EXHIBIT 10.12 100 SPEAR STREET OFFICE LEASE

EXHIBIT 10.12

 

100 SPEAR STREET

 

OFFICE LEASE

 

TENANT: APTIMUS, INC., a Washington corporation

 

100 Spear Street

San Francisco, California

Basic Lease Information

 

Date:   ______________, 2003

The foregoing Basic Lease Information is incorporated in and made a part of the Lease to which it is attached. If there is any conflict between the Basic Lease Information and the Lease, the Lease shall control.

 

TABLE OF CONTENTS

 

		Page
Article 1	Premises	1
Article 2	Term	1
Article 3	Rent	5
Article 4	Operating Expenses and Property Taxes	6
Article 5	Other Taxes Payable by Tenant	9
Article 6	Use	10
Article 7	Services	11
Article 8	Maintenance and Repairs	12
Article 9	Alterations	14
Article 10	Insurance	16
Article 11	Compliance With Legal Requirements	16
Article 12	Assignment or Sublease	16
Article 13	Rules and Regulations	19
Article 14	Entry by Landlord	20
Article 15	Events of Default and Remedies	23
Article 16	Damage or Destruction	24
Article 17	Eminent Domain	24
Article 18	Subordination, Merger and Sale	25
Article 19	Estoppel Certificate	26
Article 20	Holding Over	27
Article 21	Security Deposit	27
Article 22	Waiver	28
Article 23	Notices	28
Article 24	Waiver of Jury Trial	28
Article 25	Telephone Service	29
Article 26	Miscellaneous	29

OFFICE LEASE

 

THIS LEASE is made as of the date specified in the Basic Lease Information by and between 100 SPEAR STREET OWNERS CORP ., a Delaware corporation ("Landlord"), and the tenant specified in the Basic Lease Information ("Tenant").

 

W I T N E S S E T H:

 

ARTICLE 1

 

Premises

 

1.1   Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the term and subject to the covenants hereinafter set forth, to all of which Landlord and Tenant hereby agree, the space on the floor(s) specified in the Basic Lease Information (the "Premises"), as outlined on the floor plan(s) attached hereto as Exhibit A, in the building (the "Building") known as 100 Spear Street, San Francisco, California, which includes the land (Assessor's Lot 1, Block 3717) on which the Building is located. Tenant shall have the right to use, in common with others, the entrances, lobbies and elevators of the Building for access to the Premises. All of the windows and outside decks, balconies and walls of the Building and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of operation, maintenance and repairs, are reserved to Landlord.

 

1.2   No easement for light, air or view is included with or appurtenant to the Premises. Any diminution or shutting off of light, air or view by any structure which may hereafter be erected (whether or not constructed by Landlord) shall in no way affect this Lease or impose any liability on Landlord.

 

ARTICLE 2

 

Term

 

2.1   Generally . The term of this Lease ("Term") shall be the term specified in the Basic Lease Information , which shall commence on the later of: (a) the commencement date specified in the Basic Lease Information (which is the date upon which the parties estimate that the Tenant Improvements (defined in Exhibit B attached hereto) will be substantially completed), and (b) substantial completion of the Tenant Improvements (the "Commencement Date") and, unless sooner terminated as hereinafter provided, shall end on the expiration date specified in the Basic Lease Information (the "Expiration Date"); provided that if Tenant occupies and conducts business from any portion of the Premises prior to the Commencement Date as established pursuant to the immediately preceding sentence, the Commencement Date shall be deemed to have occurred as of the date of such prior occupancy; and provided, further, however, that Tenant’s efforts to prepare the Premises for occupancy, including without limitation, installing computer systems and furniture, in preparation for conducting business shall not trigger the Commencement Date. Landlord shall deliver possession of the Premises to Tenant on the date estimated to be the Commencement Date in the Basic Lease Information or the date of substantial completion of the Tenant Improvements, whichever is later, and Tenant shall accept such delivery of the Premises, which acceptance shall constitute agreement by Tenant that the Premises are in the condition required by this Lease. Tenant's acceptance of the Premises shall be subject to Landlord's obligation to correct:

 

(i)   portions of the Tenant Improvements as set forth on a construction punch list prepared by Landlord and Tenant in accordance with the terms hereof. Within 15 days after Substantial Completion of the Tenant Improvements, Landlord and Tenant shall together conduct an inspection of the Premises and prepare a "punch list" setting forth any portions of the Tenant Improvements that are not in conformity with the Tenant Improvements as required by the terms of the Work Agreement attached hereto as Exhibit B . Notwithstanding the foregoing, at the request of Landlord, such construction punch list shall be mutually prepared by Landlord and Tenant prior to the date on which Tenant first begins to move its furniture, equipment or other personal property into the Premises. Landlord shall use good faith efforts to correct all such items within a reasonable time following the completion of the punch list; and

 

(ii)   any system or facility serving the Premises which is not in good working order and repair as of the date the Premises are delivered to Tenant (Tenant will have thirty (30) days in which to notify Landlord in writing of any such items), provided that if any such item(s) of disrepair are caused by Tenant’s misuse or abuse of the Premises, Landlord shall not be obligated to perform such work unless Tenant bears the cost of such work.

