California-Los Gatos-980 University Avenue Lease - BR3 Partners and Netflix.com
OFFICE LEASE
BR3 Partners,
as "Landlord"
and
NetFlix.Com,
as "Tenant"
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OFFICE LEASE
SUMMARY OF BASIC LEASE TERMS
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SECTION TERMS
(LEASE REFERENCE)
A. Lease Reference Date: October 27, 2000
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(Introduction)
B. Landlord: BR3 Partners
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(Introduction)
C. Tenant: NetFlix.com
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(Introduction)
D. Premises: That area consisting of approximately 25,070
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(Section 1.21) rentable square feet, the address of which is
980 University Avenue, Building "B", within
the Building as shown on Exhibit B.
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E. Project: The land and improvements shown Exhibit A
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(Section 1.22) consisting of one (1) building(s) the
aggregate area of which is approximately
66,400 rentable square feet.
F. Building The building in which the Premises are
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(Section 1.7) located known as 980 University Avenue, Los
Gatos, CA containing approximately 66,400
rentable square feet.
G. Tenant's Share: 37.76%
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(Section 1.30)
H. Tenant's Allocated 66 parking stalls, 41 of which shall be
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(Section 4.6) Parking Stalls: unreserved and non-exclusive, the remaining
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25 shall be assigned stalls as shown as the
crosshatched stalls on Exhibit "I".
I. Scheduled
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(Section 1.28) Commencement Date: November 1, 2000.
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J. Lease Term: Sixty (60) calendar months (plus the partial
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(Section 1.18) month following the Commencement Date if such
date is not the first day of the month)
subject to early expiration as set forth in
Section 4.9.
K. Based Monthly Rent: Nov. 1, 2000 - Oct. 31, 2001 $ 125,350.00
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(Section 3.1) Nov. 1, 2001 - Oct. 31, 2002 $ 130,364.00
Nov. 1, 2002 - Oct. 31, 2003 $ 135,579.00
Nov. 1, 2003 - Oct. 31, 2004 $ 141,002.00
Nov. 1, 2004 - Oct. 31, 2005 $ 146,642.08
L. Prepaid Rent: $125,350.00
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(Section 3.3)
M. Security Deposit: $500,000.00 - cash (Section 3.5)
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(Sections 3.5 and 36) $500,000.00 - Letter of Credit
(Section 3.6)
N. Premitted Use: Offices
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(Section 4.1)
O. Permitted Tenant's
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(Section 5.2) Alterations Limit: $5,000.00
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P. Direct Expenses: See Article 8
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(Section 8.1)
Q. Tenant's Liability
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(Section 9.1) Insurance Minimum: $2,000,000.00
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R. Landlord's Address: 985 University Avenue
------------------- Suite 12
(Section 1.3) Los Gatos, CA 95032
S. Tenant's Address: 970 University Avenue
----------------- Los Gatos, CA 95032
(Section 1.3)
T. Retained Real Estate
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(Section 15.13) Brokers: Colliers Parrish
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U. Lease: This Office Lease includes the Summary of
the Basic Lease Terms, the Lease, and the
(Section 1.17) following exhibits and addenda: Exhibit A
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(site plan of the Project), Exhibit B
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(diagram of Premises shown as cross-hatched),
Exhibit C (Work Letter), Exhibit D
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(Memorandum of Commencement Date), Exhibit E
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(form of Subordination Agreement), Exhibit F
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(Landlord Services), Exhibit G (Rules and
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Regulations), Exhibit H (Acknowledgement of
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Early Expiration), and Exhibit I (Parking).
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The foregoing Summary is hereby incorporated into and made a part of this
Lease. Each reference in this Lease to any term of the Summary shall mean the
respective information set forth above and shall be construed to incorporate all
of the terms provided under the particular paragraph pertaining to such
information. In the event of any conflict between the Summary and the Lease, the
Summary shall control.
LANDLORD: TENANT:
By: /s/ [ILLEGIBLE] By: /s/ W. Barry McCarthy, Jr.
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Title: Managing Partner Title: CFO
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By:______________________________ By:_____________________________
Title:___________________________ Title:__________________________
Dated: 10/31/00 Dated: October 31, 2000
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OFFICE LEASE
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This Office Lease ("Lease") is dated, for reference purposes only, as of
the Lease Reference Date specified in Section A of the Summary of Basic Lease
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Terms ("Summary"), and is made by and between the party identified as Landlord
in Section B of the Summary and the party identified as Tenant in Section C of
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the Summary.
ARTICLE 1
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DEFINITIONS
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1.1 General. Any initially capitalized term that is given a special
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meaning by this Article 1, the Summary, or by any other provision of this Lease
(including the exhibits attached hereto) shall have such meaning when used in
this Lease or any addendum or amendment hereto unless otherwise clearly
indicated by the context.
1.2 Additional Rent. The term "Additional Rent" is defined in Section
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3.2.
1.3 Address for Notices. The term "Address for Notices" shall mean the
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addresses set forth in Sections R and S of the Summary; provided, however, that
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after the Commencement Date, Tenant's Address for Notices shall be the address
of the Premises.
1.4 Agents. The term "Agents" shall mean the following: (i) with respect
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to Landlord or Tenant, the agents, employees, contractors and invitees of such
party, and (ii) in addition with respect to Tenant, Tenant's subtenants and
their respective agents, employees, contractors and invitees.
1.5 Agreed Interest Rate. The term "Agreed Interest Rate" shall mean that
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interest rate determined as of the time it is to be applied that is equal to the
lesser of (i) the higher of five percent (5%) in excess of the discount rate
established by the Federal Reserve Bank of San Francisco as it may be adjusted
from time to time, or ten percent (10%) per annum, or (ii) the maximum interest
rate permitted by Law.
1.6 Base Monthly Rent. The term "Base Monthly Rent" shall mean the fixed
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monthly rent payable by Tenant pursuant to Section 3.1 which is specified in
Section K of the Summary.
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1.7 Building. The term "Building" shall mean the building in which the
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Premises are located which Building is identified in Section F of the Summary,
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the rentable area of which is referred to herein as the "Building Rentable
Area."
1.8 Commencement Date. The term "Commencement Date" is the date the Lease
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Term commences, which term is defined in Section 2.2.
1.9 Common Area. The term "Common Area" shall mean all areas and
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facilities within the Project that are not designated by Landlord for the
exclusive use of Tenant or any other lessee or other occupant of the Project,
including, without limitation, the parking areas, access and perimeter roads,
pedestrian sidewalks, landscaped areas, trash enclosures, recreation areas and
the like.
1.10 Direct Expenses. The term "Direct Expenses" is defined in Section
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8.2.
1.11 Consumer Price Index. The term "Consumer Price Index" shall refer to
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the Consumer Price Index, All Urban Consumers, subgroup "All Items", for the San
Francisco-Oakland-San Jose metropolitan area (base year 1982-84 equals 100),
which is presently being published monthly by the United States Department of
Labor, Bureau of Labor Statistics. However, if this Consumer Price Index is
changed so that the base year is altered from that used as of the commencement
of the Lease Term, the Consumer Price Index shall be converted in accordance
with the conversion factor published by the United States Department of Labor,
Bureau of Labor Statistics to obtain the same results that would have been
obtained had the base year not been changed. If no conversion factor is
available, or if the Consumer Price Index is otherwise changed, revised or
discontinued for any reason, there shall be substituted in lieu thereof, and the
term "Consumer Price Index" shall thereafter refer to, the most nearly
comparable official price index of the United States government in order to
obtain substantially the same result as would have been obtained had the
original Consumer Price Index not been discontinued, revised or changed, which
alternative index shall be selected by Landlord in its reasonable judgment.
1.12 Effective Date. The term "Effective Date" shall mean the date the
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last signatory to this Lease whose execution is required to make it binding on
the parties hereto shall have executed this Lease.
1.13 Event of Tenant's Default. The term "Event of Tenant's Default" is
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defined in Section 13.1
1.14 Hazardous Materials. The terms "Hazardous Materials" and "Hazardous
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Materials Laws" are defined in Section 7.2E.
1.15 Insured and Uninsured Peril. The terms "Insured Peril" and "Uninsured
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Peril" are defined in Section 11.2E.
1.16 Law(s). The term "Law(s)" shall mean any judicial decision, statute,
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constitution, ordinance, resolution, regulation, rule, administrative order or
other requirement of any municipal, county, state, federal or other governmental
agency or authority having jurisdiction over the parties to this Lease or the
Premises, or both, in effect either at the Effective Date or any time during the
Lease Term.
1.17 Lease. The term "Lease" shall mean the Summary and all elements of
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this Lease identified in Section U of the Summary, all of which are attached
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hereto and incorporated herein by this reference.
1.18 Lease Term. The term "Lease Term" shall mean the term of this Lease.
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which shall commence on the Commencement Date and, unless sooner expiring or
terminated pursuant to this Lease, shall continue for the period specified in
Section J of the Summary.
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1.19 Lender. The term "Lender" shall mean any beneficiary, mortgagee,
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secured party, ground or underlying lessor, or other holder of any Security
Instrument now or hereafter affecting the Project or any portion thereof.
l.20 Permitted Use. The term "Permitted Use" shall mean the use specified
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in Section N of the Summary, and no other use shall be permitted.
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1.21 Premises. The term "Premises" shall mean that space described in
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Section D of the Summary that is within the Building.
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1.22 Project. The term "Project" shall mean that real property and
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the improvements thereon which are specified in Section E of the Summary, the
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aggregate rentable area of which is referred to herein as the "Project Rentable
Area."
1.23 Private Restrictions. The term "Private Restrictions" shall mean
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all recorded covenants, conditions and restrictions, private agreements,
reciprocal easement agreements, and any other recorded instruments affecting the
use of the Premises and/or the Project which exist as of the Effective Date or
which are recorded after the Effective Date.
1.24 Real Property Taxes. The term "Real Property Taxes" is defined
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in Section 8.3.
1.25 Rent. The term "Rent" or "rent" shall mean, collectively, Base
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Monthly Rent, Additional Rent and all other payments of money payable to
Landlord under this Lease, whether or not such payments are specifically
denominated as rent hereunder.
l.26 Rentable Area. The term "Rentable Area" as used in this Lease
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shall mean, with respect to the Premises, the rentable square feet set forth in
Section D of the Summary, and, with respect to the Project, the rentable square
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feet set forth in Section E of the Summary (subject to reformulation pursuant to
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Section 1.32 below). Landlord and Tenant agree that (i) each has had an
opportunity to determine to its satisfaction the actual area of the Project, the
Building and the Premises, (ii) all measurements of area contained in this Lease
are conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more or
less than the amount of area reflected in this Lease, and (iii) any such
subsequent determination that the area is more or less than shown in this Lease
shall not result in a change in any way of the computations of rent, improvement
allowances, or other matters described in this Lease where area is a factor.
1.27 Rules and Regulations. The term "Rules and Regulations" shall
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mean the rules and regulations attached hereto as Exhibit G and any amendments
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or supplements thereto and any additional rules and regulations, all as may be
adopted and promulgated by Landlord from time to time.
1.28 Scheduled Commencement Date. The term "Scheduled Commencement
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Date" shall mean the date specified in Section 1 of the Summary.
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1.29 Security Instrument. The term "Security Instrument" shall mean
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any ground or underlying lease, mortgage or deed of trust which now or hereafter
affects the Project (or any portion thereof), and any renewal, modification,
consolidation, replacement or extension thereof.
1.30 Summary. The term "Summary shall mean the Summary of Basic Lease
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Terms executed by Landlord and Tenant that is part of this Lease.
1.31 Tenant's Alterations. The term "Tenant's Alterations" shall mean
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all improvements, additions, alterations and fixtures installed in the Premises
by or for the benefit of Tenant following the Commencement Date which are not
Trade Fixtures.
1.32 Tenant's Share. The term "Tenant's Share" shall mean the
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percentage obtained by dividing Tenant's Rentable Area by the Project Rentable
Area, which, as of the Effective Date, is the percentage identified in Section G
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of the Summary. In the event Landlord constructs other buildings on the Project,
Landlord may, in Landlord's sole discretion, reformulate Tenant's Share, as to
any or all of the items which comprise Direct Expenses, to reflect the rentable
square footage of the Premises as a percentage of all rentable square footage of
the Project. In the event Tenant's Share is reformulated in accordance with this
Section 1.32, Landlord shall promptly provide Tenant notice of such
reformulation, together with a written statement showing in reasonable detail
the manner in which Tenant's Share was reformulated and a List of all items of
Direct Expenses which will be accounted for using the reformulated percentage.
Any items of Direct Expenses to which the reformulated share is not applied
shall be accounted for using the original Tenant's Share set forth in Section G
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of the Summary.
1.33 Trade Fixtures. The term "Trade Fixtures" shell mean (i)
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Tenant's inventory, furniture, signs, business equipment and other personal
property, and (ii) anything affixed to the Premises by Tenant at its expense for
purposes of trade (except replacement of similar work or material originally
installed by Landlord) which can be removed without material injury to the
Premises unless such thing has, by the manner in which it is affixed, become an
integral part of the Premises.
ARTICLE 2
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DEMISE, CONSTRUCTION, AND ACCEPTANCE
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2.1 Demise of Premises. Landlord hereby leases to Tenant, and Tenant
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hereby leases from Landlord, for the Lease Term upon the terms and conditions of
this Lease, the Premises for Tenant's own use in the conduct of Tenant's
business together with (i) the non-exclusive right to use the number of Tenant's
Allocated Parking Stalls within the Common Area (subject to the limitations set
forth in Section 4.6), and (ii) the non-exclusive right to use the Common Area
for ingress to and egress from the Premises. Landlord reserves the use of the
exterior walls, the roof and the area beneath and above the Premises, together
with the right to install, maintain, use and replace ducts, wires, conduits and
pipes leading through the Premises in locations which will not materially
interfere with Tenant's use of the Premises.
2.2 Commencement Date. If Landlord is not obligated to construct
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improvements to the Premises prior to the Commencement Date pursuant to Section
2.3, then, on the Scheduled Commencement Date. Landlord shall deliver possession
of the Premises to Tenant and the Lease Term shall commence on such date (and
such date shall be referred to herein as the "Commencement Date"), subject to
Section 2.4. If Landlord is required to construct improvements to the Premises
prior to the Commencement Date pursuant to Section 2.3, then the Scheduled
Commencement Date shall be only an estimate of the actual Commencement Date, and
the Lease Term shall begin on the first to occur of the following, which,
subject to acceleration under the Work Letter attached hereto as Exhibit C,
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shall be the "Commencement Date": (i) the date Landlord offers to deliver
possession of the Premises to Tenant following substantial completion of all
improvements to be constructed by Landlord pursuant to Section 2.3 except for
punchlist items which do not prevent Tenant from using the Premises for the
Permitted Use, or (ii) the date Tenant enters into occupancy of the Premises.
Tenant shall accept possession and enter into good faith occupancy of the entire
Premises and commence the operation of its business therein within thirty (30)
days after the Commencement Date. Promptly following the delivery of possession
of the Premises by Landlord to Tenant, Landlord and Tenant shall together
execute a Memorandum of Commencement Date in the form attached as Exhibit D,
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appropriately completed (but the failure to execute such Memorandum of
Commencement Date shall not affect the Commencement Date or Tenant's obligations
hereunder).
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2.3 Construction of Improvements. Landlord shall construct certain
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improvements that shall constitute or become part of the Premises if required
by, and then in accordance with, the terms of the Work Letter attached hereto as
Exhibit C (and, if Exhibit C is left blank, then Landlord shall not be obligated
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to construct any improvement to the Premises). Except as specifically provided
in Exhibit C attached hereto, Landlord shall have no obligation whatsoever to
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in any way alter or improve the Premises. Tenant acknowledges that it has had an
opportunity to conduct, and has conducted, such inspections of the Premises as
it deems necessary to evaluate its condition. Except as otherwise specifically
provided herein, Tenant agrees to accept possession of the Premises in its then
existing condition "as-is", including all patent and latent defects. Tenant's
taking possession of any part of the Premises shall be deemed to be an
acceptance by Tenant of any work of improvement done by Landlord in such part as
complete and in accordance with the terms of this Lease, subject to Landlord's
obligations, if any, under Exhibit C attached hereto.
