1733 OCEAN AVENUE OFFICE LEASE

1733 OCEAN AVENUE

OFFICE LEASE

THIS LEASE is made and entered into as of the 15th   day of November, 2005, by and between MAGUIRE PARTNERS - 1733 OCEAN, LLC, a California limited liability company (“ Landlord ”) and MAGUIRE PROPERTIES, L.P., a Maryland limited partnership (“ Tenant ”).

1.   Lease of Premises .

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, those certain premises (the “ Premises ”) located on the fourth floor of an office building (the “ Building ”) located at 1733 Ocean Avenue, Santa Monica, California, as shown on the drawings attached hereto as Exhibit “A,” The Premises contain 17,207 square feet of Rentable Area (as defined in Exhibit “B” attached hereto) and 441 square feet of Balcony Area (as defined in Exhibit “B” attached hereto), for a total area of 17,648 square feet (“ Total Area ”). The Building, a subterranean parking garage located beneath the Building (the “ Parking Garage ”), the land on which the foregoing improvements are located (the “ Land ”), and all other improvements, parks and plazas now or hereafter constructed on the Land, except improvements which tenants may remove therefrom pursuant to the terms of their respective leases, are collectively referred to herein as the “ Project .” Landlord is the ground lessee of the Land pursuant to a Ground Lease dated as of October 16, 1987 (the “ Ground Lease ”) entered into by Landlord’s predecessor-in- interest, a memorandum of which was recorded on November 16, 1987 as Document Number 87-1827182 in the Official Records of the Los Angeles County Recorder.

2.   Purpose .

. The Premises shall be used only for office uses in keeping with the character of a first-class, office building complex and for no other purpose. Without limiting the foregoing, permitted office uses do not include uses for a medical practice, modeling, personnel or counseling agency, training center (except for training of Tenant’s employees and customers necessarily incidental to Tenant’s business at the Premises), retail sales operation, showroom, classroom, testing center or non-incidental storage. Tenant shall have the non-exclusive right to use the common areas and public areas in the Project.

. Tenant shall not use or occupy the Premises, or permit the use or occupancy of the Premises, in any manner or for any purpose which: (a) would violate any Applicable Laws including, without limitation, those with respect to hazardous or toxic materials, or the provisions of any applicable governmental permit or document related to the Project (including without limitation, the First Amendment and Restatement of Development Agreement by and between Maguire Thomas Partners Development, a California limited partnership and the City of Santa Monica recorded February 22, 1996 as Document Number 96-293171 in the Official Records of the Los Angeles County Recorder, as amended); (b) would adversely affect or render more expensive any fire or other insurance maintained by Landlord for the Building or any of its contents; or (c) would impair or interfere with any of the services and systems of the Building, including without limitation, the Building’s electrical, mechanical, vertical transportation, sprinkler, fire and life safety, structural, plumbing, security, heating, ventilation and air conditioning systems (collectively, the “ Building Systems ”) or the janitorial, security and building maintenance services (collectively, the “ Service Facilities ”).

3.   Term .

3.1   Commencement Date

. The term of this Lease (the “ Term ”) shall commence on the earlier of (i) the date Tenant commences business operations from the Premises and (ii) the first business day of the week following the date that the Occupancy Date has occurred or would have occurred had Tenant Delays, as defined in Exhibit “D” , not occurred

 

 

 

(the “ Commencement Date ”) and shall end ten (10) years after the Commencement Date, unless sooner terminated pursuant hereto. Promptly following the Commencement Date, Landlord and Tenant shall confirm the Commencement Date and the expiration date by executing and delivering a Memorandum of Commencement Date in the form attached hereto as Exhibit “C.” In no event shall the Commencement Date occur later than the date on which the Tenant commences business operations from the Premises.

. Landlord shall prepare the Premises for occupancy by Tenant in accordance with the provisions of Landlord’s Improvement Letter, attached hereto as Exhibit “D. ” The “ Occupancy Date ” for the Premises shall occur on the first business day following Tenant’s receipt of a correct notice that each of the following conditions have been satisfied: (a) the Building Systems are operational to the extent necessary to service the Premises; (b) Landlord has provided reasonable access to the Premises by Tenant, its agents, employees, licensees and invitees so that the Premises may be used without substantial interference; (c) Landlord has made available to Tenant the number of parking passes as set forth in Article 26 ; (d) Landlord has obtained a signed-off building permit card (or equivalent evidence from the City of Santa Monica that the Premises may legally be occupied) for the Premises (except to the extent such failure to obtain a such signed off building permit card or other evidence is due to any act or omission of Tenant or Tenant’s architect or space planner); and (e) Landlord has substantially completed the work required to be performed by Landlord in accordance with Exhibit “D” hereto other than details of construction, decoration and minor mechanical adjustments which do not materially interfere with Tenant’s use of the Premises ( i.e. punch list items) and any items to be installed by Tenant. Notwithstanding anything to the contrary set forth above, to the extent the Occupancy Date is delayed as a result of any Tenant Delay (as defined in Article 7 of Exhibit “D” attached hereto), the Occupancy Date shall be determined without regard to such delay and the Occupancy Date shall be deemed to occur on the date the foregoing conditions would have been satisfied “but for” the Tenant Delay. If the Occupancy Date does not occur by January 1, 2007, Tenant may terminate this Lease on ten (10) days notice to Landlord.

3.3   Acceptance of Premises

. Except for latent defects as otherwise provided in this Lease and subject to Section 1.1 of Exhibit “D” hereto, Tenant hereby accepts the Premises in its “AS-IS” condition, and Landlord shall have no obligation to repair, restore, improve, remodel or refurbish the Premises other than as may be set forth in Exhibit “D” , provided that the Base Building Improvements (as defined in Exhibit “D” hereto), elevators lobbies, corridors and common areas, upon such delivery, shall be in compliance with Applicable Laws subject to applicable hardship variances and “grandfather” rights but shall otherwise be in first-class condition and operating order. By entering into possession of the Premises or any part thereof and except for such matters as Tenant shall specify to Landlord in writing within thirty (30) days thereafter, Tenant shall be conclusively deemed to have accepted the Premises and to have agreed that Landlord has performed all of its obligations hereunder with respect to the Premises and that such Premises is in satisfactory condition and in full compliance with the requirements of this Lease as of the date of such possession, except for latent defects and compliance with Applicable Laws as otherwise specifically required of Landlord under this Lease. With respect to latent defects, Landlord shall have no responsibility to correct or liability with respect to any latent defects in any portion of the Tenant Improvements installed by a contractor of Tenant but shall be responsible for repair of or liable for latent defects, if any, in the core and shell of the Building and in the Tenant Improvements installed by Landlord or Landlord’s contractors, subject to all applicable statutes of limitation. Except as otherwise expressly provided in this Lease and except for use of the Premises for office purposes as permitted by the Certificate of Occupancy for the Building, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building or any other portion of the Project, including without limitation, any representation or warranty with respect to the suitability or fitness of the Premises, the Building or any other portion of the Project for the conduct of Tenant’s business.

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(a)   Provided an Event of Default is not in existence as of the date of exercise and the date of commencement of the Renewal Term (“ Renewal Term Commencement Date ”), Tenant shall have one (1) option

 

 

 

to renew this Lease (“ Renewal Option ”), for a period of five (5) years (“ Renewal Term ”) for the entire Premises. The Renewal Option shall be exercisable by Tenant giving written notice (“ Renewal Notice ”) to Landlord of its exercise of the Renewal Option at least twelve (12) months prior to the expiration of the initial Term.

