<PAGE>
EXHIBIT 10.04
Lease between
Sobrato Development Companies #792
And
VeriSign, Inc.
Building 5
685 East Middlefield Road
Page i
<PAGE>
Lease between
Sobrato Development Companies #792 and VeriSign, Inc.
Building 5 - 685 East Middlefield Road
[LOGO OF SOBRATO DEVELOPMENT COMPANIES]
Section Page #
Parties..................................................... 1
Premises.................................................... 1
Building 4 Development Approval............................ 1
Use......................................................... 1
Permitted Uses............................................. 1
Uses Prohibited............................................ 1
Advertisements and Signs................................... 2
Covenants, Conditions and Restrictions..................... 2
Term and Rental............................................. 2
Base Monthly Rent.......................................... 2
Tenant Subleases........................................... 2
Late Charges............................................... 2
Security Deposit........................................... 3
Construction................................................ 4
Landlord's Obligations..................................... 4
Acceptance of Possession and Covenants to Surrender......... 4
Delivery and Acceptance.................................... 4
Early Access............................................... 4
Condition Upon Surrender................................... 4
Failure to Surrender....................................... 5
Alterations and Additions................................... 5
Tenant's Alterations....................................... 5
Free From Liens............................................ 6
Compliance With Governmental Regulations................... 6
Maintenance of Premises..................................... 6
Landlord's Obligations..................................... 6
Tenant's Obligations....................................... 6
Waiver of Liability........................................ 7
Hazard Insurance............................................ 7
Tenant's Use............................................... 7
Landlord's Insurance....................................... 7
Tenant's Insurance......................................... 8
Waiver..................................................... 8
Taxes....................................................... 8
Utilities................................................... 8
Toxic Waste and Environmental Damage........................ 9
Tenant's Responsibility.................................... 9
Tenant's Indemnity Regarding Hazardous Materials........... 9
Actual Release by Tenant................................... 10
Environmental Monitoring................................... 10
Page ii
<PAGE>
Landlord's Indemnity Regarding Hazardous Materials......... 10
Tenant's Default............................................ 11
Remedies................................................... 11
Right to Re-enter.......................................... 12
Abandonment................................................ 12
No Termination............................................. 12
Non-Waiver................................................. 12
Performance by Landlord.................................... 12
Habitual Default........................................... 13
Landlord's Liability....................................... 13
Limitation on Landlord's Liability......................... 13
Limitation on Tenant's Recourse............................ 13
Indemnification of Landlord................................ 13
Destruction of Premises..................................... 14
Landlord's Obligation to Restore........................... 14
Limitations on Landlord's Restoration Obligation........... 14
Condemnation................................................ 14
Assignment or Sublease...................................... 15
Consent by Landlord........................................ 15
Assignment or Subletting Consideration..................... 15
No Release................................................. 16
Reorganization of Tenant................................... 16
Permitted Transfers........................................ 16
Effect of Default.......................................... 16
Conveyance by Landlord..................................... 17
Successors and Assigns..................................... 17
Option to Extend the Lease Term............................. 17
Grant and Exercise of Option............................... 17
Determination of Fair Market Rental........................ 17
Resolution of a Disagreement over the Fair Market Rental... 18
Personal to Tenant......................................... 18
General Provisions.......................................... 18
Attorney's Fees............................................ 18
Authority of Parties....................................... 19
Brokers.................................................... 19
Choice of Law.............................................. 19
Dispute Resolution......................................... 19
Entire Agreement........................................... 20
Entry by Landlord.......................................... 20
Estoppel Certificates...................................... 20
Exhibits................................................... 21
Interest................................................... 21
No Presumption Against Drafter............................. 21
Notices.................................................... 21
Property Management........................................ 21
Rent....................................................... 21
Representations............................................ 21
Rights and Remedies........................................ 21
Severability............................................... 21
Page iii
<PAGE>
Submission of Lease........................................ 21
Subordination.............................................. 22
Survival of Indemnities.................................... 22
Time....................................................... 22
Transportation Demand Management Programs.................. 22
Waiver of Right to Jury Trial.............................. 22
Recordation................................................ 23
Right of First Offer to Purchase............................ 23
Grant and Exercise of Option............................... 23
Exclusions................................................. 23
EXHIBIT A - Premises........................................ 25
EXHIBIT A-1 - Premises with Expansion Building.............. 26
EXHIBIT B - Draft Letter of Credit.......................... 27
Page iv
<PAGE>
1. PARTIES: THIS LEASE, is entered into on this 27th day of October, 2000
("Effective Date") between Sobrato Development Companies #792, a California
Limited Partnership, whose address is 10600 North De Anza Boulevard, Suite 200,
Cupertino, CA 95014 and VeriSign, Inc., a Delaware corporation, whose address
is 1350 Charleston Road, Mountain View, California, 94043, hereinafter called
respectively Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
Mountain View, County of Santa Clara, State of California, commonly known and
designated as 685 East Middlefield Road, consisting of 162,090 rentable square
feet ("Building") including parking for approximately 535 cars as outlined in
red on Exhibit "A" and all improvements located therein including but not
-----------
limited to buildings, parking areas and structures, landscaping, loading docks,
sidewalks, service areas and other facilities.
Tenant acknowledges Landlord's potential right to construct an additional 2-
story building of approximately 50,000 square feet ("Expansion Building") on the
Premises as generally shown on Exhibit "A-1". At Tenant's request, Landlord
shall pursue development of the Expansion Building; provided, however, Landlord
and Tenant shall first execute a Lease amendment that will commit Tenant to
lease the Expansion Building on a "cold shell" basis under construction terms
similar to those which Tenant has leased the adjacent new building to be
constructed at 575 E. Middlefield Road.
A. Expansion Building Development Approval: Preparatory to Landlord's
development of the Expansion Building, the parties acknowledge that Landlord is
currently negotiating with the city of Mountain View ("City") to rezone the
Property and obtain a transit-oriented development ("TOD") permit for
construction of the Expansion Building, generally consistent with Exhibit "A-1".
--------------
As part of such permit approval, Tenant agrees to: (i) participate in the
Valley Transportation Authority's ("VTA") Eco-Pass program for employees of
Tenant within the VTA service area; (ii) provide transit subsidies as required
by the City for employees of Tenant outside the VTA service area; and (iii)
otherwise work cooperatively with Landlord and the City towards meeting Tenant-
applicable requirements of TOD permit approval.
3. USE:
A. Permitted Uses: Tenant shall use the Premises as permitted under
applicable zoning laws only for the following purposes and shall not change the
use of the Premises without the prior written consent of Landlord: Office,
research and development, marketing, light manufacturing, data center, ancillary
storage and other incidental uses. Tenant shall use only the number of parking
spaces allocated to Tenant under this Lease. All commercial trucks and delivery
vehicles shall (i) be parked at the rear of the Buildings, (ii) loaded and
unloaded in a manner which does not interfere with the businesses of other
occupants of the Project, and (iii) permitted to remain within the Project only
so long as is reasonably necessary to complete the loading and unloading.
Landlord makes no representation or warranty that any specific use of the
Premises desired by Tenant is permitted pursuant to any Laws.
B. Uses Prohibited: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose. Tenant
shall not (i) damage or overload the electrical, mechanical or plumbing systems
of the Premises, (ii) attach, hang or suspend anything from the ceiling, walls
or columns of the Buildings in excess of the load limits for which such items
are designed or set any load on the
Page 1
<PAGE>
floor in excess of the load limits for which for which the floor is designed, or
(iii) generate dust, fumes or waste products which create a fire or health
hazard or damage the Premises or any portion of the Project, including without
limitation the soils or ground water in or around the Project. No materials,
supplies, equipment, finished products or semi-finished products, raw materials
or articles of any nature, or any waste materials, refuse, scrap or debris,
shall be stored upon or permitted to remain on any portion of the Premises
outside of the Buildings without Landlord's prior approval, which approval may
be withheld in its reasonable discretion.
C. Advertisements and Signs: Tenant will not place or permit to be
placed, in, upon or about the Premises any signs in violation of the city and
other governing authority having jurisdiction. Tenant will not place or permit
to be placed upon the Premises any large prominent outdoor signs, advertisements
or notices without the written consent of Landlord as to type, size, design,
lettering, coloring and location, which consent will not be unreasonably
withheld. Any sign placed on the Premises shall be removed by Tenant, at its
sole cost, prior to the Expiration Date or promptly following the earlier
termination of the Lease, and Tenant shall repair, at its sole cost, any damage
or injury to the Premises caused thereby, and if not so removed, then Landlord
may have same so removed at Tenant's expense.
D. Covenants, Conditions and Restrictions: This Lease is subject to the
effect of (i) any covenants, conditions, restrictions, easements, mortgages or
deeds of trust, ground leases, rights of way of record and any other matters or
documents of record; and (ii) any zoning laws of the city, county and state
where the Buildings are situated (collectively referred to herein as
"Restrictions") and Tenant will conform to and will not violate the terms of any
such Restrictions.
4. TERM AND RENTAL:
A. Base Monthly Rent: The term ("Lease Term") shall be for one hundred
thirty two (132) months, commencing November 1, 2000 ("Commencement Date"), and
ending October 31, 2011 ("Expiration Date"). Notwithstanding the parties'
agreement that the Lease Term begins on the Commencement Date, this Lease and
all of the obligations of Landlord and Tenant shall be binding and in full force
and effect from and after the Effective Date. In addition to all other sums
payable by Tenant under this Lease, Tenant shall pay base monthly rent ("Base
Monthly Rent") for the Premises according to the following schedule, subject to
adjustment pursuant to Section 4.B. below:
Months 01-12: $1,215,675.00 per month
Months 13-24: $1,264,302.00 per month
Months 25-36: $1,314,874.00 per month
Months 37-48: $1,367,469.00 per month
Months 49-60: $1,422,168.00 per month
Months 61-72: $1,479,055.00 per month
Months 73-84: $1,538,217.00 per month
Months 85-96: $1,599,745.00 per month
Months 97-108: $1,663,735.00 per month
Months 109-120: $1,730,285.00 per month
Months 121-132: $1,799,496.00 per month
Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of America,
without offset or deduction and without prior notice or demand, at the address
specified in Section 1 of this Lease or at such place or places as may be
designated in writing by Landlord during the Lease Term. Base Monthly Rent for
any period less than a calendar month shall be a pro rata portion of the monthly
installment.