 

2.2   Renewal Option .

 

(a)   Generally . Tenant shall have the right to extend the Term (the “Renewal Option”) for one (1) additional period of three (3) years (the “Renewal Term”) if:

 

(i)   Landlord receives notice of exercise of the Renewal Option (“Initial Renewal Notice”) not less than 270 days prior to the expiration of the initial Term and not more than 390 days prior to the expiration of the initial Term; and

 

(ii)   Tenant is not in default under this Lease beyond any applicable cure period and no event which, with notice, the passage of time, or both, would constitute a default hereunder on the part of Tenant exists at the time that Tenant delivers its Initial Renewal Notice or at the time Tenant delivers its Binding Notice (as defined below) or as of the commencement of the Renewal Term; and

 

(iii)   The Premises or any portion thereof has not been sublet (other than pursuant to a Permitted Transfer) at the time that Tenant delivers its Initial Renewal Notice or at the time Tenant delivers its Binding Notice; and

 

(iv)   This Lease has not been assigned by Tenant (other than pursuant to a Permitted Transfer) prior to the date that Tenant delivers its Initial Renewal Notice or prior to the date Tenant delivers its Binding Notice; and

 

(v)   Tenant executes and returns the Renewal Amendment (hereinafter defined) within twenty (20) days after submission to Tenant of an accurate Renewal Amendment; and

 

(vi)   Tenant (or a transferee pursuant to a Permitted Transfer) is in occupancy of all of the Premises at the time Tenant delivers its Initial Renewal Notice, at the time Tenant delivers its Binding Notice and as of the commencement of the Renewal Term.

 

(b)   Rent . The initial Base Rent rate during the Renewal Term shall equal the Prevailing Market (hereinafter defined) rate per Rentable Square Foot, as determined in the manner set forth below.

 

(c)   Additional Rent . Tenant shall pay Additional Rent (i.e. Operating Expenses and Property Taxes) for the Premises during the Renewal Term in accordance with this Lease.

 

(d)   Determination of Base Rent . Within thirty (30) days after receipt of Tenant’s Initial Renewal Notice, Landlord shall advise Tenant of the applicable Base Rent rate for the Premises for the Renewal Term. Tenant, within thirty (30) days after the date on which Landlord advises Tenant of the Base Rent rate for the Renewal Term, shall either (i) give Landlord final binding written notice (“Binding Notice”) of Tenant’s exercise of its option, or (ii) if Tenant disagrees with Landlord’s determination, provide Landlord with written notice of rejection (the “Rejection Notice”). If Tenant fails to provide Landlord with either a Binding Notice or Rejection Notice within such thirty (30) day period, Tenant’s Renewal Option shall be null and void and of no further force and effect. If Tenant provides Landlord with a Binding Notice, Landlord and Tenant shall enter into the Renewal Amendment (as defined below) upon the terms and conditions set forth herein. If Tenant provides Landlord with a Rejection Notice, Landlord and Tenant shall work together in good faith to agree upon the Prevailing Market Base Rent rate during the Renewal Term. Upon written agreement by both parties, Landlord and Tenant shall enter into the Renewal Amendment in accordance with the terms and conditions hereof. Notwithstanding the foregoing, if Landlord and Tenant are unable to agree upon the Prevailing Market Base Rent rate for the Premises within thirty (30) days after the date on which Tenant provides Landlord with a Rejection Notice, then Tenant’s Initial Renewal Notice and Tenant’s exercise of the Renewal Option shall be null and void and of no further force or effect, unless Tenant, on or before the thirty-fifth (35th) day following Tenant’s delivery of the Rejection Notice, elects to submit the matter to arbitration by delivery of written notice of such election to Landlord (in which event such notice will be deemed a Binding Notice, and Tenant will have irrevocably committed to lease the Premises during the Renewal Term at the rental rate(s) determined pursuant to such arbitration). If the matter is submitted to arbitration, the Prevailing Market Base Rent rate payable as of commencement of the Renewal Term shall be determined (and when determined, shall be binding upon the parties) as follows:

 

(i)   Within ten (10) days after the thirty-fifth (35th) day described above, Tenant, at its sole expense, shall obtain and deliver in writing to Landlord a determination of the Prevailing Market Base Rent rate for the Premises for a term equal to the Renewal Term, from a real estate broker (“Tenant’s Broker”) licensed in the State of California and engaged in the leasing of commercial real estate in the San Francisco, California vicinity for at least the immediately preceding five (5) years; such determination shall be stated in a single “per square foot per annum (or month)” figure, for ease of comparison. If Landlord accepts such determination, the Prevailing Market Base Rent rate payable by Tenant during the Renewal Term shall be equal to the amount determined by Tenant’s Broker. If Tenant fails to timely deliver such determination, the Prevailing Market Base Rent rate as quoted by Landlord shall control.

 

(ii)   If Landlord does not accept such determination, within fifteen (15) days after receipt of the determination of Tenant’s Broker, Landlord shall designate a similarly qualified broker (“Landlord’s Broker”). If the two Brokers are appointed by the parties as set forth above, such Brokers shall promptly meet and attempt to agree upon the applicable Prevailing Market Base Rent rate. If such Brokers are unable to agree within fifteen (15) days following the appointment of Landlord’s Broker, the Brokers shall select a third broker meeting the qualifications set forth above within ten (10) days after the last date the two Brokers are given to agree upon the applicable Prevailing Market Base Rent rate. The Third Broker shall be a person who has not previously acted and is not currently acting in any capacity for either party.

