|
EXHIBIT 10.28
-------------
OFFICE LEASE
RINCON CENTER
BRE/RINCON LEASEHOLD LLC,
a Delaware limited liability company,
as Landlord,
and
SALON MEDIA GROUP, INC.,
a Delaware corporation,
as Tenant.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON
AREAS.....................3
ARTICLE 2 LEASE
TERM........................................................4
ARTICLE 3 BASE
RENT.........................................................4
ARTICLE 4 ADDITIONAL
RENT...................................................4
ARTICLE 5 USE OF
PREMISES..................................................10
ARTICLE 6 SERVICES AND
UTILITIES...........................................10
ARTICLE 7
REPAIRS..........................................................12
ARTICLE 8 ADDITIONS AND
ALTERATIONS........................................12
ARTICLE 9 COVENANT AGAINST
LIENS...........................................14
ARTICLE 10
INSURANCE........................................................14
ARTICLE 11 DAMAGE AND
DESTRUCTION...........................................16
ARTICLE 12
NONWAIVER........................................................17
ARTICLE 13
CONDEMNATION.....................................................18
ARTICLE 14 ASSIGNMENT AND
SUBLETTING........................................18
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF
TRADE
FIXTURES...................................................21
ARTICLE 16 HOLDING
OVER.....................................................22
ARTICLE 17 ESTOPPEL
CERTIFICATES............................................22
ARTICLE 18
SUBORDINATION....................................................22
ARTICLE 19 DEFAULTS;
REMEDIES...............................................23
ARTICLE 20 COVENANT OF QUIET
ENJOYMENT......................................25
ARTICLE 21 SECURITY
DEPOSIT.................................................25
ARTICLE 22 SUBSTITUTION OF OTHER
PREMISES...................................26
ARTICLE 23
SIGNS............................................................26
ARTICLE 24 COMPLIANCE WITH
LAW..............................................26
ARTICLE 25 LATE
CHARGES.....................................................27
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY
TENANT.............27
ARTICLE 27 ENTRY BY
LANDLORD................................................27
ARTICLE 28 TENANT
PARKING...................................................28
ARTICLE 29 MISCELLANEOUS
PROVISIONS.........................................29
EXHIBITS:
A OUTLINE OF PREMISES
B TENANT WORK LETTER
C FORM OF NOTICE OF LEASE
D RULES AND REGULATIONS
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
(i)
<PAGE>
INDEX
-----
Page(s)
-------
Additional
Rent..............................................................5
Alterations.................................................................12
Apartment
Portion............................................................3
Applicable
Laws.............................................................26
Base
Building...............................................................13
Base
Rent....................................................................4
Base
Year....................................................................5
Base Year Prop 13
Taxes......................................................8
Brokers.....................................................................32
Building.....................................................................3
Building Common
Areas........................................................4
Building
Hours..............................................................10
Common
Areas.................................................................3
Control,....................................................................21
Coordinator.................................................................32
Cost
Pools...................................................................8
Direct
Expenses..............................................................5
Estimate.....................................................................9
Estimate
Statement...........................................................9
Estimated
Excess.............................................................9
Excess.......................................................................9
Expense
Year.................................................................5
Force
Majeure...............................................................30
Holidays....................................................................10
HVAC........................................................................10
Landlord.....................................................................1
Landlord
Parties............................................................14
Landlord Repair
Notice......................................................16
Lease........................................................................1
Lease Commencement
Date......................................................4
Lease Expiration
Date........................................................4
Lease
Term...................................................................4
Lease
Year...................................................................4
Lines.......................................................................33
Mail........................................................................31
Notices.....................................................................31
One Rincon Office
Portion....................................................3
One Rincon Retail
Portion....................................................3
On-site Parking
Area.........................................................3
Operating
Expenses...........................................................5
Original
Improvements.......................................................15
Other
Improvements..........................................................34
Postal
Facility..............................................................3
Premises.....................................................................3
Project......................................................................3
Project Common
Areas.........................................................3
Proposition
13...............................................................7
Reassessement................................................................8
Renovations.................................................................32
Rent.........................................................................5
Requesting
Party............................................................22
Security
Deposit............................................................25
Seismic
Upgrades............................................................33
Statement....................................................................9
Subject
Space...............................................................18
Summary......................................................................1
Tax
Expenses.................................................................7
Tenant.......................................................................1
Tenant Personal
Property....................................................22
(ii)
<PAGE>
INDEX
-----
Page(s)
-------
Tenant Work
Letter...........................................................3
Tenant's
Share...............................................................8
TMP.........................................................................32
Transfer....................................................................20
Transfer
Notice.............................................................18
Transfer
Premium............................................................20
Transferee..................................................................18
Transfers...................................................................18
Two Rincon Office
Portion....................................................3
(iii)
<PAGE>
RINCON CENTER
-------------
OFFICE LEASE
------------
This Office Lease (the "LEASE"), dated as of the date set forth
in
Section 1 of the Summary of Basic Lease Information (the
"SUMMARY"), below, is
made by and between BRE/RINCON II LEASEHOLD L.L.C., a Delaware
limited liability
company ("LANDLORD"), and SALON MEDIA GROUP, INC., a Delaware
corporation
("TENANT").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
TERMS OF LEASE DESCRIPTION
-------------- -----------
1. Date: January 13, 2005
2. Premises
(Article 1).
2.1 Building: One Rincon Center, 101 Spear Street,
San Francisco, California 94105
2.2 Premises: Approximately 8,623 rentable square feet
of space located in Suite 203 on the
second (2nd) floor of the Building, as
further set forth in EXHIBIT A to the
Office Lease.
3. Lease Term
(Article 2).
3.1 Length of Term: Four (4) years.
3.2 Lease Commencement The earlier to occur of (i) the date
Date: upon which Tenant first commences to
conduct business in the Premises and
(ii) the date upon which the Premises
are Ready for Occupancy, which is
anticipated to be March 1, 2005.
3.3 Lease Expiration Date: The date immediately preceding the
4th
anniversary of the Lease Commencement
Date.
4. Base Rent (Article 3):
Annual
Monthly Rental Rate
Annual Installment per Rentable
Lease Year Base Rent of Base Rent Square Foot
---------- --------- ------------ -----------
1* $224,198.00 $18,683.17 $26.00
2 $232,821.00 $19,401.75 $27.00
3 $241,444.00 $20,120.33 $28.00
4 $250,067.00 $20,838.92 $29.00
* Pursuant to the terms of Article 3 of this Lease, Tenant's
obligation to pay
Base Rent shall not commence until four (4) months following the
Lease
Commencement Date.
5. Base Year
(Article 4): Calendar year 2005.
<PAGE>
6. Tenant's Share
(Article 4): Approximately 3.05%.
7. Permitted Use General office use consistent with a
(Article 5): first-class office building.
8. Security Deposit
(Article 21): $98,805.21.
9. Address of Tenant Salon Media Group, Inc.
(Section 29.18): 22 Fourth Street, 11th Floor
San Francisco, California 94103
Attention: Conrad Lowry
(Prior to Lease Commencement Date)
and
One Rincon Center, 101 Spear Street
Suite 203
San Francisco, California 94105
Attention: Conrad Lowry
(After Lease Commencement Date)
10. Address of Landlord Glenborough Realty Trust, Inc.
(Section 29.18): Rincon Center
101 Spear Street
Suite 222
San Francisco, California 94105
Attention: Ken Cornwell, General Manager
with a copy to:
Glenborough Realty Trust, Inc.
400 South El Camino Real
San Mateo, California 94402
Attention: Corporate Counsel
11. Broker(s) McCarthy Cook & Co., LLC
(Section 29.24): 185 Berry Street, Suite 140
San Francisco, California 94107
and
Pacific Union Commercial Brokerage
601 California Street, 2nd Floor
San Francisco, California 94108
2
<PAGE>
ARTICLE 1
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.