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2.4 Delay in Delivery of Possession. If for any reason Landlord cannot
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deliver possession of the Premises to Tenant on or before the Scheduled
Commencement Date, Landlord shall not be subject to any liability therefor, and
such failure shall not affect the validity of this Lease or the obligations of
Tenant hereunder, but, in such case, Tenant shall not be obligated to pay Base
Monthly Rent or Tenant's Share of Direct Expenses until the Commencement Date
has occurred; provided, however, if Landlord cannot deliver possession of the
Premises to Tenant on or before the date ("Outside Commencement Date") that is
one hundred eighty (180) days following the Scheduled Commencement Date, Tenant
shall have the right, as its sole and exclusive remedy, to terminate this Lease
by providing Landlord with written notice thereof within five (5) days following
the Outside Commencement Date (provided, however, in the event that Landlord's
failure to deliver possession of the Premises to Tenant on or before the Outside
Commencement Date is attributable, in whole or in part, to any action or
inaction by Tenant or Tenant's Agents (including, without limitation, any Tenant
Delay described in the Work Letter attached hereto as Exhibit C) or by reason of
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any causes beyond the reasonable control of Landlord ("Force Majeure Delay"),
the Outside Commencement Date shall be extended for the period of delay
attributable to the action or inaction by Tenant or Tenant's Agents in question
and/or the Force Majeure Delay in question, as applicable). In the event Tenant
provides Landlord with written notice of termination within such five (5) day
period, this Lease shall terminate upon such notice and Landlord shall promptly
return to Tenant any deposits made by Tenant to Landlord under this Lease. In
the event Tenant fails to provide Landlord with written notice of termination
within such five (5) day period, this Lease shall continue in full force and
effect.
2.5 Early Occupancy. If Tenant enters or permits its Agents to enter the
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Premises prior to the Commencement Date with the written permission of Landlord,
it shall do so upon all of the terms of this Lease (including its obligations
regarding indemnity and insurance) except those regarding the obligation to pay
rent, which shall commence on the Commencement Date.
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2.6 Relocation. Intentionally deleted.
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2.7 No Roof Rights. In no event shall Tenant have any rights whatsoever to
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use all or any portion of the roof of the Building without prior written
approval from Landlord, which shall not be unreasonably withheld.
ARTICLE 3
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RENT
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3.1 Base Monthly Rent. Commencing on the Commencement Date and continuing
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throughout the Lease Term, Tenant shall pay to Landlord the Base Monthly Rent
set forth in Section K of the Summary.
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3.2 Additional Rent. Commencing on the Commencement Date and continuing
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throughout the Lease Term, Tenant shall pay the following as additional rent
(the "Additional Rent"): (i) any late charges or interest due Landlord pursuant
to Section 3.4; (ii) Tenant's Share of Direct Expenses as provided in Section
8.1; (iii) Landlord's share of any Transfer Consideration received by Tenant
upon certain assignments and sublettings as required by Section 14.1; (iv) any
legal fees and costs due Landlord pursuant to Section 15.9; and (v) any other
sums or charges payable by Tenant pursuant to this Lease.
3.3 Payment of Rent. Concurrently with Tenant's execution of this Lease,
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Tenant shall pay to Landlord the amount set forth in Section L of the Summary as
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prepayment of rent for credit against the first installment(s) of Base Monthly
Rent. All rent required to be paid in monthly installments shall be paid in
advance on the first day of each calendar month during the Lease Term. If
Section K of the Summary provides that the Base Monthly Rent is to be increased
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during the Lease Term and if the date of such increase does not fall on the
first day of a calendar month, such increase shall become effective on the first
day of the next calendar month. All rent shall be paid in lawful money of the
United States, without any abatement, deduction or offset whatsoever (except as
specifically provided in Sections 11.4 and 12.3), and without any prior demand
therefor. Rent shall be paid to Landlord at its address set forth in Section R
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the Summary, or at such other place as Landlord may designate from time to time.
Tenant's obligation to pay Base Monthly Rent and Tenant's Share of Direct
Expenses shall be prorated at the commencement and expiration of the Lease Term.
3.4 Late Charge and Interest. Tenant acknowledges that late payment by
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Tenant to Landlord of Rent under this Lease will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which is extremely difficult
or impracticable to determine. Such costs include, but are not limited to,
processing and accounting charges, late charges that may be imposed on Landlord
by the terms of any Security Instrument, and late charges and penalties that may
be imposed due to late payment of Real Property Taxes. Therefore, if any
installment of Base Monthly Rent or any payment of Additional Rent or other rent
due from Tenant is not received by Landlord in good funds by the applicable due
date, Tenant shall pay to Landlord an additional sum equal to ten percent (10%)
of the amount overdue as a late charge. The parties acknowledge that this late
charge represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant. In no event shall this provision for
a late charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any rent or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant's failure to pay any rent due under
this Lease in a timely fashion, including any right to terminate this Lease
pursuant to Section 13.2C. If any rent remains delinquent for a period in excess
of thirty (30) days then, in addition to such late charge, Tenant shall pay to
Landlord interest on any rent that is not paid when due at the Agreed Interest
Rate following the date such amount became due until paid.
3.5 Security Deposit. Concurrently with its execution of this Lease, Tenant
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shall deposit with Landlord the amount of cash set forth in Section M of the
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Summary as partial security for the performance by Tenant of its obligations
under this Lease, and not as prepayment of rent (the "Security Deposit").
Landlord may from time to time apply such portion of the Security Deposit as is
necessary for the following purposes: (i) to remedy any default by Tenant in the
payment of rent; (ii) to repair damage to the Premises caused by Tenant (iii) to
clean the Premises upon the expiration or sooner termination of the Lease;
and/or (iv) to remedy any other default of Tenant to the extent permitted by
Law, including, without limitation, on account of damages owing to Landlord
under Section 13.2, and, in this regard, Tenant hereby waives any restriction on
the uses to which the Security Deposit may be put contained in California Civil
Code Section 1950.7. In the event the Security Deposit or any portion thereof is
so used, Tenant agrees to pay to Landlord promptly upon demand an amount in cash
sufficient to restore the Security Deposit to the full original amount. Landlord
shall not be deemed a trustee of the Security Deposit, may use the Security
Deposit in business, and shall not be required to segregate it from its general
accounts. Tenant shall not be entitled to any interest on the Security Deposit.
If Landlord transfers the Premises during the Lease Term, Landlord may pay the
Security Deposit to any transferee of Landlord's interest in conformity with the
provisions of California Civil Code Section 1950.7 and/or any successor statute,
in which event the transferring Landlord will be released from all liability for
the return of the Security Deposit. If Tenant performs every provision of this
Lease to be performed by Tenant, the unused portion of the Security Deposit
shall be returned to Tenant (or the last assignee of Tenant's interest under
this Lease) within fifteen (15) days following the expiration or sooner
termination of this Lease and the surrender of the Premises by Tenant to
Landlord in accordance with the terms of this Lease. If this Lease is terminated
following an Event of Tenant's Default, the unpaid portion of the Security
Deposit, if any, shall be returned to Tenant two (2) weeks after final
determination of all damages due Landlord, and, in this respect, the provisions
of California Civil Code Section 1950.7 are hereby waived by Tenant.
3.6 Additional Security - Letter of Credit. As additional security for
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the performance of every provision of this Lease to be performed by Tenant,
Tenant shall deposit with a Landlord concurrently with Tenant's execution and
delivery of this Lease an unconditional, irrevocable sight draft letter of
credit in the principal amount of $500,000.00 (as modified, amended and/or
replaced, "Letter of Credit"), in form and content acceptable to Landlord
(including, without limitation, a provision that any termination or cancellation
thereof not be effective until at least ten (10) days after delivery of written
notice to Landlord of such termination or cancellation) and drawn on a
commercial lender acceptable to Landlord, having a term equal to (or being
automatically renewable to) November 30, 2005, subject to the second paragraph
of this Section 3.6 below. Upon any Event of Default, without waiver of any
rights that Landlord may have under this Lease or at law or in equity as a
result of an Event of Default, Landlord shall have the right to draw upon the
Letter of Credit, in whole or in part, either prior to, concurrently with or
after Landlord's application of all or any portion of the Security Deposit. If
all or any portion of the Letter of Credit is drawn upon by Landlord hereunder,
Tenant shall, within ten (10) days after written demand therefore, restore the
Letter of Credit to its original amount (or if drawn upon in full, deliver to
Landlord a replacement Letter of Credit), and Tenant's failure to do so shall
constitute an Event of Default under this Lease. In addition, the failure at any
time by Tenant to keep the Letter of Credit in full force and effect as required
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hereunder shall constitute an Event of Default under this Lease. In addition,
the failure at any time by Tenant to keep the Letter of Credit in full force and
effect as required hereunder shall constitute an Event of Default under this
Lease.
In the event that the Letter of Credit has an expiration date that is prior
to November 30, 2005, and does not provide for automatic renewals through and
including November 30, 2005, then, no later than thirty (30) days prior to each
scheduled expiration date of the Letter of Credit, Tenant shall cause the Letter
of Credit to be either extended for a period of at least one (1) year or
replaced to the satisfaction of Landlord, such that the Letter of Credit shall
remain in full force and effect and drawable by Landlord through and including
November 30, 2005. If Landlord has not received any such extension or
replacement on or before the date that is thirty (30) days prior to the then-
scheduled expiration date of the Letter of Credit, Landlord shall be entitled to
draw down on the Letter of Credit in full, and the funds so drawn by Landlord
shall be added to the Security Deposit then-held by Landlord under this Lease
and shall thereafter be held by Landlord as part of such Security Deposit,
subject to and in accordance with the terms and conditions of this Section 3.5
above.
ARTICLE 4
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USE OF PREMISES
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4.1 Limitation on Use. Tenant shall use the Premises solely for the
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Permitted Use specified in Section N of the Summary and for no other purpose
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whatsoever without the prior written consent of Landlord, which consent may be
withheld and/or conditioned by Landlord in its sole and absolute discretion.
Tenant shall not do anything in or about the Premises which will (i) cause
structural injury to the Building, or (ii) cause damage to any part of the
Building except to the extent reasonably necessary for the installation of
Tenant's Trade Fixtures and Tenant's Alterations, and then only in a manner
which has been first approved by Landlord in writing. Tenant shall not operate
any equipment within the Premises which will (i) materially damage the Building
or the Common Area, (ii) overload existing electrical systems or other
mechanical equipment servicing the Building, (iii) impair the efficient
operation of the sprinkler system or the heating ventilating or air conditioning
("HVAC") equipment within or servicing the Building, or (iv) damage, overload or
corrode the sanitary sewer system. Tenant shall not attach, hang or suspend
anything from the ceiling, roof, walls or columns of the Building or set any
load on the floor in excess of the load limits for which such items are designed
nor operate hard wheel forklifts within the Premises. Any dust, fumes, or waste
products generated by Tenant's use of the Premises shall be contained and
disposed so that they do not (i) create an unreasonable fire or health hazard,
(ii) damage the Premises, or (iii) result in the violation of any Laws. Tenant
shall not change the exterior of the Building or install any equipment or
antennas on or make any penetrations of the exterior or roof of the Building.
Tenant shall not commit any waste in or about the Premises, and Tenant shall
keep the Premises in a neat, clean, attractive and orderly condition, free of
any nuisances. If Landlord designates a standard window covering for use
throughout the Building, Tenant shall use this standard window covering to cover
all windows in the Premises. Tenant shall not conduct on any portion of the
Premises or the Project any sale of any kind, including, without limitation, any
public or private auction, fire sale, going-out-of-business sale, distress sale
or other liquidation sale.
4.2 Compliance with Regulations. Tenant shall not use the Premises in any
---------------------------
manner which violates any Laws or Private Restrictions which affect the
Premises. Tenant shall abide by and promptly observe and comply with all Laws
and Private Restrictions. Tenant shall not use the Premises in any manner which
will cause a cancellation of any insurance policy covering the Premises, the
Building, Tenant's Alterations or any improvements installed by Landlord at its
expense or which poses an unreasonable risk of damage or injury to the Premises.
Tenant shall not sell, or permit to be kept, used, or sold in or about the
Premises any article which may be prohibited by the standard form of fire
insurance policy. Tenant shall comply with all reasonable requirements of any
insurance company, insurance underwriter or Board of Fire Underwriters which are
necessary to maintain the insurance coverage carried by either Landlord or
Tenant pursuant to this Lease.
4.3 Outside Areas. No materials, supplies, tanks or containers, equipment,
-------------
finished products or semi-finished products, raw materials, inoperable vehicles
or articles of any nature shall be stored upon or permitted to remain outside of
the Premises.
4.4 Signs. Tenant shall not place on any portion of the Premises any sign,
-----
placard, lettering in or on windows, banner, displays or other advertising or
communicative material which is visible from the exterior of the Building
without the prior written approval of Landlord. All such approved signs shall
strictly conform to all Laws, Private Restrictions, and any sign criteria
established by Landlord for the Building from time to time, and shall be
installed at the expense of Tenant. Tenant shall maintain such signs in good
condition and repair, and, upon the expiration or sooner termination of this
Lease, remove the same and repair any damage caused thereby, all at its sole
cost and expense and to the reasonable satisfaction of Landlord.
4.5 No Light, Air or View Easement. Any diminution or shutting off of
------------------------------
light, air or view by any structure which may be erected on the Project or any
lands adjacent to the Project shall in no way affect this Lease or impose any
liability on Landlord.
4.6 Parking. Tenant is allocated and shall have the non-exclusive right to
-------
use the non-exclusive parking spaces located within the Project from time to
time, for its use and the use of Tenant's Agents, in common with other tenants
of the Project, up to, but not exceeding, the lesser of (i) the number of
allocated parking spaces set forth in Section H of the Summary, or (ii) the
---------
Tenant's Share of the non-exclusive parking spaces available for use within the
Project from time to time (which as of the Effective Date is the percentage set
forth in Section G of the Summary), the location of which parking spaces may be
---------
designated from time to time by Landlord. Tenant shall not at any time use more
parking spaces than the number so allocated to Tenant or park its vehicles or
the vehicles of others in any portion of the Project not designated by Landlord
as a non-exclusive parking area. Tenant shall not have the exclusive right to
use any specific parking space. If Landlord grants to any other tenant the
exclusive right to use any particular parking space(s), Tenant shall not use
such spaces. Tenant shall not park or store vehicles at the Project for more
that (24) hours without the Landlord's written consent in Landlord's sole and
absolute discretion. Such unauthorized vehicles may be towed at Tenant's
expense. Landlord reserves the right, after having given Tenant reasonable
notice, to have any vehicles owned by Tenant or Tenant's Agents utilizing
parking spaces in excess of the parking spaces allowed for Tenant's use to be
towed away at Tenant's cost. All trucks and delivery vehicles shall be (i)
parked in such areas as Landlord may designate from time to time, (ii) loaded
and unloaded in a manner which does not interfere with the businesses of other
occupants of the Project, and (iii) permitted to remain on the Project only so
long as is reasonably necessary to complete loading and unloading. In the event
Landlord elects or is required by any Law to limit or control parking in the
Project, whether by validation of parking tickets or any other method of
assessment, Tenant agrees to participate in such validation or assessment
program under such rules and regulations as are from time to time established by
Landlord.
4.7 Rules and Regulations. Landlord may from time to time promulgate such
---------------------
Rules and Regulations applicable to the Project and/or the Building as Landlord
may, in its sole discretion, deem necessary or appropriate for the care and
orderly management of the Project and the safety of its tenants and invitees.
Such Rules and Regulations shall be binding upon Tenant upon delivery of a copy
thereof to Tenant, and Tenant agrees to abide by such Rules and Regulations. If
there is a conflict
7
<PAGE>
between the Rules and Regulations and any of the provisions of this Lease, the
provisions of this Lease shall prevail. Landlord shall not be responsible for
the violation by any other tenant of the Project of any such Rules and
Regulations.