(iii)   The Third Broker shall conduct its own independent investigation of the applicable Prevailing Market Base Rent rate, and shall be instructed not to advise either party of its determination, except as follows: when the Third Broker has made its determination (which shall be completed within fifteen (15) days after the appointment of the Third Broker), it shall advise Landlord and Tenant and establish a date, at least five (5) days after the giving of notice by such Third Broker to Landlord and Tenant, on which it will disclose its determination. Such meeting shall take place in Landlord’s office unless otherwise mutually agreed by the parties. After having initialed the paper on which its determination is set forth, the Third Broker shall place its determination in a sealed envelope. Landlord’s Broker and Tenant’s Broker shall each set forth their determination (each stated in a single “per rentable square foot per annum (or month)” figure) on a separate piece of paper, initial the same, and place them in sealed envelopes. Each of the three envelopes shall be marked with the name of the party whose determination is inside the envelope. In the presence of the Third Broker, the determination of the Prevailing Market Base Rent rate by Landlord’s Broker and Tenant’s Broker shall be opened and examined. If the higher of the two determinations submitted by Landlord’s Broker and Tenant’s Broker is one hundred and five percent (105%) or less of the amount set forth in the lower determination, the average of the two determinations shall be the Prevailing Market Base Rent rate, the envelope containing the determination by the Third Broker shall be destroyed and the Third Broker shall be instructed not to disclose its determination. If either party’s envelope is blank, or does not set forth a determination, the determination of the other party shall prevail and be treated as the Prevailing Market Base Rent rate. If the higher of the two determinations is more than one hundred and five percent (105%) of the amount of the other determination, the envelope containing the Third Broker’s determination shall be opened, the Prevailing Market Base Rent rate shall, in such event, be the rent proposed by either Landlord’s Broker or Tenant’s Broker which is closest to the determination of Prevailing Market Base Rent rate by the Third Broker; if the two are equidistant, the Prevailing Market Base Rent rate shall be equal to the Third Broker’s determination.

 

(iv)   Landlord shall pay the costs and fees of Landlord’s Broker in connection with any determination hereunder, and Tenant shall pay the costs and fees of Tenant’s Broker in connection with such determination. The costs and fees of any Third Broker shall be paid one-half by Landlord and one-half by Tenant. Tenant expressly acknowledges that any costs, fees and commissions arising in favor of any broker or other party hired by Tenant to represent Tenant in the negotiation of the extension of the term of this Lease shall be borne solely by Tenant.

 

(v)   If the amount of the Prevailing Market Base Rent rate is not known as of the commencement of the Renewal Term, then Tenant shall continue to pay the then current Base Rent rate in effect immediately prior to the expiration of the initial Term until the amount of the Prevailing Market Base Rent rate are determined. When such determination is made, Tenant shall pay Landlord any deficiency to Landlord upon demand or Landlord will credit any overpayment against Base Rent next due and payable under this Lease.

 

(e)   Renewal Amendment . If Tenant is entitled to and properly exercises its Renewal Option, Landlord shall prepare an amendment (the “Renewal Amendment”) to reflect changes in the Base Rent, Term, Expiration Date and other appropriate terms. The Renewal Amendment shall be:

 

(i)   Sent to Tenant within a reasonable time after receipt of the Binding Notice; and

 

(ii)   Executed by Tenant and returned to Landlord in accordance with Section 2.2(a)(v) above.

An otherwise valid exercise of the Renewal Option shall, at Landlord’s option, be fully effective whether or not the Renewal Amendment is executed.

 

(f)   Prevailing Market . For purpose hereof, “Prevailing Market” shall mean the arms length fair market annual rent rate per rentable square foot under renewal leases and amendments in the Building and other first class office buildings in the San Francisco financial district entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building, taking into account then prevailing factors, including Landlord concessions (which may include but shall not necessarily be limited to, tenant improvement allowances, brokerage commissions, free rent and other then customary concessions).

 

2.3   Landlord shall deliver possession of the Premises to Tenant on the date estimated to be the Commencement Date in the Basic Lease Information or the date of substantial completion of the Tenant Improvements, whichever is later, and Tenant shall accept such delivery of the Premises, which acceptance shall constitute agreement by Tenant that the Premises are in the condition required by this Lease, subject to normal punch list items specified by Landlord's architect which Landlord shall promptly correct or complete.

 

ARTICLE 3

 

Rent

 

3.1   Tenant shall pay to Landlord the following amounts as rent for the Premises:

 

(a)   During the Term, Tenant shall pay to Landlord, as base monthly rent, the amount of monthly rent specified in the Basic Lease Information (the "Base Rent").

 

(b)   During the Term of this Lease, Tenant shall pay to Landlord, as additional monthly rent, Tenant's Percentage Share (as hereinafter defined) of all Operating Expenses (as hereinafter defined) paid or incurred by Landlord during the Term and Tenant's Percentage Share of all Property Taxes (as hereinafter defined) paid or incurred by Landlord during the Term as more particularly described in Article 4 below.

