OFFICE LEASE

 

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                                                                   EXHIBIT 10.25

 

                                                                  JMB 103 (2/89)

                                                                      Triple Net

 

                                   OFFICE LEASE

 

THIS LEASE made as of the 28 day of June, 2000, between 222 South Ninth Street

Limited Partnership, a Minnesota limited partnership ("Landlord'), and Capella

Education Company, a Minnesota corporation, whose address is Suite 550, Towle

Building, 330 Second Avenue South, Minneapolis, Minnesota 55401 ("Tenant").

 

                                   WITNESSETH:

 

                                    ARTICLE 1

 

                                Premises and Term

 

      Landlord hereby leases to Tenant and Tenant hereby leases from Landlord

that certain space (the "Premises") consisting of (i) the entire rentable area

of the twentieth floor, one-half (1/2) of the rentable area of the nineteenth

floor, and one-half (1/2) of the rentable area of the sixteenth floor

(collectively, the "Initial Premises"), and (ii) the one-half (1/2) of the

nineteenth floor which was not part of the Initial Premises (the "19th Floor

Remainder Space") and the one-half (1/2) of the sixteenth floor which was not

part of the Initial Premises (the "16th Floor Remainder Space," the 19th Floor

Remainder Space and the 16th Floor Remainder Space are collectively referred to

herein as the "Secondary Premises"), as described or shown on Exhibit A attached

hereto, in the building known as the Piper Jaffray Tower (the "Building")

located at 222 South Ninth Street, Minneapolis, Minnesota ("Property", as

further described in Article 25), subject to the provisions herein contained.

The term (the "Term") of this Lease with respect to the Initial Premises shall

commence on the 1st day of November, 2000 (the "Commencement Date"), and end on

the 31st day of October, 2005 (the "Expiration Date"), unless sooner terminated

as provided herein. The term of this Lease with respect to the Secondary

Premises shall commence on April 1, 2001. The Commencement Date with respect to

the Secondary Premises shall be subject to adjustment as provided in Article 4.

Landlord and Tenant have, for purposes of the calculation of Rent set forth

below, utilized Landlord's calculations of the rentable area of the Initial

Premises at 46,056 square feet, the rentable area of the 19th Floor Remainder

Space at 11,356 square feet, the rentable area of the 16th Floor Remainder Space

at 11,356 square feet, and the rentable area of the Property at 724,734 square

feet. The specified rentable area of the Premises has been determined by

Landlord through its calculation of the usable area and multiplication of that

figure by a factor of 1.09. Upon the request of Tenant, Landlord shall provide

its usable area measurements and rentable area calculations for the Premises for

Tenant's review (which review shall occur, if at all, within sixty (60) days of

Tenant's execution of the Lease). If Tenant disagrees with the rentable area

calculation, it shall provide notice of same to Landlord within ten (10) days of

receipt of Landlord's calculations. In such event, the parties shall confer with

Landlord's architect and if they still cannot agree on the rentable area

calculation within ten (10) days thereafter, the parties shall submit the matter

to a mutually acceptable third party architect, who shall perform measurements

and calculations of the usable and rentable areas. If the third party architect

confirms Landlord's calculations within 400 rentable square feet, Tenant shall

pay all costs associated with the third party architect. If the measurement

differs by more than 400 rentable square feet, Landlord shall pay such costs. In

 

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either case, the parties shall be bound by the determination of the third party

architect. In making its calculations, the third party architect shall apply

current BOMA measurement standards utilized for Class A buildings in the

Minneapolis downtown market. If applicable, the parties shall execute an

amendment to the Lease, setting forth the revised rentable square feet of the

Premises, and the Rent shall be adjusted by such amendment retroactively to the

Commencement Date to reflect such adjusted _____ble square feet. As to any

partial floors that may be occupied by Tenant under this Lease, ________

table/usable factor shall not exceed 1.15.

 

                                    ARTICLE 2

 

                                    BASE RENT

 

      Tenant shall pay Landlord monthly Base Rent as set forth in the following

table, in advance on or before the first day of each calendar month during the

Term, except that Base Rate for the first full calendar month for which Base

Rent shall be due, shall be paid on the Commencement Date.

 

<TABLE>

<CAPTION>

                                                                     Monthly         Base Rent per

         Lease Period                         Annual Base Rent        Base Rent         Square Foot

-----------------------------------           ----------------      -------------      -------------

<S>                                           <C>                   <C>                <C>

November 1, 2000 - October 31, 2001           $      587,214.00      $    48,934.50       $    12.75

November 1, 2001 - October 31, 2002           $      893,984.00      $    74,498.67       $    13.00

November 1, 2002 - October 31, 2003           $      911,176.00      $    75,931.33       $    13.25

November 1, 2003 - October 31, 2004           $      928,368.00      $     77364.00       $    13.50

November 1, 2004 - October 31, 2005           $      945,560.00      $    78,796.67       $    13.75

</TABLE>

 

      The annual Base Rent and monthly Base Rent listed above for the period

from November 1, 2000 through October 31, 2001 is the annual Base Rent and

monthly Base Rent for the Initial Premises only. Such figure shall be adjusted

proportionately for the Secondary Premises based on the date that Tenant takes

occupancy of the Secondary Premises as set forth in Article 4.

 

      If the Term commences 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, then the

Base Rent for such month shall be prorated on the basis of the ratio of the

number of days of such month that are included within the Term to the total

number of days in such month.

 

                                    ARTICLE 3

 

                                 ADDITIONAL RENT

 

      (A) TAXES. Tenant shall pay Landlord an amount equal to Tenant's Prorate

Share of Taxes in the manner described below. The terms "Taxes" and "Tenant's

Prorata Share" shall have the meanings specified therefor in Article 25.

 

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      (B) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal to

Tenant's Prorata Share of Operating Expenses in the manner described below. The

terms "Operating Expenses" and "Tenant's Prorata Share" shall have the meanings

specified therefor in Article 25.

 

      (C) INTENTIONALLY OMITTED.

 

      (D) MANNER OF PAYMENT. Taxes and Operating Expenses shall be paid in the

following manner:

 

            (i)    Landlord may reasonably estimate in advance the amounts Tenant

                  shall owe for Taxes and Operating Expenses for any full or

                  partial calendar year of the Term. In such event, Tenant shall

                  pay such estimated amounts, on a monthly basis, on or before

                  the first day of each calendar month, together with Tenant's

                  payment of Base Rent. Such estimate may be reasonably adjusted

                  from time to time by Landlord.

 

            (ii)   Within 120 days after the end of each calendar year, or as

                  soon thereafter as practicable, Landlord shall provide a

                  statement (the "Statement") to Tenant showing: (a) the amount

                  of actual Taxes and Operating Expenses for such calendar year,

                  with a listing of amounts for major categories of Operating

                  Expanses, (b) any amount paid by Tenant towards Taxes and

                  Operating Expenses during such calendar year on an estimated

                  basis, and (c) any revised estimate of Tenant's obligations

                  for Taxes and Operating Expenses for the current calendar

                  year.

 

            (iii) If the Statement shows that Tenant's estimated payments were

                  less than Tenant's actual obligations for Taxes and Operating

                  Expenses for such year, Tenant shall pay the difference. If

                  the Statement shows an increase in Tenant's estimated payments

                  for the current calendar year, Tenant shall pay the difference

                  between the new and former estimates, for the period of

                   January 1 of the current calendar year through the month in

                  which the Statement is sent. Tenant shall make such payments

                  within thirty (30) days after Landlord sends the Statement.

 

            (iv)   If the Statement shows that Tenant's estimated payments

                  exceeded Tenant's actual obligations for Taxes and Operating

                  Expenses, Tenant shall receive a credit for the difference

                  against payments of Rent next due. If the Term shall have

                  expired and no further Rent shall be due, Tenant shall receive

                  a refund of such difference, within thirty (30) days after

                  Landlord sends the Statement.

 

            (v)    So long as Tenant's obligations hereunder are not materially

                  adversely affected thereby, Landlord reserves the right to

                  reasonably change, from time to time, the manner or timing of

                  the foregoing payments. In lieu of providing one Statement

                  covering Taxes and Operating Expenses, Landlord may provide

                  separate statements, at the same or different times.

 

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                  No delay by Landlord in providing the Statement (or separate

                  statements) shall be deemed a default by Landlord or a waiver

                  of Landlord's right to require payment of Tenant's obligations

                  for actual or estimated Taxes or Operating Expenses.

 

      (E) PRORATION. If the Term commences other than on January 1, or ends

other than on December 31, Tenant's obligations to pay estimated and actual

amounts towards Taxes and Operating Expenses for such first or final calendar

years shall be prorated to reflect the portion of such years included in the

Term. Such proration shall be made by multiplying the total estimated or actual

(as the case may be) Taxes and Operating Expenses, for such calendar years by a

fraction, the numerator of which shall be the number of days of the Term during

such calendar year, and the denominator of which shall be the number of days in

such calendar year.

 

      (F) LANDLORD'S RECORDS. Landlord shall maintain detailed records

respecting Taxes and Operating Expenses and determine the same in accordance

with sound and generally acceptable accounting and management practices,

consistently applied. Although this Lease contemplates the computation of Taxes

and Operating Expenses on a cash basis, Landlord shall make reasonable and

appropriate accrual adjustments to ensure that each calendar year includes

substantially the same recurring items. Landlord reserves the right to change to

a full accrual system of accounting so long as the same is consistently applied

and Tenant's payment obligation for Taxes or Operating Expenses over the entire

Term is not increased over the amount that would have been otherwise payable had

no such change been implemented. Tenant or its representative shall have the

right to examine such records upon reasonable prior notice specifying such

records Tenant desires to examine, during normal business hours at the Building

by sending such notice no later than forty-five (45) days following the

furnishing of the Statement. Tenant may take exception to matters included in

Taxes or Operating Expenses Landlord's computation of Tenant's Prorata Share, or

any other matter impacting upon Tenant's payment obligations with regard to

Taxes and Operating Expenses by sending notice specifying such exception and the

reasons therefor to Landlord no later than thirty (30) days after Landlord makes

such records available for examination. Such Statement shall be considered

final, except as to matters to which exception is taken after examination of

Landlord's records in the foregoing manner and within the foregoing times.

Tenant acknowledges that Landlord's ability to budget and incur expenses depends

on the finality of such Statement, and accordingly agrees that time is of the

essence of this Paragraph. If Tenant takes exception to any matter contained in

the Statement as provided herein, the parties shall refer the matter to an

accounting firm mutually designated by the parties (or if the parties cannot

agree as to the accounting firm within thirty (30) days of Tenant's taking

exception to such matters contained in the Statement, designated by Landlord,

subject to the criteria that: (i) such accounting firm is a "Big 5" accounting

firm, and (ii) Landlord shall not have had any business relationship with the

accounting firm within the prior two (2) years), whose certification as to the

proper amount shall be final and conclusive as between Landlord and Tenant.

Tenant shall promptly pay the cost of such certification unless such

certification determines that Tenant was overbilled (based upon the Statement)

by more than two percent (2%), in which event Landlord shall pay the cost of

such certification. If such certification indicates that the amount actually

paid by Tenant, in relation to a matter for which Tenant has taken exception

pursuant to this Paragraph, exceeds the amount Tenant should have paid, then

Landlord shall credit the difference against the then next due payments to be

made by Tenant under this Article 3, or if the Lease has expired, such amount

shall be refunded to Tenant

 

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within thirty (30) days of such certification. Pending resolution of any such

exceptions in the foregoing manner, Tenant shall continue paying Tenant's

Prorata Share of Taxes and Operating Expenses in the amounts determined by

Landlord, subject to adjustment after any such exceptions are so resolved.