4.8 Telecommunications. The use of the Premises by Tenant for the
------------------
Permitted Use specified in Section N of the Summary shall not include using the
---------
Premises to provide telecommunications services (including, without limitation,
Internet connections) to third parties, it being intended that Tenant's
telecommunications activities within the Premises be strictly limited to such
activities as are incidental to general office use.
4.9 Early Expiration of Lease Term. Tenant acknowledges that Landlord has
------------------------------
granted to UltraCard an option to lease the Premises commencing on November 1,
2003. Notwithstanding any provision contained in this Lease to the contrary, in
the event that UltraCard exercises such option, Landlord shall have the right to
cause this Lease to expire on October 31, 2003 ("Early Expiration Date"), by
providing Tenant written notice ("Early Expiration Notice") of such early
expiration no later than five (5) months prior to the Early Expiration Date. In
the event Landlord provides Tenant with the Early Expiration Notice, any and all
provisions of this Lease regarding expiration of the Lease, vacation and
delivery of the Premises shall apply, including, but not limited to Sections
15.2 and 15.3; provided, however, the expiration date for the Lease Term shall
be the Early Expiration Date. Within ten (10) days of delivery of the Early
Expiration Notice Tenant shall execute and deliver to Landlord an
acknowledgement of the Early Expiration Date in the form attached hereto as
Exhibit H ("Early Expiration Acknowledgement"). In the event Tenant fails to
---------
timely deliver the Early Expiration Acknowledgement, Tenant shall be in material
default of this Lease and Landlord shall be permitted any and all remedies set
forth in Section 13 of this Lease.
/s/ McCarthy /s/ [ILLEGIBLE]
--------------------- -------------------
Tenant's Initials Landlord's Initials
ARTICLE 5
TRADE FIXTURES AND ALTERATIONS
------------------------------
5.1 Trade Fixtures. Throughout the Lease Term, Tenant may provide and
--------------
install, and shall maintain in good condition, any Trade Fixtures required in
the conduct of its business in the Premises; provided, however, if the
installation of any Trade Fixtures will necessitate the making of any Tenant's
Alterations, then Tenant shall not be permitted to make such installation unless
and until the applicable Tenant's Alterations have been approved by Landlord
pursuant to Section 5.2. All Trade Fixtures shall remain Tenant's property.
5.2 Tenant's Alterations. Construction by Tenant of Tenant's Alterations
--------------------
shall be governed by the following:
A. Tenant shall not construct any Tenant's Alterations or otherwise
alter the Premises without Landlord's prior written approval, which approval may
be withheld and/or conditioned by Landlord in its sole and absolute discretion.
Tenant shall be entitled, without Landord's prior approval, to make Tenant's
Alterations (i) which do not affect the structural or exterior pans or water
tight character of the Building, (ii) do not affect the HVAC, electrical,
plumbing or life safety systems of the Building, and (iii) the reasonably
estimated cost of which, plus the original cost of any part of the Premises
removed or materially altered in connection with such Tenant's Alterations,
together do not exceed the Permitted Tenant Alterations Limit specified in
Section O of the Summary per work of improvement (and, for purposes thereof, all
---------
work performed or commenced within a six (6) month period shall he considered a
single work of improvement). In the event Landlord's approval for any Tenant's
Alterations is required, Tenant shall not construct the Tenant's Alterations
until Landlord has approved in writing the plans and specifications therefor,
and such Tenant's Alterations shall be constructed substantially in compliance
with such approved plans and specifications by a licensed contractor first
approved by Landlord. All Tenant's Alterations constructed by Tenant shall be
constructed by a reputable licensed contractor (approved in writing by Landlord)
in accordance with all Laws using new materials of good quality.
B. Tenant shall not commence construction of any Tenant's
Alterations until (i) all required governmental approvals and permits have been
obtained, (ii) all requirements regarding insurance imposed by this Lease have
been satisfied, (iii) Tenant has given Landlord at least five (5) day's prior
written notice of its intention to commence such construction, and (iv) if
requested by Landlord, Tenant has obtained contingent liability and broad form
builders, risk insurance in an amount reasonably satisfactory to Landlord if
there are any perils relating to the proposed construction not covered by
insurance carried pursuant to Article 9.
C. All Tenant's Alterations shall remain the property of Tenant
during the Lease Term but shall not be altered or removed from the Premises. At
the expiration or sooner termination of the Lease Term, all Tenant's Alterations
shall be surrendered to Landlord as part of the realty and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse Tenant
for all or any portion of the value or cost thereof; provided, however, Landlord
expressly reserves the right to require Tenant to remove any Tenant's
Alterations. prior to the expiration or sooner termination of the Lease Term by
providing Tenant with written notice thereof prior to or upon such expiration or
sooner termination.
5.3 Alterations Required by Law. Tenant shall, at its sole cost and
----------------------------
expense, make any alteration, addition or change of any sort to the Premises,
the Building and the Project, that is required by any Law because of (i)
Tenant's particular use or change of use of the Premises; (ii) Tenant's
application for any permit or governmental approval; (iii) Tenant's construction
or installation of any Tenant's Alterations or Trade Fixtures; or (iv) an Event
of Tenant's Default. Any such alterations, additions or changes shall be made by
Tenant in accordance with and subject to the provisions of Section 5.3. Any
other alteration, addition, or change required by Law which is not the
responsibility of Tenant pursuant to the foregoing shall be made by Landlord
(subject to Landlord's right to reimbursement from Tenant specified in Section
5.4).
5.4 Amortization of Certain Capital Improvements. Tenant shall pay as
--------------------------------------------
Additional Rent in the event Landlord reasonably elects or is required to make
any of the following kinds of capital improvements to the Project and the cost
thereof is not reimbursable as a Direct Expense or is not the responsibility of
Tenant pursuant to Section 5.3: (i) capital improvements required to be
constructed in order to comply with any Laws (excluding any Hazardous Materials
Laws) not in effect or applicable to the Project as of the Effective Date; (ii)
modification of existing or construction of additional capital improvements or
building service equipment for the purpose of reducing the consumption of
utility services or Direct Expenses; (iii) replacement of capital improvements
or building service equipment existing as of the Effective Date when required
because of normal wear and tear; and (iv) restoration of any part of the
Project that has been damaged by any peril to the extent the cost thereof is not
covered by insurance proceeds actually recovered by Landlord up to a maximum
amount per occurrence of ten percent (10%) of the then replacement cost of the
Project. The amount of Additional Rent Tenant is to pay with respect to each
such capital improvement shall be determined as follows:
A. All costs paid by Landlord to construct such improvements
(including financing costs) shall be amortized over the useful life of such
improvement (as reasonably determined by Landlord in accordance with generally
accepted
8
<PAGE>
accounting principles) with interest on the unamortized balance at the then
prevailing market rate Landlord would pay if it borrowed funds to construct such
improvements from an institutional lender, and Landlord shall inform Tenant of
the monthly amortization payment required to so amortize such costs, and shall
also provide Tenant with the information upon which such determination is made;
and
B. As Additional Rent, Tenant shall pay at the same time the Base
Monthly Rent is due an amount equal to Tenant's Share of such monthly
amortization payment for each month after such improvements are completed until
the first to occur of (i) the expiration of the Lease Term (as it may be
extended), or (ii) the end of the term over which such costs were amortized.
5.5 Mechanic's Liens. Tenant shall keep the Project free from any liens
----------------
and shall pay when due all bills arising out of any work performed, materials
furnished, or obligations incurred by or at the direction of Tenant or Tenant's
Agents relating to the Project. If Tenant fails to cause the release of record
of any lien(s) filed against the Project (or any portion thereof) or its
leasehold interest therein by payment or posting of a proper bond within ten
(10) days from the date of the lien filing(s), then Landlord may, at Tenant's
expense, cause such lien(s) to be released by any means Landlord deems proper,
including, but not limited to, payment of or defense against the claim giving
rise to the lien(s). All sums disbursed, deposited or incurred by Landlord in
connection with the release of the lien(s) shall be due and payable by Tenant to
Landlord on demand by Landlord, together with interest at the Agreed Interest
Rate from the date of demand until paid by Tenant.
5.6 Taxes on Tenant's Property. Tenant shall pay before delinquency any
--------------------------
and all taxes, assessments, license fees and public charges levied, assessed or
imposed against Tenant or Tenant's estate in this Lease or the property of
Tenant situated within the Premises which become due during the Lease Term,
including, without limitation, Tenant's Alterations and Trade Futures. If any
tax or other charge is assessed by any governments agency because of the
execution of this Lease, such tax shall be paid by Tenant. On demand by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of these
payments.
ARTICLE 6
---------
REPAIR AND MAINTENANCE
----------------------
6.1 Tenant's Obligation to Maintain. By taking possession of the Premises,
-------------------------------
Tenant shall be deemed to have accepted the Premises as being in good, sanitary
order, condition and repair. Tenant shall, at Tenant's sole cost and expense,
keep the Premises and every part thereof in good condition and repair, damage
thereto from causes beyond the control of Tenant and ordinary wear and tear
excepted. Tenant shall upon the expiration or sooner termination of this Lease
hereof surrender the Premises in the condition described in Section 15.2. Except
as specifically provided in an addendum, if any, to this Lease, Landlord shall
have no obligation whatsoever to alter, remodel, improve, decorate or paint the
Premises or any part thereof and the parties hereto affirm that Landlord has
made no representations to Tenant respecting the condition of the Premises or
the Building except as expressly herein set forth.
6.2 Landlord's Obligation to Maintain. Landlord shall repair and maintain,
---------------------------------
in reasonably good condition, except as provided in Sections 11.2 and 12.3, the
following: (i) the structural components of the Building, (ii) the Common Area
of the Building, and (iii) the electrical, life safety, plumbing, sewage and
HVAC systems serving the Building, installed or furnished by Landlord except to
the extent such items exclusively serve the Premises. It is an express condition
precedent to all Landlord's obligations to repair and maintain that Tenant shall
have first notified Landlord in writing of the need for such repairs and
maintenance. The cost of such maintenance, repair and services shall be included
as part of Direct Expenses unless such maintenance, repairs or services are
necessitated, in whole or in part, by the act, neglect, fault or omission of
Tenant or Tenant's Agents, or such services are to be a separate charge to
Tenant as described on Exhibit F, in which case Tenant shall pay to Landlord the
cost of such maintenance, repairs and services within ten (10) days following
Landlord's written demand therefor. Tenant hereby waives all rights provided for
by the provisions of Sections 1941 and 1942 of the California Civil Code and any
present or future Laws regarding Tenant's right to make repairs at the expense
of Landlord and/or to terminate this Lease because of the condition of the
Premises.
6.3 Control of Common Area. Landlord shall at all times have exclusive
----------------------
control of the Common Area. Landlord shall have the right, exercisable in its
sole and absolute discretion and without the same constituting an actual or
constructive eviction and without entitling Tenant to any abatement of rent, to:
(i) close any part of the Common Area to whatever extent required in the opinion
of Landlord's counsel to prevent a dedication thereof or the accrual of any
prescriptive rights therein; (ii) temporarily close the Common Area to perform
maintenance or for any other reason deemed sufficient by Landlord; (iii) change
the shape, size, location and extent of the Common Area; (iv) eliminate from or
add to the Project any land or improvement, including multi-deck parking
structures; (v) make changes to the Common Area, including, without limitation,
changes in the location of driveways, entrances, passageways, doors and
doorways, elevators, stairs, restrooms, exits, parking spaces, parking areas,
sidewalks or the direction of the flow of traffic and the site of the Common
Area; (vi) remove unauthorized persons from the Project; and/or (vii) change the
name or address of the Building or Project. Tenant shall keep the Common Area
clear of all obstructions created or permitted by Tenant. If, in the opinion of
Landlord, unauthorized persons are using any of the Common Area by reason of the
presence of Tenant in the Building, Tenant, upon demand of Landlord, shall
restrain such unauthorized use by appropriate proceedings. In exercising any
such rights regarding the Common Area, (i) Landlord shall make a reasonable
effort to minimize any disruption to Tenant's business, and (ii) Landlord shall
not exercise its rights to control the Common Area in a manner that would
materially interfere with Tenant's use of the Premises without first obtaining
Tenant's consent, which consent shall not be unreasonably withheld, conditioned
or delayed.
ARTICLE 7
---------
WASTE DISPOSAL AND UTILITIES
7.1 Waste Disposal. Tenant shall store its waste either inside the
--------------
Premises or within outside trash enclosures provided by Landlord
7.2 Hazardous Materials. Landlord and Tenant agree as follows with respect
-------------------
to the existence or use of Hazardous Materials in, on or about the Project;
A. Except as otherwise permitted pursuant to Section 7.2C below, any
handling, transportation, storage, treatment, disposal or use of Hazardous
Materials by Tenant and Tenant's Agents after the Effective Date in or about the
Project is strictly prohibited. Tenant shall indemnify, defend upon demand with
counse1 reasonably acceptable to Landlord and hold harmless Landlord from and
against any liabilities, losses, claims, damages, lost profits, consequential
damages, interest, penalties, fines, monetary sanctions, attorneys' fees,
experts' fees, court costs, remediation costs, investigation costs, and other
expenses which result from or arise in any manner whatsoever out of the use,
storage, treatment, transportation, release, or disposal of any Hazardous
Materials on or about the Project caused or permitted by Tenant or Tenant's
Agents.
9
<PAGE>
B. If the presence of Hazardous Materials in, on or about the Project
caused or permitted by Tenant or Tenant's Agents results in contamination or
deterioration of water or soil resulting in a level of contamination greater
than the levels established as acceptable by any governmental agency having
jurisdiction over such contamination, then Tenant shall promptly take any and
all action necessary to investigate and remediate such contamination if required
by Law or as a condition to the issuance or continuing effectiveness of any
governmental approval which relates to the use of the Project or any part
thereof. Tenant shall further be solely responsible for, and shall defend
indemnify and hold Landlord and its Agents harmless from and against, all
claims, costs and liabilities, including, without limitation, attorneys' fees
and costs, arising out of or in connection with any investigation and
remediation required hereunder to return the Project to its condition existing
prior to the appearance of such Hazardous Materials.
C. Tenant shall give written notice to Landlord as soon as reasonably
practicable of (i) any communication received from any governmental authority
concerning Hazardous Materials which relates to the Project, and (ii) any
contamination of the Project by Hazardous Materials which constitutes a
violation of any Hazardous Materials Laws. Tenant may use small quantities of
household chemicals such as adhesives, lubricants and cleaning fluids in order
to conduct its business at the Premises and such other Hazardous Materials as
are reasonably necessary for the operation of Tenant's business of which
Landlord receives notice prior to such Hazardous Materials being brought onto
the Premises and which Landlord consents in writing may be brought onto the
Premises. At any time during the Lease Term, Tenant shall within five (5) days
after written request therefor received from Landlord, disclose in writing all
Hazardous Materials that are being used by Tenant in, on or about the Project,
the nature of such use, and the manner of storage and disposal.
D. Landlord may cause testing wells to be installed on the Project,
and may cause the ground water to be tested to detect the presence of Hazardous
Materials by the use of such tests as are then customarily used for such
purposes. If Tenant so requests, Landlord shall supply Tenant with copies of
such test results. The cost of such tests and of the installation, maintenance,
repair and replacement of such wells shall be paid by Tenant if such tests
disclose the existence of facts which give rise to liability of Tenant pursuant
to its indemnity given in Section 7.2A and/or Section 7.2B.
E. As used herein, the term "Hazardous Materials" means any hazardous
or toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States government.
The term "Hazardous Materials" includes, without limitation, petroleum products,
asbestos, PCB's, and any material or substance which is (i) listed under Article
9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title
22 of the California Administrative Code, Division 4, Chapter 20, (ii) deemed as
a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6903), or (iii)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S C. 9601 et seq.
