Rent”), which shall be equal to the Fair Market Rental Rate for such First Offer Space (as defined in Section 2 of the Extension Option Rider attached hereto), as initially determined by Landlord as set forth in Landlord’s First Offer Notice (subject, however, to Tenant’s right to object thereto and cause the Base Rent to be determined pursuant to the arbitration provisions as provided in the Extension Option Rider);

 

(v)      the tenant improvement allowance, if any, for such First Offer Space to help Tenant pay for the initial tenant improvements to be constructed by Tenant for such First Offer Space as described in Section 1.4.4 below (which amount shall be determined as part of the Fair Market Rental Rate for such First Offer Space;

 

(vi)          the term of the lease for such First Offer Space, which shall in all events be coterminous with the Lease Term for the original Leased Premises, as it may be extended pursuant to the Extension Option Rider attached hereto, except as otherwise expressly provided in the Extension Option Rider regarding Tenant’s right to extend the Lease Term for less than the entire Premises (provided, however, if there are less than thirty (30) months remaining in the initial Lease Term as of the date Landlord delivers the applicable First Offer Notice to Tenant, and Tenant has not previously delivered its Exercise Notice to Landlord extending the initial Lease Term, the lease term for such First Offer Space shall be for a period expiring upon the later of (A) the last day of the initial Lease Term (subject to extension pursuant to the Extension Option Rider), or (B) the last day of the initial lease term for such First Offer Space set forth in the Third Party Offer for such First Offer Space); and

 

(vii)         all other monetary and non-monetary concessions (if any) to be provided by Landlord for such First Offer Space, which shall be determined as part of the Fair Market Rental Rate for such First Offer Space.

 

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1.4.4        Construction In First Offer Space.  If Tenant leases any First Offer Space pursuant to the terms of this Section 1.4:  (i) Tenant shall take such First Offer Space in its “AS IS” condition as of the date of delivery of such space by Landlord to Tenant (except that Landlord shall deliver to Tenant the Base, Shell and Core of such First Offer Space and the floor upon which such First Offer Space is located in the condition therefor set forth in the Tenant Work Letter, as shall be modified if the First Offer Space is less than a full floor to include finished common elevator lobby and corridor for the floor upon which such First Offer Space is located and demising walls separating such First Offer Space from the remaining space on such floor, and as further modified if the First Offer Space is located in Building G to include only standard Building G Base, Shell and Core items then applicable for such First Offer Space and the floor upon which such First Offer Space is located); (ii) the construction of improvements in such First Offer Space shall be Tenant’s sole responsibility, with any such construction to comply with the terms of Article 8 of this Lease (and not the provisions of the Tenant Work Letter, which shall not be applicable to such First Offer Space, except for Landlord’s obligations set forth in clause (i) hereinabove pertaining to the Base, Shell and Core, if applicable); and (iii) except for Landlord’s obligations set forth in clause (i) hereinabove pertaining to the Base, Shell and Core, Landlord shall not be obligated to provide or pay for any improvements, remodeling or refurbishment work or services related to the improvement, remodeling or refurbishment of the First Offer Space; provided, however, Landlord shall provide Tenant a tenant improvement allowance for the First Offer Space leased by Tenant in the amount, if any, as determined as part of the Fair Market Rental Rate as described in Section 1.4.3 above.

 

1.4.5        Tenant’s Procedure for Acceptance.  If Tenant wishes to exercise Tenant’s right of first offer with respect to any First Offer Space described in a First Offer Notice, then within ten (10) business days of delivery of such First Offer Notice to Tenant, Tenant shall deliver written notice to Landlord (“Tenant’s Election Notice”) pursuant to which Tenant shall elect one of the following (which Tenant’s Election Notice must include current financial statements of Tenant and United Online, Inc., a Delaware corporation (“United Online”), certified as accurate by an officer of each such entity and evidencing that the combined net worth, computed in accordance with generally accepted accounting principles (but excluding goodwill as an asset), of Tenant and United Online (including any entities included within United Online’s consolidated financial reporting) is at least equal to $100,000,000.00.

 

(i)       lease the entire First Offer Space identified in such First Offer Notice upon the terms contained in such First Offer Notice;

 

(ii)      lease such entire First Offer Space identified in such First Offer Notice upon the terms contained in such First Offer Notice, but concurrently object in writing within Tenant’s Election Notice to Landlord’s determination of the Fair Market Rental Rate for such First Offer Space, in which event the Fair Market Rental Rate for such First Offer Space shall be determined pursuant to the appraisal procedures set forth in Section 4 of the Extension Option Rider attached hereto (failure by Tenant to timely object to Landlord’s determination of the Fair Market Rental Rate shall be deemed Tenant’s waiver of its objection right in this clause (ii)); or

 

(iii)          refuse to lease such First Offer Space identified in such First Offer Notice, specifying that Tenant is not interested in exercising its right of first offer for such First Offer Space at that time, in which event Tenant’s right of first offer with respect to the First Offer Space identified in the First Offer Notice shall terminate and be of no further force or effect, and Landlord shall be free to lease the First Offer Space identified in the First Offer Notice (or any portion thereof) to anyone to whom Landlord desires on any terms Landlord desires; provided, however, if Landlord does not enter into a lease or leases for the entire First Offer Space identified by Landlord in such First Offer Notice within six (6) months after the date Landlord first delivered such First Offer Notice to Tenant, then (A) Landlord shall submit to Tenant a new First Offer Notice with respect to any such unleased First Offer Space originally identified in Landlord’s First Offer Notice prior to the first time after such 6-month period that Landlord intends to accept from or submit to a third party a Third Party Offer to lease all or any portion of such unleased First Offer Space, and (B) the foregoing procedures in this Section 1.4.5 shall again apply following Tenant’s receipt of such new First Offer Notice.