 

      (G) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses, and any

other amounts which Tenant is or becomes obligated to pay Landlord under this

Lease or other agreement entered into in connection herewith, are sometimes

herein referred to collectively as "Rent," and all remedies applicable to the

non-payment of Rent shall be applicable thereto. Rent shall be paid at any

office maintained by Landlord or its agent at the Property, or at such other

place as Landlord may designate.

 

                                    ARTICLE 4

 

                              COMMENCEMENT OF TERM

 

      On or before March 1, 2001, Tenant shall deliver written notice (the

"Secondary Premises Notice") to Landlord indicating either (a) that Tenant

elects to occupy, for the purpose of conducting its business, the entire

Secondary Premises on April 1, 2001, or (b) that Tenant elects to occupy, for

the purpose of conducting its business, the 19th Floor Remainder Space on April

1, 2001, with occupancy, for the purpose of conducting its business, of the 16th

Floor Remainder Space to begin on October 1, 2001. In the event that Tenant

elects to occupy only the 19th Floor Remainder Space on April 1, 2001, the term

of the Lease with respect to such space shall commence on April 1, 2001, and the

term of the Lease with respect to the 16th Floor Remainder Space shall commence

on October 1, 2001. Failure of Tenant to deliver such notice on or before March

1, 2001 shall be deemed an election by Tenant to occupy only the 19th Floor

Remainder Space on April 1, 2001. Rent shall first be payable on the entire

Secondary Premises on April 1, 2001 if Tenant has elected to occupy the entire

Secondary Premises on that date, or on April 1, 2001 for the 19th Floor

Remainder Space and October 1, 2001 for the 16th Floor Remainder Space, if

Tenant has elected to initially occupy only one-half (1/2) of the Secondary

Premises.

 

      With the exception of such portion of the Premises on the 16th floor of

the Building which Landlord must temporarily close in order to close off the

existing interior stairway between the 16th floor of the Building and the

adjacent floor, Landlord shall deliver (a) the Initial Premises to Tenant within

five (5) business days of Landlord's receipt of a fully executed copy of this

Lease, and (b) the Secondary Premises to Tenant within five (5) business days

after written request firm Tenant for delivery of same. Tenant shall be entitled

to commence construction of its improvements in the Secondary Premises, pursuant

to Exhibit B attached hereto, at any time after delivery of the Secondary

Premises to Tenant. During any period that Tenant shall be permitted to enter

any portion of the Premises prior to the Commencement Date other than to occupy

the same (e.g., to perform alterations or improvements), Tenant shall comply

with all terms and provisions of this Lease, except those provisions requiring

the payment of Rent. Tenant shall also have the right to occupy all or a portion

(as reasonably determined by Tenant) of the 16th Floor Remainder Space while the

Initial Premises are under construction (which space shall be made available in

its "as-is" condition) for temporary occupancy without any obligation for the

payment of Rent with

 

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respect to the 16th Floor Remainder Space. Landlord shall permit early entry,

provided the Premises are legally available and Landlord has completed any work

required under this Lease or any separate agreement entered in connection

herewith. Notwithstanding the foregoing, if Tenant elects to take possession of

the Secondary Premises in two phases and Tenant opens for business in the 16th

Floor Remainder Space prior to October 1, 2001, then Rent shall commence on such

date and be prorated based on the number of rentable square feet in the 16th

Floor Remainder Space occupied and opened for business by Tenant.

 

                                     ARTICLE 5

 

                              CONDITION OF PREMISES

 

      Tenant has inspected the Premises, Property, Systems and Equipment (as

defined in Article 25), or has had an opportunity to do so, and agrees to accept

the same "as is" without any agreements, representations, understandings or

obligations on the part of Landlord to perform any alterations, repairs or

improvements except for Landlord providing an improvement allowance as set forth

in the Work Agreement attached hereto as Exhibit B and as otherwise expressly

provided in any separate agreement that may be signed by the parties To the

extent that Tenant requires a demising wall between the Initial Premises and the

19th Floor Remainder Space and/or the 16th Floor Remainder Space, such demising

wall shall be constructed at Tenant's expense and in accordance with the

provisions of Section 8 of this Lease. Prior to delivering possession of the

Initial Premises to Tenant, Landlord shall close off the existing interior

stairway between the 16th floor of the Building and the adjacent floor, at

Landlord's sole cost and expense.

 

                                    ARTICLE 6

 

                                  USE AND RULES

 

      Tenant shall use the Premises for offices, the preparation of educational

programs and materials, and related functions inherent in its on-line

educational program (all of which shall be implemented consistent with the

Rules, as defined below), including "periodic seminars" (as defined below), and

for such other purposes as Landlord may specifically authorize in writing and no

other purpose whatsoever, in compliance with all applicable Laws, and without

disturbing or interfering with any other tenant or occupant of the Property. For

purposes of this Lease, the term "periodic seminars" shall mean seminars of not

more than fifty (50) people per seminar, of a duration not to exceed two

consecutive days, and occurring not more frequently than one (1) time in any

calendar month. Landlord's approval of "periodic seminars" shall in no event be

construed as a representation by Landlord that any such "periodic seminar" is in

compliance with applicable Laws. Notwithstanding the foregoing, except for

"periodic seminars," in no event shall Tenant use any portion of the Premises

for classroom purposes. Tenant shall not use the Premises in any manner so as to

cause a cancellation of Landlord's insurance policies, or an increase in the

premiums thereunder. Tenant shall comply with all rules set forth in Rider One

attached hereto (the "Rules"). Landlord shall have the right to reasonably amend

such Rules and supplement the same with other reasonable Rules (not inconsistent

with this Lease or with Tenant's permitted use as set forth in this Article)

relating to the Property, or the promotion of safety, care, cleanliness or good

order therein, and all such amendments or new Rules shall be

 

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binding upon Tenant after five (5) days notice thereof to Tenant. All Rules

shall be applied on a non-discriminatory basis, but nothing herein shall be

construed to give Tenant or any other Person (as defined in Article 25) any

claim, demand or cause of action against Landlord arising out of the violation

of such Rules by any other tenant, occupant, or visitor of the Property, or out

of the enforcement or waiver of the Rules by Landlord in any particular

instance.

 

                                    ARTICLE 7

 

                             SERVICES AND UTILITIES

 

      Landlord shall provide the following services and utilities (the cost of

which shall be included in Operating Expenses unless otherwise stated herein or

in any separate rider hereto):

 

      (A) Electricity for standard office lighting fixtures, and equipment and

accessories customary for offices (up to 280 hours per month) where: (1) the

connected electrical load of all of the same does not exceed an average of 4

watts per square foot of the Premises, and (2) the electricity will be at

nominal 120 volts, single phase (or 110 volts, depending on available services

in the Building).

 

      (B) Heat and air-conditioning to provide a temperature required, in

Landlord's reasonable opinion, in accordance with applicable Law, and consistent

with other similarly situated buildings in downtown Minneapolis, for occupancy

of the Premises under normal business operations, from 8:00 a.m. until 6:00 p.m.

Monday through Friday, and Saturdays from 8:00 a.m. until 1:00 p.m., except on

Holidays (as defined in Article 25). Landlord shall not be responsible for

inadequate air-conditioning or ventilation to the extent the same occurs because

Tenant uses any item of equipment consuming more than 500 watts at rated

capacity without providing adequate air-conditioning and ventilation therefor.

 

      (C) Water for drinking, lavatory and toilet purposes at those points of

supply provided for nonexclusive general use of other tenants at the Property.

 

      (D) Customary office cleaning and trash removal service Monday through

Friday or Sunday through Thursday in and about the Premises.

 

      (E) Operatorless passenger elevator service and freight elevator service

(subject to reasonable scheduling by Landlord) in common with Landlord and other

tenants and their contractors, agents and visitors.

 

      (F) Landlord shall seek to provide such extra utilities or services as

Tenant may from time to time request, if the same are reasonable and feasible

for Landlord to provide and do not involve modifications or additions to the

Property or existing Systems and Equipment (as defined in Article 25), and if

Landlord shall receive Tenant's request within a reasonable period prior to the

time such extra utilities or services are required. Landlord may comply with

written or oral requests by any officer or employee of Tenant, unless Tenant

shall notify Landlord of, or Landlord shall request, the names of authorized

individuals (up to 3 for each floor on which the Premises are located) and

procedures for written requests. Tenant shall, for such extra utilities or

services, pay such charges as Landlord shall from time to time reasonably

establish based upon Landlord's actual cost of delivery of the services, plus a

reasonable administrative fee. All

 

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charges for such extra utilities or services shall be due at the same time as

the installment of Base Rent with which the same are billed, or if billed

separately, shall be due within twenty (20) days after such billing. Landlord's

current charges for after-hour utilities are $18.00 per hour per floor of the

Building for HVAC cooling and $7.00 per hour per floor of the Building for

heating.

 

      Landlord may install and operate meters or any other reasonable system for

monitoring or estimating any services or utilities used by Tenant materially in

excess of those required to be provided by Landlord under this Article

(including a system for Landlord's engineer to reasonably estimate any such

excess usage). If such system indicates such excess services or utilities,

Tenant shall pay Landlord's reasonable charges for installing and operating such

system and any supplementary air-conditioning, ventilation, heat, electrical or

other systems or equipment (or adjustments or modifications to the existing

Systems and Equipment), and Landlord's reasonable charges for such amount of

excess services or utilities used by Tenant.

 

      Landlord does not warrant that any services or utilities will be free from

shortages, failures, variations, or interruptions caused by repairs,

maintenance, replacements, improvements, alterations, changes of service,

strikes, lockouts, labor controversies, accidents, inability to obtain services,

fuel, steam, water or supplies, governmental requirements or requests, or other

causes beyond Landlord's reasonable control. None of the same shall be deemed an

eviction or disturbance of Tenant's use and possession of the Premises or any

part thereof, except as expressly provided herein to the contrary, or relieve

Tenant from performance of Tenant's obligations under this Lease. Landlord in no

event shall be liable for damages by reason of loss of profits, business

interruption or other consequential damages.

 

      Notwithstanding any of the foregoing to the contrary, Landlord shall

operate and maintain the Building in accordance with all applicable laws and

regulations, the requirements of Landlord's insurance carriers, and standards

from time to time prevailing for similarly situated office buildings of

comparable age and character in downtown Minneapolis. Landlord shall maintain

all common areas in a first class condition and in good working order and repair

and shall be responsible for keeping all exterior common areas reasonably free

and clear of snow, ice and rubbish. Tenant, its successors, permitted assigns,

permitted subtenants and their employees shall have access to the Premises at

all times, 24-hours per day, every day of the year during the Term, subject to

compliance with Landlord's reasonable security measures.

 

      Tenant shall be permitted to utilize a dual electrical power feed from the

systems serving the 19th and 20th floors of the Building, which shall be

installed at Tenant's expanse and pursuant to the provisions of Section 8

hereof.