(42 U.S.C. 9601). As used herein, the term "Hazardous Material Law(s)" shall
mean any statute, law, ordinance, or regulation of any governmental body or
agency (including the U.S. Environmental Protection Agency, the California
Regional Water Quality Control Board, and the California Department of Health
Services) which regulates the use, storage, release or disposal of any Hazardous
Materials.
F. The obligations of Landlord and Tenant under this Section 7.2
shall survive the expiration or earlier termination of the Lease Term. The
rights and obligations of Landlord and Tenant with respect to issues relating to
Hazardous Materials are exclusively established by this Section 7.2. In the
event of any inconsistency between any other part of this Lease and this Section
7.2, the terms of this Section 7.2 shall control.
7.3 Utilities and Services. Tenant shall be solely responsible for
----------------------
procuring and contracting directly for all water, gas, electricity, sewer
service, waste pick-up, janitorial service, telephone and other
telecommunications services and all other utilities and services necessary for
Tenant's use and occupancy of the Premises, and Landlord shall have no
responsibility whatsoever to procure or provide any such utilities or services.
Tenant shall pay, prior to delinquency, directly to the appropriate supplier
thereof, all charges (including taxes) for all such utilities and services;
provided, however, if any such utilities or services are not separately metered,
then Landlord, at its election, may (a) periodically charge Tenant, as
Additional Rent, a sum equal to Landlord's reasonable estimate of the cost of
such utilities or services, or (b) install a separate meter (at Tenant's
expense) to measure such utilities or services and periodically charge Tenant,
as Additional Rent, a sum equal to the cost of Tenant's use of such utilities or
services as measured by such separate meter. Landlord shall not be in default
hereunder or be liable for any damages directly or indirectly resulting from,
nor shall rent be abated by reason of, any failure or interruption of any such
utilities or services. No such failure or interruption shall be deemed an
eviction, actual or constructive, of Tenant or entitle Tenant to terminate this
Lease or withhold Rent due hereunder.
7.4 Intentionally Deleted.
---------------------
7.5 Compliance with Regulations. Tenant shall comply with all rules,
---------------------------
regulations and requirements promulgated by national, state or local
governmental agencies or utility suppliers concerning the use of utility
services, including, without limitation, any rationing, limitation or other
control, together with all rules, regulations and requirements promulgated by
Landlord from time to time to conserve utilities and/or reduce utilities costs.
Tenant shall not be entitled to terminate this Lease nor to any abatement in
rent by reason of such compliance.
7.6 Window Treatments. Landlord reserves the right, exercisable in its
-----------------
sole and absolute discretion, to install and/or apply any treatments to the
interior and/or exterior surfaces of any windows of the Premises as Landlord may
from time to time desire.
ARTICLE 8
---------
DIRECT EXPENSES
---------------
8.1 Tenant's Obligation to Reimburse. As Additional Rent, Tenant shall pay
--------------------------------
Tenant's Share (specified in Section G of the Summary) of the amount of Direct
---------
Expenses paid or incurred in any calender year. The following provision shall
apply to the foregoing obligation of Tenant:
A. Payment shall be made by whichever of the following methods is
from time to time designated by Landlord, and Landlord reserves the right to
change the method of payment at any time in its sole and absolute discretion.
After each calendar year during the Lease Term, Landlord may invoice Tenant for
Tenant's Share of the Direct Expenses for such calendar year, and Tenant shall
pay such amounts so invoiced within five (5) days after receipt of such notice.
Alternatively, (i) Landlord shall deliver to Tenant Landlord's reasonable
estimate of the Direct Expenses it anticipates will be paid or incurred for the
calendar year in question; (ii) during such calendar year, Tenant shall pay such
Tenant's Share of the estimated Direct Expenses in advance in equal monthly
installments due with each installment of Base Monthly Rent; and (iii) within
one hundred twenty (120) days after the end of such calendar year (or as soon
thereafter as is reasonably practical), Landlord shall
10
<PAGE>
furnish to Tenant a statement in reasonable detail of the actual Direct Expenses
for the just ending calendar year. If Tenant's estimated payments are less than
Tenant's Share of actual Direct Expenses as shown by the applicable statement.
Tenant shall pay the difference to Landlord within fifteen (15) days after
delivery of such statement. If Tenant shall have overpaid Tenants Share of
actual Direct Expenses, then Landlord shall credit such over payment toward
Tenants next installment payment of Tenant's Share of estimated Direct Expenses.
When the final determination is made of Tenant's Share of actual Direct
Expenses for the calendar year in which this Lease expires or sooner terminates,
Tenant shall, even though this Lease has terminated, pay the difference to
Landlord within fifteen (15) days after delivery of the final statement.
Conversely, any overpayment by Tenant shall be rebated by Landlord to Tenant
concurrently with the delivery of such final statement.
B. Within sixty (60) days after the date of Tenant's
receipt of Landlord's statement of actual Direct Expenses for any calender year,
Tenant may give Landlord written notice of its intent to review records,
invoices and receipts relating to the actual Direct Expenses for such calender
year. Tenant shall provide Landlord with at least ten (10) days prior written
notice of the date upon which it intends to review such records, invoices and
receipts. The review shall be performed during normal business hours at
Landlord's principal place of business or such other location as may be
designated by Landlord, and shall be performed at Tenant's sole cost and
expense. Promptly following Tenant's review of such records, invoices and
receipts, Tenant shall provide Landlord with a copy of the results of such
review and Tenant's conclusions regarding any overstatement or understatement by
Landlord of actual Direct Expenses for such calendar year. If Landlord disputes
Tenant's conclusions regarding any such overstatement or understatement,
Landlord shall select a certified public accountant (which accountant may be
Landlord's accountant) ("Auditor") to review the accuracy of Tenant's
determination. During such Auditor's review, Tenant shall continue to pay,
without abatement or offset, all Base Monthly Rent and Additional Rent (as
calculated by Landlord) payable by Tenant under this Lease. Tenant shall be
responsible for the cost and expense of such audit unless (a) the Auditor finds
greater than an overall five (5%) discrepancy resulting in overpayment by
Tenant, and (b) there is not a commercially reasonable justification for
Landlord's determinations. The Auditor's decision shall be final and binding on
the parties. In the event Tenant fails to object in writing to Landlord's
determination of actual Direct Expenses within sixty (60) days following
delivery of Landlord's statement, Landlord's determination of actual Direct
Expenses for the applicable calendar year shall be conclusive and binding on
Tenant and any future claims to the contrary shall be barred.
8.2 Direct Expenses Defined. The term "Direct Expenses" shall be
-----------------------
determined as if the Project were one hundred percent (100%) occupied and shall
mean the following:
A. All costs and expenses paid or incurred by Landlord in doing
the following (including payments to independent contractors providing services
related to the performance of the following): (i) maintaining, cleaning,
repairing and resurfacing the roof (including repair of leaks) and the exterior
surfaces (including painting) of all buildings located on the Project and
maintaining and repairing the structural components of the Building; (ii)
maintenance of the liability, fire, property damage and any other insurance
covering the Project carried by Landlord pursuant to Section 9.2 or otherwise
(including the prepayment of premiums for coverage of up to one year); (iii)
maintaining, repairing, operating and replacing when necessary HVAC equipment,
utility facilities and other building service equipment; (iv) providing
utilities to the Project (including lighting, trash removal and water for
landscaping irrigation); (v) complying with all applicable Laws and Private
Restrictions; (vi) operating, maintaining, repairing, cleaning, painting,
restriping and resurfacing the Common Area; (vii) replacement or installation of
lighting fixtures, directional or other signs and signals, irrigation systems,
trees, shrubs, ground cover and other plant materials, and all landscaping in
the Common Area; (viii) providing the utilities and services described on
Exhibit E other than those which are described therein as being separately
---------
chargeable to Tenant; and (ix) providing security, if any;
B. The following costs: (i) Real Property Taxes as defined in
Section 8.3; (ii) the amount of any deductible paid by Landlord under any
insurance maintained by Landlord; (iii) the cost to repair damage caused by an
Uninsured Peril up to a maximum amount in any twelve (12) month period equal to
four percent (4%) of the replacement cost of the Project; and (iv) that portion
of all compensation (including benefits and premiums for workers' compensation
and other insurance) paid to or on behalf of employees of Landlord but only to
the extent they are involved in the performance of the work described by
Sections 8.2A or 8.2D that is fairly allocable to the Project;
C. Fees for management services rendered by either Landlord or
a third party manager engaged by Landlord (which may be a party affiliated with
Landlord); and
D. All additional costs and expenses incurred by Landlord with
respect to the operation, protection, maintenance, repair and replacement of the
Project which would be considered a current expense (and not a capital
expenditure but subject to Tenant's obligations under Section 5.4) pursuant to
generally accepted accounting principles; provided, however, that Direct
Expenses shall not include any of the following: (i) debt payments on any loans
affecting the Project; (ii) depreciation of any buildings or any major systems
of building service equipment within the Project; (iii) leasing commissions; and
(iv) the cost of tenant improvements installed for the exclusive use of other
tenants of the Project.
8.3 Real Property Taxes. The term "Real Property Taxes" shall mean
-------------------
all taxes, assessments, levies, and other charges of any kind or nature
whatsoever, general and special, foreseen end unforeseen (including all
installments of principal and interest required to pay any existing or future
general or special assessments for public improvements, services or benefits,
and any increases resulting from reassessments resulting from a change in
ownership, new construction, or any other cause), now or hereafter imposed by
any governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of all or any
portion of the Project (as now constructed or as may at any time hereafter be
constructed, altered or otherwise changed) or Landlord's interest therein, the
fixtures, equipment and other property of Landlord, real or personal, that are
an integral part of and located on the Project, the gross receipts, income, or
rentals from the Project, or the use of parking areas, public utilities, or
energy within the Project, or Landlord's business of leasing the Project. If at
any time during the Lease Term the method of taxation or assessment of the
Project prevailing as of the Effective Date shall be altered so that in lieu of
or in addition to any Real Property Taxes described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge (i) on the value, use or occupancy of the Project or
Landlord's interest therein, or (ii) on or measured by the gross receipts,
income or rentals from the Project, on Landlord's business of leasing the
Project, or computed in any manner with respect to the operation of the Project,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for purposes of this Lease. If any
Real Property Tax is based upon property or rents unrelated to the Project, then
only that part of such Real Property Taxes that is fairly allocable to the
Project shall be included within the meaning of the term "Real Property Taxes".
Notwithstanding the foregoing the term "Real Property Taxes" shall not include
estate, inheritance, transfer, gift or franchise taxes of Landlord or the
federal or state net income tax imposed on Landlord's income from all sources.
"Real Property Taxes" shall also include any costs and expenses incurred by
Landlord in connection with appealing and/or contesting any Real Property Taxes.
11
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ARTICLE 9
---------
INSURANCE
---------
9.1 Tenant's Insurance. Tenant shall maintain insurance complying
------------------
with all of the following:
A. Tenant shall procure, pay for and keep in full force and
effect the following:
(1) Commercial general liability insurance, including
property damage, against liability for personal injury, bodily injury,
death and damage to property occurring in or about, or resulting from
an occurrence in or about, the Premises with combined single limit
coverage of not less than the amount of Tenant's Liability Insurance
Minimum specified in Section Q of the Summary, which insurance shall
---------
contain a "contractual liability" endorsement insuring Tenant's
performance of Tenant's obligation to indemnify Landlord contained in
Section 10.3;
(2) Fire and property damage insurance in so-called "all
risk" form insuring Tenant's Trade Fixtures and Tenant's Alterations
for the full actual replacement cost thereof; and
(3) Such other insurance that from time to time is either
(i) required by any Lender, or (ii) reasonably required by Landlord
and customarily carried by tenants of similar property in similar
businesses in the vicinity of the Project.
B. Each policy of insurance required to he carried by Tenant
pursuant to this Section 9.1: (i) shall name Landlord and such other parties in
interest as Landlord reasonably designates as additional insured; (ii) shall be
primary insurance which provides that the insurer shall be liable for the full
amount of the loss up to and including the total amount of liability set forth
in the declarations without the right of contribution from any other insurance
coverage of Landlord; (iii) shall be in a form satisfactory to Landlord; (iv)
shall be carried with companies reasonably acceptable to Landlord and having a
rating of A+, AAA or better in "Best's Insurance Guide;" (v) shall provide that
such policy shall not be subject to cancellation, lapse or change except after
at least thirty (30) days prior written notice to Landlord so long as such
provision of thirty (30) days notice is reasonably obtainable, but in any event
not less than ten (10) days prior written notice; (vi) shall not have a
"deductible" in excess of such amount as is approved by Landlord; (vii) shall
contain a cross liability endorsement; (viii) shall contain a "severability"
clause; and (ix) shall be in such form and include such endorsements as may be
required by any Lender or insurance advisor of Landlord. If Tenant has in full
force and effect a blanket policy of liability insurance with the same coverage
for the Premises as described above, as well as other coverage of other premises
and properties of Tenant, or in which Tenant has some interest, such blanket
insurance shall satisfy the requirements of this Section 9.1 provided such
blanket insurance shall have a Landlord's protective liability endorsement
attached thereto in a form acceptable to Landlord.
C. A copy of each paid-up policy evidencing the insurance
required to be carried by Tenant pursuant to this Section 9.1 (appropriately
authenticated by the insurer) or a certificate of the insurer, certifying that
such policy has been issued, providing the coverage required by this Section
9.1, and containing the provisions specified herein, shall be delivered to
Landlord prior to the time Tenant or any of its Agents enters the Premises and
upon renewal of such policies, but not less than five (5) days prior to the
expiration of the term of such coverage. Landlord may, at any time, and from
time to time, inspect and/or copy any and all insurance policies required to be
procured by Tenant pursuant to this Section 9.1. If any Lender or insurance
advisor reasonably determines at any time that the amount of coverage required
for any policy of insurance Tenant is to obtain pursuant to this Section 9.1 is
not adequate, then Tenant shall increase such coverage for such insurance to
such amount as such Lender or insurance advisor reasonably deems adequate.
9.2 Landlord's Insurance:
--------------------
A. Landlord shall maintain a policy or policies of fire and
property damage insurance in so-called "all risk" form insuring Landlord (and
such others as Landlord may designate) against loss of rents for a period of not
less than twelve (12) months and from physical damage to the Project with
coverage of not less than the full replacement cost thereof. Landlord may so
insure the Project separately, or may insure the Project with other property
owned by Landlord which Landlord elects to insure together under the same policy
or policies. Such fire and property damage insurance (i) may be endorsed to
cover loss caused by such additional perils against which Landlord may elect to
insure, including, without limitation, earthquake and/or flood, and to provide
such additional coverage as Landlord reasonably requires, and (ii) shall contain
reasonable "deductibles" which, in the case of earthquake and flood insurance,
may be up to fifteen percent (15%) of the replacement value of the property
insured or such higher amount as is then commercially reasonable. Landlord shall
not be required to cause such insurance to cover any Trade Fixtures or Tenants
Alterations.
B. Landlord may, at its election, maintain (i) a policy or
policies of commercial general liability insurance insuring Landlord (and such
others as are designated by Landlord) against liability for personal injury,
bodily injury, death and damage to property occurring or resulting from an
occurrence in, on or about the Project, with combined single limit coverage in
such amount as Landlord from time to time determines is reasonably necessary for
its protection, and/or (ii) such other forms of insurance as Landlord may desire
to maintain with respect to the Project.
9.3 Tenant's Obligation to Reimburse. The cost of all insurance
--------------------------------
maintained by Landlord with respect to the Project shall be included as part of
Direct Expenses, except that if Landlord's insurance rates for the Project are
increased at any time during the Lease Term as a result of the nature of
Tenant's use of the Premises, Tenant shall reimburse Landlord for the full
amount of such increase within fifteen (15) days following receipt of a bill
from Landlord therefor.