 

If Tenant does not deliver Tenant’s Election Notice to Landlord electing one of the options in clauses (i), (ii) or (iii) hereinabove within said ten (10) business day period and include with such notice such financial statements evidencing the net worth requirement set forth hereinabove, then Tenant shall be deemed to have elected the option in clause (iii).  Notwithstanding anything to the contrary contained in this Section 1.4:  (1) Tenant must elect to exercise its right of first offer herein with respect to the entire First Offer Space identified in any First Offer Notice delivered by Landlord to Tenant and may not elect to lease only a portion thereof; (2) once Tenant has leased an entire full floor of First Offer Space pursuant to the provisions of this Section 1.4, Tenant shall have no further rights to lease any additional space under this Section 1.4; (3) if Tenant leases a partial floor pursuant to the exercise of its first offer right, Tenant shall have no further rights under this Section 1.4 to lease any other space other than the remainder of such floor when and if such space becomes available for lease as provided above in

 

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this Section 1.4; and (4) subject to and except as provided in clauses (2) and (3) hereinabove, Tenant’s right of first offer to lease any First Offer Space not previously identified in any First Offer Notice delivered by Landlord to Tenant shall not terminate as a result of Tenant’s election or deemed election to refuse to lease any other First Offer Space so identified in a First Offer Notice at that time, and shall continue until the first time Landlord is about to first accept or submit a Third Party Offer for such space to a third party as provided above in this Section 1.4, in which case the foregoing procedures of this Section 1.4 shall apply with respect to such non-previously identified First Offer Space.

 

1.4.6        First Offer Space Term; First Offer Space Commencement Date.  The lease term for any First Offer Space (the “First Offer Space Term”) leased by Tenant hereunder and the commencement of Tenant’s payment of the First Offer Space Rent for such First Offer Space (the “First Offer Space Commencement Date”) shall commence upon the earlier of (i) the date Tenant commences business operations in such First Offer Space, or (ii) the last day of the Construction Period for such First Offer Space, and shall expire as and when provided in Section 1.4.3 above.

 

1.4.7        Amendment to Lease.  If Tenant timely exercises Tenant’s right to lease any First Offer Space as set forth herein, then, within thirty (30) days thereafter, Landlord and Tenant shall execute an amendment to this Lease (a “First Offer Space Amendment”) to provide for Tenant’s lease of the First Offer Space upon the terms and conditions as set forth in this Section 1.4.

 

1.4.8        Termination of Right of First Offer.  The rights contained in this Section 1.4 are personal to the original Tenant executing this Lease (the “Original Tenant”) and any Affiliate (as such term is defined in Section 14.6 below) to which Tenant’s entire interest in this Lease has been assigned pursuant to Section 14.6, and may only be exercised by the Original Tenant or such Affiliate assignee, as the case may be (but not by any sublessee or other assignee or transferee of Tenant’s interest in the Lease) if the Original Tenant, or such Affiliate assignee, as the case may be, has not assigned this Lease, or subleased (other than subleases to Affiliates or Business Affiliates pursuant to Sections 14.6 and 14.7 below) more than thirty-four percent (34%) of the rentable square feet of the original Premises at the time Tenant delivers Tenant’s Election Notice to Landlord.  At Landlord’s option, in addition to Landlord’s other remedies set forth in this Lease, Tenant shall not have the right to lease the applicable First Offer Space, as provided in this Section 1.4, if, as of the date of the attempted exercise of such right of first offer by Tenant, or as of the scheduled date of delivery of such First Offer Space to Tenant, Tenant is in monetary or material non-monetary default under this Lease after the expiration of any applicable notice and cure period.

 

ARTICLE 2

LEASE TERM

 

2.1      Lease Term.  The terms and provisions of this Lease shall be effective as of the date of this Lease except for the provisions of this Lease relating to the payment of Rent.  The term of this Lease (the “Lease Term”) shall be as set forth in Section 7.1 of the Summary and shall commence on the date (the “Lease Commencement Date”) set forth in Section 7.2 of the Summary subject, however, to the terms of the Tenant Work Letter, and shall terminate on the date (the “Lease Expiration Date”) set forth in Section 7.3 of the Summary, unless this Lease is sooner terminated as hereinafter provided, or extended pursuant to the Extension Option Rider attached hereto.  For purposes of this Lease, the term “Lease Year” shall mean each consecutive twelve (12) month period during the Lease Term, provided that the last Lease Year shall end on the Lease Expiration Date.

 

2.2      Beneficial Occupancy.  Tenant shall have the right to occupy and commence business operations in all or any portions of the Premises at any time after Landlord has delivered the Premises to Tenant but prior to the Lease Commencement Date (the “Early Occupancy Period”), provided that:  (i) a temporary certificate of occupancy or its equivalent shall have been issued by the appropriate governmental authorities for the Premises permitting Tenant to legally occupy such portion of the Premises; and (ii) during any such occupancy of and business operations within the Premises by Tenant prior to the Lease Commencement Date, all of the terms and conditions of this Lease shall apply (including, without limitation, Tenant’s obligation to pay, pursuant to Sections 6.1.7 and 6.2 below, for the cost of utilities consumed in connection with any Supplemental Equipment located in or serving the Premises, and any over-standard utilities and services provided to and/or consumed in the Premises) as though the Lease Commencement Date had occurred, although the Lease Commencement Date shall not actually occur until the date set forth in Section 7.2 of the Summary; provided, however, during such Early Occupancy Period, Tenant shall not be obligated to pay to Landlord any Base Rent, Operating Expenses, Tax Expenses or Utilities Costs for the Premises or parking charges for the number of parking passes within the Parking Allotment.