B. Tenant Subleases: Concurrently with Tenant's execution of this Lease
Tenant is entering into the following two subleases: (i) 53,000 square feet of
the Premises to America Online ("AOL Sublease") through December 31, 2001 at a
monthly rate of $79,500; and (ii) 55,540 square feet of the Premises to Hewlett
Packard ("Hewlett Packard Sublease") though February 28, 2003 at a monthly rate
of $138,467.61 through August 31, 2001, $142,621.64 through August 31, 2002, and
$146,900.28 through February 28, 2003. The Base Monthly Rent schedule set forth
in Section 4.A. above notwithstanding, it is understood and agreed that upon
execution of the subleases, the Base Monthly Rent due from Tenant during the
term of the subleases shall be reduced so that Tenant pays no more per square
foot on those subleased areas than the rate that Tenant is receiving pursuant to
the AOL Sublease and Hewlett Packard Sublease.
C. Late Charges: Tenant hereby acknowledges that late payment by Tenant
to
Page 2
<PAGE>
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, and late charges which may be imposed on
Landlord by the terms of any contract, revolving credit, mortgage, or trust deed
covering the Premises. Accordingly, if any installment of Base Monthly Rent or
other sum due from Tenant shall not be received by Landlord or its designee
within five (5) business days after receipt by Tenant of written notice from
Landlord that such installment or sum was not received when due, Tenant shall
pay to Landlord a late charge equal to five (5%) percent of such overdue amount,
which late charge shall be due and payable on the same date that the overdue
amount was due. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant, excluding interest and reasonable attorneys' fees and costs. If any
rent or other sum due from Tenant remains delinquent for a period in excess of
thirty (30) days then, in addition to such late charge, Tenant shall pay to
Landlord interest on any rent that is not paid when due at the Agreed Interest
Rate specified in Section 19.J following the date such amount became due until
paid. Acceptance by Landlord of such late charge shall not constitute a waiver
of Tenant's default with respect to such overdue amount nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for
four (4) consecutive installments of Base Monthly Rent, then the Base Monthly
Rent shall automatically become due and payable quarterly in advance, rather
than monthly, notwithstanding any provision of this Lease to the contrary.
D. Security Deposit: Concurrently with Tenant's execution of this Lease,
Tenant has deposited with Landlord the sum of One Million Two Hundred Fifteen
Thousand Six Hundred Seventy Five and No/100 Dollars ($1,215,675.00) ("Security
"Deposit"). Landlord shall not be deemed a trustee of the Security Deposit, may
use the Security Deposit in business, and shall not be required to segregate it
from its general accounts. Tenant shall not be entitled to interest on the
Security Deposit. If Tenant defaults with respect to any provisions of the
Lease, including but not limited to the provisions relating to payment of Base
Monthly Rent or other charges, Landlord may, to the extent reasonably necessary
to remedy Tenant's default, use any or all of the Security Deposit towards
payment of the following: (i) Base Monthly Rent or other charges in default;
(ii) any other amount which Landlord may spend or become obligated to spend by
reason of Tenant's default including, but not limited to Tenant's failure to
restore or clean the Premises following vacation thereof. If any portion of the
Security Deposit is so used or applied, Tenant shall, within ten (10) days after
written demand from Landlord, deposit cash with Landlord in an amount sufficient
to restore the Security Deposit to its full original amount, and shall pay to
Landlord such other sums as necessary to reimburse Landlord for any sums paid by
Landlord. If Tenant shall be in either monetary default or material non-
monetary default more than four (4) times in any twelve (12) month period, then
the Security Deposit shall, within ten (10) days after demand by Landlord, be
increased by Tenant to an amount equal to three (3) times the Base Monthly Rent.
Tenant may not assign or encumber the Security Deposit without the consent of
Landlord. Any attempt to do so shall be void and shall not be binding on
Landlord. The Security Deposit shall be returned to Tenant within thirty (30)
days after the Expiration Date and surrender of the Premises to Landlord, less
any amount deducted in accordance with this Section, together with Landlord's
written notice itemizing the amounts and purposes for such deduction. In the
event of termination of Landlord's interest in this Lease, Landlord may deliver
or credit the Security Deposit to Landlord's successor in interest in the
Premises and thereupon be relieved of further responsibility with respect to the
Security Deposit.
Landlord agrees that in lieu of a cash Security Deposit, Tenant may deposit a
letter of credit ("Letter of Credit") substantially in the form attached hereto
as Exhibit "B". Landlord shall be entitled to draw against the Letter of Credit
-----------
at any time provided only that Landlord certifies to the issuer of the Letter of
Credit that Tenant is in default under the Lease. Tenant shall keep the letter
of credit in effect during the entire Lease Term, as the same may be extended,
plus a period of four (4) weeks after expiration of the Lease Term. At least
thirty (30) days prior to expiration of any Letter of Credit, the term thereof
shall be renewed or extended for a period of at least one (1) year. Tenant's
failure to
Page 3
<PAGE>
so renew or extend the Letter of Credit shall be a material default
of this Lease by Tenant. In the event Landlord draws against the Letter of
Credit, Tenant shall replenish the existing Letter of Credit or cause a new
Letter of Credit to be issued such that the aggregate amount of letters of
credit available to Landlord at all times during the Lease Term is the amount of
the Security Deposit originally required.
5. CONSTRUCTION:
A. Landlord's Obligations: Except as specifically provided in this
paragraph, prior to Commencement Date Landlord shall ensure that the existing
Building and Building systems are in good operating condition and repair
including the foundation, structural components, exterior walls, plumbing, HVAC,
sprinklers, electrical (including panels and outlets), doors (both shipping and
personnel), roof structure and membrane, exterior landscaping, irrigation and
lighting, and parking lot. "Good operating condition and repair" as used in
this paragraph means that all of the foregoing systems for which Landlord is
responsible shall be fully operational and functional for use for the purposes
for which such systems were intended, and there is no deferred maintenance
required. Without limitation of the foregoing: (i) the roof membrane shall be
inspected by a reputable and licensed roofing contractor or roofing inspector
and repaired as necessary to put into good operating condition and repair based
on such inspection; (ii) the HVAC system shall be inspected by a reputable and
licensed HVAC contractor and repaired as necessary to put into good operating
condition and repair based on such inspection, as evidenced by a report by such
contractor; (iii) all windows shall be washed inside and out, and there shall be
no cracked or broken windows; (iv) all burned out, discolored or broken
lightbulbs, ballasts and lenses shall be replaced; and (v) the parking lot shall
be re-sealed and striped by a reputable and licensed asphalt contractor
provided, however, that Landlord shall have sixty days from the Commencement
Date to complete the parking lot re-sealing and striping.
The foregoing notwithstanding, Landlord shall have no obligation to perform any
work on the HVAC, electrical, plumbing, or other Building systems servicing the
Hewlett Packard Sublease space. Tenant shall be responsible to ensure that
Hewlett Packard leaves that portion of the Premises in good condition and
repair when it vacates.
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
A. Delivery and Acceptance: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises. Tenant acknowledges
that it has had an opportunity to conduct, and has conducted, such inspections
of the Premises as it deems necessary to evaluate its condition. Except as
otherwise specifically provided herein, Tenant agrees to accept possession of
the Premises in its then existing condition, subject to all Restrictions and
without representation or warranty by Landlord.
B. Early Access: Tenant shall be allowed early access and occupancy of the
Premises from September 1, 2000 until the Commencement Date ("Early Access
Period") for the purpose of constructing Tenant Improvements and otherwise
preparing for its occupancy. Tenant shall be subject to all the terms and
conditions of the Lease during the Early Access Period except that no Base
Monthly Rent or other expenses shall be due or payable.
C. Condition Upon Surrender: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In this
regard, "normal wear and tear" shall be construed to mean wear and tear caused
to the Premises by the natural aging process which occurs in spite of prudent
application of the best standards for maintenance, repair replacement, and
janitorial practices, and does not include items of neglected or deferred
maintenance. In any event, Tenant shall cause the following to be done prior to
the Expiration Date or sooner termination of this Lease: (i) all interior walls
shall be painted or cleaned so that they appear freshly painted, (ii) all tiled
floors shall be cleaned and waxed, (iii) all carpets shall be cleaned and
shampooed, (iv) all broken, marred, stained or nonconforming acoustical ceiling
tiles shall be replaced, (v) all cabling placed above the ceiling by Tenant or
Tenant's contractors shall be removed unless such cabling has been placed in
trays especially designed for such purpose and is not weighing directly on the
ceiling, (vi) all windows shall be washed; (vii) the HVAC system shall be
serviced by a
Page 4
<PAGE>
reputable and licensed service firm and left in "good operating
condition and repair" as evidenced by a report by such firm, (viii) the plumbing
and electrical systems and lighting shall be placed in good order and repair
(including replacement of any burned out, discolored or broken light bulbs,
ballasts, or lenses. On or before the Expiration Date or sooner termination of
this Lease, Tenant shall remove all its personal property and trade fixtures
from the Premises. All property and fixtures not so removed shall be deemed as
abandoned by Tenant. At the expiration of the Lease Term, Landlord shall not
have the right to require that Tenant remove from the Premises any Alterations
(as defined in Section 7 below) made with Landlord's consent unless Landlord, at
the time of granting such consent, indicates that the subject Alteration must be
removed upon the expiration of the Lease Term. With respect to Permitted
Alterations as defined in Section 7A. below, Tenant shall ascertain from
Landlord within ninety (90) days before the Expiration Date whether Landlord
desires to have such Permitted Alterations removed. If Landlord so elects,
Tenant shall, at its sole cost and expense, remove such Alterations as Landlord
has required and shall repair and restore the affected areas of the Premises
prior to the Expiration Date to a standard open office plan with materials and
finishes consistent with the other open office areas within the Premises. Such
repair and restoration shall include causing the Premises to be brought into
compliance with all applicable building codes and laws in effect at the time of
the removal to the extent such compliance is necessitated by the repair and
restoration work.
D. Failure to Surrender: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required by
this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to this
Section 6.D. and Tenant shall indemnify, defend, and hold Landlord harmless
against loss or liability resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any claims made by any succeeding tenant
founded on such delay and costs incurred by Landlord in returning the Premises
to the required condition, plus interest at the Agreed Interest Rate. Any
holding over after the termination or Expiration Date with Landlord's express
written consent, shall be construed as month-to-month tenancy, terminable on
thirty (30) days written notice from either party, and Tenant shall pay as Base
Monthly Rent to Landlord a rate equal to one hundred twenty five percent (125%)
of the Base Monthly Rent due in the month preceding the termination or
Expiration Date, plus all other amounts payable by Tenant under this Lease. Any
holding over shall otherwise be on the terms and conditions herein specified,
except those provisions relating to the Lease Term and any options to extend or
renew, which provisions shall be of no further force and effect following the
expiration of the applicable exercise period. If Tenant remains in possession
of the Premises after the Expiration Date or sooner termination of this Lease
without Landlord's consent, Tenant's continued possession shall be on the basis
of a tenancy at sufferance and Tenant shall pay as rent during the holdover
period an amount equal to one hundred fifty percent (150%) of the Base Monthly
Rent due in the month preceding the termination or Expiration Date, plus all
other amounts payable by Tenant under this Lease. This provision shall survive
the termination or expiration of the Lease.
