California-San Francisco-45 Fremont Street Lease - Forty-Five Fremont Associates and Digital Island Inc.
OFFICE LEASE
FORTY-FIVE FREMONT ASSOCIATES,
A CALIFORNIA GENERAL PARTNERSHIP,
Landlord
and
DIGITAL ISLAND, INC.,
Tenant
DATED AS OF: May 5, 1999
TABLE OF CONTENTS
Paragraph Page
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1. Premises........................................................... 1
2. Certain Basic Lease Terms.......................................... 1
3. Term; Delivery of Possession of Premises........................... 2
4. Condition of Premises.............................................. 2
5. Monthly Rent....................................................... 5
6. Lease Security..................................................... 6
7. Additional Rent: Increases in Operating Expenses and Tax Expenses.. 7
8. Use of Premises; Compliance with Law............................... 10
9. Alterations and Restoration........................................ 11
10. Repair............................................................. 12
11. Abandonment........................................................ 13
12. Liens.............................................................. 13
13. Assignment and Subletting.......................................... 13
14. Indemnification of Landlord........................................ 17
15. Insurance.......................................................... 17
16. Mutual Waiver of Subrogation Rights................................ 19
17. Utilities.......................................................... 19
18. Personal Property and Other Taxes.................................. 20
19. Rules and Regulations.............................................. 20
20. Surrender; Holding Over............................................ 21
21. Subordination and Attornment....................................... 21
22. Financing Condition................................................ 22
23. Entry by Landlord.................................................. 22
24. Insolvency or Bankruptcy........................................... 22
25. Default and Remedies............................................... 23
26. Damage or Destruction.............................................. 25
27. Eminent Domain..................................................... 26
28. Landlord's Liability; Sale of Building............................. 26
29. Estoppel Certificates.............................................. 27
30. Right of Landlord to Perform....................................... 27
31. Late Charge........................................................ 27
32. Attorneys' Fees; Waiver of Jury Trial.............................. 27
33. Waiver............................................................. 28
34. Notices............................................................ 28
35. Deleted............................................................ 28
36. Defined Terms and Marginal Headings................................ 28
37. Time and Applicable Law............................................ 28
38. Successors......................................................... 28
39. Entire Agreement; Modifications.................................... 29
40. Light and Air...................................................... 29
41. Name of Building................................................... 29
42. Severability....................................................... 29
43. Authority.......................................................... 29
44. No Offer........................................................... 29
45. Real Estate Brokers................................................ 29
46. Consents and Approvals............................................. 29
47. Reserved Rights.................................................... 30
48. Financial Statements............................................... 30
49. Deleted............................................................ 30
50. Nondisclosure of Lease Terms....................................... 30
51. Hazardous Substance Disclosure..................................... 30
52. Stairway Access.................................................... 31
53. Right of First Offer............................................... 31
54. Signage............................................................ 32
55. Parking............................................................ 32
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EXHIBITS:
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A - Outline of Premises
B - Rules and Regulations
C - Appraisal Procedure
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LEASE
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THIS LEASE is made as of the 5th day of May, 1999, between FORTY-FIVE
FREMONT ASSOCIATES, a California general partnership ("Landlord"), and DIGITAL
ISLAND, INC., a California corporation ("Tenant").
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby
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leases from Landlord, on the terms and conditions set forth herein, the space
outlined on the attached Exhibit A (the "Premises"). The Premises are located on
the floor(s) specified in Paragraph 2 below of the building (the "Building")
located at 45 Fremont Street, San Francisco, California. The Building, the
parcel(s) of land (the "Land") on which the Building is located and the other
improvements on the Land are referred to herein as the "Real Property".
Tenant's lease of the Premises shall include the right to use, in
common with others and subject to the other provisions of this Lease, the public
lobbies, entrances, stairs, elevators and other public portions of the Building.
All of the windows and outside walls of the Premises and any space in the
Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment
or other utilities or Building facilities are reserved solely to Landlord and
Landlord shall have rights of access through the Premises for the purpose of
operating, maintaining and repairing the same.
2. Certain Basic Lease Terms. As used herein, the following terms
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shall have the meaning specified below:
a. Floor(s) on which the Premises are located: Eleventh (11th) and
twelfth (12th) floors.
b. Lease term: Approximately five (5) years and two (2) months,
commencing on the date Landlord delivers the Premises to Tenant
(the "Commencement Date") and ending on the last day of the
sixtieth (60th) full calendar month after the Rent Commencement
Date (as defined in Paragraph 2.c. below)(the "Expiration Date").
c. Monthly Rent: One Hundred Ten Thousand Three Hundred Seventy-Two
Dollars ($110,372.00).
The "Rent Commencement Date" shall be the date which is the
earlier of (i) sixty (60) days after the Commencement Date
(provided that if the Tenant Improvements (as defined in
Paragraph 4.a.i. below) have not been Substantially Completed (as
defined below) by the end of such 60-day period due to a delay
caused by Force Majeure (as defined below) or a Landlord Delay
(as defined below), then the 60-day period shall be extended by
the length of such delay; provided, however, that any such
extension of the 60-day period on account of Force Majeure shall
be limited to five (5) days), or (ii) the date Tenant commences
occupancy of any portion of the Premises for the conduct of
Tenant's business therein.
For purposes of the foregoing, the following terms shall have the
following meanings:
Substantial Completion of the Tenant Improvements shall have
occurred when, in Landlord's and Tenant's reasonable judgment,
the Tenant Improvements have been completed in accordance with
the Final Plans (as defined in Paragraph 4.a.i. below),
subject only to correction or completion of "Punch List"
items, which items shall be limited to minor items of
incomplete or defective work or materials or mechanical
maladjustments that are of such a nature that they do not
materially interfere with or impair Tenant's use of the
Premises for Tenant's business. The definition of Substantial
Completion shall also apply to the term "Substantially
Completed."
"Force Majeure" shall mean any delay in the Substantial
Completion of the Tenant Improvements that is caused by (i)
strikes, lockout, labor disputes, shortages of customary
materials and supplies (for which reasonable replacements are
not readily available) or labor, fire or other casualty, acts
of God or any similar cause that is beyond the reasonable
control of the party from whom performance is required, or
(ii) the failure of the
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applicable governmental authority, following receipt of all of
the required plans and other information, to issue the
required building permits or approvals within the customary
time periods for such issuance that existed as of the date of
this Lease.
"Landlord Delay" shall mean any delay in the Substantial
Completion of the Tenant Improvements that is due to (i)
Landlord's failure to provide any required consent or
disapproval within the time periods set forth in Paragraph 4
below, (ii) Landlord's failure to timely disburse Landlord's
Contribution in accordance with Paragraph 4.d.i. below, or
(iii) any other delay that is directly and solely caused by
the acts or failures to act (subject to any applicable time
periods for such actions provided for in Paragraph 4 below) of
Landlord or its agents or contractors.
d. Letter of Credit Amount: Five Hundred Thousand Dollars
($500,000.00).
e. Tenant's Share: 6.54%
f. Base Year: The calendar year 1999.
Base Tax Year: The fiscal tax year ending June 30, 2000.
g. Business of Tenant: Global internet service provider.
h. Real estate broker(s): Shorenstein Management Inc., and CB
Richard Ellis, Inc.
3. Term Delivery of Possession of Premises.
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a. The term of this Lease shall commence on the Commencement Date
(as defined in Paragraph 2.b.) and, unless sooner terminated pursuant to the
terms hereof or at law, shall expire on the Expiration Date (defined in
Paragraph 2.b.).
b. Landlord shall deliver possession of the Premises to Tenant as
soon as reasonably possible following the date hereof. Except as expressly
provided below, in the event of any delay in the delivery of the Premises to
Tenant, this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom. Notwithstanding the
foregoing, if Landlord has not delivered the Premises to Tenant for commencement
of construction of the Tenant Improvements on or before June 1, 1999 (the
"Outside Delivery Date") then Tenant may terminate this Lease by providing
Landlord with written notice of such termination prior to the date that the
Premises are delivered to Tenant for commencement of construction of the Tenant
Improvements, but in no event later than five (5) business days following the
Outside Delivery Date (as such date may have been extended pursuant to the
following). The foregoing Outside Delivery Date shall be extended by the length
of any delay in the delivery of the Premises to Tenant that is caused by
strikes, lock-outs, labor disputes, fire or other casualty, acts of God, or any
other cause beyond the reasonable control of Landlord; provided, however, that
the Outside Delivery Date may not be extended solely as a result of Landlord's
inability to recover possession of the Premises from the prior tenant of the
Premises and/or remove such tenant's possessions from the Premises. Tenant's
foregoing right to terminate this Lease shall be Tenant's sole remedy for
Landlord's failure to deliver the Premises to Tenant by the Outside Delivery
Date (as such date may have been extended pursuant to the terms hereof).
4. Condition of Premises. Improvements shall be constructed in the
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Premises in accordance with this Paragraph 4.
a. Plans; Selection of General Contractor.
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i. Plans. On or before May 3, 1999, Tenant shall furnish to
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Landlord for Landlord's review and reasonable approval working plans and
specifications for the improvements Tenant desires to be constructed in the
Premises, prepared by an architect reasonably acceptable to Landlord ("Tenant's
Architect"). The working plans and specifications shall show improvements that
conform to Landlord's base building requirements, the "Tenant Construction
Standards" and "Conditions for Construction" applicable to the Building
(collectively, the Building Construction Standards"), applicable building codes
and other Legal Requirements (as defined in Paragraph 7.a.(16) below) and shall
be in sufficient detail as to enable the general contractor for the work to
obtain all necessary governmental permits for commencement of the improvements
and to secure complete bids from qualified contractors to perform the work.
Landlord's approval of the working plans and specifications shall merely
indicate Landlord's consent to the proposed work shown thereon. In no event
shall such consent by Landlord be deemed to constitute a representation by
Landlord that the work called for in the working plans and specifications
complies with applicable building codes or other Legal Requirements nor shall
such consent release Tenant from Tenant's obligation to supply working plans and
specifications which do so conform
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to applicable building codes and Legal Requirements. Landlord shall respond to
each portion of the plans, either in writing or by marking up the submitted
plans, as soon as reasonably possible (but in any event within five (5) business
days of its receipt thereof) and, if Landlord disapproves of any portion of the
plans, Landlord shall advise Tenant of Landlord's reasons therefor. Tenant shall
respond to any reasonable objections of Landlord to the plans and resubmit
appropriately revised plans to Landlord. Landlord shall respond to any
resubmission of the plans as soon as reasonably possible (but in any event,
within five (5) business days of Landlord's receipt thereof), provided that the
resubmitted plans shall clearly indicate /which portions of the plans are
revised and which portions of the plan remain unchanged from the previously
submitted plans. (The working plans and specifications, as approved in writing
by Landlord, are hereinafter called the "Final Plans" and the improvements to be
performed in accordance with the Final Plans are hereinafter called the "Tenant
Improvements".) Notwithstanding anything to the contrary herein, Landlord and
Tenant shall cooperate with each other to resolve any space plan issues raised
by applicable local building codes.
ii. Selection of General Contractor. On or before the date that
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is five (5) business days following the approval by Landlord and Tenant of the
Final Plans, Tenant shall advise Landlord of whether Tenant selects Landlord's
designated contractor ("Landlord's Contractor") to be the general contractor for
the construction of the Tenant Improvements or whether Tenant desires to hire an
outside general contractor ("Tenant's Contractor") to construct the Tenant
Improvements.
b. Construction by Tenant's Contractor. If Tenant selects Tenant's
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Contractor to construct the Tenant Improvements pursuant to Paragraph 4.a.ii.
above, the following provisions shall apply:
i. Tenant's Contractor shall be subject to Landlord's prior
written approval, which approval shall not be unreasonably withheld.
ii. Tenant's Contractor shall (1) have substantial recent
experience in the construction of tenant improvements in high-rise office
buildings in downtown San Francisco, (2) be licensed by the State of
California (as evidenced by Tenant's submission to Landlord of Tenant's
Contractor's state license number), and (3) have the capacity to be bonded
by a recognized surety company to assure full performance of the
construction contract for the work shown on the Final Plans (as evidenced
by Tenant's submission to Landlord of a commitment or other writing issued
by a recognized surety company confirming that Tenant's Contractor is
bondable for construction projects having a contract price not less than
the contract price under the construction contract for the Tenant
Improvements).
Tenant shall be responsible for Tenant's Contractor,
subcontractors, suppliers and materialmen (A) utilizing only union labor on
the construction, (B) obtaining Landlord's prior written approval (which
Landlord shall not unreasonably withhold) of all subcontractors to be
utilized in the performance of such construction work, (C) obtaining all
necessary governmental permits and approvals in connection with the Tenant
Improvements (and Landlord shall have no responsibility whatsoever in
connection with obtaining the same) and (D) furnishing to Landlord, prior
to the commencement of any construction in the Premises, certificates of
insurance evidencing insurance with coverage and in form and amount
required by Landlord for the subject contractors' or materialmens'
operations in the Premises, which policies shall name Landlord as an
additional insured. Landlord shall have no responsibility for furnishing
any security services in or about the Building or Premises to safeguard the
construction project or materials in connection therewith, other than that
customarily provided in the Building for its use as an office building.
iii. Following selection of Tenant's Contractor, Tenant shall
promptly enter into a contract with Tenant's Contractor for construction of
the Tenant Improvements. Tenant shall then cause Tenant's Contractor to
promptly commence and diligently pursue to completion the Tenant
Improvements in accordance with the Final Plans. If Tenant requests any
change, addition or alteration in or to the Final Plans ("Changes"), Tenant
shall cause Tenant's Architect to prepare additional plans implementing
such Change and such additional plans shall be submitted to Landlord for
Landlord's prior written approval, which approval shall not be unreasonably
withheld. Tenant's Contractor shall comply with the Building's reasonable
construction procedures and with all applicable laws and governmental
requirements regarding the performance of the work.
c. Construction By Landlord's Contractor. If Tenant selects
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Landlord's Contractor to construct the Tenant Improvements pursuant to Paragraph
4.a.ii. above, the following provisions shall apply:
i. Construction. As soon as Landlord and Tenant have approved
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the Final Plans, Landlord shall cause Landlord's Contractor to commence and
diligently pursue construction of the Tenant Improvements to completion.
Landlord will provide ordinary power wiring to locations shown on the Final
Plans and shall provide and cause Landlord's Contractor to install conduits
as required for Tenant's telephone and computer systems as shown on the
Final Plans, but unless
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required by Tenant and specifically indicated on the Final Plans,
Landlord's Contractor shall not install, pull or hook up such wires, supply
jacks or plugs or provide wiring necessary for special conditioned power to
the Premises. The Tenant Improvements shall be constructed by Landlord's
Contractor in conformance with the Final Plans (subject to approved
Changes) and Landlord's Contractor shall comply with applicable
governmental requirements regarding the performance of the work; provided,
however, that the foregoing shall in no event require Landlord's Contractor
to identify and correct any violations of codes or laws reflected in the
Final Plans, it being agreed that, as expressly stated in Paragraph 4.a.i.
hereof, Tenant is responsible for submitting to Landlord Final Plans that
comply with all applicable laws.
Landlord's Contractor's fee for the construction of the
Tenant Improvements shall be as agreed upon by Tenant and Landlord.
ii. Changes. If Tenant requests any Changes to the Final Plans,
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Tenant shall cause Tenant's Architect to prepare additional plans
implementing such Change and such plans shall be submitted to Landlord for
Landlord's prior written approval, which approval shall not be unreasonably
withheld. As soon as reasonably possible after the completion of such
additional plans and Landlord's approval thereof, Landlord shall notify
Tenant of the estimated cost of the Change and the estimated affect the
Change will have on the construction schedule for the Tenant Improvements.
Within five (5) business days after receipt of such cost and timing
estimate, Tenant shall notify Landlord in writing whether Tenant approves
the Change. If Tenant approves the Change, Landlord shall proceed with the
Change and the cost of the Change shall be added to the cost of the Tenant
Improvements. If Tenant fails to approve the Change within such five (5)
business day period, construction of the Tenant Improvements shall proceed
as provided in accordance with the Final Plans as they existed prior to the
requested Change.
iii. Punch List Items. Upon notice from Landlord that the Tenant
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Improvements have been completed in accordance With the Final Plans,
subject only to correction or completion of "Punch List" items (which Punch
List Items shall be limited to minor items of incomplete or defective work
or materials or mechanical maladjustments that are of such a nature that
they do not materially interfere with or impair Tenant's use of the
Premises for Tenant's business) Landlord and Tenant shall tour the Premises
and prepare a joint list of Punch List Items. Landlord shall cause
Landlord's Contractor to complete the Punch List items as soon as
reasonably possible.
d. Cost of Tenant Improvements. The cost of the construction and
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installation of the Tenant Improvements shall be borne as follows:
i. Landlord's Contribution. Landlord shall contribute toward the
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cost of the design, construction and installation of the Tenant
Improvements (including, without limitation, the fee for Landlord's
Contractor or Tenant's Contractor, whichever is applicable, and the
Construction Management Fee (as defined below) if applicable) an amount not
to exceed Five Hundred Thirty-Six Thousand Nine Hundred Forty Dollars
($536,940.00)("Landlord's Contribution"); provided, however that not more
than Seventy-One Thousand Five Hundred Ninety-Two Dollars ($71,592.00) of
Landlord's Contribution may be applied to Tenant's reasonable space
planning, architectural and engineering costs for the design of the Tenant
Improvements. No portion of Landlord's Contribution may be applied to the
cost of equipment, trade fixtures, moving expenses, furniture, signage or
free rent.
Tenant shall pay for all costs of the construction of the Tenant
Improvements in excess of Landlord's Contribution (the "Excess Cost").
Based on the estimated cost of the construction of the Tenant Improvements
(inclusive of the applicable fees referenced above)(which estimated cost
shall be mutually and reasonably agreed upon by Landlord and Tenant, and is
referred to hereinafter as the "Estimated Costs"), the prorata share of the
Estimated Costs payable by Landlord and Tenant shall be determined and an
appropriate percentage share established for each (a "Share of Costs").
Tenant and Landlord shall fund the cost of such work (including the
applicable portion of the applicable fees) as the same is performed, in
accordance with their respective Share of Costs for such work, with
Tenant's payments being made to Landlord's Contractor within thirty (30)
days of written demand if Landlord's Contractor constructs the Tenant
Improvements. At such time as Landlord's Contribution has been entirely
disbursed, Tenant shall pay the remaining Excess Cost, if any, which
payments shall be made in installments as construction progresses in the
same manner as Tenant's payments of Tenant's Share of Costs were paid.
If Tenant's Contractor constructs the Tenant Improvements, the
following provisions shall govern the disbursement of Landlord's
Contribution. Landlord shall disburse Landlord's Contribution (with each
payment being calculated in accordance with Landlord's Share of Costs as
provided above) directly to Tenant's Contractor, or subcontractors, or to
Tenant as Landlord and Tenant may agree, in monthly installments. Each
disbursement shall be conditioned upon Landlord's receipt of invoices to be
furnished by Tenant covering work actually performed, construction in place
and materials delivered to the site (as may be applicable). No payment will
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be made for materials or supplies not on site. To the extent permitted by
law, Landlord may withhold the amount of any and all retention percentages
provided for in original contracts or subcontracts until the earlier of (i)
the expiration of the applicable lien period or (ii) Landlord's receipt of
a waiver of lien rights from Tenant's Contractor, subcontractors or
suppliers whose invoices are applicable to the respective disbursement for,
and/or on account of, the work or materials covered by such invoice. Tenant
shall pay Tenant's Share of Costs directly to the contractor or suppliers
involved and shall furnish to Landlord copies of receipted invoices
therefor and such waivers of lien rights as Landlord may reasonably
require.
Notwithstanding the foregoing, Landlord shall retain from the amount
of Landlord's Contribution, as compensation to Landlord for review of the
Final Plans and for construction inspection, administration and management
with regard to the Tenant Improvements, a sum (the "Construction Management
Fee") equal to Twenty-Four Thousand Dollars ($24,000.00). At the time
Landlord makes any disbursement of Landlord's Contribution, Landlord shall
retain from Landlord's Contribution, as a partial payment of the
Construction Management Fee, a proportionate amount of the Construction
Management Fee based upon Landlord's reasonable estimation of the amount
required to be withheld from each disbursement in order to ensure that the
entire Construction Management Fee is retained over the course of
construction on a prorata basis. At such time as Landlord's Contribution
has been entirely disbursed, Tenant shall, within thirty (30) days of
written demand, pay to Landlord the remainder, if any, of the Construction
Management Fee not yet paid to Landlord.
ii. Landlord's Work. In additional to Landlord's Contribution,
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Landlord shall pay for the entire cost of Landlord's Work described in
Paragraph 4.e. below.
e. Landlord's Work. Regardless of whether Tenant's Contractor or
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Landlord's Contractor constructs the Tenant Improvements, Landlord shall cause
the following work ('Landlord's Work") to be performed at Landlord's cost:
i. Perform the work, if any, required to bring the restrooms on
the 11th and 12th floors of the Building into compliance
with Title 24 accessibility requirements.
ii. Perform the work, if any, required to bring the common areas
of the Building that are reasonably anticipated to be in
Tenant's path of travel, to comply with Title 24
accessibility requirements in effect as of the Commencement
Date.