 

2.3      Confirmation of Lease Dates Amendment.  Within six (6) months following the Lease Commencement Date, Landlord shall execute and deliver to Tenant an amendment in the form as set forth

 

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in Exhibit C, attached hereto (the “Confirmation of Lease Dates Amendment”), which Confirmation of Lease Dates Amendment Tenant shall execute and return to Landlord within ten (10) business days after receipt thereof; provided, however, that if said Confirmation of Lease Dates Amendment is not factually correct, then Tenant shall make such changes as are necessary to make the Confirmation of Lease Dates Amendment factually correct and shall thereafter execute and return such Confirmation of Lease Dates Amendment to Landlord within such ten (10) business day period and thereafter the dates set forth on such Confirmation of Lease Dates Amendment shall be conclusive and binding upon Tenant and Landlord, unless Landlord, within fifteen (15) business days following receipt of Tenant’s changes, sends a notice to Tenant rejecting Tenant’s changes, whereupon this procedure shall be repeated until the parties either (i) mutually agree upon the contents of Exhibit C, or (ii) the contents are determined by arbitration pursuant to Section 26.32, below.  Failure of Tenant to execute and deliver to Landlord within such 10-business day period the Confirmation of Lease Dates Amendment submitted by Landlord within such 6-month period or Landlord to reject Tenant’s changes thereto within such 15-business day period, as applicable, shall constitute an acknowledgment by Tenant or Landlord (as applicable) that the statements included in such Confirmation of Lease Dates Amendment so submitted by Landlord or Tenant (as applicable) are true and correct, without exception, and binding upon Landlord and Tenant.

 

In the event Landlord shall fail to send Tenant the Confirmation of Lease Dates Amendment within six (6) months following the Lease Commencement Date, Tenant may execute and deliver to Landlord the Confirmation of Lease Dates Amendment in the form as set forth in Exhibit C, which Confirmation of Lease Dates Amendment Landlord shall execute and return to Tenant within ten (10) business days after receipt thereof by Landlord (provided that if said Confirmation of Lease Dates Amendment submitted by Tenant is not factually correct, Landlord shall make such changes thereto as are necessary to make such Confirmation of Lease Dates Amendment factually correct, which revised Confirmation of Lease Dates Amendment shall thereafter be subject to the procedure for finalization set forth above in this Section 2.3).  Failure of Landlord to execute and deliver to Tenant within such 10-business day period the confirmation of Lease Dates Amendment initially submitted by Tenant shall constitute an acknowledgment by Landlord that the statements included in such confirmation of Lease Dates Amendment so submitted by Tenant are true and correct, without exception, and binding upon Landlord and Tenant.

 

2.4      Option to Extend.  Tenant’s rights and obligations with respect to extending the initial Lease Term are set forth in the Extension Option Rider attached to this Lease.

 

ARTICLE 3

BASE RENT

 

3.1      Base Rent.  Tenant shall pay, without notice or demand, to Landlord or Landlord’s agent at the management office of the Real Property, or at such other place as Landlord may from time to time designate in writing, in currency, by wire transfer or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (“Base Rent”) as set forth in Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first (1st) business day of each and every month during the Lease Term, without any setoff or deduction except as otherwise expressly provided in this Lease.  The Base Rent for the first (1st) full month of the Lease Term shall be paid by Tenant to Landlord at the time of Tenant’s execution of this Lease.  If any rental payment date (including the Lease Commencement Date) falls on a day of the month other than the first day of such month or if any rental payment is for a period which is shorter than one month, then the rental for any such fractional month shall be a proportionate amount of a full calendar month’s rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs.  All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis.

 

3.2      Abatement of Base Rent.  Notwithstanding anything to the contrary contained herein, Landlord hereby agrees to abate Tenant’s obligation to pay monthly Base Rent otherwise payable for (i) the fourth (4th) and fifth (5th) floors of the Premises for the second (2nd) through tenth (10th) months of the initial Lease Term, and (ii) the Base Rent otherwise payable for the second (2nd) through the thirteenth (13th) months of the initial Lease Term for the third (3rd) floor of the Premises (collectively, the “Abated Rent”); provided, however, if as of the first (1st) day such applicable month scheduled for abatement, Tenant is in monetary or material non-monetary default under this Lease, the monthly Base Rent abatement for such applicable month shall be suspended until such default is cured by Tenant (with the amount of such suspended Abated Rent to be credited toward the next monthly installment of Base Rent due under this Lease for the first month immediately following such cure that Tenant is not in monetary or material non-monetary default under this Lease).  During such abatement periods, Tenant shall remain responsible for the payment of all of its other monetary obligations under this Lease, including all amounts payable under Article 4 below.

 

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ARTICLE 4

ADDITIONAL RENT

 

4.1      Additional Rent.  In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay to Landlord as additional rent the sum of the following:  (i) ”Tenant’s Share” (as such term is defined below) of the annual Operating Expenses allocated to the Building pursuant to Section 4.3.4, which are in excess of the amount of Operating Expenses allocated to the Building and applicable to the Expense Base Year (subject, however, to the annual cap on Controllable Expenses in Section 4.3.5 below); plus (ii) Tenant’s Share of the annual Tax Expenses allocable to the Building pursuant to Section 4.3.4, which are in excess of the amount of the Tax Expenses allocated to the Building and applicable to the Tax Expense Base Year; plus (iii) Tenant’s Share of the annual Utilities Costs allocated to the Building pursuant to Section 4.3.4 which are in excess of the amount of Utilities Costs allocated to the Building and applicable to the Utilities Base Year.  Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, shall be hereinafter collectively referred to as the “Additional Rent.”  The Base Rent and Additional Rent are herein collectively referred to as the “Rent.”  All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent except as otherwise provided in this Lease.  Without limitation on other obligations of Tenant which shall survive the expiration of the Lease Term, but subject to the limitations set forth in Section 4.3.2 below, the obligations of Tenant to pay the Additional Rent provided for in this Article 4, and Landlord’s obligation to refund any overpayment by Tenant, shall survive the expiration of the Lease Term for a period of two (2) years from the date of expiration or termination of this Lease; provided, however, that any such payments made by Tenant of any Additional Rent or any refund to Tenant by Landlord of any overpayments of such Additional Rent shall not constitute a waiver by either Tenant or Landlord, as the case may be, of any amount that Tenant or Landlord (as the case may be) contend, now or in the future (subject to the limitations set forth in this Lease or under applicable Laws) are in dispute.