7. ALTERATIONS AND ADDITIONS:
A. Tenant's Alterations: Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises ("Alterations"), or any part thereof,
without obtaining Landlord's prior written consent and delivering to Landlord
the proposed architectural and structural plans for all such Alterations at
least fifteen (15) days prior to the start of construction. If such Alterations
affect the structure of the Buildings, Tenant additionally agrees to reimburse
Landlord its reasonable out-of-pocket costs incurred in reviewing Tenant's
plans. After obtaining Landlord's consent, which consent shall state whether or
not Landlord will require Tenant to remove such Alteration at the expiration or
earlier termination of this Lease, Tenant shall not proceed to make such
Alterations until Tenant has obtained all required governmental approvals and
permits. Tenant agrees to provide Landlord (i) written notice of the anticipated
and actual start-date of the work, (ii) a complete set of half-size (15" X 21")
vellum as-built drawings, and (iii) a certificate of occupancy for the work upon
completion of the Alterations. All Alterations shall be constructed in
compliance with all applicable building codes and laws including, without
limitation, the Americans with Disabilities Act of 1990 as amended from time to
time. Upon the Expiration Date, all Alterations,
Page 5
<PAGE>
except movable furniture and trade fixtures, shall become a part of the realty
and belong to Landlord but shall nevertheless be subject to removal by Tenant as
provided in Section 6 above. Alterations which are not deemed as trade fixtures
include heating, lighting, electrical systems, air conditioning, walls,
carpeting, or any other installation which has become an integral part of the
Premises (excepting backup power generators or a UPS system, which Tenant shall
have the right to remove). All Alterations shall be maintained, replaced or
repaired by Tenant at its sole cost and expense.
Notwithstanding the foregoing, Tenant shall be entitled, without obtaining
Landlord's consent, to make Alterations which do not affect the structure of the
Buildings and which do not cost more than Seventy Thousand Dollars ($70,000.00)
per Alteration ("Permitted Alterations"); provided, however, that: (i) Tenant
shall still be required to comply with all other provisions of this paragraph;
and (ii) such Permitted Alterations are subject to removal by Tenant at
Landlord's election pursuant to Section 6.C. above at the expiration or earlier
termination of the Lease.
B. Free From Liens: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within sixty (60) days after receiving notice of the
filing, Landlord shall be entitled to discharge the lien at Tenant's expense and
all resulting costs incurred by Landlord, including attorney's fees shall be due
from Tenant as additional rent.
C. Compliance With Governmental Regulations: The term Laws or Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders now
in force or hereafter enacted, promulgated, or issued. The term also includes
government measures regulating or enforcing public access, traffic mitigation,
occupational, health, or safety standards for employers, employees, landlords,
or tenants. Tenant, at Tenant's sole expense shall make all repairs,
replacements, alterations, or improvements needed to comply with all
Governmental Regulations. The judgment of any court of competent jurisdiction
or the admission of Tenant in any action or proceeding against Tenant (whether
Landlord be a party thereto or not) that Tenant has violated any such law,
regulation or other requirement in its use of the Premises shall be conclusive
of that fact as between Landlord and Tenant.
The foregoing notwithstanding, if any repair, replacement, alteration or
improvement is required to the Buildings foundation, exterior load bearing
walls, roof structure or any other structural component of the Buildings
(excluding structural components installed by Tenant) as a result of any
Governmental Regulations and such required work is not caused by Tenant's
specific use or Alterations, the cost of such repair, replacement, alteration or
improvement shall be allocated between Landlord and Tenant such that Tenant
shall pay to Landlord upon completion of such work, the portion of the cost
equal to the product of such cost multiplied by a fraction, the numerator of
which is the number of years remaining in the Lease Term, the denominator of
which is the useful life (in years) of the repair, replacement, alteration or
addition; provided, however, that if the Tenant thereafter exercises a renewal
option, then upon Tenant's exercise of the renewal option, the numerator of the
fraction shall be adjusted to the sum of: (i) the Lease Term remaining at the
time the repair, replacement, alteration or addition was made; and (ii) the
number of years in the Option Term; and Landlord's reimbursement obligation
shall immediately thereafter be re-calculated.
8. MAINTENANCE OF PREMISES:
A. Landlord's Obligations: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure, and
all other structural components of the Buildings, excluding any components
installed by Tenant.
B. Tenant's Obligations: Tenant shall clean maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all plumbing and sewage
facilities, (ii) all heating ventilating and air conditioning facilities and
equipment, (iii) all fixtures, interior walls floors, carpets and ceilings, (iv)
all windows, door entrances, plate glass and glazing systems including caulking,
and skylights, (v) all electrical facilities and equipment, (vi) all automatic
fire extinguisher
Page 6
<PAGE>
equipment, (vii) the parking lot and all underground utility facilities
servicing the Premises, (viii) all elevator equipment; (ix) the roof membrane
system, and (x) all waterscape, landscaping and shrubbery. All wall surfaces and
floor tile are to be maintained in an as good a condition as when Tenant took
possession free of holes, gouges, or defacements. With respect to items (ii),
(viii) and (ix) above, Tenant shall provide Landlord a copy of a service
contract between Tenant & a licensed service contractor providing for periodic
maintenance of all such systems or equipment in conformance with the
manufacturer's recommendations. Tenant shall provide Landlord a copy of such
preventive maintenance contracts and paid invoices for the recommended work if
requested by Landlord.
If as a part of Tenant's fulfillment of its maintenance obligations during the
last three (3) years of the Lease Term a replacement of the roof membrane is
necessary, Landlord shall reimburse Tenant for the cost of the replacement less
the sum of (i) Thirty Thousand Dollars ($30,000.00) plus (ii) that portion of
the cost over $30,000.00 equal to the product of such cost multiplied by a
fraction, the numerator of which is the number of years remaining in the Lease
Term, the denominator of which is the useful life (in years) of the roof
replacement; provided, however, that if the roof replacement is made during the
initial Lease Term and Tenant thereafter exercises a renewal option, then upon
Tenant's exercise of the renewal option, the numerator of the fraction shall be
adjusted to the sum of: (i) the Lease Term remaining at the time the roof
replacement was made; and (ii) the number of years in the Option Term; and
Landlord's reimbursement obligation shall immediately thereafter be re-
calculated.
C. Waiver of Liability: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character or by any other cause, similar or dissimilar, shall
not render Landlord liable to Tenant in any respect, including damages to either
person or property, except to the extent due to Landlord's active negligence or
willful misconduct, nor be construed as an eviction of Tenant, nor cause an
abatement of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. Should any equipment or machinery utilized in supplying the
services listed herein break down or for any cause cease to function properly,
upon receipt of written notice from Tenant of any deficiency or failure of any
services, Landlord shall use reasonable diligence to repair the same promptly,
but Tenant shall have no right to terminate this Lease and shall have no claim
for rebate of rent or damages on account of any interruptions in service
occasioned thereby or resulting therefrom, except to the extent due to
Landlord's active negligence or willful misconduct. Tenant waives the
provisions of California Civil Code Sections 1941 and 1942 concerning the
Landlord's obligation of tenantability and Tenant's right to make repairs and
deduct the cost of such repairs from the rent. Landlord shall not be liable for
a loss of or injury to person or property, however occurring, through or in
connection with or incidental to furnishing, or its failure to furnish, any of
the foregoing.
9. HAZARD INSURANCE:
A. Tenant's Use: Tenant shall not use or permit the Premises, or any
part thereof, to be used for any purpose other than that for which the Premises
are hereby leased; and no use of the Premises shall be made or permitted, nor
acts done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at its
sole cost, comply with all requirements of any insurance company or organization
necessary for the maintenance of reasonable fire and public liability insurance
covering the Premises and appurtenances.
B. Landlord's Insurance: Landlord agrees to purchase and keep in force
fire, extended coverage insurance in an amount equal to the replacement cost of
the Buildings (not including any Tenant Improvements or Alterations paid for by
Tenant) as determined by Landlord's insurance company's appraisers. At
Landlord's election, such fire and property damage insurance may be endorsed to
cover loss caused by such additional perils against which Landlord may elect to
insure, including earthquake and/or flood, and shall contain reasonable
deductibles. Additionally Landlord may maintain a policy of (i) commercial
general liability insurance insuring Landlord (and such others designated by
Landlord) against liability
Page 7
<PAGE>
for personal injury, bodily injury, death and damage to property occurring or
resulting from an occurrence in, on or about the Premises or Project in an
amount as Landlord determines is reasonably necessary for its protection, and
(ii) rental loss insurance covering a twelve (12) month period. Tenant agrees to
pay Landlord as additional rent, on demand, the full cost of said insurance as
evidenced by insurance billings to Landlord, and in the event of damage covered
by said insurance, the amount of any deductible under such policy. Payment shall
be due to Landlord within ten (10) days after written invoice to Tenant. It is
understood and agreed that Tenant's obligation under this Section will be
prorated to reflect the Lease Commencement and Expiration Dates.
C. Tenant's Insurance: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements, and Alterations for their full
replacement value (without depreciation) and to obtain worker's compensation and
public liability and property damage insurance for occurrences within the
Premises with a combined single limit of not less than Ten Million Dollars
($10,000,000.00). Tenant's liability insurance shall be primary insurance
containing a cross-liability endorsement, and shall provide coverage on an
"occurrence" rather than on a "claims made" basis. Tenant shall name Landlord
and Landlord's lender as an additional insured and shall deliver a copy of the
policies and renewal certificates to Landlord. All such policies shall provide
for thirty (30) days' prior written notice to Landlord of any cancellation,
termination, or reduction in coverage.
D. Waiver: Landlord and Tenant hereby waive all rights each may have
against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the Premises or its contents, which may arise
from any risk covered by their respective insurance policies (or which would
have been covered had such insurance policies been maintained in accordance with
this Lease) as set forth above. The Parties shall use their reasonable efforts
to obtain from their respective insurance companies a waiver of any right of
subrogation which said insurance company may have against Landlord or Tenant, as
the case may be.