Landlord's Work shall be performed concurrently with the construction of the
Tenant Improvements.
5. Monthly Rent.
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a. On or before the first day of each calendar month during the term
hereof, Tenant shall pay to Landlord, as monthly rent for the Premises, the
Monthly Rent specified in Paragraph 2 above. If the term of this Lease commences
on a day other than the first day of a calendar month, or terminates on a day
other than the last day of a calendar month, then the Monthly Rent payable for
such partial month shall be appropriately prorated on the basis of a thirty
(30)-day month. Monthly Rent and the Additional Rent specified in Paragraph 7
shall be paid by Tenant to Landlord, in advance, without deduction, offset,
prior notice or demand, in immediately available funds of lawful money of the
United States of America, or by good cheek as described below, at the office of
Shorenstein Company, L.P., at 555 California Street, 14th floor, San Francisco,
California 94104, or to such other person or at such other place as Landlord may
from time to time designate in writing not less than five (5) business days in
advance. Payments made by cheek must be drawn either on a California financial
institution or on a financial institution that is a member of the federal
reserve system. Notwithstanding the foregoing, Tenant shall pay to Landlord with
execution of this Lease an amount equal to one (1) month's Monthly Rent
hereunder, which amount shall be applied to the Monthly Rent first due and
payable hereunder.
b. All amounts payable by Tenant to Landlord under this Lease, or
otherwise payable in connection with Tenant's occupancy of the Premises, in
addition to the Monthly Rent hereunder and Additional Rent under Paragraph 7,
shall constitute rent owed by Tenant to Landlord hereunder.
c. Any rent not paid by Tenant to Landlord when due shall bear
interest from the date due to the date of payment by Tenant at an annual rate of
interest (the "Interest Rate") equal to the lesser of (i) the maximum annual
interest rate allowed by law on such due date for business loans (not primarily
for personal, family or household purposes) not exempt from the usury law, or
(ii) a rate equal to the sum of six (6) percentage points over the six-month
United States Treasury bill rate (the "Treasury Rate") in effect from time to
time during such delinquency (or if there is no such publicly announced rate,
the rate quoted by the San Francisco Main Office of Bank of America, NT&SA, or
any successor bank thereto, in pricing ninety (90)-day commercial loans to
substantial commercial borrowers). Failure by Tenant to pay rent when due,
including any interest accrued under this subparagraph, shall constitute an
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Event of Default (as defined in Paragraph 25 below) giving rise to all the
remedies afforded Landlord under this Lease and at law for nonpayment of rent.
d. No security or guaranty which may now or hereafter be furnished
to Landlord for the payment of rent due hereunder or for the performance by
Tenant of the other terms of this Lease shall in any way be a bar or defense to
any of Landlord's remedies under this Lease or at law.
6. Lease Security. As security for the performance by Tenant of
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Tenant's obligations hereunder, Tenant shall cause to be delivered to Landlord
concurrently with the execution of this Lease by Tenant, an original irrevocable
standby letter of credit (the "Letter of Credit") in the amount of Five Hundred
Thousand Dollars ($500,000.00), which Landlord may draw upon to cure any default
under this Lease or to compensate Landlord for any damage Landlord incurs as a
result of Tenant's failure to perform any of its obligations hereunder. Any such
draw on the Letter of Credit shall not constitute a waiver of any other rights
of Landlord with respect to such default. The Letter of Credit shall be issued
by a major commercial bank reasonably acceptable to Landlord with a San
Francisco service and claim point for the Letter of Credit, have an expiration
date not earlier than the Expiration Date (or, in the alternative, have a term
of not less than one (1) year and be automatically renewable for an additional
one (1) year period unless notice of non-renewal is given by the issuer to
Landlord not later than sixty (60) days prior to the expiration thereof). The
Letter of Credit shall provide for payment to Landlord upon the issuer's receipt
of a sight draft from Landlord together with Landlord's certificate certifying
that the requested sum is due and payable from Tenant and Tenant has failed to
pay, and with no other conditions, and otherwise be in form and content
satisfactory to Landlord. If the Letter of Credit has an expiration date earlier
than the Expiration Date, then throughout the term hereof (including any renewal
or extension of the term) Tenant shall provide evidence of renewal of the Letter
of Credit to Landlord at least sixty (60) days prior to the date the Letter of
Credit expires. If Landlord draws on the Letter of Credit pursuant to the terms
hereof, Tenant shall immediately replenish the Letter of Credit or provide
Landlord with an additional letter of credit conforming to the requirements of
this paragraph so that the amount available to Landlord from the Letter of
Credit(s) provided hereunder is $500,000.00
Tenant's failure to deliver any replacement, additional or extension of
the Letter of Credit, or evidence of renewal of the Letter of Credit, within the
time specified under this Lease shall entitle Landlord to draw upon the full
amount of the Letter of Credit then in effect and (a) Landlord shall hold the
drawn amount as security for Tenant's obligations under this Lease and no
interest shall accrue to Tenant with regard to such sums so held by Landlord,
(b) Landlord may (but shall not be required to) use the sums so held or any
portion thereof to cure any Event of Default or to compensate Landlord for any
damage Landlord incurs as a result of Tenant's failure to perform any of its
covenants or obligations hereunder, it being understood that any use of such
sums shall not constitute a bar or defense to any of Landlord's remedies under
this Lease or at law (and if Landlord so uses all or part of the security
deposit, then upon written notice from Landlord to Tenant specifying the amount
of the security deposit so utilized by Landlord and the particular purpose for
which such amount was applied, Tenant shall immediately deposit with Landlord an
amount sufficient to return the security deposit to an amount equal to one
hundred percent (100%) of the security deposit held by Landlord prior to such
application of the security deposit; and Tenant's failure to make such payment
to Landlord within five (5) business days of receipt of Landlord's notice shall
constitute an Event of Default, (e) if Tenant is not in default at the
expiration or termination of this Lease, Landlord shall return to Tenant the
balance of such sums so held by Landlord; provided, however, that in no event
shall any such return be construed as an admission by Landlord that Tenant has
performed all of its covenants and obligations under the Lease, and (d) no
holder of a Superior Interest (as defined in Paragraph 21 below), nor any
purchaser at any judicial or private foreclosure sale of the Real Property or
any portion thereof, shall be responsible to Tenant for the sums so held by
Landlord unless and only to the extent such holder or purchaser shall have
actually received the same.
Tenant may from time to time during the Lease term (but not more than
once during any twelve (12) month period) request that Landlord review Tenant's
then current financial statement to determine if Landlord will continue to
require the Letter of Credit as security for Tenant's obligations under this
Lease. Tenant acknowledges that Landlord shall in no event be required to
eliminate the requirement that Tenant provide the Letter of Credit, it being
agreed that Landlord's sole obligation under this grammatical paragraph is to
review the financial statement submitted by Tenant.
If, at any time during the term hereof while the Letter of Credit is in
effect, Tenant becomes a publicly held corporation, then Tenant may replace the
Letter of Credit with a cash security deposit equal to One Hundred Ten Thousand
Three Hundred Seventy-Two Dollars ($110,372.00). Upon Landlord's receipt from
Tenant of (i) reasonable documentation evidencing that Tenant has become a
publicly held company and (ii) the $110,372.00 security deposit, Landlord shall
return to Tenant the Letter of Credit held by Landlord. If Tenant does
substitute a cash security deposit for the Letter of Credit, the provisions of
(a) through (d) of the second grammatical paragraph of this Paragraph 6 shall
apply thereto. Once the Letter of Credit is replaced with the security deposit,
the security deposit shall remain in effect throughout the remainder of the
Lease term, and Landlord shall be under no further obligation to review Tenant's
financial statements.
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7. Additional Rent: Increases in Operating Expenses and Tax Expenses.
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a. Operating Expenses. Tenant shall pay to Landlord, at the times
------------------
hereinafter set forth, Tenant's Share, as specified in Paragraph 2.e. above, of
any increase in the Operating Expenses (as defined below) incurred by Landlord
in each calendar year subsequent to the Base Year specified in Paragraph 2.f.
above, over the Operating Expenses incurred by Landlord during the Base Year.
The amounts payable under this Paragraph 7.a. and Paragraph 7.b. below are
termed "Additional Rent" herein.
The term "Operating Expenses" shall mean the total costs and expenses incurred
by Landlord in connection with the management, operation, maintenance, repair
and ownership of the Real Property, including, without limitation, the following
costs: (1) salaries, wages, bonuses and other compensation (including
hospitalization, medical, surgical, retirement plan, pension plan, union dues,
life insurance, including group life insurance, welfare and other fringe
benefits, and vacation, holidays and other paid absence benefits) relating to
employees of Landlord or its agents engaged in the operation, repair, or
maintenance of the Real Property; (2) payroll, social security, workers'
compensation, unemployment and similar taxes with respect to such employees of
Landlord or its agents, and the cost of providing disability or other benefits
imposed by law or otherwise, with respect to such employees; (3) the cost of
uniforms (including the cleaning, replacement and pressing thereof) provided to
such employees; (4) premiums and other charges incurred by Landlord with respect
to fire, other casualty, rent and liability insurance, any other insurance as is
deemed necessary or advisable in the reasonable judgment of Landlord, or any
insurance required by the holder of any Superior Interest (as defined in
Paragraph 21 below), and, after the Base Year, costs of repairing an insured
casualty to the extent of the deductible amount under the applicable insurance
policy, or, in the event of earthquake damage sustained during any period that
Landlord does not actually carry earthquake insurance, the costs of repairing
the earthquake damage up to the amount of the deductible that Landlord would
have paid had Landlord actually carried earthquake insurance at the time of the
earthquake (provided that Landlord may include in Operating Expenses the amount
of Landlord's deductible (or deemed deductible, with regard to repairs of
earthquake damage sustained during any period that Landlord does not actually
carry earthquake insurance) only to the extent such deductible (or deemed
deductible) does not materially exceed the customary range of deductibles for
comparable first-class office buildings in the San Francisco financial district;
and provided, further, if the Real Property sustains earthquake damage, and
Tenant's Share of the deductible paid by Landlord under Landlord's earthquake
policy (or deemed deductible, in the event Landlord does not carry earthquake
insurance) is more than $110,372.00, then Tenant may, at Tenant's option, either
(i) pay the entire amount of Tenant's Share of the deductible in the manner
required by application of this Paragraph 7 or (ii) pay only $110,372.00 at the
time Tenant's payment is due pursuant to the provisions of this Paragraph 7,
with the remaining portion of Tenant's Share of the deductible to be paid by
Tenant by amortizing such amount over the remaining term of the Lease, which
amortization shall be on a straight line basis, with monthly payments, at an
interest rate equal to the rate (as of the commencement of the amortization
period) quoted by the San Francisco Main Office of Bank of America, NT&SA, or
any successor bank thereto, in pricing commercial loans of a duration equal to
the subject amortization period to substantial commercial borrowers); (5) water
charges and sewer rents or fees; (6) license, permit and inspection fees; (7)
sales, use and excise taxes on goods and services purchased by Landlord in
connection with the operation, maintenance or repair of the Real Property and
Building systems and equipment; (8) telephone, telegraph, postage, stationery
supplies and other expenses incurred in connection with the operation,
maintenance, or repair of the Real Property; (9) management fees and expenses;
(10) costs of repairs to and maintenance of the Real Property, including
building systems and appurtenances thereto and normal repair and replacement of
worn-out equipment, facilities and installations, but excluding the replacement
of major building systems (except to the extent provided in (16) and (17)
below); (11) fees and expenses for janitorial, window cleaning, guard,
extermination, water treatment, rubbish removal, plumbing and other services and
inspection or service contracts for elevator, electrical, mechanical and other
building equipment and systems or as may otherwise be necessary or proper for
the operation, repair or maintenance of the Real Property; (12) costs of
supplies, tools, materials, and equipment used in connection with the operation,
maintenance or repair of the Real Property; (13) accounting, legal and other
professional fees and expenses; (14) fees and expenses for painting the exterior
or the public or common areas of the Building and the cost of maintaining the
sidewalks, landscaping and other common areas of the Real Property; (15) costs
and expenses for electricity, chilled water, air conditioning, water for
heating, gas, fuel, steam, heat, lights, power and other energy related
utilities required in connection with the operation, maintenance and repair of
the Real Property; (16) the cost of any capital improvements made by Landlord to
the Real Property or capital assets acquired by Landlord after the Base Year in
order to comply with any local, state or federal law, ordinance, role,
regulation, code or order of any governmental entity or insurance requirement
(collectively, "Legal Requirement") with which the Real Property was not
required to comply during the Base Year, or to comply with any amendment or
other change to the enactment or interpretation of any Legal Requirement from
its enactment or interpretation during the Base Year; (17) the cost of any
capital improvements made by Landlord to the Building or capital assets acquired
by Landlord after the Base Year for the protection of the health and safety of
the occupants of the Real Property or that are designed to reduce other
Operating Expenses; (18) the cost of furniture, draperies, carpeting,
landscaping and other customary and ordinary items of personal property
(excluding paintings, sculptures and other works of art) provided by Landlord
for use in common areas of the Building or in the Building office (to the extent
that such Building office is dedicated to the operation and
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management of the Real Property); (19) any expenses and costs resulting from
substitution of work, labor, material or services in lieu of any of the above
itemizations, or for any additional work, labor, services or material resulting
from compliance with any Legal Requirement applicable to the Real Property or
any parts thereof; and (20) Building office rent or rental value; provided that
the rent or rental value shall be for premises not to exceed One Thousand Five
Hundred (1,500) rentable square feet of space and the rent or rental value shall
not to exceed the fair market rent for the subject space. With respect to the
costs of items included in Operating Expenses under (16) and (17), such costs
shall be amortized over a reasonable period (which period shall be determined by
Landlord in accordance with generally accepted property management practices),
together with interest on the unamortized balance at a rate per annum equal to
three (3) percentage points over the Treasury Rate charged at the time such item
is constructed or acquired, or, if Landlord borrows funds to finance the
construction or acquisition of the subject item, at the actual interest rate
paid by Landlord on such funds borrowed for the purpose of constructing or
acquiring such item, but in either case not more than the maximum rate permitted
by law at the time such item is constructed or acquired.
Operating Expenses shall not include the following: (i) depreciation
on the Building or equipment or systems therein; (ii) principal or interest
payments on loans secured by mortgages or trust deed on the Real Property; (iii)
rental under any ground or underlying lease; (iv) interest (except as expressly
provided in this Paragraph 7.a.); (v) Tax Expenses (as defined in Paragraph 7.b.
below); (vi) attorneys' fees and expenses incurred in connection with lease
negotiations with prospective Building tenants or disputes with Building
tenants; (vii) the cost (including any amortization thereof) of any improvements
or alterations which would be properly classified as capital expenditures
according to generally accepted property management practices (except to the
extent expressly included in Operating Expenses pursuant to Paragraphs 7.a.(16)
and (17); (viii) the cost of decorating, improving for tenant occupancy,
painting or redecorating portions of the Building to be demised to tenants; (ix)
salaries of executives and officers above the function of Director of Property
Management, or the cost of labor and employees with respect to personnel not
located at the Building on a full-time basis unless such costs are appropriately
allocated between the Building and the other responsibilities of such personnel;
(x) advertising; (xi) real estate broker's or other leasing commissions, rental
concessions, build-outs for tenants and lease buy-outs; (xii) penalties or other
costs incurred due to a violation by Landlord, as determined by written
admission, stipulation, final judgment or arbitration award, of any of the terms
and conditions of this Lease or any other lease relating to the Building except
to the extent such costs reflect costs that would have been incurred by Landlord
absent such violation; (xiii) subject to the Operating Expense inclusions set
forth in item (4) above, repairs and other work occasioned by fire, windstorm or
other casualty; (xiv) costs, penalties or fines arising from Landlord's
violation of any applicable governmental role or authority except to the extent
such costs reflect costs that would have been incurred by Landlord absent such
violation; (xv) overhead and profit increments paid to subsidiaries or
affiliates of Landlord for management or other services on or to the Building or
for supplies or other materials to the extent that the cost of the services,
supplies or materials materially exceed the amounts normally payable for similar
goods and services under similar circumstances (taking into account the market
factors in effect on the date any relevant contracts were negotiated) in first
class buildings in the San Francisco Financial District; (xvi) the cost of
services or facilities made available at no special cost to any tenant in the
Building but not to Tenant; (xvii) costs associated with the operation of the
business of the partnership or corporation which constitutes Landlord, as the
same are distinguished from the costs of the operation of the Real Property by
Landlord; (xviii) political or charitable contributions; (xix) costs solely
attributable to the garage in the Building (provided, however, that the cost of
providing utilities to the garage shall be included in Operating Expenses); (xx)
the cost of any service for which Tenant pays directly to third parties or for
which Landlord is reimbursed by tenants (other than by application of provisions
such as this Paragraph 7); (xxi) the cost of damage and repairs necessitated by
the deliberate misconduct of Landlord; (xxii) any costs incurred in installing,
operating, maintaining or owning any specialty not normally installed, operated
and maintained in buildings comparable to the Building and not necessary for
Landlord's operation, repair, maintenance and providing of required services for
the Building, including, but not limited to any observatory, broadcasting
facility (other than the Building's music system and life support systems),
luncheon club, athletic or recreational club; (xxiii) the costs of purchasing or
leasing any sculpture, paintings or other works of art; or (xxiv) costs incurred
in large scale or material (as opposed to minor or incidental) cleaning-up or
removing hazardous materials from the Real Property pursuant to government
mandate.
b. Tax Expenses. Tenant shall pay to Landlord as Additional Rent
------------
under this Lease, at the times hereinafter set forth, Tenant's Share, as
specified in Paragraph 2.e. above, of any increase in Tax Expenses (as defined
below) incurred by Landlord in each calendar year over Tax Expenses incurred by
Landlord during the Base Tax Year. Notwithstanding the foregoing, if any
reassessment, reduction or recalculation of any item included in Tax Expenses
during the term results in a reduction of Tax Expenses, then for purposes of
calculating Tenant's Share of increases in Tax Expenses from and after the
calendar year in which such adjustment occurs, Tax Expenses for the Base Tax
Year shall be adjusted to reflect such reduction.
The term "Tax Expenses" shall mean all taxes, assessments (whether
general or special), excises, transit charges, housing fund assessments or other
housing charges, improvement districts, levies
8
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or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind,
which are assessed, levied, charged, confirmed or imposed on the Real Property,
on Landlord with respect to the Real Property, on the act of entering into
leases of space in the Real Property, on the use or occupancy of the Real
Property or any part thereof, with respect to services or utilities consumed in
the use, occupancy or operation of the Real Property, on any improvements,
fixtures and equipment and other personal property of Landlord located in the
Real Property and used in connection with the operation of the Real Property, or
on or measured by the rent payable under this Lease or in connection with the
business of renting space in the Real Property, including, without limitation,
any gross income tax or excise tax levied with respect to the receipt of such
rent, by the United States of America, the State of California, the City and
County of San Francisco, any political subdivision, public corporation, district
or other political or public entity or public authority, and shall also include
any other tax, fee or other excise, however described, which may be levied or
assessed in lieu of, as a substitute (in whole or in part) for, or as an
addition to, any other Tax Expense. Tax Expenses shall include reasonable
attorneys' fees, costs and disbursements incurred in connection with proceedings
to contest, determine or reduce Tax Expenses. If it shall not be lawful for
Tenant to reimburse Landlord for any increase in Tax Expenses as defined herein,
the Monthly Rent payable to Landlord prior to the imposition of such increases
in Tax Expenses shall be increased to net Landlord the same net Monthly Rent
after imposition of such increases in Tax Expenses as would have been received
by Landlord prior to the imposition of such increases in Tax Expenses.