1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
hereby
leases from Landlord the premises set forth in Section 2.2 of
the Summary (the
"PREMISES"). The outline of the Premises is set forth in EXHIBIT
A attached
hereto and each floor or floors of the Premises has the number
of rentable
square feet as set forth in Section 2.2 of the Summary. Landlord
and Tenant
hereby stipulate and agree that the rentable area of the
Premises is as set
forth in Section 2.2 of the Summary, and such square footage
shall not be
subject to remeasurement or modification. The parties hereto
agree that the
lease of the Premises is upon and subject to the terms,
covenants and conditions
herein set forth, and Tenant covenants as a material part of the
consideration
for this Lease to keep and perform each and all of such terms,
covenants and
conditions by it to be kept and performed and that this Lease is
made upon the
condition of such performance. The parties hereto hereby
acknowledge that the
purpose of EXHIBIT A is to show the approximate location of the
Premises in the
"Building," as that term is defined in Section 1.1.2, below,
only, and such
Exhibit is not meant to constitute an agreement, representation
or warranty as
to the construction of the Premises, the precise area thereof or
the specific
location of the "Common Areas," as that term is defined in
Section 1.1.3, below,
or the elements thereof or of the accessways to the Premises or
the "Project,"
as that term is defined in Section 1.1.2, below. Except as
specifically set
forth in this Lease and in the Tenant Work Letter attached
hereto as EXHIBIT B
(the "TENANT WORK LETTER"), Landlord shall not be obligated to
provide or pay
for any improvement work or services related to the improvement
of the Premises.
Tenant also acknowledges that neither Landlord nor any agent of
Landlord has
made any representation or warranty regarding the condition of
the Premises, the
Building or the Project or with respect to the suitability of
any of the
foregoing for the conduct of Tenant's business, except as
specifically set forth
in this Lease and the Tenant Work Letter. The taking of
possession of the
Premises by Tenant shall conclusively establish that the
Premises and the
Building were at such time in good and sanitary order, condition
and repair.
1.1.2 THE BUILDING AND THE PROJECT. The Premises are a part of
the
building set forth in Section 2.1 of the Summary (the
"BUILDING"), commonly
known as "ONE RINCON CENTER", which is comprised of retail
stores located on the
first (1st) floor ("ONE RINCON RETAIL PORTION") and offices
located on the
second (2nd) through fifth (5th) floors ("ONE RINCON OFFICE
PORTION"). The
Building is part of an office project known as the "RINCON
CENTER", which also
includes another office building commonly known as "TWO RINCON
CENTER", which is
the office building located at 121 Spear Street, San Francisco,
California,
consisting of (a) five (5) floors of office space for lease to
general office
tenants (the "TWO RINCON OFFICE PORTION"), including all tenant
improvements and
fixtures and other improvements and fixtures thereto, (b) retail
establishments
on the first floor (the "TWO RINCON RETAIL PORTION"), (c) the
United States
Postal Service Facility ("POSTAL FACILITY") located on the
ground floor, and (d)
all portions of Two Rincon Center leased or designated for lease
to tenants for
office use, parking, storage or support facilities. On top of
Two Rincon Center,
but not part of Two Rincon Center for purposes of this Lease,
are seventeen (17)
floors containing residential apartment units (the "APARTMENT
PORTION"). The
term "PROJECT," as used in this Lease, shall mean (i) the
Building and the
Common Areas, as that term is defined in Section 1.1.3, below,
(ii) the land
upon which the Building and the Common Areas are located, (iii)
the parking
structure beneath Two Rincon Center, which services both One
Rincon Center and
Two Rincon Center ("ON-SITE PARKING AREA"), (iv) Two Rincon
Center and the land
upon which Two Rincon Center is located, (v) the Apartment
Portion, and (vi) at
Landlord's discretion, any additional real property, areas,
land, buildings or
other improvements added thereto outside of the Project.
1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to
use
in common with other tenants in the Project, and subject to the
rules and
regulations referred to in Article 5 of this Lease, those
portions of the
Project which are provided, from time to time, for use in common
by Landlord,
Tenant and any other tenants of the Project (such areas,
together with such
other portions of the Project designated by Landlord, in its
discretion,
including certain areas designated for the exclusive use of
certain tenants, or
to be shared by Landlord and certain tenants, are collectively
referred to
herein as the "COMMON AREAS"). The Common Areas shall consist of
the "Project
Common Areas" and the "Building Common Areas." The term "PROJECT
COMMON AREAS,"
as used in this Lease, shall mean the portion of the Project
designated as such
3
<PAGE>
by Landlord. The term "BUILDING COMMON AREAS," as used in this
Lease, shall mean
the portions of the Common Areas located within the Building
designated as such
by Landlord. The manner in which the Common Areas are maintained
and operated
shall be at the sole discretion of Landlord and the use thereof
shall be subject
to such rules, regulations and restrictions as Landlord may make
from time to
time. Landlord reserves the right to close temporarily, make
alterations or
additions to, or change the location of elements of the Project
and the Common
Areas; provided, however, that in connection therewith, Landlord
shall use
commercially reasonable efforts to minimize interference with
Tenant's use of,
and access to, the Premises.
ARTICLE 2
LEASE TERM
The terms and provisions of this Lease shall be effective as of
the
date of this Lease. The term of this Lease (the "LEASE TERM")
shall be as set
forth in Section 3.1 of the Summary, shall commence on the date
set forth in
Section 3.2 of the Summary (the "LEASE COMMENCEMENT DATE"), and
shall terminate
on the date set forth in Section 3.3 of the Summary (the "LEASE
EXPIRATION
DATE") unless this Lease is sooner terminated as hereinafter
provided. For
purposes of this Lease, the term "LEASE YEAR" shall mean each
consecutive twelve
(12) month period during the Lease Term; provided, however, that
the last Lease
Year shall end on the Lease Expiration Date. At any time during
the Lease Term,
Landlord may deliver to Tenant a notice in the form as set forth
in EXHIBIT C,
attached hereto, as a confirmation only of the information set
forth therein,
which Tenant shall execute and return to Landlord within five
(5) business days
of receipt thereof.
ARTICLE 3
BASE RENT
3.1 IN GENERAL. Subject to the terms of Section 3.2, below,
throughout the
Lease Term, Tenant shall pay, without prior notice or demand, to
Landlord or
Landlord's agent at the management office of the Project, or, at
Landlord's
option, at such other place as Landlord may from time to time
designate upon not
less than thirty (30) days prior written notice, by a check for
currency which,
at the time of payment, is legal tender for private or public
debts in the
United States of America, base rent ("BASE RENT") as set forth
in Section 4 of
the Summary, payable in equal monthly installments as set forth
in Section 4 of
the Summary in advance on or before the first day of each and
every calendar
month during the Lease Term, without any setoff or deduction
whatsoever. The
Base Rent for the first full month of the Lease Term shall be
paid at the time
of Tenant's execution of this Lease. If any Rent payment date
(including the
Lease Commencement Date) falls on a day of the month other than
the first day of
such month or if any payment of Rent is for a period which is
shorter than one
month, the Rent for any fractional month shall accrue on a daily
basis for the
period from the date such payment is due to the end of such
calendar month or to
the end of the Lease Term at a rate per day which is equal to
1/365 of the
applicable annual Rent. All other payments or adjustments
required to be made
under the terms of this Lease that require proration on a time
basis shall be
prorated on the same basis.
3.2 FREE RENT. Notwithstanding anything in Section 3.1, above,
to the
contrary, provided that Tenant is not in default of this Lease,
Tenant shall not
be obligated to pay the monthly Base Rent attributable to the
Premises for each
of the first four (4) months of the initial Lease Term,
commencing on the Lease
Commencement Date.
ARTICLE 4
ADDITIONAL RENT
4.1 GENERAL TERMS. In addition to paying the Base Rent specified
in Article
3 of this Lease, Tenant shall pay, commencing after the
expiration of the "Base
Year", "Tenant's Share" of the annual "Direct Expenses," as
those terms are
defined in Sections 4.2.1, 4.2.6 and 4.2.2 of this Lease,
respectively, which
are in excess of the amount of Direct Expenses applicable to the
Base Year;
provided, however, that in no event shall any decrease in Direct
Expenses for
any "Expense Year," as that term is defined in Section 4.2.3
below, below Direct
Expenses for the Base Year entitle Tenant to any decrease in
Base Rent or any
credit against sums due under this Lease. Such payments by
Tenant, together with
any and all other amounts payable by Tenant to
4
<PAGE>
Landlord pursuant to the terms of this Lease, are hereinafter
collectively
referred to as the "ADDITIONAL RENT", and the Base Rent and the
Additional Rent
are herein collectively referred to as "RENT." All amounts due
under this
Article 4 as Additional Rent shall be payable for the same
periods and in the
same manner as the Base Rent. Without limitation on other
obligations of Tenant
which survive the expiration of the Lease Term, the obligations
of Tenant to pay
the Additional Rent provided for in this Article 4 shall survive
the expiration
of the Lease Term.