 

      Subject to matters beyond the reasonable control of Landlord, in the event

that any of the utilities or services to be provided by Landlord which are

necessary for Tenant's beneficial use of the Premises should be unavailable for

a period of three (3) or more consecutive business days, and such unavailability

materially interferes with Tenant's beneficial use of the Premises and as a

result thereof, Tenant does not operate its business in all or a material

portion of the Premises for such three (3) consecutive business day period, then

Rent shall abate from the end of such three (3) consecutive business day period

until the earlier of (i) the date when said utility or service is again

available to Tenant, or (ii) the date when Tenant reopens for business in such

portion of the Premises.

 

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<PAGE>

 

      Further, should a condition exist in the Premises as to which Landlord has

the obligation of repair hereunder, and should such condition have an adverse

and immediate material impact upon Tenant's ability to use the Premises for the

purposes set forth in Article 6, Tenant may give notice to Landlord of such

condition. If, within ten (10) business days of receipt of such notice by

Landlord, Landlord has not commenced and continuously and diligently proceeded

to rectify such condition, then Tenant shall have the right to separately

contract for such repair and upon the successful completion of such repair, to

invoice Landlord for the reasonable costs incurred by Tenant in such repair.

Tenant shall not have the right to perform its own repairs if the cause of

Landlord's delay in completion of such repairs is beyond the reasonable control

of Landlord. Tenant shall not have the right to offset or deduct the cost of

such repair from any Rent due under this Lease.

 

                                     ARTICLE 8

 

                              ALTERATIONS AND LIENS

 

      Tenant shall make no material additions, changes, alterations or

improvements (the "Work") to the Premises or the Systems and Equipment (as

defined in Article 25) pertaining to the Premises without the prior written

consent of Landlord, which consent shall not be unreasonably withheld or

delayed. For purposes of this provision an item of Work shall not be deemed

"material" if the item will not affect or alter the Systems and Equipment and

shall have a cost during any twelve (12) consecutive month period of less than

$20,000, or shall involve purely decorative changes to the Premises (i.e.

installation of wall or floor coverings). Landlord's consent shall also not be

required for the installation or removal of any modular furnishings or

alterations incidental to the installation or removal thereof. However, as to

the foregoing, Tenant shall still provide Landlord with prior notice as set

forth below of the Work to be performed. Landlord may impose reasonable

requirements as a condition of such consent including without limitation the

submission of plans and specifications for Landlord's prior written approval,

obtaining necessary permits, posting bonds, obtaining insurance, prior approval

of contractors, subcontractors and suppliers, prior receipt of copies of all

contracts and subcontracts, contractor and subcontractor lien waivers,

affidavits listing all contractors, subcontractors and suppliers, use of union

labor (if Landlord uses union labor), affidavits from engineers acceptable to

Landlord stating that the Work will not adversely affect the Systems and

Equipment or the structure of the Property, and requirements as to the manner

and times in which such Work shall be done. All Work shall be performed in a

good and workmanlike manner and all materials used shall be of a quality

comparable to or better than those in the Premises and Property and shall be in

accordance with plans and specifications approved by Landlord, and Landlord may

require that all such Work be performed under Landlord's supervision. In all

cases, Tenant shall pay Landlord a reasonable fee to cover Landlord's overhead

in reviewing Tenant's plans and specifications and performing any supervision of

the Work. If Landlord consents or supervises, the same shall not be deemed a

warranty as to the adequacy of the design, workmanship or quality of materials,

and Landlord hereby expressly disclaims any responsibility or liability for the

same. Landlord shall under no circumstances have any obligation to repair,

maintain or replace any portion of the Work.

 

      Tenant shall keep the Property and Premises free from any mechanic's,

materialman's or similar liens or other such encumbrances in connection with any

Work on or respecting the

 

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<PAGE>

 

Premises not performed by or at the request of Landlord, and shall indemnify and

hold Landlord harmless from and against any claims, liabilities, judgments, or

costs (including attorneys' fees) arising out of the same or in connection

therewith. Tenant shall give Landlord notice at least twenty (20) days prior to

the commencement of any Work on the Premises (or such additional time as may be

necessary under applicable Laws), to afford Landlord the opportunity of posting

and recording appropriate notices of non-responsibility. Tenant shall remove any

such lien or encumbrance by bond or otherwise within thirty (30) days after

written notice by Landlord, and if Tenant shall fail to do so, Landlord may pay

the amount necessary to remove such lien or encumbrance, without being

responsible for investigating the validity thereof. The amount so paid shall be

deemed additional Rent under this Lease payable upon demand, without limitation

as to other remedies available to Landlord under this Lease. Nothing contained

in this Lease shall authorize Tenant to do any act which shall subject

Landlord's title to the Property or Premises to any liens or encumbrances

whether claimed by operation of law or express or implied contract. Any claim to

a lien or encumbrance upon the Property or Premises arising in connection with

any Work on or respecting the Premises not performed by or at the request of

Landlord shall be null and void, or at Landlord's option shall attach only

against Tenant's interest in the Premises and shall in all respects be

subordinate to Landlord's title to the Property and Premises.

 

                                    ARTICLE 9

 

                                     REPAIRS

 

      Except for customary cleaning and trash removal provided by Landlord under

Article 7, and damage covered under Article 10, Tenant shall keep the Premises

in good and sanitary condition, working order and repair (including without

limitation, carpet, wall-covering, doors, plumbing and other fixtures,

equipment, alterations and improvements within and solely serving the Premises

[other than Systems and Equipment] whether installed by Landlord or Tenant). In

the event that any repairs, maintenance or replacements are required, Tenant

shall promptly arrange for the same either through Landlord for such reasonable

charges as Landlord may from time to time establish, or such contractors as

Landlord generally uses at the Property or such other contractors as Landlord

shall first approve in writing, and in a first class, workmanlike manner

approved by Landlord in advance in writing. If Tenant does not promptly make

such arrangements, Landlord may, but need not, make such repairs, maintenance

and replacements, and the costs paid or incurred by Landlord therefor shall be

reimbursed by Tenant promptly after request by Landlord. Tenant shall indemnify

Landlord and pay for any repairs, maintenance and replacements to areas of the

Property outside the Premises, caused, in whole or in part, as a result of

moving any furniture, fixtures, or other property to or from the Premises, or by

Tenant or its employees, agents, contractors, or visitors (notwithstanding

anything to the contrary contained in this Lease). Except as provided in the

preceding sentence, or for damage covered under Article 10, Landlord shall keep

the common areas of the Property in good and sanitary condition, working order

and repair (the cost of which shall be included in Operating Expenses, as

described in Article 25, except as limited therein).

 

                                       10

 

<PAGE>

 

                                   ARTICLE 10

 

                                 CASUALTY DAMAGE

 

      If the Premises or any common areas of the Property providing access

thereto shall be damaged by fire or other casualty, Landlord shall use available

insurance proceeds to restore the same. Such restoration shall be to

substantially the condition prior to the casualty, except for modifications

required by zoning and building codes and other Laws or by any Holder (as

defined in Article 25), any other modifications to the common areas deemed

desirable by Landlord (provided access to the Premises is not materially

impaired), and except that Landlord shall not be required to repair or replace

any of Tenant's furniture, furnishings, fixtures or equipment, or any

alterations or improvements in excess of any work performed or paid for by

Landlord under the initial Work Agreement attached hereto as Exhibit B or under

any separate agreement signed by the parties in connection herewith. Landlord

shall not be liable for any inconvenience or annoyance to Tenant or its

visitors, or injury to Tenant's business resulting in any way from such damage

or the repair thereof. However, Landlord shall allow Tenant a proportionate

abatement of Rent during the time and to the extent the Premises are unfit for

occupancy for the purposes permitted under this Lease and not occupied by Tenant

as a result thereof (unless Tenant or its employees or agents caused the damage

and then only to the extent such Rent abatement is not covered by Landlord's

insurance). Notwithstanding the foregoing to the contrary, Landlord may elect to

terminate this Lease by notifying Tenant in writing of such termination within

sixty (60) days after the date of damage (such termination notice to include a

termination date providing at least ninety (90) days for Tenant to vacate the

Premises), if the Property shall be materially damaged by Tenant or its

employees or agents, or if the Property shall be damaged by fire or other

casualty or cause such that: (a) repairs to the Premises and access thereto

cannot reasonably be completed within 180 days after the casualty without the

payment of overtime or other premiums, (b) more than 40% of the Premises is

affected by the damage, and fewer than 15 months remain in the Term, as it nay

have been extended, or any material damage occurs to the Premises during the

last 12 months of the Term, as it may have been extended, (c) any Holder (as

defined in Article 25) shall require that the insurance proceeds or any portion

thereof be used to retire the Mortgage debt (or shall terminate the ground

lease, as the case may be), or (d) the cost of the repairs, alterations,

restoration or improvement work would exceed 25% of the replacement value of the

Building. Tenant agrees that Landlord's obligation to restore, and the abatement

of Rent provided herein, shall be Tenant's sole recourse in the event of such

damage, although if Landlord has not, within sixty (60) days after the date of

damage, given notice to Tenant of its intent to perform or not perform repairs,

Tenant shall have the right to terminate the Lease by notice to Landlord. The

abatement of Rent under this provision shall be based upon the ratio of the

portion of the Premises damaged or otherwise rendered untenantable to the total

rentable square footage of the Premises at the time of such casualty. Tenant

acknowledges that this Article represents the entire agreement between the

parties respecting damage to the Premises or Property.

 

                                   ARTICLE 11

 

                  INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS

 

                                       11

 

<PAGE>

 

      Tenant shall maintain during the Term Commercial General Liability

insurance, with limits of not less than $2,000,000 per occurrence for personal

injury, bodily injury or death, or property damage or destruction (including

loss of use thereof). Such insurance shall be primary and any insurance carried

by Landlord or any other insured shall be excess and noncontributory. Tenant

shall also maintain during the Term workers' compensation insurance as required

by statute, employer's liability insurance in an amount of not less than

$500,000 per occurrence, and primary, noncontributory, "all-risk" property

damage insurance covering Tenant's personal property, business records, fixtures

and equipment, for damage or other loss caused by fire or other casualty or

cause including, but not limited to, vandalism and malicious mischief, theft,

water damage of any type, including sprinkler leakage, bursting or stoppage of

pipes, explosion, business interruption, and other insurable risks in amounts

not less than the full insurable replacement value of such property and full

insurable value of such other interests of Tenant (subject to reasonable

deductible amounts). Landlord shall, as part of Operating Expenses, maintain

during the Term Commercial General Liability insurance, with limits of not less

than $2,000,000 per occurrence for personal injury, bodily injury or death, or

property damage or destruction (including loss of use thereof). Landlord shall

also, as part of Operating Expanses, maintain during the Term workers'

compensation insurance as required by statute, and primary, non-contributory,

extended coverage or "all-risk" property damage insurance, in an amount equal to

at least ninety percent (90%) of the full insurable replacement value of the

Property (exclusive of the costs of excavation, foundations and footings, and

such risks required to be covered by Tenant's insurance, and subject to

reasonable deductible amounts), or such other amount necessary to prevent

Landlord from being a co-insured, and such other coverage as Landlord shall deem

appropriate or that may be required by any Holder (as defined in Article 25).