Tax Expenses shall not include income, franchise, transfer, inheritance
or capital stock taxes, unless, due to a change in the method of taxation, any
of such taxes is levied or assessed against Landlord in lieu of, as a substitute
(in whole or in part) for, or as an addition to, any other charge which would
otherwise constitute a Tax Expense.
c. Adjustment for Occupancy Factor. Notwithstanding any other
-------------------------------
provision herein to the contrary, in the event the Building is not fully
occupied during the Base Year or any calendar year during the term after the
Base Year, an adjustment shall be made by Landlord in computing Operating
Expenses for such year so that the Operating Expenses shall be computed for such
year as though the Building had been fully occupied during such year. In
addition, if any particular work or service includable in Operating Expenses is
not furnished to a tenant who has undertaken to perform such work or service
itself, Operating Expenses shall be deemed to be increased by an amount equal to
the additional Operating Expenses which would have been incurred if Landlord had
furnished such work or service to such tenant. The parties agree that statements
in this Lease to the effect that Landlord is to perform certain of its
obligations hereunder at its own or sole cost and expense shall not be
interpreted as excluding any cost from Operating Expenses or Tax Expenses if
such cost is an Operating Expense or Tax Expense pursuant to the terms of this
Lease.
d. Intention Regarding Expense Pass-Through. It is the intention of
----------------------------------------
Landlord and Tenant that the Monthly Rent paid to Landlord throughout the term
of this Lease shall be absolutely net of all increases, respectively, in Tax
Expenses and Operating Expenses over, respectively, Tax Expenses for the Base
Tax Year and Operating Expenses for the Base Year, and the foregoing provisions
of this Paragraph 7 are intended to so provide.
e. Notice and Payment. On or before the first day of each calendar
------------------
year during the term hereof subsequent to the Base Year, or as soon as
practicable thereafter, Landlord shall give to Tenant notice of Landlord's
estimate of the Additional Rent, if any, payable by Tenant pursuant to
Paragraphs 7.a. and 7.b. for such calendar year subsequent to the Base Year. On
or before the first day of each month during each such subsequent calendar year,
Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated Additional
Rent; provided, however, that if Landlord's notice is not given prior to the
first day of any calendar year Tenant shall continue to pay Additional Rent on
the basis of the prior year's estimate until the month after Landlord's notice
is given. If at any time it appears to Landlord that the Additional Rent payable
under Paragraphs 7.a. and/or 7.b. will vary from Landlord's estimate by more
than five percent (5%), Landlord may, by written notice to Tenant, revise its
estimate for such year, and subsequent payments by Tenant for such year shall be
based upon the revised estimate. On the first monthly payment date after any new
estimate is delivered to Tenant, Tenant shall also pay any accrued cost
increases, based on such new estimate.
f. Annual Accounting. Landlord shall maintain adequate records of the
-----------------
Operating Expenses and Tax Expenses in accordance with generally accepted
property management practices. Within ninety (90) days after the close of each
calendar year subsequent to the Base Year, or as soon after such ninety (90) day
period as practicable, Landlord shall deliver to Tenant a statement of the
Additional Rent payable under Paragraphs 7.a. and 7.b. for such year. The
statement shall be based on the results of an audit of the operations of the
Building prepared for the applicable year by a nationally recognized certified
public accounting firm selected by Landlord. Upon Tenant's request, Landlord
shall promptly deliver to Tenant a copy of the auditor's statement on which
Landlord's annual statement is based and such other information regarding the
annual statement as may be reasonably required by Tenant to ascertain Landlord's
compliance with this Paragraph 7. Landlord's annual statement shall be final and
binding upon Landlord and Tenant unless either party, within ninety (90) days
after Tenant's receipt thereof, shall contest any item therein by giving written
notice to the other, specifying each item contested and the
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reason therefor. Notwithstanding the foregoing, the Tax Expenses included in any
such annual statement may be modified by any subsequent adjustment or
retroactive application of Tax Expenses affecting the calculation of such Tax
Expenses. Provided that the issue is raised by either party within the
aforementioned ninety (90) day period, Landlord and Tenant shall endeavor in
good faith to promptly resolve any disagreement between the parties regarding
the subject annual statement. If the annual /'statement shows that Tenant's
payments of Additional Rent for such calendar year pursuant to Paragraph 7.e.
above exceeded Tenant's obligations for the calendar year, Landlord shall, at
Tenant's option, either (1) credit the excess to the next succeeding
installments of estimated Additional Rent or (2) pay the excess to Tenant within
thirty (30) days after delivery of such statement. If the annual statement shows
that Tenant's payments of Additional Rent for such calendar year pursuant to
Paragraph 7.e. above were less than Tenant's obligation for the calendar year,
Tenant shall pay the deficiency to Landlord within thirty (30) days after
delivery of such statement.
g. Proration for Partial Lease Year. If this Lease terminates on a
--------------------------------
clay other than the last clay of a calendar year, the Additional Rent payable by
Tenant pursuant to this Paragraph 7 applicable to the calendar year in which
this Lease terminates shall be prorated on the basis that the number of days
from the commencement of such calendar year to and including such termination
date bears to three hundred sixty-five (365).
8. Use of Premises; Compliance with Law.
------------------------------------
a. Use of Premises. The Premises shall be used solely for general
---------------
office purposes which are consistent with the operation of the Building as a
first-class office building, which do not materially increase (beyond that which
would be typical for use of the Premises by a general office user typical of
first-class financial district office buildings) (a) the operating costs for the
Building, (b) the burden on the Building services, or (c) the foot traffic,
elevator usage or security concerns in the Building, and which do not create an
increased probability of the comfort and/or safety of the Landlord or other
tenants of the Building being compromised or reduced, or which may conflict with
any exclusive uses granted to other tenants of the Real Property, or with the
terms of any easement, covenant, condition or restriction or other agreement
affecting the Real Property, and for no other use or purpose without the prior
written consent of Landlord, which may be withheld in Landlord's sole discretion
(for example, but not exclusively, Landlord's consent shall be required for and
may be denied with respect to, use of the Premises for a school or training
facility, an entertainment, sports or recreation facility, retail sales to the
public, or a consulate or similar office).
Tenant shall not do or suffer or permit anything to be done in or about
the Premises or the Real Property, nor bring or keep anything therein, which
would in any way subject Landlord, Landlord's agents or the holder of any
Superior Interest (as defined in Paragraph 21) to any liability, increase the
premium rate of or affect any fire, casualty, liability, rent or other insurance
relating to the Real Property or any of the contents of the Building, or cause a
cancellation of, or give rise to any defense by the insurer to any claim under,
or conflict with, any policies for such insurance. If any act or omission of
Tenant results in any such increase in premium rates, Tenant shall pay to
Landlord upon demand the amount of such increase. Tenant shall not do or suffer
or permit anything to be done in or about the Premises or the Real Property
which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or injure or annoy them, or use or suffer or permit
the Premises to be used for any immoral, unlawful or objectionable purpose, nor
shall Tenant cause, maintain, suffer or permit any nuisance in, on or about the
Premises or the Real Property. Without limiting the foregoing, no loudspeakers
or other similar device which can be heard outside the Premises shall, without
the prior written approval of Landlord, be used in or about the Premises. Tenant
shall not commit or suffer to be committed any waste in, to or about the
Premises.
Tenant agrees not to employ any person, entity or contractor for any work
in the Premises (including moving Tenant's equipment and furnishings in, out or
around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.
b. Compliance with Law. Tenant shall not do or permit anything to be
-------------------
done in or about the Premises which will in any way conflict with any Legal
Requirement (as defined in Paragraph 7.a.(16) above) now in force or which may
hereafter be enacted. Tenant, at its sole cost and expense, shall promptly
comply with all such present and future Legal Requirements relating to the
condition, use or occupancy of the Premises, and shall perform all work to the
Premises or other portions of the Real Property required to effect such
compliance (or, at Landlord's election, Landlord may perform such work at
Tenant's cost). Notwithstanding the foregoing, however, Tenant shall not be
required to perform any structural changes to the Premises or other portions of
the Real Property unless such changes are related to or affected or triggered by
(i) Tenant's Alterations (as defined in Paragraph 9 below), (ii) Tenant's
particular use of the Premises (as opposed to Tenant's use of the Premises for
general office purposes in a normal and customary manner), (iii) Tenant's
particular employees or employment practices, or (iv) the construction of
initial improvements to the Premises (except that Tenant shall have no
responsibility for performing Landlord's Work, as defined in Paragraph 4.e.
above). The judgment of any court of competent
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jurisdiction or the admission of Tenant in an action against Tenant, whether or
not Landlord is a party thereto, that Tenant has violated any Legal Requirement
shall be conclusive of that fact as between Landlord and Tenant. Tenant shall
immediately furnish Landlord with any notices received from any insurance
company or governmental agency or inspection bureau regarding any unsafe or
unlawful conditions within the Premises or the violation of any Legal
Requirement.
c. Hazardous Materials. Tenant shall not cause or permit the
-------------------
storage, use, generation, release, handling or disposal (collectively,
"Handling") of any Hazardous Materials (as defined below), in, on, or about the
Premises or the Real Property by Tenant or any agents, employees, contractors,
licensees, subtenants, customers, guests or invitees of Tenant (collectively
with Tenant, "Tenant Parties"), except that Tenant shall be permitted to use
normal quantities of office supplies or products (such as copier fluids or
cleaning supplies) customarily used in the conduct of general business office
activities ("Common Office Chemicals"), provided that the Handling of such
Common Office Chemicals shall comply at all times with all Legal Requirements,
including Hazardous Materials Laws (as defined below). Notwithstanding anything
to the contrary contained herein, however, in no event shall Tenant permit any
usage of Common Office Chemicals in a manner that may cause the Premises or the
Real Property to be contaminated by any Hazardous Materials or in violation of
any Hazardous Materials Laws. Tenant shall immediately advise Landlord in
writing of (a) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed, or threatened pursuant
to any Hazardous Materials Laws relating to any Hazardous Materials affecting
the Premises; and (b) all claims made or threatened by any third party against
Tenant, Landlord, the Premises or the Real Property relating to damage,
contribution, cost recovery, compensation, loss, or injury resulting from any
Hazardous Materials on or about the Premises. Without Landlord's prior written
consent (which consent may be withheld in Landlord's sole discretion), Tenant
shall not take any remedial action or enter into any agreements or settlements
in response to the presence of any Hazardous Materials in, on, or about the
Premises. Tenant shall be solely responsible for and shall indemnify, defend and
hold Landlord and all other Indemnitees (as defined in Paragraph 14.b. below),
harmless from and against all Claims (as defined in Paragraph 14.b. below),
arising out of or in connection with, or otherwise relating to (i) any Handling
of Hazardous Materials by any Tenant Party or Tenant's breach of its obligations
hereunder, or (ii) any removal, cleanup, or restoration work and materials
necessary to return the Real Property or any other property of whatever nature
located on the Real Property to their condition existing prior to the Handling
of Hazardous Materials in, on or about the Premises. Tenant's obligations under
this paragraph shall survive the expiration or other termination of this Lease.
For purposes of this Lease, "Hazardous Materials" means any explosive,
radioactive materials, hazardous wastes, or hazardous substances, including
without limitation asbestos containing materials, PCB's, CFC's, or substances
defined as "hazardous substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657;
the Hazardous Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812;
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987;
or any other Legal Requirement regulating, relating to, or imposing liability or
standards of conduct concerning any such materials or substances now or at any
time hereafter in effect (collectively, "Hazardous Materials Laws").
d. Applicability of Paragraph. The provisions of this Paragraph 8
--------------------------
are for the benefit of Landlord, the holder of any Superior Interest (as defined
in Paragraph 21 below), and the other Indemnitees only and are not nor shall
they be construed to be for the benefit of any tenant or occupant of the
Building.
9. Alterations and Restoration.
---------------------------
a. Tenant shall not make or permit to be made any alterations,
modifications, additions, decorations or improvements to the Premises, or any
other work whatsoever that would directly or indirectly involve the penetration
or removal (whether permanent or temporary) of, or require access through, in,
under, or above any floor, wall or ceiling, or surface or coveting thereof in
the Premises (collectively, "Alterations"), except as expressly provided in this
Paragraph 9. Tenant shall have the right, without Landlord's consent, to make
any Alteration to the Premises, provided that (a) the Alteration is decorative
in nature (such as paint, carpet or other wall or floor finishes, partitions or
other such work), (b) Tenant provides Landlord with five (5) business days'
advance notice of the commencement of any such Alteration, (e) such Alteration
does not affect the Building's electrical, mechanical or HVAC systems or any
part of the Building other than the Premises, (d) the work will not decrease the
value of the Premises, does not require a building permit or other governmental
permit, uses only first-class materials and is performed in a workmanlike manner
and in accordance with all applicable Legal Requirements, (e) the work does not
involve opening the ceiling of the Premises and (f) the work does not involve
the Building's asbestos procedures. At the time Tenant notifies Landlord of any
such work, Tenant shall give Landlord a copy of Tenant's plans for the work. If
the Alterations are of such a nature that formal plans will not be prepared for
the work, Tenant shall provide Landlord with a reasonably specific description
of the work. If Tenant desires any Alteration that is not covered by the second
sentence of this grammatical paragraph, Tenant must obtain Landlord's prior
written approval of such Alteration, which approval Landlord agrees, shall not
be unreasonably withheld.
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All Alterations shall be made at Tenant's sole cost and expense
(including the expense of complying with all present and future Legal
Requirements, including those regarding asbestos, if applicable, and any other
work required to be performed in other areas within or outside the Premises by
reason of the Alterations). Alterations shall be made, at Tenant's election, by
Landlord or by a contractor reasonably approved by Landlord. If Tenant hires
Landlord to perform the Alteration, Landlord's contractor shall be entitled to
receive a fee as negotiated by Tenant and Landlord. If Landlord does not perform
the work pursuant to the above, Tenant shall pay Landlord on demand prior to or
during the course of such construction an amount (the "Alteration Operations
Fee") equal to five percent (5%) of the total cost of the Alteration (and for
purposes of calculating the Alteration Operations Fee, such cost shall not
include architectural, engineering or permit fees) as compensation to Landlord
for electrical energy consumed in connection with the work, freight elevator
operation, additional cleaning expenses, additional security services, and for
other miscellaneous costs incurred by Landlord as result of the work.
All such work shall be performed diligently and in a first-class
workmanlike manner and in accordance with plans and specifications approved by
Landlord, and shall comply with all Legal Requirements and Landlord's
construction procedures and requirements for the Building (including Landlord's
requirements relating to insurance and contractor qualifications). In no event
shall Tenant employ any person, entity or contractor to perform work in the
Premises whose presence may give rise to a labor or other disturbance in the
Building. Default by Tenant in the payment of any sums agreed to be paid by
Tenant for or in connection with an Alteration (regardless of whether such
agreement is pursuant to this Paragraph 9 or separate instrument) shall entitle
Landlord to all the same remedies as for non-payment of rent hereunder. Any
Alterations, including, without limitation, moveable partitions that are affixed
to the Premises (but excluding moveable, free standing partitions) and all
carpeting, shall at once become part of the Building and the property of
Landlord. Tenant shall give Landlord not less than five (5) days prior written
notice of the date the construction of the Alteration is to commence. Landlord
may post and record an appropriate notice of nonresponsibility with respect to
any Alteration and Tenant shall maintain any such notices posted by Landlord in
or on the Premises.
b. Landlord shall advise Tenant at the time of Landlord's approval
of any Alteration requested by Tenant whether Landlord will require that the
Alteration be removed by Tenant from the Premises at the expiration or sooner
termination of this Lease and the Premises restored by Tenant to their condition
prior to the making of the Alteration, ordinary wear and tear excepted. The
removal of the Alterations so required to be removed from the Premises and the
restoration of the Premises shall be performed by a general contractor selected
by Tenant and approved by Landlord, and Tenant shall pay the general
contractor's fees and costs in connection with such work. Any separate work
letter or other agreement which is hereafter entered into between Landlord and
Tenant pertaining to Alterations shall be deemed to automatically incorporate
the terms of this Lease without the necessity for further reference thereto.
10. Repair.
------
a. Except as specifically provided in this Lease, Tenant agrees that
the Premises are in good condition and repair. Tenant, at Tenant's sole cost and
expense, shall keep the Premises and every part thereof (including the interior
walls and ceilings of the Premises, those portions of the Building systems
located within and exclusively serving the Premises (which, as to the Building's
HVAC system, shall be limited to branch line flex duct, mixing boxes, diffusers
and thermostats), and improvements and Alterations) in good condition and
repair; provided that Tenant shall not be responsible for repairs to the extent
such repairs are (i) necessitated because of fire, earthquake, act of God or the
elements, (ii) necessitated by the negligence or willful misconduct of Landlord
or Landlord's agents, employees or contractors, or (iii) Landlord's obligation
pursuant to Paragraph 10.b. below. It is specifically understood and agreed
that, except as specifically set forth in this Lease, Landlord has no obligation
and has made no promises to alter, remodel, improve, repair, decorate or paint
the Premises or any part thereof, and that no representations respecting the
condition of the Premises or the Building have been made by Landlord to Tenant.
Notwithstanding the foregoing, if any portion of the Building systems located
within and exclusively serving the Premises require maintenance or repair,
Landlord shall perform the required work and Tenant shall reimburse Landlord for
the reasonable costs thereof within thirty (30) days of receipt of Landlord's
written invoice therefor. Tenant hereby waives the provisions of California
Civil Code Sections 1932(1), 1941 and 1942 and of any similar Legal Requirement
now or hereafter in effect.
b. Repairs to the Premises due to item (i) described in Paragraph
10.a. above shall be governed by Paragraph 26 below. Landlord shall repair the
Premises if they are damaged due to item (ii) described in Paragraph 10.a.
above. Further, Landlord shall repair and maintain in good condition and repair
the structural portions of the Building and all Building systems, including
plumbing, air conditioning, heating, electrical, life safety and other systems
installed or furnished by Landlord (other than the portions of those systems
that are Tenant's responsibility to maintain and repair pursuant to Paragraph
10.a. above) and the exterior windows of the Premises, but excluding (i) non-
Building standard lighting and electrical wiring and (ii) extraordinary
quantities of electrical, plumbing, HVAC or other Building facilities or
distribution thereof; provided, however, that to the extent repairs which
Landlord is required to make pursuant to this sentence are necessitated by the
negligence or deliberate misconduct of
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Tenant or Tenant's agents, employees or contractors, then Tenant shall reimburse
Landlord for the cost of such repair to the extent Landlord is not reimbursed
therefor by insurance. Landlord shall in no event be obligated to repair any
wear and tear to the Premises.
11. Abandonment. Tenant shall not vacate or abandon the Premises or any
-----------
part thereof at any time during the term hereof. Tenant understands that if
Tenant leaves the Premises or any part thereof vacant, the risk of fire, other
casualty and vandalism to the Premises and the Building will be increased.
Accordingly, such action by Tenant shall constitute an Event of Default
hereunder regardless Of whether Tenant continues to pay Monthly Rent and
Additional Rent under this Lease. Upon the expiration or earlier termination of
this Lease, or if Tenant abandons, vacates or surrenders all or any part of the
Premises or is dispossessed of the Premises by process of law, or otherwise, any
movable furniture, equipment, trade fixtures, or other personal property
belonging to Tenant and left on the Premises shall at the option of Landlord be
deemed to be abandoned and, whether or not the property is deemed abandoned,
Landlord shall have the right to remove such property from the Premises and
charge Tenant for the removal and any restoration of the Premises as provided in
Paragraph 9. Landlord may charge Tenant for the storage of Tenant's property
left on the Premises at such rates as Landlord may from time to time reasonably
determine, or, Landlord may, at its option, store Tenant's property in a public
warehouse at Tenant's expense. Notwithstanding the foregoing, neither the
provisions of this Paragraph 11 nor any other provision of this Lease shall
impose upon Landlord any obligation to care for or preserve any of Tenant's
property left upon the Premises, and Tenant hereby waives and releases Landlord
from any claim or liability in connection with the removal of such property from
the Premises and the storage thereof and specifically waives the provisions of
California Civil Code Section 1542 with respect to such release. Landlord's
action or inaction with regard to the provisions of this Paragraph 11 shall not
be construed as a waiver of Landlord's right to require Tenant to remove its
property, restore any damage to the Premises and the Building caused by such
removal, and make any restoration required pursuant to Paragraph 9 above.
12. Liens. Tenant shall not permit any mechanic's, materialman's or
-----
other liens arising out of work performed at the Premises by or on behalf of
Tenant to be filed against the fee of the Real Property nor against Tenant's
interest in the Premises. Landlord shall have the right to post and keep posted
on the Premises any notices which it deems necessary for protection from such
liens. If any such liens are filed, Landlord may, upon ten (10) days' written
notice to Tenant, without waiving its rights based on such breach by Tenant and
without releasing Tenant from any obligations hereunder, pay and satisfy the
same and in such event the sums so paid by Landlord shall be due and payable by
Tenant immediately without notice or demand, with interest from the date paid by
Landlord through the date Tenant pays Landlord, at the Interest Rate. Tenant
agrees to indemnify, defend and hold Landlord and the other Indemnitees (as
defined in Paragraph 14.b. below) harmless from and against any Claims (as
defined in Paragraph 14.b. below) for mechanics', materialmen's or other liens
in connection with any Alterations, repairs or any work performed, materials
furnished or obligations incurred by or for Tenant.