 

4.2      Definitions.  As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

 

4.2.1        “Calendar Year” shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires.

 

4.2.2        “Expense Base Year” shall mean the year set forth in Section 9.1 of the Summary.

 

4.2.3        “Expense Year” shall mean each Calendar Year.

 

4.2.4        “Operating Expenses” shall mean all expenses, costs and amounts which Landlord shall pay during any Expense Year because of or in connection with the management, maintenance, repair, replacement or operation of the Real Property, all as determined in accordance with sound real estate management practices consistently applied, including, without limitation, any amounts paid for:  (i) the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and storm drainage systems, and any escalator and/or elevator systems, and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of reasonably contesting the validity or applicability of any governmental enactments which are reasonably anticipated to reduce Operating Expenses, and the costs incurred in connection with the implementation and operation (by Landlord or any common area association(s) formed for LNR Warner Center) of any government mandated transportation demand management program (including any such program required to be implemented for the Project by the City of Los Angeles as a condition to the City’s approvals of the development of the Project); (iii) subject to the restrictions in Sections 4.2.4.2 and 4.3.6 below, the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine or as may be required by this Lease; provided, however, to the extent Landlord elects to provide insurance for unusual or expensive coverages or endorsements such as earthquake and flood and the same is in addition to any insurance required to be maintained by Landlord under this Lease, and such insurance is materially in excess of the types or amounts of insurance carried by landlords of Comparable Buildings (as defined below) for such unusual or expensive coverages or endorsements, the incremental cost of such materially excess insurance shall not be included in Operating Expenses; provided, further, however, that Landlord’s insurance shall be deemed to have satisfied such Comparable Buildings standard and the foregoing exclusion from Operating Expenses shall not apply to the extent that other office buildings in Southern California owned by Landlord or an entity affiliated with or related to Landlord or any of Landlord’s members or submembers are covered by substantially similar insurance coverage terms pertaining to such unusual or expensive coverages or endorsements (e.g., coverage rate and deductible percentage(s) as carried by Landlord); (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Real Property; (v) the cost of parking area repair and

 

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maintenance, including, but not limited to, repainting, restriping, and cleaning; (vi) fees, charges and other costs, including reasonable consulting fees, legal fees and accounting fees, of all contractors engaged by Landlord or otherwise reasonably incurred by Landlord in connection with the management, operation, maintenance and repair of the Real Property; (vii) any management agreements, including the cost of any management fee and the fair rental value of any on-site management office space (not exceeding 2,500 rentable square feet) provided thereunder, provided, however, (I) the management fee shall not exceed the greater of (A) three and one-half percent (3.5%) of the gross revenues (excluding unapplied security deposits and unearned prepaid rent) of the Real Property, or (B) the management fees (charged on a percentage of gross revenues basis) reasonably and customarily paid to independent third party management companies by landlords of Comparable Buildings (the “Market Management Fee”), and (II) if the percentage used in calculating the management fee included in Operating Expenses during the Expense Base Year is less than the Market Management Fee paid during the Expense Base Year, then the percentage used to calculate the management fees included in Operating Expenses in any Expense Year subsequent to the Expense Base Year shall not be increased above the percentage used to calculate the management fees included in Operating Expenses during the Expense Base Year, unless for each subsequent Expense Year that Landlord desires to include such increased percentage, Landlord also increases the percentage used to calculate the management fees included in Operating Expenses during the Expense Base Year to the lesser of (x) such Market Management Fee percentage, and (y) the percentage used to calculate the management fee for the Operating Expenses in such subsequent Expense Year; (viii) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security of the Real Property (that are not above the level of Project manager or Project engineer), and employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; provided, that if any employees of Landlord provide services for more than one project of Landlord, then a prorated portion of such employees’ wages, benefits and taxes shall be included in Operating Expenses based on the portion of their working time devoted to the Real Property; (ix) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Real Property or any portion thereof, including, without limitation, any covenants, conditions or restrictions now or hereafter recorded against or affecting the Real Property; (x) operation, repair and maintenance of all “Systems and Equipment,” as that term is defined in Section 4.2.5 of this Lease, and components thereof; (xi) the cost of janitorial service, alarm and security service, window cleaning, trash removal, maintenance of curbs and walkways, and repairs to roofs; (xii) annual amortization (including interest on the unamortized cost at the Amortization Interest Rate, as defined below) of the cost of acquiring, or the rental expense of renting, personal property used in the maintenance, operation and repair of the Real Property; and (xiii) annual amortization (including interest on the unamortized cost at the Amortization Interest Rate) of the cost of any capital alterations, capital replacements, capital additions, capital repairs and capital improvements incurred in connection with the Project (I) which are intended to reduce Operating Expenses in connection with the management, maintenance, repair, replacement or operation of the Real Property, but only to the extent of the cost savings reasonably anticipated by Landlord (based upon sound documentation) to result therefrom at the time of such expenditure to be incurred in connection therewith, (II) made to the Real Property after the Lease Commencement Date that are required under any governmental law or regulation (or amendment thereof) not in effect on the Lease Commencement Date, (III) pertaining to replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, or (IV) which are reasonably determined by Landlord to be reasonably required to maintain the functional character of the Real Property as a first-class office building project (except that in no event shall the amortized amount of the cost which Landlord may include in Operating Expenses pursuant to this Section 4.2.4(xiii)(IV):  (A) exceed $100,000.00 in any particular Expense Year; or (B) be attributable to the initial construction of any new office buildings, retail buildings and/or parking structures within the Project).