9.4 Release and Waiver of Subrogation. Landlord and Tenant each
---------------------------------
hereby waives all rights of recovery against the other and the other's Agents on
account of loss and damage occasioned to the property of such waiving party to
the extent only that such loss or damage is required to be insured against under
any "all risk" property insurance policies required by this Article 9; provided,
however, that (i) the foregoing waiver shall not apply to the extent of Tenant's
obligations to pay deductibles under any such policies and this Lease, and (ii)
if any loss is due to the act, omission or negligence or willful misconduct of
Tenant or its agents, employees, contractors, guests or invitees, Tenant's
liability insurance shall be primary and shall cover all losses and damages
prior to any other insurance hereunder. By this waiver it is the intent of the
parties that neither Landlord nor Tenant shall be liable to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage insured against under any "all-risk" property insurance policies
required by this Article 9, even though such loss or damage might be occasioned
by the negligence of such party or its Agents. The provisions of this Section
9.4 shall not limit the indemnification, hold harmless and/or defense provisions
elsewhere contained in this Lease.
12
<PAGE>
ARTICLE 10
----------
LIMITATION ON LANDLORD'S
------------------------
LIABILITY AND INDEMNITY
-----------------------
10.1 Limitation on Landlord's Liability. Landlord shall not be liable to
----------------------------------
Tenant, nor shall Tenant be entitled to terminate this Lease or to any abatement
of rent (except as expressly provided otherwise herein), for any injury to
Tenant or Tenant's Agents, damage to the property of Tenant or Tenant's Agents,
or loss to Tenants business resulting from any cause, including, without
limitation, any of the following: (i) failure, interruption or installation of
any HVAC or other utility system or service; (ii) failure to furnish or delay in
furnishing any utilities or services when such failure or delay is caused by
fire or other peril, the elements, labor disturbances of any character, or any
other accidents or any other conditions; (iii) limitation, curtailment,
rationing or restriction on the use of water or electricity, gas or any other
form of energy or any services or utility serving the Project; (iv) vandalism or
forcible entry by unauthorized persons or the criminal act of any person: or (v)
penetration of water into or onto any portion of the Premises or the Building
through roof leaks or otherwise. Notwithstanding the foregoing but subject to
Section 9.4 end Section 10.2, Landlord shall be liable for any such injury,
damage or loss which is caused solely by Landlord's willful misconduct or gross
negligence of which Landlord has actual notice and a reasonable opportunity to
cure but which it fails to so cure; provided, however, notwithstanding anything
contained in this Lease to the contrary, in no event shall Landlord be liable to
Tenant for lost profits, consequential damages and/or incidental damages of any
kind or nature.
10.2 Limitation on Tenant's Recourse. If Landlord is a corporation, trust,
-------------------------------
partnership, limited liability company, joint venture, unincorporated
association or other form of business entity: (i) the obligations of Landlord
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, managers, owners, stockholders, or other
principals or representatives of such business entity, and (ii) Tenant shall not
have recourse to the assets of such of officers, directors, trustees, partners,
joint venturers, members, managers, owners, stockholders, principals or
representatives except to the extent of their interest in the Project. Tenant
hereby waives and releases the officers, directors, trustees, partners, joint
venturers, members, managers, owners, stockholders, principals or representative
from personal liability for the obligations of Landlord under this Lease, and
Tenant shall have recourse only to the interest of Landlord in the Project for
the satisfaction of the obligations of Landlord hereunder and shall not have
recourse to any other assets of Landlord for the satisfaction of such
obligations.
10.3 Indemnification of Landlord. To the fullest extent permitted by law,
---------------------------
Tenant shall hold harmless, indemnify and defend Landlord, and its Agents, with
competent counsel reasonably satisfactory to Landlord (and Landlord agrees to
accept counsel that any insurer requires be used), from all liability,
penalties, losses, damages, costs, expenses, causes of action, claims and/or
judgments arising by reason of any death, bodily injury, personal injury or
property damage resulting from (i) any cause or causes whatsoever (other than
solely by the willful misconduct or gross negligence of Landlord of which
Landlord has had notice and a reasonable time to cure, but which Landlord has
failed to cure) occurring in or about or resulting from an occurrence in or
about the Premises during the Lease Term, (ii) the negligence or willful
misconduct of Tenant or its Agents, wherever the same may occur, or (iii) an
Event of Tenant's Default. The provisions of this Section 10.3 shall survive the
expiration or sooner termination of this Lease.
ARTICLE 11
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DAMAGES TO PREMISES
-------------------
11.1 Landlord's Duty to Restore. If the Premises are damaged by any peril
--------------------------
after the Effective Date, Landlord shall restore the Premises unless the Lease
is terminated by Landlord pursuant to Section 11.2 or by Tenant pursuant to
Section 11.3. All insurance proceeds available from the fire and property damage
insurance carried by Landlord pursuant to Section 9.2 shall be paid to and
become the property of Landlord. If this Lease is terminated pursuant to either
Section 11.2 or Section 11.3, then all insurance proceeds available from
insurance carried by Tenant which covers loss to property that is Landlord's
property or would become Landlord's property on expiration or termination of
this Lease shall be paid to and become the property of Landlord. If this Lease
is not so terminated then upon receipt of the insurance proceeds (if the loss is
covered by insurance) and the issuance of all necessary governmental permits,
Landlord shall commence and diligently prosecute to completion the restoration
of the Premises, to the extent then allowed by Law, to substantially the same
condition in which the Premises were immediately prior to such damage.
Landlord's obligation to restore shall be limited to the Premises and interior
improvements constructed by Landlord as they existed as of the Commencement
Date, excluding any Tenant's Alterations, Trade Fixtures and/or personal
property constructed or installed by Tenant in the Premises. Tenant shall
forthwith replace or fully repair all Tenant's Alterations end Trade Fixtures
installed by Tenant and existing at the time of such damage or destruction, and
all insurance proceeds received by Tenant from the insurance carried by it
pursuant to Section 9.1A(2) shall be used for such purpose.
11.2 Landlord's Right to Terminate. Landlord shall have the right to
-----------------------------
terminate this Lease in the event any of the following occurs, which right may
be exercised by delivery to Tenant of a written notice of election to terminate
within forty-five (45) days after the date of such damage:
A. The Project is damaged by an Insured Peril to such an extent that
the estimated cost to restore exceeds ten percent (10%) of the then actual
replacement cost thereof, or the Building in which the Premises is located is
damaged to such an extent that the estimated cost to restore exceeds twenty-five
percent (25%) of the then actual replacement cost thereof;
B. Either the Project or the Building is damaged by an Uninsured Peril
to such an event that the estimated cost to restore exceeds two percent (2%) of
the then actual replacement cost of the Building;
C. The Premises are damaged by any peril within twelve (12) months of
the last day of the Lease Term to such an extent that the estimated cost to
restore equals or exceeds an amount equal to six (6) times the Base Monthly Rent
then due; or
D. Either the Project or the Building is damaged by any peril and,
because of the Laws then in force, (i) cannot be restored at reasonable cost to
substantially the same condition in which it was prior to such damage, or (ii)
cannot be used for the same use being made thereof before such damage if
restored as required by this Article.
E. As used herein, the following terms shall have the following
meanings: (i) the term "Insured Peril" shall mean a peril actually insured
against for which the insurance proceeds actually received by Landlord (and
which are not required to be paid to any Lender) are sufficient (except for any
"deductible" amount specified by such insurance) to restore the Project under
then existing Laws to the condition existing immediately prior to the damage;
and (ii) the term "Uninsured Peril" shall mean any peril which is not an Insured
Peril. Notwithstanding the foregoing, if the "deductible" for earthquake or
flood
13
<PAGE>
insurance exceeds two percent (2%) of the replacement cost of the improvements
insured, such peril shall, at Landlord's election, be deemed an "Uninsured
Peril" for purposes of this Lease.
11.3 Tenant's Right to Terminate. If the Premises are damaged by any peril
---------------------------
and Landlord does not elect to terminate this Lease or is not entitled to
terminate this Lease pursuant to Section 11.2, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the right to terminate
this Lease in the event any of the following occurs, which right may be
exercised only by delivery to Landlord of a written notice of election to
terminate within seven (7) days after Tenant receives from Landlord the estimate
of the time needed to complete such restoration.
A. The Premises are damaged by any peril and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration of
the Premises cannot be substantially completed within two hundred seventy (270)
days after the date of such damage; or
B. The Premises are damaged by any peril within twelve (12) months of
the last day of the Lease Term and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Premises cannot be
substantially completed within ninety (90) days after the date of such damage
and such damage renders unusable more than thirty percent (30%) of the Premises.
11.4 Abatement of Rent. In the event of damage to the Premises which does
-----------------
not result in the termination of this Lease, the Base Monthly Rent and Tenant's
Share of Direct Expenses shall be temporarily abated during the period of
restoration in proportion to the degree to which Tenant's use of the Premises is
impaired by such damage, but in no event shall such abatement exceed the rental
interruption insurance proceeds actually received by Landlord. Tenant shall not
be entitled to any compensation or damages from Landlord for loss of Tenant's
business or property or for any inconvenience or annoyance caused by such damage
or restoration. Tenant hereby waives the provisions of California Civil Code
Sections 1932(2) and 1933(4) and the provisions of any similar law hereinafter
enacted.
ARTICLE 12
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CONDEMNATION
------------
12.1 Total Taking, Premises. If title to the Premises or so much thereof is
----------------------
taken for any public or quasi-public use under any statute or by right of
eminent domain so that reconstruction of the Premises will not result in the
Premises being reasonably suitable for Tenant's continued occupancy for the uses
and purposes permitted by this Lease, this Lease shall terminate as of the date
possession of the Premises or part thereof is so taken.
12.2 Partial Taking, Project. If title to ten percent (10%) of more of the
-----------------------
Project is taken for any public or quasi-public use under any statute or by
right of eminent domain, Landlord shall have the right to terminate this Lease
as of the date possession of such portion of the Project is so taken by
providing Tenant with written notice thereof no less than sixty (60) days prior
to possession being so taken.
12.3 Partial Taking, Premises. If any part of the Premises is taken for any
------------------------
public or quasi-public use under any statute or by right of eminent domain and
the remaining part is reasonably suitable for Tenant's continued occupancy for
the uses permitted by this Lease, this Lease shall, as to the part so taken,
terminate as of the date possession of such part of the Premises is taken and
Base Monthly Rent shall be reduced in the same proportion that the floor area of
the portion of the Premises so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Premises, as reasonably
determined by Landlord. Landlord shall, at its own cost and expense, make all
necessary repairs and alterations to the Premises so as to make the portion of
the Premises not taken a complete architectural unit. Such work shall not,
however, exceed the scope of the work done by Landlord in originally
constructing the Premises. If severance damages from the condemning authority
are not available to Landlord in sufficient amounts to permit such restoration,
Landlord may terminate this Lease upon written notice to Tenant. Base Monthly
Rent due and payable hereunder shall be temporarily abated during such
restoration period in proportion to the degree to which there is substantial
interference with Tenant's use of the Premises, as reasonably determined by
Landlord. Each party hereby waives the provisions of Sections 1265.130 of the
California Code of Civil Procedure and any present or future law allowing either
party to petition the Superior Court to terminate this Lease in the event of a
partial taking of the Building or the Premises.
12.4 No Apportionment of Award. No award for any partial or total taking
-------------------------
shall be apportioned, it being agreed and understood that Landlord shall be
entitled to the entire award for any partial or entire taking. Tenant assigns to
Landlord its interest in any award which may be made in such taking or
condemnation, together with any and all rights of Tenant arising in or to the
same or any part thereof. Nothing contained herein shall be deemed to give
Landlord any interest in or require Tenant to assign to Landlord any separate
award made to Tenant for the taking of Tenant's Trade Fixtures, for the
interruption of Tenant's business or its moving costs, or for the loss of
goodwill.
12.5 Temporary Taking. No temporary taking of the Premises (which for
----------------
purposes hereof shall mean a taking of all or any part of the Premises for one
hundred eighty (180) days or less) shall terminate this Lease or give Tenant any
right to abatement or reduction in Rent. Any award made to Tenant by reason of
such temporary taking shall belong entirely to Tenant and Landlord shall not be
entitled to share therein. Each party agrees to execute and deliver to the other
all instruments that may be required to effectuate the provisions of this
Section 12.5.
12.6 Sale Under Threat of Condemnation. A sale made in good faith to any
---------------------------------
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this Article 12.
ARTICLE 13
----------
DEFAULT AND REMEDIES
--------------------
13.1 Events of Tenant's Default. Tenant shall be in default of its
--------------------------
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):
A. Tenant shall have failed to pay any Rent when due, and such failure
is not cured within three (3) days after delivery of written notice from
Landlord or Landlord's counsel specifying such failure to pay; or
B. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Rent, and Tenant
shall have failed to cure such breach within thirty (30) days after written
notice from
14
<PAGE>
Landlord specifying the nature of such breach where such breach could reasonably
be cured within said thirty (30) day period, or if such breach could not be
reasonably cured within said thirty (30) day period, Tenant shall have failed to
commence such cure within said thirty (30) day period and thereafter continue
with due diligence to prosecute such cure to completion within such time period
as is reasonably needed but not to exceed ninety (90) days from the date of
Landlord's notice; or
C. Tenant shall have sublet the Premises or assigned its interest in the
Lease in violation of the provisions contained in Article 14; or
D. Tenant shall have abandoned the Premises or left the Premises
substantially vacant; or
E. The occurrence of the following: (i) the making by Tenant of any
general arrangements or assignments for the benefit of creditors: (ii) Tenant
becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute
thereto (unless, in the case of a petition filed against Tenant, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; or (iv) the attachment execution or
other judicical seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this Section 13.lE is contrary to any applicable Law, such
provision shall be of no force or effect;
F Tenant shall have failed to deliver documents required of it pursuant
to Section 4.9, SectIon 15.4 or Section 15.6 within the time periods specified
therein; or
G. Chronic delinquency by Tenant in the payment of any Rent. For purposes
of this Lease, "Chronic delinquency" shall mean failure by Tenant to pay within
five (5) days of the due date any Rent for any three (3) months (consecutive or
non-consecutive) during any twelve (12) month period during the Lease Term. This
section shall in no way limit, nor be construed as a waiver of the rights and
remedies of Landlord provided hereunder or by law in the event of even one (1)
instance of delinquency in the payment of Rent by Tenant. In the event of
chronic delinquency, at Landlord's option, Landlord shall have the right, in
addition to all other rights under this Lease and at law, to require that all
Rent be paid by Tenant on a quarterly basis, in advance. In addition, the
occurrence of a chronic delinquency shall automatically void any options granted
to Tenant under this Lease.
13.2 Landlord's Remedies. If an Event of Tenant's Default occurs, Landlord
-------------------
shall have the following remedies, in addition to all other rights and remedies
provided by any Law or otherwise provided in this Lease, to which Landlord may
resort to cumulatively or in the alternative:
A. Landlord may keep this Lease in effect and enforce by an action at law
or in equity all of its rights and remedies under this Lease, including (i) the
right to recover the rent and other sums as they become due by appropriate legal
action, (ii) the right to make payments required of Tenant or perform Tenant's
obligations and be reimbursed by Tenant for the cost thereof with interest at
the Agreed Interest Rate from the date the sum is paid by Landlord until
Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief
and specific performance to compel Tenant to perform its obligations under this
Lease. Notwithstanding anything contained in this Lease, in the event of a
breach of an obligation by Tenant which results in a condition which poses an
imminent danger to safety of persons or damage to property, an unsightly
condition visible from the exterior of the Building, or a threat to insurance
coverage, then if Tenant does not cure such breach within three (3) days after
delivery to it of written notice from Landlord identifying the breach, Landlord
may cure the breach of Tenant and be reimbursed by Tenant for the cost thereof
with interest at the Agreed Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant.
B. Landlord may enter the Premises and re-lease them to third parties for
Tenant's account for any period, whether shorter or longer than the remaining
Lease Term. Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in releasing the Premises, including, without limitation,
brokers' commissions, expenses of altering and preparing the Premises required
by the releasing. Tenant shall pay to Landlord the rent and other sums due under
this Lease on the date the rent is due, less the rent and other sums Landlord
received from any releasing. No act by Landlord allowed by this subparagraph
shall terminate this Lease unless Landlord notices Tenant in writing that
Landlord elects to terminate this Lease. Notwithstanding any releasing without
termination, Landlord may later elect to terminate this Lease because of the
default by Tenant.