10. TAXES: Tenant shall be liable for and shall pay as additional rental,
prior to delinquency, the following: (i) all taxes and assessments levied
against Tenant's personal property and trade or business fixtures; (ii) all real
estate taxes and assessment installments or other impositions or charges which
may be levied on the Premises or upon the occupancy of the Premises, including
any substitute or additional charges which may be imposed applicable to the
Lease Term; and (iii) real estate tax increases due to an increase in assessed
value resulting from a sale, transfer or other change of ownership of the
Premises as it appears on the City and County tax bills during the Lease Term.
All real estate taxes shall be prorated to reflect the Lease Commencement and
Expiration Dates. If, at any time during the Lease Term a tax, excise on rents,
business license tax or any other tax, however described, is levied or assessed
against Landlord as a substitute or addition, in whole or in part, for taxes
assessed or imposed on land or Buildings, Tenant shall pay and discharge its pro
rata share of such tax or excise on rents or other tax before it becomes
delinquent; except that this provision is not intended to cover net income
taxes, inheritance, gift or estate tax imposed upon Landlord. In the event that
a tax is placed, levied, or assessed against Landlord and the taxing authority
takes the position that Tenant cannot pay and discharge its pro rata share of
such tax on behalf of Landlord, then Landlord may increase the Base Monthly Rent
by the exact amount of such tax and Tenant shall pay such increase. If by
virtue of any application or proceeding brought by Landlord, there results a
reduction in the assessed value of the Premises during the Lease Term, Tenant
agrees to pay Landlord a fee consistent with the fees charged by a third party
appeal firm for such services.
Notwithstanding the foregoing, if property taxes increase during the first three
years of the Lease Term as a result of a reassessment due to a voluntary change
of ownership, Tenant shall be responsible for payment of the resulting property
tax increase as follows: during the first twelve months, Tenant shall be
responsible for payment of thirty three percent (33%) of the tax increase;
during the second twelve months, Tenant shall be responsible for payment of
sixty seven percent (67%) of the tax increase, thereafter Tenant shall be
responsible for payment of the entire tax increase.
11. UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises.
Landlord shall not be liable for loss of
Page 8
<PAGE>
or injury to person or property, however occurring, through or in connection
with or incidental to furnishing or the utility company's failure to furnish
utilities to the Premises, and in such event Tenant shall not be entitled to
abatement or reduction of any portion of Base Monthly Rent or any other amount
payable under this Lease.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. Tenant's Responsibility: Without the prior written consent of
Landlord, Tenant or Tenant's agents, employees, contractors and invitees
("Tenant's Agents") shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or toxicity or
substances or materials which are listed on any of the Environmental Protection
Agency's lists of hazardous wastes or which are identified in Division 22 Title
26 of the California Code of Regulations as the same may be amended from time to
time or any other similar wastes, materials or substances which are or may
become regulated by or under the authority of any applicable local, state or
federal laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements ("Hazardous Materials")
except for those substances customary in typical office uses for which no
consent shall be required. In order to obtain consent, Tenant shall deliver to
Landlord its written proposal describing the toxic material to be brought onto
the Premises, measures to be taken for storage and disposal thereof, safety
measures to be employed to prevent pollution of the air, ground, surface and
ground water. Landlord's approval may be withheld in its reasonable judgment. In
the event Landlord consents to Tenant's use of Hazardous Materials on the
Premises or such consent is not required, Tenant represents and warrants that it
shall comply with all Governmental Regulations applicable to Hazardous Materials
including doing the following: (i) adhere to all reporting and inspection
requirements imposed by Federal, State, County or Municipal laws, ordinances or
regulations and will provide Landlord a copy of any such reports or agency
inspections; (ii) obtain and provide Landlord copies of all necessary permits
required for the use and handling of Hazardous Materials on the Premises; (iii)
enforce Hazardous Materials handling and disposal practices consistent with
industry standards; (iv) surrender the Premises free from any Hazardous
Materials arising from Tenant's bringing, using, permitting, generating,
creating, releasing, emitting or disposing of Hazardous Materials; and (v)
properly close the facility with regard to Hazardous Materials including the
removal or decontamination of any process piping, mechanical ducting, storage
tanks, containers, or trenches which have come into contact with Hazardous
Materials and obtain a closure certificate from the local administering agency
prior to the Expiration Date. Landlord acknowledges and consents to the storage
on the Premises by Tenant of diesel fuel for Tenant's emergency generators, such
storage to be in above-ground tanks reasonably approved by Landlord.
B. Tenant's Indemnity Regarding Hazardous Materials: Tenant shall, at its
sole cost and expense, comply with all laws pertaining to, and shall with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord's trustees, shareholders, directors, officers, employees,
partners, affiliates, and agents from, any claims, liabilities, costs or
expenses incurred or suffered arising from the bringing, using, permitting,
generating, emitting or disposing of Hazardous Materials by Tenant or Tenant's
Agents through the surface soils of the Premises during the Lease Term or the
violation of any Governmental Regulation or environmental law, by Tenant or
Tenant's Agents. Tenant's foregoing indemnification, defense, and hold harmless
obligations include, without limitation, the following: (i) claims, liability,
costs or expenses resulting from or based upon administrative, judicial (civil
or criminal) or other action, legal or equitable, brought by any private or
public person under common law or under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Resource Conservation and Recovery Act of 1980 ("RCRA") or any other federal,
state, county or municipal law, ordinance or regulation now or hereafter in
effect; (ii) claims, liabilities, costs or expenses pertaining to the
identification, monitoring, cleanup, containment, or removal of Hazardous
Materials from soils, riverbeds or aquifers including the provision of an
alternative public drinking water source; (iii) all
Page 9
<PAGE>
costs of defending such claims; (iv) losses attributable to diminution in the
value of the Premises or the Buildings; (v) loss or restriction of use of
rentable space in the Buildings; (vi) adverse effect on the marketing of any
space in the Buildings; and (vi) all other liabilities, obligations, penalties,
fines, claims, actions (including remedial or enforcement actions of any kind
and administrative or judicial proceedings, orders or judgments), damages
(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation. This Section 12.B shall survive the expiration or termination of this
Lease.
C. Actual Release by Tenant: Tenant agrees to notify Landlord of any
lawsuits or orders which relate to the remedying of or actual release of
Hazardous Materials on or into the soils or ground water at or under the
Premises. Tenant shall also provide Landlord all notices required by Section
25359.7(b) of the Health and Safety Code and all other notices required by law
to be given to Landlord in connection with Hazardous Materials. Without
limiting the foregoing, Tenant shall also deliver to Landlord, within twenty
(20) days after receipt thereof, any written notices from any governmental
agency alleging a material violation of, or material failure to comply with, any
federal, state or local laws, regulations, ordinances or orders, the violation
of which or failure to comply with poses a foreseeable and material risk of
contamination of the ground water or injury to humans (other than injury solely
to Tenant or Tenant's Agents).
In the event of any release on or into the Premises or into the soil or
ground water under the Premises, the Buildings or the Project of any Hazardous
Materials used, treated, stored or disposed of by Tenant or Tenant's Agents,
Tenant agrees to comply, at its sole cost, with all laws, regulations,
ordinances and orders of any federal, state or local agency relating to the
monitoring or remediation of such Hazardous Materials. In the event of any such
release of Hazardous Materials Tenant shall immediately give verbal and follow-
up written notice of the release to Landlord, and Tenant agrees to meet and
confer with Landlord and its Lender to attempt to eliminate and mitigate any
financial exposure to such Lender and resultant exposure to Landlord under
California Code of Civil Procedure Section 736(b) as a result of such release,
and promptly to take reasonable monitoring, cleanup and remedial steps given,
inter alia, the historical uses to which the Property has and continues to be
used, the risks to public health posed by the release, the then available
technology and the costs of remediation, cleanup and monitoring, consistent with
acceptable customary practices for the type and severity of such contamination
and all applicable laws. Nothing in the preceding sentence shall eliminate,
modify or reduce the obligation of Tenant under 12.B of this Lease to indemnify,
defend and hold Landlord harmless from any claims liabilities, costs or expenses
incurred or suffered by Landlord. Tenant shall provide Landlord prompt written
notice of Tenant's monitoring, cleanup and remedial steps.
In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other response
action required by applicable law, any dispute arising between Landlord and
Tenant concerning Tenant's obligation to Landlord under this Section 12.C
concerning the level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by mediation and/or arbitration pursuant to this Lease.
D. Environmental Monitoring: Landlord and its agents shall have the
right to inspect, investigate, sample and monitor the Premises including any
air, soil, water, ground water or other sampling or any other testing, digging,
drilling or analysis to determine whether Tenant is complying with the terms of
this Section 12. If Landlord discovers that Tenant is not in compliance with the
terms of this Section 12, any such costs incurred by Landlord, including
attorneys' and consultants' fees, shall be due and payable by Tenant to Landlord
within thirty (30) days following Landlord's written demand therefore.
E. Landlord's Indemnity Regarding Hazardous Materials: Landlord shall, at
its sole cost and expense, with counsel reasonably acceptable to Tenant,
indemnify, defend, and hold Tenant harmless from any claims, liabilities, costs
or expenses incurred or suffered by Tenant related to the release, existence,
removal, investigation, monitoring or remediation of Hazardous Materials which
are
Page 10
<PAGE>
present or which come to be present on or beneath the Premises except to the
extent the presence of such Hazardous Materials is caused by Tenant or Tenant's
agents. Landlord's indemnification and hold harmless obligations include,
without limitation, (i) claims, liability, costs or expenses resulting from or
based upon administrative, judicial (civil or criminal) or other action, legal
or equitable, brought by any private or public person under common law or
CERCLA, RCRA, or any other federal, state, county or municipal law, ordinance or
regulation now or hereinafter in effect, (ii) claims, liabilities, costs or
expenses pertaining to the identification, monitoring, cleanup, containment, or
removal of Hazardous Materials from soils, riverbeds or aquifers including the
provision of an alternative public drinking water source, and (iii) all costs of
defending such claims. In no event shall Landlord be liable for any
consequential damages suffered or incurred by Tenant as a result of any such
contamination.
13. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a default and breach of this Lease by Tenant: (i) Tenant's failure
to pay the Base Monthly Rent including additional rent or any other payment due
under this Lease within five (5) business days after receipt by Tenant of
written notice from Landlord that such Base Monthly Rent or other payment was
not received when due, (ii) the abandonment of the Premises by Tenant; (iii)
Tenant's failure to observe and perform any other required provision of this
Lease, where such failure continues for thirty (30) days after written notice
from Landlord; provided, however, that if the nature of the default is such that
it cannot reasonably be cured within the 30-day period, Tenant shall not be
deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion; (iv) Tenant's making of any
general assignment for the benefit of creditors; (v) the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or of a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Tenant, the same is dismissed within sixty
(60) days after the filing); (vi) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where possession is not restored to
Tenant within sixty (60) days; or (vii) the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where such seizure is not discharged
within sixty (60) days.
A. Remedies: In the event of any such default by Tenant, then in addition
to other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss for the same
period that Tenant proves could have been reasonably avoided; (iii) the worth at
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker's fees, advertising costs or other expenses of reletting
the Premises, and (z) costs of carrying the Premises such as taxes, insurance
premiums, utilities and security precautions; and (v) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted by applicable California law. The term "rent", as used herein, is
defined as the minimum monthly installments of Base Monthly Rent and all other
sums required to be paid by Tenant pursuant to this Lease, all such other sums
being deemed as additional rent due hereunder. As used in (i) and (ii) above,
"worth at the time of award" shall be computed by allowing interest at a rate
equal to the discount rate of the Federal Reserve Bank of San Francisco plus
five (5%) percent per annum. As used in (iii) above, "worth at the time of
award" shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one (1%)
percent.
<PAGE>
B. Right to Re-enter: In the event of any such default by Tenant,
Landlord shall have the right, after terminating this Lease, to re-enter the
Premises and remove all persons and property. Such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Tenant, and disposed of by Landlord in any manner permitted by law.
C. Abandonment: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California Civil
Code Section 1951.4, (Landlord may continue the lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due if Tenant has a right
to sublet and assign, subject only to reasonable limitations) as amended from
time to time, shall apply and Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes due or relet the
Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its reasonable
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. In the event that Landlord elects to so relet, rentals received
by Landlord from such reletting shall be applied in the following order to: (i)
the payment of any indebtedness other than Base Monthly Rent due hereunder from
Tenant to Landlord; (ii) the payment of any cost of such reletting; (iii) the
payment of the cost of any alterations and repairs to the Premises; and (iv) the
payment of Base Monthly Rent due and unpaid hereunder. The residual rentals, if
any, shall be held by Landlord and applied in payment of future Base Monthly
Rent as the same may become due and payable hereunder. Landlord shall have the
obligation to market the space but shall have no obligation to relet the
Premises following a default if Landlord has other comparable available space
within the Buildings or Project. In the event the portion of rentals received
from such reletting which is applied to the payment of rent hereunder during any
month be less than the rent payable during that month by Tenant hereunder, then
Tenant shall pay such deficiency to Landlord immediately upon demand. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
D. No Termination: Landlord's re-entry or taking possession of the
Premises pursuant to 13.B or 13.C shall not be construed as an election to
terminate this Lease unless written notice of such intention is given to Tenant
or unless the termination is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.
E. Non-Waiver: Landlord may accept Tenant's payments without waiving any
rights under this Lease, including rights under a previously served notice of
default. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment of rent due shall be deemed as other than payment on account of the
amount due. If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and pursue an action to enforce rights and
remedies under the previously served notice of default without giving Tenant any
further notice or demand. Furthermore, the Landlord's acceptance of rent from
the Tenant when the Tenant is holding over without express written consent does
not convert Tenant's Tenancy from a tenancy at sufferance to a month to month
tenancy. No waiver of any provision of this Lease shall be implied by any
failure of Landlord to enforce any remedy for the violation of that provision,
even if that violation continues or is repeated. Any waiver by Landlord of any
provision of this Lease must be in writing. Such waiver shall affect only the
provision specified and only for the time and in the manner stated in the
writing. No delay or omission in the exercise of any right or remedy by Landlord
shall impair such right or remedy or be construed as a waiver thereof by
Landlord. No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises, shall constitute acceptance of the surrender
of the Premises by Tenant before the Expiration Date. Only written notice from
Landlord to Tenant of acceptance shall constitute such acceptance of surrender
of the Premises. Landlord's consent to or approval of any act by Tenant which
requires Landlord's consent or approvals shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
F. Performance by Landlord: If Tenant fails to perform any obligation
required under
Page 12
<PAGE>
this Lease or by law or governmental regulation, Landlord in its
sole discretion may, after ten (10) days prior written notice to Tenant, without
waiving any rights or remedies and without releasing Tenant from its obligations
hereunder, perform such obligation, in which event Tenant shall pay Landlord as
additional rent all sums paid by Landlord in connection with such substitute
performance, including interest at the Agreed Interest Rate (as defined in
Section 19.J) within ten (10) days of Landlord's written notice for such
payment.
G. Habitual Default: The provisions of Section 13 notwithstanding, the
Parties agree that if Tenant has been in either monetary default or material
non-monetary default (beyond applicable notice and cure periods) in the
performance of any (but not necessarily the same) term or condition of this
Lease for four or more times during any twelve (12) month period during the
Lease Term, then such conduct shall, at the election of the Landlord, represent
a separate event of default which cannot be cured by Tenant. Tenant
acknowledges that the purpose of this provision is to prevent repetitive
defaults by Tenant, which work a hardship upon Landlord and deprive Landlord of
Tenant's timely performance under this Lease.
14. LANDLORD'S LIABILITY:
A. Limitation on Landlord's Liability: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease, Tenant
shall give Landlord written notice of such failure and shall give Landlord
thirty (30) days to cure or commence to cure such failure prior to any claim for
breach or resultant damages, provided, however, that if the nature of the
default is such that it cannot reasonably be cured within the 30-day period,
Landlord shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion. In addition,
upon any such failure by Landlord, Tenant shall give notice by registered or
certified mail to any person or entity with a security interest in the Premises
("Mortgagee") that has provided Tenant with notice of its interest in the
Premises, and shall provide Mortgagee a reasonable opportunity to cure such
failure, including such time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effectuate a
cure. Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any right
under California Civil Code Section 1950.7 or any other present or future law to
the collection of any payment or deposit from Mortgagee or any purchaser at a
foreclosure sale of Mortgagee's interest unless Mortgagee or such purchaser
shall have actually received and not refunded the applicable payment or deposit.
Tenant further waives any right to terminate this Lease and to vacate the
Premises on Landlord's default under this Lease, except in the event of a
constructive eviction under law. Tenant's sole remedy on Landlord's default is
an action for damages or injunctive or declaratory relief.
B. Limitation on Tenant's Recourse: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their interest in the Premises. Tenant shall have recourse only
to the interest of Landlord in the Premises or for the satisfaction of the
obligations of Landlord and shall not have recourse to any other assets of
Landlord for the satisfaction of such obligations.
C. Indemnification of Landlord: As a material part of the consideration
rendered to Landlord, Tenant hereby waives all claims against Landlord for
damages to goods, wares and merchandise, and all other personal property in,
upon or about said Premises and for injuries to persons in or about said
Premises, from any cause arising at any time to the fullest extent permitted by
law, except to the extent caused by the willful misconduct or active negligence
of Landlord, and Tenant shall indemnify, defend with counsel reasonably
acceptable to Landlord and hold Landlord, and their shareholders, directors,
officers, trustees, employees, partners, affiliates and agents from any claims,
liabilities, costs or expenses incurred or suffered arising from the use of
occupancy of the Premises or any part of the Project by Tenant or Tenant's
Agents, the acts or omissions of Tenant or Tenant's Agents, Tenant's breach of
this Lease, or any damage or injury to person or property from any cause, except
to the extent caused by the willful misconduct or active negligence of Landlord
or from the failure of
Page 13
<PAGE>
Tenant to keep the Premises in good condition and repair as herein provided,
except to the extent due to the active negligence or willful misconduct of
Landlord. Further, in the event Landlord is made party to any litigation due to
the acts or omission of Tenant and Tenant's Agents, Tenant will indemnify,
defend (with counsel reasonably acceptable to Landlord) and hold Landlord
harmless from any such claim or liability including Landlord's costs and
expenses and reasonable attorney's fees incurred in defending such claims.
15. DESTRUCTION OF PREMISES:
A. Landlord's Obligation to Restore: In the event of a destruction of the
Premises during the Lease Term Landlord shall repair the same to a similar
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while repairs are being made, such
proportionate reduction to be based upon the extent to which the repairs
interfere with Tenant's business in the Premises, as reasonably determined by
Landlord. In no event shall Landlord be required to replace or restore
Alterations, Tenant Improvements, or Tenant's fixtures or personal property.
With respect to a destruction which Landlord is obligated to repair or may elect
to repair under the terms of this Section, Tenant waives the provisions of
Section 1932, and Section 1933, Subdivision 4, of the Civil Code of the State of
California, and any other similarly enacted statute, and the provisions of this
Section 15 shall govern in the case of such destruction.
B. Limitations on Landlord's Restoration Obligation: Notwithstanding the
provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot
be made within two hundred seventy (270) days from the date of receipt of all
governmental approvals necessary under the laws and regulations of State,
Federal, County or Municipal authorities, as reasonably determined by Landlord,
(ii) if the holder of the first deed of trust or mortgage encumbering the
Buildings elects not to permit the insurance proceeds payable upon damage or
destruction to be used for such repair or restoration, (iii) the damage or
destruction is not fully covered by the insurance (plus any deductible amount)
maintained by Landlord, (iv) the damage or destruction occurs in the last twenty
four (24) months of the Lease Term, (v) Tenant is in default pursuant to the
provisions of Section 13, or (vi) Tenant has vacated the Premises for more than
the immediately preceding one hundred twenty (120) days. In any such event
Landlord may elect either to complete the repair or restoration, or terminate
this Lease by providing Tenant written notice of its election within sixty (60)
days following the damage or destruction. Tenant shall also have a right to
terminate this Lease if the repairs cannot be made within two hundred seventy
(270) days from the date of receipt of all governmental approvals necessary
under the laws and regulations of State, Federal, County or Municipal
authorities, by providing Landlord written notice of its election within sixty
(60) days following the damage or destruction.