 

All such costs described in Section 4.2.4(xiii) above and the amortization of any other capital expenditures under this Section 4.2.4 (including, without limitation, Section 4.2.4(xii) above and Section 4.2.4.1(t) below) shall be amortized over the useful life of the particular item in question as Landlord shall reasonably determine in accordance with standard real estate management and accounting practices consistently applied by Landlord and consistent with standard real estate management and accounting practices used by landlords of other first-class office buildings in the Warner Center area of Woodland Hills, California (collectively, the “Comparable Buildings”).  As used herein, the “Amortization Interest Rate” shall mean a rate equal to the floating commercial loan rate announced from time to time by Bank of America, a national banking association, or its successor, as its reference rate, plus one percent (1%) per annum.

 

If, during all or any part of any Expense Year or the Expense Base Year, Landlord shall not furnish any particular items of work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant (including Tenant) who has undertaken to perform such item of work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been

 

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incurred during such period by Landlord if Landlord had at its own expense furnished such item of work or service to such tenant.  In addition, if the Building (and during the period of time when any other buildings are fully constructed and ready for occupancy and are owned by Landlord and included by Landlord within the Project) is (are) less than 95% occupied during all or a portion of any Expense Year (including the Expense Base Year), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Building (and any of such other buildings, as applicable) been 95% occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof.  In determining such adjustment pursuant to the immediately preceding sentence, any gross receipts taxes, management fees or other expenses that are tied to the receipt of rental income shall be determined as if the applicable buildings described above were 95% occupied during any Expense Year (including the Expense Base Year) and all tenants were paying the full rental initially payable under their respective leases (as opposed to half-rent or abated rent).

 

Subject to the provisions of Section 4.3.4 below, Landlord shall have the right, from time to time, to equitably allocate some or all of the Operating Expenses, Tax Expenses and Utilities Costs (as defined below) among the Building, and the Other Existing Buildings and/or among different tenants of the Project, and/or among different and additional buildings of the Project, as and when such different and/or additional buildings are constructed and added to (and/or excluded from) the Project or otherwise (collectively, the “Cost Pools”).  Such Cost Pools may include, but shall not be limited to, the office space tenants and retail space tenants (and if applicable, child care tenants or occupants) of the Project.  Such Cost Pools may also include allocation of certain Operating Expenses, Tax Expenses and Utilities Costs within or under covenants, conditions and restrictions affecting the Project.  In addition, Landlord shall have the right from time to time, in its reasonable discretion, to include or exclude existing or future buildings in the Project for purposes of determining Operating Expenses, Tax Expenses and Utilities Costs and/or the provision of various services and amenities thereto, including allocation of Operating Expenses, Tax Expenses and Utilities Costs in any such Cost Pools.  The Operating Expenses, Tax Expenses and/or Utilities Costs within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner over all Expense Years.  In addition, in the event any facilities, services or utilities used in connection with the Project are provided from another building outside the Project owned or operated by Landlord or vice versa, the costs incurred by Landlord in connection therewith shall be allocated by Landlord to Operating Expenses, Tax Expenses and/or Utilities Costs, as the case may be, on an equitable basis.

 

4.2.4.1     Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses (and to the extent applicable, Utilities Costs) shall not include the following:

 

(a)      brokerage commissions, space planning costs, finders’ fees, attorneys’ fees and other costs incurred by Landlord in connection with leasing or attempting to lease space within the Real Property;

 

(b)      costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for any tenants in the Real Property or incurred in renovating or otherwise improving, preparing, decorating, painting or redecorating vacant space for tenants or other occupants of the Real Property.

 

(c)      interest, points, fees and principal payments on any mortgages encumbering the Real Property, and other debt costs, if any, except as specifically included in Sections 4.2.4(xii) and (xiii) above and Section 4.2.4.1(t) below;

 

(d)      costs of correcting defects in, or significant design error relating to, the initial design or construction of the Building, the Parking Facilities or any other improvements to the Real Property or equipment or materials used therewith;

 

(e)      advertising and promotional expenditures;

 

(f)       costs of any items (including, but not limited to, costs incurred by Landlord with respect to goods, services and utilities sold and/or supplied to tenants and occupants of the Real Property, and/or for the repair of damage to the Building for items which are reimbursable under any contractor, manufacturer or supplier warranty) to the extent Landlord receives reimbursement from insurance or condemnation proceeds, or from a contractor, manufacturer, supplier or any other third party pursuant to any warranty or otherwise or would have been reimbursed if Landlord had carried the insurance Landlord is required to carry pursuant to this Lease (other than reimbursement by tenants pursuant to the Operating Expenses pass-through provisions of their leases); such proceeds shall be credited to Operating Expenses in the year in which received;

 

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(g)      expenses in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged directly but which are provided to any other tenant or occupant of the Real Property at no cost (or are separately reimbursed by such other tenants);

 