 

(c)   Throughout the Term of this Lease, Tenant shall pay, as additional rent, all other amounts of money and charges required to be paid by Tenant under this Lease, whether or not such amounts of money or charges are designated "additional rent." As used in this Lease, "rent" shall mean and include all Base Rent, additional monthly rent and additional rent payable by Tenant in accordance with this Lease. Landlord will have the same remedies for a default in the payment of additional rent as for a default in the payment of Base Rent.

 

 

3.2   Tenant shall pay all Base Rent and additional monthly rent under Section 3.1 above to Landlord, in advance, on or before the first day of each and every calendar month during the Term of this Lease, provided that the installment of Base Rent for the first full calendar month of the Term, and the first monthly installment of additional monthly rent, shall be payable upon the execution of this Lease by Tenant. Tenant shall pay all rent to Landlord without notice, demand, deduction or offset, in lawful money of the United States of America, at the address of Landlord specified in the Basic Lease Information , or to such other person or at such other place as Landlord may from time to time designate in writing.

 

ARTICLE 4

 

Operating Expenses and Property Taxes

 

4.1   As used in this Lease, "Tenant's Percentage Share" shall mean the percentage specified in the Basic Lease Information .

 

4.2   Operating Expenses . As used in this Lease, "Operating Expenses" shall mean all costs and expenses of any kind paid or incurred by Landlord in connection with the ownership, management, operation, maintenance or repair of the Building or providing services in accordance with this Lease, including, without limitation but by way of example the following: salaries, wages, other compensation, taxes and benefits (including payroll, social security, workers' compensation, unemployment, disability and similar taxes and payments) for all personnel engaged in the management, operation, maintenance or repair of the Building; uniforms provided to such personnel; premiums and other charges for all property, earthquake, rental value, liability and other insurance carried by Landlord, as well as the deductible portion of any insured loss; water and sewer charges or fees; license, permit and inspection fees; electricity, chilled water, air conditioning, gas, fuel, steam, heat, light, power and other utilities; sales, use and excise taxes on goods and services purchased by Landlord; telephone, delivery, postage, stationery supplies and other expenses; management fees and expenses; equipment lease payments; repairs to and maintenance of the Building, including Building systems and accessories thereto and repair and replacement of worn-out or broken equipment, facilities, parts and installations; janitorial, window cleaning, security, guard, extermination, water treatment, garbage and waste disposal, rubbish removal, plumbing and other services; inspection or service contracts for elevator, electrical, mechanical and other Building equipment and systems; the cost to maintain the Building's main telephone system (including wiring), supplies, tools, materials and equipment; accounting, legal, consulting and other professional fees and expenses (excluding legal fees incurred by Landlord relating to the negotiation of specific leases); painting the exterior or the public or common areas of the Building and the cost of maintaining the sidewalks, landscaping and other common areas of or serving the Building as well as the Building's exterior and rooftop; the cost, reasonably amortized as determined by Landlord, with interest at the rate of ten percent (10%) per annum, or such higher rate as Landlord may actually have to pay, on the unamortized balance, of all furniture, fixtures, draperies, carpeting and personal property furnished by Landlord in common areas or public corridors of the Building or in the Building office; all costs and expenses resulting from compliance with any laws, ordinances, rules, regulations or orders applicable to the Building, including compliance with requirements of the transportation management program; Building office rent or rental value; all costs and expenses of contesting by appropriate legal proceedings any matter concerning managing, operating, maintaining or repairing the Building, or the validity or applicability of any law, ordinance, rule, regulation or order relating to the Building, or the amount or validity of any Property Taxes; reasonable depreciation as determined by Landlord on all machinery, fixtures and equipment (including window washing machinery) used in the management, operation, maintenance or repair of the Building and on window coverings and floor coverings provided by Landlord; and the cost, reasonably amortized as determined by Landlord, with interest at the rate of ten percent (10%) per annum, or such higher annual rate as Landlord may actually have to pay, on the unamortized balance, of all capital improvements made to the Building or capital assets acquired by Landlord that are designed or intended to be a labor-saving or energy-saving device, or to improve economy or efficiency in the management, operation, maintenance or repair of the Building, or to reduce any item of Operating Expenses, or that are reasonably necessary to comply with any conservation program or required by any law, ordinance, rule, regulation or order. Operating Expenses shall not include Property Taxes, the cost of any goods or services (such as electricity) billed separately to and paid directly by Tenant or another tenant of the Building, depreciation on the Building (except as described above); costs of tenants' improvements, real estate brokers' commissions, interest (except as described above) or capital items (except as described above). Actual Operating Expenses for the first calendar year and each calendar year shall be adjusted, if necessary, to equal Landlord's reasonable estimate of Operating Expenses for a full calendar year with the total area of the Building occupied during such full calendar year. The determination of Operating Expenses shall be in accordance with generally accepted accounting principles applied on a consistent basis.

 

 

4.3   Property Taxes . As used in this Lease, "Property Taxes" shall mean all taxes, assessments, excises, levies, fees and charges (and any tax, assessment, excise, levy, fee or charge levied wholly or partly in lieu thereof or as a substitute therefor or as an addition thereto) of every kind and description, general or special, ordinary or extraordinary, foreseen or unforeseen, secured or unsecured, whether or not now customary or within the contemplation of Landlord and Tenant, that are levied, assessed, charged, confirmed or imposed by any public or government authority on or against, or otherwise with respect to, the Building or any part thereof or any personal property used in connection with the Building. Property Taxes shall not include net income (measured by the income of Landlord from all sources or from sources other than solely rent), franchise, documentary transfer, inheritance or capital stock taxes of Landlord, unless levied or assessed against Landlord in whole or in part in lieu of, as a substitute for, or as an addition to any Property Taxes. Property Taxes shall not include any tax, assessment, excise, levy, fee or charge paid by Tenant pursuant to Section 5.1 hereof.