4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As
used in this
Article 4, the following terms shall have the meanings
hereinafter set forth:
4.2.1 "BASE YEAR" shall mean the period set forth in Section 5
of the
Summary.
4.2.2 "DIRECT EXPENSES" shall mean "Operating Expenses" and
"Tax
Expenses."
4.2.3 "EXPENSE YEAR" shall mean each calendar year in which
any
portion of the Lease Term falls, through and including the
calendar year in
which the Lease Term expires, provided that Landlord, upon
notice to Tenant, may
change the Expense Year from time to time to any other twelve
(12) consecutive
month period, and, in the event of any such change, Tenant's
Share of Direct
Expenses shall be equitably adjusted for any Expense Year
involved in any such
change.
4.2.4 "OPERATING EXPENSES" shall mean all expenses, costs and
amounts
of every kind and nature which Landlord pays or accrues during
any Expense Year
because of or in connection with the ownership, management,
maintenance,
security, repair, replacement, restoration or operation of the
Project, or any
portion thereof. Without limiting the generality of the
foregoing, Operating
Expenses shall specifically include any and all of the
following: (i) the cost
of supplying all utilities, the cost of operating, repairing,
maintaining, and
renovating the utility, telephone, mechanical, sanitary, storm
drainage, and
elevator systems, the cost of maintenance and service contracts
in connection
therewith, and the cost of compliance with any applicable
governmental
ordinances or other requirements relating to the conservation of
utilities; (ii)
the cost of licenses, certificates, permits and inspections and
the cost of
contesting any governmental enactments which may affect
Operating Expenses, to
the extent of the reasonably anticipated cost savings, and the
costs incurred in
connection with a transportation system management program or
similar program;
(iii) the cost of all insurance carried by Landlord in
connection with the
Project; (iv) the cost of landscaping, relamping, and all
supplies, tools,
equipment and materials used in the operation, repair and
maintenance of the
Project, or any portion thereof; (v) costs incurred in
connection with the
parking areas servicing the Building; (vi) fees and other costs,
including
management fees, consulting fees, legal fees and accounting
fees, of all
contractors and consultants in connection with the management,
operation,
maintenance and repair of the Project; (vii) payments under any
equipment rental
agreements and the fair rental value of any management office
space; (viii)
wages, salaries and other compensation and benefits, including
taxes levied
thereon, of all persons engaged in the operation, maintenance
and security of
the Project; (ix) costs under any instrument pertaining to the
sharing of costs
by the Project; (x) operation, repair, maintenance and
replacement of all
systems and equipment and components thereof of the Building;
(xi) the cost of
janitorial, alarm, security and other services, replacement of
wall and floor
coverings, ceiling tiles and fixtures in common areas,
maintenance and
replacement of curbs and walkways, exterior windows and walls,
repair to roofs
and re-roofing, waterproofing and sealing of garage, foundation
and basement
areas; (xii) amortization (including interest on the unamortized
cost) of the
cost of acquiring or the rental expense of personal property
used in the
maintenance, operation and repair of the Project, or any portion
thereof; (xiii)
the cost of capital improvements or other costs incurred in
connection with the
Project (A) which are intended to effect economies in the
operation or
maintenance of the Project, or any portion thereof, (B) that are
required to
comply with present or anticipated conservation programs, (C)
which are
replacements or modifications of nonstructural items located in
the Common Areas
required to keep the Common Areas in good order or condition, or
(D) that are
required under any governmental law or regulation enacted after
the Lease
Commencement Date; provided, however, that any capital
expenditure shall be
amortized with interest over its useful life as Landlord shall
reasonably
determine; (xiv) costs, fees, charges or assessments imposed by,
or resulting
from any mandate imposed on Landlord by, any federal, state or
local government
for fire and police protection, trash removal, community
services, or other
services which do not constitute "Tax Expenses" as that term is
defined in
Section 4.2.5, below; and (xv) payments under any easement,
license, operating
agreement, declaration, restrictive covenant, or instrument
pertaining to the
sharing of costs by
5
<PAGE>
the Building. If Landlord is not furnishing any particular work
or service (the
cost of which, if performed by Landlord, would be included in
Operating
Expenses) to a tenant who has undertaken to perform such work or
service in lieu
of the performance thereof by Landlord, Operating Expenses shall
be deemed to be
increased by an amount equal to the additional Operating
Expenses which would
reasonably have been incurred during such period by Landlord if
it had at its
own expense furnished such work or service to such tenant. If
the Project is not
at least ninety-five percent (95%) occupied during all or a
portion of the Base
Year or any Expense Year, Landlord shall make an appropriate
adjustment to the
components of Operating Expenses for such year to determine the
amount of
Operating Expenses that would have been incurred had the Project
been
ninety-five percent (95%) occupied; and the amount so determined
shall be deemed
to have been the amount of Operating Expenses for such year.
Operating Expenses
for the Base Year shall not include market-wide labor-rate
increases due to
extraordinary circumstances, including, but not limited to,
boycotts and
strikes, and utility rate increases due to extraordinary
circumstances
including, but not limited to, conservation surcharges,
boycotts, embargoes or
other shortages, or amortized costs relating to capital
improvements. In no
event shall the components of Direct Expenses for any Expense
Year related to
utilities, security or insurance costs be less than the
components of Direct
Expenses related to utilities, security or insurance, costs,
respectively, in
the Base Year. Operating Expenses shall not include any of the
following.
(a) costs incurred to comply with laws relating to the removal
of
hazardous material (as defined under applicable law as of the
date hereof) which
was in existence in the Building or on the Project prior to the
Lease
Commencement Date; and costs incurred to remove, remedy,
contain, or treat
hazardous material, which hazardous material is brought into the
Building or
onto the Project after the date hereof by Landlord or any other
tenant of the
Project and at such time is a hazardous material (as defined
under then existing
applicable law);
(b) Interest, principal, points and fees on debts or
amortization on
any mortgage or mortgages or any other debt instrument
encumbering the Project
or any portion thereof;
(c) all items and services for which Tenant or any other tenant
in the
Project reimburses Landlord or which Landlord provides
selectively to one or
more tenants (other than Tenant) without reimbursement;
(d) costs for which the Landlord is reimbursed by any tenant
or
occupant of the Project or by insurance by its carrier or any
tenant's carrier
or by anyone else, and electric power costs for which any tenant
directly
contracts with the local public service company;
(e) except as otherwise specifically provided in this Section
4.2.4,
costs incurred by Landlord in the repairs, capital additions,
alterations or
replacements made or incurred to rectify or correct defects in
design, materials
or workmanship in connection with any portion of the
Building;
(f) costs of capital repairs and alterations, capital
improvements and
equipment except as set forth in items (xii) and (xiii),
above;
(g) except for a Project management fee, overhead and profit
increment
paid to the Landlord or to subsidiaries or affiliates of the
Landlord for
services in the Project to the extent the same exceeds the costs
of such
services rendered by qualified, first-class unaffiliated third
parties on a
competitive basis;
(h) costs (including permit, license and inspection costs)
incurred in
renovating or otherwise improving, decorating or redecorating
rentable space for
other tenants or vacant rentable space;
(i) costs of leasing commissions, attorneys' fees and other
costs and
expenses incurred in connection with negotiations or disputes
with present or
prospective tenants or other occupants of the Building;
(j) costs associated with the operation of the business of
the
partnership or entity which constitutes the Landlord, as the
same are
distinguished from the costs of operation of the Project (which
shall
specifically include, but not be limited to, accounting
costs
associated
6
<PAGE>
with the operation of the Project). Costs associated with the
operation of the
business of the partnership or entity which constitutes the
Landlord include,
without limitation, costs of partnership accounting and legal
matters, costs of
defending any lawsuits with any mortgagee (except as the actions
of the Tenant
may be in issue), costs of selling, syndicating, financing,
mortgaging or
hypothecating any of the Landlord's interest in the Project, and
costs incurred
in connection with any disputes between Landlord and its
employees, between
Landlord and Project management, or between Landlord and other
tenants or
occupants (including, without limitation, lease disputes, lease
enforcement
actions and evictions); or
(k) the wages and benefits of any employee who does not
devote
substantially all of his or her employed time to the Project
unless such wages
and benefits are prorated to reflect time spent on operating and
managing the
Project vis-a-vis time spent on matters unrelated to operating
and managing the
Project; provided, that in no event shall Operating Expenses for
purposes of
this Lease include wages and/or benefits attributable to
personnel above the
level of Project manager;