 

      Tenant shall provide Landlord with certificates, evidencing such coverage

(and, with respect to liability coverage, showing Landlord and such other

parties that Landlord shall designate from time to time as additional insureds)

prior to the Commencement Date, which shall state that such insurance coverage

may not be changed or canceled without at least twenty (20) days prior written

notice to Landlord, and shall provide renewal certificates to Landlord at least

twenty (20) days prior to expiration of such policies. Except as provided to the

contrary herein, any insurance carried by Landlord or Tenant shall be for the

sole benefit of the party carrying such insurance. Any insurance policies

hereunder may be "blanket polices," provided that payments made in connection

with other properties covered by such blanket policies shall not diminish the

insurance amounts required hereunder. All insurance required hereunder shall be

provided by responsible insurers and Tenant's insurer shall have a rating of at

least A- and IX in the then current edition of Best's Key Rating Insurance guide

and shall otherwise be reasonably acceptable to Landlord. By this Article,

Landlord and Tenant intend that their respective property loss risks shall be

borne by responsible insurance carriers to the extent above provided, and

Landlord and Tenant hereby agree to look solely to, and seek recovery only from,

their respective insurance carriers in the event of a property loss to the

extent that such coverage is agreed to be provided hereunder. The parties each

hereby waive all rights and claims against such other for such losses, and waive

all rights of subrogation of their respective insurers, provided such waiver of

subrogation shall not affect the right of the insured to recover thereunder. The

parties agree that their respective insurance policies are now, or shall be,

endorsed such that said waiver of subrogation shall not affect the right of the

insured to recover thereunder, so long as no material additional premium is

charged therefor.

 

                                       12

 

<PAGE>

 

                                   ARTICLE 12

 

                                  CONDEMNATION

 

      If the whole or any material part of the Premises or Property shall be

taken by power of eminent domain or condemned by any competent authority for any

public or quasi-public use or purpose, or if any adjacent property or street

shall be so taken or condemned, or reconfigured or vacated by such authority in

such manner as to require the reconstruction or remodeling of any material part

of the Premises or such portion of the Property as would render the Premises no

longer reasonably usable by Tenant, or if Landlord shall grant a deed or other

instrument in lieu of such taking by eminent domain or condemnation, Landlord

shall have the option to terminate this Lease upon ninety (90) days notice,

provided such notice is given no later than 180 days after the date of such

taking, condemnation, reconfiguration, vacation, deed or other instrument.

Tenant shall have reciprocal termination rights if the whole or any material

part of the Premises is permanently taken, or if access to the Premises is

(other than on a temporary basis where alternative access to the Premises is

still available to Tenant)materially impaired. Landlord shall be entitled to

receive the entire award or payment in connection therewith, except that Tenant

shall have the right to file any separate claim available to Tenant for any

taking of Tenant's personal property and fixtures belonging to Tenant and

removable by Tenant upon expiration of the Term, and for moving expenses (so

long as such claim does not diminish the award available to Landlord or any

Holder, and such claim is payable separately to Tenant). All Rent shall be

apportioned as of the date of such termination, or the date of such taking,

whichever shall first occur. If any part of the Premises shall be taken, and

this Lease shall not be so terminated, the Rent shall be proportionately abated.

 

                                   ARTICLE 13

 

                              RETURN OF POSSESSION

 

      At the expiration or earlier termination of this Lease or Tenant's right

of possession, Tenant shall surrender possession of the Premises in the

condition required under Article 9, ordinary wear and tear and casualty damage

(provided that, with respect to any casualty damage, Tenant provides Landlord

with any insurance proceeds received by Tenant for such casualty not

attributable to Tenant's furniture, fixtures, and equipment, plus an amount

equal to Tenant's deductible under its insurance) excepted, and shall surrender

all keys, any key cards, and any parking stickers or cards, to Landlord, and

advise Landlord as to the combination of any locks or vaults then remaining in

the Premises, and shall remove all trade fixtures, equipment, furnishings and

personal property. All improvements, fixtures and other items in or upon the

Premises (except trade fixtures, equipment, furnishings and personal property

belonging to Tenant), whether installed by Tenant or Landlord, shall be

Landlord's property and shall remain upon the Premises, all without

compensation, allowance or credit to Tenant. However, if prior to such

termination or within ten (10) days thereafter Landlord so directs by notice,

Tenant shall promptly remove such of the foregoing items as are designated in

such notice and restore the Premises to the condition prior to the installation

of such items; provided, Landlord shall not require removal of customary office

improvements installed pursuant to any separate agreement signed by both parties

in connection with entering this Lease, or installed by Tenant with Landlord's

written approval (except as expressly required by Landlord in

 

                                        13

 

<PAGE>

 

connection with granting such approval). However, under no circumstances shall

Landlord require Tenant to remove improvements installed in conjunction with the

initial occupancy by Tenant of any portion of the Premises, provided that such

improvements were installed in conformance, in all material respects, with the

approved Plans (as defined in Exhibit B). If Tenant shall fail to perform any

repairs or restoration, or fail to remove any items from the Premises required

hereunder, Landlord may do so, and Tenant shall pay Landlord the cost thereof

upon demand. All property removed from the Premises by Landlord pursuant to any

provisions of this Lease or any Law may be handled or stored by Landlord at

Tenant's expense, and Landlord shall in no event be responsible for the value,

preservation or safekeeping thereof. All property not removed from the Premises

or retaken from storage by Tenant within thirty (30) days after expiration or

earlier termination of this Lease or Tenant's right to possession, shall at

Landlord's option be conclusively deemed to have been conveyed by Tenant to

Landlord as if by bill of sale without payment by Landlord. Unless prohibited by

applicable Law, Landlord shall have a lien against such property for the costs

incurred in removing and storing the same.

 

                                   ARTICLE 14

 

                                  HOLDING OVER

 

      Unless Landlord expressly agrees otherwise in writing, Tenant shall pay

Landlord 150% of the amount of Base Rent then applicable (or the highest amount

permitted by Law, whichever shall be less), plus Tenant's Prorata Share of Taxes

and Operating Expenses prorated on per diem basis for each day Tenant shall

retain possession of the Premises or any part thereof after expiration or

earlier termination of this Lease. If such holdover, without consent, continues

for more than fifteen (15) days, then Tenant shall also be obligated for the

payment of (a) amounts payable by Landlord to third parties on account of such

holdover by Tenant, and (b) direct damages sustained by Landlord on account of

such holdover by Tenant. The foregoing provisions shall not serve as permission

for Tenant to holdover, nor serve to extend the Term (although Tenant shall

remain bound to comply with all provisions of this Lease until Tenant vacates

the Premises, and shall be subject to the provisions of Article 13).

Notwithstanding the foregoing to the contrary, at any time before or after

expiration or earlier termination of the Lease, Landlord may serve notice

advising Tenant of the amount of Rent and other terms required, should Tenant

desire to enter a month-to-month tenancy (and if Tenant shall hold over more

than one full calendar month after such notice, Tenant shall thereafter be

deemed a month-to-month tenant, on the terms and provisions of this Lease then

in effect, as modified by Landlord's notice, and except that Tenant shall not be

entitled to any renewal or expansion rights contained in this Lease or any

amendments hereto).

 

                                   ARTICLE 15

 

                                    NO WAIVER

 

      No provision of this Lease will be deemed waived by either party unless

expressly waived in writing signed by the waiving party. No waiver shall be

implied by delay or any other act or omission of either party. No waiver by

either party of any provision of this Lease shall be deemed a waiver of such

provision with respect to any subsequent matter relating to

 

                                        14

 

<PAGE>

 

such provision, and Landlord's consent or approval respecting any action by

Tenant shall not constitute a waiver of the requirement for obtaining Landlord's

consent or approval respecting any subsequent action. Acceptance of Rent by

Landlord shall not constitute a waiver of any breach by Tenant of any item or

provision of this Lease. No acceptance of a lesser amount than the Rent herein

stipulated shall be deemed a waiver of Landlord's right to receive the full

amount due, nor shall any endorsement or statement on any check or payment or

any letter accompanying such check or payment be deemed an accord and

satisfaction, and Landlord may accept such check or payment without prejudice to

Landlord's right to recover the full amount due. The acceptance of Rent or of

the performance of any other term or provision from any Person other than

Tenant, including any Transferee, shall not constitute a waiver of Landlord's

right to approve any Transfer.

 

                                   ARTICLE 16

 

                          ATTORNEYS' FEES AND JURY TRIAL

 

      In the event of any litigation between the parties, the prevailing party

shall be entitled to obtain, as part of the judgment, all reasonable attorneys'

fees, costs and expenses incurred in connection with such litigation, except as

may be limited by applicable Law. In the interest of obtaining a speedier and

less costly hearing of any dispute, the parties hereby each irrevocably waive

the right to trial by jury.

 

                                   ARTICLE 17

 

               PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES

 

      Tenant shall pay prior to delinquency all taxes, charges or other

governmental impositions assessed against or levied upon Tenant's fixtures,

furnishings, equipment and personal property located in the Premises. Tenant

shall pay any rent tax or sales tax, service tax, transfer tax or value added

tax, or any other applicable tax on the Rent or services herein. To the extent

that any Work in the Premises (beyond the initial improvements installed in

conjunction with Tenant's occupancy) have a value materially greater than the

tenant improvements installed by the average tenant in the Building, and if the

taxing authorities separately assess such additional improvements, Tenant shall

reimburse Landlord for the tax associated with such additional improvements.

 

                                   ARTICLE 18

 

                              REASONABLE APPROVALS

 

      Whenever Landlord's approval or consent is expressly required under this

Lease (including Article 21) or any other agreement between the parties,

Landlord shall not unreasonably withhold or delay such approval or consent

(reasonableness shall be a condition to Landlord's enforcement of such consent

or approval requirement, and not a covenant), except for matters affecting the

structure, safety or security of the Property, or the appearance of the Property

from any common or public areas.

 

                                       15

 

<PAGE>

 

                                    ARTICLE 19

 

               SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION

 

      Subject to the provisions of a subordination, non-disturbance and

attornment agreement in the form of Exhibit C attached hereto, to be entered

into between Tenant and the Holder, this Lease is subject and subordinate to all

Mortgages (as defined in Article 25) now or hereafter placed upon the Property,

and all other encumbrances and matters of public record applicable to the

Property. If any foreclosure proceedings are initiated by any Holder or a deed

in lieu is granted (or if any ground lease is terminated), Tenant agrees, upon

written request of any such Holder or any purchaser at foreclosure sale, to

attorn and pay Rent to such party and to execute and deliver any instruments

necessary or appropriate to evidence or effectuate such attornment (provided

such Holder or purchaser shall agree to accept this Lease and not disturb

Tenant's occupancy, so long as Tenant does not default and fail to cure within

the time permitted hereunder). However, in the event of attornment, no Holder

shall be: (i) liable for any act or omission of Landlord, or subject to any

offsets or defenses which Tenant might have against Landlord (prior to such

Holder becoming Landlord under such attornment), (ii) liable for any security

deposit or bound by any prepaid Rent not actually received by such Holder, or

(iii) bound by any future modification of this Lease not consented to by such

Holder under circumstances in which Landlord is required to obtain the consent

of the Holder, but such consent has not been provided (with Tenant to be

provided with notice of any such Holder refusal to grant consent when such

consent is required). Any Holder (as defined in Article 25) may elect to make

this Lease prior to the lien of its Mortgage, by written notice to Tenant, and

if the Holder of any prior Mortgage shall require, this Lease shall be prior to

any subordinate Mortgage. Tenant agrees to give any Holder by certified mail,

return receipt requested, a copy of any notice of default served by Tenant upon

Landlord, provided that prior to such notice Tenant has been notified in writing

(by way of service on Tenant of a copy of an assignment of leases, or otherwise)

of the address of such Holder. Tenant further agrees that if Landlord shall have

failed to cure such default within the times permitted Landlord for cure under

this Lease, any such Holder whose address has been provided to Tenant shall have

an additional period of thirty (30) days in which to cure (or such additional

time as may be required due to causes beyond such Holder's control, including

time to obtain possession of the Property by power of sale or judicial action)

subject to Tenant's right to exercise its remedies under Article 7, which Tenant

may utilize whether or not Holder has obtained possession or control of the

Property. Tenant shall execute such documentation as Landlord may reasonably

request from time to time, in order to confirm the matters set forth in this

Article in recordable form.