 

4.4   Landlord's Statement of Estimated Operating Expenses and Property Taxes . On or before the Commencement Date, or as soon thereafter as practicable, and on or before the first day of each subsequent calendar year during the Term, or as soon thereafter as practicable, Landlord shall give Tenant written notice of Landlord's estimate of Tenant's Percentage Share of Operating Expenses and Property Taxes for the balance of the first calendar year after the Commencement Date or for the ensuing calendar year, as the case may be. Tenant shall pay such estimated amount to Landlord in equal monthly installments, in advance, on or before the Commencement Date and on or before the first day of each month during such balance of the first calendar year after the Commencement Date or during such ensuing calendar year, as the case may be. If such notice is not given for any calendar year, Tenant shall continue to pay on the basis of the prior year's estimate until the month after such notice is given, and subsequent payments by Tenant shall be based on Landlord's current estimate. Landlord may, by giving written notice to Tenant, revise Landlord's estimate for any such year, and subsequent payments by Tenant for such year shall be based on such revised estimate.

 

 

4.5   Final Statements . Within a reasonable time after the end of each calendar year, Landlord shall give Tenant a written statement of the actual Operating Expenses and Property Taxes for such calendar year and Tenant's Percentage Share of such amount which statement shall be final and binding. If such statement shows an amount owing by Tenant that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall credit the excess to the next succeeding monthly installments of the amount payable by Tenant under Section 4.4 hereof. If such statement shows an amount owing by Tenant that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within ten (10) days after delivery of such statement. Notwithstanding any other provision of this Article 4 to the contrary, failure by Landlord to give any notice or statement to Tenant under this Section 4.5 shall not waive Landlord's right to receive, or Tenant's obligation to pay, the amount payable by Tenant under Section 3.1(b) hereof.

 

4.6   Proration . If the Term of this Lease ends on a day other than the last day of a calendar year, the amount payable by Tenant under Section 3.1(b) hereof applicable to the calendar year in which such Term ends shall be prorated according to the ratio which the number of days in such calendar year to and including the end of the Term bears to three hundred sixty (360). Termination of this Lease shall not affect the obligations of Landlord and Tenant pursuant to this Article 4 to be performed after such termination.

 

4.7   Net Lease . It is the intention of Landlord and Tenant that the Base Rent payable by Tenant to Landlord during the entire Term of this Lease shall be absolutely net of Tenant's Percentage Share of all Operating Expenses and all Property Taxes. The provisions of this Lease for payment by Tenant of Tenant's Percentage Share of all Operating Expenses and all Property Taxes are intended to pass on to Tenant and to reimburse Landlord for all Operating Expenses and all Property Taxes in connection with the Building. Landlord and Tenant agree that statements in this Lease to the effect that Landlord is to perform certain of its obligations hereunder at its own or sole cost or expense shall not be interpreted as excluding any cost or expense from Operating Expenses or Property Taxes if such cost or expense is an Operating Expense or a Property Tax pursuant to this Lease.

 

4.8   Property Tax Appeal . As of the date of this Lease, Landlord is appealing the amount of Property Taxes payable by the Building (the “Appeal”). Landlord estimates that the aggregate of 2003 Building Operating Expenses and Property Taxes and Tenant utilities will equal to $17.50 per rentable square foot; the Base Rent rates set forth herein were established by assuming an Operating Expense/Property Tax/Tenant utilities burden of $17.50 per rentable square foot for the calendar year 2003, thus providing an agreed-upon effective rental rate (i.e., Base Rent plus estimated Property Taxes, Operating Expenses and Tenant utilities). Prior to the resolution of the Appeal, Tenant shall pay its percentage Share of actual Operating Expenses, Tenant’s share of utilities, and Tenant’s Percentage Share of Property Taxes which for the calendar year 2003 are, for the purposes of Tenant’s payment, estimated to be $17.50 per rentable square foot per year. Upon the conclusion of the Appeal, Tenant shall continue to pay Tenant’s Percentage Share of the actual Property Taxes (as adjusted, if applicable, pursuant to the final determination of the Appeal) and Operating Expenses as well as Tenant’s share of utilities costs, but, if and only if the Appeal produces an assessed valuation of the Building which results in a per rentable square foot Property Tax burden which differs from that originally estimated by Landlord, Landlord shall adjust the Base Rent rate payable by Tenant for the calendar year 2004 (and for subsequent years) upwards or downwards, as is necessary to provide Tenant with an effective rental rate that was assumed by the parties in entering into this Lease; provided, however, that in no event will the Base Rent rate payable by Tenant be adjusted as a result of any increase or decrease in any component of Operating Expenses, Tenant utilities or Property Taxes (all of which Tenant shall continue to pay in full) other than solely due to increases or decreases in Property Taxes resulting directly from the final determination of the Appeal.