4.2.5 TAXES.
4.2.5.1 "TAX EXPENSES" 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, leasehold taxes or taxes based upon
the receipt of
rent, including gross receipts or sales taxes applicable to the
receipt of rent,
unless required to be paid by Tenant, personal property taxes
imposed upon the
fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances,
furniture and other personal property used in connection with
the Project, or
any portion thereof), which shall be paid or accrued during any
Expense Year
(without regard to any different fiscal year used by such
governmental or
municipal authority) because of or in connection with the
ownership, leasing and
operation of the Project, or any portion thereof.
4.2.5.2 Tax Expenses shall include, without limitation: (i)
Any
tax on the rent, right to rent or other income from the Project,
or any portion
thereof, or as against the business of leasing the Project, or
any portion
thereof; (ii) Any assessment, tax, fee, levy or charge in
addition to, or in
substitution, partially or totally, of any assessment, tax, fee,
levy or charge
previously included within the definition of real property tax,
it being
acknowledged by Tenant and Landlord that Proposition 13 was
adopted by the
voters of the State of California in the June 1978 election
("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges may be
imposed by
governmental agencies for such services as fire protection,
street, sidewalk and
road maintenance, refuse removal and for other governmental
services formerly
provided without charge to property owners or occupants, and, in
further
recognition of the decrease in the level and quality of
governmental services
and amenities as a result of Proposition 13, Tax Expenses shall
also include any
governmental or private assessments or the Project's
contribution towards a
governmental or private cost-sharing agreement for the purpose
of augmenting or
improving the quality of services and amenities normally
provided by
governmental agencies; (iii) Any assessment, tax, fee, levy, or
charge allocable
to or measured by the area of the Premises or the Rent payable
hereunder,
including, without limitation, any business or gross income tax
or excise tax
with respect to the receipt of such rent, or upon or with
respect to the
possession, leasing, operating, management, maintenance,
alteration, repair, use
or occupancy by Tenant of the Premises, or any portion thereof;
and (iv) Any
assessment, tax, fee, levy or charge, upon this transaction or
any document to
which Tenant is a party, creating or transferring an interest or
an estate in
the Premises.
4.2.5.3 Any costs and expenses (including, without
limitation,
reasonable attorneys' fees) incurred in attempting to protest,
reduce or
minimize Tax Expenses, to the extent of the reasonably
anticipated cost savings,
shall be included in Tax Expenses in the Expense Year such
expenses are paid. If
Tax Expenses for any period during the Lease Term or any
extension thereof are
increased after payment thereof for any reason, including,
without limitation,
error or reassessment by applicable governmental or municipal
authorities,
Tenant shall pay Landlord upon demand Tenant's Share of any such
increased Tax
Expenses included by Landlord as Building Tax Expenses pursuant
to the terms of
this Lease. Notwithstanding anything to the contrary contained
in this Section
4.2.5 (except as set forth in Section 4.2.5.1, above), there
shall be excluded
from Tax Expenses (i) all excess profits taxes, franchise taxes,
gift taxes,
capital stock taxes, inheritance and succession taxes, estate
taxes, federal and
state
7
<PAGE>
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 Project), (ii) any items included as Operating Expenses,
(iii) any
interest or penalties incurred as a result of Landlord's failure
to pay Tax
Expenses when due; and (iv) any items paid by Tenant under
Section 4.5 of this
Lease.
4.2.5.4 Notwithstanding anything to the contrary set forth
in
this Lease, the amount of Tax Expenses for the Base Year and any
Expense Year
shall be calculated without taking into account any decreases in
real estate
taxes obtained in connection with Proposition 8, and, therefore,
the Tax
Expenses in the Base Year and/or an Expense Year may be greater
than those
actually incurred by Landlord, but shall, nonetheless, be the
Tax Expenses due
under this Lease; provided that (i) any costs and expenses
incurred by Landlord
in securing any Proposition 8 reduction shall not be deducted
from Tax Expenses
nor included in Direct Expenses for purposes of this Lease, and
(ii) tax refunds
under Proposition 8 shall not be deducted from Tax Expenses nor
refunded to
Tenant, but rather shall be the sole property of Landlord.
Landlord and Tenant
acknowledge that the preceding sentence is not intended to in
any way affect (A)
the inclusion in Tax Expenses of the statutory two percent
(2.0%) annual
increase in Tax Expenses (as such statutory increase may be
modified by
subsequent legislation), or (B) the inclusion or exclusion of
Tax Expenses
pursuant to the terms of Proposition 13. Notwithstanding the
foregoing, upon a
reassessment of the Building and/or Project pursuant to the
terms of Proposition
13 (a "REASSESSEMENT") occurring after the Base Year which
results in a decrease
in Tax Expenses, the component of Tax Expenses for the Base Year
which is
attributable to the assessed value of the Building and/or
Project under
Proposition 13 prior to the Reassessment (without taking into
account any
Proposition 8 reductions) (the "BASE YEAR PROP 13 TAXES") shall
be reduced, if
at all, for the purposes of comparison to all subsequent Expense
Years
(commencing with the Expense Year in which the Reassessment
takes place) to an
amount equal to the real estate taxes based upon such
Reassessment, and if
thereafter, in connection with a subsequent Reassessment, the
assessed value of
the Building and/or Project under Proposition 13 shall increase,
the current
Base Year Prop 13 Taxes shall be increased for purposes of
comparison to all
subsequent Expense Years (commencing with the Expense Year in
which the
Reassessment takes place) to an amount equal to the lesser of
the original Base
Year Prop 13 Taxes and an amount equal to the real estate taxes
based upon such
Reassessment.
4.2.6 "Tenant's Share" shall mean the percentage set forth in
Section
6 of the Summary, and is based on the ratio of the square
footage of the
Premises to the total square footage of the One Rincon Office
Portion.
4.3 ALLOCATION OF DIRECT EXPENSES.
4.3.1 The parties acknowledge that the Building is a part of
a
multi-building project and that the costs and expenses incurred
in connection
with the Project (i.e. the Direct Expenses) are an aggregate of
the Building and
the other buildings in the Project. In accordance with the terms
of this Section
4.3, Landlord shall allocate the operating and tax costs for the
Project among
the "Cost Pools," as that term is defined below. The "COST
POOLS" shall be: (i)
the Apartment Portion, (ii) the Two Rincon Office Portion, (iii)
the Two Rincon
Retail Portion (iv) the One Rincon Office Portion, (v) the One
Rincon Retail
Portion, and (vi) the On-site Parking Area. To the extent
operating or tax costs
are directly and solely attributable to a specific Cost Pool,
such operating or
tax costs will be charged directly to such Cost Pool based upon
an equitable
comparison of relative square footage or as otherwise determined
by Landlord, in
Landlord's sole discretion. To the extent operating or tax costs
are
attributable and allocable to two or more Cost Pools, such
Operating Expense
will be prorated on an equitable basis amongst such Cost Pools,
and therefore,
only operating or tax costs attributable to the One Rincon
Office Portion shall
be part of Operating Expenses or Tax Expenses. To the extent
operating or tax
costs are common to all Cost Pools, such Operating Expense will
be allocated
among the Cost Pools in accordance with the following
percentages: (a) Apartment
Portion - 26.492%, (b) Two Rincon Office Portion - 28.176%, (c)
Two Rincon
Retail Portion - 3.520%, (d) One Rincon Office Portion -
30.412%, (e) One Rincon
Retail Portion - 8.899%, and (f) On-site Parking Area -
2.501%.