(b)   The Basic Rent payable hereunder for the Premises during the Renewal Term shall be adjusted to the then-prevailing Fair Market Rental Rate (as defined below) as of the Renewal Term Commencement Date. In order to determine the Fair Market Rental Rate for the Renewal Term, Landlord and Tenant, thirty (30) days after the date on which the Renewal Notice is given by Tenant (but not earlier than one year prior to the expiration of the initial Term), shall each simultaneously submit to the other in writing its good faith estimate of the Fair Market Rental Rate. If the higher of said estimates is not more than one hundred and five percent (105%) of the lower of such estimates, the Fair Market Rental Rate in question shall be deemed to be the average of the submitted rates. If otherwise, then the rate shall be set by arbitration as provided in Section 30.20 below.

(c)   Tenant shall pay Additional Rent during the Renewal Term in accordance with the provisions of Article 5 .

(d)   The Renewal Option set forth in this Section 3.4 is personal to Tenant and may not be assigned, transferred or conveyed to any party, except in connection with an assignment of the Lease in its entirety to an Affiliate or Successor of Tenant (as defined in Section 14.1 ) or to a Transferee that is approved under Article 14 .

(e)   The phrase “ Fair Market Rental Rate ” shall mean the fair market value annual rental rate per square foot of Rentable Area that a tenant has agreed to pay (i) to Landlord or (ii) to a willing, comparable landlord of a Comparable Building, in each case in then-current transactions executed in the preceding twelve months between non-affiliated parties from non-equity, non- renewal (unless pursuant to a comparable definition of Fair Market Rental Rate) and/or non-expansion (unless pursuant to a comparable definition of Fair Market Rental Rate) tenants, as applicable, for comparable space and for a comparable period of time ( “Comparable Transactions ”). “ Comparable Buildings ” means the Building and the buildings currently located at 1299 Ocean Avenue, 100 Wilshire Boulevard, 401 Wilshire Boulevard, 1333 2nd Street, and 120 Broadway, each in Santa Monica, California. In any determination of Comparable Transactions, appropriate consideration should be given to annual rental rates per square foot of Rentable Area, the type of escalation clauses (e.g., whether increases in additional rent are determined on a net or gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop), taking into account all rental and other concessions granted in such Comparable Transactions (as well as such concessions to which Tenant is entitled in this Lease), length of the lease term, size and location of the building in which the premises are being leased and the location of the premises therein (taking into account any views and the comparison thereto of the Premises), the base, shell and core delivery conditions, building standard work letter and/or tenant improvement allowances, if any, the level of existing base, shell and core and tenant improvements (taking into account the value of the improvements to the typical general business office user and not this Tenant), free rent periods for construction of tenant improvements, brokerage commissions, and other generally applicable conditions of tenancy for such Comparable Transactions. The intent is that Tenant will obtain the same rent and other economic benefits and concessions that Landlord (and other landlords of first-class office projects, as applicable) have otherwise given in current Comparable Transactions and that Landlord will make, and receive the same economic payments and concessions that Landlord (and other landlords of first-class office projects, as applicable) have otherwise made, and received in current Comparable Transactions, and Landlord can adjust the face rental rate to reflect any concessions actually given by Landlord as compared to Comparable Transactions. If, for example, after applying the criteria set forth above, a Comparable Transaction provides a new tenant with comparable space at Thirty-Two Dollars ($32) per square foot of Rentable Area, with a Ten Dollar ($10) base amount expense stop, two (2) months’ free rent, two (2) months’ construction time, Thirty Dollars ($30) per usable square foot as a tenant improvement allowance, and certain other generally applicable economic terms, the Fair Market Rental Rate for Tenant shall not be Thirty-Two Dollars ($32) per square foot of Rentable Area only, but shall be the equivalent of Thirty-Two Dollars ($32) per square foot of Rentable Area, a Ten Dollar ($10) base amount expense stop, four (4) months’ free rent, Thirty Dollars ($30) per usable square foot tenant improvement allowance or payment in lieu of such allowance, and such other generally applicable economic terms. As a further example, the rental rate may be adjusted to Thirty-Three Dollars ($33) to reflect a larger tenant improvement allowance or longer free rent period granted by Landlord as compared to Comparable Transactions.

 

 

 

4.   Basic Rent .

The basic annual rent payable to Landlord (“ Basic Rent ”) shall be as set forth in this Article 4 .

4.1   Initial Basic Rent

. For the period beginning on the Commencement Date and continuing until Basic Rent is adjusted pursuant to Section 4.2 , Tenant shall pay Landlord Basic Rent in the amount of Nine Hundred Twenty-Nine Thousand One Hundred Seventy-Eight Dollars ($929,178.00) annually, which is equal to the total Rentable Area (as defined in Exhibit “B” ) of the Premises multiplied by the annual rent of Fifty-Four Dollars ($54.00) per square foot of Rentable Area. Such initial Basic Rent shall be payable in equal monthly installments of Seventy-Seven Thousand Four Hundred Thirty-One and 50/100 Dollars ($77,431.50), each installment being payable in advance on the first day of each calendar month beginning on the Commencement Date and continuing until Basic Rent is adjusted pursuant to Section 4.2 .

4.2   Adjustment of Basic Rent .

(a)   On the first anniversary of the Commencement Date, the Basic Rent shall be increased to Nine Hundred Fifty-Seven Thousand Fifty-Three and 34/100 Dollars ($957,053.34) annually, payable in advance in equal monthly installments of Seventy-Nine Thousand Seven Hundred Fifty Four and 45/100 Dollars ($79,754.45), until further adjustment pursuant to Subsection 4.2(b) below. Said adjustment of the initial Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(b)   On the second anniversary of the Commencement Date, the Basic Rent shall be increased to Nine Hundred Eighty-Five Thousand Seven Hundred Sixty-Four and 94/100 Dollars ($985,764.94) annually, payable in advance in equal monthly installments of Eighty Two Thousand One Hundred Forty-Seven and 08/100 Dollars ($82,147.08), until further adjustment pursuant to Subsection 4.2(c) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(c)   On the third anniversary of the Commencement Date, the Basic Rent shall be increased to One Million Fifteen Thousand Three Hundred Thirty-Seven and 80/100 ($1,015,337.80) annually, payable in advance in equal monthly installments of Eighty-Four Thousand Six Hundred Eleven and 49/100 Dollars ($84,611.49), until further adjustment pursuant to Subsection 4.2(d) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(d)   On the fourth anniversary of the Commencement Date, the Basic Rent shall be increased to One Million Forty-Five Thousand Seven Hundred Ninety-Seven and 90/100 Dollars ($1,045,797.90) annually, payable in advance in equal monthly installments of Eighty Seven Thousand One Hundred Forty-Nine and 82/100 Dollars ($87,149.82), until further adjustment pursuant to Subsection 4.2(e) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(e)   On the fifth anniversary of the Commencement Date, the Basic Rent shall be increased to One Million Seventy-Seven Thousand One Hundred Seventy One and 80/100 Dollars ($1,077,171.80) annually, payable in advance in equal monthly installments of Eighty-Nine, Seven Hundred Sixty-Four and 32/100 Dollars ($89,764.32), until further adjustment pursuant to Subsection 4.2(f) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(f)   On the sixth anniversary of the Commencement Date, the Basic Rent shall be increased to One Million One Hundred Nine Thousand Four Hundred Eighty-Six and 90/100 Dollars ($1,109,486.90) annually, payable in advance in equal monthly installments of Ninety Two Thousand Four Hundred Fifty-Seven and 24/100 Dollars ($92,457.24), until further adjustment pursuant to Subsection 4.2(g) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(g)   On the seventh anniversary of the Commencement Date, the Basic Rent shall be increased to One Million One Hundred Forty-Two Thousand Seven Hundred Seventy-One and 40/100 Dollars

 

 

 

($1,142,771.40) annually, payable in advance in equal monthly installments of Ninety-Five Thousand Two Hundred Thirty and 96/100 Dollars ($95,230.96), until further adjustment pursuant to Subsection 4.2(h) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(h)   On the eighth anniversary of the Commencement Date, the Basic Rent shall be increased to One Million One Hundred Seventy-Seven Thousand Fifty-Four and 50/100 Dollars ($1,177,054.50) annually, payable in advance in equal monthly installments of Ninety-Eight Thousand Eighty-Seven and 87/100 Dollars ($98,087.87), until further adjustment pursuant to Subsection 4.2(i) below. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

(i)   On the ninth anniversary of the Commencement Date, the Basic Rent shall be increased to One Million Two Hundred Twelve Thousand Three Hundred Sixty-Six and 10/100 Dollars ($1,212,366.10) annually, payable in advance in equal monthly installments of One Hundred One Thousand Thirty and 51/100 Dollars ($101,030.51), throughout the remainder of the Term. Said adjustment of the Basic Rent shall not limit any subsequent rent adjustment pursuant to Article 5 hereof.