13. Assignment and Subletting.
-------------------------
a. Landlord's Consent. Landlord's and Tenant's agreement with regard
------------------
to Tenant's right to transfer all or part of its interest in the Premises is as
expressly set forth in this Paragraph 13. Tenant agrees that, except upon
Landlord's prior written consent, which consent shall not (subject to Landlord's
rights under Paragraph 13.d. below) be unreasonably withheld, neither this Lease
nor all or any part of the leasehold interest created hereby shall, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, be
assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant or
Tenant's legal representatives or successors in interest (collectively an
"assignment") and neither the Premises nor any part thereof shall be sublet or
be used or occupied for any purpose by anyone other than Tenant (collectively, a
"sublease"). Any assignment or subletting without Landlord's prior written
consent shall, at Landlord's option, be void and shall constitute an Event of
Default entitling Landlord to terminate this Lease and to exercise all other
remedies available to Landlord under this Lease and at law.
The parties hereto agree and acknowledge that, among other circumstances
for which Landlord may reasonably withhold its consent to an assignment or
sublease, it shall be reasonable for Landlord to withhold its consent where: (i)
the assignment or subletting would increase the operating costs for the Building
or the burden on the Building services, or generate additional foot traffic,
elevator usage or security concerns in the Building, or create an increased
probability of the comfort and/or safety of Landlord and other tenants in the
Building being compromised or reduced, (ii) the space will be used for a school
or training facility, an entertainment, sports or recreation facility, retail
sales to the public (unless Tenant's permitted use is retail sales), a personnel
or employment agency, an office or facility of any governmental or quasi-
governmental agency or authority, a place of public assembly (including without
limitation a meeting center, theater or public forum), any use by or affiliation
with a foreign government (including without limitation an embassy or consulate
or similar office), or a facility for the provision of social, welfare or
clinical health services or sleeping accommodations (whether temporary, daytime
or overnight); (iii) the proposed assignee or subtenant is a prospective tenant
of the Building with whom Landlord is then negotiating to lease space in the
Building and Landlord has adequate available space to meet such prospective
tenant's space requirements, or is a current tenant of the Building and Landlord
has
13
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adequate available space to meet such current tenant's expansion requirements;
(iv) Landlord disapproves of the proposed assignee or subtenant's reputation or
creditworthiness; (v) Landlord determines that the character of the business
that would be conducted by the proposed assignee or subtenant at the Premises,
Or the manner of conducting such business, would be inconsistent with the
character of the Building as a first-class office building; (vi) the proposed
assignee or subtenant is an entity or related to an entity with whom Landlord or
any affiliate of Landlord has had adverse dealings; (vii) the assignment or
subletting may conflict with any exclusive uses granted to other tenants of the
Real Property, or with the terms of i any easement, covenant, condition or
restriction, or other agreement affecting the Real Property; (viii) the
assignment or subletting would involve a change in use from that expressly
permitted under this Lease; or (ix) Landlord determines that the proposed
assignee may be unable to perform all of Tenant's obligations under this Lease
or the proposed subtenant may be unable to perform all of its obligations under
the proposed sublease. Landlord's foregoing rights and options shall continue
throughout the entire term of this Lease.
For purposes of this Paragraph 13, the following events shall be deemed
an assignment or sublease, as appropriate: (i) the issuance of equity interests
(whether stock, partnership interests or otherwise) in Tenant or any subtenant
or assignee, or any entity controlling any of them, to any person or group of
related persons, in a single transaction or a series of related or unrelated
transactions, such that, following such issuance, such person or group shall
have Control (as defined below) of Tenant or any subtenant or assignee; (ii) a
transfer of Control of Tenant or any subtenant or assignee, or any entity
controlling any of them, in a single transaction or a series of related or
unrelated transactions (including, without limitation, by consolidation, merger,
acquisition or reorganization), except that the transfer of outstanding capital
stock or other listed equity interests by persons or parties other than
"insiders" within the meaning of the Securities Exchange Act of 1934, as
amended, through the "over-the-counter" market or any recognized national or
international securities exchange, shall not be included in determining whether
Control has been transferred; (iii) a reduction of Tenant's assets to the point
that this Lease is substantially Tenant's only asset; (iv) a change or
conversion in the form of entity of Tenant, any subtenant or assignee, or any
entity controlling any of them, which has the effect of limiting the liability
of any of the partners, members or other owners of such entity; or (v) the
agreement by a third party to assume, take over, or reimburse Tenant for, any or
all of Tenant's obligations under this Lease, in order to induce Tenant to lease
space with such third party. "Control" shall mean direct or indirect ownership
of 50% or more of all of the voting stock of a corporation or 50% or more of the
legal or equitable interest in any other business entity, or the power to direct
the operations of any entity (by equity ownership, contract or otherwise).
Notwithstanding anything to the contrary in this grammatical paragraph or
elsewhere in this Paragraph 13, (i) if Digital Island, Inc., a California
corporation ("Digital Island") makes a public offering of shares of Tenant in
conformance with applicable securities laws, the issuance of stock in Tenant
pursuant to such laws shall not constitute an assignment or subletting of the
Lease and Landlord's consent shall not be required therefor and (ii) if Digital
Island, Inc., a California corporation issues any equity interests in itself as
a result of investments or strategic partnerships with or by any public or
private entities or individuals, then the issuance of such equity interests
shall not be deemed an assignment for the purposes of this Lease, or require the
consent of Landlord thereto, notwithstanding the fact that the issuance of such
equity interests may result in a change in Control, so long as the issuance of
such equity interests does not result in a decrease in the net worth of Digital
Island and, following such issuance of the equity interests, Digital Island
continues substantially the same business operations as were in effect of the
date as of this Lease. The provisions of the immediately preceding sentence are
personal to Digital Island, and shall not apply to any assignee or subtenant
thereof.
If this Lease is assigned, whether or not in violation of the terms of
this Lease, Landlord may collect rent from the assignee. If the Premises or any
part thereof is sublet, Landlord may, upon an Event of Default by Tenant
hereunder, collect rent from the subtenant. In either event, Landlord may apply
the amount collected from the assignee or subtenant to Tenant's monetary
obligations hereunder.
The consent by Landlord to an assignment or subletting hereunder shall
not relieve Tenant or any assignee or subtenant from obtaining Landlord's
express prior written consent to any other or further assignment or subletting
(which consent shall not be unreasonably withheld, subject to Landlord's rights
under this Paragraph 13). Neither an assignment or subletting nor the collection
of rent by Landlord from any person other than Tenant, nor the application of
any such rent as provided in this Paragraph 13.a. shall be deemed a waiver of
any of the provisions of this Paragraph 13.a. or release Tenant from its
obligation to comply with the provisions of this Lease and Tenant shall remain
fully and primarily liable for all of Tenant's obligations under this Lease. If
Landlord approves of an assignment or subletting hereunder and this Lease
contains any renewal options, expansion options, rights of first refusal, rights
of first negotiation or any other rights or options pertaining to additional
space in the Building, such rights and/or options shall not run to the subtenant
or assignee unless such subtenant or assignee is an Affiliate (as defined in
Paragraph 13.g. below), it being agreed by the parties hereto that any such
rights and options are personal to the Tenant originally named herein and may
not be transferred other than to an Affiliate.
b. Processing Expenses. Tenant shall pay to Landlord, as Landlord's
-------------------
cost of processing each proposed assignment or subletting, an amount equal to
the sum of (i) Landlord's reasonable attorneys'
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and other professional fees, plus (ii) the sum of $750.00 for the cost of
Landlord's administrative, accounting and clerical time (collectively,
"Processing Costs"), and the amount of all out-of-pocket costs and expenses (if
any) incurred by Landlord directly arising from the assignee or sublessee taking
Occupancy of the subject space (including, without limitation, costs of freight
elevator operation for moving of furnishings and trade fixtures, security
service, janitorial and cleaning service, and rubbish removal service).
Notwithstanding anything to the contrary herein, Landlord shall not be required
to process any request for Landlord's consent to an assignment or subletting
until Tenant has paid to Landlord the amount of Landlord's estimate of the
Processing Costs and all other direct and indirect costs and expenses of
Landlord and its agents arising from the assignee or subtenant taking occupancy.
c. Consideration to Landlord. In the event of any assignment or
-------------------------
sublease, whether or not requiting Landlord's consent, Landlord shall be
entitled to receive, as additional rent hereunder, seventy-five percent (75%) of
any consideration (including, without limitation, payment for leasehold
improvements and any "Leasehold Profit" as defined below) paid by the assignee
or subtenant for the assignment or sublease and, in the case of a sublease,
seventy-five percent (75%) of the excess of the amount of rent paid for the
sublet space by the subtenant over the amount of Monthly Rent under Paragraph 5
above and Additional Rent under Paragraph 7 above attributable to the sublet
space for the corresponding month; except that Tenant may first recapture (i)
any brokerage commissions paid by Tenant in connection with the subletting or
assignment (not to exceed commissions typically paid in the market at the time
of such subletting or assignment), (ii) reasonable legal fees paid by Tenant in
connection with such assignment or subletting (provided that Tenant shall submit
to Landlord evidence reasonably acceptable to Landlord of such legal fees
actually paid by Tenant, which evidence shall include copies of the applicable
attorney bills) and (iii) any improvement allowance or construction costs
incurred by Tenant in connection with the assignment or sublease (collectively
the "Assignment or Subletting Costs"), provided that, as a condition to Tenant
recapturing the Assignment or Subletting Costs, Tenant shall provide to
Landlord, within ninety (90) days of Landlord's execution of Landlord's consent
to the assignment or subletting, a detailed accounting of the Assignment or
Subletting Costs and supporting documents, such as receipts and construction
invoices. To effect the foregoing, Tenant shall deduct from the monthly amounts
received by Tenant from the subtenant or assignee as rent or consideration (i)
the Monthly Rent and Additional Rent payable by Tenant to Landlord for the
subject space and (ii) the Assignment or Subletting Costs, and seventy-five
percent (75%) of the then remaining sum shall be paid promptly to Landlord. Upon
Landlord's request, Tenant shall assign to Landlord all amounts to be paid to
Tenant by any such subtenant or assignee and that belong to Landlord, and shall
direct such subtenant or assignee to pay the same directly to Landlord. If there
is more than one sublease under this Lease, the amounts (if any) to be paid by
Tenant to Landlord pursuant to the preceding sentence shall be separately
calculated for each sublease and amounts due Landlord with regard to any one
sublease may not be offset against rental and other consideration pertaining to
or due under any other sublease.
"Leasehold Profit" shall be the value allocated to the leasehold between
the parties to the assignment or sublease, provided that, if (a) such allocation
is less than the "Calculated Leasehold Profit" (which Calculated Leasehold
Profit shall be the excess of the present value of the fair market rent of the
Premises for the remaining term of this Lease after such assignment or sublease,
over the present value of the Monthly Rent payable hereunder for such remaining
term (as reasonably estimated by Landlord and Tenant)), (b) Tenant will receive
from the assignee or subtenant pursuant to the written agreement between Tenant
and the assignee or subtenant, an amount in excess of Tenant's monetary
obligations under the Lease for the subject space and (c) Tenant does not
provide reasonable evidence to Landlord that the excess consideration received
by Tenant from the assignee or subtenant is attributable to payment for some
value received by the assignee or subtenant from Tenant other than the value of
the leasehold, then the Leasehold Profit shall be deemed to be the Calculated
Leasehold Profit; provided, however, that Landlord shall collect Landlord's
share of Leasehold Profit only to the extent such amounts are actually paid by
the assignee or subtenant to Tenant in connection with such assignment or
sublease.
d. Procedures. If Tenant desires to assign this Lease or any
----------
interest therein or sublet all or part of the Premises, Tenant Shall give
Landlord written notice thereof and the terms proposed (the "Sublease Notice"),
which Sublease Notice, in the case of a proposed sublease, shall designate the
space proposed to be sublet. Landlord shall have the prior right and option (to
be exercised by written notice to Tenant given within thirty (30) days after
receipt of the Sublease Notice) (i) in the event of an assignment of the Lease,
to terminate this Lease in its entirety, and in the event of a sublease that
will result in more than twenty-five percent (25%) of the Premises being under
sublease or a sublease that will terminate during the final eighteen (18) months
of the Lease term, to terminate the Lease as it pertains to the portion of the
Premises so proposed by Tenant to be sublet, or (ii) to approve Tenant's
proposal to sublet conditional upon Landlord's subsequent written approval of
the specific sublease obtained by Tenant and the specific subtenant named
therein. If Landlord exercises its option described in (ii) above, then Tenant
shall have six (6) months thereafter to submit to Landlord, for Landlord's
written approval, Tenant's proposed sublease agreement (in which the proposed
subtenant shall be named, and which agreement shall otherwise meet the
requirements of Paragraph 13.e. below), together with a current financial
statement of such proposed subtenant and any other information reasonably
requested by Landlord. If (x) Tenant fails to submit the specific sublease and
other required information within such time, or (y) the rent under the specific
sublease submitted by Tenant is Five Dollars ($5.00) or more per
15
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square foot per annum lower than the rental rate set forth in the Sublease
Notice previously approved by Landlord pursuant to (ii) above, or (z) the size
of the space to be sublet under the specific sublease submitted by Tenant
differs by more than twenty-five percent (25%) from the size set forth in the
Sublease Notice approved by Landlord pursuant to (ii) above, then Tenant shall
be required to submit a new Sublease Notice for Landlord's evaluation pursuant
to the procedures set forth in this paragraph. If Landlord fails to exercise any
such option to sublet or to terminate, this shall not be construed as or
constitute a waiver of any of the provisions of Paragraphs 13.a., b., c. or d.
herein. If Landlord exercises any option to terminate, any costs of demising the
portion of the Premises affected by such termination shall be borne by Landlord.
In addition, Landlord shall have no liability for any real estate brokerage
commission(s) or with respect to any of the costs and expenses that Tenant may
have incurred in connection with its proposed subletting, and Tenant agrees to
indemnify, defend and hold Landlord and all other Indemnitees harmless from and
against any and all Claims (as defined in Paragraph 14.b. below), including,
without limitation, claims for commissions arising from such proposed
subletting. Landlord's foregoing rights and options shall continue throughout
the entire term of this Lease. For purposes of this Paragraph 13.d., a proposed
assignment of this Lease in whole or in part shall be deemed a proposed
subletting of such space.
If Landlord exercises its rights under (i) of the immediately preceding
grammatical paragraph, then, notwithstanding anything to the contrary in
Paragraph 13.b. above, the Processing Costs provided for therein shall be
inapplicable with regard to the proposed assignment or sublease which triggered
Landlord's exercise of its rights under (i) above.
e. Documentation. No permitted assignment or subletting by Tenant
-------------
shall be effective until there has been delivered to Landlord a fully executed
counterpart of the assignment or sublease which expressly provides that (i) the
assignee or subtenant may not further assign or sublet the assigned or sublet
space without Landlord's prior written consent (which, in the case of a further
assignment proposed by an assignee, shall not be unreasonably withheld, subject
to Landlord's rights under the provisions of this Paragraph 13), (ii) the
assignee or subtenant will comply with all of the provisions of this Lease, and
Landlord may enforce the Lease provisions directly against such assignee or
subtenant, (iii) in the case of an assignment, the assignee assumes all of
Tenant's obligations under this Lease arising on or after the date of the
assignment, and (iv) in the case of a sublease, the subtenant agrees to be and
remain jointly and severally liable with Tenant for the payment of rent
pertaining to the sublet space in the amount set forth in the sublease, and for
the performance of all of the terms and provisions of this Lease. In addition to
the foregoing, no sublease by Tenant shall be effective until there has been
delivered to Landlord a fully executed counterpart of Landlord's consent to
sublease form or, in the case of a sublease to an Affiliate pursuant to
Paragraph 13.g. below, a waiver and acknowledgement form. The failure or refusal
of a subtenant or assignee to execute any such instrument shall not release or
discharge the subtenant or assignee from its liability as set forth above.
Notwithstanding the foregoing, however, no subtenant or assignee shall be
permitted to occupy the Premises unless and until such subtenant or assignee
provides Landlord with certificates evidencing that such subtenant or assignee
is carrying all insurance coverage required of such subtenant or assignee under
this Lease.
f. No Merger. Without limiting any of the provisions of this
---------
Paragraph 13, if Tenant has entered into any subleases of any portion of the
Premises, the voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies or,
at the option of Landlord, operate as an assignment to Landlord of any or all
such subleases or subtenancies. If Landlord does elect that such surrender or
cancellation operate as an assignment of such subleases or subtenancies,
Landlord shall in no way be liable for any previous act or omission by Tenant
under the subleases or for the return of any deposit(s) under the subleases that
have not been actually delivered to Landlord, nor shall Landlord be bound by any
sublease modification(s) executed without Landlord's consent or for any advance
rental payment by the subtenant in excess of one month's rent.
g. Affiliates. Notwithstanding anything to the contrary in
----------
Paragraphs 13.a. and 13.d., but subject to Paragraphs 13.e. and 13.f., Tenant
may assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent, to any partnership, corporation or other entity which
controls, is controlled by, or is under common control with Tenant or Tenant's
parent (control being defined for such purposes as ownership of at least 50% of
the equity interests in, or the power to direct the management of, the relevant
entity) or to any partnership, corporation or other entity resulting from a
merger or consolidation with Tenant or Tenant's parent, or to the corporation
resulting from a corporate reorganization of Tenant (provided that, following
such reorganization, the corporation continues substantially the same business
operations of Tenant as were in effect as of the date of this Lease) or to any
person or entity which acquires substantially all the assets of Tenant as a
going concern (collectively, an "Affiliate"), provided that (i) Landlord
receives prior written notice of an assignment or subletting, (ii) the
Affiliate's net worth is sufficient, in Landlord's sole but good faith judgment,
to satisfy Landlord's then existing financial criteria for new tenants of the
Building, (iii) the Affiliate (or its officers and employees) has proven
experience in the operation of a first-class business of a type consistent with
the use of the Building as a first-class office Building, (iv) the Affiliate
remains an Affiliate for the duration of the subletting or the balance of the
term in the event of an assignment, (v) the Affiliate assumes (in the event
16
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of an assignment) in writing all of Tenant's obligations under this Lease and
(vi) Landlord receives a fully executed copy of an assignment or sublease
agreement between Tenant and the Affiliate.
h. Shared Space Arrangement. Notwithstanding anything to the
------------------------
contrary in this Paragraph 13, Tenant may from time to time permit third parties
with whom Tenant will share office services to use a portion of the Premises and
such use shall not be deemed to be a sublease so long as (i) no more than 1,500
rentable square feet of the Premises is so used at any one time, and (ii) the
space Occupied by such parties is not separately demised from the balance of the
Premises (i.e. separated from the balance of the space by a wall or other
constructed device and having separate entrances to the common areas) and (iii)
the use of the space is not a use which increases (a) the operating costs for
the Building, (b)the burden on the Building services, or (c) the foot traffic,
elevator usage or security concerns in the Building, or creates an increased
probability of the comfort and/or safety of the Landlord and other tenants in
the Building being unreasonably compromised or reduced, and (iv) Tenant does not
realize a profit with respect to the space so used. The rights set forth in this
paragraph are personal to Digital Island, Inc., a California corporation, and
shall not inure to the benefit of any successor, assignee or subtenant of
Tenant. Tenant shall be fully responsible for the conduct of such parties within
the Premises and the Real Property, and Tenant's indemnification obligations set
forth in Paragraph 14 of this Lease shall apply with respect to the conduct of
such parties. Tenant shall supply Landlord with the terms of any such space
sharing arrangement. If such arrangement indicates that the sums payable
thereunder for the value of the use of the space exceed the Monthly Rent and
Additional Rent payable under Paragraphs 5 and 7 hereof for such space, that
particular space sharing arrangement will be deemed to be a sublease for the
purpose of applying the provisions of Paragraph 13.e. above. Notwithstanding the
foregoing, Tenant shall not permit any party to occupy space in the Premises (or
conduct business in the Premises) pursuant to the above until Tenant delivers to
Landlord a fully executed counterpart of Landlord's waiver and acknowledgement
form for space sharing arrangements.