(h)      attorneys’ fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants or prospective occupants of the Real Property (including costs incurred due to violations by tenants of the terms and conditions of their leases), or any other attorneys’ fees incurred in connection with the Real Property (including, without limitation, any financing, sale or syndication of the Real Property), except (A) as specifically enumerated as an Operating Expense in this Lease and/or (B) to the extent the expenditure of such attorneys’ fees generally benefits all of the tenants of the Building and any other buildings in the Project owned by Landlord;

 

(i)       the wages and benefits of any employee who does not devote substantially all of his or her employed time to the operation and management of the Building or Real Property unless such wages and benefits are prorated to reflect time spent on operating and managing the Building and Real Property vis-à-vis time spent on matters unrelated to operating and managing the Building and Real Property;

 

(j)       compensation (including benefits) of any employee of Landlord above the grade of Project manager or Project engineer;

 

(k)      costs of additions, alterations, repairs or improvements, equipment replacement and all other items which under standard real estate management and accounting practices consistently applied are properly classified as capital expenditures, except those costs set forth in Sections 4.2.4(xii) and (xiii) above, and except as provided in Section 4.2.4.1(t) below;

 

(l)       rentals and other related expenses for leasing heating, ventilation and air conditioning (“HVAC”) systems, elevators, or other items (except when needed in connection with normal repairs and maintenance of the Building and/or Real Property and/or to an ameliorate an emergency condition in the Building and/or Real Property) which if purchased, rather than rented, would constitute a capital improvement not included in Operating Expenses pursuant to this Lease;

 

(m)          costs and overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Real Property to the extent the same exceeds typical costs and overhead and profit increment of such goods and/or services rendered by qualified unaffiliated third parties on a competitive basis;

 

(n)      any costs for which Landlord has been reimbursed (other than through the Operating Expenses pass-through provisions of other tenants’ leases) or for which Landlord receives a credit, refund or discount;

 

(o)      costs of signs (other than building directories and signage for various equipment rooms and common areas) in or on the Real Property or any buildings located on the Real Property which identify the owner of the Real Property or other tenants’ signs;

 

(p)      interest, penalties, late charges, liquidated damages or other costs arising out of Landlord’s failure to make timely payment of any of its obligations under this Lease or the Underlying Documents, including, without limitation, Landlord’s failure to make timely payment of any item that is included in Operating Expenses, Tax Expenses, or Utilities Costs, and any penalties or fines imposed upon Landlord due to Landlord’s violation of any applicable Laws or the Underlying Documents;

 

(q)      reserves of any kind, including replacement reserves for bad debt loss or lost rent (but Operating Expenses may include reasonable reserves imposed upon the Real Property as part of the assessments under any covenants, conditions and restrictions recorded against the Real Property);

 

(r)       any costs expressly excluded from Operating Expenses elsewhere in this Lease;

 

(s)      any ground lease rental;

 

(t)       depreciation and amortization, except as expressly provided in this Section 4.2.4, and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party, and when depreciation or amortization is permitted or required, the item shall be amortized over its useful

 

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life in the manner described in Section 4.2.4 above, together with interest on the unamortized costs at the Amortization Interest Rate;

 

(u)      costs (including, without limitation, fines, penalties, interest, and costs of repairs, replacements, alterations and/or improvements) incurred in bringing the Real Property into compliance with building codes and other applicable Laws in effect as of the Lease Commencement Date and as interpreted by applicable governmental authorities as of such date, including, without limitation, any costs to correct building code violations pertaining to the initial design or construction of the Building, the Parking Facilities or any other improvements to the Real Property, to the extent such violations exist as of the Lease Commencement Date under any applicable building codes in effect and as interpreted by applicable governmental authorities as of such date;

 

(v)      costs incurred by Landlord due to the violation by Landlord of the terms and conditions of (A) any lease of space within the Real Property and/or (B) any Underlying Documents or ground leases pertaining to the Real Property;

 

(w)          Landlord’s general corporate overhead and administrative expenses, except for the property management fee permitted pursuant to the terms of Section 4.2.4 above;

 

(x)       costs of acquisition of sculptures, painting and other objects of art;

 

(y)      costs incurred to comply with applicable Laws with respect to cleanup, removal, investigation and/or remediation (collectively, “Remediation Costs”) of any Hazardous Materials (as such term is defined in Article 5 below) in, on or under the Real Property and/or the Building to the extent such Hazardous Materials:  are (1) present in the soil or groundwater of the Project; (2) in existence as of the Lease Commencement Date and in violation of applicable Laws in effect as of the Lease Commencement Date, and were of such a nature that a federal, state or municipal governmental or quasi-governmental authority, if it had then had knowledge of the presence of such Hazardous Materials, in the state and under the conditions that the same existed in the Building or on the Real Property, would have then required removal, remediation or other action with respect to such Hazardous Materials; and/or (3) introduced onto the Real Property and/or Building after the Lease Commencement Date by Landlord or any of Landlord’s agents, employees, contractors or tenants in violation of applicable Laws in effect at the date of introduction, and were of such a nature that a federal, state or municipal governmental or quasi-governmental authority, if it had then had knowledge of the presence of such Hazardous Materials, in the state and under the conditions that the same existed in the Building or on the Real Property, would have then required removal, remediation or other action with respect to such Hazardous Materials;

 

(z)       any Tax Expenses (and Operating Expenses shall not include any Utilities Costs);

 

(aa)         any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord (other than the Parking Facilities);

 

(bb)         costs arising out of the operation, management, maintenance or repair of any retail premises in the Project or any other retail areas operated by Landlord or its agents, contractors or vendors to the extent such costs are uniquely attributable (and separately identifiable) to such retail premises or areas (as opposed to general office use tenancies) or are extraordinary, separately identifiable expenses arising in connection therewith;

 

(cc)         costs for which Landlord has been compensated by a management fee, to the extent that the inclusion of such costs in Operating Expenses would result in a double charge to Tenant;