4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. If for any
Expense Year
ending or commencing within the Lease Term, Tenant's Share of
Direct Expenses
for such Expense Year exceeds Tenant's Share of Direct Expenses
applicable to
the Base Year, then Tenant shall
8
<PAGE>
pay to Landlord, in the manner set forth in Section 4.4.1,
below, and as
Additional Rent, an amount equal to the excess (the
"EXCESS").
4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY
TENANT.
Landlord shall give to Tenant following the end of each Expense
Year, a
statement (the "STATEMENT") which shall state the Direct
Expenses incurred or
accrued for such preceding Expense Year, and which shall
indicate the amount of
the Excess. Upon receipt of the Statement for each Expense Year
commencing or
ending during the Lease Term, if an Excess is present, Tenant
shall pay, with
its next installment of Base Rent due, the full amount of the
Excess for such
Expense Year, less the amounts, if any, paid during such Expense
Year as
"Estimated Excess," as that term is defined in Section 4.4.2,
below. The failure
of Landlord to timely furnish the Statement for any Expense Year
shall not
prejudice Landlord or Tenant from enforcing its rights under
this Article 4.
Even though the Lease Term has expired and Tenant has vacated
the Premises, when
the final determination is made of Tenant's Share of Direct
Expenses for the
Expense Year in which this Lease terminates, if an Excess if
present, Tenant
shall immediately pay to Landlord such amount. The provisions of
this Section
4.4.1 shall survive the expiration or earlier termination of the
Lease Term.
4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition,
Landlord
shall give Tenant a yearly expense estimate statement (the
"ESTIMATE STATEMENT")
which shall set forth Landlord's reasonable estimate (the
"ESTIMATE") of what
the total amount of Direct Expenses for the then-current Expense
Year shall be
and the estimated excess (the "ESTIMATED EXCESS") as calculated
by comparing the
Direct Expenses for such Expense Year, which shall be based upon
the Estimate,
to the amount of Direct Expenses for the Base Year. The failure
of Landlord to
timely furnish the Estimate Statement for any Expense Year shall
not preclude
Landlord from enforcing its rights to collect any Estimated
Excess under this
Article 4, nor shall Landlord be prohibited from revising any
Estimate Statement
or Estimated Excess theretofore delivered to the extent
necessary. Thereafter,
Tenant shall pay, with its next installment of Base Rent due, a
fraction of the
Estimated Excess for the then-current Expense Year (reduced by
any amounts paid
pursuant to the next to last sentence of this Section 4.4.2).
Such fraction
shall have as its numerator the number of months which have
elapsed in such
current Expense Year, including the month of such payment, and
twelve (12) as
its denominator. Until a new Estimate Statement is furnished
(which Landlord
shall have the right to deliver to Tenant at any time), Tenant
shall pay
monthly, with the monthly Base Rent installments, an amount
equal to one-twelfth
(1/12) of the total Estimated Excess set forth in the previous
Estimate
Statement delivered by Landlord to Tenant.
4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY
RESPONSIBLE.
4.5.1 Tenant shall be liable for and shall pay ten (10) days
before
delinquency, taxes levied against Tenant's equipment, furniture,
fixtures and
any other personal property located in or about the Premises. If
any such taxes
on Tenant's equipment, furniture, fixtures and any other
personal property are
levied against Landlord or Landlord's property or if the
assessed value of
Landlord's property is increased by the inclusion therein of a
value placed upon
such equipment, furniture, fixtures or any other personal
property and if
Landlord pays the taxes based upon such increased assessment,
which Landlord
shall have the right to do regardless of the validity thereof
but only under
proper protest if requested by Tenant, Tenant shall upon demand
repay to
Landlord the taxes so levied against Landlord or the proportion
of such taxes
resulting from such increase in the assessment, as the case may
be.
4.5.2 If the tenant improvements in the Premises, whether
installed
and/or paid for by Landlord or Tenant and whether or not affixed
to the real
property so as to become a part thereof, are assessed for real
property tax
purposes at a valuation higher than the valuation at which
tenant improvements
conforming to Landlord's "building standard" in other space in
the Building are
assessed, then the Tax Expenses levied against Landlord or the
property by
reason of such excess assessed valuation shall be deemed to be
taxes levied
against personal property of Tenant and shall be governed by the
provisions of
Section 4.5.1, above.
4.5.3 Notwithstanding any contrary provision herein, Tenant
shall pay
prior to delinquency any (i) rent tax or sales tax, gross
receipts tax, service
tax, transfer tax or value added tax, or any other applicable
tax on the rent or
services herein or otherwise respecting this Lease, (ii) taxes
assessed upon or
with respect to the possession, leasing, operation, management,
maintenance,
alteration, repair, use or occupancy by Tenant of the Premises
or any portion of
the
9
<PAGE>
Project, including the Project parking facility; or (iii) taxes
assessed upon
this transaction or any document to which Tenant is a party
creating or
transferring an interest or an estate in the Premises.
ARTICLE 5
USE OF PREMISES
5.1 PERMITTED USE. Tenant shall use the Premises solely for the
Permitted
Use set forth in Section 7 of the Summary and Tenant shall not
use or permit the
Premises or the Project to be used for any other purpose or
purposes whatsoever
without the prior written consent of Landlord, which may be
withheld in
Landlord's sole discretion.
5.2 PROHIBITED USES. The uses prohibited under this Lease shall
include,
without limitation, use of the Premises or a portion thereof for
(i) offices of
any agency or bureau of the United States or any state or
political subdivision
thereof; (ii) offices or agencies of any foreign governmental or
political
subdivision thereof; (iii) offices of any health care
professionals or service
organization; (iv) schools or other training facilities which
are not ancillary
to corporate, executive or professional office use; (v) retail
or restaurant
uses; or (vi) radio and/or television stations. Tenant shall not
allow occupancy
density of use of the Premises which is greater than one person
for each 150
square feet of the Premises. Tenant further covenants and agrees
that Tenant
shall not use, or suffer or permit any person or persons to use,
the Premises or
any part thereof for any use or purpose contrary to the
provisions of the Rules
and Regulations set forth in EXHIBIT D, attached hereto, or in
violation of the
laws of the United States of America, the State of California,
or the
ordinances, regulations or requirements of the local municipal
or county
governing body or other lawful authorities having jurisdiction
over the Project)
including, without limitation, any such laws, ordinances,
regulations or
requirements relating to hazardous materials or substances, as
those terms are
defined by applicable laws now or hereafter in effect. Tenant
shall not do or
permit anything to be done in or about the Premises which will
in any way damage
the reputation of the Project or obstruct or interfere with the
rights of other
tenants or occupants of the Building, or injure or annoy them or
use or allow
the Premises to be used for any improper, unlawful or
objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or
about the
Premises. Tenant shall comply with all recorded covenants,
conditions, and
restrictions now or hereafter affecting the Project.
ARTICLE 6
SERVICES AND UTILITIES
6.1 STANDARD TENANT SERVICES. Landlord shall provide the
following
services on all days (unless otherwise stated below) during the
Lease Term.
6.1.1 Subject to limitations imposed by all governmental
rules,
regulations and guidelines applicable thereto, Landlord shall
provide heating
and air conditioning ("HVAC") when necessary for normal office
use in the
Premises from 8:00 A.M. to 6:00 P.M. Monday through Friday
(collectively, the
"BUILDING HOURS"), except for the date of observation of New
Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and,
at Landlord's discretion, other locally or nationally recognized
holidays
(collectively, the "HOLIDAYS").
6.1.2 Landlord shall provide adequate electrical wiring and
facilities
for connection to Building standard ceiling mounted lighting
fixtures and
incidental use equipment, provided that Tenant's consumption of
electricity does
not exceed 1 kilowatt/hour per usable square foot of the
Premises per month,
which electrical usage shall be subject to applicable laws and
regulations,
including Title 24. Tenant will design Tenant's electrical
system serving any
equipment producing nonlinear electrical loads to accommodate
such nonlinear
electrical loads, including, but not limited to, oversizing
neutral conductors,
derating transformers and/or providing power-line filters.