4.3   Other Terms

. If the Term begins on a day other than the first day of a calendar month, or ends on a day other than the last day of a calendar month, or if Basic Rent is increased on other than the first day of a calendar month, Basic Rent for such month shall be prorated based upon the number of days in such month. Basic Rent, together with all other sums due hereunder (herein called “ Additional Rent ”), shall be paid to the Landlord without deduction or offset of any kind, and in advance and without demand (except as otherwise herein expressly provided) in lawful money of the United States at the office of Landlord at the Project or such other location and/or to such other person as Landlord may from time to time designate in writing. The Basic Rent and Additional Rent may sometimes be referred to herein collectively as the “ rent .”

5.   Rent Adjustments .

(a)   “ Base Operating Expenses and Real Property Taxes ” shall mean the amount of Project Expenses during the Base Year, as adjusted hereunder, expressed as an amount per square foot of Total Area of the Building. “ Base Year ” shall mean calendar year 2006.

(b)   “ Operating Expenses ” means the total of all actual costs (except as set forth herein) incurred by Landlord in connection with the management, operation, maintenance, cleaning, protecting, servicing and repair of the Project. Operating Expenses shall include, without limitation, (i) the cost of providing, managing, operating, maintaining and repairing air conditioning, sprinkler, fire and life safety, electricity, steam, heating, mechanical, ventilation, lighting, escalator and elevator systems and all other utilities and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of repairs, general maintenance and cleaning, landscaping, gardening, trash removal, telephone service, janitorial service, light bulb and tube replacement (except for the non-Building-standard light bulbs and tubes replaced within the Premises and within the premises of other tenants of the Project which are paid for directly by Tenant and such other tenants of the Project), and supplies, security and parking shuttle service; (iii) the cost of fire, extended coverage, boiler, sprinkler, apparatus, public liability, property damage, rent, earthquake and other insurance; (iv) wages, salaries and other labor costs including taxes, insurance, retirement, medical and other employee benefits of on-site Building personnel at the level of building manager and below (or, if there is not an on-site building manager, a reasonable allocation of personnel costs of a designated off-site manager based on such manager’s time spent on the Building and Building matters); (v) fees, charges and other costs, including management fees, consulting fees, legal fees and accounting fees, of all independent contractors engaged by Landlord or reasonably charged by Landlord if Landlord performs management services in connection with the Project, provided that, with respect to management services charged by Landlord, Operating Expenses may include an annual fee not in excess of three percent (3%) of gross revenue of the Project; (vi) the fair market rental value of the Building manager’s offices and storage areas in the Building, provided said offices and storage areas are devoted solely to the management, operation, maintenance or repair of the Project; (vii) the cost of business licenses; (viii) fees imposed by any federal, state or local government for fire

 

 

 

and police protection, trash removal, community services or other similar services which do not constitute Real Property Taxes; (ix) any charges which are payable by Landlord pursuant to a service agreement with the City of Santa Monica, under a special assessment district or pursuant to any other lawful means; (x) the costs of contesting the validity or applicability of any governmental enactment which would increase Operating Expenses; (xi) capital costs incurred in connection with any equipment, device or other improvement reasonably anticipated to achieve economies in the operation, maintenance or repair of the Project or portion thereof, or to comply with Applicable Laws not effective with respect to the Project on the date hereof; provided, however, the same shall be amortized (including interest at Landlord’s cost of funds on the unamortized cost) over the shorter of (A) the useful life, or (B) the cost recovery period (i.e., the anticipated period to recover the full cost of such capital item from cost savings achieved by such capital item) of the relevant capital item as reasonably determined by Landlord; and (xii) depreciation of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building or Project. For purposes of computing rent adjustments pursuant to this Article 5 , Operating Expenses for the entire Project shall be equitably allocated and charged to Tenant as an amount per square foot of Rentable Area. Operating Expenses shall be adjusted to reflect one hundred percent (100%) occupancy of the Project during any period in which the Project is not one hundred percent (100%) occupied, including, if applicable, the Base Year. Said adjustment to reflect one hundred percent (100%) occupancy shall be applied only to Operating Expenses which by their nature vary based on the occupancy of the Project and not applied to Operating Expenses which by their nature are fixed independently of the level of occupancy of the Project, all as determined in accordance with generally accepted accounting and management practices consistently applied. In no event shall the components of Operating Expenses for any Lease Year related to costs for electricity, Project security or insurance be less than the components of Operating Expenses related to costs for electricity, Project security or insurance, respectively, in the Base Year. Operating Expenses shall not include the following:

(1)   The cost of repairs to the Building including the Premises, to the extent the cost of the repairs is reimbursed by insurance, or which, in the case of major, non-capital repairs to the Project which are necessitated as a result of a casualty caused by an earthquake or a terrorist act and which are uninsured; provided, however, the cost of such uninsured non-capital repairs may be amortized and such annual amortized cost may be passed through as Operating Expenses to the extent such annual amortization costs do not exceed Two Dollars ($2.00) per square foot of Rentable Area per annum (such amortization shall be over the useful life of the applicable repair, determined in accordance with generally accepted accounting and management practices);

(2)   Costs arising from correction of latent defects in the Tenant Improvements installed by Landlord (but not by Tenant), or in the Base Building Improvements;

(3)   Marketing costs, including, without limitation, attorneys’ fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, leasing commissions paid to agents of Landlord, other brokers or any other persons in connection with the leasing of premises in the Building;

(4)   The cost (inclusive of permits, licenses and inspections) of improving or renovating space for tenants (including Tenant) or space vacated by any tenant (including Tenant) and the cost of relocating or moving any tenant (including any rental paid for or reimbursed to any tenant and any other consideration, incentive or amount paid or given to any tenant in consideration of moving into or out of the Project;

(5)   The cost of utilities or services charged to individual tenants (including Tenant) and payroll, material and contract costs of other services charged to tenants (including Tenant);

(6)   The cost of painting and decorating the Premises or the premises of other tenants;

(7)   The depreciation of the Building and other real property structures in the Project;

(8)   Interest, points and fees on debt or amortization or other principal payments on any real property mortgages or deeds of trust and ground lease payments or any other debt instrument encumbering

 

 

 

the Building or the Project, and other costs and charges in connection therewith, such as, without limitation, legal fees and brokerage fees;

(9)   Legal, accounting, auditing and other related expenses associated with the negotiation and enforcement of leases or the defense of Landlord’s title to the Land, the Building or other portions of the Project;

(10)   Advertising and promotional costs incurred directly for leasing space in the Building or other portions of the Project;

(11)   Landlord’s general corporate overhead and general administrative expenses not related to the operation of the Project;

(12)   Subject to Paragraph 5.1(b)(v) or as specifically provided otherwise in this Lease, and including the management fees payable to Landlord or its subsidiaries or affiliates, the overhead and profit increments paid to Landlord, or to any subsidiary or affiliate of Landlord, for goods and/or services in the Building, to the extent such overhead and profit increments exceed the costs of comparable first-class, high quality goods and/or services, delivered or rendered by unaffiliated third parties of comparable reputation, stature, experience and quality to Landlord, on a competitive basis; provided that a management fee equal to three percent (3%) of the gross revenues of the Project annually, payable to Landlord or its affiliate, shall be permitted as part of Operating Expenses;