14. Indemnification of Landlord.
---------------------------
a. Landlord and the holders of any Superior Interests (as defined in
Paragraph 21 below) shall not be liable to Tenant and Tenant hereby waives all
claims against such parties for any loss, injury or other damage to person or
property in or about the Premises or the Real Property from any cause
whatsoever, including without limitation, water leakage of any character from
the roof, walls, basement, fire sprinklers, appliances, air conditioning,
plumbing or other portion of the Premises or the Real Property, or gas, fire,
explosion, falling plaster, steam, electricity, or any malfunction within the
Premises or the Real Property, or acts of other tenants of the Building;
provided, however, that the foregoing waiver shall be inapplicable to any loss,
injury or damage resulting directly from Landlord's gross negligence or willful
misconduct. Tenant acknowledges that from time to time throughout the term of
this Lease, construction work may be performed in and about the Building and the
Real Property by Landlord, contractors of Landlord, or other tenants or their
contractors, and that such construction work may result in noise and disruption
to Tenant's business. In addition to and without limiting the foregoing waiver
or any other provision of this Lease, Tenant agrees that Landlord shall not be
liable for, and Tenant expressly waives and releases Landlord and the other
Indemnitees (as defined in Paragraph 14.b. below) from any Claims (as defined in
Paragraph 14.b. below), including without limitation, any and all consequential
damages or interruption or loss of business, income or profits, or claims of
constructive eviction, arising or alleged to be arising as a result of any such
construction activity.
b. Tenant shall hold Landlord and the holders of any Superior
Interest, and the constituent shareholders, partners or other owners thereof,
and all of their agents, contractors, servants, officers, directors, employees
and licensees (collectively with Landlord, the "Indemnitees") harmless from and
indemnify the Indemnitees against any and all claims, liabilities, damages,
costs and expenses, including reasonable attorneys' fees and costs incurred in
defending against the same (collectively, "Claims"), to the extent arising from
(a) the acts or omissions of Tenant or any other Tenant Parties (as defined in
Paragraph 8.e. above) in, on or about the Real Property, or (b) any construction
or other work undertaken by or on behalf of Tenant in, on or about the Premises,
whether prior to or during the term of this Lease, or (e) any breach or Event of
Default under this Lease by Tenant, or (d) any accident, injury or damage,
howsoever and by whomsoever caused, to any person or property, occurring in, on
or about the Premises; except to the extent such Claims are caused directly by
the gross negligence or willful misconduct of Landlord or its authorized
representatives. In case any action or proceeding be brought against any of the
Indemnitees by reason of any such Claim, Tenant, upon notice from Landlord,
covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Paragraph 14.b. shall survive the expiration or earlier termination of this
Lease with respect to any injury, illness, death or damage occurring prior to
such expiration or termination.
15. Insurance.
---------
a. Tenant's Insurance. Tenant shall, at Tenant's expense, maintain
------------------
during the term of this Lease (and, if Tenant occupies or conducts activities in
or about the Premises prior to or after the term hereof, then also during such
pre-term or post-term period): (i) commercial general liability insurance
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including contractual liability coverage, with minimum coverages of $1,000,000
per occurrence combined single limit for bodily injury and property damage,
$1,000,000 for products-completed operations coverage, $100,000 fire legal
liability, $1,000,000 for personal and advertising injury (which coverage shall
not be subject to the contractual liability exclusion), with a $2,000,000
general aggregate limit, for injuries to, or illness or death of, persons and
damage to property occurring in or about the Premises or otherwise resulting
from Tenant's operations in the Building, (ii) property insurance protecting
Tenant against loss or damage by fire and such other risks as arc insurable
under then-available standard forms Of "all risk" insurance policies (excluding
earthquake and flood but including water damage), coveting Tenant's personal
property and trade fixtures in or about the Premises or the Real Property, and
any improvements and/or Alterations in the Premises, for the full replacement
value thereof without deduction for depreciation; (iii) workers' compensation
insurance in statutory limits; (iv) at least three months' coverage for loss of
business income and continuing expenses, providing protection against any peril
included within the classification "all risk," excluding earthquake and flood
but including water damage; and (v) if Tenant operates owned, leased or non-
owned vehicles on the Real Property, comprehensive automobile liability
insurance with a minimum coverage of $1,000,000 per occurrence, combined single
limit. The above described policies shall protect Tenant, as named insured, and
Landlord and all the other Indemnitees and any other parties designated by
Landlord, as additional insureds; shall insure Landlord's and such other
parties' contingent liability with regard to acts or omissions of Tenant; shall
specifically include all liability assumed by Tenant under this Lease (provided,
however, that such contractual liability coverage shall not limit or be deemed
to satisfy Tenant's indemnity obligations under this Lease); and, if subject to
deductibles, shall provide for deductible amounts not in excess of those
reasonably approved in advance in writing by Landlord. Landlord reserves the
right to increase the foregoing amount of liability coverage from time to time
as Landlord determines is required to adequately protect Landlord and the other
parties designated by Landlord from the matters insured thereby (provided,
however, that Landlord makes no representation that the limits of liability
required hereunder from time to time shall be adequate to protect Tenant);
provided, however, such increased amounts shall not materially exceed the
greater of (a) those amounts normally required for comparable buildings in the
San Francisco Financial District or (b) those amounts required to provide
Landlord with the same relative protection as the amounts set forth above as of
the date of this Lease. Further, Landlord reserves the right to require that
Tenant cause any of its contractors, vendors, movers or other parties conducting
activities in or about or occupying the Premises to obtain and maintain
insurance as reasonably determined by Landlord and as to which Landlord and such
other parties designated by Landlord shall be additional insureds.
b. Policy Form. Each insurance policy required pursuant to Paragraph
-----------
15.a. above shall be issued by an insurance company licensed in the State of
California and with a general policyholders' rating of "A+" or better and a
financial size ranking of "Class VIII" or higher in the most recent edition of
Best's Insurance Guide. Each insurance policy, other than Tenant's workers'
compensation insurance, shall (i) provide that it may not be materially changed,
cancelled or allowed to lapse unless thirty (30) days' prior written notice to
Landlord and any other insureds designated by Landlord is first given, (ii)
provide that no act or omission of Tenant shall affect or limit the obligations
of the insurer with respect to any other insured, (iii) include all waiver of
subrogation rights endorsements necessary to effect the provisions of Paragraph
16 below, and (iv) provide that the policy and the coverage provided shall be
primary, that Landlord, although an additional insured, shall nevertheless be
entitled to recovery under such policy for any damage to Landlord or the other
Indemnitees by reason of acts or omissions of Tenant, and that any coverage
carried by Landlord shall be noncontributory with respect to policies carried by
Tenant. Each such insurance policy or a certificate thereof shall be delivered
to Landlord by Tenant on or before the effective date of such policy and
thereafter Tenant shall deliver to Landlord renewal policies or certificates at
least thirty (30) days prior to the expiration dates of expiring policies. If
Tenant fails to procure such insurance or to deliver such policies or
certificates, Landlord may, at its option, procure the same for Tenant's
account, and the cost thereof shall be paid to Landlord by Tenant upon demand.
Landlord may at any time, and from time to time, inspect and/or copy any and all
insurance policies required by this Lease.
Nothing in this Paragraph 15 shall be construed as creating or
implying the existence of (i) any ownership by Tenant of any fixtures,
additions, Alterations, or improvements in or to the Premises or (ii) any right
on Tenant's part to make any addition, Alteration or improvement in or to the
Premises.
d. Landlord's Insurance. During the term hereof, Landlord shall keep
--------------------
the Building and all Tenant Improvements to the Premises made pursuant to
Paragraph 4 hereof (but excluding any Alterations made pursuant to Paragraph 9
hereof, and any personal property, fixtures, office equipment, furniture,
artwork and other decoration not affixed to and a part of the Building) insured
through reputable insurance underwriters against perils covered by a standard
"all risk" insurance policy or policies as such policies are in use as of the
date of this Lease (excluding perils such as earthquake, flood and other
standard "all risk" policy form exclusions, although Landlord may carry
earthquake insurance at Landlord's option), if such a policy is reasonably
available, with a deductible provision, if any, that does not materially exceed
that which prudent, efficient operators of first-class high-rise office
buildings in the downtown San Francisco financial district would carry from
time-to-time in the exercise of reasonable business judgment, in an amount or
amounts equal to not less than eighty percent (80%) of the full
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replacement value of the Building (excluding the land and the footings,
foundations and installations below the basement level) and the Tenant
Improvements made pursuant to Paragraph 4 hereof, without deduction for
depreciation, including the costs of demolition and debris removal, or such
other fire and property damage insurance as Landlord shall reasonably determine
to give substantially equal or greater protection.
16. Mutual Waiver of Subrogation Rights. Each party hereto hereby
-----------------------------------
releases the other respective party and, in the Case of Tenant as the releasing
party, the other Indemnitees, and the respective partners, shareholders, agents,
employees, officers, directors and authorized representatives of such released
party, from any claims such releasing party may have for damage to the Building,
the Premises or any of such releasing party's fixtures, personal property,
improvements and alterations in or about the Premises, the Building or the Real
Property that is caused by or results from risks insured against under any fire
and extended coverage insurance policies actually carried by such releasing
party or deemed to be carried by such releasing party; provided, however, that
such waiver shall be limited to the extent of the net insurance proceeds payable
by the relevant insurance company with respect to such loss or damage (or in the
case of deemed coverage, the net proceeds that would have been payable). For
purposes of this Paragraph 16, Tenant shall be deemed to be carrying any of the
insurance policies required pursuant to Paragraph 15 but not actually carried by
Tenant, and Landlord shall be deemed to carry standard fire and extended
coverage policies on the Real Property with a deductible not to exceed the
customary range of deductibles in effect for comparable first-class office
buildings in the San Francisco Financial District. Each party hereto shall cause
each such fire and extended coverage insurance policy obtained by it to provide
that the insurance company waives all rights of recovery by way of subrogation
against the other respective party and the other released parties in connection
with any matter covered by such policy.
17. Utilities.
---------
a. Basic Services. Landlord shall furnish the following utilities
--------------
and services ("Basic Services") for the Premises: (i) during the hours of 8 A.M.
to 6 P.M. ("Business Hours") Monday through Friday (except public holidays)
("Business Days"), electricity for Building standard lighting and power suitable
for the use of the Premises for ordinary general office purposes, (ii) during
Business Hours on Business Days, heat and air conditioning required in
Landlord's reasonable judgment for the comfortable use and occupancy of the
Premises for ordinary general office purposes, (iii) unheated water for the
restroom(s) and drinking fountains in the public areas servicing the Premises,
(iv) elevator service to the floor(s) of the Premises by nonattended automatic
elevators for general office pedestrian usage, and (v) on Business Days,
janitorial services limited to emptying and removal of general office refuse,
light vacuuming as needed and window washing as determined by Landlord.
Notwithstanding the foregoing, however, Tenant may use water, heat, air
conditioning, electric current, elevator and janitorial service in excess of
that provided in Basic Services ("Excess Services," which shall include without
limitation any power usage other than through existing standard 110-volt AC
outlets; electricity and/or water consumed by Tenant in connection with any
dedicated or supplemental heating, ventilating and/or air conditioning, computer
power, telecommunications and/or other special units or systems of Tenant;
chilled, heated or condenser water; or water used for any purpose other than
ordinary drinking and lavatory purposes), provided that the Excess Services
desired by Tenant are reasonably available to Landlord and to the Premises (it
being understood that in no event shall Landlord be obligated to make available
to the Premises more than the pro rata share of the capacity of any Excess
Service available to the Building or the applicable floor of the Building, as
the case may be), and provided further that Tenant complies with the procedures
established by Landlord from time to time for requesting and paying for such
Excess Services and with all other provisions of this Paragraph 17. Landlord
reserves the right to install in the Premises or the Real Property electric
current and/or water meters (including, without limitation, any additional
wiring, conduit or panel required therefor) to measure the electric current or
water consumed by Tenant or to cause the usage to be measured by other
reasonable methods (e.g. by temporary "check" meters or by survey).
b. Payment for Utilities and Services. The cost of Basic Services
----------------------------------
shall be included in Operating Expenses. In addition, Tenant shall pay to
Landlord upon demand (i) the cost, at Landlord's prevailing rate (based on
Landlord's actual cost thereof) of any Excess Services used by Tenant, (ii) the
cost of installing, operating, maintaining, repairing or reasonable costs of
monitoring, any meter or other device or system used to measure Tenant's
consumption of utilities and (iii) the cost of installing, operating,
maintaining, repairing or reasonable costs of monitoring, any Temperature
Balance Equipment (as defined in Paragraph 17.c. below) for the Premises and/or
any equipment required in connection with any Excess Services requested by
Tenant. Landlord's failure to bill Tenant for any of the foregoing shall not
waive Landlord's right to bill Tenant for the same at a later time.
c. Temperature Balance. If the temperature otherwise maintained in
-------------------
any portion of the Premises by the heating, air conditioning or ventilation
system is affected as a result of (i) the type or quantity of any lights,
machines or equipment (including without limitation typical office equipment)
used by Tenant in the Premises, (ii) the occupancy of such portion of the
Premises by more than one person per two hundred (200) square feet of rentable
area therein, (iii) an electrical load for lighting or power in excess of the
limits specified in Paragraph 17.d. below, or (iv) any rearrangement of
partitioning or other improvements, then at Tenant's sole cost, Landlord may
install any equipment, or modify any
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existing equipment (including the standard air conditioning equipment) Landlord
deems necessary to restore the temperature balance (such new equipment or
modifications to existing equipment termed herein "Temperature Balance
Equipment"). Tenant agrees to keep closed, when necessary, draperies which,
because of the sun's position, must be closed to provide for the efficient
operation of the air conditioning system, and Tenant agrees to cooperate with
Landlord and to abide by the regulations and requirements which Landlord may
prescribe for the proper functioning and protection of the heating, ventilating
and air conditioning system. Landlord makes no representation to Tenant
regarding the adequacy or fitness of the heating, air conditioning or
ventilation equipment in the Building to maintain temperatures that may be
required for, or because of, any computer or communications rooms, machine
rooms, conference rooms or other areas of high concentration of personnel or
electrical usage, or any other uses other than or in excess of the fractional
horsepower normally required for office equipment, and Landlord shall have no
liability for loss or damage suffered by Tenant or others in connection
therewith.
d. Utility Connections. Tenant shall not connect or use any
-------------------
apparatus or device in the Premises (i) using current in excess of 110 volts, or
(ii) which would cause Tenant's electrical demand load to exceed 1.0 watts per
rentable square foot for overhead lighting or 2.0 watts per rentable square foot
for convenience outlets, or (iii) which would exceed the capacity of the
existing panel or transformer serving the Premises. Tenant shall not connect
with electric current (except through existing outlets in the Premises or such
additional outlets as may be installed in the Premises as part of initial
improvements or Alterations approved by Landlord), or water pipes, any apparatus
or device for the purpose of using electrical current or water.
Landlord will not permit additional coring of the floor of the Premises
in order to install new electric outlets in the Premises unless Landlord is
satisfied, on the basis of such information to be supplied by Tenant at Tenant's
expense, that coring of the floor in order to install such additional outlets
will not weaken the structure of the floor.
e. Interruption of Services. Landlord's obligation to provide
------------------------
utilities and services for the Premises are subject to the Rules and Regulations
of the Building, applicable Legal Requirements (including the rules or actions
of the public utility company furnishing the utility or service), and shutdowns
for maintenance and repairs, for security purposes, or due to strikes, lockouts,
labor disputes, fire or other casualty, acts of God, or other causes beyond the
control of Landlord. In the event of an interruption in, or failure or inability
to provide any service or utility for the Premises for any reason, such
interruption, failure or inability shall not constitute an eviction of Tenant,
constructive or otherwise, or impose upon Landlord any liability whatsoever,
including, but not limited to, liability for consequential damages or loss of
business by Tenant. Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future Legal Requirement
permitting the termination of this Lease clue to such interruption, failure or
inability.
f. Governmental Controls. In the event any governmental authority
---------------------
having jurisdiction over the Real Property or the Building promulgates or
revises any Legal Requirement or building, fire or other code or imposes
mandatory or voluntary controls or guidelines on Landlord or the Real Property
or the Building relating to the use or conservation of energy or utilities or
the reduction of automobile or other emissions (collectively "Controls") or in
the event Landlord is required or elects to make alterations to the Real
Property or the Building in order to comply with such mandatory or voluntary
Controls, Landlord may, in its sole discretion, comply with such Controls or
make such alterations to the Real Property or the Building related thereto;
provided that in making any such alterations, Landlord shall use commercially
reasonable efforts to minimize any disruption to Tenant's business in the
Premises. Such compliance and the making of such alterations shall not
constitute an eviction of Tenant, constructive or otherwise, or impose upon
Landlord any liability whatsoever, including, but not limited to, liability for
consequential damages or loss of business by Tenant.
18. Personal Property and Other Taxes. Tenant shall pay before
---------------------------------
delinquency, any and all taxes, fees, charges or other governmental impositions
levied or assessed against Landlord or Tenant (a) upon Tenant's equipment,
furniture, fixtures, improvements and other personal property (including
carpeting installed by Tenant) located in the Premises, (b) by virtue of any
Alterations made by Tenant to the Premises, and (e) upon this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises. If any such fee, charge or other governmental imposition
is paid by Landlord, Tenant shall reimburse Landlord for Landlord's payment upon
demand.
19. Rules and Regulations. Tenant shall comply with the rules and
---------------------
regulations set forth on Exhibit B attached hereto, as such rules and
---------
regulations may be reasonably modified or amended by Landlord from time to time,
provided that such modifications or amendments do not conflict with the express
provisions of this Lease (the "Rules and Regulations"). Landlord shall not be
responsible to Tenant for the nonperformance or noncompliance by any other
tenant or occupant of the Building of or with any of the Rules and Regulations,
but Landlord shall use reasonable efforts to enforce the Rules and Regulations.
20
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20. Surrender; Holding Over.
------------------------
a. Surrender. Upon the expiration or other termination of this
---------
Lease, Tenant shall surrender the Premises to Landlord vacant and broom-clean,
with all improvements and Alterations (except as provided below) in their
original condition, except for reasonable wear and tear, damage from casualty or
condemnation or from acts of Landlord or its agents, employees or contractors
and any changes resulting from approved Alterations; provided, however, that
prior to the expiration or termination of this Lease Tenant shall remove from
the Premises any Alterations that Tenant is required by Landlord to remove under
the provisions of this Lease, and all of Tenant's personal property and trade
fixtures, and, at Landlord's sole election, any portion of the Tenant
Improvements constructed pursuant to Paragraph 4 above that Landlord advises
Tenant, at the time Landlord approves of the Final Plans therefor, Landlord will
require be removed upon the expiration or sooner termination of this Lease. If
such removal is not completed at the expiration or other termination of this
Lease, Landlord may remove the same at Tenant's expense. Any damage to the
Premises or the Building caused by such removal shall be repaired promptly by
Tenant (including the patching or repairing of ceilings and walls) or, if Tenant
fails to do so, Landlord may do so at Tenant's expense. The removal of
Alterations from the Premises shall be governed by Paragraph 9 above. Tenant's
obligations under this paragraph shall survive the expiration or other
termination of this Lease. Upon expiration or termination of this Lease or of
Tenant's possession, Tenant shall surrender all keys to the Premises or any
other part of the Building and shall make known to Landlord the combination of
locks on all safes, cabinets and vaults that may be located in the Premises.
b. Holding Over. If Tenant remains in possession of the Premises
------------
after the expiration or earlier termination of this Lease with the express
written consent of Landlord (which consent may be withheld in Landlord's sole
discretion), Tenant's occupancy shall be a month-to-month tenancy at a rent
equal to the greater of (i) for the first thirty (30) days of any such holdover
period, one hundred twenty-five percent (125%), and for each day of the holdover
period thereafter, one hundred fifty percent (150%), of the Monthly Rent and
Additional Rent payable under this Lease during the last full month prior to the
date of the expiration of this Lease or (ii) the then fair market rental (as
reasonably determined by Landlord) for the Premises; provided, however, if
Landlord and Tenant agree in writing that a different monthly rent shall apply
during such month-to-month tenancy, then the monthly rent specified in such
written agreement shall instead apply. Except as provided in the preceding
sentence, the month-to-month tenancy shall be on the terms and conditions of
this Lease, except that any renewal options, expansion options, rights of first
refusal, rights of first negotiation or any other rights or options pertaining
to additional space in the Building contained in this Lease shall be deemed to
have terminated and shall be inapplicable thereto. Landlord's acceptance of rent
after such holding over with Landlord's written consent shall not result in any
other tenancy or in a renewal of the original term of this Lease. If Tenant
remains in possession of the Premises after the expiration or earlier
termination of this Lease without Landlord's consent as required above, Tenant's
continued possession shall be on the basis of a tenancy at sufferance and Tenant
shall pay as Monthly Rent during the holdover period an amount equal to the
greater of (i) one hundred twenty-five percent (125%) of the fair market rental
(as reasonably determined by Landlord) for the Premises or (ii) two hundred
percent (200%) of the Monthly Rent and Additional Rent payable under this Lease
for the last full month prior to the date of such expiration or termination.
c. Indemnification. Tenant shall indemnify, defend and hold Landlord
---------------
harmless from and against all Claims incurred by or asserted against Landlord
and arising directly or indirectly from Tenant's failure to timely surrender the
Premises, including but not limited to (i) any rent payable by or any loss,
cost, or damages, including lost profits, claimed by any prospective tenant of
the Premises or any portion thereof, and (ii) Landlord's damages as a result of
such prospective tenant rescinding or refusing to enter into the prospective
lease of the Premises or any portion thereof by reason of such failure to timely
surrender the Premises.