C. Landlord may terminate this Lease by giving Tenant written notice of
termination, in which event this Lease shall terminate on the date set forth for
termination in such notice. Any termination under this Section 13.2C shall not
relieve Tenant from its obligation to pay sums then due Landlord or from any
claim against Tenant for damages or rent previously accrued or then accruing. In
no event shall any one or more of the following actions by Landlord, in the
absence of a written election by Landlord to terminate this Lease, constitute a
termination of this Lease: (i) appointment of a receiver or keeper in order to
protect Landlord's interest hereunder; (ii) consent to any subletting of the
Premises or assignment of this Lease by Tenant, whether pursuant to the
provisions hereof or otherwise; or (iii) any other action by Landlord or
Landlord's Agents intended to mitigate the adverse effects of any breach of this
Lease by Tenant, including, without limitation, any action taken to maintain and
preserve the Premises or any action taken to relet the Premises or any
portions thereof to the event such action do not affect a termination of
Tenant's right to possession of the Premises.
D. In the event Tenant breaches this Lease and abandons the Premises, this
Lease shall not terminate unless Landlord gives Tenant written notice of its
election to so terminate this Lease. No act by or on behalf of Landlord intended
to mitigate the adverse effect of such breach, including those described by
Section 13.2C, shall constitute a termination of Tenant's right to possession
unless Landlord gives Tenant written notice of termination. Should Landlord not
terminate this Lease by giving Tenant written notice, Landlord may enforce all
its rights and remedies under this Lease and/or any Laws, including, without
limitation, the remedy described in California Civil Code Section 1951.4 (lessor
may continue lease in effect after lessee's breach and abandonment and recover
rent as it becomes due, if lessee has right to sublet or assign, subject only to
reasonable limitations). Tenant acknowledges and agrees that the express
standards and conditions set forth in Article 14 below relating to assignments
of this Lease and sublettings of the Premises are reasonable at the time this
Lease is executed by Tenant.
E. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date. For
purposes of computing damages pursuant to California Civil Code Section 1951.2,
(i) an interest rate equal to the Agreed Interest Rate shall be used where
permitted, and (iii) the term "rent" includes Base Monthly Rent and Additional
Rent. Such damages shall include, without limitation:
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(1) The worth at the time of award of the amount by which the unpaid
rent for the balance of the Lease Term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%);
and
(2) Any other amount necessary to compensate Landlord for all detriment
proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely
to result therefrom, including the following: (i) expenses for cleaning,
repairing or restoring the Premises; (ii) expenses for altering, remodeling
or otherwise improving the Premises for the purpose of reletting, including
installation of leasehold improvements (whether such installation be funded
by a reduction of rent, direct payment or allowance to a new tenant, or
otherwise); (iii) broker's fees, advertising costs and other expenses of
reletting the Premises; (iv) costs of carrying the Premises, such as taxes,
insurance premiums, utilities and security precautions; (v) expenses in
retaking possession of the Premises; and (vi) attorney's fees and court
costs incurred by Landlord in retaking possession of the Premises and in
releasing the Premises or otherwise incurred as a result of Tenant's
default.
F. Nothing in this Section 13.2 shall limit Landlords's right to
indemnification from Tenant as provided in Section 7.2 and Section 10.3. Any
notice given by Landlord in order to satisfy the requirements of Section 13.1A
or 13.lB above shall also satisfy the notice requirements of California Code of
Civil Procedure Section 1161 regarding unlawful detainer proceedings.
13.3 Waiver. One party's consent to or approval of any act by the other
------
party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any rent
or payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in writing
and signed by Landlord. No delay or omission in the exercise of any right or
remedy accruing to either party upon any breach by the other party under this
Lease shall impair such right or remedy or be construed as a waiver of any such
breach theretofore or thereafter occurring. The waiver by either party of any
breach of any provision of this Lease shall not be deemed to be a waiver of any
subsequent breach of the same or of any other provisions herein contained.
13.4 Limitation On Exercise of Rights. At any time that an Event of
--------------------------------
Tenants Default has occurred and remains uncured, (i) it shall not be
unreasonable for Landlord to deny or withhold any consent or approval requested
of it by Tenant which Landlord would otherwise be obligated to give, and (ii)
Tenant may not exercise any option to extend, right to terminate this Lease, or
other right granted to it by this Lease which would otherwise be available to
it.
13.5 Waiver by Tenant of Certain Remedies. Tenant waives the provisions
------------------------------------
of Sections 1932(l), 1941 and 1942 of the California Civil Code and any similar
or successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs from the rent due under this
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, including, without limitation, the provisions of Sections 1174 and 1179 of
the California Code of Civil Procedure.
13.6 Landlord's Default. Landlord shall not be deemed to be in default
------------------
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty (30)
days after receipt of written notice from Tenant to Landlord (and any Lender who
have provided Tenant with notice) specifying the nature of such default;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are reasonably required for its performance, then Landlord
shall not be deemed to be in default if is shall commence such performance
within such thirty (30) day period and thereafter diligently prosecutes the same
to completion. Tenant expressly waives any right to terminate this Lease or to
claim a constructive eviction by reason of any default by Landlord hereunder.
13.7 Limitation of Actions Against Landlord. Any claim, demand or right
--------------------------------------
of any kind by Tenant which is based upon or arises in connection with this
Lease shall be barred unless Tenant commences an action thereon within six (6)
months after the date that the act, omission, event or default upon which the
claim, demand or right in question arises, has occurred.
ARTICLE 14
----------
ASSIGNMENT AND SUBLETTING
-------------------------
14.1 Transfer By Tenant. The following provisions shall apply to any
------------------
assignment, subletting or other transfer by Tenant or any subtenant or assignee
or other successor in interest of the original Tenant (collectively referred to
in this Section 14.1 as "Tenant"):
A. Tenant shall not do any of the following (collectively referred
to herein as a "Transfer"), whether voluntarily, involuntarily or by
operation of law, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed (subject to Section 14.lB and
Section 14.lC below): (i) sublet all or any part of the Premises or allow it to
be sublet, occupied or used by any person or entity other than Tenant; or (ii)
assign its interest in this Lease. In no event shall Tenant mortgage or encumber
the Lease (or otherwise use the Lease as a security device) in any manner, or
materially amend or modify an assignment, sublease or other transfer that has
been previously approved by Landlord. Tenant shall reimburse Landlord for all
reasonable costs and attorneys' fees incurred by Landlord in connection with the
evaluation, processing and/or documentation of any requested Transfer, plus an
amount equal to 5% of the Base Monthly Rent as a fee for Landlord's review
whether or not Landlord's consent is granted. Landlord's reasonable costs shall
include the cost of any review or investigation performed by Landlord or
consultant acting on Landlord's behalf of (i) Hazardous Materials (as defined in
Section 7.2E of this Lease) used, stored, released, or disposed of by the
potential subtenant or assignee, and/or (ii) violations of Hazardous Materials
Law (as defined in Section 7.2E of this lease) by Tenant or the proposed
subtenant or assignee. Any Transfer so approved by Landlord shall not be
effective until Tenant has delivered to Landlord an executed counterpart of the
document evidencing the Transfer which (i) is in a form reasonably approved by
Landlord, (ii) contains the same terms and conditions as stated in Tenant's
notice given to Landlord pursuant to Section 14.lB, and (iii) in the case of an
assignment of the Lease, contains the agreement of the proposed transferee to
assume all obligations of Tenant under this Lease arising after the effective
date of such Transfer and to remain jointly and severally liable therefor with
Tenant. Any attempted Transfer without Landlord's consent shall constitute an
Event of Tenant's Default and shall be voidable at Landlord's option. Landlord's
consent to any one Transfer shall not constitute a waiver of the provisions of
this Section 14.1 as to any subsequent Transfer or a consent to any subsequent
Transfer. No Transfer, even with the consent of Landlord, shall relieve Tenant
of its personal and primary obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any perform shall not be deemed to be a waiver by Landlord of any
provision of this Lease nor to be a consent to any Transfer.
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<PAGE>
B. At least thirty (30) days before a proposed Transfer is
to become effective, Tenant shall give Landlord written notice of the proposed
terms of such Transfer and request Landlord's approval, which notice shall
include the following: (i) the name and legal composition of the proposed
transferee; (ii) a current financial statement of the transferee, financial
statements of the transferee covering the preceding three (3) years if the same
exist, and (if available) an audited financial statement of the transferee for a
period ending not more than one year prior to the proposed effective date of the
Transfer, all of which statements are prepared in accordance with generally
accepted accounting principles; (iii) the nature of the proposed transferee's
business to be carried out in the Premises; (iv) all consideration to be given
on account of the Transfer; (v) a current financial statement of Tenant; and
(vi) an accurately filled out response to Landlord's then-standard Hazardous
Materials Questionnaire, if any. Tenant shall provide to Landlord such other
information as may be reasonably requested by Landlord within seven (7) days
after Landlord's receipt of such notice from Tenant. Landlord shall respond in
writing to Tenant's request for Landlord's consent to a Transfer within the
later of (i) fifteen (15) business days of receipt of such request together with
the required accompanying documentation, or (ii) seven (7) days after Landlord's
receipt of all information which Landlord reasonably requests within seven (7)
days after it receives Tenant's first notice regarding the Transfer in question.
If Landlord fails to respond in writing within said period, Landlord will be
deemed to have withheld its consent to such Transfer, provided that if Tenant
specifically requests from Landlord, within five (5) days following the
expiration of said period a statement of reasons for withholding consent,
Landlord shall have thirty (30) days following such request within which to
provide Tenant with a written statement of its reasonable objections to the
Transfer in question (and, if Landlord fails to provide such statement to Tenant
within such thirty (30) day, then Landlord shall be deemed to have consented to
the Transfer in question). Tenant shall immediately notify Landlord of any
material modification to the proposed terms of such Transfer.
Tenant agrees, by way of example and without limitation, that its shall not
be unreasonable for Landlord to withhold its consent to a proposed Transfer if
any of the following situations exist or may exist:
(1) Landlord determines that the proposed assignee's or
sublessee's use of the Premises conflicts with Article 4 above,
presents an unacceptable risk, as determined by Landlord, under
Section 7.2 above, or conflicts with any other provision under this
Lease;
(2) Landlord determines that the proposed assignee or
sublessee is not financially responsible as Tenant as of the date of
Tenant's request for consent or as of the effective date of such
proposed assignment or subletting;
(3) Landlord determines that the proposed assignee or
sublessee lacks sufficient business reputation or experience to
conduct on the Premises a business of a type and quality equal to that
conducted by Tenant;
(4) Landlord determines that the proposed assignment or
subletting would breach a covenant, condition or restriction in some
other lease, financing agreement or other agreement relating to the
Project, the Building, the Premises or this Lease;
(5) An Event of Tenant's Default (or any act or
omission which, with the giving of notice or the passage of time, or
both, would constitute an Event of Tenant's Default) has occurred and
is continuing at the time of Tenant's request for Landlord's consent,
or as of the effective date of such assignment or subletting;
(6) With respect to a proposed assignment, the
consideration to be paid by the proposed assignee for such assignment
is less than the fair market value thereof (as reasonably determined
by Landlord), and, with respect to a proposed subletting, the rent to
be paid by the proposed sublessee under the sublease is less than the
fair market rental value of the Premises or the applicable portion
thereof (as reasonably determined by Landlord);
(7) The proposed assignment or subletting would require
alterations, additions or changes to the Premises not otherwise
approved by Landlord pursuant to Section 5.2; or
(8) The proposed assignee's or sublessee's use of the
Premises would place additional burdens on the Project and/or its
operation, including, without limitation, the Common Area and the
utilities.
C. Notwithstanding anything contained in this Article 14 to
the contrary, in the event that Tenant seeks to make any Transfer, Landlord
shall have the right to terminate this Lease or, in the case of a sublease of
less than all of the Premises, terminate this Lease as to that part of the
Premises proposed to be so sublet, either (i) on the condition that the proposed
transferee immediately enter into a direct lease of the Premises with Landlord
(or, in the case of a partial sublease, a lease for the portion proposed to be
so sublet) on the same terms and conditions contained in Tenant's notice, or
(ii) so that Landlord is thereafter free to lease the Premises (or, in the case
of a partial sublease, the portion proposed to be so sublet) to whomever
(including, without limitation, the proposed transferee) it pleases on whatever
terms are acceptable to Landlord. In the event Landlord elects to so terminate
this Lease, then (i) if such termination is conditioned upon the execution of a
lease between Landlord and the proposed transferee, Tenant's obligations under
this Lease shall not be terminated until such transferee executes a new lease
with Landlord, enters into possession and commences the payment of rent, and
(ii) if Landlord elects simply to terminate this Lease (or, in the case of a
partial sublease, terminate this Lease as to the portion to be so sublet), the
Lease shall so terminate in its entirety (or as to the space to be so sublet)
fifteen (15) days after Landlord has notified Tenant in writing of such
election. Upon such termination, Tenant shall be released from any further
obligation under this Lease if it is terminated in its entirety (or shall be
released from any further obligation under the Lease with respect to the space
proposed to be sublet in the case of a proposed partial sublease), except that
the foregoing release shall not apply to, and Tenant shall not be released from,
(i) any obligations under this Lease accruing prior to such termination, (ii)
any obligations under Section 15.2 below relating to the surrender of the
Premises or such space proposed to be sublet, as applicable, and (iii) any
obligations which, by their terms, are to survive the expiration or sooner
termination of this Lease. In the case of a partial termination of the Lease,
the Base Monthly Rent and Tenant's Share shall be reduced to an amount which
bears the same relationship to the original amount thereof as the area of that
part of the Premises which remains subject to the Lease bears to the original
area of the Premises, all as reasonably determined by Landlord. Upon Landlord's
request, Tenant shall execute a separate termination agreement evidencing any
termination of this Lease pursuant to this Section 14.1C.
D. If Landlord consents to a Transfer proposed by Tenant,
Tenant may enter into such Transfer, and if Tenant does so, the following shall
apply:
(1) Tenant shall not be released of its liability for
the performance of all of its obligations under this Lease.
(2) If Tenant assigns its interest in this Lease, then
Tenant shall pay to Landlord one hundred percent (100%) of all Transfer
Consideration (as defined in Section 14.1D(5)) received by Tenant over and
17
<PAGE>
above (i) the assignee's agreement to assume the obligations of Tenant
under this Lease, and (ii) all Permitted Transfer Costs related to
such assignment. In the case of assignment, the amount of Transfer
Consideration owed to Landlord shall be paid to Landlord on the same
basis, whether periodic or in lump sum, that such Transfer
Consideration is paid to Tenant by the assignee.
(3) If Tenant sublets any part of the Premises, then
with respect to the space so subleased, Tenant shall pay to Landlord
one hundred percent (100%) of the positive difference, if any, between
(i) all Transfer Consideration paid by the subtenant to Tenant, less
(ii) the sum of all Base Monthly Rent and Tenant's Share of Direct
Expenses allocable to the space sublet and all Permitted Transfer
Costs related to such sublease. Such amount shall be paid to Landlord
on the same basis, whether periodic or in lump sum, that such Transfer
Consideration is paid to Tenant by its subtenant. In calculating
Landlord's share of any periodic payments, all Permitted Transfer
Costs shall be first recovered by Tenant.
(4) Tenant's obligations under this Section 14.1D
shall survive any Transfer, and Tenant's failure to perform its
obligations hereunder shall be an Event of Tenant's Default. At the
time Tenant makes any payment to Landlord required by this Section
14.1D, Tenant shall deliver to Landlord an itemized statement of the
method by which the amount to which Landlord is entitled was
calculated, certified by Tenant as true and correct. Landlord shall
have the right at reasonable intervals to inspect Tenant's books and
records relating to the payments due hereunder. Upon request therefor,
Tenant shall deliver to Landlord copies of all bills, invoices or
other documents upon which its calculations are based. Landlord may
condition its approval of any Transfer upon obtaining a certification
from both Tenant and the proposed transferee of all Transfer
Consideration and other amounts that are to be paid to Tenant in
connection with such Transfer.