 

                                    ARTICLE 20

 

                              ESTOPPEL CERTIFICATE

 

      Tenant shall from time to time, within twenty (20) days after written

request from Landlord, execute, acknowledge and deliver a statement (i)

certifying that this Lease is unmodified and in full force and effect or, if

modified, stating the nature of such modification and certifying that this Lease

as so modified, is in full force and effect (or if this Lease is claimed not to

be in force and effect, specifying the ground therefor) and any dates to which

the Rent has been paid in advance, and the amount of any Security Deposit, (ii)

acknowledging

 

                                       16

 

<PAGE>

 

that there are not, to Tenant's knowledge, any uncured defaults on the part of

Landlord hereunder, or specifying such defaults if any are claimed, and (iii)

certifying such other matters as Landlord may reasonably request, or as may be

requested by Landlord's current or prospective Holders, insurance carriers,

auditors, and prospective purchasers. Any such statement may be relied upon by

any such parties. If Tenant shall fail to execute and return such statement

within the time required herein, Tenant shall be deemed to have agreed with the

matters set forth therein.

 

                                   ARTICLE 21

 

                            ASSIGNMENT AND SUBLETTING

 

      (A) TRANSFERS. Except as otherwise specifically provided herein, Tenant

shall not, without the prior written consent of Landlord, which consent shall

not be unreasonably withheld, as further described below: (i) assign, mortgage,

pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise

transfer, this Lease or any interest hereunder, by operation of law or

otherwise, (ii) sublet the Premises or any part thereof, or (iii) permit the use

of the Premises by any Persons (as defined in Article 25) other than Tenant, its

employees, its agents and invitees (all of the foregoing are hereinafter

sometimes referred to collectively as "Transfers" and any Person to whom any

Transfer is made or sought to be made is hereinafter sometimes referred to as a

"Transferee"). If Tenant shall desire Landlord's consent to any Transfer, Tenant

shall notify Landlord in writing, which notice shall include: (a) the proposed

effective date (which shall not be less than 30 nor more than 180 days after

Tenant's notice), (b) the portion of the Premises to be Transferred (herein

called the "Subject Space"), (c) the terms of the proposed Transfer and the

consideration therefor, the name and address of the proposed Transferee, and a

copy of all documentation pertaining to the proposed Transfer, and (d) current

financial statements of the proposed Transferee certified by an officer, partner

or owner thereof, and any other reasonably required information to enable

Landlord to determine the financial responsibility, character, and reputation of

the proposed Transferee, nature of such Transferee's business and proposed use

of the Subject Space, and such other information as Landlord may reasonable

require. Any Transfer made without complying with this Article shall, be null,

void and of no effect. Whether or not Landlord shall grant consent, Tenant shall

pay $300.00 towards Landlord's review and processing expenses, as well as any

reasonable legal fees incurred by Landlord, within thirty (30) days after

written request by Landlord.

 

      (B) APPROVAL. Landlord will not unreasonably withhold its consent (as

provided in Article 18) to any proposed Transfer of the Subject Space to the

Transferee on the terms specified in Tenant's notice. The parties hereby agree

that it shall be reasonable under this Lease and under any applicable Law for

Landlord to withhold consent to any proposed Transfer where one or more of the

following applies (without limitation as to other reasonable grounds for

withholding consent): (i) the Transferee is of a character or reputation or

engaged in a business which is not consistent with the quality of the Property,

or would be a significantly less prestigious occupant of the Property than

Tenant, (ii) the Transferee intends to use the Subject Space for purposes which

are not permitted under this Lease, (iii) the Subject Space is not regular in

shape with appropriate means of ingress and egress suitable for use in

accordance with any applicable Law, (iv) the Transferee is either a government

(or agency or instrumentality thereof) or an occupant of the Property, (v) the

proposed Transferee

 

                                       17

 

<PAGE>

 

does not have a reasonable financial condition in relation to the obligations to

be assumed in connection with the Transfer, or (vi) Tenant has committed and

failed to cure a Default at the time Tenant requests consent to the proposed

Transfer.

 

      (C) TRANSFER PREMIUM. If Landlord consents to a Transfer, and as a

condition thereto which the parties hereby agree is reasonable, Tenant shall pay

Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such

Transfer. "Transfer Premium" shall mean all rent, additional rent or other

consideration paid by such Transferee in excess of the Rent payable by Tenant

under this Lease (on a monthly basis during the Term, and on a per rentable

square foot basis, if less than all of the Premises is transferred), after

deducting the reasonable expenses incurred by Tenant for any changes,

alterations and improvements to the Premises, any other economic concessions or

services provided to the Transferee, and any customary brokerage commissions

paid in connection with the Transfer. If part of the consideration for such

Transfer shall be payable other than in cash, Landlord's share of such non-cash

consideration shall be in such form as is reasonably satisfactory to Landlord.

The percentage of the Transfer Premium due Landlord hereunder shall be paid

within ten (10) days after Tenant receives any Transfer Premium from the

Transferee.

 

      (D) RECAPTURE. Notwithstanding anything to the contrary contained in this

Article, Landlord shall have the option, by giving written notice to Tenant

within thirty (30) days after receipt of Tenant's notice of any proposed

Transfer, to indicate its intention to recapture the subject Space. Upon receipt

of Landlord's notice indicating its intention to recapture the portion of the

Premises subject to the proposed Transfer, Tenant may, upon delivery of notice

to Landlord within five (5) business days thereafter, rescind its intention to

proceed with the proposed Transfer. If Tenant does not so rescind, Landlord's

recapture notice shall be deemed to cancel and terminate this Lease with respect

to the Subject Space as of the date stated in Tenant's notice as the effective

date of the proposed Transfer (or at Landlord's option, shall cause the Transfer

to be made to Landlord or its agent, in which case the parties shall execute the

Transfer documentation promptly thereafter). If this Lease shall be cancelled

with respect to less than the entire Premises, the Rent reserved herein shall be

prorated on the basis of the number of rentable square feet retained by Tenant

in proportion to the number of rentable square feet contained in the Premises,

this Lease as so amended shall continue thereafter in full force and effect, and

upon request of either party, the parties shall execute written confirmation of

the same.

 

      (E) TERMS OF CONSENT. If Landlord consents to a Transfer: (a) the terms

and conditions of this Lease, including among other things, Tenant's liability

for the Subject Space, shall in no way be deemed to have been waived or

modified, (b) such consent shall not be deemed consent to any further Transfer

by either Tenant or a Transferee, (c) no Transferee shall succeed to any rights

provided in this Lease or any amendment hereto to extend the Term of this Lease,

expand the Premises, or lease additional space, any such rights being deemed

personal to Tenant, (d) Tenant shall deliver to Landlord promptly after

execution, an original executed copy of all documentation pertaining to the

Transfer in form reasonably acceptable to Landlord, and (e) Tenant shall furnish

upon Landlord's request a complete statement, certified by an independent

certified public accountant, or Tenant's chief financial officer, setting forth

in detail the computation of any Transfer Premium Tenant has derived and shall

derive from such Transfer. Landlord or its authorized representatives shall have

the right at all reasonable

 

                                       18

 

<PAGE>

 

times to audit the books, records and papers of Tenant relating to any Transfer,

and shall have the right to make copies thereof. If the Transfer Premium

respecting any Transfer shall be found understated, Tenant shall within thirty

(30) days after demand pay the deficiency, and if understated by more than 2%,

Tenant shall pay Landlord's costs of such audit. Any sublease hereunder shall be

subordinate and subject to the provisions of this Lease, and if this Lease shall

be terminated during the term of any sublease, Landlord shall have the right to:

(i) treat such sublease as canceled and repossess the Subject Space by any

lawful means, or (ii) require that such subtenant attorn to and recognize

Landlord as its landlord under any such sublease. If Tenant shall Default and

fail to cure within the time permitted for cure under Article 23(A), Landlord is

hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct

any Transferee to make all payments under or in connection with the Transfer

directly to Landlord (which Landlord shall apply towards Tenant's obligations

under this Lease) until such Default is cured.

 

      (F) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"

shall also include (a) if Tenant is a partnership, the withdrawal or change,

voluntary, involuntary or by operation of law, of a majority of the partners, or

a transfer of a majority of partnership interests, within a twelve month period,

or the dissolution of the partnership, and (b) if Tenant is a closely held

corporation (i.e., whose stock is not publicly held and not traded through an

exchange or over the counter), the dissolution, merger, consolidation or other

reorganization of Tenant, or within a twelve month period: (i) the sale or other

transfer of more than an aggregate of 50% of the voting shares of Tenant (other

than to immediate family members by reason of gift or death) or (ii) the sale,

mortgage, hypothecation or pledge of more than an aggregate of 50% of Tenant's

net assets. Notwithstanding any of the foregoing to the contrary, no Transfer

shall be deemed to exist based upon: (i) Tenant's participation in a private

placement or public offering of its securities (even if involving in excess of

fifty percent (50%) of the voting shares of Tenant); or (ii) Tenant's providing

an overall lien on its assets in conjunction with corporate financing, provided

that same have no reasonable business purpose other than to circumvent

Landlord's rights pursuant to this Article 21.

 

      (G) RELATED ENTITIES. Notwithstanding anything to the contrary in this

Article 21, Tenant may, upon not less than five (5) days prior written notice to

Landlord, permit any corporations or other business entities which are

controlled by, or under common control with Tenant, or a parent, subsidiary

division or corporation controlled by or controlling Tenant, a successor

corporation related to Tenant by merger or consolidation, or the purchaser of

substantially all of Tenant's assets or stock (a "Related Entity") to sublet all

or part of the Premises or receive an assignment of the Lease, provided that (i)

Tenant shall not be in default under this Lease, (ii) prior to such subletting

or assignment, as the case may be, Tenant furnishes Landlord with the name of

any such Related Entity, together with a certification of Tenant, and such other

proof as Landlord may reasonably request, that such subtenant or assignee, as

the case may be, is a Related Entity of Tenant and continues to remain such

during the Term. Landlord shall have the right, at any reasonable time, to

examine such books and records of Tenant as may be necessary to establish that

such sublessee or assignee, as the case may be, remains a Related Entity of

Tenant. Such subletting or assignment shall not relieve Tenant of any of

Tenant's liability or obligations under this Lease. For the purposes hereof,

"control" shall mean the power to directly or indirectly direct or cause the

direction of the management or policies of such corporation or entity.

 

                                       19

 

<PAGE>

 

                                   ARTICLE 22

 

                           RIGHTS RESERVED BY LANDLORD

 

      Except to the extent expressly limited herein, Landlord reserves full

rights to control the Property (which rights may be exercised without subjecting

Landlord to claims for constructive eviction, abatement of Rent, damages or

other claims of any kind), including more particularly, but without limitation,

the following rights:

 

      (A) To change the name or street address of the Property; install and

maintain signs on the exterior and interior of the Property; retain at all

times, and use in appropriate instances (subject to the limitations set forth in

this Lease, keys to all doors within and into the Premises; grant to any Person

the right to conduct any business or render any service at the Property, whether

or not it is the same or similar to the use permitted Tenant by this Lease; and

have access for Landlord and other tenants of the Property to any mail chutes

located on the Premises according to the rules of the United States Postal

Service.