21. Subordination and Attornment.
----------------------------
a. This Lease is expressly made subject and subordinate to any
mortgage, deed of trust, ground lease, underlying lease or like encumbrance
affecting any part of the Real Property or any interest of Landlord therein
which is now existing or hereafter executed or recorded, any present or future
modification, amendment or supplement to any of the foregoing, and to any
advances made thereunder (any of the foregoing being a "Superior Interest")
without the necessity of any further documentation evidencing such
subordination. Notwithstanding the foregoing, Tenant shall, within ten (10) days
after Landlord's request, execute and deliver to Landlord a document evidencing
the subordination of this Lease to a particular Superior Interest, and Tenant's
failure to timely deliver the required document shall constitute an Event of
Default under Paragraph 25.a.3. below. If the interest of Landlord in the Real
Property or the Building is transferred to any person ("Purchaser") pursuant to
or in lieu of proceedings for enforcement of any Superior Interest, Tenant shall
immediately and automatically attorn to the Purchaser, and this Lease shall
continue in full force and effect as a direct lease between the Purchaser and
Tenant on the terms and conditions set forth herein.
b. Notwithstanding the above, upon Tenant's written request,
Landlord will request that the then existing (if any) holders of a Superior
Interest execute a written "non-disturbance agreement"
21
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on Tenant's behalf providing that, if Tenant is not in default under this Lease
beyond any applicable grace period, that such party will recognize this Lease
and Tenant's rights hereunder and will not disturb Tenant's possession
hereunder, and if this Lease is by operation of law terminated in a foreclosure,
that a new lease will be entered into on the same terms as this Lease for the
remaining term hereof. The failure of any future holder of a Superior Interest
to execute and deliver such a non-disturbance agreement upon Landlord's request
shall not constitute a default hereunder by Landlord, it being understood that
Landlord's sole obligation is to request in good faith the execution and
delivery of such agreement. Further, if in order to obtain such non-disturbance
agreement, Landlord is required to expend any sum, Landlord shall so notify
Tenant and Tenant may elect to pay such sum. In no event shall Landlord be
required to expend any sums in connection therewith.
22. Financing Condition. If any lender or ground lessor that intends to
-------------------
acquire an interest in, or holds a mortgage, ground lease or deed of trust
encumbering any portion of the Real Property should require, either the
execution by Tenant of an agreement requiring Tenant to send such lender written
notice of any default by Landlord under this Lease, giving such lender the right
to cure such default until such lender has completed foreclosure, and preventing
Tenant from terminating this Lease unless such default remains uncured after
foreclosure has been completed, and/or any modification of the agreements,
covenants, conditions or provisions of this Lease, then Tenant agrees that it
shall, within ten (10) days after Landlord's request, execute and deliver such
agreement and modify this Lease as required by such lender or ground lessor;
provided, however, that no such modification shall affect the length of the term
or increase the rent payable by Tenant under Paragraphs 5 and 7 or otherwise
materially lessen the rights, or increase the obligations of, Tenant hereunder.
Tenant acknowledges and agrees that its failure to timely execute any such
agreement or modification required by such lender or ground lessor may cause
Landlord serious financial damage by causing the failure of a financing
transaction and giving Landlord all of its rights and remedies under Paragraph
25 below, including its right to damages caused by the loss of such financing.
23. Entry by Landlord. Landlord may, at any and all reasonable times,
-----------------
and upon reasonable advance notice (provided that no advance notice need be
given if an emergency necessitates an immediate entry or prior to entry to
provide routine janitorial services), enter the Premises to (a) inspect the same
and to determine whether Tenant is in compliance with its obligations hereunder,
(b) supply janitorial and any other service Landlord is required to provide
hereunder, (c) show the Premises to prospective lenders or purchasers or, during
the final twelve (12) months of the Lease term, to prospective tenants, (d) post
notices of nonresponsibility, and (e) alter, improve or repair the Premises or
any other portion of the Real Property. In connection with any such alteration,
improvement or repair, Landlord may erect in the Premises or elsewhere in the
Real Property scaffolding and other structures reasonably required for the work
to be performed. In no event shall such entry or work entitle Tenant to an
abatement of rent, constitute an eviction of Tenant, constructive or otherwise,
or impose upon Landlord any liability whatsoever, including but not limited to
liability for consequential damages or loss of business or profits by Tenant;
provided, however, that Landlord shall use good faith efforts to cause all such
work to be done in such a manner as to cause as little interference to Tenant as
reasonably possible without incurring additional expense. Landlord shall at all
times retain a key with which to unlock all of the doors in the Premises, except
Tenant's vaults and safes. If an emergency necessitates immediate access to the
Premises, Landlord may use whatever force is necessary to enter the Premises and
any such entry to the Premises shall not constitute a forcible or unlawful entry
into the Premises, a detainer of the Premises, or an eviction of Tenant from the
Premises, or any portion thereof.
In any entrance into the Premises pursuant to the provisions of this
Paragraph 23, Landlord shall endeavor in good faith to comply with Tenant's
reasonable security procedures previously detailed by Tenant to Landlord, except
to the extent Landlord or its agents determine that an emergency makes
compliance with such procedures impracticable.
24. Insolvency or Bankruptcy. The occurrence of any of the following
------------------------
shall constitute an Event of Default under Paragraph 25 below:
1. Tenant ceases doing business as a going concern, makes an
assignment for the benefit of creditors, is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of such
petition) seeking for Tenant any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any state or
federal bankruptcy or other law, or Tenant consents to or acquiesces in the
appointment, pursuant to any state or federal bankruptcy or other law, of a
trustee, receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets; or
2. Tenant fails within sixty (60) days after the commencement of
any proceedings against Tenant seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any state or
federal bankruptcy or other Legal Requirement, to have such proceedings
dismissed, or Tenant fails, within sixty (60) days after an appointment pursuant
to any state or federal bankruptcy or other Legal Requirement without Tenant's
consent or acquiescence, of any trustee,
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receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets, to have such appointment vacated; or
3. Tenant is unable, or admits in writing its inability, to pay
its debts as they mature; or
4. Tenant gives notice to any governmental body of its
insolvency or pending insolvency, or of its suspension or pending suspension of
operations.
In no event shall this Lease be assigned or assignable by reason of any
voluntary or involuntary bankruptcy, insolvency or reorganization proceedings,
nor shall any rights or privileges hereunder be an asset of Tenant, the trustee,
debtor-in-possession, or the debtor's estate in any bankruptcy, insolvency or
reorganization proceedings.
25. Default and Remedies.
a. Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" by Tenant:
1. Tenant fails to pay Monthly Rent, Additional Rent or any
other rent due hereunder within five (5) business days following written notice
that such sum is past due; provided, however, if Landlord is entitled to give
written notice to Tenant that sums due under this Lease are past due and
Landlord actually gives such notice to Tenant two (2) times during any twelve
(12) month period, then thereafter the above five (5) business day notice and
grace period for payment shall no longer apply until a period of twelve (12)
months passes during which all payments due from Tenant to Landlord under this
Lease are timely paid by Tenant, at which time the five (5) business day notice
and grace period provided for above shall again apply; or
2. Tenant fails to occupy and use the Premises for thirty (30)
consecutive days, which failure shall be deemed an abandonment of the Premises
by Tenant; or
3. Tenant fails to deliver any estoppel certificate pursuant to
Paragraph 29 below, subordination agreement pursuant to Paragraph 21 above, or
document required pursuant to Paragraph 22 above, within the applicable period
set forth therein; or
4. Tenant violates the bankruptcy and insolvency provisions of
Paragraph 24 above; or
5. Tenant makes or has made or delivers or has delivered any
warranty, representation or statement to Landlord in connection with this Lease,
or any other agreement made by Tenant for the benefit of Landlord, which is or
was false or misleading in any material respect when made or furnished; or
6. Tenant assigns this Lease or subleases any portion of the
Premises in violation of Paragraph 13 above; or
7. A default by Tenant occurs under any other lease between
Tenant and Landlord or any affiliate of Landlord, and Tenant fails to cure such
default within the applicable period set forth therein; or
8. Tenant fails to comply with any other provision of this Lease
in the manner required after notice from Landlord of such failure, or, with
respect to matters which do not pose a health, safety or security risk and do
not annoy other tenants, Tenant fails to comply within thirty (30) calendar days
after written notice of such failure (or if the noncompliance cannot by its
nature be cured within the 30-day period, if Tenant fails to commence to cure
such noncompliance within the 30-day period and thereafter diligently prosecute
such cure to completion) .
b. Remedies. Upon the occurrence of an Event of Default Landlord
--------
shall have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
1. Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including, but not limited to, its re-entry into the Premises, its
efforts to relet the Premises, its reletting of the Premises for Tenant's
account, its storage of Tenant's personal property and trade fixtures, its
acceptance of keys to the Premises from Tenant, its appointment of a receiver,
or its exercise of any other rights and remedies under this Paragraph 25 or
otherwise at law, shall constitute an acceptance of Tenant's surrender of the
Premises or constitute a termination of this Lease or of Tenant's right to
possession of the Premises.
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Upon such termination in writing of Tenant's right to possession of
the Premises, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
or any other applicable existing or future Legal Requirement providing for
recovery of damages for such breach, including but not limited to the following:
(i) The reasonable cost of recovering the Premises; plus
(ii) The reasonable cost of removing Tenant's Alterations,
trade fixtures and improvements; plus
(iii) All unpaid rent due or earned hereunder prior to the
date of termination, less the proceeds of any reletting or any rental received
from subtenants prior to the date of termination applied as provided in
Paragraph 25.b.2. below, together with interest at the Interest Rate, on such
sums from the date such rent is due and payable until the date of the award of
damages; plus
(iv) The amount by which the rent which would be payable by
Tenant hereunder, including Additional Rent under Paragraph 7 above, as
reasonably estimated by Landlord, from the date of termination until the date of
the award of damages, exceeds the amount of such rental loss as Tenant proves
could have been reasonably avoided, together with interest at the Interest Rate
on such sums from the date such rent is due and payable until the date of the
award of damages; plus
(v) The amount by which the rent which would be payable by
Tenant hereunder, including Additional Rent under Paragraph 7 above, as
reasonably estimated by Landlord, for the remainder of the then term, after the
date of the award of damages exceeds the amount such rental loss as Tenant
proves could have been reasonably avoided, discounted at the discount rate
published by the Federal Reserve Bank of San Francisco for member banks at the
time of the award plus one percent (1%); plus
(vi) Such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law, including
without limitation any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
2. Landlord has the remedy described in California Civil Code
Section 1951.4 (a landlord may continue the lease in effect after the tenant's
breach and abandonment and recover rent as it becomes due, if the tenant has the
right to sublet and assign subject only to reasonable limitations), and may
continue this Lease in full force and effect and may enforce all of its rights
and remedies under this Lease, including, but not limited to, the right to
recover rent as it becomes due. After the occurrence of an Event of Default,
Landlord may enter the Premises without terminating this Lease and sublet all or
any part of the Premises for Tenant's account to any person, for such term
(which may be a period beyond the remaining term of this Lease), at such rents
and on such other terms and conditions as Landlord deems advisable. In the event
of any such subletting, rents received by Landlord from such subletting shall be
applied (i) first, to the payment of the costs of maintaining, preserving,
altering and preparing the Premises for subletting, the other costs of
subletting, including but not limited to brokers' commissions, attorneys' fees
and expenses of removal of Tenant's personal property, trade fixtures and
Alterations; (ii) second, to the payment of rent then due and payable hereunder;
(iii) third, to the payment of future rent as the same may become due and
payable hereunder; (iv) fourth, the balance, if any, shall be paid to Tenant
upon (but not before) expiration of the term of this Lease. If the rents
received by Landlord from such subletting, after application as provided above,
are insufficient in any month to pay the rent due and payable hereunder for such
month, Tenant shall pay such deficiency to Landlord monthly upon demand.
Notwithstanding any such subletting for Tenant's account without termination,
Landlord may at any time thereafter, by written notice to Tenant, elect to
terminate this Lease by virtue of a previous Event of Default.
During the continuance of an Event of Default, for so long as Landlord
does not terminate Tenant's right to possession of the Premises and subject to
Paragraph 13, entitled Assignment and Subletting, and the options granted to
Landlord thereunder, Landlord shall not unreasonably withhold its consent to an
assignment or sublease of Tenant's interest in the Premises or in this Lease.
3. During the continuance of an Event of Default, Landlord may
enter the Premises without terminating this Lease and remove all Tenant's
personal property, Alterations and trade fixtures from the Premises and store
them at Tenant's risk and expense. If Landlord removes such property from the
Premises and stores it at Tenant's risk and expense, and if Tenant fails to pay
the cost of such removal and storage after written demand therefor and/or to pay
any rent then due, then after the property has been stored for a period of
thirty (30) days or more Landlord may sell such property at public or private
sale, in the manner and at such times and places as Landlord deems commercially
reasonable following reasonable notice to Tenant of the time and place of such
sale. The proceeds of any such sale shall be applied first to the payment of the
expenses for removal and storage of the property, the preparation for and the
conducting of such sale, and for attorneys' fees and other legal expenses
incurred
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by Landlord in connection therewith, and the balance shall be applied as
provided in Paragraph 25.b.2. above.
Tenant hereby waives all claims for damages that may be caused by
Landlord's reentering and taking possession of the Premises or removing and
storing Tenant's personal property pursuant to this Paragraph 25, and Tenant
shall indemnify, defend and hold Landlord harmless from and against any and all
Claims resulting from any such act. No reentry by Landlord shall constitute or
be construed as a forcible entry by Landlord.
4. Landlord may require Tenant to remove any and all
Alterations from the Premises or, if Tenant fails to do so within ten (10) days
after Landlord's request, Landlord may do so at Tenant's expense.
5. Landlord may cure the Event of Default at Tenant's
expense, it being understood that such performance shall not waive or cure the
subject Event of Default. If Landlord pays any sum or incurs any expense in
curing the Event of Default, Tenant shall reimburse Landlord upon demand for the
amount of such payment or expense with interest at the Interest Rate from the
date the sum is paid or the expense is incurred until Landlord is reimbursed by
Tenant. Any amount due Landlord under this subsection shall constitute
additional rent hereunder.
c. Waiver of Redemption. Tenant hereby waives, for itself and all
--------------------
persons claiming by and under Tenant, all rights and privileges which it might
have under any present or future Legal Requirement to redeem the Premises or to
continue this Lease after being dispossessed or ejected from the Premises.
26. Damage or Destruction. If all or a part of the Premises are
---------------------
damaged by fire or other casualty, or if the Building is so damaged that access
to or use and occupancy of the Premises is materially impaired, Landlord shall
promptly give Tenant notice of Landlord's reasonable estimate of the time
required to make such repairs (the "Damage Estimate"). If the Damage Estimate is
one hundred twenty (120) days or less, then Landlord shall repair the damage and
this Lease shall remain in full force and effect. If the Damage Estimate is more
than one hundred twenty (120) days, Landlord, at its option exercised by written
notice to Tenant within sixty (60) days of the date of the damage, shall either
(a) repair the damage, in which event this Lease shall continue in full force
and effect, or (b) terminate this Lease as of the date specified by Landlord in
the notice, which date shall be not less than thirty (30) days nor more than
sixty (60) days after the date such notice is given, and this Lease shall
terminate on the date specified in the notice. If the Damage Estimate is more
than one hundred eighty (180) days, and Landlord does not give notice
terminating this Lease, then Tenant may give notice to Landlord, within thirty
(30) calendar days after Tenant receives the Damage Estimate, terminating this
Lease as of the date of such fire or casualty.
Notwithstanding anything to the contrary contained in this Paragraph 26,
if the initial Damage Estimate is more than ninety (90) days, and the date on
which Landlord reasonably anticipates the repairs of such damage will be
completed is during the last twelve (12) months of the Lease term, Landlord and
Tenant shall each have the option to terminate this Lease as of the date of such
damage by giving written notice to the other, in the case of Landlord together
with the Damage Estimate, or, in the case of Tenant, within thirty (30) days of
Tenant's receipt of the Damage Estimate.
If the fire or other casualty damages the Premises or the common areas of
the Real Property necessary for Tenant's use and occupancy of the Premises,
Tenant ceases to use any portion of the Premises as a result of such damage, and
the damage does not result from the negligence or willful misconduct of Tenant
or any other Tenant Parties, then during the period the Premises or portion
thereof are rendered unusable by such damage and repair, Tenant's Monthly Rent
and Additional Rent under Paragraphs 5 and 7 above shall be proportionately
reduced based upon the extent to which the damage and repair prevents Tenant
from conducting, and Tenant does not conduct, its business at the Premises.
Landlord shall not be obligated to repair or replace any of Tenant's movable
furniture, equipment, trade fixtures, and other personal property, nor any
Alterations installed in the Premises by Tenant, and no damage to any of the
foregoing shall entitle Tenant to any abatement, and Tenant shall, at Tenant's
sole cost and expense, repair and replace such items. All such repair and
replacement of Alterations shall be constructed in accordance with Paragraph 9
above regarding Alterations.
A total destruction of the Building shall automatically terminate this
Lease. In no event shall Tenant be entitled to any compensation or damages from
Landlord for loss of use of the whole or any part of the Premises or for any
inconvenience occasioned by any such destruction, rebuilding or restoration of
the Premises, the Building or access thereto, except for the rent abatement
expressly provided above. Tenant hereby waives California Civil Code Sections
1932(2) and 1933(4), providing for termination of hiring upon destruction of the
thing hired and Sections 1941 and 1942, providing for repairs to and of
premises.
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27. Eminent Domain.
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a. If all or any part of the Premises are taken by any public or
quasi-public authority under the power of eminent domain, or any agreement in
lieu thereof (a "taking"), this Lease shall terminate as to the portion of the
Premises taken effective as of the date of taking. If only a portion of the
Premises is taken, Landlord or Tenant may terminate this Lease as to the
remainder of the Premises upon written notice to the other party within ninety
(90) days after the taking; provided, however, that Tenant's right to terminate
this Lease is conditioned upon the remaining portion of the Premises being of
Such size or configuration that such remaining portion of the Premises is
unusable or uneconomical for Tenant's business. Landlord shall be entitled to
all compensation, damages, income, rent awards and interest thereon whatsoever
which may be paid or made in connection with any taking and Tenant shall have no
claim against Landlord or any governmental authority for the value of any
unexpired term of this Lease or of any of the improvements or Alterations in the
Premises; provided, however, that the foregoing shall not prohibit Tenant from
prosecuting a separate claim against the taking authority for an amount
separately designated for Tenant's relocation expenses or the interruption of or
damage to Tenant's business or as compensation for Tenant's personal property,
trade fixtures, Alterations or other improvements paid for by Tenant so long as
any award to Tenant will not reduce the award to Landlord.
In the event of a partial taking of the Premises which does not result
in a termination of this Lease, the Monthly Rent and Additional Rent under
Paragraphs 5 and 7 hereunder shall be equitably reduced. If all or any part of
the Real Property other than the Premises is taken, Landlord may terminate this
Lease upon written notice to Tenant given within ninety (90) days after the date
of taking.
b. Notwithstanding the foregoing, if all or any portion of the
Premises is taken for a period of time ending prior to the end of the term of
this Lease, this Lease shall remain in full force and effect and Tenant shall
continue to pay all rent and to perform all of its obligations under this Lease;
provided, however, that Tenant shall be entitled to all compensation, damages,
income, rent awards and interest thereon that is paid or made in connection with
such temporary taking of the Premises (or portion thereof), except that any such
compensation in excess of the rent or other amounts payable to Landlord
hereunder shall be promptly paid over to Landlord as received. Landlord and
Tenant each hereby waive the provisions of California Code of Civil Procedure
Section 1265.130 and any other applicable existing or future Legal Requirement
providing for, or allowing either party to petition the courts of the state in
which the Real Property is located for, a termination of this Lease upon a
partial taking of the Premises and/or the Building.
28. Landlord's Liability; Sale of Building. The term "Landlord," as
--------------------------------------
used in this Lease, shall mean only the owner or owners of the Real Property at
the time in question. Notwithstanding any other provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to
Landlord's interest in the Real Property as the same may from time to time be
encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against the constituent
shareholders, partners or other owners of Landlord, or the directors, officers,
employees and agents of Landlord or such constituent shareholder, partner or
other owner, on account of any of Landlord's obligations or actions under this
Lease. For purposes of the foregoing, Landlord's interest in the Real Property
shall include (subject to the rights of any holder of a Superior Interest) (a)
any condemnation awards receivable (but not received) by Landlord in respect of
a taking of a portion of the Real Property and (b) any proceeds of casualty
insurance receivable (but not received) by Landlord in respect of damage to or
destruction of any portion of the Real Property, but only to the extent that
such insurance proceeds are not used or to be used for the repair or replacement
of any portion of the Real Property damaged or destroyed. In addition, in the
event of any conveyance of title to the Real Property, then the grantor or
transferor shall be relieved of all liability with respect to Landlord's
obligations to be performed under this Lease after the date of such conveyance.