(13)   Subject to Paragraph 5.1(b)(v) , costs associated with the operation of the business of the partnership or entity which constitutes Landlord as the same are distinguished from the costs of operation of the Building, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Building, costs of any disputes between Landlord and its employees (if any) not engaged in Building operation, disputes of Landlord with Building management, or outside fees paid in connection with disputes with other tenants;

(14)   Any compensation paid to clerks or attendants in commercial concessions operated by Landlord and compensation paid to employees for leasing space in the Building or other portions of the Project;

(15)   All items and services for which Tenant or any other tenant in the Building reimburses or is contractually bound to reimburse Landlord (other than through Operating Expenses) and all items and services supplied selectively to any tenant without reimbursement (regardless of whether such items and services would be required to be reimbursed by Tenant under this Lease), provided that, any item or service supplied selectively to Tenant shall be paid for by Tenant;

(16)   The cost of payroll for clerks and attendants, bookkeeping, garage keepers insurance, parking management fees, tickets, striping and uniforms and other direct costs of operating the parking facilities;

(17)   Costs of capital improvements, replacements, repairs or alterations to the Building and other portions of the Project except as otherwise included in Operating Expenses pursuant to Paragraph 5.1(b)(xi) above;

(18)   Costs of repairs or modifications to the Building, Project or Premises due to Landlord’s failure, if any, to construct the Building, Project or Premises in full compliance with governmental regulations, ordinances and laws effective with respect to such construction at the time of such construction;

(19)   The cost of any political or charitable donations or contributions;

 

 

 

(20)   Interest, fines or penalties assessed as a result of Landlord’s failure to make payments in a timely manner, unless such failure is reasonable under the circumstances in accordance with the standard of operation set forth in Paragraph 7.1(g) below;

(21)   Costs of complying with laws, codes, regulations or ordinances relating to Hazardous Materials including capital expenditures relating thereto and/or testing, reporting, monitoring, clean-up, management of, administration of, and defense of claims relating to Hazardous Materials which are incurred (A) as a result of the presence of Hazardous Materials in the Project as of November 1, 2003 or which were thereafter placed thereon by Landlord or Landlord’s agents or contractors in the course of construction or operation of the Project, including the selection and use of building materials which Landlord should have known were Hazardous Materials at the time of their installation or (B) as a result of the presence of Hazardous Materials in the soil or groundwater under the Project on or before the date of execution of this Lease (provided, however, unless caused by the gross negligence or willful misconduct of Landlord, its agents or employees, Operating Expenses shall include costs incurred in connection with the clean-up, remediation, monitoring, management and administration of (and defense of claims related to) the presence of Hazardous Materials used by Landlord in connection with the operation, repair and maintenance of the Project to perform Landlord’s obligations under this Lease (such as, without limitation, fuel oil for generators, cleaning solvents, and lubricants) and which are customarily found or used in first-class office buildings). Except to the extent such costs are the responsibility of Tenant under Article 16, all other costs and expenses associated with the compliance with such laws, codes, regulations or ordinances relating to all other Hazardous Materials shall be included as Operating Expenses. As used herein, the term “Hazardous Materials” means any hazardous or toxic substance which is listed or defined as a “hazardous waste,” “restricted hazardous waste,” or “hazardous substance” under any municipal, state or federal law, code or other regulation, or which would require removal, treatment or remedial action pursuant to standards established by the California Department of Health Services.

(22)   Costs of purchasing, installing and replacing art work or decorative features, excluding replacements required as a result of normal wear and tear (to the extent properly capitalized under generally accepted accounting and management practices) in the Building or elsewhere in the Project;

(23)   Except for making repairs or keeping permanent systems in operation while repairs are being made, rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment not affixed to the Building which is used in providing janitorial or similar services;

(24)   Expenses incurred by Landlord for use of any portions of the Building to accommodate events including, but not limited to shows, promotions, kiosks, displays, filming, photography, private events or parties, ceremonies, and advertising beyond the normal expenses otherwise attributable to providing Building services, such as lighting and HVAC to such public portions of the Building in normal Building operations during standard Building hours of operation;

(25)   Costs of flowers, gifts, balloons, etc. provided to any entity whatsoever, to include, but not limited to, Tenant, other tenants, employees, vendors, contractors, prospective tenants and agents;

(26)   Costs of any “tenant relations” parties, events or promotion not consented to by an authorized representative of Tenant in writing;

(27)   Any bad debt loss, rent loss or reserves for bad debts or rent loss;

(28)   Costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Building;

(29)   Costs arising from Landlord’s breach of this Lease;

(30)   Management fees computed using a percentage above 3% or the percentage utilized during the Base Year;

 

 

 

(31)   Reserves of any kind;

(32)   Costs incurred in connection with the upgrading of the Building to comply with disability, life, fire and safety codes, ordinances, statutes or other laws in effect with respect to the Project prior to November 1, 2003; and

(33)   Costs of validated parking for Landlord’s visitors to the Building.

Landlord agrees that Landlord will not collect or be entitled to collect Operating Expenses from all of its tenants in an amount which is in excess of one hundred percent (100%) of the Operating Expenses actually paid or incurred by Landlord in connection with the operation of the Project. All assessments and premiums which are not specifically charged to Tenant because of what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law and not included as Operating Expenses except in the year in which the assessment or premium installment is actually paid; provided, however, that if the prevailing practice in comparable buildings is to pay such assessments or premiums on an earlier basis, and Landlord pays on such basis, such assessments or premiums shall be included in Operating Expenses as paid by Landlord, and Landlord may, in such event, include any accrued interest (resulting from such assessments or premiums) in its computation of Operating Expenses. Each time Landlord provides Tenant with an actual and/or estimated statement of Operating Expenses, such statement shall be in a format containing at least the level of detail as such statements normally provided by Landlord as of the date hereof.

(c)   “ Real Property Taxes ” shall mean all taxes, assessments (special or otherwise) and charges levied upon or with respect to the Project and ad   valorem taxes on personal property used in connection therewith. Real Property Taxes shall include, without limitation, any tax, fee or excise on the act of entering into this Lease, on the occupancy of Tenant, the rent hereunder or in connection with the business of owning and/or renting space in the Project which are now or hereafter levied or assessed against Landlord by the United States of America, the State of California or any political subdivision, public corporation, district or other political or public entity, and shall also include any other tax, assessment, fee or excise, however described (whether general or special, ordinary or extraordinary, foreseen or unforeseen), which may be levied or assessed in lieu of, as a substitute for, or as an addition to, any other Real Property Taxes. Landlord may pay any such special assessments in installments when allowed by law, in which case Real Property Taxes shall include any interest charged thereon. Real Property Taxes shall also include any private assessments or the Building’s contribution towards a private cost-sharing agreement for the purpose of augmenting or improving the quality of service and amenities normally provided by governmental agencies. Real Property Taxes shall also include legal fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Property Taxes. Real Property Taxes shall not include income, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes are levied or assessed against Landlord, in whole or in part, in lieu of, as a substitute for or as an addition to, any other tax which would otherwise constitute a Real Property Tax. The amount of Real Property Taxes for the Base Year attributable to the valuation of the Project, inclusive of tenant improvements, shall be referred to herein as “ Base Taxes .” If, in any Lease Year subsequent to the Base Year, the amount of Real Property Taxes decreases, then for purposes of that Lease Year and all subsequent Lease Years in which such decrease in Real Property Taxes occurs, the Base Taxes shall be decreased by an amount equal to the decrease in Real Property Taxes.