 

      (B) To enter the Premises at reasonable hours for reasonable purposes,

including inspection and supplying cleaning service or other services to be

provided Tenant hereunder, to show the Premises to current and prospective

mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants

and brokers, at reasonable hours, and if Tenant shall abandon the Premises at

any time, or shall vacate the same during the last 3 months of the Term, to

decorate, remodel, repair, or alter the Premises.

 

      (C) To limit or prevent access to the Property, shut down elevator

service, activate elevator emergency controls, or otherwise take such action or

preventative measures deemed necessary by Landlord for the safety of tenants or

other occupants of the Property or the protection of the Property and other

property located thereon or therein, in case of fire, invasion, insurrection,

riot, civil disorder, public excitement or other dangerous condition, or threat

thereof.

 

      (D) To decorate and to make alterations, additions and improvements,

structural or otherwise, in or to the Property or any part thereof, and any

adjacent building, structure, parking facility, land, street or alley (including

without limitation changes and reductions in corridors, lobbies, parking

facilities and other public areas and the installation of kiosks, planters,

sculptures, displays, escalators, mezzanines, and other structures, facilities,

amenities and features therein, and changes for the purpose of connection with

or entrance into or use of the Property in conjunction with any adjoining or

adjacent building or buildings, now existing or hereafter constructed). In

connection with such matters, or with any other repairs, maintenance,

improvements, or alterations, in or about the Property, Landlord may erect

scaffolding and other structures reasonably required, and during such operations

may enter upon the Premises and take into and upon or through the Premises, all

materials required to make such repairs, maintenance, alterations or

improvements, and may close public entry ways, other public areas, restrooms,

stairways or corridors so long as such work does not unreasonably materially and

permanently interfere with Tenant's access to or use of the Premises.

 

                                       20

 

<PAGE>

 

      In connection with entering the Premises to exercise any of the foregoing

rights, Landlord shall: (a) provide reasonable advance written or oral notice to

Tenant's on-site manager or other appropriate person (except in emergencies, or

for routine cleaning or other routine matters), (b) take reasonable steps to

minimize any interference with Tenant's business, and (c) not show the Premises

to prospective tenants other than during the last nine (9) months of the Term

(or otherwise with Tenant's specific consent).

 

                                   ARTICLE 23

 

                               LANDLORD'S REMEDIES

 

      (A) DEFAULT. The occurrence of any one or more of the following events

shall constitute a "Default" by Tenant, which is not cured within any applicable

time permitted for cure below, shall give rise to Landlord's remedies set forth

in Paragraph (B), below: (i) failure by Tenant to make when due any payment of

Rent, unless such failure is cured within ten (10) days after notice; (ii)

failure by Tenant to observe or perform any of the terms or conditions of this

Lease to be observed or performed by Tenant other than the payment of Rent, or

as provided below, unless such failure is cured within thirty (30) days after

notice, or such shorter period expressly provided elsewhere in this Lease

(provided, if the nature of Tenant's failure is such that more time is

reasonably required in order to cure, Tenant shall not be in Default if Tenant

commences to cure within such period and thereafter reasonably seeks to cure

such failure to completion); (iii) failure by Tenant to comply with the Rules,

unless such failure is cured within five (5) days after notice (provided, if the

nature of Tenant's failure is such that more time is reasonably required in

order to cure, Tenant shall not be in Default if Tenant commences to cure within

period and thereafter reasonably seeks to cure such failure to completion); (iv)

the failure to take possession of the Premises within sixty (60) days after the

Commencement Date; (v) (a) making by Tenant or any guarantor of this Lease

("Guarantor") of any general assignment for the benefit of creditors, (b) filing

by or against Tenant or any Guarantor of a petition to have Tenant or such

Guarantor adjudged a bankrupt or a petition for reorganization or arrangement

under any Law relating to bankruptcy (unless, in the case of a petition filed

against Tenant or such Guarantor, the same is dismissed within sixty (60) days,

(c) appointment of a trustee or receiver to take possession of substantially all

of Tenant's assets located on the Premises or of Tenant's interest in this

Lease, where possession is not restored to Tenant within thirty (30) days, (d)

attachment, execution or other judicial seizure of substantially all of Tenant's

assets located on the Premises or of Tenant's interest in this Lease, (e)

Tenant's or any Guarantor's convening of a meeting of its creditors or any class

thereof for the purpose of effecting a moratorium upon or composition of its

debts, or (f) Tenant's or any Guarantor's insolvency or admission of an

inability to pay its debts as they mature; or (vi) any material

misrepresentation herein, or material misrepresentation or omission in any

financial statements or other materials provided by Tenant or any Guarantor in

connection with negotiating or entering this Lease or in connection with any

Transfer under Article 21. Failure to comply with the same term or condition of

this Lease, which failure is either monetary in nature or a material term or

condition of this Lease, on four (4) occasions during any twelve (12) month

period shall cause any failure to comply with such term or condition during the

succeeding twelve month period, at Landlord's option, to constitute an incurable

Default, if Landlord has given Tenant notice of each such failure within ten

(10) days after each such

 

                                       21

 

<PAGE>

failure occurs. The notice and cure periods provided herein are in lieu of, and

not in addition to, any notice and cure periods provided by Law.

 

      (B) REMEDIES. If a Default occurs and is not cured within any applicable

time permitted under Paragraph (A), Landlord shall have the rights and remedies

hereinafter set forth, which shall be distinct, separate and cumulative with and

in addition to any other right or remedy allowed under any Law or, other

provisions of this Lease:

 

            (i)    Landlord may terminate this Lease, repossess the Premises by

                  detainer suit, summary proceedings or other lawful means, and

                  recover as damages a lump sum of money equal to: (a) any

                  unpaid Rent as of the termination date including interest at

                  the Default Rate calculated from the date each item of unpaid

                  Rent was first payable hereunder (as defined in Article 25),

                  plus (b) any unpaid Rent which would have accrued after the

                  termination date, less such loss of Rent the Tenant proves

                  could have been reasonably avoided, discounted to present

                  value at an assumed interest rate equal to six percent (6%)

                  per annum. Landlord shall also be entitled to recover all

                  Costs of Reletting (as defined in Paragraph F). For purposes

                  of computing the amount of Rent herein that would have accrued

                  after the time of award, Tenant's Prorata Share of Taxes and

                  Operating Expenses shall be projected, based upon the average

                   rate of increase, if any, in such items from the Commencement

                  Date through the time of award.

 

            (ii)   If applicable Law permits, Landlord may terminate Tenant's

                  right of possession and repossess the Premises by detainer

                  suit, summary proceedings or other lawful means, without

                  terminating this Lease (and if such Law permits, and Landlord

                  shall not have expressly terminated the Lease in writing, any

                  termination shall be deemed a termination of Tenant's right of

                  possession only). In such event, Landlord may recover: (a) any

                  unpaid Rent as of the date possession is terminated, including

                   interest at the Default Rate, (b) any unpaid Rent which

                  accrues during the Term from the date possession is terminated

                  through the time of award (or which may have accrued from the

                  time of any earlier award obtained by Landlord through the

                  time of award), including interest at the Default Rate

                  calculated from the date each item of unpaid Rent was first

                  payable hereunder, less any Net Re-Letting Proceeds (as

                  defined in Paragraph F) received by Landlord during such

                  period. Landlord shall also be entitled to recover all Costs

                  of Reletting (as defined in Paragraph F). Landlord may bring

                   suits for such amounts or portions thereof, at any time or

                  times as the same accrue or after the same have accrued, and

                  no suit or recovery of any portion due hereunder shall be

                  deemed a waiver of Landlord's right to collect all amounts to

                  which Landlord is entitled hereunder, nor shall the same serve

                  as any defense to any subsequent suit brought for any amount

                  not theretofore reduced to judgment.

 

                                       22

 

<PAGE>

 

      (C) MITIGATION OF DAMAGES. If Landlord terminates this Lease or Tenant's

right to possession, Landlord shall use reasonable efforts to mitigate

Landlord's damages, and Tenant shall be entitled to submit proof of such failure

to mitigate as a defense to Landlord's claims hereunder. If Landlord has not

terminated this Lease or Tenant's right to possession, Landlord shall have no

obligation to mitigate, and may permit the Premises to remain vacant or

abandoned; in such case, Tenant may seek to mitigate damages by attempting to

sublease the Premises or assign this Lease (subject to Article 21).

 

      (D) SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord

shall at all times have the rights and remedies (which shall be cumulative with

each other and cumulative and in addition to those rights and remedies available

under Paragraph (B), above or any Law or other provision of this Lease), without

prior demand or notice except as required by applicable Law: (i) to seek any

declaratory, injunctive or other equitable relief, and specifically enforce this

Lease, or restrain or enjoin a violation or breach of any provision hereof, and

ii) to sue for and collect any unpaid Rent which has accrued. Notwithstanding

anything to the contrary contained in this Lease, to the extent not expressly

prohibited by applicable Law, in the event of any Default by Tenant not cured

within any applicable time for cure hereunder, Landlord may terminate this Lease

or Tenant's right to possession in accordance with Paragraphs (B)(i) and (ii)

above.

 

      (E) LATE CHARGES AND INTEREST. Tenant shall pay, additional Rent, a

service charge of Two Hundred Dollars ($200.00) for bookkeeping and

administrative expenses, if Rent is not received within ten (10) days after its

due date. In addition, any Rent paid more than five (5) days after due shall

accrue interest from the due date at the Default Rate (as defined in Article

25), until payment is received by Landlord. Such service charge and interest

payments shall not be deemed consent by Landlord to late payments, nor a waiver

of Landlord's right to insist upon timely payments at any time, nor a waiver of

any remedies to which Landlord is entitled as a result of the late payment of

Rent.

 

      (F) CERTAIN DEFINITIONS. "Net Re-Letting Proceeds" shall mean the total

amount of rent and other consideration paid by any Replacement Tenants, less all

Costs of Re-Letting, during a given period of time. "Costs of Re-Letting" shall

include without limitation, all reasonable costs and expenses incurred by

Landlord for any repairs, maintenance, changes, alterations and improvements to

the Premises, brokerage commissions, advertising costs, reasonable attorneys'

fees, any customary free rent periods or credits, tenant improvement allowances,

take-over lease obligations and other customary, necessary or appropriate

economic incentives required to enter leases with Replacement Tenants, and costs

of collecting rent from Replacement Tenants. "Replacement Tenants" shall mean

any Persons (as defined in Article 25) to whom Landlord relets the Premises or

any portion thereof pursuant to this Article. The amount of `Net Re-Letting

Proceeds' shall be increased by any amounts that Tenant reasonably demonstrates

would have been received by Landlord with regard to the Premises, but which

Landlord has not received due to its negligent actions.