In no event shall Landlord be deemed to be in default under this Lease unless
Landlord fails to perform its obligations under this Lease, Tenant delivers to
Landlord written notice specifying the nature of Landlord's alleged default, and
Landlord fails to cure such default within thirty (30) days following receipt of
such notice (or, if the default cannot reasonably be cured within such period,
to commence action within such thirty (30)-day period and proceed diligently
thereafter to cure such default). Upon any conveyance of title to the Real
Property, the grantee or transferee shall be deemed to have assumed Landlord's
obligations to be performed under this Lease from and after the date of such
conveyance, subject to the limitations on liability set forth above in this
Paragraph 28. If Tenant provides Landlord with any security for Tenant's
performance of its obligations hereunder, and Landlord transfers such security
to the grantee or transferee of Landlord's interest in the Real Property,
Landlord shall be released from any further responsibility or liability for such
security. Notwithstanding any other provision of this Lease, but not in
limitation of the provisions of Paragraph 14.a. above, Landlord shall not be
liable for any consequential damages, or interruption or loss of business,
income or profits, or claims of constructive eviction, nor shall Landlord be
liable for loss of or damage to artwork, currency, jewelry, bullion, unique or
valuable documents, securities or other valuables, or for other property not in
the nature of ordinary fixtures, furnishings and equipment used in general
administrative and executive office activities and functions. Wherever in this
Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or
limits any right of Tenant to assert any claim against Landlord or to seek
recourse against any property of Landlord or (c) agrees to indemnify
26
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Landlord against any matters, the relevant release, waiver, limitation or
indemnity shall run in favor of and apply to Landlord, the constituent
shareholders, partners or other owners of Landlord, and the directors, officers,
employees and agents of Landlord and each such constituent shareholder, partner
or other owner.
Notwithstanding anything to the contrary contained above in this
Paragraph 28 or elsewhere in this Lease, in the event that Landlord's interest
in the Real Property, as the same may from time to time be encumbered, shall be
in excess often Million Dollars ($10,000,000.00), then such excess shall not be
subject to any claims by Tenant or liability to Tenant arising out of or in
connection with this Lease.
29. Estoppel Certificates. At any time and from time to time, upon
---------------------
not less than ten (10) business days' prior notice from Landlord, Tenant shall
execute, acknowledge and deliver to Landlord a statement certifying the
commencement date of this Lease, stating that this Lease is unmodified and in
full force and effect (or if there have been modifications, that this Lease is
in full force and effect as modified and the date and nature of each such
modification), that Landlord is not in default under this Lease (or, if Landlord
is in default, specifying the nature of such default), that Tenant is not in
default under this Lease (or if Tenant is in default, specifying the nature of
such default), the current amounts of and the dates to which the Monthly Rent
and Additional Rent has been paid, and setting forth such other matters as may
be reasonably requested by Landlord. Any such statement may be conclusively
relied upon by a prospective purchaser of the Real Property or by a lender
obtaining a lien on the Real Property as security. If Tenant fails to execute
and deliver to Landlord the required certificate within the required ten (10)
business day period, then Landlord may send Tenant a second written notice
requesting that Tenant execute and deliver such certificate to Landlord pursuant
to the terms hereof. If Tenant fails to execute and return such certificate to
Landlord within ten (10) business days following such second written notice,
then such failure shall be conclusive upon Tenant that (i) this Lease is in full
force and effect, without modification except as may be represented by Landlord,
(ii) there are no uncured defaults in Landlord's performance of its obligations
hereunder, (iii) not more than one month's installment of Monthly Rent has been
paid in advance, and (iv) any other statements of fact included by Landlord in
such statement are correct. Tenant acknowledges and agrees that its failure to
execute such certificate within the ten (10) business day period following
Landlord's second written notice to Tenant, as provided above, may cause
Landlord serious financial damage by causing the failure of a sale or financing
transaction and shall give Landlord all of its rights and remedies under
Paragraph 25 above, including its right to damages caused by the loss of such
sale or financing.
30. Right of Landlord to Perform. If Tenant fails to make any payment
----------------------------
required hereunder (other than Monthly Rent and Additional Rent) or fails to
perform any other of its obligations hereunder within any applicable notice and
cure period provided for herein, Landlord may, but shall not be obliged to, and
without waiving any default of Tenant or releasing Tenant from any obligations
to Landlord hereunder, make any such payment or perform any other such
obligation on Tenant's behalf. All sums so paid by Landlord and all necessary
incidental costs in connection with the performance by Landlord of an obligation
of Tenant (together with interest thereon from the date of such payment by
Landlord until paid at the Interest Rate) shall be payable by Tenant to Landlord
within thirty (30) days of written demand, and Tenant's failure to make such
payment within such thirty (30) day period shall entitle Landlord to the same
rights and remedies provided Landlord in the event of non-payment of rent.
31. Late Charge. Tenant acknowledges that late payment of any
-----------
installment of Monthly Rent or Additional Rent or any other amount required
under this Lease will cause Landlord to incur costs not contemplated by this
Lease and that the exact amount of such costs would be extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, late charges that may be imposed on Landlord by the terms of
any encumbrance or note secured by the Real Property and the loss of the use of
the delinquent funds. Therefore, if any installment of Monthly Rent or
Additional Rent or any other amount due from Tenant is not received when due,
Tenant shall pay to Landlord on demand, on account of the delinquent payment, an
additional sum equal to the greater of (i) five percent (5%) of the overdue
amount, or (ii) $100.00, which additional sum represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of late payment by
Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant's
default with respect to the overdue amount, nor prevent Landlord from exercising
its right to collect interest as provided above, rent, or any other damages, or
from exercising any of the other rights and remedies available to Landlord.
32. Attorneys' Fees; waiver of Jury Trial. In the event of any action
-------------------------------------
or proceeding between Landlord and Tenant (including an action or proceeding
between Landlord and the trustee or debtor in possession while Tenant is a
debtor in a proceeding under any bankruptcy law) to enforce any provision of
this Lease, the losing party shall pay to the prevailing party all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred in such action and in any appeal in connection therewith by
such prevailing party. The "prevailing party" will be determined by the court
before whom the action was brought based upon an assessment of which party's
major arguments or positions taken in the suit or proceeding could fairly be
said to have prevailed over the other party's major arguments or positions on
major disputed issues in the court's decision. Notwithstanding the foregoing,
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however, Landlord shall be deemed the prevailing party in any unlawful detainer
or other action or proceeding instituted by Landlord based upon any default or
alleged default of Tenant hereunder if (i) judgment is entered in favor of
Landlord, or (ii) prior to trial or judgment Tenant pays all or any portion of
the rent claimed by Landlord, vacates the Premises, or otherwise cures the
default claimed by Landlord.
If Landlord becomes involved in any litigation or dispute, threatened or
actual, by or against anyone not a party to this Lease, but arising by reason of
or related to any act or omission of Tenant or any Tenant Party, Tenant agrees
to pay Landlord's reasonable attorneys' fees and other costs incurred in
connection with the litigation or dispute, regardless of whether a lawsuit is
actually filed.
IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE
PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND
THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING
UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL. Landlord and Tenant agree that
this paragraph constitutes a written consent to waiver of trial by jury within
the meaning of California Code of Civil Procedure Section 631 (a)(2), and Tenant
does hereby authorize and empower Landlord to file this paragraph and/or this
Lease, as required, with the clerk or judge of any court of competent
jurisdiction as a written consent to waiver of jury trial.
33. Waiver. No provisions of this Lease shall be deemed waived by
------
Landlord or Tenant unless such waiver is in a writing signed by the party giving
such waiver. The waiver by either party of any breach of any provision of this
Lease by the other party shall not be deemed a waiver of any subsequent breach
of the same or any other provision of this Lease. No delay or omission in the
exercise of any right or remedy of Landlord upon any default by Tenant, or of
Tenant upon any default of Landlord, shall impair such right or remedy or be
construed as a waiver. Landlord's acceptance of any payments of rent due under
this Lease shall not be deemed a waiver of any default by Tenant under this
Lease (including Tenant's recurrent failure to timely pay rent) other than
Tenant's nonpayment of the accepted sums, and no endorsement or statement on any
check or accompanying any check or payment shall be deemed an accord and
satisfaction. Tenant's payment of rent due and Tenant's continuance in
possession shall not constitute a waiver by Tenant of any default of Landlord.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.
34. Notices. All notices and demands which may or are required to be
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given by either party to the other hereunder shall be in writing. All notices
and demands by Landlord to Tenant shall be delivered personally or sent by
United States certified or registered mail, return receipt requested, postage
prepaid, or by any reputable overnight or same-day courier, addressed to Tenant
at the Premises, or to such other place as Tenant may from time to time
designate by notice to Landlord hereunder. All notices and demands by Tenant to
Landlord shall be sent by United States mail, postage prepaid, or by any
reputable overnight or same-day courier, addressed to Landlord in care of
Shorenstein Company, L.P., 555 California Street, 49th floor, San Francisco,
California 94104, or to such other place as Landlord may from time to time
designate by notice to Tenant hereunder. In the event Tenant requests multiple
notices hereunder, Tenant will be bound by such notice from the earlier of the
effective times of the multiple notices.
35. Deleted.
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36. Defined Terms and Marginal Headings. When required by the context of
-----------------------------------
this Lease, the singular includes the plural. If more than one person or entity
signs this Lease as Tenant, the obligations hereunder imposed upon Tenant shall
be joint and several, and the act of, written notice to or from, refund to, or
signature of, any Tenant signatory to this Lease (including without limitation
modifications of this Lease made by fewer than all such Tenant signatories)
shall bind every other Tenant signatory as though every other Tenant signatory
had so acted, or received or given the written notice or refund, or signed. The
headings and titles to the paragraphs of this Lease are for convenience only and
are not to be used to interpret or construe this Lease. Wherever the term
including or includes is used in this Lease it shall be construed as if followed
by the phrase "without limitation." The language in all parts of this Lease
shall in all eases be construed as a whole and in accordance with its fair
meaning and not construed for or against any party simply because one party was
the drafter thereof."
37. Time and Applicable Law. Time is of the essence of this Lease and of
-----------------------
each and all of its provisions, except as to the conditions relating to the
delivery of possession of the Premises to Tenant. This Lease shall be governed
by and construed in accordance with the laws of the State of California, and the
venue of any action or proceeding under this Lease shall be the City and County
of San Francisco, California.
38. Successors. Subject to the provisions of Paragraphs 13 and 28 above,
----------
the covenants and conditions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors, executors, administrators and assigns.
28
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39. Entire Agreement; Modifications. This Lease (including any
-------------------------------
exhibit, rider or attachment hereto) constitutes the entire agreement between
Landlord and Tenant with respect to Tenant's lease of the Premises. No provision
of this Lease may be amended or otherwise modified except by an agreement in
writing signed by the parties hereto. Neither Landlord nor Landlord's agents
have made any representations or warranties with respect to the Premises, the
Building, the Real Property or this Lease except as expressly set forth herein,
including without limitation any representations or warranties as to the
suitability or fitness of the Premises for the conduct of Tenant's business or
for any other purpose, nor has Landlord or its agents agreed to undertake any
alterations or construct any improvements to the Premises except those, if any,
expressly provided in this Lease, and no rights, easements or licenses shall be
acquired by Tenant by implication or otherwise unless expressly set forth
herein. Neither this Lease nor any memorandum hereof shall be recorded by
Tenant.
40. Light and Air. Tenant agrees that no diminution of light, air or
-------------
view by any structure which may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any
liability of Landlord to Tenant, or in any other way affect this Lease.
41. Name of Building. Tenant shall not use the name of the Building for
----------------
any purpose other than as the address of the business conducted by Tenant in the
Premises without the written consent of Landlord, which consent may be denied in
Landlord's sole discretion. Landlord reserves the right to change the name of
the Building at any time in its sole discretion by written notice to Tenant and
Landlord shall not be liable to Tenant for any loss, cost or expense on account
of any such change of name.
42. Severability. If any provision of this Lease or the application
------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
43. Authority. If Tenant or Landlord is a corporation, partnership,
---------
trust, association or other entity, Tenant and Landlord and each person
executing this Lease on their respective behalf, hereby covenant and warrant
that (a) Tenant or Landlord, as the case may be, is duly incorporated or
otherwise established or formed and validly existing under the laws of its state
of incorporation, establishment or formation, (b) Tenant or Landlord, as the
case may be, has and is duly qualified to do business in California, (c) Tenant
or Landlord, as the case may be, has full corporate, partnership, trust,
association or other appropriate power and authority to enter into this Lease
and to perform all Tenant's obligations hereunder, and (d) each person (and all
of the persons if more than one signs) signing this Lease on behalf of Tenant or
Landlord is duly and validly authorized to do so.
44. No Offer. Submission of this instrument for examination and
--------
signature by Tenant does not constitute an offer to lease or a reservation of or
option for lease, and is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
45. Real Estate Brokers. Landlord and Tenant each represents and
-------------------
warrants to the other that such party has negotiated this Lease directly with
the Real Estate Broker(s) identified in Paragraph 2 and has not authorized or
employed, or acted by implication to authorize or to employ, any other real
estate broker or salesman to act for such party in connection with this Lease.
Each party shall hold the other harmless from and indemnify and defend the other
against any and all Claims by any real estate broker or salesman other than the
Real Estate Broker(s) identified in Paragraph 2 for a commission, finder's fee
or other compensation as a result of the inaccuracy of such party's
representation above.
46. Consents and Approvals. Wherever the consent, approval, judgment or
----------------------
determination of Landlord is required or permitted under this Lease, such
consent, approval, judgment or determination shall not be unreasonably withheld,
unless the provision providing for such consent, approval, judgment or
determination specifies that Landlord's consent or approval may be granted or
denied in Landlord's sole discretion or otherwise states specific criteria for
the granting or withholding of consent or approval. Whenever Tenant requests
Landlord to take any action or give any consent or approval, Tenant shall
reimburse Landlord for all of Landlord's reasonable costs incurred in reviewing
the proposed action or consent (whether or not Landlord consents to any such
proposed action), including without limitation reasonable attorneys' or
consultants' fees and expenses, within thirty (30) days after Landlord's
delivery to Tenant of a statement of such costs. If it is determined that
Landlord failed to give its consent or approval where it was required to do so
under this Lease, Tenant's sole remedy will be an order of specific performance
or mandatory injunction of the Landlord's agreement to give its consent or
approval. The review and/or approval by Landlord of any item shall not impose
upon Landlord any liability for accuracy or sufficiency of any such item or the
quality or suitability of such item for its intended use. Any such review or
approval is for the sole purpose of protecting Landlord's interest in the Real
Property, and neither Tenant nor any Tenant Party nor any person or entity
claiming by, through or under Tenant, nor any other third party shall have any
rights hereunder by virtue of such review and/or approval by Landlord.
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47. Reserved Rights. Landlord retains and shall have the rights set
---------------
forth below, exercisable without notice and without liability to Tenant for
damage or injury to property, person or business and without effecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
of the Premises or giving rise to any claim for rent abatement:
(a) To grant to anyone the exclusive right to conduct any business or render
any service in or to the Building and its tenants, provided that such
exclusive right shall not operate to require Tenant to use or patronize
such business or service or to exclude Tenant from its use of the
Premises expressly permitted herein.
(b) To perform, or cause or permit to be performed, at any time and from time
to time, including during Business Hours, construction in the common
areas and facilities or other leased areas in the Real Property.
(c) To reduce, increase, enclose or otherwise change at any time and from
time to time the size, number, location, lay-out and nature of the common
areas and facilities and other tenancies and premises in the Real
Property and to create additional rentable areas through use or enclosure
of common areas.
48. Financial Statements. Upon submission of this Lease to Landlord
--------------------
and at any time thereafter within thirty (30) days after Landlord's request
therefor, Tenant shall furnish to Landlord copies of true and accurate financial
statements reflecting Tenant's then current financial situation (including
without limitation balance sheets, statements of profit and loss, and changes in
financial condition) and Tenant's most recent audited or certified annual
financial statements pertaining to Tenant's business, and in addition shall
cause to be furnished to Landlord similar financial statements for any
guarantor(s) of this Lease. Landlord shall use good faith efforts to keep such
information received from Tenant confidential, except that Landlord may disclose
such financial information received from Tenant to any lender or prospective
lender for, or purchaser or prospective purchaser of, the Real Property and
except that the foregoing confidentiality requirement shall be inapplicable in
the event the subject financial information is made publicly available by the
Security and Exchange Commission or any other governmental body.
49. Deleted.
-------
50. Nondisclosure of Lease Terms. Tenant agrees that the terms of
----------------------------
this Lease are confidential and constitute proprietary information of Landlord,
and that disclosure of the terms hereof could adversely affect the ability of
Landlord to negotiate with other tenants. Tenant hereby agrees that Tenant and
its partners, officers, directors, employees, agents, real estate brokers and
sales persons and attorneys shall not disclose the terms of this Lease to any
other person without Landlord's prior written consent (which consent may be
denied in Landlord's sole discretion), except to (i) any accountants of Tenant
in connection with the preparation of Tenant's financial statements or tax
returns, (ii) to an assignee of this Lease or sublessee of the Premises, (iii)
to an entity or person to whom disclosure is required by applicable law or in
connection with any action brought to enforce this Lease, (iv) Tenant's
consultants, agents, architects or attorneys representing Tenant in connection
with this Lease or (v) any governmental or judicial entity involved in any
investigation into the compliance of the Premises or the Real Property with
applicable Legal Requirements.
51. Hazardous Substance Disclosure. California law requires landlords
------------------------------
to disclose to tenants the existence of certain hazardous substances.
Accordingly, the existence of gasoline and other automotive fluids, maintenance
fluids, copying fluids and other office supplies and equipment, certain
construction and finish materials, tobacco smoke, cosmetics and other personal
items, and asbestos-containing materials ("ACM") must be disclosed. Gasoline and
other automotive fluids are found in the garage area of the Building. Cleaning,
lubricating and hydraulic fluids used in the operation and maintenance of the
Building are found in the utility areas of the Building not generally accessible
to Building occupants or the public. Many Building occupants use copy machines
and printers with associated fluids and toners, and pens, markers, inks, and
office equipment that may contain hazardous substances. Certain adhesives,
paints and other construction materials and finishes used in portions of the
Building may contain hazardous substances. Although smoking is prohibited in the
public areas of the Building, these areas may, from time to time, be exposed to
tobacco smoke. Building occupants and other persons entering the Building from
time-to-time may use or carry prescription and non-prescription drugs, perfumes,
cosmetics and other toiletries, and foods and beverages, some of which may
contain hazardous substances. Further, certain portions of the Building contain
ACM in the form of fireproofing on structural elements, heat insulation sealed
within fire doors, and small areas of resilient floor tile, but these areas are
generally inaccessible to Building occupants and visitors, such as machinery and
utility rooms, the inside of sealed walls and above suspended ceilings. Landlord
has made no special investigation of the Premises with respect to any hazardous
substances. Tenant agrees not to expose or disturb any ACM unless Landlord has
given Tenant prior written consent thereto (which consent may be denied in
Landlord's sole discretion) and Tenant complies with all applicable Legal
Requirements and Landlord's written procedures for handling ACM. Tenant's
failure to comply with the immediately preceding sentence
30
<PAGE>
shall constitute an Event of Default under Paragraph 25 of this Lease. Tenant
may obtain a copy of Landlord's written procedures for handling ACM from the
Building office.
52. Stairway Access. Throughout the Lease term, Landlord shall permit
---------------
Tenant to use the Building's fire stairs for access by Tenant's employees
between the 11th floor of the Premises and the 12th floor of the Premises.