 

 

ARTICLE 5

 

Other Taxes Payable by Tenant

 

5.1   In addition to all monthly rent and other charges to be paid by Tenant under this Lease, Tenant shall reimburse Landlord upon demand for all taxes, assessments, excises, levies, fees and charges, including all payments related to the cost of providing facilities or services, whether or not now customary or within the contemplation of Landlord and Tenant, that are payable by Landlord and levied, assessed, charged, confirmed or imposed by any public or government authority upon, or measured by, or reasonably attributable to (a) the Premises, (b) the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises or the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, regardless of whether title to such improvements is vested in Tenant or Landlord, (c) any rent payable under this Lease, including, without limitation, any gross income tax or excise tax levied by any public or government authority with respect to the receipt of any such rent, (d) the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or (e) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. Such taxes, assessments, excises, levies, fees and charges shall not include net income (measured by the income of Landlord from all sources or from sources other than solely rent), franchise, documentary transfer, inheritance or capital stock taxes of Landlord, unless levied or assessed against Landlord in whole or in part in lieu of, as a substitute for, or as an addition to any such taxes, assessments, excises, levies, fees and charges. All taxes, assessments, excises, levies, fees and charges payable by Tenant under this Section 5.1 shall be deemed to be, and shall be paid as, additional rent.

 

ARTICLE 6

 

Use

 

6.1   The Premises shall be used for general office purposes and for no other purpose. Tenant shall not do or permit to be done in, on or about the Premises, nor bring or keep or permit to be brought or kept therein, anything which (a) is prohibited by or will in any way conflict with any law, ordinance, rule, regulation or order now in force or which may hereafter be enacted, (b) which is prohibited by any insurance policy carried by Landlord for the Building, or will in any way increase the existing rate of, or cause a cancellation of, or affect any insurance for the Building or (c) will impair the proper and economic maintenance, operation of the Building or any portion thereof. Tenant shall not bring or keep, or permit to be brought or kept, in the Premises or the Building any toxic or hazardous substance, material or waste or any other contaminant or pollutant. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of Landlord or other tenants of the Building, or injure or annoy them. Tenant shall not use or allow the Premises to be used for any improper, immoral, unlawful or objectionable activity, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises or commit or suffer to be committed any waste in, on or about the Premises. Tenant shall not bring or keep in the Premises any furniture, equipment, materials or other objects which overload the Premises or any portion thereof in excess of fifty (50) pounds per square foot live or dead load, which is the normal load-bearing capacity of the floors of the Building.

 

 

ARTICLE 7

 

Services

 

7.1   So long as Tenant is not in default under this Lease, Landlord shall supply the Premises during reasonable and usual business hours, as determined by Landlord and subject to the Rules and Regulations (as hereinafter defined) established by Landlord, with normal electricity for lighting and the operation of desk top office machines, normal heating, ventilation and air conditioning reasonably required for the use and occupancy of the Premises, and normal water for lavatory purposes. Landlord shall furnish normal elevator service to the Premises during business hours (and shall use reasonable efforts to provide at least one (1) passenger elevator for use after Landlord's normal business hours) and lighting replacement for Building standard lights, restroom supplies and exterior window washing when needed, as determined by Landlord and subject to the Rules and Regulations. Landlord shall also furnish normal security service for the Building (not Tenant or the Premises) in such a manner as Landlord deems appropriate; Tenant expressly acknowledges that Landlord's security service, if provided, shall in no way limit Tenant's obligation to secure the Premises and Tenant's personnel and personal property, and no warranty against or obligation to prevent any loss, damage or injury is given, express or implied, by Landlord by virtue of Landlord's provision of security services, and Tenant hereby waives any claim against Landlord for failure to provide security services, or for the provisions of inadequate security services. Landlord shall not be liable for any criminal acts of others or for any direct, consequential or other loss or damage related to any malfunction, circumvention or other failure of such security service. Landlord shall also provide normal janitor service to the Premises during the times and in the manner that such services are customarily furnished in comparable office buildings in the area. Landlord shall not be in default under this Lease or be liable for any damage or loss directly or indirectly resulting from, nor, except as expressly set forth herein, shall the rent be abated or a constructive or other eviction be deemed to have occurred by reason of, any installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, any failure to furnish or delay in furnishing any such services, any interruption in telephone service to the Premises, or any limitation, curtailment, rationing or restriction on use of water, electricity, gas or any resource or form of energy serving the Premises or the Building, whether such results from mandatory restrictions or voluntary compliance with guidelines. Landlord shall use reasonable efforts to correct any interruption in the furnishing of such services. Notwithstanding anything to the contrary contained in this Article 7, if (i) Landlord ceases to furnish any service to be provided by Landlord hereunder to the Premises for a period in excess of five (5) consecutive business days after Tenant notifies Landlord of such cessation; (ii) such cessation is due to the act or omission of Landlord and does not in any way result as a result of an act or omission of Tenant or any event of force majeure; (iii) such cessation is not caused by a fire or other casualty (in which case Article 16 shall control); (iv) the restoration of such service is reasonably within the control of Landlord; and (v) as a result of such cessation, the Premises, or a material portion thereof, is rendered untenantable (meaning that Tenant is unable to use the Premises for the Permitted Use) and Tenant in fact ceases to use the Premises, or material portion thereof, then Tenant, as its sole remedy, shall be entitled to receive an abatement of Base Rent payable hereunder during the period beginning on the first (1st) day following Tenant’s notice to Landlord of such cessation and ending on the day when the service in question has been restored. In the event the entire Premises has not been rendered untenantable by the cessation in service, the amount of abatement that Tenant is entitled to receive shall be prorated based upon the percentage of the Premises so rendered untenantable and not used by Tenant.