 

(dd)         costs arising from Landlord’s charitable or political contributions;

 

(ee)         costs arising from any voluntary special assessment on the Building or the Project by any transit district authority or any other governmental entity having the authority to impose such assessment, unless such costs are included in the Expense Base Year or Utilities Base Year at the initial rate in effect for such assessments;

 

(ff)      costs associated with the operation of the business of the partnership or entity which constitutes Landlord as the same are distinguished from the costs of operation of the Building and/or the Project, including partnership accounting and legal matters, costs of defending any lawsuits with or claims by any mortgagee (except as the actions of Tenant may be in issue), costs of

 

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selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Building or the Project, costs of any disputes between Landlord and its employees (if any) not engaged in Building and/or Project operation, disputes of Landlord with Project management, or outside fees paid in connection with disputes with other tenants (except to the extent the expenditure of such outside fees generally benefit all tenants of the Building and any other buildings in the Project owned by Landlord, and Landlord included such category of expenses or similar types of expenses, if actually incurred, in the Expense Base Year);

 

(gg)         costs of any “tap fees” or any sewer or water connection fees for the benefit of any particular tenant in the Building or the Project;

 

(hh)         any “validated” parking for any entity;

 

(ii)      the cost of providing any service directly to and paid directly by any tenant;

 

(jj)      rent for any office space occupied by Building or Project management personnel to the extent the size of such office space exceeds 2,500 rentable square feet or the rental rate for such office space exceeds the fair market rental value of comparable-sized office space occupied by management personnel of the Comparable Buildings;

 

(kk)         costs arising from the gross negligence or willful misconduct of Landlord or the Landlord Parties, as that term is defined in Section 10.1 of this Lease;

 

(ll)      any above-Building standard cleanup, including construction and special events cleanup (other than special events where Tenant is invited);

 

(mm)       costs incurred in connection with the original construction and development of the Building or Project;

 

(nn)         costs of flowers, gifts, balloons, etc. provided to any prospective tenants, Tenant, other tenants, and occupants of the Building, and entertainment, dining or travel expenses, except to the extent customarily included in the operating expenses of Comparable Buildings;

 

(oo)         costs of third party non-tenant parties;

 

(pp)         material costs associated with the operation, maintenance and/or repairs of any portions of the common areas of the Project which are dedicated for the exclusive use of other tenants of the Project, but only to the extent such costs are easily and readily identifiable and separable without undue accounting or other costs to Landlord; and

 

(qq)         penalties resulting from Landlord’s non-compliance with the maximum allowable p.m. peak hour trips for the Premises.

 

4.2.4.2     Landlord hereby agrees that the cost of any new type or increased amount of insurance coverage (or increased limits of insurance or decrease in the amount of deductibles) which is obtained or effected by Landlord during any Expense Year after the Expense Base Year (but is not obtained or effected during the Expense Base Year) shall be added to the Operating Expenses for the Expense Base Year (but at the rate which would have been in effect during the Expense Base Year or the rate in effect during such subsequent Expense Year, whichever is lower) prior to the calculation of Tenant’s Share of Operating Expenses for each such Expense Year in which such change in insurance is obtained or effected.  In the event that any of Landlord’s insurance premiums applicable to the Real Property shall decrease in any Expense Year subsequent to the Expense Base Year (including, without limitation, as a result of any decrease in the amount or type of coverage or increase in deductibles), Operating Expenses attributable to the Expense Base Year, shall, commencing the year of such decrease, but only as long as and to the extent such decrease remains in effect, thereafter be reduced by the amount of such decrease in the insurance premiums.

 

4.2.4.3     Landlord further agrees that any costs incurred in any Expense Year after the Expense Base Year or Utilities Base Year because of any added new type of discretionary services which were readily available during the Expense Base Year or Utilities Base Year, as applicable, and customarily provided by landlords of Comparable Buildings during the Expense Base Year or Utilities Base Year, as applicable (but not by Landlord), and not included in the Expense Base Year or Utilities Base Year, as applicable shall be added to and included in the Expense Base Year or Utilities Base Year, as applicable for purposes of determining the Excess payable for such Expense Year in which such added new type of discretionary services are so provided, as if such services were provided in the Expense Base Year or Utilities Base Year, as applicable (but at the rate for such services which would have been in

 

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effect during the Expense Base Year or Utilities Base Year, as applicable, or the rate in effect during such subsequent Expense Year, whichever is lower); provided, however, the foregoing provision shall not apply to the costs of:  (i) any capital additions, capital alterations, capital repairs or capital improvements which shall be governed by the provisions of Sections 4.2.4 (xii) and (xiii) and Section 4.2.4.1(t) above; or (ii) security and/or parking control services required to operate the Project as a first-class office building project.  In addition, if in the event and to the extent any portion of the Project is covered by a warranty or service agreement which provides warranty-type protection at any time during the Expense Base Year and/or Utilities Base Year and is not covered by such warranty or such warranty-type protection under such service agreement in a subsequent Expense Year to the same extent, Operating Expenses for the Expense Base Year and/or Utilities Costs for the Utilities Base Year shall be deemed increased by the amount Landlord would have incurred during the applicable Base Year with respect to the items or matters covered by the subject warranty or warranty-type protection (net of the cost of the warranty or the service agreement included in the applicable base year), had such warranty or such service agreement not been in effect during the applicable Base Year.