16. CONDEMNATION: If any part of the Premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and only a part thereof remains which is susceptible
of occupation hereunder as reasonably determined by Tenant, this Lease shall, as
to the part so taken, terminate as of the day before title vests in the
condemnor or purchaser ("Vesting Date") and Base Monthly Rent payable hereunder
shall be adjusted so that Tenant is required to pay for the remainder of the
Lease Term only such portion of Base Monthly Rent as the value of the part
remaining after such taking bears to the value of the entire Premises prior to
such taking. If all of the Premises or such part thereof be taken so that there
does not remain a portion susceptible for occupation hereunder as reasonably
determined by Tenant, this Lease shall terminate on the Vesting Date. If part
or all of the Premises be taken, all compensation awarded upon such taking shall
go to Landlord, and Tenant shall have no claim thereto; except Landlord shall
cooperate with Tenant, without cost to Landlord, to recover compensation for
damage to or taking of any Alterations, Tenant Improvements, or for Tenant's
moving costs, loss of or damage to Tenant's personal property, loss to Tenant
because of interruption of business, Tenant's loss of goodwill, and the value
attributable to any leasehold value for the difference between the market value
of the Premises for the remainder or the term above the value, at the date of
taking, of the rent payable for the remainder of the term. Tenant will have no
right to pursue a claim based upon
Page 14
<PAGE>
the residual value of the Land after expiration of the term or pursue claims or
retain any award to which Landlord is entitled so as inequitably to diminish
Landlord's award. Tenant hereby waives the provisions of California Code of
Civil Procedures Section 1265.130 and any other similarly enacted statue, and
the provisions of this Section 16 shall govern in the case of a taking.
17. ASSIGNMENT OR SUBLEASE:
A. Consent by Landlord: Except for the AOL Sublease and Hewlett Packard
Sublease or as specifically provided in this Section 17, Tenant may not assign,
sublet, hypothecate, or allow a third party to use the Premises without the
express written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. In the event Tenant desires to assign this Lease or any
interest herein or sublet the Premises or any part thereof, Tenant shall deliver
to Landlord (i) executed counterparts of any agreement and of all ancillary
agreements with the proposed assignee/subtenant, (ii) current financial
statements of the transferee covering the preceding three years, (iii) the
nature of the proposed transferee's business to be carried on in the Premises,
(iv) a statement outlining all consideration to be given on account of the
Transfer, and (v) a current financial statement of Tenant. Landlord may
condition its approval of any Transfer on receipt of a certification from both
Tenant and the proposed transferee of all consideration to be paid to Tenant in
connection with such Transfer. At Landlord's request, Tenant shall also provide
additional information reasonably required by Landlord to determine whether it
will consent to the proposed assignment or sublease. Landlord shall have a
eight (8) business-day period following receipt of all the foregoing within
which to notify Tenant in writing that Landlord elects to: (i) terminate this
Lease in the event the proposed sublease or assignment is for substantially all
of space in the Premises (provided, however, that Landlord shall not have the
right to terminate on any sublease or assignment expiring, including any options
in favor of sublessee/assignee, more than three (3) years prior to the Lease
Expiration Date, including any options under this Lease which have been
exercised by Tenant); (ii) permit Tenant to assign or sublet such space to the
named assignee/subtenant on the terms and conditions set forth in the notice; or
(iii) refuse consent. If Landlord should fail to notify Tenant in writing of
such election within the 8-business day period, Landlord shall be deemed to have
elected option (ii) above. In the event Landlord elects option (i) above, this
Lease shall expire with respect to such part of the Premises on the date upon
which the proposed sublease or transfer was to commence, and from such date
forward, Base Monthly Rent and all other costs and charges shall be adjusted
based upon the proportion that the rentable area of the Premises remaining bears
to the total rentable area of the Buildings. In the event Landlord elects
option (ii) above, Landlord's written consent to the proposed assignment or
sublease shall not be unreasonably withheld, provided and upon the condition
that: (i) the proposed assignee or subtenant is engaged in a business that is
limited to the use expressly permitted under this Lease; (ii) the proposed
assignment or sublease is in form reasonably satisfactory to Landlord; (iii) the
proposed sublease will not result in there being more than two (2) subtenants
within the Premises at any time during the Lease Term; (iv) Tenant reimburses
Landlord on demand for any reasonable costs that may be incurred by Landlord in
connection with said assignment or sublease, including the costs of making
investigations as to the acceptability of the proposed assignee or subtenant and
legal costs (not to exceed $2,000.00 per occurance) incurred in connection with
the granting of any requested consent; and (v) Tenant shall not have advertised
or publicized in any way the availability of the Premises without prior notice
to Landlord. In the event all or any one of the foregoing conditions are not
satisfied, Landlord shall be considered to have acted reasonably if it withholds
its consent.
B. Assignment or Subletting Consideration: Landlord and Tenant hereby
agree that fifty percent (50%) of any rent or other economic consideration (not
including any payments for Tenant's furniture or other personal property owned
by Tenant, any payment for utilities or for other office services provided by
Tenant); (i) realized by Tenant under any sublease or assignment, or (ii)
realized by any subtenant under any sub-sublease of the Premises, in excess of
the Base Monthly Rent payable hereunder after deducting reasonable subletting
and assignment costs directly related to such sublease or assignment including
lease commissions, attorneys fees, costs of demising or otherwise preparing the
sublease space for occupancy, and the unamortized cost of Alterations applicable
to
Page 15
<PAGE>
the space so sublet or assigned, shall be paid to Landlord. Tenant's obligation
to pay over Landlord's portion of the consideration constitutes an obligation
for additional rent hereunder. The above provisions relating to Landlord's right
to terminate the Lease and relating to the allocation of excess rent are
independently negotiated terms of the Lease which constitute a material
inducement for the Landlord to enter into the Lease, and are agreed by the
Parties to be commercially reasonable. No assignment or subletting by Tenant
shall relieve it of any obligation under this Lease. Any assignment or
subletting which conflicts with the provisions hereof shall be void.
C. No Release: Any assignment or sublease shall be made only if and shall
not be effective until the assignee or subtenant shall execute, acknowledge, and
deliver to Landlord an agreement, in form and substance satisfactory to
Landlord, whereby the assignee or subtenant shall assume all the applicable
obligations of this Lease on the part of Tenant to be performed or observed and
shall be subject to all the covenants, agreements, terms, provisions and
conditions in this Lease. Notwithstanding any such sublease or assignment and
the acceptance of rent by Landlord from any subtenant or assignee, Tenant and
any guarantor shall remain fully liable for the payment of Base Monthly Rent and
additional rent due, and to become due hereunder, for the performance of all the
covenants, agreements, terms, provisions and conditions contained in this Lease
on the part of Tenant to be performed and for all acts and omissions of any
licensee, subtenant, assignee or any other person claiming under or through any
subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed a violation by
Tenant. Tenant shall indemnify, defend and hold Landlord harmless from and
against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant (except to the extent caused by
Landlord's gross negligence or willful misconduct) or by any real estate brokers
or other persons claiming compensation in connection with the proposed
assignment or sublease.
D. Reorganization of Tenant: The provisions of this Section 17.D shall
apply if Tenant is a corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer to one person
or entity (or to any group of related persons or entities) of stock possessing
more than 50% of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding and entitled to vote for the election of
directors, and after such sale or transfer of stock Tenant's stock is no longer
publicly traded. In a transaction under clause (i) the surviving corporation
shall promptly execute and deliver to Landlord an agreement in form reasonably
satisfactory to Landlord under which such surviving corporation assumes the
obligations of Tenant hereunder, and in a transaction under clause (ii) the
transferee or buyer shall promptly execute and deliver to Landlord an agreement
in form reasonably satisfactory to Landlord under which such transferee or buyer
assumes the obligations of Tenant under the Lease.
E. Permitted Transfers: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be entitled
to terminate the Lease or to receive any part of any subrent resulting therefrom
that would otherwise be due pursuant to Sections 17.A and 17.B. Tenant may
sublease all or part of the Premises or assign its interest in this Lease to (i)
any corporation which controls, is controlled by, or is under common control
with the original Tenant to this Lease by means of an ownership interest of more
than 50%; (ii) a corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation, so long as the
surviving corporation has a net worth at the time of such assignment that is
equal to or greater than the net worth of Tenant immediately prior to such
transaction; and (iii) a corporation which purchases or otherwise acquires all
or substantially all of the assets of Tenant so long as such acquiring
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction.
F. Effect of Default: In the event of Tenant's default, Tenant hereby
assigns all rents due from any assignment or subletting to Landlord as security
for performance of its
Page 16
<PAGE>
obligations under this Lease, and Landlord may collect such rents as Tenant's
Attorney-in-Fact, except that Tenant may collect such rents unless a default
occurs as described in Section 13 above. A termination of the Lease due to
Tenant's default shall not automatically terminate an assignment or sublease
then in existence; rather at Landlord's election, such assignment or sublease
shall survive the Lease termination, the assignee or subtenant shall attorn to
Landlord, and Landlord shall undertake the obligations of Tenant under the
sublease or assignment; except that Landlord shall not be liable for prepaid
rent, security deposits or other defaults of Tenant to the subtenant or
assignee, or for any acts or omissions of Tenant and Tenant's Agents.
G. Conveyance by Landlord: As used in this Lease, the term "Landlord" is
defined only as the owner for the time being of the Premises, so that in the
event of any sale or other conveyance of the Premises or in the event of a
master lease of the Premises, Landlord shall be entirely freed and relieved of
all its covenants and obligations hereunder, and it shall be deemed and
construed, without further agreement between the Parties and the purchaser at
any such sale or the master tenant of the Premises, that the purchaser or master
tenant of the Premises has assumed and agreed to carry out any and all covenants
and obligations of Landlord hereunder. Such transferor shall transfer and
deliver Tenant's security deposit to the purchaser at any such sale or the
master tenant of the Premises, and thereupon the transferor shall be discharged
from any further liability in reference thereto.
F. Successors and Assigns: Subject to the provisions this Section 17, the
covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all Parties hereto; and all
Parties hereto comprising Tenant shall be jointly and severally liable
hereunder.
18. OPTION TO EXTEND THE LEASE TERM:
A. Grant and Exercise of Option: Landlord grants to Tenant, subject to
the terms and conditions set forth in this Section 18.A, two (2) options (the
"Options") to extend the Lease Term for an additional term (the "Option Term").