 

 

7.2   If Tenant uses heat generating machines, equipment, or computers or lighting other than Building standard lights and ordinary and customary computing equipment and peripherals in the Premises which affect the temperature otherwise maintained by the air conditioning system or causes the Premises to be occupied by more than one (1) person per 120 rentable square feet, Landlord shall have the right to install supplementary air conditioning units in the Premises and Tenant shall pay to Landlord the reasonable cost thereof, including the costs of installation, operation, maintenance and repair thereof, as reasonably determined by Landlord, upon billing by Landlord. If Tenant installs lighting requiring power in excess of that required for normal office use in the Building or equipment or computers requiring power in excess of that required for normal desk top office equipment, Tenant shall pay to Landlord, upon billing by Landlord, the reasonable cost of such excess, as reasonably determined by Landlord (which may be determined by either an electrical engineer’s survey or by a separate meter installed at Tenant’s cost), together with Landlord's then-standard administrative fee. Tenant shall pay to Landlord, upon billing by Landlord, the cost of all additional services, electricity, power and energy consumed by Tenant, in excess of the amount that would reasonably be incurred for a normal business office operating during reasonable and usual business hours, as a result of the operation of Tenant's computers or equipment, the number of hours Tenant operates, or any other feature of the conduct of Tenant's business in the Premises, all as reasonably determined by Landlord. All costs payable by Tenant under this Section 7.2 shall be deemed to be, and shall be paid as, additional rent.

 

ARTICLE 8

 

Maintenance and Repairs

 

8.1   Landlord shall maintain and repair the public and common areas of the Building, such as plazas, lobbies, stairs, corridors and restrooms, the roof and exterior elements of the Building, and the elevator, mechanical (heating, ventilating and air conditioning) and electrical systems serving the Building as a whole and keep such areas, elements and systems in reasonably good order and condition. Any damage in or to any such areas, elements or systems solely caused by Tenant or any agent, officer, employee, contractor, licensee or invitee of Tenant shall be repaired by Landlord at Tenant's expense and Tenant shall pay to Landlord, upon billing by Landlord, as additional rent, the reasonable cost of such repairs incurred by Landlord.

 

8.2   Tenant shall, at all times during the Term of this Lease and at Tenant's sole cost and expense, maintain and repair the Premises and every part thereof and all equipment, fixtures and improvements therein (including, without limitation, the interior portion of the demising walls, interior partition walls, wall-covering and glass, any electrical systems installed for the exclusive use of Tenant, plumbing, floor coverings, millwork, draperies, kitchen areas, ceiling tiles, entry doors and light fixtures) and keep all of the foregoing clean and in good order and operating condition, ordinary wear and tear and damage thereto excepting (x) by fire or other casualty, or (y) attributable to the acts of Landlord of Landlord’s employees, contractors or agents or to any other tenants or occupants of the Building (unless invitees of Tenant at the time of damage). Tenant hereby waives all rights under California Civil Code Section 1941 and all rights to make repairs at the expense of Landlord or in lieu thereof to vacate the Premises as provided by California Civil Code Section 1942 or any other law, statute or ordinance now or hereafter in effect. Subject to Section 9.2 hereof, Tenant shall, at the end of the Term of this Lease, surrender to Landlord the Premises and all alterations, additions, fixtures and improvements therein or thereto in the same condition as when received, ordinary wear and tear and damage thereto by fire or other casualty excepted (provided that at Landlord's request Tenant shall remove all computer cabling and/or wiring installed by or on behalf of Tenant). Landlord shall have the right to approve in advance all work, repair, maintenance or otherwise, to be performed under this Lease by Tenant and all of Tenant's repairmen, contractors, subcontractors and suppliers performing work or supplying materials (Landlord's approval not to be unreasonably withheld, conditioned or delayed).

 

 

ARTICLE 9

 

Alterations

 

9.1   Tenant shall make no alterations, additions or improvements to the Premises or install fixtures in the Premises without first obtaining Landlord's written consent, which consent shall not be unreasonably withheld. In no event, however, may Tenant make any alterations, additions or improvements or install fixtures which in Landlord's sole discretion might (i) affect the exterior appearance of the Premises or the Building, (ii) affect the structural components of the Building, (iii) affect the Building's mechanical, utility or life safety systems or (iv) diminish the value of, or Landlord's ability to re-lease, the Premises. At the time such consent is requested, Tenant shall furnish to Landlord for Landlord's written approval a copy of all plans and permits for the proposed work, an estimate of the cost thereof and such other information as shall be requested by Landlord substantiating Tenant's ability to pay for such work. Landlord, at its sole option, may require as a condition to the granting of such consent to any work costing in excess of $50,000, that Tenant provide to Landlord, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to one and one-half (1-1/2) times any and all estimated costs of the proposed work, to insure Landlord against any liability for mechanics' and materialmen's liens and to insure completion of the work. Before commencing any work, Tenant shall deliver to Landlord a copy of any required building permit with respect thereto and shall give Landlord at least ten (10) days' written notice of the proposed commencement of such work in order to give Landlord an opportunity to prepare, post and record such notice as may be permitted by law to protect Landlord's interest in the Premises and the Building from mechanics' and materialmen's liens. Within thirty (30) days following completion of any work, Tenant, at Tenant's cost, shall furnish to Landlord "as built" plans showing the changes made to the Premises, but only if such “as builts” are typically prepared given the scope of the alterations in question.