Engineering plans
shall include a calculation of Tenant's fully connected
electrical design load
with and without demand factors and shall indicate the number of
watts of
unmetered and submetered loads. Tenant shall bear the cost of
replacement of
lamps, starters and ballasts for non-Building standard lighting
fixtures within
the Premises.
10
<PAGE>
6.1.3 Landlord shall provide city water from the regular
Building
outlets for drinking, lavatory and toilet purposes in the
Building Common Areas.
6.1.4 Landlord shall provide janitorial services to the
Premises,
except the date of observation of the Holidays, in and about the
Premises and
window washing services in a manner consistent with other
comparable buildings
in the vicinity of the Building.
6.1.5 Landlord shall provide nonexclusive, non-attended
automatic
passenger elevator service during the Building Hours, shall have
one elevator
available at all other times.
6.1.6 Landlord shall provide nonexclusive freight elevator
service
subject to scheduling by Landlord.
6.1.7 Landlord shall provide city water from the regular
Building
outlets for drinking, lavatory and toilet purposes in the
Premises.
Tenant shall cooperate fully with Landlord at all times and
abide by all
regulations and requirements that Landlord may reasonably
prescribe for the
proper functioning and protection of the HVAC, electrical,
mechanical and
plumbing systems.
6.2 OVERSTANDARD TENANT USE. Tenant shall not, without
Landlord's prior
written consent, use heat-generating machines, machines other
than normal
fractional horsepower office machines, or equipment or lighting
other than
Building standard lights in the Premises, which may affect the
temperature
otherwise maintained by the air conditioning system or increase
the water
normally furnished for the Premises by Landlord pursuant to the
terms of Section
6.1 of this Lease. If such consent is given, Landlord shall have
the right to
install supplementary air conditioning units or other facilities
in the
Premises, including supplementary or additional metering
devices, and the cost
thereof, including the cost of installation, operation and
maintenance,
increased wear and tear on existing equipment and other similar
charges, shall
be paid by Tenant to Landlord upon billing by Landlord. If
Tenant uses water,
electricity, heat or air conditioning in excess of that supplied
by Landlord
pursuant to Section 6.1 of this Lease, Tenant shall pay to
Landlord, upon
billing, the cost of such excess consumption, the cost of the
installation,
operation, and maintenance of equipment which is installed in
order to supply
such excess consumption, and the cost of the increased wear and
tear on existing
equipment caused by such excess consumption; and Landlord may
install devices to
separately meter any increased use and in such event Tenant
shall pay the
increased cost directly to Landlord, on demand, at the rates
charged by the
public utility company furnishing the same, including the cost
of such
additional metering devices. Tenant's use of electricity shall
never exceed the
capacity of the feeders to the Project or the risers or wiring
installation. If
Tenant desires to use heat, ventilation or air conditioning
during hours other
than those for which Landlord is obligated to supply such
utilities pursuant to
the terms of Section 6.1 of this Lease, Tenant shall give
Landlord such prior
notice, if any, as Landlord shall from time to time establish as
appropriate, to
the extent such additional utilities can be made available, and
Landlord shall
supply such utilities to Tenant at such hourly cost to Tenant
(which shall be
treated as Additional Rent and which may include an
administrative fee) as
Landlord shall from time to time establish.
6.3 INTERRUPTION OF USE. Tenant agrees that Landlord shall not
be liable
for damages, by abatement of Rent or otherwise, for failure to
furnish or delay
in furnishing any service (including telephone and
telecommunication services),
or for any diminution in the quality or quantity thereof, when
such failure or
delay or diminution is occasioned, in whole or in part, by
compliance with
applicable governmental ordinances or other requirements
relating to
conservation of utilities, breakage, repairs, replacements, or
improvements, by
any strike, lockout or other labor trouble, by inability to
secure electricity,
gas, water, or other fuel at the Building or Project after
reasonable effort to
do so, by any riot or other dangerous condition, emergency,
accident or casualty
whatsoever, by act or default of Tenant or other parties, or by
any other cause;
and such failures or delays or diminution shall never be deemed
to constitute an
eviction or disturbance of Tenant's use and possession of the
Premises or
relieve Tenant from paying Rent or performing any of its
obligations under this
Lease. Furthermore, Landlord shall not be liable under any
circumstances for a
loss of, or injury to, property or for injury to, or
interference with, Tenant's
business, including, without limitation, loss of profits,
however occurring,
through or in connection with or incidental to a failure to
furnish any of the
services or utilities as set forth in this Article 6. Landlord
may comply with
voluntary controls or guidelines promulgated by any governmental
entity relating
to the use or conservation of energy, water, gas,
11
<PAGE>
light or electricity or the reduction of automobile or other
emissions without
creating any liability of Landlord to Tenant under this Lease,
provided that the
Premises are not thereby rendered untenantable.
6.4 ADDITIONAL SERVICES. Landlord shall also have the exclusive
right, but
not the obligation, to provide any additional services which may
be required by
Tenant, including, without limitation, locksmithing,
non-standard lamp
replacement, additional janitorial service, and additional
repairs and
maintenance, provided that Tenant shall pay to Landlord upon
billing, the sum of
all costs to Landlord of such additional services, plus an
administration fee.
Charges for any service for which Tenant is required to pay from
time to time
hereunder, shall be deemed Additional Rent hereunder and shall
be billed on a
monthly basis.
ARTICLE 7
REPAIRS
Tenant shall, at Tenant's own expense, pursuant to the terms of
this Lease,
including without limitation Article 8 hereof, keep the
Premises, including all
improvements, fixtures and furnishings therein, in good order,
repair and
condition at all times during the Lease Term. In addition,
Tenant shall, at
Tenant's own expense, but under the supervision and subject to
the prior
approval of Landlord, and within any reasonable period of time
specified by
Landlord, pursuant to the terms of this Lease, including without
limitation
Article 8 hereof, promptly and adequately repair all damage to
the Premises and
replace or repair all damaged, broken, or worn fixtures and
appurtenances,
except for damage caused by ordinary wear and tear or beyond the
reasonable
control of Tenant; provided however, that, at Landlord's option,
or if Tenant
fails to make such repairs, Landlord may, but need not, make
such repairs and
replacements, and Tenant shall pay Landlord the cost thereof,
including a
percentage of the cost thereof (to be uniformly established for
the Building
and/or the Project) sufficient to reimburse Landlord for all
overhead, general
conditions, fees and other costs or expenses arising from
Landlord's involvement
with such repairs and replacements forthwith upon being billed
for same.
Notwithstanding the foregoing, Landlord shall be responsible for
maintenance,
repairs and replacements to the exterior walls, foundation and
roof of the
Building, the structural portions of the floors of the Building,
and the base
building systems and equipment of the Building. Landlord may,
but shall not be
required to, enter the Premises at all reasonable times, upon
reasonable prior
written notice, except in the event of an emergency, in which
case no notice
shall be required, to make such repairs, alterations,
improvements or additions
to the Premises or to the Project or to any equipment located in
the Project as
Landlord shall desire or deem necessary or as Landlord may be
required to do by
governmental or quasi-governmental authority or court order or
decree. Tenant
hereby waives any and all rights under and benefits of
subsection 1 of Section
1932 and Sections 1941 and 1942 of the California Civil Code or
under any
similar law, statute, or ordinance now or hereafter in
effect.
ARTICLE 8
ADDITIONS AND ALTERATIONS
8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make
any
improvements, alterations, additions or changes to the Premises
or any
mechanical, plumbing or HVAC facilities or systems pertaining to
the Premises
(collectively, the "ALTERATIONS") without first procuring the
prior written
consent of Landlord to such Alterations, which consent shall be
requested by
Tenant not less than thirty (30) days prior to the commencement
thereof, and
which consent shall not be unreasonably withheld by Landlord,
provided it shall
be deemed reasonable for Landlord to withhold its consent to any
Alteration
which adversely affects the structural portions or the systems
or equipment of
the Building or, to the extent the subject Alteration is visible
from the
exterior of the Premises or Building is, based upon Landlord's
reasonable
determination, inconsistent with a first class office building
project. The
construction of the initial improvements to the Premises shall
be governed by
the terms of the Tenant Work Letter and not the terms of this
Article 8.