Tenant acknowledges that the doors leading from the fire stairs to individual
floors are kept locked, subject to applicable Legal Requirements and Building
procedures. Accordingly, a security system mutually acceptable to Landlord and
Tenant (such as code access, card key access or other system) shall be installed
by Tenant, at Tenant's sole cost, on the doors leading from the fire stairs to
the 11th floor of the Premises and the 12th floor of the Premises so that
Tenant's employees are able to open the doors from the fire stairs using such
system. Such installation shall be performed either as a part of the Tenant
Improvements or as an Alteration pursuant to Paragraph 9 below. Tenant's access
rights provided in this Paragraph 52 shall be subject to applicable Legal
Requirements and reasonable Building procedures currently or hereinafter in
effect. Throughout the Lease term, Tenant shall, at Tenant's sole cost, maintain
the security system in first class working condition. Notwithstanding anything
to the contrary above, if Landlord, at any time during the Lease term and for
any reason, adopts a uniform policy that tenants of the Building may not use the
fire stairs for access to their premises, then Landlord may revoke Tenant's
rights under this Paragraph 52 to use the fire stairs for such access. Upon the
expiration or earlier termination of this Lease (or such earlier date that
Landlord, in accordance with the provisions above, revokes Tenant's right to use
the fire stairs for access between the 11th and 12th floors) Landlord may, at
its option, require that the security system be removed and the affected
portions of the Building returned to their condition immediately prior to the
installation of the security system (ordinary wear and tear excepted). If
Landlord does so require that the security system be removed, then Landlord
shall perform such removal and Tenant shall reimburse Landlord for the
reasonable costs thereof, within thirty (30) days of Landlord's written demand
therefor.
53. Right of First Offer.
--------------------
a. First Offer Right; Available Space. If, during the first three
----------------------------------
(3) years of the Lease term, the entire thirteenth (13th) floor of the Building
(the "First Offer Space") becomes "available for lease," then Tenant shall have
a right of first offer to lease the First Offer Space, subject to the provisions
of this Paragraph 53. The First Offer Space shall not be deemed "available for
lease" if the tenant under an expiring lease of such space desires to renew or
extend its lease, whether pursuant to a renewal option or a new arrangement with
Landlord, or if any tenant of the Building exercises an option or right of first
offer to lease such space, which option or right of first offer existed as of
the date of this Lease. Upon Landlord obtaining knowledge that the First Offer
Space will be available for lease, Landlord shall send Tenant a written notice
(the "Availability Notice") specifying the availability date (or estimated
availability date).
b. Exercise of First Offer Right. If Tenant elects to lease the
-----------------------------
First Offer Space (and Tenant must lease the entire First Offer Space, and may
not elect to lease only a portion thereof), Tenant shall so notify Landlord in
writing within five (5) business days after Tenant's receipt of the Availability
Notice. If Tenant does not exercise its right to lease the First Offer Space
within such five (5) business day period, then Landlord shall be released of its
obligation to lease the First Offer Space to Tenant and the provisions of this
Paragraph 53 shall no longer have any force or effect either as to the First
Offer Space.
c. Terms and Conditions.
--------------------
(i) Upon Tenant's election to lease the First Offer Space,
Landlord and Tenant shall promptly enter into an amendment of this Lease, adding
the First Offer Space to the Premises on all the terms and conditions set forth
in this Lease as to the Premises originally demised hereunder, except that (1)
the term of the lease to Tenant of the First Offer Space shall commence upon the
availability date specified in the Availability Notice (but in event sooner than
thirty (30) days after the date of Landlord's Availability Notice to Tenant) or,
if later, the date Landlord actually delivers the space to Tenant, vacant and
free of other tenancies, and shall continue coextensively with the remaining
term hereof and any extension thereof, (2) the Monthly Rent payable by Tenant
under Paragraph 5 of this Lease for the First Offer Space shall be the fair
market rent for the First Offer Space, as provided below, (3) Tenant's Share for
purposes of Paragraph 7 hereof with respect to the First Offer Space shall be
determined by dividing the rentable square footage of such First Offer Space by
the rentable square footage of the Building, (4) for purposes of Paragraph 7
hereof, the Base Year for the First Offer Space shall be the calendar year in
which the First Offer Space is added to this Lease and the Base Tax Year shall
be the fiscal tax year in which the First Offer Space is added to this Lease,
and (5) Tenant shall take the First Offer Space in its then "as-is" condition.
For purposes of this Paragraph 53.c., the term "fair market rent"
shall mean the rental rate that would be applicable for a lease term commencing
on the commencement date of the lease as to the First Offer Space and that would
be payable in any arms length negotiations for the First Offer Space for a lease
term of the length of the term that Tenant will lease the First Offer Space
(provided, however,
31
<PAGE>
if the term of this Lease as to the First Offer Space will be less than five (5)
years, then for the purposes of establishing the fair market rent for the First
Offer Space, the term of this Lease shall be deemed to be five (5) years), which
rental rate may be established by reference to rental terms actually negotiated
for comparable space under primary lease (and not sublease), taking into
consideration the fact that the First Offer Space is being leased in its as-is
condition, and taking into consideration the location of the Building and such
amenities as existing improvements, view, floor on which the First Offer Space
is situated and the like, situated in first-class, reputable, established office
and retail complexes in comparable locations in the San Francisco Financial
District, in comparable physical and economic condition, taking into
consideration the then-prevailing ordinary rental market practices with respect
to tenant concessions (if any) (e.g. not offering extraordinary rental,
promotional deals and other concessions to tenants which deviate from what is
the then-prevailing ordinary practice in an effort to alleviate cash flow
problems, difficulties in meeting loan obligations or other financial distress,
or in response to a greater than average vacancy rate).
The fair market rent for the First Offer Space shall be mutually
agreed upon by Landlord and Tenant in writing within the thirty (30)-day period
commencing with Landlord's notice to Tenant stating the commencement date for
the First Offer Space, but no sooner than three (3) months prior to the date the
First Offer Space is to be added to this Lease. If Landlord and Tenant are
unable to agree upon the fair market rent within such thirty (30)-day period,
the fair market rent shall be established by appraisal in accordance with the
procedures set forth in Exhibit C attached hereto.
---------
(ii) If Tenant exercises the right of first offer granted
herein, Landlord does not guarantee that the First Offer Space will be available
on the stated availability date for the lease thereof, if the then existing
occupants of the First Offer Space shall hold-over, or for any other reason
beyond Landlord's reasonable control. In such event, rent with respect to the
First Offer Space shall be abated until Landlord legally delivers the same to
Tenant, as Tenant's sole recourse.
d. Minimum Monthly Rent. Notwithstanding anything in the foregoing
--------------------
or Exhibit C to the contrary, at no time during the term of this Lease may the
Monthly Rent for the First Offer Space be less than the amount produced by
multiplying the rentable square footage of such First Offer Space by the
aggregate of the monthly rental rate per rentable square foot payable by Tenant
for the original Premises leased under this Lease under Paragraphs 5 and 7
hereof, as such monthly rental rate may adjust from time to time during the term
hereof.
e. Limitation on Tenant's Right of First Offer. Notwithstanding the
-------------------------------------------
foregoing, if (i) on the date of exercise of the right of first offer, or the
date immediately preceding the date the Lease term for the First Offer Space is
to commence, Tenant is in default of any of its obligations under this Lease, or
(ii) on the date immediately preceding the date the Lease term for the First
Offer Space is to commence Tenant named herein (a) is not in occupancy of eighty
percent (80%) of the Premises then leased hereunder or (b) does not intend to
occupy eighty percent (80%) of the Premises then leased hereunder, together with
the entire First Offer Space, then Tenant shall have no right to lease the First
Offer Space and the exercise of the right of first offer shall be null and void.
54. Signage. Tenant may, at Tenant's expense, install a sign
-------
identifying Tenant's business at the entrance to the Premises, provided that the
design, size, color and location of the sign shall be in accordance with the
Building's standard signage program and subject to Landlord's prior reasonable
approval. Tenant shall be entitled, at no cost to Tenant, to have the name of
Tenant's company listed on the Building directory situated in the lobby of the
Building.
55. Parking.
--------
a. Commencing upon the date that Tenant first conducts its business
from the Premises, Landlord shall provide Tenant with five (5) reserved parking
spaces in such areas of the parking facility for the Building as Landlord may
designate from time to time, and Tenant shall pay for such parking at the rate
or charge in effect from time to time for parking in the Building. Tenant
acknowledges that monthly parking rates apply only to parking during Business
Hours on Business Days and that parking outside or beyond such hours shall be
subject to additional hourly rates in effect from time to time, and Tenant
further acknowledges that the monthly and hourly rates or charges in effect may
vary from time to time based on, among other things, the time of day, type of
parking (e.g., valet, self-park, or tandem), occurrence of "special events", and
general rate increases.
b. Tenant shall provide Landlord with advance written notice of the
names of each individual to whom Tenant from time to time distributes Tenant's
parking rights hereunder, and shall cause each such individual to execute
Landlord's standard waiver form for garage users. If the parking charge is not
paid when due, and such failure continues for ten (10) days after written notice
to Tenant of such failure, then in addition to any other remedies afforded
Landlord under this Lease by reason of nonpayment of rent, Landlord may
terminate Tenant's rights under this Paragraph 55. Further, if at any time
Tenant releases to Landlord any parking space provided for in this Paragraph 55,
then Tenant's right under this Paragraph 55 to use such released parking space
shall automatically terminate.
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c. The parking spaces to be made available to Tenant hereunder may
contain a reasonable mix of spaces for compact ears. Landlord shall take
reasonable actions to ensure the availability of the parking spaces leased by
Tenant, but Landlord does not guarantee the availability of those spaces at all
times against the actions of other tenants of the Building and users of the
parking facility, and Landlord further reserves the right to restrict the hours
during which the parking facility is available to Tenant for use of the parking
spaces provided to Tenant hereunder to Business Hours on Business Days. Without
limiting the foregoing, in no event shall this Lease be void or voidable, nor
shall Landlord be liable to Tenant for any loss or damage, nor shall there be
any abatement of rent hereunder (other than the parking charge paid hereunder
for any parking space no longer made available), by reason of any reduction in
Tenant's parking rights hereunder by reason of strikes, lock-outs, labor
disputes, shortages of material or labor, fire, flood or other casualty, acts of
God or any other cause beyond the control of Landlord. Access to the parking
spaces to be made available to Tenant shall, at Landlord's option, be by card,
pass, bumper sticker, decal or other appropriate identification issued by
Landlord, and Tenant's right to use the parking facility is conditioned on
Tenant's abiding by and shall otherwise be subject to such rules and regulations
as may be promulgated by Landlord from time to time for the parking facility.
d. The parking rights set forth in this Paragraph 55 are non-
transferrable, are personal to the Tenant originally named herein, and shall not
inure to the benefit of any successor, assignee or subtenant of Tenant other
than an Affiliate (as defined in Paragraph 13.g. above). In the event of any
assignment or sublease of parking space rights that is approved by Landlord
(provided, however, that such approval may be granted or withheld by Landlord in
its sole and absolute discretion), Landlord shall be entitled to receive one
hundred percent (100%) of any profit received by Tenant in connection with such
assignment or sublease.
THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set forth at
----------------------
the top of page 1 hereof.
FORTY-FIVE FREMONT ASSOCIATES, DIGITAL ISLAND, INC., a California
a California general partnership corporation
By Shorenstein Company, L.P., a By /s/ TL THOMPSON
California limited partnership, --------------------------------
General Partner Name TL Thompson
------------------------------
By Shorenstein Management, Inc., a Title CFO
California corporation, -----------------------------
General Partner Tenant
By /s/ Douglas W. Shorenstein
__________________________
Douglas W. Shorenstein
President
Landlord
33
<PAGE>
[PREMISES FLOOR PLAN]
45 FREMONT
FLOOR 11
EXHIBIT A
Page 1 of 2
<PAGE>
[PREMISES FLOOR PLAN]
45 FREMONT
FLOOR 12
EXHIBIT A
Page 2 of 2
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
FORTY-FIVE FREMONT STREET BUILDING
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building or any part of the Premises visible from the exterior of
the Premises without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion. Landlord shall have the right to remove,
at Tenant's expense and without notice to Tenant, any such sign, placard,
picture, advertisement, name or notice that has not been approved by Landlord.
All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of Tenant by a person
approved of by Landlord.
If Landlord notifies Tenant in writing that Landlord objects to
any curtains, blinds, shades or screens attached to or hung in or used in
connection with any window or door of the Premises, such use of such curtains,
blinds, shades or screens shall be removed immediately by Tenant. No awning
shall be permitted on any part of the Premises.
2. No ice, drinking water, towel, barbering or bootblacking,
shoeshining or repair services, or other similar services shall be provided to
the Premises, except from persons authorized by Landlord and at the hours and
under regulations fixed by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Tenant Parties or used by Tenant
for any purpose other than for ingress to and egress from its Premises. The
halls, passages, exits, entrances, elevators, stairways, balconies and roof are
not for the use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Building and its tenants. No tenant and no employees or
invitees of any tenant shall go upon the roof of the Building.
5. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any interior or exterior door of the Premises without the
prior written consent of Landlord.
6. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
7. Tenant shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in any way
deface the Premises or any part thereof.
8. No furniture, freight or equipment of any kind shall be brought
into the Building without the consent of Landlord and all moving of the same
into or out of the Building shall be done at such time and in such manner as
Landlord shall designate. Landlord shall have the right to prescribe the weight,
size and position of all safes and other heavy equipment brought into the
Building and also the times and manner of moving the same in and out of the
Building. Safes or other heavy objects shall, if considered necessary by
Landlord, stand on a platform of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such safe or property from any cause, and all damage done to the Building by
moving or maintaining any such safe or other property shall be repaired at the
expense of Tenant. The elevator designated for freight by Landlord shall be
available for use by all tenants in the Building during the hours and pursuant
to such procedures as Landlord may determine from time to time. The persons
employed to move Tenant's equipment, material, furniture or other property in or
out of the Building must be acceptable to Landlord. The moving company must be a
locally recognized professional mover, whose primary business is the performing
of relocation services, and must be bonded and fully insured. In no event shall
Tenant employ any person or company whose presence may give rise to a labor or
other disturbance in the Real Property. A certificate or other verification of
such insurance must be received and approved by Landlord prior to the start of
any moving operations. Insurance must be sufficient in Landlord's sole opinion,
to cover all personal liability, theft or damage to the Project, including, but
not limited to, floor coverings, doors, walls, elevators, stairs, foliage and
landscaping. Special care must be taken to prevent damage to foliage and
landscaping during adverse weather. All moving operations shall be conducted at
such times and in such a manner as Landlord shall direct, and all moving shall
take place during non-business hours unless Landlord agrees in writing
otherwise.
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<PAGE>
9. Tenant shall not employ any person or persons other than the
janitor of Landlord for the purpose of cleaning the Premises, unless otherwise
agreed to by Landlord. Except with the written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the Building or the Premises. Tenant shall
not cause any unnecessary labor by reason of Tenant's carelessness or
indifference in the preservation of good order and cleanliness.
10. Tenant shall not use, keep or permit to be used or kept any foul
or noxious gas or substance in the Premises, or permit or suffer the Premises to
be occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building. In no event shall Tenant keep, use, or permit to be used in the
Premises or the Building any guns, firearm, explosive devices or ammunition.
11. No cooking shall be done or permitted by Tenant in the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
12. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
13. Landlord will direct electricians as to where and how telephone
and telegraph wires are to be introduced into the Premises and the Building. No
boring or cutting for wires will be allowed without the prior consent of
Landlord. The location of telephones, call boxes and other office equipment
affixed to the Premises shall be subject to the prior approval of Landlord.
14. Upon the expiration or earlier termination of the Lease, Tenant
shall deliver to Landlord the keys of offices, rooms and toilet rooms which have
been furnished by Landlord to Tenant and any copies of such keys which Tenant
has made. In the event Tenant has lost any keys furnished by Landlord, Tenant
shall pay Landlord for such keys.
15. Tenant shall not lay linoleum, tile, carpet or other similar
floor covering so that the same shall be affixed to the floor of the Premises,
except to the extent and in the manner approved in advance by Landlord. The
expense of repairing any damage resulting from a violation of this rule or
removal of any floor covering shall be borne by the tenant by whom, or by whose
contractors, employees or invitees, the damage shall have been caused.
16. No furniture, packages, supplies, equipment or merchandise will
be received in the Building or carried up or down in the elevators, except
between such hours and in such elevators as shall be designated by Landlord,
which elevator usage shall be subject to the Building's customary charge
therefor as established from time to time by Landlord.
17. On Saturdays, Sundays and legal holidays, and on other days
between the hours of 6:00 P.M. and 8:00 A.M., access to the Building, or to the
halls, corridors, elevators or stairways in the Building, or to the Premises may
be refused unless the person seeking access is known to the person or employee
of the Building in charge and has a pass or is properly identified. Landlord
shall in no ease be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In ease of invasion,
mob, riot, public excitement, or other commotion, Landlord reserves the right to
prevent access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of the tenants and protection of property in
the Building.
18. Tenant shall be responsible for insuring that the doors of the
Premises are closed and securely locked before leaving the Building and must
observe strict care and caution that all water faucets or water apparatus are
entirely shut off before Tenant or Tenant's employees leave the Building, and
that all electricity, gas or air shall likewise be carefully shut off, so as to
prevent waste or damage, and for any default or carelessness Tenant shall make
good all injuries sustained by other tenants or occupants of the Building or
Landlord. Landlord shall not be responsible to Tenant for loss of property on
the Premises, however occurring, or for any damage to the property of Tenant
caused by the employees or independent contractors of Landlord or by any other
person.
19. Landlord reserves the right to exclude or expel from the Building
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of the rules and regulations of the Building.
20. The requirements of any tenant will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord, and no employee will admit any person
(tenant or otherwise) to any office without specific instructions from Landlord.
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21. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises without the prior written
consent of Landlord.
22. Subject to Tenant's right of access to the Premises in accordance
with Building security procedures, Landlord reserves the right to close and keep
locked all entrance and exit doors of the Building on Saturdays, Sundays and
legal holidays and on other days between the hours of 6:00 P.M. and 8:00 A.M.,
and during such further hours as Landlord may deem advisable for the adequate
protection of the Building and the property of its tenants.
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EXHIBIT C
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Appraisal Procedure
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Within fifteen (15) days after the expiration of the thirty (30)-day
period set forth in Paragraph 53 of the Lease for the mutual agreement of
Landlord and Tenant as to the fair market monthly rental, each party hereto, at
its cost, shall engage a real estate appraiser to act on its behalf in
determining the fair market monthly rental. The appraisers each shall have at
least ten (10) years' experience with leases in first-class office/retail
buildings in the San Francisco Financial District and shall submit to Landlord
and Tenant in advance for Landlord's and Tenant's reasonable approval the
appraisal methods to be used. If a party does not appoint an appraiser within
such fifteen (15)-day period but an appraiser is appointed by the other
respective party, the single appraiser appointed shall be the sole appraiser and
shall set the fair market monthly rental. If the two appraisers are appointed by
the parties as stated in this paragraph, such appraisers shall meet promptly and
attempt to set the fair market monthly rental. If such appraisers are unable to
agree within thirty (30) days after appointment of the second appraiser, the
appraisers shall elect a third appraiser meeting the qualifications stated in
this paragraph within ten (10) days after the last date the two appraisers are
given to set the fair market monthly rental. Each of the parties hereto shall
bear one-half (1/2) the cost of appointing the third appraiser and of the third
appraiser's fee. The third appraiser shall be a person who has not previously
acted in any capacity for either party.
The third appraiser shall conduct his own investigation of the fair
market monthly rent, and shall be instructed not to advise either party of his
determination of the fair market monthly rent except as follows: When the third
appraiser has made his determination, he shall so advise Landlord and Tenant and
shall establish a date, at least five (5) days after the giving of notice by the
third appraiser to Landlord and Tenant, on which he shall disclose his
determination of the fair market monthly rent. Such meeting shall take place in
the third appraiser's office unless otherwise agreed by the parties. After
having initialed a paper on which his determination of fair market monthly rent
is set forth, the third appraiser shall place his determination of the fair
market monthly rent in a sealed envelope. Landlord's appraiser and Tenant's
appraiser shall each set forth their determination of fair market monthly rent
on a paper, initial the same and place them in sealed envelopes. Each of the
three envelopes shall be marked with the name of the party whose determination
is inside the envelope.
In the presence of the third appraiser, the determination of the fair
market monthly rent by Landlord's appraiser and Tenant's appraiser shall be
opened and examined. If the higher of the two determinations is 105% or less of
the amount set forth in the lower determination, the average of the two
determinations shall be the fair market monthly rent, the envelope containing
the determination of the fair market monthly rent by the third appraiser shall
be destroyed and the third appraiser shall be instructed not to disclose his
determination. If either party's envelope is blank, or does not set forth a
determination of fair market monthly rent, the determination of the other party
shall prevail and be treated as the fair market monthly rent. If the higher of
the two determinations is more than 105% of the amount of the lower
determination, the envelope containing the third appraiser's determination shall
be opened. If the value determined by the third appraiser is the average of the
values proposed by Landlord's appraiser and Tenant's appraiser, the third
appraiser's determination of fair market monthly rent shall be the fair market
monthly rent. If such is not the case, fair market monthly rent shall be the
rent proposed by either Landlord's appraiser or Tenant's appraiser which is
closest to the determination of fair market monthly rent by the third appraiser.
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