 

      (G) OTHER MATTERS. No re-entry or repossession, repairs, changes,

alterations and additions, reletting, acceptance of keys from Tenant, or any

other action or omission by Landlord shall be construed as an election by

Landlord to terminate this Lease or Tenant's right to possession, or accept a

surrender of the Premises, nor shall the same operate to release

 

                                       23

 

<PAGE>

 

Tenant in whole or in part from any of Tenant's obligations hereunder, unless

express written notice of such intention is sent by Landlord or its agent to

Tenant. To the fullest extent permitted by Law, all rent and other consideration

paid by any Replacement Tenants shall be applied: first, to the Costs of

Re-Letting, second, to the payment of any Rent theretofore accrued, and the

residue, if any, shall be held by Landlord and applied to the payment of other

obligations of Tenant to Landlord as the same become due (with any remaining

residue, after full discharge of Tenant's obligations, to be retained by

Landlord). Rent shall be paid without any prior demand or notice therefor

(except as expressly provided herein) and without any deduction, set-off or

counterclaim, or relief from any valuation or appraisement laws. Landlord may

apply payments received from Tenant to any obligations of Tenant then accrued,

without regard to such obligations as may be designated by Tenant. Landlord

shall be under no obligation to observe or perform any provision of this Lease

on its part to be observed or performed which accrues after the date of any

Default by Tenant hereunder not cured within the times permitted hereunder. The

times set forth herein for the curing of Defaults by Tenant are of the essence

of this Lease. Tenant hereby irrevocably waives any right otherwise available

under any Law to redeem or reinstate this Lease.

 

                                   ARTICLE 24

 

                            LANDLORD'S RIGHT TO CURE

 

      If Landlord shall fail to perform any term or provision under this Lease

required to be performed by Landlord, Landlord shall not be deemed to be in

default hereunder nor subject to any claims for damages of any kind, unless such

failure shall have continued for a period of thirty (30) days after written

notice thereof by Tenant; provided, if the nature of Landlord's failure is such

that more than thirty (30) days are reasonably required in order to cure,

Landlord shall not be in default if Landlord commences to cure such failure

within such thirty (30) day period, and thereafter diligently and continuously

pursues such cure to completion. The aforementioned periods of time permitted

for Landlord to cure shall be extended for any period of time during which

Landlord is delayed in, or prevented from, curing due to fire or other casualty,

strikes, lock-outs or other labor troubles, shortages of equipment or materials,

governmental requirements, power shortages or outages, acts or omissions by

Tenant or other Persons not under the control of Landlord, and other causes

beyond Landlord's reasonable control. If Landlord shall fail to cure within the

times permitted for cure herein, Landlord shall be subject to such remedies as

may be available to Tenant (subject to the other provisions of this Lease);

provided, in recognition that Landlord must receive timely payments of Rent and

operate the Property, Tenant shall have no right to withhold, set-off, or abate

Rent based solely upon Landlord's failure to cure.

 

                                   ARTICLE 25

 

                     CAPTIONS, DEFINITIONS AND SEVERABILITY

 

      The captions of the Articles and Paragraphs of this Lease are for

convenience of reference only and shall not be considered or referred to in

resolving questions of interpretation. If any term or provision of this Lease

shall be found invalid, void, illegal, or unenforceable with respect to any

particular Person by a court of competent jurisdiction, it

 

                                       24

 

<PAGE>

 

shall not affect, impair or invalidate any other terms or provisions hereof, or

its enforceability with respect to any other Person, the parties hereto agreeing

that they would have entered into the remaining portion of this Lease

notwithstanding the omission of the portion or portions adjudged invalid, void,

illegal, or unenforceable with respect to such Person.

 

      (A) "Building" shall mean the structure identified in Article I of this

Lease.

 

      (B) Intentionally omitted.

 

      (C) "Default Rate" shall mean twelve percent (12%) per annum, or the

highest rate permitted by applicable Law, whichever shall be less.

 

      (D) "Holder" shall mean the holder of any Mortgage at the time in

question, and where such Mortgage is a ground lease, such term shall refer to

the ground lessor.

 

      (E) "Holidays" shall mean all federally observed holidays, including New

Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,

Christmas Day, and such other holidays as are from time to time determined by

Landlord to be generally applicable to the Property, consistent with other

similarly situated office buildings in downtown Minneapolis.

 

      (F) "Landlord" and "Tenant" shall be applicable to one or more Persons as

the case may be, and the singular shall include the plural, and the neuter shall

include the masculine and feminine; and if there be more than one, the

obligations thereof shall be joint and several. For purposes any provisions

indemnifying or limiting the liability of Landlord, the term "Landlord" shall

include Landlord's present and future partners, beneficiaries, trustees,

officers, directors, employees, shareholders, principals, agents, affiliates,

successors and assigns.

 

      (G) "Law" shall mean all federal, state, county and local governmental and

municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders

and other such requirements, applicable equitable remedies and decisions by

courts in cases where such decisions are considered binding precedents in the

state in which the Property is located, and decisions of federal courts applying

the Laws of such State.

 

      (H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases and

other such encumbrances now or hereafter placed upon the Property or Building,

or any part thereof, and all renewals, modifications, consolidations,

replacements or extensions thereof, and all indebtedness now or hereafter

secured thereby and all interest thereon.

 

      (I) "Operating Expenses" shall mean all expenses, costs and amounts (other

than Taxes) of every kind and nature which Landlord shall pay during any

calendar year any portion of which occurs during the Term, because of or in

connection with the ownership, management, repair, maintenance, restoration and

operation of the Property, including without limitation, any amounts paid for:

(a) utilities for the Property, including but not limited to electricity, power,

gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning

and ventilating, (b) permits, licenses and certificates necessary to operate,

manage and lease

 

                                       25

 

<PAGE>

 

the Property, (c) insurance applicable to the Property, not limited to the

amount of coverage Landlord is required to provide under this Lease, (d)

supplies, tools, equipment and materials used in the operation, repair and

maintenance of the Property, (e) accounting, legal, inspection, consulting,

concierge and other services, (f) any equipment rental (or installment equipment

purchase or equipment financing agreements), or management agreements (including

the cost of any management fee actually paid thereunder and the fair rental

value of any office space provided thereunder, up to customary and reasonable

amounts), (g) wages, salaries and other compensation and benefits (including the

fair value of any parking privileges provided) for all persons engaged in the

operation, maintenance or security of the Property, and employer's Social

Security taxes, unemployment taxes or insurance, and any other taxes which may

be levied on such wages, salaries, compensation and benefits, (h) payments under

any easement, operating agreement, declaration, restrictive covenant, or

instrument pertaining to the sharing of costs in any planned development, and

(i) operation, repair, and maintenance of all Systems and Equipment and

components thereof (including replacement of components), janitorial service,

alarm and security service, window cleaning, trash removal, elevator

maintenance, cleaning of walks, parking facilities and building walls, removal

of ice and snow, replacement of wall and floor coverings, ceiling tiles and

fixtures in lobbies, corridors, restrooms and other common or public areas or

facilities, maintenance and replacement of shrubs, trees, grass, sod and other

landscaped items, irrigation systems, drainage facilities, fences, curbs, and

walkways, re-paving and re-striping parking facilities, and roof repairs. If the

Property is not fully occupied during all or a portion of any calendar year,

Landlord may, in accordance with sound accounting and management practices,

determine the amount of variable Operating Expenses (i.e., those items which

vary according to occupancy levels) that would have been paid had the Property

been fully occupied, and the amount so determined shall be deemed to have been

the amount of variable Operating Expenses for such year. Notwithstanding the

foregoing, Operating Expenses shall not, however, include:

 

            (i)    depreciation, interest and amortization on Mortgages, and

                  other debt costs or ground lease payments, if any; legal fees

                  in connection with leasing, tenant disputes or enforcement of

                   leases; real estate brokers' leasing commissions; improvements

                  or alterations to tenant spaces; the cost of providing any

                  service directly to and paid directly by, any tenant; any

                  costs expressly excluded from Operating Expenses elsewhere in

                  this Lease; costs of any items to the extent Landlord receives

                  reimbursement from insurance proceeds or from a third party

                  (such proceeds to be deducted from Operating Expenses in the

                  year in which received);

 

            (ii)   capital expenditures, except those: (a) made primarily to

                  reduce Operating Expenses, or to comply with any Laws or other

                  governmental requirements, or (b) for replacements (as opposed

                  to additions or new improvements) of non-structural items

                  located in the common areas of the Property required to keep

                  such areas in good condition; provided, all such permitted

                  capital expenditures (together with reasonable financing

                  charges) shall be amortized for purposes of this Lease over

                  the shorter of: (i) their useful lives, or (ii) the period

                  during which the reasonably estimated savings in Operating

                  Expenses equals the expenditures, and

 

                                       26

 

<PAGE>

 

            (iii) the cost of marketing tenant spaces, costs incurred by

                  Landlord in preparing rentable space for occupancy, payments

                  of principal, penalties, fees or other charges (as well as

                  interest) on any mortgages or other encumbrances on the

                  Property or rent under any ground lease, wages, salaries or

                  other compensation paid to any executive employee of Landlord

                  or the property manager ranking above the on-site property

                  manager, any cost or expense representing an amount paid for

                  products or services to a person or entity related to or

                  affiliated with Landlord which is in excess of the fair market

                  value of such services and products, all costs resulting from

                  the delivery to other tenants of the Building of services

                  substantially greater in quantity or higher in quality than

                  those delivered to Tenant, any bad debt expense or bad debt

                   reserve or costs of correcting defects in the initial design

                  or construction of the Building. The management fee payable

                  shall not exceed 3% of the Building's gross rentals. Any

                  refunds or rebates on account of insurance paid during the

                  Term, for which Tenant paid Team's Prorata Share for same,

                  shall be credited to Tenant's obligation for the payment of

                  Operating Expenses, notwithstanding the time limits set forth

                  in Article 3(F).

 

      (J) "Person" shall mean an individual, trust, partnership, joint venture,

association, corporation, and any other entity.

 

      (K) "Property" shall mean the Building, and any common or public areas or

facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways,

landscaped areas, skywalks, parking garages and lots, and any and all other

structures or facilities operated or maintained in connection with or for the

benefit of the Building, and all parcels or tracts of land on which all or any

portion of the Building or any of the other foregoing items are located, and any

fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture and

other personal property located thereon or therein and used in connection

therewith, whether title is held by Landlord or its affiliates. Possession of

areas necessary for utilities, services, safety and operation of the Property,

including the Systems and Equipment (as defined in Article 25), fire stairways,

perimeter walls, space between the finished ceiling of the Premises and the slab

of the floor or roof of the Property there above, and the use thereof together

with the right to install, maintain, operate, repair and replace the Systems and

Equipment, including any of the same in, through, under or above the Premises in

locations that will not materially interfere with Tenant's use of the Premises,

are hereby excepted and reserved by Landlord, and not demised to Tenant. If the

Building shall be part of a complex, development or group of buildings or

structures collectively owned or managed by Landlord or its affiliates or

collectively managed by Landlord's managing agent, the Property shall, at

Landlord's option also be deemed to include such other of those buildings or

structures as Landlord shall from time to time designate, and shall initially

include such buildings and structures (and related facilities and parcels on

which the same are located) as Landlord shall have incorporated by reference to

the total square footage of the Property in Article 1. However, no inclusion of

other such buildings and structures (and related facilities and parcels on which

the same are located) within the definition of Property (and the allocation of

the costs of such other properties hereunder) shall increase the amount payable

by Tenant hereunder for Taxes or Operating Expenses.

 

                                       27

 

<PAGE>

 

      (L) "Rent" shall have the meaning specified therefor in Article 3(G).