. If, for any Lease Year (as defined in Section 5.4 ), the Operating Expenses and Real Property Taxes for the Project, expressed as an amount per square foot of Total Area in the Building, is higher than the Base Operating Expenses and Real Property Taxes, then Tenant shall pay to Landlord as Additional Rent for such Lease Year (and any subsequent Lease Year until further adjustment in accordance with this Article 5) a sum equal to the amount by which the Operating Expenses and Real Property Taxes for the Project (per square foot of Total Area in the Building) for such Lease Year exceeds the Base Operating Expenses and Real Property Taxes, multiplied by the number of square feet of Total Area of the Premises. Notwithstanding anything to the contrary set forth in this Article 5 , when calculating the Base Operating Expenses and Real Property Taxes, the Base Taxes shall not include (in each case to the extent same are not included in subsequent Lease Years) any increase in Real Property Taxes attributable to special assessments, charges, costs, or fees, or due to modifications or changes in governmental laws

 

 

 

or regulations, including but not limited to the institution of a split tax roll, and Operating Expenses shall exclude market-wide increases (in each case to the extent same are not included in subsequent Lease Years) due to extraordinary circumstances, including, but not limited to, boycotts and strikes, and utility rate increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages and amortized costs (in each case to the extent same are not included in subsequent Lease Years) relating to capital improvements.

. Prior to the commencement of each Lease Year, or as soon thereafter as possible, Landlord shall furnish to Tenant a statement containing Landlord’s reasonable estimate of the Operating Expenses and Real Property Taxes (collectively, “ Project Expenses ”) for such Lease Year and a calculation of the Additional Rent, if any, payable by Tenant for such Lease Year pursuant to Section 5.2 on the basis of such estimate. If the Lease Year is a full year, Tenant shall pay to Landlord one-twelfth (1/12) of the amount of said Additional Rent on each monthly rent payment date during such year (commencing on January 1) until further adjustment pursuant to this Section 5.3 . If the Lease Year is a partial year, Tenant shall pay to Landlord on each monthly rent payment date in such partial year an amount equal to said Additional Rent divided by the number of months in said partial Lease Year. If Landlord’s statement is furnished after the start of the Lease Year, then on the next monthly rent payment date Tenant shall pay the entire portion of the Additional Rent attributable to portions of the Lease Year prior to such date. Landlord may reasonably adjust Tenant’s monthly rent payments under this Article 5 from time to time during the Lease Year to reflect the then current or estimated Project Expenses and actual expenditures made during the elapsed portion of the Lease Year. Following each Lease Year, Landlord shall furnish to Tenant a statement prepared by a firm of certified public accountants selected by Landlord showing the actual Project Expenses during the previous Lease Year, and Landlord shall compute any charge or credit to Tenant necessary to adjust rent previously paid by Tenant to reflect the actual Project Expenses. If such statement and computation reveal an underpayment, Tenant shall promptly pay to Landlord an amount equal to such underpayment (whether or not this Lease has expired or been terminated), and if such statement and computation show an overpayment, Landlord shall credit the next monthly rental payment of Tenant with an amount equal to such overpayment, or, if the Term has expired, refund the overpayment to Tenant.

5.4   Lease Year; Proration

. “ Lease Year ” shall mean the whole or partial calendar year commencing on the Commencement Date and ending on December 31 of the year in which the Commencement Date occurs, and all subsequent calendar years within the Term. The amount of Additional Rent payable under this Article 5 shall be proportionately abated in the case of a partial month or if the Lease Year is less than 365 days.

. Any costs or expenses for services or utilities in excess of those required by this Lease to be supplied by Landlord, not otherwise included in Operating Expenses, and which are attributable directly to Tenant’s use or occupancy of the Premises shall be paid in full by Tenant as Additional Rent when such costs are incurred or, if Landlord makes such payments, within five (5) days after being billed therefor by Landlord.

. Landlord shall maintain in a safe and orderly manner all of its records pertaining to the Additional Rent payable pursuant to this Article 5 for a period of three (3) years after the completion of each calendar year. Landlord shall maintain such records on a current basis and in sufficient detail to permit adequate review thereof and, at all reasonable times, after reasonable notice, copies of such records shall be available to Tenant’s accounting personnel (but not other representatives except as set forth in this Section 5.6 ) for such purposes at the management office of the Project. If Tenant disputes the year-end statement provided under Section 5.3 above, provided an Event of Default (as defined in Article 22 ) does not exist, Tenant may, by written notice to Landlord within one (1) years after receipt of Landlord’s statement for a particular Lease Year, cause an audit to be commenced of the Project Expenses for such Lease Year by a regionally or nationally recognized firm of certified public accountants on a non-contingency fee basis, at Tenant’s sole expense (except as provided below), to verify if Landlord’s statement was accurate. If such audit reveals an overpayment of Project Expenses for the year covered by such statement, then,

 

 

 

provided Landlord does not reasonably dispute the result of such audit, Landlord shall credit the next monthly rent payment of Tenant, or if the Term has expired, and, in any event, with respect to any amount of the credit due Tenant in excess of the next monthly rent payment Landlord shall refund the overpayment or such excess, as applicable, within thirty (30) days after final determination of the amount due Tenant. If any such overpayment is not refunded or credited to Tenant within thirty (30) days after such overpayment is determined hereunder, the amount of such overpayment shall bear interest at the lesser of two percent (2%) in excess of the Reference Rate (as defined in Paragraph 22.2(b)) or the maximum rate permitted by law, from the date of such determination until paid or credited to Tenant. If such audit reveals an underpayment of Project Expenses for the year covered by the most recent statement, then provided Tenant does not reasonably dispute the results of such audit, Tenant shall pay the same with its next monthly rent payment, or if the Term has expired, within thirty (30) days after receipt of the audit results. If Landlord or Tenant disagrees with the results of any such audit, either party may submit such results to arbitration in accordance with the provisions of Section 30.20 , and such arbitration shall be final and binding on Landlord and Tenant. Tenant’s failure to dispute a year-end statement and conduct an audit of Project Expenses within one (1) years after receipt of Landlord’s statement for a particular Lease Year shall constitute Tenant’s acknowledgement of the accuracy of such statement. Tenant agrees to keep the results of any audit hereunder confidential. Tenant agrees to pay the cost of any audit hereunder by Tenant; provided that if the audit reveals, with respect to any Lease Year, that Landlord has billed Tenant for Tenant’s share of Project Expenses more than four percent (4%) in excess of the Project Expenses that Tenant should pay for such Lease Year pursuant to the terms of the Lease, then Landlord shall pay the reasonable cost of such audit. If Tenant is denied the right to conduct an audit hereunder because an Event of Default is claimed to exist at the time of Tenant’s request for an audit, and if it is later finally determined by a court or other tribunal having jurisdiction that such Event of Default did not then exist, then Tenant’s right to cause an audit to be commenced for the applicable Landlord’s statement shall be reinstated for a sixty (60) day period after such final determination and written notice to Tenant thereof.

6.   Abatement for Untenantability .

If the Premises or any portion thereof are rendered untenantable and are not used by Tenant for a period of five (5) consecutive days or any ten (10) business days in any twelve (12) month period (the “ Eligibility Period ”) as a result of failure in the water, sewage, life/safety, vertical transportation, air conditioning, heating, ventilating or electrical systems of the Project or due to any condition or circumstance referred to in Section 7.3 below, or as a result of any Damage (as defined in Section 12.1 ), or as a result of any taking by eminent domain described in Article 13 , or as a result of the presence or introduction of Hazardous Materials (as defined in Subsection 5.1(b)(21) ) at the Project in violation of Applicable Laws (provided the same were not introduced by Tenant), or as a result of any repair, maintenance or alteration performed by Landlord which interferes with Tenant’s use of the Premises, Tenant’s rent shall be reduced and abated after the expiration of the Eligibility Period for such time as the Premises or such portion thereof remain untenantable and are not used by Tenant, in the proportion that the Rentable Area of the portion of the Premises rendered untenantable and not used by Tenant bears to the total Rentable Area of the Premises, provided, however, there shall be no abatement of rent if Landlord provides to Tenant and Tenant uses other space in the Project which is reasonably suited for the temporary operation of Tenant’s business and Landlord pays for the costs incurred by Tenant to move to such other space. Provided, however, Tenant shall not be entitled to an abatement of rent to the extent the failure of the Building Systems was caused by the intentional deliberate acts of Tenant’s authorized agents or employees intended to result in Tenant being entitled to an abatement of rent. Notwithstanding the foregoing, during any rent abatement under this Lease, Tenant shall pay Landlord Additional Rent for all services and utilities provided to and used by Tenant during the period of the rent abatement. However, if due to the causes referred to in the first sentence of this Article 6 , any portion of the Premises is rendered untenantable for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the rent allocable to such reoccupied portion, based on the proportion that the Rentable Area of such reoccupied portion of the Premises bears to the total Rentable Area of the Premises, shall be payable by Tenant from the date such business operations commence. If Tenant’s right to abatement occurs because of Damage to the Premises, Tenant’s abatement period shall continue until Tenant has been given reasonably sufficient time, and reasonably sufficient access to the Premises, for the restoration of the Premises and installation of Tenant’s property, furniture, fixtures and equipment and to move in. To the extent rental loss insurance carried by Landlord, the premiums for which are