 

4.2.4.4     Any refunds or discounts actually received by Landlord for any category of Operating Expenses, Utilities Costs and/or Tax Expenses shall reduce the Operating Expenses, Utilities Costs and/or Tax Expenses, as applicable, in the applicable Expense Year pertaining to such category of Operating Expenses, Utilities Costs and/or Tax Expenses, as applicable.  Notwithstanding the foregoing provisions of this Article 4 to the contrary, Landlord will not collect or be entitled to collect Operating Expenses, Utilities Costs or Tax Expenses from all of its tenants in an amount which is in excess of one hundred percent (100%) of the Operating Expenses, Utilities Costs and Tax Expenses actually paid or incurred by Landlord in connection with the operation of the Building and the Real Property, and Landlord shall make no profit from the collection of Operating Expenses, Utilities Costs and Tax Expenses.

 

4.2.5        “Systems and Equipment” shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part.

 

4.2.6        “Tax Expense Base Year” shall mean the year set forth in Section 9.2 of the Summary.

 

4.2.7        “Tax Expenses” shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property owned or leased by Landlord and used in connection with the Real Property), which Landlord shall pay during any Expense Year (subject, however, to the restrictions in Section 4.3.6 below) because of or in connection with the ownership, leasing and operation of the Real Property or Landlord’s interest therein (including any tax expenses, assessments and other charges allocated to the Real Property under any declaration, restriction covenant or other instrument pertaining to the sharing of costs by the Real Property or any portion thereof, including any covenants, conditions or restrictions now or hereafter recorded against or affecting the Real Property).  For purposes of this Lease, Tax Expenses for the Tax Expense Base Year and each Expense Year thereafter shall be calculated as if the Building and the tenant improvements therein (at a Building-standard amount) were fully constructed, and the Building and such tenant improvements therein were fully assessed for real estate tax purposes; and accordingly, during any Expense Year and during the portion of any Expense Year occurring during the Tax Expense Base Year, Tax Expenses shall be deemed to be increased appropriately.

 

4.2.7.1     Tax Expenses shall include, without limitation:

 

(i)       Any tax on Landlord’s rent, right to rent or other income from the Real Property or as against Landlord’s business of leasing any of the Real Property;

 

(ii)      Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“Proposition 13”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental

 

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services formerly provided without charge to property owners or occupants.  It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease;

 

(iii)          Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and

 

(iv)          Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises.

 

4.2.7.2     Landlord shall make such reasonable efforts as Landlord shall in its reasonable discretion deem reasonably necessary to minimize the amount of Tax Expenses, including challenging (following reasonable written request therefor by Tenant or otherwise) the amount of Tax Expenses with the applicable governmental authority if Landlord reasonably determines a reduction in Tax Expenses is likely to result therefrom.  Any expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid but not in excess of the reduction in Tax Expenses achieved as a result thereof.

 

4.2.7.3     Notwithstanding anything to the contrary contained in this Section 4.2.7, there shall be excluded from Tax Expenses:  (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Real Property); (ii) any items included as Operating Expenses or Utilities Costs; (iii) any items paid by Tenant under Section 4.4 of this Lease; (iv) Tax Expenses attributable to the tenant improvements of other tenants’ or occupants’ premises in the Real Property in excess of the Cut-Off Point, as that term is defined in Section 4.4 below, but only to the extent such taxes in excess of the Cut-Off Point are directly billed to and collected from such tenants or occupants; (iv) penalties, interest and late charges attributable to Landlord’s delinquent payment of any Tax Expenses; and (vi) any real property taxes imposed with respect to any new office buildings, retail buildings and/or parking structures constructed within the Project after the date hereof, unless the initial real property taxes for such applicable buildings and structures (calculated on a fully assessed and constructed basis as described in Section 4.2.7 above) are included in the Tax Expenses for the Tax Expense Base Year.

 

4.2.7.4     To the extent Landlord obtains a refund, such tax refund shall be credited against Tax Expenses for the Expense Year to which such refund is applicable and if as a result of such refund as credit, Tenant overpaid Tax Expenses for such Expense Year, Tenant shall be entitled to receive from Landlord a return of such overpayment, but not in excess of the amount of Tax Expenses actually prepaid by Tenant prior to the application of such refund/credit.

 

4.2.7.5     Special Proposition 13 Buy-Out.  Tenant acknowledges and agrees that Tax Expenses payable by Tenant under this Article 4 include, without limitation, any real estate taxes assessed upon or as a result of any sale, transfer or other change in ownership of the Project or any portion thereof (subject, however, to the provisions of Section 4.3.4 below), including, without limitation, any Tax Expenses assessed or resulting from the sale of the Improved Building H Property (as defined below).  Notwithstanding anything to the contrary contained in this Lease, if the initial sale (or other change in ownership which triggers reassessment of real estate taxes under Proposition 13) of the Building and the parcel of land upon which the Building is located and known as Lot 2 of Tract Map No. 52799-03 recorded in Book 1278, Pages 77679 of Maps in the Official Records of Los Angeles County (collectively, the “Improved Building H Property”) is consummated during the initial Lease Term for a purchase price in excess of the Threshold Price, as defined below (such portion of the purchase price which exceeds the Threshold Price shall be referred to herein as the “Excess Purchase Amount”), then upon the closing date of such initial sale of the Improved Building H Property (the “Closing Date”), Landlord shall pay to Tenant the Excess Reassessment Amount (as defined below).  As used herein, the term “Threshold Price” means $265.00 per rentable square foot of the Building (i.e., $47,525,630.00, based upon 179,342 rentable square feet within the Building).  As used herein, the term “Excess Reassessment Amount” means the product of multiplying (i) Tenant’s Share in effect as of the Closing Date, calculated based upon the rentable square feet of the Premises(but not including any First Offer Space or other space in the Project leased by Tenant), by (ii) the present value, as of the Closing Date, of the real estate taxes estimated to be payable by Tenant pursuant to the terms of Proposition 13 during the Protection Period (as defi