 

      (M) "Systems and Equipment" shall mean any plant, machinery, transformers,

duct work, cable, wires, and other equipment, facilities, and systems designed

to supply heat, ventilation, air conditioning and humidity or any other services

or utilities, or comprising or serving as any component or portion of the

electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or

fire/life/safety systems or equipment, or any other mechanical, electrical,

electronic, computer or other systems or equipment for the Property.

 

      (N) "Taxes" shall mean all federal, state, county, or local governmental

or municipal taxes, fees, charges or other impositions of every kind and nature,

whether general, special, ordinary or extraordinary (including without

limitation, real estate taxes, general and special assessments, transit taxes,

water and sewer rents, taxes based upon the receipt of rent including gross

receipts or sales taxes applicable to the receipt of rent or service or value

added taxes (unless required to be paid by Tenant under Article 17), personal

property taxes imposed upon the fixtures, machinery, equipment, apparatus,

Systems and Equipment, appurtenances, furniture and other personal property used

in connection with the Property which Landlord shall pay during any calendar

year, any portion of which occurs during the Term (without regard to any

different fiscal year used by such government or municipal authority) because of

or in connection with the ownership, leasing and operation of the Property.

Notwithstanding the foregoing, there shall be excluded from Taxes all excess

profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and

succession taxes, estate taxes, federal and state income taxes, and other taxes

to the extent applicable to Landlord's general or net income (as opposed to

rents, receipts or income attributable to operations at the Property). If the

method of taxation of real estate prevailing at the time of execution hereof

shall be, or has been altered, so as to cause the whole or any part of the taxes

now, hereafter or heretofore levied, assessed or imposed on real estate to be

levied, assessed or imposed on Landlord, wholly or partially, as a capital levy

or otherwise, or on or measured by the rents received therefrom, then such new

or altered taxes attributable to the Property shall be included within the term

"Taxes," except that the same shall not include any enhancement of said tax

attributable to other income of Landlord. Any expenses incurred by Landlord in

attempting to protest, reduce or minimize Taxes shall be included in Taxes in

the calendar year such expenses are paid. Tax refunds shall be deducted from

Taxes in the year they are received by Landlord, but if such refund shall relate

to taxes paid in a prior year of the Term, and the Lease shall have expired,

Landlord shall mail Tenant's Prorata Share of such net refund (after deducting

expenses and reasonable attorneys' fees), to Tenant's last known address. If

Taxes to which such refund applied for any period during the Term or any

extension thereof, shall be increased after payment thereof by Landlord, for any

reason including without limitation or reassessment by applicable governmental

or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Prorata

Share of such increased Taxes. Tenant shall pay increased Taxes whether Taxes

are increased as a result of increases in the assessment or valuation of the

Property (whether based on a sale, change in ownership or refinancing of the

Property or otherwise), increases in the tax rates, reduction or elimination of

any rollbacks or other deductions available under currant law, scheduled

reductions of any tax abatement, as a result of the elimination, invalidity or

withdrawal of any tax abatement, or for any other cause whatsoever.

Notwithstanding the foregoing, if any Taxes shall be paid based on assessments

or bills by a governmental or municipal authority using a fiscal year other than

a calendar year, Landlord may elect to

 

                                        28

 

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average the assessments or bills for the subject calendar year, based on the

number of months of such calendar year included in each such assessment or bill.

Tenant's contribution to expenses and reasonable attorneys' fees associated with

a contest as to the Taxes shall be equal to Tenant's Prorata Share applied to

the total of such expenses and fees.

 

      (O) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be the

rentable area of the Premises divided by the rentable area of the Property,

excluding any parking facilities. Tenant acknowledges that the "rentable area of

the Premises" under this Lease includes the usable area, without deduction for

columns or projections, multiplied by a load or conversion factor, to reflect a

share of certain areas, which may include lobbies, corridors, mechanical,

utility, janitorial, boiler and service rooms and closets, restrooms, and other

public, common and service areas. Except as provided expressly to the contrary

herein, the "rentable area of the Property" shall include all rentable area of

all space leased or available for lease at the Property, which Landlord may

reasonably re-determine from time to time, to reflect re-configurations,

additions or modifications to the Property. If the Property or any development

of which it is a part, shall contain non-office uses, Landlord shall have the

right to determine in accordance with sound accounting and management

principles, Tenant's Prorata Share of Taxes and Operating Expenses for only the

office portion of the Property or of such development, in which event, Tenant's

Prorata Share shall be based on the ratio of the rentable area of the Premises

to the rentable area of such office portion. Similarly, if the Property shall

contain tenants who do not participate in all or certain categories of Taxes or

Operating Expenses on a prorata basis, Landlord may exclude the amount of Taxes

or Operating Expenses, or such categories of the same, as the case may be,

attributable to such tenants, and exclude the rentable area of their premises,

in computing Tenant's Prorata Share so long as such adjustments do not increase

the amount of Taxes or Operating Expenses otherwise payable by Tenant hereunder

had such tenants participated in all or certain categories of Taxes or Operating

Expenses on a prorata basis. If the Property shall be part of or shall include a

complex, development or group of buildings or structures collectively owned or

managed by Landlord or its affiliates or collectively managed by Landlord's

managing agent, Landlord may allocate Taxes and Operating Expenses within such

complex, development or group, and between such buildings and structures and the

parcels on which they are located, in accordance with sound generally acceptable

accounting and management principles. In the alternative, Landlord shall have

the right to determine, in accordance with sound accounting and management

principles, Tenant's Prorata Share of Taxes and Operating Expenses based upon

the totals of each of the same for all such buildings and structures, the land

constituting parcels on which the same are located, and all related facilities,

including common areas and easements, corridors, lobbies, sidewalks, elevators,

loading areas, parking facilities and driveways and other appurtenances and

public areas, in which event Tenant's Prorata Share shall be based on the ratio

of the rentable area of the Premises to the rentable area of all such buildings.

To the extent that the rentable square footage of the Premises changes during

any calendar year (or other period during which the allocation of Taxes and

Operating Expenses to tenants of the Building occurs), adjustments shall be made

to Tenant's Prorata Share to properly account for the allocation of Taxes and

Operating Expenses based upon the rentable area of the Premises prior to such

change and the rentable area of the Premises thereafter.

 

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                                   ARTICLE 26

 

                       CONVEYANCE BY LANDLORD AND LIABILITY

 

      In case Landlord or any successor owner of the Property or the Building

shall convey or otherwise dispose of any portion thereof in which the Premises

are located, to another Person (and nothing herein shall be construed to

restrict or prevent such conveyance or disposition), such other Person shall

thereupon be and become landlord hereunder and shall be deemed to have fully

assumed and be liable for all obligations of this Lease to be performed by

Landlord which first arise after the date of conveyance, including the return of

any Security Deposit, and Tenant shall attorn to such other Person, and Landlord

or such successor owner shall, from and after the date of conveyance, be free of

all liabilities and obligations hereunder not then incurred. The liability of

Landlord to Tenant for any default by Landlord under this Lease or arising in

connection herewith or with Landlord's operation, management, leasing, repair,

renovation, alteration, or any other matter relating to the Property or the

Premises, shall be limited to the interest of Landlord in the Property (and the

rental proceeds thereof). Tenant agrees to look solely to Landlord's interest in

the Property (and the rental proceeds thereof) for the recovery of any judgment

against Landlord, and Landlord shall not be personally liable for any such

judgment or deficiency after execution thereon. The limitations of liability

contained in this Article shall apply equally and inure to the benefit of

Landlord's present and future partners, beneficiaries, officers, directors,

trustees, shareholders, agents and employees, and their respective partners,

heirs, successors and assigns. Under no circumstances shall any present or

future general or limited partner of Landlord (if Landlord is a partnership), or

trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have

any liability for the performance of Landlord's obligations under this Lease.

Notwithstanding the foregoing to the contrary, Landlord shall have personal

liability for insured claims, beyond Landlord's interest in the Property (and

rental proceeds thereof), to the extent of Landlord's liability insurance

coverage available for such claims.

 

                                   ARTICLE 27

 

                                 INDEMNIFICATION

 

      Except to the extent arising from the intentional or negligent acts of

Landlord or Landlord's agents or employees, Tenant shall defend, indemnify and

hold harmless Landlord from and against any and all claims, demands,

liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,

penalties, costs and expenses, including without limitation, court costs and

reasonable attorneys' fees arising from or relating to any loss of life, damage

or injury to person, property or business occurring in or from the Premises, or

caused by or in connection with any violation of this Lease or use of the

Premises or Property by, or any other act or omission of, Tenant, any other

occupant of the Premises, or any of their respective agents, employees,

contractors or business invitees. Without limiting the generality of the

foregoing, Tenant specifically acknowledges that the indemnity undertaking

herein shall apply to claims in connection with or arising out of any "Work" as

described in Article 8, the installation, maintenance, use or removal of any

"Lines" located in or serving the Premises as described in Article 29, and the

transportation, use, storage, maintenance, generation, manufacturing, handling,

disposal, release or discharge of any "Hazardous Material" as

 

                                       30

 

<PAGE>

 

described in Article 30 (whether or not any of such matters shall have been

theretofore approved by Landlord), except to the extent that any of the same

arises from the intentional or negligent acts of Landlord or Landlord's agents

or employees. Notwithstanding any of the foregoing to the contrary, Tenant shall

not in any way be required to indemnify or hold Landlord harmless against any

damage or injury resulting from any material breach by Landlord of its

obligations under this Lease, or resulting from the negligence or willful

misconduct of Landlord, or its agents, servants, contractors or employees.

Landlord shall defend, indemnify and hold Tenant harmless from and against any

and all claims, demands, liabilities, damages, judgments, orders, decrees,

actions, proceedings, fines, penalties, costs and expenses, including without

limitation, court costs and reasonable attorneys' fees, arising in any way out

of the negligence or intentional acts of Landlord, its agents, servants or

employees, or from Landlord's violation of laws, ordinances, or governmental

orders of any kind or resulting from Landlord's breach of the Lease, which

breach is not cured within the applicable time period provided in the Lease.

 

                                   ARTICLE 28

 

               SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS

 

      The parties acknowledge that safety and security devices, services and

programs provided by Landlord, if any, while intended to deter crime and ensure

safety, may not in given instances prevent theft or other criminal acts, or

ensure safety of persons or property. The risk that any safety or security

device, service or program may not be effective, or may malfunction, or be

circumvented by a criminal, is assumed by Tenant with respect to Tenant's

property and interests, and Tenant shall obtain insurance coverage to the extent

Tenant desires protection against such criminal acts and other losses, as

further described in Article 11. Tenant agrees to cooperate in any reasonable

safety or security program developed by Landlord or required by law. Landlord

will permit the installation by Tenant of additional card key readers to provide

access to the Premises from the elevator lobbies or common corridors and in the

Building fire stairs, which readers may be connected to the Building card key

access system. Tenant shall pay the costs of supplying, installing, maintaining

and connecting such readers to the Building system, but no other charges shall

be imposed upon Tenant with regard to the operation of that system. The Building

will provide a reasonable number of access cards with programming free upon

occupancy. Additional cards or changes will be implemented based upon the

following costs:

 

      (i)    $6.00 to program or delete an existing card;

 

      (ii)   $16.00 for unreturned "lost" cards;

 

      (iii) $6.00 to provide and program a new card; or

 

      (iv)   $22.00 for a replacement card and reprogramming.

 

                                       31

 

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                                   ARTICLE 29

 

                        COMMUNICATIONS AND COMPUTER LINES

 

      Tenant may install, maintain, replace, remove or use any communications or

computer wires, cables and related devices (coll