 

 

 

included in Operating Expenses, covers rent loss for any portion of the Eligibility Period, the Eligibility Period shall be reduced to the extent of such coverage.

7.   Utilities and Services .

. In accordance with the standards set forth in Paragraph 7.1(g) , Landlord shall furnish the following services and utilities to the Premises, the cost of which shall be included in Operating Expenses except as specifically provided otherwise herein, during the periods from 8:00 a.m. to 6:00 p.m., Monday through Friday and 9:00 a.m. to 1:00 p.m. Saturday, except New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving, Christmas Day (on the days such holidays are generally observed) and such other holidays as are generally recognized by Class A office buildings in the Santa Monica/West Los Angeles area, and subject to rules and regulations from time to time established by Landlord (such hours and days of operation are herein called “ Normal Working Hours ”):

(a)   HVAC . Landlord shall furnish heating, ventilation and air conditioning (“ HVAC ”) in amounts required for the use and occupancy of the Premises for normal office purposes. Tenant shall not, without Landlord’s prior written consent, use any equipment or lighting or occupy the Premises with personnel so that heat generated by such use or occupancy materially and adversely affects the ambient temperature otherwise maintained in the Premises by the HVAC system under normal operation. In the event such use or occupancy affects the ambient temperature, , after notice to Tenant and after Tenant has had a reasonable opportunity to modify the conditions of such usage or occupancy to mitigate such effect on the ambient temperature, Landlord shall have the right to install any machinery or equipment which Landlord reasonably deems necessary to restore temperature balance, including without limitation, modifications to the standard air conditioning equipment, and the Actual Cost (as defined below) thereof including the Actual Cost of installation and any additional cost of operation and maintenance incurred thereby, shall be paid by Tenant to Landlord upon demand by Landlord. Landlord makes no representation with respect to the adequacy or fitness of the HVAC equipment in the Building to maintain temperatures which may be required for, or because of, any equipment of Tenant, and Landlord shall have no liability for loss or damage in connection therewith. Landlord shall also provide HVAC services during other than Normal Working Hours (“ After Hours HVAC ”), subject to the following terms and conditions:

(1)   Landlord shall provide the After Hours HVAC in the event Tenant gives Landlord advance notice of its need for such service no later than 3:00 p.m. on Monday through Friday (except holidays referred to above) that Tenant requires the services, and no later than 3:00 p.m. on the last business day preceding the weekend or holiday that Tenant requires the service. In addition and notwithstanding the foregoing, Tenant may contact the Building manager or on-site Building engineer at any reasonable time to order After Hours HVAC, and Landlord shall, to the extent reasonably practicable, provide After Hours HVAC service as requested by Tenant, even if Tenant failed to give notice within the time periods specified above. If After Hours HVAC is designed to be available under an automated system on demand from Tenant, Tenant shall be entitled to such service.

(2)   Landlord will provide the After Hours HVAC at the “ Actual Cost ,” defined below. There shall be no start-up charges and minimum usage for After-Hours HVAC service after the first hour. Landlord shall give Tenant not less than twenty (20) days prior notice of any change in the Actual Cost of After Hours HVAC. The foregoing direct charges shall be payable by Tenant as Additional Rent on the next rent payment date at least fifteen (15) days following submission of a reasonably detailed invoice therefor by Landlord.

(b)   Electricity . Landlord shall furnish to the Premises electric current for HVAC, and an average of six (6) watts of electric current for connected load and one and one half (1.5) watts of electric current for lighting per square foot of Usable Area (“ Electric Capacity ”). Tenant acknowledges that the Building is supplied with electrical power by a single electrical feed serviced by Southern California Edison. Tenant shall not install or operate any machinery, appliances or equipment in the Premises or the Building which will in any way increase the amount of electricity usually furnished or supplied for use of the Premises as general office space in excess of the Electric Capacity; nor shall Tenant connect any apparatus, device, machinery, appliances or equipment (except through existing electrical outlets in the Premises) or as approved by Landlord with respect to the Tenant

 

 

 

Improvements installed pursuant to Exhibit “D” hereto or Alterations, for the purpose of using electric current, which approval will not be withheld unless a Design Problem exists. Tenant agrees to pay directly (instead of as part of Operating Expenses and in addition to Operating Expense payments pursuant to Section 5.1 ) for the cost of electrical current, at Actual Cost, used by Tenant which exceeds the amount of such current typically used by other tenants in the Project or a common base amount for all tenants reasonably established by Landlord such that the allocation of electricity costs to all tenants in the Project through Operating Expenses would otherwise be materially distorted or unfair. If Landlord determines at any time during the Term that Tenant is using such excess amount of electric current, Landlord shall have the right, at its sole cost and expense and without charge to Tenant, to install a submeter on any floor or floors of the Premises to determine the actual amount of electric current which Tenant is utilizing from time to time. If such submeter indicates that Tenant’s usage of electric current exceeds the amount of such electric current typically used by other tenants in the Project or the common base amount referred to above and that the allocation of electricity costs to all tenants in the Project through Operating Expenses is, therefore, materially distorted or unfair, then Tenant shall pay Landlord the Actual Cost of the installation of such submeter and shall pay directly (instead of as part of Operating Expenses) for the Actual Cost of such excess electric current usage plus any additional Actual Cost incurred in keeping account of the electric current so consumed; provided that such costs paid by Tenant and by other tenants of the Project as if they have similar provisions which are applied under their leases (whether or not actually paid by such other tenants) shall be excluded from Operating Expenses for purposes of Additional Rent payable under Article 5 . Landlord shall have the right to install such submeter at any time and from time to time during the Term or any renewal thereof.

(c)   Elevators . Landlord shall furnish freight and passenger elevator services to the Premises during Normal Working Hours. During all other hours, Landlord shall furnish passenger elevator cab service in the elevator bank serving the Premises on an as needed basis, and, by prior arrangement with Landlord’s project manager, freight elevator service. In addition, if Tenant requires extended or uninterrupted use of the freight elevator for other than normal deliveries to the Premises (such as for a special move or alterations), then Landlord shall provide freight elevator service by prior arrangement with the manager of the Building the Actual Cost of which shall be charged to Tenant in accordance with Section 7.2 .

(d)   Water . Landlord shall make available water for normal lavatory and drinking purposes to be drawn from the public lavatory in the core of the floor on which the Premises are located twenty-four (24) hours per day, seven (7) days per week.

(e)   Janitorial . Landlord shall provide janitorial service five (5) nights per week generally consistent with that furnished in other first-class office buildings in the Santa Monica/West Los Angeles area. Landlord shall not be required to provide other than Building standard janitorial services for portions of the Premises used for storage, mailroom, storage room or similar purposes, or preparing or consuming food or beverages, nor shall Landlord be required to provide janitorial services to areas secured, obstructed or locked by Tenant, or used as a lavatory, other than the lavatory rooms shown on the floor plan of the Premises to be attached hereto as Exhibit “A.”  