 

9.2   Any alterations, additions or improvements to the Premises shall be made by Tenant at Tenant's sole cost and expense (including the cost of all utilities, permits, fees, taxes, and property and liability insurance premiums in connection therewith as well as a construction management fee to Landlord in the amount of five percent (5%) of the aggregate cost of such work, net of fees, utilities, permits, taxes and insurance to reimburse Landlord for its administrative and managerial time and effort), and all such work shall be performed by a contractor(s) designated by Tenant and reasonably acceptable to Landlord. Tenant shall also be responsible for the cost of all work required by applicable law to be performed in or about the Premises or Building as a result of Tenant's elective alterations. Tenant shall pay to Landlord, as additional rent, any additional reasonable costs (beyond the normal services provided to tenants in the Building) and shall reimburse Landlord, as additional rent, for all reasonable expenses incurred by Landlord in connection with the review, approval and supervision of any elective alterations, additions or improvements. Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of any plans and specifications, contractors or subcontractors, design of any work, construction of any work, or delay in completion of any work.

 

9.3   All work performed by Tenant shall comply with the laws, rules, orders, directions, regulations and requirements of the Building and all governmental entities having jurisdiction over such work and shall comply with the rules, orders, directions, regulations and requirements of any nationally recognized board of insurance underwriters. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against any and all loss, cost (including, without limitation, reasonable attorneys' fees and costs), damage or liability arising in any way out of Tenant's performance of any work of alterations, additions or improvements, including, without limitation, any claims based upon interference to or interruption of other occupants or invitees of the Building (whether due to noise levels, vibrations, the presence of smoke, fumes, odors, dust or debris or otherwise) or upon the violation of any applicable law, rule, order, direction or regulation.

 

9.4   All alterations, additions, fixtures and improvements, including carpeting and all other improvements made pursuant to Exhibit B, whether temporary or permanent in character, made in or to the Premises by Landlord or Tenant, shall become part of the Building and Landlord's property. Upon termination of this Lease, Landlord shall have the right, at Landlord's option, by giving written notice to Tenant at any time before or within sixty (60) days after such termination, to retain all such alterations, additions, fixtures and improvements in the Premises, without compensation to Tenant, or to remove all such alterations, additions, fixtures and improvements from the Premises, repair all damage caused by any such removal, and restore the Premises (including restoration of all openings or holes, stairs and vertical penetrations in the Premises) to the condition in which the Premises existed before such alterations, additions, fixtures and improvements were made, and in the latter case Tenant shall pay to Landlord, upon billing by Landlord, the cost of such removal, repair and restoration (including a fee in the amount of five percent (5%) of the cost of such work for Landlord's overhead and profit). All movable furniture, equipment, trade fixtures, computers, office machines and other personal property shall remain the property of Tenant. Upon termination of this Lease, Tenant shall, at Tenant's expense, remove all such movable furniture, equipment, trade fixtures, computers, office machines and other personal property, and, if requested by Landlord, all cabling and/or wiring installed by Tenant within or serving the Premises from the Building and repair all damage caused by any such removal. Termination of this Lease shall not affect the obligations of Tenant pursuant to this Section 9.4 to be performed after such termination.

 

 

ARTICLE 10

 

Insurance

 

10.1   Landlord shall not be liable to Tenant for any damage to or loss or theft of any property or for any bodily or personal injury, illness or death of any person in, on or about the Premises or the Building arising at any time and from any cause whatsoever, except to the extent caused by the negligence or willful misconduct of Landlord, and subject in any event to the terms of Section 10.5 below. Tenant waives all claims against Landlord arising from any liability described in this Section 10.1, except to the extent caused by the negligence or willful misconduct of Landlord. Notwithstanding any other provision of this Lease to the contrary, in no event shall Landlord be liable to Tenant for the loss or interruption of Tenant's business or for indirect or consequential damages of any kind.

 

10.2   To the fullest extent permitted under applicable law, Tenant shall indemnify, defend, protect and hold Landlord, Landlord's members, managers, patrons, shareholders, officers, directors, employees, agents and contractors ("Landlord's Indemnitees") harmless from and against any and all claims, demands, liabilities, damages, losses, costs and expenses of any kind, including, without limitation, reasonable attorneys' fees and disbursements, arising from or in any way related to any use or occupancy of the Premises, or any condition of the Premises (including, without limitation, Tenant's failure to comply with any of the requirements of the Americans with Disabilities Act of 1991, 42 U.S.C. § 12101 et. seq. (as amended from time to time) and the regulations promulgated thereunder ("ADA") within the Premises or with respect to alterations performed by or on behalf of Tenant), or any failure by Tenant to comply wi