(5) As used in this Section 14.1D, the term
"Transfer Consideration" shall mean: any consideration of any kind
received, or to be received, by Tenant as a result of the Transfer, if
such sums are related to Tenant's interest in this Lease or in the
Premises, including payments from or on behalf of the transferee (in
excess of the book value thereof) for Tenant's assets, fixtures,
leasehold improvements, inventory, accounts, goodwill, equipment,
furniture, and general intangibles. As used in this Section 14.1D, the
term "Permitted Transfer Costs" shall mean (i) all reasonable leasing
commissions paid to third parties not affiliated with Tenant in order
to obtain the Transfer in question, and (ii) all reasonable attorney's
fees incurred by Tenant with respect to negotiating the Transfer in
question.
E. The sale of all or substantially all of Tenant's assets
(other than bulk sales in the ordinary course of business), any dissolution of
Tenant, or, if Tenant is a corporation, an unincorporated association, a
partnership or a limited liability company, the transfer, assignment and/or
hypothecation of any stock or other interest in such corporation, association,
partnership or limited liability company in the aggregate in excess of
twenty-five percent (25%) during the Term (except for publicly traded shares of
stock constituting a transfer of twenty-five percent (25%) or more in the
aggregate, so long as no change in the controlling interests of Tenant occurs as
a result thereof) shall be deemed an assignment within the meaning and
provisions of this Article 14. As used in the Section 14.1E, the term "Tenant"
shall mean Tenant and/or any person or entity that owns, directly or indirectly,
in whole or in part, Tenant (e.g., a parent corporation of Tenant).
14.2 Transfer By Landlord. Landlord and its successors in interest
--------------------
shall have the right to transfer their interest in this Lease, the Building and
the Project at any time and to any person or entity. In the event of any such
transfer, the Landlord originally named herein (and, in the case of any
subsequent transfer, the transferor) from the date of such transfer, shall be
automatically relieved, without any further act by any person or entity, of all
liability for the performance of the obligations of the Landlord hereunder which
may accrue after the date of such transfer. After the date of any such transfer,
term "Landlord" as used herein shall mean the applicable transferee of such
interest in the Premises.
ARTICLE 15
----------
GENERAL PROVISIONS
------------------
15.1 Landlord's Right to Enter. Landlord and its Agents may enter
-------------------------
the Premises at any reasonable time after giving reasonable prior written or
verbal notice to Tenant (except in the case of any emergency or regularly
scheduled services, in which case no prior notice shall be required) for the
purpose of: (i) inspecting the same; (ii) posting notices of non-responsibility;
(iii) supplying any service to be provided by Landlord to Tenant; (iv) showing
the Premises to prospective purchasers, Lenders or tenants; (v) making necessary
alterations, additions or repairs; (vi) performing Tenant's obligations when
Tenant has failed to do so after written notice from Landlord; (vii) placing
upon the Premises ordinary "for lease" signs or "for sale" signs; and (viii)
responding to an emergency. Landlord shall have the right to use any and all
means Landlord may deem necessary and proper to enter the Premises in an
emergency. Any entry into the Premises obtained by Landlord in accordance with
this Section 15.1 shall not be deemed to be a forcible or unlawful entry into,
or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises. Tenant hereby waives any claims for damages for any
injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby.
15.2 Surrender of the Premises. Upon the expiration or sooner
-------------------------
termination of this Lease, Tenant shall vacate and surrender the Premises to
Landlord in the same condition as existed on the Commencement Date, except for
(i) reasonable wear and tear, (ii) damage caused by any casualty not caused by
Tenant or Tenant's Agents or condemnation, and (iii) contamination by Hazardous
Materials for which tenant is not responsible pursuant to Section 7.2A or
Section 7.2B. In this regard, normal wear and tear shall be construed to mean
wear and tear caused to the Premises by the natural aging process which occurs
in spite of prudent application of the best standards for maintenance, repair
and janitorial practices, and does not include items of neglected or deferred
maintenance. In any event, Tenant shall cause the following to be done prior to
the expiration or the sooner termination of this Lease: (i) all interior walls
shall be painted or cleaned so that they appear freshly painted; (ii) all
non-carpeted floor coverings shall be cleaned and waxed; (iii) all carpets shall
be cleaned and shampooed; (iv) all broken, marred, stained or nonconforming
acoustical ceiling tiles shall be replaced; and (v) all windows shall be washed.
If Landlord so requests, Tenant shall, prior to the expiration or sooner
termination of this Lease, (i) remove any Tenant's Alterations which Tenant is
required to remove pursuant to Section 5.2 and repair all damage caused by such
removal, and (ii) return the Premises or any part thereof to its original
configuration existing as of the time the Premises were delivered to Tenant. If
the Premises are not so surrendered upon the expiration or sooner termination of
this Lease, Tenant shall be liable to Landlord for all costs incurred by
Landlord in returning the Premises to the required condition, plus interest on
all costs incurred at the Agreed Interest Rate. Tenant shall indemnify Landlord
against loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, any claims made by any succeeding
tenant or losses to Landlord due to lose opportunities to lease to succeeding
tenants.
15.3 Holding Over. This Lease shall terminate without further
------------
notice at the expiration of the Lease Term. Any holding over by Tenant after
expiration of the Lease Term shall not constitute a renewal or extension of this
Lease or give Tenant any rights in or to the Premises except as expressly
provided in this Lease. Any holding over after such expiration with
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<PAGE>
the written consent of Landlord shall be construed to be a tenancy from month to
month on the same terms and conditions herein specified insofar as applicable
except that Base Monthly Rent shall be increased to an amount equal to two
hundred percent (200%) of the full unabated Base Monthly Rent payable during the
last full calendar month of the Lease Term.
15.4 Subordination. The following provisions shall govern the
-------------
relationship of this Lease to any Security Instrument:
A. The Lease is subject and subordinate to all Security
Instruments existing as of the Effective Date. However, if any Lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.
B. At LandLord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and performs
all of its obligations under this Lease, unless this Lease is otherwise
terminated pursuant to its terms.
C. Tenant shall upon request execute and acknowledge any
document or instrument reasonably required by any Lender to make this Lease
either prior or subordinate to a Security Instrument, which may include such
other matters as the Lender customarily requires in connection with such
agreements, including provisions that the Lender not be liable for (i) the
return of any security deposit unless the Lender receives it from Landlord, (ii)
any defaults on the part of Landlord occurring prior to the time the Lender
takes possession of the Project in connection with the enforcement of its
Security Instrument, and/or (iii) completion of any improvements to the Premises
or the Project agreed to or undertaken by Landlord. Tenant's failure to execute
any such document or instrument within ten (10) days after written demand
therefor shall constitute an Event of Tenant's Default. Tenant approves as
reasonable the form of subordination agreement attached to this Lease as Exhibit
-------
E; provided, however, the attachment of such form as an exhibit to this Lease
-
shall in no way limit the form of document or instrument that Landlord may
request Tenant to execute and acknowledge pursuant to this Section 15.4C.
15.5 Mortgage Protection and Attornment. In the event of any default on
----------------------------------
the part of the Landlord, Tenant will use reasonable efforts to give notice by
registered mail to any Lender whose name has been provided to Tenant and shall
offer such Lender a reasonable opportunity to cure the default, including time
to obtain possession of the Premises by power of sale or judicial foreclosure or
other appropriate legal proceedings, if such should prove necessary to effect a
cure. Tenant shall attorn to any purchaser of the Premises at any foreclosure
sale or private sale conducted pursuant to any Security Instrument encumbering
the Premises, or to any grantee or transferee designated in any deed given in
lieu of foreclosure.
15.6 Estoppel Certificates and Financial Statements. At all times
----------------------------------------------
during the Lease Term, Tenant agrees, following any request by Landlord, to
execute and deliver to Landlord within (10) days following delivery of such
request an estoppel certificate: (i) certifying that this Lease is unmodified
and in full force and effect or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect, (ii) stating the date to which the Rent and other charges are paid
in advance, if any, (iii) acknowledging that there are not any uncured defaults
on the part of any party hereunder or, if there are uncured defaults, specifying
the nature of such defaults, and (iv) certifying such other information about
the status of the Lease and the Premises as may be required by Landlord. A
failure to deliver an estoppel certificate within ten (10) days after delivery
of a request therefor shall be a conclusive admission that, as of the date of
the request for such statement: (i) this Lease is unmodified except as may be
represented by Landlord in said request and is in full force and effect, (ii)
there are no uncured defaults in Landlord's performance, (iii) no rent has been
paid more than thirty (30) days in advance, and (iv) the information regarding
the status of this Lease, as represented by Landlord in said request, is true
and correct. At any time during the Lease Term Tenant shall, upon ten (10) days'
prior written notice from landlord, provide Tenant's most recent financial
statement and financial statements covering the twenty-four (24) month period
prior to the date of such most recent financial statement to any existing Lender
or to any potential Lender or buyer of the Premises. Such statements shall be
prepared in accordance with generally accepted accounting principles and shall
be certified by Tenant's chief financial officer as true and correct in all
material respects or, if such is the normal practice of Tenant, shall be audited
by an independent certified public accountant.
15.7 Landlord's Consent. Wherever Landlord's approval or consent is
------------------
required under this Lease before any action may be taken by Tenant, such
approval or consent may be withheld or conditioned in Landlord's sole and
absolute discretion unless a different standard is specifically provided for
with respect to the required approval or consent in question.
15.8 Notices. Any notice required or desired to be given regarding
-------
this Lease shall be in writing and may be given by personal delivery, by
facsimile telecopy, by courier service, or by mail. A notice shall be deemed to
have been given (i) on the third business day after mailing if such notice was
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the party to be served at its Address for Notices specified in
Section R or Section S of the Summary (as applicable), (ii) when delivered if
--------- ---------
given by personal delivery, and (iii) in all other cases when actually received
at the party's Address for Notices. Either party may change its address by
giving notice of the same in accordance with this Section 15.8, provided
however, that any address to which notices may be sent must be a California
address.
15.9 Attorneys' Fees. In the event either Landlord or Tenant shall
---------------
bring any action or legal proceeding or any appeal therefrom, for an alleged
breach of any provision of this Lease, to recover rent, to terminate this Lease
or otherwise to enforce, protect or establish any term or covenant of this
Lease, the prevailing party shall be entitled to recover as a part of such
action or proceeding, or in a separate action brought for that purpose,
reasonable attorneys' fees, court costs, and experts' fees as may be fixed by
the court.
15.10 Authority. If Tenant is a corporation (or partnership or limited
---------
liability company), each individual executing this Lease on behalf of Tenant
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of such corporation in accordance with the by-laws of such
corporation (or partnership in accordance with the partnership agreement of such
partnership or limited liability company in accordance with the operating
agreement of such limited liability company) and that this Lease is binding upon
such corporation (or partnership or limited liability company) in accordance
with its terms. Each of the persons executing this Lease on behalf of a
corporation, partnership or limited liability company does hereby covenant and
warrant that the party for whom it is executing this Lease is a duly authorized
and existing corporation, partnership or limited liability company, that such
entity is qualified to do business in California, and that such entity has full
right and authority to enter into this Lease.
15.11 Miscellaneous. Should any provision of this Lease prove to be
-------------
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. The captions used in this Lease are for convenience only and shall not
to be considered in the construction or interpretation of any provision hereof.
Any executed copy of this Lease shall be deemed an original for all purposes.
This Lease shall, subject to the provisions regarding assignment, apply to and
bind the respective heirs, successors, executors,
19
<PAGE>
administrators and assigns of Landlord and Tenant. "Party" shall mean Landlord
or Tenant, as the context implies. If Tenant consists of more than one person or
entity, then all persons or entities so comprising Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning, and not strictly for or against either Landlord or Tenant. When the
context of this Lease requires, the neuter gender includes the masculine, the
feminine, a partnership or corporation or joint venture, and the singular
includes the plural. The terms "shall", "will" and "agree" are mandatory. The
term "may" is permissive. When a party is required to do something by this
Lease, it shall do so at its sole cost and expense without right of
reimbursement from the other party unless a provision of this Lease expressly
requires reimbursement. Landlord and Tenant agree that (i) the gross leasable
area of the Premises includes any atriums, depressed loading docks, covered
entrances or egresses, and covered loading areas, (ii) each has had an
opportunity to determine to its satisfaction the actual area of the Project and
the Premises, (iii) all measurements of area contained in this Lease are
conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more or
less than the amount of area reflected in this Lease, determination that the
area is more or less than shown in this Lease shall not result in a change in
any of the computations of rent, improvement allowances, or other matters
described in this Lease where area is a factor. Where a party hereto is
obligated not to perform any act, such party is also obligated to restrain any
others within its control from performing said act, including the Agents of such
party. Landlord shall not become or be deemed a partner or a joint venturer with
Tenant by reason of the provisions of this Lease.
15.12 Termination by Exercise Right. If this Lease is terminated
-----------------------------
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease shall
terminate thirty (30) days after the date the right to terminate is properly
exercised (unless another date is specified in that part of the Lease creating
the right, in which event the date so specified for termination shall prevail),
the rent and all other charges due hereunder shall be prorated as of the date of
termination, and neither Landlord nor Tenant shall have any further rights or
obligations under this Lease except for those that have accrued prior to the
date of termination or those obligations which this Lease specifically provides
are to survive the expiration or sooner termination of this Lease. This Section
15.12 does not apply to a termination of this Lease by Landlord as a result of
an Event of Tenant's Default.
15.13 Brokerage Commissions. Each party hereto (i) represents and
---------------------
warrants to the other that it has not had any dealings with any real estate
brokers, leasing agents or salesmen, or incurred any obligations for the payment
of real estate brokerage commissions or finder's fees which would be earned or
due and payable by reason of the execution of this Lease, other than to the
Retained Real Estate Brokers described in Section T of the Summary (and then
---------
only to the extent set forth in such separate agreement), and (ii) agrees to
indemnify, defend, and hold harmless the other party from any claim for any such
commission or fees which allegedly result from the actions of the indemnifying
party. Landlord shall be responsible for the payment of any commission owed to
the Retained Real Estate Brokers if, and only to the extent, there is a separate
written commission agreement between Landlord and the Retained Real Estate
Brokers for the payment of a commission as a result of the execution of this
Lease by Tenant. The indemnity, defense and hold harmless obligations under this
Section 15.13 shall survive the expiration or sooner termination of this Lease.
15.14 Force Majeure. Any prevention, delay or stoppage due to strikes,
-------------
lock-outs, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental restrictions,
regulations, controls, action or inaction, civil commotion, fire or other acts
of God, and other causes beyond the reasonable control of the party obligated to
perform (except financial inability) shall excuse the performance, for a period
equal to the period of any said prevention, delay or stoppage, of any obligation
hereunder except the obligation of Tenant to pay rent or any other sums due
hereunder.
15.15 Entire Agreement. This Lease constitutes the entire agreement
----------------
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that neither
Landlord nor Landlord's Agents has made any legally binding representation or
warranty as to any matter except those expressly set forth herein, including any
warranty as to (i) whether the Premises may be used for Tenant's intended use
under existing Laws, (ii) the suitability of the Premises or the Project for the
conduct of Tenant's business, or (iii) the condition of any improvements. There
are no oral agreements between Landlord and Tenant affecting this Lease, and
this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease. This instrument shall not be legally binding until it is executed
by both Landlord and Tenant. No subsequent change or addition to this Lease
shall be binding unless in writing and signed by Landlord and Tenant.
16.16 JURY TRIAL WAIVER. LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT
-----------------
IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS
RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY
WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST
ITS OFFICERS, DIRECTORS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR
AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THE LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY
CLAIM OF INJURY OR DAMAGE.