(f)   Access; Security . Landlord shall furnish to Tenant’s employees and agents access to the Premises and the Parking Garage on a seven (7) day per week, twenty-four (24) hour per day basis, subject to compliance with such reasonable and non-discriminatory security measures as shall from time to time be in effect for the Building and/or the Project, Landlord maintenance activities and the reasonable and non-discriminatory rules and regulations from time to time established by Landlord. Landlord shall provide twenty-four (24) hour building security equipment, procedures and personnel for the Project which are comparable with those used in other comparable buildings in the Santa Monica/West Los Angeles area. Landlord does not warrant the effectiveness of said security equipment, procedures and personnel.

(g)   Standard of Operation . Landlord agrees that it will cause the Project to be operated and managed, and services provided, in a manner consistent with that of a reasonably prudent building manager of a Class A office building located in the Santa Monica/West Los Angeles area (“ First Class Project ”), and in a manner which is efficient and reasonably controls Project Expenses but is consistent with the character of the Project as a First Class Project in compliance with all laws and shall maintain the Project in first-class condition and operating order.

 

 

 

(h)   Actual Cost Definition . “ Actual Cost ” , as used in this Lease, means the actual costs incurred by Landlord (including Landlord’s reasonably estimated related administrative cost for the cost of services to the extent not already included in Operating Expenses and if applicable, depreciation related to increased utilization of HVAC related equipment and other equipment, as applicable) in providing the applicable service, including, without limitation, After Hours HVAC.

. Freight and passenger elevator services, HVAC, electricity, water, and access to and use of the loading dock facilities will be available twenty-four (24) hours a day, subject to the provisions of this Article 7 . Landlord may charge Tenant, at Landlord’s Actual Cost, and establish reasonable rules and regulations for any of the following: (a) the use of any After Hours HVAC by Tenant (at Landlord’s Actual Cost); (b) the usage of any services provided to Tenant (including without limitation, passenger or freight elevator service, or use of the loading dock facilities by Tenant when and if Tenant’s use of the loading dock requires the use of personnel for the operation and/or security of the Building) at any time other than during Normal Working Hours except as set forth in Paragraph 7.1(c) ; (c) additional or unusual janitorial services required because of any unusual, non-building standard improvements in the Premises, the negligence of Tenant, the nature of Tenant’s business (including the operation of Tenant’s business other than during Normal Working Hours); and (d) the removal of any refuse and rubbish from the Premises except for discarded material placed in wastepaper baskets and left for emptying as an incident to Landlord’s normal cleaning of the Premises. Landlord agrees that the initial Tenant Improvements installed by Tenant shall not be deemed non-building standard improvements. The foregoing direct charges shall be payable by Tenant as Additional Rent on the later to occur of the next rent payment date after submission of an invoice therefor by Landlord or ten (10) days after Tenant’s receipt thereof. Notwithstanding anything to the contrary contained in this Lease, if Landlord determines at any time during the Term that Tenant is using excess electricity or HVAC services, Landlord shall have the right, at its option, to meter and charge all tenants in the Building, including Tenant, directly for their use of electricity or chilled water for HVAC services within their respective premises. In such event, following the commencement of such separate metering, (i) Tenant shall pay such charges as Additional Rent on a monthly basis on the later to occur of the next rent payment date after submission of an invoice therefor by Landlord or ten (10) days after Tenant’s receipt thereof, and (ii) all such direct charges shall be excluded from Operating Expenses under Article 5 .

7.3   Interruption in Utility Services

. Landlord shall not be liable for damages or otherwise for failure, stoppage or interruption of any services or utilities or unavailability of access to the Project, nor shall the same be construed either as an eviction of Tenant, or result in an abatement of rent (except as provided in Article 6 ), when such failure is caused by acts of God, accidents, breakage, repairs, strikes, lockouts, other labor disputes, other force majeure events, or by the making of repairs, alterations or improvements to the Premises or the Building, or the limitation, curtailment, rationing or restriction on supply of fuel, steam, water, electricity, labor or other supplies or for any other condition beyond Landlord’s reasonable control, including without limitation, any governmental energy conservation program or legal requirement. If any governmental entity imposes mandatory or voluntary controls or guidelines on Landlord or the Project or any part thereof, relating to the services provided by Landlord, or the reduction of emissions, Landlord may make such alterations to the Building or any other part of the Project related thereto and take such other steps as are necessary to comply with such controls and guidelines (provided that Landlord may do so with respect to voluntary controls or guidelines only to the extent such action by Landlord is consistent with the standards set forth in Paragraph 7.1(g) above), the cost of such compliance and alterations shall be included in Operating Expenses, and Landlord shall not be liable therefor, for damages or otherwise, nor shall the same be construed either as an eviction of Tenant, or result in an abatement of rent, subject, however to the provisions of Article 6 above. Landlord shall, to the extent commercially reasonable, perform all alterations and repairs after normal business hours and/or on weekends and shall endeavor to minimize any interruptions to Tenant’s normal and customary business operations.

8.   Alterations .

 

 

 

(a)   Tenant may make alterations, additions or improvements to the Premises after the Commencement Date (collectively, “ Alterations ”) which do not create a Design Problem.(as defined in Section 8.1(c) ), on the terms and conditions set forth in this Article 8 and provided Tenant submits its plans, including floor load calculations, for such Alterations to Landlord at least fifteen (15) business days prior to commencement of construction of such Alterations (except as to decorative items, minor repairs or installations of trade fixtures and furniture for which plans are not required) and subject to Landlord’s consent to the extent required under Section 8.1(b) . Alterations shall be scheduled through Landlord and each of Tenant’s contractors shall cooperate and coordinate with Landlord and Landlord’s contractor so that there shall be no disruption of the Building Systems or Service Facilities or of any other construction on or in the Project. Within ten (10) days after receipt of the plans for Alterations, Landlord shall inform Tenant, in good faith, whether such Alterations will create a Design Problem. If Landlord indicates that such Alterations will create a Design Problem, Landlord will have five (5) additional days to inform Tenant of its disapproval, and the reasons for such disapproval, and what changes or conditions could be made or satisfied to obtain Landlord’s approval. Under no circumstances shall Tenant make any Alterations that create a Design Problem without Landlord’s prior consent, which Landlord may withhold in its discretion.

(b)   If the proposed Alterations in, to or about the Premises or the Building individually or cumulatively will not create a Design Problem, Tenant may make such Alterations with the prior written consent of Landlord, which Landlord shall not unreasonably withhold or delay beyond fifteen (15) days following request for the consent and any submittal of plans required hereunder, and which may only be conditioned upon (i) the right to approve the plans and specifications for any work provided that Landlord shall not disapprove such plans if a Design Problem is not created, (ii) the right to require reasonable supplemental insurance satisfactory to Landlord and naming Landlord as an additional insured, (iii) requirements as to the manner in which or the time or times at which work may be performed and (iv) the right to approve the contractor or contractors to perform the Alterations, which approval shall not be unreasonably withheld or delayed. No approval shall be required to paint or cover walls or for the installation of the floor covering, provided the manner of installing the floor covering is subject to Landlord approval; and further provided that any such painting, covering or installation shall be subject to the notice requirement set forth in Section 8.1(a) .