8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition
of its
consent to any and all Alterations or repairs of the Premises or
about the
Premises, such reasonable requirements as Landlord in its sole
discretion may
deem desirable, including, but not limited to, the requirement
that Tenant
utilize for such purposes only contractors, subcontractors,
materials,
12
<PAGE>
mechanics and materialmen selected by Tenant from a list
provided and approved
by Landlord, the requirement that upon Landlord's request,
Tenant shall, at
Tenant's expense, remove such Alterations upon the expiration or
any early
termination of the Lease Term. If such Alterations will involve
the use of or
disturb hazardous materials or substances existing in the
Premises, Tenant shall
comply with Landlord's rules and regulations concerning such
hazardous materials
or substances. Tenant shall construct such Alterations and
perform such repairs
in a good and workmanlike manner, in conformance with any and
all applicable
federal, state, county or municipal laws, rules and regulations
and pursuant to
a valid building permit, issued by the City of San Francisco,
all in conformance
with Landlord's reasonable construction rules and regulations.
In the event
Tenant performs any Alterations in the Premises which also
require or give rise
to governmentally required changes to the "Base Building," as
that term is
defined below, then Landlord shall, at Tenant's expense, make
such required
changes to the applicable portion of the Base Building. The
"BASE BUILDING"
shall include the structural portions of the Building, and the
public restrooms
and the systems and equipment located in the internal core of
the Building on
the floor or floors on which the Premises are located. In
performing the work of
any such Alterations, Tenant shall have the work performed in
such manner so as
not to obstruct access to the Project or any portion thereof, by
any other
tenant of the Project, and so as not to obstruct the business of
Landlord or
other tenants in the Project. Tenant shall not use (and upon
notice from
Landlord shall cease using) contractors, services, workmen,
labor, materials or
equipment that, in Landlord's reasonable judgment, would disturb
labor harmony
with the workforce or trades engaged in performing other work,
labor or services
in or about the Building or the Common Areas. In addition to
Tenant's
obligations under Article 9 of this Lease, upon completion of
any Alterations,
Tenant agrees to cause a Notice of Completion to be recorded in
the office of
the Recorder of the County of San Francisco in accordance with
Section 3093 of
the Civil Code of the State of California or any successor
statute, and Tenant
shall deliver to the Project management office a reproducible
copy of the "as
built" drawings of the Alterations as well as all permits,
approvals and other
documents issued by any governmental agency in connection with
the Alterations.
8.3 PAYMENT FOR IMPROVEMENTS. If payment is made directly to
contractors,
Tenant shall comply with Landlord's requirements for final lien
releases and
waivers in connection with Tenant's payment for work to
contractors. If Tenant
orders any work directly from Landlord, Tenant shall pay to
Landlord a
percentage of the cost of such work sufficient to compensate
Landlord for all
overhead, general conditions, fees and other costs and expenses
arising from
Landlord's involvement with such work. If Tenant does not order
any work
directly from Landlord, Tenant shall reimburse Landlord for
Landlord's
reasonable, actual, out-of-pocket costs and expenses actually
incurred in
connection with Landlord's review of such work.
8.4 CONSTRUCTION INSURANCE. In addition to the requirements of
Article 10
of this Lease, in the event that Tenant makes any Alterations,
prior to the
commencement of such Alterations, Tenant shall provide Landlord
with evidence
that Tenant carries "Builder's All Risk" insurance in an amount
approved by
Landlord covering the construction of such Alterations, and such
other insurance
as Landlord may reasonably require, it being understood and
agreed that all of
such Alterations shall be insured by Tenant pursuant to Article
10 of this Lease
immediately upon completion thereof. In addition, Landlord may,
in its
discretion, require Tenant to obtain a lien and completion bond
or some
alternate form of security satisfactory to Landlord in an amount
sufficient to
ensure the lien-free completion of such Alterations and naming
Landlord as a
co-obligee.
8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures
and/or
appurtenances which may be installed or placed in or about the
Premises, from
time to time, shall be at the sole cost of Tenant and shall be
and become the
property of Landlord upon the expiration or earlier termination
of this Lease,
except that Tenant may remove any Alterations, improvements
and/or fixtures
which Tenant can substantiate to Landlord have not been paid for
with any Tenant
improvement allowance funds provided to Tenant by Landlord,
provided Tenant
repairs any damage to the Premises and Building caused by such
removal and
returns the affected portion of the Premises to the condition
which existed as
of the Lease Commencement Date, reasonable wear and tear
excluded. Furthermore,
Landlord may, by written notice to Tenant prior to the end of
the Lease Term, or
given following any earlier termination of this Lease, require
Tenant, at
Tenant's expense, to remove any Alterations or improvements in
the Premises, and
to repair any damage to the Premises and Building caused by such
removal and
returns the affected portion of the Premises to the condition
which existed as
of the Lease Commencement Date, reasonable wear and tear
excluded. If Tenant
fails to complete such
13
<PAGE>
removal and/or to repair any damage caused by the removal of any
Alterations or
improvements in the Premises, and return the affected portion of
the Premises to
the condition which existed as of the Lease Commencement Date,
reasonable wear
and tear excluded, Landlord may do so and may charge the cost
thereof to Tenant.
Tenant hereby protects, defends, indemnifies and holds Landlord
harmless from
any liability, cost, obligation, expense or claim of lien in any
manner relating
to the installation, placement, removal or financing of any such
Alterations,
improvements and/or fixtures in, on or about the Premises, which
obligations of
Tenant shall survive the expiration or earlier termination of
this Lease.
ARTICLE 9
COVENANT AGAINST LIENS
Tenant shall keep the Project and Premises free from any liens
or
encumbrances arising out of the work performed, materials
furnished or
obligations incurred by or on behalf of Tenant, and shall
protect, defend,
indemnify and hold Landlord harmless from and against any
claims, liabilities,
judgments or costs (including, without limitation, reasonable
attorneys' fees
and costs) arising out of same or in connection therewith.
Tenant shall give
Landlord notice at least twenty (20) days prior to the
commencement of any such
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 five (5) days after
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
Building 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
Building or Premises arising in connection with any such work 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
Project, Building and Premises.
ARTICLE 10
INSURANCE
10.1 INDEMNIFICATION AND WAIVER. Except as otherwise expressly
provided
herein, Tenant hereby assumes all risk of damage to property or
injury to
persons in, upon or about the Premises from any cause whatsoever
and agrees that
Landlord, its partners, subpartners and their respective
officers, agents,
servants, employees, and independent contractors (collectively,
"LANDLORD
PARTIES") shall not be liable for, and are hereby released from
any
responsibility for, any damage either to person or property or
resulting from
the loss of use thereof, which damage is sustained by Tenant or
by other persons
claiming through Tenant. Tenant shall indemnify, defend,
protect, and hold
harmless the Landlord Parties from any and all loss, cost,
damage, expense and
liability (including without limitation court costs and
reasonable attorneys'
fees) incurred in connection with or arising from any cause in,
on or about the
Premises, any acts, omissions or negligence of Tenant or of any
person claiming
by, through or under Tenant, or of the contractors, agents,
servants, employees,
invitees, guests or licensees of Tenant or any such person, in,
on or about the
Project or any breach of the terms of this Lease, either prior
to, during, or
after the expiration of the Lease Term, provided that the terms
of the foregoing
indemnity shall not apply to the negligence, willful misconduct
or breach of
this Lease by Landlord. Should Landlord be named as a defendant
in any suit
brought against Tenant in connection with or arising out of
Tenant's occupancy
of the Premises, Tenant shall pay to Landlord its costs and
expenses incurred in
such suit, including without limitation, its actual professional
fees such as
appraisers', accountants' and attorneys' fees. Further, Tenant's
agreement to
indemnify Landlord pursuant to this Section 10.1 is not intended
and shall not
relieve any insurance carrier of its obligations under policies
required to be
carried by Tenant pursuant to the provisions of this Lease, to
the extent such
policies cover the matters subject to Tenant's indemnification
obligations; nor
shall they supersede any inconsistent agreement of the parties
set forth in any
other provision of this Lease. The provisions of this Section
10.1 shall survive
the expiration or sooner termination of this Lease with respect
to any claims or
liability arising in connection with any event occurring prior
to such
expiration or termination.