LANDLORD'S INITIALS: /s/ [ILLEGIBLE] TENANT'S INITIALS: /s/ McCarthy
------------------- -------------------
ARTICLE 16
WARRANTS
16. Warrants. Concurrently herewith, Tenant grants to Landlord, or its
--------
assigns, warrants to purchase up to sixty thousand (60,000) shares of common
stock ("Warrants") of Tenant pursuant to the terms of that certain Stock Warrant
Agreement ("Stock Warrant Agreement"), in the form attached hereto as Exhibit J.
---------
As a condition precedent to the effectiveness if this Lease, concurrently with
the execution of this Lease, Tenant shall deliver to Landlord two (2) fully
executed originals of the Stock Warrant Agreement and a corporate resolution of
Tenant authorizing the grant and issuance to Landlord of the Warrants.
20
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with the
intent to be legally bound thereby, to be effective as of the Effective Date.
LANDLORD:
BR3 PARTNERS
---------------------------------
By: /s/ James C. Rees
------------------------------
James C. Rees
---------------------------------
typed or printed name
Its: Managing Partner
----------------------------
Dated: 10/31/00
---------------------------
TENANT:
Netflix.Com
---------------------------------
a Delaware Corporation
-------------------------------
By: /s/ W. Barry McCarthy, Jr.
------------------------------
Barry McCarthy
---------------------------------
typed or printed name
Title: CFO
---------------------------
By: _____________________________
_________________________________
typed or printed name
Title:___________________________
Dated: __________________________
21
<PAGE>
EXHIBIT A
---------
PROJECT SITE PLAN
[To be attached]
[SITE PLAN]
<PAGE>
EXHIBIT B
---------
DIAGRAM OF PREMISES
[To be attached with Premises shown as cross-hatched]
[DIAGRAM]
<PAGE>
EXHIBIT C
---------
WORK LETTER
(As-Is)
[INTENTIONALLY LEFT BLANK]
Tenant to accept Premises in its "As-Is" condition;
no Tenant Improvements of any kind being provided by Landlord.
<PAGE>
EXHIBIT D
---------
MEMORANDUM OF COMMENCEMENT DATE
(As-Is)
Landlord: ___________
Tenant: ___________
Project: ___________
Premises: ___________
In connection with that certain Office Lease dated _________, the
undersigned hereby certify as follows:
1. That the undersigned Tenant occupies the above-described Premises
consisting of approximately ________ rentable square feet.
2. That the Lease Term commenced (and the Commencement Date occurred)
on _________, and, unless sooner terminated pursuant to the terms of said
Office Lease, shall expire on __________.
3. That Tenants obligation to pay Base Monthly Rent in the amount of
$___________ commenced [or will commence] on __________.
4. That a security deposit of $_______ has been paid by Tenant to
Landlord.
5. That the Premises has been accepted by Tenant in good and sanitary
order, condition and repair in its present "as-is" condition.
LANDLORD TENANT
___________________ _____________________
___________________ _____________________
By:________________ By:__________________
Name:______________ Name:________________
Its:_______________ Its:_________________
<PAGE>
EXHIBIT E
---------
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into as of the _____ day of ____________, ____,
by and between ___________________, a _______________ (the "Beneficiary"),
_______________, a ____________ (the "Tenant") and __________, a _______________
(the "Landlord").
W I T N E S S E T H
A. Tenant has entered into a certain lease dated ___________, ______
(the "Lease") with Landlord covering certain spaces (the "Premises") located in
and upon the real property described in Schedule 1 attached hereto (the
----------
"Property");
B. Beneficiary is the holder of a mortgage loan (the "Loan") to
Landlord in the amount of ___________ Dollars ($___________) which is secured by
a ______________ (the "Deed of Trust") covering the Property;
C. The parties hereto desire expressly to confirm the subordination of
the Lease to the lien of the Deed of Trust, it being a requirement by
Beneficiary that the lien and charge of the Deed of Trust be unconditionally and
at all times prior and superior to the leasehold interests and estates created
by the Lease; and
D. Tenant has requested that Beneficiary agree not to disturb Tenant's
possessory rights in the Premises in the event Beneficiary should foreclose the
Deed of Trust, provided that Tenant is not in default under the Lease and
provided that Tenant attorns to Beneficiary or the purchaser at any foreclosure
or Trustee's sale of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and of other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. Notwithstanding anything to the contrary set forth in the Lease,
the Lease and the leasehold estate created thereby and all of Tenant's rights
thereunder shall be and shall at all times remain subject, subordinate to the
Deed of Trust and the lien thereof and all rights of Beneficiary thereunder and
to any and a11 renewals, modifications, consolidations, replacements and
extensions thereof.
2. Tenant hereby declares, agrees and acknowledges that:
A. Beneficiary would not have agreed to recognize the Lease
without this Agreement; and
B. Beneficiary, in making disbursements pursuant to the
agreements evidencing and securing the Loan, is under no obligation or duty to
oversee or direct the application of the proceeds of such disbursements and such
proceeds may be used by Landlord for purposes other than improvement of the
Premises.
3. In the event of foreclosure of the Deed of Trust, or upon a sale of
the Property pursuant to the Trustee's power of sale contained therein, or upon
a transfer of the Property by deed in lieu of foreclosure, then so long as
Tenant is not in default under any of the terms, covenants, or conditions of the
Lease, the Lease shall continue in full force and effect as a direct lease
between the succeeding owner of the Property and Tenant, upon and subject to all
of the terms, covenants and conditions of the Lease for the balance of the term
of the Lease. Tenant hereby agrees to attorn to and accept any such successor
owner as landlord under the Lease, and to be bound by and perform all of the
obligations imposed by the Lease and Beneficiary or any such successor owner of
the Property will not disturb the possession of Tenant, and will be bound by all
of the obligations imposed by the Lease upon the landlord thereunder; provided,
however, that the Beneficiary, or any purchaser at a trustee's or sheriff's sale
or any successor owner of the Property shall not be:
A. liable for any act or omission of a prior landlord (including
Landlord); or
B. subject to any offsets or defenses which the Tenant might
have against any prior landlord (including Landlord); or
c. bound by any rent or additional rent which the Tenant might
have paid in advance to any prior landlord (including Landlord) for a period in
excess of one month; or
D. bound by any agreement or modification of the Lease made
without the written consent of the Beneficiary; or
E. liable or responsible for or with respect to the retention,
application and/or return to Tenant of any security deposit paid to any prior
lessor (including Landlord), whether or not still held by such prior lessor,
unless and until Beneficiary or such other purchaser has actually received for
its own account as 1essor the full amount of such security deposit; or
F. bound by or liable under any representations, warranties,
covenants or indemnities made to Tenant by any prior landlord (including
Landlord) regarding Hazardous Materials (as defined in the Lease); or
G. obligated to construct the building in which the Premises are
located or any improvements for Tenant's use.
4. Upon the written request of Beneficiary at the time of a
foreclosure, Trustee's sale or deed in lieu thereof or at any time thereafter,
the parties agree to execute a lease of the Premises upon the same terms and
conditions as the Lease between Landlord and Tenant, which lease shall cover any
unexpired term of the Lease existing prior to such foreclosure, Trustee's sale
or conveyance in lieu of foreclosure.
1
<PAGE>
5. Tenant agrees to give to Beneficiary, by registered mail, a copy of any
notice or statement served upon Landlord. Tenant agrees not to exercise any
rights of termination available by virtue of a default unless (i) Landlord shall
have failed to cure such default, and (ii) following expiration of the
applicable period under the Lease for cure Landlord of such default, Tenant
shall have furnished to Beneficiary notice of Landlord's failure to cure such
default, and afforded Beneficiary an additional thirty (30) days following
receipt of such notice within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such thirty (30) days Beneficiary has commenced and is diligently
pursuing the remedies necessary to cure such default (including, but not limited
to, commencement of foreclosure proceedings if necessary to effect such cure),
in which event such right, if any, as Tenant might otherwise have to terminate
the Lease shall not be exercised while such remedies are being so diligently
pursued.
6. Landlord, as landlord under the lease and trustor under the Deed of
Trust, agrees for itself and its heirs, successors, and assigns, that: (i) this
Agreement does not constitute a waiver by Beneficiary of any of its rights under
the Deed of Trust or in any way release Landlord from its obligation to comply
with the terms, provisions, conditions, covenants, agreements and clauses of
the Deed of Trust; and (ii) the provisions of the Deed of Trust remain in full
force and effect and must be complied with by Landlord, if Beneficiary so
requires.
7. Tenant acknowledges that it has notice that the Lease and the rent and
all other sums due thereunder have been assigned or are to be assigned to
Beneficiary as security for the Loan secured by the Deed of Trust. In the event
the Beneficiary notifies Tenant of a default under the Deed of Trust and demands
that Tenant pay its rent and all other sums due under the Lease to the
Beneficiary Tenant agrees that it will honor such demand and pay its rent and
all other sums due under the Lease to the Beneficiary or as otherwise required
pursuant to such notice.
8. All notices hereunder shall be deemed to have been duly given if mailed
by United States registered or certified mail with return receipt requested,
postage prepaid, to Beneficiary at the following address (or at such other
address as shall be given in writing by Beneficiary to the Tenant) and shall be
deemed complete upon any such mailing:
__________________________________
__________________________________
__________________________________
__________________________________
Attention:________________________
with a copy
to: _________________________________
_________________________________
_________________________________
_________________________________
9. This agreement supersedes any inconsistent provisions of the Lease.
10. This Agreement shall inure to the benefit of the parties hereto, their
successors and permitted assigns; provided, however, that in the event of the
assignment or transfer of the interest of Beneficiary, all obligations and
liabilities of Beneficiary under this Agreement shall terminate, and thereupon
all such obligations and liabilities shall be the responsibility of the party to
whom Beneficiary's interest is assigned or transferred.
11. Tenant agrees that this Agreement satisfies any condition or
requirement in the Lease relating to the granting of a non-disturbance
agreement.
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
IN WITNESS WHEREOF, the pirates have executed this Agreement on the date
and year first set forth above.
"Beneficiary" "Landlord"
____________________________ ________________________________
a___________________________ a_______________________________
By: ________________________ By: ____________________________
Printed Printed
Name: ______________________ Name: __________________________
Title: _____________________ Title: _________________________
"Tenant"
____________________________
a___________________________
By: ________________________
Printed
Name: ______________________
Title: _____________________
<PAGE>
EXHIBIT G
---------
RULES & REGULATIONS
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 without the written consent of landlord first had and
obtained and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises; provided, however, that Landlord may furnish end install
a Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.
2. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the tenants or used by them for any
purpose other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any doors or windows of the Premises.
4. Tenant shall not allow any chairs with wheels or casters to be used
without a carpet protector or chairmat. Failure to follow this requirement
which results in carpet damage will result in Tenant being charged for
replacement of the carpet.
5. The toilet rooms, 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 Tenant who, or whose employees or invitees shall
have caused it,
6. Tenant ahall not overload the floor of the Premises or in any way
deface the Premises or any part thereof.
7. No furniture, freight or equipment of any kind shall be brought in
the Building without the prior notice to Landlord and all moving of the same
into or out of the Building shall he done 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
supports of such thickness as is necessary by properly distribute the weight.
Landlord would 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 movmg or
maintaining any such safe or other property shall be repaired at the expense of
Tenant.
8. 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 or 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.
9. No cooking, except by microwave oven, shall be done or permitted by
any Tenant on 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.
10. Tenant shall not use or keep in the Premises of 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.
11. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of Landlord. The locations of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to
the approval of landlord.
12. On Saturdays, Sundays, and legal holidays, and on other days between
the hours of 6:00 PM and 8:00 AM the following day, 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 excess is known to the
person or employee of the Building in charge and has a pass or is properly
identified. Landlord shall in no case be liable for damages for any error with
regard to admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, Landlord reserve
the right to prevent access to the Building during the continuance of the same
by closing of the doors or otherwise, for the safety of the tenants and
protection of property in the Building and the Building.
13. Landlord reserves the right to exclude or expel from tbe 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.
14. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises wthout the written consent
of the Landlord.
15. Landlord shall have the right, exercisable without notice and
without liability to Tenant, to change the name end street address of the
Building of which the Premises are a part.
16. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent the same.
17. Without the written consent of Landlord, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
1
<PAGE>
18. Landlord shall have the right to control and operate the public
portions of the Building, and the public facilities, and heating and air
conditioning, as well as facilities furnished for the common use of the tenants,
in such manner as it deems best for the benefit of the tenants generally.
19. All entrance doors in the Premises shall be left locked when the
Premises are not in use, and all doors opening to public corridors shall be kept
closed except for normal ingress and egress from the Premises.
20. Landlord shall clean the Premises as provided in the Lease, and except
with the written consent of Landlord, no person or persons other than those
approved by Landlord will be permitted to enter the Building for such purposes.
Tenant shall not cause unnecessary labor by reason of Tenant's carelessness and
indifference in the preservation of good order and cleanliness. All cardboard
boxes must be "broken down", and all styrofoam chips must be bagged or otherwise
contained so as not to constitute a nuisance. Landlord shall have no
responsibility whatsoever for the theft of or damage to any property of Tenant
or its employees resulting from any acts or omissions of janitorial personnel,
and Tenant hereby waives any and all claims against Landlord therefor.
21. Landlord reserves the right to amend or supplement the foregoing Rules
and Regulations and to adopt and promulgate additional rules and regulations
applicable to the Project, the Building and/or the Premises.
22. Neither Landlord nor Landlord's Agents or any other person or entity
shall be responsible to Tenant or to any other person for the violation of these
or other Rules and regulations by any other tenant or other person. Tenant shall
be deemed to have read these Rules and Regulations and to have agreed to abide
by them as a condition precedent, waivable only by Landlord, to Tenant's
occupancy of the Premises.
23. Tenant shall be solely responsible for procuring and contracting
directly for all water, gas, electricity, sewer service, waste pick-up,
janitorial service, telephone and other telecommunications services and all
other utilities and services necessary for Tenant's use and occupancy of the
Premises, and landlord shall have no responsibility whatsoever to procure or
provide any such utilities or services. Tenant shall pay, prior to delinquency,
directly to the appropriate supplier thereof, all charges (including taxes) for
all such utilities and services; provided, however, if any such utilities or
services are not separately metered, then Landlord, at its election, may (a)
periodically charge Tenant, as Additional Rent, a sum equal to Landlord's
reasonable estimate of the cost of such utilities or services, or (b) install a
separate meter (at Tenant's expense) to measure such utilities or services and
periodically charge Tenant, as Additional Rent, a sum equal to the cost of
Tenant's use of such utilities or services as measured by such separate meter.
Landlord shall not be in default hereunder or be liable for any damages directly
or indirectly resulting from, nor shall rent be abated by reason of, any failure
or interruption of any such utilities or services. No such failure or
interruption shall be deemed an eviction, actual or constructive, of Tenant or
entitle Tenant to terminate this Lease or withhold Rent due hereunder.
2
<PAGE>
EXHIBIT H
ACKNOWLEDGEMENT OF EARLY EXPIRATION
The undersigned, NetFlix.com, as tenant ("Tenant"), pursuant to that
certain Office Lease ("Lease") dated _____________, with BR3 Partners, as
landlord ("Landlord"), hereby acknowledges receipt of written notice from
Landlord that Landlord is exercising its right to cause the Lease to expire
early, on October 31, 2003, pursuant to the terms of Section 4.9 of the Lease.
Tenant shall vacate the Premises (as such term is defined in the Lease) on or
before October 31, 2003, pursuant to the applicable provisions of the Lease. In
the event that Tenant has not vacated the Premises by said date, Tenant
acknowledges that it is required to pay, and it shall pay, holdover rent to
Landlord at the rate of two hundred percent (200%) of the then Base Monthly Rent
(as such term is defined in the Lease) pursuant to Section 15.3 of the Lease.
Date: ___________________ Netflix.com
By: _____________________________
Name: ___________________________
Its: _______________________
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EXHIBIT I
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PARKING
[To be attached with Parking shown as cross-hatched]
[MAP OF PARKING LOT]
University avenue
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EXHIBIT J
STOCK WARRANT AGREEMENT
[see attached]
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