(c)   “ Design Problem ” means any Alteration (or as the context dictates, other work or use of the Premises or the Project by Tenant) which does not meet each of the following requirements: (i) the Alterations work shall be done in a first class manner and completed in accordance with Landlord’s requirements and to the extent not inconsistent with this Article 8 ¸ all Applicable Laws, all applicable rules, regulations and requirements of governmental authorities and insurance carriers and shall not affect the outside appearance, character or use of the Building, nor shall any Alteration materially weaken or impair the structural strength of the Building; (ii) no Alteration shall create the potential for unusual expenses to be incurred upon the removal of the Alterations and the restoration of the Premises upon the termination of this Lease unless Tenant agrees to pay for the incremental removal cost caused by such non-typical Alterations; (iii) no part of the Building outside of the Premises shall be materially, adversely affected by any Alteration; (iv) the proper functioning of the Building structure, Building Systems and Service Facilities shall not be materially, adversely affected by any Alteration (nor shall any Alteration involve or permit the installation of equipment or other fixtures or improvements which exceeds the capacities of the Building structure or Building Systems unless Tenant authorizes Landlord to modify, at Tenant’s expense, the Building Systems to increase such capacity and such modification does not create a Design Problem); (v) no Alteration shall materially, adversely interfere with Landlord’s free access to the Building Systems or materially, adversely interfere with the moving of Landlord’s equipment to or from the enclosures containing the Building Systems; (vi) no Alteration shall materially increase the floor load or plumbing requirements, or increase the electrical or HVAC requirements, over those provided as of the Commencement Date, unless Tenant reinforces the floor or increases the capacity of the electrical, plumbing or HVAC systems at its own cost and expense without adversely affecting such systems, and (vii) no Alteration shall adversely affect any other tenant’s normal and customary use of the Project. Any changes necessary to eliminate any Design Problems shall be incorporated into Tenant’s plans for the proposed Alterations and shall be performed at Tenant’s sole cost as a condition for Landlord’s approval of such proposed Alterations. Tenant shall not be permitted to install and make part of the Premises any materials, fixtures or articles which are subject to liens, conditional sales contracts or chattel mortgages other than trade fixtures, furniture and equipment. Landlord agrees that none of the Tenant’s initial Tenant Improvements shown on the plans approved by Landlord under the Tenant Improvement Letter shall be deemed to adversely offset any other tenant’s use of the Project.

 

 

. Tenant shall pay to Landlord the reasonable, actual out-of-pocket costs incurred by Landlord as the need for such review is reasonably determined by Landlord, for reviewing and inspecting all Alterations to assure full compliance with all of Landlord’s requirements, including, without limitation, any out-of-pocket cost for engineering review incurred by Landlord. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any Applicable Laws. Further, Tenant shall indemnify, protect, defend and hold Landlord harmless from any loss, cost or expense, including reasonable attorneys’ fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Alterations, except to the extent such defects are caused by Landlord, its agents, servants or employees. If reasonably requested by Landlord, Tenant shall provide Landlord with copies of all contracts, receipts, paid vouchers, and any other documentation (including, without limitation, “as-built” drawings, air/water balancing reports, permits and inspection certificates) in connection with the construction of such Alterations. Tenant shall promptly pay all costs incurred in connection with all Alterations. Any increase in any tax, assessment or charge levied or assessed as a result of any Alterations shall be payable by Tenant in accordance with Article 10 . 

. All Alterations and all Tenant Improvements installed in the Premises which are attached to, or built into, the Premises, shall become the property of Landlord and shall be surrendered with the Premises, as a part thereof, at the end of the Term; provided, however, Landlord may, by written notice to Tenant at least thirty (30) days prior to the end of the Term, require Tenant to remove any Alterations or Tenant Improvements designated by Landlord to be removed at the time of Landlord’s approval thereof, and to repair any damage to the Premises, the Building and any other part of the Project caused by such removal, all at Tenant’s sole expense and to the satisfaction of Landlord. Notwithstanding the foregoing, Landlord may not require Tenant to remove (i) any improvements existing in the Premises on the Delivery Date, (ii) any Tenant Improvement or any Alteration which is a normal and customary improvement for a business office, and/or (iii) structural improvements made to the Building. Any articles of personal property including business and trade fixtures (not attached to, or built into, the Premises), machinery and equipment, free-standing cabinet work, and movable partitions, which were installed by Tenant in the Premises shall be and remain the property of Tenant and may be removed by Tenant at any time during the Term as long as an Event of Default under Section 22.1 does not exist hereunder and provided that Tenant repairs to Landlord’s reasonable satisfaction any damage to the Premises, the Building and any other part of the Project caused by such removal. However, upon such surrender of the Premises, upon surrender of the Premises, Tenant shall not be required to paint walls or replace wall or floor coverings, nor patch walls or floors unless Tenant has caused damage thereto in excess of damage normally incident to removal of furniture, fixtures and equipment from, and vacation of premises by, tenants generally. On the termination of this Lease, Landlord and Tenant shall each own undivided interests in such Tenant Improvements to the extent, in the case of Landlord, provided or paid for by Landlord, and, in the case of Tenant, the portion of the cost of such Tenant Improvements paid for by Tenant. For purposes of the insurance requirements of Section 11.2 , Tenant shall be deemed to have an insurable interest in all of the Tenant Improvements and Alterations in the Premises, as between Landlord and Tenant, but the same shall be surrendered with the Premises on termination of this Lease, to the extent set forth above.

9.   Maintenance and Repairs .

. Except for Landlord’s obligations specifically set forth in this Lease, including, without limitation, Articles 12 and 13 and Section 16.3 , Tenant shall, at Tenant’s sole expense, keep the Premises and every part thereof (but not the Building structures or the Building Systems) clean and in good condition and repair and Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof.

. Subject to Article 12 , Landlord shall repair and maintain with reasonable diligence after notice from Tenant the Building structures and Building Systems in a manner consistent with that of a reasonably prudent building owner of a first-class office building in the Santa Monica/West Los Angeles area (including, without limitation, the Building’s

 

 

 

HVAC system in accordance with the recommended maintenance specifications therefor). To the extent such maintenance and repair is required (a) by modifications to the Building and/or Building Systems made by or at the direction of Tenant, or (b) due to the act (other than ordinary use as contemplated by this Lease), neglect, misuse, or fault of Tenant, its agents, employees, contractors, licensees or invitees, Tenant shall pay to Landlord the cost of such maintenance and repairs except to the extent Tenant has been relieved of such liability pursuant to this Lease, including, without limitation, under Section 11.5 . Except as provided in Articles 6 and 12 , there shall be no abatement of rent with respect to, and Landlord shall not be liable for, any injury to or interference with Tenant’s business arising from any repairs, maintenance, alteration or improvement in or to any portion of the Project or the Building, including the Premises. Further, neither Landlord nor any member, manager, partner, director, officer, agent or employee of Landlord shall be liable for any damage caused by other lessees or persons in or about the Project, or for any consequential damages arising out of any loss of use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant. As a material inducement to Landlord entering into this Lease, Tenant waives and releases its right to make repairs at Landlord’s expense under Section 1942 of the California Civil Code or under any other law, statute or ordinance now or hereafter in effect, and Tenant waives and releases the right to terminate this Lease under Section 1932(1) of the California Civil Code or any similar or successor statute. Subject to the foregoing, Landlord shall endeavor to cause the least disruption practicable to Tenant while making repairs, alterations or improvements to the Project. If reasonably requested by Tenant, such activities by Landlord which materially affect the Premises or access thereto shall be performed outside of Normal Working Hours to the extent practicable.

10.   Tax on Tenant’s Personal Property and Leasehold Improvements .

10.1   Personal Property Taxes

. At least ten (10) days prior to delinquency, Tenant shall pay all taxes levied or assessed upon Tenant’s equipment, furniture, fixtures and other personal property located in or about the Premises. If the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon Tenant’s equipment, furniture, fixtures or other personal property, Tenant shall pay Landlord, upon written demand, the taxes so levied against Landlord, or the proportion thereof resulting from said increase in assessment.

10.2   Tax on Leasehold Improvements

. Tenant shall pay Landlord, upon written demand, such portion of all real estate taxes levied or assessed against Landlord which are attributable to the value of the leasehold improvements (including, but not limited to, all Tenant Improvements and Alterations) installed in the Premises in excess of Thirty-Five and no/100 Dollars ($35.00) per square foot of Rentable Area in the Premises. If the assessing authority allocates a specific value