14
<PAGE>
10.2 TENANT'S COMPLIANCE WITH LANDLORD'S FIRE AND CASUALTY
INSURANCE.
Tenant shall, at Tenant's expense, comply with all insurance
company
requirements pertaining to the use of the Premises. If Tenant's
conduct or use
of the Premises causes any increase in the premium for such
insurance policies
then Tenant shall reimburse Landlord for any such increase.
Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or
requirements of the
American Insurance Association (formerly the National Board of
Fire
Underwriters) and with any similar body.
10.3 TENANT'S INSURANCE. Tenant shall maintain the following
coverages in
the following amounts.
10.3.1 Commercial General Liability Insurance covering the
insured
against claims of bodily injury, personal injury and property
damage (including
loss of use thereof) arising out of Tenant's operations, and
contractual
liabilities (covering the performance by Tenant of its indemnity
agreements)
including a Broad Form endorsement covering the insuring
provisions of this
Lease and the performance by Tenant of the indemnity agreements
set forth in
Section 10.1 of this Lease, for limits of liability not less
than:
Bodily Injury and $2,000,000 each occurrence
Property Damage Liability $3,000,000 annual aggregate
Personal Injury Liability $2,000,000 each occurrence
$3,000,000 annual aggregate
0% Insured's participation
10.3.2 Physical Damage Insurance covering (i) all office
furniture,
business and trade fixtures, office equipment, free-standing
cabinet work,
movable partitions, merchandise and all other items of Tenant's
property on the
Premises installed by, for, or at the expense of Tenant, (ii)
the "Tenant
Improvements," as that term is defined in Section 2.1 of the
Tenant Work Letter,
and any other improvements which exist in the Premises as of the
Lease
Commencement Date (excluding the Base Building) (the "ORIGINAL
IMPROVEMENTS"),
and (iii) all other improvements, alterations and additions to
the Premises.
Such insurance shall be written on an "all risks" of physical
loss or damage
basis, for the full replacement cost value (subject to
reasonable deductible
amounts) new without deduction for depreciation of the covered
items and in
amounts that meet any co-insurance clauses of the policies of
insurance and
shall include coverage for damage or other loss caused by fire
or other peril
including, but not limited to, vandalism and malicious mischief,
theft, water
damage of any type, including sprinkler leakage, bursting or
stoppage of pipes,
and explosion, and providing business interruption coverage for
a period of one
year.
10.3.3 Worker's Compensation and Employer's Liability or other
similar
insurance pursuant to all applicable state and local statutes
and regulations.
10.3.4 Business Interruption Insurance in the amount necessary
to
insure payment of Tenant's obligations to pay Rent hereunder for
a period of not
less than twelve (12) months.
10.4 FORM OF POLICIES. The minimum limits of policies of
insurance required
of Tenant under this Lease shall in no event limit the liability
of Tenant under
this Lease. Such insurance shall (i) name Landlord, and any
other party the
Landlord so specifies, as an additional insured, including
Landlord's managing
agent, if any; (ii) specifically cover the liability assumed by
Tenant under
this Lease, including, but not limited to, Tenant's obligations
under Section
10.1 of this Lease; (iii) be issued by an insurance company
having a rating of
not less than A-X in Best's Insurance Guide or which is
otherwise acceptable to
Landlord and licensed to do business in the State of California;
(iv) be primary
insurance as to all claims thereunder and provide that any
insurance carried by
Landlord is excess and is non-contributing with any insurance
requirement of
Tenant; (v) be in form and content reasonably acceptable to
Landlord; and (vi)
provide that said insurance shall not be canceled or coverage
changed unless
thirty (30) days' prior written notice shall have been given to
Landlord and any
mortgagee of Landlord. Tenant shall deliver said policy or
policies or
certificates (including endorsements) thereof to Landlord on or
before the Lease
Commencement Date and at least thirty (30) days before the
expiration dates
thereof. In the event Tenant shall fail to procure such
insurance, or to deliver
such policies or certificate, Landlord may, at its option,
procure such policies
for the account of Tenant, and
15
<PAGE>
the cost thereof shall be paid to Landlord within five (5) days
after delivery
to Tenant of bills therefor.
10.5 SUBROGATION. Landlord and Tenant intend that their
respective property
loss risks shall be borne by reasonable 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 each
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 the waiver of
subrogation
shall not affect the right of the insured to recover thereunder,
so long as no
material additional premium is charged therefor.
10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and
maintain
during the entire Lease Term, as the same may be extended, at
Tenant's sole cost
and expense, increased amounts of the insurance required to be
carried by Tenant
pursuant to this Article 10 and such other reasonable types of
insurance
coverage and in such reasonable amounts covering the Premises
and Tenant's
operations therein, as may be reasonably requested by Landlord,
but in no event
in excess of the amounts and types of insurance then being
required by landlords
of buildings comparable to and in the vicinity of the
Building.
ARTICLE 11
DAMAGE AND DESTRUCTION
11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall
promptly notify
Landlord of any damage to the Premises resulting from fire or
any other
casualty. If the Premises or any Common Areas serving or
providing access to the
Premises shall be damaged by fire or other casualty, Landlord
shall promptly and
diligently, subject to reasonable delays for insurance
adjustment or other
matters beyond Landlord's reasonable control, and subject to all
other terms of
this Article 11, restore the Base Building and such Common
Areas. Such
restoration shall be to substantially the same condition of the
Base Building
and the Common Areas prior to the casualty, except for
modifications required by
zoning and building codes and other laws or by the holder of a
mortgage on the
Building or Project or any other modifications to the Common
Areas deemed
desirable by Landlord, provided that access to the Premises and
any common
restrooms serving the Premises shall not be materially impaired.
Upon the
occurrence of any damage to the Premises, upon notice (the
"LANDLORD REPAIR
NOTICE") to Tenant from Landlord, Tenant shall assign to
Landlord (or to any
party designated by Landlord) all insurance proceeds payable to
Tenant under
Tenant's insurance required under Section 10.3 of this Lease,
and Landlord shall
repair any injury or damage to the Tenant Improvements and the
Original
Improvements installed in the Premises and shall return such
Tenant Improvements
and Original Improvements to their original condition; provided
that if the cost
of such repair by Landlord exceeds the amount of insurance
proceeds received by
Landlord from Tenant's insurance carrier, as assigned by Tenant,
the cost of
such repairs shall be paid by Tenant to Landlord prior to
Landlord's
commencement of repair of the damage, or as soon as such
additional costs are
known. In the event that Landlord does not deliver the Landlord
Repair Notice
within sixty (60) days following the date the casualty becomes
known to
Landlord, Tenant shall, at its sole cost and expense, repair any
injury or
damage to the Tenant Improvements and the Original Improvements
installed in the
Premises and shall return such Tenant Improvements and Original
Improvements to
their original condition. Whether or not Landlord delivers a
Landlord Repair
Notice, prior to the commencement of construction, Tenant shall
submit to
Landlord, for Landlord's review and approval, all plans,
specifications and
working drawings relating thereto, and Landlord shall select the
contractors to
perform such improvement work. 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; provided
however, that if such fire or other casualty shall have damaged
the Premises or
Common Areas necessary to Tenant's occupancy, 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; provided, further,
however, that if the
damage or destruction is due to the negligence or wilful
misconduct of Tenant or
any of its agents, employees, contractors, invitees or guests,
Tenant shall be
responsible for any reasonable, applicable insurance deductible
(which shall be
payable to
16
<PAGE>
Landlord upon demand) and there shall be no rent abatement. In
the event that
Landlord shall not deliver the Landlord Repair Notice, Tenant's
right to rent
abatement pursuant to the preceding sentence shall terminate as
of the date
which is reasonably determined by Landlord to be the date Tenant
should have
completed repairs to the Premises assuming Tenant used
reasonable due diligence
in connection therewith.
11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of
Section 11.1
of this Lease, Landlord may elect not to rebuild and/or restore
the Premises,
Building and/or Project, and instead terminate this Lease, by
notifying Tenant
in writing of such termination within sixty (60) days after the
date of damage,
such notice to include a termination date giving Tenant sixty
(60) days to
vacate the Premises, but Landlord may so elect only if the
Buildin
| 