Each Option Term shall be for a period of sixty (60) months and shall be
exercised, if at all, by written notice to Landlord no later than nine (9)
months prior to the date the Lease Term would expire but for such exercise, time
being of the essence for the giving of such notice. If Tenant exercises the
Option, all of the terms, covenants and conditions of this Lease except for the
grant of additional Options pursuant to this Section, provided that Base Monthly
Rent for the Premises payable by Tenant during the Option Term shall be the
greater of (i) the Base Monthly Rent applicable to the period immediately prior
to the commencement of the Option Term, and (ii) ninety five percent (95%) of
the Fair Market Rental as hereinafter defined. Notwithstanding anything herein
to the contrary, if Tenant is in monetary or material non-monetary default under
any of the terms, covenants or conditions of this Lease (beyond applicable cure
periods) either at the time Tenant exercises the Option or at any time
thereafter prior to the commencement date of the Option Term, then Landlord
shall have, in addition to all of Landlord's other rights and remedies provided
in this Lease, the right to terminate the Option upon notice to Tenant, in which
event the Lease Term shall not be extended pursuant to this Section 18.A. As
used herein, the term "Fair Market Rental" is defined as the rental and all
other monetary payments, including any escalations and adjustments thereto
(including without limitation Consumer Price Indexing) that Landlord could
obtain during the Option Term from a third party desiring to lease the Premises,
based upon the current use and other potential uses of the Premises, as
determined by the rents then being obtained for new leases of space comparable
in age and quality to the Premises in the same real estate submarket as the
Buildings. The appraisers shall be instructed that the foregoing five percent
(5%) discount is intended to offset comparable rents that include the following
costs which Landlord will not incur in the event Tenant exercises its option (i)
brokerage commissions, (ii) tenant improvement allowances, (iii) building
improvement costs, and (iv) vacancy costs.
B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send Tenant notice no later than two hundred forty (240) days
before to the Lease Expiration Date setting forth the Fair Market Rental for the
Option Term. If Tenant disputes Landlord's determination of Fair Market Rental
for the Option Term, Tenant shall, within thirty (30) days after the date of
Landlord's notice setting forth Fair Market Rental for the Option Term,
Page 17
<PAGE>
send to Landlord a notice stating that Tenant either elects to terminate its
exercise of the Option, in which event the Option shall lapse and this Lease
shall terminate on the Expiration Date, or that Tenant disagrees with Landlord's
determination of Fair Market Rental for the Option Term and elects to resolve
the disagreement as provided in Section 18.C below. If Tenant does not send
Landlord a notice as provided in the previous sentence, Landlord's determination
of Fair Market Rental shall be the basis for computing the Base Monthly Rent
payable by Tenant during the Option Term. If Tenant elects to resolve the
disagreement as provided in Section 18.C and such procedures are not concluded
prior to the commencement date of the Option Term, Tenant shall pay to Landlord
as Base Monthly Rent ninety five percent (95%) of the Fair Market Rental as
determined by Landlord in the manner provided above. If the Fair Market Rental
as finally determined pursuant to Section 18.C is greater than Landlord's
determination, Tenant shall pay Landlord the difference between the amount paid
by Tenant and ninety five percent (95%) of the Fair Market Rental as so
determined in Section 18.C within thirty (30) days after such determination. If
the Fair Market Rental as finally determined in Section 18.C is less than
Landlord's determination, the difference between the amount paid by Tenant and
ninety five percent (95%) of the Fair Market Rental as so determined in Section
18.C shall be credited against the next installments of Base Monthly Rent due
from Tenant to Landlord hereunder.
C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to Landlord's notice
setting forth the Fair Market Rental, Landlord and Tenant shall meet at a
mutually agreeable time and place, in an attempt to resolve the disagreement.
2. If within the 30-day period referred to above, Landlord and Tenant
cannot reach agreement as to Fair Market Rental, each party shall select one
appraiser to determine Fair Market Rental. Each such appraiser shall arrive at
a determination of Fair Market Rental and submit their conclusions to Landlord
and Tenant within thirty (30) days after the expiration of the 30-day
consultation period described above.
3. If only one appraisal is submitted within the requisite time period,
it shall be deemed as Fair Market Rental. If both appraisals are submitted
within such time period and the two appraisals so submitted differ by less than
ten percent (10%), the average of the two shall be deemed as Fair Market Rental.
If the two appraisals differ by more than 10%, the appraisers shall immediately
select a third appraiser who shall, within thirty (30) days after his selection,
make and submit to Landlord and Tenant a determination of Fair Market Rental.
This third appraisal will then be averaged with the closer of the two previous
appraisals and the result shall be Fair Market Rental.
4. All appraisers specified pursuant to this Section shall be members
of the American Institute of Real Estate Appraisers with not less than ten (10)
years experience appraising office and industrial properties in the Santa Clara
Valley. Each party shall pay the cost of the appraiser selected by such party
and one-half of the cost of the third appraiser.
D. Personal to Tenant: All Options provided to Tenant in this Lease are
personal and granted to VeriSign, Inc. (and any permitted transferee pursuant to
Section 17.E. above) and are not exercisable by any third party should Tenant
assign or sublet all or a portion of its rights under this Lease, unless
Landlord consents to permit exercise of any option by any assignee or subtenant,
in Landlord's sole and absolute discretion. In the event Tenant has multiple
options to extend this Lease, a later option to extend the Lease cannot be
exercised unless the prior option has been properly exercised.
19. GENERAL PROVISIONS:
A. Attorney's Fees: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant herein; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall
also be entitled to recover
Page 18
<PAGE>
all costs and expenses including reasonable attorney's fees incurred in
enforcing any judgment or award against the other party. The foregoing provision
relating to post-judgment costs is severable from all other provisions of this
Lease.
B. Authority of Parties: Tenant represents and warrants that it is duly
formed and in good standing, and is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. At Landlord's request, Tenant shall
provide Landlord with corporate resolutions or other proof in a form acceptable
to Landlord, authorizing the execution of the Lease.
C. Brokers: Tenant represents it has not utilized or contacted a real
estate broker or finder with respect to this Lease other than Cornish & Carey
Commercial and Tenant agrees to indemnify, defend and hold Landlord harmless
against any claim, cost, liability or cause of action asserted by any other
broker or finder claiming through Tenant.
D. Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E, venue
shall be Santa Clara County.
E. Dispute Resolution: Landlord and Tenant and any other party that may
become a party to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer or
any claim within the jurisdiction of the small claims court (which small claims
court shall be the sole court of competent jurisdiction), any controversy,
dispute, or claim of whatever nature arising out of, in connection with or in
relation to the interpretation, performance or breach of this Lease, including
any claim based on contract, tort, or statute, shall be resolved at the request
of any party to this agreement through a two-step dispute resolution process
administered by J.A.M.S. or another judicial mediation service mutually
acceptable to the parties located in Santa Clara County, California. The dispute
resolution process shall involve first, mediation, followed, if necessary, by
final and binding arbitration administered by and in accordance with the then
existing rules and practices of J.A.M.S. or other judicial mediation service
selected. In the event of any dispute subject to this provision, either party
may initiate a request for mediation and the parties shall use reasonable
efforts to promptly select a J.A.M.S. mediator and commence the mediation. In
the event the parties are not able to agree on a mediator within thirty (30)
days, J. A. M. S. or another judicial mediation service mutually acceptable to
the parties shall appoint a mediator. The mediation shall be confidential and in
accordance with California Evidence Code (S) 1119 et. seq. The mediation shall
be held in Santa Clara County, California and in accordance with the existing
rules and practice of J. A. M. S. (or other judicial and mediation service
selected). The parties shall use reasonable efforts to conclude the mediation
within sixty (60) days of the date of either party's request for mediation. The
mediation shall be held prior to any arbitration or court action (other than a
claim by Landlord for unlawful detainer or any claim within the jurisdiction of
the small claims court which are not subject to this mediation/arbitration
provision and may be filed directly with a court of competent jurisdiction).
Should the prevailing party in any dispute subject to this Section 19.E attempt
an arbitration or a court action before attempting to mediate, the prevailing
party shall not be entitled to attorney's fees that might otherwise be available
to them in a court action or arbitration and in addition thereto, the party who
is determined by the arbitrator to have resisted mediation, shall be sanctioned
by the arbitrator or judge.
IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN EXISTING
RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND MEDIATION SERVICE
SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY BE
ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION THEREOF AS PROVIDED BY
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET. SEQ, AS SAID STATUTES THEN
APPEAR, INCLUDING ANY AMENDMENTS TO SAID STATUTES OR SUCCESSORS TO SAID STATUTES
OR AMENDED STATUTES, EXCEPT THAT IN NO EVENT SHALL THE PARTIES BE ENTITLED TO
PROPOUND INTERROGATORIES OR REQUEST FOR
Page 19
<PAGE>
ADMISSIONS DURING THE ARBITRATION PROCESS. THE ARBITRATOR SHALL BE A RETIRED
JUDGE OR A LICENSED CALIFORNIA ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR
MEDIATION SHALL BE IN SANTA CLARA COUNTY, CALIFORNIA.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED
IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES" PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY
BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
LANDLORD: /s/ JMS TENANT: /s/ DLE
----------- -----------
F. Entire Agreement: This Lease and the exhibits attached hereto contains
all of the agreements and conditions made between the Parties hereto and may not
be modified orally or in any other manner other than by written agreement signed
by all parties hereto or their respective successors in interest. This Lease
supersedes and revokes all previous negotiations, letters of intent, lease
proposals, brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent Landlord
or Tenant.
G. Entry by Landlord: Upon prior notice to Tenant and subject to Tenant's
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any reasonable loss of
occupation or quiet enjoyment of the Premises thereby occasioned, for the
following purposes: (i) inspecting and maintaining the Premises; (ii) making
repairs, alterations or additions to the Premises; (iii) erecting additional
building(s) and improvements on the land where the Premises are situated or on
adjacent land owned by Landlord; (iv) performing any obligations of Landlord
under the Lease including remediation of Hazardous Materials if determined to be
the responsibility of Landlord, (v) posting and keeping posted thereon notices
of non-responsibility for any construction, alteration or repair thereof, as
required or permitted by any law, and (vi) showing the Premises to Landlord's or
the Master Landlord's existing or potential successors, purchaser, tenants and
lenders. Tenant shall permit Landlord and his agents, at any time within one
hundred eighty (180) days prior to the Expiration Date (or at any time during
the Lease if Tenant is in default hereunder), to place upon the Premises "For
Lease" signs and exhibit the Premises to real estate brokers and prospective
tenants at reasonable hours.
H. Estoppel Certificates: At any time during the Lease Term, each party
(the "Responding Party") shall, within ten (10) business days following written
notice from the other party (the "Requesting Party"), execute and deliver to the
Requesting Party a written statement certifying, if true, the following: (i)
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification); (ii) the date to which rent and other
charges are paid in advance, if any; (iii) acknowledging that there are not, to
Responding Party's knowledge, any uncured defaults on Requesting Party's part
hereunder (or specifying such defaults if they are claimed); and (iv) such other
information as Requesting Party may reasonably request. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of
Requesting Party's interest in the Premises. The Responding Party's failure to
deliver such statement within such time shall be conclusive upon the Responding
Party that this Lease is in full force and effect without modification, except
Page 20
<PAGE>
as may be represented by the Requesting Party, and that there are no uncured
defaults in Requesting Party's performance. Tenant agrees to provide, within
five (5) days of Landlord's request, Tenant's most recent three (3) years of
audited financial statements for Landlord's use in financing or sale of the
Premises or Landlord's interest therein.
I. Exhibits: All exhibits referred to are attached to this Lease and
incorporated by reference.
J. Interest: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
Francisco Branch, plus two percent (2%) per annum from that date until paid in
full ("Agreed Interest Rate"). This provision shall survive the expiration or
sooner termination of the Lease. Despite any other provision of this Lease, the
total liability for interest payments shall not exceed the limits, if any,
imposed by the usury laws of the State of California. Any interest paid in
excess of those limits shall be refunded to Tenant by application of the amount
of excess interest paid against any sums outstanding in any order that Landlord
requires. If the amount of excess interest paid exceeds the sums outstanding,
the portion exceeding those sums shall be refunded in cash to Tenant by
Landlord. To ascertain whether any interest payable exceeds the limits imposed,
any non-principal payment (including late charges) shall be considered to the
extent permitted by law to be an expense or a fee, premium, or penalty rather
than interest.
K. This section intentionally left blank.
L. No Presumption Against Drafter: Landlord and Tenant understand, agree
and acknowledge that this Lease has been freely negotiated by both Parties; and
that in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.
M. Notices: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at
least fifteen (15) days prior notice to the notifying party. When this Lease
requires service of a notice, that notice shall satisfy rather than supplement
any similar statutorily required notice, including any notice required by Code
of Civil Procedure Section 1161 or any similar or successor statute. When a
statute requires service of a notice in a particular manner, service of such
notice in the manner described in the first sentence of this Section 19.M. shall
satisfy such statutory requirement.
N. Property Management: In addition, Tenant agrees to pay Landlord along
with the expenses to be reimbursed by Tenant a monthly fee for management
services rendered by either Landlord or a third party manager engaged by
Landlord (which may be a party affiliated with Landlord), in the amount of three
percent (3%) of the Base Monthly Rent.
O. Rent: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as "additional rent", shall be
deemed as rent.
P. Representations: Tenant acknowledges that neither Landlord nor any of
its employees or agents have made any agreements, representations, warranties or
promises with respect to the Premises or with respect to present or future
rents, expenses, operations, tenancies or any other matter. Except as herein
expressly set forth herein, Tenant relied on no statement of Landlord or its
employees or agents for that purpose.
Q. Rights and Remedies: Subject to Section 14 above, All rights and
remedies hereunder are cumulative and not alternative to the extent permitted by
law, and are in addition to all other rights and remedies in law and in equity.
R. Severability: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.
S. Submission of Lease: Submission of this document for examination or
signature by the parties does not constitute an option or offer
Page 21
<PAGE>
to lease the Premises on the terms in this document or a reservation of the
Premises in favor of Tenant. This document is not effective as a lease or
otherwise until executed and delivered by both Landlord and Tenant.
T. Subordination: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the
commercially reasonable form presented to Tenant, which Landlord or Holder deems
necessary or desirable for such purposes. Landlord shall have the right to
cause this Lease to be and become and remain subject and subordinate to any and
all Encumbrances which are now or may hereafter be executed covering the
Premises or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided only, that in the event of termination of any such lease or
upon the foreclosure of any such mortgage or deed of trust, Holder agrees to
recognize Tenant's rights under this Lease as long as Tenant is not in default
either at the time Holder recognizes such rights or at any time thereafter.
Within ten (10) business days after Landlord's written request, Tenant shall
execute any documents in commercially reasonable form required by Landlord or
the Holder to make this Lease subordinate to any lien of the Encumbrance,
provided that within those documents the Tenant's rights under this Lease are
recognized only as long as Tenant is not in default. If Tenant fails to do so,
then in addition to such failure constituting a default by Tenant, it shall be
deemed that this Lease is so subordinated to such Encumbrance. Notwithstanding
anything to the contrary in this Section, Tenant hereby attorns and agrees to
attorn to any entity purchasing or otherwise acquiring the Premises at any sale
or other proceeding or pursuant to the exercise of any other rights, powers or
remedies under such encumbrance.
Landlord shall cause the existing lender to furnish to Tenant, within sixty (60)
days of the date of both parties' execution of this Lease, with a written
agreement providing for (i) recognition by the lender of all of the terms and
conditions of this Lease; and (ii) continuation of this Lease upon foreclosure
of existing lender's security interest in the Premises. In the event that
Landlord is unable to provide such agreement, Tenant's sole remedy shall be
termination of the Lease, which election shall be made within fourteen (14) days
following the expiration of such sixty (60) day period.
U. Survival of Indemnities: All indemnification, defense, and hold harmless
obligations of Landlord and Tenant under this Lease shall survive the expiration
or sooner termination of the Lease.
V. Time: Time is of the essence hereunder.
W. Transportation Demand Management Programs: Should a government agency or
municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or programs, Tenant agrees that the cost of TDM
imposed facilities and programs required on the Premises, including but not
limited to employee showers, lockers, cafeteria, or lunchroom facilities, shall
be paid by Tenant. Further, any ongoing costs or expenses associated with a TDM
program which are required for the Premises and not provided by Tenant, such as
an on-site TDM coordinator, shall be provided by Landlord with such costs being
included as additional rent and reimbursed to Landlord by Tenant within thirty
(30) days after demand. If TDM facilities and programs are instituted on a
Project wide basis, Tenant shall pay its proportionate share of such costs in
accordance with Section 8 above.
X. Waiver of Right to Jury Trial: Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
Page 22
<PAGE>
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.
Y. Recordation: A short form Memorandum of Lease, in form and content
reasonably acceptable to the parties, will be executed in recordable form by
each party following execution of this Lease, delivered to Tenant, and may be
recorded by Tenant at its expense.
20. RIGHT OF FIRST OFFER TO PURCHASE:
A. Grant and Exercise of Option: In the event Landlord elects to sell
the Buildings either separately or as part of a larger sale including other
building(s) within the Project ("Offered Property"), Landlord (referred to
hereinafter in this Section 20 as "Seller") hereby grants Tenant a right of
first offering to purchase. Prior to Seller committing to sell its interest in
the Offered Property to a third party, Seller shall give Tenant written notice
of such desire and the terms and other information under which Seller intends to
sell the Offered Property. Provided at the time of such written notice: (i)
Tenant leases at least two buildings within the Project; and (ii) Tenant is not
in default under the Lease beyond the expiration of any applicable cure period,
Tenant shall have the option, which must be exercised, if at all, by written
notice to Seller within fifteen (15) days after Tenant's receipt of Seller's
notice, to purchase Seller's interest in the Offered Property at the sales price
and terms of sale specified in the notice. In the event Tenant timely exercises
such option to purchase its interest in the Offered Property, Seller shall sell
its interest in the Offered Property to Tenant, and Tenant shall purchase its
interest in the Offered Property from Seller in accordance with the price and
terms specified in Seller's notice. Seller and Tenant shall, in good faith,
attempt to reach agreement on the terms of a mutually acceptable purchase
agreement consistent with the terms set forth in Seller's notice within thirty
(30) days of Tenant's exercise of its option to purchase. In the event either:
(i) Tenant fails to exercise Tenant's option within said 15-day period; or (ii)
after Tenant's exercise, Seller and Tenant are unable to reach agreement on a
mutually acceptable purchase agreement within the subsequent 30-day period;
Seller shall have one hundred eighty (180) days thereafter to sell its interest
in the Offered Property at no less than ninety percent (90%) of the sales price
and upon substantially the same other terms of sale as specified in the notice
to Tenant. In the event Seller fails to sell its interest in the Offered
Property within said one hundred eighty (180) day period or in the event Seller
proposes to sell its interest in the Offered Property at less than ninety
percent (90%) of the sales price or on other material terms which are more
favorable to the prospective buyer than that proposed to Tenant, Seller shall be
required to resubmit such offer to Tenant in accordance with this Right of First
Offering except that Tenant shall be required to respond to any resubmission
within a seven (7) day period.
B. Exclusions: This Right of First Offering shall automatically
terminate (i) upon the expiration or sooner termination of the Lease, or (ii) in
the event of a foreclosure or other involuntary transfer of Landlord's interest
in the Buildings. Further, this Right of First Offering shall not apply to
transfers (but shall survive such transfers) of all or a portion of the
Buildings or Project to (i) John A. Sobrato and/or John M. Sobrato (individually
and collectively "Sobrato"), (ii) any immediate family member of Sobrato, (iii)
any trust established, in whole or in part, for the benefit of Sobrato and/or
any immediate family member of Sobrato, (iv) any partnership in which Sobrato or
any immediate family member, either directly or indirectly (e.g., through a
partnership or corporate entity or a trust) retains a general partner interest,
and/or (v) any corporation under the control, either directly or indirectly, by
Sobrato or any immediate family member of Sobrato.
Page 23
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
Landlord: Ellis-Middlefield Business Park, Tenant: VeriSign, Inc.
a California Limited Partnership a Delaware corporation
By: /s/ John M. Sobrato * By:/s/ Dana L. Evan
------------------------------- ---------------------------
Its: G.P. Its:
------------------------------- ---------------------------
* By:/s/ Stratton D. Sclavos
---------------------------
Its:
---------------------------
* NOTE: This lease must either: (i) be signed by two (2) officers of such
corporation: one being the chairman of the board, the president, or a vice
president, and the other being the secretary, an assistant secretary, the chief
financial officer or an assistant treasurer; or (ii) signed by the chief
financial officer and accompanied by a corporate resolution authorizing such
signing. With respect to item (i) above, if one (1) individual is signing in
two (2) of the foregoing capacities, that individual must sign twice; once as
one officer and again as the other officer and in such event, Tenant must
deliver to Landlord a certified copy of a corporate resolution authorizing the
signatory to execute this Lease.
Page 24
<PAGE>
Exhibit "A" - Premises-
Page 25
<PAGE>
Exhibit "A-1" - Premises with Expansion Building-
Page 26
<PAGE>
EXHIBIT "B" - Draft Letter of Credit
